Credit Agreement

Credit Agreement

by Equity Inns
July 10th, 1997






                                                                 Exhibit 10.1


                                CREDIT AGREEMENT

                            DATED AS OF JUNE 24, 1997

                                      AMONG

                         EQUITY INNS PARTNERSHIP, L.P.,

                               EQUITY INNS TRUST,

                                EQUITY INNS, INC.

                                       AND

                       THE FIRST NATIONAL BANK OF CHICAGO,

                        CREDIT LYONNAIS NEW YORK BRANCH,

                                  AMSOUTH BANK,

                                   AS LENDERS

                                       AND

                        CREDIT LYONNAIS NEW YORK BRANCH,

                             AS DOCUMENTATION AGENT

                                       AND

                                  AMSOUTH BANK,

                                   AS CO-AGENT

                                       AND

                       THE FIRST NATIONAL BANK OF CHICAGO,

                  AS ADMINISTRATIVE AGENT AND SYNDICATION AGENT






                                TABLE OF CONTENTS


ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS...........................................  2

    1.1      Definitions...................................................  2
             -----------
    1.2      Financial Standards........................................... 13

ARTICLE II
THE FACILITY............................................................... 13

    2.1      The Loan...................................................... 13
    2.2      Requests for Advance; Responsibility for Advance.............. 14
    2.3      Evidence of Credit Extensions................................. 14
    2.4      Repayment..................................................... 14
    2.5      Interest...................................................... 15
    2.6      Selection of Rate Options and LIBOR Interest Periods.......... 15
    2.7      Method of Payment............................................. 17
    2.8      Default....................................................... 17
    2.9      Lending Installations......................................... 18
    2.10     Non-Receipt of Funds by Agent................................. 18
    2.11     Grant of Security Interest.................................... 18
    2.12     Release of Properties......................................... 18

ARTICLE Ill
CHANGE IN CIRCUMSTANCES.................................................... 19

    3.2      Changes in Capital Adequacy Regulations....................... 19
    3.3      Funding Indemnification....................................... 20
    3.4      Lender Statements; Survival of Indemnity...................... 20

ARTICLE IV
CONDITIONS PRECEDENT; ADDITIONAL INFORMATION............................... 21

    4.1      Conditions Precedent to Closing............................... 21
    4.2      Additional Information........................................ 25

ARTICLE V
REPRESENTATIONS AND WARRANTIES............................................. 25

    5.1      Existence..................................................... 25
    5.2      Authorization................................................. 26
    5.3      Perfection of Security Interests.............................. 27
    5.4      Financial Statements.......................................... 27






    5.5      Litigation.................................................... 28
    5.6      Ownership of Assets........................................... 28
    5.7      Taxes......................................................... 28
    5.8      No Defaults................................................... 29
    5.9      Insurance..................................................... 30
    5.10     Accuracy of Furnished Information............................. 30
    5.11     Compliance with Laws.......................................... 30
    5.12     Condition of Properties....................................... 30
    5.13     Franchise Agreements.......................................... 30
    5.14     Leases........................................................ 30
    5.15     Condemnation.................................................. 31
    5.16     Margin Stock.................................................. 31
    5.18     Use of Loan Proceeds.......................................... 31
    5.19     Solvency...................................................... 31
    5.20     Investment Company Act........................................ 31
    5.21     Public Utility Holding Company Act............................ 31
    5.22     Brokers....................................................... 32
    5.23     (Intentionally Deleted.)...................................... 32
    5.24     Foreign Person................................................ 32

ARTICLE VI
AFFIRMATIVE COVENANTS...................................................... 33

    6.1      Notices....................................................... 33
    6.3      Existence and Conduct of Operations........................... 35
    6.5      Maintenance of Properties..................................... 35
    6.6      Insurance..................................................... 35
    6.7      Payment of Obligations........................................ 36
    6.8      Compliance with Laws.......................................... 36
    6.9      Adequate Books................................................ 36
    6.10     ERISA......................................................... 36
    6.11     Maintenance of Status......................................... 36
    6.12     Use of Proceeds............................................... 36
    6.13     FF&E Replacement and Capital Expenditures..................... 36
    6.14     Material Agreements........................................... 37

ARTICLE VII
NEGATIVE COVENANTS......................................................... 38

    7.1      Change in Business............................................ 38
    7.2      Change of Ownership of Properties............................. 38
    7.3      Ratio of Net Rent to Interest Expense......................... 38
    7.4      Use of Proceeds............................................... 38
    7.5      Purchase Price................................................ 38
    7.6      Value of Property as a Percentage of Purchase Price........... 39





    7.7      Liens......................................................... 39
    7.8      Regulation U.................................................. 39
    7.9      Net Worth..................................................... 39
    7.10     Partnership Distributions..................................... 39
    7.11     Total Liabilities............................................. 39
    7.12     Level Two Adjusted Earnings................................... 40
    7.13     Cost Basis.................................................... 40
    7.14     Other Indebtedness............................................ 40
    7.15     Material Agreements........................................... 41

ARTICLE VIII
DEFAULTS................................................................... 41

    8.1      Nonpayment of Principal and Interest.......................... 41
    8.2      Certain Covenants............................................. 41
    8.3      Security Documents............................................ 41
    8.4      Representations and Warranties................................ 41
    8.5      Property Assessments.......................................... 42
    8.6      Federal Tax Lien.............................................. 42
    8.7      FF&E.......................................................... 42
    8.8      Insurance..................................................... 42
    8.9      Crossroads Lease.............................................. 42
    8.10     Ground Lease.................................................. 42
    8.11     Material Agreements........................................... 42
    8.12     Property Liens................................................ 43
    8.13     Certain Covenants............................................. 43
    8.14     Bankruptcy.................................................... 43
    8.15     Loan Documents................................................ 44
    8.16     Revolving Credit Facility..................................... 44
    8.17     Cross Default................................................. 44
    8.18     Material Adverse Effect....................................... 44
    8.19     Furnishing Information........................................ 44
    8.20     Monetary...................................................... 44

ARTICLE IX
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES............................. 45

    9.1      Acceleration.................................................. 45
    9.2      Preservation of Rights; Amendments............................ 45

ARTICLE X
THE AGENT.................................................................. 45

    10.1     Appointment................................................... 45
    10.2     Powers........................................................ 45






    10.3     General Immunity.............................................. 45
    10.4     No Responsibility for Loans, Recitals, etc.................... 46
    10.5     Action on Instructions of Lenders............................. 46
    10.6     Employment of Agents and Counsel.............................. 46
    10.7     Reliance on Documents; Counsel................................ 46
    10.8     Agent's Reimbursement and Indemnification..................... 46
    10.9     Rights as a Lender............................................ 47
    10.10    Lender Credit Decision........................................ 47
    10.11    Successor Agent............................................... 47

ARTICLE XI
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.......................... 48

    11.1     Successors and Assigns........................................ 48
    11.2     Participations................................................ 48
    11.3     Assignments................................................... 49
    11.4     Dissemination of Information.................................. 50
    11.5     Tax Treatment................................................. 50

ARTICLE XII
GENERAL PROVISIONS......................................................... 50

    12.1     Survival of Representations................................... 50
    12.2     Governmental Regulation....................................... 50
    12.3     Taxes......................................................... 50
    12.4     Headings...................................................... 51
    12.5     No Third Party Beneficiaries.................................. 51
    12.6     Expenses; Indemnification..................................... 51
    12.7     Severability of Provisions.................................... 51
    12.8     Nonliability of the Lenders................................... 52
    12.9     Choice of Law................................................. 52
    12.10    Consent to Jurisdiction....................................... 52
    12.11    Waiver of Jury Trial.......................................... 52
    12.12    Successors and Assigns........................................ 52
    12.13    Entire Agreement; Modification of Agreement................... 52
    12.14    Dealings with the Borrower.................................... 53
    12.15    Set-Off....................................................... 53
    12.16    Counterparts.................................................. 53

ARTICLE XIII
NOTICES.................................................................... 54

    13.1     Giving Notice................................................. 54
    13.2     Change of Address............................................. 55







                                CREDIT AGREEMENT

         THIS CREDIT AGREEMENT is entered into as of June 24, 1997, by and among
the following:

         EQUITY  INNS  PARTNERSHIP,   L.P.,  a  Tennessee  limited   partnership
("Borrower")  having its principal  place of business at c/o Equity Inns,  Inc.,
4735 Spottswood,  Suite 102, Memphis,  Tennessee 38117, the sole general partner
of which is Equity Inns Trust;

         EQUITY INNS TRUST, a Maryland real estate  investment  trust  ("General
Partner"),  whose  principal  place of business is 4735  Spottswood,  Suite 102,
Memphis, Tennessee 38117;

         EQUITY  INNS,  INC.,  a Tennessee  corporation  (the  "Company")  whose
principal place of business is 4735 Spottswood,  Suite 102,  Memphis,  Tennessee
38117, the owner of 100% of the beneficial interest in General Partner;

         THE FIRST NATIONAL BANK OF CHICAGO ("First Chicago."),  a national bank
organized under the laws of the United States of America having an office at One
First National Plaza, Chicago, Illinois 60670;

         CREDIT LYONNAIS NEW YORK BRANCH ("Credit Lyonnais"),  a branch licensed
under  the  laws of the  State  of New  York of a  foreign  banking  corporation
organized  under the laws of the  Republic  of France,  having an office at 1301
Avenue of the Americas, New York, New York 10019;

         AMSOUTH BANK  ("AmSouth"),  an Alabama  banking  corporation  having an
office at 1900 Fifth Avenue North, 9th Floor, Birmingham, Alabama 35203;

         Credit Lyonnais, as Documentation Agent for the Lenders (as defined
below);

         AmSouth, as Co-Agent for the Lenders; and

         First Chicago, as Administrative Agent ("Agent") and as Syndication
Agent for the Lenders.

                                    RECITALS

         A.       Borrower is primarily engaged in the business of acquiring,
developing and owning hotel properties.

         B. First Chicago, Borrower, certain other lenders and Agent are parties
to a Credit  Agreement  dated as of November 29, 1995, as amended by (i) a First
Amendment to Credit Agreement and Facility Notes dated as of April 2, 1996, (ii)
a Second  Amendment to Credit Agreement dated as of July 25, 1996, (iii) a Third
Amendment to Credit  Agreement and Other Credit  Facility  Documents dated as of
November 14, 1996, (iv) a Fourth  Amendment to Credit Agreement and Other Credit
Facility  Documents dated as of December 15, 1996, and (v) a Fifth Amendment and
Other Credit Facility Documents dated April 1, 1997 (as heretofore and hereafter
amended, the

                                        1





"Revolving Credit Agreement"), which Revolving Credit Agreement contains certain
covenants and agreements pertaining to the Revolving Credit Facility (as defined
below).

         C. Borrower  requires interim financing for the acquisition of up to 27
"Hampton Inn" hotel properties  located in 13 states, and Borrower has requested
that First  Chicago and the other  Lenders  provide  Borrower with a term credit
facility for such purpose in an aggregate principal amount of up to $75,000,000.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:

                                    ARTICLE I
                        DEFINITIONS AND ACCOUNTING TERMS

         1.1      Definitions. As used in this Agreement, the following terms
have the meanings set forth below:

         "Adjusted  LIBOR Rate" means,  with respect to a LIBOR  Advance for the
relevant  LIBOR  Interest  Period,  the sum of (i) the  quotient of (a) the Base
LIBOR Rate  applicable to such LIBOR Interest  Period,  divided by (b) one minus
the  Reserve  Requirement  (expressed  as a  decimal)  applicable  to that LIBOR
Interest  Period,  plus the (ii) LIBOR Rate  Spread in effect  from time to time
during such LIBOR Interest Period.

         "Advance"  means  the loan to the  Borrower  hereunder  by the  Lenders
pursuant to Section 2.1 (a) hereof,  whether all or a portion of such Advance is
from time to time an Alternate Base Rate Advance or a LIBOR Advance.

         "Affiliate"  means  any  Person  directly  or  indirectly  controlling,
controlled by or under direct or indirect  common control with any other Person.
A Person shall be deemed to control  another  Person if the  controlling  Person
owns  fifty-one  percent (51%) or more of any class of voting  securities of the
controlled Person or possesses,  directly or indirectly,  the power to direct or
cause the  direction of the  management  or policies of the  controlled  Person,
whether through ownership of stock, by contract or otherwise.

         "Agent" means First  Chicago,  acting as  administrative  agent for the
Lenders in connection with the transactions  contemplated by this Agreement, and
its successors in such capacity.

         "Aggregate Commitment" means, as of any date, the sum of all of the
Lenders' then-current Commitments.

         "Agreement" means this Credit Agreement and all amendments,
modifications and supplements hereto.


                                        2





         "Agreement  Execution Date" shall mean June 24, 1997, the date on which
each of the parties hereto has executed this Agreement.

         "Alternate Base Rate" means, on any day, a fluctuating rate of interest
per annum equal to the higher of (a) the Federal Funds  Effective  Rate for such
day, and (b) the Corporate Base Rate for such day.

         "Alternate  Base Rate  Advance"  means that portion of the Advance that
bears interest at the Alternate Base Rate.

         "Appraised  Value" shall have the meaning  ascribed to such term in the
Revolving Credit Agreement.

         "Assignment  of Leases and Rents" means the  assignments  of the leases
and rents for each of the  Properties,  the  generic  form of which is  attached
hereto as Exhibit F.

         "Base  LIBOR  Rate"  means,  with  respect to a LIBOR  Advance  for the
relevant LIBOR Interest Period,  the rate determined by the Agent to be the rate
at which deposits in immediately  available funds in U.S. dollars are offered by
the Agent to  first-class  banks in the London  interbank  eurodollar  market at
approximately 11:00 a.m. London time two Business Days prior to the first day of
such LIBOR  Interest  Period,  in the  approximate  amount of the relevant LIBOR
Advance and having a maturity approximately equal to such LIBOR Interest Period.

         "Borrower"  means  Equity Inns  Partnership,  L.P.,  together  with its
permitted successors and assigns, if any.

         "Business Day" means a day,  other than a Saturday,  Sunday or holiday,
on which  banks  are open for  business  in  Chicago,  Illinois  and in  London,
England.

         "Code" means the Internal  Revenue Code of 1986 as amended from time to
time, or any replacement or successor statute,  and the regulations  promulgated
thereunder from time to time.

         "Collateral" means all of the now existing or hereafter acquired rights
of the Borrower in (a) the Properties and all rents, leases, easements, options,
personal  property and other rights and property  related to the  owner-ship  or
operation thereof, and (b) all of the proceeds of the foregoing.

         "Commitment" means the obligation of each Lender,  subject to the terms
and  conditions of this Agreement and in reliance upon the  representations  and
warranties  herein, to make an Advance not exceeding in the aggregate the amount
set forth opposite its signature  below,  or the amount stated in any subsequent
amendment hereto.

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


                                        3





         "Consolidated  Operating  Partnership" means the Borrower,  the General
Partner, the Company and any other subsidiary partnerships or entities of either
of them which are required under GAAP to be  consolidated  with the Borrower and
the General Partner for financial reporting purposes.

         "Controlled   Group"  means  all  members  of  a  controlled  group  of
corporations and all trades or businesses  (whether or not  incorporated)  under
common  control  which,  together  with  all  or  any  of  the  entities  in the
Consolidated  Operating  Partnership,  are  treated as a single  employer  under
Sections 414(b) or 414(c) of the Code.

         "Corporate  Base Rate"  means a rate per annum  equal to the  corporate
base rate of interest  announced by First  Chicago  from time to time,  changing
when and as such corporate base rate changes.

         "Cost Basis" for any Property shall mean the aggregate of (y) the costs
actually  incurred  by  Borrower  in  connection  with the  acquisition  of such
Property,   as  substantiated   by  evidence  in  form  and  detail   reasonably
satisfactory to Agent,  including,  without limitation,  a detailed breakdown by
item and category of costs so incurred and certified to by Borrower, and (z) the
cost actually  incurred by Borrower  within twelve (12) months after  Borrower's
acquisition  of such Property in completing  the initial PIP (as defined  below)
for such Property, which costs (together with evidence of payment of such costs)
shall be substantiated by evidence in form and detail reasonably satisfactory to
Agent, including,  without limitation, a detailed breakdown by item and category
of costs so incurred and  certified to by Borrower,  shall not include any costs
which are incurred more than twelve (12) months after such acquisition and which
costs shall be added to the Cost Basis of such  Property on the earlier to occur
of (i)  completion  of such PIP or (ii) twelve (12) months after the date of the
acquisition  of such  Property,  and upon  receipt by Agent from  Borrower  or a
request for such increase in the Cost Basis of such Property.

         "Crossroads Lease" shall mean that certain Consolidated Lease Agreement
dated as of June 24, 1997, by and between Borrower and Lessee  pertaining to the
operation and management of the Properties,  including that certain  Guaranty of
even  date  therewith  by  Interstate   Hotels  Company  and  Interstate  Hotels
Corporation.

         "Default"  means an event which,  with notice or lapse of time or both,
would become an Event of Default.

         "Default  Rate"  means  (a) with  respect  to an  Alternate  Base  Rate
Advance,  a rate equal to the  Alternate  Base Rate plus three percent (3 %) per
annum, or (b) with respect to any LIBOR Advance,  a rate equal to the applicable
Adjusted LIBOR Rate plus three percent (3 %) per annum.

         "Dollars" and "$" mean United States Dollars.

         "Draw Request" means a written  request of the Borrower for an Advance,
specifying (i) the date of the proposed Advance,  which shall be a Business Day;
(ii) the aggregate principal amount of

                                        4





such  proposed  Advance,  which  amount  in the case of an  Alternate  Base Rate
Advance  shall be at least One Hundred  Thousand  Dollars  ($100,000)  and which
amount  in the case of a LIBOR  Advance  shall be at least One  Million  Dollars
($1,000,000),  provided  that if such LIBOR  Advance is in excess of  $1,000,000
then such LIBOR Advance  shall be made only in multiples of $100,000;  (iii) the
Rate Option or Rate Options selected for such Advance; and (iv) in the case of a
LIBOR Advance, the LIBOR Interest Period applicable thereto.

     "Environmental   Indemnity"  means  the  Hazardous  Material  Guaranty  and
Indemnification  Agreement dated as of the Agreement Execution Date, executed by
Borrower,  the General  Partner and the  Company,  substantially  in the form of
Exhibit D hereto.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended, and regulations promulgated thereunder from time to time.

         "Event of Default" means any event set forth in Article VIII hereof.

         "Facility" means the term loan described in Section 2.1.

         "FDICIA" means the Federal Deposit  Insurance  Corporation  Improvement
Act of 1991, as the same may be amended from time to time,  and the  regulations
promulgated thereunder from time to time.

         "Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the  weighted  average of the rates on  overnight  Federal  funds
transactions  with  members of the Federal  Reserve  System  arranged by Federal
funds  brokers on such day, as published  for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York,  or, if such rate is not so  published  for any day which is a
Business Day, the average of the quotations at  approximately  10 a.m.  (Chicago
time) on such day on such transactions  received by the Agent from three Federal
funds  brokers  of  recognized-standing  selected  by  the  Agent  in  its  sole
discretion.

