10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Period ended June 30, 2004

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from            to

Commission file no. 1-14537

Lodgian, Inc.

(Exact name of registrant as specified in its charter)

Delaware	52-2093696
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
3445 Peachtree Road, N.E., Suite 700,
Atlanta, GA	30326
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code
(404) 364-9400

     (Former name, former address and former fiscal year, if changed since last report): Not applicable

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant is an accelerated filer as defined by section 12-b-2 of the Act. Yes o No þ

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Class	Outstanding as of August 9, 2004
Common	24,543,505

LODGIAN, INC. AND SUBSIDIARIES

INDEX

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:		2
	Condensed Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003 (unaudited)		2
	Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2004 and June 30, 2003 and for the Six Months Ended June 30, 2004 and June 30, 2003 (unaudited)		3
	Condensed Consolidated Statement of Stockholders’ Equity for the Six Months Ended June 30, 2004 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and June 30, 2003 (unaudited)		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33
Item 4.	Controls and Procedures		33
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		34
Item 2.	Changes in Securities		34
Item 4.	Submission of Matters to a Vote of Security Holders		35
Item 6.	Exhibits and Reports on Form 8-K		36
Signatures			37

1

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LODGIAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2004			December 31, 2003
	(Unaudited in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	170,198		$	10,897
Cash, restricted		9,612			7,084
Accounts receivable (net of allowances: 2004 - $737; 2003 - $689)		11,104			8,169
Inventories		5,951			5,609
Prepaid expenses and other current assets		19,879			17,068
Assets held for sale		39,636			68,567
Total current assets		256,380			117,394
Property and equipment, net		561,744			563,818
Deposits for capital expenditures		36,234			15,782
Other assets, net		7,689			12,180
	$	862,047		$	709,174
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	9,250		$	7,131
Other accrued liabilities		32,420			31,432
Advance deposits		2,634			1,882
Current portion of long-term debt		14,403			16,563
12.25% Cumulative preferred shares subject to mandatory redemption		110,893			—
Liabilities related to assets held for sale		37,335			57,948
Total current liabilities		206,935			114,956
Long-term debt:
12.25% Cumulative preferred shares subject to mandatory redemption		—			142,177
Long-term debt — other		408,921			409,115
Total long-term debt		408,921			551,292
Total liabilities		615,856			666,248
Minority interests		2,538			2,320
Commitments and contingencies
Stockholders’ equity:
Common stock, $.01 par value, 60,000,000 shares authorized; 24,559,690 and 2,333,591 issued and outstanding at June 30, 2004 and December 31, 2003, respectively		246			23
Additional paid-in capital		307,211			89,874
Unearned stock compensation		(408	)		(508	)
Accumulated deficit		(64,440	)		(50,107	)
Accumulated other comprehensive income		1,044			1,324
Total stockholders’ equity		243,653			40,606
	$	862,047		$	709,174

See notes to condensed consolidated financial statements.

LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three months ended						Six months ended
	June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
	(Unaudited in thousands, except						(Unaudited in thousands, except
	per share data)						per share data)
Revenues:
Rooms	$	64,325		$	61,010		$	121,888		$	114,924
Food and beverage		19,436			18,977			35,924			35,584
Other		2,816			2,838			5,570			5,696
		86,577			82,825			163,382			156,204
Operating expenses:
Direct:
Rooms		16,960			16,730			32,978			32,093
Food and beverage		12,713			12,365			24,247			24,099
Other		2,077			1,842			4,049			3,780
		31,750			30,937			61,274			59,972
		54,827			51,888			102,108			96,232
Other operating expenses:
Other hotel operating costs		23,822			22,797			47,894			45,272
Property and other taxes, insurance and leases		5,376			6,923			11,127			13,584
Corporate and other		4,782			6,075			9,195			12,045
Depreciation and amortization		6,870			7,573			13,675			14,995
Impairment of long-lived assets		—			1,378			—			1,378
Other operating expenses		40,850			44,746			81,891			87,274
		13,977			7,142			20,217			8,958
Other income (expenses):
Interest income and other		66			124			109			207
Interest expense and other financing costs:
Preferred stock dividend		(4,233	)		—			(8,518	)		—
Other interest expense		(19,920	)		(6,919	)		(28,079	)		(13,198	)
Loss on preferred stock redemption		(1,592	)		—			(1,592	)		—
Loss before income taxes, reorganization items and minority interests		(11,702	)		347			(17,863	)		(4,033	)
Reorganization items		—			(808	)		—			(2,045	)
Loss before income taxes and minority interest		(11,702	)		(461	)		(17,863	)		(6,078	)
Minority interests		(71	)		(69	)		(218	)		(217	)
Loss before income taxes — continuing operations		(11,773	)		(530	)		(18,081	)		(6,295	)
Provision for income taxes — continuing operations		(75	)		(75	)		(151	)		(151	)
Loss — continuing operations		(11,848	)		(605	)		(18,232	)		(6,446	)
Discontinued operations:
Income (loss) from discontinued operations before income taxes		4,601			(1,836	)		3,899			(5,079	)
Income tax provision		—			—			—			—
Income (loss) from discontinued operations		4,601			(1,836	)		3,899			(5,079	)
Net loss		(7,247	)		(2,441	)		(14,333	)		(11,525	)
Preferred stock dividend		—			(3,818	)		—			(7,594	)
Net loss attributable to common stock	$	(7,247	)	$	(6,259	)	$	(14,333	)	$	(19,119	)
Basic and diluted loss per common share:
Net loss attributable to common stock	$	(2.04	)	$	(2.68	)	$	(4.87	)	$	(8.20	)

See notes to condensed consolidated financial statements.

3

LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

	COMMON STOCK														ACCUMULATED
						ADDITIONAL			UNEARNED						OTHER			TOTAL
						PAID-IN			STOCK			ACCUMULATED			COMPREHENSIVE			STOCKHOLDERS’
	SHARES			AMOUNT		CAPITAL			COMPENSATION			DEFICIT			LOSS (net of tax)			EQUITY
	(In thousands, except share data)
Balance December 31, 2003		2,333,591		$	23	$	89,874		$	(508	)	$	(50,107	)	$	1,324		$	40,606
Partial shares cancelled on reverse stock split		(971	)				(5	)											(5	)
Issuance of new common shares		18,285,714			183		175,997												176,180
Amortization of unearned stock compensation		—			—		—			100			—			—			100
Exercise of stock options		241			—		4			—			—			—			4
Exchange of preferred shares for common shares		3,941,115			40		41,341												41,381
Comprehensive loss:
Net loss		—			—		—			—			(14,333	)		—			(14,333	)
Currency translation adjustments (related taxes estimated at nil)		—			—		—			—			—			(280	)		(280	)
Total comprehensive loss					—		—			—			—			—			(14,613	)
Balance June 30, 2004		24,559,690		$	246	$	307,211		$	(408	)	$	(64,440	)	$	1,044		$	243,653

The comprehensive loss for the three months ended June 30, 2004 was $7.9 million and the comprehensive loss for the three months ended June 30, 2003 was $1.9 million. The comprehensive loss for the six months ended June 30, 2003 was $10.6 million.

See notes to condensed consolidated financial statements.

4

LODGIAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended
	June 30, 2004			June 30, 2003
	(Unaudited in thousands)
Operating activities:
Net loss	$	(14,333	)	$	(11,525	)
Less: (Income) loss from discontinued operations		(3,899	)		5,079
Loss — continuing operations		(18,232	)		(6,446	)
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:
Depreciation and amortization		13,675			15,008
Impairment of long-lived assets		—			1,377
Amortization of unearned stock compensation		100			—
Preferred stock dividends		8,518			—
Loss on redemption of preferred stock		1,592			—
Minority interests		218			217
Write-off and amortization of deferred financing costs		9,099			1,363
Other		938			1,238
Changes in operating assets and liabilities:
Accounts receivable, net of allowances		(2,935	)		(2,512	)
Inventories		(342	)		(33	)
Prepaid expenses, other assets and restricted cash		(4,877	)		7,794
Accounts payable		2,305			(2,223	)
Other accrued liabilities		2,913			2,377
Advance deposits		752			795
Net cash provided by operating activities from continuing operations		13,724			18,955
Net cash used in operating activities from discontinued operations		(2,673	)		(5,793	)
Net cash provided by operating activities		11,051			13,162
Investing activities:
Capital improvements		(12,881	)		(19,454	)
Net proceeds from disposition of discontinued operations		33,890			—
Withdrawals for capital expenditures		(20,452	)		6,975
Other		(60	)		(853	)
Net cash provided by (used in) investing activities		497			(13,332	)
Financing activities:
Proceeds from issuance of long term debt		370,000			80,000
Proceeds from exercise of stock options and issuance of common stock		176,183			—
Shares redeemed from reverse stock split		(5	)		—
Principal payments on long-term debt		(393,071	)		(78,791	)
Payments of deferred financing costs		(5,354	)		(4,438	)
Net cash used in financing activities		147,753			(3,229	)
Effect of exchange rate changes on cash		—			—
Net increase in cash and cash equivalents		159,301			(3,399	)
Cash and cash equivalents at beginning of period		10,897			10,875
	$	170,198		$	7,476
Supplemental cash flow information:
Cash paid during the period for:
Interest, net of the amounts capitalized shown below	$	22,018		$	13,491
Interest capitalized		190			493
Income taxes, net of refunds		586			40
Supplemental disclosure of non-cash investing and financing activities:
Net non-cash debt increase (decrease)		(228	)		(15,808	)
Issuance of promissory notes as consideration for taxation liabilities		2,369			852

See notes to consolidated financial statements.

5

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(Throughout this Form 10-Q, we will use the terms Lodgian, “we”, “our”, and “us”, to refer to Lodgian, Inc. and unless the context otherwise requires or expressly states, our subsidiaries).

1. Business Summary

     We are one of the largest independent owners and operators of full-service hotels in the United States in terms of our number of guest rooms and gross annual revenues, as reported by Hotel & Motel Management Magazine in September 2003. We are considered an independent owner and operator because we do not operate our hotels under our own name. We operate substantially all of our hotels under nationally recognized brands, such as “Crowne Plaza,” “Holiday Inn,” “Marriott,” and “Hilton”. As of August 9, 2004, we operated 87 hotels with an aggregate of 16,366 rooms, located in 30 states and Canada. Of the 87 hotels, 78 hotels, with an aggregate of 14,348 rooms, are part of our continuing operations, while nine hotels, with an aggregate of 2,018 rooms, are held for sale. Our portfolio of 87 hotels consists of:

• 82 hotels that we wholly own and operate through subsidiaries;

• four hotels that we operate in joint ventures in which we have a 50% or greater voting equity interest and exercise control; and

• one hotel that we operate in a joint venture in which we have a 30% non-controlling equity interest.

     We consolidate all of these hotels in our financial statements, other than the one hotel in which we hold a non-controlling equity interest and which we account for under the equity method.

     Our hotels are primarily full-service properties that offer food and beverage services, meeting space and banquet facilities and compete in the midscale and upscale market segments of the lodging industry. As of August 9, 2004, we operated all but three of our hotels under franchises obtained from nationally recognized hospitality franchisors. We operate 59 of our hotels under franchises obtained from InterContinental Hotels Group as franchisor of the Crowne Plaza, Holiday Inn, Holiday Inn Select and Holiday Inn Express brands. We operate 15 of our hotels under franchises from Marriott International as franchisor of the Marriott, Courtyard by Marriott, Fairfield Inn by Marriott and Residence Inn by Marriott brands. We operate another 10 hotels under other nationally recognized brands. We believe that these strong national brands afford us many benefits such as guest loyalty and market share premiums.

2. General

     Our condensed consolidated financial statements include the accounts of Lodgian, Inc., its wholly-owned subsidiaries and four joint ventures in which Lodgian, Inc. has a controlling financial interest (owns a 50% or greater voting equity interest and exercises control). We believe we have control of the joint ventures when we manage and have control of the joint ventures’ assets and operations. We report the third party partners’ share of the net income or loss of these joint ventures and their share of the joint ventures’ equity as minority interest. We include in other assets our investment in the hotel in which we hold a minority interest and which we account for under the equity method. We report our share of the income or loss of this minority-owned hotel as part of interest income and other. All significant intercompany accounts and transactions have been eliminated in consolidation.

     The accounting policies which we follow for quarterly financial reporting are the same as those which we disclosed in Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2003.

6

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     During 2003, we developed a portfolio improvement strategy which was consistent with our goals of operating a portfolio of profitable, well-maintained and appealing hotels at superior locations in strong markets. In accordance with this strategy and our efforts to reduce debt and interest costs, we identified 19 hotels, one office building and three land parcels for sale. Between November 1, 2003 and August 9, 2004, we sold the office building and ten of the 19 hotels. As of August 9, 2004, our portfolio consisted of 87 hotels, 78 of which represent our continuing portfolio (including one hotel in which we have a non-controlling equity interest which we do not consolidate).

     In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting primarily of normal recurring adjustments, necessary to present fairly our financial position as of June 30, 2004, the results of our operations for the three and six months ended June 30, 2004 and June 30, 2003 and our cash flows for the six months ended June 30, 2004 and June 30, 2003. Our results for interim periods are not necessarily indicative of our results for the entire year. You should read these financial statements in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2003.

     As we prepare our financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP), we reclassify certain prior period amounts to conform to the current period’s presentation. We also make estimates and assumptions which affect:

• the reported amounts of assets and liabilities;

• the reported amounts of revenues and expenses during the reporting period; and

• the disclosures of contingent assets and liabilities at the date of our financial statements.

     Our actual results could differ from our estimates.

  Reverse Stock Split

     On April 27, 2004, our Board of Directors authorized a reverse stock split of our common stock in a ratio of one-for-three (1:3). The reverse split affected all of our issued and outstanding common shares, warrants, stock options, and restricted stock. The record date for the reverse split was April 29, 2004 and our new common stock began trading under the split adjustment on April 30, 2004.

     Fractional shares which resulted from the reverse stock split were paid in cash. Each holder of a fractional share of common stock after the effective date of the reverse split was paid cash equal to the product of (i) the average of the closing prices of the common stock for the last ten trading days prior to April 30, 2004, multiplied by (ii) the fraction of a share of common stock held by such holder.

     All amounts for common stock, warrants, stock options and restricted stock, and all earnings per share computations have been retroactively adjusted to reflect the change in our capital structure.

3. Stock-based Compensation

     As disclosed in Note 2 above, on April 27, 2004, our Board of Directors authorized a reverse stock split of our common stock in a ratio of one-for-three (1:3). All stock option disclosures below have been retroactively adjusted to reflect the reverse stock split.

     As we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003, on November 25, 2002, we adopted a new Stock Incentive Plan which replaced the stock option plan previously in place. In accordance with the Stock Incentive Plan, and prior to the consummation of the public offering, we were permitted to grant awards to acquire up to 353,333 shares of common stock to our directors, officers, or other key employees or consultants as determined by a committee appointed by our Board of Directors. Awards may consist of stock options, stock appreciation rights, stock awards, performance share awards, section 162(m) awards or other awards determined by the committee. We cannot grant stock options pursuant to the Stock Incentive Plan at an

7

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

exercise price which is less than 100% of the fair market value per share on the date of the grant. Vesting, exercisability, payment and other restrictions pertaining to any awards made pursuant to the Stock Incentive Plan are determined by the Committee. At our 2004 annual meeting, stockholders approved an amendment and restatement of the Stock Incentive Plan to, among other things, increase the number of shares of common stock available for issuance thereunder by 29,667 immediately and, in the event we consummated a firm commitment, underwritten public offering of our common stock, by an additional amount to be determined pursuant to a formula. With the consummation of our public offering of common stock on June 25, 2004, the total number of shares available for issuance under our Stock Incentive Plan increased to 2,950,832 shares.

     On April 9, 2004, the Company issued our CEO, Thomas Parrington, 1,382 restricted stock units in accordance with his employment agreement. The restricted stock units vest on April 9, 2005 when they will be convertible into an equal number of shares of common stock.

     We present below a summary of our stock option plan and the restricted stock units activity under the plan for the six months ended June 30, 2004:

	Weighted Average
	Options			Exercise Price
Balance, December 31, 2003		157,529		$	13.92
Granted		383,500			10.52
Exercised		(241	)		15.21
Forfeited		(4,771	)		15.21
Balance, June 30, 2004		536,017		$	11.47

	Restricted
	Stock Units
Balance, December 31, 2003		66,666
Issued		1,382
Forfeited		—
Balance, June 30, 2004		68,048	(1)

(1) At June 30, 2004, none of the restricted stock had vested.

     In the following table, we summarize information for options outstanding and exercisable at June 30, 2004:

	Options outstanding						Options exercisable
			Weighted average		Weighted average				Weighted average
Range of prices	Number		remaining life (in years)		exercise prices		Number		exercise prices
$9.00 to $10.50		33,333		9.0	$	9.00		—	$	9.00
$10.51 to $15.00		383,500		10.0	$	10.52		—	$	10.52
$15.01 to $15.50		112,018		9.2	$	15.21		37,424	$	15.21
$15.51 to $16.00		7,166		9.3	$	15.66		2,389	$	15.66
		536,017		9.7	$	11.47		39,813	$	15.24

     We account for stock option grants in accordance with Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Under APB No. 25, if the exercise price of

8

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

our employee stock options is equal to the market price of the underlying stock on the date of grant, no compensation expense is recognized. Under Statement of Financial Accounting Standard (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” (as amended by SFAS No. 148), compensation cost is measured at the grant date based on the estimated value of the award and is recognized over the service (or vesting) period. The income tax benefit, if any, associated with the exercise of stock options is credited to additional paid-in capital.

     Had the compensation cost of our stock option plan been recognized under SFAS No. 123, based on the fair market value at the grant dates, our pro forma net loss and net loss per share would have been as follows:

	Three months ended						Six months ended
	June 30, 2004			June 30, 2003(1)			June 30, 2004			June 30, 2003 (1)
Loss — continuing operations
As reported	$	(11,848	)	$	(605	)	$	(18,232	)	$	(6,446	)
Pro forma		(11,973	)		(605	)		(18,481	)		(6,446	)
Income (loss) from discontinued operations
As reported		4,601			(1,836	)		3,899			(5,079	)
Pro forma		4,601			(1,836	)		3,899			(5,079	)
Net loss:
As reported		(7,247	)		(2,441	)		(14,333	)		(11,525	)
Pro forma		(7,372	)		(2,441	)		(14,582	)		(11,525	)
Net loss attributable to common stock
As reported		(7,247	)		(6,259	)		(14,333	)		(19,119	)
Pro forma		(7,372	)		(6,259	)		(14,582	)		(19,119	)
Loss from continuing operations attributable to common stock before discontinued operations
As reported		(11,848	)		(4,423	)		(18,232	)		(14,040	)
Pro forma		(11,973	)		(4,423	)		(18,481	)		(14,040	)
Basic and diluted loss per common share:
Loss — continuing operations
As reported	$	(3.33	)	$	(0.26	)	$	(6.19	)	$	(2.76	)
Pro forma		(3.37	)		(0.26	)		(6.28	)		(2.76	)
Income (loss) from discontinued operations
As reported		1.29			(0.79	)		1.32			(2.18	)
Pro forma		1.29			(0.79	)		1.32			(2.18	)
Net loss
As reported		(2.04	)		(1.05	)		(4.87	)		(4.94	)
Pro forma		(2.07	)		(1.05	)		(4.95	)		(4.94	)
Net loss attributable to common stock
As reported		(2.04	)		(2.68	)		(4.87	)		(8.20	)
Pro forma		(2.07	)		(2.68	)		(4.95	)		(8.20	)
Loss from continuing operations attributable to common stock before discontinued operations
As reported		(3.33	)		(1.90	)		(6.19	)		(6.02	)
Pro forma		(3.37	)		(1.90	)		(6.28	)		(6.02	)

(1) There were no options outstanding between January 1, 2003 and June 30, 2003.

4. Discontinued Operations

     As discussed above, during 2003, we identified 19 hotels, one office building and three land parcels for sale as part of our portfolio improvement strategy and our efforts to reduce debt and interest costs. Between April 1, 2004 and June 30, 2004, we sold three hotels for an aggregate sales price of $20.7 million. From the sale of these assets, we paid down debt of approximately $18.1 million.

     In accordance with SFAS No. 144, we have included the hotel assets sold during 2003 and 2004 as well as the hotel assets held for sale at June 30, 2004 (including any related impairment charges) in Discontinued Operations in the Consolidated Statements of Operations. The assets held for sale at June 30, 2004 and December 31, 2003 and the liabilities related to these assets are separately disclosed in the Condensed Consolidated Balance Sheets. Where the carrying values of the assets held for sale exceeded the estimated fair values, net of selling costs, we reduced the

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LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

carrying values and recorded impairment charges. We determine fair values using quoted market prices, when available, or other accepted valuation techniques. During the three and six months ended June 30, 2004, we recorded impairment charges of $0.5 million and $2.6 million, respectively, on assets held for sale. Where the estimated selling prices, net of selling costs, of assets held for sale exceeded the carrying values, we did not increase the carrying values of the assets. Among other criteria, we classify an asset as held for sale if we expect to dispose of it within one year.

At June 30, 2004, ten hotels and three land parcels were held for sale. At December 31, 2003, 18 hotels and three land parcels were held for sale. The following condensed combined table summarizes the assets and liabilities relating to the properties identified as held for sale as of June 30, 2004 and December 31, 2003:

	June 30, 2004		December 31, 2003
	(Unaudited in thousands)
ASSETS
Accounts receivable, net of allowances	$	1,451	$	1,252
Inventories		879		1,377
Prepaid expenses and other current assets		1,036		1,039
Property and equipment, net		35,173		61,624
Other assets		1,097		3,275
	$	39,636	$	68,567
LIABILITIES
Accounts payable	$	1,167	$	1,234
Other accrued liabilities		1,460		3,120
Advance deposits		358		390
Current portion of long-term debt		344		771
Long-term debt		34,006		52,433
Total liabilities	$	37,335	$	57,948

     The condensed combined results of operations of the properties classified as Discontinued Operations for the three and six months ended June 30, 2004 were as follows:

10

	Three months ended						Six months ended
	June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
	(Unaudited in thousands)						(Unaudited in thousands)
Revenues:
Rooms	$	8,491		$	12,709		$	16,435		$	21,843
Food and beverage		2,439			3,176			4,757			5,535
Other		358			893			836			1,686
		11,288			16,778			22,028			29,064
Operating expenses:
Direct:
Rooms		2,339			3,714			5,035			6,910
Food and beverage		1,751			2,360			3,585			4,388
Other		253			586			638			1,184
		4,343			6,660			9,258			12,482
		6,945			10,118			12,770			16,582
Other operating expenses:
Other hotel operating costs		3,460			5,721			8,514			11,474
Property and other taxes, insurance and leases		74			1,871			1,083			3,868
Depreciation and amortization		18			1,502			151			2,949
Impairment of long-lived assets		451			2,070			2,604			2,070
Other operating expenses		4,003			11,164			12,352			20,361
		2,942			(1,046	)		418			(3,779	)
Interest expense and other financing costs		(2,583	)		(791	)		(3,768	)		(1,301	)
Gain on asset dispositions		4,242			1			7,249			1
Income (loss) before income taxes		4,601			(1,836	)		3,899			(5,079	)
Provision for income taxes		—			—			—			—
Net income (loss)	$	4,601		$	(1,836	)	$	3,899		$	(5,079	)

5. Cash, Restricted

     Our restricted cash as of June 30, 2004 consists of amounts reserved for letter of credit collateral, a deposit required by our bankers and cash reserved pursuant to certain loan agreements.

6. Loss Per Share

     The following table sets forth the computation of basic and diluted loss per share:

	Three months ended						Six months ended
	June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
	(Unaudited in thousands, except						(Unaudited in thousands, except
	per share data)						per share data)
Basic and diluted loss per share:
Numerator:
Loss — continuing operations	$	(11,848	)	$	(605	)	$	(18,232	)	$	(6,446	)
Income (loss) from discontinued operations		4,601			(1,836	)		3,899			(5,079	)
Net loss		(7,247	)		(2,441	)		(14,333	)		(11,525	)
Preferred stock dividend		—			(3,818	)		—			(7,594	)
Net loss attributable to common stock		(7,247	)		(6,259	)		(14,333	)		(19,119	)
Loss — continuing operations		(11,848	)		(605	)		(18,232	)		(6,446	)
Preferred stock dividend		—			(3,818	)		—			(7,594	)
Loss from continuing operations attributable to common stock before discontinued operations	$	(11,848	)	$	(4,423	)	$	(18,232	)	$	(14,040	)
Denominator:
Denominator for basic and diluted loss per share - weighted-average shares		3,554			2,333			2,944			2,333
Basic and diluted loss per common share:
Loss — continuing operations	$	(3.33	)	$	(0.26	)	$	(6.19	)	$	(2.76	)
Income (loss) from discontinued operations		1.29			(0.79	)		1.32			(2.18	)
Net loss		(2.04	)		(1.05	)		(4.87	)		(4.94	)
Net loss attributable to common stock		(2.04	)		(2.68	)		(4.87	)		(8.20	)
Loss from continuing operations attributable to common stock before discontinued operations	$	(3.33	)	$	(1.90	)	$	(6.19	)	$	(6.02	)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     We did not include the shares associated with the assumed conversion of the restricted stock units (68,048 shares) or the exercise of stock options (options to acquire 536,017 shares of common stock) and A and B warrants (rights to acquire 503,546 and 343,122 shares of common stock, respectively) in the computation of diluted loss per share for the three and six months ended June 30, 2004 because their inclusion would have been antidilutive. We did not include the shares associated with the exercise of the A and B warrants (rights to acquire 503,546 and 343,122 shares of common stock, respectively) in the computation of diluted loss per share for the three and six months ended June 30, 2003 because their inclusion would have been antidilutive.

7. Other Accrued Liabilities

     At June 30, 2004 and December 31, 2003, other accrued liabilities consisted of the following:

	June 30, 2004		December 31, 2003
	(Unaudited in thousands)
Salaries and related costs	$	18,178	$	16,211
Property and sales taxes		11,253		9,427
Professional fees		531		570
Provision for state income taxes		213		2,361
Franchise fee accrual		1,631		1,115
Accrued interest		46		526
Accrual for allowed claims		31		186
Other		537		1,036
	$	32,420	$	31,432

8. Debt

     Substantially all of our property and equipment are pledged as collateral for long-term obligations with the exception of three hotels that are now unencumbered as a result of our Refinancing Debt and the three land parcels. Certain of our mortgage notes are subject to a prepayment or yield maintenance penalty if we repay them prior to their maturity. Set forth below, by debt pool, is a summary of our debt at June 30, 2004 along with the applicable interest rates and the related carrying values of the property, plant and equipment which collateralize these debts:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

				June 30, 2004
				(Unaudited in thousands)
	Number			Property, plant			Long-term			Interest
	of Hotels			and equipment, net			obligations			rates
				(1)			(1)
Refinancing Debt
Merrill Lynch Mortgage Lending, Inc. — Floating		29		$	125,254		$	110,000		LIBOR plus 3.40%
Merrill Lynch Mortgage Lending, Inc. — Fixed		35			316,148			260,000			6.58	%
Merrill Lynch Mortgage Lending, Inc. — Total		64			441,402			370,000
Computershare Trust Company of Canada		1			13,975			7,137			7.88	%
Other financing
Column Financial, Inc.		9			61,334			26,209			10.59	%
Lehman Brothers Holdings, Inc.		5			37,870			23,173		$16,329 at 9.40%; $6,844 at 8.9%
JP Morgan Chase Bank		2			8,714			10,385			7.25	%
DDL Kinser		1			3,164			2,336			8.25	%
Column Financial, Inc.		1			8,893			8,749			9.45	%
Column Financial, Inc.		1			6,046			3,140			10.74	%
Total — other financing		19			126,021			73,992
		84			581,398			451,129			6.63%	(2)
Long-term debt — other
Deferred rent on a long-term ground lease		—			—			1,842
Tax notes issued pursuant to our Joint Plan of Reorganization		—			—			3,779
Other		—			—			924
		—			—			6,545
Property, plant and equipment — other		3			15,519			—
		87			596,917			457,674
Held for sale (3)		(10	)		(35,173	)		(34,350	)
Total June 30, 2004		77			561,744			423,324

(1)	Long-term obligations and property, plant and equipment of one hotel in which we have a non-controlling equity interest that we do not consolidate are excluded from the table above.
(2)	The 6.63% in the table above represents our annual weighted average cost of debt at June 30, 2004, using a 1.36% LIBOR rate.
(3)	Debt on assets held for sale of $34.4 million reflects new allocated loan amounts as part of the Refinancing Debt.

Refinancing Debt

     On June 25, 2004, we closed on the $370 million Merrill Lynch Mortgage Lending, Inc. (“Merrill Lynch Mortgage”) refinance (“Refinancing Debt”) secured by 64 of our hotels. We refinanced (1) our outstanding mortgage debt (“Merrill Lynch Exit Financing”) with Merrill Lynch Mortgage which, as of June 25, 2004, had a balance of $290.9 million, (2) certain of our outstanding mortgage debt (the “Lehman Financing”) with Lehman Brothers Holdings, Inc. (“Lehman”) which, as of June 25, 2004, had a balance of $56.1 million and (3) our outstanding mortgage debt on the Crowne Plaza Hotel in Macon, Georgia, in which we own a 60% interest that, as of June 25, 2004, had a balance of $6.9 million.

     Prepayment penalties totaling $2.7 million were paid on the Merrill Lynch Mortgage Exit Financing debt (not including $0.2 million allocated to discontinued operations). Deferred loan costs related to the Merrill Lynch Exit Financing debt, Lehman debt, and Macon debt that were written off and charged to other interest expense were $3.4 million, $3.3 million and nil, respectively (not including the write-off of $0.3 million and $0.4 million of deferred loan costs for Merrill Lynch and Lehman, respectively, that were allocated to discontinued operations). We purchased a swaption contract to hedge against rising interest rates until the interest rate on the fixed rate Refinancing Debt was determined. The swaption net cost of $1.9 million was expensed to other interest expense and the $1.1 million of loan origination fees incurred on the Floating Rate Debt was expensed to other interest expense with $0.8 million allocated to continuing operations (and $0.3 million allocated to discontinued operations).

     The Refinancing Debt consists of a loan of $110 million bearing a floating rate of interest (the “Floating Rate Debt”) and is secured by 29 of our hotels, and four loans totaling $260 million each bearing a fixed interest rate of 6.58% (the “Fixed Rate Debt”) and secured, in the aggregate, by 35 of our hotels. Merrill Lynch Mortgage also has the right to further divide the Refinancing Debt into first priority mortgage loans and mezzanine loans. Prior to any securitization of the four fixed rate loans, such loans will be cross-defaulted and cross-collateralized.

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LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Each of the four fixed rate loans (“Fixed Rate Loan”) comprising the Fixed Rate Debt is a five-year loan and bears a fixed rate of interest of 6.58%. Except as provided for through defeasance, we may not prepay the Fixed Rate Debt except during the 60 days prior to maturity. We may, after the earlier of 48 months after the closing of any Fixed Rate Debt or the second anniversary of the securitization of any Fixed Rate Debt, defease such Fixed Rate Debt, in whole, or in part.

     The Floating Rate Debt is a two-year loan with three one-year extension options and bears interest at LIBOR plus 3.40%. The first extension option will be available to us only if no defaults exist and we have entered into the requisite interest rate cap agreement. The second and third extension options will be available to us only if no defaults exist, a minimum debt yield ratio of 13% is met, and minimum debt service coverage ratios of 1.3x for the second extension and 1.35x for the third extension are met. An extension fee of 0.25% of the outstanding Floating Rate Debt is payable if we opt to exercise each of the second and third extensions. We may prepay the Floating Rate Debt in whole or in part, subject to a prepayment penalty in the amount of 3% of the amount prepaid during the first year of the loan and 1% of the amount prepaid during the second year of the loan. If the loan is prepaid after the second year of the loan, there is no prepayment penalty.

     The Refinancing Debt provides that when either (i) the debt yield ratio for the hotels securing the Floating Rate Debt or any Fixed Rate Loan for the trailing 12-month period is below 9% during the first year, 10% during the second year and 11%, 12% and 13% during each of the next three years (in the case of the Floating Rate Debt to the extent extended), or (ii) in the case of the Floating Rate Debt (to the extent extended), the debt service coverage ratio is less than 1.30x in the fourth year or 1.35x in the fifth year, excess cash flows produced by the mortgaged hotels securing the applicable loan (after payment of operating expenses, management fees, required reserves, service fees, principal and interest) must be deposited in a restricted cash account. These funds can be used for the prepayment of the applicable loan in an amount required to satisfy the applicable test, capital expenditures reasonably approved by the lender with respect to the hotels securing the applicable loan, and scheduled principal and interest payments due on the Floating Rate Debt of up to $0.9 million or any Fixed Rate Loan of up to $525,000, as applicable. Funds will no longer be deposited into the restricted cash account when the debt yield ratio and, if applicable, the debt service coverage ratio are sustained above the minimum requirements for three consecutive months and there are no defaults. As of August 9, 2004, our debt yield ratios were above the minimum requirements.

     Each loan comprising the Refinancing Debt is non-recourse; however, we have agreed to indemnify Merrill Lynch Mortgage in certain situations, such as fraud, waste, misappropriation of funds, certain environmental matters, asset transfers in violation of the loan agreements, or violation of certain single-purpose entity covenants. In addition, each loan comprising the Refinancing Debt will become full recourse in certain limited cases such as bankruptcy of a borrower or Lodgian. During the term of the Refinancing Debt, we will be required to fund, on a monthly basis, a reserve for furniture, fixtures and equipment equal to 4% of the previous month’s gross revenues from the hotels securing each of the respective loans comprising the Refinancing Debt.

     Third party paid loan costs, incurred as a part of the Refinancing Debt, totaling $5.4 million, were deferred and will be amortized using the effective yield method over five years for the Fixed Rate Debt and three years for the Floating Rate Debt.

     In the table above, approximately 75.6% of our long-term mortgage debt (including current portion) at June 30, 2004, bears interest at a fixed rate and 24.4% bears interest at a floating rate.

9. Commitments and Contingencies

   Franchise Agreements and Capital Expenditures

     We benefit from the superior brand qualities of the Crowne Plaza, Holiday Inn, Marriott, Hilton and other brands, including the reputation of these brands, reservation bookings through their central reservation systems, global distribution systems, guest loyalty programs and brand Internet booking sites. Reservations made by means of these franchisor facilities generally account for approximately 30% of our total reservations.

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LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     To obtain these franchise affiliations, we enter into franchise agreements with hotel franchisors that generally have terms of between 10 and 20 years. The franchise agreements typically authorize us to operate the hotel under the franchise name, at a specific location or within a specified area, and require that we operate a hotel in accordance with the standards specified by the franchisor. As part of our franchise agreements, we are generally required to pay a royalty fee, an advertising/marketing fee, a fee for the use of the franchisor’s nationwide reservation system and certain ancillary charges. Royalty fees generally range from 3.0% to 6.0% of gross room revenues, advertising/marketing fees generally range from 1.0% to 4.0% of gross room revenues and reservation system fees generally range from 1.0% to 2.0% of gross room revenues. In the aggregate, royalty fees, advertising/marketing fees and reservation fees for the various brands under which we operate our hotels range from 5.0% to 12.0% of gross room revenues.

     These costs vary with revenues and are not fixed commitments. Franchise fees incurred for the three and six months ended June 30, 2004 and June 30, 2003 were as follows:

	Three months ended				Six months ended
	June 30, 2004		June 30, 2003		June 30, 2004		June 30, 2003
	(Unaudited in thousands)				(Unaudited in thousands)
Continuing operations	$	5,871	$	5,378	$	11,121	$	10,158
Discontinued operations		696		1,053		1,284		1,778
	$	6,567	$	6,431	$	12,405	$	11,936

     During the term of the franchise agreements, the franchisors may require us to upgrade facilities to comply with their current standards. Our current franchise agreements terminate at various times and have differing remaining terms, for example, the terms of 3, 10 and 9 of our franchise agreements are scheduled to expire in 2004, 2005, and 2006, respectively. As franchise agreements expire, we may apply for a franchise renewal. In connection with renewals, the franchisor may require payment of a renewal fee, increased royalty and other recurring fees and substantial renovation of the facilities, or the franchisor may elect not to renew the franchise. The costs incurred in connection with these agreements are primarily monthly payments due to the franchisors based on a percentage of room revenues.

     If we do not comply with the terms of a franchise agreement, following notice and an opportunity to cure, the franchisor has the right to terminate the agreement, which could lead to a default under one or more of our loan agreements, and which could materially and adversely affect us. Prior to terminating a franchise agreement, franchisors are required to notify us of the areas of non-compliance and give us the opportunity to cure the non-compliance. In the past, we have been able to cure most cases of non-compliance and most defaults within the cure periods, and those events of non-compliance and defaults did not cause termination of our franchises or defaults on our loan agreements. If we perform an economic analysis of the hotel and determine that it is not economically feasible to comply with a franchisor’s requirements, we will either select an alternative franchisor or operate the hotel without a franchise affiliation.

     As of August 9, 2004, we have been notified that we were not in compliance with some of the terms of eight of our franchise agreements and have received default and termination notices from franchisors with respect to an additional six hotels. We cannot assure you that we will be able to complete our action plans (which we estimate will cost approximately $3.8 million) to cure the alleged defaults prior to the specified termination dates or be granted additional time in which to cure any defaults. We are not aware of any other instances of non-compliance with our franchise agreements.

     We believe that we will cure the non-compliance and defaults on these hotels before the applicable termination dates, but we cannot provide assurance that we will be able to do so or that we will be able to obtain additional time in which to do so. If a franchise agreement is terminated, we will either select an alternative franchisor or, with the respective lender’s approval, operate the hotel independently of any franchisor. However, terminating or changing the franchise affiliation of a hotel could require us to incur significant expenses, including liquidated damages, and capital expenditures. Our loan agreements generally prohibit a hotel from operating without a franchise.

15

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     In addition, as part of our bankruptcy reorganization proceedings, we entered into stipulations with each of our major franchisors setting forth a timeline for completion of capital expenditures for some of our hotels. However, as of August 9, 2004, we have not completed the required capital expenditures for 32 hotels in accordance with the stipulations and estimate that completing those improvements will cost $19.8 million. Under the stipulations, the applicable franchisors could therefore seek to declare certain franchise agreements in default and, in certain circumstances, seek to terminate the franchise agreement. We have scheduled or have begun renovations on 17 of these hotels aggregating $8.5 million of the $19.8 million. In addition, five of these hotels are held for sale and represent $2.4 million of the $19.8 million.

     We agreed to renew our 15 Marriott franchise agreements during 2004 and to pay, over a three year period, a fee aggregating approximately $500,000, subject to offsets. In connection with these renewals, and after Marriott reviews the capital improvements we have made at our Marriott franchised hotels during 2004, Marriott may, in its reasonable business judgment, require us to make additional property improvements and to place amounts into a reserve account for the purpose of funding those property improvements.

     To comply with the requirements of our franchisors and to improve our competitive position in individual markets, we have enhanced our capital improvement program in 2004.

  Letters of Credit

     As of June 30, 2004, we had issued two irrevocable letters of credit totaling $3.6 million as guarantees to Zurich American Insurance Company and Donlen Fleet Management Services. These letters of credit will expire in November 2004 but may require renewal beyond that date. All letters of credit are fully collateralized by our cash (classified as restricted cash in the accompanying Condensed Consolidated Balance Sheets).

  Self-insurance

     We are self-insured up to certain limits with respect to employee medical, employee dental, property insurance, general liability insurance, workers’ compensation, auto liability and other forms of insurance. We establish liabilities for these self-insured obligations annually, based on actuarial valuations and our history of claims. Should unanticipated events cause these claims to escalate beyond normal expectations, our financial condition and results of operations would be negatively impacted. As of June 30, 2004, and December 31, 2003, we had approximately $10.9 million and $10.0 million accrued for these liabilities, respectively.

     There are other types of losses for which we cannot obtain insurance at all or at a reasonable cost, including losses caused by acts of war. If an uninsured loss or a loss that exceeds our insurance limits were to occur, we could lose both the revenues generated from the affected hotel and the capital that we have invested. We also could be liable for any outstanding mortgage indebtedness or other obligations related to the hotel. Any such loss could materially and adversely affect our financial condition and results of operations.

     We believe that we maintain sufficient insurance coverage for the operation of our business.

  Litigation

     From time to time, as we conduct our business, legal actions and claims are brought against us. The outcome of these matters is uncertain. However, we believe that all currently pending matters will be resolved without a material adverse effect on our results of operations or financial condition. Claims relating to the period before we filed for Chapter 11 protection are limited to the amounts approved by the Bankruptcy Court for settlement of such claims and are payable out of the disputed claims reserves provided for in our plans of reorganization, which in the case of the Joint Plan of Reorganization, consists of our common stock and Preferred Stock, and in the case of the Impac Plan of Reorganization, consists of cash. On July 26, 2004 the Preferred Stock was redeemed and cash of $2.2 million replaced the Preferred Stock shares held in the disputed claims reserve. As of June 30, 2004, approximately $20,000 in cash remained to be paid on the Impac claims. We have reserved for all claims approved by the Bankruptcy Court which have not yet been paid.

16

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10. Stockholders’ Equity

     On June 25, 2004, we completed a public equity offering of 18,285,714 shares of our common stock, par value $0.01 per share, at a price of $10.50 per share. Net proceeds from this equity offering, after deducting the underwriting discount, advisory fee and other offering expenses, amounted to approximately $176.2 million.

     Additionally, immediately upon the consummation of the equity offering, we exchanged 3,941,115 shares of our common stock for 1,483,558 shares of Series A Preferred Stock (“the Preferred Share Exchange”) held by (1) certain affiliates of, and investments accounts managed by, Oaktree Capital Management, LLC, (2) an affiliate of Blackstone Real Estate Advisors and (3) Merrill Lynch, Pierce, Fenner & Smith Incorporated, based on a common stock price of $10.50 per share. In the Preferred Share Exchange, Oaktree, Blackstone and Merrill Lynch received 2,262,661, 1,049,034 and 629,420 shares of our common stock, respectively. As part of the Preferred Share Exchange, we recorded a $1.6 million loss on preferred stock redemption for the 4% prepayment premium on the Preferred Stock shares that were converted to common stock.

11. New Accounting Pronouncements

     On July 1, 2003, in accordance with SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, we reclassified the Preferred Stock to the liability section of the consolidated balance sheet and began presenting the related dividends in interest expense. Prior to the adoption of SFAS No. 150, we presented the Preferred Stock between liabilities and equity in our consolidated balance sheet (called the “mezzanine” section) and reported the Preferred Stock dividend as a deduction from retained earnings with no effect on our results of operations. In accordance with SFAS No. 150, the Preferred Stock and the dividends for the period prior to July 1, 2003, have not been reclassified.. Thus the Preferred Stock dividends for the three and six months ended June 30, 2004 of $4.2 million and $8.5 million, respectively, are presented as part of interest expense while the Preferred Stock dividend for the three and six months ended June 30, 2003 of $3.8 million and $7.6 million, respectively, are presented as a deduction from retained earnings.

     In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”), to address perceived weaknesses in accounting for entities commonly known as special-purpose or off-balance sheet entities. In addition to numerous FASB Staff Positions written to clarify and improve the application of FIN 46, the FASB recently announced a deferral for certain entities, and an amendment to FIN 46 entitled FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46R”). FIN 46 establishes consolidation criteria for entities for which “control” is not easily discernible under Accounting Research Bulletin 51, Consolidated Financial Statements, which is based on the premise that holders of the equity of an entity, control the entity by virtue of voting rights. FIN 46 provides guidance for identifying the party with a controlling financial interest resulting from arrangements or financial interests rather than from voting interests. FIN 46 defines the term “variable interest entity” (“VIE”) and is based on the premise that if a business enterprise absorbs a majority of the VIE’s expected losses and/or receives a majority of its expected residual returns (measure of risk and reward), that enterprise (the primary beneficiary) has a controlling financial interest in the VIE. The assets, liabilities, and results of the activities of the VIE should be included in the consolidated financial statements of the primary beneficiary. We were required to adopt the provisions of FIN 46R relating to any interests in special-purpose entities (SPEs) as of December 31, 2003. In addition, during the first quarter of 2004, we were required to apply the provisions of FIN 46R to any other entities falling within its scope. The adoption of FIN 46 and the counterpart revision (FIN 46R) has not had and is not expected to have a material impact on our financial position and results of operations.

12. Related Party Transactions

     Oaktree and Blackstone, representatives of which serve on our board of directors, and/or affiliates received 2,262,661 shares and 1,049,034 shares of common stock that were exchanged as part of the Preferred Share Exchange. Approximately $26.3 million and $11.1 million of the net proceeds from the equity offering were used to redeem the remaining shares of Preferred Stock held by Oaktree and Blackstone, respectively. Including the Preferred Share Exchange shares, Oaktree and Blackstone are currently the beneficial owners of 2,817,577 and 1,326,909 shares of our common stock, respectively.

17

LODGIAN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Richard Cartoon, our Executive Vice President and Chief Financial Officer between October 4, 2001 and October 13, 2003, is a principal in a business which we retained in October 2001 to provide Richard Cartoon’s services as Chief Financial Officer and other restructuring support and services. In addition to amounts paid for Richard Cartoon’s services as Chief Financial Officer, we were billed $28,000 and $47,000 including expenses, for other support and services provided by Richard Cartoon, LLC for the three and six months ended June 30, 2004, respectively. Richard Cartoon, LLC is continuing to provide restructuring support and other services in the short-term.

     Until May 1, 2004, we had a revolving loan agreement with OCM Fund II that allowed us to borrow up to $2 million; however, all of our borrowings under that agreement were repaid in full in December 2003. The interest rate on the loan was 10% per annum, and in 2003 we paid $42,222 in interest to OCM Fund II on our borrowings. This revolving loan agreement, secured by two land parcels, expired on May 1, 2004. OCM Fund II is a greater than 10% stockholder, and Oaktree is the general partner of OCM Fund II. Russel S. Bernard, a principal of Oaktree and Sean F. Armstrong, a managing director of Oaktree, are directors of Lodgian.

     Merrill Lynch, which served as a joint lead managing underwriter in the offering with Citigroup (see Note 10), is currently the owner of 890,031 shares of our common stock, including 629,420 shares obtained as part of the Preferred Share Exchange, and warrants to purchase 4,287 shares of our common stock. Merrill Lynch also received approximately $6.7 million in cash from the net proceeds of the offering for the remaining shares of Preferred Stock held on July 26, 2004. In November 2002, in connection with our emergence from Chapter 11 bankruptcy, we received exit financing of $302.7 million of senior and mezzanine debt provided by Merrill Lynch Mortgage, an affiliate of Merrill Lynch, which was refinanced as part of our Refinancing Debt in June 2004.

     On June 25, 2004 the public equity offering was completed along with the funding of the $370 million of Refinancing Debt with Merrill Lynch Mortgage. Lodgian paid Merrill Lynch an advisory fee of $1,440,000, a 1% origination fee on the Floating Rate Debt of $1.1 million, and prepayment penalties on the exit financing debt of $2.9 million.

13. Subsequent Events

     As previously discussed, between November 1, 2003 and August 9, 2004, we sold an office building and ten of the hotels identified for sale. One of these hotels was sold in 2003, five were sold in the first quarter of 2004, three were sold in the second quarter of 2004, and one hotel was sold subsequent to the second quarter 2004. Summarized below is certain financial data relating to the one hotel sold between July 1, 2004 and August 9, 2004:

	(Unaudited in thousands)
Aggregate sales price	$	3,350
Carrying value of property, plant and equipment at June 30, 2004		1,044
Debt paid down from sales proceeds		3,209
Total revenues for the three months ended June 30, 2004 ($1.0 million for the three months ended June 30, 2003)		1,458
Direct operating expenses for the three months ended June 30, 2004 $1.2 million for the three months ended June 30, 2003)		634
Other hotel operating expenses for the three months ended June 30, 2004 ($0.4 million for the three months ended June 30, 2003)		391

     On July 26, 2004, we redeemed 4,048,183 shares of outstanding Series A Preferred Stock totaling approximately $114.0 million. The 79,278 shares of Preferred Stock that remained in the disputed claims reserve were replaced with approximately $2.2 million of cash. Approximately $4.5 million was paid for the 4% prepayment premium on the Preferred Stock when it was redeemed on July 26, 2004.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     You should read the discussion below in conjunction with the unaudited condensed consolidated financial statements and accompanying notes, set forth in “Item I. Financial Statements” included in this Form 10-Q. Also, the discussion which follows contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in our Form 10-K for the year ended December 31, 2003.

Executive Summary

     We are one of the largest independent owners and operators of full-service hotels in the United States in terms of our number of guest rooms and gross annual revenues, as reported by Hotel & Motel Management Magazine in September 2003. We are considered an independent owner and operator because we do not operate our hotels under our own name. We operate substantially all of our hotels under nationally recognized brands, such as “Crowne Plaza,” “Holiday Inn,” “Marriott,” and “Hilton”. As of August 9, 2004, we operated 87 hotels with an aggregate of 16,366 rooms, located in 30 states and Canada. Of the 87 hotels, 78 hotels, with an aggregate of 14,348 rooms, are part of our continuing operations, while nine hotels, with an aggregate of 2,018 rooms, are held for sale. Our portfolio of 87 hotels consists of:

• 82 hotels that we wholly own and operate through subsidiaries;

• four hotels that we operate in joint ventures in which we have a 50% or greater voting equity interest and exercise control; and

• one hotel that we operate in a joint venture in which we have a 30% non-controlling equity interest.

     We consolidate all of these hotels in our financial statements, other than the one hotel in which we hold a minority interest and which we account for on the equity method.

     During 2003, we developed a portfolio improvement strategy which was consistent with our goals of operating a portfolio of profitable, well-maintained and appealing hotels at superior locations in strong markets. In accordance with this strategy and our efforts to reduce debt and interest costs, we identified 19 hotels, one office building and three land parcels for sale. Between November 1, 2003 and August 9, 2004, we sold the office building and ten of the nineteen hotels. As of August 9, 2004, our portfolio consisted of 87 hotels, 78 of which represent our continuing portfolio (including one hotel in which we have a non-controlling equity interest and which we do not consolidate).

Reverse Stock Split

     On April 27, 2004, our Board of Directors authorized a reverse stock split of our common stock in a ratio of one-for-three (1:3). The reverse split affected all of our issued and outstanding common shares, warrants, stock options and restricted stock. The record date for the reverse split was April 29, 2004 and our new common stock began trading under the split adjustment on April 30, 2004.

     Fractional shares which resulted from the reverse stock split were paid in cash. Each holder of a fractional share of common stock after the effective date of the reverse split has been paid cash equal to the product of (i) the average of the closing prices of the common stock for the last ten trading days prior to April 30, 2004, multiplied by (ii) the fraction of a share of common stock held by such holder.

     All amounts for common stock, warrants, stock options, restricted stock and all earnings per share computations have been retroactively adjusted to reflect this change in our capital structure.

Equity Offering

     On June 25, 2004, we completed an offering of 18,285,714 shares of common stock at a price of $10.50 per share. Net proceeds from this equity offering, after deducting the underwriting discount, advisory fee and other offering expenses, amounted to approximately $176.2 million. On July 26, 2004, approximately $114.0 million of

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the net proceeds was to be used to redeem all of our outstanding Series A Preferred Stock shares including accrued dividends and a 4% prepayment premium, and approximately $2.2 million in cash replaced the 79,278 shares of Preferred Stock held in the disputed claims reserve. We intend to use approximately $35.2 million of the net proceeds to fund capital expenditures, of which $22.7 million was deposited into a reserve account with Merrill Lynch Mortgage as part of the Refinancing Debt. Approximately $3.0 million of the net proceeds of the equity offering was used to fund a reserve account pursuant to other requirements in our June 2004 debt refinancing agreements. We intend to use the remaining net proceeds for general corporate purposes including funding our growth strategy.

Series A Preferred Stock

     On June 25, 2004, immediately following the consummation of our equity offering, we exchanged 3,941,115 shares of our common stock for 1,483,558 shares of Series A Preferred Stock held by (1) certain affiliates of, and investments accounts managed by, Oaktree Capital Management, LLC, (2) an affiliate of Blackstone Real Estate Advisors and (3) Merrill Lynch, Pierce, Fenner & Smith Incorporated, based on a common stock price of $10.50 per share. In the Preferred Share exchange, Oaktree, Blackstone and Merrill Lynch received 2,262,661, 1,049,034, and 629,420 shares of our common stock, respectively.

     On July 26, 2004, we used approximately $114.0 million of the net proceeds from the equity offering to redeem all of the outstanding shares of Series A Preferred Stock including accrued dividends and a 4% prepayment premium, and approximately $2.2 million to replace the 79,278 shares of Preferred Stock held in the disputed claims reserve.

Summary of Continuing Operations

     Below is a summary of our results of operations, which are presented in more detail in “Results of Operations — Continuing Operations:”

• Revenues increased as a result of an increase in leisure and business travel as the hospitality industry and the economy continued to recover in the second quarter 2004. In addition, hotels that were renovated in 2003 experienced improved occupancy levels upon the completion of their renovations.

• Operating expenses, including direct hotel and other operating expenses, decreased $3.1 million in the second quarter 2004 as compared to the second quarter 2003. Our hotels were negatively affected by increased benefit costs for 401k, workers’ compensation, union costs and state unemployment tax rate increases, higher fuel costs, advertising, and repair and maintenance costs. The hotels benefited, however, from the stabilization of health insurance costs due to better claims experience, successful appeals on tax assessments, the settlement of a deferred ground rent obligation on one of our hotels and reduced corporate overhead costs primarily due to lower post-emergence bankruptcy costs. Depreciation and amortization costs were lower due to a reduced asset base from impairment charges. Finally, no impairment charges were recorded in the second quarter 2004, whereas, impairment charges were recorded in the second quarter 2003.

• Interest expense and other financing costs was impacted by the write-off of our deferred loan costs on the debt that was refinanced, the origination fee on the Refinancing Debt, and the costs incurred for a derivative instrument used to cap our interest rate exposure on the fixed-rate Refinancing Debt. Interest expense and other was also higher in the second quarter 2004 compared with the prior year because we did not incur interest on the debt related to 18 properties in 2003 until those properties emerged from Chapter 11 on May 22, 2003.

• Loss on preferred stock redemption represents the 4% prepayment premium due at the time the Preferred Stock shares were exchanged for common stock shares.

• Net loss attributable to common stock was $7.2 million for the second quarter 2004 and $6.3 million for the second quarter 2003.

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Summary of Discontinued Operations

     As discussed above, during 2003, we identified 19 hotels, one office building and three land parcels for sale as part of our portfolio improvement strategy and our efforts to reduce debt and interest costs. Between November 1, 2003 and August 9, 2004, we sold ten of the nineteen hotels and the office building. Summarized below is certain financial data related to the ten hotels and one office building sold between November 1, 2003 and August 9, 2004:

	(Unaudited in thousands)
Aggregate sales price	$	51,613
Debt pay down (principal only)		38,722
Total revenues for the year ended December 31, 2003		28,121
Direct operating expenses for the year ended December 31, 2003		12,918
Other hotel operating expenses for the year ended December 31, 2003		10,899

     In accordance with SFAS No. 144, we have included the hotel assets sold during 2003 and 2004 as well as the hotel assets held for sale at June 30, 2004 (including any related impairment charges) in Discontinued Operations in the Consolidated Statement of Operations. The assets held for sale at June 30, 2004 and December 31, 2003 and the liabilities related to these assets are separately disclosed in the Condensed Consolidated Balance Sheets. Where the carrying values of the assets held for sale exceeded the estimated fair values, net of selling costs, we reduced the carrying values and recorded impairment charges. We determine fair values using quoted market prices, when available, or other accepted valuation techniques. During the three and six months ended June 30, 2004, we recorded impairment charges of $0.5 million and $2.6 million on assets held for sale. Where the estimated selling prices, net of selling costs, of assets held for sale exceeded the carrying values, we did not increase the carrying values of the assets. Among other criteria, we classify an asset as held for sale if we expect to dispose of it within one year.

     While we believe that the completion of these dispositions is probable, the sale of these assets is subject to market conditions and we cannot provide assurance that we will finalize the sale of all or any of these assets on favorable terms or at all.

     The results of operations of the other 77 hotels that we consolidate in our financial statements are reported in continuing operations. Our continuing operations reflect the results of operations of those hotels which we plan to retain in our portfolio for the foreseeable future.

Critical Accounting Policies and Estimates

     Our financial statements are prepared in accordance with GAAP. As we prepare our financial statements, we make estimates and assumptions which affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from our estimates. A summary of our significant accounting policies is included in Note 1 of the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2003. Also, our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the year ended December 31, 2003, and we believe no changes have occurred.

Income Statement Overview

     The discussion below focuses primarily on our continuing operations. In the continuing operations discussions, we compare the results of operations for the 77 consolidated hotels which we plan to retain in our portfolio for the foreseeable future, for the three months ended June 30, 2004 and June 30, 2003 and the results of operations for the six months ended June 30, 2004 and June 30, 2003. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Income Statement Overview” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003 for a general description of the categorization of our revenues and expenses.

     We have modified how we categorize our general, administrative and other expenses to better separate the general and administrative expenses that are hotel related from the expenses that relate to corporate overhead and

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other. Accordingly, we have divided our general, administrative and other expenses into three expense categories: (1) other hotel operating expenses, (2) property and other taxes, insurance and leases, and (3) corporate and other.

Three Months Ended June 30, 2004 (“Second Quarter 2004”) Compared to the Three Months Ended June 30, 2003 (“Second Quarter 2003”) and Six Months Ended June 30, 2004 (“2004 Period”) Compared to the Six Months Ended June 30, 2003 (“2003 Period”)

Results of Operations — Continuing Operations

Revenues – Continuing Operations

Second Quarter 2004 Compared to Second Quarter 2003

	Three months ended
Revenues (unaudited in thousands):	June 30, 2004			June 30, 2003			Increase (decrease)
Rooms	$	64,325		$	61,010		$	3,315		5.4	%
Food and beverage		19,436			18,977			459		2.4	%
Other		2,816			2,838			(22	)	(0.8	)%
Total revenues	$	86,577		$	82,825		$	3,752		4.5	%
Occupancy		64.4	%		63.4	%				1.6	%
ADR	$	77.81		$	74.98		$	2.83		3.8	%
RevPAR	$	50.10		$	47.52		$	2.58		5.4	%

     The 5.4% increase in room revenues is a result of a 1.6% increase in occupancy and a 3.8% increase in ADR (average daily rate). The 1.6% occupancy increase for the second quarter 2004 was negatively impacted by displacement at our hotels that were being renovated during the quarter. Renovation displacement occurs as we receive reservations at a hotel under renovation for which we cannot fulfill the room order because the room is out of service.

     Food and beverage revenues increased 2.4% over the same period last year primarily due to increased a la carte and banquet revenues resulting from higher occupancy levels. Other revenues declined by 0.8% and were affected by a 25.7% decline in telephone revenues as a result of the increased usage of cell phones by our guests as well as the availability of free high speed Internet access at most of our hotels. The reduction in telephone revenues was offset by an 8.1% increase in other (non-telephone) revenues, such as in-room movies, parking services, laundry services, sundries and snacks and golf and activity sales, which increased due to higher hotel occupancy levels.

  2004 Period Compared to 2003 Period

	Six months ended
Revenues (unaudited in thousands):	June 30, 2004			June 30, 2003			Increase (decrease)
Rooms	$	121,888		$	114,924		$	6,964		6.1	%
Food and beverage		35,924			35,584			339		1.0	%
Other		5,570			5,696			(126	)	(2.2	)%
Total revenues	$	163,382		$	156,204		$	7,177		4.6	%
Occupancy		61.8	%		60.1	%				2.8	%
ADR	$	76.82		$	74.89		$	1.93		2.6	%
RevPAR	$	47.47		$	45.00		$	2.47		5.5	%

     The 6.1% increase in room revenues is a result of a 5.5% increase in RevPAR and the impact of the leap year’s additional day in February. RevPAR increased as a result of a 2.8% increase in occupancy and a 2.6% increase in ADR.

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     Food and beverage revenues increased 1.0% primarily due to increased banquet room rentals. Other revenues decreased 2.2% primarily driven by a 23.7% decrease in telephone revenues as a result of increased cell phone use by our guests and the availability of free high speed Internet service at most of our hotels. Other (non-telephone) revenues increased by 5.7% for the first six months of the year primarily due to increases in pay TV and parking revenues.

Direct operating expenses – Continuing Operations

  Second Quarter 2004 Compared to Second Quarter 2003

	Three months ended
Direct operating expenses:	June 30, 2004			June 30, 2003			Increase (decrease)
	(Unaudited in thousands)
Rooms	$	16,960		$	16,730		$	230	1.4	%
Food and beverage		12,713			12,365			348	2.8	%
Other		2,077			1,842			235	12.8	%
	$	31,750		$	30,937		$	813	2.6	%
% of total revenues		36.7	%		37.4	%

     Rooms expenses, which vary with room revenues, were higher due to increased revenues. However, rooms expenses did not increase proportionately as room revenues increased due to the moderating effect of the fixed portion of our room expenses. Rooms expenses as a percentage of room revenues for the second quarter 2004 were 26.4% as compared to 27.4% for the second quarter 2003. Total rooms expenses, on an actual cost per occupied room basis, were $20.52 for the second quarter 2004 as compared to $20.56 for second quarter 2003. Payroll and related benefits, on an actual cost per occupied room basis, were $13.01 for the second quarter 2004 as compared to $12.97 for the second quarter 2003. Other rooms expenses, on an actual cost per occupied room basis, decreased from $7.59 in the second quarter 2003 to $7.50 for the second quarter 2004 primarily driven by a decrease in cable television expenses.

     Food and beverage department expenses increased 2.8% in the second quarter 2004 as revenues increased 2.4%. Food and beverage costs as a percentage of revenues were 0.2% higher than second quarter 2003 partially due to higher salaries in the second quarter 2004.

     Other direct operating expenses include telephone service expenses and the costs of providing ancillary services to our guests such as in-room movies, parking, laundry and vending machine sales. Other direct operating expenses for the second quarter 2004 increased 12.8% as compared to the second quarter 2003 while other revenues declined 0.8%. Telephone expenses for the second quarter 2004 increased 5.1% as compared to the second quarter 2003 while ancillary service costs for the second quarter 2004 increased 16.8% as compared to the second quarter 2003 primarily due to an increase in parking costs.

   2004 Period Compared to 2003 Period

	Six months ended
Direct operating expenses:	June 30, 2004			June 30, 2003			Increase (decrease)
	(Unaudited in thousands)
Rooms	$	32,978		$	32,093		$	885	2.8	%
Food and beverage		24,247			24,099			148	0.6	%
Other		4,049			3,780			269	7.1	%
	$	61,274		$	59,972		$	1,302	2.2	%
% of total revenues		37.5	%		38.4	%

     Total direct operating expenses as a percentage of revenues for the first six months of 2004 were 37.5% as compared to 38.4% in the same period 2003 due to continued cost containment programs. Rooms expenses increased 2.8% while room revenues increased 6.1% for the six months ended June 30, 2004. On a cost per occupied room basis, rooms expenses for the first six months of 2004 were $20.78 as compared to $20.91 in the

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same period in 2003. Payroll and related benefits, on an actual cost per occupied room basis, were $13.24 for the first six months of 2004 as compared to $13.39 for the same period in 2003. Other rooms expenses, on an actual cost per occupied room basis, increased from $7.52 for the first six months of 2003 to $7.55 for the same period in 2004 primarily driven by increases in credit card commissions and guest loyalty program expenses.

     Food and beverage expenses increased 0.6% for the first six months of 2004 from the same period in 2003 as revenues increased 1.0%. Other direct operating expenses increased 7.1% for the first six months of 2004 as compared to the same period in 2003 while other revenues declined by 2.2%. Telephone expenses declined 3.4% while other direct operating costs increased 12.5% primarily due to increases in parking and pay TV costs.

Other operating expenses – Continuing Operations

  Second Quarter 2004 Compared to Second Quarter 2003

	Three months ended
	June 30, 2004			June 30, 2003			Increase (decrease)
	(Unaudited in thousands)
Other operating expenses:
Other hotel operating costs	$	23,822		$	22,797		$	1,025		4.5	%
Property and other taxes, insurance and leases		5,376			6,923			(1,547	)	(22.3	)%
Corporate and other		4,782			6,075			(1,293	)	(21.3	)%
Depreciation and amortization		6,870			7,573			(703	)	(9.3	)%
Impairment of long-lived assets		—			1,378			(1,378	)	(100.0	)%
	$	40,850		$	44,746		$	(3,896	)	(8.7	)%
% of total revenues		47.2	%		54.0	%

     Other hotel operating costs increased due to the following:

• Hotel administration costs increased $0.1 million, primarily as a result of salary and employee benefit increases;

• Advertising and promotion costs increased $0.2 million, primarily as a result of salary and employee benefit increases;

• Franchise fees increased $0.5 million as a result of the increase in revenues and the increased cost of brand loyalty programs;

• Repairs and maintenance costs increased $0.2 million primarily as a result of our continuing preventative maintenance program and our renovation projects; and

• Utility costs increased $0.1 million as a result of rate and consumption increases.

     Property and other taxes, insurance and leases decreased $1.5 million as compared to second quarter 2003 as a result of stabilization in the insurance markets and improved loss experience, successful appeals related to property tax assessments, reductions in franchise taxes, and settlement of a deferred ground rent obligation at one of our hotels.

     Corporate and other expenses decreased 21.3% in the second quarter 2004 as compared to the same period in 2003 as a result of the significant reduction in post-emergence legal, professional and other costs related to the Chapter 11 proceedings. For the second quarter 2004, these costs totaled $0.1 million compared to $1.8 million for the second quarter 2003 (not including the $0.8 million of reorganization items).

     Depreciation and amortization expenses decreased as a result of our reduced asset base on the continuing operations hotels. The asset base on these hotels was reduced by a $1.4 million impairment charge in the second

24

quarter 2003 and subsequent impairment charges of $11.3 million recorded in the last six months of 2003 on assets held for use.

  2004 Period Compared to 2003 Period

	Six months ended						Increase (decrease)
	June 30, 2004			June 30, 2003
	(Unaudited in thousands)
Other operating expenses:
Other hotel operating costs	$	47,894		$	45,272		$	2,622		5.8	%
Property and other taxes, insurance and leases		11,127			13,584			(2,457	)	(18.1	)%
Corporate and other		9,195			12,045			(2,850	)	(23.7	)%
Depreciation and amortization		13,675			14,995			(1,320	)	(8.8	)%
Impairment of long-lived assets		—			1,378			(1,378	)	(100.0	)%
	$	81,891		$	87,274		$	(5,383	)	(6.2	)%
% of total revenues		50.1	%		55.9	%

     Other hotel operating costs increased due to the following:

• Hotel administration costs increased $0.4 million primarily as a result of salary and employee benefit cost increases;

• Advertising and promotion costs increased $0.5 million primarily as a result of salary and benefit cost increases;

• Franchise fees increased $1.0 million as a result of the increase in revenues and the increased cost of brand loyalty programs;

• Repair and maintenance costs increased $0.5 million due to our preventative maintenance and hotel renovation programs; and

• Utility costs increased $0.3 million due to rate and consumption increases.

