DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING

GRANTEE:   JPMORGAN CHASE BANK, N.A., a banking association chartered under the laws of the United States of America, BENEFICIARY

THIS DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING (this “ Security Instrument” is made as of the _____ day of November, 2006, by (COMPANY SUBSIDIARY), a _________ limited partnership, (“ Borrower” ), having its principal place of business at c/o Equity Inns, 7700 Wolf River Blvd., Germantown, Tennessee 38138 to CHICAGO TITLE INSURANCE COMPANY (“ Trustee” ), having its principal place of business at 701 5th Avenue, Suite 3400, Seattle, Washington 98104, for the benefit of JPMORGAN CHASE BANK, N.A., a banking association chartered under the laws of the United States of America, having its principal place of business at 270 Park Avenue, New York, New York 10017, as beneficiary (“ Lender” ).

Borrower by its Fixed Rate Note of even date herewith given to Lender is indebted to Lender in the principal sum of $_________ in lawful money of the United States of America (such Fixed Rate Note, together with all extensions, renewals, modifications, substitutions and amendments thereof, shall collectively be referred to as the “ Note” , with interest from the date thereof at the rates set forth in the Note, principal and interest to be payable in accordance with the terms and conditions provided in the Note, and with a final maturity date of December 1, 2016.

Borrower desires to secure the payment of the Debt (as defined in Article 2 ) and the performance of all of its obligations under the Note and the Other Obligations (as defined in Article 2 ).

ARTICLE 1 -    GRANTS OF SECURITY

Section 1.1    PROPERTY CONVEYED . Borrower does hereby irrevocably, unconditionally and absolutely grant, bargain, sell, pledge, enfeoff, assign, warrant, transfer and convey to Trustee in trust   (with power of sale and right of entry and possession) for the benefit of Lender for the purposes herein set forth, the following property, rights, interests and estates now owned, or hereafter acquired, by Borrower (collectively, the “ Property” ):

(a)    Land . The real property described in Exhibit A attached hereto and made a part hereof (collectively, the “ Land” ), together with additional lands, estates and (to the extent assignable) development rights hereafter acquired by Borrower for use in connection with the development, ownership or occupancy of such real property, and all additional lands and estates therein which may, from time to time, by supplemental deed of trust or otherwise be expressly made subject to the lien of this Security Instrument;

(b)    Improvements . The buildings, structures, fixtures, additions, accessions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter erected or located on the Land (the " Improvements”),

(c)    Easements . All of Borrower's right, title and interest in and to all easements, rights-of-way or use, rights, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, air rights and development rights, and all estates, rights, titles, interests, privileges, liberties, servitudes, tenements, hereditaments and appurtenances of any nature whatsoever, in any way now or hereafter belonging, relating or pertaining to the Land and the Improvements and the reversion and reversions, remainder and remainders, and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Land, to the center line thereof and all the estates, rights, titles, interests, dower and rights of dower, curtesy and rights of curtesy, property, possession, claim and demand whatsoever, both at law

and in equity, of Borrower of, in and to the Land and the Improvements and every part and parcel thereof, with the appurtenances thereto;

(d)    Fixtures and Personal Property . All machinery, equipment, goods, inventory, consumer goods, furnishings, fixtures (including but not limited to all heating, air conditioning, plumbing, inventory, lighting, communications and elevator fixtures) and other personal property of every kind and nature, whether tangible or intangible, whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon the Land and the Improvements, or appurtenant thereto, and usable in connection with the present or future use, maintenance, enjoyment, operation and occupancy of the Land and the Improvements, including without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, keys or other entry systems, bars, bar fixtures, mini-bars, liquor and other drink dispensers, icemakers, kitchen equipment, radios, television sets, cable t.v. equipment, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, reservation systems and related computer software, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, fittings, plants, apparatus, stoves, ranges, refrigerators, cutlery and dishes, laundry machines, tools, machinery, engineers, dynamos, motors, boilers, incinerators, washers and dryers, other customary hotel equipment, and all building equipment, materials and supplies of any nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon the Land and the Improvements, or appurtenant thereto, or usable in connection with the present or future operation, enjoyment and occupancy of the Land and the Improvements and the right, title and interest of Borrower in and to any of the Personal Property (as hereinafter defined) which may be subject to any security interests, as defined in the Uniform Commercial Code, as adopted and enacted by the state or states where any of the Property is located (the “ Uniform Commercial Code” ) superior in lien to the lien of this Security Instrument and all proceeds and products of the above;

(e)    Leases and Rents . All leases, subleases and other agreements (specifically including, but not limited to that certain (i) Lease Agreement for (Hotel) between Borrower and (COMPANY SUBSIDIARY), a ________ limited liability company (the “ Lessee” ) dated on or about as of even date herewith (the “ Operating Lease” ) and (ii) Original Assignment of Leases and Rents dated as of even date herewith between Borrower and Lessee (the " Original Assignment ") affecting the use, enjoyment or occupancy of the Land and the Improvements heretofore or hereafter entered into (including, without limitation, any and all security interests, contractual liens and security deposits) whether before or after the filing by or against Borrower of any petition for relief under 11 U.S.C. §101 et seq. as the same may be amended from time to time (the “ Bankruptcy Code” ) (individually, a “ Lease” , collectively, the “ Leases” ) and all

income, rents (including, without limitation, room rents, revenues, accounts and receivables derived from the use or occupancy of all or any portion of the Improvements), issues, profits and revenues (including all oil and gas or other mineral royalties and bonuses) from the Land and the Improvements whether paid or accruing before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code, including, without limitation, all 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 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 (including mini-bar revenues), service charges, vending machine sales and proceeds, if any, from business interruption or other loss of income insurance (collectively, the “ Rents” ) and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt;

(f)    Condemnation Awards . All awards or payments, including interest thereon, which may heretofore and hereafter be made with respect to the Property, whether from the exercise of the right of eminent domain (including but not limited to any transfer made in lieu of or in anticipation of the exercise of the right), or for a change of grade, or for any other injury to or decrease in the value of the Property;

(g)    Insurance Proceeds . All proceeds of and any unearned premiums on any insurance policies covering the Property, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Property;

(h)    Tax Certiorari . All refunds, rebates or credits in connection with a reduction in real estate taxes and assessments charged against the Property as a result of tax certiorari or any applications or proceedings for reduction;

(i)    Conversion . All proceeds of the conversion, voluntary or involuntary, of any of the foregoing including, without limitation, proceeds of insurance and condemnation awards, into cash or liquidation claims;

(j)    Rights . The right, in the name and on behalf of Borrower, to appear in and defend any action or proceeding brought with respect to the Property and to commence any action or proceeding to protect the interests of Trustee and/or Lender in the Property;

