Document:

EXHIBIT 10.7

                        EQI FINANCING PARTNERSHIP V, L.P.
                                   (Borrower)

                                       to

                      GMAC COMMERCIAL MORTGAGE CORPORATION
                                    (Lender)

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

                                 LOAN AGREEMENT

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

                          Dated: As of October 20, 2000

                              DOCUMENT PREPARED BY:

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

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                                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....................................................14
Section 2.3  Terms of Payment.................................................14
Section 2.4  Prepayment Defeasance............................................16
Section 2.5  Release of Property..............................................18
Section 2.6  Substitution of Properties.......................................20
Section 2.7  Release of Out-Parcel............................................27

                                   ARTICLE III

                     SECURITY; RESERVES AND CASH MANAGEMENT

Section 3.1  Security; Establishment of Funds.................................29
Section 3.2  Pledge and Grant of Security Interest............................31
Section 3.3  Disbursement of Funds............................................31
Section 3.4  Intentionally Omitted............................................32
Section 3.5  Cash Management Account..........................................32
Section 3.6  Payments Received Under the Cash Management Agreement............34

                                   ARTICLE IV

                              CONDITIONS PRECEDENT

Section 4.1  Closing Conditions...............................................34

                                    ARTICLE V

                      INSURANCE, CONDEMNATION, AND IMPOUNDS

Section 5.1  Insurance; Casualty and Condemnation.............................38
Section 5.2  Condemnation.....................................................42
Section 5.3  Restoration......................................................43
Section 5.4  Impounds.........................................................47

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                                   ARTICLE VI

                              ENVIRONMENTAL MATTERS

Section 6.1  Certain Definitions..............................................48
Section 6.2  Representations and Warranties on Environmental Matters..........48
Section 6.3  Covenants on Environmental Matters...............................49
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................................52
Section 8.2  Validity of Loan Documents.......................................52
Section 8.3  No Conflicts.....................................................52
Section 8.4  Liabilities; Litigation..........................................53
Section 8.5  Taxes and Assessments............................................53
Section 8.6  Other Agreements; Defaults.......................................53
Section 8.7  Title............................................................54
Section 8.8  Compliance with Law..............................................54
Section 8.9  Location of Borrower.............................................55
Section 8.10  ERISA...........................................................55
Section 8.11  Forfeiture......................................................55
Section 8.12  Tax Filings.....................................................55
Section 8.13  Solvency........................................................55
Section 8.14  Full and Accurate Disclosure....................................56
Section 8.15  Flood Zone......................................................56
Section 8.16  Federal Reserve Regulations.....................................56
Section 8.17  Not a Foreign Person............................................57
Section 8.18  Separate Lots...................................................57
Section 8.19  No Prior Assignment.............................................57
Section 8.20  Insurance.......................................................57
Section 8.21  Use of Properties...............................................57
Section 8.22  Certificate of Occupancy; Licenses..............................57
Section 8.23  Physical Condition..............................................57
Section 8.24  Boundaries......................................................58

                                      -ii-

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Section 8.25  Survey..........................................................58
Section 8.26  Embargoed Person................................................58
Section 8.27  Filing and Recording Taxes......................................58
Section 8.28  Single Purpose Entity/Separateness..............................59
Section 8.29  Franchise Agreement; Hotel Management...........................62
Section 8.30  Operating Lease.................................................63
Section 8.31  Investment Company Act..........................................65

                                   ARTICLE IX

                               FINANCIAL REPORTING

Section 9.1  Financial Statements.............................................65
Section 9.2  Accounting Principles............................................67
Section 9.3  Other Information; Access........................................67
Section 9.4  Format of Delivery...............................................67

                                    ARTICLE X

                                    COVENANTS

Section 10.1  Due Sale and Encumbrance; Transfers of Interests................68
Section 10.2  Taxes; Utility Charges..........................................68
Section 10.3  Operating Lease.................................................68
Section 10.4  Operation; Maintenance; Inspection..............................68
Section 10.5  Taxes on Security...............................................69
Section 10.6  Legal Existence; Name, Etc......................................69
Section 10.7  Further Assurances..............................................69
Section 10.8  Estoppel Certificates...........................................70
Section 10.9  Notice of Certain Events........................................70
Section 10.10  Indemnification................................................70
Section 10.11  Payment For Labor and Materials................................70
Section 10.12  Alterations....................................................71
Section 10.13  Handicapped Access.............................................71
Section 10.14  Certain Hotel/Franchise Covenants..............................72
Section 10.15  Certain Operating Lease Covenants..............................73

                                   ARTICLE XI

                                EVENTS OF DEFAULT

Section 11.1  Payments........................................................74
Section 11.2  Insurance.......................................................74
Section 11.3  Single Purpose Entity...........................................74
Section 11.4  Insolvency Opinion..............................................74
Section 11.5  Taxes...........................................................74
Section 11.6  Sale, Encumbrance, Etc..........................................74

                                      -iii-

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Section 11.7  Representations and Warranties..................................74
Section 11.8  Other Encumbrances..............................................75
Section 11.9  Involuntary Bankruptcy or Other Proceeding......................75
Section 11.10 Voluntary Petitions, etc........................................75
Section 11.11 Covenants.......................................................75
Section 11.12 Operating Lease.................................................75
Section 11.13 Management Agreement and Franchise Agreement....................76

                                   ARTICLE XII

                                    REMEDIES

Section 12.1 Remedies - Insolvency Events.....................................76
Section 12.2 Remedies - Other Events..........................................76
Section 12.3 Lender's Right to Perform the Obligations........................77
Section 12.4 Cross-Default; Cross-Collateralization; Waiver
               of Marshalling of Assets.......................................78

                                                   ARTICLE XIII

                                             LIMITATIONS ON LIABILITY

Section 13.1 Limitation on Liability..........................................78
Section 13.2 Limitation on Liability of Lender's Officers, Employees, etc.....79

                                   ARTICLE XIV

                                 SECURITIZATION

Section 14.1 Securitization...................................................80
Section 14.2 Securitization Indemnification...................................81
Section 14.3 Servicer.........................................................84

                                   ARTICLE XV

                                  MISCELLANEOUS

Section 15.1 Notices..........................................................84
Section 15.2 Amendment and Waivers............................................85
Section 15.3 Limitation on Interest...........................................85
Section 15.4 Invalid Provisions...............................................86
Section 15.5 Reimbursement of Expenses........................................86
Section 15.6 Approvals; Third Parties; Conditions.............................86
Section 15.7 Lender Not in Control; No Partnership............................87
Section 15.8 Time of the Essence..............................................87
Section 15.9 Successors and Assigns...........................................87
Section 15.10 Renewal, Extension or Rearrangement.............................87
Section 15.11 Waivers.........................................................87
Section 15.12 Cumulative Rights; Joint and Several Liability..................88