     Property and other tax savings of $0.7 million, insurance savings of $0.7 million, franchise tax savings of $0.2 million, and ground rent savings of $0.9 million in the first six months of 2004 were offset partially by equipment rental increases of $0.1 million.

     Corporate and other expenses decreased 23.7% in the six months ended June 30, 2004 as compared to the same period in 2003 as a result of a significant reduction in post-emergence legal, professional and other costs related to the Chapter 11 proceedings. For the six months ended June 30, 2004 these costs totaled $0.3 million as compared to $3.2 million for the same period in 2003 (not including $2.0 million of reorganization items).

     Depreciation and amortization expenses decreased $1.3 million as a result of our reduced asset base on the continuing operations hotels due to asset write-downs for impairment charges. The asset base on these hotels was reduced by a $1.4 million impairment charge in the second quarter 2003 and subsequent impairment charges of $11.3 million recorded in the last six months of 2003 on assets held for use.

Non-operating income (expenses) – Continuing Operations

  Second Quarter 2004 Compared to Second Quarter 2003

	Three months ended						Increase (decrease)
	June 30, 2004			June 30, 2003
	(Unaudited in thousands)
Non-operating income (expenses):
Interest income and other	$	66		$	124		$	(58	)	(46.8	)%
Interest expense and other financing costs:
Preferred stock dividend		(4,233	)	$	—			(4,233	)	N/A	%
Other interest expense		(19,920	)	$	(6,919	)		(13,001	)	187.9	%
Loss on preferred stock redemption		(1,592	)		—			(1,592	)	N/A	%
Reorganization items		—			(808	)		808		(100.0	)%
Minority interests		(71	)		(69	)		(2	)	2.9	%

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     The Preferred Stock dividend relates to dividends on the Preferred Stock issued on November 25, 2002. Dividends for the second quarter 2004 were $4.2 million. In accordance with SFAS No. 150 effective for us on July 1, 2003, dividends relating to the period after the effective date are reported as interest expense. Dividends for the period prior to the effective date continue to be shown as a deduction from retained earnings with no effect on our results of operations. As a result, the $4.2 million dividend accrued for the second quarter 2004 is reported in interest expense while the $3.8 million dividend accrued for the period April 1, 2003 to June 30, 2003 is shown as a deduction from retained earnings.

     Other interest expense for the second quarter 2004 increased $13.0 million as compared to the same period in 2003 because of the following transactions:

• The $1.9 million net cost of the swaption contract to hedge against rising interest rates until the Fixed Rate Loans’ interest rate was locked;

• Prepayment penalties paid to Merrill Lynch Mortgage of $1.9 million on the Senior Loan and $0.8 million on the Mezzanine Loan (not including $0.2 million of prepayment penalties allocated to discontinued operations) with the extinguishment of Merrill Lynch Exit Financing debt;

• The write-off of $6.7 million in deferred loan costs ($3.3 million for Lehman, $3.4 million for Merrill Lynch and nil for Macon), not including $0.7 million in deferred loan costs allocated to discontinued operations, as a result of the extinguishment of the Merrill Lynch Mortgage, Lehman Debt and Macon Debt;

• The $0.8 million loan origination costs incurred as a part of the Refinancing Debt (not including $0.3 million of origination costs allocated to discontinued operations); and

• Loss on preferred stock redemption of $1.6 million representing the 4% prepayment premium on the Preferred Stock shares that were converted to common stock immediately following the consummation of our equity offering on June 25, 2004.

     We continue to incur expenses related to the Chapter 11 proceedings but currently report these expenses as part of general, administrative and other expenses. Reorganization items for the second quarter 2003 of $0.8 million represent Chapter 11 expenses incurred between April 1, 2003 and May 22, 2003 relating to the 18 hotels which emerged from Chapter 11 on May 22, 2003. In accordance with generally accepted accounting principles (“GAAP”), all Chapter 11 expenses incurred in the second quarter 2003 from April 1, 2003 to May 22, 2003 that were related to the 18 hotels were reported as reorganization items.

     Minority interests represent the third party owners’ share of the net income of the four joint ventures in which we have a controlling equity interest. The aggregate results of these joint ventures for the second quarter 2004 were similar to the results for the second quarter 2003; hence our share of the joint ventures’ income for the second quarter 2004 was flat compared to the second quarter 2003.

  2004 Period Compared to 2003 Period

	Six months ended						Increase (decrease)
	June 30, 2004			June 30, 2003
	(Unaudited in thousands)
Non-operating income (expenses):
Interest income and other	$	109		$	207		$	(98	)	(47.3	)%
Interest expense and other financing costs:
Preferred stock dividend		(8,518	)		—			(8,518	)	N/A	%
Other interest expense		(28,079	)		(13,198	)		(14,881	)	112.8	%
Loss on preferred stock redemption		(1,592	)		—			(1,592	)	N/A	%
Reorganization items		—			(2,045	)		2,045		(100.0	)%
Minority interests		(218	)		(217	)		(1	)	0.5	%

     The $8.5 million preferred stock dividend included in interest expense the six months ended June 30, 2004 compares to the $7.6 million dividend charged directly to retained earnings, per GAAP, in the same period in 2003.

26

     Other interest expense increased $14.9 million in the six months ended June 30, 2004 as compared to the same period in 2003 due to the purchase of a $1.9 million swaption contract, the write-off of $6.7 million of deferred loan costs due to the extinguishment of the Merrill Lynch Mortgage, Lehman Debt, and Macon Debt, $2.7 million of prepayment penalties for early retirement on the Merrill Lynch Mortgage debt, the expensing of $0.8 million in loan origination costs incurred as part of the Refinancing Debt and additional mortgage interest in 2004 on the former Lehman hotels since we did not pay interest expense during 2003 while the hotels were in Chapter 11.

     Loss on preferred stock redemption of $1.6 million represents the 4% prepayment premium on the Preferred Stock shares that were converted to common stock immediately following the consummation of our equity offering on June 25, 2004.

     Post-emergence bankruptcy charges incurred during the six months ended June 30, 2004 are included in corporate general and administrative expenses whereas reorganization expenses for the 18 hotels that were in Chapter 11 in the same period in 2003 are categorized as reorganization expenses per GAAP.

     The aggregate results of our four joint ventures in which we have a controlling equity interest for the six months ended June 30, 2004 were similar to the same period in 2003; hence, our share of the joint ventures’ income for six months ended June 30, 2004 is flat as compared to the same period in 2003.

Results of Operations — Discontinued Operations

     Discontinued operations include results of operations for both assets sold during the reporting period and assets that have been identified for sale. Consequently, the 10 hotels and three land parcels which were held for sale at June 30, 2004, as well as the 18 hotels and the office building that were disposed of between January 1, 2003 and June 30, 2004, are included in discontinued operations. We present the current quarter’s results of these hotels as discontinued operations as well as the comparative results for the prior quarter.

27

     Set forth below are the condensed combined statement of operations for the properties classified as discontinued operations:

  Second Quarter 2004 Compared to Second Quarter 2003

	Three months ended
	June 30,			June 30,			Increase
	2004			2003			(Decrease)
	(Unaudited in thousands)
Revenues:
Rooms	$	8,491		$	12,709		$	(4,218	)
Food and beverage		2,439			3,176			(737	)
Other		358			893			(535	)
		11,288			16,778			(5,490	)
Operating expenses:
Direct:
Rooms		2,339			3,714			(1,375	)
Food and beverage		1,751			2,360			(609	)
Other		253			586			(333	)
		4,343			6,660			(2,317	)
		6,945			10,118			(3,173	)
Other operating expenses:
Other hotel operating costs		3,460			5,721			(2,261	)
Property and other taxes, insurance and leases		74			1,871			(1,797	)
Depreciation and amortization		18			1,502			(1,484	)
Impairment of long-lived assets		451			2,070			(1,619	)
Other operating expenses		4,003			11,164			(7,161	)
		2,942			(1,046	)		3,988
Interest expense and other financing costs		(2,583	)		(791	)		(1,792	)
Gain on asset dispositions		4,242			1			4,241
Loss before income taxes		4,601			(1,836	)		6,437
Provision for income taxes		—			—			—
Net loss	$	4,601		$	(1,836	)	$	6,437

     Second quarter 2004 revenues and expenses reflected in discontinued operations above are not fully comparable with the second quarter 2003 revenues and expenses as a result of the following:

• For the second quarter 2004 there are no revenues and expenses in the table for the hotel and office building sold during 2003 and the five properties sold in first quarter 2004. Hence, the second quarter 2003 results reflect the full quarter’s operations for these seven properties. For the second quarter 2003, revenues for these seven properties were $3.8 million and direct operating expenses were $1.6 million in aggregate.

• Less than a full quarter’s revenues and expenses are included in the results for the second quarter 2004 for the three hotels sold at various intervals during the quarter.

     Additionally, the following factors affected the results of the hotels included in discontinued operations:

• Depreciation on these hotels was suspended by our classification of these assets as held for sale. Fourteen of the nineteen hotels were identified for sale in June 2003 and therefore the full quarter’s depreciation would have been recorded in the second quarter 2003 with no depreciation on these assets recorded during the second quarter 2004. Impairment charges of $0.5 million recorded in the second quarter 2004 represent the excess of the carrying values of assets held for sale over the revised estimated selling price less estimated selling costs.

28

• Interest expense increased as a result of the Lehman Financing which was executed in May 2003 and which replaced debt on which we were not required to pay interest while the related hotels were in Chapter 11.

• The gain on asset dispositions of $4.2 million represents the gain on sale of two of the three hotels sold during the second quarter 2004.

  2004 Period Compared to 2003 Period

	Six months ended
	June 30,			June 30,			Increase
	2004			2003*			(Decrease)
	(Unaudited in thousands)
Revenues:
Rooms	$	16,435		$	21,843		$	(5,408	)
Food and beverage		4,757			5,535			(778	)
Other		836			1,686			(850	)
		22,028			29,064			(7,036	)
Operating expenses:
Direct:
Rooms		5,035			6,910			(1,875	)
Food and beverage		3,585			4,388			(803	)
Other		638			1,184			(546	)
		9,258			12,482			(3,224	)
		12,770			16,582			(3,812	)
Other operating expenses:
Other hotel operating costs		8,514			11,474			(2,960	)
Property and other taxes, insurance and leases		1,083			3,868			(2,785	)
Depreciation and amortization		151			2,949			(2,798	)
Impairment of long-lived assets		2,604			2,070			534
Other operating expenses		12,352			20,361			(8,009	)
		418			(3,779	)		4,197
Interest expense and other financing costs		(3,768	)		(1,301	)		(2,467	)
Gain on asset dispositions		7,249			1			7,248
Loss before income taxes		3,899			(5,079	)		8,978
Provision for income taxes		—			—			—
Net loss	$	3,899		$	(5,079	)	$	8,978

*The six months ended June 30, 2003 revenues and expenses in the table above includes de minimus amounts for the eight hotels conveyed to a lender in January 2003 and the one hotel returned to the lessor of a capital lease, also in January 2003.

     The six months ended June 30, 2004 revenues and expenses reflected in discontinued operations above are not fully comparable with the six months ended June 30, 2003 revenues and expenses as a result of the following:

• For the six months ended June 30, 2004 there are no revenues and expenses in the table for the hotel and office building sold during 2003. The hotel was sold in November 2003 and the office building was sold in December 2003. Hence, the six months ended June 30, 2003 results reflect the full period’s operations for these two properties. For the six months ended June 30, 2003, revenues for these two properties were $1.4 million and direct operating expenses were $0.6 million in aggregate.

• Less than six month’s revenues and expenses are included in the results for the six months ended June 30, 2004 for the eight hotels sold at various intervals during the period.

     Additionally the following factors affected the results of the hotels included in discontinued operations:

29

• Depreciation on these hotels was suspended by our classification of these assets as held for sale. All nineteen hotels were identified for sale in June 2003 or later and hence the full six months depreciation would have been recorded in the six months ended June 30, 2003 with no depreciation on these assets being recorded during the six months ended June 30, 2004. Impairment charges of $2.6 million and $2.1 million were recorded for the six months ended June 30, 2004 and June 30, 2003, respectively, which represent the excess of the carrying values of assets held for sale over the revised estimated selling price less estimated selling costs.

• Interest expense increased as a result of the Lehman Financing which was executed in May 2003 and which replaced debt on which we were not required to pay interest while the related hotels were in Chapter 11.

• The gain on asset dispositions of $7.2 million represents the gain on sale of six of the eight hotels sold during the six months ended June 30, 2004.

Income taxes

     At December 31, 2003, we had available net operating loss carryforwards of approximately $270 million for federal income tax purposes, which will expire in 2004 through 2023. Our reorganization under Chapter 11 resulted in an ownership change, as defined in Section 382 of the Internal Revenue Code. Consequently, our ability to use the net operating loss carryforwards to offset future income is subject to certain annual limitations.

     The recently concluded equity offering resulted in another Section 382 ownership change, placing further limitations on the Company’s ability to utilize these losses. Due to these and other limitations, a portion or all of the net operating loss carryforwards could expire unused. At December 31, 2003, we established a valuation allowance of $140.0 million to fully offset our net deferred tax asset.

EBITDA

     We use earnings before interest, taxes, depreciation and amortization (“EBITDA”) to measure our performance and to assist us in the assessment of hotel property values. EBITDA is also a widely-used industry measure. However, EBITDA is a non-GAAP measure and should not be used as a substitute for measures such as net income (loss), cash flows from operating activities, or other measures computed in accordance with GAAP. Depreciation and amortization are significant non-cash expenses for us as a result of the high proportion of our assets which are long-lived, including property, plant and equipment. We depreciate property, plant and equipment over their estimated useful lives and amortize deferred financing and franchise fees over the term of the applicable agreements. We also believe that EBITDA provides pertinent information to investors and is an additional indicator of our operating performance.

     The following table presents EBITDA, a non-GAAP measure, for the second quarter 2004 and second quarter 2003 and the six months ended June 30, 2004 and June 30, 2003, and provides a reconciliation with the loss from continuing operations, a GAAP measure:

30

	Three months ended						Six months ended
	June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
	(Unaudited in thousands)						(Unaudited in thousands)
Continuing operations:
Loss — continuing operations	$	(11,848	)	$	(605	)	$	(18,232	)	$	(6,446	)
Depreciation and amortization		6,870			7,573			13,675			14,995
Impairment of long-lived assets		—			1,378			—			1,378
Interest income and other		(66	)		(124	)		(109	)		(207	)
Interest expense and other financing costs		19,920			6,919			28,079			13,198
Preferred stock dividends		4,233			—			8,518			—
Loss on preferred stock redemption		1,592			—			1,592			—
Provision for income taxes — continuing operations		75			75			151			151
EBITDA	$	20,776		$	15,216		$	33,674		$	23,069

Loss — continuing operations is after deducting post-emergence Chapter 11 expenses, included in general, administrative and other on the consolidated statement of operations, of $0.1 million and $1.0 million for the three months ended June 30, 2004 and June 30, 2003, respectively, and $0.3 million and $3.2 million for the six months ended June 30, 2004 and June 30, 2003, respectively. EBITDA for the three and six months ended June 30, 2003 is also after deducting reorganization expenses of $0.8 million and $2.0 million, respectively.

Additional Financial Information Regarding Quarterly Results of Our Continuing Operations

     The following table presents certain quarterly data for our continuing operations for the six quarters ended June 30, 2004. The data have been derived from our unaudited condensed consolidated financial statements for the periods indicated. Our unaudited consolidated financial statements have been prepared on substantially the same basis as our audited consolidated financial statements and include all adjustments, consisting primarily of normal recurring adjustments we consider to be necessary to present fairly this information when read in conjunction with our consolidated financial statements. The results of operations for certain quarters may vary from the amounts previously reported on our Forms 10-Q filed for prior quarters due to timing of our identification of assets held for sale during the course of the fiscal year ended December 31, 2003. The allocation of results of operations between our continuing operations and discontinued operations, at the time of the quarterly filings, was based on the assets held for sale, if any, as of the dates of those filings. This table represents the comparative quarterly operating results for the 77 hotels classified in continuing operations at June 30, 2004.

	Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			March 31,
	2004			2004			2003			2003			2003			2003
Revenues:
Rooms	$	64,325		$	57,563		$	52,089		$	62,506		$	61,010		$	53,914
Food and beverage		19,436			16,488			18,800			16,407			18,977			16,607
Other		2,816			2,754			2,817			2,841			2,838			2,858
		86,577			76,805			73,706			81,754			82,825			73,379
Operating expenses:
Direct:
Rooms		16,960			16,018			16,023			17,697			16,730			15,363
Food and beverage		12,713			11,534			12,557			12,030			12,365			11,734
Other		2,077			1,972			2,178			2,013			1,842			1,938
		31,750			29,524			30,758			31,740			30,937			29,035
		54,827			47,281			42,948			50,014			51,888			44,344
Other operating expenses:
Other hotel operating expenses		23,822			24,072			22,546			24,164			22,797			22,475
Property and other taxes, insurance and leases		5,376			5,751			5,343			6,087			6,923			6,661
Corporate and other		4,782			4,413			4,791			4,235			6,075			5,970
Depreciation and amortization		6,870			6,805			7,156			7,572			7,573			7,422
Impairment of long-lived assets		—			—			11,286			2			1,378			—
Other operating expenses		40,850			41,041			51,122			42,060			44,746			42,528
		13,977			6,240			(8,174	)		7,954			7,142			1,816
Other income (expenses):
Interest income and other		66			43			366			114			124			83
Interest expense and other financing costs:
Preferred stock dividend		(4,233	)		(4,285	)		(4,065	)		(4,027	)
Other interest expense		(19,920	)		(8,159	)		(7,756	)		(7,665	)		(6,919	)		(6,279	)
Gain on asset dispositions					0			444			—			—			—
Loss on preferred stock redemption		(1,592	)		—			—			—			—			—
(Loss) income before income taxes, reorganization items and minority interests		(11,702	)		(6,161	)		(19,185	)		(3,624	)		347			(4,380	)
Reorganization items		—			—			647			—			(808	)		(1,237	)
Loss before income taxes and minority interest		(11,702	)		(6,161	)		(18,538	)		(3,624	)		(461	)		(5,617	)
Minority interests		(71	)		(147	)		1,412			99			(69	)		(148	)
Loss before income taxes — continuing operations		(11,773	)		(6,308	)		(17,126	)		(3,525	)		(530	)		(5,765	)
(Provision) benefit for income taxes - continuing operations		(75	)		(76	)		48			(75	)		(75	)		(76	)
Loss — continuing operations		(11,848	)		(6,384	)		(17,078	)		(3,600	)		(605	)		(5,841	)
Discontinued operations:
(Loss) income from discontinued operations before income taxes		4,601			(702	)		572			(46	)		(1,836	)		(3,243	)
Income tax benefit (provision)		—			—			—			—			—			—
(Loss) income from discontinued operations		4,601			(702	)		572			(46	)		(1,836	)		(3,243	)
Net loss		(7,247	)		(7,086	)		(16,506	)		(3,646	)		(2,441	)		(9,084	)
Preferred stock dividend		—			—			—			—			(3,818	)		(3,776	)
Net loss attributable to common stock	$	(7,247	)	$	(7,086	)	$	(16,506	)	$	(3,646	)	$	(6,259	)	$	(12,860	)

EBITDA Reconciliation of Continuing Operations

31

The following table is a reconciliation of the quarterly EBITDA for the hotels classified as continuing operations as of June 30, 2004, reflecting the reclassification of certain hotels from continuing operations to discontinued operations as discussed in connection with the preceding table:

	Three Months Ended
	June 30, 2004			March 30, 2004			December 31, 2003			September 30, 2003			June 30, 2003			March 31, 2003
Continuing operations:
Loss — continuing operations	$	(11,848	)	$	(6,384	)	$	(17,078	)	$	(3,600	)	$	(605	)	$	(5,841	)
Depreciation and amortization		6,870			6,805			7,156			7,572			7,573			7,422
Impairment of long-lived assets		—			—			11,286			2			1,378			—
Interest income and other		(66	)		(43	)		(366	)		(114	)		(124	)		(83	)
Interest expense and other financing costs		19,920			8,159			7,756			7,665			6,919			6,279
Preferred stock dividends		4,233			4,285			4,065			4,027			—			—
Gain on asset dispositions		—			(0	)		(444	)		—			—			—
Loss on preferred stock redemption		1,592			—			—			—			—			—
Provision (benefit) for income taxes— continuing operations		75			76			(48	)		75			75			76
EBITDA	$	20,776		$	12,898		$	12,327		$	15,627		$	15,216		$	7,853

  Hotel data by market segment and region

     The following two tables present data on occupancy, ADR and RevPAR for the hotels in our portfolio (including one hotel that we do not consolidate) at June 30, 2004, by market segment for the second quarter 2004 and the second quarter 2003 and the six months ended June 30, 2004 and June 30, 2003. From November 1, 2003 through August 9, 2004, we sold ten of the hotels included in the following table as part of our discontinued operations.

32

Combined Continuing and Discontinued Operations — 88 hotels

	Capital expenditures		Three Months Ended						Six Months Ended
	Six Months Ended
	June 30, 2004		June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
	(in thousands $)
Upper Upscale
Number of properties	$	753		4			4			4			4
Number of rooms				825			825			825			825
Occupancy				72.0	%		57.7	%		68.0	%		59.6	%
Average daily rate			$	95.43		$	88.93		$	94.87		$	90.76
RevPAR			$	68.74		$	51.35		$	64.53		$	54.11
Upscale
Number of properties		4,571		17			17			17			17
Number of rooms				3,002			3,002			3,002			3,002
Occupancy				69.2	%		68.2	%		68.9	%		67.1	%
Average daily rate			$	84.95		$	83.67		$	86.73		$	85.75
RevPAR			$	58.77		$	57.08		$	59.78		$	57.51
Midscale with Food & Beverage
Number of properties		6,755		55			55			55			55
Number of rooms				11,198			11,198			11,198			11,198
Occupancy				61.6	%		61.2	%		57.3	%		56.3	%
Average daily rate			$	74.20		$	72.31		$	72.02		$	70.69
RevPAR			$	45.67		$	44.24		$	41.24		$	39.77
Midscale without Food & Beverage
Number of properties		325		9			9			9			9
Number of rooms				1,067			1,067			1,067			1,067
Occupancy				63.5	%		60.1	%		60.3	%		52.6	%
Average daily rate			$	60.99		$	59.73		$	61.13		$	59.52
RevPAR			$	38.76		$	35.89		$	36.85		$	31.31
Independent Hotels
Number of properties		80		3			3			3			3
Number of rooms				535			535			535			535
Occupancy				43.4	%		49.7	%		39.1	%		44.7	%
Average daily rate			$	67.19		$	62.02		$	63.18		$	59.95
RevPAR			$	29.14		$	30.82		$	24.71		$	26.82
All Hotels
Number of properties		12,484		88			88			88			88
Number of rooms				16,627			16,627			16,627			16,627
Occupancy				63.0	%		61.8	%		59.5	%		57.8	%
Average daily rate			$	76.53		$	74.29		$	75.50		$	73.95
RevPAR			$	48.21		$	45.94		$	44.93		$	42.73

The categories in the table above are based on the Smith Travel Research Chain Scales and are defined as:

Upper Upscale: Hilton and Marriott
Upscale: Courtyard by Marriott, Crowne Plaza, Radisson and Residence Inn by Marriott
Midscale with Food & Beverage: Clarion, Doubletree, Four Points, Holiday Inn, Holiday Inn Select,
  Holiday Inn SunSpree Resort and Quality Inn
Midscale without Food & Beverage: Fairfield Inn by Marriott and Holiday Inn Express

Continuing Operations — 78 hotels

33

	Capital expenditures		Three Months Ended						Six Months Ended
	Six Months Ended
	June 30, 2004		June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
	(in thousands $)
Upper Upscale
Number of properties	$	753		4			4			4			4
Number of rooms				825			825			825			825
Occupancy				72.0	%		57.7	%		68.0	%		59.6	%
Average daily rate			$	95.43		$	88.93		$	94.87		$	90.76
RevPAR			$	68.74		$	51.35		$	64.53		$	54.11
Upscale
Number of properties		4,571		17			17			17			17
Number of rooms				3,002			3,002			3,002			3,002
Occupancy				69.2	%		68.2	%		68.9	%		67.1	%
Average daily rate			$	84.95		$	83.67		$	86.73		$	85.75
RevPAR			$	58.77		$	57.08		$	59.78		$	57.51
Midscale with Food & Beverage
Number of properties		6,307		45			44			44			44
Number of rooms				8,919			8,526			8,526			8,526
Occupancy				62.9	%		64.6	%		59.9	%		60.7	%
Average daily rate			$	75.60		$	72.74		$	73.34		$	71.40
RevPAR			$	47.53		$	47.02		$	43.91		$	43.34
Midscale without Food & Beverage
Number of properties		325		9			7			7			7
Number of rooms				1,067			833			833			833
Occupancy				63.5	%		58.2	%		60.3	%		51.7	%
Average daily rate			$	60.99		$	60.89		$	61.13		$	60.68
RevPAR			$	38.76		$	35.42		$	36.85		$	31.35
Independent Hotels
Number of properties		80		3			6			6			6
Number of rooms				535			1,162			1,162			1,162
Occupancy				43.4	%		46.2	%		39.1	%		41.2	%
Average daily rate			$	67.19		$	62.90		$	63.18		$	60.93
RevPAR			$	29.14		$	29.05		$	24.71		$	25.10
All Hotels
Number of properties		12,036		78			78			78			78
Number of rooms				14,348			14,348			14,348			14,348
Occupancy				64.0	%		63.1	%		61.5	%		59.9	%
Average daily rate			$	77.70		$	74.85		$	76.72		$	74.75
RevPAR			$	49.76		$	47.24		$	47.18		$	44.75

The categories in the table above are based on the Smith Travel Research Chain Scales and are defined as:

Upper Upscale: Hilton and Marriott
Upscale: Courtyard by Marriott, Crowne Plaza, Radisson and Residence Inn by Marriott
Midscale with Food & Beverage: Clarion, Doubletree, Four Points, Holiday Inn, Holiday Inn Select,
  Holiday Inn SunSpree Resort and Quality Inn
Midscale without Food & Beverage: Fairfield Inn by Marriott and Holiday Inn Express

     The categories in the tables above are based on the Smith Travel Research Chain Scales and are defined as:

• Upper Upscale: Hilton and Marriott;

• Upscale: Courtyard by Marriott, Crowne Plaza, Radisson and Residence Inn by Marriott;

• Midscale with Food & Beverage: Clarion, DoubleTree, Four Points, Holiday Inn, Holiday Inn Select, Holiday Inn SunSpree Resort and Quality Inn; and

• Midscale without Food & Beverage: Fairfield Inn by Marriott and Holiday Inn Express.

     The following two tables present data on occupancy, ADR and RevPAR for the hotels in our portfolio (including one hotel that we do not consolidate) at June 30, 2004, by market segment for the second quarter 2004 and the second quarter 2003 and the six months ended June 30, 2004 and June 30, 2003. From November 1, 2003 through August 9, 2004, we sold ten of the hotels included in the following table as part of our discontinued operations.

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Combined Continuing and Discontinued Operations — 88 hotels

	Capital expenditures		Three Months Ended						Six Months Ended
	Six Months Ended
	June 30, 2004		June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
	(in thousands $)
Northeast Region
Number of properties	$	3,064		33			33			33			33
Number of rooms				6,325			6,325			6,325			6,325
Occupancy				66.5	%		65.2	%		60.3	%		58.8	%
Average daily rate			$	83.34		$	81.85		$	81.24		$	79.82
RevPAR			$	55.42		$	53.38		$	48.98		$	46.90
Southeast Region
Number of properties		4,378		30			30			30			30
Number of rooms				5,088			5,088			5,088			5,088
Occupancy				61.5	%		62.5	%		59.3	%		58.4	%
Average daily rate			$	72.17		$	68.33		$	69.86		$	67.08
RevPAR			$	44.36		$	42.69		$	41.45		$	39.20
Midwest Region
Number of properties		1,453		18			18			18			18
Number of rooms				3,895			3,895			3,895			3,895
Occupancy				60.6	%		56.2	%		56.0	%		53.3	%
Average daily rate			$	69.33		$	68.60		$	69.90		$	69.83
RevPAR			$	42.00		$	38.57		$	39.16		$	37.26
West Region
Number of properties		3,589		7			7			7			7
Number of rooms				1,319			1,319			1,319			1,319
Occupancy				59.2	%		59.8	%		66.7	%		63.6	%
Average daily rate			$	79.03		$	74.59		$	83.82		$	82.54
RevPAR			$	46.77		$	44.62		$	55.90		$	52.49
All Hotels
Number of properties		12,484		88			88			88			88
Number of rooms				16,627			16,627			16,627			16,627
Occupancy				63.0	%		61.8	%		59.5	%		57.8	%
Average daily rate			$	76.53		$	74.29		$	75.50		$	73.95
RevPAR			$	48.21		$	45.94		$	44.93		$	42.73

The regions in the table above are defined as:

Northeast: Canada, Connecticut, Massachusetts, Maryland, New Hampshire, New York, Ohio, Pennsylvania, Vermont, West Virginia
Southeast: Alabama, Florida, Georgia, Kentucky, Louisiana, South Carolina, Tennessee
Midwest: Arkansas, Iowa, Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, Oklahoma, Texas
West: Arizona, California, Colorado, New Mexico

Continuing Operations — 78 hotels

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	Capital expenditures		Three Months Ended						Six Months Ended
	Six Months Ended
	June 30, 2004		June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
	(in thousands $)
Northeast Region
Number of properties	$	2,681		28			28			28			28
Number of rooms				5,154			5,154			5,154			5,154
Occupancy				69.2	%		67.9	%		64.0	%		62.5	%
Average daily rate			$	85.60		$	83.09		$	83.30		$	81.38
RevPAR			$	59.23		$	56.41		$	53.34		$	50.86
Southeast Region
Number of properties		4,327		27			27			27			27
Number of rooms				4,612			4,612			4,612			4,612
Occupancy				61.3	%		62.7	%		59.8	%		59.3	%
Average daily rate			$	72.62		$	69.06		$	70.62		$	67.83
RevPAR			$	44.50		$	43.33		$	42.21		$	40.23
Midwest Region
Number of properties		1,439		16			16			16			16
Number of rooms				3,263			3,263			3,263			3,263
Occupancy				61.8	%		57.5	%		57.8	%		55.0	%
Average daily rate			$	70.34		$	68.51		$	70.79		$	69.75
RevPAR			$	43.44		$	39.37		$	40.93		$	38.35
West Region
Number of properties		3,589		7			7			7			7
Number of rooms				1,319			1,319			1,319			1,319
Occupancy				59.2	%		59.8	%		66.7	%		63.6	%
Average daily rate			$	79.03		$	74.59		$	83.82		$	82.54
RevPAR			$	46.77		$	44.62		$	55.90		$	52.49
All Hotels
Number of properties		12,036		78			78			78			78
Number of rooms				14,348			14,348			14,348			14,348
Occupancy				64.0	%		63.1	%		61.5	%		59.9	%
Average daily rate			$	77.70		$	74.85		$	76.72		$	74.75
RevPAR			$	49.76		$	47.24		$	47.18		$	44.75

The regions in the table above are defined as:

	Northeast: Canada, Connecticut, Massachusetts, Maryland, New Hampshire, New York, Ohio, Pennsylvania, Vermont, West Virginia Southeast: Alabama, Florida, Georgia, Kentucky, Louisiana, South Carolina, Tennessee Midwest: Arkansas, Iowa, Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, Oklahoma, Texas West: Arizona, California, Colorado, New Mexico
	The regions in the tables above are defined as:
•	Northeast: Canada, Connecticut, Massachusetts, Maryland, New Hampshire, New York, Ohio, Pennsylvania, Vermont, West Virginia;

• Southeast: Alabama, Florida, Georgia, Kentucky, Louisiana, South Carolina, Tennessee;

• Midwest: Arkansas, Iowa, Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, Oklahoma, Texas; and

• West: Arizona, California, Colorado, New Mexico.

Liquidity and Capital Resources

Working Capital

     We use our cash flows primarily for operating expenses, debt service, and capital expenditures. Currently, our principal sources of liquidity consist of cash flows from operations and existing cash balances. Cash flows from operations may be adversely affected by factors such as a reduction in demand for lodging or certain large scale renovations being performed at our hotels. To the extent that significant amounts of our accounts receivable are due from airline companies, a further downturn in the airline industry also could materially and adversely affect the collectibility of our accounts receivable, and hence our liquidity. At June 30, 2004, airline receivables represented

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approximately 18.2% of our accounts receivable, net of allowances. A further downturn in the airline industry could also affect our revenues by decreasing the aggregate levels of demand for travel. Between November 1, 2003 and August 9, 2004, we sold ten hotels and an office building with another nine hotels and three land parcels classified as assets held for sale. The aggregate sales price from the sale of the ten hotels and office building sold between November 1, 2003 and August 9, 2004, was $51.6 million, $38.7 million of which was used to pay down debt and $9.4 million of which was used for general corporate purposes, including capital expenditures.

     Our ability to make scheduled debt service payments and fund operations and capital expenditures depends on our future performance and financial results, including the successful implementation of our business strategy and, to a certain extent, the general condition of the lodging industry and the general economic, political, financial, competitive, legislative and regulatory environment. In addition, our ability to refinance our indebtedness depends to a certain extent on these factors as well. Many factors affecting our future performance and financial results, including the severity and duration of macro-economic downturns, are beyond our control. See “Matters Which May Affect Future Results — Risks Related to Our Business” in our Annual Report on Form 10-K for the year ended December 31, 2003.

     In June 2004, we completed an offering to the public of our common stock, the purpose of which was to redeem our outstanding Preferred Stock, to fund capital expenditures related to renovations and repositionings of selected hotels, and for general corporate purposes including funding our growth strategy. In connection with this offering, we refinanced approximately $370 million of our floating rate mortgage debt in order to extend maturities and to convert a substantial portion of floating rate debt to fixed rate debt.

     We intend to continue to use our cash flow to make scheduled debt service payments and fund operations and capital expenditures and, therefore, do not anticipate paying dividends on our common stock in the foreseeable future.

     Although we have emerged from Chapter 11, the distribution of shares to general unsecured creditors is not complete as we continue to reconcile the claims made by these creditors. We have established a disputed claims reserve out of which those claims will be paid. Until this process is complete, we will continue to incur expenses in respect of these claims as well as Bankruptcy Court fees and professional fees.

     In accordance with GAAP, all assets held for sale, including assets that would normally be classified as long-term assets in the normal course of business, were reported as “assets held for sale” in current assets. Similarly, all liabilities related to assets held for sale were reported as “liabilities related to assets held for sale” in current liabilities, including debt that would otherwise be classified as long-term liabilities in the ordinary course of business.

     At June 30, 2004, we had working capital (current assets less current liabilities) of $49.4 million compared to $2.4 million at December 31, 2003. Working capital of $2.4 million as of December 31, 2003 was determined based on current assets and current liabilities as of that date. Had the preferred stock liability been classified as a current liability at December 31, 2003, consistent with the classification as of June 30, 2004, the working capital deficit would have been 139.7 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Debt, Contractual Obligations and Franchise Agreements — Exit Financing” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003 with respect to our decision to include the Merrill Lynch Mortgage debt financing in long-term debt.

     The increase in working capital was primarily the result of an increase in cash and cash equivalents due to the cash proceeds received from the June 2004 common stock offering. The net proceeds to us from the common stock offering approximated $176.2 million, of which approximately $25.7 million was used to fund reserve accounts with Merrill Lynch Mortgage ($22.7 million for capital expenditures and $3.0 million for other requirements related to a hotel ground lease) pursuant to requirements in our June 2004 Refinancing Debt agreements. The remaining $150.6 million in cash proceeds received from the offering was held in cash and cash equivalents at June 30, 2004. On July 26, 2004, we used approximately $114.0 million of the proceeds from our equity offering to redeem all of our outstanding shares of Series A Preferred Stock, including accrued dividends and a 4% prepayment premium. Approximately $2.2 million in cash replaced the 79,278 shares of Preferred Stock held in the disputed claims reserve.

     During the second quarter 2004 and the six months ended June 30, 2004, we spent approximately $7.9 million and $12.9 million, respectively, on capital expenditures. We expect to spend an additional $30.1 million during the

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remainder of 2004, with an additional $10.5 million that will be spent in the first quarter 2005 to complete the projects started in 2004, thereby completing substantially all of our deferred renovations.

     We believe that the combination of our current cash, cash flows from operations, capital expenditure escrows and the proceeds of asset sales will be sufficient to meet our liquidity needs for the next 24 months.

     Our ability to meet our long-term cash needs is dependent on the continuation and extent of the recovery of the economy and the lodging industry, improvement in our operating results, the successful implementation of our portfolio improvement strategy and our ability to obtain third party sources of capital on favorable terms as and when needed. In the short term, we continue to diligently monitor our costs. Our future liquidity needs and sources of working capital are subject to uncertainty and we can provide no assurance that we will have sufficient liquidity to be able to meet our operating expenses, debt service requirements, including scheduled maturities, and planned capital expenditures. We could lose the right to operate certain hotels under nationally recognized brand names, and furthermore, the termination of one or more franchise agreements could lead to defaults and acceleration under one or more loan agreements as well as obligations to pay liquidated damages under the franchise agreements. See “Matters Which May Affect Future Results — Risks Related to Our Business” in our Annual Report on Form 10-K for the year ended December 31, 2003, for further discussion of conditions that could adversely affect our estimates of future liquidity needs and sources of working capital.

Cash Flow

  Operating Activities

     Net cash provided by operating activities was $11.1 million and $13.2 million for the six months ended June 30, 2004 and 2003, respectively. Although EBITDA of $33.7 million for six months ended June 30, 2004 was $10.6 million higher than six months ended June 30, 2003, net cash provided by operating activities was $2.0 million lower in the six months ended June 30, 2004 primarily as the result of the release of bankruptcy-related restricted cash during 2003.

     During the six months ended June 30, 2003, $10.8 million of restricted cash was released and made available for our operations.

  Investing Activities

     Investing activities provided net cash flow of $0.5 million for the six months ended June 30, 2004 while investing activities accounted for a net cash outflow of approximately $13.3 million for the first six months of 2003. The increase in investing activities in the six months ended June 30, 2004 as compared to the six months ended June 30, 2003 is primarily a result of cash inflows from the sale of hotels during the six months ended June 30, 2004. Net proceeds from the sale of eight hotels during the six months ended June 30, 2004 totaled $33.9 million. Investing activities for the six months ended June 30, 2004 also consisted of deposits to lender controlled capital reserves of $20.5 million and capital expenditure outlays of $12.9 million. Due primarily to large scale renovations being performed at some of our hotels during the six months ended June 30, 2003, capital expenditures totaled $19.5 million, which were partially funded by withdrawals of $7.0 million from lender-controlled capital expenditure escrows.

  Financing activities

     The increase in financing activities in the six months ended June 30, 2004 was primarily due to the proceeds received from the equity offering of our common stock in June 2004 of $176.2 million, net of the underwriting discount, offset by approximately $3.8 million of other expenses we incurred related to the equity offering.

     Primarily as a result of our debt refinance with Merrill Lynch and the sale of eight hotels, we paid down portions of our debt in the six months ended June 30, 2004. Principal payments, including scheduled principal payments, were approximately $393.1 million for the six months ended June 30, 2004 compared with principal payments and the refinance of 18 of our hotels upon their emergence from Chapter 11 of $78.8 million in the six

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months ended June 30, 2003. Financing activities also consisted of payments of financing costs of $5.4 million and $4.4 million for the six months ended June 30, 2004 and six months ended June 30, 2003, respectively.

     On September 18, 2003, we drew down the full availability of $2.0 million under a revolving credit facility with OCM Real Estate Opportunities Fund II, L.P. (the “OCM Fund”). The revolving loan agreement, secured by two land parcels, expired on May 1, 2004. We did not renew the facility on May 1, 2004. Borrowings under the facility bore interest at the fixed rate of 10% per annum and were repaid in December 2003 out of the proceeds we received from the sale of an office building.

Debt, Contractual Obligations and Franchise Agreements

     See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Debt, Contractual Obligations and Franchise Agreements” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and the Notes to our unaudited condensed consolidated financial statements included in “Item 1. Financial Statements” herein for more information on our debt, contractual obligations and franchise agreements, including the following:

• Our existing mortgage debt and refinancing plans;

• Encumbrances on our properties;

• Our Preferred Stock; and

• Our franchise agreements and capital expenditures.

Off Balance Sheet Arrangements

     We have no off balance sheet arrangements.

Market Risk

     We are exposed to interest rate risks on our variable rate debt. At June 30, 2004 and December 31, 2003, we had outstanding variable rate debt of approximately $110.0 million and $382.8 million, respectively.

     In order to manage our exposure to fluctuations in interest rates with the U.S. portion of the exit financing received in November 2002 ($299.3 million at December 31, 2003), we entered into two interest rate cap agreements, which allowed us to obtain exit financing at floating rates and effectively cap them at LIBOR of 6.44% plus the spread. If LIBOR exceeded 6.44%, the contracts would have required settlement of net interest receivable at specified intervals, which generally coincide with the dates on which interest was payable on the underlying debt. If LIBOR would have been below 6.44%, there would have been no settlement from the interest rate caps. Therefore, we were exposed to interest rate risks on the exit financing debt for increases in LIBOR up to 6.44% but we were not exposed to increases in LIBOR above 6.44% because settlements from the interest rate caps would have offset the incremental interest expense. The one-month LIBOR as of June 30, 2004 was 1.36%. The notional principal amount of the interest rate caps outstanding was $302.2 million at December 31, 2003.

     On May 22, 2003, we finalized the $80 million Lehman Financing. The Lehman Financing was a two-year term loan with an optional one-year extension and bore interest at the higher of 7.25% or LIBOR plus 5.25%. In order to manage our exposure to fluctuations in interest rates with the Lehman Financing, we entered into an interest rate cap agreement, which allowed us to obtain this financing at a partial floating rate and effectively capped the interest rate at LIBOR of 5.00% plus 5.25%. When LIBOR exceeded 5.00%, the contracts would have required settlement of net interest receivable at specified intervals, which generally coincided with the dates on which interest was payable on the underlying debt. If LIBOR would have fallen below 5.00%, there would have been no settlement from the interest rate cap. We were exposed to interest rate risks on the Lehman Financing for LIBOR of between 2.00% and 5.00%. The notional principal amount of the interest rate cap outstanding was $79.2 million at December 31, 2003.

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     On June 25, 2004, we refinanced both the exit financing and Lehman financing with Merrill Lynch Mortgage. The new refinancing is organized in four fixed rate pools and one floating rate pool. In order to manage our exposure to fluctuations in interest rates with the floating pool, we entered into an interest rate cap agreement, which allowed us to obtain this financing at a floating rate and effectively cap the interest rate at LIBOR of 5.00% plus 3.40%. When LIBOR exceeds 5.00%, the contract requires settlement of net interest receivable at specified intervals, which generally coincide with the dates on which interest is payable on the underlying debt. When LIBOR is below 5.00%, there is no settlement from the interest rate cap. We are exposed to interest rate risks on the floating pool for increases in LIBOR up to 5.00%, but we are not exposed to increases in LIBOR above 5.00% because settlements from the interest rate caps would offset the incremental interest expense. The notional principal amount of the interest rate cap outstanding was $110.0 million at June 30, 2004.

     The fair value of the interest rate cap related to Refinanced Debt as of June 30, 2004 was approximately $175,000. The fair values of the two interest rate caps related to the Merrill Lynch Exit Financing and the one cap related to the Lehman Financing as of June 30, 2004 and December 31, 2003 were approximately $15,000 and nil, respectively. The fair values of the interest rate caps were recognized on the balance sheet in other assets. Adjustments to the carrying values of the interest rate caps are reflected in interest expense.

     With respect to the fair market value of the four interest rate caps, we believe that our interest rate risk at June 30, 2004 and December 31, 2003 was minimal. The impact on annual results of operations of a hypothetical one-point interest rate reduction on the interest rate caps as of June 30, 2004 would be a reduction in net income of approximately $145,000. These derivative financial instruments are viewed as risk management tools. We do not use derivative financial instruments for trading or speculative purposes. However, we have not elected the hedging requirements of SFAS No. 133.

     The nature of our fixed rate obligations does not expose us to fluctuations in interest payments. The impact on the fair value of our fixed rate obligations of a hypothetical one-point interest rate increase on the outstanding fixed-rate debt as of June 30, 2004 and December 31, 2003 would be approximately $13.1 million and $3.0 million, respectively.

     In addition, the hotel business is inherently capital intensive, as the vast majority of assets are hotels, which are long-lived. Lodgian’s exposure to market risk associated with changes in interest rates relates primarily to its debt obligations. As of June 30, 2004, approximately 24.4% of the long-term debt carries floating rates of interest. For the balance of long-term debt, the nature of fixed rate obligations does not expose us to the risk of changes in the fair value of these instruments. Our outstanding debt was $457.7 million, at June 30, 2004, including current maturities and long-term debt related to assets held for sale.

     At June 30, 2004, approximately $110.0 million of debt instruments outstanding were subject to changes in the LIBOR rate. Without regard to additional borrowings under those instruments or scheduled amortization, the annualized effect of each twenty five basis point increase in LIBOR would be a reduction in income before income taxes of approximately $0.3 million. The fair value of the fixed rate debt (book value $341.1 million) at June 30, 2004 is estimated at $350.5 million.

Forward-looking Statements

     We make forward looking statements in this report and other reports we file with the SEC. In addition, management may make oral forward-looking statements in discussions with analysts, the media, investors and others. These statements include statements relating to our plans, strategies, objectives, expectations, intentions and adequacy of resources, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believes,” “anticipates,” “expects,” “intends,” “plans,” “estimates,” and “projects” and similar expressions are intended to identify forward-looking statements. These forward-looking statements reflect our current views with respect to future events and the impact of these events on our business, financial condition, results of operations and prospects are subject to many risks and uncertainties including the following:

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• The effects of regional, national and international economic conditions, including the magnitude and duration of the economic recovery in the United States;

• Competitive conditions in the lodging industry and increases in room capacity;

• The effects of actual and threatened terrorist attacks and international conflicts and their impact on domestic and international travel, including the potentially marked decrease in travel in connection with military action in Iraq or elsewhere;

• The effectiveness of changes in management and our ability to retain qualified individuals to serve in senior management positions;

• Requirements of franchise agreements, including the right of some franchisors to immediately terminate their respective agreements if we breach certain provisions;

• Seasonality of the hotel business;

• The financial condition of the airline industry and its impact on air travel;

• The effect that Internet reservation channels may have on the rates that we are able to charge for hotel rooms;

• Increases in the cost of debt and our continued compliance with the terms of our loan agreements;

• Our high level of secured debt;

• Our ability to complete planned hotel and land parcel dispositions;

• Our ability to meet the continuing listing requirements of the American Stock Exchange;

• The effect of self-insured claims in excess of our reserves, or our ability to obtain adequate property and liability insurance to protect against losses, or to obtain insurance at reasonable rates;

• Potential litigation and/or governmental inquiries and investigations;

• Laws and regulations applicable to our business, including federal, state or local hotel, resort, restaurant or land use regulations, employment, labor or disability laws and regulations;

• The short time that the public market for our new securities has existed; and

• The risks identified under “Risks Related to Our Business” and “Risks Relating to Our Common Stock” in our Annual Report on Form 10-K for the year ended December 31, 2003.

     Any of these risks and uncertainties could cause actual results to differ materially from historical results or those anticipated. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained and caution you not to place undue reliance on such statements. We undertake no obligation to publicly update or revise any forward-looking statements to reflect current or future events or circumstances or their impact on our business, financial condition, results of operations and prospects. Many of these factors are not within our control and we caution you not to put undue reliance on forward looking statements.

Inflation

     We have not determined the precise impact of inflation. However, we believe that the rate of inflation has not had a material effect on our revenues or expenses in recent years. It is difficult to predict whether inflation will have a material effect on our results in the long-term.

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New Accounting Pronouncements

     The table below summarizes recent accounting pronouncements and their effects on Lodgian:

		Month	Effective date for	Summary of Major
	Description	Issued	Lodgian	Provisions	Effect on Lodgian
FIN No. 46	Consolidation of Variable Interest Entities	January-03	Special purpose entities — December 31, 2003. Other entities — first quarter of 2004.	Addresses consolidation by a business of variable interest entities in which it is the primary beneficiary.	No impact, since we have no variable interest entities
SFAS No. 150	Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity	May-03	July-03	Aims to eliminate diversity by requiring that certain types of freestanding instruments be reported as liabilities including mandatorily redeemable shares which unconditionally obligate the issuer to redeem the shares for cash or by transferring other assets	Our Mandatorily Redeemable 12.25% Cumulative Preferred Stock has been reclassified to long-term debt in the Condensed Consolidated Financial Statements and the related dividends for the period January 1, 2004 to June 30, 2004 has been included in interest expense.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk.”

Item 4. Controls and Procedures

     a) Based on an evaluation of our disclosure controls and procedures carried out as of June 30, 2004, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective since they would cause material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 to be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

     b) During the quarter ended June 30, 2004, there were no changes in our internal controls over financial reporting which materially affected, or are likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     From time to time, as we conduct our business, legal actions and claims are brought against us. The outcome of these matters is uncertain. However, we believe that all currently pending matters will be resolved without a material adverse effect on our results of operations or financial condition. Claims relating to the period before we filed for Chapter 11 protection are limited to the amounts approved by the Bankruptcy Court for settlement of such claims and are payable out of the disputed claims reserves provided for in our plans of reorganization, which in the case of the Joint Plan of Reorganization, consists of our securities, and in the case of the Impac Plan of Reorganization, consists of $0.1 million of cash as of June 30, 2004. We have reserved for all claims approved by the Bankruptcy Court which have not yet been paid.

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Item 2. Changes in Securities

     On April 27, 2004, our Board of Directors authorized a reverse stock split of our common stock in a ratio of one-for-three (1:3). The reverse split affected all of our issued and outstanding common shares, warrants, restricted stock and stock options. The record date for the reverse split was April 29, 2004 and our new common stock began trading under the split adjustment on April 30, 2004.

     At the annual meeting of stockholders on April 8, 2004, our stockholders authorized us to affect a reverse split of our common stock at one of the following ratios:

• 1-for-1 ½;

• 1-for-2;

• 1-for-2 ½;

• 1-for-3;

• 1-for-3 ½; and

• 1-for-4

     as determined by the Board of Directors.

     Fractional shares which resulted from the reverse stock split were paid in cash. Each holder of a fractional share of common stock after the effective date of the reverse split was paid in cash equal to the product of (i) the average of the closing prices of the common stock for the last ten trading days prior to April 30, 2004, multiplied by (ii) the fraction of a share of common stock held by such holder.

     Also, at the annual meeting of stockholders on April 8, 2004, our stockholders authorized an increase in our authorized share capital from 40 million to 70 million shares.

     On June 25, 2004, we completed an equity offering of 18,285,714 shares of our common stock, par value $0.01 per share, at a price of $10.50 per share. Net proceeds from this equity offering, after deducting the underwriting discount, advisory fee and other offering expenses, amounted to approximately $176.2 million.

     We have not declared or paid any cash dividends on our common stock and our board of directors do not anticipate declaring or paying any cash dividends in the foreseeable future. We anticipate that all of our earnings and other cash resources, if any, will be retained to fund our business and will be available for other strategic opportunities that may develop. Future dividend policy will be subject to the discretion of our board of directors, and will be contingent upon our results of operations, financial position, cash flow, liquidity, capital expenditure plan and requirements, general business conditions, restrictions imposed by financing arrangements, if any, legal and regulatory restrictions on the payment of dividends and other factors that our board of directors deems relevant.

     The Preferred Stock issued on November 25, 2002 (the date on which the first of the two plans of reorganization became effective) accrued dividends at the rate of 12.25% per annum. As required, we paid the dividend due on November 21, 2003 by issuing additional shares of Preferred Stock, except for fractional shares which we paid in cash.

     On June 25, 2004, immediately following the consummation of our equity offering, we exchanged 3,941,115 shares of our common stock for 1,483,558 shares of Series A Preferred Stock held by (1) certain affiliates of, and investments accounts managed by, Oaktree Capital Management, LLC, (2) an affiliate of Blackstone Real Estate Advisors, and (3) Merrill Lynch, Pierce, Fenner & Smith Incorporated, based on a common stock price of $10.50 per share. In the Preferred Share exchange, Oaktree, Blackstone and Merrill Lynch received 2,262,661, 1,049,034, and 629,420 shares of our common stock, respectively.

43

     On July 26, 2004, we used approximately $114.0 million of the net proceeds from the equity offering to redeem all of the outstanding shares of Series A Preferred Stock including accrued dividends and a 4% prepayment premium; and approximately $2.2 million replaced the 79,278 shares of Preferred Stock held in the disputed claims reserve, an amount equal to the liquidation preference of those shares, plus accrued dividends and a 4% prepayment premium.

Item 4. Submission of Matters to a Vote of Security Holders

We held our Annual Meeting on April 8, 2004. The stockholders voted as follows:

     1. For the election of eight directors to hold office until the 2005 Annual Meeting:

	For		Withheld
Sean F. Armstrong		5,995,987		26,815
Russel S. Bernard		5,995,987		26,815
Stewart J. Brown		5,993,487		29,315
Kenneth A. Caplan		5,995,987		26,815
Stephen P. Grathwohl		5,994,987		27,815
Jonathan D. Gray		5,763,908		258,894
Kevin C. McTavish		5,995,987		26,815
W. Thomas Parrington		5,994,942		27,860

     2. For the approval of an amendment and restatement of the Lodgian, Inc. 2002 Stock Incentive Plan:

	Common Stock
For		4,250,670
Against		329,265
Abstain		197
Broker Non Vote		1,442,670

     3. For the approval of a capital restructuring proposal to permit the board of directors, in its sole discretion, to amend our certificate of incorporation to implement a reverse stock split of our issued and outstanding common stock at one of the following ratios: 1-for-1 ½, 1-for-2, 1-for-2 ½, 1-for-3, 1-for-3 ½, and 1-for-4:

	Common Stock		Preferred Stock
For		5,727,224		4,528,585
Against		295,023		251,792
Abstain		555		168

     4. For the approval of a Second Amended and Restated Certificate of Incorporation as described in the Proxy Statement for the Annual Meeting, among other things, (a) increasing the number of authorized shares of common stock, (b) providing our stockholders the right to remove any or all of the members of the board of directors with or without cause, (c) electing out of the Delaware law restricting business combinations with interested stockholders, (d) eliminating the designation of an obsolete series of preferred stock, and (e) implementing the reverse stock split (if Proposal 3 is approved):

	Common Stock		Preferred Stock
For		4,519,598		3,256,680
Against		59,734		53,126
Abstain		800		179
Broker Non Vote		1,442,670		1,470,560

     5. To ratify the appointment of Deloitte & Touche LLP as our independent public auditors:

	Common Stock
For		5,996,052
Against		1,279
Abstain		25,471

44

Item 6. Exhibits and Reports on Form 8-K

     (a) A list of the exhibits required to be filed as part of this Report on Form 10-Q, is set forth in the “Exhibit Index” which immediately precedes such exhibits, and is incorporated herein by reference.

     (b) Reports on Form 8-K

     A Form 8-K was filed on April 26, 2004 relating to results for the quarter ended March 31, 2004.

45

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LODGIAN, INC.
	By:	/s/ W. THOMAS PARRINGTON
Date: August 16, 2004		W. Thomas Parrington
		President and Chief Executive Officer

	By:	/s/ MANUEL ARTIME
Date: August 16, 2004		Manuel Artime
		Executive Vice President and Chief Financial Officer

46

INDEX TO EXHIBITS

Exhibit
Number	Description
1.1	Purchase Agreement, dated June 22, 2004.
10.1.1	Loan and Security Agreement (Floating Rate), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
10.1.2	Promissory Note A in the original amount of $72,000,000.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc.
10.1.3	Promissory Note B in the original amount of $38,000,000, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc.
10.1.4	Guaranty of Recourse Obligations, dated as of June 25, 2004, by Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
10.1.5	Conditional Assignment of Hotel Management Agreement, dated as of June 25, 2004, made by Lodgian Management Corp. and the Lodgian Entities listed on the signature pages thereto, to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
10.1.6	Conditional Assignment of Hotel Management Agreement (Beverage), dated as of June 25, 2004, made by Lodgian Management Corp. and the Lodgian Entities listed on the signature pages thereto, to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
10.1.7	Assignment of Agreements, Licenses, Permits and Contracts, dated as of June 25, 2004, made by the Lodgian Entities listed on the signature pages thereto to Merrill Lynch Mortgage Lending, Inc.
10.1.8	Cooperation Agreement, dated as of June 25, 2004, by and between the Mortgage Borrowers listed on the signature pages thereto, Lodgian Mezzanine Floating, LLC and Merrill Lynch Mortgage Lending, Inc.
10.1.9	Collateral Assignment of Interest Rate Protection Agreement, dated as of June 25, 2004, made by the Lodgian Entities listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc.
10.1.10	Cash Management Agreement, dated as of June 25, 2004, among the Lodgian Entities listed on the signature pages thereto, Merrill Lynch Mortgage Lending, Inc., Wachovia Bank, National Association and Lodgian Management Corp.
10.1.11	Environmental Indemnity, dated as of June 25, 2004, by the Lodgian Entities listed on the signature pages thereto and Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
10.2.1	Loan and Security Agreement (Fixed Rate #1), dated as of June 25, 2004, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
10.2.2	Promissory Note in the original amount of $63,801,000.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc.
10.2.3	Guaranty of Recourse Obligations, dated as of June 25, 2004, by Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
10.2.4	Cross-Guaranty, dated as of June 25, 2004, from the parties listed as Guarantors on the signature pages thereto to Merrill Lynch Mortgage Lending, Inc.
10.2.5	Conditional Assignment of Hotel Management Agreement, dated as of June 25, 2004, made by Lodgian Management Corp. and the Lodgian Entities listed on the signature pages thereto, to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
10.2.6	Assignment of Agreements, Licenses, Permits and Contracts, dated as of June 25, 2004, made by the Lodgian Entities listed on the signature pages thereto to Merrill Lynch Mortgage Lending, Inc.

Exhibit
Number	Description
10.2.7	Cooperation Agreement, dated as of June 25, 2004, by and between the Mortgage Borrowers listed on the signature pages thereto, Lodgian Mezzanine Fixed, LLC and Merrill Lynch Mortgage Lending, Inc.
10.2.8	Cash Management Agreement, dated as of June 25, 2004, among the Lodgian Entities listed on the signature pages thereto, Merrill Lynch Mortgage Lending, Inc., Wachovia Bank, National Association and Lodgian Management Corp.
10.2.9	Environmental Indemnity, dated as of June 25, 2004, by the Lodgian Entities listed on the signature pages thereto and Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
10.3.1	Loan and Security Agreement (Fixed Rate #2), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
10.3.2	Promissory Note in the original amount of $67,864,000.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc.
10.3.3	Guaranty of Recourse Obligations, dated as of June 25, 2004, by Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
10.3.4	Cross-Guaranty, dated as of June 25, 2004, from the parties listed as Guarantors on the signature pages thereto to Merrill Lynch Mortgage Lending, Inc.
10.3.5	Conditional Assignment of Hotel Management Agreement, dated as of June 25, 2004, made by Lodgian Management Corp. and the Lodgian Entities listed on the signature pages thereto, to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
10.3.6	Conditional Assignment of Hotel Management Agreement (Beverage), dated as of June 25, 2004, made by Lodgian Management Corp. and the Lodgian Entities listed on the signature pages thereto, to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
10.3.7	Assignment of Agreements, Licenses, Permits and Contracts, dated as of June 25, 2004, made by the Lodgian Entities listed on the signature pages thereto to Merrill Lynch Mortgage Lending, Inc.
10.3.8	Cooperation Agreement, dated as of June 25, 2004, by and between the Mortgage Borrowers listed on the signature pages thereto, Lodgian Mezzanine Fixed, LLC and Merrill Lynch Mortgage Lending, Inc.
10.3.9	Cash Management Agreement, dated as of June 25, 2004, among the Lodgian Entities listed on the signature pages thereto, Merrill Lynch Mortgage Lending, Inc., Wachovia Bank, National Association and Lodgian Management Corp.
10.3.10	Environmental Indemnity, dated as of June 25, 2004, by the Lodgian Entities listed on the signature pages thereto and Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
10.4.1	Loan and Security Agreement (Fixed Rate #3), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
10.4.2	Promissory Note in the original amount of $66,818,500.00, dated as of June 25, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc.
10.4.3	Guaranty of Recourse Obligations, dated as of June 25, 2004, by Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
10.4.4	Cross-Guaranty, dated as of June 25, 2004, from the parties listed as Guarantors on the signature pages thereto to Merrill Lynch Mortgage Lending, Inc.
10.4.5	Conditional Assignment of Hotel Management Agreement, dated as of June 25, 2004, made by Lodgian Management Corp. and the Lodgian Entities listed on the signature pages thereto, to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
10.4.6	Conditional Assignment of Hotel Management Agreement (Beverage), dated as of June 25, 2004, made by Lodgian Management Corp. and the Lodgian Entities listed on the signature pages thereto, to and for the benefit of Merrill Lynch Mortgage Lending, Inc.

Exhibit
Number	Description
10.4.7	Assignment of Agreements, Licenses, Permits and Contracts, dated as of June 25, 2004, made by the Lodgian Entities listed on the signature pages thereto to Merrill Lynch Mortgage Lending, Inc.
10.4.8	Cooperation Agreement, dated as of June 25, 2004, by and between the Mortgage Borrowers listed on the signature pages thereto, Lodgian Mezzanine Fixed, LLC and Merrill Lynch Mortgage Lending, Inc.
10.4.9	Cash Management Agreement, dated as of June 25, 2004, among the Lodgian Entities listed on the signature pages thereto, Merrill Lynch Mortgage Lending, Inc., Wachovia Bank, National Association and Lodgian Management Corp.
10.4.10	Environmental Indemnity, dated as of June 25, 2004, by the Lodgian Entities listed on the signature pages thereto and Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
10.5.1	Loan and Security Agreement (Fixed Rate #4), dated as of June 25, 2004, by and between the Borrowers listed on Schedule 1 thereto and Merrill Lynch Mortgage Lending, Inc.
10.5.2	Promissory Note in the original amount of $61,516,500.00, dated as of June 25, 2004, 2004, by the Borrowers listed on the signature pages thereto in favor of Merrill Lynch Mortgage Lending, Inc.
10.5.3	Guaranty of Recourse Obligations, dated as of June 25, 2004, by Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
10.5.4	Cross-Guaranty, dated as of June 25, 2004, from the parties listed as Guarantors on the signature pages thereto to Merrill Lynch Mortgage Lending, Inc.
10.5.5	Conditional Assignment of Hotel Management Agreement, dated as of June 25, 2004, made by Lodgian Management Corp. and the Lodgian Entities listed on the signature pages thereto, to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
10.5.6	Conditional Assignment of Hotel Management Agreement (Beverage), dated as of June 25, 2004, made by Lodgian Management Corp. and the Lodgian Entities listed on the signature pages thereto, to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
10.5.7	Assignment of Agreements, Licenses, Permits and Contracts, dated as of June 25, 2004, made by the Lodgian Entities listed on the signature pages thereto to Merrill Lynch Mortgage Lending, Inc.
10.5.8	Cooperation Agreement, dated as of June 25, 2004, by and between the Mortgage Borrowers listed on the signature pages thereto, Lodgian Mezzanine Fixed, LLC and Merrill Lynch Mortgage Lending, Inc.
10.5.9	Cash Management Agreement, dated as of June 25, 2004, among the Lodgian Entities listed on the signature pages thereto, Merrill Lynch Mortgage Lending, Inc., Wachovia Bank, National Association and Lodgian Management Corp.
10.5.10	Environmental Indemnity, dated as of June 25, 2004, by the Lodgian Entities listed on the signature pages thereto and Lodgian, Inc. in favor of Merrill Lynch Mortgage Lending, Inc.
10.6	General Form of Mortgage, Assignment of Leases and Rents and Security Agreement by [Property Owner Name](Mortgagor) to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
10.7	General Form of Deed of Trust, Assignment of Leases and Rents and Security Agreement (Credit Line Deed of Trust) by [Property Owner Name](Trustor) to [Trustee Name] for the benefit of Merrill Lynch Mortgage Lending, Inc.
10.8	General Form of Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement by [Property Owner Name](Borrower) to and for the benefit of Merrill Lynch Mortgage Lending, Inc.
10.9	Preferred Share Exchange Agreement, dated June 22, 2004, by and among Lodgian, Inc. and the record and/or beneficial stockholders as signatories thereto.
10.10	Registration Rights Agreement, dated June 22, 2004, by and among Lodgian, Inc. and the signatories thereto.
10.11	Restricted Unit Award Agreement with Thomas W. Parrington, dated as of April 9, 2004

Exhibit
Number	Description
	(Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.12	Employment Agreement between Lodgian, Inc. and Daniel E. Ellis, dated May 2, 2004 (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.13	Employment Agreement between Lodgian, Inc. and Manuel E. Artime, dated May 10, 2004 (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.14	Employment Agreement between Lodgian, Inc. and Michael W. Amaral, dated May 4, 2004 (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report for the period ended March 31, 2004 (File No. 1-14537), filed with the Commission on May 14, 2004).
10.15	Employment Agreement between Lodgian, Inc. and Samuel J. Davis, dated May 14, 2004 (Incorporated by reference to Exhibit 10.19 to the Company’s Registration Statement on Form S-1 (Registration Number 333-113410), filed with the Commission on June 4, 2004.).
21.1	Subsidiaries of Lodgian, Inc.
31.1	Sarbanes-Oxley Section 302 Certification by the CEO.
31.2	Sarbanes-Oxley Section 302 Certification by the CFO.
32	Sarbanes-Oxley Section 902 Certification by the CEO and CFO.