(k)    Agreements . All agreements, contracts (including purchase, sale, option, right of first refusal and other contracts pertaining to the Property), certificates, instruments, franchises, permits, licenses, approvals, consents, plans, specifications, franchise agreements and other documents, now or hereafter entered into, and all rights therein and thereto, respecting or pertaining to the use, occupation, construction, management or operation of the Property (including any Improvements or respecting any business or activity conducted on the Land and any part thereof) and all right, title and interest of Borrower therein and thereunder, including, without limitation, the right, upon the occurrence and during the continuance of any Event of Default, to receive and collect any sums payable to Borrower thereunder and specifically including that certain Assignment of Contracts, Licenses, Permits, Agreements, Warranties and Approvals between Borrower and the Lessee dated as of even date hereof (the “ Assignment of Contracts” ) and the Original Assignment;

(l)    Trademarks . All tradenames, trademarks, servicemarks, logos, copyrights, goodwill, books and records and all other general intangibles relating to or used in connection with the operation of the Property;

(m)    Accounts . All accounts, accounts receivable, escrows (including, without limitation, all escrows, deposits, reserves and impounds established pursuant to that certain Escrow Agreement for Reserves and Impounds of even date herewith between Borrower and Lender; hereinafter the “ Escrow Agreement”) , documents, instruments, chattel paper, deposit accounts, investment property, claims, reserves (including deposits) representations, warranties and general intangibles, as one or more of the foregoing terms may be defined in the Uniform Commercial Code, and all contract rights, franchises, books, records, plans, specifications, permits, licenses (to the extent assignable), approvals, actions, choses, commercial tort claims, suits, proofs of claims in bankruptcy and causes of action which now or hereafter relate to, are derived from or are used in connection with the Property, including, without limitation, all 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 Debtor 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, or arising from the sale of any Property or the rendition of services in the ordinary course of business or otherwise (whether or not earned by performance), together with any

Property returned by or reclaimed from customers wherever such Property is located, or the use, operation, maintenance, occupancy or enjoyment thereof or the conduct of any business activities thereon (hereinafter collectively called the “ Intangibles” ); and

(n)    Liquor License . To the extent assignable, all licenses, permits, approvals and consents which are required for the sale and service of alcoholic beverages on the Property heretofore or hereafter obtained by Borrower from applicable state and local authorities.

(o)    Other Rights . Any and all other rights of Borrower in and to the Property and any accessions, renewals, replacements and substitutions of all or any portion of the Property and all proceeds derived from the sale, transfer, assignment or financing of the Property or any portion thereof.

Section 1.2    ASSIGNMENT OF RENTS . Borrower hereby absolutely and unconditionally assigns to Lender Borrower's right, title and interest in and to all current and future Leases and Rents; it being intended by Borrower that this assignment constitutes a specific, perfected and choate assignment upon recording pursuant to RCW 7.28.230. Nevertheless, subject to the terms of this Section 1.2 and the terms and conditions of that certain Assignment of Rents and Leases, of even date herewith between Borrower and Lender (the “ ALR” ), Lender grants to Borrower a revocable license to collect and receive the Rents. Borrower shall hold the Rents, or a portion thereof sufficient to discharge all current sums due on the Debt, for use in the payment of such sums and may utilize all other portions of the rents for the payment of costs and expenses of operation of the Property and thereafter as deemed appropriate by Borrower.

Section 1.3    DEFINITION OF PERSONAL PROPERTY . For purposes of this Security Instrument, the Property identified in Subsections 1.1(d) through 1.1(o) , inclusive, shall be collectively referred to herein as the “ Personal Property .”

Section 1.4    PLEDGE OF MONIES HELD . Borrower hereby pledges to Lender any and all monies now or hereafter held by Lender, including, without limitation, any sums deposited in the Funds (as defined in the Escrow Agreement), all insurance proceeds described in Section 3.2 and condemnation awards or payments described in Section 3.4 , as additional security for the Obligations until expended or applied as provided in this Security Instrument.

TO HAVE AND TO HOLD the above granted and described Property unto and to the use and benefit of Trustee, and the successors and assigns of Trustee, forever;

PROVIDED, HOWEVER, these presents are upon the express condition that, if Borrower shall well and truly pay to Lender the Debt at the time and in the manner provided in the Note and this Security Instrument, shall well and truly perform the Other Obligations as set forth in this Security Instrument and shall well and truly abide by and comply with each and

every covenant and condition set forth herein and in the Note, these presents and the estate hereby granted shall cease, terminate and be void; provided   however , that Borrower's obligation to indemnify and hold harmless Lender pursuant to the provisions hereof with respect to matters relating to any period of time during which this Security Instrument was in effect shall survive any such payment or release.

ARTICLE 2 -    DEBT AND OBLIGATIONS SECURED

Section 2.1    DEBT . This Security Instrument and the grants, assignments and transfers made in Article 1 are given for the purpose of securing the following, in such order of priority as Lender may determine in its sole discretion (the “ Debt” ):

(a)    the payment of the indebtedness evidenced by the Note in lawful money of the United States of America;

(b)    the payment of interest, default interest, late charges and other sums, as provided in the Note, this Security Instrument or the Other Loan Documents (as hereinafter defined);

(c)    the payment of all other moneys agreed or provided to be paid by Borrower in the Note, this Security Instrument or the Other Loan Documents;

(d)    the payment of all sums advanced pursuant to this Security Instrument to protect and preserve the Property and the lien and the security interest created hereby; and

(e)    the payment of all sums advanced, costs and expenses incurred, and processing fees charged by Lender in connection with the Debt or any part thereof, any renewal, extension, or change of or substitution for the Debt or any part thereof, or the acquisition or perfection of the security therefor, whether made or incurred at the request of Borrower or Lender.

Section 2.2    OTHER OBLIGATIONS . This Security Instrument and the grants, assignments and transfers made in Article 1 are also given for the purpose of securing the following (the “ Other Obligations” ):

(a)    the performance of all other obligations of Borrower contained herein;

(b)    the performance of each obligation of Borrower contained in any other agreement given by Borrower to Lender which is for the purpose of further securing the obligations secured hereby, and any amendments, modifications and changes thereto; and

(c)    the performance of each obligation of Borrower contained in any renewal, extension, amendment, modification, consolidation, change of, or substitution or

replacement for, all or any part of the Note, this Security Instrument or the Other Loan Documents.

Section 2.3    DEBT AND OTHER OBLIGATIONS . Borrower's obligations for the payment of the Debt and the performance of the Other Obligations shall be referred to collectively herein as the " Obligations ."

Section 2.4    PAYMENTS . Unless payments are made in the required amount in immediately available funds at the place where the Note is payable, remittances in payment of all or any part of the Debt shall not, regardless of any receipt or credit issued therefor, constitute payment until the required amount is actually received by Lender in funds immediately available at the place where the Note is payable (or any other place as Lender, in Lender's sole discretion, may have established by delivery of written notice thereof to Borrower) and shall be made and accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks. Acceptance by Lender of any payment in an amount less than the amount then due shall be deemed an acceptance on account only, and the failure to pay the entire amount then due shall be and continue to be an Event of Default (as hereinafter defined).