         "FF&E" shall mean, collectively,  all goods (as such term is defined in
the Uniform  Commercial Code of the state in which a given Property is located),
now owned or hereafter  acquired by Borrower,  located at or used in  connection
with the  Properties  and the operation of the  Properties,  including,  without
limitation,  (i) all furniture and  furnishings  and all other items of personal
property  (including  inventory now owned or hereafter  acquired by Borrower but
excluding  inventory and personal  property owned by Lessee or any Other Lessee)
located on, or used in connection with the operation of the Properties, together
with all replacements,  modifications,  alterations and additions  thereto;  and
(ii) all equipment,  machinery, fixtures and other items of property required or
incidental to the use of the Properties,  including all components thereof,  now
and  hereafter  permanently  affixed  to or  incorporated  into the  Properties,
including,  without  limitation,  all  furnaces,  boilers,  heaters,  electrical
equipment,    heating,   plumbing,   lighting,    ventilating,    refrigerating,
incineration,  air and water pollution control, waste, disposal, air-cooling and
air conditioning systems and apparatus, sprinkler

                                        5





systems and fire and theft  protection  equipment,  all of which to the greatest
extent  permitted  by law are deemed by the parties  hereto to  constitute  real
estate, together with all replacements, modifications, alterations and additions
thereto.

         "Financing  Statement"  means  Form  UCC-1  and  Form  UCC-2  financing
statements, in form and content acceptable to Lenders.

         "FIRREA"  means  the  Financial  Institutions,   Reform,  Recovery  and
Enforcement  Act, as amended,  and the regulations  promulgated  thereunder from
time to time.

         "First Chicago" means The First National Bank of Chicago.

     "Franchise  Agreements" means the "Hampton Inn License  Agreements" between
Lessee  and  Promus  Hotels,   Inc.  with  respect  to  the   Properties   (each
individually, a "Franchise Agreement").

     "GAAP"  means  generally  accepted  accounting   principles,   consistently
applied.

         "General  Partner"  means  Equity  Inns Trust,  a Maryland  real estate
investment trust.

         "Ground  Leases"  shall mean (i) the Ground Lease dated  September  16,
1986, as amended by Amendment to Lease dated  December 17, 1987, and as assigned
by assignment dated December 21, 1987, for the Hampton Inn Hotel located at 2731
U.S. Highway 280, Birmingham,  Alabama,  (ii) the Ground Lease dated December 1,
1983 for the Hampton Inn Hotel  located at 1585  Sycamore  View Drive,  Memphis,
Tennessee,  (iii) the Ground  Lease dated April 11, 1985 as amended by Amendment
to Lease dated May 24, 1985,  as assigned by  Assignment of Lease dated March 4,
1987,  for the Hampton Inn Hotel  located at 2350 Elm Hill  Parkway,  Nashville,
Tennessee,  and (iv) the  Ground  Lease  dated  August 18,  1988,  as amended by
Amendment  No. 1 to Ground  Lease dated  September  30, 1988 for the Hampton Inn
Hotel located at 3400 North Lake Parkway, Atlanta, Georgia.

         "Ground Lease Property" shall mean any Property which is subject to one
of the Ground Leases.


         "Guaranties"  means any  agreement  or  agreements  by which any Person
assumes,  guarantees,  endorses,  contingently  agrees to provide  funds for the
payment of, or otherwise becomes liable upon the obligation of any other Person,
or agrees  to  maintain  the net worth or  working  capital  or other  financial
condition  of any other  Person or  otherwise  assure any creditor of such other
Person against loss.

     "Guarantors" means General Partner and the Company, jointly and severally.

         "Guaranty"  means,  collectively,  (i) the Guaranty of  Performance  of
Lessor's  Obligation under  Crossroads  Lease, and (it) the Guaranty of Payment,
each dated as of the Agreement Execution Date,

                                        6





and each executed by General Partner and the Company, substantially in the forms
of Exhibits Q-1 and Q-2 attached hereto.

         "Hazardous  Material"  means any hazardous,  toxic or dangerous  waste,
substance   or  material   subject  to   regulation   under  the   Comprehensive
Environmental Response, Compensation and Liability Act, as amended, and federal,
state or local so-called  "Superfund" or "Superlien" laws, or any other federal,
state or local laws,  ordinances,  rules or regulations  governing or regulating
hazardous materials,  pollution,  the environment or public health, as now or at
any time hereafter in effect.

         "Indebtedness" means for any Person, without duplication, the following
(including all indebtedness  secured by a Lien on property owned by such Person,
whether or not such Person has assumed or become liable for the payment thereof)
(i) all  obligations  of such Person for or with respect to  (including  without
limitation all fees, costs or unpaid accrued interest) borrowed money (including
without  limitation  the  Obligations)  or for the  deferred  purchase  price of
property or services,  (ii) all  obligations  of such Person  created or arising
under any conditional  sale or other title  retention  agreement with respect to
any  property  acquired  by such Person and all  obligations  created or arising
under such agreement even though the rights and remedies of the seller or lender
thereunder are limited to  repossession or sale of such property in the event of
default, (iii) all obligations of such Person under leases which shall have been
or should  under GAAP be  recorded  as  capitalized  leases,  (iv) all direct or
indirect  Guaranties or  endorsements of such Person (other than, in the case of
instruments,  for deposit or collection or similar  transactions in the ordinary
course of  business),  (v) all  obligations  (contingent  or  otherwise) by such
person to assure a creditor against loss including, without limitation,  letters
of responsibility or comfort, arrangements to purchase or repurchase property or
obligations to pay for property, goods or services,  whether or not delivered or
rendered,  (vi) all  obligations  (contingent or otherwise) to maintain  working
capital, equity capital or other financial condition or to lend or contribute to
or invest in,  made by any such  Person in respect of  obligations  of any other
Person  (including any obligations to such Person with respect to any Plan), and
(vii) all  obligations  of such  Person for Letters of Credit or  extensions  of
credit to or on behalf of such Person,  whether or not representing  obligations
for borrowed money.


         "Insolvency"   means   insolvency  as  defined  in  the  United  States
Bankruptcy  Code,  as amended.  "Insolvent"  when used with respect to a Person,
shall refer to a Person who satisfies the definition of Insolvency.

         "Lenders"  means,  collectively,  First  Chicago,  Credit  Lyonnais and
AmSouth,  or any Person which  subsequently  executes and delivers any amendment
hereto in such capacity and each of their  respective  permitted  successors and
assigns.  Where reference is made to "the Lenders" in any Loan Document it shall
be read to mean "all of the Lenders".

     "Lending  Installation"  means any U.S. office of any Lender  authorized to
make loans similar to the Advance described herein.


                                        7





         "Lessee"  shall mean  Crossroads  Future  Company,  L.L.C.,  a Delaware
limited liability company.

         "Level Two  Adjusted  Earnings"  shall mean  consolidated  earnings  of
Borrower,  the  General  Partner  and the  Company  before  minority  interests,
interest,  income  taxes,  depreciation  and  amortization,  as  determined on a
consolidated  basis and according to generally  accepted  accounting  principles
consistently  applied,  for the period in question and which relates directly to
payments made by Lessee and any Other Lessee under the  Crossroads  Lease or any
other  lessees  under any other  leases  entered into with respect to the hotels
from time to time owned by Borrower irrespective of whether constituting part of
the  Collateral  for the  Facility,  which  earnings  (i) shall not  include any
earnings  of Borrower or the General  Partner  which do not  directly  relate to
payments made by Lessee or any Other Lessee under such  Crossroads  Lease or any
other lessees  under any other leases,  (ii) shall be reduced by an amount equal
to four (4%)  percent of the gross room  revenues  for the hotels  which will be
assumed  to be  allocated  to the  replacement  of  FF&E,  and  (iii)  shall  be
determined on a rolling  12-month basis (i.e., for the 12 month period preceding
the date of each  determination).  If any such hotel has been owned for a period
of less than 12 months,  the earnings derived from such hotel will be determined
for the portion of the prior  12-month  period  during  which such hotel was not
owned by Borrower on a pro-forma basis based upon earnings  relating to payments
made by Lessee or such Other Lessee under the Crossroads Lease entered into with
respect to such hotel during the period of  ownership,  as adjusted  pursuant to
the  provisions  of  this  definition,  and  otherwise  in a  manner  reasonably
satisfactory to Agent.

         "LIBOR  Advance"  means that portion of the Advance that bears interest
at the Adjusted LIBOR Rate.

         "LIBOR  Interest  Period"  means,  with respect to a LIBOR  Advance,  a
period of one (1) month,  two (2) months or three (3)  months,  as  selected  in
advance by the Borrower.

         "LIBOR Rate  Spread"  shall mean (x) 1.625% per annum for the first six
calendar  months of the Facility  term,  and (y) 1.875% per annum for the second
six calendar  months of the Facility  term, it being  understood and agreed that
the LIBOR Rate Spread will be increased for any LIBOR Advance outstanding on the
first day of such second six calendar month period.

         "Lien" means any mortgage,  pledge,  security title, security interest,
encumbrance,  lien or charge of any kind  (including,  without  limitation,  any
conditional  sale or other  title  retention  agreement  or lease in the  nature
thereof,  any filing or agreement to file a financing  statement as debtor under
the Uniform  Commercial  Code on any property leased to any Person under a lease
which is not in the nature of a conditional  sale or title retention  agreement,
or any subordination agreement in favor of another Person).

         "Loan  Documents" means this Agreement,  the Notes,  the  Environmental
Indemnity, the Guaranty, the Security Documents and any and all other agreements
or instruments  creating or evidencing  the Lenders'  interest in any Collateral
provided to the Lenders by the Borrower or the

                                        8





General Partner and any other  instrument or agreement  required and/or provided
to Lenders hereunder or thereunder,  as any of the foregoing may be amended from
time to time,

         "Majority Lenders" means, as of any date, those Lenders holding, in the
aggregate more than one-half (1/2) of the then-current Aggregate Commitment.

         "Margin  Stock" has the meaning  ascribed to it in  Regulation U of the
Board of Governors of the Federal Reserve System.

         "Material Adverse Effect" means, with respect to any matter,  that such
matter in the Supermajority  Lenders' good faith judgment may (x) materially and
adversely affect the business, properties, condition or results of operations of
the  Consolidated  Operating  Partnership  taken as a whole, or (y) constitute a
non-frivolous  challenge  to the  validity  or  enforceability  of any  material
provision of any Loan Document against any obligor party thereto.

         "Material Adverse Financial Change" shall be deemed to have occurred if
the Lenders,  in their good faith  judgment,  determine that a material  adverse
financial  change has  occurred  which could  prevent  timely  repayment  of any
Advance  hereunder  or  materially  impair  Borrower's  ability to  perform  its
obligations under any of the Loan Documents.

     "Material Agreements" means, collectively, the Crossroads Lease, the Ground
Leases and the Franchise Agreements.

         "Maturity Date" means the earliest to occur of:

                  (a)      June 23, 1998; or


                  (b) the first date, if any, on which Borrower's right to
         receive advances under the Revolving Credit Facility is terminated; or

                  (c)  the  date  on  which  the  Agent  and  Majority   Lenders
         accelerate the Obligations pursuant to Article IX hereof.

         "Mortgages"  means the first  mortgages,  first deeds of trust or first
deeds to secure debt in form satisfactory to the Agent, executed by the Borrower
as the owner of fee title or leasehold  title,  as the case may be, with respect
to the Properties,  including all improvements  thereon and rights and easements
appurtenant  thereto,  securing  all of the  Obligations,  as  the  same  may be
modified or amended from time to time.

         "Net  Purchase  Price"  means,  for any  Property  or  Properties,  the
price(s) for such Property or Properties shown on Schedule 1 attached hereto and
made a pan hereof.


                                        9





         "Note" means the promissory note payable to the order of each Lender in
the amount of such Lender's  maximum  Commitment in the form attached  hereto as
Exhibit A (collectively, the "Notes").

         "Obligations" means the Advance and all accrued and unpaid fees and all
other  obligations  of Borrower to the Agent or the Lenders  arising  under this
Agreement or any of the other Loan Documents.

         "Other  Lessee"  means any other lessee  approved by Agent from time to
time with respect to any replacement lease or leases for the Crossroads Lease.

         "Other  Permitted Debt" shall have the meaning ascribed to such term in
Section 7.14 hereof.

         "Payment Date" means the last Business Day of each calendar quarter.

         "Participants" is defined in Section 11.2.1 hereof.

         "PBGC" means the Pension  Benefit  Guaranty  Corporation  or any entity
succeeding to any or all of its functions under ERISA.

         "Percentage"  means,  with  respect  to  each  Lender,  the  applicable
percentage of the then-current Aggregate Commitment represented by such Lender's
then-current Commitment.

         "Permitted  Exceptions"  means those  matters to which the  interest of
Borrower  in the  Properties  is  permitted  by the Lenders to be subject on the
Agreement  Execution  Date,  and  thereafter  that do not  adversely  affect the
Collateral,  and such other  title  exceptions  or  objections,  if any,  as the
Lenders or their  counsel may approve in advance in writing,  which  approval or
consent shall not be unreasonably withheld.
         "Permitted Liens" means:

                  (a) Liens for current taxes, assessments or other governmental
         charges which are not delinquent or remain payable without any penalty,
         or the  validity  of  which  are  being  contested  in  good  faith  by
         appropriate   proceedings   which  have  the  effect  of  staying   any
         enforcement for non-payment thereof;

                  (b) Liens  imposed by mandatory  provisions of law such as for
         materialmen,  mechanics, warehousemen, workmen and repairmen arising in
         the'  ordinary  course of business  and which have been bonded over and
         removed  of record or have  otherwise  been  insured  over by the title
         insurer for the property to which such liens apply;

                  (c) Liens  imposed by mandatory  provisions  of law related to
         workers' compensation, unemployment insurance, social security or other
         similar  legislation  arising in the  ordinary  course of business  and
         which  are  being   contested   and/or  removed  in  a  continuous  and
         businesslike manner;

                                       10





                  (d) Equipment liens in favor of any lessor of equipment (e.g.,
         computer  reservation  system) leased  pursuant to a capital  equipment
         lease between such lessor and Lessee (or any Other Lessee);

                  (e) Judgment and other  similar  liens  arising in  connection
         with  court   proceedings,   provided   that  the  execution  or  other
         enforcement of such liens is effectively  stayed and the claims secured
         thereby  are  vigorously  and  continuously  contested  by  appropriate
         proceedings; and

                  (f) Easements,  rights of way,  restrictions and other similar
         encumbrances  which alone and/or in the  aggregate,  do not  materially
         interfere with the occupation, use and enjoyment of the Properties.

         "Person"  means an  individual,  a  corporation,  a limited  or general
partnership,   an   association,   a  joint  venture  or  any  other  entity  or
organization,  including a governmental or political  subdivision or an agent or
instrumentality thereof.

         "PIP" means for any Property,  the renovations and capital improvements
contemplated by the property  improvement  plan for such Property which property
improvement  plan for each of the Properties  previously have been submitted to,
and approved by, Agent.

         "Plan"  means an employee  benefit  plan as defined in Section  3(3) of
ERISA, whether or not terminated,  as to which the Borrower or any member of the
Controlled Group may have any liability.

         "Properties" means, as of any date, all of those 27 "Hampton Inn" hotel
properties  approved  by the  Lenders  (or  such  lesser  number  of said  hotel
properties as actually  purchased by Borrower) which are encumbered by Mortgages
in favor of the Agent for the  benefit of the  Lenders  pursuant to the terms of
this Agreement which properties are listed on Exhibit H attached hereto and made
a part hereof.

         "Property" means one of the Properties, individually.

         "Purchasers" is defined in Section 11.3.1 hereof.

         "Qualified  Officer"  means,  with  respect  to any  entity,  the chief
financial  officer,  chief accounting officer or controller of such entity if it
is a corporation or of such entity's general partner if it is a partnership.

         "Rate Option" means the Alternate Base Rate or the Adjusted LIBOR Rate.
The Rate Option in effect on any date shall  always be the  Alternate  Base Rate
unless the Borrower has properly  selected the Adjusted  LIBOR Rate  pursuant to
Section 2.6 hereof.



                                       11





         "Reportable  Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section,  with respect to a Plan,
excluding,  however,  such events as to which the PBGC by regulation  waived the
requirement  of Section  4043(a) of ERISA that it be notified  within 30 days of
the  occurrence  of such  event,  provided  that a failure  to meet the  minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall be
a Reportable  Event regardless of the issuance of any such waivers in accordance
with either Section 4043(a) of ERISA or Section 412(d) of the Code.

         "Reserve  Requirement" means, with respect to the LIBOR Rate applicable
to a LIBOR Interest Period. the maximum aggregate reserve requirement (including
all basic,  supplemental,  marginal and other  reserves)  which is imposed under
Regulation D on eurocurrency  liabilities on the date of  determination  of such
LIBOR Rate.

         "Revolving  Credit  Agreement"  shall have the meaning ascribed to such
term in the Recitals hereof.

         "Revolving  Credit  Facility" shall mean the revolving  credit facility
currently in place among  Borrower,  General  Partner and a syndicate of lenders
having First Chicago as the administrative  agent thereof.  The Revolving Credit
Facility consists of (i) a base facility of 5127,000,000,  and (ii) a swing line
facility of  $3,000,000,  and the  Revolving  Credit  Facility  currently  has a
maturity date of November 30, 1998.

         "Security Documents" means:

                  (a)      the Mortgages;

                  (b)      the Assignments of Leases and Rents;

                  (c) Financing  Statements securing the first priority security
         interest of the Lenders in all of  Borrower's  interest in the fixtures
         on the  Properties  and all  personal  property  owned by Borrower  and
         located on the Property and/or  necessary or useful in the operation of
         the Properties;

                  (d)      The Security Agreements, each in the form attached
         hereto as .Exhibit E; and

                  (e)  all  estoppels,   consents,   acknowledgments  and  other
         documentation  executed in connection  with the creation and perfection
         of the Lenders' security interest.

     "Subsidiaries"  means the  partnerships and companies set forth on Schedule
3. attached hereto and made a part hereof.

         "Total  Liabilities"  shall have the  meaning  ascribed to such term in
Section 7.11 hereof.


                                       12





         "Transferee" is defined in Section 11.4 hereof.

         The  foregoing  definitions  shall be  equally  applicable  to both the
singular and the plural forms of the defined terms.

         All capitalized  terms used in this Agreement and not otherwise defined
herein shall have the meanings  ascribed to such terms in the  Revolving  Credit
Agreement.

         1.2  Financial  Standards.  All  financial  computations  required of a
Person  under  this  Agreement  shall be  made,  and all  financial  information
required under this Agreement shall be prepared, in accordance with GAAP, except
that if any  Person's  financial  statements  are  not  audited,  such  Person's
financial  statements  shall be  prepared  in  accordance  with  the same  sound
accounting  principles  utilized in connection  with the  financial  information
submitted to Lenders with respect to the Borrower or the General  Partner or the
Properties  in  connection  with this  Agreement  and shall be  certified  by an
authorized representative of such Person.