EX-1.1

                                                                    EXHIBIT 1.1


===============================================================================






                                 LODGIAN, INC.
                            (a Delaware corporation)
                       18,285,714 Shares of Common Stock



                               PURCHASE AGREEMENT



Dated:  June 22, 2004







===============================================================================

                                 LODGIAN, INC.
                            (a Delaware corporation)
                       18,285,714 Shares of Common Stock
                           (Par Value $.01 Per Share)
                               PURCHASE AGREEMENT

                                                                  June 22, 2004

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated
CITIGROUP GLOBAL MARKETS INC.
BANC OF AMERICA SECURITIES LLC
LEGG MASON WOOD WALKER, INCORPORATED
RAYMOND JAMES & Associates, Inc.


c/o    Merrill Lynch & Co.
       Merrill Lynch, Pierce, Fenner & Smith
                   Incorporated
4 World Financial Center
New York, New York  10080

Ladies and Gentlemen:

         Lodgian, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), Citigroup Global Markets Inc. ("Citigroup") and
each of the other Underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), with respect to the issue and sale
by the Company and the purchase by the Underwriters, acting severally and not
jointly, of the respective numbers of shares of Common Stock, par value $.01
per share, of the Company ("Common Stock") set forth in said Schedule A, and
with respect to the grant by the Company to the Underwriters, acting severally
and not jointly, of the option described in Section 2(b) hereof to purchase all
or any part of 2,742,857 additional shares of Common Stock to cover
overallotments, if any. The aforesaid 18,285,714 shares of Common Stock (the
"Initial Securities") to be purchased by the Underwriters and all or any part
of the 2,742,857 shares of Common Stock subject to the option described in
Section 2(b) hereof (the "Option Securities") are hereinafter called,
collectively, the "Securities."

         The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as they deem advisable after this Agreement
has been executed and delivered.

         The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-113410), as
amended, including the related preliminary prospectus or prospectuses, covering
the registration of the Securities under the Securities Act of 1933, as amended
(the "1933 Act"). Promptly after execution and delivery of this Agreement, the
Company will prepare and file a prospectus in accordance with the provisions of
Rule 430A ("Rule 430A") of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations. The information included in such
prospectus that



was omitted from such registration statement at the time it became effective
but that is deemed to be part of such registration statement at the time it
became effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information." Each prospectus used before such registration statement
became effective, and any prospectus that omitted the Rule 430A Information,
that was used after such effectiveness and prior to the execution and delivery
of this Agreement, is herein called a "preliminary prospectus." Such
registration statement, including the exhibits and any schedules thereto, at
the time it became effective, and including the Rule 430A Information, is
herein called the "Registration Statement." Any registration statement filed
pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as
the "Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
The final prospectus in the form first furnished to the Underwriters for use in
connection with the offering of the Securities is herein called the
"Prospectus." For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").

         SECTION 1. Representations and Warranties.

         (a)      Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof (except as
otherwise specifically provided herein), as of the Closing Time referred to in
Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in
Section 2(b) hereof, and agrees with each Underwriter, as follows:

                  (i)      Compliance with Registration Requirements. Each of
         the Registration Statement, any Rule 462(b) Registration Statement and
         any post-effective amendment thereto has become effective under the
         1933 Act and no stop order suspending the effectiveness of the
         Registration Statement, any Rule 462(b) Registration Statement or any
         post-effective amendment thereto has been issued under the 1933 Act
         and no proceedings for that purpose have been instituted or are
         pending or, to the knowledge of the Company, are contemplated by the
         Commission, and any request on the part of the Commission for
         additional information has been complied with.

                  At the respective times the Registration Statement, any Rule
         462(b) Registration Statement and any post-effective amendments
         thereto became effective and at the Closing Time (and, if any Option
         Securities are purchased, at the Date of Delivery), the Registration
         Statement, the Rule 462(b) Registration Statement and any amendments
         and supplements thereto complied and will comply in all material
         respects with the requirements of the 1933 Act and the 1933 Act
         Regulations and did not and will not contain an untrue statement of a
         material fact or omit to state a material fact required to be stated
         therein or necessary to make the statements therein not misleading.
         Neither the Prospectus nor any amendments or supplements thereto, at
         the time the Prospectus or any such amendment or supplement was issued
         and at the Closing Time (and, if any Option Securities are purchased,
         at the Date of Delivery), included or will include an untrue statement
         of a material fact or omitted or will omit to state a material fact
         necessary in order to make the statements therein, in the light of the
         circumstances under which they were made, not misleading. The
         representations and warranties in this subsection shall not apply to
         statements in or omissions from the Registration Statement or
         Prospectus made in reliance upon and in conformity with written
         information furnished to the Company by any Underwriter through
         Merrill Lynch expressly for use in the Registration Statement (or any
         amendment thereto) or the Prospectus (or any amendment or supplement
         thereto).


                                       2

                  Each preliminary prospectus and the prospectus filed as part
         of the Registration Statement as originally filed or as part of any
         amendment thereto complied when so filed in all material respects with
         the 1933 Act Regulations and each preliminary prospectus and the
         Prospectus delivered to the Underwriters for use in connection with
         this offering was identical to the electronically transmitted copies
         thereof filed with the Commission pursuant to EDGAR, except to the
         extent permitted by Regulation S-T.

                  (ii)     Independent Accountants. To the Company's knowledge,
         the accountants who certified the financial statements and supporting
         schedules included in the Registration Statement are independent
         public accountants as required by the 1933 Act and the 1933 Act
         Regulations.

                  (iii)    Financial Statements. The financial statements
         included in the Registration Statement and the Prospectus, together
         with the related schedules and notes, present fairly, in all material
         respects, the financial position of the Company and its consolidated
         subsidiaries at the dates indicated and the statement of operations,
         stockholders' equity and cash flows of the Company and its
         consolidated subsidiaries for the periods specified; and said
         financial statements have been prepared in conformity with generally
         accepted accounting principles ("GAAP") applied on a consistent basis
         throughout the periods involved, except as otherwise noted therein and
         in the Registration Statement and Prospectus. The supporting schedules
         included in the Registration Statement present fairly in accordance
         with GAAP the information required to be stated therein. The selected
         financial data and the summary financial information included in the
         Prospectus present fairly, in all material respects, the information
         shown therein and have been compiled on a basis consistent with that
         of the audited financial statements included in the Registration
         Statement. All historical financial statements and information and all
         pro forma financial statements and information relating to the Company
         or any entity acquired or to be acquired by the Company required by
         the 1933 Act and the 1933 Act Regulations to be included in the
         Registration Statement and Prospectus. The statistical and
         market-related data included in the Registration Statement and the
         Prospectus are based on or derived from sources which the Company
         reasonably and in good faith believes are reliable and accurate, and
         such data agrees with the sources from which they are derived.

                  (iv)     Related-Party Transactions. No relationship, direct
         or indirect, exists between or among any of the Company or any
         affiliate of the Company, on the one hand, and any director, officer,
         stockholder, customer or supplier of the Company or any affiliate of
         the Company, on the other hand, which is required by the 1933 Act or
         the 1933 Act Regulations to be described in the Registration Statement
         or the Prospectus which is not so described or is not described as
         required. There are no outstanding loans, advances (except normal
         advances for business expenses in the ordinary course of business) or
         guarantees of indebtedness by the Company to or for the benefit of any
         of the officers or directors of the Company or any of their respective
         family members, except as disclosed in the Registration Statement and
         the Prospectus.

                  (v)      Internal Controls. The Company and its subsidiaries
         maintain a system of internal accounting and other controls sufficient
         to provide reasonable assurances that (A) transactions are executed in
         accordance with management's general or specific authorizations, (B)
         transactions are recorded as necessary to permit preparation of
         financial statements in conformity with generally accepted accounting
         principles and to maintain accountability for assets, (C) access to
         assets is permitted only in accordance with management's general or
         specific authorization and (D) the recorded accounting for assets is
         compared with existing assets at reasonable intervals and appropriate
         action is taken with respect to any differences.


                                       3

                  (vi)     No Material Adverse Change in Business. Since the
         respective dates as of which information is given in the Registration
         Statement and the Prospectus, except as otherwise stated therein, (A)
         there has been no material adverse change in the condition, financial
         or otherwise, or in the earnings, business affairs or business
         prospects of the Company and its subsidiaries considered as one
         enterprise, whether or not arising in the ordinary course of business
         (a "Material Adverse Effect"), (B) no casualty loss or condemnation or
         other adverse event with respect to any of the interests held directly
         or indirectly in any of the real properties or real property
         interests, including, without limitation, any interest or
         participation, direct or indirect, in any mortgage obligation owned,
         directly or indirectly, by the Company, any of its subsidiaries or any
         Joint Venture (as defined below) (the "Properties") has occurred which
         would be material with respect to the Company and its subsidiaries
         considered as one enterprise, (C) there have been no transactions
         entered into by the Company or any of its subsidiaries, other than
         those in the ordinary course of business, which are material with
         respect to the Company and its subsidiaries considered as one
         enterprise and (D) there has been no dividend or distribution of any
         kind declared, paid or made by the Company on any class of its capital
         stock since November 21, 2003, and there has been no increase in
         long-term debt or decrease in the capital of the Company or any of its
         subsidiaries.

                  (vii)    Good Standing of the Company. The Company has been
         duly organized and is validly existing as a corporation in good
         standing under the laws of the State of Delaware and has corporate
         power and authority to own, lease and operate its properties and to
         conduct its business as described in the Prospectus and to enter into
         and perform its obligations under this Agreement; and the Company is
         duly qualified as a foreign corporation to transact business and is in
         good standing in each other jurisdiction in which such qualification
         is required, whether by reason of the ownership or leasing of property
         or the conduct of business, except where the failure so to qualify or
         to be in good standing would not result in a Material Adverse Effect.

                  (viii)   Good Standing of Subsidiaries. As of the Closing
         Time and as of the Date of Delivery, each "significant subsidiary" of
         the Company (as such term is defined in Rule 1-02 of Regulation S-X)
         (each a "Subsidiary" and, collectively, the "Subsidiaries") has been
         duly organized and is validly existing as a corporation, partnership
         or limited liability company in good standing under the laws of its
         respective jurisdiction of organization, has power and authority to
         own, lease and operate its properties and to conduct its business as
         described in the Prospectus and is duly qualified as a foreign
         corporation, partnership or limited liability company to transact
         business and is in good standing in each jurisdiction in which such
         qualification is required, whether by reason of the ownership or
         leasing of property or the conduct of business, except where the
         failure so to qualify or to be in good standing would not result in a
         Material Adverse Effect; except as otherwise disclosed in the
         Registration Statement, as of the Closing Time and as of the Date of
         Delivery, all of the issued and outstanding capital stock of each such
         Subsidiary has been duly authorized and validly issued, is fully paid
         and non-assessable and is owned by the Company, directly or through
         subsidiaries, free and clear of any security interest, mortgage,
         pledge, lien, encumbrance, claim or equity; none of the outstanding
         shares of capital stock of any Subsidiary was issued in violation of
         the preemptive or similar rights of any securityholder of such
         Subsidiary. As of the Closing Time and as of the Date of Delivery, the
         only subsidiaries of the Company are (a) the subsidiaries listed on
         Exhibit 21.1 to the Registration Statement and (b) the subsidiaries
         listed on Schedule F hereto.

                  (ix)     Joint Ventures. All of the joint ventures in which
         the Company or any subsidiary owns an interest of greater than five
         percent and that are currently conducting business (the "Joint
         Ventures") are listed on Schedule D hereto. The Company's (or
         subsidiary's, as the case may be) ownership interest in such Joint
         Venture is as set forth on Schedule D. To the knowledge of the


                                       4

         Company, each of the Joint Ventures possesses such certificates,
         authorizations or permits issued by the appropriate state, federal or
         foreign regulatory agencies or bodies necessary to conduct the
         business now being conducted by it, as described in the Prospectus,
         and none of the Joint Ventures has received notice of any proceedings
         relating to the revocation or modification of any such certificate,
         authority or permit which singly or in the aggregate, if the subject
         of an unfavorable ruling or decision, would have a Material Adverse
         Effect.

                  (x)      Capitalization. The authorized, issued and
         outstanding capital stock of the Company is as set forth in the
         Prospectus in the column entitled "Actual" under the caption
         "Capitalization" (except for subsequent issuances, if any, pursuant to
         this Agreement, pursuant to reservations, agreements or employee
         benefit plans referred to in the Prospectus or pursuant to the
         exercise of convertible securities or options referred to in the
         Prospectus). The shares of issued and outstanding capital stock of the
         Company have been duly authorized and validly issued and are fully
         paid and non-assessable; none of the outstanding shares of capital
         stock of the Company was issued in violation of the preemptive or
         other similar rights of any securityholder of the Company.

                  (xi)     Authorization of Agreement. This Agreement has been
         duly authorized, executed and delivered by the Company.

                  (xii)    Authorization and Description of Securities. The
         Securities have been duly authorized for issuance and sale to the
         Underwriters pursuant to this Agreement and, when issued and delivered
         by the Company pursuant to this Agreement against payment of the
         consideration set forth herein, will be validly issued and fully paid
         and non-assessable; the Common Stock conforms to all statements
         relating thereto contained in the Prospectus and such description
         conforms to the rights set forth in the instruments defining the same;
         the certificate evidencing the Securities will be in substantially the
         form filed as an exhibit to the Registration Statement and the form of
         stock certificate evidencing the Securities will comply with all
         applicable legal requirements, with all applicable requirements of the
         Company's charter and by-laws and with the requirements of the
         American Stock Exchange, Inc.; no holder of the Securities will be
         subject to personal liability by reason of being such a holder; and
         the issuance of the Securities is not subject to the preemptive or
         other similar rights of any securityholder of the Company.

                  (xiii)   Execution of Definitive Agreements with Merrill
         Lynch Mortgage. The Company has executed definitive loan agreements
         (the "Loan Agreements") as listed on Schedule E hereto, that have been
         placed in escrow with Merrill Lynch Mortgage Lending, Inc. ("Merrill
         Lynch Mortgage"), together with all related documentation necessary to
         effect the closing of such agreements (the "Refinancing Debt").

                  (xiv)    Absence of Defaults and Conflicts. Neither the
         Company nor any of its subsidiaries is in violation of its charter,
         by-laws or operating agreement or in default in the performance or
         observance of any obligation, agreement, covenant or condition
         contained in any contract, indenture, mortgage, deed of trust, loan or
         credit agreement, franchise agreement, management agreement, note,
         lease or other agreement or instrument to which the Company or any of
         its subsidiaries is a party or by which it or any of them may be
         bound, or to which any of the property or assets of the Company or any
         subsidiary is subject (collectively, "Agreements and Instruments")
         except for such violations or defaults as are described in the
         Registration Statement and the Prospectus or that would not result in
         a Material Adverse Effect; and the execution, delivery and performance
         of this Agreement and the consummation of the transactions
         contemplated herein and in the Registration Statement (including the
         issuance and sale of the Securities and the use of the proceeds from
         the sale of the Securities as described in the


                                       5

         Prospectus under the caption "Use of Proceeds") and compliance by the
         Company with its obligations hereunder have been duly authorized by
         all necessary corporate action and do not and will not, whether with
         or without the giving of notice or passage of time or both, conflict
         with or constitute a breach of, or default or Repayment Event (as
         defined below) under, or result in the creation or imposition of any
         lien, charge or encumbrance upon any property or assets of the Company
         or any subsidiary pursuant to, the Agreements and Instruments (except
         for such conflicts, breaches, defaults or Repayment Events or liens,
         charges or encumbrances that would not result in a Material Adverse
         Effect), nor will such action result in any violation of the
         provisions of the charter, by-laws or operating agreement of the
         Company or any subsidiary or any applicable law, statute, rule,
         regulation, judgment, order, writ or decree of any government,
         government instrumentality or court, domestic or foreign, having
         jurisdiction over the Company or any subsidiary or any of their
         assets, properties or operations. As used herein, a "Repayment Event"
         means any event or condition which gives the holder of any note,
         debenture or other evidence of indebtedness (or any person acting on
         such holder's behalf) the right to require the repurchase, redemption
         or repayment of all or a portion of such indebtedness by the Company
         or any subsidiary.

                  (xv)     Absence of Labor Dispute. No labor dispute with the
         employees of the Company or any subsidiary exists or, to the knowledge
         of the Company, is imminent, and the Company is not aware of any
         existing or imminent labor disturbance by the employees of any of its
         or any subsidiary's principal suppliers, manufacturers, customers or
         contractors, which, in either case, would result in a Material Adverse
         Effect.

                  (xvi)    Absence of Proceedings. There is no action, suit,
         proceeding, inquiry or investigation before or brought by any court or
         governmental agency or body, domestic or foreign, now pending, or, to
         the knowledge of the Company, threatened, against or affecting the
         Company or any subsidiary, which is required to be disclosed in the
         Registration Statement (other than as disclosed therein), or which
         might result in a Material Adverse Effect, or which might materially
         and adversely affect the properties or assets thereof or the
         consummation of the transactions contemplated in this Agreement or the
         performance by the Company of its obligations hereunder; the aggregate
         of all pending legal or governmental proceedings to which the Company
         or any subsidiary is a party or of which any of their respective
         property or assets is the subject which are not described in the
         Registration Statement, including ordinary routine litigation
         incidental to the business, could not result in a Material Adverse
         Effect.

                  (xvii)   Accuracy of Exhibits. There are no contracts or
         documents which are required to be described in the Registration
         Statement or the Prospectus or to be filed as exhibits thereto which
         have not been so described and filed as required.

                  (xviii)  Possession of Intellectual Property. The Company and
         its subsidiaries own or possess, or can acquire on reasonable terms,
         adequate patents, patent rights, licenses, franchises, inventions,
         copyrights, know-how (including trade secrets and other unpatented
         and/or unpatentable proprietary or confidential information, systems
         or procedures), trademarks, service marks, trade names or other
         intellectual property (collectively, "Intellectual Property")
         necessary to carry on the business now operated by them, and neither
         the Company nor any of its subsidiaries has received any notice or is
         otherwise aware of any infringement of or conflict with asserted
         rights of others with respect to any Intellectual Property or of any
         facts or circumstances which would render any Intellectual Property
         invalid or inadequate to protect the interest of the Company or any of
         its subsidiaries therein, and which infringement or conflict (if the
         subject of any unfavorable decision, ruling or finding) or invalidity
         or inadequacy, singly or in the aggregate, would result in a Material
         Adverse Effect.


                                       6

                  (xix)    Absence of Further Requirements. No filing with, or
         authorization, approval, consent, license, order, registration,
         qualification or decree of, any court or governmental authority or
         agency is necessary or required for the performance by the Company of
         its obligations hereunder, in connection with the offering, issuance
         or sale of the Securities hereunder or the consummation of the
         transactions contemplated by this Agreement, except such as have been
         already obtained or as may be required under the 1933 Act or the 1933
         Act Regulations or state securities laws.

                  (xx)     Other Fees. Except as disclosed in the Registration
         Statement and the Prospectus, there are no contracts, agreements or
         understandings between the Company and any person that would give rise
         to a valid claim against the Company or any Underwriter for a
         brokerage commission, finder's fee or other like payment in connection
         with the transactions contemplated by this Agreement, the Registration
         Statement and the Prospectus or, to the knowledge of the Company, any
         arrangements, agreements, understandings, payments or issuance with
         respect to the Company or any of its officers, directors,
         shareholders, partners, employees, Subsidiaries or affiliates that may
         affect the Underwriters' compensation as determined by the NASD, Inc.
         (the "NASD").

                  (xxi)    Absence of Manipulation. Neither the Company nor any
         affiliate of the Company has taken, nor will the Company or any
         affiliate take, directly or indirectly, any action which is designed
         to or which has constituted or which would be expected to cause or
         result in stabilization or manipulation of the price of any security
         of the Company to facilitate the sale or resale of the Securities.

                  (xxii)   Possession of Licenses and Permits. The Company and
         its subsidiaries possess such permits, licenses, approvals, consents
         and other authorizations (collectively, "Governmental Licenses")
         issued by the appropriate federal, state, local or foreign regulatory
         agencies or bodies necessary to conduct the business now operated by
         them, except where the failure so to possess would not, singly or in
         the aggregate, result in a Material Adverse Effect; the Company and
         its subsidiaries are in compliance with the terms and conditions of
         all such Governmental Licenses, except where the failure so to comply
         would not, singly or in the aggregate, result in a Material Adverse
         Effect; all of the Governmental Licenses are valid and in full force
         and effect, except when the invalidity of such Governmental Licenses
         or the failure of such Governmental Licenses to be in full force and
         effect would not, singly or in the aggregate, result in a Material
         Adverse Effect; and neither the Company nor any of its subsidiaries
         has received any notice of proceedings relating to the revocation or
         modification of any such Governmental Licenses which, singly or in the
         aggregate, if the subject of an unfavorable decision, ruling or
         finding, would result in a Material Adverse Effect.

                  (xxiii)  Title to Property. (A) The Company, each of its
         subsidiaries and, to the knowledge of the Company, any joint ventures
         in which the Company or any subsidiary owns an interest, as the case
         may be, have good and marketable fee simple title or leasehold title,
         as the case may be, to all real property owned or leased, as
         applicable, by the Company or its subsidiaries or the applicable joint
         venture, respectively, and good title to all other properties owned by
         them, and any improvements thereon and all other assets that are
         required for the operation of such operations in the manner in which
         they currently are operated, free and clear of all liens,
         encumbrances, claims, security interests and defects, except such as
         are Permitted Encumbrances (as defined below); (B) all material liens,
         charges, encumbrances, claims or restrictions on or affecting any of
         the Properties and the assets of any of the Company or its
         subsidiaries or any joint venture in which Company or any of its
         subsidiaries owns an interest that are required to be disclosed in the
         Prospectus are disclosed therein; (C) each of the Properties


                                       7

         complies with all applicable codes, laws and regulations (including,
         without limitation, building and zoning codes, laws and regulations
         and laws relating to access to the Properties), except if and to the
         extent disclosed in the Prospectus and except for such failures to
         comply that would not in the aggregate have a Material Adverse Effect;
         (D) there are in effect for the assets of the Company and its
         subsidiaries or, to the knowledge of the Company, any joint venture in
         which the Company or any of its subsidiaries owns an interest,
         insurance policies covering the risks and in amounts that are
         commercially reasonable for the types of assets owned by them and that
         are consistent with the types and amounts of insurance typically
         maintained by prudent owners of properties similar to such assets in
         the markets in which such assets are located, and neither the Company
         nor any subsidiary or, to the knowledge of the Company, any joint
         venture in which the Company or any subsidiary owns an interest has
         received from any insurance company notice of any material defects or
         deficiencies affecting the insurability of any such assets or any
         notices of cancellation or intent to cancel any such policies; and (E)
         the Company does not have any knowledge of any pending or threatened,
         litigation, moratorium, condemnation proceedings, zoning change, or
         other similar proceeding or action that could in any manner affect the
         size of, use of, improvements on, construction on, access to or
         availability of utilities or other necessary services to the
         Properties, except such proceedings or actions that would not have a
         Material Adverse Effect. All of the leases and subleases material to
         the business of the Company and its subsidiaries considered as one
         enterprise, and under which the Company or any subsidiary holds
         Properties described in the Prospectus, are in full force and effect,
         and neither the Company nor any subsidiary has received any notice of
         any material claim of any sort that has been asserted by anyone
         adverse to the rights of the Company or any subsidiary under any of
         the leases or subleases mentioned above, or affecting or questioning
         the rights of the Company or any subsidiary of the continued
         possession of the leased or subleased premises under any such lease or
         sublease. The Company and each of its subsidiaries, as the case may
         be, have obtained title insurance on the fee interests and leasehold
         interests in each of the Properties in an amount at least equal to the
         greater of (A) the mortgage indebtedness on each such Property or (B)
         the purchase price paid for each such Property. "Permitted
         Encumbrance" shall mean (a) liens on Properties securing any of the
         Company, any subsidiary or joint venture obligations, (b) other liens
         which are expressly described in the Prospectus and (c) customary
         easements and encumbrances and other exceptions to title which do not
         materially impair the operation, development or use of the Properties
         for the purposes intended therefor as contemplated in the Prospectus.

                  (xxiv)   Investment Company Act. The Company is not required
         to, and upon the issuance and sale of the Securities as herein
         contemplated and the application of the net proceeds therefrom as
         described in the Prospectus will not be required to, register as an
         "investment company" under the Investment Company Act of 1940, as
         amended (the "1940 Act").

                  (xxv)    Environmental Laws. Except as described in the
         Registration Statement and except as would not, singly or in the
         aggregate, result in a Material Adverse Effect, (A) neither the
         Company nor any of its subsidiaries is in violation of any federal,
         state, local or foreign statute, law, rule, regulation, ordinance,
         code, policy or rule of common law or any judicial or administrative
         interpretation thereof, including any judicial or administrative
         order, consent, decree or judgment, relating to pollution or
         protection of human health, the environment (including, without
         limitation, ambient air, surface water, groundwater, land surface or
         subsurface strata) or wildlife, including, without limitation, laws
         and regulations relating to the release or threatened release of
         chemicals, pollutants, contaminants, wastes, toxic substances,
         hazardous substances, petroleum or petroleum products,
         asbestos-containing materials or mold (collectively, "Hazardous
         Materials") or to the manufacture, processing, distribution, use,
         treatment, storage, disposal, transport or handling of Hazardous
         Materials (collectively, "Environmental Laws"), (B)


                                       8

         the Company and its subsidiaries have all permits, authorizations and
         approvals required under any applicable Environmental Laws and are
         each in compliance with their requirements, (C) there are no pending
         or threatened administrative, regulatory or judicial actions, suits,
         demands, demand letters, claims, liens, notices of noncompliance or
         violation, investigation or proceedings relating to any Environmental
         Law against the Company or any of its subsidiaries and (D) there are
         no events or circumstances that would reasonably be expected to form
         the basis of an order for clean-up or remediation, or an action, suit
         or proceeding by any private party or governmental body or agency,
         against or affecting the Company or any of its subsidiaries relating
         to Hazardous Materials or any Environmental Laws. None of the
         environmental consultants which prepared environmental and asbestos
         inspection reports with respect to the Properties was employed for
         such purpose on a contingent basis or has any substantial interest in
         the Company or any subsidiary and none of them nor any of their
         directors, officers or employees is connected with the Company or any
         subsidiary as a promoter, selling agent, trustee, director, officer or
         employee.

                  (xxvi)   Tax Returns. Except to the extent that a failure to
         do so would not result in a Material Adverse Effect, the Company and
         each of its subsidiaries, as the case may be, have filed all federal,
         state, local and foreign income and franchise tax returns which have
         been required to be filed (except in any case in which an extension
         has been granted) and have paid all taxes required to be paid and any
         other assessment, fine or penalty levied against it, to the extent
         that any of the foregoing is due and payable, except, in all cases,
         for any such tax, assessment, fine or penalty that is being contested
         in good faith.

                  (xxvii)  Absence of Regulation M Violation. Neither the
         Company nor any subsidiary, nor any of their respective trustees,
         directors, officers, affiliates, members or controlling persons, has
         taken or will take, directly or indirectly, any action resulting in a
         violation of Regulation M under the Securities Exchange Act of 1934
         Act, as amended (the "1934 Act") or designed to cause or result in, or
         that has constituted or that reasonably might be expected to
         constitute, the stabilization or manipulation of the price of any
         security of the Company to facilitate the sale or resale of the
         Securities.

                  (xxviii) Registration Rights. There are no persons with
         registration rights or other similar rights to have any securities
         registered pursuant to the Registration Statement or otherwise
         registered by the Company under the 1933 Act, except as disclosed in
         the Prospectus under "Risk Factors -- Risks Related to this Offering
         and Our Common Stock" and "Shares Eligible for Future Sale --
         Registration Rights."

                  (xxix)   Bankruptcy. With regard to the Joint Plan of
         Reorganization of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C.
         together with the Official Committee of Unsecured Creditors dated
         March 3, 2003 Under Chapter 11 of the United States Bankruptcy Code
         confirmed on April 24, 2003 (the "Impac Plan") and the Company's First
         Amended Joint Reorganization Plan, dated as of November 1, 2002 under
         Chapter 11 of the United States Bankruptcy Code confirmed on November
         5, 2002 (the "Lodgian Plan" and collectively, the "Reorganization
         Plans"), (A) the effective date of the Impac Plan and the Lodgian Plan
         occurred on May 22, 2003 and November 25, 2002, respectively, and each
         Reorganization Plan has been consummated; (B) neither the Company nor
         any of its Subsidiaries is currently, or has in the past, been in
         default in any respect, and no event has occurred which, with notice
         or lapse of time or both, would constitute such a default, in the due
         performance or observance of any term, covenant or condition contained
         in the Reorganization Plans; (C) there is no legal or governmental
         proceeding relating to the Reorganization Plans to which the Company
         or any of its Subsidiaries is a party or of which any property or
         assets of the Company or any of its Subsidiaries is the subject; and
         to the best of the Company's knowledge, no such proceedings are
         threatened or contemplated by any governmental


                                       9

         authorities or threatened by others; and (D) except for the Claims (as
         defined in Section 101(5) of the United States Bankruptcy Code)
         described in the Reorganization Plans, to the knowledge of the
         Company, there are no Claims that exist relating to the Reorganization
         Plans, including without limitation, any Claims relating to state or
         federal securities laws.

                  (xxx)    Franchise Agreements. Except as disclosed in or
         contemplated by the Registration Statement and the Prospectus, neither
         the Company nor any subsidiary that manages any Properties has
         received any notice from any franchisor concerning any property any of
         them own or manage in which such franchisor has : (A) threatened any
         action adverse to the Company or any subsidiary; (B) notified the
         Company or any subsidiary of their failure to perform under any
         franchise agreement; or (C) notified the Company or any subsidiary of
         its intention to terminate or modify the franchise agreement; nor, to
         the knowledge of the Company, do there exist any events, conditions or
         circumstances which are reasonably likely to result in any such
         termination, except where any such action, failure to perform,
         termination or modification would not, individually or in the
         aggregate, reasonably be expected to have a Material Adverse Effect.
         All franchise agreements are in full force and effect and are
         enforceable in accordance with their terms, except as may be limited
         by bankruptcy, insolvency, reorganization, moratorium or other similar
         laws relating to or affecting the enforcement of creditors' rights
         generally and general equitable principles and except where the
         failure to be enforceable or to be in full force or effect would not,
         individually or in the aggregate, reasonably be expected to have a
         Material Adverse Effect. Except as described in the Registration
         Statement and Prospectus, any prior notice received by the Company or
         any subsidiary from any franchisor terminating, or threatening to
         terminate, the current franchise agreement for any of the Properties
         has been cured, is no longer effective or has been waived by the party
         issuing such notice, except where any such termination would not,
         individually or in the aggregate, reasonably be expected to have a
         Material Adverse Effect. .

                  (xxxi)   Compliance with Sarbanes-Oxley Act of 2002. The
         Company, its officers and directors are in compliance with the
         provisions of the Sarbanes-Oxley Act of 2002 and the rules and
         regulations promulgated in connection therewith.

         (b)      Officer's Certificates. Any certificate signed by any officer
of the Company or any of its subsidiaries delivered to the Underwriters or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby.

         SECTION 2. Sale and Delivery to Underwriters; Closing.

         (a)      Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B hereto, the
number of Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.

         (b)      Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional
2,742,857 shares of Common Stock at the price per share set forth in Schedule B
hereto, less an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial Securities but not payable
on the Option Securities. The option hereby granted will expire 30 days after
the date hereof and may be exercised in whole or in part from time to time only
for the purpose of covering overallotments which


                                      10

may be made in connection with the offering and distribution of the Initial
Securities upon notice by Merrill Lynch to the Company setting forth the number
of Option Securities as to which the several Underwriters are then exercising
the option and the time and date of payment and delivery for such Option
Securities. Any such time and date of delivery (a "Date of Delivery") shall be
determined by Merrill Lynch, but shall not be later than seven full business
days after the exercise of said option, nor in any event prior to the Closing
Time, as hereinafter defined. If the option is exercised as to all or any
portion of the Option Securities, each of the Underwriters, acting severally
and not jointly, will purchase that proportion of the total number of Option
Securities then being purchased which the number of Initial Securities set
forth in Schedule A opposite the name of such Underwriter bears to the total
number of Initial Securities, subject in each case to such adjustments as
Merrill Lynch in its discretion shall make to eliminate any sales or purchases
of fractional shares.

         (c)      Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Sidley
Austin Brown & Wood LLP, or at such other place as shall be agreed upon by the
Underwriters and the Company, at 9:00 A.M. (Eastern time) on the third business
day after the date hereof (unless postponed in accordance with the provisions
of Section 10), or such other time not later than ten business days after such
date as shall be agreed upon by the Underwriters and the Company (such time and
date of payment and delivery being herein called "Closing Time").

         In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Underwriters and the Company, on each Date of Delivery as specified in the
notice from the Underwriters to the Company.

         Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery
to the respective accounts of the Underwriters of certificates for the
Securities to be purchased by them. It is understood that each Underwriter has
authorized Merrill Lynch, for its account, to accept delivery of, receipt for,
and make payment of the purchase price for, the Initial Securities and the
Option Securities, if any, which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Initial Securities
or the Option Securities, if any, to be purchased by any Underwriter whose
funds have not been received by the Closing Time or the relevant Date of
Delivery, as the case may be, but such payment shall not relieve such
Underwriter from its obligations hereunder.

         (d)      Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations
and registered in such names as the Underwriters may request in writing at
least one full business day before the Closing Time or the relevant Date of
Delivery, as the case may be. The certificates for the Initial Securities and
the Option Securities, if any, will be made available for examination and
packaging by the Underwriters in The City of New York not later than 10:00 A.M.
(Eastern time) on the business day prior to the Closing Time or the relevant
Date of Delivery, as the case may be.

         (e)      Appointment of Qualified Independent Underwriter. The Company
hereby confirms its engagement of Citigroup as, and Citigroup hereby confirms
its agreement with the Company to render services as, a "qualified independent
underwriter" within the meaning of Rule 2720 of the Conduct Rules of the NASD
with respect to the offering and sale of the Securities. Citigroup, solely in
its capacity as qualified independent underwriter and not otherwise, is
referred to herein as the "Independent Underwriter."


                                      11

         SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:

         (a)      Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A and will notify the Underwriters immediately, and
confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt
of any comments from the Commission, (iii) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threatening of
any proceedings for any of such purposes. The Company will promptly effect the
filings necessary pursuant to Rule 424(b) and will take such steps as it deems
necessary to ascertain promptly whether the form of prospectus transmitted for
filing under Rule 424(b) was received for filing by the Commission and, in the
event that it was not, it will promptly file such prospectus. The Company will
make every reasonable effort to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the earliest
possible moment.

         (b)      Filing of Amendments. The Company will give the Underwriters
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)) or any amendment, supplement
or revision to either the prospectus included in the Registration Statement at
the time it became effective or to the Prospectus, will furnish the
Underwriters with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file or
use any such document to which the Underwriters or counsel for the Underwriters
shall object.

         (c)      Delivery of Registration Statements. The Company has
furnished or will deliver to the Underwriters and counsel for the Underwriters,
without charge, signed copies of the Registration Statement as originally filed
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Underwriters, without
charge, a conformed copy of the Registration Statement as originally filed and
of each amendment thereto (without exhibits) for each of the Underwriters. The
copies of the Registration Statement and each amendment thereto furnished to
the Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.

         (d)      Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act, such number of
copies of the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.

         (e)      Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement and in the Prospectus. If at any time when a prospectus is required
by the 1933 Act to be delivered in connection with sales of the Securities, any
event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the Underwriters or for the Company,
to amend the Registration Statement or amend or supplement the Prospectus in
order that the


                                      12

Prospectus will not include any untrue statements of a material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Company will promptly prepare and file
with the Commission, subject to Section 3(b), such amendment or supplement as
may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements, and the
Company will furnish to the Underwriters such number of copies of such
amendment or supplement as the Underwriters may reasonably request.

         (f)      Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions as the Underwriters may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which
it is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.

         (g)      Rule 158. The Company will timely file such reports pursuant
to the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.

         (h)      Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Prospectus under "Use of Proceeds."

         (i)      Listing. The Company will use its best efforts to effect the
listing of the Securities on the American Stock Exchange.

         (j)      Restriction on Sale of Securities. During a period of 180
days from the date of the Prospectus, the Company will not, without the prior
written consent of Merrill Lynch and Citigroup, (i) directly or indirectly,
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
file any registration statement under the 1933 Act with respect to any of the
foregoing or (ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Securities to be sold hereunder, (B) any
shares of Common Stock issued by the Company upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof and
referred to in the Prospectus or (C) any shares of Common Stock issued or
options to purchase Common Stock granted pursuant to existing employee benefit
plans of the Company referred to in the Prospectus.

         (k)      Reporting Requirements. The Company, during the period when
the Prospectus is required to be delivered under the 1933 Act, will file all
documents required to be filed with the Commission pursuant to the 1934 Act
within the time periods required by the 1934 Act and the rules and regulations
of the Commission thereunder.


                                      13

         (l)      Refinancing Debt. The Company shall use its best efforts to
facilitate the consummation of the Refinancing Debt on or prior to the Closing
Time and, upon consummation, shall utilize the funds received therefrom to
retire the indebtedness specified in the Registration Statement and the
Prospectus.

         SECTION 4. Payment of Expenses. Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration
Statement (including financial statements and exhibits) as originally filed and
of each amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon
the sale, issuance or delivery of the Securities to the Underwriters, (iv) the
fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the blue sky
survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus and of the Prospectus and
any amendments or supplements thereto, (vii) the preparation, printing and
delivery to the Underwriters of copies of the blue sky survey and any
supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities, (ix) the costs and expenses of the Company
relating to investor presentations on any "road show" undertaken in connection
with the marketing of the Securities, including without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging
expenses of the representatives and officers of the Company and any such
consultants, and the cost of aircraft and other transportation chartered in
connection with the road show and (x) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities, (xi)
the fees and expenses incurred in connection with the listing of the Securities
on the American Stock Exchange and (xii) the fees and expenses of the
Independent Underwriter.

         SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any subsidiary of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:

         (a)      Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A).

         (b)      Opinion of Counsel for Company. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of Closing
Time, of Morris, Manning & Martin LLP, counsel for the Company, in form and
substance reasonably satisfactory to counsel for the Underwriters, together
with signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit A hereto and to such further
effect as counsel to the Underwriters may reasonably request.


                                      14

         (c)      Opinion of Counsel for Underwriters. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of Closing
Time, of Sidley Austin Brown & Wood LLP, counsel for the Underwriters, together
with signed or reproduced copies of such letter for each of the other
Underwriters with respect to the matters set forth in clauses (i), (ii), (v),
(vi) (solely as to preemptive or other similar rights arising by operation of
law or under the charter or by-laws of the Company), (viii) through (xi),
(xiii) (solely as to the information in the Prospectus under "Description of
Capital Stock--Common Stock") and the penultimate paragraph of Exhibit A
hereto. In giving such opinion such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the law of the State of New
York and the federal law of the United States and the General Corporation Law
of the State of Delaware, upon the opinions of counsel satisfactory to the
Underwriters. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers of the Company and its subsidiaries and
certificates of public officials.

         (d)      Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Underwriters shall have received a certificate of the President or an Executive
Vice President of the Company and of the chief financial or chief accounting
officer of the Company, dated as of Closing Time, to the effect that (i) there
has been no such material adverse change, (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same force and
effect as though expressly made at and as of Closing Time, (iii) the Company
has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or, to
their knowledge, contemplated by the Commission.

         (e)      Accountant's Comfort Letter. At the time of the execution of
this Agreement, the Underwriters shall have received from Deloitte & Touche LLP
a letter dated such date, in form and substance satisfactory to the
Underwriters, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.

         (f)      Bring-down Comfort Letter. At Closing Time, the Underwriters
shall have received from Deloitte & Touche LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.

         (g)      Approval of Listing. At Closing Time, the Securities shall
have been approved for listing on the American Stock Exchange, subject only to
official notice of issuance.

         (h)      No Objection. The NASD shall have confirmed that it has not
raised any objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.

         (i)      Lock-up Agreements. At the date of this Agreement, the
Underwriters shall have received (i) an agreement substantially in the form of
Exhibit B hereto signed by each director or officer of the Company listed on
Schedule C hereto; and (ii) an agreement from each of OCM Real Estate
Opportunities Fund II, L.P., Third Avenue Value Fund and BRE HY Funding LLC
substantially in the forms attached hereto as Exhibit C, Exhibit D, and Exhibit
E, respectively.


                                      15

         (j)      Refinancing Debt. At the Closing Time, Merrill Lynch Mortgage
shall have funded to the Company $370 million of Refinancing Debt pursuant to
the Loan Agreements.

         (k)      Conditions to Purchase of Option Securities. In the event
that the Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations and
warranties of the Company contained herein and the statements in any
certificates furnished by the Company or any subsidiary of the Company
hereunder shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Underwriters shall have received:

                  (i)      Officers' Certificate. A certificate, dated such
         Date of Delivery, of the President or an Executive Vice President of
         the Company and of the chief financial or chief accounting officer of
         the Company confirming that the certificate delivered at the Closing
         Time pursuant to Section 5(d) hereof remains true and correct as of
         such Date of Delivery.

                  (ii)     Opinion of Counsel for Company. The favorable
         opinion of Morris, Manning & Martin LLP, counsel for the Company, in
         form and substance reasonably satisfactory to counsel for the
         Underwriters, dated such Date of Delivery, relating to the Option
         Securities to be purchased on such Date of Delivery and otherwise to
         the same effect as the opinion required by Section 5(b) hereof.

                  (iii)    Opinion of Counsel for Underwriters. The favorable
         opinion of Sidley Austin Brown & Wood LLP, counsel for the
         Underwriters, dated such Date of Delivery, relating to the Option
         Securities to be purchased on such Date of Delivery and otherwise to
         the same effect as the opinion required by Section 5(c) hereof.

                  (iv)     Bring-down Comfort Letter. A letter from Deloitte &
         Touche LLP, in form and substance satisfactory to the Underwriters and
         dated such Date of Delivery, substantially in the same form and
         substance as the letter furnished to the Underwriters pursuant to
         Section 5(f) hereof, except that the "specified date" in the letter
         furnished pursuant to this paragraph shall be a date not more than
         five days prior to such Date of Delivery.

         (l)      Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the
Underwriters and counsel for the Underwriters.

         (m)      Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Underwriters by notice to the Company at
any time at or prior to Closing Time or such Date of Delivery, as the case may
be, and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 1, 6, 7, 8 and
14 shall survive any such termination and remain in full force and effect.


                                      16

         SECTION 6. Indemnification.

         (a)      Indemnification of Underwriters. (1) The Company agrees to
indemnify and hold harmless each Underwriter, its affiliates, as such term is
defined in Rule 501(b) under the 1933 Act (each, an "Affiliate"), its selling
agents and each person, if any, who controls any Underwriter within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

                  (i)      against any and all loss, liability, claim, damage
         and expense whatsoever, as incurred, arising out of any untrue
         statement or alleged untrue statement of a material fact contained in
         the Registration Statement (or any amendment thereto), including the
         Rule 430A Information or the omission or alleged omission therefrom of
         a material fact required to be stated therein or necessary to make the
         statements therein not misleading or arising out of any untrue
         statement or alleged untrue statement of a material fact included in
         any preliminary prospectus or the Prospectus (or any amendment or
         supplement thereto), or the omission or alleged omission therefrom of
         a material fact necessary in order to make the statements therein, in
         the light of the circumstances under which they were made, not
         misleading;

                  (ii)     against any and all loss, liability, claim, damage
         and expense whatsoever, as incurred, to the extent of the aggregate
         amount paid in settlement of any litigation, or any investigation or
         proceeding by any governmental agency or body, commenced or
         threatened, or of any claim whatsoever based upon any such untrue
         statement or omission, or any such alleged untrue statement or
         omission; provided that (subject to Section 6(d) below) any such
         settlement is effected with the written consent of the Company;

                  (iii)    against any and all expense whatsoever, as incurred
         (including the fees and disbursements of counsel chosen by Merrill
         Lynch), reasonably incurred in investigating, preparing or defending
         against any litigation, or any investigation or proceeding by any
         governmental agency or body, commenced or threatened, or any claim
         whatsoever based upon any such untrue statement or omission, or any
         such alleged untrue statement or omission, to the extent that any such
         expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information or
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).

         (2)      In addition to, and without limitation of the Company's
obligation to indemnify Citigroup as an Underwriter under the other paragraphs
of this Section 6, the Company also agrees to indemnify and hold harmless the
Independent Underwriter, its Affiliates and selling agents and each person, if
any, who controls the Independent Underwriter within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act, from and against any and all
loss, liability, claim, damage, joint or several, to which they or any of them
may become subject, insofar as such loss, liability, claim or damage (or action
in respect thereof) arise out of or are based upon Independent Underwriter's
acting as a "qualified independent underwriter" (within the meaning of NASD
Conduct Rule 2720) in connection with the offering contemplated by this
Agreement, and agrees to reimburse each such indemnified party, as incurred,
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability results from the gross
negligence or willful misconduct of the Independent Underwriter.


                                      17

         (b)      Indemnification of Company, Directors and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection
(a)(1) of this Section, as incurred, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information or any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Merrill Lynch
expressly for use in the Registration Statement (or any amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).

         (c)      Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. In the case of parties indemnified pursuant to
Section 6(a)(1) above, counsel to the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b)
above, counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances;
provided, that, if indemnity is sought pursuant to Section 6(a)(2), then, in
addition to the fees and expenses of such counsel for the indemnified parties,
the indemnifying party shall be liable for the reasonable fees and expenses of
not more than one counsel (in addition to any local counsel) separate from its
own counsel and that of the other indemnified parties for the Independent
Underwriter in its capacity as a "qualified independent underwriter" and all
persons, if any, who control the Independent Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of 1934 Act in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances if, in the
reasonable judgment of the Independent Underwriter, based upon advice of its
counsel, there may exist a conflict of interest between the Independent
Underwriter and the other indemnified parties. Any such separate counsel for
the Independent Underwriter and such control persons of the Independent
Underwriter shall be designated in writing by the Independent Underwriter. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
in respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from
all liability arising out of such litigation, investigation, proceeding or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.

         (d)      Settlement without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(1)(ii) effected without its written consent
if (i) such settlement is entered


                                      18

into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.

         SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the
offering of the Securities pursuant to this Agreement, (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand and
of the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations or (iii) the
Independent Underwriter in its capacity as "qualified independent underwriter"
(within the meaning of NASD Conduct Rule 2720) be responsible for any amount in
excess of the compensation received by the Independent Underwriter for acting
in such capacity.

         The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters,
in each case as set forth on the cover of the Prospectus, bear to the aggregate
initial public offering price of the Securities as set forth on the cover of
the Prospectus. Benefits received by the Independent Underwriter in its
capacity as "qualified independent underwriter" shall be deemed to be equal to
the compensation received by the Independent Underwriter for acting in such
capacity.

         The relative fault of the Company on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

         The Company and the Underwriters agree that Citigroup will not receive
any additional benefits hereunder for serving as the Independent Underwriter in
connection with the offering and sale of the Securities.

         The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.


                                      19

         Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.

         No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

         For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act and each Underwriter's Affiliates and selling agents shall have
the same rights to contribution as such Underwriter, and each director of the
Company, each officer of the Company who signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the number
of Initial Securities set forth opposite their respective names in Schedule A
hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to Survive. All
representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its subsidiaries submitted
pursuant hereto, shall remain operative and in full force and effect regardless
of (i) any investigation made by or on behalf of any Underwriter or its
Affiliates or selling agents, any person controlling any Underwriter, its
officers or directors or any person controlling the Company and (ii) delivery
of and payment for the Securities.

         SECTION 9. Termination of Agreement.

         (a)      Termination; General. The Underwriters may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Underwriters, impracticable or inadvisable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the American Stock Exchange, or if trading generally on the
American Stock Exchange, the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required,
by any of said exchanges or by such system or by order of the Commission, the
NASD or any other governmental authority, or (iv) a material disruption has
occurred in commercial banking or securities settlement or clearance services
in the United States, or (v) if a banking moratorium has been declared by
either Federal or New York authorities.

         (b)      Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party, provided further that Sections 1, 6, 7, 8 and 14 shall survive such
termination and remain in full force and effect. If this Agreement is
terminated by the Underwriters in accordance with the provisions of Section 5
or Section 9(a)(i) or (iii) (with respect to the


                                      20

first clause only) hereof, the Company shall reimburse the Underwriters for all
of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.

         SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Underwriters shall have the right,
within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but
not less than all, of the Defaulted Securities in such amounts as may be agreed
upon and upon the terms herein set forth; if, however, the Underwriters shall
not have completed such arrangements within such 24-hour period, then:

                  (i)      if the number of Defaulted Securities does not
         exceed 10% of the number of Securities to be purchased on such date,
         each of the non-defaulting Underwriters shall be obligated, severally
         and not jointly, to purchase the full amount thereof in the
         proportions that their respective underwriting obligations hereunder
         bear to the underwriting obligations of all non-defaulting
         Underwriters, or

                  (ii)     if the number of Defaulted Securities exceeds 10% of
         the number of Securities to be purchased on such date, this Agreement
         or, with respect to any Date of Delivery which occurs after the
         Closing Time, the obligation of the Underwriters to purchase and of
         the Company to sell the Option Securities to be purchased and sold on
         such Date of Delivery shall terminate without liability on the part of
         any non-defaulting Underwriter.

         No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.

         In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the
obligation of the Underwriters to purchase and the Company to sell the relevant
Option Securities, as the case may be, either the Underwriters or the Company
shall have the right to postpone Closing Time or the relevant Date of Delivery,
as the case may be, for a period not exceeding seven days in order to effect
any required changes in the Registration Statement or Prospectus or in any
other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 10.

         SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Underwriters at c/o Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center,
New York, New York 10080, attention of Jack J. Vissicchio; and notices to the
Company shall be directed to it at 3445 Peachtree Road, N.E., Suite 700,
Atlanta, Georgia 30326, attention of W. Thomas Parrington, President and Chief
Executive Officer.

         SECTION 12. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Underwriters and the Company
and their respective successors, and said controlling persons


                                      21

and officers and directors and their heirs and legal representatives, and for
the benefit of no other person, firm or corporation. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase.

         SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

         SECTION 14. TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT.
EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK
CITY TIME.

         SECTION 15. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

         SECTION 16. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.


                                      22

         If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company in accordance with its
terms.


                                        Very truly yours,

                                        LODGIAN, INC.


                                        By: /s/ W. Thomas Parrington
                                            -----------------------------------
                                            Name: W. Thomas Parrington
                                            Title: President and Chief
                                                   Executive Officer


CONFIRMED AND ACCEPTED,
as of the date first
above written:


MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED
CITIGROUP GLOBAL MARKETS INC.
BANC OF AMERICA SECURITIES LLC
LEGG MASON WOOD WALKER, INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.

By: MERRILL LYNCH, PIERCE, FENNER & SMITH
                INCORPORATED

By: /s/ Jack Vissiccho
    -------------------------------------
    Authorized Signatory


On behalf of itself and the other Underwriters named in Schedule A hereto.


                                      23

                                   SCHEDULE A



                                                                                               Number of
                                Name of Underwriter                                       Initial Securities
                                -------------------                                       ------------------

                                                                                       
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated................................................................     6,400,001
Citigroup Global Markets Inc............................................................     6,400,000
Banc of America Securities LLC..........................................................     1,828,571
Legg Mason Wood Walker, Incorporated....................................................     1,828,571
Raymond James & Associates, Inc. .......................................................     1,828,571
                                                                                             ---------

Total...................................................................................    18,285,714
                                                                                            ==========



                                    Sch A-1

                                   SCHEDULE B
                                 LODGIAN, INC.
                       18,285,714 Shares of Common Stock
                           (Par Value $.01 Per Share)

         1.       The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be $10.50.

         2.       The purchase price per share for the Securities to be paid by
the several Underwriters shall be $9.8437, being an amount equal to the initial
public offering price set forth above less $.6563 per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the overallotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial Securities but not payable on the Option
Securities.


                                    Sch B-1

                                   SCHEDULE C

                             Directors and Officers

W. Thomas Parrington

Sean F. Armstrong

Russel S. Bernard

Stewart J. Brown

Kenneth A. Caplan

Stephen P. Grathwohl

Jonathan D. Gray

Kevin C. McTavish

Michael W. Amaral

Manuel E. Artime

Samuel J. Davis

Daniel E. Ellis

Linda Borchert Philp

Daniel K. Abernethy

Deborah N. Ethridge

Mark T. DiPiazza

Paul J. Hitselberger

David T. Robinson


                                    Sch C-1

                                   SCHEDULE D

                                 Joint Ventures




                    JOINT VENTURE                                            OWNERSHIP INTEREST
                    -------------                                            ------------------
                                                                          
Melbourne Hospitality Associates, Limited Partnership                               50%
     New Orleans Airport Motel Associates, Ltd.                                     82%
           Servico Centre Associates, Ltd.                                          50%
           Macon Hotel Associates, L.L.C.                                           60%
         Columbus Hospitality Associates, LP                                        30%



                                    Sch D-1

                                   SCHEDULE E

                                Loan Agreements


                                    Sch E-1

                                   SCHEDULE F

                          Subsidiaries of the Company
                          (*Significant Subsidiaries)


Lodgian Financing Corp. *
Lodgian Financing Mezzanine, LLC *
Lodgian Mezzanine Fixed, LLC *
Lodgian Mezzanine Floating, LLC *
Servico, Inc. *
Servico Operations Corporation *
1075 Hospitality, LP
12801 NWF Beverage, Inc.
Albany Hotel, Inc.
AMI Operating Partners, L.P.
AMIOP Acquisition Corp.
AMIOP Acquisition General Partner SPE Corp.
Apico Hills. Inc.
Apico Inns of Green Tree, Inc.
Apico Inns of Pennsylvania, Inc.
Apico Inns of Pittsburgh, Inc.
Apico Management Corp.
Atlanta-Boston Holdings, LLC
Atlanta-Boston Lodging, LLC
Atlanta-Boston SPE, Inc.
Atlanta-Rio Rancho Beverage Management, Inc.
Brecksville Hospitality, Inc.
Brecksville Hospitality, LP
Brunswick Motel Enterprises, Inc.
Columbus Hospitality Associates, LP
The Courtyard Club, Inc.
Dedham Lodging Associates I, LP
Dedham Lodging SPE, Inc.
Dothan Hospitality 3053, Inc.
Dothan Hospitality 3071, Inc.
East Washington Hospitality, LP
Fayetteville Motel Enterprises, Inc.
Fort Wayne Hospitality Associates II, LP
Fourth Street Hospitality, Inc.
Gadsden Hospitality, Inc.
Harrisburg Motel Enterprises, Inc.
Hilton Head Motel Enterprises, Inc.
Impac Holdings III, LLC
Impac Hotel Group Mezzanine, LLC
Impac Hotel Group, L.L.C.
Impac Hotel Management, LLC
Impac Hotels I, L.L.C.
Impac Hotels II, L.L.C.
Impac Hotels III, LLC
Impac Hotels Member SPE, Inc.


                                    Sch F-1

Impac SPE #2, Inc.
Impac SPE #4, Inc.
Impac SPE #6, Inc.
Island Motel Enterprises, Inc.
KDS Corporation
Kinser Motel Enterprises, Inc.
Lafayette Beverage Management, Inc.
Lawrence Hospitality Associates, LP
Little Rock Beverage Management, Inc.
Little Rock Lodging Associates I, LP
Lodgian Abeline Beverage Corp.
Lodgian Acquisition, LLC
Lodgian AMI, Inc.
Lodgian Augusta LLC
Lodgian Austin Beverage Corp.
Lodgian Bridgeport LLC
Lodgian Cincinnati LLC
Lodgian Coconut Grove, LLC
Lodgian Colchester LLC
Lodgian Dallas Beverage Corp.
Lodgian Denver LLC
Lodgian Fairmont LLC
Lodgian Florence LLC
Lodgian Fort Mitchell LLC
Lodgian Hamburg LLC
Lodgian Hotels, Inc.
Lodgian Hotels Fixed I, LLC
Lodgian Hotels Fixed II, Inc.
Lodgian Hotels Fixed III, LLC
Lodgian Hotels Fixed IV, L.P.
Lodgian Hotels Fixed IV GP, Inc.
Lodgian Hotels Floating, LLC
Lodgian Jackson LLC
Lodgian Lafayette LLC
Lodgian Lancaster North, Inc.
Lodgian Little Rock SPE, Inc.
Lodgian Management Corp.
Lodgian Market Center Beverage Corp.
Lodgian Memphis LLC
Lodgian Merrimack LLC
Lodgian Memphis Property Owner, LLC
Lodgian Mezzanine Springing Member, Inc.
Lodgian Morgantown LLC
Lodgian Mortgage Springing Member, Inc.
Lodgian Mount Laurel, Inc.
Lodgian North Miami LLC
Lodgian Ontario, Inc.
Lodgian Syracuse LLC
Lodgian Tulsa LLC
Lodgian York Market Street, Inc.
Macon Hotel Associates LLC


                                    Sch F-2

Macon Hotel Associates Manager, Inc.
Manhattan Hospitality Associates, LP
McKnight Motel, Inc.
Melbourne Hospitality Associates, LP
Minneapolis Motel Enterprises, Inc.
Moon Airport Motel, Inc.
New Orleans Airport Motel Associates, LP
New Orleans Airport Motel Enterprises, Inc.
NH Motel Enterprises, Inc.
Penmoco, Inc.
Prime American Realty Corp.
Raleigh Downtown Enterprises, Inc.
REPL, Inc.
Royce Management Corp of Morristown
Saginaw Hospitality, LP
Second Fayetteville Motel Enterprises, Inc.
Servico Austin, Inc.
Servico Cedar Rapids, Inc.
Servico Centre Associates, Ltd.
Servico Colesville, Inc.
Servico Columbia II, Inc.
Servico Columbia, Inc.
Servico Columbus, Inc.
Servico Concord, Inc.
Servico Council Bluffs, Inc.
Servico East Washington, Inc.
Servico Flagstaff, Inc.
Servico Fort Wayne II, Inc.
Servico Fort Wayne, Inc.
Servico Frisco, Inc.
Servico Grand Island, Inc.
Servico Hilton Head, Inc.
Servico Hotels I, Inc.
Servico Hotels II, Inc.
Servico Hotels III, Inc.
Servico Hotels IV, Inc.
Servico Houston, Inc.
Servico Jamestown, Inc.
Servico Lansing, Inc.
Servico Lawrence II, Inc.
Servico Lawrence, Inc.
Servico Management Corporation (FL)
Servico Management Corporation (TX)
Servico Manhattan II, Inc.
Servico Manhattan, Inc.
Servico Market Center, Inc.
Servico Maryland, Inc.
Servico Melbourne, Inc.
Servico Metairie, Inc.
Servico New York, Inc.
Servico Niagara Falls, Inc.


                                    Sch F-3

Servico Northwoods, Inc.
Servico Operations Mezzanine, LLC
Servico Palm Beach General Partner SPE, Inc.
Servico Pensacola 7200, Inc.
Servico Pensacola 7330, Inc.
Servico Pensacola, Inc.
Servico Rolling Meadows, Inc.
Servico Roseville, Inc.
Servico Silver Springs, Inc.
Servico Tucson, Inc.
Servico West Des Moines, Inc.
Servico Wichita, Inc.
Servico Windsor, Inc.
Servico Winter Haven, Inc.
Servico Worcester, Inc.
Sharon Motel Enterprises, Inc.
Sheffield Motel Enterprises, Inc.
Sioux City Hospitality, LP
Sixteen Hotels, Inc.
South Carolina Interstate Motel Enterprises
Southfield Hotel Group II, LP
W.V.B.M., Inc.
Washington Motel Enterprises, Inc.
Wilpen, Inc.
Worcester Hospitality Associates, LP


                                    Sch F-4

                                                                      Exhibit A


                      FORM OF OPINION OF COMPANY'S COUNSEL
                          TO BE DELIVERED PURSUANT TO
                                  SECTION 5(b)

         (i)      The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware.

         (ii)     The Company has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.

         (iii)    The Company is duly qualified as a foreign corporation to
transact business and is in good standing in the State of Georgia and in each
other jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.

         (iv)     The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus in the column entitled "Actual" under
the caption "Capitalization" (except for subsequent issuances, if any, pursuant
to the Purchase Agreement or pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the exercise of
convertible securities, warrants or options referred to in the Prospectus); the
shares of issued and outstanding capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; and none
of the outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any securityholder of
the Company.

         (v)      The Securities have been duly authorized for issuance and
sale to the Underwriters pursuant to the Purchase Agreement and, when issued
and delivered by the Company pursuant to the Purchase Agreement against payment
of the consideration set forth in the Purchase Agreement, will be validly
issued and fully paid and non-assessable and no holder of the Securities is or
will be subject to personal liability by reason of being such a holder.

         (vi)     The issuance of the Securities is not subject to preemptive
or other similar rights of any securityholder of the Company.

         (vii)    Each Subsidiary has been duly organized and is validly
existing as a corporation, limited partnership or limited liability company, as
the case may be, in good standing under the laws of its respective jurisdiction
of organization, has corporate, limited partnership or limited liability
company, as the case may be, power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and is
duly qualified as a foreign corporation, limited partnership or limited
liability company, as the case may be, to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully


                                      A-1

paid and non-assessable and, to the best of our knowledge, is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, except such
security interests, mortgages, pledges, liens or encumbrances as are imposed in
accordance with the terms of the refinancing debt; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.

         (viii)   The Purchase Agreement has been duly authorized, executed and
delivered by the Company.

         (ix)     The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); and, to the best of
our knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings for that purpose have been instituted or are
pending or threatened by the Commission.

         (x)      The Registration Statement, including any Rule 462(b)
Registration Statement and the Rule 430A Information, the Prospectus and each
amendment or supplement to the Registration Statement and Prospectus as of
their respective effective or issue dates (other than the financial statements
and supporting schedules included therein or omitted therefrom, as to which we
need express no opinion) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.

         (xi)     The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of the Company and
the requirements of the American Stock Exchange.

         (xii)    To the best of our knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which the
Company or any subsidiary is a party, or to which the property of the Company
or any subsidiary is subject, before or brought by any court or governmental
agency or body, domestic or foreign, which would reasonably be expected to
result in a Material Adverse Effect, or which would reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in the Purchase Agreement or the
performance by the Company of its obligations thereunder.

         (xiii)   The information in the Prospectus under "Description of
Capital Stock", "Shares Eligible for Future Sale -- Rule 144" and in the
Registration Statement under Item 14, to the extent that it constitutes matters
of law, summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by us and is correct in
all material respects.

         (xiv)    All descriptions in the Registration Statement of contracts
and other documents to which the Company or its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits to the Registration Statement other than
those described or referred to therein or filed as exhibits thereto. To our
knowledge, (i) neither the Company nor any Subsidiary is in violation of its
charter, by-laws or operating agreement, as applicable and (ii) no default by
the Company or any Subsidiary exists in the due performance or observance of
any


                                      A-2

material obligation, agreement, covenant or condition contained in any
agreement filed as an exhibit to the Registration Statement, except for such
defaults that would not result in a Material Adverse Effect.

         (xv)     No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and the
1933 Act Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement or for the offering, issuance,
sale or delivery of the Securities.

         (xvi)    The execution, delivery and performance of the Purchase
Agreement and the consummation of the transactions contemplated in the Purchase
Agreement and in the Registration Statement (including the issuance and sale of
the Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by the Company with its obligations under the Purchase Agreement do not and
will not, whether with or without the giving of notice or lapse of time or
both, conflict with or constitute a breach of, or default or Repayment Event
(as defined in Section 1(a)(xiv) of the Purchase Agreement) under or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any subsidiary pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, franchise agreement,
management agreement, note, lease or any other agreement or instrument, known
to us, to which the Company or any subsidiary is a party or by which it or any
of them may be bound, or to which any of the property or assets of the Company
or any subsidiary is subject (except for such conflicts, breaches, defaults or
Repayment Events or liens, charges or encumbrances that would not have a
Material Adverse Effect), nor will such action result in any violation of the
provisions of the charter or by-laws of the Company or any subsidiary, or any
applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any subsidiary or any of
their respective properties, assets or operations.

         (xvii)   To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act, except as disclosed in the Prospectus under "Risks Related
to this Offering and Our Common Stock" and "Shares Eligible for Future Sale --
Registration Rights."

         (xviii)  The Company is not required, and upon the issuance and sale
of the Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus will not be required, to
register as an "investment company" under the 1940 Act.

         Nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information, (except for financial statements and schedules and other financial
data included therein or omitted therefrom, as to which we need make no
statement), at the time such Registration Statement or any such amendment
became effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any amendment or
supplement thereto (except for financial statements and schedules and other
financial data included therein or omitted therefrom, as to which we need make
no statement), at the time the Prospectus was issued, at the time any such


                                      A-3

amended or supplemented prospectus was issued or at the Closing Time, included
or includes an untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

         In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it
is otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991).


                                      A-4

                  FORM OF LOCK-UP FROM DIRECTORS AND OFFICERS


                                                                      Exhibit B


                                   ____, 2004

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated
4 World Financial Center
New York, New York  10080

         Re:      Proposed Public Offering by Lodgian, Inc.

Dear Sirs:

         The undersigned, a director and/or officer and a stockholder and/or
optionholder of Lodgian, Inc., a Delaware corporation (the "Company"),
understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") as representative of the underwriters (the
"Underwriters") proposes to enter into a Purchase Agreement (the "Purchase
Agreement") with the Company providing for the public offering (the "Offering")
of shares (the "Securities") of the Company's common stock, par value $0.01 per
share (the "Common Stock"). In recognition of the benefit the Offering will
confer upon the undersigned as a director and/or officer and a stockholder
and/or optionholder of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the undersigned agrees with each underwriter to be named in the Purchase
Agreement (i) to maintain the confidentiality of the proposed Offering prior to
the filing of the related registration statement with the Securities and
Exchange Commission (the "Commission"), (ii) that from the date hereof until
the earlier of (1) 180 days after the date of effectiveness of the registration
statement on Form S-1 filed by the Company with the Commission for the purpose
of effectuating the Offering and (2) December 15, 2004 (the "Lock-up Period"),
the undersigned will not, without the prior written consent of Merrill Lynch,
directly or indirectly, (a) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of, or otherwise dispose of or
transfer any shares of the Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock, whether now owned or hereafter
acquired by the undersigned or with respect to which the undersigned has or
hereafter acquires the power of disposition, or file, or cause to be filed, any
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to any of the foregoing (collectively, the
"Lock-Up Securities") or (b) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Lock-Up Securities, whether any such
swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise.


                                        Very truly yours,


                                        Signature:
                                                   ----------------------------

                                        Print Name:
                                                    ---------------------------


                                      B-1

                                                                      Exhibit C


   FORM OF LOCK-UP AGREEMENT FOR OCM REAL ESTATE OPPORTUNITIES FUND II, L.P.

                               February, 27 2004


MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated
4 World Financial Center
New York, New York 10080

         Re:      Proposed Public Offering by Lodgian, Inc.