ARTICLE 3 -    BORROWER COVENANTS

Borrower covenants and agrees that:

Section 3.1    INCORPORATION BY REFERENCE . All the covenants, conditions and agreements contained in (a) the Note, and (b) all and any of the documents other than the Note or this Security Instrument now or hereafter executed by Borrower and/or others and by or in favor of Lender in connection with the creation of the Obligations, the payment of any other sums owed by Borrower to Lender or the performance of any Obligations (collectively the “ Other   Loan Documents” ), are hereby made a part of this Security Instrument to the same extent and with the same force as if fully set forth herein. The term “ Loan Documents” as used herein shall individually and collectively refer to the Note, this Security Instrument and the Other Loan Documents; provided , however , that notwithstanding any provision of this Security Instrument to the contrary, the Obligations of the Borrower under that certain Environmental Indemnity Agreement of even date herewith executed by Borrower in favor of Lender (the “ Environmental Indemnity” ) and the Obligations of the Guarantor under that certain Guaranty of even date herewith executed by Guarantor in favor of Lender (the “ Guaranty”) shall not be deemed or construed to be secured by this Security Instrument or otherwise restricted or affected by the foreclosure of the lien hereof or any other exercise by Lender of its remedies hereunder or under any other Loan Document, such Environmental Indemnity and Guaranty being intended by the signatories thereto to be its (or their) unsecured obligation.

Section 3.2    INSURANCE .

(a)    Borrower shall obtain and maintain (or cause to be obtained and maintained), shall pay all premiums in accordance with Subsection 3.2(b) below for, and

shall deliver to Lender certificates reasonably acceptable to Lender evidencing, insurance for Borrower and the Property providing at least the following coverages:

(i)    comprehensive all risk insurance providing "special" form coverage (including, without limitation, riot and civil commotion, vandalism, malicious mischief, water, fire, burglary and theft, sinkhole collapse, windstorm, hail, smoke, aircraft or vehicles, sprinkler leakage, and damage from weight of ice or snow, and without any exclusion for terrorism) on the Improvements and the Personal Property and in each case (A) in an amount equal to 100% of the "Full Replacement Cost," which for purposes of this Security Instrument shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation; (B) containing an agreed amount endorsement and replacement cost endorsement with respect to the Improvements and Personal Property waiving all co-insurance provisions; (C) providing that the deductible shall not exceed $100,000.00, for so long as the Original Principal (as defined herein) shall control the Borrower; and (D) containing Demolition Costs, Increased Cost of Construction and "Ordinance or Law Coverage" or "Enforcement" endorsements in amounts satisfactory to Lender if any of the Improvements or the use of the Property shall at any time constitute legal non-conforming structures or uses or the ability to rebuild the Improvements is restricted or prohibited. The Full Replacement Cost may be redetermined from time to time by an appraiser or contractor designated and paid by Lender or by an engineer or appraiser in the regular employ of the insurer. No omission on the part of Lender to request any such appraisals shall relieve Borrower of any of its obligations under this Subsection. Notwithstanding anything contained herein to the contrary, the deductible for windstorm coverage shall be equal to the lesser of (a) a commercially reasonable market deductible based on similar properties located in the geographic region where the Property is located or (b) ten percent (10%) of the Full Replacement Cost;

(ii)    comprehensive commercial general liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about the Property, such insurance (A) to be on the so-called "occurrence" form with a combined single limit of not less than $1,000,000.00 per occurrence and not less than $2,000,000.00 in the aggregate, as well as liquor liability insurance in a minimum amount of $2,000,000.00 if any part of the Property is covered by a liquor license and an aggregate coverage limit acceptable to Lender; (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; (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 contracts; (5) contractual liability covering the indemnities contained in Article 11  

hereof to the extent the same is available; and (D) to be with a $25,000.00 deductible;

(iii)    business income insurance (A) with loss payable to Lender; (B) covering losses of income and Rents derived from the Property and any non-insured property on or adjacent to the Property resulting from any risk or casualty whatsoever; (C) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of six (6) months from the date that the 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; and (D) in an amount equal to 100% of the projected gross income from the Property for a period of twelve (12) months. The amount of such business income insurance shall be determined by Lender prior to the date hereof and at least once each year thereafter based on Borrower's reasonable estimate of the gross income from the Property for the succeeding twelve (12) month period. All insurance proceeds payable to Lender pursuant to this Subsection 3.2(a) shall be held by Lender and shall be applied to the obligations secured hereunder 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 hereunder on the respective dates of payment provided for in the Note except to the extent such amounts are actually paid out of the proceeds of such business income insurance;

(iv)    at all times during which structural construction, repairs or alterations are being made with respect to the Improvements: (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 3.2(a)(i) 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 3.2(a)(i) , (3) including permission to occupy the Property, and (4) with an agreed amount endorsement waiving co-insurance provisions;

(v)    workers' compensation, subject to the statutory limits of the state in which the Property is located, and employer's liability insurance with a limit of at least $1,000,000.00 per accident and per disease per employee, and $1,000,000.00 for disease aggregate in respect of any work or operations on or about the Property, or in connection with the Property or its operation (if applicable);

(vi)    comprehensive boiler and machinery insurance (without exclusion for explosion), if applicable, covering all boilers or other pressure vessels, turbines, engines, machinery and equipment located at or about the Property

(including, without limitation, electrical equipment, sprinkler systems, heating and air conditioning equipment, refrigeration equipment and piping) for 100% of the full replacement cost of such equipment and the building or buildings housing same;

(vii)    if any portion of the Improvements is currently or at any time in the future located in a "special flood hazard area" as designated by the Federal Emergency Management Agency or such other applicable federal agency, flood hazard insurance in an amount equal to the maximum amount available under the National Flood Insurance Program and in addition to the maximum available under the National Flood Insurance Program, any excess limits as determined by Lender in its sole and absolute discretion;

(viii)    umbrella liability insurance in an amount not less than Ten Million and No/100 Dollars $10,000,000.00 per occurrence and in the aggregate on terms consistent with the commercial general liability insurance policy required under Section 3.2(a)(ii) hereof ;

(ix)    if the Property is in an area identified by any governmental, engineering or any hazard underwriting agencies as being subject to the peril of earthquake or located in an area with a high degree of seismic activity, with a probable maximum loss (“ PML” ) exceeding fifteen percent (15%), earthquake insurance equal to fifteen percent (15%) of the Full Replacement Cost with a waiver of depreciation of the Property; and

(x)    such other insurance and in such 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 Property located in or around the region in which the Property is located, including, without limitation, mine subsidence insurance and environmental insurance, to the extent available on commercially reasonable terms.