                                   ARTICLE II
                                  THE FACILITY

        2.1     The Loan.

                  (a) Subject to the terms and  conditions of this Agreement and
         in reliance  upon the  representations  and  warranties of Borrower and
         General  Partner  contained  herein,  Lenders  agree  to make a  single
         Advance of  Facility  proceeds  through  the Agent to  Borrower  on the
         disbursement  date set forth in Borrower's  Draw  Request.  The maximum
         principal  amount of the Facility  disbursed to Borrower in  accordance
         with  the  preceding  sentence  shall  not  exceed  the  lesser  of (x)
         forty-five  percent (45 %) of the Net  Purchase  Price paid by Borrower
         for the  Properties  (after  deduction  of all  credits to  Borrower as
         provided in the purchase  agreements for the  Properties),  and (y) the
         Aggregate  Commitment.  Each Lender shall fund its  Percentage  of such
         Advance and no Lender will be required to fund any amounts which are in
         excess of such Lender's  Commitment.  This facility  ("Facility")  is a
         term  credit  facility,  Borrower  shall  not be  entitled  to  receive
         multiple  advances of Loan  proceeds,  and any portion of the  Advance,
         once repaid, may not be reborrowed.

                  (b) The  Loan  created  by  this  Agreement  shall  be due and
         payable  on the  Maturity  Date,  unless  sooner  due  and  payable  in
         accordance with the terms of this Agreement.

                  (c) If Borrower  acquires fewer than all 27 of the Properties,
         then the Lenders shall reduce the Aggregate Commitment proportionately,
         based on the Net  Purchase  Price (and the per property  allocation  of
         such Net Purchase  Price) for those  Properties  actually  purchased by
         Borrower.   In  no  event  shall  the   Aggregate   Commitment   exceed
         Seventy-Five Million Dollars ($75,000,000).


                                       13





         2.2 Requests for Advance;  Responsibility for Advance. The sole Advance
of Loan proceeds shall be made available to Borrower by Agent in accordance with
Section 2. l (a) and Section  2.6(a)  hereof.  The  obligation of each Lender to
fund its  Percentage  of each Advance  shall be several and not joint;  however,
Agent shall coordinate the funding of the Advance.

         2.3  Evidence  of  Credit  Extensions.   The  Advance  of  each  Lender
outstanding  at any time shall be evidenced by the Notes.  Each Note executed by
the  Borrower  shall be in a maximum  principal  amount  equal to each  Lender's
Percentage  of the current  Aggregate  Commitment.  Each Lender shall record its
Advance and principal  payments thereof on the schedule attached to its Note or,
at its  option,  in its  records,  and each  Lender's  record  thereof  shall be
conclusive absent Borrower  furnishing to such Lender conclusive and irrefutable
evidence of an error made by such Lender with respect to that Lender's  records.
Notwithstanding  the  foregoing,  the failure to make, or an error in making,  a
notation  with respect to any Advance  shall not limit or  otherwise  affect the
obligations of Borrower  hereunder or under the Notes to pay the amount actually
owed by Borrower to Lenders.

         2.4 Repayment.  The outstanding principal balance of the Loan, plus all
accrued and unpaid interest thereon and other amounts owed by Borrower under the
Loan Documents, shall be due and payable on the Maturity Date.

         2.5      Interest.

                  (a) The  outstanding  principal  balance under the Notes shall
         bear interest from time to time at a rate per annum equal to:

                           (i) the Alternate Base Rate; or

                           (ii) at the election of Borrower  with respect to all
                  or portions of the Obligations, the Adjusted LIBOR Rate.

                  (b) All interest  shall be calculated  for actual days elapsed
         on the basis of a 360-day year. Interest accrued on each Alternate Base
         Rate  Advance  shall be payable in arrears on (i) the first day of each
         calendar month,  commencing with the first such date to occur after the
         date hereof,  (ii) on any date on which the Alternate Base Rate Advance
         is prepaid,  whether due to acceleration or otherwise, and (iii) on the
         Maturity Date.  Interest accrued on each LIBOR Advance shall be payable
         (i) on the first day of each calendar month,  (ii) on any date on which
         the LIBOR Advance is prepaid, whether due to acceleration or otherwise,
         and (iii) on the Maturity  Date.  Interest shall not be payable for the
         day of any  payment on the amount  paid if payment is received by Agent
         prior to noon (Chicago  time).  If any payment of principal or interest
         under the Notes shall  become due on a day that is not a Business  Day,
         such payment shall be made on the next succeeding  Business Day and, in
         the case of a payment of  principal,  such  extension  of time shall be
         included in computing  interest due in  connection  with such  payment;
         provided  that for  purposes  of Section 8.1  hereof,  any  payments of
         principal described in this sentence shall be considered to be "due" on
         such next succeeding Business Day.


                                       14





         2.6      Selection of Rate Options and LIBOR Interest Periods.

                  (a)  Borrower,  from time to time,  may select the Rate Option
         and, in the case of each LIBOR Advance,  the  commencement  date (which
         shall be a Business  Day) and the length of the LIBOR  Interest  Period
         applicable to each LIBOR Advance. Not later than noon (Chicago time) on
         the proposed borrowing date contained in Borrower's Draw Request,  each
         Lender shall make available its Percentage of the Advance  requested in
         funds  immediately  available in Chicago,  Illinois to Agent;  provided
         that, if any portion of the Advance is a LIBOR  Advance,  then Borrower
         shall give Agent the Draw  Request  not later than 11:00 a.m.  (Chicago
         time) at least three (3)  Business  Days prior to such  Advance.  Agent
         will make the funds so received  from Lenders  available to Borrower by
         transfer to Borrower's account at Agent.

                  (b) Agent shall,  as soon as practicable  after receipt of the
         Draw Request, determine the Adjusted LIBOR Rate initially applicable to
         that portion of the Advance which Borrower requests to be LIBOR Advance
         and inform Borrower and Lenders of the same. The  determination  of the
         Adjusted  LIBOR Rate by Agent  shall be  conclusive  and  binding  upon
         Borrower in the absence of manifest error.

                  (c) If Borrower  shall prepay any portion of the LIBOR Advance
         other  than on the last day of the  LIBOR  Interest  Period  applicable
         thereto,  Borrower  shall  be  responsible  to pay all  amounts  due to
         Lenders as required by Section 3.3 hereof.

                  (d) As of the end of each LIBOR Interest Period selected for a
         LIBOR  Advance,  the interest rate on the LIBOR Advance will become the
         Alternate  Base Rate,  unless  Borrower has once again selected a LIBOR
         Interest  Period in accordance with the timing and procedures set forth
         in Section 2.6(g).

                  (e) The right of  Borrower to select the  Adjusted  LIBOR Rate
         for  an  Advance   pursuant  to  this   Agreement  is  subject  to  the
         availability to Lenders of a similar option.  If Agent  determines that
         (i) deposits of U.S.  dollars in an amount  approximately  equal to the
         LIBOR  Advance  for which the  Borrower  wishes to select the  Adjusted
         LIBOR  Rate are not  generally  available  at such  time in the  London
         interbank  eurodollar  market,  or (ii) the rate at which the  deposits
         described  in  subsection   (i)  herein  are  being  offered  will  not
         adequately  and fairly  reflect  the costs to Agent of  maintaining  an
         Adjusted LIBOR Rate on an Advance or of funding the same in such market
         for such LIBOR Interest Period,  or (iii) reasonable means do not exist
         for determining an Adjusted LIBOR Rate, or (iv) the Adjusted LIBOR Rate
         would be in excess of the maximum  interest rate which  Borrower may by
         law pay, then in any of such events, Agent shall so notify Borrower and
         such Advance shall bear interest at the Alternate Base Rate.

                  (f) In no event may  Borrower  elect a LIBOR  Interest  Period
         which would  extend  beyond the Maturity  Date.  Unless  Lenders  agree
         thereto,  in no event may Borrower  have more than three (3)  different
         LIBOR  Interest  Periods for the LIBOR Advance  outstanding  at any one
         time.

                                       15





                  (g)      Conversion and Continuation.

                           (i) Borrower may elect from time to time,  subject to
                  the other  provisions  of this  Section 2.6, to convert all or
                  any part of the  Advance  into a LIBOR  Advance or a Alternate
                  Base  Rate  Advance,  as the  case may be;  provided  that any
                  conversion  of any LIBOR  Rate  Advance  shall be made on, and
                  only on, the last day of the LIBOR Interest Period  applicable
                  thereto.

                           (ii) The Alternate  Base Rate Advance shall  continue
                  as an  Alternate  Base Rate  Advance  unless  and  until  such
                  Alternate  Base Rate  Advance is  converted  into a LIBOR Rate
                  Advance  pursuant  to a  Conversion/Continuation  Notice  from
                  Borrower in accordance with Section 2.6(g)(iv). The LIBOR Rate
                  Advance shall  continue  until the end of the then  applicable
                  LIBOR  Interest  Period  therefor,  at which  time  each  such
                  Advance  shall be  automatically  converted  into an Alternate
                  Base Rate  Advance  unless the  Borrower  shall have given the
                  Agent a  Conversion/Continuation  Notice  in  accordance  with
                  Section  2.6(g)(iv)  requesting that, at the end of such LIBOR
                  Interest Period, such Advance either continue as an Advance of
                  such type for the same or another LIBOR Interest Period.

                           (iii)   Notwithstanding   anything  to  the  contrary
                  contained in Sections 2.6(g)(i) or (g)(ii),  no Advance may be
                  converted  into a LIBOR Rate  Advance or  continued as a LIBOR
                  Rate Advance (except with the consent of the Majority Lenders)
                  when any Event of Default has occurred and is continuing.

                           (iv) The  Borrower  shall give the Agent  irrevocable
                  notice (a "Conversion/Continuation Notice") of each conversion
                  of an Advance or  continuation  of a LIBOR  Rate  Advance  not
                  later than  11:00  a.m.  (Chicago  time) on the  Business  Day
                  immediately  preceding the date' of the requested  conversion,
                  in the  case of a  conversion  into  an  Alternate  Base  Rate
                  Advance,  or 11:00  a.m.  (Chicago  time) at least  three  (3)
                  Business Days prior to the date of the requested conversion or
                  continuation, in the case of a conversion into or continuation
                  of a LIBOR Rate Advance,  specifying:  (1) the requested  date
                  (which  shall  be  a  Business  Day)  of  such  conversion  or
                  continuation;  (2) the  amount  and type of the  Advance to be
                  convened  or  continued;  and (3) the  amounts  and type(s) of
                  Advance(s)  into which  such  Advance  is to be  converted  or
                  continued   and,  in  the  case  of  a   conversion   into  or
                  continuation  of a LIBOR Rate  Advance,  the  duration  of the
                  LIBOR Interest Period applicable thereto.

         2.7 Method of Payment. All payments of the Obligations  hereunder shall
be made, without set-off,  deduction, or counterclaim,  in immediately available
funds to Agent at Agent's  address  specified  herein,  or at any other  Lending
Installation of Agent specified in writing by Agent to Borrower,  by noon (local
time) on the date when due and shall be applied  ratably by Agent among Lenders.
Each payment delivered to Agent for the account of any Lender shall be delivered
promptly by Agent to such  Lender in the same type of funds that Agent  received
at its address  specified herein or at any Lending  Installation  specified in a
notice received by Agent from such Lender. Agent is

                                       16





hereby  authorized  to charge the  account  of  Borrower  maintained  with First
Chicago  for each  payment of  principal,  interest  and fees as it becomes  due
hereunder.

         2.8 Default.  Notwithstanding the foregoing,  during the continuance of
an Event of  Default,  Borrower  shall  not have the  right to  request  a LIBOR
Advance,  select a new LIBOR  Interest  Period for an existing  LIBOR Advance or
convert  any  Alternate  Base  Rate  Advance  to a  LIBOR  Advance.  During  the
continuance of an Event of Default,  at the election of the Majority Lenders, by
notice  to  Borrower,  the  outstanding  Advance  shall  bear  interest  at  the
applicable Default Rates until such Event of Default is cured or the Obligations
are paid in full.
         2.9  Lending  Installations.  Each  Lender may book its  Advance at any
Lending  Installation  selected  by such  Lender  and  may  change  its  Lending
Installation from time to time. All terms of this.  Agreement shall apply to any
such Lending  Installation and the Notes shall be deemed held by each Lender for
the benefit of such Lending  Installation.  Each Lender may, by written or telex
notice to the Agent and Borrower, designate a Lending Installation through which
the Advance will be made by it and for whose account payments are to be made.

         2.10 Non-Receipt of Funds by Agent. Unless Borrower or a Lender, as the
case may be,  notifies  Agent prior to the date on which it is scheduled to make
payment to Agent of (i) in the case of a Lender, such Lender's Percentage of the
Advance,  or (ii) in the case of Borrower,  a payment of principal,  interest or
fees to the Agent for the  account  of the  Lenders,  that it does not intend to
make such payment, Agent may assume 'that such payment has been made. Agent may,
but shall not be obligated to, make the amount of such payment  available to the
intended recipient in reliance upon such assumption. If such Lender or Borrower,
as the case may be, has not in fact made such payment to Agent, the recipient of
such  payment  shall,  on  demand by  Agent,  repay to Agent the  amount so made
available  together  with  interest  thereon  in  respect of each day during the
period  commencing on the date such amount was so made  available by Agent until
the date Agent recovers such amount at a rate per annum equal to (i) in the case
of payment by a Lender,  the Federal  Funds  Effective  Rate (as  determined  by
Agent)  for such day or (ii) in the case of payment by  Borrower,  the  interest
rate  applicable to the Advance Agent shall not make the single  Advance of Loan
proceeds  described  in Section 2.1 hereof until such time as Agent has received
from each Lender an amount equal to such Lender's Percentage of the Advance.

         2.11     Grant of Security Interest. Borrower hereby grants to the
Lenders a security interest in the Collateral to secure payment of the
Obligations.

         2.12 Release of Properties. Borrower may from time to time make written
request to the Agent for the release of one or more  Properties from the lien or
security title of the applicable  Security  Document(s),  provided that (i) such
release is being made in  connection  with either the sale of such Property to a
third party which is not an Affiliate of the Borrower or a  refinancing  of such
Property,  (ii)  concurrently  with each  release of a Property  or  Properties,
Borrower makes a partial repayment of the principal amount of the Facility in an
amount  which  is the  greater  of (A) 80% of the Net  Purchase  Price  for such
released Property or Properties,  and (B) 100% of net cash sales proceeds or net
refinancing proceeds, as the case may be, received by the Borrower on account of
the sale or refinancing of such Property or Properties,  after  deduction of any
amounts payable to third parties in connection  therewith  (including the amount
payable to Crossroads as a result of a termination of

                                       17





the  Crossroads  Lease as to such  Property  or  Properties)  and of  Borrower's
estimated  income tax  liability on such sale;  (iii) after giving effect to the
release of any  Property  or  Properties,  Borrower  is in  compliance  with the
provisions of Sections 7.5 and 7.6 hereof and the other  covenants  contained in
this Agreement;  and (iv) at the time of such release,  no Event of Default then
exists  hereunder or under any other Loan Document.  In all cases Borrower shall
pay or reimburse  Agent for all fees,  reasonable  legal fees and expenses,  and
other costs and expenses incurred by Agent in connection with such release.

                                   ARTICLE Ill
                             CHANGE IN CIRCUMSTANCES

         3.1      Yield Protection. If the adoption of or change in any law or
any governmental or quasi-governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law), or any interpretation
thereof, or the compliance of any Lender therewith,

                  (a) subjects any Lender or any applicable Lending Installation
         to any tax,  duty,  charge or  withholding on or from payments due from
         Borrower  (excluding  federal  and state  taxation  of the  overall net
         income of any Lender or applicable  Lending  Installation),  or changes
         the basis of such  taxation of payments to any Lender in respect of its
         Advance or other amounts due it hereunder; or

                  (b) imposes or  increases  or deems  applicable  any  reserve,
         assessment,  insurance charge,  special deposit or similar  requirement
         against  assets  of,  deposits  with or for the  account  of, or credit
         extended by, any Lender or any applicable Lending  Installation  (other
         than reserves and  assessments  taken into account in  determining  the
         interest rate applicable to the LIBOR Advance); or

                  (c) imposes any other condition, and the result is to increase
         the  cost of any  Lender  or any  applicable  Lending  Installation  of
         making,  funding or maintaining  loans or reduces any amount receivable
         by any Lender or any applicable Lending Installation in connection with
         loans, or requires any Lender or any applicable Lending Installation to
         make any payment  calculated  by reference to the amount of loans held,
         or  interest  received  by it, by an  amount  deemed  material  by such
         Lender,

then, within fifteen (15) days of demand by such Lender, Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender determines (using customary and reasonable allocation
methods) is attributable to making.  funding and maintaining its Advance and its
Commitment.

         3.2 Changes in Capital Adequacy Regulations. If a Lender determines the
amount of capital  required or expected to be  maintained  by such  Lender,  any
Lending  Installation of such Lender or any corporate  entity  controlling  such
Lender is increased  as a result of a Change (as defined  below),  then,  within
fifteen (15) days of demand by such Lender,  Borrower  shall pay such Lender the
amount  necessary to  compensate  for any shortfall in the rate of return on the
portion of such increased  capital which such Lender determines (using customary
and reasonable allocation methods)

                                       18





is  attributable  to this  Agreement,  its Advance,  or its  obligation  to make
Advance  hereunder  (after  taking into  account  such  Lender's  policies as to
capital  adequacy).  "Change"  means  (i)  any  change  after  the  date of this
Agreement in the  Risk-Based  Capital  Guidelines (as defined below) or (ii) any
adoption of or change in any other law, governmental or quasi-governmental rule,
regulation,  policy,  guideline,  interpretation,  or directive  (whether or not
having  the force of law) after the date of this  Agreement  which  affects  the
amount of capital  required or expected  to be  maintained  by any Lender or any
Lending  Installation  or any corporation  controlling  any Lender.  "Risk-Based
Capital Guidelines" means (i) the risk-based capital guidelines in effect in the
United States on the date of this Agreement,  including  transition  rules,  and
(ii) the corresponding capital regulations promulgated by regulatory authorities
outside  the  United  States  implementing  the July  1988  report  of the Basle
Committee   on   Banking   Regulation   and   Supervisory   Practices   Entitled
"International  Convergence  of Capital  Measurements  and  Capital  Standards",
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.

         3.3 Funding  Indemnification.  If any payment of a LIBOR Advance occurs
on a date which is not the last day of the  applicable  LIBOR  Interest  Period,
whether because of acceleration,  prepayment or otherwise, or a LIBOR Advance is
not made on the date  specified by Borrower for any reason other than default by
one or more of the Lenders,  Borrower will indemnify each Lender for any loss or
cost incurred by such Lender resulting therefrom, including, without limitation,
any  loss or cost in  liquidating  or  employing  deposits  acquired  to fund or
maintain the LIBOR Advance.