Dear Sirs:

         The undersigned, a stockholder of Lodgian, Inc., a Delaware
corporation (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), as representative
of the underwriters (the "Underwriters"), proposes to enter into a Purchase
Agreement (the "Purchase Agreement") with the Company providing for the public
offering (the "Offering") of shares (the "Securities") of the Company's common
stock, par value $0.01 per share (the "Common Stock"). In recognition of the
benefit that the Offering will confer upon the undersigned as a stockholder of
the Company; and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
Underwriter to be named in the Purchase Agreement (i) to maintain the
confidentiality of the proposed Offering prior to the filing of the related
registration statement with the Securities and Exchange Commission (the
"Commission"), (ii) that, notwithstanding any provision contained in the
registration rights agreement among the Company, the undersigned and certain
other shareholders of the Company, dated as of November 25, 2002 (the
"Registration Rights Agreement"), or otherwise, from the date hereof until the
earlier of (l) 180 days after the date of effectiveness of the registration
statement on Form S-1 filed by the Company with the United States Securities
and Exchange Commission for the purpose of effectuating the Offering and (2)
December 15, 2004 (the "Lock-up Period"), the undersigned will not, without the
prior written consent of Merrill Lynch, directly or indirectly, (a) offer,
pledge, sell, contract to sell, sell any option or contract to purchase any
option or contract to sell, grant any option, right or warrant for the sale of,
lend or otherwise dispose of or transfer any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file, or cause, to be filed, any registration statement under the Securities
Act of 1933, as amended (the "Securities Act") with respect to any of the
foregoing (collectively, the "Lock-Up Securities") or (b) enter into any swap
or any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Lock-Up
Securities, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise, (iii) that the
Company will not be required, under the Registration Rights Agreement or
otherwise, to use its reasonable best efforts to have declared effective as
promptly as practicable after filing with the Commission a registration
statement covering the resale of shares of Common Stock as contemplated, by
Section 2.1 of the Registration Rights Agreement until the expiration of the
Lock-Up Period, and (iv) to waive any and all rights, under the Registration
Rights Agreement or otherwise, that the undersigned may have to cause shares of
Common Stock to be registered for resale with the Commission along with shares
of Common Stock offered publicly by the Company in connection with the
Offering, including rights under Section 3.1 of the Registration Rights
Agreement.


                                      C-1

                                        Very truly yours,


                                        OCM Real Estate Opportunities Fund
                                        II, L.P.


                                        By: Oaktree Capital Management, LLC,
                                            its General Partner


                                        By:
                                           ------------------------------------

                                        By:
                                           ------------------------------------


                                      C-2

                                                                      Exhibit D


             FORM OF LOCK-UP AGREEMENT FOR THIRD AVENUE VALUE FUND

                                 March 4, 2004


MERRILL LYNCH & CO.
Merrill Lynch, Pierce Fenner & Smith
            Incorporated
4 World Financial Center
New York, New York 10080

         Re:      Proposed Public Offering by Lodgian, Inc.

         The undersigned, a stockholder of Lodgian, Inc., a Delaware
corporation (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), as representative
of the underwriters (the "Underwriters"), proposes to enter into a Purchase
Agreement (the "Purchase Agreement") with the Company providing for the public
offering (the "Offering") of shares (the "Securities") of the Company's common
stock, par value $0.01 per share (the "Common Stock"). In recognition of the
benefit that the Offering will confer upon the undersigned as a stockholder of
the Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
Underwriter to be named in the Purchase Agreement (i) to maintain the
confidentiality of the proposed Offering prior to the filing of the related
registration statement with the Securities and Exchange Commission (the
"Commission"), (ii) that, notwithstanding any provision contained in the
registration rights agreement among the Company, the undersigned and certain
other shareholders of the Company, dated as of November 25, 2002 (the
"Registration Rights Agreement"), or otherwise, from the date hereof until this
earlier of (1) 180 days after the date of effectiveness of the registration
statement on Form S-1 filed by the Company with the United States Securities
and Exchange Commission for the purpose of effectuating the Offering and (2)
December 15, 2004 (the "Lock-up Period"), the undersigned will not, without the
prior written consent of Merrill Lynch, directly or indirectly, (a) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, lend otherwise dispose of or transfer any shares of Common Stock
or any securities convertible into or exchangeable or exercisable for Common
Stock, whether now owned or hereafter acquired by the undersigned or with
respect to which the undersigned has or hereafter acquires the power of
disposition, or file, or cause to be filed, any registration statement under
the Securities Act of 1933, as amended (the "Securities Act") with respect to
any of the foregoing (collectively, the "Lock-Up Securities") or (b) enter into
any swap or any other agreement or any transaction that transfers, in whole or
in part, directly or indirectly, the economic consequence of ownership of the
Lock-Up Securities, whether any such swap or transaction is to be settled by
delivery of Common Stock or other securities, in cash or otherwise, (iii) that
the Company will not be required, under the Registration Rights Agreement or
otherwise, to use its reasonable best efforts to have declared effective as
promptly as practicable after filing with the Commission a registration
statement covering the resale of shares of Common Stock as contemplated by
Section 2.1 of the Registration Rights Agreement until the expiration of the
Lock-Up Period, and (iv) to waive any and all rights, under the Registration
Rights Agreement or otherwise, that the undersigned may have to cause shares of
Common Stock to be registered for resale with the Commission along with shares
of Common Stock offered publicly by the Company in connection with the
Offering, including rights under Section 3.1 of the Registration Rights
Agreement.


                                      D-1

                                        Very truly yours,

                                        Third Avenue Trust, on behalf of Third
                                        Avenue Value Fund


                                        By:
                                           ------------------------------------

                                        Print Name:
                                                   ----------------------------

                                        Title:
                                              ---------------------------------


                                      D-2

                                                                      Exhibit E


                FORM OF LOCK-UP AGREEMENT FOR BRE HY FUNDING LLC

                                 March 2, 2004


MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated
4 World Financial Center
New York, New York 10080

         Re:      Proposed Public Offering by Lodgian, Inc.

Dear Sirs:

         The undersigned, a stockholder of Lodgian, Inc., a Delaware
corporation (the "Company"), understands that Merrill Lynch & Co., Merrill
Lynch, Pierce, Fencer & Smith Incorporated ("Merrill Lynch"), as representative
of the underwriters (the "Underwriters") proposes to enter into a Purchase
Agreement (the "Purchase Agreement") with the Company providing for the public
offering (the "Offering") of shares (the "Securities") of the Company's common
stock, par value $0.01 per share (the "Common Stock"). In recognition of the
benefit that the Offering will confer upon the undersigned as a stockholder of
the Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with. each
Underwriter to be named in the Purchase Agreement (i) that, notwithstanding any
provision contained in the registration rights agreement among the Company, the
undersigned and certain other shareholders of the Company, dated as of November
25, 2002 (the "Registration Rights Agreement"), or otherwise, from the date
hereof until the earliest of (1) 180 days after the date of effectiveness of
the registration statement on Form S-1 filed by the Company with the United
States Securities and Exchange Commission for the purpose of effectuating the
Offering, (2) December 15, 2004, and (3) the termination of the Purchase
Agreement (the "Lock-up Period"), the undersigned will not, without the prior
written consent of Merrill Lynch, directly or indirectly, (a) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale of,
lend or otherwise dispose of or transfer any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file, or cause to be filed, any registration statement under the Securities Act
of 1933, as amended (the "Securities Act") with respect to any of the foregoing
(collectively, the "Lock-Up Securities") or (b) enter into any swap or any
other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Lock-Up
Securities, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise, (ii) that, prior to
the expiration of the Lock-Up Period, the Company will not be required, under
the Registration Rights Agreement or otherwise, to use its reasonable best
efforts to have declared effective as promptly as practicable after filing with
the Commission a registration statement covering the resale of shares of Common
Stock as contemplated by Section 2.1 of the Registration Rights Agreement, and
(iii) to waive any and all rights, under the Registration Rights Agreement or
otherwise, that the undersigned may have to cause shares of Common Stock to be
registered for resale with the Commission along with shares of Common Stock
offered publicly by the Company in connection with the Offering, including
rights under Section 3.1 of the Registration Rights Agreement, until the
expiration of the Lock-up Period. Any Company Common Stock acquired by the
undersigned in the open market after the date hereof shall not be subject to
the terms of paragraph (i) of this Agreement.


                                      E-1

                                        Very truly yours,


                                        BRE HY Funding LLC


                                        By:

                                        Signature:
                                                   ----------------------------

                                        Print Name:
                                                    ---------------------------

                                        Title:
                                               --------------------------------


                                      E-2

EX-10.1.1

                                                                  EXHIBIT 10.1.1

                           LOAN AND SECURITY AGREEMENT
                                 (FLOATING RATE)

                           DATED AS OF JUNE 25, 2004

                                     BETWEEN

                    THE BORROWERS LISTED ON SCHEDULE 1 HERETO
                                  AS BORROWERS

                                       AND

                      MERRILL LYNCH MORTGAGE LENDING, INC.
                                    AS LENDER


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


                                TABLE OF CONTENTS



                                                                                            Page
                                                                                            ----
                                                                                      
                                         ARTICLE I
                                        DEFINITIONS

Section 1.1      Certain Defined Terms....................................................    1
Section 1.2      Accounting Terms.........................................................   25
Section 1.3      Other Definitional Provisions............................................   25

                                        ARTICLE II
                                     TERMS OF THE LOAN

Section 2.1      Loan.....................................................................   25
Section 2.2      Interest.................................................................   26
Section 2.3      Interest Rate Cap Agreement..............................................   27
Section 2.4      Payments.................................................................   28
Section 2.5      Maturity.................................................................   29
Section 2.6      Prepayment...............................................................   31
Section 2.7      Outstanding Balance......................................................   31
Section 2.8      Taxes....................................................................   31
Section 2.9      Reasonableness of Charges................................................   32
Section 2.10     Funding Losses/Change in Law Etc.........................................   32
Section 2.11     Servicing/Special Servicing..............................................   33

                                        ARTICLE III
                                    CONDITIONS TO LOAN

Section 3.1      Conditions to Funding of the Loan on the Closing Date....................   34

                                        ARTICLE IV
                              REPRESENTATIONS AND WARRANTIES

Section 4.1      Organization, Powers, Capitalization, Good Standing, Business............   39
Section 4.2      Authorization of Borrowing, etc..........................................   40
Section 4.3      Financial Statements.....................................................   40
Section 4.4      Indebtedness and Contingent Obligations..................................   41
Section 4.5      Title to the Properties..................................................   41
Section 4.6      Zoning; Compliance with Laws.............................................   41
Section 4.7      Leases; Agreements.......................................................   42
Section 4.8      Condition of the Properties..............................................   43
Section 4.9      Litigation; Adverse Facts................................................   43
Section 4.10     Payment of Taxes.........................................................   44
Section 4.11     Adverse Contracts........................................................   44
Section 4.12     Performance of Agreements................................................   44
Section 4.13     Governmental Regulation..................................................   44
Section 4.14     Employee Benefit Plans...................................................   44


                                             i


                                                                                       
Section 4.15     Broker's Fees............................................................   44
Section 4.16     Intentionally Deleted....................................................   44
Section 4.17     Solvency.................................................................   44
Section 4.18     Disclosure...............................................................   45
Section 4.19     Use of Proceeds and Margin Security......................................   45
Section 4.20     Insurance................................................................   45
Section 4.21     Separate Tax Lots........................................................   45
Section 4.22     Investments..............................................................   45
Section 4.23     Bankruptcy...............................................................   46
Section 4.24     Defaults.................................................................   46
Section 4.25     No Plan Assets...........................................................   46
Section 4.26     Governmental Plan........................................................   46
Section 4.27     Not Foreign Person.......................................................   46
Section 4.28     No Collective Bargaining Agreements......................................   46
Section 4.29     Condominium Property Documents...........................................   46
Section 4.30     Ground Leases............................................................   47
Section 4.31     No Prohibited Persons....................................................   47

                                         ARTICLE V
                               COVENANTS OF BORROWER PARTIES

Section 5.1      Financial Statements and Other Reports...................................   48
Section 5.2      Existence; Qualification.................................................   53
Section 5.3      Payment of Impositions and Claims........................................   53
Section 5.4      Maintenance of Insurance.................................................   54
Section 5.5      Operation and Maintenance of the Properties; Casualty....................   58
Section 5.6      Inspection...............................................................   61
Section 5.7      O&M Plan.................................................................   61
Section 5.8      Intentionally Deleted....................................................   61
Section 5.9      Compliance with Laws and Contractual Obligations.........................   61
Section 5.10     Further Assurances.......................................................   61
Section 5.11     Performance of Agreements and Leases.....................................   62
Section 5.12     Leases...................................................................   62
Section 5.13     Management; Franchise Agreement..........................................   63
Section 5.14     Material Agreements......................................................   65
Section 5.15     Deposits; Application of Receipts........................................   66
Section 5.16     Estoppel Certificates....................................................   66
Section 5.17     Indebtedness.............................................................   66
Section 5.18     No Liens.................................................................   67
Section 5.19     Contingent Obligations...................................................   67
Section 5.20     Restriction on Fundamental Changes.......................................   67
Section 5.21     Transactions with Related Persons........................................   67
Section 5.22     Bankruptcy, Receivers, Similar Matters...................................   68
Section 5.23     ERISA....................................................................   68
Section 5.24     Press Release............................................................   69
Section 5.25     Ground Leases............................................................   69
Section 5.26     Condominium Property.....................................................   72



                                            ii


                                                                                       
Section 5.27     Lender's Expenses........................................................   74
Section 5.28     Distributions............................................................   74
Section 5.29     Completion of Required Capital Improvements..............................   73
Section 5.30     Cancellation of Indebtedness; Settlement of Claims.......................   74

                                        ARTICLE VI
                                         RESERVES

Section 6.1      Security Interest in Reserves; Other Matters Pertaining to Reserves......   75
Section 6.2      Funds Deposited with Lender..............................................   75
Section 6.3      Impositions and Insurance Reserve........................................   76
Section 6.4      FF&E Reserve.............................................................   76
Section 6.5      Capital Improvement Reserve; Required Capital Improvements...............   77
Section 6.6      Hazardous Materials Remediation Reserve..................................   77
Section 6.7      Conditions to Disbursements from Hazardous Materials Remediation Reserve
                   and Capital Improvement Reserve; Performance of Work...................   77
Section 6.8      Cash Trap Reserve........................................................   82

                                        ARTICLE VII
               LOCK BOX; CLEARING ACCOUNT; CENTRAL ACCOUNT; CASH MANAGEMENT

Section 7.1      Establishment of Deposit Account and Lock Box Account....................   83
Section 7.2      Application of Funds in Lock Box Account.................................   85
Section 7.3      Application of Funds After Event of Default..............................   85

                                       ARTICLE VIII
                               DEFAULT, RIGHTS AND REMEDIES

Section 8.1      Event of Default.........................................................   85
Section 8.2      Acceleration and Remedies................................................   88
Section 8.3      Performance by Lender....................................................   89
Section 8.4      Evidence of Compliance...................................................   90

                                        ARTICLE IX
        SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 9.1      Applicable to all Primary Borrower Parties...............................   90
Section 9.2      Applicable to Borrowers, General Partner and Member......................   92

                                         ARTICLE X
                     RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS

Section 10.1     Secondary Market Transactions Generally..................................   94
Section 10.2     Cooperation; Limitations.................................................   94
Section 10.3     Information..............................................................   95
Section 10.4     Additional Provisions....................................................   96



                                            iii


                                                                                      
                                        ARTICLE XI
           RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES

Section 11.1     Restrictions on Transfer and Encumbrance.................................   97
Section 11.2     Transfers of Beneficial Interests in Borrowers...........................   97
Section 11.3     Assumability.............................................................   98
Section 11.4     Release of Properties....................................................   99
Section 11.5     Reserved.................................................................  101
Section 11.6     Sale of Building Equipment...............................................  101
Section 11.7     Immaterial Transfers and Easements, etc..................................  101

                                        ARTICLE XII
                             RECOURSE; LIMITATIONS ON RECOURSE

Section 12.1     Limitations on Recourse..................................................  102
Section 12.2     Partial Recourse.........................................................  102
Section 12.3     Miscellaneous............................................................  103

                                       ARTICLE XIII
                      WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES

Section 13.1     Waivers..................................................................  103

                                        ARTICLE XIV
                                       MISCELLANEOUS

Section 14.1     Expenses and Attorneys' Fees.............................................  105
Section 14.2     Indemnity................................................................  105
Section 14.3     Amendments and Waivers...................................................  106
Section 14.4     Retention of the Borrowers' Documents....................................  106
Section 14.5     Notices..................................................................  107
Section 14.6     Survival of Warranties and Certain Agreements............................  108
Section 14.7     Failure or Indulgence Not Waiver; Remedies Cumulative....................  108
Section 14.8     Marshaling; Payments Set Aside...........................................  108
Section 14.9     Severability.............................................................  108
Section 14.10    Headings.................................................................  108
Section 14.11    APPLICABLE LAW...........................................................  108
Section 14.12    Successors and Assigns...................................................  109
Section 14.13    Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship ......  109
Section 14.14    Reasonableness of Determinations.........................................  109
Section 14.15    Limitation of Liability..................................................  110
Section 14.16    No Duty..................................................................  110
Section 14.17    Entire Agreement.........................................................  110
Section 14.18    Construction; Supremacy of Loan Agreement................................  110
Section 14.19    Consent to Jurisdiction..................................................  110
Section 14.20    Waiver of Jury Trial.....................................................  111
Section 14.21    Counterparts; Effectiveness..............................................  111



                                            iv


                                                                                      
Section 14.22    Servicer.................................................................  112
Section 14.23    Obligations of Borrower Parties..........................................  112
Section 14.24    Additional Inspections; Reports..........................................  112



                                            v


                         LIST OF EXHIBITS AND SCHEDULES
               
Exhibit A         -  Properties
Exhibit B         -  Environmental Reports
Exhibit C         -  Franchise Agreements
Exhibit D         -  Allocated Loan Amounts/Aggregate Allocated Loan Amount
Exhibit E         -  Management Agreements
Exhibit F         -  [Reserved]
Exhibit G         -  Property Improvement Plan
Exhibit H         -  [Reserved]
Exhibit I         -  Acceptable Franchisors
Exhibit J         -  Property Condition Reports
Exhibit K         -  Zoning Reports
Exhibit L         -  Certificate Regarding Work Reserves

Schedule 1        -  Borrowers
Schedule 2.4      -  Scheduled Mortgage Principal Payments
Schedule 3.1(A)   -  List of Loan Documents
Schedule 4.1(C)   -  Organizational Chart for Borrower Parties
Schedule 4.2      -  Consents
Schedule 4.5      -  Condemnation Proceedings
Schedule 4.5(A)   -  Rights to Purchase/Rights of First Offer
Schedule 4.7(B)   -  Rent Roll
Schedule 4.7(E)   -  Franchise Defaults
Schedule 4.9      -  Litigation
Schedule 4.14        ERISA Plans
Schedule 4.20     -  Insurance
Schedule 4.28     -  Collective Bargaining Agreements
Schedule 4.29     -  Condominium Property Documents
Schedule 4.30     -  Ground Leases
Schedule 5.7      -  O&M Plans
Schedule 5.14     -  Material Agreements
Schedule 6.5      -  Required Capital Improvements
Schedule 6.6      -  Environmental Work
Schedule 6.7      -  Reserve Funding Conditions



                                       i


                           LOAN AND SECURITY AGREEMENT

            This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as
of June 25, 2004 and entered into by and between the parties listed as Borrowers
on SCHEDULE 1 hereto (collectively, "BORROWERS", and individually, each a
"BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation
(together with its successors and assigns, "LENDER").

            NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrowers and Lender agree as
follows:

                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan
Agreement as so defined. Terms defined in the preamble and recitals to this Loan
Agreement are used in this Loan Agreement as so defined.

      "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the
franchisors identified on EXHIBIT I.

      "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate
of the Borrowers and, upon receipt of a Rating Confirmation, another reputable
hotel management company with at least five (5) years experience managing hotel
properties similar to the Properties and which at the time of its engagement is
managing at least 5,000 hotel rooms (exclusive of the Properties).

      "ACCEPTABLE REPLACEMENT CAP" has the meaning set forth in Section 2.3.

      "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest
in and to the Accounts, the Reserves, all monies and amounts which may from time
to time be on deposit therein, all monies, checks, notes, instruments,
documents, deposits, and credits from time to time in the possession of Lender
representing or evidencing such Accounts and Reserves and all earnings and
investments held therein and proceeds thereof.

      "ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any
Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any
other accounts pledged to Lender pursuant to this Loan Agreement or any other
Loan Document.

      "AFFILIATE" means in relation to any Person, any other Person: (i)
directly or indirectly controlling, controlled by, or under common control with,
the first Person; (ii) directly or indirectly owning or holding fifty percent
(50%) or more of any equity interest in the first Person; or (iii) fifty percent
(50%) or more of whose voting stock or other equity interest is directly or
indirectly owned or held by the first Person. In addition, the Affiliates of
each Borrower Party include, without limitation, all other Borrower Parties,
irrespective of whether they now or hereafter satisfy the foregoing criteria.
For purposes of this definition, "CONTROL" (including with correlative meanings,
the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means
the possession directly or indirectly of the power to direct or



cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise. Where expressions
such as "[name of party] or any Affiliate" are used, the same shall refer to the
named party and any Affiliate of the named party. Further, the Affiliates of any
Person that is an entity shall include all natural persons who are officers,
directors, managing members, or general partners of the entity.

      "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the
Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT
D.

      "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of
determination, the aggregate outstanding principal balance of the Mezzanine Loan
and the Loan.

      "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each
Property as set forth on EXHIBIT D.

      "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers,
Deloitte & Touche or KPMG Peat Marwick or any successor entity.

      "APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in
Section 6.7.

      "APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section
6.7.

      "APPROVED EXPENDITURES" has the meaning set forth in Section 6.7.

      "ARCHITECT" has the meaning set forth in Section 5.5.

      "ASSIGNMENT OF RATE CAP" means that certain Collateral Assignment of
Interest Rate Protection Agreement of even date herewith from the Borrowers to
Lender, constituting an assignment of the Cap and proceeds therefrom as
Collateral for the Loan, as same may be amended or modified from time to time.

      "ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and
Rents of even date herewith from each of the Borrowers to Lender, constituting
assignments of each Borrower's right, title and interest in the Leases and
proceeds therefrom for each of their respective Properties as Collateral for the
Loan, as same may be amended or modified from time to time.

      "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain
Conditional Assignments of Hotel Management Agreements of even date herewith
executed by each of the Borrowers and the applicable Manager, constituting an
assignment of each Management Agreement as Collateral for the Loan, as same may
be amended or modified from time to time.

      "ASSUMPTION" has the meaning set forth in Section 11.3.

      "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended
from time to time, and all rules and regulations promulgated thereunder.

                                       2


      "BEVERAGE COMPANY" means any Person (other than any of the Borrowers)
holding, or entitled to any proceeds from, any liquor license or other beverage
permit for the sale of alcoholic beverages at any Property.

      "BOARD OF MANAGERS" means the board of managers, or similar governing
entity, established for the governance of the condominium association
established pursuant to the terms of the Condominium Property Documents.

      "BORROWER" and "BORROWERS" have the meanings set forth in the preamble;
provided that, following a Release, "BORROWERS" means each of the Borrowers
remaining as a party to the Loan Documents, and whose Properties remain
encumbered by the Mortgages as Collateral for the Loan and "BORROWER" means any
of such remaining parties.

      "BORROWER PARTY" and "BORROWER PARTIES" means, individually or
collectively, the Borrowers, General Partner, Member and Guarantor.

      "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1.

      "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii)
any day which is a legal holiday under the laws of the State of New York, the
state or states where the servicing offices of the Servicer, and, if the Loan
becomes a "specially serviced mortgage loan" pursuant to the terms of any trust
and servicing agreement entered into in connection with any Securitization
backed in whole or in part by the Loan, the special servicer, are located or the
state in which the corporate trust office of the trustee in connection with any
such Securitization is located, and (iv) any day on which banking institutions
located in such state are generally not open for the conduct of regular
business.

      "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event,
the last day of each calendar quarter, and (y) during the continuance of a Cash
Trap Event, the last day of each calendar month.

      "CAP" has the meaning set forth in Section 2.3.

      "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other
expenditures for FF&E and Capital Expenditures set forth in an annual budget
approved by Lender in writing (such approval not to be unreasonably withheld or
delayed as long as the budget is consistent with the form of the CapEx/FF&E
Budget provided to Lender prior to Closing), covering the planned FF&E
expenditures and Capital Expenditures for the period covered by such budget, as
same may be amended pursuant to Section 5.1(D) hereof.

      "CAPITAL EXPENDITURES" means expenditures for Capital Improvements.

      "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations
(including any improvements, repairs or alterations required pursuant to a
Property Improvement Plan), FF&E and other capital items (whether paid in cash
or property or accrued as liabilities) made by the Borrowers that, in conformity
with GAAP, would not be included in the Borrowers' annual financial statements
as an Operating Expense of the Properties.

                                       3


      "CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5.

      "CAP PROVIDER" has the meaning set forth in Section 2.3.

      "CAP RESERVE" has the meaning set forth in Section 2.3.

      "CAP THRESHOLD RATE" has the meaning set forth in Section 2.3.

      "CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even
date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank.

      "CASH TRAP EVENT" has the meaning set forth in Section 6.8.

      "CASH TRAP RESERVE" has the meaning set forth in Section 6.8.

      "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier
3 Hotel category.

      "CLAIMS" has the meaning set forth in Section 5.3.

      "CLOSING" means the funding of the Loan and the consummation of the other
transactions contemplated by this Loan Agreement.

      "CLOSING DATE" means the date on which the Closing occurs.

      "COLLATERAL" means rights, interests, and property of every kind, real and
personal, tangible and intangible, which is granted, pledged, liened, or
encumbered as security for the Loan or any of the other Obligations under this
Loan Agreement, the Mortgages, the Cash Management Agreement or other Loan
Documents, including without limitation the Properties and the Account
Collateral.

      "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1.

      "COMPONENT A" means that portion of the Loan in the amount of $72,000,000
made by Lender to Borrower pursuant to this Agreement.

      "COMPONENT A RATE" means a rate per annum equal to the Component A Spread
plus the LIBO Rate in effect for the relevant Interest Accrual Period.

      "COMPONENT B" means that portion of the Loan in the amount of $37,999,900
made by Lender to Borrower pursuant to this Agreement.

      "COMPONENT B RATE" means a rate per annum equal to the Component B Spread
plus the LIBO Rate in effect for the relevant Interest Accrual Period.

      "COMPONENT A SPREAD" means 1.015.

      "COMPONENT B SPREAD" means 7.920.

                                       4


      "COMPONENTS" means, collectively, Component A and Component B.

      "CONDOMINIUM BORROWER" means, Servico Maryland, Inc., the Borrower that
owns the Condominium Property.

      "CONDOMINIUM DEFAULT" has the meaning set forth in Section 4.29.

      "CONDOMINIUM PROPERTY" means the Property currently operated as a Holiday
Inn, located in Silver Springs, Maryland.

      "CONDOMINIUM PROPERTY DOCUMENTS" means those certain documents identified
on SCHEDULE 4.29.

      "CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (A) with respect to
any indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto; (B) with respect to any
letter of credit issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings; (C) under any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect against
fluctuations in interest rates; or (D) under any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect that Person against fluctuations in currency values. Contingent
Obligations shall include (i) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making (other than the Loan), discounting with recourse or sale with recourse
by such Person of the obligation of another, (ii) the obligation to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement, and (iii) any liability of such Person
for the obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance sheet item or level of
income of another. The amount of any Contingent Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported or, if not a fixed
and determined amount, the maximum amount so guaranteed.

      "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject, other than the Loan Documents.

      "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1.

      "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set
forth in Section 7.1.

      "D&O INSURANCE" has the meaning set forth in Section 5.4.

                                       5


      "DEBT SERVICE COVERAGE RATIO" OR "DSCR" means, at any time of
determination, Net Cash Flow for the trailing twelve (12) month period divided
by the amount of interest (assuming an interest rate equal to the Test Rate)
that will be required to be paid over the succeeding twelve (12) months on the
Loan and the Mezzanine Loan, plus principal amortization of the Loan and the
Mezzanine Loan that would be required in respect of the then outstanding
principal amount of the Loan and the Mezzanine Loan over the succeeding twelve
(12) months based on a twenty-five (25) year amortization schedule, calculated
using the Test Rate.

      "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1.

      "DEBT YIELD" means, at any time of determination, Net Cash Flow for the
trailing twelve (12) month period divided by the then outstanding principal
balance of the Loan and the Mezzanine Loan.

      "DEFAULT" means any breach or default under any of the Loan Documents,
whether or not the same is an Event of Default, and also any condition or event
that, after notice or lapse of time or both, would constitute an Event of
Default if that condition or event were not cured or removed within any
applicable grace or cure period.

      "DEFAULT RATE" has the meaning set forth in Section 2.2.

      "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1.

      "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1.

      "DEPOSIT BANK" has the meaning set forth in Section 7.1.

      "DETERMINATION DATE" means the day which is two (2) Eurodollar Business
Days prior to the first (1st) day of an Interest Accrual Period; provided that
the first (1st) Determination Date shall be two (2) Eurodollar Business Days
prior to the Closing Date or, if such date is not a Eurodollar Business Day, the
immediately preceding Eurodollar Business Day. The LIBO Rate set on each
Determination Date shall be in effect for the Interest Accrual Period
immediately following such Determination Date.

      "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3.

      "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by
Moody's or A-1 or better by S&P or similarly rated by any successor to either of
such rating services, (b) obligations of the United States government or any
agency thereof which are backed by the full faith and credit of the United
States, or (c) deposits, including certificates of deposit, in any commercial
bank or trust company (i) which is registered to do business in any state of the
United States, (ii) which has capital and surplus in excess of $100,000,000 and
(iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or
better by Moody's or is similarly rated by any successor thereof, provided that
each such item of commercial paper, each such obligation, and each such time
deposit has a maturity date not later than thirty days after the date of
purchase thereof.

      "DOLLARS" and the sign "$" mean the lawful money of the United States of
America.

                                       6


      "ELIGIBLE ACCOUNT" means a separate and identifiable account from all
other funds held by the holding institution, which account is either (i) an
account maintained with an Eligible Bank or (ii) a segregated trust account
maintained by a corporate trust department of a federal depository institution
or a state chartered depository institution subject to regulations regarding
fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulations ss. 9.10(b), which, in either case, has corporate trust powers and
is acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.

      "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria.

      "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning
of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is
maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii)
which has at any time within the preceding six (6) years been maintained for the
employees of any of the Borrowers or any current or former ERISA Affiliate or
(iii) for which any of the Borrowers or any ERISA Affiliate has any liability,
including contingent liability.

      "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date
herewith from the Borrowers and Guarantor to Lender, as same may be amended or
modified from time to time.

      "ENVIRONMENTAL LAWS" means all present and future local, state, federal or
other governmental authority, statutes, ordinances, codes, orders, decrees,
laws, rules or regulations pertaining to or imposing liability or standards of
conduct concerning environmental regulation (including, without limitation,
regulations concerning health and safety), contamination or clean-up or the
handling, generation, release or storage of Hazardous Material affecting the
Properties including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know
Act of 1986, as amended, the Hazardous Substances Transportation Act, as
amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as
amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as
amended, the Safe Drinking Water Act, as amended, the Occupational Safety and
Health Act, as amended, any state superlien and environmental clean-up statutes
and all regulations adopted in respect of the foregoing laws whether now or
hereafter in effect.

      "ENVIRONMENTAL REPORTS" means those certain environmental reports and
audits for the Properties as described on EXHIBIT B.

      "ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6.

      "EO13224" has the meaning set forth in Section 4.31.

      "ERISA" means the Employee Retirement Income Security Act of 1974, and all
rules and regulations promulgated thereunder.

      "ERISA AFFILIATE" means, in relation to any Person, any other Person under
common control with the first Person, within the meaning of Section 4001(a)(14)
of ERISA.

                                       7


      "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of
London, England are generally open for interbank or foreign exchange
transactions and which is also a Business Day.

      "EVENT OF DEFAULT" has the meaning set forth in Section 8.1.

      "EXCESS CASH FLOW" has the meaning set forth in the Cash Management
Agreement.

      "EXCESS INTEREST" has the meaning set forth in Section 2.2.

      "EXCULPATED PARTIES" has the meaning set forth in Section 12.2.

      "EXTENSION CAP THRESHOLD RATE" has the meaning set forth in Section 2.5.

      "EXTENSION NOTICE" has the meaning set forth in Section 2.5.

      "EXTENSION TERMS" has the meaning set forth in Section 2.5.

      "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash
Management Agreement.

      "FF&E" means all machinery, furniture, furnishings, equipment, fixtures
(including, without limitation, all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures), inventory and articles of
personal property and accessions, renewals and replacements thereof and
substitutions therefor (including, without limitation, beds, bureaus,
chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs,
carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings,
pictures, divans, couches, luggage carts, luggage racks, stools, sofas,
chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry
cleaning facilities, dining room wagons, tools, keys or other entry systems,
bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock
radios, television sets, intercom and paging equipment, electric and electronic
equipment, dictating equipment, private telephone systems, medical equipment,
potted plants, heating, lighting and plumbing fixtures, fire prevention and
extinguishing apparatus, cooling and air-conditioning systems, elevators,
escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry
machines, tools, machinery, engines, dynamos, motors, boilers, incinerators,
switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning,
waxing and polishing equipment, call systems, brackets, electrical signs, bulbs,
bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment,
dishwashers, garbage disposals, washer and dryers), other customary hotel
equipment and other tangible property of every kind and nature whatsoever owned
by the Borrowers, or in which the Borrowers have or shall have an interest, now
or hereafter located at the Properties, or appurtenant thereto, and useable in
connection with the present or future operation and occupancy of the Properties
and all building equipment, material and supplies of any nature whatsoever owned
by the Borrowers, or in which the Borrowers have or shall have an interest, now
or hereafter located at the Properties, or appurtenant thereto, and useable in
connection with the present or future operation, enjoyment and occupancy of the
Properties.

      "FF&E RESERVE" means the reserve established pursuant to Section 6.4.

                                       8


      "FINANCIAL STATEMENTS" means statements of operations and retained
earnings, statements of cash flow and balance sheets.

      "FINANCING STATEMENTS" means the Uniform Commercial Code Financing
Statements naming the applicable Borrower Parties as debtor, and Lender as
secured party, required under applicable state law to perfect the security
interests created hereunder or under the other Loan Documents.

      "FIRST EXTENSION TERM" has the meaning set forth in Section 2.5.

      "FITCH" means Fitch, Inc.

      "FORCE MAJEURE" means acts of god, governmental restrictions, stays,
judgments, orders, decrees, enemy actions, civil commotion, fire, casualty,
strikes or work stoppages which are industry-wide and not aimed at the Borrowers
or their Affiliates, or other causes beyond the reasonable control of the
Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of
itself shall not be deemed a cause beyond the control of the Borrowers.

      "FRANCHISE AGREEMENTS" means, collectively, those certain agreements
described in EXHIBIT C and any replacement franchise agreement which may
hereafter be entered into in accordance with the terms and conditions hereof by
any of the Borrowers, as franchisee, pursuant to which the Borrowers have the
right to operate the Properties under names and hotel systems controlled by the
Franchisor.

      "FRANCHISOR" means the current hotel franchisor or licensor with respect
to each Property or any other successor franchisor or licensor permitted
pursuant to Section 5.13.

      "FRANCHISOR LETTER" means, with respect to each Property, a comfort
letter(s), and/or similar instrument(s) from the related Franchisor to Lender
acknowledging the Loan and providing certain assurances, reasonably satisfactory
to Lender, with respect thereto.

      "FUNDING LOSSES" has the meaning set forth in Section 2.10.

      "FUNDING PARTY" means any bank or other entity, if any, which is
indirectly or directly funding Lender with respect to the Loan, in whole or in
part, including, without limitation, any direct or indirect assignee of, or
participant in, the Loan.

      "GAAP" means generally accepted accounting principles as set forth in
Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting
Fairly in Conformity with Generally Accepted Accounting Principles in the
Independent Auditor's Report" issued by the Auditing Standards Board of the
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board to the extent such principles are
applicable to the facts and circumstances as of the date of determination.

      "GENERAL PARTNER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "General Partners", and any other entity which
is now or hereafter becomes a general partner of any of the Borrowers under such
Borrower's limited partnership agreement.

                                       9


      "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or
state government or other political subdivision thereof and any entity,
including any regulatory or administrative authority or court, exercising
executive, legislative, judicial, regulatory or administrative or
quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal in each case having jurisdiction over such
applicable Person or such Person's property, and any stock exchange on which
shares of capital stock of such Person are listed or admitted for trading.

      "GROUND LEASE DEFAULT" has the meaning set forth in Section 4.30

      "GROUND LEASED PROPERTIES" means the Properties subject to the Ground
Leases described on SCHEDULE 4.30 attached hereto.

      "GROUND LEASES" means the ground leases described on SCHEDULE 4.30
attached hereto.

      "GROUND LESSORS" means the lessors under the Ground Leases described on
SCHEDULE 4.30 attached hereto.

      "GUARANTOR" means Lodgian, Inc., a Delaware corporation.

      "GUARANTY" means the Guaranty of Recourse Obligations and the
Environmental Indemnity.

      "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse
Obligations of even date herewith from Guarantor to Lender, as same may be
amended or modified from time to time.

      "HAZARDOUS MATERIAL" means all or any of the following: (A) substances,
materials, compounds, wastes, products, emissions and vapors that are defined or
listed in, regulated by, or otherwise classified pursuant to, any applicable
Environmental Laws, including any so defined, listed, regulated or classified as
"hazardous substances", "hazardous materials", "hazardous wastes", "toxic
substances", "pollutants", "contaminants", or any other formulation intended to
regulate, define, list or classify substances by reason of deleterious, harmful
or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources; (C)
any flammable substances or explosives or any radioactive materials; (D)
asbestos in any form; (E) electrical or hydraulic equipment which contains any
oil or dielectric fluid containing polychlorinated biphenyls; (F) radon; (G)
mold; or (H) urea formaldehyde, provided, however, such definition shall not
include cleaning materials and other substances commonly used in the ordinary
course of the Borrowers' business, which materials exist only in reasonable
quantities and are stored, contained, transported, used, released, and disposed
of in accordance with all applicable Environmental Laws.

      "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established
pursuant to Section 6.6.

                                       10


      "IMPOSITIONS" means (i) all real estate and personal property taxes, and
vault charges and all other taxes, levies, assessments and other similar
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, of every kind and nature whatsoever (including any payments in lieu
of taxes), which at any time prior to, at or after the execution hereof may be
assessed, levied or imposed by, in each case, a governmental authority upon any
of the Properties or the rents relating thereto or upon the ownership, use,
occupancy or enjoyment thereof, and any interest, cost or penalties imposed by
such governmental authority with respect to any of the foregoing and (ii) all
rent and other amounts payable by the Borrowers under each of the Ground Leases
and under the Condominium Property Documents. Impositions shall not include (x)
any sales or use taxes payable by the Borrowers, (y) taxes payable by tenants or
guests occupying any portions of the Properties, or (z) taxes or other charges
payable by any Manager or Franchisor unless such taxes are being paid on behalf
of the Borrowers.

      "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant
to Section 6.3.

      "IMPROVEMENTS" means all buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
of every kind and nature now or hereafter located on the Properties.

      "INDEBTEDNESS" or "INDEBTEDNESS", means, for any Person, without
duplication: (i) all indebtedness of such Person for borrowed money, for amounts
drawn under a letter of credit, or for the deferred purchase price of property
for which such Person or its assets is liable, (ii) all unfunded amounts under a
loan agreement, letter of credit (unless secured in full by Dollars), or other
credit facility for which such Person would be liable if such amounts were
advanced thereunder, (iii) all amounts required to be paid by such Person as a
guaranteed payment to partners or a preferred or special dividend, including any
mandatory redemption of shares or interests but not any preferred return or
special dividend paid solely from, and to the extent of, excess cash flow after
the payment of all operating expenses, capital improvements and debt service on
all Indebtedness, (iv) all obligations under leases that constitute capital
leases for which such Person is liable, and (v) all obligations of such Person
under interest rate swaps, caps, floors, collars and other interest hedge
agreements, in each case whether such Person is liable contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which
obligations such Person otherwise assures a creditor against loss.

      "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2.

      "INDEMNITEES" has the meaning set forth in Section 14.2.

      "INDEPENDENT DIRECTOR" means an individual who shall not have been at the
time of such individual's appointment or at any time while serving as a director
of General Partner, Member, any of the Borrowers or any of their respective
Affiliates, and may not have been at any time during the preceding five years
(i) a stockholder, director (other than as an independent director/member),
officer, employee, partner, attorney or counsel of General Partner, Member,
Guarantor, any of the Borrowers or any Affiliate of any of them (except that
such individual may be an independent director of any other Affiliate of the
foregoing), (ii) a customer, supplier or other Person who derives any of its
purchases or revenues from its activities with General

                                       11


Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them
(other than a company that provides professional independent directors and which
also may provide other ancillary corporate, partnership, company or trust
services to the Borrowers, Member, General Partner or their Affiliates in the
ordinary course of business (for example, The Corporation Trust Company)), (iii)
a Person or other entity controlling or under common control with any such
stockholder, partner, customer, supplier or other Person, or (iv) a member of
the immediate family of any such stockholder, director, officer, employee,
partner, customer, supplier or other Person. As used in this definition, the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management, policies or activities of a
Person, whether through ownership of voting securities, by contract or
otherwise.

      "INITIAL TERM" means the period from the Closing Date to the Scheduled
Maturity Date.

      "INSURANCE POLICIES" has the meaning set forth in Section 5.4.

      "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance
policies required to be maintained by the Borrowers with respect to the
Properties under Section 5.4.

      "INTEREST ACCRUAL PERIOD" means a period commencing on the first (1st)
Business Day of a calendar month and ending on the day immediately prior to the
first (1st) Business Day of the next calendar month; provided that the first
(1st) Interest Accrual Period means the period from and including the Closing
Date and including the day immediately prior to the first (1st) Business Day of
the next calendar month.

      "INTERESTED PARTIES" has the meaning set forth in Section 10.3.

      "INTEREST RATE" means the Component A Rate and/or the Component B Rate, as
applicable.

      "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section
5.22.

      "IRC" means the Internal Revenue Code of 1986, and any rule or regulation
promulgated thereunder from time to time, in each case as amended from time to
time.

      "IRS" means the Internal Revenue Service or any successor thereto.

      "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents,
or in any document or certificate executed on behalf of any Borrower Party
pursuant to this Loan Agreement or any of the Loan Documents, reference is made
to the knowledge of the Borrowers or any other Borrower Party (whether by use of
the words "knowledge" or "known", or other words of similar meaning, and whether
or not the same are capitalized), such shall be deemed to refer to the knowledge
(without independent investigation or inquiry unless otherwise specified) of (i)
the individuals who have significant responsibility for any policy making, major
decisions or financial affairs of the applicable entity; (ii) the general
manager for the applicable Property; (iii) the regional vice president of
operations for Guarantor, the president of each Borrower and Member, with
respect to operational issues of any Property or any of the Borrowers; (iv) the
chief operating officer of Guarantor, with respect to representations regarding
Guarantor; and (v) the person signing such document or certificate.

                                       12


      "LEASE" means any lease, tenancy, license, assignment and/or other rental
or occupancy agreement or other agreement or arrangement (including, without
limitation, any and all guaranties of any of the foregoing) heretofore or
hereafter entered into affecting the use, enjoyment or occupancy of, or the
conduct of any activity upon or in, the Properties or any portion thereof,
including any extensions, renewals, modifications or amendments thereof.

      "LENDER" is defined in the preamble.

      "LENDER'S CONSULTANT" has the meaning set forth in Section 6.7

      "LETTER OF CREDIT" means an irrevocable, unconditional, transferable,
clean sight draft letter of credit (either an evergreen letter of credit or one
which does not expire until at least thirty (30) days after the Maturity Date
(the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw
thereon in New York, New York based solely on a statement executed by an officer
or authorized signatory of Lender, in form and substance reasonably acceptable
to Lender and issued by an Eligible Bank. If at any time (a) the institution
issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if
the Letter of Credit is due to expire prior to the LC Expiration Date, Lender
shall have the right immediately to draw down the same in full and hold the
proceeds thereof in accordance with the provisions of this Loan Agreement,
unless the Borrowers shall deliver a replacement Letter of Credit from an
Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers
written notice to the Borrowers that the institution issuing the Letter of
Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty
(20) days prior to the expiration date of said Letter of Credit.

      "LIBO RATE" means the applicable London interbank offered rate (rounded
upwards, if necessary, to the nearest one hundredth (1/100th) of one percent
(1%)) expressed as a percentage per annum for deposits in U.S. dollars appearing
on Telerate Page 3750 as of 11:00 a.m. (London time) two business days prior to
the first day of the applicable Interest Accrual Period and having a maturity
equal to the duration of such Interest Accrual Period, provided that, (1) if
Telerate Page 3750 is not available for any reason, LIBO Rate for the relevant
Interest Accrual Period shall instead be the applicable London interbank offered
rate for deposits in U.S. dollars as reported by any other generally recognized
financial information service as of 11:00 a.m. (London time) two business days
prior to the first day of such Interest Accrual Period, and having a remaining
term to maturity equal to such Interest Accrual Period, and (2) if no such
report is available, LIBO Rate for the relevant interest period shall instead be
the rate determined by the Lender to be the rate at which it offers to place
deposits in U.S. dollars with first-class banks in the London interbank market
at approximately 11:00 a.m. (London time) two business days prior to the first
day of such Interest Accrual Period, in the approximate amount of its portion of
the relevant loan and having a maturity equal to such Interest Accrual Period.
LIBO Rate shall be adjusted for Federal Reserve Board reserve requirements.

      "LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).

      "LOAN" has the meaning set forth in Section 2.1.

                                       13


      "LOAN AGREEMENT" means this Loan and Security Agreement, as same may be
amended, modified or restated from time to time (including all schedules,
exhibits, annexes and appendices hereto).

      "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgages, the
Assignments of Leases, the Assignments of Management Agreements, the Guaranty,
the Assignment of Rate Cap, the Financing Statements, the Cash Management
Agreement and any and all other documents and agreements from any of the
Borrowers, General Partner, Member, Guarantor or Manager and accepted by Lender
for the purposes of evidencing and/or securing the Loan, excluding the Mezzanine
Loan Documents.

      "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1.

      "MANAGEMENT AGREEMENTS" means those certain Management Agreements
described in EXHIBIT E, between each Borrower and the applicable Manager
described therein, and any management agreement which may hereafter be entered
into in accordance with the terms and conditions hereof, pursuant to which any
subsequent Manager may hereafter manage one or more of the Properties.

      "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the
terms of the Management Agreements.

      "MANAGERS" means the managers described in EXHIBIT E or an Acceptable
Manager as may hereafter be charged with management of one or more of the
Properties approved by Lender in accordance with the terms and conditions
hereof.

      "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable
discretion, (A) a material adverse effect (which may include economic or
political events) upon the business, operations, properties, assets or condition
(financial or otherwise) of any of the Borrowers or Guarantor, or (B) the
impairment of the ability of any of the Borrowers or Guarantor to perform its
obligations under any Loan Documents, or (C) the impairment of the ability of
Lender to enforce or collect any of the Obligations as such Obligations become
due. In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then occurring events and existing
conditions would result in a Material Adverse Effect.

      "MATERIAL AGREEMENT" means any contract or agreement relating to the
ownership, management, development, use, operation, leasing, maintenance, repair
or improvement of the Properties under which there is an obligation of the
Borrowers, in the aggregate, to pay, or under which any of the Borrowers
receives in compensation, more than $500,000 per annum, other than (i) the
Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement
under which (x) there is an obligation of the Borrowers, in the aggregate, to
pay, or under which any of the Borrowers (or all the Borrowers in the aggregate)
receives in compensation, not more than $1,000,000 per annum and (y) which is
terminable by the Borrowers on not more than sixty (60) days prior written
notice without any fee or penalty.

                                       14


      "MATERIAL ALTERATION" means any improvement or alteration to a Property
(other than decorative work such as painting, wallpapering and carpeting), the
cost of which exceeds the greater of (x) five percent (5%) of the Aggregate
Allocated Loan Amount with respect to the applicable Property or (y) $250,000,
and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget
then in effect, or as approved Work under Section 6.7 hereof.

      "MATERIAL LEASE" means any Lease of space in a Property which (i) is with
an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other
payments in an amount equal to or greater than $100,000, or has a term
(including all extensions and renewals which are unilaterally exercisable by the
tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by
either party thereto on thirty (30) days' notice without payment of a
termination fee, penalty or other cancellation fee, (iii) demises in excess of
2000 square feet of space, or (iv) obligates the Borrowers to make any
improvements to the Properties either directly or through cash allowances
(including, without limitation, free rent, tenant improvement allowances, or
landlord's construction work) to the applicable tenant in excess of $25,000. For
purposes of this definition only, in determining the square footage demised
under any Lease, all space in the applicable Property which may in the future be
demised to the tenant under such Lease by reason of such tenant exercising any
right or option contained in such Lease shall be included in the calculation of
the square footage demised under such Lease.

      "MATURITY DATE" means the Scheduled Maturity Date, as same may be extended
for the First Extension Term, the Second Extension Term, or the Third Extension
Term (subject to the terms and conditions of Section 2.5(B)), or such other date
on which the final payment of principal of the Note becomes due and payable as
herein provided, whether at such stated maturity date, by acceleration, or
otherwise.

      "MAXIMUM RATE" has the meaning set forth in Section 2.2.

      "MEMBER" means, individually or collectively, those parties identified on
SCHEDULE 4.1(C) as "Members" (being the managing or sole members of each of the
Borrowers which are limited liability companies) and any other entity which is
now or hereafter becomes the managing or sole member of any of the Borrowers
under such Borrower's limited liability company operating agreement.

      "MERRILL LYNCH" has the meaning set forth in Section 10.3.

      "MEZZANINE BORROWER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "Mezzanine Borrower".

      "MEZZANINE LENDER" means Merrill Lynch Mortgage Lending, Inc., its
successors and assigns.

      "MEZZANINE LENDER'S PERCENTAGE" means, at the time of determination, the
ratio, expressed as a percentage, that the outstanding principal balance of the
Mezzanine Loan bears to the Aggregate Outstanding Principal Balance. As of the
date hereof Mezzanine Lender's Percentage is 0%.

                                       15


      "MEZZANINE LOAN" means that certain loan being made on the date hereof
from Mezzanine Lender to Mezzanine Borrower.

      "MEZZANINE LOAN DOCUMENTS" means the documents evidencing and securing the
Mezzanine Loan, as same may be amended, modified or restated from time to time.

      "MINIMUM DEBT YIELD" means (i) prior to the first (1st) anniversary of the
Closing Date, 9%, (ii) from the first (1st) anniversary of the Closing Date but
prior to the second (2nd) anniversary of the Closing Date, 10%, (iii) during the
First Extension Term, 11%, (iv) during the Second Extension Term, 12%, and (v)
during the Third Extension Term, 13%.

      "MINIMUM DSCR" means (i) during the Second Extension Term, 1.30:1.0; and
(ii) during the Third Extension Term, 1.35:1.0.

      "MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4.

      "MOODY'S" means Moody's Investors Service.

      "MORTGAGE LENDER'S PERCENTAGE" means, at the time of determination, the
ratio, expressed as a percentage, that the outstanding principal balance of the
Loan bears to the Aggregate Outstanding Principal Balance. As of the date hereof
Mortgage Lender's Percentage is 100%.

      "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments
of Leases and Security Agreements, (ii) those certain Deeds of Trust,
Assignments of Leases and Security Agreements, and (iii) those certain Deeds to
Secure Debt, Assignment of Leases and Security Agreements, each of even date
herewith from a Borrower to Lender (or deed trustee on behalf of Lender, as
applicable), constituting a Lien on its respective Property as Collateral for
the Loan as same may be modified or amended from time to time.

      "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any
Affiliate is making, or is accruing an obligation to make, contributions or has
made, or been obligated to make, contributions within the preceding six (6)
years, or for which any of the Borrowers or any Affiliate has any liability,
including contingent liability.

      "NET CASH FLOW" means Net Operating Income for any period less (i) a base
management fee equal to the greater of (A) the actual base management fee for
such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve
for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due
to all Franchisors for such period.

      "NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which
Operating Revenues exceed Operating Expenses (excluding Management Fees,
interest, income taxes, depreciation, amortization, FF&E reserves, and fees due
to all Franchisors for such period).

      "NET SALES PROCEEDS" means (x) all consideration, from whatever source,
for the purchase of a Sale Property pursuant to the terms of a purchase contract
with an entity which is

                                       16


not an Affiliate of the Borrowers or Guarantor less (y) actual and verifiable
(i) real estate transfer taxes and recording and filing fees, (ii) out-of-pocket
attorney's fees and disbursements, (iii) mortgage taxes, intangible taxes,
escrow charges and title insurance premiums to the extent imposed by law or
customarily paid by a seller and (iv) brokerage fees paid to bona-fide third
persons, in each case to the extent incurred by the applicable Borrower and not
reimbursed to any of the Borrowers, Guarantor or their respective Affiliates,
which shall not exceed in the aggregate six percent (6%) of the sales price for
the applicable Sale Property.

      "NON-FLAGGED PROPERTIES" means the Property located at 2144 Madison
Avenue, Memphis, Tennessee, prior to such Property becoming subject to a
Franchise Agreement.

      "NOTE" means, collectively, Note A and Note B.

      "NOTE A" means that certain Promissory Note A, dated as of the date
hereof, executed by the Borrowers and payable to the order of Lender which
evidences Component A of the Loan, as amended, modified or restated, and any
replacement or substitute notes therefor, by means of multiple notes or
otherwise.

      "NOTE B" means that certain Promissory Note B, dated as of the date
hereof, executed by the Borrowers and payable to the order of Lender which
evidences Component B of the Loan, as amended, modified or restated, and any
replacement or substitute notes therefor, by means of multiple notes or
otherwise.

      "OBLIGATIONS" means the Loan and all obligations, liabilities and
indebtedness of every nature to be paid or performed by the Borrowers under the
Loan Documents, including the principal amount of the Loan, interest accrued
thereon and all fees, costs and expenses, and other sums now or hereafter owing,
due or payable and whether before or after the filing of a proceeding under the
Bankruptcy Code by or against any of the Borrowers, and the performance of all
other terms, conditions and covenants under the Loan Documents.

      "OFAC" has the meaning set forth in Section 4.31.

      "O&M PLANS" has the meaning set forth in Section 5.7.

      "OPERATING BUDGET" means, collectively, for any period, the Borrowers'
budgets setting forth the Borrowers' best estimate, after due consideration, of
all Operating Revenues and Operating Expenses and any other revenues, costs and
expenses for each of the Properties for such period, which budgets have been
approved by Lender in accordance herewith, as same may be amended pursuant to
Section 5.1(D) hereof.

      "OPERATING EXPENSES" means, for any period, without duplication, all costs
and expenses of operating, maintaining and managing the Properties determined in
accordance with GAAP, including, without limitation, Impositions (due and
payable during the applicable period of determination), Insurance Premiums,
repair and maintenance costs, Management Fees and costs, fees payable to all
Franchisors, utilities, accounting, legal and other professional fees, fees
relating to environmental and financial audits, wages, salaries, payroll taxes
and benefits, business franchise taxes, tips and gratuities paid to employees
and staff and other personnel expenses, costs and expenses related to operating
and maintaining all guest rooms, restaurants

                                       17


(including inventory and supplies), retail stores and shops, bars, meeting
rooms, banquet rooms, apartments, parking and recreational facilities, and all
other "costs and expenses" as defined in the Uniform System; but excluding
principal and interest payments on the Loan, fees and expenses of a
non-operating nature and fees and expenses due and payable to or for the benefit
of Lender under this Loan Agreement or any of the other Loan Documents
(including, without limitation, all loan servicing fees and expenses, and
expenses related to a Cap), expenses which, in accordance with GAAP, should be
capitalized, any expense paid by a tenant that would otherwise be an Operating
Expense, capital expenditures, tenant improvement allowances and leasing
commissions, if any, asset management fees, any payment or expense for which
each Borrower was or is to be reimbursed from proceeds of the Loan or insurance
or by any third party, any fees or expenses paid to any partner or member of the
Borrowers for services provided to any of the Borrowers and any non-cash charges
such as depreciation and amortization. Operating Expenses shall not include
federal, state or local income taxes or legal and other professional fees
unrelated to the operation of the Properties.

      "OPERATING REVENUES" means, without duplication, all revenues and receipts
of the Borrowers from operation of the Properties or otherwise arising in
respect of the Properties which are properly allocable to the Properties for the
applicable period in accordance with GAAP, including, without limitation, all
hotel receipts, revenues and credit card receipts collected from guest rooms,
restaurants and bars (including without limitation, service charges for
employees and staff), mini-bars, meeting rooms, banquet rooms, apartments,
parking and recreational facilities, health club membership fees, food and
beverage wholesale and retail sales, service charges, convention services,
special events, audio-visual services, boat cruises, travel agency fees,
internet booking fees, telephone charges, laundry services, vending machines and
otherwise, all rents, revenues and receipts now existing or hereafter arising or
created out of the sale, lease, sublease, license, concession or other grant of
the right of the possession, use or occupancy of all or any portion of the
Properties or personalty located thereon, or rendering of service by any of the
Borrowers or any operator or manager of the hotel or commercial space
(including, without limitation, from the rental of any office space, retail
space, guest rooms or other space, halls, stores and deposits securing
reservations of such space (only to the extent such deposits are not required to
be returned or refunded to the depositor)), proceeds from rental or business
interruption insurance relating to business interruption or loss of income for
the period in question and any other items of revenue which would be included in
operating revenues under the Uniform System; but excluding proceeds from the
sale of FF&E, abatements, reductions or refunds of real estate or personal
property taxes relating to the Properties, dividends on insurance policies
relating to the Properties, condemnation proceeds arising from a temporary
taking of all or a part of any Properties, security and other deposits until
they are forfeited by the depositor, advance rentals until they are earned,
proceeds from a sale, financing or other disposition of the Properties or any
part thereof or interest therein and other non-recurring revenues as determined
by Lender, insurance proceeds (other than proceeds from rental or business
interruption insurance), other condemnation proceeds, capital contributions or
loans to any of the Borrowers, disbursements to any of the Borrowers from the
Reserves, sales, use and occupancy taxes collected from customers or patrons of
the Properties to be remitted to the applicable taxing authorities, and
gratuities or service charges collected on behalf of and remitted to employees
or contractors of the Properties.

      "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1.

                                       18


      "PAYMENT DATE" means the date that is the last day of each calendar month
occurring during the term of the Loan (or if such last day is not a Business
Day, the immediately preceding Business Day).

      "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3.

      "PERMITTED ENCUMBRANCES" means, collectively, (i) the Mortgages and the
other Liens of the Loan Documents in favor of Lender, (ii) the items shown in
Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not
yet due and payable or Liens arising after the date hereof which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted in accordance with Section 5.3(B) hereof; (iv) in the case
of Liens arising after the date hereof, statutory Liens of carriers,
warehousemen, mechanics, materialmen and other similar Liens arising by
operation of law, which are incurred in the ordinary course of business and
discharged by the Borrowers by payment, bonding or otherwise within forty-five
(45) days after the filing thereof or which are being contested in good faith in
accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and
customary purchase money financing of personal property and equipment leasing to
the extent the same are created in the ordinary course of business in accordance
with Section 5.17(B) hereof; (vi) all easements, rights-of-way, restrictions and
other similar charges or non-monetary encumbrances against real property which
do not materially adversely affect (A) the ability of the Borrowers to pay any
of their obligations to any Person as and when due, (B) the marketability of
title to the Properties, (C) the fair market value of the Properties, or (D) the
use or operation of the Properties as of the Closing Date and thereafter; (vii)
rights of existing and future tenants, as tenants only, pursuant to the Leases;
(viii) any other Lien to which Lender may expressly consent in writing; and (ix)
Liens of the Mezzanine Loan Documents in favor of Mezzanine Lender.

      "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17.

      "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management
Agreement.

      "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in
Section 11.2.

      "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies
the requirements of Article IX hereof) controlled by, and more than 51% of which
is owned by, one of the following:

      (i)   a pension fund, pension trust or pension account that (a) has total
real estate assets of at least $2.5 Billion and (b) is managed by a Person who
controls real estate equity assets (not including the Properties) having a fair
market value of at least $1.25 Billion; or

      (ii)  a pension fund advisor who (a) immediately prior to such transfer,
controls at least $1 Billion of real estate equity assets and (b) is acting on
behalf of one or more pension funds that, in the aggregate, satisfy the
requirements of clause (i) of this definition; or

      (iii) an insurance company which is subject to supervision by the
insurance commissioner, or a similar official or agency, of a state or territory
of the United States (including the District of Columbia) (a) with a net worth,
as of the date immediately prior to the

                                       19


date of the transfer, of at least $1 Billion and (b) who, immediately prior to
such transfer, controls real estate equity assets (not including the Properties)
having a fair market value of at least $2.5 Billion; or

      (iv)  a corporation organized under the banking laws of the United States
or any state or territory of the United States (including the District of
Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b)
who, immediately prior to such transfer, controls real estate equity assets (not
including the Properties) having a fair market value of at least $5 Billion; or

      (v)   any other Person (a) with a long-term unsecured debt rating from the
Rating Agencies of at least investment grade and (b) that owns or operates at
least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior
to the date of such transfer, of at least $750 Million and (iii) immediately
prior to such transfer, controls real estate equity assets (not including the
Properties) having a fair market value of at least $1.5 Billion.

      "PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof
and their respective permitted successors and assigns (or in the case of a
governmental Person, the successor functional equivalent of such Person).

      "PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5.

      "PREPAYMENT CONSIDERATION" means (i) prior to the Payment Date in July
2005, three percent (3%) of the principal amount of the Loan being prepaid, (ii)
from the Payment Date in July 2005 but prior to the Payment Date in July 2006,
one percent (1%) of the principal amount of the Loan being prepaid and (iii)
thereafter, none.

      "PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General
Partner and Member.

      "PROHIBITED PERSON" has the meaning set forth in Section 4.31.

      "PROPERTIES" and "PROPERTY" means, collectively or individually, the
properties (including land and Improvements) described in EXHIBIT A, together
with all Improvements now or hereafter located thereon and all related
facilities, amenities and FF&E owned by the Borrowers and which shall be
encumbered by and are more particularly described in the respective Mortgages:
provided that, following a Release, "PROPERTIES" means each of the Properties
that remain encumbered by the Mortgages as Collateral for the Loan.

      "PROPERTY CONDITION REPORTS" means those certain property condition
reports for the Properties as described on EXHIBIT J.

      "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property
improvement plans for the Properties described on EXHIBIT G and any future
Property Improvement Plans required to be implemented by the applicable
Franchisor.

                                       20


      "PROPERTY RELEASE" has the meaning set forth in Section 11.4.

      "RATING AGENCY" means, prior to a securitization, any of S&P, Moody's and
Fitch or any other nationally-recognized statistical rating organization
designated by Lender in its sole discretion, and, after a Securitization, each
Rating Agency which has rated the Securities that are the subject of the
Securitization.

      "RATING CONFIRMATION" with respect to the transaction or matter in
question, means: (i) if all or any portion of the Loan, by itself or together
with other loans, has been the subject of a Securitization, then each applicable
Rating Agency shall have confirmed in writing that such transaction or matter
shall not result in a downgrade, qualification, or withdrawal of any rating then
in effect for any certificate or other securities issued in connection with such
Securitization; and (ii) if all of the Loan has not been the subject of a
Securitization, then Lender shall have determined in its reasonable discretion
(taking into consideration such factors as Lender may in good faith determine,
including the attributes of the loan pool in which the Loan might reasonably be
expected to be securitized) that no rating for any certificate or other
securities that would be issued in connection with a Securitization of such
portion of the Loan will be downgraded, qualified, or withheld by reason of such
transaction or matter.

      "RATING CRITERIA" with respect to any Person, means that (i) the
short-term unsecured debt obligations of such Person are rated at least "A-1" by
S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person
for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.

      "RECEIPTS" means all revenues, receipts and other payments of every kind
arising from ownership or operation of the Properties, including without
limitation, all warrants, stock options, or equity interests in any tenant,
licensee or other Person occupying space at, or providing services related to or
for the benefit of, the Properties received by the Borrowers or any Related
Person of the Borrowers in lieu of rent or other payment.

      "RELATED PERSON" means any Person in which any of the Borrowers or the
Guarantor holds greater than a ten percent (10%) equity interest.

      "RELEASE" has the meaning set forth in Section 11.4.

      "RELEASE DATE" has the meaning set forth in Section 11.4.

      "RELEASE PRICE" means an amount equal to (x) with respect to a Sale
Property, the greater of (i) one hundred percent (100%) of the Aggregate
Allocated Loan Amount of the applicable Sale Property, and (ii) one hundred
percent (100%) of the Net Sales Proceeds with respect to the applicable Sale
Property, and (y) with respect to any Property that is not a Sale Property, one
hundred twenty-five percent (125%) of the Aggregate Allocated Loan Amount of the
applicable Property.

      "RENT ROLL" has the meaning set forth in Section 3.1.

                                       21


      "RENTS" has the meaning set forth in the Mortgages.

      "REPLACEMENTS" has the meaning set forth in Section 6.4.

      "REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5.

      "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1.

      "RESERVES" means the reserves held by or on behalf of Lender pursuant to
this Loan Agreement or the other Loan Document, including without limitation,
the reserves established pursuant to Article VI.

      "RESTORATION" has the meaning set forth in Section 5.5.

      "RESTORATION THRESHOLD" means the greater of (x) $250,000 or (y) five
percent (5%) of the Aggregate Allocated Loan amount of the applicable Property,
not to exceed $500,000, per Property per occurrence.

      "REVPAR" means average room revenues per available room per day.

      "S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.

      "SALE PROPERTY" and "SALE PROPERTIES" means individually or collectively,
the properties identified on EXHIBIT A as "Sale Properties".

      "SCHEDULED MATURITY DATE" shall mean the Payment Date in June 2006.

      "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" means the monthly payments of
principal for each Payment Date as set forth on SCHEDULE 2.4 attached hereto;
which payment amounts were calculated based upon a twenty-five (25) year
amortization schedule at an assumed interest rate of eight and four tenths
percent (8.4%) per annum. In the event that the amount of principal prepayments
on the Loan from Releases of Properties under Section 11.4 or application of
casualty insurance proceeds or condemnation awards under Section 5.5 shall
exceed $10,000,000, in the aggregate, from the Closing Date or from the date of
the last re-amortization of the Loan under this sentence, Lender shall
recalculate the Scheduled Mortgage Principal Payments based upon the then
remaining principal amount of the Loan and the foregoing assumptions and deliver
a revised SCHEDULE 2.4 to the Borrowers, which revised schedule shall replace
SCHEDULE 2.4 hereto in its entirety.

      "SECOND EXTENSION TERM" has the meaning set forth in Section 2.5(B).

      "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1.

      "SECURITIES" (whether or not capitalized) means any stock, shares, voting
trust certificates, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in

                                       22


temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.

      "SECURITIZATION" means a rated offering of securities representing direct
or indirect interests in the Loan or the right to receive income therefrom.

      "SERVICER" means a servicer selected by Lender from time to time in its
sole discretion to service the Loan.

      "SERVICING FEE" has the meaning set forth in Section 2.11.