(b)    All insurance provided for in Subsection 3.2(a) hereof shall be obtained under valid and enforceable policies (the “ Policies” or in the singular, the “ Policy” ), in such forms and, from time to time after the date hereof, in such amounts as may from time to time be satisfactory to Lender, for a minimum policy term not less than one year, issued by financially sound and responsible insurance companies authorized to do business in the state in which the Property is located as admitted or unadmitted carriers which, in either case, have been approved by Lender and which have a claims paying ability rating of at least A or better issued by Standard & Poor's Ratings Services, a division of the Mc-Graw Hill Companies, Inc. or with a claims paying ability rating otherwise acceptable to Lender (each such insurer shall be referred to below as a “ Qualified Insurer” ). Such Policies shall not be subject to invalidation due to the use or occupancy of the Property for purposes more hazardous than the use of the Property at the time such Policies were issued. Not less than thirty (30) days prior to the expiration

dates of the Policies theretofore furnished to Lender pursuant to Subsection 3.2(a) , certificates evidencing renewal or replacement Policies accompanied by evidence satisfactory to Lender of payment of the premiums due thereunder (the “ Insurance Premiums” ), shall be delivered by Borrower to Lender. No Policy required under Sections 3.2(a)(i) and (iii) hereof shall contain an exclusion from coverage under such Policy for loss or damage incurred as a result of an act of terrorism or similar acts of sabotage, or if any such Policy does contain such an exclusion, Borrower shall obtain and maintain a separate terrorism insurance policy with coverage amounts and for periods required by Sections 3.2(a)(i) and (iii) above (“ Terrorism Coverage” ); provided, however, Borrower shall not be required to pay more than $_________ (the “ Terrorism Premium Cap” ) in annual premiums to obtain Terrorism Coverage.  If the Terrorism Premium Cap is not sufficient to purchase the amount of Terrorism Coverage required by Sections 3.2(a)(i) and (iii) above, then Borrower shall purchase the amount of Terrorism Coverage that is available for the Terrorism Premium Cap. Upon a request by Lender, Borrower shall provide to Lender certified copies of the Policies.

(c)    Borrower shall not obtain (i) separate insurance concurrent in form or contributing in the event of loss with that required in Subsection 3.2(a) to be furnished by, or which may be reasonably required to be furnished by, Borrower, or (ii) any umbrella or blanket liability or casualty Policy unless, in each case, Lender's interest is included therein as provided in this Security Instrument and such Policy is issued by a Qualified Insurer. If Borrower obtains separate insurance or an umbrella or a blanket Policy, Borrower shall notify Lender of the same and shall cause certified copies of each Policy to be delivered as required in Subsection 3.2(a) . Any blanket insurance Policy shall specifically allocate to the 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 Property in compliance with the provisions of Subsection 3.2(a) .

(d)    All Policies of insurance provided for or contemplated by Subsection 3.2(a) shall name Lender, its successors and assigns, including any servicers, trustees or other designees of Lender, and Borrower as the insured or additional insured, as their respective interests may appear, and in the case of property damage, boiler and machinery, and flood insurance, shall contain a so-called New York standard non-contributing Lender clause in favor of Lender providing that the loss thereunder shall be payable to Lender.

(e)    All Policies of insurance provided for in Subsection 3.2(a) shall contain clauses or endorsements to the effect that:

(i)    no act or negligence of Borrower, or anyone acting for Borrower, or of any tenant under any Lease 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;

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

(iii)    each Policy shall provide that the issuers thereof shall give written notice to Lender if the Policy has not been renewed thirty (30) days prior to its expiration; and

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

(f)    Borrower shall furnish to Lender within ten (10) calendar days after Lender's request therefor, a statement certified by Borrower or a duly authorized officer of Borrower of the amounts of insurance maintained in compliance herewith, of the risks covered by such insurance and of the insurance company or companies which carry such insurance and, if requested by Lender, verification that the insurance policies maintained on the Property comply with the requirements hereof, issued by an independent insurance broker or appraiser acceptable to Lender.

(g)    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 but not the obligation, without notice to Borrower, to take such action as Lender deems necessary to protect its interest in the Property, including, without limitation, the obtaining of such insurance coverage as Lender in its sole discretion deems appropriate, and all expenses 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 this Security Instrument and shall bear interest at the Default Rate (as hereinafter defined).

(h)    If the Property shall be damaged or destroyed, in whole or in part, by fire or other casualty, Borrower shall give prompt notice thereof to Lender.

(i)    In case of loss covered by Policies, Lender may either (1) settle and adjust any claim without the consent of Borrower, or (2) allow Borrower to agree with the insurance company or companies on the amount to be paid upon the loss; provided , that so long as Original Principal controls Borrower, Borrower may adjust losses aggregating not in excess of $100,000.00 if such adjustment is carried out in a competent and timely manner, and provided that in any case Lender shall and is hereby authorized to collect and receive any such insurance proceeds; and the reasonable expenses incurred by Lender in the adjustment and collection of insurance proceeds shall become part of the Debt and be secured

hereby and shall be reimbursed by Borrower to Lender upon demand (unless deducted by and reimbursed to Lender from such proceeds).

(ii)    In the event of any insured damage to or destruction of the Property or any part thereof (herein called an “ Insured Casualty” ), if (A) in the reasonable judgment of Lender, the Property can be restored within six (6) months after insurance proceeds are made available and at least six (6) months prior to the Maturity Date (as defined in the Note) to an economic unit not less valuable (including an assessment by Lender of the impact of the termination of any Leases due to such Insured Casualty) and not less useful than the same was prior to the Insured Casualty, and after such restoration will adequately secure the outstanding balance of the Debt, and (B) no Event of Default (hereinafter defined) shall have occurred and be then continuing, then the proceeds of insurance shall be applied to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Property or part thereof subject to Insured Casualty, as provided below; and Borrower hereby covenants and agrees forthwith to commence and diligently to prosecute such restoring, repairing, replacing or rebuilding; provided , however , in any event Borrower shall pay all costs (and if required by Lender, Borrower shall deposit the total thereof with Lender in advance) of such restoring, repairing, replacing or rebuilding in excess of the net proceeds of insurance made available pursuant to the terms hereof.

(iii)    Except as provided above, the proceeds of insurance collected upon any Insured Casualty shall, at the option of Lender in its sole discretion, be applied to the payment of the Debt or applied to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Property or part thereof subject to the Insured Casualty, in the manner set forth below. Any such application to the Debt shall not be considered a voluntary prepayment requiring payment of the prepayment consideration provided in the Note, and, except as provided in the Note, shall not reduce or postpone any payments otherwise required pursuant to the Note, other than the final payment on the Note.