         3.4 Lender  Statements;  Survival of  Indemnity.  If, in respect of any
Lender,  circumstances arise which result in an increase in the liability of the
Borrower  to such  Lender  under  Section  3.1 or 3.2 then,  without  in any way
limiting,  reducing or otherwise qualifying the Borrower's obligations under any
of the  Sections  referred  to above in this  Section  3.4,  such  Lender  shall
promptly upon becoming aware of such circumstances  notify the Agent thereof and
such Lender shall,  in  consultation  with the Agent and the Borrower and to the
extent that it can do so without  disadvantaging  itself,  take such  reasonable
steps  as  may  be  reasonably  open  to it to  mitigate  the  effects  of  such
circumstances  (including,  without limitation,  the designation of an alternate
Lending Installation or the transfer of its Percentage of the Advance to another
Lending  Installation).  If and so long as a Lender has been unable to take,  or
has not taken,  steps  acceptable to the Borrower,  to assign all its rights and
obligations herein to another Person nominated by the Borrower with the approval
of the  Agent  (which  shall  not  be  unreasonably  withheld)  and  willing  to
participate  in the facility in place of such  Lender;  provided  that:  (i) the
assigning Lender receives repayment of all amounts then owing to it with respect
to the Facility,  and (ii) such Person satisfies all of the requirements of this
Agreement.  Notwithstanding any such assignment, the obligations of the Borrower
under  Sections  3.1,  3.2 and 3.3  shall  survive  any such  assignment  and be
enforceable  by such Lender.  Each Lender shall  deliver a written  statement of
such Lender as to the amount due, if any, under Sections 3.1, 3.2 or 3.3 hereof.
Such written  statement  shall set forth in reasonable  detail the  calculations
upon which such Lender determined such amount and shall be final, conclusive and
binding on Borrower in the absence of manifest error.  Determination  of amounts
payable  under  such  Sections  in  connection  with a LIBOR  Advance  shall  be
calculated as though each Lender  funded its LIBOR Advance  through the purchase
of a deposit of the type and  maturity  corresponding  to the deposit  used as a
reference in determining the LIBOR Rate  applicable to such Advance,  whether in
fact that is the case or not.  Unless  otherwise  provided  herein,  the  amount
specified in the written

                                       19





statement  shall be payable on demand  after  receipt by Borrower of the written
statement.  The  obligations  of Borrower under Sections 3.1, 3.2 and 3.3 hereof
shall survive payment of the Obligations and termination of this Agreement.


                                   ARTICLE IV
                  CONDITIONS PRECEDENT; ADDITIONAL INFORMATION

         4.1 Conditions  Precedent to Closing.  The obligation of each Lender to
make its Advance is subject to the  condition  precedent  that on the  Agreement
Execution  Date, the following (or updates  thereof,  as applicable)  shall have
been  delivered to the Agent in form and substance  reasonably  satisfactory  to
each of the Lenders:

                  (a) Certificates of Limited Partnership/Incorporation.  A copy
         of the  Certificate of Limited  Partnership  for Borrower and a copy of
         the  articles  of  incorporation  of each of  General  Partner  and the
         Company,  each  certified  by the  appropriate  Secretary  of  State or
         equivalent state official.

                  (b)  Agreements of Limited  Partnership/Bylaws.  A copy of the
         Agreement of Limited  Partnership for Borrower and a copy of the bylaws
         of  each  of  the  General  Partner  and  the  Company,  including  all
         amendments  thereto,  each  certified by the  Secretary or an Assistant
         Secretary  of the General  Partner as being in full force and effect on
         the Agreement Execution Date.

                  (c)  Good  Standing  Certificates.   A  certified  copy  of  a
         certificate from the Secretary of State or equivalent state official of
         the states of  organization,  dated as of the most  recent  practicable
         date,  showing  the good  standing  or  partnership  qualification  (if
         issued) of (i) Borrower, (ii) General Partner, and (iii) the Company.

                  (d) Foreign Qualification Certificates.  A certified copy of a
         certificate from the Secretary of State or equivalent state official of
         each of the states in which a Property is located, dated as of the most
         recent practicable date, showing the qualification to transact business
         in such state as a foreign limited partnership or foreign  corporation,
         as the case  may be,  for (i)  Borrower,  (ii) in  those  states  where
         General  Partner  is  required  by  law  to be  qualified  to  transact
         business,  General Partner, and (iii) in those states where the Company
         is required by law to be qualified to transact business, the Company.

                  (e)  Resolutions.  A copy of a resolution or  resolutions  and
         adopted by the Board of Directors of the General Partner,  certified by
         the Secretary or an Assistant Secretary of the General Partner as being
         in full force and effect on the Agreement  Execution Date,  authorizing
         the  Advance  provided  for  herein  and the  execution,  delivery  and
         performance of the Loan Documents by the General Partner to be executed
         and  delivered  by it  hereunder  on  behalf of  itself  and  Borrower.
         Borrower shall also provide similar documentation for the Company.


                                       20





                  (f)  Incumbency  Certificate.  A  certificate,  signed  by the
         Secretary  or an Assistant  Secretary of the General  Partner and dated
         the Agreement Execution Date, as to the incumbency,  and containing the
         specimen signature or signatures,  of the Persons authorized to execute
         and deliver the Loan  Documents to be executed and  delivered by it and
         Borrower hereunder.  Borrower shall also provide similar  documentation
         for the Company.

                  (g)      Loan Documents. Originals of the Loan Documents (in
         such quantities as the Lenders may reasonably request), duly executed
         by authorized officers of the appropriate entity.

                  (h) Opinion of Borrower's  Counsel.  A written opinion,  dated
         the Agreement  Execution  Date,  from outside  counsel for the Borrower
         which counsel is reasonably satisfactory to Agent, substantially in the
         form attached hereto as Exhibit G.

                  (i) Opinion of General  Partner's  and  Company's  Counsel.  A
         written  opinion,  dated the  Agreement  Execution  Date,  from outside
         counsel  for the  General  Partner  and the  Company  which  counsel is
         reasonably  satisfactory to Agent,  substantially  in the form attached
         hereto as Exhibit G.

                  (j)      Financing Statements. Financing Statements, duly
         executed by Borrower, as reasonably requested by Agent.

                  (k) ALTA Loan Policy.  One or more ALTA loan policies of title
         insurance (or "marked-up" and binding  commitments for title insurance)
         in the amount of the Aggregate  Commitment (or, if more than one policy
         is  obtained,  such  portion  of  the  Aggregate  Commitment  as may be
         allocable to the particular  Property as determined by Agent) as of the
         applicable Property Acceptance Date issued by a title insurance company
         satisfactory  to the Agent  insuring the Lenders'  first  mortgage lien
         with  respect  to  each  of  the  Properties,  showing  only  Permitted
         Exceptions  and  containing  all   endorsements   (including,   without
         limitation, a so-called "comprehensive"  endorsement or, if applicable,
         an  endorsement  deleting  the  "standard  exceptions"  from such title
         policies) required by the Agent (except to the extent that the issuance
         of a particular  endorsement  is prohibited  by applicable  state law),
         together with:
                           (i)      copies of all documents referred to therein;
                  and

                           (ii)     satisfactory reinsurance agreements relating
                  thereto, if required by Agent.

                  (l) ALTA Surveys. A Survey of each of the Properties  prepared
         in  accordance  with the  "Minimum  Standard  Detail  Requirements  for
         ALTA/ACSM  Land Title  Surveys  (1992)" and which are dated not earlier
         than  sixty  (60)  days  prior to the  Agreement  Execution  Date  .and
         certified to the Agent for the benefit of the  Lenders.  The survey for
         each  Property  shall specify any flood zone  designation(s)  (based on
         federal flood insurance rate maps or the state or local equivalent with
         proper annotation) applicable to all or any portion of that Property.

                                       21





                  (m)      Property Agreements. Copies of all management and
         leasing agreements (including, without limitation, all reciprocal
         easement agreements) for the Properties in full force and effect as of
         the Agreement Execution Date.

                  (n) Local Counsel Opinions.  Written opinions,  each dated the
         Agreement  Execution  Date,  from  outside  counsel  in each  of  those
         jurisdictions  in which the Properties are located (which counsel shall
         be reasonably satisfactory to Agent).

                  (o)      Crossroads Lease. A copy of the Crossroads Lease,
         certified as complete, true and correct by the Secretary or Assistant
         Secretary of the General Partner.

                  (p)      Ground Leases. Copies of all of the Ground Leases,
         certified as complete, true and correct by the Secretary or Assistant
         Secretary of the General Partner. Borrower shall hold a leasehold
         interest only in the Ground Lease Properties.

                  (q)      Ground Lease Estoppel Letters. Estoppel letters from
         all ground lessors under the Ground Leases.

                  (r)      Subordination and Attornment Agreement. A
         subordination and attornment agreement executed by the Lessee with
         respect to the Crossroads Lease.

                  (s) Franchise Agreements.  Copies of the Franchise Agreements,
         certified  as  true,  correct  and  complete  by the  Secretary  or the
         Assistant  Secretary of the General  Partner,  together with a "comfort
         letter"  addressed to Agent and executed by the  franchisor  under such
         agreements.

                  (t)  Insurance.  Original  or  certified  copies of  insurance
         policies  or binders  therefore,  with  accompanying  receipts  showing
         prepayment  of all  premiums  for one full  year  after  the  Agreement
         Execution  Date,  evidencing  that  Borrower  carries  insurance on the
         Properties   which  satisfies  the  Agent's   insurance   requirements,
         including, without limitation:

                           (i)  Property  and  casualty   insurance   (including
                  coverage for flood and other water  damage for any  Properties
                  located  within a 100-year  flood  plain) in the amount of the
                  replacement cost of the improvements at the Properties;

                           (ii)     Loss of rental income insurance in the
                  amount not less than one year's Gross Revenues from the
                  Properties; and

                           (iii)    Comprehensive general liability insurance
                  in the amount of $1,000,000 per occurrence.

                  All  insurance  must  be  carried  by  companies  with  a Best
Insurance Reports (1992)  Policyholder's and Financial Size Rating of "A-VII" or
better.  All insurance required under this Agreement shall have endorsed thereon
the standard Deed of Trust or Mortgage clause in favor of Agent as agent for the
Lenders and shall include the Lenders as loss payees. All insurance required

                                       22





under this  Agreement  shall contain  provisions  stating that (i) the insurance
policy is non-cancelable without at least thirty (30) days' notice to the Agent,
and (ii) no claims  shall be paid  without at least ten (10) days' notice to the
Agent.

                  (u)      Searches. UCC financing statement, judgment,
         bankruptcy and tax lien searches with respect to the Borrower and
         Borrower's predecessor in title.

                  (v)  Environmental  Reports.  A  Phase I or,  at the  Lenders'
         request, a Phase II or other environmental  survey or audit for each of
         the Properties dated within sixty (60) days of the Agreement  Execution
         Date in form  and  substance  satisfactory  to all of the  Lenders  and
         prepared by a qualified  environmental  consultant  satisfactory to the
         Agent.

                  (w)      Financial and Operating Statements. Actual operating
         statements for the Properties for at least a full fiscal quarter for
         the most recent fiscal quarter for which results are available as of
         the Agreement Execution Date.

                  (x)      No ERISA. Violations. Evidence that the Facility and
         each Plan do not violate any laws, statutes, orders or regulations
         governing pension or ERISA plans.

                  (y) Waiver.  Execution  and delivery by the lenders  under the
         Revolving  Credit Facility of a waiver under such facility  authorizing
         the Facility described in this Agreement.

                  (z)      Equity Contribution. Evidence that Borrower has
         received an equity contribution of not less than $95,000,000 from the
         Guarantors as the proceeds of a stock or other equity offering by the
         Guarantors.

                           (aa) Other  Evidence  as Lenders  May  Require.  Such
                  other  evidence as Agent may  reasonably  request to establish
                  the consummation of the transactions  contemplated hereby, the
                  taking  of  all  necessary   actions  in  any  proceedings  in
                  connection  herewith and  compliance  with the  conditions set
                  forth in this Agreement.

                  Each of AmSouth  and  Credit  Lyonnais  also shall  approve or
disapprove  in writing each item  furnished to such Lender  pursuant to Sections
4.1(o),  4. l(p),  4.1(v) and 4.1(w)  within a reasonable  period of time not to
exceed ten (10) Business Days following such Lender's receipt of a complete copy
of the final  version of each such item and the failure of any such Lender to so
notify  Agent on a timely basis shall be deemed to be an approval by such Lender
of such items.

         4.2 Additional  Information.  Agent shall,  at Borrower's sole cost and
expense,   order   appraisals   (which   appraisals   shall  conform  to  FIRREA
requirements) and engineering reports for each of the Properties on or after the
150th day following  the Agreement  Execution  Date (the "Order  Date"),  unless
prior to the Order Date  Borrower has  furnished  the Lenders with  evidence (in
form and substance  satisfactory  to the Lenders) that, not later than the 180th
day following the Agreement  Execution  Date, the Facility and all other amounts
due and owing to the Agent and the Lenders under

                                       23





the Loan  Documents  will be  repaid  in full.  If  Borrower  notifies  Agent of
Borrower's  intent to repay the Loan and fails to make such repayment in full by
such 180th day, then Agent shall  immediately  order such appraisals and reports
at Borrower's expense.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

   Borrower, General Partner and the Company hereby represent and warrant to the
Lenders as follows:

         5.1  Existence.   Borrower  is  and  will  continue  to  be  a  limited
partnership duly organized. validly existing and in good standing under the laws
of the State of Tennessee; the General Partner is and will continue to be a real
estate  investment  trust duly organized,  validly existing and in good standing
under the laws of the State of Maryland and is and will at all times continue to
maintain its tax status as a real estate  investment  trust under Section 856 of
the Code; the Company is and will continue to be a corporation  duly  organized,
validly  existing and in good standing  under the laws of the State of Tennessee
and is and will at all  times  continue  to  maintain  its tax  status as a real
estate  investment  trust under Section 856 of the Code;  each of Borrower,  the
General  Partner and the Company is and will  continue to be duly  licensed  and
qualified  as  a  foreign   partnership,   corporation   or  otherwise  in  each
jurisdiction  in which a Property  is located  or  failure  to be  qualified  or
licensed  would  have a  materially  adverse  effect on  Borrower,  the  General
Partner,  the  Company,  any  Property,  or on any  other  Collateral  or on the
business,  assets,  operations,  property or  financial  or other  condition  of
Borrower, the General Partner or the Company;  Borrower has and will continue to
have all  requisite  power and  authority  to borrow  under the  Facility and to
execute and deliver,  and to observe and perform all of its  obligations  under,
this Agreement and the other Loan Documents; each of the General Partner and the
Company  has and will  continue to have all  requisite  power and  authority  to
execute  and  deliver,  and to  observe  and  perform  all of  their  respective
obligations  under,  this  Agreement and the other Loan  Documents;  the General
Partner has and will  continue to have all  requisite  power and authority to be
the sole general partner of the Borrower and to execute and deliver on behalf of
the Borrower, as general partner, all of the Loan Documents,  and to observe and
perform all of its  obligations,  as general partner of the Borrower,  under the
Loan  Documents;  and each of Borrower,  the General Partner and the Company has
and will  continue  to have all  requisite  power  and  authority  to own  their
respective  assets and  property  and to carry on the business in which they are
engaged.

         5.2 Authorization.  The execution, delivery and performance by Borrower
and the Company of this Agreement and the other Loan  Documents,  the borrowings
by the  Borrower  under the  Agreement  and the other  Loan  Documents,  and the
execution, delivery and performance by the Borrower, the Company and the General
Partner,  individually  and as the sole general partner of the Borrower,  of all
other  agreements  and  instruments  (not  mentioned  above) to be executed  and
delivered  by them  pursuant  hereto or thereto  or in  connection  herewith  or
therewith,  have  been or will be duly  authorized  by all  necessary  corporate
action (including any necessary stockholder action), partnership action or other
action on the part of each of them, and do not and will not (i) violate (A)

                                       24





any provision of any law,  rule,  regulation,  order,  writ,  judgment,  decree,
determination or award presently in effect having applicability to Borrower, the
General  Partner or the Company,  or of any of the  organizational  documents of
Borrower, the General Partner or the Company, or (B) any indenture, agreement or
other  instrument  to which  Borrower or the General  Partner is a party,  or by
which Borrower,  the General  Partner or the Company or any of their  respective
property or assets is bound,  except in cases where such violation will not have
a materially  adverse  effect on any Property,  any  Collateral or the business,
assets,  operations,  property or financial or other condition of Borrower,  the
General Partner or the Company,  or (ii) be in conflict with, result in a breach
of or constitute  (with the notice or lapse of time or both) a default under any
such  indenture,  agreement  or other  instrument,  except in cases  where  such
conflict,  breach or default  will not have a materially  adverse  effect on any
Property,  any Collateral or on the business,  assets,  operations,  property or
financial or other condition of Borrower. the General Partner or the Company, or
(iii)  result  in or  require  (except  as  specifically  contemplated  by  this
Agreement)  the creation or imposition of any lien of any nature upon any of the
assets or property of Borrower or the General  Partner.  This Agreement has been
duly  executed and  constitutes,  and (when  executed and  delivered by Borrower
and/or the General  Partner and/or the Company) each other Loan Documents now or
hereafter  executed and delivered by Borrower  and/or the General Partner and/or
the Company pursuant hereto or thereto or in connection herewith,  or therewith,
will each constitute the legal,  valid and binding obligation of Borrower and/or
the General Partner and/or the Company,  respectively,  enforceable against them
in  accordance  with  their  terms,  except as  enforcement  may be  limited  by
bankruptcy  insolvency  and other  similar laws  affecting  the  enforcement  of
creditors'  rights generally and by moratorium laws from time to time in effect.
No authorization,  consent,  approval, license or formal exemption from, nor any
filing,  declaration or  registration  with, any court,  governmental  agency or
regulatory  authority  (Federal,  state, local or foreign),  including,  without
limitation,  the  Securities  and Exchange  Commission,.  or with any securities
exchange,  is  required  by  Borrower,  the  General  Partner or the  Company in
connection  with the making and performance by Borrower of this Agreement or the
Notes or with respect to the borrowings hereunder or for the execution, delivery
and  performance by Borrower,  the General  Partner and the Company of the other
Loan Documents, except for those already obtained or completed.

         5.3  Perfection of Security  Interests.  When duly recorded or filed in
the  appropriate  public  records,  the Mortgages .and the Financing  Statements
shall each  create in the  Lenders,  valid and  perfected  first  liens upon the
property  purportedly  subject  thereto  (other  than  capital  leases of a type
described  in the  definition  of  "Permitted  Liens"  contained  herein) and no
further action will be required to perfect such liens.

         5.4      Financial Statements.

                  (a) The  December  31, 1996,  audited  consolidated  financial
         statements  of each of  Borrower,  the General  Partner and the Company
         previously  delivered  by  Borrower  to the  Lenders are correct in all
         material  respects  and fairly  set forth the  financial  condition  of
         Borrower,  the General  Partner and the  Company,  respectively,  as of
         December 31, 1996, and the results of Borrower's, the General Partner's
         and the Company's respective operations and

                                       25





         changes  in  Borrower's,   the  General  Partner's  and  the  Company's
         respective  financial  position  for  the  period  then  ended,  all in
         accordance with generally accepted  accounting  principles applied on a
         consistent  basis.  Since December 31, 1996, there has not occurred any
         material adverse change in the business, assets,  operations,  property
         or financial or other condition of Borrower, the General Partner or the
         Company.