                                      -iv-

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Section 15.13 Singular and Plural.............................................88
Section 15.14 Phrases.........................................................88
Section 15.15 Exhibits and Schedules..........................................88
Section 15.16 Titles of Articles, Sections and Subsections....................88
Section 15.17 Promotional Material............................................88
Section 15.18 Survival........................................................89
Section 15.19 WAIVER OF TRIAL.................................................89
Section 15.20 Waiver of Punitive or Consequential Damages.....................89
Section 15.21 Governing Law...................................................89
Section 15.22 Entire Agreement................................................91
Section 15.23 Counterparts....................................................91
Section 15.24 Brokers and Financial Advisors..................................91

                                       -v-

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                         LIST OF EXHIBITS AND SCHEDULES

EXHIBIT A                   LEGAL DESCRIPTION OF PROPERTIES

EXHIBIT B                   FORM OF TRS LEASE

EXHIBIT C                   FORMS OF FRANCHISE AGREEMENT

EXHIBIT D                   FORM OF TRS SUBORDINATION AGREEMENT

EXHIBIT E                   OUT-PARCEL

EXHIBIT F                   TRS LESSEE ORGANIZATIONAL DOCUMENTS

EXHIBIT G                   FORM OF TRS NON-CONSOLIDATION OPINION

SCHEDULE I                  ALLOCATED LOAN AMOUNTS

SCHEDULE II                 REQUIRED REPAIRS

SCHEDULE III                OPERATING LEASES

SCHEDULE IV                 FRANCHISE AGREEMENTS

SCHEDULE V                  REPLACEMENT ESCROW FUND REIMBURSEMENT ITEMS

SCHEDULE VI                 MANAGEMENT AGREEMENTS

                                      -vi-

<PAGE>

                                 LOAN AGREEMENT

         This Loan Agreement  (this  "Agreement")  is entered into as of October
20, 2000, between GMAC COMMERCIAL CAPITAL CORPORATION,  a California corporation
("Lender"),   and  EQI  FINANCING  PARTNERSHIP  V,  L.P.,  a  Tennessee  limited
partnership ("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.

         "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.

         "Allocable Amount" has the meaning assigned in Section 3.1(b)(iii).

         "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 November 1, 2010.

         "Appraised Value" means with respect to any Individual Property at any
time, the value of such Individual Property, as most recently determined by an

                                       -1-

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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(b).

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

         "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-

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         "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:

         (a)      the numerator is the Net Operating Income for such Properties;
and

         (b) 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.

         The Debt Service  Coverage Ratio for the Loan for all of the Properties
as of the Closing Date is 1.81 to 1.0.

         "Debt Service Escrow Fund" 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.

                                       -3-

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

         "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 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.

         "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.

                                       -4-

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         "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 Equity Inns, Inc., a Tennessee corporation.

         "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 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.

         "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,

                                       -5-

<PAGE>

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.

         "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  Agreements,  (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.

         "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.

                                       -6-

<PAGE>

         "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.  The LTV  Ratio  for all of the
Properties as of the Closing Date is fifty-one percent (51%).

         "Management  Agreement" means, with respect to any Individual Property,
the management  agreement,  if any,  entered into by and between  Borrower or an
Operating Lessee, as applicable, and a Manager pursuant to which such Manager is
to  provide  management  and other  services  with  respect  to said  Individual
Property.  The initial Management Agreements in effect as of the date hereof are
identified on Schedule VI attached hereto.

         "Management  Fee"  shall mean an amount  equal to no greater  than five
percent (5.0%) per annum of Operating Revenues for each Individual Property.

         "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) November 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 the Mortgage,
Assignment of Leases and Rents,  Security  Agreement  and Fixture  Filing or the
Deed of Trust,  Assignment of Leases and Rents,  Security  Agreement and Fixture
Filing,  as  applicable,  dated as of the date  hereof,  executed 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 each shall be  determined  in
accordance with Lender's then current underwriting policies and procedures.

         "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 $36,000,000,  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.

                                       -7-

<PAGE>

         "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,  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.

         "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

                                       -8-

<PAGE>

(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 or any TRS Lessee.

         "Out-Parcel"  means that  certain  portion of the  Individual  Property
located in Tampa, Florida specified on Exhibit E attached hereto

         "Payment  Date"  shall  mean  the  first  day of  each  calendar  month
commencing on the first day of December, 2000.

         "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 Noncompliance"  means a material  noncompliance with, or a default
under, the PIP Requirements by Borrower or any Operating Lessee.

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

         "PIP  Satisfaction  Event"  means the delivery to Lender of evidence of
the complete and satisfactory remedying or cure of any PIP Noncompliance.

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

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

                                       -9-

<PAGE>

         "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.

         "Pro-Rata Percentage" has the meaning assigned in Section 3.1(b)(i).

         "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
reasonable judgement of Lender, a management  organization possessing experience
in  managing  properties  similar  in size,  scope and  value of the  applicable
Individual  Property or  Properties,  provided that Borrower shall have obtained
prior 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)
in the case of  accounts  in which  funds are held for thirty  (30) 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.

                                      -10-

<PAGE>

         "Rent" means all rents, revenues,  issues, profits, income and proceeds
due or to become due from tenants of 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) a management  agreement
with a Qualified  Manager,  which  management  agreement  shall be acceptable to
Lender (to be determined  within thirty (30) days of submission to Lender of the
form of  management  agreement)  in form and  substance  in Lender's  reasonable
discretion,  provided that, such management agreement shall be deemed acceptable
to Lender if Borrower shall have obtained prior confirmation from the applicable
Rating  Agencies 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  executed  and  delivered  to Lender by Borrower  and such
Qualified Manager at Borrower's expense,  which agreement shall be acceptable to
Lender (to be  determined  within  thirty (30) days of submission of the form of
such  agreement) in form and substance in its  reasonable  discretion,  provided
that, such agreement shall be deemed acceptable to Lender if Borrower shall have
obtained  prior  confirmation  from the  applicable  Rating  Agencies  that such
agreement will not cause a downgrading,  withdrawal or qualification of the then
current rating of the securities issued pursuant to a Securitization.

         "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, which such alterations as may be reasonably approved by Lender.

                                      -11-

<PAGE>

         "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.

         "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.