(iv)    If proceeds of insurance, if any, are made available to Borrower for the restoring, repairing, replacing or rebuilding of the Property, Borrower hereby covenants to restore, repair, replace or rebuild the same to be of at least equal value and of substantially the same character as prior to such damage or destruction, all to be effected in accordance with applicable law and plans and specifications approved in advance by Lender.

(v)    If Borrower is entitled to reimbursement out of insurance proceeds held by Lender, such proceeds shall be disbursed from time to time upon Lender being furnished with (1) evidence satisfactory to it (which evidence may include inspection[s] of the work performed) that the restoration, repair, replacement and rebuilding covered by the disbursement has been completed in accordance with

plans and specifications approved by Lender, (2) evidence satisfactory to it of the estimated cost of completion of the restoration, repair, replacement and rebuilding, (3) funds, or, at Lender's option, assurances satisfactory to Lender that such funds are available, sufficient in addition to the proceeds of insurance to complete the proposed restoration, repair, replacement and rebuilding, and (4) such architect's certificates, waivers of lien, contractor's sworn statements, title insurance endorsements, bonds, plats of survey and such other evidences of cost, payment and performance as Lender may reasonably require and approve; and Lender may, in any event, require that all plans and specifications for such restoration, repair, replacement and rebuilding be submitted to and approved by Lender prior to commencement of work. With respect to disbursements to be made by Lender: (A) no payment made prior to the final completion of the restoration, repair, replacement and rebuilding shall exceed ninety percent (90%) of the value of the work performed from time to time; (B) funds other than proceeds of insurance shall be disbursed prior to disbursement of such proceeds; and (C) at all times, the undisbursed balance of such proceeds remaining in the hands of Lender, together with funds deposited for that purpose or irrevocably committed to the satisfaction of Lender by or on behalf of Borrower for that purpose, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the restoration, repair, replacement or rebuilding, free and clear of all liens or claims for lien and the costs described in Subsection 3.2(h)(vi) below. Any surplus which may remain out of insurance proceeds held by Lender after payment of such costs of restoration, repair, replacement or rebuilding shall be paid to any party entitled thereto. In no event shall Lender assume any duty or obligation for the adequacy, form or content of any such plans and specifications, nor for the performance, quality or workmanship of any restoration, repair, replacement and rebuilding.

(vi)    Notwithstanding anything to the contrary contained herein, the proceeds of insurance reimbursed to Borrower in accordance with the terms and provisions of this Security Instrument shall be reduced by the reasonable costs (if any) incurred by Lender in the adjustment and collection thereof and in the reasonable costs incurred by Lender of paying out such proceeds (including, without limitation, reasonable attorneys' fees and costs paid to third parties for inspecting the restoration, repair, replacement and rebuilding and reviewing the plans and specifications therefor).

Section 3.3    PAYMENT OF TAXES, ETC .

(a)    Borrower shall pay (or cause to be paid) all taxes, assessments, water rates, sewer rents, governmental impositions, and other charges, including without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Land, now or hereafter levied or assessed or imposed against the Property or any part thereof (the “ Taxes” ), all ground rents, maintenance charges and similar

charges, now or hereafter levied or assessed or imposed against the Property or any part thereof (the “ Other Charges” ), and all charges for utility services provided to the Property as same become due and payable. Borrower will deliver to Lender, promptly upon Lender's request, evidence satisfactory to Lender that the Taxes, Other Charges and utility service charges have been so paid or are not then delinquent. Borrower shall not allow and shall promptly cause to be paid and discharged any lien or charge whatsoever which may be or become a lien or charge against the Property. Except to the extent sums sufficient to pay all Taxes and Other Charges have been deposited with Lender in accordance with the terms of this Security Instrument, Borrower shall furnish to Lender paid receipts for the payment of the Taxes and Other Charges prior to the date the same shall become delinquent.

(b)    After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any of the Taxes, provided that (i) no Event of Default has occurred and is continuing under the Note, this Security Instrument or any of the Other Loan Documents, (ii) Borrower is permitted to do so under the provisions of any other mortgage, deed of trust or deed to secure debt affecting the Property, (iii) such proceeding shall suspend the collection of the Taxes from Borrower and from the Property or Borrower shall have paid all of the Taxes under protest, (iv) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder, (v) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost, (vi) Borrower shall have set aside and deposited with Lender adequate reserves for the payment of the Taxes, together with all interest and penalties thereon, unless Borrower has paid all of the Taxes under protest, and (vii) Borrower shall have furnished the security as may be required in the proceeding, or as may be requested by Lender to insure the payment of any contested Taxes, together with all interest and penalties thereon.

Section 3.4    CONDEMNATION . Borrower shall, or shall cause Lessee to promptly give Lender notice of the actual or threatened commencement of any condemnation or eminent domain proceeding and shall deliver to Lender copies of any and all papers served in connection with such proceedings. In case of any condemnation award excess of $100,000.00, Lender may either (1) settle and adjust any such claim with the consent of Borrower (which consent shall not be unreasonably withheld, conditioned or delayed and shall not be required during the continuance of an Event of Default), or (2) allow Borrower to agree with the condemning authority on the amount of the award to be paid. Borrower has the sole right to agree with the condemning authority with regard to condemnation awards in any one instance aggregating not in excess of $100,000.00 if Borrower acts in a competent and timely manner. While an Event of Default is continuing hereunder, 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 or payment for said condemnation or eminent domain and to make any compromise or settlement in connection with such proceeding, subject to the provisions of this Security Instrument.

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 Security Instrument and the Debt shall not be reduced until any award or payment therefor shall have been actually received and applied by Lender, after the deduction of reasonable 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. Borrower shall cause the award or payment made in any condemnation or eminent domain proceeding, which is payable to Borrower, to be paid directly to Lender. Lender may apply any award or payment to the reduction or discharge of the Debt whether or not then due and payable (such application to be free from any prepayment consideration provided in the Note, except that if an Event of Default, or an event which with notice and/or the passage of time, or both, would constitute an Event of Default, has occurred, then such application shall be subject to the full prepayment consideration computed in accordance with the Note). If the Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of the award or payment, 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 payment, or a portion thereof sufficient to pay the Debt.