      "SPE EFFECTIVE DATE" means the later of (x) November 25, 2002, or (y) the
date of formation of the applicable Person in its respective jurisdiction of
formation.

      "SUB-ACCOUNTS" has the meaning set forth in Section 7.1.

      "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the
budgeted income and expenses and the actual income and expenses for the prior
calendar year or corresponding calendar quarter for such prior year, (ii) a
calculation of the average daily rate, RevPAR and average occupancy statistics
for the Properties for the applicable period, (iii) a calculation of the Debt
Service Coverage Ratio and the Debt Yield for the applicable period (which shall
not be binding on Lender), and (iv) such other financial reports as the subject
entity shall routinely and regularly prepare.

      "SURVEY" has the meaning set forth in Section 3.1.

      "TAX LIABILITIES" has the meaning set forth in Section 2.9.

      "TEST RATE" means an interest rate equal to the greater of (x) the then
current yield on the ten (10) year United States Treasury Note plus the Test
Rate Spread, and (y) the then current LIBO Rate plus the Test Rate Spread.

      "TEST RATE SPREAD" means 3.40%.

      "THIRD EXTENSION TERM" has the meaning set forth in Section 2.5(B).

      "TIER 1 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, as
applicable, identified in the "Tier 1" category on EXHIBIT I.

      "TIER 2 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 2" category on EXHIBIT I.

      "TIER 3 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 3" category on EXHIBIT I.

                                       23


      "TITLE COMPANIES" means LandAmerica Title Insurance Company and Stewart
Title Insurance Company, as co-insurers, and/or such other national title
insurance company as may be acceptable to Lender.

      "TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title
insurance pertaining to the Mortgages issued by the Title Companies to Lender in
connection with the Closing.

      "TRANSFER" has the meaning set forth in Section 11.2.

      "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3.

      "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary
termination of any Franchise Agreement, (y) the failure to pay to any Franchisor
any amount due under any Franchise Agreement (a, "FRANCHISE PAYMENT DEFAULT")
and the continuance thereof beyond any applicable notice and grace period under
such Franchise Agreement or the occurrence of one or more breaches or defaults
(other than Franchise Payment Defaults) and the continuance thereof beyond all
applicable notice and grace periods, if any, under such Franchise Agreements (or
such other cure periods as may be provided by the applicable Franchisors in
writing) covering Properties with Aggregate Allocated Loan Amounts of ten
percent (10%) or more of the Aggregate Outstanding Principal Balance; provided,
however, no Uncured Franchise Default shall be deemed to have occurred under
clause (x) above with respect to any Property (excluding the Non-Flagged
Properties) following the voluntary or involuntary termination of the applicable
Franchise Agreement if (a) within ten (10) Business Days of the termination of
the applicable Franchise Agreement (and at the time of delivery of each report
pursuant to Section 5.1(A)(v)) the applicable Borrower delivers to Lender
evidence reasonably satisfactory to Lender that such Borrower is diligently
pursuing efforts to enter into a new Franchise Agreement with an Acceptable
Franchisor for the applicable Property and such Borrower shall thereafter
diligently and continuously pursue such efforts to enter into a new Franchise
Agreement, (b) at the time of such termination not more than the lesser of (i)
two (2) Properties, or (ii) Properties with Aggregate Allocated Loan Amounts of
five percent (5%) of the Aggregate Outstanding Principal Balance, in either
case, shall be in operation for more than five (5) consecutive days without
being subject to Franchise Agreements, and (c) no Property (other than any
Non-Flagged Property) shall be without a Franchise Agreement in place for a
period in excess of six (6) months from the termination of the applicable
Franchise Agreement.

      "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging
Industry promulgated by the American Hotel and Motel Association, as in effect
from time to time.

      "WAIVING PARTY" has the meaning set forth in Section 13.1.

      "WORK" has the meaning set forth in Section 6.7.

      "WORK RESERVES" has the meaning set forth in Section 6.7.

      "ZONING REPORTS" means those certain zoning and site requirements
summaries for the Properties as described on Exhibit K.

                                       24


SECTION 1.2 ACCOUNTING TERMS.

      For purposes of this Loan Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to such terms in conformity with
GAAP or the Uniform System, as the case may be.

SECTION 1.3 OTHER DEFINITIONAL PROVISIONS.

      References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and
"SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules,
respectively, of this Loan Agreement unless otherwise specifically provided. Any
of the terms defined in Section 1.1 may, unless the context otherwise requires,
be used in the singular or the plural depending on the reference. In this Loan
Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer
to this Loan Agreement as a whole and not merely to the specific article,
section, subsection, paragraph or clause in which the respective word appears;
words importing any gender include the other genders; references to "WRITING"
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be
deemed to be followed by the words "without limitation"; and any reference to
any statute or regulation may include any amendments of same and any successor
statutes and regulations. Further, (i) any reference to any agreement or other
document may include subsequent amendments, assignments, and other modifications
thereto, and (ii) any reference to any Person may include such Person's
respective permitted successors and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons.

                                   ARTICLE II
                                TERMS OF THE LOAN

SECTION 2.1 LOAN.

      (A)   LOAN. Subject to the terms and conditions of this Loan Agreement and
in reliance upon the representations and warranties of the Borrowers contained
herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to
borrow from Lender, a loan in the original principal amount of $109,999,900 (the
"LOAN") comprised of Component A and Component B.

      (B)   NOTE. On the Closing Date, the Borrowers shall execute and deliver
to Lender Note A and Note B.

      (C)   USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be
used to (i) refinance existing indebtedness; (ii) pay all recording fees and
taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses
incurred by Lender, including reasonable legal fees and expenses of counsel to
Lender, and other costs and expenses approved by Lender (which approval will not
be unreasonably withheld) related to the Loan; (iii) establish the Reserves
required hereunder; and (iv) provide for general corporate purposes, including,
without limitation, payment of transaction costs and expenses incurred by the
Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or
as otherwise directed by the Borrowers.

                                       25


      (D)   MODIFICATION OF COMPONENTS. Lender shall have the right, at Lender's
sole cost (other than each Borrower's internal costs and expenses and the costs
and expenses of the Borrowers' counsel), any time prior to a Securitization, to
modify the Loan in order to create additional components, reduce the number of
Components, reallocate the principal balances of the Components, change the
Interest Rates of the Components or eliminate the component structure of the
Loan provided that as of the effective date of such modification (i) the total
principal balance of the Loan equals the outstanding principal balance of the
Loan immediately prior to such modification, (ii) the aggregate monthly interest
payment does not exceed the aggregate monthly amount of the interest payment
required prior to such modification and (iii) the aggregate monthly principal
amortization does not exceed the aggregate monthly principal amortization
required prior to such modification. Lender shall have the right to modify the
Components in accordance with this Section 2.1.(D) upon notice to Borrower (in
which event such modification shall then be deemed effective). If requested by
Lender, Borrower shall promptly execute an amendment to this Agreement and the
Note to evidence such modification.

SECTION 2.2 INTEREST.

      (A)   RATE OF INTEREST. The outstanding principal balance of each
Component shall bear interest at a rate per annum equal to the Interest Rate in
effect for such Component.

      (B)   DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and
during the continuance of an Event of Default and in any event from and after
the Maturity Date of the Loan and until the Loan and all other Obligations are
satisfied in full, the outstanding principal balance of the Loan and all other
Obligations shall bear interest until paid in full at a rate per annum that is
four percent (4%) in excess of the Interest Rate otherwise applicable under this
Loan Agreement and the Note (the "DEFAULT RATE").

      (C)   COMPUTATION OF INTEREST. Interest on the Loan and all other
Obligations owing to Lender shall be computed on the basis of a 360-day year,
and shall be charged for the actual number of days elapsed during any month or
other accrual period. Interest shall be payable in arrears (except with respect
to the number of days from the Payment Date in any Interest Accrual Period to
the last day of such Interest Accrual Period, as to which interest shall be
payable in advance, if any).

      (D)   INTEREST LAWS. Notwithstanding any provision to the contrary
contained in this Loan Agreement or the other Loan Documents, the Borrowers
shall not be required to pay, and Lender shall not be permitted to collect, any
amount of interest in excess of the maximum amount of interest permitted by law
("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a
court of competent jurisdiction to have been provided for in this Loan Agreement
or in any of the other Loan Documents, then in such event: (1) the provisions of
this subsection shall govern and control; (2) the Borrowers shall not be
obligated to pay any Excess Interest; (3) any Excess Interest that Lender may
have received hereunder shall be, at Lender's option, (a) applied as a credit
against either or both of the outstanding principal balance of the Loan or
accrued and unpaid interest thereunder (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any combination of
the foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to time under
applicable law (the "MAXIMUM RATE"), and this Loan

                                       26


Agreement and the other Loan Documents shall be deemed to have been and shall
be, reformed and modified to reflect such reduction; and (5) the Borrowers shall
not have any action against Lender for any damages arising out of the payment or
collection of any Excess Interest. Notwithstanding the foregoing, if for any
period of time interest on any Obligation is calculated at the Maximum Rate
rather than the applicable rate under this Loan Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest payable
on such Obligations shall, to the extent permitted by law, remain at the Maximum
Rate until Lender shall have received or accrued the amount of interest which
Lender would have received or accrued during such period on Obligations had the
rate of interest not been limited to the Maximum Rate during such period. If the
Default Rate shall be finally determined to be unlawful, then the Interest Rate
shall be applicable during any time when the Default Rate would have been
applicable hereunder, provided however that if the Maximum Rate is greater or
lesser than the Interest Rate, then the foregoing provisions of this paragraph
shall apply.

      (E)   LATE CHARGES. If an Event of Default regarding non-payment of
principal, interest or other sums due hereunder or under any of the other Loan
Documents shall occur, then the Borrowers shall pay to Lender, in addition to
all sums otherwise due and payable, a late fee in an amount equal to five
percent (5.0%) of such principal, interest or other sums due hereunder or under
any other Loan Document, such late charge to be immediately due and payable
without demand by Lender.

SECTION 2.3 INTEREST RATE CAP AGREEMENT.

      (A)   As a condition to Closing, the Borrowers shall purchase and pledge
and deliver to Lender an interest rate cap agreement satisfying the criteria set
forth below (the "CAP"), and the Borrowers shall maintain such Cap in the
possession of Lender, in full force and effect, until all Obligations are fully
and finally repaid. The Cap (i) shall have a notional amount equal to the
outstanding principal balance of the Loan calculated based upon the declining
principal balance of the Loan scheduled to be outstanding over the term of such
Cap taking into account scheduled principal amortization hereunder, (ii) shall
provide that to the extent that the LIBO Rate exceeds five percent (5%) per
annum (the "CAP THRESHOLD RATE"), then the Cap Provider shall pay to Lender, on
behalf of the Borrowers, not less than the amount of interest that would accrue
on the Loan at a per annum rate equal to the difference between the LIBO Rate
and the Cap Threshold Rate, (iii) shall be in form and substance reasonably
satisfactory to Lender, (iv) shall have a term equal to the Initial Term of the
Loan (or the applicable Extension Term), and (v) shall be issued by a financial
institution (the "CAP PROVIDER") having a financial rating by S&P of at least
"AA-" (and at least an equivalent rating from each of the other Rating
Agencies).

      (B)   If at any time the financial rating assigned to any Cap Provider by
S&P shall fall below AA- (or the equivalent rating for any other Rating Agency),
the Borrowers shall be required to deliver a replacement Cap in substantially
the form of the Cap delivered at Closing issued by a Cap Provider meeting the
rating requirements for a Cap Provider under Section 2.3(A)(v), providing for a
cap "strike price" not greater than the Cap Threshold Rate (a replacement Cap
meeting all of the foregoing conditions, an "ACCEPTABLE REPLACEMENT CAP") within
twenty (20) Business Days after receipt of notice from Lender or Servicer of
such downgrade of the Cap Provider, together with an assignment of such Cap
substantially in the form of the Assignment of Rate Cap and such Financing
Statements and opinions of in-house or

                                       27


outside counsel to the Cap Provider as Lender may reasonably require each in
form and substance acceptable to Lender. Notwithstanding the foregoing to the
contrary, under no circumstances shall the Cap be terminated by the Borrowers
prior to delivery of an Acceptable Replacement Cap, together with the required
documentation with respect thereto, to Lender. If, for any reason, the Borrowers
are unable to deliver a replacement Cap when required hereunder, then at or
prior to the time when the replacement Cap is due hereunder, the Borrowers shall
deliver to Lender cash security (such cash security together with any interest
thereon, the "CAP RESERVE") in an amount sufficient to cover the amount of
additional interest which Lender reasonably estimates may be incurred during the
remaining term of the Loan (or remaining Extension Term then in effect) as a
result of the LIBO Rate exceeding the Cap Threshold Rate, which Cap Reserve
shall be held by Lender and applied to the Obligations in accordance with
Section 6.1. Upon delivery of an Acceptable Replacement Cap reasonably
acceptable to Lender, the remaining balance of the Cap Reserve shall be promptly
returned to the Borrowers.

      (C)   All payments made by the Cap Provider under the Cap shall be
deposited directly by the Cap Provider into the Lock Box Account and applied in
accordance with the Cash Management Agreement.

SECTION 2.4 PAYMENTS.

      (A)   PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make
payments of interest and principal on the Note as follows:

            (i)   The Borrowers shall make a payment to Lender of interest only
on the Closing Date for the first Interest Accrual Period; and

            (ii)  On each Payment Date commencing with the Payment Date in July
2004 and on each Payment Date thereafter through but not including the Maturity
Date, the Borrowers shall make a payment of interest on the Loan for the
Interest Accrual Period corresponding to such Payment Date, and in addition
shall make a payment of principal on the Loan in an amount equal to the
Scheduled Mortgage Principal Payment for such Payment Date.

      (B)   DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for
payments on the Loan which are transferred to the account of Lender as provided
below (i) on the day that such funds are received by Lender if such receipt
occurs by 2:00 p.m. (New York time) on such day, or (ii) on the next succeeding
Business Day after such funds are received by Lender if such receipt occurs
after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall
be stated to be due on a day that is not a Business Day, the payment may be made
on the next succeeding Business Day.

      (C)   MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to
pay all of the Obligations relating to the Loan as such amounts become due or
are declared due pursuant to the terms of this Loan Agreement. All payments by
the Borrowers on the Loan shall be made without deduction, defense, set off or
counterclaim and in immediately available funds delivered to Lender by wire
transfer to such accounts at such banks as Lender may from time to time
designate. Prior to an Event of Default, each payment and prepayment hereunder
shall be applied first to pay late charges and the charges and expenses of
Lender, Servicer and any special

                                       28


servicer as provided hereunder, second to accrued and unpaid interest, and the
balance to principal. Prior to an Event of Default, to the extent sufficient
funds are contained in the Lock Box Account, or an Account or Sub-Account
thereof, to make the required monthly payments to the applicable Reserves and
Sub-Account on such Payment Date, the Borrowers shall be deemed to have
satisfied their obligations to make such payments. Provided no Event of Default
has occurred and is then continuing, all principal payments on the Loan shall be
applied to the outstanding principal balance of the Components pro rata. Any
amounts received by Lender during the continuance of an Event of Default may be
applied by Lender toward the payment of interest and/or principal on any of the
Components and/or any other amounts due under the Loan Documents in such order,
priority and proportions as Lender in its sole discretion shall determine.

SECTION 2.5 MATURITY.

      (A)   SCHEDULED MATURITY DATE. To the extent not sooner due and payable in
accordance with the Loan Documents (and unless the Borrowers shall extend the
term of the Loan for the First Extension Term, the Second Extension Term, or the
Third Extension Term upon the terms and subject to the conditions of Section
2.5(B) below), the then outstanding principal balance of the Loan, all accrued
and unpaid interest thereon (and including interest through the end of the
Interest Accrual Period then in effect), and all other sums then owing to Lender
hereunder and under the Note, the Mortgages and the other Loan Documents, shall
be due and payable on (i) the Scheduled Maturity Date or (ii) if the Borrowers
shall have extended the term of the Loan for the First Extension Term, the
Second Extension Term, or the Third Extension Term, upon the terms and subject
to the conditions of Section 2.5(B) below, the applicable Maturity Date.

      (B)   EXTENSION TERMS. The Borrowers may extend the term of the Loan for
three extension terms of one year each (each, an "EXTENSION TERM", and,
collectively the "EXTENSION TERMS"); (i) the first Extension Term (the "FIRST
EXTENSION TERM") commencing on the day immediately following the Scheduled
Maturity Date and ending (unless sooner terminated in accordance with the Loan
Documents) on the first (1st) anniversary of the Scheduled Maturity Date, (ii)
the second Extension Term (the "SECOND EXTENSION TERM") commencing on the day
immediately following the last day of the First Extension Term and ending
(unless sooner terminated in accordance with the Loan Documents) on the second
(2nd) anniversary of the Scheduled Maturity Date and (iii) the third Extension
Term (the "THIRD EXTENSION TERM") commencing on the day immediately following
the last day of the Second Extension Term and ending (unless sooner terminated
in accordance with the Loan Documents) on the third (3rd) anniversary of the
Scheduled Maturity Date; subject to the following terms and conditions, provided
that subsections (iii) and (iv) shall not be conditions to the exercise of the
First Extension Term:

            (i)   The Borrowers shall give Lender notice (an "EXTENSION NOTICE")
                  of their request to extend the term of the Loan for the First
                  Extension Term at any time not later than forty-five (45) days
                  but not more than one hundred twenty (120) days prior to the
                  Scheduled Maturity Date, the expiration of the First Extension
                  Term, or expiration of the Second Extension Term, as the case
                  may be;

                                       29


            (ii)  No Default or Event of Default shall have occurred and be
                  continuing as of the date the Borrowers deliver the applicable
                  Extension Notice or as of the first (1st) day of the
                  applicable Extension Term;

            (iii) The Debt Service Coverage Ratio for the trailing twelve (12)
                  month period ended (x) on the last day of the immediately
                  preceding calendar quarter prior to the expiration of the
                  First Extension Term is at least 1.30:1.0, with respect to the
                  Second Extension Term, and (y) on the last day immediately
                  prior to the expiration of the Second Extension Term, is at
                  least 1.35:1.0, with respect to the Third Extension Term, and
                  the Debt Yield for the twelve (12) month period ended on the
                  last day of the immediately preceding calendar quarter prior
                  to the expiration of the First Extension Term, or expiration
                  of the Second Extension Term, as the case may be, is not less
                  than 13%; provided however, if the Debt Service Coverage Ratio
                  and/or the Debt Yield fail to satisfy such requirements, the
                  Borrowers shall be entitled to make a principal prepayment of
                  a portion of the Aggregate Outstanding Principal Balance (to
                  be applied in accordance with the terms of the Cash Management
                  Agreement) on the then current Maturity Date in an amount, as
                  reasonably determined by Lender, sufficient to cause the Debt
                  Service Coverage Ratio and/or the Debt Yield, as applicable,
                  to satisfy such requirements based upon a recalculation
                  thereof assuming that the prepayment amount were applied to
                  reduce the Aggregate Outstanding Principal Balance (on a
                  pro-rata basis between the Loan and the Mezzanine Loan) as of
                  the last day of the immediately preceding calendar quarter
                  (and provided that the Prepayment Consideration shall be
                  payable in connection with such prepayment);

            (iv)  Prior to the date the applicable Extension Term commences, the
                  Borrowers shall deliver to Lender an extension fee equal to
                  one quarter of one percent (.25%) of the outstanding principal
                  balance of the Loan as of the date the applicable Extension
                  Term commences for each of the Second Extension Term and the
                  Third Extension Term;

            (v)   The Borrowers shall execute all such documents and other
                  agreements as Lender shall reasonably request; and

            (vi)  The Borrowers shall deliver to Lender an extension of the Cap
                  or a replacement Cap in form substantially the same as the Cap
                  delivered at Closing covering the term of the applicable
                  Extension Term, providing for a cap "strike price" (such
                  "strike price", the "EXTENSION CAP THRESHOLD RATE") not
                  greater than five percent (5%) per annum and otherwise
                  satisfying the requirements of Section 2.3 together with an
                  assignment of such replacement Cap substantially in the form
                  of the Assignment of Rate Cap and such Financing Statements
                  and opinions of in-house or outside counsel to the Cap
                  Provider as Lender may reasonably require each in form and
                  substance reasonably acceptable to Lender. The Borrowers shall
                  be required to pay any and all reasonable out-of-pocket costs
                  and expenses

                                       30


                  (including, without limitation, reasonable
                  attorneys' fees and disbursements) incurred by Lender (and by
                  any Servicer and trustee in connection with any Securitization
                  backed in whole or in part by the Loan) in connection with
                  delivery of such extension or replacement Cap and all related
                  documentation and opinions required above.

SECTION 2.6 PREPAYMENT.

      (A)   LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON
ACCELERATION. The Borrowers may prepay the Loan in whole, or, to the extent
expressly provided herein, in part (in amounts of at least $1,000,000), at any
time, provided that (i) the Borrowers shall provide to Lender not less than
fifteen (15) days prior written notice of such prepayment, (ii) together with
such prepayment the Borrowers also shall pay all accrued and unpaid interest and
all other Obligations then due and owing, (iii) if such prepayment occurs on any
day other than a Payment Date, then together therewith the Borrowers also shall
pay to Lender the amount of interest that would have accrued on the amount being
prepaid from and including the date of such prepayment to the end of such
Interest Accrual Period, and (iv) the Borrowers shall pay the applicable
Prepayment Consideration.

      (B)   PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any
portion of the Loan shall occur on account of acceleration of the Loan (whether
or not due to an Event of Default), or otherwise, then except only as expressly
provided in this Loan Agreement or the other Loan Documents to the contrary, the
Borrowers shall pay the Prepayment Consideration on the amount prepaid to Lender
together with such prepayment, as liquidated damages and compensation for costs
incurred, and in addition to all other amounts due and owing to Lender.
Notwithstanding the foregoing, no Prepayment Consideration will be due as to a
prepayment of the Loan in connection with (i) application of insurance or
condemnation proceeds required by Lender pursuant to this Loan Agreement or the
Mortgages in the absence of an Event of Default, (ii) Scheduled Mortgage
Principal Payments, (iii) in connection with prepayments made in connection with
any Release of a Sales Property (it being agreed that the Prepayment
Consideration will be due with respect to all other Releases (other than
Releases effectuated pursuant to Section 5.5(E)), or (iv) upon prepayment of the
Loan in full or in part during any Extension Term (provided the amount of
interest that would have accrued on the amount being prepaid from and including
the date of such prepayment through the end of the current Interest Accrual
Period shall be payable with such prepayment). The foregoing designation of any
amount of Prepayment Consideration in this Agreement shall not create a right to
prepay at any time or in any circumstances where this Agreement does not
expressly state that such a right exists.

SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall
be presumptive evidence (absent manifest error) of the amounts owing to Lender
by the Borrowers; provided that any failure to record any transaction affecting
such balance or any error in so recording shall not limit or otherwise affect
the Borrowers' obligation to pay the Obligations.

SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or
under the Note shall be made free and clear of and without deduction for any and
all taxes, withholding taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto

                                       31


arising out of or in connection with the transactions contemplated by the Loan
Documents (all such taxes, levies, imposts, deductions, charges or withholdings
and all liabilities with respect thereto (excluding taxes imposed on net income
in accordance with the following sentence) herein "TAX LIABILITIES").
Notwithstanding the foregoing, the Borrowers shall not be liable for taxes
imposed on the net income of Lender by the jurisdiction under the laws of which
Lender is organized or doing business or any political subdivision thereof and
taxes imposed on its net income by the jurisdiction of Lender's applicable
lending office or any political subdivision thereof. If the Borrowers shall be
required by law to deduct any such Tax Liabilities (or amounts in estimation or
reimbursement for the same) from or in respect of any sum payable hereunder to
Lender, then the sum payable hereunder shall be increased as may be necessary so
that, after making all required deductions, Lender receives an amount equal to
the sum it would have received had no such deductions been made.

SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the
actual costs and damages that Lender would suffer by reason of an Event of
Default (exclusive of the attorneys' fees and other costs incurred in connection
with enforcement of Lender's rights under the Loan Documents) or a prepayment
would be difficult and needlessly expensive to calculate and establish, and (ii)
the amounts of the Default Rate, the late charges, and the Prepayment
Consideration are reasonable, taking into consideration the circumstances known
to the parties at this time, and (iii) such Default Rate and late charges and
Lender's reasonable attorneys' fees and other costs and expenses incurred in
connection with enforcement of Lender's rights under the Loan Documents shall be
due and payable as provided herein, and (iv) such interest at the Default Rate,
late charges, Prepayment Consideration, and the obligation to pay Lender's
reasonable attorneys' fees and other enforcement costs do not, individually or
collectively, constitute a penalty.

SECTION 2.10  FUNDING LOSSES/CHANGE IN LAW ETC.

      (A)   The Borrowers hereby agree to pay to Lender any amount necessary to
compensate Lender and any Funding Party for any losses or costs (including,
without limitation, the costs of breaking any "LIBOR" contract, if applicable,
or funding losses determined on the basis of Lender's or such Funding Party's
reinvestment rate and the interest rate on the Loan) (collectively, "FUNDING
LOSSES") sustained by Lender or any Funding Party: (i) if the Note, or any
portion thereof, is repaid for any reason whatsoever on any date other than a
Payment Date (including, without limitation, from condemnation or insurance
proceeds); or (ii) as a consequence of (x) any increased cost of funds that
Lender or any Funding Party may sustain in maintaining the borrowing evidenced
hereby or (y) the reduction of any amounts received or receivable from the
Borrowers, in either case, due to the introduction of, or any change in, law or
applicable regulation or treaty adopted after the date hereof (including the
administration or interpretation thereof), whether or not having the force of
law, or due to the compliance by Lender or the Funding Party, as the case may
be, with any directive, whether or not having the force of law, or request from
any central bank or domestic or foreign governmental authority, agency or
instrumentality having jurisdiction made as of the date hereof, to the extent
Lender reasonably determines that such Funding Losses are allocable to the Loan.

      (B)   If Lender or any Funding Party shall have determined that the
applicability of any law, rule, regulation or guideline adopted pursuant to or
arising out of the July 1988 report of the

                                       32


Basle Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or the
adoption of any other law, rule, regulation or guideline (including but not
limited to any United States law, rule, regulation or guideline) regarding
capital adequacy, or any change becoming effective in any of the foregoing or in
the enforcement or interpretation or administration of any of the foregoing by
any court or any domestic or foreign governmental authority, central bank or
comparable agency charged with the enforcement or interpretation or
administration thereof, or compliance by Lender or its holding company or a
Funding Party or its holding company, as the case may be, with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency made after the date
hereof, has or would have the effect of reducing the rate of return on the
capital of Lender or its holding company, or of the Funding Party's or its
holding company, as the case may be, then, upon demand by Lender, the Borrowers
shall pay to Lender, from time to time, such additional amount or amounts as
will compensate Lender or such Funding Party for any such reduction suffered.

      (C)   Any amount payable by the Borrowers under Section 2.10(A) or 2.10(B)
shall be paid to Lender within fifteen (15) Business Days after receipt by the
Borrowers of a certificate signed by an officer of Lender setting forth the
amount due and the basis for the determination of such amount in reasonable
detail and the computations made by Lender to determine the amount due, which
statement shall be conclusive and binding upon the Borrowers, absent manifest
error. Failure on the part of Lender to demand payment from the Borrowers for
any such amount attributable to any particular period shall not constitute a
waiver of Lender's right to demand payment of such amount for any subsequent or
prior period. Lender shall use reasonable efforts to deliver to the Borrowers
prompt notice of any event described in Sections 2.10(A) or 2.10(B) above and of
the amount to be paid as a result thereof, provided, however, any failure by
Lender to so notify the Borrowers shall not affect the Borrowers' obligation to
make the payments to be made under this Section as a result thereof. All amounts
which may become due and payable by the Borrowers in accordance with the
provisions of this Section shall constitute additional interest under the Loan
and shall be secured by the Mortgages and the other Loan Documents.

      (D)   If Lender or any Funding Party requests compensation for any losses
or costs to be reimbursed pursuant to any one or more of the provisions of
clause (ii) of Sections 2.10(A) or 2.10(B), then, upon request of the Borrowers,
Lender or such Funding Party shall use reasonable efforts in a manner consistent
with such institution's practice in connection with loans like the Loan to
eliminate, mitigate or reduce amounts that would otherwise be payable by the
Borrowers under the foregoing provisions, provided that such action would not be
otherwise prejudicial to Lender or such Funding Party, including, without
limitation, by designating another of Lender's or such Funding Party's offices,
branches or affiliates; the Borrowers hereby agreeing to pay all reasonably
incurred costs and expenses incurred by Lender or any Funding Party in
connection with any such action.

SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from
time to time without the consent of the Borrowers, on prior written notice to
the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's
fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths
of one percent (.05%) per annum on the outstanding principal balance of the
Loan, payable in monthly installments, and if the Loan becomes a specially
serviced loan, any fees of the special servicer, shall be payable by the
Borrowers and

                                       33


shall constitute a portion of the Obligations; provided, however, that at no
time shall the Borrowers be liable for Servicing Fees or special servicing fees
in excess of those fees charged to Lender by the Servicer or any special
servicer.

                                  ARTICLE III
                               CONDITIONS TO LOAN

SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The
obligation of Lender to fund the Loan are subject to the prior or concurrent
satisfaction or waiver of the conditions set forth below, and to satisfaction of
any other conditions specified herein or elsewhere in the Loan Documents. With
respect to facts and circumstances actually known to Lender at Closing, by
funding the Loan Lender shall be deemed to have acknowledged that each of the
conditions set forth below has been satisfied or waived (except as otherwise set
forth in any other agreement in writing between the Borrowers and Lender). Where
in this Section any documents, instruments or information are to be delivered to
Lender, then the condition shall not be satisfied unless (i) the same shall be
in form and substance satisfactory to Lender, and (ii) if so required by Lender,
the Borrowers shall deliver to Lender a certificate duly executed by the
Borrowers stating that the applicable document, instrument or information is
true and complete and does not omit to state any information without which the
same might reasonably be deemed materially misleading.

      (A)   LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall
execute and deliver and cause to be executed and delivered to Lender all of the
Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan
Documents as may be reasonably required by Lender, each, unless otherwise noted,
of even date herewith, duly executed, in form and substance satisfactory to
Lender and in quantities designated by Lender (except for the Note, of which
only one shall be signed), which Loan Documents shall become effective upon the
Closing.

      (B)   DEPOSITS. The deposits required herein, including without
limitation, the initial deposits into the Reserves and Accounts, shall have been
made (and at the Borrowers' option, the same may be made from the proceeds of
the Loan).

      (C)   PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES.
Each Borrower Party and all other Persons executing any agreement on behalf of
any Borrower Party shall have performed in all material respects all agreements
which this Loan Agreement provides shall be performed on or before the Closing
Date. The representations and warranties contained herein and in the other Loan
Documents shall be true, correct and complete in all material respects on and as
of the Closing Date.

      (D)   CLOSING CERTIFICATE. On or before the Closing Date, Lender shall
have received certificates of even date herewith executed on behalf of each
Borrower by the chief financial officer (or similar officer of the Borrowers)
stating that: (i) on such date, to the Borrowers' Knowledge no Default exists;
(ii) no material adverse change in the financial condition or operations of the
business of the Borrowers or the projected cash flow of the Borrowers or the
Properties, in each case taken as a whole, has occurred since the delivery to
Lender of any financial statements, budgets, proformas, or similar materials (or
if there has been any change,

                                       34


specifying such change in detail), and that, to the Borrowers' Knowledge after
due inquiry, such financial materials fairly present the financial condition and
results of operations of the Borrowers and the Properties, in each case taken as
a whole, and all other materials delivered to Lender are complete and accurate
in all material respects; and (iii) the representations and warranties set forth
in this Loan Agreement are true and correct in all material respects on and as
of such date with the same effect as though made on and as of such date (or if
any such representations or warranties require qualification, specifying such
qualification in detail) and (iv) to the Borrowers' Knowledge, there are no
material facts or conditions concerning the Properties or any Borrower Party
that have not been disclosed to Lender which could have a Material Adverse
Effect.

      (E)   OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall
have received from Morris, Manning & Martin, LLP or other legal counsel for the
Borrowers satisfactory to Lender, written legal opinions, each in form and
substance acceptable to Lender, as to such matters as Lender shall request,
including opinions to the effect that (i) each of the Borrower Parties is duly
formed, validly existing, and in good standing in its state of organization and,
in the case of each Borrower, in each state where its Property is located, (ii)
this Loan Agreement and the Loan Documents have been duly authorized, executed
and delivered and are enforceable in accordance with their terms subject to
customary qualifications for bankruptcy, general equitable principles, and other
customary assumptions and qualifications; (iii) the Deposit Account Agreement
and Cash Management Agreement have been duly authorized, executed and delivered
by Borrower and Manager and are enforceable in accordance with their terms and
the security interests in favor of Lender in the Account Collateral have been
validly created and perfected; and (iv) no Borrower, Member or General Partner
would be consolidated in any bankruptcy proceeding affecting Guarantor or
certain other Affiliates of the Borrower Parties specified by Lender. Also on or
before the Closing Date, Lender shall have received the following legal
opinions, each in form and substance acceptable to Lender: (a) an opinion of the
Borrowers' local counsel in each state where the Properties are located as to
the enforceability of, and the creation and perfection of Liens under, the
Mortgages and the Assignments of Leases and such other matters as Lender may
reasonably request; (b) an opinion of counsel to the Cap Provider (which may be
in-house counsel) that the Cap has been duly authorized, executed and delivered
by the Cap Provider and is enforceable in accordance with its terms and such
other matters as Lender may reasonably request; (c) opinions of Richards, Layton
& Finger or other Delaware legal counsel, acceptable to Lender, for each
Borrower that is a single member limited liability company formed under the laws
of the State of Delaware that, among other matters, (1) under Delaware law (x)
the prior unanimous written consent of Member (and the unanimous written consent
of the board of directors of Member including the Independent Directors, or the
unanimous prior written consent of the board of managers' of each Borrower,
including the Independent Directors') would be required for a voluntary
bankruptcy filing by each such Borrower, (y) the prior unanimous written consent
of the board of directors of Member (including the Independent Directors) would
be required for a voluntary bankruptcy filing by Member, (z) such unanimous
consent requirements are enforceable against Member in accordance with their
terms; (2) under Delaware law the bankruptcy or dissolution of Member would not
cause the dissolution of any of the Borrowers and the bankruptcy or dissolution
of the sole shareholder or member would not cause the dissolution of Member; (3)
under Delaware law, creditors of Member shall have no legal or equitable
remedies with respect to the assets of any of the Borrowers and creditors of
Guarantor shall have no legal or equitable remedies with respect

                                       35


to the assets of Member; and (4) a federal bankruptcy court would hold that
Delaware law governs the determination of what Persons have authority to file a
voluntary bankruptcy petition on behalf of each Borrower and Member; and (d)
such other legal opinions as Lender may reasonably request.

      (F)   TITLE POLICIES. On or before the Closing Date, Lender shall have
received and approved pro forma Title Policies for the Mortgages, and as of the
Closing, each Title Company shall be irrevocably committed and prepared
immediately to issue the Title Policies or binding commitments. The Title
Policies shall be in form and substance satisfactory to Lender. Without
limitation, each Title Policy shall be issued on an ALTA form acceptable to
Lender by each Title Company or if an ALTA form is not available in the
applicable jurisdiction, another form acceptable to Lender, together with such
reinsurance and direct access agreements as Lender may require, insuring that
the Mortgages are valid first and prior enforceable liens on each Borrower's fee
simple interest or ground leasehold interest, as the case may be, in the
applicable Property (including any easements appurtenant thereto) subject only
to such exceptions to coverage as are acceptable to Lender, including the
Permitted Exceptions. Each Title Policy shall contain such endorsements as
Lender may require (to the extent available in the state where the Properties is
located) in form acceptable to Lender, including deletion of the creditors'
rights exception and affirmative endorsement coverage for creditors' rights
risks.

      (G)   SURVEY. Lender shall have received a survey of each of the
Properties, certified to Lender and its successors, assigns and designees and to
each Title Company by a surveyor reasonably satisfactory to Lender (the
"SURVEY"), or Lender shall have received both (x) a "no change" affidavit from
each Borrower with respect to such Borrower's most recent Survey sufficient to
cause the Title Company to provide current survey coverage to Lender in the
applicable Title Policy without exception for matters that would be revealed by
a current and accurate survey of the applicable Property, except for matters
specifically shown on such most recent Survey, and (y) a reliance letter (to the
extent any such surveys are not currently addressed to Lender) in form and
substance satisfactory to Lender, permitting Lender to rely on the Survey (and
any certification thereof) as if originally addressed and certified to Lender.
Each Survey shall contain the minimum detail for land surveys as most recently
adopted by ALTA/ASCM, shall comply with Lender's survey requirements and shall
contain Lender's standard form certification, and shall show no state of facts
or conditions reasonably objectionable to Lender.

      (H)   ZONING. On or before the Closing Date, Lender shall have received
evidence reasonably satisfactory to Lender as to the zoning and subdivision
compliance of each of the Properties.

      (I)   CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the
Closing Date, Lender shall have received copies of the organizational documents
and filings of each Borrower Party, together with good standing certificates (or
similar documentation) (including verification of tax status) from the state of
its formation and from all states in which the laws thereof require such Person
to be qualified and/or licensed to do business (including without limitation,
each state in which the Properties are located for the applicable Borrower(s)
and, to the extent required by law, Member and General Partner). Each such
certificate shall be dated not more than 30 days prior to the Closing Date, as
applicable, and certified by the applicable Secretary of State or other
authorized governmental entity. In addition, on or before the Closing Date the

                                       36


secretary or corresponding officer of each Borrower Party, or the secretary or
corresponding officer of the partner, trustee, or other Person as required by
such Borrower Party's organizational documents (as the case may be, the
"BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating
that the copies of the organizational documents as delivered to Lender are true
and complete and are in full force and effect, and that the same have not been
amended except by such amendments as have been so delivered to Lender.

      (J)   CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing
Date, Lender shall have received certificates of incumbency and resolutions of
each Borrower Party and its constituents as requested by Lender, approving and
authorizing the Loan and the execution, delivery and performance of the Loan
Documents, certified as of the Closing Date by the Borrower Party Secretary as
being in full force and effect without modification or amendment.

      (K)   FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall
have received such financial statements and other financial information as shall
be satisfactory to Lender for each Borrower Party (including for Guarantor) and
for the Properties. If any such statements are not available for the Properties,
then the Borrowers shall provide such financial reports as are available. All
such financial statements shall be certified to Lender by the applicable
Borrower Party (through its chief financial officer or other officer charged
with similar duties), which certification shall be in form and substance
reasonably satisfactory to Lender.

      (L)   OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date,
Lender shall have received and approved the Operating Budget and CapEx/FF&E
Budget for the Properties for the remainder of the current calendar year.

      (M)   AGREEMENTS. On or before the Closing Date, Lender shall have
received a list of all Material Agreements and, to the extent requested by
Lender, copies thereof.

      (N)   MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing
Date, Lender shall have received copies of the Management Agreements and any
leasing brokerage agreements pertaining to the Properties and the Assignments of
Management Agreements, duly executed by each Manager and the applicable
Borrower. On or before the Closing Date, Lender shall have received copies of
the existing Franchise Agreements (including any Property Improvement Plan) and
Franchisor Letters for each of the Properties duly executed by the applicable
Franchisors.

      (O)   RENT ROLL. Prior to the Closing, Lender shall have received from the
Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL")
in form and substance satisfactory to Lender. The Rent Roll shall constitute a
true, correct, and complete list of each and every Material Lease, together with
all extensions and amendments thereof, and shall accurately and completely
disclose all annual and monthly rents payable by all tenants, including all
percentage rents, if any, and expiration dates of such Material Leases, and the
amount of security deposit being held by the Borrowers under each Material
Lease, if any.

                                       37


      (P)   MATERIAL LEASES. Prior to the Closing, Lender shall have received
true, correct and complete copies of the Material Leases, as amended.

      (Q)   LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender
shall have received copies of the final, unconditional certificates of occupancy
issued with respect to each of the Properties, together with all other
applicable licenses (including, without limitation, each liquor license and beer
permit), permits and approvals required for each Borrower to own, use, occupy,
operate and maintain each of the Properties as a hotel.

      (R)   INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date,
Lender shall have received copies of certificates of insurance (dated not more
than twenty (20) days prior to the Closing Date) regarding insurance required to
be maintained under this Loan Agreement and the other Loan Documents, together
with endorsements satisfactory to Lender naming Lender as an additional insured
and loss payee, as required by this Loan Agreement, under such policies. In
addition, as to any insurance matters arising under Environmental Laws or
pertaining to any environmental insurance that any of the Borrowers has with
respect to any Property, the same shall be endorsed to Lender as required by
this Loan Agreement and shall name Lender as an insured, additional insured
and/or loss payee, as applicable.

      (S)   ENVIRONMENTAL ASSESSMENT. Lender shall have received the
Environmental Reports relating to each of the Properties, together with a letter
from each preparer thereof entitling Lender and its successors and assigns to
rely upon said Environmental Report.

      (T)   PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender
shall have received a property condition report for each of the Properties,
which shall be prepared by an engineer or other consultant satisfactory to
Lender and otherwise shall be in form and substance satisfactory to Lender in
its sole discretion. Each such report shall set forth any items of deferred
maintenance at the applicable Property.

      (U)   APPRAISAL. On or before the Closing Date, Lender shall have received
an independent appraisal of each of the Properties from a state certified
appraiser engaged by Lender. Each such appraisal shall conform in all respects
to the criteria for appraisals set forth in the Financial Institutions Reform
and Recovery Act of 1989 and the regulations promulgated thereunder (as if
Lender were an institution under the jurisdiction thereof) and the Uniform
Standards of Professional Appraisal Practices of the Appraisal Foundation.

      (V)   SEARCHES. Prior to the Closing Date, Lender shall have received
copies of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation
search reports with respect to the Borrowers, Guarantor, Managers, General
Partner and Member, all dated not more than thirty (30) days prior to the
Closing Date.

      (W)   DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2)
days prior to the Closing Date, Lender shall have received payoff demand letters
and wiring instructions from each lender or other obligee of any existing
indebtedness which is required to be repaid pursuant to this Loan Agreement.

                                       38


      (X)   LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and
all reasonable legal fees and expenses of counsel to Lender, together with all
recording fees and taxes, title insurance premiums, and other reasonable costs
and expenses related to the Closing.

      (Y)   COMMITMENT CONDITIONS. If a commitment letter or similar agreement
shall have been issued by Lender for the Loan, such additional conditions as
shall be specified in such commitment shall have been satisfied.

      (Z)   OTHER REVIEW. Lender shall have completed all other review of the
Borrower Parties, the Properties, and such other items as it reasonably
determines relevant, and shall have determined based upon such review to fund
the Loan. The Borrower Parties shall have satisfied such other reasonable
criteria as Lender may reasonably specify.

      (AA)  GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing
Date, Lender shall have received (i) true and complete copies of each of the
Ground Leases, certified by the Borrowers, and (ii) estoppels and agreements
acceptable to Lender, duly executed by each Ground Lessor.

      (BB)  CONDOMINIUM PROPERTY AGREEMENTS. On or before the Closing Date,
Lender shall have received an estoppel and agreement of the Board of Managers
with respect to the Condominium Property Documents in form and substance
reasonably acceptable to Lender.

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

      In order to induce Lender to enter into this Loan Agreement and to make
the Loan, each Borrower represents and warrants to Lender that the statements
set forth in this Article IV, after giving effect to the Closing, will be, true,
correct and complete in all material respects as of the Closing Date.

SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS.

      (A)   ORGANIZATION AND POWERS. Each Borrower Party is duly organized,
validly existing and in good standing under the laws of the state of its
formation. Each Borrower Party has all requisite power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
to be conducted, and to enter into each Loan Document to which it is a party and
to perform the terms thereof.

      (B)   QUALIFICATION. Each Borrower Party is duly qualified and in good
standing in the state of its formation. In addition, each Borrower Party is duly
qualified and in good standing in each state where necessary to carry on its
present business and operations, except in jurisdictions in which the failure to
be qualified and in good standing could not reasonably be expected to have a
Material Adverse Effect.

      (C)   ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C)
accurately sets forth the direct and indirect ownership structure of the
Borrowers, General Partners and Members.

                                       39


SECTION 4.2 AUTHORIZATION OF BORROWING, ETC.

      (A)   AUTHORIZATION OF BORROWING. The Borrowers have the power and
authority to incur the Indebtedness evidenced by the Note. The execution,
delivery and performance by each Borrower Party of each of the Loan Documents to
which it is a party and the consummation of the transactions contemplated
thereby have been duly authorized by all necessary limited liability company,
partnership, trustee, corporate or other action, as the case may be.

      (B)   NO CONFLICT. The execution, delivery and performance by each
Borrower Party of the Loan Documents to which it is a party and the consummation
of the transactions contemplated thereby do not and will not: (1) violate (x)
any provision of law applicable to any Borrower Party; (y) the partnership
agreement, certificate of limited partnership, certificate of incorporation,
bylaws, declaration of trust, operating agreement or other organizational
documents, as the case may be, of each Borrower Party; or (z) any order,
judgment or decree of any Governmental Authority binding on any Borrower Party
or any of its Affiliates; (2) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any Contractual
Obligation of any Borrower Party or any of its Affiliates (except where such
breach will not cause a Material Adverse Effect); (3) result in or require the
creation or imposition of any material Lien (other than the Lien of the Loan
Documents) upon the Properties or assets of any Borrower Party; or (4) except as
set forth on SCHEDULE 4.2, require any approval or consent of any Person under
any material Contractual Obligation of any Borrower Party, which approvals or
consents have been obtained on or before the dates required under such material
Contractual Obligation, but in no event later than the Closing Date.

      (C)   GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower
Party of the Loan Documents to which it is a party, and the consummation of the
transactions contemplated thereby do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
Governmental Authority.

      (D)   BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents,
including the Note, when executed and delivered will be, the legally valid and
binding obligations of each Borrower Party that is a party thereto, enforceable
against each of the Borrower Parties, as applicable, in accordance with their
respective terms, subject to bankruptcy, insolvency, moratorium, reorganization
and other similar laws affecting creditor's rights. No Borrower Party has any
defense or offset to any of its obligations under the Loan Documents to which it
is a party. No Borrower Party has any claim against Lender or any Affiliate of
Lender.

SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the
Borrowers, their Affiliates and the Properties which have been furnished by or
on behalf of the Borrowers to Lender pursuant to this Loan Agreement present
fairly the financial condition of the Persons covered thereby as of the dates
thereof and the results of their operations for the periods then ended, and, to
the Borrowers' Knowledge after due inquiry, have been prepared in accordance
with GAAP consistently applied (except as disclosed therein). Since the date of
the financial statements delivered to Lender, there has been no material adverse
change in the financial condition, operations or business of the Borrower
Parties or the Properties from that set forth in said financial statements.

                                       40


SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the
Borrowers shall have no outstanding Indebtedness or Contingent Obligations other
than the Obligations or any other Permitted Indebtedness.

SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee
simple title (or, in the case of the Ground Leased Properties, leasehold title)
to the Properties, free and clear of all Liens except for the Permitted
Encumbrances. The Borrowers own and will own at all times all FF&E relating to
the Properties (other than personal property which is either owned by tenants of
such Property, not used or necessary for the operation of the applicable
Property, or leased by the Borrowers as permitted hereunder), subject only to
the Permitted Encumbrances. The Mortgages, when properly recorded in the
appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (i) a
valid, perfected first lien on each of the Properties, subject only to the
Permitted Encumbrances, and (ii) perfected first priority security interests in
and to, and perfected collateral assignments of, all personalty (including the
Rents, the Leases, and the FF&E ), all in accordance with the terms thereof, in
each case subject only to any applicable Permitted Encumbrances. Lender will
have a perfected first priority security interest in and to the FF&E owned by
the Borrowers, if any, not located at the Properties. To the Borrowers'
Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in
condemnation or eminent domain affecting any of the Properties, and to the
actual Knowledge of the Borrowers, none is threatened. Except as set forth on
SCHEDULE 4.5(A), no Person has any option or other right to purchase all or any
portion of any of the Properties or any interest therein. To the Borrowers'
Knowledge, there are no mechanic's, materialman's or other similar liens or
claims which have been filed for work, labor or materials affecting the
Properties which are or will be liens prior to, or equal or coordinate with, the
lien of any of the Mortgages. None of the Permitted Encumbrances, individually
or in the aggregate, materially interfere with the benefits of the security
intended to be provided by the Mortgages and this Loan Agreement, materially and
adversely affect the value of any of the Properties, impair the use or
operations of the Properties or impair the Borrowers' ability to pay its
obligations in a timely manner.

SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as
set forth in the Zoning Reports for the Properties delivered to Lender, the
Properties and the use thereof comply in all material respects with all
applicable zoning, subdivision and land use laws, regulations and ordinances,
all applicable health, fire, building codes, parking laws and all other laws,
statutes, codes, ordinances, rules and regulations applicable to the Properties,
or any of them, including without limitation the Americans with Disabilities
Act. To the Borrowers' Knowledge, there are no illegal activities relating to
controlled substances on any of the Properties. To the Borrower's Knowledge,
except as set forth in the Zoning Reports for the Properties delivered to
Lender, all material permits, licenses and certificates for the lawful use,
occupancy and operation of each component of each of the Properties in the
manner in which it is currently being used, occupied and operated, including,
but not limited to liquor licenses and certificates of occupancy, or the
equivalent, have been obtained and are current and in full force and effect. To
the Borrower's Knowledge, except as set forth in the Zoning Reports for the
Properties delivered to Lender, in the event that all or any part of the
Improvements located on any Property is destroyed or damaged, said Improvements
can be legally reconstructed to their condition prior to such damage or
destruction, and thereafter exist for the same use without violating any zoning
or other ordinances applicable thereto and without the necessity of

                                       41


obtaining any variances or special permits, other than customary demolition,
building and other construction related permits. To the Borrowers' Knowledge, no
legal proceedings are pending or threatened with respect to the zoning of any
Property. To the Borrowers' Knowledge, except as set forth in the Title Policies
and/or the Surveys, neither the zoning nor any other right to construct, use or
operate any Property is in any way dependent upon or related to any real estate
other than such Property. No tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded by the
Borrowers with respect to any Property without Lender's prior written consent,
which consent shall not be unreasonably withheld, delayed or conditioned.

SECTION 4.7 LEASES; AGREEMENTS.

      (A)   LEASES; AGREEMENTS. The Borrowers have delivered to Lender true and
complete copies (in all material respects) of all (i) Leases for more than five
hundred (500) square feet of space at any Property and (ii) Material Agreements
affecting the operation and management of the Properties, and such Leases and
Material Agreements have not been modified or amended except pursuant to
amendments or modifications delivered to Lender. Except for the rights of each
of the current Managers pursuant to the existing Management Agreements, no
Person has any right or obligation to manage any of the Properties or to receive
compensation in connection with such management. Except for the parties to any
leasing brokerage agreement that has been delivered to Lender, no Person has any
right or obligation to lease or solicit tenants for the Properties, or (except
for cooperating outside brokers) to receive compensation in connection with such
leasing.

      (B)   RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is
attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described
in the Rent Roll, none of the Properties are subject to any Material Leases.
Except only as specified in the Rent Roll, or as otherwise disclosed to Lender
in the estoppel certificates delivered to Lender at Closing, to the Borrowers'
Knowledge, (i) the Material Leases are in full force and effect; (ii) the
Borrowers have not given any notice of default to any tenant under any Material
Lease which remains uncured; (iii) no tenant has any set off, claim or defense
to the enforcement of any Material Lease; (iv) no tenant is in arrears in the
payment of rent, additional rent or any other charges whatsoever due under any
Material Lease, or is materially in default in the performance of any other
obligations under such Material Lease; (v) the Borrowers have completed all work
or alterations required of the landlord or lessor under each Material Lease, and
all of the other obligations of landlord or lessor under the Material Leases
have been performed; and (vi) there are no rent concessions (whether in form of
cash contributions, work agreements, assumption of an existing tenant's other
obligations, or otherwise) or extensions of time whatsoever not reflected in
such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge
of the Borrowers, threatened) against the Borrowers by any tenant or former
tenant. No rental in excess of one month's rent has been prepaid under any of
the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is
valid and binding on the parties thereto in accordance with its terms.

      (C)   NO RESIDENTIAL UNITS. There are no residential units in any of the
Properties and, to each Borrower's Knowledge, no person (other than a site
manager employed by Manager) occupies any part of the Properties for dwelling
purposes other than on a transient basis.

                                       42


      (D)   MANAGEMENT AGREEMENTS. The Borrowers have delivered to Lender a true
and complete copy of each of the Management Agreements to which they are a party
that will be in effect on the Closing Date, and such Management Agreements have
not been modified or amended except pursuant to amendments or modifications
delivered to Lender. The Management Agreements are in full force and effect and
no default by any of the Borrowers or Manager exists thereunder.

      (E)   FRANCHISE AGREEMENTS; PROPERTY IMPROVEMENT PLANS. The Borrowers have
delivered to Lender a true and complete copy of each of the Franchise Agreements
to which they are a party, and such Franchise Agreements have not been modified
or amended except pursuant to amendments or modifications delivered to Lender.
To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full
force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material
default by the Borrowers, Manager or the applicable Franchisor exists
thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the
aggregate, do not and will not have a Material Adverse Effect. Except for the
Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no
other property improvement plans or similar capital improvement plans or
obligations required by any Franchisor pursuant to any Franchise Agreement, in
effect for any of the Properties.

SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as
set forth in the Property Condition Reports for the Properties delivered to
Lender, all Improvements including, without limitation, the roof and all
structural components, plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior doors, parking facilities,
sidewalks and landscaping are in good condition and repair. Except as disclosed
in the Property Condition Reports, (i) the Borrowers are not aware of any latent
or patent structural or other material defect or deficiency in the Properties
and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary
sewers, and electrical, gas (if applicable) and telephone facilities are
available to each of the Properties within the boundary lines of each of the
Properties (except as may be shown on the applicable Survey), are fully
connected to the Improvements and are fully operational, are sufficient to meet
the reasonable needs of each of the Properties as now used or presently
contemplated to be used, and no other utility facilities are necessary to meet
the reasonable needs of each of the Properties as now used or presently
contemplated. Except as may be shown on the applicable Survey, to the Borrowers'
Knowledge no part of any of the Properties is within a flood plain and none of
the Improvements create encroachments over, across or upon the Properties'
boundary lines, rights of way or easements, and no building or other
improvements on adjoining land create such an encroachment which could
reasonably be expected to have a Material Adverse Effect. All public roads and
streets necessary for service of and access to each of the Properties for the
current and contemplated uses thereof have been completed and are serviceable
and are physically and legally open for use by the public. To the Borrowers'
Knowledge after due inquiry, and except as disclosed in the Property Condition
Reports, any septic system located at any of the Properties is in good and safe
condition and repair and in compliance with all applicable law.

SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9,
there are no judgments outstanding against any Borrower Party, or affecting any
of the Properties or any property of any Borrower, nor is there any action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration now pending or, to the Borrowers'

                                       43


Knowledge, threatened against any Borrower Party that could reasonably be
expected to result in a Material Adverse Effect. To the Borrowers' Knowledge
after due inquiry, the actions, charges, claims, demand, suits, proceedings,
petitions, investigations and arbitrations set forth on SCHEDULE 4.9 are not
reasonably expected to result, either individually or in the aggregate, in any
Material Adverse Effect.

SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and
reports of each Primary Borrower Party required to be filed have been timely
filed (or each Borrower has timely filed for an extension and the applicable
extension has not expired), and all taxes, assessments, fees and other
governmental charges (including any payments in lieu of taxes) upon such Person
and upon its properties, assets, income and franchises which are due and payable
have been paid. To the Borrowers' Knowledge, there is not presently pending any
special assessment against any of the Properties or any part thereof.

SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the
Primary Borrower Parties is a party to or bound by, nor is any property of such
Person subject to or bound by, any contract or other agreement which restricts
such Person's ability to conduct its business in the ordinary course as
currently conducted that, either individually or in the aggregate, has a
Material Adverse Effect or could reasonably be expected to have a Material
Adverse Effect.

SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation of any such Person which
could reasonably be expected to have a Material Adverse Effect, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default which could reasonably be expected to have a Material
Adverse Effect.

SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940 or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.

SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no
Primary Borrower Party maintains or contributes to, or has any obligation
(including a contingent obligation) under, any Employee Benefit Plans.

SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar
compensation will be payable by or pursuant to any contract or other obligation
of any Primary Borrower Party with respect to the making of the Loan or any of
the other transactions contemplated hereby or by any of the Loan Documents. The
Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from
any and all broker's or finder's fees claimed to be due in connection with the
making of the Loan arising from any Borrower Parties' actions.

SECTION 4.16 INTENTIONALLY DELETED.

SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction
or any Loan Document with the actual intent to hinder, delay, or defraud any
creditor and (b) received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving

                                       44


effect to the Loan, the aggregate fair saleable value of the Borrowers' assets
exceed and will, immediately following the making of the Loan, exceed the
Borrowers' total liabilities, including, without limitation, subordinated,
unliquidated, disputed and Contingent Obligations. The aggregate fair saleable
value of the Borrowers' assets is and will, immediately following the making of
the Loan, be greater than the Borrowers' probable total liabilities, including
the maximum amount of their Contingent Obligations on their debts as such debts
become absolute and matured. Each Borrower's assets do not and, immediately
following the making of the Loan will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. The
Borrowers do not intend to, and do not believe that they will, incur
Indebtedness and liabilities (including Contingent Obligations and other
commitments) beyond their ability to pay such Indebtedness and liabilities as
they mature (taking into account the timing and amounts of cash to be received
by the Borrowers and the amounts to be payable on or in respect of obligations
of the Borrowers).

SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on
behalf of any Borrower Party contains any untrue representation, warranty or
statement of a material fact, or omits to state a material fact necessary in
order to make the statements contained therein not misleading. No Loan Document
or any other document, certificate or written statement for use in connection
with the Loan and prepared by any Borrower Party, or any information provided by
any Borrower Party and contained in, or used in preparation of, any document or
certificate for use in connection with the Loan, contains any untrue
representation, warranty or statement of a material fact, or omits to state a
material fact necessary in order to make the statements contained therein not
misleading. There is no material fact actually known to the Borrowers that has
had or could reasonably be expected to have a Material Adverse Effect and that
has not been disclosed in writing to Lender by the Borrowers.

SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the
proceeds of the Loan only for the purposes set forth herein and consistent with
all applicable laws, statutes, rules and regulations. No portion of the proceeds
of the Loan shall be used by the Borrowers or any Person in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation T, Regulation U or Regulation X or any other regulation of the Board
of Governors of the Federal Reserve System.

SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate
description of all policies of insurance for each Borrower that are in effect as
of the Closing Date. No notice of cancellation has been received with respect to
such policies, and, to each Borrower's Knowledge, the Borrowers are in
compliance with all conditions contained in such policies.

SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1)
or more parcels which constitute separate tax lots. No part of any of the
Properties is included or assessed under or as part of another tax lot or
parcel, and no part of any other property is included or assessed under or as
part of the tax lots or parcels comprising any of the Properties.

SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest
in, including without limitation stock, partnership interest or other securities
of, any other Person (other than Beverage Companies), or (ii) direct or indirect
loan, advance or capital contribution to any other Person, including all
indebtedness and accounts receivable from that other Person.

                                       45


SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any
of them (including any Property) is property of the estate, in any voluntary or
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or other similar law now or hereafter in effect. No
Borrower Party and no property of any of them is under the possession or control
of a receiver, trustee or other custodian. No Borrower Party has made any
assignment for the benefit of creditors. No such assignment or bankruptcy or
similar case or proceeding is now contemplated.

SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to
Lender in writing herein or in any of the Loan Documents, no Default exists.

SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an
employee benefit plan as defined in Section 3(3) of ERISA which is subject to
ERISA, (ii) a plan as defined in Section 4975(e)(1) of the IRC which is subject
to Section 4975 of the IRC, or (iii) an entity whose underlying assets
constitute "plan assets" of any such employee benefit plan or plan for purposes
of Title I of ERISA of Section 4975 of the IRC; provided that, in making such
representation, the Borrowers have assumed that (i) no portion of the Loan shall
be funded with plan assets of any employee benefit plan that is subject to Title
I of ERISA or any plan that is covered by Section 4975 of the Code unless the
Lender is eligible to apply one or more exemptions such that the Loan will not
constitute a nonexempt prohibited transaction under Section 406 of ERISA or that
could subject a Borrower Party or its Affiliates to an excise tax under Section
4975 of the IRC; and (ii) such assumption in the preceding clause is true and
correct with respect to any party to which Lender transfers or assigns any
portion of the Loan.

SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with the Borrowers are not and will not be subject to state
statutes applicable to the Borrowers' regulating investments of and fiduciary
obligations with obligations with respect to governmental plans.

SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person"
within the meaning of Section 1445(f)(3) of the IRC.

SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on
SCHEDULE 4.28, no Primary Borrower Party is a party to any collective bargaining
agreement.

SECTION 4.29 CONDOMINIUM PROPERTY DOCUMENTS.

      (A)   The Borrowers have delivered true and correct copies of each of the
Condominium Property Documents to Lender and same have not been modified,
amended or assigned except as set forth on SCHEDULE 4.29, and to the Borrowers'
Knowledge, there are no other material documents or agreements affecting the
Condominium Borrower's interest in the Condominium Property.

      (B)   Each of the Condominium Property Documents is in full force and
effect and, to the Condominium Borrower's Knowledge, no breach or default, or
event that, with the giving of notice or the passage of time or both would
constitute a breach or default, under any of the Condominium Property Documents
(a "CONDOMINIUM DEFAULT") exists or has occurred on the

                                       46


part of the Condominium Borrower or on the part of any other party to any of the
Condominium Property Documents. The Condominium Borrower has not received any
written notice that a default under the Condominium Property Documents has
occurred or exists, or that the Board of Managers or any third party alleges the
same to have occurred or exist.

SECTION 4.30 GROUND LEASES

      (A)   Each Ground Lease contains the entire agreement of the Ground Lessor
and the applicable Borrower pertaining to each Ground Leased Property covered
thereby. The Borrowers have no estate, right, title or interest in or to the
Ground Leased Properties except under and pursuant to the Ground Leases. The
Borrowers have delivered true and correct copies of each of the Ground Leases to
Lender and the Ground Leases have not been modified, amended or assigned except
as set forth on SCHEDULE 4.30.

      (B)   To the Knowledge of the Borrowers, each Ground Lessor is the
exclusive fee simple owner of its Ground Leased Property, subject only to the
Ground Lease and the Permitted Encumbrances, and each Ground Lessor is the sole
owner of the lessor's interest in the applicable Ground Lease.

      (C)   There are no rights to terminate any Ground Lease other than any
Ground Lessor's right to terminate by reason of default, casualty, condemnation
or other reasons, in each case as expressly set forth in the applicable Ground
Lease.

      (D)   Each Ground Lease is in full force and effect and to the Borrowers'
Knowledge, no breach or default or event that with the giving of notice or
passage of time would constitute a breach or default under any Ground Lease (a
"GROUND LEASE DEFAULT") exists or has occurred on the part of the Borrowers or
on the part of any Ground Lessor under any Ground Lease. All base rent and
additional rent due and payable under the Ground Leases has been paid through
the date hereof and the Borrowers are not required to pay any deferred or
accrued rent after the date hereof under any of the Ground Leases. The Borrowers
have not received any written notice that a Ground Lease Default has occurred or
exists, or that any Ground Lessor or any third party alleges the same to have
occurred or exist.

      (E)   The applicable Borrower set forth on SCHEDULE 4.30 is the exclusive
owner of the lessee's interest under and pursuant to the applicable Ground Lease
and has not assigned, transferred, or encumbered its interest in, to, or under
any Ground Lease (other than assignments that will terminate on or prior to
Closing), except in favor of Lender pursuant to this Loan Agreement and the
other Loan Documents.

SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their
respective officers, directors, partners, members, Affiliates or, to the
knowledge of the Borrowers, shareholders is an entity or person: (i) that is
listed in the Annex to, or is otherwise subject to the provisions of Executive
Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on
the United States Treasury Department's Office of Foreign Assets Control
("OFAC") most current list of "Specifically Designated National and Blocked
Persons" (which list may be published from time to time in various mediums
including, but not limited to, the OFAC website,
http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or

                                       47


supports "terrorism", as that term is defined in EO 13224; or (iv) who is
otherwise affiliated with any entity or person listed above (any and all parties
or persons described in clauses (i) through (iv) above are herein referred to as
a "PROHIBITED PERSON").

                                   ARTICLE V
                          COVENANTS OF BORROWER PARTIES

      The Borrowers covenant and agree that until payment in full of the Loan,
all accrued and unpaid interest and all other Obligations, the Borrowers shall
perform and comply with all covenants in this Article V applicable to such
Person.

SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.

      (A)   FINANCIAL STATEMENTS.

            (i)   ANNUAL REPORTING. Within one hundred twenty (120) days after
the end of each calendar year, the Borrowers (on a consolidated basis), and
within ninety (90) days after the end of each calendar year, Guarantor shall
provide true and complete copies of their Financial Statements for such year to
Lender. All such Financial Statements shall be audited by an Approved Accounting
Firm or by other independent certified public accountants reasonably acceptable
to Lender, and shall bear the unqualified certification of such accountants that
such Financial Statements present fairly in all material respects the financial
position of the subject company. The annual Financial Statements shall be
accompanied by Supplemental Financial Information for such calendar year. The
annual Financial Statements for the Borrowers (on a consolidated basis) and
Guarantor shall also be accompanied by a certification executed by the entity's
chief executive officer or chief financial officer (or other officer with
similar duties), satisfying the criteria set forth in Section 5.1(A)(viii)
below, and a Compliance Certificate (as defined below).

            (ii)  QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days
after the end of each calendar quarter, the Borrowers on a consolidated basis
(other than with respect to income statements, which shall be on an individual
property basis) shall provide copies of their Financial Statements for such
quarter to Lender, together with a certification executed on behalf of each of
the Borrowers by their respective chief executive officers or chief financial
officers (or other officer with similar duties) in accordance with the criteria
set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements
shall be accompanied by Supplemental Financial Information and a Compliance
Certificate for such quarter.

            (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days
after the end of each calendar quarter, Guarantor shall provide copies of its
Financial Statements for such quarter to Lender, together with a certification
executed on behalf of Guarantor by its chief executive officer or chief
financial officer (or other officer with similar duties) in accordance with the
criteria set forth in Section 5.1(A)(viii) below.