         "Subordination,   Non-Disturbance  and  Attornment   Agreement"  means,
collectively,   each  of  those  certain   Subordination,   Non-Disturbance  and
Attornment Agreements among Lender, Borrower and each Operating Lessee, dated as
of October 20, 2000.

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

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

                                      -12-

<PAGE>

         "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 a PIP Noncompliance or the Anticipated Payment Date.

         "Trigger Period" means the period of time during the Loan (a) following
a PIP  Noncompliance  until the  occurrence  of a PIP  Satisfaction  Event,  (b)
following a DSCR Event,  and (c) following the Anticipated  Payment Date, if the
Debt is not paid in full.

         "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.

         "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).

                                      -13-

<PAGE>

         "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 AND NO/100  DOLLARS
($36,000,000)  to  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
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 $283,842.05 (the "Monthly Debt Service
Payment  Amount"),  on the first day of December,  2000 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.

                                      -14-

<PAGE>

         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.

                  2.3.2  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.

                  2.3.3  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
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.

                  2.3.4 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.

                  2.3.5  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.

                                      -15-

<PAGE>

                  2.3.6 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.

                  2.3.7 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
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

                                      -16-

<PAGE>

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 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;

                                      -17-

<PAGE>

                           (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.

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

                                      -18-

<PAGE>

         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 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.

                  In connection  with the release of the Liens,  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:

                           (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
         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

                                      -19-

<PAGE>

         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
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  the  Allocated  Loan  Amounts  of  any  and  all
Substituted Properties in the aggregate comprise no more than twenty-five

                                      -20-

<PAGE>

percent (25%) or Nine Million and No/100 Dollars  ($9,000,000) of the  Allocated
Loan Amounts for all of the  Properties,  unless Lender shall have  otherwise
expressly  consented,  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
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

                                      -21-

<PAGE>

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
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, provided
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

                                      -22-

<PAGE>

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 Surveys. Such
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

                                      -23-

<PAGE>

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
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.

                                      -24-

<PAGE>

                  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
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 and
(ii) subordination  agreements in the form approved by Lender in connection with
the  origination  of the Loan with respect to (A) any Operating  Leases that are
not TRS Leases and (B) 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

                                      -25-

<PAGE>

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.

                  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.

                                      -26-

<PAGE>

         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.

         Section 2.7  Release of Out-Parcel.

         Borrower may transfer and obtain a release of the  Out-Parcel  from the
Lien of the Mortgage thereon upon at least thirty (30) days prior written notice
to Lender,  provided  that such release  shall only be granted if the  following
conditions have been met or satisfied:

                  2.7.1  Borrower shall (i) pay Lender a processing fee equal to
$5,000 and (ii) reimburse Lender for any  out-of-pocket or third party costs and
expenses it actually  incurs arising from the transfer of the Out-Parcel and any
release of the  Out-Parcel  from the Lien of the  Mortgage  thereon  (including,
without limitation, reasonable attorneys' fees and expenses);

                  2.7.2 At the time  Borrower  requests  such release and at the
time such release is granted there is no continuing Event of Default;

                  2.7.3  The Out-Parcel has not been developed, improved or
subject to construction in any manner;

                  2.7.4  The  intended  use  of  such  Out-Parcel  shall  be for
activities  consistent or complementary with the use of the Individual  Property
and the intended use of the Out-Parcel  will not have a material  adverse effect
on the value, use, operation or occupancy of the Individual Property;

                  2.7.5 Upon the  transfer  and  release of the  Out-Parcel  and
after the completion of the standard  approval process for tax lot-splits by the
applicable municipal authority exercising  jurisdiction over the Out-Parcel,  no
part of the  remaining  Individual  Property  shall  be part of a tax lot  which
includes any portion of the Out-Parcel;

                  2.7.6   Each   applicable   municipal   authority   exercising
jurisdiction  over the Out-Parcel  shall have approved,  as part of its standard
approval process,  a lot-split  ordinance or other applicable action under local
law dividing the Out-Parcel  from the remainder of the  Individual  Property and
the required  procedures or processes  necessary for the  assignment of separate
tax  identification  numbers to each shall be  initiated  concurrently  with the
release and transfer of the Out-Parcel;

                  2.7.7 All  requirements  under all laws,  statutes,  rules and
regulations  (including,  without  limitation,  all zoning and subdivision laws,
setback requirements,  sideline  requirements,  parking ratio requirements,  use
requirements,  building and fire code requirements,  environmental  requirements
and wetlands  requirements)  applicable to the Individual  Property necessary to
accomplish the lot split shall have been fulfilled, and all necessary variances,
if any,  shall have been  obtained,  and evidence  thereof has been delivered to
Lender which in form and substance is appropriate for the  jurisdiction in which
the Individual Property is located;

                                      -27-

<PAGE>

                  2.7.8 As a result of the lot split,  the remaining  Individual
Property with all easements appurtenant and other Permitted Encumbrances thereto
will not be in violation of any then applicable law, statute, rule or regulation
(including,  without  limitation,  all  zoning  and  subdivision  laws,  setback
requirements,   sideline   requirements,   parking   ratio   requirements,   use
requirements,  building and fire code requirements,  environmental  requirements
and wetland  requirements) and all necessary variances,  if any, shall have been
obtained  and  evidence  thereof has been  delivered to Lender which in form and
substance is appropriate for the  jurisdiction in which the Individual  Property
is located;

                  2.7.9 Lender shall receive  evidence  that the single  purpose
nature and bankruptcy  remoteness of Borrower and its  shareholders  or partners
following  such release have not been  adversely  affected and are in accordance
with the terms and provisions of this Agreement (which requirement may include a
"bring-down"  of the legal  non-consolidation  opinion  previously  delivered to
Lender);

                  2.7.10  Appropriate  reciprocal  easement  agreements  for the
benefit  and  burden of the  remaining  Individual  Property  and the Out Parcel
requiring no cost or expense to Borrower  regarding the use of common facilities
of such  parcels,  including,  but not  limited  to,  roadways,  parking  areas,
utilities and community  facilities,  in a form and  substance  satisfactory  to
Lender and which  easements will not materially  adversely  affect the remaining
Individual  Property,   shall  be  declared  and  recorded,  and  the  remaining
Individual  Property  and  the  Out-Parcel  shall  be  in  compliance  with  all
applicable  covenants under all easements and property  agreements  contained in
the Permitted Encumbrances for the Individual Property;