                  (b) All quarterly  consolidated  and  consolidating  unaudited
         financial  statements for the calendar quarter ending March 31, 1997 of
         each of  Borrower,  the  General  Partner  and the  Company  previously
         delivered  by  Borrower  to the  Lenders  are  correct in all  material
         respects and fairly set forth the financial condition of Borrower,  the
         General  Partner  and the  Company,  respectively,  as of the dates set
         forth therein, and the results of Borrower's, the General Partner's and
         the Company's  respective  operations  and changes in  Borrower's,  the
         General Partner's and the Company's  respective  financial position for
         the period  then  ended,  all in  accordance  with  generally  accepted
         accounting  principles applied on a consistent basis. Since the date of
         such  statements  delivered by Borrower to the  Lenders,  there has not
         occurred  any  material   adverse  change  in  the  business,   assets,
         operations,  property or financial or other condition of Borrower,  the
         General Partner or the Company.

                  (c)  All  monthly   unaudited   individual  and   consolidated
         operating   statements  and  all  annual  individual  and  consolidated
         operating  statements  covering  each  of  the  Properties   previously
         delivered  by  Borrower  to the  Lenders  are  correct in all  material
         respects and fairly set forth the operating  results of the  Properties
         as of the dates set forth therein,  and the results of each  Property's
         respective   operations  and  changes  in  each  Property's   operating
         activities for the period then ended,  all in accordance with generally
         accepted accounting principles applied on a consistent basis. Since the
         date of such  statements,  there has not occurred any material  adverse
         change in the operations of any Property.

         5.5  Litigation.  Except as set forth on  Schedule 2  attached  to this
Agreement,  there are no actions,  audits or proceedings pending or, to the best
knowledge of Borrower,  threatened against Borrower,  the General Partner or the
Company or any of their  respective  properties or assets by or before any court
or any Federal, state, local, foreign or other governmental agency or regulatory
authority which, in the reasonable judgment of Borrower, after consultation with
counsel,  would have or could  have a  materially  adverse  effect on any of the
Properties or the Collateral or on the business, assets, operations, property or
financial or other condition of Borrower,  the General Partner or the Company or
would or could materially impair its ability of Borrower, the General Partner or
the Company to perform their respective  obligations  under this Agreement,  the
Notes and the other Loan Documents.

         5.6      Ownership of Assets.

                  (a) Each of Borrower,  the General Partner and the Company own
         fee title to, or a  leasehold  estate in, or other  title or  ownership
         interest  in all their  respective  properties  and  assets  including,
         without limitation, the properties and assets reflected on the audited

                                       26





         consolidated  financial  statements referred to in Section 5.4(a) above
         and assets and properties  acquired since December 31, 1996, except for
         such  properties and assets as have been disposed of since December 31,
         1996.

                  (b) The  Borrower  owns  fee  title  to all of the  Properties
         (other  than  the  Ground  Lease   Properties  with  respect  to  which
         Borrower's  interest  is a  leasehold  estate).  The fee  title  to and
         leasehold  estates in the  Properties are and will continue to be owned
         and held by the  Borrower  free and  clear of all  liens  and  monetary
         encumbrances  of  any  nature  whatsoever  (except  for  the  Permitted
         Exceptions).  The  Ground  Leases  are in full  force and effect and no
         event has  occurred,  which but for the  passage of time or notice,  or
         both,  would constitute a default under any Ground Lease, and no action
         has commenced and no notice has been given or received for the purposes
         of  terminating  any  Ground  Lease.  All   non-monetary   encumbrances
         affecting the  Properties  will either  benefit the  Properties or will
         enhance the integrated use,  operation and management of the Properties
         or will not otherwise  have a materially  adverse  effect on the title,
         ownership, value, use or operation of any of the Properties.

         5.7 Taxes.  Each of Borrower,  the General  Partner and the Company has
filed or caused to be filed all United States and state income tax returns which
are  required  to be filed and has paid or caused to be paid all taxes  shown on
such returns or on any assessment  made against it, except in cases where such a
failure  to file or to pay would  not have a  materially  adverse  effect on any
Property,  any Collateral or on the business,  assets,  operations,  property or
financial  or other  condition  of  Borrower  or the  General  Partner.  Each of
Borrower,  the  General  Partner and the Company has filed or caused to be filed
all United States,  state,  local and foreign tax returns (other than income tax
returns)  which are  required  to be filed and has paid or caused to be paid all
taxes shown on such returns or on any  assessment  made against it and all other
taxes, fees or other charges imposed on it by any governmental authority, agency
or  instrumentality  which  have  become  due and  payable  (other  than  taxes,
assessments,  fees and other  charges  the  validity or amount of which is being
contested in good faith by  appropriate  proceeding  or the failure to pay which
would not have a materially adverse effect on any Property, any Collateral or on
the business,  assets,  operations,  property or financial or other condition of
Borrower,  the  General  Partner or the  Company).  No tax liens have been filed
against Borrower, the General Partner or the Company or against their respective
assets and  property  (other than those the validity or amount of which is being
contested in good faith by appropriate  proceedings or the  foreclosure of which
would not have a materially adverse effect on any Property, any Collateral or on
the business,  assets,  operations,  property or financial or other condition of
Borrower,  the General Partner or the Company), and no material claims are being
asserted in respect of any taxes (other than those being  contested as aforesaid
or those that are not material as aforesaid).

         5.8      No Defaults.

                  (a)      Neither Borrower, the General Partner nor the Company
         is in default in any respect under or in respect of any contract,
         agreement or other instrument to which it is a party or by which it or

                                       27





         or its property or assets may be bound,  except in Case  where  such
         default  has no  materially  adverse  effect  on any Property,  any
         Collateral  or on  the  business,  assets,  operations, property or
         financial  or other  condition  of Borrower or the General Partner.  No
         Event of Default has  occurred  and is  continuing  and no event has
         occurred which but for notice,  lapse of time, or both, would 
         constitute an Event of Default.  Neither Borrower,  the General Partner
         nor the  Company is in  default  under any  order,  judgment,  award or
         decree of any court, arbitrator or other governmental authority binding
         upon or  effecting  it or by which any of its property or assets may be
         bound or affected, except in cases where such default has no materially
         adverse  effect on any  Property,  any  Collateral  or on the business,
         assets,  operations,  property  or  financial  or  other  condition  of
         Borrower or the General Partner, and no such order, judgment,  award or
         decree  materially  adversely  affects  the  ability of  Borrower,  the
         General  Partner  or the  Company,  to  carry  on its  business  as now
         conducted  or the  ability  of  Borrower,  the  General  Partner or the
         Company, to perform their respective  obligations under this Agreement,
         the Notes and the other Loan Documents.

                  (b) There exists no default by Borrower,  the General  Partner
         or the  Company  under  any deed of  trust,  mortgage,  pledge or other
         security  agreement  affecting any Property or any  Collateral,  or any
         portion  thereof,  or under any Material  Agreement  pertaining  to any
         Property,  or by  which  any  portion  of any of  the  Property  or the
         Collateral may be bound.

         5.9 Insurance.  Each of Borrower,  the General  Partner and the Company
maintains or causes to be maintained by Lessee or Other Lessee with  financially
sound and reputable  insurance  companies,  with premiums at all times currently
paid, property and casualty insurance upon fixed assets and inventories,  public
liability insurance,  fidelity bond coverage,  business interruption  insurance,
and all insurance  required by law, all in form and amounts  required by law and
customary to the  respective  natures of their  businesses and  properties,  and
including,  without  limitation,  the insurance  policies  required  pursuant to
Section 4. l(s) of this  Agreement,  except in cases  where  failure to maintain
such insurance will not have or potentially have a materially  adverse effect on
any of the Properties or the Collateral or on the business,  assets, operations,
property or financial or other condition of Borrower, the General Partner or the
Company.

         5.10 Accuracy of Furnished  Information.  Neither this  Agreement,  any
other Loan  Document nor any  document,  financial  statement,  report,  notice,
schedule,  certificate,  statement  or  other  writing  furnished  to  or  to be
furnished  to the Lenders by  Borrower,  the  General  Partner or the Company in
connection  with the Facility or otherwise in  connection  with the  transaction
contemplated hereby, contains or will contain any untrue or misleading statement
of, or omission of, any  material  fact as of the date upon which the same is so
furnished.

         5.11     Compliance with Laws.

                  (a) All of the  Properties  and  their  use  comply  and  will
         continue to comply to all material  respects with all applicable zoning
         resolutions, building codes, fire safety, environmental subdivision and
         other  applicable  laws,  rules  and  regulations  including,   without
         limitation, the Americans with Disabilities Act.


                                       28





                  (b)  Borrower  has no knowledge of any notices of violation of
         Federal law or municipal  ordinances or orders or  requirements  of the
         states in which the Properties are located or an)' municipal department
         or other governmental authority.

         5.12  Condition  of  Properties.  No  portion of any  Property  nor any
improvements  located on any Property which are material to the operations,  use
or value of a Property  are  damaged or  injured  in any  material  respect as a
result of any fire, explosion, accident, flood or other casualty.

         5.13     Franchise Agreements.  All required Franchise Agreements are
in full force and effect and are free from default.

         5.14 Leases.  Except for the Crossroads  Leases, the Ground Leases, the
space leases  described on Schedule 2 attached to this  Agreement  and the other
leases  described on Schedule 3 attached to this  Agreement,  there are no other
leases  concerning  or with  respect to any of the  Properties  or any  portions
hereof,  including any personal  property located thereon to which Borrower is a
party.

         5.15   Condemnation.   Except  for  the  proposed   condemnation  of  a
non-material  portion of the Greenville,  North Carolina  Property in connection
with a local sanitary sewer project (as previously  disclosed in writing to, and
approved by,  Agent),  no  condemnation  or eminent  domain  proceeding has been
commenced or to the knowledge of Borrower is threatened against any Property.

         5.16  Margin  Stock.  Neither  Borrower,  the  General  Partner nor the
Company  is engaged  in the  business  of  extending  credit for the  purpose of
purchasing or carrying any margin stock (within the meaning of Regulation G or U
of the Board of Governors of the Federal  Reserve System of the United  States).
No part of the proceeds of any advance  made under the Facility  will be used to
purchase  or carry any such margin  stock or to extend  credit to others for the
purpose of  purchasing  or carrying  any such margin stock or for the purpose of
repaying any loan the proceeds of which were used for such purpose. If requested
by Agent,  Borrower,  the General  Partner  will furnish to Agent a statement in
conformity with the requirements of Federal Reserve Form U-1 referred to in said
Regulation  U. No part of the  proceeds of any advance  made under the  Facility
will be used for any purpose that violates,  or which is inconsistent  with, the
provisions of  Regulation  G, T, U or X or any other  regulation of the Board of
Governors of the Federal Reserve System of the United States.

         5.17 ERISA.  Neither Borrower,  the General Partner nor the Company has
taken any action  which would cause it to become an "employee  benefit  plan" as
defined in Section 3(3) of the Employee  Retirement Income Security Act of 1974,
as amended from time to time ("ERISA"),  or a "governmental  plan" as defined in
Section  3(32) of ERISA or a "plan" as  defined  in  Section  4975(e)(1)  of the
Internal  Revenue  Code, or which would cause its assets to become "plan assets"
as defined in 29 C.F.R. Section 2510.3-101.

         5.18     Use of Loan Proceeds. The proceeds of any and all advances
under the Facility shall be used for the purposes set forth in this Agreement
and for no other purposes.



                                       29





         5.19 Solvency. Borrower, the General Partner and the Company taken as a
whole are each and, after giving effect to all of the transactions  contemplated
by this Agreement and the other Loan  Documents,  will each continue to be, in a
solvent  condition.  As used herein,  "solvent" means, when used with respect to
any Person,  that (i) the present fair saleable value of such Person's assets is
in  excess  of  the  total  amount  of  its  liabilities  (including  contingent
liabilities);  (ii) such Person is able to pay its debts as they become due; and
(iii) such  Person  does not have  unreasonably  small  capital to carry on such
Person's business as therefore  operated and all businesses in which such Person
is about to engage.

         5.20     Investment Company Act. Borrower is not, and will by such acts
as may be necessary, continue not to be, an investment company within the
meaning of the Investment Company Act of 1940.

         5.21 Public  Utility  Holding  Company Act.  Borrower is not a "holding
company" or a "subsidiary  company" of a "holding company," or an "affiliate" of
a "holding company," or a "subsidiary company" of a "holding company" within the
definitions of the "Public Utility Company Act of 1935", as amended.

         5.22 Brokers. Borrower has dealt with no brokers in connection with the
Facility,  and no brokerage fees or commissions  are payable by or to any Person
in  connection  with this  Agreement or the  Facility.  The Lenders shall not be
responsible  for the  payment  of any  fees or  commissions  to any  broker  and
Borrower shall indemnify,  defend and hold the Lenders harmless from and against
any claims,  liabilities,  obligations,  damages, costs and expenses any claims,
liabilities;  obligations,  damages,  costs and expenses  (including  reasonable
attorneys' fees and disbursements)  made against or incurred by the Lenders as a
result of claims made or actions instituted by any broker or Person claiming by,
through or under Borrower in connection with the Facility.

         5.23     (Intentionally Deleted.)

         5.24     Foreign Person. Borrower is not a "foreign person" within the
meaning of Section 1445 or 7701 of the Internal Revenue Code.

         5.25     Trade Name. Borrower uses no trade name and has not and does
not do business under any name other than its actual name set forth herein. The
principal place of business of Borrower is as stated in the recitals hereto.

         The representations and warranties of Borrower, General Partner and the
Company under this  paragraph  shall be deemed to be continuing  representations
and warranties  which may at all times during the term of the Credit Facility be
relied upon by the Lenders (and each  Participant)  unless Agent shall have been
informed by Borrower of any change in fact or  circumstances  which would effect
the continuing  accuracy of the representations and warranties set forth in this
paragraph. Borrower shall promptly inform Agent (but in no event later than five
(5) business days after Borrower shall have knowledge thereof) of the occurrence
of any fact, circumstance or event which

                                       30





would  change or  materially  affect in any way the  continuing  accuracy of the
representations and warranties set forth in this paragraph or which would render
any such representation or warranty inaccurate or false in any material respect.


                                   ARTICLE VI
                              AFFIRMATIVE COVENANTS

         The Borrower  (and the General  Partner and the  Company,  if expressly
included in Sections  contained in this  Article)  covenant and agree that until
the full and final payment of all obligations  incurred under the Loan Documents
they will:

         6.1      Notices. Promptly give written notice to Agent of:

                  (a) any Default or Event of Default, specifying the nature and
         the period of existence  thereof and what action has been taken or been
         proposed to be taken with respect thereto;

                  (b)  all  claims  filed  against  any  property  owned  by the
         Borrower or the General Partner which, if adversely  determined,  could
         have a material  adverse effect on any Collateral or the ability of the
         Borrower,  the  General  Partner  or the  Company  to meet any of their
         obligations under the Loan Documents;

                  (c) effect or cause a General  Partner,  the occurrence of any
         other  event  which  might have a  material  adverse  material  adverse
         financial change on or with respect to the Borrower, the Company or any
         Collateral;

                  (d)      any change in the equity ownership of any Collateral;

                  (e) any Reportable  Event or any "prohibited  transaction" (as
         such term is defined in Section  4975 of the Code) in  connection  with
         any Plan or any trust created  thereunder,  which may, singly or in the
         aggregate  materially impair the ability of the Borrower or the General
         Partner  to repay  any of its  obligations  under  the Loan  Documents,
         describing  the nature of each such event and the action,  if any,  the
         Borrower,  the  General  Partner,  the  Company,  as the  case  may be,
         proposes to take with respect thereto;

                  (f)      any default under any Ground Lease, deed of trust or
         mortgage relating to any Collateral, or any breach or default under any
         Material Agreement relating to any Collateral; and

                  (g) any  notice  from any  federal,  state,  local or  foreign
         authority  regarding  any  Hazardous  Material,   asbestos,   or  other
         environmental   condition,   proceeding,   order,  claim  or  violation
         affecting any of the Properties.

                                       31





         6.2      Financial Statements, Reports, Etc. Borrower shall furnish or
cause to be furnished to each Lender each of the following:

                  (a) annually,  within ninety (90) days next  following the end
         of each calendar year during the term of the Facility,  individual  and
         consolidated  financial and  operating  statements in the form attached
         hereto as Exhibit I covering the  operation  of each of the  Properties
         from time to time  constituting part of the Collateral for the Facility
         for such calendar year, which financial and operating  statements shall
         show the actual performance of each of the Properties from time to time
         constituting   part  of  the   Collateral  for  the  Facility  for  the
         immediately  preceding calendar year and shall otherwise be in form and
         substance reasonably satisfactory to Agent;

                  (b) annually,  within ninety (90) days next  following the end
         of  each  calendar  year  during  the  term of the  Facility,  complete
         executed  copies of annual audited  consolidated  and annual  unaudited
         consolidating  financial  statements  in the form  attached  hereto  as
         Exhibit J for each of Borrower, the General Partner and the Company for
         such fiscal year, and  containing a fully itemized  statement of profit
         and loss and of surplus and a balance sheet;

                  (c)  annually,  not later than the first  business day of each
         calendar  year  during  the  term  of  the  Facility,   individual  and
         consolidated  operating and capital  expenditure  budgets pertaining to
         such  calendar  year in the form  attached  hereto  as  Exhibit  K with
         respect to each of the Properties from time to time  constituting  part
         of the Collateral for the Facility;

                  (d) quarterly,  within forty-five (45) days next following the
         end of each calendar quarter during the term of the Facility, quarterly
         consolidated and consolidating  unaudited  financial  statements in the
         form  attached  hereto as Exhibit L for each of  Borrower,  the General
         Partner and the Company;

                  (e)  quarterly  (unless  otherwise  requested  by  Agent  more
         frequently  than  quarterly,  but  in no  event  more  frequently  than
         monthly) not later than thirty (30) days after the end of each calendar
         quarter (or such shorter  period of time if requested  more  frequently
         than  quarterly)  during the term of the  Facility,  monthly  unaudited
         individual and consolidated  operating  statements in the form attached
         hereto as Exhibit M covering each of the  Properties  from time to time
         constituting part of the Collateral for the Facility, reconciled to the
         then current annual  individual and consolidated  operating budgets for
         the Properties;

                  (f)  copies of all  other  quarterly  and  annual  filings  of
         Borrower,  the General  Partner or the Company with the  Securities and
         Exchange Commission and other publicly released information  concurrent
         with such filing or public releases;

                  (g)  copies of all  correspondence  (other  than  non-material
         correspondence pertaining to administrative or other day-to-day matters
         of  operation)  between  Borrower  and (y) the issuer of the  Franchise
         Agreement for the Properties and (z) the Lessee of the

                                       32





         Crossroads   Lease,   concurrent  with  Borrower's   sending  any  such
         correspondence  to such  issuer or such lessee and within five (5) days
         following the receipt by Borrower of any such  correspondence  from any
         such issuer or such lessee;

                  (h) within  ninety  (90) days next  following  the end of each
         calendar  year  during  the  term  of the  Facility,  (i) a  compliance
         certificate  in the  form of  Exhibit  P  attached  hereto,  and (ii) a
         certificate  signed  by  the  chief  financial  officer  or  the  chief
         executive  officer of Borrower  certifying  on the date thereof  either
         that there  does not exist an event  which  constitutes,  or which upon
         notice or lapse of time or both would constitute, a Default or an Event
         of Default  under.  any of the Loan  Documents,  and if such Default or
         Event of Default  exists,  the nature thereof and the period of time it
         has existed; and

                  (i) within ten (10) days after Agent's  request,  such further
         detailed  financial or other information with respect to Borrower,  the
         General  Partner,  the Company,  the Properties or the operation of the
         Properties, as may be reasonably requested by Agent.