Section 3.5    USE AND MAINTENANCE OF PROPERTY . Borrower shall cause the Property to be maintained and operated in a good and safe condition and repair and in keeping with the condition and repair of properties of a similar use, value, age, nature and construction. Borrower shall not allow the Property to be used, maintained or operated in any manner which constitutes a public or private nuisance or which makes void, voidable, or cancelable, or increases the premium of, any insurance then in force with respect thereto. The Improvements and the Personal Property shall not be removed, demolished or materially altered (except for normal replacement of the Personal Property with items of the same utility and of equal or greater value) without the prior written consent of Lender. Borrower shall, or shall cause Lessee to promptly repair, replace or rebuild any part of the Property which may be destroyed by any casualty (to the extent Lender permits the use of insurance proceeds for repair after an insured casualty) , or become damaged, worn or dilapidated or which may be affected by any proceeding of the character referred to in Section 3.4 hereof and shall complete and pay for any structure at any time in the process of construction or repair on the Land. Neither Borrower nor Lessee shall initiate, join in, acquiesce in, or consent to any change in any private restrictive covenant, zoning law or other public or private restriction, limiting or defining the uses which may be made of the Property or any part thereof. If under applicable zoning provisions the use of all or any portion of the Property is or shall become a nonconforming use, neither Borrower nor Lessee will cause or permit the nonconforming use to be discontinued or abandoned without the express written consent of Lender (provided that Lender permits Borrower to use the proceeds of insurance for such purpose, to the extent discontinuance or abandonment would result from an insured casualty). Neither Borrower nor Lessee shall take any steps whatsoever to convert the Property, or any portion thereof, to a condominium or cooperative form of management.

Section 3.6    WASTE . Borrower shall not commit or suffer any waste of the Property or allow Lessee to commit or suffer any waste of the Property (excluding waste which results from an insured casualty for which Lender does not release insurance proceeds) or, without first obtaining such additional insurance as may be necessary to cover a proposed change in use of the Property, make or allow Lessee to make any change in the use of the Property which will in any way materially increase the risk of fire or other hazard arising out of the operation of the Property, or take any action that might invalidate or give cause for cancellation of any Policy, or do or permit to be done thereon anything that may in any way impair the value of the Property or the security of this Security Instrument. Borrower will not, nor will allow Lessee, without the prior written consent of Lender, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of the Land, regardless of the depth thereof or the method of mining or extraction thereof.

Section 3.7    COMPLIANCE WITH LAWS; ALTERATIONS .

(a)    Borrower shall promptly comply with and cause Lessee to promptly comply, in all material respects, with all existing and future federal, state and local laws, orders, ordinances, governmental rules and regulations or court orders affecting or which may be interpreted to affect the Property, or the use thereof, including, but not limited to, the Americans with Disabilities Act (the “ ADA” ) (collectively “ Applicable Laws” ).

(b)    Notwithstanding any provisions set forth herein or in any document regarding Lender's approval of alterations of the Property, Borrower shall not alter the Property (or allow Lessee to alter the Property) in any manner which would increase Borrower's (or, if applicable, Lessee's) responsibilities for compliance with Applicable Laws without the prior written approval of Lender. Lender's approval of the plans, specifications, or working drawings for alterations of the Property shall create no responsibility or liability on behalf of Lender for their completeness, design, sufficiency or their compliance with Applicable Laws. The foregoing shall apply to tenant improvements constructed by Borrower or Lessee or by any of its tenants. Lender may condition any such approval upon receipt of a certificate of compliance with Applicable Laws from an independent architect, engineer, or other person acceptable to Lender.

(c)    Borrower shall give prompt notice to Lender of the receipt by Borrower of any notice related to a violation of any Applicable Laws and of the commencement of any proceedings or investigations which relate to compliance with Applicable Laws.

(d)    Borrower shall take commercially reasonable measures to prevent and will not engage in or knowingly permit any illegal activities at the Property.

Section 3.8    BOOKS AND RECORDS .

(a)    Borrower shall keep accurate books and records of account in accordance with sound accounting principles in which full, true and correct entries shall be promptly made with respect to Borrower, the Property and the operation thereof, and will permit all such books and records (including without limitation all contracts, statements, invoices, bills and claims for labor, materials and services supplied for the construction, repair or operation to Borrower of the Improvements) to be inspected or audited, subject to the provisions of the Management Agreement, and copies made by Lender and its representatives during normal business hours and at any other reasonable times. Borrower represents that its chief executive office is as set forth in the introductory paragraph of this Security Instrument and that all books and records pertaining to the Property are maintained at the Property or at the office of the Property Manager, or, if applicable, the Qualified Manager. Borrower will furnish, or cause to be furnished, to Lender on or before forty-five (45) calendar days after the end of each calendar quarter the following items, each certified by Borrower as being true and correct, in such format and in such detail as Lender or its servicer may request:

(i)    if (and only if) there are tenants at the Property (other than the Lessee) a written statement (rent roll) dated as of the last day of each such calendar quarter identifying each of the Leases by the term, space occupied, rental required to be paid, security deposit paid, any rental concessions, and identifying any defaults or payment delinquencies thereunder;

(ii)    a report of occupancy for the hotel located on the Property for the subject quarter, including an average daily rate, and any and all franchise inspection reports received by Borrower during the subject quarter; and

(iii)    quarterly and year to date operating statements prepared for each calendar quarter during each such reporting period detailing the total revenues received and total expenses incurred with respect to the Property.

(b)    Within ninety (90) calendar days following the end of each calendar year, Borrower shall furnish to Lender (i) a statement of profit and loss for the Property in such format and in such reasonable detail as Lender or its servicer may request and (ii) a certificate from an authorized representative of Borrower certifying, to the best knowledge of the authorized representative of Borrower, that such annual financial statements present fairly the financial condition and the results of operations of Borrower and the Property and, following an Event of Default, an unqualified opinion of a firm of independent accountants reasonably acceptable to Lender.

(c)    Borrower will permit representatives appointed by Lender, including independent accountants, agents, attorneys, appraisers and any other persons, to visit and

inspect during its normal business hours and at any other reasonable times any of the Property and to make photographs thereof, and to write down and record any information such representatives obtain, and shall permit Lender or its representatives to investigate and verify the accuracy of the information furnished to Lender under or in connection with this Security Instrument or any of the Other Loan Documents and to discuss all such matters with its officers, employees and representatives. Borrower will furnish to Lender at Borrower's expense all evidence which Lender may from time to time reasonably request as to the accuracy and validity of or compliance with all representations and warranties made by Borrower in the Loan Documents and satisfaction of all conditions contained therein. Any inspection or audit of the Property or the books and records of Borrower, or the procuring of documents and financial and other information, by or on behalf of Lender, shall be at Borrower's expense up to $2,000.00 per inspection or audit and requested no more than once per year prior to an Event of Default, and shall not constitute any assumption of responsibility or liability by Lender to Borrower or anyone else with regard to the condition, construction, maintenance or operation of the Property, nor Lender's approval of any certification given to Lender nor relieve Borrower of any of Borrower's obligations.

(d)    Prior to the transfer of the Loan by Lender pursuant to Section 16.1 hereof , Borrower shall deliver to Lender the reports required by Section 3.8(a) on a monthly basis. Such reports shall be delivered within thirty (30) calendar days after the end of each calendar month.

Section 3.9    PAYMENT FOR LABOR AND MATERIALS .