                  2.7.11 Such easements,  rights and uses agreements as shall be
necessary  to  assure  the  availability  of the use of the  improvements  to be
constructed on the Out-Parcel as an amenity of the guests, patrons and occupants
of the  remaining  Individual  Property  at no  additional  cost or  expense  to
Borrower;  provided,  however,  that such guests,  patrons and  occupants may be
charged for any such use of the  Out-Parcel  if such charges are no greater than
would  be  reasonably  and  customarily  charged  for  the use of a  similar  or
complementary amenity;

                  2.7.12  Lender shall have  received (A) an  appropriate  title
policy  endorsement  to the effect that the release of the  Out-Parcel  will not
have an  adverse  affect  on the  priority  of the Lien of the  Mortgage  on the
remaining Individual  Property,  and (B) an appropriate title policy endorsement
or other  evidence  reasonably  satisfactory  to Lender that there are no new or
additional  subordinate  Liens on the remaining  Individual  Property other than
Permitted Encumbrances;

                  2.7.13 Borrower has delivered an Officer's  Certificate to the
effect that the  conditions in subsection  (a)-(l) hereof have occurred or shall
occur concurrently with the transfer and release of the Out-Parcel; and

                  2.7.14  Borrower shall execute such documents and  instruments
and obtain such  opinions  of counsel as are  typical for similar  transactions,
including,  if a Securitization shall have occurred, an opinion that the release
of the Out-Parcel will not be a "significant  modification"  of this Loan within
the  meaning  of  Section  1.1001-3  of the  regulations  of the  United  States
Department of the Treasury and that all other requirements  applicable,  if any,
to a REMIC Trust, have been satisfied or have not otherwise been violated.

                                      -28-

<PAGE>

                                   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 One Hundred  Forty-Five  Thousand  One
Hundred  Sixty-Seven  and 50/100 Dollars  ($145,167.50)  (the  "Required  Repair
Fund") to perform the required  repairs set forth on Schedule II attached hereto
by no later than one hundred  twenty  (120) days from the Closing  Date,  unless
otherwse expressly extended by Lender;

                  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 as  calculated  both on an
         aggregate basis for all of the Properties (the  "Replacements  Budget")
         and on an  individual  basis for each  Individual  Property in order to
         determine the pro-rata percentage that the Operating Revenues from each
         Individual  Property bears to the aggregate Operating Revenues from all
         of the Properties (the "Pro-Rata Percentage").

                           (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 a DSCR Event has not  occurred  and within
         twenty (20) days following the end of each calendar  quarter,  Borrower
         provides Lender with reports 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, is less than the Replacements Budget
         for such calendar  quarter,  Borrower  shall deposit an amount equal to
         such  difference  in  the  Replacement  Escrow  Fund  for  disbursement
         pursuant to Section 3.3.  Notwithstanding the preceding sentence to the
         contrary, the amount of any such deposit required to be made by

                                      -29-

<PAGE>

         Borrower shall be reduced by the  amount  of  any  actual  expenditure
         made by Borrower for any Replacement  completed  prior to the  calendar
         quarter in which such Replacement  was  scheduled  to be made  pursuant
         to the  Replacements Budget.  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.

                           (c)  Within  ninety  (90)  days  after the end of the
         calendar  year 2002 and within  ninety  (90) days after the end of each
         calendar  year   thereafter,   Borrower   shall  provide   Lender  with
         satisfactory  reports  of the  expenditures  made by  Borrower  for the
         Replacements for each Individual Property, which reports shall indicate
         that  expenditures  for  each  Individual   Property  made  during  the
         preceding  three (3) calendar  year period equal an amount no less than
         the  product  of  (A)  the  Pro-Rata  Percentage   applicable  to  such
         Individual Property and (B) the total expenditures made by Borrower for
         the Replacements  (including  disbursements from the Replacement Escrow
         Fund) for all of the Properties during such three (3) year period (such
         amount, the "Allocable Amount"); provided, however, solely for purposes
         of calculating  the Allocable  Amount,  an amount equal to four percent
         (4%) of  Operating  Revenues  for such three (3) year  period  shall be
         applied  if such  amount  is less than the  actual  amount of the total
         expenditures  specified in the preceding  subclause  (B). If the amount
         expended by Borrower is less than the Allocable Amount,  Borrower shall
         deposit  an  amount  equal to any such  difference  in the  Replacement
         Escrow Fund for disbursement solely for Replacements for the particular
         Individual Property and otherwise in accordance with Section 3.3.

                  3.1.3 Debt Service  Escrow Fund. On the date hereof,  Borrower
shall deposit with Lender an amount equal to Seventy-Three  Thousand One Hundred
Twelve  and  22/100  Dollars   ($73,112.22)  (said  amount  so  deposited  shall
hereinafter be referred to as the "Debt Service Escrow Fund"). 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 the Operating Lessee of the Individual Property
located in  Germantown,  Tennessee is either (i) a TRS Lessee,  or (ii) a Single
Purpose Entity.

         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

                                      -30-

<PAGE>

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.

         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.  Any  and all
disbursements  from the Replacement  Escrow Fund shall be made only with respect
to those Replacements listed on Schedule V attached hereto. 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 and if any of the  Properties
are subject to a Management  Agreement  and no Operating  Lease,  all other sums
collected with respect to the Properties and payable to a TRS Lessee or

                                      -31-

<PAGE>

Borrower,  as  applicable,  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
the sole  dominion  and  control  of  Lender,  subject  to the  Cash  Management
Agreement.  The Cash  Management  Account  shall  be  entitled  GMAC  Commercial
Mortgage  Corporation,  as Lender,  to EQI  Financing  Partnership  V, 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 (i) subject to a TRS Lease, or (ii) not subject to an Operating
Lease to deliver all Rents payable to the TRS Lessee or Borrower, as applicable,
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  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 Tax and Insurance Escrow
         Fund in accordance with the terms and conditions of Section 5.4 hereof;

                                      -32-

<PAGE>

                           (b)  Second,  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;

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

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

                           (e) Fifth, on or after the Anticipated  Payment Date,
         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;

                           (f)  Sixth, on or after the Anticipated Payment Date,
         payments for Extraordinary Expenses approved by Lender, if any;

                           (g) Seventh,  on or after the occurrence of a Trigger
         Event  and  during  the  continuance  of a  Trigger  Period  due to PIP
         Noncompliance,  payments  for  monthly  expenses  for PIP  Requirements
         approved by Lender;

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

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

                           (j)  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

                                      -33-

<PAGE>

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.

                                   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 and 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

                                      -34-

<PAGE>

         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.

                           (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.

                                      -35-

<PAGE>

                  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.

                  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; REA Estoppels.  Lender shall have
received an executed tenant estoppel letter, which shall be in form and
substance satisfactory to Lender, from each Operating Lessee and any other
tenant requested by Lender

                  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

                                      -36-

<PAGE>

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.