            (iv)  LEASING REPORTS. Within forty-five (45) days after the end of
each calendar year, each Borrower shall provide to Lender a certified Rent Roll
and a schedule of security deposits held under Material Leases, each in form and
substance reasonably acceptable to Lender. Within forty-five (45) days after the
end of each calendar year, each Borrower shall

                                       48


also provide to Lender (a) a schedule of any retail Material Leases that expired
during such calendar year and a schedule of retail Material Leases scheduled to
expire within the next calendar year and (b) to the extent the Borrowers
received notice thereof, a list of any retail tenants under Material Leases that
filed bankruptcy, insolvency or reorganization proceedings during such calendar
year. Within ninety (90) days after the end of each calendar year, each Borrower
shall provide to Lender a statement of income and expenses for all retail space
at each of the Properties owned and operated by the Borrowers and, to the extent
provided to the Borrowers and not subject to confidentiality restrictions, sales
reports for retail tenants for such year.

            (v)   MONTHLY REPORTING. Within thirty (30) days after the end of
each calendar month, each Borrower shall provide, or cause Manager to provide,
to Lender the following items determined on an accrual basis: (a) a calculation
of the average daily rate, RevPAR and occupancy calculations and statistics for
each of the Properties for the subject month; (b) Smith Travel Research "STAR"
reports then available; (c) monthly and year to date operating statements
prepared for such calendar month and for the trailing twelve (12) month period
then ended, noting Net Operating Income, Net Cash Flow and including budgeted
and last year results for the same year-to-date period and other information
necessary and sufficient under GAAP to fairly represent the results of operation
of each of the Properties during such calendar month, all in form reasonably
satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects
completed during such calendar month (including a detailed explanation for any
material deviations from budget) and setting forth that all disbursements and/or
withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E
Reserve have been made with respect to items of Capital Improvement only (as
opposed to items that, in accordance with GAAP, would be included as an
Operating Expense); (e) monthly and year to date detailed reports of Operating
Expenses for each of the Properties, including supporting documentation
satisfactory to Lender in its sole discretion for each item of Extraordinary
Expense (as such term is defined in the Cash Management Agreement) for which
Lender has approved a disbursement from the Cash Trap Reserve pursuant to the
terms of Section 3.3(a)(v) of the Cash Management Agreement; (f) most recently
available "OSI", or similar quality index, scores (including detailed
information regarding criteria and thresholds); (g) prior to Securitization of
the Loan, market segmentation reports for the trailing twelve (12) month period
for each of the Properties; and (h) a report setting forth (i) the date of
termination by Property for each Franchise Agreement that has been terminated
after the Closing Date and not replaced with an Approved Franchisor, (ii) the
number of Properties for which a default has occurred and has continued beyond
applicable notice and grace periods under the applicable Franchise Agreement
(including the percentage of the original Aggregate Allocated Loan Amount
represented by such Properties), (iii) a summary report establishing that the
Borrowers are diligently continuing to pursue reflagging efforts with respect to
each such Property, and (iv) a summary report including (a) the aggregate number
of Properties for which the Borrowers have entered into new Franchise Agreements
as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting
Category of each such Property, and (b) the aggregate number of Properties for
which any replacement (and, if more than one replacement has occurred to a
single Property, the number of replacements with respect to such Property) of
the applicable Franchise Agreements has occurred pursuant to the terms of
Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the
Aggregate Outstanding Principal Balance represented by such Properties and
including the resulting Category of each such Property. All of the above
statements, reports and information shall be provided to Lender by

                                       49


email in Microsoft Excel format or other spreadsheet format reasonably
acceptable to Lender (in the case of any statements, reports or information
provided by third parties that are not Affiliates of the Borrowers, to the
extent same are available in such format). Along with such operating statements,
each Borrower shall deliver to Lender a Compliance Certificate of such
Borrower's chief executive officer or chief financial officer (or other officer
with similar duties) satisfying the criteria set forth in Section 5.1(A)(viii)
below.

            (vi)  ADDITIONAL REPORTING. In addition to the foregoing, the
Borrowers shall, and shall cause Guarantor and Manager to, promptly provide to
Lender such further documents and information concerning its operations,
properties, ownership, and finances as Lender shall from time to time reasonably
request upon prior written notice to the Borrowers.

            (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause
Guarantor and Manager to, maintain systems of accounting established and
administered in accordance with sound business practices and sufficient in all
respects to permit preparation of Financial Statements in conformity with GAAP
and the Uniform System. All Financial Statements shall be prepared in accordance
with GAAP and the Uniform System, consistently applied; provided, however, in
the event of a conflict between the Uniform System and GAAP, GAAP will be
followed.

            (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS,
COMPLIANCE CERTIFICATE. Together with the Financial Statements and other
documents and information provided to Lender by or on behalf of the Borrowers or
Guarantor under this Section, the Borrowers or Guarantor also shall deliver to
Lender a certification to Lender, executed on behalf of the Borrowers or
Guarantor by their respective chief executive officer or chief financial officer
(or other officer with similar duties), stating that to their Knowledge after
due inquiry such quarterly and annual Financial Statements and information
fairly present the financial condition and results of operations of the
Borrowers, Guarantor and/or the Properties for the period(s) covered thereby,
and do not omit to state any material information without which the same might
reasonably be misleading, and all other non-financial documents submitted to
Lender (whether monthly, quarterly or annually) are true, correct, accurate and
complete in all material respects. In addition, where this Loan Agreement
requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same
shall deliver a certificate duly executed on behalf of such Person by its chief
executive officer or chief financial officer (or other officer with similar
duties) stating (a) that, to their Knowledge after due inquiry, there does not
exist any Default or Event of Default under the Loan Documents (or if any
exists, specifying the same in detail), and (b) the Borrowers and Guarantor have
complied with the applicable reporting requirements of this Section 5.1.

            (ix)  FISCAL YEAR. Each Borrower represents that its fiscal year and
that of the Guarantor ends on December 31, and agrees that no change shall be
made to each such fiscal year, without Lender's prior written consent.

      (B)   ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower
will deliver copies of all material reports submitted by independent public
accountants in connection with each annual, interim or special audit of the
Financial Statements or other business

                                       50


operations of such Borrower made by such accountants, including the comment
letter submitted by such accountants to management in connection with the annual
audit.

      (C)   TAX RETURNS. Within thirty (30) days after filing the same, each
Borrower shall deliver to Lender a copy of its Federal income tax returns (or
the return of the applicable Person into which such Borrower's Federal income
tax return is consolidated) certified on its behalf by its chief financial
officer (or similar position) to be true and correct.

      (D)   ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 15 of
each calendar year, each Borrower shall deliver to Lender for its review for its
Property a proposed Operating Budget and CapEx/FF&E Budget (in each case
presented on a monthly and annual basis) for such calendar year. Each Operating
Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall
not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap
Event or Event of Default exists, the Borrowers may make changes to the
Operating Budget and the CapEx/FF&E Budget from time to time as deemed
reasonably necessary by the Borrower, provided no such modification (together
with all prior modifications taken as a whole) shall alter any single line item
(or the applicable Budget as a whole) by more than ten percent (10%) without
Lender's prior written approval, which approval shall not be unreasonably
withheld; provided, however, notwithstanding the foregoing, during a Cash Trap
Event, increases to the Operating Budget for any Property (not to exceed ten
percent (10%) of the Operating Budget for such Property as a whole) will be
permitted without Lender's consent for actual verifiable increases in utilities,
water and sewer assessments and charges and real property taxes for the
applicable Property over the amounts therefor set forth in the Operating Budget
for the prior period. Notice of any modifications to the Operating Budget and
the CapEx/FF&E Budget shall be delivered to Lender at the time of delivery of
the next financial reporting required pursuant to Section 5.1(A)(v). Lender
acknowledges that it has approved the annual Operating Budget and the CapEx/FF&E
Budget for the 2004 calendar year. The proposed Operating Budget shall identify
and set forth each Borrower's reasonable estimate, after due consideration, of
all revenue, costs, and expenses, and shall specify Operating Revenues and
Operating Expenses on a line-item basis consistent with the form of Operating
Budget delivered to Lender prior to Closing. If any of said budgets or plans
requiring Lender's approval is not in form and substance reasonably satisfactory
to Lender, Lender may disapprove the same and specify the reasons therefor in
writing, and the Borrowers shall promptly amend and resubmit for approval
revised budgets or plans, as applicable, making such changes as are necessary to
comply with the reasonable requirements of Lender. Until any such budget or plan
for any year requiring Lender's approval has been approved or deemed approved,
the applicable budget or plan for the previous year shall remain in effect until
the new budget or plan is approved or deemed approved. Lender's consent to any
budget, plan or amendments thereto shall be deemed given, if the first
correspondence from the Borrowers to Lender requesting such approval is in an
envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the
top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS,
YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and
documents required above and any other information reasonably requested by
Lender in writing prior to the expiration of such fifteen (15) day period in
order to adequately review the same has been delivered and, if Lender fails to
respond or to expressly deny such request for approval in writing within the
fifteen (15) day period, a second

                                       51


notice is delivered to Lender from the Borrowers in an envelope marked
"PRIORITY" requesting approval containing a bold-faced, conspicuous legend at
the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR
APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny
each request for approval within the ten (10) day period.

      (E)   MATERIAL NOTICES.

            (i)   The Borrowers shall promptly deliver, or cause to be
delivered, copies of all notices given or received with respect to a default
under any term or condition related to any Permitted Indebtedness of any
Borrower, and shall notify Lender within five (5) Business Days of any potential
or actual event of default with respect to any such Permitted Indebtedness.

            (ii)  The Borrowers shall promptly deliver to Lender copies of any
and all material notices (including without limitation any notice alleging any
default or breach which is reasonably expected to result in a termination)
received with respect to any Material Agreement or any Lease, including, without
limitation, any inspection report and any progress reports related to any
Property Improvement Plan received from a Franchisor related to such Borrower's
Property.

      (F)   EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining
knowledge of any of the following events or conditions, such Borrower shall
deliver a certificate executed on its behalf by its chief financial officer or
similar officer specifying the nature and period of existence of such condition
or event and what action such Borrower or any Affiliate thereof has taken, is
taking and proposes to take with respect thereto: (i) any condition or event
that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii)
any actual or alleged breach or default or assertion of (or written threat to
assert) remedies under any Management Agreement, Franchise Agreement or Ground
Lease.

      (G)   LITIGATION. Promptly upon any of the Borrowers obtaining knowledge
of (1) the institution of any action, suit, proceeding, governmental
investigation or arbitration against the Borrowers or any of the Properties not
previously disclosed in writing by the Borrowers to Lender which would be
reasonably likely to have a Material Adverse Effect or is not covered by
insurance or (2) any material development in any action, suit, proceeding,
governmental investigation or arbitration at any time pending against or
affecting the Borrowers or the Properties which, in each case, if adversely
determined would reasonably be expected to have a Material Adverse Effect, the
Borrowers will give notice thereof to Lender and, upon request from Lender,
provide such other information as may be reasonably available to them to enable
Lender and its counsel to evaluate such matter.

      (H)   INSURANCE. At least five (5) Business Days prior to the end of each
insurance policy period of the Borrowers, the Borrowers will deliver
certificates, reports, and/or other information (all in form and substance
reasonably satisfactory to Lender), (i) outlining all material insurance
coverage maintained as of the date thereof by the Borrowers and all material
insurance coverage planned to be maintained by the Borrowers in the subsequent
insurance policy period and (ii) evidencing payment in full of the premiums for
such insurance policies.

                                       52


      (I)   OTHER INFORMATION. With reasonable promptness, Borrowers will
deliver such other information and data with respect to such Person and its
Affiliates or the Properties as from time to time may be reasonably requested by
Lender.

SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve
and keep in full force and effect their existence as a limited partnership,
limited liability company, or corporation, as the case may be, and all rights
and franchises material to its business, including their qualification to do
business in each state where it is required by law to so qualify. Without
limitation of the foregoing, each Borrower and, to the extent required by
applicable law, General Partner and Member, shall at all times be qualified to
do business in each of the states where the Properties are located.

SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS.

      (A)   Except for those matters being contested pursuant to clause (B)
below, the Borrowers will pay (i) all Impositions; (ii) all claims (including
claims for labor, services, materials and supplies) for sums that have become
due and payable and that by law have or may become a Lien upon any of its
properties or assets (hereinafter referred to as the "CLAIMS"); and (iii) all
federal, state and local income taxes, sales taxes, excise taxes and all other
taxes and assessments of the Borrowers on their business, income or assets; in
each instance before any penalty or fine is incurred with respect thereto.

      (B)   The Borrowers shall not be required to pay, discharge or remove any
Imposition or Claim relating to a Property so long as the Borrowers contest in
good faith such Imposition, Claim or the validity, applicability or amount
thereof by an appropriate legal proceeding which operates to prevent the
collection of such amounts and the sale of the applicable Property or any
portion thereof, and so long as: (i) no Event of Default shall have occurred and
be continuing, (ii) prior to the date on which such Imposition or Claim would
otherwise have become delinquent, the Borrowers shall have given Lender prior
written notice of their intent to contest said Imposition or Claim; (iii) prior
to the date on which such Imposition or Claim would otherwise have become
delinquent, the Borrowers shall have deposited with Lender (or with a court of
competent jurisdiction or other appropriate body reasonably approved by Lender)
such additional amounts as are necessary to keep on deposit at all times, an
amount by way of cash, Dollar Equivalents, or a Letter of Credit, equal to at
least one hundred twenty-five percent (125%) (or such higher amount as may be
required by applicable law) of the total of (x) the balance of such Imposition
or Claim then remaining unpaid, and (y) all interest, penalties, costs and
charges accrued or accumulated thereon; (iv) no risk of sale, forfeiture or loss
of any interest in the applicable Property or any part thereof arises, in
Lender's reasonable judgment, during the pendency of such contest; (v) such
contest does not, in Lender's reasonable determination, have a Material Adverse
Effect; and (vi) such contest is based on bona fide, material, and reasonable
claims or defenses. Any such contest shall be prosecuted with due diligence, and
the Borrowers shall promptly pay the amount of such Imposition or Claim as
finally determined, together with all interest and penalties payable in
connection therewith. Lender shall have full power and authority, but no
obligation, to apply any amount deposited with Lender under this subsection to
the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture
of the applicable Property for non-payment thereof, if Lender reasonably
believes that such sale or forfeiture is threatened. Any surplus retained by
Lender after payment of the Imposition or Claim for which

                                       53


a deposit was made shall be promptly repaid to the Borrowers unless an Event of
Default shall have occurred, in which case said surplus may be retained by
Lender to be applied to the Obligations. Notwithstanding any provision of this
Section to the contrary, the Borrowers shall pay any Imposition or Claim which
they might otherwise be entitled to contest if an Event of Default shall occur
and be continuing, or if, in the reasonable determination of Lender, the
applicable Property is in danger of being forfeited or foreclosed. If the
Borrowers refuse to pay any such Imposition or Claim, Lender may (but shall not
be obligated to) make such payment and the Borrowers shall reimburse Lender on
demand for all such advances.

SECTION 5.4 MAINTENANCE OF INSURANCE.

      The Borrowers will continuously maintain the following described policies
of insurance on each of the respective Properties without cost to Lender (the
"INSURANCE POLICIES"):

            (i)   Property insurance against loss and damage by all risks of
physical loss or damage, including fire, sprinkler leakage, windstorm,
hurricane, terrorism, and other risks covered by the so-called extended coverage
endorsement covering the Improvements and personal property in amounts not less
than the full insurable replacement value of all Improvements (less building
foundations and footings) and personal property from time to time on the
Properties and without sublimits, and bearing a replacement cost agreed-amount
endorsement;

            (ii)  Commercial general liability insurance, including death,
bodily injury, innkeeper legal liability and broad form property damage coverage
with a combined single limit in an amount not less than One Million Dollars
($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the
aggregate for any policy year;

            (iii) If any of the Properties are in an area prone to geological
phenomena, including, but not limited to, sinkholes, mine subsidence or
earthquakes, insurance covering such risks in an amount equal to 100% of the
full replacement cost of all improvements (without any deductions for
depreciation) and with a maximum permissible deductible equal to the lesser of
$25,000 or 10% of the face value of the policy;

            (iv)  For each Property located in whole or in part in a federally
designated "special flood hazard area", flood insurance in the maximum available
amount;

            (v)   An umbrella excess liability policy with a limit of not less
than Twenty Million Dollars ($20,000,000) over primary insurance, which policy
shall include coverage for so-called assumed and contractual liability coverage
and automobile liability coverage, and coverage for safeguarding of personalty
and shall also include such additional coverages and insured risks which are
acceptable to Lender;

            (vi)  Business interruption and/or rent loss insurance with an
aggregate limit equal to at least the gross income from the Properties for an
indemnity period commencing on the date of such casualty and ending at least six
(6) months after completion of the Restoration (such amount being adjusted
annually);

                                       54


            (vii) Crime protection insurance covering all employees with access
to funds and located in Guarantor's corporate offices with a limit of not less
than One Million Dollars ($1,000,000) and with the same coverages and
deductibles as currently in place at the Properties;

            (viii) Steam boiler, machinery and pressurized vessel insurance
insuring against breakdown or explosion of such equipment on a replacement cost
value basis, which shall not contain any exclusions for testing procedures;

            (ix)  Worker's Compensation Insurance in statutory amounts, if any,
at all times;

            (x)   Insurance against loss or damage from (A) leakage of sprinkler
systems and (B) explosion of steam boilers, air conditioning equipment, high
pressure piping, machinery and equipment, pressure vessels or similar apparatus
now or hereafter installed in the Improvements (without exclusion for
explosions), in an amount at least equal to the Aggregate Allocated Loan Amount;

            (xi)  During any period of construction, repair or restoration,
builder's "all risk" insurance in an amount equal to not less than the full
insurable value of the Properties (excluding building foundations and footings)
against such risks (including, without limitation, fire and extended coverage
and collapse of the Improvements to agreed limits) as Lender may reasonably
request;

            (xii) If the Properties are or become a "non-conforming use" under
applicable zoning and building ordinances, or other requirements of the
applicable Governmental Authority, law or ordinance coverage to compensate for
the cost of demolition and the increased cost of construction, if available;

            (xiii) If the Borrowers, Manager or any of their respective
Affiliates holds a liquor license for the Properties, liquor liability insurance
(including "dram shop" liability) in an amount not less than $1,000,000 for each
common cause and $3,000,000 in the aggregate; provided that if such liquor
license is held by any tenant under a Lease, the Borrowers shall cause such
tenant to cause liquor liability insurance in an amount not less than the limits
set forth above to be carried in such tenant's name, and shall include the
Borrowers and Lender as additional insureds thereunder;

            (xiv) If reasonably required by Lender as a result of the release,
disposal or existence of any Hazardous Materials on or about any Property after
the date hereof (or as to which Lender obtains knowledge after the date hereof)
or if such insurance is then customarily required by institutional lenders for
securitized loans, environmental insurance, including mold coverage, in form and
with coverages (including business interruption coverage) reasonably
satisfactory to Lender; provided, however, without limiting or affecting
Lender's right to require such environmental insurance with respect to any other
Properties after the date hereof, Lender acknowledges that, as of the date
hereof, environmental insurance shall only be required with respect to the
Property known as the Holiday Inn Express, located at 801 Cleveland Avenue,
Attalla, Alabama;

                                       55


            (xv)  Fiduciary liability insurance and directors and officers
liability insurance ("D&O INSURANCE") with coverages at levels in effect as of
the Closing Date;

            (xvi) Insurance against acts of terrorism, or insurance policies
without an exclusion for damages resulting from acts of terrorism on terms
consistent with the commercial property insurance policies required under
subsection (i), (ii), (v) and (vi) above;

            (xvii) Such other insurance as may from time to time be reasonably
required by Lender and which is then customarily required by institutional
lenders for securitized loans secured by similar properties similarly situated,
against other insurable hazards, including, but not limited to, malicious
mischief, vandalism, windstorm and or earthquake, due regard to be given to the
size and type of the Properties, Improvements, fixtures and equipment and their
location, construction and use. Additionally, the Borrowers shall carry such
insurance coverage as Lender may from time to time require if the failure to
carry such insurance would result in a downgrade, qualification or withdrawal of
any class of securities issued in connection with a Securitization.

      All Insurance Policies shall be in content (including, without limitation,
endorsements or exclusions, if any), form, and amounts, and issued by companies,
satisfactory to Lender from time to time and shall name Lender and its
successors and assignees as their interests may appear as (x) an "additional
insured" for each of the liability policies under this Section 5.4 hereof, and
(y) a "mortgagee" for each of the property and casualty policies under this
Section hereof, and shall (except for Worker's Compensation Insurance) contain a
waiver of subrogation clause reasonably acceptable to Lender. Other than with
respect to D&O Insurance, an insurance company shall not be satisfactory unless
such insurance company (a) is licensed or authorized to issue insurance in the
State where the applicable Property is located and (b) has a claims paying
ability rating by the Rating Agencies of AA- (or its equivalent).
Notwithstanding the foregoing, a carrier which does not meet the foregoing
ratings requirement shall nevertheless be deemed acceptable hereunder provided
that such carrier is reasonably acceptable to Lender and the Borrowers shall
obtain and deliver to Lender a Rating Confirmation with respect to such carrier
from each of the Rating Agencies, provided, however, that: (a) if any insurance
coverage required under this Section 5.4 is maintained by a syndicate of
insurers, the preceding ratings requirements shall be deemed satisfied (without
any required Rating Confirmation) as long as at least seventy five percent (75%)
of the coverage (if there are four or fewer members of the syndicate) or at
least sixty percent (60%) of the coverage (if there are five or more members of
the syndicate) is maintained with carriers meeting the claims-paying ability
ratings requirements by S&P and Moody's (if applicable) set forth above and all
carriers in such syndicate have a claims-paying ability rating by S&P of not
less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by
Moody's); (b) Lender hereby approves Zurich Insurance Company as the carrier
providing the insurance described in clause (ii) above, so long as such carrier
maintains a claims paying ability of not less than A- by S&P (and the equivalent
from each of the other Rating Agencies to the extent rated thereby) and (c)
until the expiration of the current term of the applicable policies, Lender
hereby approves Landmark American as the carrier providing the insurance
described in clauses (i), (iv) and (vi) above (covering losses over the first
$25,000,000 of coverage), so long as thereafter such carrier or any other
carrier providing the above coverages maintains a claims paying ability of not
less than A by S&P (and the equivalent from each of the other Rating Agencies to
the extent rated thereby). All Insurance Policies under

                                       56


Sections 5.4 (i), (iv), (vi), (vii), (x), (xi) and (xii) hereof shall contain a
Non-Contributory Standard mortgagee clause and a mortgagee's Loss Payable
Endorsement (Form 438 BFU NS), or their equivalents (such endorsements shall
entitle Lender to collect any and all proceeds payable under all such insurance,
with the insurance company waiving any claim or defense against Lender for
premium payment, deductible, self-insured retention or claims reporting
provisions). All Insurance Policies shall provide that the coverage shall not be
modified without (30) days' advance written notice to Lender and shall provide
that no claims shall be paid thereunder to a Person other than Lender without
ten (10) days' advance written notice to Lender. The Borrowers may obtain any
insurance required by this Section through blanket policies; provided, however,
that such blanket policies shall separately set forth the amount of insurance in
force with respect to the Properties (which shall not be reduced by reason of
events occurring on property other than the Properties) and shall afford all the
protections to Lender as are required under this Section. Except as may be
expressly provided above, all policies of insurance required hereunder shall
contain no annual aggregate limit of liability, other than with respect to
liability insurance. If a blanket policy is issued, a certified copy of said
policy shall be furnished, together with a certificate indicating that Lender is
an additional insured (and, if applicable, loss payee) under such policy in the
designated amount. The Borrowers will deliver duplicate originals of all
Insurance Policies, premium prepaid through the current expiration dates of such
Insurance Policies, to Lender and, in case of Insurance Policies about to
expire, the Borrowers will deliver duplicate originals of replacement policies
satisfying the requirements hereof to Lender not less than ten (10) days prior
to the date of expiration; provided, however, if such replacement policy is not
yet available, the Borrowers shall provide Lender with an insurance certificate
executed by the insurer or its authorized agent evidencing that the insurance
required hereunder is being maintained under such policy, which certificate
shall be acceptable to Lender on an interim basis until the duplicate original
of the policy is available. The Borrowers shall furnish Lender receipts for the
payment of premiums on such insurance policies or other evidence of such payment
reasonably satisfactory to Lender in the event that such premiums have not been
paid by Lender pursuant to the Loan Agreement. The requirements of this Section
5.4 shall apply to any separate policies of insurance taken out by the Borrowers
concurrent in form or contributing in the event of loss with the Insurance
Policies. Losses shall be payable to Lender notwithstanding (1) any act, failure
to act or negligence of the Borrowers or their agents or employees, Lender or
any other insured party which might, absent such agreement, result in a
forfeiture or all or part of such insurance payment, other than the willful
misconduct of Lender knowingly in violation of the conditions of such policy,
(2) the occupation or use of the Properties or any part thereof for purposes
more hazardous than permitted by the terms of such policy, (3) any foreclosure
or other action or proceeding taken pursuant to this Loan Agreement or (4) any
change in title to or ownership of the Properties or any part thereof. The
property insurance and the boiler and machinery insurance described in Sections
5.4(i) and (x) hereof shall include "underground hazards" coverage; "time
element" coverage by which Lender shall be assured payment of all amounts due
under the Note, this Loan Agreement and the other Loan Documents; "extra
expense" (i.e., soft costs), clean-up, transit and ordinary payroll coverage;
and "expediting expense" coverage to facilitate rapid repair or restoration of
the Properties. The Insurance Policies shall not contain any deductible in
excess of $250,000.

                                       57


SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY.

      (A)   The Borrowers will operate and maintain the Properties as is
necessary to maintain hotel standards at least as high as those that currently
apply to each Property, subject to ordinary wear and tear, as reasonably
determined by the Borrowers, and otherwise in compliance with the standards
under the applicable Franchise Agreement and shall maintain or cause to be
maintained in good repair, working order and condition all material property
used in the business of each Borrower, including the applicable Property, and
will make or cause to be made all appropriate repairs, renewals and replacements
thereof. Without limitation of the foregoing, each Borrower will operate and
maintain its Property substantially in accordance with the applicable Operating
Budget and the CapEx/FF&E Budget. All work required or permitted under this Loan
Agreement shall be performed in a workmanlike manner and in compliance with all
applicable laws.

      So long as no Event of Default has occurred and is continuing, the
Borrowers may, without Lender's consent, perform alterations to the Properties
which do not constitute a Material Alteration. The Borrowers shall not perform
any Material Alteration without Lender's prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed; provided, however,
that Lender may, in its sole and absolute discretion, withhold consent to any
Material Alteration which is likely to result in a decrease of Net Operating
Income (taking into consideration all Material Alterations being undertaken at
the Properties at such time) by 5% or more below that which was in effect prior
to the commencement of the first such Material Alteration being undertaken at
the time of determination for a period of sixty (60) days or longer; provided,
further, however, the Borrowers may perform a Material Alteration without
Lender's consent if (i) the delay caused by obtaining Lender's prior consent may
result in injury or death at, or further destruction or deterioration of, the
applicable Property, (ii) such Material Alteration is necessary to prevent the
likelihood of injury or death at, or further destruction or deterioration of,
the applicable Property, and (iii) the Borrowers deliver notice to Lender within
two (2) Business Days of commencement of such Material Alteration together with
such supporting documentation as Lender may require with respect to such
Material Alteration. Lender may, as a condition to giving its consent to a
Material Alteration, require that the Borrowers deliver to Lender evidence
reasonably satisfactory to Lender that the Borrowers have cash available for
payment of the cost of such Material Alteration or, if the Borrowers fail to
deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an
amount equal to 125% of the cost of such Material Alteration as reasonably
estimated by Lender. Cash deposited by the Borrowers with Lender in connection
with any Material Alteration pursuant to the foregoing sentence shall be held by
Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers
to pay for the cost of such Material Alteration as such work progresses subject
to satisfaction of the conditions for disbursement of amounts from the Capital
Improvement Reserve under Section 6.5 (including the requirements set forth
under Section 6.7). Upon completion of the Material Alteration, the Borrowers
shall provide evidence reasonably satisfactory to Lender that (i) the Material
Alteration was constructed in accordance with all material applicable laws and
substantially in accordance with plans and specifications approved by Lender
(which approval shall not be unreasonably withheld or delayed), (ii) all
contractors, subcontractors, materialmen and professionals who provided work,
materials or services in connection with the Material Alteration have been paid
in full and have delivered unconditional releases of lien and (iii) all material
licenses necessary for the use, operation and occupancy of the Material
Alteration (other

                                       58


than those which depend on the performance of tenant improvement work) have been
issued. The Borrowers shall reimburse Lender upon demand for all reasonable
out-of-pocket costs and expenses (including the reasonable fees of any
architect, engineer or other professional engaged by Lender) incurred by Lender
in reviewing plans and specifications or in making any determinations necessary
to implement the provisions of this Section 5.5(A).

      (B)   In the event of casualty or loss at any of the Properties, the
Borrowers shall give immediate written notice of the same to the insurance
carrier and to Lender and shall promptly commence and diligently prosecute to
completion, in accordance with the terms hereof, the repair and restoration of
the Property as nearly as possible to the Pre-Existing Condition (a
"RESTORATION"). The Borrowers hereby authorize and empower Lender as
attorney-in-fact for the Borrowers (jointly with the Borrowers unless an Event
of Default has occurred and is continuing), or any of them, to make proof of
loss, to adjust and compromise any claim under insurance policies, to appear in
and prosecute any action arising from such insurance policies, to collect and
receive insurance proceeds, and to deduct therefrom Lender's expenses incurred
in the collection of such proceeds; provided however, that nothing contained in
this Section shall require Lender to incur any expense or take any action
hereunder. The Borrowers further authorize Lender, at Lender's option, (i) to
hold the balance of such proceeds to be used to reimburse the Borrowers for the
cost of Restoration of any of the Properties or (ii) subject to Subsection
5.5(C), to apply such proceeds to payment of the Obligations whether or not then
due, in any order. Notwithstanding the foregoing, in the event of a casualty
where the loss does not exceed the Restoration Threshold, the Borrowers may
settle and adjust such claim; provided that (a) no Event of Default has occurred
and is continuing and (b) such adjustment is carried out in a commercially
reasonable and timely manner.

      (C)   Lender shall not exercise Lender's option to apply insurance
proceeds to payment of the Obligations if all of the following conditions are
met: (i) no Event of Default then exists; (ii) Lender reasonably determines that
there will be sufficient funds to complete the Restoration of the Property to at
least substantially the Pre-Existing Condition and to timely make all payments
due under the Loan Documents during the Restoration of the affected Property;
(iii) Lender reasonably determines that the Net Operating Income of the
Properties (including rental income or business interruption insurance) will be
sufficient to pay principal and interest on the Loan and the Mezzanine Loan and
Operating Revenues of the Properties, after the Restoration thereof to the
Pre-Existing Condition, will be sufficient to meet all Operating Expenses,
payments for Reserves and payments of principal and interest under the Note and
the Mezzanine Loan; (iv) Lender determines that the Restoration of the affected
Property to the Pre-Existing Condition will be completed not later than five (5)
months prior to the expiration of any business interruption insurance, but in no
event later than six (6) months prior to the Maturity Date; (v) less than fifty
percent (50%) of the total floor area of the Improvements has been damaged,
destroyed or rendered unusable as a result of such fire or other casualty; and
(vi) such Property can be restored and repaired substantially to the condition
it was in immediately prior to such casualty and in compliance with all
applicable zoning, building and other laws and codes (the "PRE-EXISTING
CONDITION"). If Lender elects to apply insurance proceeds to payment of the
Obligations, such application shall be made on the Payment Date immediately
following such election in accordance with the terms of the Cash Management
Agreement.

                                       59


      (D)   If Lender elects or is obligated to make the insurance proceeds
available for the Restoration of any Property and Lender is holding such
proceeds, the Borrowers agree that, if at any time during the Restoration, the
cost of completing such Restoration, as reasonably determined by Lender, exceeds
the undisbursed insurance proceeds, the Borrowers shall, within ten (10)
Business Days following the written demand by Lender, deposit the amount of such
excess with Lender, and Lender shall first disburse such deposit to pay for the
costs of such Restoration on the same terms and conditions as the insurance
proceeds are disbursed. If the Borrowers deposit such excess with Lender and if,
after completion of the Restoration, any funds remain from the combination of
insurance proceeds and the funds so deposited with Lender by the Borrowers, and
if no Event of Default shall have occurred and be continuing, then Lender shall
promptly disburse to the Borrowers such remaining funds.

      (E)   Lender may, at Lender's option, condition disbursement of any
insurance proceeds on Lender's approval (which approval shall not be
unreasonably withheld) of plans and specifications of an independent architect
licensed in the state where the Property is located and reasonably satisfactory
to Lender (the "ARCHITECT"), any and all contractors, subcontractors and
materialmen engaged in the Restoration and the contracts under which they have
been engaged, contractor's cost estimates, architect's certificates, waivers of
liens, sworn statements of mechanics and materialmen and such other evidence of
costs, percentage completion of construction, application of payments, and
satisfaction of liens as Lender may reasonably require. Lender shall not be
obligated to disburse insurance proceeds more frequently than once every
calendar month. If insurance proceeds are applied to the payment of the
Obligations and provided no Event of Default exists, any such application of
proceeds to principal shall be without any Prepayment Consideration and shall
not extend or postpone the due dates of the monthly payments due under the Note
or otherwise under the Loan Documents, or change the amounts of such payments.
If Lender elects to apply all of such insurance proceeds toward the repayment of
the Obligations, the Borrowers shall (subject to compliance with clauses (A),
(B), (D) and (F) of Section 11.4) be entitled to obtain from Lender a Property
Release (without representation or warranty) of the applicable Property from the
Lien of the Mortgage relating to such Property (in which event the Borrowers
shall not be obligated to restore the applicable Property pursuant to Section
5.5(B) above) provided that the Borrowers pay to Lender the amount, if any, by
which the Release Price for such Property exceeds the insurance proceeds
received by Lender and applied to repayment of the Obligations. If any proceeds
are applied to reduce the Obligations under this Section 5.5, provided that no
Event of Default has occurred and is continuing, no Prepayment Consideration
shall be due and payable in connection with such application. Any amount of
insurance proceeds remaining in Lender's possession after full and final payment
and discharge of all Obligations shall be refunded to, or as directed by, the
Borrowers or otherwise paid in accordance with applicable law. If the Property
is sold at foreclosure or if Lender acquires title to the Property, Lender shall
have all of the right, title and interest of the applicable Borrower in and to
any insurance policies and unearned premiums thereon and in and to the proceeds
resulting from any damage to such Property prior to such sale or acquisition.

      (F)   In no event shall Lender be obligated to make disbursements of
insurance proceeds in excess of an amount equal to the costs actually incurred
from time to time for work in place as part of the Restoration, as certified by
the Architect, less a retainage equal to the lesser of (x) the actual retainage
required pursuant to the permitted contract, or (y) ten percent

                                       60


(10%) of such costs incurred until the Restoration has been completed. The
retainage shall in no event be less than the amount actually held back by the
Borrowers from contractors, subcontractors and materialmen engaged in the
Restoration. The retainage shall not be released until the Architect certifies
to Lender, or, if no Architect has been retained by Lender, Lender is reasonably
satisfied, that the Restoration has been completed in accordance with the
provisions of this Section 5.5 and that all approvals necessary for the
re-occupancy and use of the Property have been obtained from all appropriate
governmental authorities, and Lender receives final lien waivers and such other
evidence reasonably satisfactory to Lender that the costs of the Restoration
have been paid in full or will be paid in full out of the retainage.

SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized
representatives designated by Lender to visit and inspect during normal business
hours its Property and its business, including its financial and accounting
records, and to make copies and take extracts therefrom and to discuss its
affairs, finances and business with its officers and independent public
accountants (with such Borrower's representative(s) present), at such reasonable
times during normal business hours and as often as may be reasonably requested.
Unless an Event of Default has occurred and is continuing, Lender shall provide
advance written notice of at least three (3) Business Days prior to visiting or
inspecting any Property or such Borrower's offices.

SECTION 5.7 O&M PLAN. Each Borrower that is the owner of a Property set forth on
SCHEDULE 5.7 shall cause to be prepared and delivered to Lender an operations
and maintenance program (the "O&M PLANS") with respect to suspected asbestos,
asbestos-containing materials, and/or mold located in its Property as set forth
in the applicable Environmental Reports. Each Borrower shall at all times
implement and carry out the O&M Plan in accordance with its terms. Lender's
requirement that the Borrowers develop and comply with the O&M Plan shall not be
deemed to constitute a waiver or modification of any covenants or agreements of
the Borrowers or Guarantor with respect to Hazardous Material or Environmental
Laws as set forth in the Environmental Indemnity.

SECTION 5.8 INTENTIONALLY DELETED.

SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will
(A) comply with the requirements of all present and future applicable laws,
rules, regulations and orders of any governmental authority in all jurisdictions
in which it is now doing business or may hereafter be doing business, other than
those laws, rules, regulations and orders the noncompliance with which would not
reasonably be expected to have, either individually or in the aggregate, a
material adverse effect on the operation or value of any Property, (B) maintain
all licenses and permits now held or hereafter acquired by any Borrower, the
loss, suspension, or revocation of which, or failure to renew, could have a
material adverse effect on the operation or value of any Property and (C)
perform, observe, comply and fulfill all of its material obligations, covenants
and conditions contained in any Contractual Obligation.

SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute
and/or deliver such documents, instruments, agreements, financing statements,
and perform such acts as Lender at any time may reasonably request to evidence,
preserve and/or protect the Collateral at any time securing or intended to
secure the Obligations and/or to better and more effectively carry out the
purposes of this Loan Agreement and the other Loan Documents.

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SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party
shall duly and punctually perform, observe and comply in all material respects
with all of the terms, provisions, conditions, covenants and agreements on its
part to be performed, observed and complied with (i) hereunder and under the
other Loan Documents to which it is a party, (ii) under all Material Agreements
and Leases and (iii) all other agreements entered into or assumed by such Person
in connection with the Properties, and will not suffer or permit any material
default or event of default (giving effect to any applicable notice requirements
and cure periods) to exist under any of the foregoing except where the failure
to perform, observe or comply with any agreement referred to in this clause
(iii) would not reasonably be expected to have a material adverse effect on the
operation or value of any Property.

SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which
shall not be unreasonably withheld or delayed, the Borrowers shall not, nor
shall the Borrowers authorize Manager or any other Person to, (i) enter into any
Material Lease; (ii) cancel or terminate any Material Lease (except to enforce
any such Lease after a default thereunder); (iii) amend or modify any Material
Lease (except for minor modifications and amendments entered into in the
ordinary course of business, consistent with prudent property management
practices, not materially and adversely affecting the economic terms of the
Material Lease); (iv) approve any assignment, sublease or underlease of any
Material Lease (except as required pursuant to the express terms of any existing
Lease or Lease hereafter approved by Lender); or (v) cancel or modify any
guaranty, or release any security deposit, letter of credit, or other item
constituting security pertaining to any Material Lease (except as required
pursuant to the express terms of any existing Lease or Lease hereafter approved
by Lender).

      (B)   Any request for approval of any Material Lease or assignment,
termination, amendment or modification of any Material Lease shall be made to
Lender in writing and together with such request the Borrowers shall furnish to
Lender: (i) such biographical and financial information about the proposed
tenant as Lender may reasonably require in conjunction with its review, (ii) a
copy of the proposed form of Lease (or amendment or modification), and (iii) a
summary of the material terms of such proposed Lease (or amendment or
modification) including, without limitation, rental terms and the term of the
proposed Lease and any options. Lender's approval of any Material Lease or
assignment, termination, amendment or modification of any Material Lease, shall
be deemed given, if the first correspondence from the Borrowers to Lender
requesting such approval is in an envelope marked "PRIORITY" and contains a
bold-faced, conspicuous legend at the top of the first page thereof stating that
"IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN
WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is
accompanied by the information and documents required above and any other
information reasonably requested by Lender in writing prior to the expiration of
such fifteen (15) day period in order to adequately review the same has been
delivered and, if Lender fails to respond or to expressly deny such request for
approval in writing within the fifteen (15) day period, a second notice is
delivered to Lender from the Borrowers in an envelope marked "PRIORITY"
requesting approval containing a bold-faced, conspicuous legend at the top of
the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY
THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL
BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request
for approval within the ten (10) day period.

                                       62


      Except for security deposits, no Material Lease executed after the Closing
Date shall provide for payment of rent more than one month in advance, and the
Borrowers shall not under any circumstances collect any such rent more than one
month in advance. The Borrowers, at Lender's request, shall furnish Lender with
executed copies of all Material Leases hereafter made. Each new Material Lease
or a separate agreement with the tenant of such Material Lease shall be in
recordable form and shall specifically provide that such Material Lease (i) is
subordinate to the Mortgages; (ii) that the tenant attorns to Lender, such
attornment to be effective upon Lender's acquisition of title to the Property;
(iii) that the tenant agrees to execute such further evidences of attornment as
Lender may from time to time request; (iv) that the attornment of the tenant
shall not be terminated by foreclosure; (v) that in no event shall Lender, as
holder of the Mortgages or as successor landlord, be liable to the tenant for
any act or omission of any prior landlord or for any liability or obligation of
any prior landlord occurring prior to the date that Lender or any subsequent
owner acquire title to the Property; and (vi) that Lender may, at Lender's
option, accept or reject such attornment.

SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS.

      (A)   The Borrowers shall cause each Manager to manage the Properties in
accordance with the Management Agreements including, without limitation,
maintaining inventory in amounts and types customary for hotels comparable to
each Property. The Borrowers shall (i) perform and observe all of the material
terms, covenants and conditions of the Management Agreement on the part of each
Borrower to be performed and observed, and (ii) promptly notify Lender of any
notice to any of the Borrowers of any material default under the Management
Agreement of which it is aware. If any of the Borrowers shall default in the
performance or observance of any material term, covenant or condition of the
applicable Management Agreement on the part of the Borrowers to be performed or
observed, then, without limiting Lender's other rights or remedies under this
Agreement or the other Loan Documents, and without waiving or releasing the
Borrowers from any of their obligations hereunder or under the applicable
Management Agreement, Lender shall have the right, upon prior written notice to
the Borrower, but shall be under no obligation, to pay any sums and to perform
any act as may be reasonably appropriate to cause such material conditions of
the applicable Management Agreement on the part of the Borrowers to be performed
or observed.

      (B)   The Borrowers shall not surrender, terminate, cancel, modify (other
than non-material changes), renew or extend the Management Agreement, or enter
into any other Management Agreement with Manager or any new Manager, or consent
to the assignment by the Manager of its interest under the Management Agreement,
in each case without (i) prior to a Securitization, the express consent of
Lender, which consent shall not be unreasonably withheld, or (ii) after a
Securitization, delivery of Rating Confirmations from each of the Rating
Agencies. The Borrowers shall cause any new Manager with respect to any Property
to execute and deliver a subordination of management agreement in substantially
the form delivered in connection with the closing of the Loan.

      (C)   Lender shall have the right to require any of the Borrowers to
replace any Manager with a Person chosen by the Borrowers and reasonably
acceptable to Lender (unless such proposed Manager is an Acceptable Manager) and
the applicable Franchisor (to the extent the applicable Franchisor has consent
rights), upon the earliest to occur of any one or more of the

                                       63


following events: (i) upon the occurrence and during the continuance of an Event
of Default; (ii) thirty (30) days after notice from Lender to the Borrowers if
Manager has engaged in fraud, gross negligence or willful misconduct arising
from or in connection with its performance under the applicable Management
Agreement; or (iii) upon a change of control of the current Manager.

      (D)   The Borrowers shall not terminate or enter into any Franchise
Agreement without Lender's prior written consent, which may be granted or
withheld in Lender's sole discretion. Notwithstanding the foregoing, the
following changes to Franchise Agreements shall be permitted without Lender's
prior written consent:

            (i)   Replacement of any Franchise Agreement with a new Franchise
                  Agreement in form substantially similar to a form previously
                  approved by Lender with any Franchisor that would cause a Tier
                  3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or
                  that would cause a Tier 2 Hotel to become a Tier 1 Hotel;

            (ii)  Replacement of any Franchise Agreement with a new Franchise
                  Agreement in form substantially similar to a form previously
                  approved by Lender with another Franchisor within the same
                  Category, provided that the Borrowers shall not replace
                  Franchise Agreements (in the aggregate) pursuant to this
                  Section 5.13(D)(ii) with respect to more than the lesser of
                  (x) three (3) Properties, or (y) Properties with Aggregate
                  Allocated Loan Amounts (in the aggregate) of ten percent (10%)
                  of the Aggregate Outstanding Principal Balance;

            (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with
                  a new Franchise Agreement in form substantially similar to a
                  form previously approved by Lender for Tier 3 Hotels, provided
                  that the Borrowers shall not replace Franchise Agreements (in
                  the aggregate) pursuant to this Section 5.13(D)(iii) with
                  respect to more than the lesser of (x) two (2) Properties, or
                  (y) Properties with Aggregate Allocated Loan Amounts (in the
                  aggregate) of three percent (3%) (in each case under clauses
                  (x) or (y), exclusive of the Franchise Agreement for the
                  Holiday Inn, located at 5252 New Jessup Highway, Brunswick,
                  Georgia 31525, which is in the process of being reflagged as a
                  "Park Inn");

            (iv)  Entering into a new Franchise Agreement in form substantially
                  similar to a form previously approved by Lender with an
                  Acceptable Franchisor for any of the Non-Flagged Hotels, at
                  which time the applicable Property shall be deemed to be
                  within the Category determined by the applicable Franchise
                  Agreement;

            (v)   Entering into a new Franchise Agreement in form substantially
                  similar to a form previously approved by Lender with Park
                  Hospitality LLC under the "Park Inn" brand for the hotel
                  located at 5252 New Jessup Highway, Brunswick, Georgia 31525
                  at which time the applicable Property shall be deemed to be a
                  Tier 3 Hotel; and

                                       64


            (vi)  Entering into new Franchise Agreements (or amendments or
                  addenda to existing Franchise Agreements) with the existing
                  Franchisors for the applicable Properties for the same
                  franchise brand, each in form substantially similar to the
                  forms previously approved for the respective Properties by
                  Lender, as required by the existing Franchisors under the
                  respective Franchise Agreements in connection with the
                  transfers of the applicable Properties and the direct and
                  indirect ownership interests in the Borrowers made by the
                  Borrower Parties and their Affiliates in connection with the
                  Closing of the Loan.

      In connection with the replacement of any Franchisors permitted hereunder,
the applicable Borrower shall, within ten (10) Business Days of the execution of
such Franchise Agreement, deliver to Lender a Franchisor Letter from any
replacement Franchisor in form and substance reasonably acceptable to Lender. In
all cases, each Borrower shall (a) cause the hotel located on the applicable
Property to be operated pursuant to the applicable Franchise Agreement; (b)
promptly perform and observe in all material respects all of the covenants
required to be performed and observed by it under the applicable Franchise
Agreement (including the requirements of any Property Improvement Plan); (c)
promptly notify Lender of any material default under the applicable Franchise
Agreement of which it is aware; and (d) promptly enforce in a commercially
reasonable manner the performance and observance of all of the material
covenants required to be performed and observed by the Franchisor under the
Franchise Agreement. In addition, the Borrowers shall not, without Lender's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed: (x) increase or consent to the increase of the aggregate
amount of any fees under any Franchise Agreement; or (y) otherwise materially
modify, change, supplement, alter or amend, or waive or release any of its
material rights and remedies under, any Franchise Agreement.

      Lender's consent to any replacement of any Franchise Agreement, or the
termination, renewal, extension or modification of an existing Franchise
Agreement, shall be deemed given, if the first correspondence from the Borrowers
to Lender requesting such consent is in an envelope marked "PRIORITY" and
contains a bold-faced, conspicuous legend at the top of the first page thereof
stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR
APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED
GIVEN", and is accompanied by the information and documents required above and
any other information reasonably requested by Lender in writing prior to the
expiration of such fifteen (15) day period in order to adequately review the
same has been delivered and, if Lender fails to respond or to expressly deny
such request for approval in writing within the fifteen (15) day period, a
second notice is delivered to Lender from the Borrowers in an envelope marked
"PRIORITY" requesting approval containing a bold-faced, conspicuous legend at
the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR
APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny
each request for approval within the ten (10) day period.

SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become
obligated under any Material Agreement pertaining to any Property without
Lender's prior written

                                       65


approval, which approval shall not be unreasonably withheld or conditioned;
except that the following Material Agreements shall not require Lender approval:
(i) any Lease that does not require Lender's approval under, and otherwise
complies with, the provisions of Section 5.12 hereof, (ii) any Management
Agreement that does not require Lender's approval under, and otherwise complies
with, the provisions of Section 5.13 hereof (provided, however, that the
foregoing shall not affect Borrowers' obligation to deliver Rating Confirmations
with respect to any such Management Agreement if required under Section 5.13),
(iii) the existing Material Agreements described on SCHEDULE 5.14 attached
hereto, (iv) any Franchise Agreement that does not require Lender's approval
under, and otherwise complies with, the provisions of Section 5.13(E) or (v) any
other agreement that may be terminated without cause and without payment of a
penalty or premium, on not more than thirty (30) days' prior written notice.

SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all
Receipts from the Properties into, and otherwise comply with, the Accounts
established from time to time hereunder. Subject to Article VII hereof and the
Cash Management Agreement, each Borrower shall promptly apply all Receipts to
the payment of all current and past due Operating Expenses, and to the repayment
of all sums currently due or past due under the Loan Documents, including all
payments into the Reserves.

SECTION 5.16 ESTOPPEL CERTIFICATES.

      (A)   Within ten (10) Business Days following a request by Lender, the
Borrowers shall provide to Lender a duly acknowledged written statement
confirming (i) the amount of the outstanding principal balance of the Loan, (ii)
the terms of payment and maturity date of the Note, (iii) the date to which
interest has been paid, (iv) whether any offsets or defenses exist against the
Obligations, and if any such offsets or defenses are alleged to exist, the
nature thereof shall be set forth in detail and (v) that this Loan Agreement,
the Note, the Mortgages and the other Loan Documents are legal, valid and
binding obligations of the Borrowers and have not been modified or amended, or
if modified or amended, describing such modification or amendments.

      (B)   Within ten (10) Business Days following a written request by the
Borrowers, Lender shall provide to the Borrowers a duly acknowledged written
statement setting forth the amount of the outstanding principal balance of the
Loan, the date to which interest has been paid, and whether Lender has provided
the Borrowers with written notice of any Event of Default. Compliance by Lender
with the requirements of this Section shall be for informational purposes only
and shall not be deemed to be a waiver of any rights or remedies of Lender
hereunder or under any other Loan Document.

SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly
create, incur, assume, guaranty, or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness except for the following
(collectively, "PERMITTED INDEBTEDNESS"):

      (A)   The Obligations;

      (B)   (i) Unsecured trade payables not evidenced by a note and arising out
of purchases of goods or services in the ordinary course of business and (ii)
Indebtedness incurred in the

                                       66


financing of equipment or other personal property used at any Property in the
ordinary course of business, provided that (a) each such trade payable is
payable not later than ninety (90) days after the original invoice date and is
not overdue by more than thirty (30) days, and (b) the aggregate amount of such
trade payables and Indebtedness relating to financing of equipment and personal
property or otherwise referred to in clauses (i) and (ii) above (excluding
therefrom utility expenses of the Properties and fees payable to the Franchisors
pursuant to the terms of the Franchise Agreements) outstanding does not, at any
time, exceed five percent (5%) of the outstanding principal balance of the Loan;
and

      (C)   The Mezzanine Loan.

In no event shall any Indebtedness other than the Loan be secured, in whole or
in part, by the Properties or any portion thereof or interest therein.

SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are
in addition to and not in limitation of its obligations under Article XI herein.
The Borrower shall not create, incur, assume or permit to exist any Lien on or
with respect to the Properties, any other Collateral or any direct or indirect
ownership interest in the Borrowers, except the Permitted Encumbrances and Liens
on the ownership interests in the Borrowers securing the Mezzanine Loan.

SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no
Primary Borrower Party shall directly or indirectly create or become or be
liable with respect to any Contingent Obligation.

SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly
permitted in this Loan Agreement, no Primary Borrower Party shall, or shall
permit any other Person to, (i) amend, modify or waive any term or provision of
such Borrower Party's partnership agreement, certificate of limited partnership,
articles of incorporation, by-laws, articles of organization, operating
agreement or other organizational documents so as to violate or permit the
violation of the single-purpose entity provisions set forth in Article IX,
unless required by law; or (ii) liquidate, wind-up or dissolve such Primary
Borrower Party.

SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses
payable to the Manager under the Management Agreement, the Borrowers shall not
pay any management, consulting, director or similar fees to any Related Person
of the Borrowers or to any director, officer or employee of the Borrowers. The
Borrowers shall not directly or indirectly enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Related Person of any of the Borrowers or
with any director, officer or employee of any Borrower Party, except
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of the Borrowers and upon fair and reasonable terms
and which are no less favorable to any of the Borrowers than would be obtained
in a comparable arm's length transaction with a Person that is not a Related
Person of any Borrower. The Borrowers shall not make any payment or permit any
payment to be made to any Related Person of any of the Borrowers when or as to
any time when any Event of Default shall exist.

                                       67


SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS.

      (A)   VOLUNTARY CASES. The Borrower Parties shall not commence any
voluntary case under the Bankruptcy Code or under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect.

      (B)   INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not
apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or
collude to cause the appointment of or taking possession by, a receiver, trustee
or other custodian for all or a substantial part of the assets of any Borrower.
As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, in which any of the
Borrowers is a debtor or any portion of the Properties is property of the estate
therein. The Borrowers shall not file a petition for, consent to the filing of a
petition for, or aid, solicit, support, or otherwise act, cooperate or collude
to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any
Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior
written consent of Lender, consent to the entry of any order, file any motion,
or support any motion (irrespective of the subject of the motion), and the
Borrowers shall not file or support any plan of reorganization. The Borrowers
having any interest in any Involuntary Borrower Bankruptcy shall do all things
reasonably requested by Lender to assist Lender in obtaining such relief as
Lender shall seek, and shall in all events vote as directed by Lender. Without
limitation of the foregoing, each such Borrower shall do all things reasonably
requested by Lender to support any motion for relief from stay or plan of
reorganization proposed or supported by Lender.

SECTION 5.23 ERISA.

      (A)   NO ERISA PLANS. None of the Primary Borrower Parties will establish
any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence
making contributions to (or become obligated to make contributions to) any
Employee Benefit Plan, Pension Plan or Multiemployer Plan.

      (B)   COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any
non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the IRC; or (ii) except as may be necessary to comply with applicable laws,
establish or amend any Employee Benefit Plan which establishment or amendment
could result in liability to the Borrowers or any ERISA Affiliate or increase
the obligation of the Borrowers, provided that the Borrower shall not be in
default of this covenant if, in either case, any portion of the Loan has been,
or will be, funded with plan assets of any employee benefit plan that either (x)
is subject to Title I of ERISA or any plan that is covered by Section 4975 of
the Code (unless the Lender is eligible to apply for one or more exemptions such
that the Loan will not constitute a nonexempt prohibited transaction under
Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to
an excise tax under Section 4975 of the IRC.

      (C)   NO PLAN ASSETS. The Borrowers shall not at any time during the term
of this Loan Agreement become (1) an employee benefit plan defined in Section
3(3) of ERISA which is subject to ERISA, (2) a plan as defined in Section
4975(e)(1) of the IRC which is subject to

                                       68


Section 4975 of the IRC, (3) a "governmental plan" within the meaning of Section
3(32) of ERISA or (4) an entity any of whose underlying assets constitute "plan
assets" of any such employee benefit plan, plan or governmental plan for
purposes of Title I or ERISA, Section 4975 of the IRC or any state statutes
applicable to the Borrowers regulating investments of governmental plans.

SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any
other Person within its control to, disclose the name of Lender or terms of this
Loan Agreement or the Loan Documents in any press release without the prior
written consent of Lender, which shall not be unreasonably withheld.
Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted
to make such filings and disclosures with respect to the Loan as are required by
law.

SECTION 5.25 GROUND LEASES.

      (A)   NO MODIFICATION. The Borrowers shall not modify or amend, or
terminate or surrender any Ground Lease, in each case without the prior written
consent of Lender, which consent may be withheld by Lender in its sole and
absolute discretion. Any attempted or purported modification, amendment, or any
surrender or termination of any Ground Lease without Lender's prior written
consent shall be null and void and of no force or effect.

      (B)   PERFORMANCE OF GROUND LEASES. The Borrowers shall fully perform as
and when due each and all of its obligations under each Ground Lease in
accordance with the terms of such Ground Lease, and shall not cause or suffer to
occur any material breach or default in any of such obligations. The Borrowers
shall keep and maintain each Ground Lease in full force and effect. The
Borrowers shall exercise any option to renew or extend any Ground Lease and give
written confirmation thereof to Lender within thirty (30) days after such option
is exercised. Notwithstanding that certain of the obligations of the Borrowers
under this Loan Agreement may be similar or identical to certain of the
obligations of the Borrowers under the Ground Leases, all of the obligations of
the Borrowers under this Loan Agreement are and shall be separate from and in
addition to its obligations under the Ground Leases.

      (C)   NOTICE OF DEFAULT. If any of the Borrowers shall have or receive any
written notice that any Ground Lease Default has occurred, then the Borrowers
immediately shall notify Lender in writing of the same and immediately deliver
to Lender a true and complete copy of each such notice. Further, the Borrowers
shall provide such documents and information as Lender shall reasonably request
concerning the Ground Lease Default.

      (D)   LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and
be continuing, or if any Ground Lessor asserts that a Ground Lease Default has
occurred (whether or not the Borrowers question or deny such assertion), then,
subject to the terms and conditions of the applicable Ground Lease, Lender, upon
five (5) Business Days' prior written notice to the Borrowers, unless Lender
reasonably determines that a shorter period (or no period) of notice is
necessary to protect Lender's interest in the Ground Lease, may (but shall not
be obligated to) take any action that Lender deems reasonably necessary,
including, without limitation, (i) performance or attempted performance of the
applicable Borrower's obligations under the applicable Ground Lease, (ii) curing
or attempting to cure any actual or purported Ground Lease Default, (iii)
mitigating or attempting to mitigate any damages or consequences of the same and

                                       69


(iv) entry upon the applicable Ground Leased Property for any or all of such
purposes. Upon Lender's request, each Borrower shall submit satisfactory
evidence of payment or performance of any of its obligations under each Ground
Lease. Lender may pay and expend such sums of money as Lender in its sole
discretion deems necessary or desirable for any such purpose, and the Borrowers
shall pay to Lender within five (5) Business Days of the written demand of
Lender all such sums so paid or expended by Lender, together with interest
thereon from the date of expenditure at the Default Rate.

      (E)   LEGAL ACTION. The Borrowers shall not commence any action or
proceeding against any Ground Lessor or affecting or potentially affecting any
Ground Lease or the Borrowers' or Lender's interest therein, the effect of which
could cause an event of default or termination of any such Ground Lease, without
the prior written consent of Lender, which consent shall not be unreasonably
withheld, conditioned or delayed. The Borrowers shall notify Lender immediately
if any action or proceeding shall be commenced between any Ground Lessor and
either Borrower, or affecting or potentially affecting any Ground Lease or
either Borrower's or Lender's interest therein (including, without limitation,
any case commenced by or against any Ground Lessor under the Bankruptcy Code).
Lender shall have the option, exercisable upon notice from Lender to the
Borrowers, to participate in any such action or proceeding with counsel of
Lender's choice. The Borrowers shall cooperate with Lender, comply with the
reasonable instructions of Lender, execute any and all powers, authorizations,
consents or other documents reasonably required by Lender in connection
therewith, and shall not settle any such action or proceeding without the prior
written consent of Lender, which consent shall not be unreasonably withheld,
conditioned or delayed.

      (F)   ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the
applicable Ground Lease, from time to time, at Lender's request, the Borrowers
shall use commercially reasonable efforts to obtain and deliver to Lender within
the time period required under the applicable Ground Lease, an estoppel
certificate from each Ground Lessor setting forth (A) (i) the identities of the
original lessor and lessee under the applicable Ground Lease and each of their
respective successors, (ii) that the Ground Lease has not been modified or, if
it has been modified, the date of each modification (together with copies of
each such modification), (iii) the rent payable under the Ground Lease, (iv) the
dates to which all rent and other charges have been paid, (v) whether there are
any alleged Ground Lease Defaults and, if so, setting forth the nature thereof
in reasonable detail, and (vi) such other matters as Lender may reasonably
request or (B) the matters required to be certified by the Ground Lessor under
the applicable Ground Lease. The Borrowers shall not be required to request an
estoppel from any Ground Lessor more than two (2) times in any calendar year.

      (G)   BANKRUPTCY.

            (i)   If any Ground Lessor shall reject any Ground Lease under or
pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrowers shall
not elect to treat the Ground Lease as terminated but shall elect to remain in
possession of the applicable Ground Leased Property and the leasehold estate
under such Ground Lease. The lien of the Mortgage covering such Property does
and shall encumber and attach to all of the Borrowers' rights and remedies at
any time arising under or pursuant to Section 365 of the Bankruptcy Code,
including without

                                       70


limitation, all of such Borrower's rights to remain in possession of such
Property and the leasehold estate.

            (ii)  The Borrowers acknowledge and agree that in any case commenced
by or against the Borrowers under the Bankruptcy Code, Lender by reason of the
liens and rights granted under the Mortgage covering such Property and the Loan
Documents shall have a substantial and material interest in the treatment and
preservation of such Borrower's rights and obligations under such Ground Lease,
and that such Borrower shall, in any such bankruptcy case, provide to Lender
immediate and continuous reasonably adequate protection of such interests. Each
Borrower and Lender agree that such adequate protection shall include but shall
not necessarily be limited to the following:

                  (a)   Lender shall be deemed a party to the Ground Lease (but
shall not have any obligations thereunder) for purposes of Section 365 of the
Bankruptcy Code, and shall, provided that, prior to an Event of Default, no such
action by Lender would adversely and materially affect the Borrowers' ability to
prosecute, or defend, any such claims asserted therein, have standing to appear
and act as a party in interest in relation to any matter arising out of or
related to the Ground Lease or such Property.

                  (b)   The Borrowers shall serve Lender with copies of all
notices, pleadings and other documents relating to or affecting the Ground Lease
or the applicable Property. Any notice, pleading or document served by the
Borrowers on any other party in the bankruptcy case shall be contemporaneously
served by such Borrower on Lender, and any notice, pleading or document served
upon or received by such Borrower from any other party in the bankruptcy case
shall be served by such Borrower on Lender promptly upon receipt by such
Borrower.

                  (c)   Upon written request of Lender, the Borrowers shall
assume the Ground Lease, and shall take such steps as are necessary to preserve
such Borrower's right to assume the Ground Lease, including without limitation
using commercially reasonable efforts to obtain extensions of time to assume or
reject the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the
extent it is applicable.

      (H)   ASSUMPTION AND ASSIGNMENT. If the Borrowers or the applicable Ground
Lessor seeks to reject any Ground Lease or have the Ground Lease deemed
rejected, then prior to the hearing on such rejection Lender shall, subject to
applicable law, be given no less than twenty (20) days' notice and opportunity
to elect in lieu of rejection to have the Ground Lease assumed and assigned to a
nominee of Lender. If Lender shall so elect to assume and assign the Ground
Lease, then the Borrowers shall, subject to applicable law, continue any request
to reject the Ground Lease until after the motion to assume and assign has been
heard. If Lender shall not elect to assume and assign the Ground Lease, then
Lender may, subject to applicable law, obtain in connection with the rejection
of the Ground Lease a determination that the applicable Ground Lessor, at
Lender's option, shall (1) agree to terminate the Ground Lease and enter into a
new lease with Lender on the same terms and conditions as the Ground Lease, for
the remaining term of the Ground Lease, or (2) treat the Ground Lease as
breached and provide Lender with the rights to cure defaults under the Ground
Lease and to assume the rights and benefits of the Ground Lease.

                                       71


            Each Borrower shall join with and support any request by Lender to
grant and approve the foregoing as necessary for adequate protection of Lender's
interests. Notwithstanding the foregoing, Lender may seek additional terms and
conditions, including such economic and monetary protections as it deems
reasonably appropriate to adequately protect its interests, and any request for
such additional terms or conditions shall not delay or limit Lender's right to
receive the specific elements of adequate protection set forth herein.

            Each Borrower hereby appoints Lender as its attorney in fact to act
on behalf of Lender in connection with all matters relating to or arising out of
the assumption or rejection of any Ground Lease, in which the other party to the
lease is a debtor in a case under the Bankruptcy Code. This grant of power of
attorney is present, unconditional, irrevocable, durable and coupled with an
interest.

SECTION 5.26 CONDOMINIUM PROPERTY.

      (A)   NO MODIFICATION. The Condominium Borrower shall not modify or amend
any material terms of, or terminate any of the Condominium Property Documents,
in each case, without the prior written consent of Lender, which consent shall
not be unreasonably withheld, conditioned or delayed.

      (B)   PERFORMANCE OF CONDOMINIUM PROPERTY DOCUMENTS. The Condominium
Borrower shall fully and faithfully pay when due and payable all assessments,
common charges and other charges payable by the Condominium Borrower under the
Condominium Property Documents and shall perform as and when due each of its
material obligations under the Condominium Property Documents in substantial
accordance with their respective terms, and shall not cause or suffer to occur
any breach or default in any of such obligations. The Condominium Borrower shall
keep and maintain each of the Condominium Property Documents in full force and
effect.

      (C)   NOTICE OF DEFAULT. If the Condominium Borrower shall receive any
written notice of any Condominium Default, the Condominium Borrower immediately
shall notify Lender of same and deliver to Lender a true and complete copy of
each such notice, and provide such documents and information as Lender may
reasonably request concerning such Condominium Default.

      (D)   LENDER'S RIGHT TO CURE. If any Condominium Default shall occur and
be continuing, or if any party to any Condominium Property Document asserts that
a Condominium Default has occurred (whether or not the Borrowers question or
deny such assertion), then, subject to the terms and conditions of the
applicable Condominium Property Documents, after notice to the Condominium
Borrower, Lender upon five (5) Business Days' prior written notice to the
Borrowers, unless Lender reasonably determines that a shorter period (or no
period) of notice is necessary to protect Lender's interest in the Ground Lease,
may (but shall not be obligated to) take any action that Lender deems reasonably
necessary to cure such Condominium Default, including, without limitation, (i)
performance or attempted performance of the Borrowers' obligations under the
applicable Condominium Property Documents, (ii) curing or attempting to cure any
actual or purported Condominium Default, (iii) mitigating or attempting to
mitigate any damages or consequences of the same and (iv) entry upon the
Condominium

                                       72


Property for any or all of such purposes. Upon Lender's request, the Condominium
Borrower shall submit satisfactory evidence of payment or performance of any of
its obligations under each of the Condominium Property Documents. Lender may pay
and expend such sums of money as Lender in its sole discretion deems necessary
or desirable for any such purpose, and the Borrowers shall pay to Lender within
five (5) Business Days of the written demand of Lender all such sums so paid or
expended by Lender pursuant to this Section 5.26, together with interest thereon
from the date of expenditure at the Default Rate.