         All audited  financial  statements  required to be prepared pursuant to
the  provisions  of  this  paragraph  shall  be  prepared  and  certified  by an
independent  certified public accountant  acceptable to Agent, shall be prepared
in  accordance  with GAAP,  and shall be in form and substance  satisfactory  to
Agent. All unaudited financial  statements delivered to Lenders' pursuant to the
provisions  of this  paragraph  shall be certified to be true and correct in all
material  respects by the chief financial officer or the chief executive officer
of the General Partner.

         6.3 Existence and Conduct of  Operations.  Except as permitted  herein,
maintain and preserve its existence and all rights,  privileges  and  franchises
now enjoyed and necessary for the operation of its business, including remaining
in good standing in each  jurisdiction in which business is currently  operated.
The  Borrower,  the General  Partner and the Company  shall carry on and conduct
their   respective   businesses  in   substantially   the  same  manner  and  in
substantially the same fields of enterprise as presently conducted.

         6.4 Appraisals of  Properties.  Reimburse the Lenders for all costs and
expenses  incurred in connection with Agent's  obtaining the appraisals for each
of the Properties if ordered by Agent pursuant to Section 4.2 hereof.

         6.5  Maintenance of Properties.  Cause the Properties to be maintained,
preserved,  protected and kept in good repair, working order and condition,  and
make all necessary and proper repairs,  renewals and  replacements,  normal wear
and tear excepted.

         6.6 Insurance. Cause to be provided a certificate of insurance from all
insurance  carriers who maintain  policies with respect to the Properties within
thirty  (30)  clays  after  the end of each  fiscal  year,  evidencing  that the
insurance  required to be furnished  to the Lenders  pursuant to Section 4. l(s)
hereof is in full force and effect.  Borrower  shall  timely pay, or cause to be
paid, all premiums on all insurance  policies required under this Agreement from
time to time. Borrower shall promptly notify

                                       33





the  insurance  carriers or agents  therefor  (with a copy of such  notification
being provided  simultaneously to Agent) if there is any occurrence which, under
the terms of any insurance policy then in effect with respect to the Properties,
requires such notification from Borrower.

         6.7   Payment  of   Obligations.   Cause  the  payment  of  all  taxes,
assessments, governmental charges and other obligations when due, except such as
may be contested in good faith or as to which a bona fide dispute may exist, and
for which  adequate  reserves  have  been  provided  in  accordance  with  sound
accounting principles used by Borrower on the date hereof.

         6.8 Compliance  with Laws.  Cause  compliance in all material  respects
with all  applicable  laws;  rules,  regulations,  orders and  directions of any
governmental  authority having jurisdiction over Borrower,  General Partner, the
Company, any of the Collateral or any of their respective businesses,  except in
cases where such default has no materially  adverse effect on any Property,  any
Collateral  or on the  business,  assets,  operations,  property or financial or
other  condition of Borrower,  the General  Partner or the Company,  and no such
order,  judgment,  award or decree  materially  adversely affects the ability of
Borrower,  the General  Partner or the Company,  to carry on its business as now
conducted or the ability of  Borrower,  the General  Partner or the Company,  to
perform their  respective  obligations  under this Agreement,  the Notes and the
other Loan Documents.

         6.9 Adequate Books.  Maintain  adequate books,  accounts and records in
order to provide financial  statements in accordance with GAAP and, if requested
by the Lenders, permit employees or representatives of Lenders at any reasonable
time and upon reasonable notice to inspect and audit the properties of Borrower,
the General Partner, the Company and of the Consolidated  Operating Partnership,
and to examine or audit the  inventory,  books,  accounts and records of each of
them and make copies and memoranda thereof.

         6.10     ERISA. Comply in all material respects with all requirements
of ERISA applicable to it with respect to each Plan.

         6.11  Maintenance of Status.  The Company shall at all times (i) remain
as a  corporation  listed and in good  standing  on the New York Stock  Exchange
(NYSE), and (ii) maintain the Company's status as a real estate investment trust
in compliance with all applicable  provisions of the Code. General Partner shall
at all times maintain its status as a real estate investment trust in compliance
with all applicable provisions of the Code.

         6.12     Use of Proceeds.  Use the proceeds of the Facility for the
acquisition of the Properties.

         6.13 FF&E Replacement and Capital Expenditures. Commencing in the first
calendar  quarter of 1998 and thereafter  during  succeeding  calendar  quarter,
Borrower   shall  expend  and/or   reserve  for  FF&E   replacement  or  capital
expenditures  approved by Agent for each  Property  an amount  which is not less
than  four  percent  (4 %) of the  cumulative  gross  hotel  revenues  from  the
Properties as measured for the  Applicable  Period (as defined  below).  As used
herein, the term

                                       34





"Applicable  Period" shall mean the period commencing on July 1, 1997 and ending
on the last day of the calendar quarter immediately  preceding the date on which
Borrower's cumulative  expenditures are determined.  If in any given calculation
period less than four percent (4%) of the gross room revenues of the  Properties
for  such  period  is  incurred  by  Borrower  on  replacement  of FF&E  used in
connection  with the Properties and for capital  expenditures  (as determined in
accordance with GAAP) for the Properties,  as  substantiated by evidence in form
and detail  reasonably  satisfactory to Agent, then Borrower shall establish and
maintain with Agent an FF&E replacement  and/or capital  expenditure  reserve as
provided  in this  Section.  The amount to be  deposited  by  Borrower  into the
reserve for any quarter shall equal the difference  between four percent (4%) of
the gross  hotel  revenues  for the  Properties  and the  actual  amount of FF&E
replacement  and capital  expenditures  made by Borrower for such  quarter.  All
reserve amounts shall be held by Agent in an  interest-bearing  account entitled
"Equity Inns/Term Loan FF&E Reserve Account,  in trust for Agent" established at
The First  National  Bank of Chicago  (the  "FF&E  Reserve"),  and shall,  until
disbursed in accordance  with the provisions of this paragraph  hereinafter  set
forth, constitute additional collateral for the payment of the Obligations. Each
deposit to be made by Borrower  pursuant to the Section shall be made with Agent
not later  than the  forth-fifth  (45th) day  following  the  beginning  of each
calendar quarter  (commencing in 1998), which Upon Borrower's  delivery to Agent
of a request  for  disbursement  in the form of Exhibit N attached  hereto  (the
"FF&E Reserve Request"),  which FF&E Reserve Request shall not be submitted more
than once in any given  calendar  month and not less than twenty (20) days after
submission of the immediately  preceding FF&E Reserve Request, and to the extent
that there are available  funds in the FF&E Reserve,  Agent shall  authorize and
shall make a  disbursement  to Borrower from the FF&E Reserve in an amount equal
to the  amount of such  excess  to the  extent  that the  amounts  requested  by
Borrower are for items of FF&E or for such capital  expenditure items.  Borrower
shall reimburse Agent for any out-of-pocket  costs or expenses incurred by Agent
in connection  with evaluating  such FF&E Reserve  Requests  provided that Agent
shall have notified  Borrower  prior to retaining  any  consultant in connection
with such  evaluation  and Borrower  shall have failed to furnish the additional
evidence deemed necessary by Agent to  satisfactorily  substantiate  such costs.
Unless otherwise agreed to by Agent in the exercise of its sole discretion,  the
FF&E  Reserve  shall only be  available  to fund  amounts  owed by  Borrower  to
third-party  vendors or  providers  of services  pursuant  to written  bona fide
third-party  contracts or agreements  and shall not be available to fund amounts
owed by Borrower to any Affiliates.

         6.14     Material Agreements. Borrower shall comply; with all of the
material terms and conditions of all of the Material Agreements.


                                   ARTICLE VII
                               NEGATIVE COVENANTS

         The Borrower,  the General Partner and the Company covenants and agrees
that, so long as the Commitment  shall remain available and until full and final
payment of all obligations incurred under the Loan Documents,  without the prior
written consent of the Lenders, they will not:


                                       35





         7.1 Change in Business. Engage in any business activities or operations
other than (i) the  ownership and  operation of the  Properties  and other hotel
properties owned by Borrower from time to time, or (ii) other business functions
and  transactions  related  to  the  financing,  ownership,  acquisition  and/or
development of hotel  properties  compatible with the Properties,  or expand the
Properties  or  otherwise  materially  change  the  nature  of  the  use  of the
Properties.  Nothing  contained  in the  foregoing  shall be deemed to  prohibit
Borrower, the General Partner, the Company or any of their respective Affiliates
or subsidiaries  from acquiring  mortgages secured by hotels which are generally
comparable in nature to the Properties  constituting  part of the Collateral for
the Facility  provided  that (i)  Borrower  shall inform Agent in advance of its
intention  to  acquire  such   mortgages,   (ii)  Borrower  shall  provide  such
information  with  respect  thereto as shall be requested by Agent and (iii) the
Lenders shall be reasonably satisfied that the acquisition of any such mortgages
are for the sole  purpose  of  enabling  Borrower  to acquire  ownership  of the
collateral  therefor  through  foreclosure  of such  mortgages  or  deed-in-lieu
thereof.

         7.2      Change of Ownership of Properties. Change the ownership and/or
management of the Properties.

         7.3  Ratio of Net Rent to  Interest  Expense.  Permit  the ratio of (i)
"Base Rent" and "Percentage  Rent" (as defined in the Crossroads  Lease) payable
to the Borrower under the Crossroads  Lease (or any  replacement  lease) for any
full or partial calendar  quarter after the Agreement  Effective Date on account
of all  Properties  owned by the  Borrower  as of the  last day of such  full or
partial calendar quarter,  less an FF&E reserve charge of 4% of "Gross Revenues"
(as  defined in the  Crossroads  Lease) from such  Properties,  less real estate
taxes and ground  lease rent  payable by the  Borrower  on such  Properties,  as
accrued on a straight-line  basis, for such full or partial calendar quarter, to
(ii) all interest  accrued for such full or partial  calendar on that portion of
the Loan for such quarter  attributable  to such Properties to be less than 1.75
to 1.

         7.4 Use of Proceeds.  Apply or permit to be applied any proceeds of any
Advance directly or indirectly, to the funding of any purchase of, or offer for,
any share of capital stock of any publicly held corporation  unless the board of
directors of such  corporation  has  consented to such offer prior to any public
announcements relating thereto and the Lenders have consented to such use of the
proceeds of the Facility.


         7.5 Purchase  Price.  Permit the  aggregate  Net Purchase  Price of all
Properties  securing  the  Facility  at any time,  excluding  the  Ground  Lease
Properties),  to be less  than  (i)  $100,000,000,  or  (ii) if and  only if the
then-current  outstanding  principal  balance  of  the  Facility  is  less  than
thirty-five  percent (35%) of the aggregate Net Purchase Price of all Properties
then securing the Facility, $75,000,000.

         7.6 Value of Property as a  Percentage  of Purchase  Price.  Permit the
percentage of the aggregate Net Purchase Price of all  Properties  then securing
the Facility  (excluding  the Ground Lease  Properties)  represented  by the Net
Purchase Price of any single Property then securing the Facility

                                       36





to be  greater  than  (i)  eleven  percent  (11%),  or (ii)  if and  only if the
then-current  outstanding  principal  balance  of  the  Facility  is  less  than
thirty-five percent (35 %) of the aggregate Net Purchase Price of all Properties
then securing the Facility, fifteen percent (15 %).

         7.7 Liens.  Create,  assume or suffer to exist any Lien  (including the
Lien of an  attachment,  judgment  or  execution)  on the  Properties  or on any
Collateral,  whether now owned or hereafter  acquired,  except  Permitted Liens.
Create, assume or suffer to exist any Lien (including the Lien of an attachment,
judgment  or  execution)  on  the  General  Partner's  partnership  interest  in
Borrower.

         7.8      Regulation U. Use any of the proceeds of the Advance to
purchase or carry any Margin Stock.

         7.9 Net Worth.  At any time  maintain a net worth (i.e.  value of total
assets less total liabilities, as determined on the basis of GAAP) less than the
aggregate of  $190,000,000  plus ninety percent (90%) of the net proceeds (i.e.,
after the expenses  incurred in  connection  with such  offerings) of all equity
offerings of the Borrower after May 9, 1997. The Borrower shall deliver to Agent
on or before  the  thirtieth  (30th)  day  following  the  commencement  of each
calendar   quarter  during  the  term  of  the  Facility   evidence   reasonably
satisfactory  to Agent  substantiating  compliance  with the  provisions of this
Section.

         7.10 Partnership  Distributions.  Except as otherwise shall be required
by law in order for General Partner and the Company to maintain their respective
status  as real  estate  investment  trusts,  permit  the  aggregate  amount  of
dividends paid by General Partner and/or the Company  (without  duplication) for
the most recent four fiscal quarters for which  financial  reports are available
to exceed ninety percent (90%) of the  consolidated  "funds from  operations" of
General  Partner  or the  Company,  as the case may be,  for  such  four  fiscal
quarters,  as  determined  on  a  consistent  basis  with  the  prior  financial
statements of General Partner and the Company, as approved by the Agent.

         7.11 Total  Liabilities.  Permit the  aggregate of (1) the  outstanding
balance  of the  Facility,  (2)  the  outstanding  under  the  Revolving  Credit
Facility,  and  (3)  the  maximum  committed  amount  of  Other  Permitted  Debt
(irrespective  of whether such maximum  committed amount of Other Permitted Debt
is fully  outstanding)  (items (1), (2) and (3) above are  collectively,  "Total
Liabilities")  to exceed  forty-five  percent (45 %) of the aggregate of (i) the
lesser  of (a) the  Appraised  Value of all  hotels  which  are then part of the
collateral pool for the Revolving Credit Facility (the "Revolving  Collateral"),
and (b) the Cost Basis of all  Revolving  Collateral  and (ii) the Cost Basis of
the  Properties  and all  other  hotels  owned by  Borrower  and its  Affiliates
(including EQI Financing  Partnership I, L.P., and Equity Inns  Partnership/West
Virginia, L.P.) which do not constitute part of the Collateral for the Facility,
it being understood that the Cost Basis of hotels not  constituting  part of the
Collateral  for the Facility  will be  determined in the same manner as the Cost
Basis of the Revolving Collateral.

         7.12     Level Two Adjusted Earnings. At any time permit the ratio of
Level Two Adjusted Earnings of the Borrower, the General Partner and the
Company, on a consolidated basis, to debt service on the Total Liabilities

                                       37





(including  actual  interest  and  scheduled principal  payments as well as
interest and  scheduled  principal  payments that would be required if all 
committed but unfunded  portions of Total  Liabilities were funded) to be less
than 1.75 to 1.

     7.13 Cost Basis.  Permit:  (a) more than thirty  percent (30%) of the total
Cost Basis of all hotels owned by Borrower and its consolidated Subsidiaries to
be attributable to hotels located in a single state; or (b) more than ten
percent (10%) of the total Cost Basis of all hotels owned by Borrower and its
consolidated Subsidiaries to be attributable to a single hotel.

         7.14 Other  Indebtedness.  Permit Borrower,  the General  Partner,  the
Company or any of their respective  Affiliates  (excluding,  however,  companies
that are controlled by Phillip H. McNeill, Sr.) or subsidiaries to incur (either
directly or as a guarantor) any liability (whether recourse or non-recourse) for
the  payment  of any  indebtedness  other  than the  Obligations  and the  Other
Permitted  Debt.  In  addition to the  outstanding  under the  Revolving  Credit
Facility, (y) Borrower shall be permitted to borrower,  assume loans, enter into
leases and acquire assets with purchase money  financing  provided that Borrower
shall  otherwise  remain in compliance with the provisions of this Agreement and
the  other  Loan  Documents  and that the  aggregate  indebtedness  incurred  by
Borrower shall in no event or under any  circumstances  exceed (A)  $175,000,000
less (B) the  then-current  principal  balance of the  Obligations,  and (z) the
General Partner and the Company shall be permitted to guaranty repayment of such
obligations to the extent  required,  provided that (i) no such obligation shall
be secured in whole or in party by any  Property  or any other  Collateral  from
time to time  securing  payment  of the  Facility,  (ii) the  Supplemental  Debt
Service Coverage Ratio and the Supplemental Loan to Value Requirement  contained
in the Revolving Credit Agreement shall continue to be complied with both before
and after the  incurring of any such  obligations  by Borrower,  (iii)  Borrower
shall inform Agent in advance of its  intention  to incur such  obligations  and
shall  provide  to Agent a  detailed  term  sheet  setting  forth  the terms and
conditions  which will pertain to such  obligations  and  containing  such other
information with respect thereto as shall be requested by Agent, (iv) all of the
other  affirmative  and negative  covenants and  representations  and warranties
contained in this  Agreement and the other Loan  Documents  shall continue to be
complied  with both before and after the  incurring of any such  obligations  by
Borrower, and (v) Agent shall be satisfied that such obligations will not have a
materially adverse effect on Borrower, the General Partner, the Company,  Lessee
or any Other Lessee, or on their ability to perform their respective obligations
under the Loan  Documents,  or on any Property or any other  Collateral and have
approved  the  incurrence  of such  obligations.  Any  obligations  incurred  by
Borrower in compliance  with the  provisions  of the preceding  sentence of this
subparagraph is herein  referred to as "Other  Permitted  Debt".  Borrower shall
furnish Agent,  within fifteen (15) days after the end of each calendar  quarter
during the term of this  Agreement  (or more  frequently if requested by Agent),
with a detailed itemized list of all obligations of Borrower in respect of Other
Permitted  Debt and which is otherwise in a form  sufficient  to enable Agent to
confirm  Borrower's  compliance  with its  obligations  under this  Agreement in
respect of the Other  Permitted  Debt. The occurrence of a default in respect of
any Other  Permitted  Debt  shall  constitute  an Event of  Default  under  this
Agreement and the other Loan Documents.


                                       38





         7.15 Material  Agreements.  Without the prior written consent of Agent,
(i) transfer,  sell, assign, pledge,  encumber or grant, or consent to or permit
the transfer,  sale, assignment,  pledge,  encumbrance or granting of a security
interest in any Material  Agreement  (except  pursuant to the Loan Documents) or
(ii) terminate, modify or amend, or consent to the termination,  modification or
amendment of any Material Agreement.

                                  ARTICLE VIII
                                    DEFAULTS

         The  occurrence  of any  one or  more  of the  following  events  shall
constitute an Event of Default:

         8.1      Nonpayment of Principal and Interest. Borrower fails to pay
any portion of the Obligations when due.

         8.2      Certain Covenants. A breach of any of the covenants contained
in Article VII of this Agreement.

         8.3 Security  Documents.  The occurrence of any fact,  circumstance  or
event which is  specifically  characterized  under any provision of any Security
Document as an "Event of Default" within the meaning given to such term pursuant
to the provisions of this Agreement.

         8.4 Representations  and Warranties.  Any representation or warranty of
Borrower, the General Partner, the Company or of any Person guaranteeing payment
of the  Obligations or any portion  thereof or performance by Borrower of any of
the terms of this  Agreement or any of the other Loan Documents made in any such
guaranty,  this  Agreement  or  any  of  the  other  Loan  Documents,  or in any
certificate,  reports,  financial  statement  or other  instrument  furnished in
connection  with the making of the Notes,  the Mortgages,  this  Agreement,  the
Guaranty,  any  other  guaranty  or any other  Loan  Document,  proves  false or
misleading in any material respect.