                  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, if any, 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:

                                      -37-

<PAGE>

                           (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 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 the  applicable  Operating  Lessee  (other than a TRS  Lessee);  (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

                                      -38-

<PAGE>

         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 Nine  Million  One
         Hundred  Thirty Eight  Thousand  Three  Hundred Six and No/100  Dollars
         ($9,138,306.00)  in the aggregate for all of the  Properties  (based on
         Operating  Expenses  and NOI for the  Properties).  The  amount of such
         business income  insurance shall be determined prior to the date hereof
         and at least once each year thereafter  based on clause (D) above.  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;

                                      -39-

<PAGE>

                           (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

                           (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+XI" 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:

                                      -40-

<PAGE>

                           (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;

                           (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

                                      -41-

<PAGE>

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
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.

                                      -42-

<PAGE>

                           (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:

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

                                    (ii) (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;

                                    (iii) 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;

                                    (iv) 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;

                                    (v)  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;

                                    (vi)  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);

                                    (vii) 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;

                                      -43-

<PAGE>

                                    (viii)  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);

                                    (ix) 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;

                                    (x) 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;

                                    (xi)   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;
                  and

                                    (xii) 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.

                           (b) 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.

                           (c)  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 Lender and

                                      -44-

<PAGE>

         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.

                           (d) 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  Consultant,  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
         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.

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

                           (f)  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 by Lender and shall be  disbursed  for costs
         actually  incurred  in  connection  with  the  Restoration  on the same
         conditions applicable to the disbursement of the

                                      -45-

<PAGE>

         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.

                           (g) 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.

         Section 5.4  Impounds.

         Borrower shall deposit with Lender,  monthly,  (a) 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 (b)  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 (a) and (b) 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

                                      -46-

<PAGE>

a bill  for such  charges.  Notwithstanding  the  foregoing  provisions  of this
Section 5.4 and provided  that no Event of Default or Trigger  Period shall have
occurred  and be  continuing,  Borrower  shall not be required  to deposit  that
portion of the Insurance  Premiums in the Tax and Insurance  Escrow Fund for any
Individual  Property  for which the  Operating  Lessee shall be obligated to pay
such Insurance  Premiums;  provided that (x) the related Operating Lease has not
expired  or  terminated  and is in full  force  and  effect,  and  (y)  Borrower
continually complies with Section 5.1(f) hereof.

                                   ARTICLE VI
                              ENVIRONMENTAL MATTERS

         Section 6.1  Certain Definitions.

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

                  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

                                      -47-

<PAGE>

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,
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

                                      -48-

<PAGE>

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,
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."

                                      -49-

<PAGE>

                                   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
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 with respect to any Lease.

         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) 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.

                                      -50-

<PAGE>

                                  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
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.

                                      -51-

<PAGE>

         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
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

                                      -52-

<PAGE>

Loan  Documents  and the Liens  created  by the Loan  Documents.  Each  Mortgage
creates  (i) a valid,  perfected  lien on 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.

         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, with the exception of the parking deficiency  currently existing
at the Individual Property located in Tampa,  Florida, 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.

         Section 8.10  ERISA.

                  8.10.1  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

                                      -53-

<PAGE>

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

                  8.10.2 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 8.11  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
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 8.12  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 8.13  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,

                                      -54-

<PAGE>

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 8.14  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,
might  materially  and  adversely  affect,   the  Properties  or  the  business,
operations  or condition  (financial  or  otherwise) of Borrower or any Borrower
Party.

         Section 8.15  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 8.16  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 8.17  Not a Foreign Person.

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

         Section 8.18  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 8.19  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.

                                      -55-

<PAGE>

         Section 8.20  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 8.21  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.

         Section 8.22  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 8.23  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 8.24  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.

                                      -56-

<PAGE>

         Section 8.25  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 8.26  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,
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 8.27  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 8.28  Single Purpose Entity/Separateness.

         Borrower represents, warrants and covenants as follows:

                  8.28.1 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

                                      -57-

<PAGE>

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.

                  8.28.2 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.

                  8.28.3  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.

                  8.28.4  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.

                  8.28.5  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.

                  8.28.6  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.

                  8.28.7  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.

                  8.28.8  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

                                                      -58-

<PAGE>

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.

                  8.28.9 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.

                  8.28.10 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.

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

                  8.28.12 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.

                  8.28.13  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.

                  8.28.14  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.

                  8.28.15  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.

                  8.28.16 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

                                      -59-

<PAGE>

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.

                  8.28.17  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.

                  8.28.18  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.

                  8.28.19  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.

                  8.28.20  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.

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

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

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

         Section 8.29  Franchise Agreement; Hotel Management.

                  8.29.1  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.

                                      -60-

<PAGE>

                  8.29.2 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.

                  8.29.3  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
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 C, or otherwise
acceptable to Lender in form and substance in Lender's reasonable discretion.

                  8.29.4  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. The fees 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 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 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 purchaser at  foreclosure or party which accepts a
deed in lieu of foreclosure  shall have any obligation  regarding the payment of
such fees, and (iv) such 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

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<PAGE>

Operating Lessee may terminate a Management Agreement and enter into a
Replacement  Management Agreement with a Qualified Manager with respect to any
Individual Property.

                  8.29.5  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
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.

                  8.29.6   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 8.30  Operating Lease.

                  8.30.1 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.

                  8.30.2   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.

                  8.30.3  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 a 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

                                      -62-

<PAGE>

         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 fees payable
         thereunder  are  subordinate  to this  Agreement and to the  Mortgages,
         provided,  however,  the 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 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  purchaser at
         foreclosure or party which accepts a deed in lieu of foreclosure  shall
         have any  obligation  regarding the payment of such fees, and (iv) such
         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 8.31  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.

                                   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 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,

                                      -63-

<PAGE>

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 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 requested by Lender,  (A) a written  statement  setting forth any variance of
ten percent (10%) or more between  budgeted and actual amounts  expended 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 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 furnised to Lender

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<PAGE>

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.

         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).

                                      -65-

<PAGE>

         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.

         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 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

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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.

         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

                                      -67-

<PAGE>

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.

         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

                                      -68-

<PAGE>

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 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

                                      -69-

<PAGE>

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:

                           (a)  promptly  perform  and/or  observe  all  of  the
         material covenants and agreements 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;

                                      -70-

<PAGE>

                           (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  required  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; or

                           (d) 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.

                  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 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

                                      -71-

<PAGE>

                           (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.