(a)    Borrower will promptly pay when due and cause Lessee to promptly pay when due all bills and costs for labor, materials, and specifically fabricated materials incurred in connection with the Property and never permit to exist beyond the due date thereof in respect of the Property or any part thereof any lien or security interest, even though inferior to the liens and the security interests hereof, and in any event never permit to be created or exist in respect of the 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 Exceptions (as hereinafter defined).

(b)    After prior written notice to Lender, Borrower, at its own expense may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any of the bills and costs referred to in Section 3.9(a) , provided that (i) no Event of Default has occurred and is continuing under the Note, this Security Instrument or any of the Other Loan Documents, (ii) such proceeding shall suspend the collection of such bills and costs from Borrower and from the Property or Borrower shall have paid all of such bills and costs under protest, (iii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder, (iv) neither the Property nor any part thereof or

interest therein will be in danger of being sold, forfeited, terminated, canceled or lost and (v) Borrower shall have set aside and deposited with Lender adequate reserves or other security, reasonably satisfactory to Lender, for the payment of such bills and costs, together with all interest and penalties thereon, unless Borrower has paid all of such bills and costs under protest.

Section 3.10    PERFORMANCE OF OTHER AGREEMENTS . Borrower shall observe and perform and cause Lessee to observe and perform each and every term to be observed or performed by Borrower or Lessee pursuant to the terms of any agreement or recorded instrument affecting or pertaining to the Property, or given by Borrower to Lender for the purpose of further securing an obligation secured hereby and any amendments, modifications or changes thereto.

Section 3.11    CERTAIN HOTEL COVENANTS . Borrower further covenants and agrees with Lender as follows:

(a)    Subject to Section 3.11(c)(i) below, Borrower shall cause the Lessee to cause the hotel located on the Property to be operated pursuant to the Franchise Agreement (as hereinafter defined) and the Management Agreement (as hereinafter defined).

(b)    Borrower covenants and agrees that it shall (or, if applicable, Borrower shall cause the Lessee to):

(i)    promptly perform and/or observe all of the covenants and agreements required to be performed and observed by it under the Franchise Agreement and the Management Agreement and do all things necessary to preserve and to keep unimpaired its material rights thereunder;

(ii)    promptly notify Lender of any default under the Franchise Agreement or the Management Agreement of which it is aware;

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

(iv)    promptly enforce the performance and observance of all of the covenants and agreements required to be performed and/or observed by Promus Hotels, Inc., a Delaware corporation (the “ Franchisor” ) under the Franchise Agreement and the Property Manager under the Management Agreement.

(c)    Borrower consents and agrees that it shall not allow the Lessee to do the following, without Lender's prior written consent:

(i)    surrender, terminate or cancel the Franchise Agreement or the Management Agreement; provided , however , the Management Agreement may be

terminated by the Lessee if the Property Manager is in default under the terms of the Management Agreement or the Lessee otherwise has the right to terminate the Property Manager under the terms of the Management Agreement so long as Lessee, before terminating the Management Agreement, notifies Lender of its intention to do so and agrees to provide a Qualified Manager which shall replace the Property Manager. " Qualified Manager” shall mean a replacement property manager of the Property which, including its affiliates, (i) has been approved, in writing, by the Franchisor, with evidence of such approval sent to Lender, (ii) is the property manager pursuant to a replacement property management agreement that is structured at then-prevailing market rates for manager of properties similar to the Property and (iii) agrees to enter into (with Borrower, Lessee and Lender) a tri-party agreement acceptable to Lender comparable to the Acknowledgment of Property Manager executed by the Property Manager as of even date herewith. Notwithstanding anything contained herein to the contrary, the provisions of Section 8.4(b) must also be complied with in order for a Qualified Manager to be appointed or selected;

(ii)    reduce or consent to the reduction of the term of the Franchise Agreement;

(iii)    increase or consent to the increase of the amount of any charges under the Franchise Agreement or in the management fees payable under the Management Agreement in excess of five percent (5%) of gross revenues of the Property; or

(iv)    otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Franchise Agreement in any material respect.

(d)    Borrower shall not, without Lender's prior consent, enter into transactions (or allow Lessee to enter into transactions) with any affiliate, including without limitation, any arrangement providing for the managing of the hotel located on the Property, the rendering or receipt of services or the purchase or sale of inventory, except any such transaction in the ordinary course of business of Borrower if the monetary or business consideration arising therefrom would be substantially as advantageous to Borrower as the monetary or business consideration that would obtain in a comparable transaction with a person not an affiliate of Borrower.

(e)    Except as provided in Section 3.11(c)(i) , Borrower shall cause the Lessee to maintain the Management Agreement for the operation of the Property in full force and effect and timely perform all of Lessee's obligations thereunder and enforce performance of all obligations of the Property Manager thereunder, and not permit the termination or amendment of such Management Agreement unless the prior written consent of Lender is first obtained. Borrower will cause the Lessee and the Property Manager to enter into an assignment and subordination of such Management Agreement in form satisfactory to

Lender, assigning and subordinating the Property Manager's interest in the Property and all fees and other rights of the manager pursuant to such Management Agreement to the rights of Lender.

ARTICLE 4 -    SPECIAL COVENANTS

Borrower covenants and agrees that:

Section 4.1    PROPERTY USE . The Property shall be used only for a hotel and ancillary services and amenities, and for no other use without the prior written consent of Lender, which consent may be withheld in Lender's sole and absolute discretion.

Section 4.2    ERISA .

(a)    It shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Security Instrument and the Other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended (“ ERISA” ).

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

(i)    Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. § 2510.3-101(b)(2);

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

(iii)    Borrower qualifies as an "operating company" or a "real estate operating company" within the meaning of 29 C.F.R. § 2510.3-101(c) or (e) or an investment company registered under The Investment Company Act of 1940.

Section 4.3    SINGLE PURPOSE ENTITY . (1) Borrower covenants and agrees that it has not and shall not:

(a)    engage in any business or activity other than the acquisition, ownership, operation and maintenance of the Property, and activities incidental thereto;

(b)    acquire or own any material asset other than (i) the Property, and (ii) such incidental Personal Property as may be necessary for the operation of the Property;

(c)    merge into or consolidate with any person or entity or dissolve, terminate or liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure, without in each case Lender's consent;

(d)    fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the laws of the jurisdiction of its organization or formation, or without the prior written consent of Lender, amend or modify in any material respect, terminate or fail to comply with the provisions of Borrower's Partnership Agreement, Articles or Certificate of Incorporation, Articles of Organization, Operating Agreement or similar organizational documents, as the case may be;

(e)    own any subsidiary or make any investment in or acquire the obligations or securities of any other person or entity without the consent of Lender;

(f)    commingle its assets with the assets of any of its partner(s), members, shareholders, affiliates, or of any other person or entity or transfer any assets to any such person or entity other than distributions on account of equity interests in the Borrower not prohibited hereunder and properly accounted for;