         8.5 Property Assessments. Borrower fails to pay within twenty (20) days
of notice and demand by Agent any  installment  of any  assessment  against  any
Property for local  improvements  heretofore or hereafter laid, which assessment
is or may become payable in annual or periodic installments and is or may become
a lien on such Property,  notwithstanding the fact that such installment may not
be due and payable at the time of such notice and demand.

         8.6  Federal  Tax Lien.  Any  Federal  tax lien shall be filed  against
Borrower,  the General Partner,  the Company or any Property and the same is not
discharged of record within thirty (30) days after the same is filed (unless the
same is being contested in good faith by appropriate proceeding).

         8.7 FF&E.  Without  the consent of Agent,  any FF&E  (except for normal
replacement  of the FF&E) shall be removed from any Property,  or if without the
consent of Agent any Property or any FF&E is demolished or materially altered.


                                       39





         8.8      Insurance. Borrower fails to keep the insurance policies in
full force and effect, or the insurance policies are not delivered to Lenders
upon request.

         8.9      Crossroads Lease.  Without the consent of Agent, the
Crossroads Lease is canceled or modified or if any portion of the rents
thereunder is paid for a period of more than one (1) month in advance or if any
of the rents thereunder are further assigned.

         8.10 Ground Lease.  Borrower shall default beyond the expiration of any
applicable notice and cure periods in the observance or performance of any term,
covenant or condition  of any Ground  Lease on the part of  Borrower,  as ground
lessee  thereunder,  to be observed or performed,  unless any such observance or
performance  shall  have been  waived or not  required  in writing by the ground
lessor under such Ground Lease,  or if any one or more of the events referred to
in such Ground  Lease shall occur which would or may cause such Ground  Lease to
terminate  without  notice or action by the ground  lessor  thereunder  or which
would entitle the ground lessor under such Ground Lease to terminate such Ground
Lease and the term  thereof  by  giving  notice to  Borrower,  as ground  lessee
thereunder,  or if the  leasehold  estate  created by such Ground Lease shall be
surrendered,  in whole or in pan, or if such Ground Lease shall be terminated or
canceled for any reason or under any circumstance  whatsoever,  or if any of the
terms,  covenants  or  conditions  of such  Ground  Lease shall in any manner be
modified,  changed,  supplemented,  altered or amended  without  the  consent of
Agent.

         8.11 Material Agreements.  Borrower or other Person shall be in default
under  any  mortgage,   deed  of  trust,  pledge  or  other  security  agreement
(including,  without  limitation,  any such  agreement now or hereafter  held by
Lenders) affecting or relating to any of the Properties, or any other Collateral
or any portion thereof or under any Material Agreement  affecting or relating to
the Properties or the Collateral, or any portion thereof.

         8.12 Property Liens.  Any of the Properties shall become subject (i) to
any tax lien,  other than a lien for local real estate taxes and assessments not
due and  payable,  or (ii) to any lis pendens,  notice of pendency,  stop order,
notice  of  intention  to file  mechanic's  materialman's  lien,  mechanic's  or
materialman's lien or other lien of any nature whatsoever and the same shall not
either  be  discharged  of  record  or in the  alternative  insured  over to the
satisfaction  of Agent by the title  company  insuring  the lien of the Mortgage
pertaining to the Property in question within a period of thirty (30) days after
the same is filed or recorded,  and irrespective of whether the same is superior
or  subordinate  in lien or  other  priority  to the  lien of the  Mortgage  and
irrespective  of whether the same  constitutes  a perfected or inchoate  lien or
encumbrance  on the  Property in  question  or any portion  thereof or is only a
matter of record or notice.

         8.13 Certain Covenants.  Borrower,  General Partner or the Company fail
for any  reason  to  comply  in all  respects  with the  covenants  set forth in
Articles  VI and  VII of this  Agreement  at any  time  during  the  term of the
Facility,  or if any  representation  or warranty set forth in Article V of this
Agreement or elsewhere in the Loan Documents  shall at any time cease to be true
and accurate in all material respects;



                                       40





         8.14     Bankruptcy. If:

                  (a)      Borrower, the General Partner or the Company shall
         make an assignment for the benefit of creditors; or

                  (b) a court of competent  jurisdiction  (i) enters a decree or
         order for relief with respect to Borrower,  the General  Partner or the
         Company under Title 11 of the United States Code as now  constituted or
         hereafter  amended  or under  any  other  applicable  Federal  or state
         bankruptcy, insolvency or other similar law, rule or regulation; or (2)
         if  such  court  enters  a  decree  or  order  appointing  a  receiver,
         liquidator,   assignee,  trustee,  custodian,   examiner,   magistrate,
         arbitrator, sequestrator (or similar official) of Borrower, the General
         Partner or the Company or of any  substantial  pan of their  respective
         properties;  or (3) if such court  decrees or orders the  winding up or
         liquidation  of the affairs of  Borrower,  the  General  Partner or the
         Company,  and such  order or decree  is not  dismissed,  discharged  or
         vacated  of record  within  thirty  (30)  days  after the same has been
         entered; or

                  (c)  Borrower,  the  General  Partner or the  Company  files a
         petition for relief or answer or consent  seeking relief under Title 11
         of the United States Code as now  constitute or hereafter  amended,  or
         under any other applicable  Federal or state bankruptcy,  insolvency or
         other  similar law,  rule or  regulation,  of if Borrower,  the General
         Partner or the Company fails to  vigorously  and  diligently  oppose or
         shall  otherwise  consent  to the  commencement  or  prosecution  of an
         involuntary  case  under  Title  11 of the  United  States  Code as now
         constituted or hereafter amended, or under any other applicable Federal
         or state bankruptcy,  insolvency or similar law, rule or regulation, or
         to the appointment of or taking  possession by a receiver,  liquidator,
         assignee,  trustee,  custodian,   examiner,   magistrate,   arbitrator,
         sequestrator  (or other  similar  official)  of  Borrower,  the General
         Partner or the Company,  or of any substantial pan of their  respective
         properties,  or if Borrower,  the General  Partner or the Company fails
         generally to pay their respective debts as such debts become due, or if
         Borrower,  the  General  Partner  or the  Company  takes any  action in
         furtherance of any action described in this subsection.

         8.15 Loan Documents.  Borrower, General Partner or the Company shall be
in default beyond the expiration of any applicable notice and cure periods under
the Notes,  the  Mortgages,  this  Agreement or any other Loan  Documents or any
other  document or  instrument  otherwise  executed and  delivered in connection
therewith.

         8.16     Revolving Credit Facility.  The occurrence of a default under
the Revolving Credit Agreement or under any of the other documents evidencing or
securing the Revolving Credit Facility, which default is not cured within any
applicable cure period.

         8.17 Cross Default.  Any Indebtedness of Borrower,  the General Partner
or the Company to any lender or Person shall be declared to be  immediately  due
and payable  prior to its stated  maturity  and shall not be paid within  thirty
(30) days after such  declaration,  or shall otherwise not be paid within thirty
(30) days after the same shall become due and payable.


                                       41





         8.18 Material  Adverse Effect.  There shall occur a complete or partial
suspension  or  liquidation  of all or  substantially  all  of any  business  of
Borrower,  the General Partner or the Company and such occurrence in the opinion
of the Lenders has or may have materially  adverse impact on any Property or any
Collateral or on the business, assets, operations,  property, financial or other
condition of Borrower, the General Partner or the Company.

         8.19 Furnishing Information. Borrower shall fail to furnish or cause to
be furnished to each Lender,  any financial or other information  required to be
provided in accordance  with the  provisions of this Agreement or the other Loan
Documents  or  otherwise  reasonably  requested  by the Lenders or shall fail to
permit,  or to arrange for, the  inspection by the Lenders (or their  respective
employees and agents) of any books or records of Borrower,  the General  Partner
or the Company and such default shall continue for twenty (20) days after notice
by Agent to Borrower.

         8.20  Monetary.  Borrower,  the General  Partner or the  Company  shall
continue to be in default under any of the other terms,  covenants or conditions
of this  Agreement  for five (5) days after notice from Agent in the case of any
default which can be cured by the payment of a sum of money,  or for twenty (20)
days after notice from Agent in the case of any other default.  provided that if
such default  cannot  reasonably be cured within such twenty (20) day period and
Borrower,  the General  Partner or the  Company,  as the case may be, shall have
commenced to cure such default within such twenty (20) day period and thereafter
diligently  (20) day period  shall be extended  for so long as it shall  require
Borrower,  the  General  Partner  or the  Company,  as the case  may be,  in the
exercise of due diligence to cure such default, it being agreed,  however,  that
no such extension shall be for a period in excess of sixty (60) days.

                                   ARTICLE IX
                 ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

         9.1  Acceleration.  If any Event of Default  described  in Section 8.14
hereof occurs, the Obligations shall immediately become due and payable.  If any
other Event of Default described in Article VIII hereof occurs,  such obligation
to make the Advance  shall be  terminated  and at the  election of the  Majority
Lenders, the Obligations may be declared to be due and payable.

         9.2  Preservation  of Rights;  Amendments.  No delay or omission of the
Lenders in exercising any right under the Loan Documents shall impair such right
or be construed to be a waiver of any Default or an  acquiescence  therein,  and
the  making of an  Advance  notwithstanding  the  existence  of a Default or the
inability  of the Borrower to satisfy the  conditions  precedent to such Advance
shall not constitute any waiver or acquiescence.  Any single or partial exercise
of any such right shall not preclude  other or further  exercise  thereof or the
exercise of any other right, and no waiver,  amendment or other variation of the
terms,  conditions or provisions of the Loan Documents whatsoever shall be valid
unless  in  writing  signed by the Agent  and the  number  of  Lenders  required
hereunder  and then only to the extent in such writing  specifically  set forth.
All  remedies  contained  in the  Loan  Documents  or by law  afforded  shall be
cumulative and all shall be available to the Lenders until the Obligations  have
been paid in full.


                                       42






                                    ARTICLE X
                                    THE AGENT

         10.1 Appointment. First Chicago is hereby appointed Agent hereunder and
under each other Loan Document,  and each of the Lenders authorizes the Agent to
act as the  agent of such  Lender.  The  Agent  agrees  to act as such  upon the
express  conditions  contained  in this  Article  X. The Agent  shall not have a
fiduciary  relationship  in respect  of any Lender by reason of this  Agreement,
except to the extent the Agent acts as an agent with  respect to the  receipt or
payment of funds hereunder.

         10.2 Powers.  The Agent shall have and may  exercise  such powers under
the Loan  Documents as are  specifically  delegated to the Agent by the terms of
each thereof,  together with such powers as are reasonably  incidental  thereto.
The Agent shall have no implied duties to the Lenders,  or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.

         10.3 General Immunity. Neither the Agent (in its capacity as Agent) nor
any of its  directors,  officers,  agents  or  employees  shall be liable to the
Borrower,  the Lenders or any Lender for any action taken or omitted to be taken
by it or them  hereunder  or under  any other  Loan  Document  or in  connection
herewith or therewith,  except for its or their own gross  negligence or willful
misconduct.

         10.4 No Responsibility for Loans, Recitals,  etc. Neither the Agent (in
its capacity as Agent) nor any of its directors,  officers,  agents or employees
shall be responsible for or have any duty to ascertain,  inquire into, or verify
(i) any statement,  warranty or representation  made in connection with any Loan
Document or any borrowing  hereunder;  (ii) the performance or observance of any
of the covenants or agreements of any obligor under any Loan Document; (iii) the
satisfaction  of any condition  specified in Article IV, except receipt of items
required to be delivered to the Agent;  or (iv) the validity,  effectiveness  or
genuineness of any Loan Document or any other instrument or writing furnished in
connection therewith.

         10.5 Action on Instructions of Lenders. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan  Document  in  accordance  with  written  instructions  signed by the
Majority Lenders or all Lenders,  as the case may be, and such  instructions and
any action taken or failure to act pursuant  thereto  shall be binding on all of
the Lenders and on all holders of Notes.  The Agent shall be fully  justified in
failing  or  refusing  to take any  action  hereunder  and under any other  Loan
Document unless it shall first be indemnified to its satisfaction by the Lenders
pro rata  against any and all  liability,  cost and expense that it may incur by
reason of taking or continuing to take any such action.

         10.6 Employment of Agents and Counsel. The Agent may execute any of its
duties  as Agent  hereunder  and under any other  Loan  Document  by or  through
employees,  agents,  and  attorneys-in-fact  and shall not be  answerable to the
Lenders,  except  as to money or  securities  received  by it or its  authorized
agents,  for the default or misconduct  of any such agents or  attorneys-in-fact
selected by it with  reasonable  care.  The Agent shall be entitled to advice of
counsel concerning all

                                       43





matters  pertaining  to the agency hereby  created and its duties  hereunder and
under any other Loan Document.

         10.7  Reliance on  Documents;  Counsel.  The Agent shall be entitled to
rely upon any Note. notice, consent,  certificate,  affidavit, letter, telegram,
statement,  paper or  document  believed  by it to be genuine and correct and to
have been  signed or sent by the proper  person or  persons,  and, in respect to
legal matters, upon the opinion of outside counsel selected by the Agent.

         10.8 Agent's  Reimbursement and  Indemnification.  The Lenders agree to
reimburse and indemnify  the Agent ratably in accordance  with their  respective
Percentages  (i)  for  any  amounts  payable  to  third  parties  which  are not
reimbursed by the Borrower for which the Agent is entitled to  reimbursement  by
the Borrower under the Loan  Documents,  (ii) for any other expenses  payable to
third  parties  which are  incurred  by the Agent on behalf of the  Lenders,  in
connection  with  the  preparation,   execution,  delivery,  administration  and
enforcement of the Loan  Documents,  if not paid by Borrower,  and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted  against the Agent (in its capacity as Agent
and not as a Lender) in any way relating to or arising out of the Loan Documents
or any other  document  delivered in  connection  therewith or the  transactions
contemplated  thereby,  or the enforcement of any of the terms thereof or of any
such other  documents,  provided  that no Lender  shall be liable for any of the
foregoing  to the  extent  they  arise  from the  gross  negligence  or  willful
misconduct of the Agent.

         10.9 Rights as a Lender.  With respect to the  Commitment,  the Advance
made by it and the Note  issued to it, the Agent  shall have the same rights and
powers  hereunder  and under any  other  Loan  Document  as any  Lender  and may
exercise  the same as though it were not the  Agent,  and the term  "Lender"  or
"Lenders" shall,  unless the context otherwise  indicates,  include the Agent in
its  individual  capacity.  Each  Lender  (including  Agent)  in its  individual
capacity,  may accept deposits from, lend money to, and generally  engage in any
kind of  trust,  debt,  equity  or  other  transaction,  in  addition  to  those
contemplated by this Agreement or any other Loan Document,  with the Borrower or
any of its  Subsidiaries  in  which  the  Borrower  or  such  Subsidiary  is not
restricted hereby from engaging with any other Person.

         10.10 Lender Credit  Decision.  Each Lender  acknowledges  that it has,
independently  and without reliance upon the Agent or any other Lender and based
on the financial  statements  prepared by the Borrower and such other  documents
and information as it has deemed  appropriate,  made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents.  Each Lender
also  acknowledges  that it will,  independently  and without  reliance upon the
Agent or any other  Lender and based on such  documents  and  information  as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.

         10.11  Successor  Agent.  Each Lender  agrees that First  Chicago shall
serve as Agent at all times during the term of this Facility,  except that First
Chicago may resign as Agent in the event (x) First  Chicago and  Borrower  shall
mutually  agree in writing or (y) an Event of Default shall occur under the Loan
Documents  (irrespective  of  whether  such  Event of  Default  subsequently  is
waived),

                                       44





or (z) First Chicago shall determine,  in its sole reasonable  discretion,  that
because of its other  banking  relationships  with  Borrower  and/or  Borrower's
Affiliates at the time of such decision  First  Chicago's  resignation  as Agent
would be necessary in order to avoid  creating an appearance of  impropriety  on
the pan of First Chicago.  First Chicago (or any successor Agent) may be removed
as Agent by written  notice  received by Agent from all of the other  Lenders at
any time with cause (i.e., a breach by First Chicago (or any successor Agent) of
its  duties as Agent  hereunder).  Upon any such  resignation  or  removal,  the
Lenders  shall  have the right to  appoint,  on behalf of the  Borrower  and the
Lenders,  a successor  Agent. If no successor Agent shall have been so appointed
by the Lenders and shall have accepted such appointment within thirty days after
the retiring  Agent's giving notice of resignation,  then the retiring Agent may
appoint,  on behalf of the  Borrower and the Lenders,  a successor  Agent.  Such
successor Agent shall be a commercial bank having capital and retained  earnings
of at  least  $100,000,000.  Upon the  acceptance  of any  appointment  as Agent
hereunder by a successor Agent,  such successor Agent shall thereupon succeed to
and become  vested with all the  rights,  powers,  privileges  and duties of the
retiring  Agent,  and the retiring Agent shall be discharged from all duties and
obligations  of the agent  hereunder  and under the other Loan  Documents  which
first  occur  after  the date of such  succession.  After any  retiring  Agent's
resignation  hereunder as Agent, the provisions of this Article X shall continue
in effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was  acting as the  Agent  hereunder  and  under  the other  Loan
Documents.

                                   ARTICLE XI
                BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

         11.1  Successors  and  Assigns.  The terms and  provisions  of the Loan
Documents  shall be binding  upon and inure to the benefit of  Borrower  and the
Lenders and their  respective  successors and assigns,  except that the Borrower
shall not have the  right to assign  its  rights or  obligations  under the Loan
Documents  without  the consent of all the  Lenders  and any  assignment  by any
Lender must be made in  compliance  with Section  11.3.  The Agent may treat the
payee of any Note as the owner thereof for all purposes  hereof unless and until
such payee  complies with Section 11.3 in the case of an assignment  thereof or,
in the case of any other  transfer,  a written  notice of the  transfer is filed
with the Agent.  Any  assignee  or  transferee  of a Note  agrees by  acceptance
thereof to be bound by all the terms and provisions of the Loan  Documents.  Any
request,  authority  or consent  of any  Person  who at the time of making  such
request or giving such authority or consent is the holder of any Note,  shall be
conclusive and binding on any subsequent holder,  transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.

         11.2     Participations.

                  (a)  Permitted  Participants;  Effect.  Any Lender may, in the
         ordinary  course of its business and in accordance with applicable law,
         at  any  time   sell  to  one  or  more   banks   or   other   entities
         ("Participants")  participating  interests in any Advance owing to such
         Lender,  any Note held by such Lender, any Commitment of such Lender or
         any  other  interest  of such  Lender  under  the Loan  Documents,  but
         Borrower  shall not be obligated to pay any fees and expenses  incurred
         by any  Lender in  connection  with any  participation  interests  sold
         pursuant to this Section.  In the event of any such sale by a Lender of
         participating  interests to a  Participant,  such Lender's  obligations
         under the Loan Documents shall remain unchanged,

                                       45





         such Lender shall remain solely responsible to the other parties hereto
         for the performance of such  obligations,  such Lender shall remain the
         holder of any such Note for all purposes under the Loan Documents,  all
         amounts payable by Borrower under this Agreement shall be determined as
         if such Lender had not sold such participating  interests, and Borrower
         and the Agent  shall  continue to deal  solely and  directly  with such
         Lender in connection with such Lender's  rights and  obligations  under
         the Loan Documents.