         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.

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<PAGE>

         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.

         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

                                      -73-

<PAGE>

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.

         Section 11.12  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 the Operating
Lessee of the Individual Property located in Germantown, Tennessee is not either
a TRS Lessee, or a Single Purpose Entity by a date no later than March 1, 2001.

         Section 11.13  Management Agreement and Franchise Agreement.

         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  thereunder  or under 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.

                                   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.

         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.

                  12.2.1  With respect to Borrower and the Properties, nothing
contained herein or in

                                      -74-

<PAGE>

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.

                  12.2.2  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
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

                                      -75-

<PAGE>

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.

                  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.

                                      -76-

<PAGE>

                                  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;  (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) the failure of Borrower or any Borrower  Party to
indemnify any Operating Lessee as may be required under the applicable Operating
Lease for amounts  incurred or imposed  under any Policy in excess of the limits
imposed for deductibles under such Policy pursuant to Section 5.1.

         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

                                      -77-

<PAGE>

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.

                                   ARTICLE XIV
                                 SECURITIZATION

         Section 14.1  Securitization.

                  14.1.1 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  Securitization  Information  through  letters  of  auditors  or
         opinions of counsel of independent  attorneys  acceptable to the Lender
         and the Rating Agencies;

                  14.1.2 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;

                  14.1.3  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

                  14.1.4  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  capital
improvements)  as may be  requested  by the  holder  of the  Note or the  Rating
Agencies or otherwise to effect the Securitization, including splitting the Note
into two notes and splitting each Mortgage into two mortgages, including a first
priority  mortgage and a second priority  mortgage or otherwise as determined by
and acceptable to Lender; 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.
Notwithstanding  the foregoing  sentence,  Lender shall be  responsible  for the
reasonable  attorney's  fees incurred by Borrower in connection  with Borrower's
compliance under Section 14.1(d).

         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

                                      -78-

<PAGE>

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 (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

                                      -79-

<PAGE>

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  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 or
willful misconduct of 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;

                                      -80-

<PAGE>

(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.

                                   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 V, L.P.
                                c/o Equity Inns, Inc.
                                7700 Wolf River Boulevard
                                Germantown, Tennessee  38138
                                Attention:  President
                                Telecopy:  (901) 754-2374

      If to Lender:             GMAC Commercial Mortgage Corporation
                                200 Witmer Road
                                P.O. Box 809
                                Horsham, Pennsylvania  19044
                                Attention:  Servicing - Executive Vice President

      With a copy to:           Cadwalader, Wickersham & Taft
                                100 Maiden Lane

                                      -81-

<PAGE>

                                New York, New York  10038
                                Attention:  William P. McInerney, Esq.
                                Telecopy:  (212) 504-6666

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
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  Amendment 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

                                      -82-

<PAGE>

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.

         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

                                      -83-

<PAGE>

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
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.

                                      -84-

<PAGE>

         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.

         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.

                                      -85-

<PAGE>

         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 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
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

                                      -86-

<PAGE>

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.

         (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

                                      -87-

<PAGE>

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 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]

                                      -88-

<PAGE>

         EXECUTED as of the date first written above.

                               LENDER:

                               GMAC COMMERCIAL MORTGAGE
                               CORPORATION, a California corporation

                               By: /s/ Morgan G. Earnest, II
                                   -------------------------
                                   Name:  Morgan G. Earnest, II
                                   Title: Senior Vice President

                               BORROWER:

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

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

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

                                      -89-

<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.  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.

         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;

                                       90

<PAGE>

         (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.

                                       91

<PAGE>

         Executed as of October 20, 2000.

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

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

                               EQUITY INNS TRUST, a Maryland corporation

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

                               EQUITY INNS PARTNERSHIP, a Tennessee
                               limited partnership

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

                                      By:  /s/ Howard A. Silver
                                           --------------------
                                      Name:  Howard A. Silver
                                      Title: PresidentEXHIBIT 10.8

                       EQI FINANCING PARTNERSHIP III, L.P.
                                   (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

                                       -i-

<PAGE>

Section 5.4  Impounds.........................................................46
Section 5.5  Letters of Credit................................................47

                                   ARTICLE VI

                              ENVIRONMENTAL MATTERS

Section 6.1  Certain Definitions..............................................48
Section 6.2  Representations and Warranties on Environmental Matters..........49
Section 6.3  Covenants on Environmental Matters...............................49
Section 6.4  Allocation of Risks and Indemnity................................50
Section 6.5  No Waiver........................................................51

                                   ARTICLE VII

                                 LEASING MATTERS

Section 7.1  Representations and Warranties on Leases.........................51
Section 7.2  Approval Rights..................................................51
Section 7.3  Covenants........................................................51
Section 7.4  Tenant Estoppels.................................................52

                                  ARTICLE VIII

                         REPRESENTATIONS AND WARRANTIES

Section 8.1  Organization, Power and Authority................................52
Section 8.2  Validity of Loan Documents.......................................52
Section 8.3  No Conflicts.....................................................53
Section 8.4  Liabilities; Litigation..........................................53
Section 8.5  Taxes and Assessments............................................54
Section 8.6  Other Agreements; Defaults.......................................54
Section 8.7  Title............................................................54
Section 8.8  Compliane with Law...............................................54
Section 8.9  Location of Borrower.............................................55
Section 8.10  ERISA...........................................................55
Section 8.11  Forfeiture......................................................55
Section 8.12  Tax Filings.....................................................55
Section 8.13  Solvency........................................................56
Section 8.14  Full and Accurate Disclosure....................................56
Section 8.15  Flood Zone......................................................56
Section 8.16  Federal Reserve Regulations.....................................57
Section 8.17  Not a Foreign Person............................................57
Section 8.18  Separate Lots...................................................57
Section 8.19  No Prior Assigment..............................................57

                                      -ii-

<PAGE>

Section 8.20  Insurance.......................................................57
Section 8.21  Use of Properties...............................................57
Section 8.22  Certificate of Occupancy; Licenses..............................57
Section 8.23  Physical Condition..............................................58
Section 8.24  Boundaries......................................................58
Section 8.25  Survey..........................................................58
Section 8.26  Embargoed Person................................................58
Section 8.27  Filing and Recording Taxes......................................59
Section 8.28  Single Purpose Entity/Separateness..............................59
Section 8.29  Franchise Agreement; Hotel Management...........................62
Section 8.30  Operating Lease.................................................64
Section 8.31  Investment Company Act..........................................65
Section 8.32  Ground Lease....................................................65

                                   ARTICLE IX

                    FINANCIAL REPORTINGFINANCIAL STATEMENTS.