      (E)   PRESERVATION OF CONDOMINIUM. The Condominium Borrower will do all
things necessary to preserve and to keep unimpaired its material rights, powers
and privileges under the Condominium Property Documents and to prevent the
termination or expiration of the Condominium Property Documents, or the
withdrawal of the Condominium Property from a condominium form of ownership
under applicable law, to the end that the Condominium Borrower may enjoy all of
the material rights granted to it as a party to the Condominium Property
Documents.

      (F)   NOTICE OF CONDOMINIUM DEFAULTS. The Condominium Borrower will (i)
promptly notify Lender of the receipt by the Condominium Borrower of any notice
from the Board of Managers, or the owner of any other unit in the condominium,
covering the Condominium Property, asserting or claiming a default by the
Condominium Borrower thereunder or lack of compliance by the Condominium
Borrower with the Condominium Property Documents, (ii) promptly notify Lender of
the receipt by the Condominium Borrower of any notice or request from the Board
of Managers or owner of any unit of the termination or purported termination of
the Condominium Property Documents or to withdraw the Condominium Property from
condominium ownership pursuant to applicable law or to seek any action for
partition, (iii) promptly notify Lender of the receipt by the Condominium
Borrower of any notice or request from the Board of Managers or owner of any
unit of the material modification or change or proposed material modification or
change of the Condominium Property Documents and (iv) promptly cause a copy of
each such notice of request received by the Condominium Borrower from the Board
of Managers or any unit owner, or from a mortgagee of a mortgage on such other
unit, to be delivered to Lender. The Condominium Borrower will permit Lender to
participate in any such partition or withdrawal proceeding to the extent
permitted by law and the Condominium Property Documents (but Lender shall not be
obligated so to do). The Condominium Borrower will promptly deliver to Lender a
copy of each notice, pleading, brief and preliminary, interim and final
determination or decision and other papers received by it in each such partition
or withdrawal proceeding.

      (G)   STATEMENTS, NOTICES. The Condominium Borrower will, within twenty
(20) days after demand from Lender (which shall not be required more than two
(2) times in any calendar year), obtain, if and to the extent that the
Condominium Borrower is entitled to the same under the Condominium Property
Documents, and otherwise request from and make good faith efforts to obtain,
from the Board of Managers and deliver to Lender a duly signed and acknowledged
certificate (signed also by the Condominium Borrower) that the Condominium
Property Documents are unmodified and in full force and effect (or, if the same
have been modified in compliance with this Loan Agreement, that the Condominium
Property Documents are in full force and effect as to modified and that there
have been no other modifications), stating the dates to which the assessments,
common charges and other charges payable under the Condominium

                                       73


Property Documents have been paid and stating whether to each certifying party's
knowledge, the Condominium Borrower is in compliance with the Condominium
Property Documents, or, if not, specifying each default or failure of compliance
of which the certifying party has knowledge. The Condominium Borrower will,
promptly upon receipt thereof by the Condominium Borrower, furnish Lender with a
copy of all notices and statements, however characterized, issued by the Board
of Managers or relating to the Condominium Property Documents including without
limitation, financial statements and projected budgets.

SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender,
all reasonable out-of-pocket expenses, charges, costs and fees (including
reasonable attorneys' fees and expenses) in connection with the negotiation,
documentation, closing, administration, servicing, enforcement interpretation,
and collection of the Loan and the Loan Documents, and in the preservation and
protection of Lender's rights hereunder and thereunder. Without limitation the
Borrowers shall pay all costs and expenses, including reasonable attorneys'
fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or
any law succeeding or replacing any of the same). At the Closing, Lender is
authorized to pay directly from the proceeds of the Loan any or all of the
foregoing expenses then or theretofore incurred and approved by the Borrowers.

SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and
at any time that a Cash Trap Event is in effect, the Borrowers shall not make
any distributions of cash or other property to any Borrower Party, or make any
payments in lieu thereof, without Lender's prior written approval, which may be
granted or withheld in Lender's sole discretion.

SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless
otherwise specifically provided herein to the contrary, the Borrowers shall not
cancel any indebtedness from any Person owing to any Borrower, or settle any
claims without Lender's prior written consent which shall not be unreasonably
withheld.

SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no
Borrower Party, nor any of their respective Affiliates, officers, directors,
partners or members will knowingly: (i) conduct any business, nor engage in any
transaction or dealing, with any Prohibited Person, including, but not limited
to, the making or receiving of any contribution of funds, goods, or services, to
or for the benefit of a Prohibited Person; or (ii) engage in or conspire to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in
EO13224. The Borrowers further covenants and agrees to deliver (from time to
time) to Lender any such certification or other evidence as may be requested by
Lender in its sole and absolute discretion, confirming that: (i) neither any
Borrower Party, nor their respective officers, directors, partners, members or
Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party, nor
their respective officers, directors, partners, members or Affiliates, has to
its Knowledge engaged in any business, transaction or dealings with a Prohibited
Person, including, but not limited to, the making or receiving of any
contribution of funds, goods, or services, to or for the benefit of a Prohibited
Person.

                                       74


                                   ARTICLE VI
                                    RESERVES

SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES.

      (A)   The Borrowers hereby pledge, assign and grant to Lender a security
interest in and to all of the Borrowers' right, title and interest in and to the
Account Collateral, including the Reserves, as security for payment and
performance of all of the Obligations hereunder and under the Note and the other
Loan Documents. The Reserves constitute Account Collateral and are subject to
the security interest in favor of Lender created herein and all provisions of
this Loan Agreement and the other Loan Documents pertaining to Account
Collateral.

      (B)   In addition to the rights and remedies provided in Article VII and
elsewhere herein, upon the occurrence and during the continuance of any Event of
Default, Lender shall have all rights and remedies pertaining to the Reserves as
are provided for in any of the Loan Documents or under any applicable law.
Without limiting the foregoing, upon and at all times after the occurrence and
during the continuance of an Event of Default, Lender in its sole and absolute
discretion, may use the Reserves (or any portion thereof) for any purpose,
including but not limited to any combination of the following: (i) payment of
any of the Obligations including the Prepayment Consideration (if any)
applicable upon such payment in such order as Lender may determine in its sole
discretion; provided, however, that such application of funds shall not cure or
be deemed to cure any Default; (ii) reimbursement of Lender for any actual
losses or expenses (including, without limitation, reasonable legal fees)
suffered or incurred as a result of such Event of Default; (iii) payment for the
work or obligation for which such Reserves were reserved or were required to be
reserved; and (iv) application of the Reserves in connection with the exercise
of any and all rights and remedies available to Lender at law or in equity or
under this Loan Agreement or pursuant to any of the other Loan Documents.
Nothing contained in this Loan Agreement shall obligate Lender to apply all or
any portion of the funds contained in the Reserves during the continuance of an
Event of Default to payment of the Loan or in any specific order of priority.

SECTION 6.2 FUNDS DEPOSITED WITH LENDER.

      (A)   INTEREST, OFFSETS. Except only as expressly provided otherwise
herein, all funds of the Borrowers which are deposited with Lock Box Account
Bank as Reserves hereunder shall be held by Lock Box Account Bank in one or more
Permitted Investments, such Permitted Investments, prior to an Event of Default,
to be as directed by Borrower. All interest which accrues on the Reserves shall
be taxable to the Borrowers and shall be added to and disbursed in the same
manner and under the same conditions as the principal sum on which said interest
accrued. Additional provisions pertaining to investments are set forth in
Article VII. After repayment of all of the Obligations, all funds held as
Reserves will be promptly returned to, or as directed by, the Borrowers.

      (B)   FUNDING AT CLOSING. The Borrowers shall deposit with Lender the
amounts necessary to fund each of the Reserves as set forth below. Deposits into
the Reserves at Closing may occur by deduction from the amount of the Loan that
otherwise would be disbursed to the Borrowers, followed by deposit of the same
into the applicable Sub-Account or Account of the

                                       75


Lock Box Account in accordance with the Cash Management Agreement on the Closing
Date. Notwithstanding such deductions, the Loan shall be deemed for all purposes
to be fully disbursed at Closing.

SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the
Borrowers shall deposit with Lock Box Account Bank $2,162,828.40 and,
pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly,
on each Payment Date commencing on the Payment date in July 2004, 1/12th of the
annual charges (as reasonably estimated by Lender) for all Impositions and all
Insurance Premiums (other than for D&O Insurance) payable with respect to the
Properties hereunder (said funds, together with any interest thereon and
additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount
of the monthly deposit to be made to the Impositions and Insurance Reserve from
and after the date hereof is $487,739.18. The Borrowers shall also deposit
with Lock Box Account Bank within ten (10) Business Days of the written demand
by Lender, to be added to and included within such reserve, a sum of money which
Lender reasonably estimates, together with such monthly deposits, will be
sufficient to make the payment of each such charge at least ten (10) Business
Days prior to the date initially due. The Borrowers shall provide Lender with
bills and all other documents necessary for the payment of the foregoing charges
at least thirty (30) days prior to the date on which each payment shall first
become subject to penalty or interest if not paid. So long as (i) no Event of
Default has occurred and is continuing, (ii) the Borrowers have provided Lender
with the foregoing bills and other documents in a timely manner, and (iii)
sufficient funds are held by Lender for the payment of the Impositions and
Insurance Premiums relating to each of the Properties, Lender shall pay said
items or disburse to the Borrowers from such Reserve an amount sufficient to pay
said items. Interest shall accrue in favor of the Borrowers on funds in the
Impositions and Insurance Reserve and be added to the balance thereof and
disbursed in accordance with the terms hereof.

SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on
behalf of Lender shall establish and maintain with Lock Box Bank an account for
the purpose of creating a reserve for replacements of FF&E at or in, or used in
connection with, the Properties (the "REPLACEMENTS") in accordance with the
applicable CapEx/FF&E Budget approved by Lender (said funds, together with any
interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve
shall be held in an Eligible Account entitled "FF&E Reserve Account for the
benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account
shall be under the sole dominion and control of Lender, subject to the terms of
the Cash Management Agreement. Pursuant to the Cash Management Agreement, the
Borrowers shall deposit monthly, on each Payment Date commencing with the
Payment Date in July 2004, an amount equal to 4.0% of the Operating Revenues
generated from the Properties for the prior calendar month (such amount, the
"MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the
Borrowers, subject in all instances to the terms of the Cash Management
Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds
held in the FF&E Reserve shall be used in connection with the Required Capital
Improvements. Upon and at all times after the occurrence and during the
continuance of an Event of Default, no draws will be permitted from the FF&E
Reserve other than for Replacements subject, in each instance, to Manager's
compliance with the FF&E reporting requirements set forth in Section
5.1(A)(v)(d).

                                       76

 SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At
Closing, the Borrowers shall deposit with Lock Box Account Bank $16,019,622.00
(said funds, together with any interest thereon, the "CAPITAL IMPROVEMENT
RESERVE"), which funds shall be made available to the Borrowers solely for
payment of certain Capital Improvements required to be made to the Properties
and designated as "Required Capital Improvements" on SCHEDULE 6.5 attached
hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by the
Borrowers for purposes for which any other Reserve is established or for any
other purpose other than completion of the Required Capital Improvements. The
Borrowers shall promptly commence and diligently prosecute to completion,
subject to Force Majeure, the Required Capital Improvements within the time
periods for each Required Capital Improvement set forth on EXHIBIT A. Funds held
in the Capital Improvement Reserve shall be disbursed in accordance with Section
6.7. Subject to the foregoing conditions, but also subject to the last paragraph
of Section 11.4, the Borrowers shall be entitled to draw any remaining balance
in the Capital Improvement Reserve when all Required Capital Improvements are
complete, and paid for, in accordance with the terms hereof.

SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers
shall deposit with Lock Box Account Bank, an amount equal to $21,368.75 (said
funds, together with any interest thereon and additions thereto, the "HAZARDOUS
MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous Materials
on the Properties as indicated in the Environmental Reports for the Properties
prepared and delivered prior to the Closing and as such work is more
particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the
earlier of (x) the date required by any applicable Governmental Authority or (y)
nine (9) months after the Closing, the Borrowers shall, subject to Force
Majeure, complete such Environmental Work and shall provide to Lender such
closure reports, no-further-action letters, or other evidence of compliance with
law as Lender may reasonably require. The funds contained in the Hazardous
Materials Remediation Reserve shall be utilized by the Borrowers solely for
performance of the Environmental Work in accordance with the Environmental
Reports, and shall not be used by the Borrowers for purposes for which any other
Reserve is established. Subject to the Borrowers' satisfaction of the applicable
conditions of Section 6.7, the Borrowers shall be entitled to draw upon the
Hazardous Materials Remediation Reserve to pay for costs that have been incurred
by the Borrowers for such Environmental Work, provided that the Borrowers
deliver to Lender such evidence as may be reasonably satisfactory to Lender
that, after payment of such draw, the funds remaining in the Hazardous Materials
Remediation Reserve shall be sufficient to pay for the remainder of such
Environmental Work. Subject to the foregoing conditions, but also subject to the
last paragraph of Section 11.4, the Borrowers shall be entitled to draw any
remaining balance in the Hazardous Materials Remediation Reserve when all such
Environmental Work is complete, and is paid for, in accordance with the terms
hereof.

SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION
RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK.

      (A)   DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND
CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for
disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to
or for the account of the Borrowers (x) from the Hazardous Materials Remediation
Reserve, to pay to, or pay on behalf of, the

                                       77


Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket
expenditures or costs incurred for Environmental Work (the "APPROVED
ENVIRONMENTAL EXPENDITURES", and (y) from the Capital Improvement Reserve, to
pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers'
actual bona fide out-of-pocket expenditures or costs incurred for Required
Capital Improvements ("APPROVED CAPITAL IMPROVEMENT EXPENDITURES"; and together
with the Approved Environmental Expenditures, collectively, "APPROVED
EXPENDITURES"; and the related Environmental Work or Required Capital
Improvements to which any such request for disbursement relates shall be
referred to as the "WORK"), upon satisfaction of each of the conditions listed
on SCHEDULE 6.7 and each of the conditions set forth below in Lender's
reasonable discretion:

            (i)   Except as provided in this Section 6.7, each request for
disbursement from the Hazardous Materials Remediation Reserve or the Capital
Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for
completion of the Approved Expenditures for which disbursement is requested.

            (ii)  A request for disbursement from the Work Reserves may be made
after completion of a portion of the work under such contract, or for payment of
deposits required in connection with the Work under such contract, provided (1)
all other conditions in this Loan Agreement for disbursement have been
satisfied, (2) funds remaining in the Hazardous Materials Remediation Reserve
are, in Lender's reasonable judgment, sufficient to complete the Environmental
Work when required and/or funds remaining in the Capital Improvement Reserve
are, in Lender's reasonable judgment, sufficient to complete such item of
Required Capital Improvements and any other Required Capital Improvements
remaining to be performed, as the case may be, and (3) if reasonably required by
Lender, each contractor or subcontractor receiving payments in excess of
$100,000 under such contract shall provide a waiver of lien with respect to
amounts which have been paid to that contractor or subcontractor.

            (iii) To the extent the contract with the relevant contractor or
supplier provides for a retainage, each disbursement from a Work Reserve, except
for a final disbursement, shall be in the amount of actual costs incurred less
the percentage of such costs that the contract with the relevant contractor or
supplier specifies to be retained and advanced as part of the final
disbursement. No funds will be advanced for materials stored at any Property
unless such materials are properly stored and secured at the applicable Property
in accordance with the Borrowers' customary procedures and sound construction
practices as reasonably determined by Lender. No funds will be advanced for
materials stored at any location other than at the Properties unless Lender
determines in its reasonable discretion that Lender has a perfected first
priority security interest in any such materials.

            (iv)  The amount of all invoices in connection with the Work with
respect to which a disbursement is requested and which has been approved by
Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers
(in which event, the Borrowers covenant and agree to promptly pay such invoices)
or, if an Event of Default has occurred and is continuing, at Lender's option
and in Lender's sole and absolute discretion, directly to the contractor,
supplier, materialman, mechanic or subcontractor indicated on said invoices
unless already paid by the Borrowers and Lender has received satisfactory
evidence of such payment in which case Lender shall reimburse the Borrowers. All
invoices in connection with

                                       78


disbursements from the Capital Improvement Reserve shall be classified as
requests for payment for items of Capital Improvement (as opposed to items that,
in conformity with GAAP, would be included as Operating Expenses). If the
Borrowers request that any amounts be disbursed directly to the Borrowers
pursuant to the foregoing sentence, the Borrowers shall be required to deliver
evidence reasonably acceptable to Lender of payment of all invoices for which
disbursements were previously made to the Borrowers as a condition to such
requested disbursement.

            (v)   No more than two (2) disbursements will be made by Lender from
the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve
in any calendar month, and, if made in accordance herewith or otherwise approved
by Lender, requested disbursements will be made within five (5) Business Days
after the request therefor. Lender shall not be required to make any
disbursement from a Work Reserve with respect to the Property unless such
requested disbursement is in an amount equal to or greater than $25,000 (other
than the final disbursement).

            (vi)  Lender reserves the right, at its option and as a condition to
any disbursement from a Work Reserve, to approve (which shall not be
unreasonably withheld, delayed or conditioned) (i) all drawings and plans and
specifications, if any, for any Work which require aggregate payments in amounts
exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan
Amount with respect to the applicable Property or (y) $250,000, and (ii) all
contracts and work orders with materialmen, mechanics, suppliers,
subcontractors, contractors and other parties providing labor or materials in
connection with any Work which require aggregate payments in amounts exceeding
the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with
respect to the applicable Property or (y) $250,000. Upon Lender's reasonable
request, the Borrowers shall assign (to the extent assignable) any drawings,
plans and specifications, contracts or subcontracts to Lender. Drawings, plans
and specifications, contracts and work orders approved by Lender shall not be
changed in any material respect without Lender's prior written consent, which
shall not be unreasonably withheld, delayed or conditioned.

            (vii) The Borrowers shall have delivered a certificate to Lender
from an Architect certifying that the Work has been completed in a good and
workmanlike manner in accordance with all applicable laws for any item in excess
of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount
with respect to the applicable Property or (y) $250,000. Lender may retain its
own architect or engineer ("LENDER'S CONSULTANT") to review any plans and
specifications for any item in excess of the greater of (x) five percent (5%) of
the Aggregate Allocated Loan Amount with respect to the applicable Property or
(y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost
and expense.

            (viii) The Borrowers shall have delivered to Lender a certificate of
the Borrowers (substantially in the form attached hereto as EXHIBIT L)
certifying as to the actual costs which were incurred by the Borrowers to
complete such Work, which costs shall not materially exceed the amount budgeted
for such Work under the CapEx/FF&E Budget then in effect unless approved by
Lender, which shall not be unreasonably withheld, delayed or conditioned
(together with supporting documentation reasonably acceptable to Lender).

                                       79


            (ix)  The Borrowers shall have delivered to Lender all necessary
material certificates, authorizations, permits and licenses which are required
to permit the construction and completion of the Work, as issued by the
appropriate Governmental Authority. The Borrowers, to the full extent permitted
by applicable law, hereby assigns to Lender as additional security for the
payment of the Obligations and the observance and performance by the Borrowers
of the terms, covenants and provisions of the Loan Documents all right, title
and interest which the Borrowers may now have or may hereafter acquire in and to
such certificates, authorizations, permits and licenses.

            (x)   Lender may require an inspection of the Property prior to
making a monthly disbursement from the applicable Work Reserve in order to
verify completion of the Work for which disbursement is sought in excess of the
greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with
respect to the applicable Property or (y) $250,000. Lender may require that such
inspection be conducted by Lender's Consultant and/or may require a copy of a
certificate of completion by an independent qualified architect or engineer
acceptable to Lender prior to the disbursement of any amounts from the
applicable Work Reserve. The Borrowers shall pay the reasonable out-of-pocket
expense of such inspections as reasonably required hereunder, whether such
inspections are conducted by Lender, Servicer, Lender's Consultant or by an
independent qualified professional.

      (B)   PERFORMANCE OF WORK.

            (i)   The Borrowers shall complete all Work in a good and
workmanlike manner as soon as practicable following the commencement thereof
substantially in accordance with the applicable budget approved by Lender in
accordance with the terms of this Loan Agreement. The insufficiency of the
balance in the applicable Work Reserve shall not relieve the Borrowers from
their obligations to perform and complete the related Work as herein provided or
to fulfill all other preservation and maintenance covenants in the Loan
Documents.

            (ii)  If Lender determines in its reasonable discretion that any
Work is not being performed in a workmanlike or timely manner or that any Work
has not been completed in a workmanlike manner, Lender shall have the option to
withhold disbursement for such unsatisfactory work and so notify the Borrowers
with reasonable detail regarding the basis for Lender's dissatisfaction and,
after the expiration of forty-five (45) days from the giving of such notice by
Lender to the Borrowers of such unsatisfactory work without the cure thereof
(or, if such unsatisfactory work is susceptible of a cure but cannot reasonably
be cured within said forty-five (45) day period and provided that the Borrowers
shall have commenced to cure such unsatisfactory work within said forty-five
(45) day period and thereafter diligently and expeditiously proceeds to cure the
same, after the expiration of such longer period as is reasonably necessary for
the Borrowers in the exercise of due diligence to cure such unsatisfactory work,
up to a maximum of an additional sixty (60) days, subject to Force Majeure,
without the cure thereof), Lender may proceed under existing contracts or
contract with third parties to complete such Work, as the case may be, and apply
amounts contained in the applicable Work Reserve toward the labor and materials
necessary to complete the same, without providing any additional prior notice to
the Borrowers, and exercise any and all other remedies available to Lender upon
and during the continuance of an Event of Default hereunder.

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            (iii) In order to facilitate Lender's completion or making of any
Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right
to enter onto each Property during normal business hours after the expiration of
the notice specified above and perform, subject to the rights of tenants, any
and all work and labor necessary to complete the applicable Work and/or employ
watchmen to protect the Property from damage. All sums so expended by Lender
shall be deemed to have been advanced under the Loan to the Borrowers and
secured by the applicable Mortgage. For this purpose, the Borrowers constitute
and appoint Lender their true and lawful attorney-in-fact with full power of
substitution to complete or undertake the applicable Work in the name of the
Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked. Upon the
occurrence and during the continuance of an Event of Default, the Borrowers
empower said attorney-in-fact as follows: (i) to use any funds in the applicable
Work Reserve for the purpose of making or completing any Work; (ii) to make such
additions, changes and corrections to any Work as shall be reasonably necessary
or desirable to complete the same; (iii) to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for such
purposes; (iv) to pay, settle or compromise all existing bills and claims which
are or may become Liens against any Property, or as may be necessary or
desirable for the completion of any Work, or for clearance of title; (v) to
execute all applications and certificates in the name of the Borrowers which may
be required by any of the contract documents; (vi) in its reasonable discretion,
to prosecute and defend all actions or proceedings in connection with any
Property or the rehabilitation and repair of such Property; and (vii) to do any
and every act which the Borrowers might do in their own behalf to fulfill the
terms of this Loan Agreement.

            (iv)  Nothing in this Section shall: (i) make Lender responsible for
making or completing any Work; (ii) require Lender to expend funds in addition
to the amounts on deposit in the applicable Work Reserve to make or complete any
Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to
demand from the Borrowers additional sums to make or complete any Work.

            (v)   The Borrowers shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer, architect or
inspector) or third parties performing any Work pursuant to this Section 6.7 to
enter onto any Property during normal business hours upon reasonable notice
(subject to the rights of tenants under their Leases) to inspect the progress of
any Work and all materials being used in connection therewith, to examine all
plans and shop drawings relating thereto which are or may be kept at any
Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The
Borrowers shall use commercially reasonable efforts to cause all contractors and
subcontractors to cooperate with Lender or Lender's representatives or such
other persons described above in connection with inspections described in this
Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B).

            (vi)  All Work and all materials, equipment, fixtures and any other
item comprising a part thereof shall be constructed, installed or completed, as
applicable, free and clear of all mechanic's, materialman's or other liens
(except for the Permitted Encumbrances).

            (vii) All Work shall comply with all applicable legal requirements
of all Governmental Authorities having jurisdiction over the Properties and
applicable insurance

                                       81


requirements, including, without limitation, applicable building codes, special
use permits, environmental regulations and requirements of insurance
underwriters.

      (C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender
harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations, out-of-pocket costs and expenses
(including, without limitation, litigation costs and reasonable attorneys' fees
and expenses) arising from or in any way connected with the performance of the
Work, except to the extent caused by the bad faith, willful misconduct or gross
negligence of Lender. The Borrowers shall assign to Lender all rights and claims
the Borrowers may have against all Persons supplying labor or materials in
connection with the Work; provided, however, that Lender may not pursue any such
right or claim or pursue any other action with respect to such rights and claims
unless an Event of Default has occurred and remains uncured.

SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the
Obligations in full, a Cash Trap Event shall occur, then for so long as such
Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise
expressly provided below) shall be deposited with Lender (or its Servicer or
agent) and held in the Lock Box Account in accordance with the terms of the Cash
Management Agreement (said funds, together with any interest thereon, the "CASH
TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when
(x) the Debt Yield is less than the Minimum Debt Yield or (y) during the Second
Extension Term or Third Extension Term, the Debt Service Coverage Ratio is less
than the Minimum DSCR, in each case for the trailing twelve (12) month period
ending on such Calculation Date and shall continue to exist until such time as
the Minimum Debt Yield and, during the Second Extension Term or Third Extension
Term, the Minimum DSCR tests have been satisfied for three (3) consecutive
Calculation Dates (on a trailing twelve (12) month basis) following the
commencement of the applicable Cash Trap Event. Notwithstanding that the Debt
Yield is less than the Minimum Debt Yield or, if applicable, the Debt Service
Coverage Ratio is less than the Minimum DSCR as of any Calculation Date, no Cash
Trap Event shall be deemed to have occurred as a result of such event if the
Borrowers make a principal prepayment of the Aggregate Outstanding Principal
Balance (which prepayment amount shall be disbursed on the next Payment Date in
accordance with the terms of the Cash Management Agreement), within three (3)
Business Days after the date of delivery of the financial statements disclosing
the existence of such Cash Trap Event (or the date on which such financial
statements are required to be delivered pursuant to Section 5.1), in an amount
equal to the greater of (x) one percent (1%) of the Aggregate Outstanding
Principal Balance, or (y) 120% of the amount, as determined by Lender in its
reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the
Minimum Debt Yield and, if applicable, the Debt Service Coverage Ratio to meet
or exceed the Minimum DSCR if such calculations were recalculated as provided
above assuming that such amount was applied to reduce the Aggregate Outstanding
Principal Balance as of the first day of the relevant measuring period. During
the continuance of a Cash Trap Event, provided that no Event of Default shall
have occurred and be continuing, any funds on deposit in the Cash Trap Reserve
may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be
applied to (i) prepayment of the Aggregate Outstanding Principal Balance as
provided above, (ii) Capital Expenditures reasonably approved by Lender, or
(iii) scheduled payments (not to exceed $900,000 in the aggregate) of principal
and interest under the Loan and the Mezzanine Loan (to be applied in accordance
with the terms of the Cash Management Agreement). Any funds on

                                       82


deposit in the Cash Trap Reserve shall continue to be held as additional
Collateral in accordance with this Section 6.8 until the earlier of (a) the date
that such funds are applied or disbursed pursuant to the foregoing sentence or
(b) the date that the Minimum Debt Yield and, during the Second Extension Term
or Third Extension Term, the Minimum DSCR tests have each been satisfied for
three (3) consecutive months (as determined above), at which time, provided no
Event of Default exists, and no Cash Trap Event has commenced, such funds,
together with any and all amounts then held in the Minimum Balance Sub-Account
(as defined in the Cash Management Agreement), shall be automatically released
to the Borrowers without any further certification requirements on the part of
the Borrowers. The existence of a Cash Trap Event shall be determined by Lender
in its reasonable good faith determination. If Lender determines that a Cash
Trap Event has occurred, Lender shall send the Borrowers written notice thereof.
Notwithstanding any provision herein to the contrary, if an Event of Default has
occurred and is continuing, all funds on deposit in the Cash Trap Reserve and
any subsequent Excess Cash Flow, while such Event of Default is continuing, may
be applied by Lender to payment of the Loan (including payment of any Prepayment
Consideration) or other Obligations (or to the obligations of the Mezzanine
Borrowers to Mezzanine Lender) as Lender may elect.

                                  ARTICLE VII
                       DEPOSIT ACCOUNT; LOCK BOX ACCOUNT;
                                 CASH MANAGEMENT

SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT.

      (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more
deposit accounts shall be established at the Borrowers' sole cost and expense in
the name of Lender, as secured party hereunder (said accounts, and any accounts
replacing same in accordance with this Loan Agreement and the Deposit Account
Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial
institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"),
pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT
AGREEMENT") substantially similar to Lender's form or otherwise in form and
substance reasonably acceptable to Lender, executed and delivered by the
Borrowers and the Deposit Bank. The Deposit Account shall be under the sole
dominion and control of Lender (which dominion and control may be exercised by
Servicer). Among other things, the Deposit Account Agreement shall provide that
the Borrowers shall have no access to or control over the Deposit Account, that
all available funds on deposit in the Deposit Account shall be transferred by
wire transfer (or transfer via the ACH System) on each Business Day by the
Deposit Bank into the Lock Box Account, for application in accordance with the
Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall
be directed to deliver to the Borrowers copies of bank statements and other
information made available by the Deposit Bank and the Lock Box Account Bank
concerning the Deposit Account and the Lock Box Account.

            (ii) Upon establishing the Deposit Account, (1) the Borrowers shall
cause any and all Operating Revenues, including distributions or other payments
made directly or indirectly to the Borrowers, Manager, or any of their
respective Affiliates, from any Beverage Company, to be deposited promptly into
the Deposit Account and in no event later than two (2) Business Days after the
same are paid to or for the benefit of the Borrowers, and (2) the Borrowers
shall obtain agreements (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION
LETTER") from each of the

                                       83


Persons paying or disbursing credit card receivables (the "CREDIT CARD
COMPANIES"), substantially similar to Lender's form or otherwise in form and
substance reasonably acceptable to Lender, pursuant to which the Credit Card
Companies agree to pay all credit card receivables into the Lock Box Account,
and acknowledge and agree that Lender shall have a first priority perfected
security interest in such credit card receivables. To the extent that the
Borrowers or any Person on the Borrowers' behalf holds any Receipts, whether in
accordance with this Loan Agreement or otherwise, the Borrowers shall be deemed
to hold the same in trust for Lender for the protection of the interests of
Lender hereunder and under the Loan Documents. The Borrowers represent and
warrant that, as of the date hereof, the only Credit Card Companies paying or
disbursing credit card receivables with respect to the Property are Chase
Merchant Services, American Express, Discover Financial Service, Diners Club,
JCB (Japanese Credit Bureau), and, if any of the Borrowers shall hereafter enter
into an agreement with any other Credit Card Company pursuant to which such
Credit Card Company shall pay credit card receivables with respect to the
Properties, such Borrower shall promptly obtain a Credit Card Receivables
Payment Direction Letter in form and substance reasonably acceptable to Lender
from such Credit Card Company.

            (ii) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses incurred by Lender in connection with the transactions and other
matters contemplated by this Section 7.1, including but not limited to, Lender's
reasonable attorneys' fees and expenses, and all reasonable fees and expenses of
the Deposit Bank and the Lock Box Account Bank, including without limitation
their reasonable attorneys' fees and expenses.

      (B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms
of the Cash Management Agreement, an Eligible Account shall be established in
the name of Lender, as secured party hereunder, to serve as the "Lock Box
Account" (said account, and any account replacing the same in accordance with
this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT";
and the depositary institution in which the Lock Box Account is maintained, the
"LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion
and control of Lender (which dominion and control may be exercised by Servicer);
and except as expressly provided hereunder and/or in the Cash Management
Agreement, the Borrowers shall not have the right to control or direct the
investment or payment of funds therein during the continuance of an Event of
Default. Lender may elect to change any financial institution in which the Lock
Box Account shall be maintained if such institution is no longer an Eligible
Bank, upon not less than five (5) Business Days' notice to the Borrower. The
Lock Box Account shall be deemed to contain such sub-accounts as Lender may
designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts
and need not be separate Eligible Accounts. The Sub-Accounts shall include the
following as more particularly described in the Cash Management Agreement:

            (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box
Account established for the purposes of reserving for payments of principal and
interest and other amounts due under the Loan Documents (but without duplication
of amounts covered under item (ii) below); and

            (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box
Account established for the purpose of holding funds in the Reserves including:
(a) the

                                       84


"Imposition and Insurance Reserve Sub-Account"; (b) the "Capital Improvement
Reserve Sub-Account"; (c) the "Hazardous Materials Remediation Reserve
Sub-Account"; (d) the "Extraordinary Receipts Sub-Account" (e) the "Mezzanine
Loan Debt Service Sub-Account"; (f) the "Minimum Balance Sub-Account" and (g)
the "Cash Trap Reserve Sub-Account".

SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box
Account shall be allocated to the Sub-Accounts or the other Accounts (or paid,
as the case may be) in accordance with the Cash Management Agreement.

SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default
shall occur and be continuing, then notwithstanding anything to the contrary in
this Section or elsewhere, Lender shall have all rights and remedies available
under applicable law and under the Loan Documents. Without limitation of the
foregoing, for so long as an Event of Default exists, Lender may apply any and
all funds in the Deposit Account, and/or any Sub-Accounts against all or any
portion of any of the Obligations, in any order.

                                  ARTICLE VIII
                          DEFAULT, RIGHTS AND REMEDIES

SECTION 8.1 EVENT OF DEFAULT.

      "EVENT OF DEFAULT" means the occurrence or existence of any one or more of
the following:

      (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled
payment amount when the same is due under this Loan Agreement, the Note, or any
other Loan Documents (whether such amount is interest, principal, Reserves, or
otherwise), or to pay for any Insurance Policies required pursuant to Section
5.4 hereof; or

      (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time
to time owing under this Loan Agreement, the Note, or any other Loan Documents
(other than amounts subject to the preceding paragraph) within ten (10) days
after written notice to the Borrowers; or

      (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to
perform or comply with any term or condition contained in Section 5.1 which
continues for a period of ten (10) days after written notice to the Borrowers
(except that no notice or grace period shall be granted for any breach under
Section 5.1(H)); or

      (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE
PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19,
5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary
Lien under Section 5.18 or 11.1, the same shall not constitute an Event of
Default if (i) within forty-five (45) days after the filing thereof, the
Borrowers shall either cause the same to be removed of record by payment,
bonding or otherwise, or (ii) same is being contested in good faith in
accordance with Section 5.3(B) hereof); or

      (E) BREACH OF WARRANTY. Any representation, warranty, certification or
other statement made by any Borrower, Guarantor or Manager in any Loan Document
or in any

                                       85


statement or certificate at any time given in writing pursuant to or in
connection with any Loan Document is false in any material respect as of the
date made; or

      (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the
performance of or compliance with any term contained in this Loan Agreement or
the other Loan Documents and such default is not fully cured within thirty (30)
days after receipt by the Borrowers of written notice from Lender of such
default (other than occurrences described in other provisions of this Section
8.1 for which a different grace or cure period is specified or which constitute
immediate Events of Default); provided however that if (i) the default is
capable of cure but with diligence cannot be cured within such period of thirty
(30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced
the cure within such thirty (30) day period and has pursued such cure
diligently, and (iii) each Borrower delivers to Lender promptly following
written demand (which demand may be made from time to time by Lender) evidence
reasonably satisfactory to Lender of the foregoing, then such period shall be
extended for so long as is reasonably necessary for the Borrowers in the
exercise of due diligence to cure such default, but in no event beyond one
hundred and twenty (120) days after the original notice of default; or

      (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court
enters a decree or order for relief with respect to any Borrower Party, in an
Involuntary Borrower Bankruptcy, which decree or order is not stayed or other
similar relief is not granted under any applicable federal or state law unless
dismissed within ninety (90) days; (ii) the occurrence and continuance of any of
the following events for ninety (90) days unless dismissed or discharged within
such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or
order of a court for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over any Borrower
Party or over all or a substantial part of its property, is entered, or (z) an
interim receiver, trustee or other custodian is appointed without the consent of
any Borrower Party, for all or a substantial part of the property of such
Person; or

      (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for
relief is entered with respect to any Borrower Party, or any Borrower Party
commences a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for any Borrower Party or for all or a substantial part of the
property of any Borrower Party; (ii) any Borrower Party makes any assignment for
the benefit of creditors; or (iii) the Board of Directors or other governing
body of any Borrower Party adopts any resolution or otherwise authorizes action
to approve any of the actions referred to in this subsection 8.1(H); or

      (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as
described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the
Collateral becomes property of the estate or subject to the automatic stay in
any case or proceeding under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect (provided that if the
same occurs in the context of an involuntary proceeding, it shall not constitute
an Event of Default if it is dismissed or discharged within ninety (90) days
following its occurrence); or

                                       86


      (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing
its present or prospective inability to pay its debts as they become due; or

      (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of
attachment, or similar process is entered or filed against any Borrower Party or
any of its assets, which claim is not fully covered by insurance (other than
with respect to the amount of commercially reasonable deductibles permitted
hereunder), would have a Material Adverse Effect and remains undischarged,
unvacated, unbonded or unstayed for a period of forty-five (45) days; or

      (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of their business and such order
continues for more than thirty (30) days; or

      (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Mortgage or any
of the Loan Documents for any reason ceases to be in full force and effect or
ceases to be a legally valid, binding and enforceable obligation of the
Borrowers or any Lien securing the Obligations shall, in whole or in part, cease
to be a perfected first priority Lien, subject to the Permitted Encumbrances
(except in any of the foregoing cases in accordance with the terms hereof or
under any other Loan Document) and the Borrowers do not take all actions
requested by Lender to correct such defect within ten (10) days after the
written request by Lender to take such action, or any Person under the control
of the Borrowers or Guarantor who is a party thereto, other than Lender, denies
that it has any further liability (as distinguished from denial of the existence
of a Default or Event of Default) under any Loan Documents to which it is party,
or gives notice to such effect; or

      (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any
applicable grace periods shall occur under any of the other Loan Documents; or

      (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An
Uncured Franchise Default occurs; (ii) or any breach or default shall occur in
the material obligations of the Borrowers under any of the Management
Agreements, and such breach or default either is of such a nature or continues
for such a period of time beyond applicable notice and cure periods, if any,
that Manager shall have the right to exercise material remedies as a consequence
thereof; or

      (P) GROUND LEASE/CONDOMINIUM PROPERTY. Any default by any of the Borrowers
beyond any applicable grace period shall occur under any Ground Lease or any
Condominium Property Document or any actual or attempted surrender, termination,
modification or amendment of any Ground Lease or any Condominium Property
Document without Lender's prior written consent.

            If more than one of the foregoing paragraphs shall describe the same
condition or event, then Lender shall have the right to select which paragraph
or paragraphs shall apply. In any such case, Lender shall have the right (but
not the obligation) to designate the paragraph or paragraphs which provide for
non-written notice (or for no notice) or for a shorter time to cure (or for no
time to cure).

                                       87


SECTION 8.2 ACCELERATION AND REMEDIES.

      (A) Upon the occurrence and during the continuance of any Event of Default
described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal
amount of and accrued interest and fees on the Loan and all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
requirements of any kind, all of which are hereby expressly waived by the
Borrowers. Upon and at any time after the occurrence of any other Event of
Default, at the option of Lender, which may be exercised without notice or
demand to anyone, all or any portion of the Loan and other Obligations shall
immediately become due and payable.

      (B) Upon the occurrence and during the continuance of an Event of Default,
all or any one or more of the rights, powers, privileges and other remedies
available to Lender against the Borrowers under this Loan Agreement or any of
the other Loan Documents, or at law or in equity, may be exercised by Lender at
any time and from time to time, whether or not all or any of the Obligations
shall be declared due and payable, and whether or not Lender shall have
commenced any foreclosure proceeding or other action for the enforcement of its
rights and remedies under any of the Loan Documents with respect to the
Properties. Any such actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singly, successively, together or otherwise,
at such time and in such order as Lender may determine in its sole discretion,
to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or
as set forth herein or in the other Loan Documents. Without limiting the
generality of the foregoing, if an Event of Default is continuing (i) to the
fullest extent permitted by law, Lender shall not be subject to any "one action"
or "election of remedies" law or rule, and (ii) all liens and other rights,
remedies or privileges provided to Lender shall remain in full force and effect
until Lender has exhausted all of its remedies against each Property and the
Mortgages have been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Obligations or the Obligations have been paid in full.

      (C) Lender shall have the right from time to time to partially foreclose
the Mortgages in any manner and for any amounts secured by the Mortgages then
due and payable as determined by Lender in its sole discretion including,
without limitation, the following circumstances: (i) in the event the Borrowers
default beyond any applicable grace period in the payment of one or more
scheduled payments of principal and interest, Lender may foreclose the Mortgage
to recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose the Mortgage or any of them to recover so much of the
principal balance of the Loan as Lender may accelerate and such other sums
secured by the Mortgage as Lender may elect. Notwithstanding one or more partial
foreclosures, the Property shall remain subject to the Mortgage to secure
payment of sums secured by the Mortgage and not previously recovered.

      (D) During the continuance of an Event of Default, Lender shall have the
right from time to time to sever the Note and the other Loan Documents into one
or more separate notes, mortgages and other security documents in such
denominations as Lender shall determine in its sole discretion for purposes of
evidencing and enforcing its rights and remedies provided

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hereunder. The Borrowers shall execute and deliver to Lender from time to time,
within ten (10) days after the request of Lender, a severance agreement and such
other documents as Lender shall reasonably request in order to effect the
severance described in the preceding sentence, all in form and substance
reasonably satisfactory to Lender. The Borrowers hereby absolutely and
irrevocably appoint Lender as their true and lawful attorney, coupled with an
interest, in their name and stead to make and execute all documents reasonably
necessary to effect the aforesaid severance if the Borrowers fail to do so
within ten (10) days of Lender's written request, the Borrowers ratifying all
that their said attorney shall do by virtue thereof.

      (E) Any amounts recovered from the Properties or any other collateral for
the Loan after an Event of Default may be applied by Lender toward the payment
of any interest and/or principal of the Loan and/or any other amounts due under
the Loan Documents in such order, priority and proportions as Lender in its sole
discretion shall determine.

      (F) The rights, powers and remedies of Lender under this Loan Agreement
shall be cumulative and not exclusive of any other right, power or remedy which
Lender may have against the Borrowers pursuant to this Loan Agreement or the
other Loan Documents, or existing at law or in equity or otherwise. Lender's
rights, powers and remedies may be pursued singly, concurrently or otherwise, at
such time and in such order as Lender may determine in Lender's sole discretion.
No delay or omission to exercise any remedy, right or power accruing upon an
Event of Default shall impair any such remedy, right or power or shall be
construed as a waiver thereof, but any such remedy, right or power may be
exercised from time to time and as often as may be deemed expedient. A waiver of
one Default or Event of Default with respect to the Borrowers shall not be
construed to be a waiver of any subsequent Default or Event of Default by the
Borrowers or to impair any remedy, right or power consequent thereon.

SECTION 8.3 PERFORMANCE BY LENDER.

      (A) Upon the occurrence and during the continuance of an Event of Default,
if any of the Borrowers shall fail to perform, or cause to be performed, any
material covenant, duty or agreement contained in any of the Loan Documents
(subject to applicable notice and cure periods), Lender may perform or attempt
to perform such covenant, duty or agreement on behalf of the Borrowers including
making protective advances on behalf of any Borrower, or, in its sole
discretion, causing the obligations of any of the Borrowers to be satisfied with
the proceeds of any Reserve. In such event, the Borrowers shall, at the request
of Lender, promptly pay to Lender, or reimburse, as applicable, any of the
Reserves, any actual amount reasonably expended or disbursed by Lender in such
performance or attempted performance, together with interest thereon at the
Default Rate (including reimbursement of any applicable Reserves), from the date
of such expenditure or disbursement, until paid. Any amounts advanced or
expended by Lender to perform or attempt to perform any such matter shall be
added to and included within the indebtedness evidenced by the applicable Note
and shall be secured by all of the Collateral securing the applicable Loan.
Notwithstanding the foregoing, it is expressly agreed that Lender shall not have
any liability or responsibility for the performance of any obligation of the
Borrowers under this Loan Agreement or any other Loan Document, and it is
further expressly agreed that no such performance by Lender shall cure any Event
of Default hereunder.

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      (B) Lender may cease or suspend any and all performance required of Lender
under the Loan Documents upon and at any time after the occurrence and during
the continuance of any Event of Default.

SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each
Borrower shall provide such documents and instruments as shall be reasonably
satisfactory to Lender to evidence compliance with any material provision of the
Loan Documents applicable to the Borrowers.

                                   ARTICLE IX
               SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,
                            WARRANTIES AND COVENANTS

SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower
Party hereby represents, warrants and covenants as of the Closing Date and until
such time as all Obligations are paid in full, that absent express advance
written waiver from Lender, which may be withheld in Lender's sole discretion,
that such Primary Borrower Party:

      (A) does not own and will not own any assets other than the Properties
(including incidental personal property necessary for the operation thereof and
proceeds therefrom) or direct or indirect ownership interests in the Borrowers,
and other wholly owned subsidiaries of the Primary Borrower Parties established
solely for the purpose of holding liquor licenses with respect to one or more of
the Properties (collectively, the "OWNERSHIP INTERESTS") or, with respect to
each of the Primary Borrower Parties, such incidental assets as are necessary to
enable it to discharge its obligations with respect to the Borrowers;

      (B) is not engaged and will not engage in any business, directly or
indirectly, other than the ownership, management and operation of the Properties
or the Ownership Interests;

      (C) will not enter into any contract or agreement with any partner,
member, shareholder, trustee, beneficiary, principal or Affiliate of any Primary
Borrower Party except upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arms-length basis
with third parties other than such Affiliate (including the Management
Agreements);

      (D) has not incurred any debt that remains outstanding as of Closing and
will not incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted
Indebtedness, and (iii) the Mezzanine Loan;

      (E) has not made any loans or advances to any Person that remains
outstanding as of Closing and will not make any loan or advances to any Person
(including any of its Affiliates), and has not acquired and will not acquire
obligations or securities (other than the Ownership Interests) of any of its
Affiliates other than the other Borrower Parties;

      (F) is and reasonably expects to remain solvent and pay its own
liabilities, indebtedness, and obligations of any kind from its own separate
assets as the same shall become due;

                                       90


      (G) has at all times since the SPE Effective Date done or caused to be
done and will do all things necessary to preserve its existence, and will not,
and no partner, member, shareholder, trustee, beneficiary, or principal will,
further amend, modify or otherwise change, its partnership certificate,
partnership agreement, articles of incorporation, by-laws, articles of
organization, operating agreement, or other organizational documents, as
modified, amended, restated or supplemented as of the date hereof, in any manner
with respect to the matters set forth in this Article IX;

      (H) has at all times since the SPE Effective Date continuously maintained
its existence and has at all times since the SPE Effective Date been qualified
to do business, and shall continue to maintain its existence and be qualified to
do, business in all states necessary to carry on its business, specifically
including in the case of each Borrower, the state where its Property is located;

      (I) has at all times since the SPE Effective Date conducted and operated,
and will conduct and operate its business as presently conducted and operated
and otherwise contemplated with respect to the ownership of its Property, or the
ownership interests in the Borrowers, as applicable;

      (J) has at all times since the SPE Effective Date maintained and will
maintain books and records and bank accounts (other than bank accounts
established hereunder, or established by Manager with respect to the operations
of the Properties pursuant to the Management Agreement) separate from those of
its partners, members, shareholders, trustees, beneficiaries, principals,
Affiliates, and any other Person and has at all times since the SPE Effective
Date maintained and will maintain separate financial statements except that it
may also be included in consolidated financial statements of its Affiliates;

      (K) has at all times since the SPE Effective Date been, and held itself
out to the public as, and will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other Person (including
any of its partners, members, shareholders, trustees, beneficiaries, principals
and Affiliates, and any Affiliates of any of the same), and not as a department
or division of any Person and has at all times since the SPE Effective Date
corrected and will correct any known misunderstandings regarding its existence
as a separate legal entity;

      (L) has at all times since the SPE Effective Date paid, and will pay, the
salaries of its own employees, if any;

      (M) has at all times since the SPE Effective Date allocated, and will
allocate, fairly and reasonably any overhead for shared office space;

      (N) has at all times since the SPE Effective Date used, and will use its
own stationery, invoices and checks;

      (O) has at all times since the SPE Effective Date filed, and will file,
its own tax returns with respect to itself (or consolidated tax returns, if
applicable) as may be required under applicable law;

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      (P) has at all times since the SPE Effective Date maintained, and
reasonably expects to maintain adequate capital (taken as a whole with all of
the other Borrowers) for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;

      (Q) will not seek, acquiesce in, or suffer or permit its liquidation,
dissolution or winding up, in whole or in part;

      (R) will not enter into any transaction of merger or consolidation, and
will not acquire by purchase or otherwise all or substantially all of the
business or assets of, or any stock or beneficial ownership (other than the
Ownership Interests) of, any Person;

      (S) has not at any time since the SPE Effective Date commingled or
permitted to be commingled, and will not commingle or permit to be commingled,
its funds or other assets with those of any other Person (other than, with
respect to the Borrowers, each other Borrower, or as may be held by Manager, as
agent, for each Borrower pursuant to the terms of the Management Agreement, and
except for funds deposited in the Accounts in accordance with the Loan
Documents);

      (T) has at all times since the SPE Effective Date maintained, and will
maintain, its assets in such a manner that it is not costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person;

      (U) does not and will not hold itself out to be responsible for the debts
or obligations (other than the Obligations) of any other Person;

      (V) has not guaranteed or otherwise become liable in connection with any
obligation of any other Person that remains outstanding, and will not guarantee
or otherwise become liable on or in connection with any obligation (other than
the Obligations) of any other Person that remains outstanding;

      (W) except for funds deposited into the Accounts in accordance with the
Loan Documents, shall not hold title to its assets other than in its name; and

      (X) shall comply with all of the assumptions, statements, certifications,
representations, warranties and covenants regarding or made by it contained in
or appended to the nonconsolidation opinion delivered pursuant hereto.

SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to
their respective obligations under Section 9.1, each Borrower, General Partner
and Member hereby represents, warrants and covenants, as of the Closing Date and
until such time as all Obligations are paid and satisfied in full, that absent
express advance written waiver from Lender, which may be withheld in Lender's
sole discretion:

      (A) each General Partner shall at all times act as the sole general
partner of each Borrower that is a limited partnership, with all of the rights,
powers, obligations and liabilities thereof under the limited partnership
agreement of such Borrower and shall take any and all

                                       92



actions and do any and all things necessary or appropriate to the accomplishment
of the same and will not engage in any other business;

      (B) Member shall at all times act as the sole member of each Borrower that
is a limited liability company with all of the rights, powers, obligations and
liabilities thereof under the limited liability company operating agreement of
such Borrower and shall take any and all actions and will do any and all things
necessary or appropriate to the accomplishment of the same and will not engage
in any other business;

      (C) each Borrower that is a limited liability company shall not, without
the prior written consent of its Member (including the unanimous written consent
of its Member's board of directors including the Independent Directors or the
unanimous written consent of each of the Borrowers' board of managers including
the Independent Directors), and each Borrower that is a limited partnership
shall not, without the prior written consent of its General Partner (including
the unanimous written consent of General Partner's Independent Directors),
institute proceedings for itself to be adjudicated bankrupt or insolvent;
consent to the institution of bankruptcy or insolvency proceedings against
itself; file a petition seeking, or consent to, reorganization or relief under
any applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) for itself or a substantial part of its property; make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;

      (D) each Borrower that is a corporation shall not, without the prior
unanimous written consent of its board of directors, including its Independent
Directors, institute proceedings for itself to be adjudicated bankrupt or
insolvent; consent to the institution of bankruptcy or insolvency proceedings
against it; file a petition seeking, or consent to, reorganization or relief
under any applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) for itself or a substantial part of its property; make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;

      (E) no Member or any General Partner shall, without the unanimous vote of
its board of directors or board of managers, as the case may be, including, in
each case, its Independent Directors, institute proceedings for itself or any
Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of
a bankruptcy or insolvency proceeding against it or any Borrower; file a
petition seeking, or consent to, reorganization or relief under any applicable
federal or state law relating to bankruptcy; consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) for itself or any Borrower; or a substantial part of its or any
Borrower's property; make any assignment for the benefit of creditors; or admit
in writing its inability to pay its debts generally as they become due;

      (F) except as otherwise permitted hereunder, no Member or any General
Partner shall for itself or for any of the Borrowers (i) liquidate or dissolve,
in whole or in part; (ii) consolidate, merge or enter into any form of
consolidation with or into any other Person, nor convey, transfer or lease its
or any Borrower's assets substantially as an entirety to any Person nor permit
any Person to consolidate, merge or enter into any form of consolidation with or
into itself or any Borrower, nor convey, transfer or lease its or any Borrower's
assets substantially as an entirety to

                                       93


any Person; or (iii) amend any provisions of its or any Borrower's
organizational documents containing provisions similar to those contained in
this Article IX; and

      (G) each Member, General Partner and Borrower that is a corporation shall
each promptly elect and at all times maintain at least two (2) Independent
Directors on its board of directors, who shall be selected by such Member,
General Partner or Borrower, as applicable, and be reasonably acceptable to
Lender. Each Borrower that is a single member limited liability company shall
promptly appoint and at all times maintain at least two (2) Independent
Directors on its board of managers, who shall be selected by such Borrower, and
be reasonably acceptable to Lender.

                                   ARTICLE X
                RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS

SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the
right to engage in one or more Secondary Market Transactions with respect to the
Loan, and to structure and restructure all or any part of the Loan, including
without limitation in multiple tranches, as a wraparound loan, or for inclusion
in a REMIC or other Securitization. Without limitation, Lender shall have the
right, at Lender's sole cost (other than each Borrower's internal costs and
expenses and the costs and expenses of the Borrowers' counsel), to cause the
Note and any Mortgage to be split into a first and a second mortgage loan, or
into one or more loans evidenced by multiple notes and secured by multiple
mortgages and/or by ownership interests in any of the Borrowers in whatever
proportion Lender determines, and thereafter to engage in Secondary Market
Transactions with respect to all or any part of the indebtedness and loan
documentation. Each of the Borrower Parties acknowledge that it is the intention
of the parties that all or a portion of the Loan will be securitized and that
all or a portion of the Loan will be rated by one or more Rating Agencies. Each
of the Borrower Parties further acknowledge that additional structural
modifications may be required to satisfy issues raised by any Rating Agencies.
As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale,
assignment, or other transfer of all or any portion of the Obligations or the
Loan Documents or any interest therein to one or more investors, (ii) the sale,
assignment, or other transfer of one or more participation interests in the
Obligations or Loan Documents to one or more investors, (iii) the transfer or
deposit of all or any portion of the Obligations or Loan Documents to or with
one or more trusts or other entities which may sell certificates or other
instruments to investors evidencing an ownership interest in the assets of such
trust or the right to receive income or proceeds therefrom or (iv) any other
Securitization backed in whole or in part by the Loan or any interest therein.

SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all
reasonable efforts and cooperate reasonably and in good faith with Lender in
effecting any such restructuring or Secondary Market Transactions at Lender's
sole cost (other than, with respect to the first successful Securitization and
any related Secondary Market Transaction only (or if the Loan shall be hereafter
split into multiple loans, the first successful Securitization and any related
Secondary Market Transaction with respect to each of such loans), the Borrowers'
internal costs and expenses and the costs and expenses of the Borrower Parties'
counsel). Notwithstanding the foregoing or anything to the contrary contained in
this Article X, it is acknowledged and agreed that in no event shall Lender be
responsible for payment of any Borrower Party's (or its Affiliate's) internal
costs and expenses in connection with any Secondary Market Transaction.

                                       94


Such cooperation shall include without limitation, executing and delivering such
reasonable amendments to the Loan Documents and the organizational documents of
each Borrower as Lender or any Interested Party (as defined below) may request,
provided however that, no such amendment shall modify (i) the weighted average
interest rate payable under the Note (or notes); (ii) the stated maturity date
of the Note, (iii) the amortization of the principal amount of the Note, (iv)
any other material economic terms of the Obligations, (v) the non-recourse
provisions of the Loan or (vi) any provision, the effect of which would increase
the Borrowers' obligations or decrease the Borrowers' rights under the Loan
Documents except to a de minimis extent. The Borrower Parties shall not be
required to provide additional collateral to effect any such restructuring or
Secondary Market Transaction after the Closing Date. The Borrower Parties shall
not be required to pay any third party (other than, which respect to the first
successful Securitization and any related Secondary Market Transaction only (or
if the Loan shall be hereafter split into multiple loans, the first successful
Securitization and any related Secondary Market Transaction with respect to each
of such loans), the costs and expenses of the Borrowers' counsel) costs and
expenses incurred by Lender in connection with any such Secondary Market
Transaction unless otherwise expressly payable by the Borrower Parties under
this Loan Agreement or the other Loan Documents.

SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense
(other than, with respect to the first successful Securitization and any related
Secondary Market Transaction only (or if the Loan shall be hereafter split into
multiple loans, the first successful Securitization and any related Secondary
Market Transaction with respect to each of such loans), the Borrowers' internal
costs and expenses and the costs and expenses of the Borrower Parties' counsel),
shall provide such access to personnel and such information and documents
relating to the Borrower Parties, Manager, the Properties and Collateral and the
business and operations of all of the foregoing and such opinions of counsel
(including nonconsolidation opinions) as any Rating Agency may request or as
Lender or any other Interested Party may reasonably request in connection with
any such Secondary Market Transaction including, without limitation, updated
financial information, appraisals, market studies, environmental reviews (Phase
I's and, if appropriate, Phase II's), mold inspection, property condition
reports and other due diligence investigations together with appropriate
verification of such updated information and reports through letters of auditors
and consultants and, as of the closing date of the Secondary Market Transaction,
updated representations and warranties made in the Loan Documents and such
additional representations and warranties as any Rating Agency may request or
any purchaser, transferee, assignee, trustee, servicer or potential investor
(the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED
PARTIES") may reasonably request, to the extent such updated representations and
warranties are true. On or prior to the date of closing of any Secondary Market
Transaction, the Borrowers, at Lender's cost and expense (other than with
respect to the first successful Securitization and any related Secondary Market
Transaction only (or if the Loan shall be hereafter split into multiple loans,
the first successful Securitization and any related Secondary Market Transaction
with respect to each of such loans), the Borrowers' internal costs and expenses
and the costs and expenses of the Borrowers' counsel), shall, if required by any
Rating Agency or reasonably required by Lender, provide revisions or
"bringdowns" to any opinions delivered at Closing (including nonconsolidation
opinions), or if required by the Rating Agencies, new versions of such opinions,
which opinions shall be consistent in substance with the opinions covered by the
original opinions, addressed to Lender, any trustee under any Securitization
backed in whole or in part by the Loan, any Rating Agency

                                       95


that assigns a rating to any securities in connection therewith and any investor
purchasing securities therein. Lender shall be permitted to share all such
information with the investment banking firms, Rating Agencies, accounting
firms, law firms, other third party advisory firms, potential investors,
servicers and other service providers and other parties directly involved in any
proposed Secondary Market Transaction. The Borrowers understand that any such
information may be incorporated into any offering circular, prospectus,
prospectus supplement, private placement memorandum or other offering documents
for any Secondary Market Transaction. Lender and the Rating Agencies shall be
entitled to rely upon such information. Without limiting the foregoing, the
Borrowers and Guarantor shall provide in connection with each (i) preliminary
and final private placement memorandum or (ii) a preliminary and final
prospectus or prospectus supplement, as applicable, prepared in connection with
any Secondary Market Transaction (the documents referred to in the foregoing
clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement
reasonably satisfactory to the Borrowers and Guarantor certifying that the
Borrowers and Guarantor have examined such Disclosure Documents specified by
Lender and, that the sections of such Disclosure Document describing the
Borrowers, Guarantor, the Properties and Manager do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they
were made, not materially misleading. The Borrowers and Guarantor shall each
indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates,
directors, employees, agents and each Person, if any, who controls Lender,
Merrill Lynch or any such Affiliate within the meaning of Section 15 of the
Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and
any other placement agent or underwriter with respect to any Securitization or
Secondary Market Transaction from and against any losses, claims, damages and
liabilities that arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Disclosure Document as to
the Borrowers, Guarantor, Manager and the Properties or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated in such information or necessary in order to make the
statements in such information not materially misleading; provided, however, the
Borrowers shall not be required to indemnify Merrill Lynch for any liabilities
arising out of untrue statements or omissions that were identified to Lender in
writing or are set forth in any third party report not prepared by the Borrowers
or their Affiliates unless such reports are caused to be incorrect or misleading
based upon information provided by the Borrowers or their Affiliates. Lender may
publicize the existence of the Obligations in connection with Lender's Secondary
Market Transaction activities or otherwise.

SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender
may transfer its obligations under this Loan Agreement and under the other Loan
Documents (or may transfer the portion thereof corresponding to the transferred
portion of the Obligations), and thereafter Lender shall be relieved of any
obligations hereunder and under the other Loan Documents arising after the date
of said transfer with respect to the transferred interest. Each transferee
investor shall become a "Lender" hereunder.

                                       96


                                   ARTICLE XI
           RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF
                                   PROPERTIES

SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or
a Permitted Assumption expressly permitted under this Article XI, Leases entered
into as permitted hereunder, and pledges in connection with the Mezzanine Loan,
the Borrowers shall not cause or suffer to occur or exist, directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, any
sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted
Encumbrances) of (i) all or any part of any Property or any interest therein, or
(ii) any direct or indirect ownership or beneficial interest in any Borrower
(other than to Mezzanine Lender), irrespective of the number of tiers of
ownership without Lender's consent.

SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following
voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges
(each, a "TRANSFER") of a direct, indirect or beneficial interest in any
Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP
INTEREST TRANSFERS"):

      (A) A Transfer of no more than forty-nine percent (49%) of the direct or
indirect ownership interests in such Borrower (in the aggregate), provided that,
following such Transfer, Guarantor maintains control of such Borrower.

      (B) A Transfer or a series of Transfers that result in the proposed
transferee, together with Affiliates of such transferee, owning in the aggregate
(directly or indirectly) more than forty-nine percent (49%) of the economic and
beneficial interests in such Borrower (where, prior to such Transfer, such
proposed transferee and its Affiliates owned in the aggregate (directly or
indirectly) forty-nine percent (49%) or less of such interests in that
Borrower); and, provided that such Transfer shall not be a Permitted Ownership
Interest Transfer unless Lender receives, prior to such Transfer, both (x)
evidence reasonably satisfactory to Lender (which shall include a legal
non-consolidation opinion reasonably acceptable to Lender and the Rating
Agencies) that the single purpose nature and bankruptcy remoteness of such
Borrower (and its members and general partners, as applicable) following such
Transfer or Transfers will be the same as prior to such Transfer or Transfers
and (y) a Rating Agency Confirmation.

      (C) For so long as Guarantor's (or its successor's) stock is traded
through the "over-the-counter market" or through any recognized stock exchange,
any Transfer of all or any portion of the issued and outstanding capital stock
of Guarantor, or the issuance of additional capital stock of Guarantor
(including common or preferred shares) through the "over-the-counter market" or
through any recognized stock exchange.

      (D) The pledge of ownership interests granted by the Mezzanine Borrowers
pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan
Agreement).

      For purposes of this Section 11.2, "control" shall have the meaning given
thereto in the definition of "Affiliate" in Section 1.1 and a "change of
control" of any Person shall include the Transfer of legal or equitable
ownership interests in such Person which after giving effect to such

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Transfer results in any transferee or pledgee of such interests holding more
than a 49% legal or equitable ownership interest or security interest in such
Person.

SECTION 11.3 ASSUMABILITY.

      (A) The Borrowers shall have the right to request that Lender consent to
(i) a transfer of all of the Properties to another Person (the "TRANSFEREE
BORROWER") and the assumption by the Transferee Borrower of all of the
Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor
with new guarantors and indemnitors who shall assume all of the obligations of
the Guarantors arising from and after such date and release of the Borrowers and
Guarantor from obligations arising from and after such date and (iii) the
replacement of the Mezzanine Borrowers with pledgors of the ownership interests
in the Transferee Borrower (collectively, an "ASSUMPTION"), subject to the
conditions set forth in paragraphs (B) and (C) of this Section. Together with
such written application, the Borrowers will pay to Lender a review fee of
$10,000. The Borrowers also shall pay on demand all of the reasonable
out-of-pocket costs and expenses incurred by Lender, including reasonable
attorneys' fees and expenses, and the fees and expenses of the Rating Agencies,
if any, and other outside entities, in connection with considering any proposed
Assumption, whether or not the same is permitted or occurs.

      (B) Lender shall not withhold its consent to an Assumption (any such
Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon
the conditions that:

            (i) No Event of Default shall have occurred and be continuing at the
time of such Assumption;

            (ii) The Borrowers shall have submitted to Lender true, correct and
complete copies of any and all information and documents reasonably requested by
Lender concerning the Transferee Borrower, replacement guarantors and
indemnitors and all of such information and documents shall be reasonably
acceptable to Lender;

            (iii) Evidence reasonably satisfactory to Lender shall have been
provided showing that the Transferee Borrower and such of its Affiliates as
shall reasonably be designated by Lender comply and will comply with Article IX,
as those provisions may be modified by Lender taking into account the ownership
structure of Transferee Borrower and its Affiliates;

            (iv) The Borrowers shall have obtained (and delivered to Lender) a
Rating Confirmation with respect to the Assumption, the Transferee Borrower, the
new guarantors and indemnitors and all related transactions;

            (v) The Borrowers shall have paid all of Lender's reasonable
out-of-pocket costs and expenses in connection with considering the Assumption,
and shall have paid the amount reasonably requested by Lender as a deposit
against Lender's reasonable costs and expenses in connection with effecting the
Assumption;

            (vi) The Borrowers, the Transferee Borrower, and the replacement
guarantors and indemnitors shall have indicated in writing in form and substance
reasonably satisfactory to Lender their readiness and ability to satisfy the
conditions set forth in Subsection (C) below;

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            (vii) (a) The Transferee Borrower shall be a Permitted Transferee or
(b) the identity, experience and financial condition of the Transferee Borrower
shall otherwise be satisfactory to Lender in its reasonable discretion; and

            (viii) The identity and financial condition of the replacement
guarantors and indemnitors shall be satisfactory to Lender.