                  (b) Voting Rights.  Each Lender shall retain the sole right to
         vote its Percentage of the Aggregate Commitment, without the consent of
         any  Participant,  for the approval or  disapproval  of any  amendment,
         modification or waiver of any provision of the Loan Documents, provided
         that such  Lender may grant such  Participant  the right to approve any
         amendment, modification or waiver which forgives principal, interest or
         fees or reduces the interest rate or fees payable hereunder,  postpones
         any date fixed for any  regularly-scheduled  payment of principal of or
         interest on the Obligations,  releases  Collateral  beyond any releases
         expressly provided for herein or extends the Maturity Date.

         11.3     Assignments.

                  (a)  Permitted  Assignments.  Any Lender  may,  with the prior
         written  consent  of Agent  (which  consent  shall not be  unreasonably
         withheld or  delayed),  in the  ordinary  course of its business and in
         accordance with applicable law, at any time assign to one or more banks
         or other entities  (collectively,  "Purchasers") all or any part of its
         rights and obligations under the Loan Documents, except that no consent
         of Agent  shall ever be  required  for (i) any  assignment  to a Person
         directly or  indirectly  controlling,  controlled by or under direct or
         indirect common control with the assigning Lender or (it) the pledge or
         assignment by a Lender of such Lender's Note and other rights under the
         Loan  Documents  to  any  Federal   Reserve  Bank  in  accordance  with
         applicable  law. The Borrower shall execute any and all documents which
         are customarily required by such Lender (including, without limitation,
         a replacement  promissory note) in connection with any such assignment,
         but  Borrower  shall  not be  obligated  to pay any fees  and  expenses
         incurred by any Lender in connection  with any  assignment  pursuant to
         this  Section.  Any  Lender  selling  all or any part of its rights and
         obligation  hereunder  in a  transaction  requiring  the consent of the
         Agent  shall  pay to the  Agent  a fee of  $3,000.00  per  assignee  to
         reimburse Agent for its involvement in such assignment. Notwithstanding
         anything contained in this Agreement to the contrary, in no event shall
         Borrower have the right to consent to any proposed assignment described
         in this  Section  11.3.1,  and each Lender  shall be entitled to freely
         assign all or any portion of its respective Commitment.

                  (b) Effect; Effective Date of Assignment. Upon delivery to the
         Agent of a notice of assignment  executed by the  assigning  Lender and
         the Purchaser,  such assignment shall become effective on the effective
         date specified in such notice of  assignment.  The notice of assignment
         shall contain a representation by the Purchaser to the effect that none
         of the consideration  used to make the purchase of the o Commitment and
         the Loan under the applicable assignment agreement are "plan assets" as
         defined  under ERISA and that the rights and interests of the Purchaser
         in and under the Loan Documents will not be "plan assets"

                                       46





         under ERISA. On and after the effective date of such  assignment,  such
         Purchaser  shall for all purposes be a Lender  party to this  Agreement
         and any other Loan Document  executed by the Lenders and shall have all
         the rights and obligations of a Lender under the Loan Documents, to the
         same  extent as if it were an  original  party  hereto,  and no further
         consent  or action  by  Borrower,  the  Lenders  or the Agent  shall be
         required  to  release  the  transferor   Lender  with  respect  to  the
         percentage  of  the  Commitment  and  the  Advance   assigned  to  such
         Purchaser.  Upon the  consummation  of any  assignment  to a  Purchaser
         pursuant to this Section 11.3.2,  the transferor  Lender, the Agent and
         Borrower shall make appropriate  arrangements so that replacement Notes
         are issued to such transferor  Lender and new Notes or, as appropriate,
         replacement  Notes,  are  issued  to such  Purchaser,  in each  case in
         principal amounts reflecting their respective Commitments,  as adjusted
         pursuant to such assignment.

         11.4 Dissemination of Information.  Borrower  authorizes each Lender to
disclose to any  Participant  or  Purchaser  or any other  Person  acquiring  an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective  Transferee  any and all  information  in such  Lender's  possession
concerning the creditworthiness of Borrower and General Partner. Each Transferee
shall agree in writing to keep  confidential any such  information  which is not
publicly available.

         11.5 Tax Treatment. If any interest in any Loan Document is transferred
to any Transferee  which is organized under the laws of any  jurisdiction  other
than the United States or any State thereof,  the transferor  Lender shall cause
such Transferee, concurrently with the effectiveness of such transfer, to comply
with all applicable provisions of the Code with respect to withholding and other
tax matters.

                                   ARTICLE XII
                               GENERAL PROVISIONS

         12.1 Survival of  Representations.  All  representations and warranties
contained in this Agreement  shall survive  delivery of the Notes and the making
of the Advance herein contemplated.

         12.2     Governmental Regulation. Anything contained in this Agreement
to the contrary notwithstanding, no Lender shall be obligated to extend credit
to the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.

         12.3 Taxes. Any recording and other taxes (excluding 'franchise, income
or similar  taxes) or other  similar  assessments  or  charges  payable or ruled
payable  by  any  governmental   authority   incurred  in  connection  with  the
consummation of the transactions contemplated by this Agreement shall be paid by
the Borrower, together with interest and penalties, if any.

         12.4     Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.


                                       47





     12.5 No Third Party Beneficiaries. This Agreement shall not be construed so
as to confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns.

         12.6  Expenses;  Indemnification.  Subject  to the  provisions  of this
Agreement,  Borrower will pay (a) all out-of-pocket  costs and expenses incurred
by the Agent  (including the reasonable fees,  out-of-pocket  expenses and other
reasonable  expenses of counsel,  which  counsel may be  employees  of Agent) in
connection with the preparation,  execution and delivery of this Agreement,  the
Notes, the Security  Documents and any other agreements or documents referred to
herein or therein and any amendments  thereto,  (b) all out-of-pocket  costs and
expenses  incurred by the Agent  (including the reasonable  fees,  out-of-pocket
expenses and other  reasonable  expenses of counsel to the Agent,  which counsel
may be employees of Agent) in connection  with the enforcement and protection of
the  rights of the  Lenders  under  this  Agreement,  the  Notes,  the  Security
Documents or any other agreement or document referred to herein or therein,  (c)
all  costs of  obtaining  all  appraisals,  environmental  reports,  engineering
reports and all other documents or reports required to be requested or furnished
to the Agent  (irrespective  of whether any such Lenders first become parties to
this Agreement  following the Agreement  Execution Date) pursuant to Section 4.1
hereof,  and (d) all  reasonable  and  customary  costs and expenses of periodic
audits by the Agent's  personnel of the Borrower's  books and records,  provided
that prior to an Event of Default Borrower shall be required to pay for only one
such  audit  during any year.  The  Borrower  further  agrees to  indemnify  the
Lenders,  their directors,  officers and employees  against all losses,  claims,
damages, penalties,  judgments,  liabilities and reasonable expenses (including,
without limitation,  all expenses of litigation or preparation  therefor whether
or not the  Lenders  is a party  thereto)  which  any of them  may pay or  incur
arising out of or  relating to this  Agreement,  the other Loan  Documents,  the
transactions  contemplated  hereby or the  direct  or  indirect  application  or
proposed  application of the proceeds of any Advance hereunder,  except that the
foregoing  indemnity  shall not apply to a Lender to the extent that any losses,
claims.  etc. are the result of (i) such  Lender's  gross  negligence or willful
misconduct,  or (ii) any disputes between Lenders  regarding the alleged failure
of a Lender or the Agent to perform its  respective  obligations  under the Loan
Documents  (where  such  alleged  failure is in no way  related  to any  alleged
failure of Borrower to perform its obligations  under the Loan  Documents).  The
obligations of the Borrower under this Section shall survive the  termination of
this Agreement.

         12.7  Severability  of  Provisions.  Any provision in any Loan Document
that is held to be inoperative,  unenforceable,  or invalid in any  jurisdiction
shall,  as to that  jurisdiction,  be  inoperative,  unenforceable,  or  invalid
without  affecting  the  remaining   provisions  in  that  jurisdiction  or  the
operation,   enforceability,   or  validity  of  that  provision  in  any  other
jurisdiction,  and to this end the provisions of all Loan Documents are declared
to be severable.

         12.8 Nonliability of the Lenders. The relationship between the Borrower
and the Lenders  shall be solely that of borrower and lender.  The Lenders shall
not have any fiduciary  responsibilities to the Borrower.  The Lenders undertake
no responsibility to the Borrower to review or inform the Borrower of any matter
in connection with any phase of the Borrower's business or operations.


                                       48





         12.9 Choice of Law. The loan documents  (other than those  containing a
contrary  express choice of law provision) shall be construed in accordance with
the internal laws (and not the law of  conflicts) of the state of illinois,  but
giving effect to federal laws applicable to national banks.

         12.10 Consent to Jurisdiction.  The Borrower hereby irrevocably submits
to the non-exclusive jurisdiction of any United States Federal or Illinois state
court sitting in Chicago, Illinois in any action or proceeding arising out of or
relating to any loan documents and the Borrower hereby  irrevocably  agrees that
all claims in respect of such action or proceeding  may be heard and  determined
in any such court and  irrevocably  waives any objection it may now or hereafter
have as to the venue of any such suit,  action or  proceeding  brought in such a
court or that such court is an  inconvenient  forum.  Nothing herein shall limit
the right of the lenders to bring proceedings against the borrower in the courts
of any other  jurisdiction.  Any judicial proceeding by the Borrower against the
lenders or any affiliate of the lenders involving,  directly or indirectly,  any
matter  in any way  arising  out of,  related  to,  or  connected  with any loan
document shall be brought only in a court in Chicago, Illinois.

         12.11 Waiver of Jury Trial.  The Borrower,  the General Partner and the
lenders  hereby  waive  trial  by jury  in any  judicial  proceeding  involving,
directly  or  indirectly,  any matter  (whether  sounding  in tort,  contract or
otherwise)  in any way arising out of,  related to, or  connected  with any loan
document or the relationship established thereunder.

         12.12  Successors  and Assigns.  The terms and  provisions  of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their  respective  successors and assigns,  except that the Borrower
shall not have the  right to assign  its  rights or  obligations  under the Loan
Documents.  Any assignee or transferee of the Notes agrees by acceptance thereof
to be bound by all the terms and provisions of the Loan Documents.  Any request,
authority  or consent of any Person,  who at the time of making such  request or
giving such authority or consent is the holder of the Notes, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Notes or of
any note or notes issued in exchange therefor.

         12.13 Entire Agreement;  Modification of Agreement.  The Loan Documents
embody the entire  agreement among the Borrower,  General  Partner,  Agent,  and
Lenders  and  supersede  all prior  conversations,  agreements,  understandings,
commitments and term sheets among any or all of such parties with respect to the
subject  .matter  hereof.  Any  provisions  of this  Agreement may be amended or
waived if, but only if, such  amendment or waiver is in writing and is signed by
the parties hereto.

         12.14 Dealings with the Borrower.  The Lenders and their affiliates may
accept  deposits  from,  extend  credit to and  generally  engage in any kind of
banking, trust or other business with the Borrower or the General Partner or any
of their Affiliates regardless of the capacity of the Lenders hereunder.



                                       49





         12.15    Set-Off.

                  (a) If an Event of Default  shall have  occurred,  each Lender
         shall,  subject to and in accordance with Section 12.15(c) below,  have
         the  right,  at any time and from  time to time  without  notice to the
         Borrower, any such notice being hereby expressly waived, to set-off and
         to  appropriate  or apply any and all  deposits of money or property or
         any other  indebtedness  at any time held or owing by such Lender to or
         for the credit or the account of the Borrower against and on account of
         all outstanding Obligations and all Obligations which from time to time
         may become due hereunder and all other  obligations  and liabilities of
         the Borrower under this Agreement,  irrespective of whether or not such
         Lender  shall have made any demand  hereunder  and  whether or not said
         obligations and liabilities shall have matured.

                  (b) Each Lender  agrees that if it shall,  by  exercising  any
         right of set-off or  counterclaim  or otherwise,  receive  payment of a
         proportion of the aggregate  amount of principal,  interest or fees due
         with  respect  to any  Note  held  by it  which  is  greater  than  the
         proportion  received  by any other  Lender in respect of the  aggregate
         amount of principal, interest or fees due with respect to any Note held
         by such other Lender, the Lender receiving such proportionately greater
         payment  shall  purchase  such  participation  in the Notes held by the
         other  Lenders  and  such  other  adjustments  shall  be made as may be
         required so that all such payments of principal,  interest or Fees with
         respect to the Notes held by the Lenders shall be shared by the Lenders
         pro rata according to their respective Commitments.

                  (c)  Each  Lender  agrees  that in the  event  that any of the
         Properties are located in California, that no Lender (or Participant or
         assignee  thereof)  shall  exercise its rights of set off  contained in
         this Section  12.15 or any other  rights and remedies  unless and until
         the Agent and  Supermajority  Lenders are  reasonably  satisfied (by an
         opinion from counsel  satisfactory to Agent or such other proof that is
         acceptable  to Agent and  Supermajority  Lenders) that such actions (i)
         will not cause  California's  so called "one  action" rule to apply and
         (ii)  will not  adversely  affect  the Agent and  Lenders'  ability  to
         exercise any other rights and remedies under the Loan Documents.

         12.16  Counterparts.  This  Agreement  may be executed in any number of
counterparts,  all of which taken together shall  constitute one agreement,  and
any of the  parties  hereto may  execute  this  Agreement  by  signing  any such
counterpart.  This Agreement shall be effective when it has been executed by the
Borrower and each of the Lenders shown on the signature pages hereof.

                                  ARTICLE XIII
                                     NOTICES

         13.1 Giving Notice.  All notices and other  communications  provided to
any party hereto under this  Agreement  or any other Loan  Document  shall be in
writing or by telex or by facsimile  and addressed or delivered to such party at
its  address set forth below or at such other  address as may be  designated  by
such party in a notice to the other parties. Any notice, if mailed and properly

                                       50





addressed with postage prepaid, shall be deemed given when received; any notice,
if  transmitted  by telex or facsimile,  shall be deemed given when  transmitted
(answerback confirmed in the case of telexes). Notice may be given as follows:

                  To the Borrower:

                           Equity Inns Partnership, L.P.
                           c/o Equity Inns, Inc.
                           4735 Spottswood
                           Suite 102
                           Memphis, Tennessee 38117
                           Attention: Howard Silver
                           Telecopy: (901) 761-3945

                  To General Partner:

                           Equity Inns Trust
                           4735 Spottswood
                           Suite 102
                           Memphis, Tennessee 38117
                           Attention: Howard Silver
                           Telecopy: (901) 761-3945

                  To the Company:

                           Equity Inns, Inc.
                           4735 Spottswood
                           Suite 102
                           Memphis, Tennessee 38117
                           Attention: Howard Silver
                           Telecopy: (901) 761-3945


                  Each of the above with a copy to:

                           Hunton & Williams
                           Suite 1700
                           1751 Pinnacle Drive
                           McLean, Virginia 22102
                           Attention: Gerald R. Best
                           Telecopy: (703) 714-7450



                                       51





                  To the Lenders:

                  As shown below the Lender's signatures.

                  To the Agent:

                  The First National Bank of Chicago
                  One First National Plaza
                  Chicago, Illinois 60670
                  Attention: Real Estate Finance Division
                  Telecopy: (312) 732-1117

                  With a copy to:

                  Sonnenschein Nath & Rosenthal
                  8000 Sears Tower
                  Chicago, Illinois 60606
                  Attention: Patrick G. Moran, Esq.
                  Telecopy: (312) 876-7934

         13.2     Change of Address. Each party may change the address for
service of notice upon it by a notice in writing to the other parties hereto.



                                       52





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

BORROWER:                         EQUITY INNS PARTNERSHIP, L.P.

                                  By:  EQUITY INNS TRUST, its General Partner

                                       By:
                                             --------------------------------
                                       Title:
                                             --------------------------------



GENERAL PARTNER:                  EQUITY INNS TRUST

                                       By:
                                             --------------------------------
                                       Title:
                                             --------------------------------

COMPANY:                          EQUITY INNS, INC.

                                       By:
                                             --------------------------------
                                       Title:
                                             --------------------------------


LENDERS:                          THE FIRST NATIONAL BANK OF CHICAGO

                                       By:
                                             --------------------------------
                                       Title:
                                             --------------------------------
                                  Commitment:  $25,000,000
                                  Percentage of Aggregate Commitment: 33.3334%

                                  Address for Notices:
                                  One First National Plaza
                                  Chicago, Illinois 60670
                                  Attention:  Real Estate Finance Division






                                       53





                                  CREDIT LYONNAIS NEW YORK BRANCH


                                       By:
                                             --------------------------------
                                       Title:
                                             --------------------------------
                                  Commitment:  $25,000,000
                                  Percentage of Aggregate Commitment 33.333%

                                  Address for Notices:
                                  1301 Avenue of the Americas
                                  New York, New York 10019
                                  Attention:  Hotel Finance Group


                                  AMSOUTH BANK

                                       By:
                                             ---------------------------------
                                       Title:
                                             ---------------------------------
                                  Commitment:  $25,000,000
                                  Percentage of Aggregate Commitment: 33.3333%

                                  Address for Notices:
                                  1900 Fifth Avenue North
                                  9th Floor
                                  Birmingham, Alabama 35203


ADMINISTRATIVE AGENT:             THE FIRST NATIONAL BANK OF CHICAGO

                                       By:
                                             ---------------------------------
                                       Title:
                                             ---------------------------------


DOCUMENTATION AGENT:              CREDIT LYONNAIS NEW YORK BRANCH

                                       By:
                                             ---------------------------------
                                       Title:
                                             ---------------------------------




                                       54




                                  CREDIT LYONNAIS NEW YORK BRANCH

                                       By:
                                             ---------------------------------
                                       Title:
                                             ---------------------------------
                                  Commitment:  $25,000,000
                                  Percentage of Aggregate Commitment: 33.3333%

                                  Address for Notices:
                                  1301 Avenue of the Americas
                                  New York, New York 10019
                                  Attention:  Hotel Finance Group


                                  AMSOUTH BANK

                                       By:
                                             ---------------------------------
                                       Title:
                                             ---------------------------------
                                  Commitment: $25,000,000
                                  Percentage of Aggregate Commitment: 33.3333%

                                  Address for Notices:
                                  1900 Fifth Avenue North
                                  9th Floor
                                  Birmingham, Alabama 35203


ADMINISTRATIVE AGENT:             THE FIRST NATIONAL BANK OF CHICAGO

                                       By:
                                             ---------------------------------
                                       Title:
                                             ---------------------------------


DOCUMENTATION AGENT:              CREDIT LYONNAIS NEW YORK BRANCH

                                       By:
                                             ---------------------------------
                                       Title:
                                             ---------------------------------


CO-AGENT:                         AMSOUTH BANK

                                       By:
                                             ---------------------------------
                                       Title:
                                             ---------------------------------



                                       55