Section 9.1  Obligations of Borrower..........................................67
Section 9.2  Accounting Principles............................................69
Section 9.3  Other Information; Access........................................69
Section 9.4  Format of Delivery...............................................69

                                    ARTICLE X

                                    COVENANTS

Section 10.1  Due Sale and Encumbrance; Transfers of Interests................69
Section 10.2  Taxes; Utility Charges..........................................70
Section 10.3  Operating Lease.................................................70
Section 10.4  Operation; Maintenance; Inspection..............................70
Section 10.5  Taxes on Security...............................................71
Section 10.6  Legal Existence; Name, Etc......................................71
Section 10.7  Further Assurances..............................................71
Section 10.8  Estoppel Certificates...........................................71
Section 10.9  Notice of Certain Events........................................72
Section 10.10  Indemnification................................................72
Section 10.11  Payment For Labor and Materials................................72
Section 10.12  Alterations....................................................73
Section 10.13  Handicapped Access.............................................73
Section 10.14  Certain Hotel/Franchise Covenants..............................74
Section 10.15  Certain Operating Lease Covenants..............................75

                                      -iii-

<PAGE>

                                   ARTICLE XI

                                EVENTS OF DEFAULT

Section 11.1  Payments........................................................76
Section 11.2  Insurance.......................................................76
Section 11.3  Single Purpose Entity...........................................76
Section 11.4  Insolvency Opinion..............................................76
Section 11.5  Taxes...........................................................76
Section 11.6  Sale, Encumbrance, Etc..........................................76
Section 11.7  Representations and Warranties..................................77
Section 11.8  Other Encumbrances..............................................77
Section 11.9  Involuntary Bankruptcy or Other Proceeding......................77
Section 11.10  Voluntary Petitions, Etc.......................................77
Section 11.11  Covenants......................................................77
Section 11.12  Management Agreement and Franchise Agreement...................78

                                   ARTICLE XII

                                    REMEDIES

Section 12.1  Remedies - Insolvency Events....................................78
12.2  Remedies - Other Events.................................................78
12.3  Lender's Right to Perform the Obligations...............................79
12.4  Cross-Default; Cross-Collateralization; Waiver of Marshalling of
        Assets................................................................80

                                  ARTICLE XIII

                            LIMITATIONS ON LIABILITY

Section 13.1  Limitation on Liability.........................................81
Section 13.2  Limitation on Liability of Lender's Officers, Employees, Etc....82

                                   ARTICLE XIV

                                 SECURITIZATION

Section 14.1  Securitization..................................................82
Section 14.2  Securitization Indemnification..................................83
Section 14.3  Servicer........................................................86

                                   ARTICLE XV

                                  MISCELLANEOUS

Section 15.1  Notices.........................................................86
Section 15.2  Amendments and Waivers..........................................87

                                      -iv-

<PAGE>

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............................90
Section 15.11  Waivers........................................................90
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...........................................91
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  III,  L.P.,  a  Tennessee  limited
partnership ("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.

         "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.

         "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

                                       -1-

<PAGE>

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:

         (a)      the numerator is the Net Operating Income for such Properties;
                  and

         (b)      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,  the Rutland 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,

                                       -6-

<PAGE>

governing  or  otherwise  pertaining  to  the  Loan,  and  (l)  all  amendments,
modifications, renewals, substitutions or replacements of any of the foregoing.

         "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 or the Leasehold Mortgage, Assignment of Leases and

                                       -7-

<PAGE>

Rents, Security Agreement and Fixture Filing, executed 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  $33,053,100.00,  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.

                                       -9-

<PAGE>

         "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
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.

                                      -10-

<PAGE>

         "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)
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

                                      -11-

<PAGE>

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 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.

         "Rutland Escrow Fund" has the meaning assigned in Section 3.1(f).

         "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.

                                      -12-

<PAGE>

         "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.

         "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.

                                      -13-

<PAGE>

         "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.

         "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.

                                      -14-

<PAGE>

                                   ARTICLE II
                                   LOAN TERMS

         Section 2.1  The Loan.

         Lender  agrees  to  make a Loan  of  THIRTY-THREE  MILLION  FIFTY-THREE
THOUSAND ONE HUNDRED AND NO/100 DOLLARS  ($33,053,100.00) 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
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  Payment.  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 $260,607.21 (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.

                  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

                                      -15-

<PAGE>

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
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

                                      -16-

<PAGE>

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 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;

                                      -17-

<PAGE>

                           (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 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;

                                      -18-

<PAGE>

                           (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
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.

                  2.5.2  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

                                      -19-

<PAGE>

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.

                  2.5.3  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:

                           (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.

                                      -20-

<PAGE>

                           (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.

                  2.5.4 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
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

                                      -21-

<PAGE>

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
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

                                      -22-

<PAGE>

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
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, provided
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

                                      -23-

<PAGE>

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 Surveys. Such
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

                                      -24-

<PAGE>

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
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

                                      -25-

<PAGE>

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
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,

                                      -26-

<PAGE>

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.

                  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

                                      -27-

<PAGE>

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 One Hundred  Sixty-Seven  Thousand Six
Hundred Fifty-Six and No/100 Dollars  ($167,656.00) (the "Required Repair Fund")
to perform the required  repairs set forth on Schedule II 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

                                      -28-

<PAGE>

         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 Seven Hundred  Eighty-One  Thousand
Eight  Hundred  Twenty-One  Dollars  and 63/100  ($781,821.63)  (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.

                  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.   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

                                      -29-

<PAGE>

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.

                  3.1.6 Rutland  Escrow Fund. On the date hereof  Borrower shall
deposit  with Lender an amount  equal to Three  Million Two Hundred  Eighty-Five
Thousand  Nine  Hundred  and  No/100  Dollars  ($3,285,900.00)  (such  amount so
deposited shall hereinafter be referred to as the "Rutland Escrow Fund"),  which
Rutland Escrow Fund shall be held as additional  security for the Loan. Provided
no Event of Default shall have occurred and be continuing,  Lender shall release
the Rutland  Escrow Fund to Borrower upon receipt by Lender of written  evidence
satisfactory to Lender from the State of Vermont that  definitively  states that
the State of Vermont intends to take no action with regard to any  environmental
matters relating to the Individual Property located in Rutland, Vermont (the "No
Action Letter").

         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.

         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.

                                      -30-

<PAGE>

                  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
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  III,  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.

                                      -31-

<PAGE>

                  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);

                           (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;

                                      -32-

<PAGE>

                           (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.