(g)    incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the Debt, except unsecured trade and operational debt incurred with trade creditors in the ordinary course of its business of owning and operating the Property in such amounts as are normal and reasonable under the circumstances, provided that such debt is not evidenced by a note and is paid when due and provided in any event the outstanding principal balance of such debt shall not exceed at any one time four percent (4%) of the outstanding Debt;

(h)    allow any person or entity to pay its debts and liabilities (except a Guarantor) or fail to pay its debts and liabilities solely from its own assets;

(i)    fail to maintain its records, books of account and bank accounts separate and apart from those of the shareholders, partners, members, principals and affiliates of Borrower, the affiliates of a shareholder, partner or member of Borrower, and any other person or entity or fail to prepare and maintain its own financial statements in accordance with generally accepted accounting principles and susceptible to audit, or if such financial statements are consolidated fail to cause such financial statements to contain footnotes disclosing that the Property is actually owned by the Borrower;

(j)    enter into any contract or agreement with any shareholder, partner, member, principal or affiliate of Borrower, any guarantor of all or a portion of the Debt (a

“ Guarantor” ) or any shareholder, partner, member, principal or affiliate thereof, 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 shareholder, partner, member, principal or affiliate of Borrower or Guarantor, or any shareholder, partner, member, principal or affiliate thereof;

(k)    seek dissolution or winding up, in whole or in part;

(l)    fail to correct any known misunderstandings regarding the separate identity of Borrower;

(m)    hold itself out to be responsible or pledge its assets or credit worthiness for the debts of another person or entity or allow any person or entity to hold itself out to be responsible or pledge its assets or credit worthiness for the debts of the Borrower (except for a Guarantor);

(n)    make any loans or advances to any third party, including any shareholder, partner, member, principal or affiliate of Borrower, or any shareholder, partner, member, principal or affiliate thereof, except advances to the Lessee or Property Manager in accordance with the requirements of the Management Agreement and Disbursements to members of Borrower not prohibited under the Loan Documents;

(o)    fail to file its own tax returns or to use separate contracts, purchase orders, stationery, invoices and checks;

(p)    fail either to hold itself out to the public as a legal entity separate and distinct from any other entity or person or to conduct its business solely in its own name in order not (i) to mislead others as to the entity with which such other party is transacting business, or (ii) to suggest that Borrower is responsible for the debts of any third party (including any shareholder, partner, member, principal or affiliate of Borrower, or any shareholder, partner, member, principal or affiliate thereof);

(q)    fail to allocate fairly and reasonably among Borrower and any third party (including, without limitation, any Guarantor) any overhead for common employees, shared office space or other overhead and administrative expenses;

(r)    allow any person or entity to pay the salaries of Borrower's employees or fail to maintain a sufficient number of employees for its contemplated business operations;

(s)    fail to 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, subject only to the limits of revenues generated by the Property;

(t)    file a voluntary petition or otherwise initiate proceedings to have the Borrower or any general partner, manager or managing member of Borrower adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against the Borrower or any general partner, manager or managing member of Borrower, or file a petition seeking or consenting to reorganization or relief of the Borrower or any general partner, manager or managing member of Borrower as debtor under any applicable federal or state law relating to bankruptcy, insolvency, or other relief for debtors with respect to the Borrower or any general partner, manager or managing member of Borrower; or seek or consent to the appointment of any trustee, receiver, conservator, assignee, sequestrator, custodian, liquidator (or other similar official) of the Borrower or any general partner, manager or managing member of Borrower or of all or any substantial part of the properties and assets of the Borrower or any general partner, manager or managing member of Borrower, or make any general assignment for the benefit of creditors of the Borrower or any general partner, manager or managing member of Borrower , or admit in writing the inability of the Borrower or any general partner, manager or managing member of Borrower to pay its debts generally as they become due or declare or effect a moratorium on the Borrower or any general partner, manager or managing member of Borrower debt or take any action in furtherance of any such action;

(u)    share any common logo (other than logos associated with the Franchisor of the hotel and logos associated with the Borrower's affiliation with Equity Inns, Inc.) with or hold itself out as or be considered as a department or division of (i) any shareholder, partner, principal, member or affiliate of Borrower, (ii) any affiliate of a shareholder, partner, principal, member or affiliate of Borrower, or (iii) any other person or entity or allow any person or entity to identify the Borrower as a department or division of that person or entity; or

(v)    conceal assets from any creditor, or enter into any transaction with the intent to hinder, delay or defraud creditors of the Borrower or the creditors of any other person or entity.

(2)   Borrower covenants and agrees that Lessee has not and shall not:

(a)   engage in any business or activity other than the acquisition, ownership, operation and maintenance of its leasehold interest in the Property, and activities incidental thereto;

(b)   acquire or own any material asset other than (i) its leasehold interest in the Property, and (ii) such incidental Personal Property as may be necessary for the operation of the Property;

(c)   merge into or consolidate with any person or entity or dissolve, terminate or liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure, without in each case Lender's consent;

(d)   fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the laws of the jurisdiction of its organization or formation, or without the prior written consent of Lender, amend, modify, terminate or fail to comply with the provisions of Lessee's Partnership Agreement, Articles or Certificate of Incorporation, Articles of Organization, Operating Agreement or similar organizational documents, as the case may be;

(e)   own any subsidiary or make any investment in or acquire the obligations or securities of any other person or entity without the consent of Lender;

(f)   commingle its assets with the assets of any of its partner(s), members, shareholders, affiliates, or of any other person or entity or transfer any assets to any such person or entity other than distributions on account of equity interests in the Lessee permitted hereunder and properly accounted for;

(g)   incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than its obligations under the Operating Lease, except unsecured trade and operational debt incurred with trade creditors in the ordinary course of its business of owning and operating the Property in such amounts as are normal and reasonable under the circumstances, provided that such debt is not evidenced by a note and is paid when due and provided in any event the outstanding principal balance of such debt shall not exceed at any one time four percent (4%) of the outstanding Debt, which four percent (4%) specifically excludes (a) the amounts that are paid out of reserves held by Lender and (b) the following GAAP (meaning generally accepted accounting principles as applied in the United States defined by the Financial Accounting Standards Board or its successor, as in effect from time to time consistently applied) accruals: (i) employee benefits, (ii) payroll taxes and (iii) income taxes;

(h)   allow any person or entity to pay its debts and liabilities or fail to pay its debts and liabilities solely from its own assets;

(i)   fail to maintain its records, books of account and bank accounts separate and apart from those of the shareholders, partners, members, principals and affiliates of Lessee, the affiliates of a shareholder, partner or member of Lessee, and any other person or entity or fail to prepare and maintain its own financial statements in accordance with generally accepted accounting principles and susceptible to audit, or if such financial statements are consolidated fail to cause such financial statements to contain footnotes disclosing that the Property is actually owned by the Lessee;

(j)   enter into any contract or agreement with any shareholder, pa