                                   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:

                                      -33-

<PAGE>

                  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 and 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.

                           (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

                                      -34-

<PAGE>

         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.

                  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

                                      -35-

<PAGE>

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.

                  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.

                                      -36-

<PAGE>

                  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 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

                                      -37-

<PAGE>

         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

                                      -38-

<PAGE>

         Borrower's  reasonable estimate of the projected gross operating profit
         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;

                                      -39-

<PAGE>

                           (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

                           (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;

                                      -40-

<PAGE>

                           (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;

                           (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

                                      -41-

<PAGE>

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 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:

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

                                      -42-

<PAGE>

                                    (ii) (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;

                                    (iii) 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;

                                    (iv) 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;

                                    (v)  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;

                                    (vi)  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);

                                    (vii) 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;

                                    (viii)  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);

                                      -43-

<PAGE>

                                    (ix) 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;

                                    (x) 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;

                                    (xi)   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;

                                    (xii) 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.

                           (b) 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.

                           (c)  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 Lender 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.

                                      -44-

<PAGE>

                           (d) 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  Consultant,  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
         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.

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

                           (f)  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 by 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.

                           (g)  The excess, if any, of the Net Proceeds and the
         remaining balance, if any, of the Net Proceeds Deficiency deposited

                                      -45-

<PAGE>

         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.

         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

                                      -46-

<PAGE>

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
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

                                      -47-

<PAGE>

         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:

                  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

                                      -48-

<PAGE>

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,
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.

                                      -49-

<PAGE>

         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,
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."

                                      -50-

<PAGE>

                                   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
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.

                                      -51-

<PAGE>

         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
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

                                      -52-

<PAGE>

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
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.

                                      -53-

<PAGE>

         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.

         Section 8.8  Compliane 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.

                                      -54-

<PAGE>

         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.

         Section 8.10  ERISA.

                  8.10.1 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

                  8.10.2 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 8.11  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
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 8.12  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 8.13  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

                                      -55-

<PAGE>

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 8.14  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,
might  materially  and  adversely  affect,   the  Properties  or  the  business,
operations  or condition  (financial  or  otherwise) of Borrower or any Borrower
Party.

         Section 8.15  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 8.16  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.

                                      -56-

<PAGE>

         Section 8.17  Not a Foreign Person.

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

         Section 8.18  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 8.19  No Prior Assigment.

         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 8.20  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 8.21  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.

         Section 8.22  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 8.23  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

                                      -57-

<PAGE>

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 8.24  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 8.25  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 8.26  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,
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 8.27  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

                                      -58-

<PAGE>

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 8.28  Single Purpose Entity/Separateness.

         Borrower represents, warrants and covenants as follows:

                  8.28.1 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.

                  8.28.2 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.

                  8.28.3  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.

                  8.28.4  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.

                  8.28.5  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.

                                      -59-

<PAGE>

                  8.28.6  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.

                  8.28.7  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.

                  8.28.8  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.

                  8.28.9 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,  0shall
conduct  business in its own name,  shall not  identify  itself as a division or
part of any other person or entity.

                  8.28.10 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.

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

                  8.28.12 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.

                  8.28.13  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.

                  8.28.14  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.

                                      -60-

<PAGE>

                  8.28.15  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.

                  8.28.16 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.

                  8.28.17  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.

                  8.28.18  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.

                  8.28.19  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.

                  8.28.20  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.

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

                                      -61-

<PAGE>

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

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

         Section 8.29  Franchise Agreement; Hotel Management.

                  8.29.1  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.

                  8.29.2 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.

                  8.29.3  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
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.

                  8.29.4  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

                                      -62-

<PAGE>

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.

                  8.29.5  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
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.

                  8.29.6   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 8.30  Operating Lease.

                  8.30.1 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)

                                      -63-

<PAGE>

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.

                  8.30.2   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.

                  8.30.3  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  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

                                      -64-

<PAGE>

         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 8.31  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 8.32  Ground Lease.

                  8.32.1  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.

                  8.32.2  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.

                  8.32.3 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 Mt. Brook,  Alabama,  the Ground Leases are
further assignable by Lender, its successors and assigns without Ground Lessors'
consent.

                  8.32.4 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.

                  8.32.5  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.

                                      -65-

<PAGE>

                  8.32.6 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.

                  8.32.7 Term.  The Ground  Leases have a term which extends not
less than twenty (20) years beyond the Anticipated Payment Date.

                  8.32.8 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.

                  8.32.9 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.

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

                                   ARTICLE IX
                              FINANCIAL REPORTING

         Section 9.1  Obligations of Borrower.

                  9.1.1 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  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

                                      -66-

<PAGE>

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
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.

         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.

                                      -67-

<PAGE>

         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 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

                                      -68-

<PAGE>

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.

         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

                                      -69-

<PAGE>

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.

         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,

                                      -70-

<PAGE>

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 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

                                      -71-

<PAGE>

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:

                           (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;

                                      -72-

<PAGE>

                           (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  required  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.

                  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

                                      -73-

<PAGE>

         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.

         Section 11.2  Insurance.

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

                                      -74-

<PAGE>

         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.

         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

                                      -75-

<PAGE>

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.

         Section 11.12  Management Agreement and Franchise Agreement.

         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.

                  11.12.1  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
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,

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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.

         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
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

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<PAGE>

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.

         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.

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

                  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

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<PAGE>

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;  (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

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<PAGE>

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;  or (n) Borrower's or any TRS Lessee's  failure
to comply, or cause compliance, with any PIP Requirements.

         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.

                                   ARTICLE XIV
                                 SECURITIZATION

         Section 14.1  Securitization.

                  14.1.1  At the request of the holder of the Note and, to the
extent not already required to be provided by Borrower under this Agreement,

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<PAGE>

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  Securitization  Information  through  letters  of  auditors  or
         opinions of counsel of independent  attorneys  acceptable to the Lender
         and the Rating Agencies;

                  14.1.2 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;

                  14.1.3  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

                  14.1.4  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  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

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<PAGE>

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 (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

                                      -82-

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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  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

                                      -83-

<PAGE>

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.

                                      -84-

<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 III, 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
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.

                                      -85-

<PAGE>

         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.

         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

                                      -86-

<PAGE>

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
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

                                      -87-

<PAGE>

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.

                                      -88-

<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

                                      -89-

<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.

                                      -90-

<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 Agreement. Borrower hereby

                                      -91-

<PAGE>

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]

                                      -92-

<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 III, L.P.,
                                           a Tennessee limited partnership

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

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

<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.  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.

         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;

<PAGE>

                  (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.

<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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}]]