      (C) If Lender consents to the proposed Assumption, the Transferee Borrower
and/or Borrowers, as the case may be, shall promptly and as a condition to the
Assumption deliver the following to Lender:

            (i) The Borrowers, the Transferee Borrower, the original and
replacement guarantors and indemnitors shall execute and deliver any and all
documents reasonably required by Lender to evidence the Transfer and Assumption
of the Loan, in form and substance reasonably required by Lender and similar to
those received at Closing;

            (ii) Counsel to the Transferee Borrower and replacement guarantors
and indemnitors shall deliver to Lender opinions in form and substance
reasonably satisfactory to Lender as to such matters as Lender shall reasonably
require in connection with such Assumption, which may include opinions as to
substantially the same matters as were required in connection with the
origination of the Loan including, without limitation, a bankruptcy
non-consolidation opinion;

            (iii) The Borrowers shall cause to be delivered to Lender, an
endorsement (relating to the change in the identity of the Borrowers and
execution and delivery of the Assumption documents) to Lender's policy of title
insurance in form and substance acceptable to Lender, in Lender's reasonable
discretion; and

            (iv) The Borrowers shall deliver to Lender a payment in the amount
of all remaining unpaid reasonable costs incurred by Lender in connection with
the Transfer and Assumption, including but not limited to Lender's reasonable
attorneys' fees and expenses, all recording fees, and all fees payable to the
title company in connection with the Transfer and Assumption.

SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may
obtain the release (each, a "RELEASE") of one or more Properties from the Lien
of the applicable Mortgage(s) in connection with a prepayment of a portion of
the Loan subject to the conditions of the Note and subject to the satisfaction
of the following conditions:

      (A) Lender shall have received from the Borrowers at least fifteen (15)
days prior written notice of the date proposed for such release (the "RELEASE
DATE") which notice is revocable;

      (B) No Event of Default shall have occurred and be continuing as of the
date of such notice and the Release Date;

      (C) Lender shall have received from the Borrowers on the date proposed for
such Release, the Release Price (together with, except in connection with a
Release of a Sale Property,

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the applicable Prepayment Consideration and any prepayment consideration due
pursuant to the terms of the Mezzanine Loan Documents) for deposit into the Lock
Box Account and disbursement in accordance with the terms of the Cash Management
Agreement, and following such disbursement, Lender shall have received Mortgage
Lender's Percentage of the Release Price and Mezzanine Lender shall have
received Mezzanine Lender's Percentage of the Release Price;

      (D) If required by any Rating Agency, the Borrowers at their sole cost and
expense, shall have delivered to Lender, one or more endorsements to the Title
Policies delivered to Lender on the date hereof in connection with the Mortgages
insuring that, after giving effect to such Release, (i) the Liens created hereby
and thereby and insured under the Title Policies are first priority Liens on the
respective remaining Properties subject only to the Permitted Encumbrances
applicable to the remaining Properties and (ii) that the Title Policies remain
in full force and effect and unaffected by such Release;

      (E) Immediately following any Release (other than a Release of a Sale
Property) both the Debt Service Coverage Ratio and the Debt Yield (based upon a
trailing twelve (12) month period) shall be equal to or greater than the Debt
Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12)
month period) in effect at Closing, or immediately prior to the Release,
whichever is greater;

      (F) Notwithstanding the foregoing, the Borrowers may not obtain the
Release under this Section 11.4 of any Property or Properties (other than the
Sale Properties) which individually, or in the aggregate (with all Releases of
Properties other than the Sale Properties since the Closing Date), have an
Aggregate Allocated Loan Amount of more than thirty percent (30%) of the Loan
Amount (exclusive of the Allocated Loan Amount with respect to any Sale
Property);

      (G) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses (including, without limitation, title search costs and endorsement
premiums and reasonable attorney's fees and disbursements) incurred by Lender,
Servicer, and any custodian employed by Lender or Servicer, in connection with
the Release; and

      (H) Immediately following such Property Release, the Released Property
will be owned by a Person other than the Borrowers.

Upon satisfaction of the above conditions, Lender shall effectuate the following
(hereinafter referred to as a "PROPERTY RELEASE"): the security interest of
Lender under the Mortgage and other Loan Documents relating to the Released
Property shall be released and Lender will execute and deliver any agreements
reasonably requested by the Borrowers to release and terminate or reassign, at
the Borrowers' option, the Mortgage, the applicable Assignment of Leases, and
financing statements as to the released Property; provided, that such release
and termination or reassignment shall be without recourse to Lender and without
any representation or warranty except that Lender shall be deemed to have
represented that such release and termination or reassignment has been duly
authorized and that it has not assigned or encumbered the Mortgage or the other
Loan Documents relating to the released Property (except as contemplated hereby)
and Lender shall return the originals of any Loan Documents that relate solely
to the released

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Property to the Borrowers; provided, further, that upon the release and
termination or reassignment of Lender's security interest in the Mortgage
relating to the released Property all references herein to the Mortgage relating
to the released Property shall be deemed deleted, except as otherwise provided
herein with respect to indemnities. In addition promptly after consummation of
any such Property Release and Lender's receipt of the Release Price and any
other sums payable to Lender, any and all Reserves designated as applicable to
the released Property held by or on behalf of Lender shall be returned to the
Borrowers.

SECTION 11.5 RESERVED.

SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the
contrary contained herein, provided no Event of Default exists, the Borrowers
may Transfer or dispose of building equipment which is being replaced or which
is no longer necessary in connection with the operation of the Property free
from the lien of the Mortgage, provided that such transfer or disposal will not
have a Material Adverse Effect on the value of any individual Property or on the
Properties taken as a whole, will not materially impair the utility of any
individual Property or the Properties, taken as a whole, and will not result in
a reduction or abatement of, or right of offset against, the Rents payable under
any Lease, in either case as a result thereof, and provided further that any new
building equipment acquired by the Borrowers (and not so disposed of) shall be
subject to the lien of the Mortgage. Lender shall, from time to time, upon the
reasonable request of any Borrower, execute a written instrument in form
reasonably satisfactory to Lender to confirm that such building equipment which
is to be, or has been, sold or disposed of is free from the lien of the
Mortgage.

SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of
Default exists, the Borrowers may, without the consent of Lender, (i) make
immaterial Transfers of portions of the any Property to Governmental Authorities
for dedication for public use, and (ii) grant easements, restrictions,
covenants, reservations and rights of way with respect to any Property in the
ordinary course of business for access, water and sewer lines, telephone and
telegraph lines, electric lines or other utilities or for other similar
purposes, provided that no such transfer, conveyance or encumbrance set forth in
the foregoing clauses (i) and (ii) shall materially impair the utility and
operation of such Property or have a Material Adverse Effect on the value of
such Property taken as a whole. In connection with any Transfer permitted
pursuant to this Section 11.7, Lender shall execute and deliver any instrument
reasonably necessary or appropriate, in the case of the Transfers referred to in
clause (i) above, to release the portion of such Property affected by such
transfer from the lien of the applicable Mortgage or to subordinate the
applicable Mortgage to any such easement, restriction, covenant, reservation or
right of way within ten (10) days of Lender's receipt of the following:

      (A) Ten (10) days prior written notice thereof.

      (B) A copy of the instrument or instruments of transfer.

      (C) An officer's certificate given by the Borrowers stating that such
transfer does not materially impair the utility and operation of the Property,
materially reduce the value of the Property or have a Material Adverse Effect.

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      (D) Reimbursement of all of Lender's reasonable, out-of-pocket costs and
expenses incurred in connection with such Transfer.

                                   ARTICLE XII
                        RECOURSE; LIMITATIONS ON RECOURSE

SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article,
and notwithstanding any provision of the Loan Documents other than this Article,
the personal liability of the Borrowers to pay any and all Obligations including
but not limited to the principal of and interest on the debt evidenced by the
Note and any other agreement evidencing the Borrowers' obligations under the
Note shall be limited to (i) the Properties, (ii) the rents, profits, issues,
products and income of the Properties, and (iii) any other Collateral.

Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages
or any of the Loan Documents, Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Obligations secured by the Mortgages or to require that all collateral shall
continue to secure all of the Obligations owing to Lender in accordance with the
Loan Documents.

SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the
Borrowers (but not their members, partners (other than the General Partners),
employees, shareholders agents, directors or officers (the "EXCULPATED
PARTIES")) and Guarantor shall be personally liable to the extent of any
liability, loss, damage, cost or expense (including, without limitation,
reasonable attorneys' fees and expenses) suffered or incurred by Lender
resulting from any and all of the following: (i) fraud of any of the Borrower
Parties or their agents or employees; (ii) any material misrepresentation made
by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan
Document; (iii) insurance proceeds, condemnation awards, or other sums or
payments attributable to the Properties which are not applied in accordance with
the provisions of the Loan Documents; (iv) all rents, profits, issues, products
and income of the Properties received or collected by or on behalf of the
Borrowers or any Borrower Party or Manager and not deposited into the Deposit
Account in accordance with Article VII and the Cash Management Agreement; (v)
failure to turn over to Lender, after an Event of Default, or misappropriation
of any tenant security deposits or rents collected in advance (other than by
Lender or Servicer); (vi) failure to notify Lender of any change in the
principal place of business address of the Borrowers or of any change in the
name of any of the Borrowers or if any of the Borrowers takes any other action
which could make the information set forth in the Financing Statements relating
to the Loan materially misleading; (vii) failure by the Borrowers, or any
indemnitor or guarantor to comply with the covenants, obligations, liabilities,
warranties and representations contained in the Environmental Indemnity or
otherwise pertaining to environmental matters; (viii) material waste with
respect to any of the Properties; (ix) all liabilities and expenses under the
indemnification provisions of Section 10.3; (x) any uncured default under
Section 11.1; (xi) any material uncured default under Article IX; and (xii) any
distributions made in violation of Section 5.28 (to the extent of any such
distribution) including amounts improperly paid or distributed, directly or
indirectly, by Manager in circumvention of such restrictions. Notwithstanding
the preceding sentence or Section 12.1, the Loan shall be fully recourse to the
Borrowers and Guarantor upon the happening of any of the following: (i)

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any Borrower Party's defense of any efforts by Lender to collect or enforce the
Obligations following maturity of the Loan or acceleration of the Loan on
account of an Event of Default under Section 8.1(A), or any other defense of any
efforts by Lender to collect or enforce the Obligations without a good faith
basis following any other Event of Default, and (ii) any condition or event
described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the
Borrowers and Guarantor shall not be liable under this Section 12.2 in
connection with any Involuntary Borrower Bankruptcy unless such involuntary
proceeding is solicited, procured, consented to or acquiesced in by any
Borrower, Guarantor or any Affiliate of either of them or any Involuntary
Borrower Bankruptcy caused by Mezzanine Lender following the exercise by
Mezzanine Lender of its rights under the Mezzanine Loan Documents).

SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the
enforcement of the Environmental Indemnity, the Guaranty or any guaranty or
similar agreement executed in connection with the Loan, (ii) release or reduce
the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or
any other security document, (iv) impair the rights of Lender to enforce any
provisions of the Loan Documents, or (v) limit Lender's ability to obtain a
deficiency judgment or judgment on the Note or otherwise against any Borrower
Party but not any Exculpated Party to the extent necessary to obtain any amount
for which such Borrower Party may be liable in accordance with this Article or
any other Loan Document.

                                  ARTICLE XIII
                 WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES

SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article,
a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or
for any other Borrower Party or Affiliate or to have rights or obligations in
the nature of the rights or obligations of a guarantor or surety (whether by
reason of execution of a guaranty, provision of security for the obligations of
another, or otherwise) then this Article shall apply. This Article shall not
affect the rights of the Waiving Party other than to waive or limit rights and
defenses that Waiving Party would have (i) in its capacity as a guarantor or
surety or (ii) in its capacity as one having rights or obligations in the nature
of a guarantor or surety.

      Waiving Party hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of receivership or bankruptcy of any
of the other Borrower Parties, protest or notice with respect to any of the
obligations of any of the other Borrower Parties, setoffs and counterclaims and
all presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance, the benefits
of all statutes of limitation, and all other demands whatsoever (and shall not
require that the same be made on any of the other Borrower Parties as a
condition precedent to the obligations of Waiving Party), and covenants that the
Loan Documents will not be discharged, except by complete payment and
performance of the obligations evidenced and secured thereby, except only as
limited by the express contractual provisions of the Loan Documents. Waiving
Party further waives all notices that the principal amount, or any portion
thereof, and/or any interest on any instrument or document evidencing all or any
part of the obligations of any of the other Borrower Parties to Lender is due,
notices of any and all proceedings to collect from any of the other Borrower
Parties or any endorser or any other guarantor of all or any part of their
obligations, or from any other person or entity, and, to the extent permitted by
law, notices of

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exchange, sale, surrender or other handling of any security or collateral given
to Lender to secure payment of all or any part of the obligations of any of the
other Borrower Parties.

      Except only to the extent provided otherwise in the express contractual
provisions of the Loan Documents, Waiving Party hereby agrees that all of its
obligations under the Loan Documents shall remain in full force and effect,
without defense, offset or counterclaim of any kind, notwithstanding that any
right of Waiving Party against any of the other Borrower Parties or defense of
Waiving Party against Lender may be impaired, destroyed, or otherwise affected
by reason of any action or inaction on the part of Lender. Waiving Party waives
all rights and defenses arising out of an election of remedies by the Lender,
even though that election of remedies, may have destroyed the Waiving Party's
rights of subrogation and reimbursement against the other Borrower Parties.

      Lender is hereby authorized, without notice or demand, from time to time,
(a) to renew, extend, accelerate or otherwise change the time for payment of, or
other terms relating to, all or any part of the obligations of any of the other
Borrower Parties; (b) to accept partial payments on all or any part of the
obligations of any of the other Borrower Parties; (c) to take and hold security
or collateral for the payment of all or any part of the obligations of any of
the other Borrower Parties; (d) to exchange, enforce, waive and release any such
security or collateral for such obligations; (e) to apply such security or
collateral and direct the order or manner of sale thereof as in its discretion
it may determine; (f) to settle, release, exchange, enforce, waive, compromise
or collect or otherwise liquidate all or any part of such obligations and any
security or collateral for such obligations. Any of the foregoing may be done in
any manner, and Waiving Party agrees that the same shall not affect or impair
the obligations of Waiving Party under the Loan Documents.

      Waiving Party hereby assumes responsibility for keeping itself informed of
the financial condition of all of the other Borrower Parties and any and all
endorsers and/or other guarantors of all or any part of the obligations of the
other Borrower Parties, and of all other circumstances bearing upon the risk of
nonpayment of such obligations, and Waiving Party hereby agrees that Lender
shall have no duty to advise Waiving Party of information known to it regarding
such condition or any such circumstances.

      Waiving Party agrees that neither Lender nor any person or entity acting
for or on behalf of Lender shall be under any obligation to marshal any assets
in favor of Waiving Party or against or in payment of any or all of the
obligations secured hereby. Waiving Party further agrees that, to the extent
that any of the other Borrower Parties or any other guarantor of all or any part
of the obligations of the other Borrower Parties makes a payment or payments to
Lender, or Lender receives any proceeds of collateral for any of the obligations
of the other Borrower Parties, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid or refunded, then, to the extent of such payment or
repayment, the part of such obligations which has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the time immediately preceding such initial payment, reduction or
satisfaction.

      Waiving Party (i) shall have no right of subrogation with respect to the
obligations of the other Borrower Parties; (ii) waives any right to enforce any
remedy that Lender now has or may

                                      104


hereafter have against any of the other Borrower Parties any endorser or any
guarantor of all or any part of such obligations or any other person; and (iii)
waives any benefit of, and any right to participate in, any security or
collateral given to Lender to secure the payment or performance of all or any
part of such obligations or any other liability of the other parties to Lender.

      Waiving Party agrees that any and all claims that it may have against any
of the other Borrower Parties, any endorser or any other guarantor of all or any
part of the obligations of the other Borrower Parties, or against any of their
respective properties, shall be subordinate and subject in right of payment to
the prior payment in full of all obligations secured hereby. Notwithstanding any
right of any of the Waiving Party to ask, demand, sue for, take or receive any
payment from the other Borrower Parties, all rights, liens and security
interests of Waiving Party, whether now or hereafter arising and howsoever
existing, in any assets of any of the other Borrower Parties (whether
constituting part of the security or collateral given to Lender to secure
payment of all or any part of the obligations of the other Borrower Parties or
otherwise) shall be and hereby are subordinated to the rights of Lender in those
assets.

                                  ARTICLE XIV
                                  MISCELLANEOUS

SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions
contemplated hereby shall be consummated, the Borrowers agree to promptly pay
all reasonable fees, costs and expenses incurred by Lender in connection with
any matters contemplated by or arising out of this Loan Agreement, including the
following, and all such fees, costs and expenses shall be part of the
Obligations, payable on demand: (A) reasonable fees, costs and expenses
(including reasonable attorneys' fees, and other professionals retained by
Lender) incurred in connection with the examination, review, due diligence
investigation, documentation and closing of the financing arrangements evidenced
by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and
expenses (including reasonable attorneys' fees and other professionals retained
by Lender) incurred in connection with the administration of the Loan Documents
and the Loan and any amendments, modifications and waivers relating thereto; (C)
subject to Section 10.2, reasonable fees, costs and expenses (including
reasonable attorneys' fees) incurred in connection with the review,
documentation, negotiation, closing and administration of any subordination or
intercreditor agreements; and (D) reasonable fees, costs and expenses (including
reasonable attorneys' fees and fees of other professionals retained by Lender)
incurred in any action to enforce or interpret this Loan Agreement or the other
Loan Documents or to collect any payments due from the Borrowers under this Loan
Agreement, the Note or any other Loan Document or incurred in connection with
any refinancing or restructuring of the credit arrangements provided under this
Loan Agreement, whether in the nature of a "workout" or in connection with any
insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due
and payable to Lender after the Closing Date may be paid to Lender pursuant to
the Cash Management Agreement.

SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required
elsewhere herein, whether or not the transactions contemplated hereby shall be
consummated, the Borrowers agree to indemnify, defend, protect, pay and hold
Lender, Servicer and their successors and assigns (including, without
limitation, the trustee and/or the trust under any trust agreement executed in
connection with any Securitization backed in whole or in part by the Loan and
any other Person

                                      105


which may hereafter be the holder of the Note or any interest therein), and the
officers, directors, stockholders, partners, members, employees, agents,
Affiliates and attorneys of Lender and such successors and assigns (collectively
called the "INDEMNITEES") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax
Liabilities, broker's or finders fees, reasonable costs, expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of outside counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto) that are
imposed on, incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of (A) the negotiation, execution, delivery,
performance, administration, ownership, or enforcement of any of the Loan
Documents; (B) any of the transactions contemplated by the Loan Documents; (C)
any breach by the Borrowers of any material representation, warranty, covenant,
or other agreement contained in any of the Loan Documents; (D) Lender's
agreement to make the Loan hereunder; (E) any claim brought by any third party
arising out of any condition or occurrence at or pertaining to the Properties;
(F) any design, construction, operation, repair, maintenance, use, non-use or
condition of the Properties or Improvements, including claims or penalties
arising from violation of any applicable laws or insurance requirements, as well
as any claim based on any patent or latent defect, whether or not discoverable
by Lender; (G) any performance of any labor or services or the furnishing of any
materials or other property in respect of the Properties or any part thereof;
(H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or
undertaking relating to the performance or discharge of any of the terms,
covenants and conditions of the landlord contained in the Leases; or (J) the use
or intended use of the proceeds of any of the Loan (the foregoing liabilities
herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that
the Borrowers shall not have an obligation to an Indemnitee hereunder with
respect to Indemnified Liabilities arising from the fraud, gross negligence or
willful misconduct of such Indemnitee as determined by a court of competent
jurisdiction. The obligations and liabilities of the Borrowers under this
Section 14.2 shall survive the term of the Loan and the exercise by Lender of
any of its rights or remedies under the Loan Documents, including the
acquisition of the Properties by foreclosure or a conveyance in lieu of
foreclosure.

SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
amendment, modification, termination or waiver of any provision of this Loan
Agreement, the Note or any other Loan Document, or consent to any departure
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender and any other party to be charged. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on the Borrowers in any case shall entitle the Borrowers or other Person
to any other or further notice or demand in similar or other circumstances.

SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance
with Lender's customary practices, destroy or otherwise dispose of all
documents, schedules, invoices or other papers, delivered by the Borrowers to
Lender (other than the Note) unless the Borrowers request in writing that same
be returned. Upon such request and at the Borrowers' expense, Lender shall
return such papers when Lender's actual or anticipated need for same has
terminated.

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SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice
or other communication required or permitted to be given shall be in writing and
addressed to the respective party as set forth below. Notices shall be effective
(i) three (3) days after the date such notice is mailed, (ii) on the next
Business Day if sent by a nationally recognized overnight courier service, (iii)
on the date of delivery by personal delivery and (iv) on the date of
transmission if sent by telefax during business hours on a Business Day
(otherwise on the next Business Day).

Notices shall be addressed as follows:

If to the Borrowers or any Borrower Party:

c/o Lodgian
3445 Peachtree Road NE
Suite 700
Atlanta, Georgia 30326
Attention:  General Counsel
Facsimile:  (404) 364-0088

With a copy to:

Morris, Manning & Martin, LLP
3343 Peachtree Rd., NE
1600 Atlanta Financial Center
Atlanta, Georgia 30326
Attention:  Thomas Gryboski, Esq.
Facsimile:  (404) 365-9532

If to Lender:

c/o Merrill Lynch & Co.
Four World Financial Center
New York, New York 10080
Attention:    Robert Spinna
Facsimile:  (212) 449-7684

With a copy to:

Sidley Austin Brown & Wood LLP
787 Seventh Avenue
New York, New York 10019
Attn:    Robert L. Boyd, Esq.
Facsimile:  (212) 839-5599

Any party may change the address at which it is to receive notices to another
address in the United States at which business is conducted (and not a
post-office box or other similar receptacle), by giving notice of such change of
address in accordance with the foregoing. This provision shall not invalidate or
impose additional requirements for the delivery or effectiveness

                                      107


of any notice (i) given in accordance with applicable statutes or rules of
court, or (ii) by service of process in accordance with applicable law. If there
is any assignment or transfer of Lender's interest in the Loan, then the new
Lenders may give notice to the parties in accordance with this Section,
specifying the addresses at which the new Lenders shall receive notice, and they
shall be entitled to notice at such address in accordance with this Section.

SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Loan Agreement, the making of the Loan hereunder and the
execution and delivery of the Note. Notwithstanding anything in this Loan
Agreement or implied by law to the contrary, the agreements of the Borrowers to
indemnify or release Lender or Persons related to Lender, or to pay Lender's
costs, expenses, or taxes shall survive the payment of the Loan and the
termination of this Loan Agreement.

SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of Lender in the exercise of any power, right or privilege
hereunder or under the Note or any other Loan Document shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Loan Agreement,
the Note and the other Loan Documents are cumulative to, and not exclusive of,
any rights or remedies otherwise available.

SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any
obligation to marshal any assets in favor of any Person or against or in payment
of any or all of the Obligations. To the extent that any Person makes a payment
or payments to Lender, or Lender enforces its remedies or exercises its rights
of set off, and such payment or payments or the proceeds of such enforcement or
set off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
if any, and rights and remedies therefor, shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or set
off had not occurred.

SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Loan Agreement, the
Note or other Loan Documents shall not affect or impair the validity, legality
or enforceability of the remaining provisions or obligations under this Loan
Agreement, the Note or other Loan Documents or of such provision or obligation
in any other jurisdiction.

SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Loan Agreement for any other purpose or be given any substantive
effect.

SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED

                                      108


AND DELIVERED IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE
DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY,
AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF
NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA EXCEPT THAT AT
ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF THE
LIENS AND SECURITY INTERESTS CREATED PURSUANT TO EACH MORTGAGE AND EACH
ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE
APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE SECURITY INTERESTS IN ACCOUNT
COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK OR THE STATE
WHERE THE SAME IS HELD, AT THE OPTION OF LENDER.

SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns except that the Borrowers may not assign their rights or obligations
hereunder or under any of the other Loan Documents except as expressly provided
in Article XI.

SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY
RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties,
represent, warrant and acknowledge that (i) they are sophisticated real estate
investors, familiar with transactions of this kind, and (ii) they have entered
into this Loan Agreement and the other Loan Documents after conducting their own
assessment of the alternatives available to them in the market, and after
lengthy negotiations in which they have been represented by legal counsel of
their choice. The Borrowers, on behalf of themselves and all Borrower Parties,
also acknowledge and agree that the rights of Lender under this Loan Agreement
and the other Loan Documents are reasonable and appropriate, taking into
consideration all of the facts and circumstances including without limitation
the quantity of the Loan, the nature of the Properties, and the risks incurred
by Lender in this transaction. No provision in this Loan Agreement or in any of
the other Loan Documents and no course of dealing between the parties shall be
deemed to create (i) any partnership or joint venture between Lender and the
Borrowers or any other Person, or (ii) any fiduciary or similar duty by Lender
to the Borrowers or any other Person. The relationship between Lender and the
Borrowers is exclusively the relationship of a creditor and a debtor, and all
relationships between Lender and any other Borrower are ancillary to such
creditor/debtor relationship.

SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any
consent, approval, determination or other action by Lender is, pursuant to the
Loan Documents or applicable law, required to be done reasonably or required not
to be unreasonably withheld, then Lender's action shall be presumed to be
reasonable, and the Borrowers shall bear the burden of proof of showing that the
same was not reasonable. In the event that a claim or adjudication is made that
Lender or its agents have acted unreasonably or unreasonably delayed acting in
any

                                      109


case where, by law or under this Loan Agreement or the other Loan Documents,
Lender or such agent, as the case may be, has an obligation to act reasonably or
promptly, neither Lender nor its agents shall be liable for any monetary
damages, and the Borrowers' sole remedy shall be limited to commencing an action
seeking injunctive relief or declaratory judgment. Any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.

SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate,
officer, director, employee, attorney, or agent of Lender, shall have any
liability with respect to, and each of the Borrowers hereby waives, releases,
and agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by the Borrower
Parties in connection with, arising out of, or in any way related to, this Loan
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Loan Agreement or any of the other Loan Documents, other
than the gross negligence or willful misconduct of Lender. Each of the Borrowers
hereby waives, releases, and agrees not to sue Lender or any of Lender's
Affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Loan Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Loan Agreement or any of the
transactions contemplated hereby, except to the extent the same is caused by the
gross negligence or willful misconduct of Lender.

SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to any of the Borrowers or Affiliates thereof, or any other Person.

SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other
Loan Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties to the Loan
Documents.

SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and
Lender acknowledge that each of them has had the benefit of legal counsel of its
own choice and has been afforded an opportunity to review this Loan Agreement
and the other Loan Documents with its legal counsel and that this Loan Agreement
and the other Loan Documents shall be construed as if jointly drafted by the
Borrowers and Lender. If any term, condition or provision of this Loan Agreement
shall be inconsistent with any term, condition or provision of any other Loan
Document, then this Loan Agreement shall control.

SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS
LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN

                                      110


DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR
ITSELF AND IN CONNECTION WITH THE PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN
DOCUMENTS OR SUCH OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER
TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION.

SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR
ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT
MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS
BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND
OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF
ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS
ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND
LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan
Documents and any amendments or supplements thereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which counterparts together shall constitute but

                                      111


one and the same instrument. This Loan Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.

SECTION 14.22 SERVICER. Lender shall have the right from time to time to
designate and appoint a Servicer and special servicer, and to change or replace
any Servicer or special servicer. Provided that the Borrowers have been notified
of such Servicer's role, all rights of the Lender hereunder may be exercised by
Servicer on behalf of Lender and provided the Borrowers shall not be required to
deal with more than one such servicing entity at any time. Lender shall notify
the Borrowers in writing as to the identity of the Servicer and any special
servicer.

SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than
the Borrowers are parties to this Loan Agreement only with regard to the
representations, warranties, and covenants specifically applicable to them.

SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything
contained in this Loan Agreement to the contrary, if for any reason whatsoever
Lender suspects that any conditions exist or may exist at any Property which
might have a Material Adverse Effect, Lender shall have the right, at the
Borrowers' sole reasonable cost and expense, to cause such inspections and
reports to be prepared and performed with respect to any Property as Lender
shall reasonably determine.

                        [signatures follow on next page]

                                      112


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

                                 BORROWERS:

                                 APICO HILLS, INC.
                                 BRUNSWICK MOTEL ENTERPRISES, INC.
                                 DOTHAN HOSPITALITY 3053, INC.
                                 DOTHAN HOSPITALITY 3071, INC.
                                 GADSDEN HOSPITALITY, INC.
                                 LODGIAN BRIDGEPORT LLC
                                 LODGIAN COLCHESTER LLC
                                 LODGIAN FLORENCE LLC
                                 LODGIAN HAMBURG LLC
                                 LODGIAN HOTELS FLOATING, LLC
                                 LODGIAN JACKSON LLC
                                 LODGIAN MEMPHIS LLC
                                 LODGIAN MEMPHIS PROPERTY OWNER, LLC
                                 LODGIAN MORGANTOWN LLC
                                 SERVICO AUSTIN, INC.
                                 SERVICO CEDAR RAPIDS, INC.
                                 SERVICO GRAND ISLAND, INC.
                                 SERVICO JAMESTOWN, INC.
                                 SERVICO LANSING, INC.
                                 SERVICO MARYLAND, INC.
                                 SERVICO NEW YORK, INC.
                                 SERVICO NIAGARA FALLS, INC.
                                 SERVICO PENSACOLA 7200, INC.
                                 SERVICO PENSACOLA 7330, INC.
                                 SERVICO WINTER HAVEN, INC.
                                 SHEFFIELD MOTEL ENTERPRISES, INC.

                                 By: /s/ Daniel E. Ellis
                                     -------------------------------------------
                                         Name: Daniel E. Ellis
                                         Title: Vice President and Secretary, or
                                         Authorized Signatory for each of the
                                         entities listed above

                                      113


                                 LENDER:

                                 MERRILL LYNCH MORTGAGE LENDING, INC.

                                 By: /s/ Robert Spinna
                                     -------------------------------------------
                                         Name: Robert Spinna
                                         Title: Vice President

                                      114


                         LIST OF EXHIBITS AND SCHEDULES

Exhibit A        -  Properties
Exhibit B        -  Environmental Reports
Exhibit C        -  Franchise Agreements
Exhibit D        -  Allocated Loan Amounts/Aggregate Allocated Loan Amounts
Exhibit E        -  Management Agreements
Exhibit F        -  [Reserved]
Exhibit G        -  Property Improvement Plans
Exhibit H        -  [Reserved]
Exhibit I        -  Acceptable Franchisors
Exhibit J        -  Property Condition Reports
Exhibit K        -  Zoning Reports
Exhibit L        -  Certificate Regarding Work Reserves

Schedule 1       -  Borrowers
Schedule 2.4     -  Scheduled Mortgage Principal Payments
Schedule 3.1(A)  -  List of Loan Documents
Schedule 4.1(C)  -  Organizational Chart for Borrower Parties
Schedule 4.2     -  Consents
Schedule 4.5     -  Condemnation Proceedings
Schedule 4.5(A)  -  Rights to Purchase/Rights of First Offer
Schedule 4.7(B)  -  Rent Roll
Schedule 4.7(E)  -  Franchise Defaults
Schedule 4.9     -  Litigation
Schedule 4.14       ERISA Plans
Schedule 4.20    -  Insurance
Schedule 4.28    -  Collective Bargaining Agreements
Schedule 4.29    -  Condominium Property Documents
Schedule 4.30    -  Ground Leases
Schedule 5.14    -  Material Agreements
Schedule 6.5     -  Required Capital Improvements
Schedule 6.6     -  Environmental Work
Schedule 6.7     -  Reserve Funding Condition

                         List of Exhibits and Schedules

                                      115


                                    EXHIBIT A

                                   PROPERTIES



                                                          SALE
     CHAIN/NAME                  CITY             ST    PROPERTY
- ----------------------------------------------------------------
                                               
Holiday Inn Express     Dothan (ex Hampton)       AL
Quality Inn             Dothan                    AL
Holiday Inn Express     Gadsden (Attalla)         AL
Holiday Inn             Sheffield                 AL
Holiday Inn             Pensacola                 FL
Holiday Inn Express     Pensacola  (ex Hampton)   FL
Holiday Inn             Winter Haven              FL
Holiday Inn             Brunswick                 GA
Holiday Inn             Valdosta                  GA
Fairfield Inn           Valdosta                  GA
Crowne Plaza            Cedar Rapids              IA
HOLIDAY INN             FLORENCE                  KY       X
Clarion Hotel           Louisville                KY
Holiday Inn             Silver Spring             MD
Holiday Inn             Lansing                   MI
Holiday Inn             St. Louis North           MO
HOLIDAY INN             GRAND ISLAND              NY       X
Holiday Inn             Hamburg                   NY
Holiday Inn             Jamestown                 NY
HOLIDAY INN SELECT      NIAGARA FALLS             NY       X
FOUR POINTS SHERATON    NIAGARA FALLS             NY       X
HOLIDAY INN             PITTSBURGH (PKWY EAST)    PA       X
Fairfield Inn           Jackson                   TN
French Quarter Suites   Memphis                   TN
HOLIDAY INN             MEMPHIS                   TN       X
HOLIDAY INN             AUSTIN                    TX       X
Fairfield Inn           Colchester                VT
Holiday Inn             Clarksburg (Bridgeport)   WV
HOLIDAY INN             MORGANTOWN                WV       X


                                    Exhibit A



                                    EXHIBIT B

                              ENVIRONMENTAL REPORTS

                                   Exhibit B-1


LODGIAN HOTEL PORTFOLIO
ENVIRONMENTAL REPORT



                                                                                                                        PROJECT
 ML   LODGIAN  LOCATION                                                                           ASSESSMENT  REPORT     OR JOB
CODE    CODE     CODE     PROPERTY NAME       ADDRESS         CITY     STATE        REPORT           FIRM      DATE      NUMBER
                                                                                         
FLOATING PORTFOLIO
 18     ssp      1720    Holiday Inn -     8777 Georgia    Silver        MD   Phase I             EMG         May 21,      116624
                         Silver Spring     Ave.            Spring             Environmental Site              2004
                                                                              Assessment Report

 43     lan      3970    Holiday Inn -     7501 W.         Lansing       MI   Phase I             EMG         May 20,      116632
                         Lansing           Saginaw Hwy                        Environmental Site              2004
                                                                              Assessment Report

 63     cwv      4899    Holiday Inn  -    100 Lodgeville  Bridgeport    WV   Phase I             Building    May 6,   04-121/ams
                         Bridgeport        Road                               Environmental Site  Evaluation  2004
                                                                              Assessment Report   Services &
                                                                                                  Technology

 1      shf       210    Holiday Inn -     4900 Hatch      Sheffield     AL   Phase I             EMG         May 21,      116569
                         Sheffield         Blvd.                              Environmental Site              2004
                                                                              Assessment Report

 3      dha       230    Holiday Inn       3071 Ross       Dothan        AL   Phase I             EMG         May 22,      116562
                         Express -         Clark Circle                       Environmental Site              2004
                         Dothan                                               Assessment Report

 9      uma      1116    Holiday Inn -     7200            Pensacola     FL   Phase I             EMG         May 20,      116587
                         Pensacola         Plantation Rd.                     Environmental Site              2004
                                                                              Assessment Report

 12     brw      1206    Holiday Inn -     5252 New Jesup  Brunswick     GA   Phase I             EMG         May 20,      116595
                         Brunswick         Hwy                                Environmental Site              2004
                                                                              Assessment Report

 11     pns      1168    Holiday Inn       7330            Pensacola     FL   Phase I             EMG         May 22,      116581
                         Express  -        Plantation Rd.                     Environmental Site              2004
                         Pensacola                                            Assessment Report

 16     vhi      1285    Holiday Inn -     1309 St.        Valdosta      GA   Phase I             EMG         May 20,      116599
                         Valdosta          Augustine Rd.                      Environmental Site              2004
                                                                              Assessment Report

 10     wnh      1132    Holiday Inn -     1150 3rd St.,   Winter        FL   Phase I             EMG         May 21,      116591
                         Winter Haven      SW              Haven              Environmental Site              2004
                                                                              Assessment Report

 15     vfi      1280    Marriott          1311 St.        Valdosta      GA   Phase I             EMG         May 20,      116601
                         Fairfield Inn -   Augustine Rd.                      Environmental Site              2004
                         Valdosta                                             Assessment Report

 58     jtn      4205    Marriott          535 Wiley       Jackson       TN   Phase I             Building    May 6,   04-114/skt
                         Fairfield Inn  -  Parker Road                        Environmental Site  Evaluation  2004
                         Jackson                                              Assessment Report   Services &
                                                                                                  Technology

 56     ham      3398    Holiday Inn  -    5440 Camp Road  Hamburg       NY   Phase I             Building    May 6,   04-117/skt
                         Hamburg                                              Environmental Site  Evaluation  2004
                                                                              Assessment Report   Services &
                                                                                                  Technology

 34     jam      3330    Holiday Inn -     150 W. 4th St.  Jamestown     NY   Phase I             EMG         May 21,      116644
                         Jamestown                                            Environmental Site              2004
                                                                              Assessment Report

 4      gad       240    Holiday Inn       801 Cleveland   Attalla       AL   Phase I             EMG         May 22,      116566
                         Express -         Ave.                               Environmental Site              2004
                         Attalla                                              Assessment Report

 28     lvl      2040    Clarion Hotel -   9700 Blue       Louisville    KY   Phase I             EMG         May 20,      116608
                         Louisville        Grass Parkway                      Environmental Site              2004
                                                                              Assessment Report

 46     mem      4215    French Quarter    2144 Madison    Memphis       TN   Phase I             EMG         May 22,      116669
                         Suites - Memphis  Ave.                               Environmental Site              2004
                                                                              Assessment Report

 60     bvt      4545    Marriott          15 South Park   Colchester    VT   Phase I             Building    May 6,   04-118/skt
                         Fairfield Inn  -  Drive                              Environmental Site  Evaluation  2004


                                   Exhibit B-1



                                                                                         
                         Colchester                                           Assessment Report   Services &
                                                                                                  Technology

 2      dhi       220    Quality Inn -     3053 Ross       Dothan        AL   Phase I             EMG         May 24,      116564
                         Dothan            Clark                              Environmental Site              2004
                                                                              Assessment Report

 24     ced      1840    Crowne Plaza -    350 1st Ave,    Cedar         IA   Phase I             EMG         May 21,      116603
                         Cedar Rapids      NE              Rapids             Environmental Site              2004
                                                                              Assessment Report

 29     sln      2222    Holiday Inn -     4545 N.         St. Louis     MO   Phase I             EMG         May 20,      116636
                         St. Louis         Lindbergh                          Environmental Site              2004
                                           Blvd.                              Assessment Report

 32     nia      3314    Holiday Inn       300 Third St.   Niagara       NY   Phase I             EMG         May 22,      116646
                         Select - Niagara                  Falls              Environmental Site              2004
                         Falls                                                Assessment Report

 62     mwv      4848    Holiday Inn  -    1400 Saratoga   Morgantown    WV   Phase I             Building    May 6,   04-120/ams
                         Morgantown        Avenue                             Environmental Site  Evaluation  2004
                                                                              Assessment Report   Services &
                                                                                                  Technology

 33     nfa      3326    Four Points -     114 Buffalo     Niagara       NY   Phase I             EMG         May 24,      116650
                         Niagara Falls     Ave.            Falls              Environmental Site              2004
                                                                              Assessment Report

 49     aus      4375    Holiday Inn -     3401 South      Austin        TX   Phase I             EMG         May 20,      116675
                         Austin            I-35                               Environmental Site              2004
                                                                              Assessment Report

 35     gil      3345    Holiday Inn -     100 Whitehaven  Grand         NY   Phase I             EMG         May 22,      116641
                         Grand Island      Rd.             Island             Environmental Site              2004
                                                                              Assessment Report

 54     fhi      2050    Holiday Inn  -    8055 Holiday    Florence      KY   Phase I             Building    May 6,   04-113/skt
                         Florence          Drive                              Environmental Site  Evaluation  2004
                                                                              Assessment Report   Services &
                                                                                                  Technology

 38     prk      3804    Holiday Inn -     915 Brinton     Pittsburgh    PA   Phase I             EMG         May 21,      116661
                         Pittsburgh        Rd.                                Environmental Site              2004
                                                                              Assessment Report

 59     mhi      4242    Holiday Inn  -    6101 Shelby     Memphis       TN   Phase I             Building    May 6,   04-115/skt
                         Memphis           Oaks Drive                         Environmental Site  Evaluation  2004
                                                                              Assessment Report   Services &
                                                                                                  Technology


                                   Exhibit B-2



                                    EXHIBIT C

                              FRANCHISE AGREEMENTS



          PROPERTY                                                       AGREEMENT
            NAME                    STATE           FRANCHISOR             DATE
                                                                
FLOATING PORTFOLIO
Holiday Inn - Silver Spring           MD   Intercontinental Hotel Group   11/17/97
Holiday Inn - Lansing                 MI   Intercontinental Hotel Group     5/7/96
Holiday Inn  - Bridgeport             WV   Intercontinental Hotel Group   12/11/98
Holiday Inn - Sheffield               AL   Intercontinental Hotel Group   12/11/98
Holiday Inn Express - Dothan          AL   Intercontinental Hotel Group    2/26/03
Holiday Inn - Pensacola               FL   Intercontinental Hotel Group    8/14/95
Holiday Inn - Brunswick               GA   Intercontinental Hotel Group    9/24/91
Holiday Inn Express  - Pensacola      FL   Intercontinental Hotel Group   12/30/02
Holiday Inn - Valdosta                GA   Intercontinental Hotel Group   12/11/98
Holiday Inn - Winter Haven            FL   Intercontinental Hotel Group   11/17/97
Fairfield Inn - Valdosta              GA                       Marriott    11/1/96
Fairfield Inn  - Jackson              TN                       Marriott    4/28/95
Holiday Inn  - Hamburg                NY   Intercontinental Hotel Group   12/11/98
Holiday Inn - Jamestown               NY   Intercontinental Hotel Group    11/7/97
Holiday Inn Express - Attalla         AL   Intercontinental Hotel Group    8/14/95
Clarion Hotel - Louisville            KY                         Choice    3/26/03
French Quarter Suites - Memphis       TN                             --        N/A
Fairfield Inn  - Colchester           VT                       Marriott    4/28/95
Quality Inn - Dothan                  AL                         Choice    3/31/03
Crowne Plaza - Cedar Rapids           IA   Intercontinental Hotel Group     6/6/97
Holiday Inn - St. Louis               MO   Intercontinental Hotel Group   12/11/98

SALE PROPERTIES
Holiday Inn Select - Niagara Falls    NY   Intercontinental Hotel Group    3/19/98
Holiday Inn  - Morgantown             WV   Intercontinental Hotel Group   12/11/98
Four Points - Niagara Falls           NY                       Starwood    5/20/98
Holiday Inn - Austin                  TX   Intercontinental Hotel Group    9/22/93
Holiday Inn - Grand Island            NY   Intercontinental Hotel Group    1/16/98
Holiday Inn  - Florence               KY   Intercontinental Hotel Group   12/11/98
Holiday Inn - Pittsburgh              PA   Intercontinental Hotel Group   12/11/98
Holiday Inn  - Memphis                TN   Intercontinental Hotel Group   12/11/98


                                    Exhibit C



                                    EXHIBIT D

              ALLOCATED LOAN AMOUNT/AGGREGATE ALLOCATED LOAN AMOUNT

                                   Exhibit D-1


LODGIAN HOTEL PORTFOLIO
ALLOCATED LOAN AMOUNT



                                                                                                          ALLOCATED    AGGREGATE
                                                                                             ALLOCATED    MEZZANINE    ALLOCATED
 ML  LODGIAN LOCATION                         PROPERTY                                         LOAN         LOAN         LOAN
CODE  CODE     CODE        LEGAL ENTITY         NAME          ADDRESS         CITY    STATE   AMOUNT       AMOUNT       AMOUNT
                                                                                       
FIXED FLOATING
LOAN
 18    ssp     1720   Servico Maryland,     Holiday Inn  8777 Georgia Ave. Silver       MD  $ 18,400,000     $0      $ 18,400,000
                      Inc.                  -  Silver                      Spring
                                            Spring

 43    lan     3970   Servico Lansing, Inc. Holiday Inn  7501 W. Saginaw   Lansing      MI  $ 10,260,000     $0      $ 10,260,000
                                            - Lansing    Hwy

 63    cwv     4899   Lodgian Bridgeport    Holiday Inn  100 Lodgeville    Bridgeport   WV  $  4,650,000     $0      $  4,650,000
                      LLC                   - Bridgeport Road

 1     shf      210   Sheffield Motel       Holiday Inn  4900 Hatch Blvd.  Sheffield    AL  $  3,895,000     $0      $  3,895,000
                      Enterprises, Inc.     - Sheffield

 3     dha      230   Dothan Hospitality    Holiday Inn  3071 Ross Clark   Dothan       AL  $  2,925,000     $0      $  2,925,000
                      3071, Inc.            Express -    Circle
                                            Dothan

 9     uma     1116   Servico Pensacola     Holiday Inn  7200 Plantation   Pensacola    FL  $  3,360,000     $0      $  3,360,000
                      7330, Inc.            - Pensacola  Rd.

 12    brw     1206   Brunswick Motel       Holiday Inn  5252 New Jesup    Brunswick    GA  $  2,000,000     $0      $  2,000,000
                      Enterprises, Inc.     - Brunswick  Hwy

 11    pns     1168   Servico Pensacola     Holiday Inn  7330 Plantation   Pensacola    FL  $  2,750,000     $0      $  2,750,000
                      7200, Inc.            Express  -   Rd.
                                            Pensacola

 16    vhi     1285   Lodgian Hotels        Holiday Inn  1309 St.          Valdosta     GA  $  2,700,000     $0      $  2,700,000
                      Floating, LLC         - Valdosta   Augustine Rd.

 10    wnh     1132   Servico Winter Haven, Holiday Inn  1150 3rd St., SW  Winter       FL  $  4,425,000     $0      $  4,425,000
                      Inc.                  - Winter                       Haven
                                            Haven

 15    vfi     1280   Lodgian Hotels        Marriott     1311 St.          Valdosta     GA  $  1,837,500     $0      $  1,837,500
                      Floating, LLC         Fairfield    Augustine Rd.
                                            Inn -
                                            Valdosta

 58    jtn     4205   Lodgian Jackson LLC   Marriott     535 Wiley Parker  Jackson      TN  $  1,275,000     $0      $  1,275,000
                                            Fairfield    Road
                                            Inn  -
                                            Jackson

 56    ham     3398   Lodgian Hamburg LLC   Holiday Inn  5440 Camp Road    Hamburg      NY  $  1,600,000     $0      $  1,600,000
                                            - Hamburg

 34    jam     3330   Servico Jamestown,    Holiday Inn  150 W. 4th St.    Jamestown    NY  $  1,320,000     $0      $  1,320,000
                      Inc.                  - Jamestown

 4     gad      240   Gadsden Hospitality,  Holiday Inn  801 Cleveland     Attalla      AL  $  1,125,000     $0      $  1,125,000
                      Inc.                  Express -    Ave.
                                            Attalla

 28    lvl     2040   Lodgian Hotels        Clarion      9700 Blue Grass   Louisville   KY  $  2,370,000     $0      $  2,370,000
                      Floating, LLC         Hotel -      Parkway
                                            Louisville

 46    mem     4215   Lodgian Memphis       French       2144 Madison Ave. Memphis      TN  $  1,425,000     $0      $  1,425,000
                      Property Owner, LLC   Quarter
                                            Suites -
                                            Memphis

 60    bvt     4545   Lodgian Colchester    Marriott     15 South Park     Colchester   VT  $  1,125,000     $0      $  1,125,000
                      LLC                   Fairfield    Drive
                                            Inn  -
                                            Colchester


                                   Exhibit D-1



                                                                                       
 2     dhi      220   Dothan Hospitality    Quality Inn  3053 Ross Clark   Dothan       AL  $    647,500     $0      $    647,500
                      3053, Inc.            - Dothan

 24    ced     1840   Servico Cedar Rapids, Crowne Plaza 350 1st Ave, NE   Cedar        IA  $  2,760,000     $0      $  2,760,000
                      Inc.                  - Cedar                        Rapids
                                            Rapids

 29    sln     2222   Lodgian Hotels        Holiday Inn  4545 N. Lindbergh St. Louis    MO  $  4,800,000     $0      $  4,800,000
                      Floating, LLC         - St. Louis  Blvd.

 32    nia     3314   Servico New York,     Holiday Inn  300 Third St.     Niagara      NY  $ 14,250,000     $0      $ 14,250,000
                      Inc.                  Select -                       Falls
                                            Niagara
                                            Falls

 62    mwv     4848   Lodgian Morgantown    Holiday Inn  1400 Saratoga     Morgantown   WV  $  2,700,000     $0      $  2,700,000
                      LLC                   - Morgantown Avenue

 33    nfa     3326   Servico Niagara       Four Points  114 Buffalo Ave.  Niagara      NY  $  4,000,000     $0      $  4,000,000
                      Falls, Inc.           - Niagara                      Falls
                                            Falls

 49    aus     4375   Servico Austin, Inc.  Holiday Inn  3401 South I-35   Austin       TX  $  4,500,000     $0      $  4,500,000
                                            - Austin

 35    gil     3345   Servico Grand Island, Holiday Inn  100 Whitehaven    Grand        NY  $  3,000,000     $0      $  3,000,000
                      Inc.                  - Grand      Rd.               Island
                                            Island

 54    fhi     2050   Lodgian Florence LLC  Holiday Inn  8055 Holiday      Florence     KY  $  1,700,000     $0      $  1,700,000
                                            - Florence   Drive

 38    prk     3804   Apico Hills, Inc.     Holiday Inn  915 Brinton Rd.   Pittsburgh   PA  $  2,200,000     $0      $  2,200,000
                                            - Pittsburgh

 59    mhi     4242   Lodgian Memphis LLC   Holiday Inn  6101 Shelby Oaks  Memphis      TN  $  2,000,000     $0      $  2,000,000
                                            - Memphis    Drive
                                            SUBTOTAL                                        $110,000,000     $0      $110,000,000



                                   Exhibit D-2



                                    EXHIBIT E

                              MANAGEMENT AGREEMENTS

 1. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Apico Hills, Inc., as owner, re: Holiday
      Inn, Pittsburgh, PA.

 2. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Brunswick Motel Enterprises, Inc., as
      owner, re: Holiday Inn, Brunswick, GA.

 3. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Dothan Hospitality 3053, Inc., as owner,
      re: Holiday Inn, Dothan, AL.

 4. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Dothan Hospitality 3071, Inc., as owner,
      re: Holiday Inn Express, Dothan, AL.

 5. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Gadsden Hospitality, Inc., as owner, re:
      Holiday Inn Express, Gadsden, AL.

 6. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Floating, LLC, as owner,
      re: Clarion, Louisville, KY.

 7. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Floating, LLC, as owner,
      re: Fairfield Inn, Valdosta, GA.

 8. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Floating, LLC, as owner,
      re: Holiday Inn, Valdosta, GA.

 9. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Floating, LLC, as owner,
      re: Holiday Inn, North St. Louis, MO.

10. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Bridgeport LLC, as owner, re:
      Holiday Inn, Bridgeport, WV.

11. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Colchester LLC, as owner, re:
      Fairfield Inn, Colchester, VT.

12. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hamburg LLC, as owner, re:
      Holiday Inn, Hamburg, NY.

13. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Jackson LLC, as owner, re:
      Fairfield Inn, Jackson, TN.

                                    Exhibit E-1


14. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Jamestown, Inc., as owner, re:
      Holiday Inn, Jamestown, NY.

15. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Memphis LLC, as owner, re:
      Holiday Inn, Memphis, TN.

16. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Memphis Property Owner, LLC, as
      owner, re: French Quarter Suites, Memphis, TN.

17. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Morgantown LLC, as owner, re:
      Holiday Inn, Morgantown, WV.

18. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Cedar Rapids, Inc., as owner,
      re: Crowne Plaza, Cedar Rapids, IA.

19. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Grand Island, Inc., as owner,
      re: Holiday Inn, Grand Island, NY.

20. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Lansing, Inc., as owner, re:
      Holiday Inn, Lansing, MI.

21. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Maryland, Inc., as owner, re:
      Holiday Inn, Silver Springs, MD.

22. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico New York, Inc., as owner, re:
      Holiday Inn Select, Niagara Falls, NY.

23. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Niagara Falls, Inc., as owner,
      re: Four Points Sheraton, Niagara Falls, NY.

24. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Pensacola 7200, Inc., as owner,
      re: Holiday Inn, Pensacola, FL.

25. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Pensacola 7330, Inc., as owner,
      re: Holiday Inn Express, Pensacola, FL.

26. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Winter Haven, Inc., as owner,
      re: Holiday Inn, Winter Haven, FL.

                                    Exhibit E-2


27. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Sheffield Motel Enterprises, Inc., as
      owner, re: Holiday Inn, Sheffield, AL.

28. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Austin, Inc., as owner, re:
      Holiday Inn, Austin, TX.

29. Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Florence LLC, as owner, re:
      Holiday Inn, Florence, KY.

                                    Exhibit E-3


                                    EXHIBIT F

                                   [RESERVED]

                                    Exhibit F


                                    EXHIBIT G

                           PROPERTY IMPROVEMENT PLANS



        PROPERTY                    PURPOSE               PIP DATES
        --------                    -------               ---------
                                                   
Holiday Inn Sheffield       License renewal               1/25/1999
Holiday Inn Brunswick       Conversion to Park Inn         5/4/2004
Holiday Inn Silver Spring   Conversion to Crowne Plaza   10/28/2003


                                    Exhibit G



                                    EXHIBIT H

                                   [RESERVED]

                                    Exhibit H


                                    EXHIBIT I

                             ACCEPTABLE FRANCHISORS

                                   Exhibit I-1


                                    EXHIBIT I

                    ACCEPTABLE FRANCHISORS & FRANCHISE NAMES



                                                                                                   TIER 3 (WITHOUT FOOD AND
                 TIER 1                            TIER 2 (WITH FOOD AND BEVERAGE)                         BEVERAGE
                                                                                                     
Six Continents         Crowne Plaza        Six Continents             Holiday Inn            Six Continents         Holiday Inn
                                                                                                                    Express
Hilton Hotels Corp.    Hilton              Six Continents             Holiday Inn Select     Hilton Hotels Corp.    Hampton Inn
Hilton Hotels Corp.    Doubletree          Six Continents             Holiday Inn SunSpree   Marriott               Fairfield
                                                                      Resort                 International, Inc.
Hilton Hotels Corp.    Homewood Suites     Choice Hotels              Clarion                Choice Hotels          Comfort Inn
                                           International                                     International
Hilton Hotels Corp.    Hilton Garden Inn   Best Western               Best Western           Choice Hotels          Comfort Suites
                                           International, Inc.                               International
Starwood Hotels &      Westin              Cendant Corporation        Ramada                 La Quinta              La Quinta
Resorts
Starwood Hotels &      Sheraton            Starwood Hotels & Resorts  Four Points
Resorts
Starwood Hotels &      W                   Choice Hotels              Quality
Resorts                                    International
US Franchise           Hawthorn            Wyndham International      Wyndham Gardens
Systems, Inc.
Marriott               Marriott            Marriott International,    Spring Hill Suites
International, Inc.                        Inc.
Marriott               Renaissance
International, Inc.
Marriott               Courtyard
International, Inc.
Marriott               Residence Inn
International, Inc.
Wyndham International  Wyndham Hotel
Carlson Hotels         Radisson
Worldwide


                                   Exhibit I-1


                                    EXHIBIT J

                           PROPERTY CONDITION REPORTS

                                    Exhibit J


LODGIAN HOTEL
PORTFOLIO
ENGINEERING AND SEISMIC
REPORT



 ML    LODGIAN   LOCATION
CODE    CODE       CODE        PROPERTY NAME               ADDRESS             CITY        STATE         REPORT
- ----   -------   --------      -------------               -------             ----        -----         ------
                                                                               
FIXED FLOATING LOAN
 18      ssp       1720    Holiday Inn- Silver      8777 Georgia Ave.       Silver Spring    MD     Property Condition
                           Spring                                                                   Assessment Report
 43      lan       3970    Holiday Inn - Lansing    7501 W. Saginaw Hwy     Lansing          MI     Property Condition
                                                                                                    Assessment Report

 63      cwv       4899    Holiday Inn  -           100 Lodgeville Road     Bridgeport       WV     Property Condition
                           Bridgeport                                                               Assessment Report
  1      shf        210    Holiday Inn - Sheffield  4900 Hatch Blvd.        Sheffield        AL     Property Condition
                                                                                                    Assessment Report

  3      dha        230    Holiday Inn Express -    3071 Ross Clark Circle  Dothan           AL     Property Condition
                           Dothan                                                                   Assessment Report
  9      uma       1116    Holiday Inn - Pensacola  7200 Plantation Rd.     Pensacola        FL     Property Condition
                                                                                                    Assessment Report

 12      brw       1206    Holiday Inn - Brunswick  5252 New Jesup Hwy      Brunswick        GA     Property Condition
                                                                                                    Assessment Report

 11      pns       1168    Holiday Inn Express  -   7330 Plantation Rd.     Pensacola        FL     Property Condition
                           Pensacola                                                                Assessment Report
 16      vhi       1285    Holiday Inn - Valdosta   1309 St. Augustine Rd.  Valdosta         GA     Property Condition
                                                                                                    Assessment Report

 10      wnh       1132    Holiday Inn - Winter     1150 3rd St., SW        Winter Haven     FL     Property Condition
                           Haven                                                                    Assessment Report
 15      vfi       1280    Marriott Fairfield Inn   1311 St. Augustine Rd.  Valdosta         GA     Property Condition
                           - Valdosta                                                               Assessment Report
 58      jtn       4205    Marriott Fairfield Inn   535 Wiley Parker Road   Jackson          TN     Property Condition
                           - Jackson                                                                Assessment Report
 56      ham       3398    Holiday Inn  - Hamburg   5440 Camp Road          Hamburg          NY     Property Condition
                                                                                                    Assessment Report

 34      jam       3330    Holiday Inn - Jamestown  150 W. 4th St.          Jamestown        NY     Property Condition
                                                                                                    Assessment Report

  4      gad        240    Holiday Inn Express -    801 Cleveland Ave.      Attalla          AL     Property Condition
                           Attalla                                                                  Assessment Report
 28      lvl       2040    Clarion Hotel -          9700 Blue Grass         Louisville       KY     Property Condition




 ML    LODGIAN   LOCATION                                                                              PROJECT OR JOB
CODE    CODE       CODE        PROPERTY NAME                ASSESSMENT FIRM              REPORT DATE      NUMBER
- ----   -------   --------      -------------                ---------------              -----------      ------
                                                                                     
FIXED FLOATING LOAN
 18      ssp       1720    Holiday Inn- Silver         EMG                               May 21, 2004     116625
                           Spring
 43      lan       3970    Holiday Inn - Lansing       EMG                               May 21, 2004     116633

 63      cwv       4899    Holiday Inn  -              Building Evaluation Services &    May 6, 2004    04-121/Ec
                           Bridgeport                  Technology
  1      shf        210    Holiday Inn - Sheffield     EMG                               May 21, 2004     116571

  3      dha        230    Holiday Inn Express -       EMG                               May 21, 2004     116563
                           Dothan
  9      uma       1116    Holiday Inn - Pensacola     EMG                               May 22, 2004     116588

 12      brw       1206    Holiday Inn - Brunswick     EMG                               May 20, 2004     116596

 11      pns       1168    Holiday Inn Express  -      EMG                               May 24, 2004     116582
                           Pensacola
 16      vhi       1285    Holiday Inn - Valdosta      EMG                               May 20, 2004     116600

 10      wnh       1132    Holiday Inn - Winter        EMG                               May 20, 2004     116592
                           Haven
 15      vfi       1280    Marriott Fairfield Inn      EMG                               May 21, 2004     116602
                           - Valdosta
 58      jtn       4205    Marriott Fairfield Inn      Building Evaluation Services &    May 6, 2004    04-114/Ec
                           - Jackson                   Technology
 56      ham       3398    Holiday Inn  - Hamburg      Building Evaluation Services &    May 6, 2004    04-117/Ec
                                                       Technology

 34      jam       3330    Holiday Inn - Jamestown     EMG                               May 24, 2004     116645

  4      gad        240    Holiday Inn Express -       EMG                               May 21, 2004     116567
                           Attalla
 28      lvl       2040    Clarion Hotel -             EMG                               May 20, 2004     116609
                           Louisville


                                  Exhibit J-1



                                                                                
FIXED FLOATING LOAN
                           Louisville                Parkway                                         Assessment Report
 46      mem       4215    French Quarter Suites -   2144 Madison Ave.       Memphis          TN     Property Condition
                           Memphis                                                                   Assessment Report
 46      mem       4215    French Quarter Suites -   2144 Madison Ave.       Memphis          TN     Seismic Report
                           Memphis
 60      bvt       4545    Marriott Fairfield Inn    15 South Park Drive     Colchester       VT     Property Condition
                           - Colchester                                                              Assessment Report
  2      dhi        220    Quality Inn - Dothan      3053 Ross Clark         Dothan           AL     Property Condition
                                                                                                     Assessment Report

 24      ced       1840    Crowne Plaza - Cedar      350 1st Ave, NE         Cedar Rapids     IA     Property Condition
                           Rapids                                                                    Assessment Report
 29      sln       2222    Holiday Inn - St. Louis   4545 N. Lindbergh       St. Louis        MO     Property Condition
                                                     Blvd.                                           Assessment Report

 32      nia       3314    Holiday Inn Select -      300 Third St.           Niagara Falls    NY     Property Condition
                           Niagara Falls                                                             Assessment Report
 62      mwv       4848    Holiday Inn  -            1400 Saratoga Avenue    Morgantown       WV     Property Condition
                           Morgantown                                                                Assessment Report
 33      nfa       3326    Four Points - Niagara     114 Buffalo Ave.        Niagara Falls    NY     Property Condition
                           Falls                                                                     Assessment Report
 49      aus       4375    Holiday Inn - Austin      3401 South I-35         Austin           TX     Property Condition
                                                                                                     Assessment Report

 35      gil       3345    Holiday Inn - Grand       100 Whitehaven Rd.      Grand Island     NY     Property Condition
                           Island                                                                    Assessment Report
 54      fhi       2050    Holiday Inn  - Florence   8055 Holiday Drive      Florence         KY     Property Condition
                                                                                                     Assessment Report

 38      prk       3804    Holiday Inn - Pittsburgh  915 Brinton Rd.         Pittsburgh       PA     Property Condition
                                                                                                     Assessment Report

 59      mhi       4242    Holiday Inn  - Memphis    6101 Shelby Oaks Drive  Memphis          TN     Property Condition
                                                                                                     Assessment Report



                                                                                     
FIXED FLOATING LOAN
 46      mem       4215    French Quarter Suites -     EMG                               May 21, 2004     116670
                           Memphis
 46      mem       4215    French Quarter Suites -     EMG                               May 20, 2004     116689
                           Memphis
 60      bvt       4545    Marriott Fairfield Inn      Building Evaluation Services &    May 6, 2004    04-118/Ec
                           - Colchester                 Technology
  2      dhi        220    Quality Inn - Dothan        EMG                               May 21, 2004     116565

 24      ced       1840    Crowne Plaza - Cedar        EMG                               May 20, 2004     116604
                           Rapids
 29      sln       2222    Holiday Inn - St. Louis     EMG                               May 20, 2004     116637

 32      nia       3314    Holiday Inn Select -        EMG                               May 24, 2004     116647
                           Niagara Falls
 62      mwv       4848    Holiday Inn  -              Building Evaluation Services &     May 6, 2004   04-120/Ec
                           Morgantown                  Technology
 33      nfa       3326    Four Points - Niagara       EMG                               May 21, 2004     116651
                           Falls
 49      aus       4375    Holiday Inn - Austin        EMG                               May 20, 2004     116677

 35      gil       3345    Holiday Inn - Grand         EMG                               May 24, 2004     116642
                           Island
 54      fhi       2050    Holiday Inn  - Florence     Building Evaluation Services &    May 6, 2004    04-113/Ec
                                                       Technology

 38      prk       3804    Holiday Inn - Pittsburgh    EMG                               May 21, 2004     116662

 59      mhi       4242    Holiday Inn  - Memphis      Building Evaluation Services &    May 6, 2004    04-115/Ec
                                                       Technology



                                   Exhibit J-2



                                    EXHIBIT K

                                ZONING REPORTS*



                                                                               DATE OF                  PZR SITE
             CHAIN NAME                  CITY                        ST        REPORT                    NUMBER
             ----------                  ----                        --        -------                   ------
                                                                                         
1.        Quality Inn                   Dothan                       AL     4/26/2004                     26417
                                                                            Revised 4/28/2004

2.        Holiday Inn Express           Dothan                       AL     4/26/2004                     26418
                                                                            Revised 4/28/2004
3.        Holiday Inn Express           Attalla                      AL     4/30/2004                     26419
4.        Holiday Inn                   Sheffield                    AL     4/30/2004                     26416
5.        Holiday Inn                   Pensacola                    FL     5/3/2004                      26424
                                        (University Mall)
6.        Holiday Inn Express           Pensacola                    FL     5/3/2004                      26426
7.        Holiday Inn                   Winter Haven                 FL     4/28/2004                     26425
                                                                            Revised 5/24/2004
8.        Holiday Inn                   Brunswick                    GA     4/27/2004                     26420
9.        Fairfield Inn                 Valdosta                     GA     5/6/2004                      26430
10.       Holiday Inn                   Valdosta                     GA     5/6/2004                      26431
11.       Crowne Plaza                  Cedar Rapids                 IA     4/23/2004                     26439
12.       Courtyard by Marriott         Florence                     KY     5/5/2004                      26422
13.       Clarion Hotel                 Louisville                   KY     4/29/2004                     26443
                                                                            Revised 5/7/2004
14.       Holiday Inn                   Silver Spring                MD     4/27/2004                     26433
15.       Holiday Inn                   Lansing                      MI     4/28/2004                     26458
16.       Holiday Inn                   Bridgeton                    MO     4/27/2004                     26444
17.       Holiday Inn                   Grand Island                 NY     4/28/2004                     26450
                                                                            Revised 5/26/2004


- ----------
* All reports were prepared for Merrill Lynch Mortgage Lending, Inc. by the
Planning & Zoning Resource Corporation.

                                    Exhibit K-1





                                                                               DATE OF                  PZR SITE
             CHAIN NAME                  CITY                        ST        REPORT                    NUMBER
             ----------                  ----                        --        ------                    ------
                                                                                         
18.       Holiday Inn                   Hamburg                      NY     5/5/2004                      26471
19.       Holiday Inn                   Jamestown                    NY     4/26/2004                     26449
20.       Four Points                   Niagara Falls                NY     4/30/2004                     26448
                                                                            Revised 5/5/2004
21.       Holiday Inn Select            Niagara Falls                NY     4/30/2004                     26447
                                                                            Revised 5/5/2004
22.       Holiday Inn                   Pittsburgh                   PA     5/5/2004                      26453
23.       Fairfield Inn                 Jackson                      TN     5/3/2004                      26473
24.       French Quarter Suites         Memphis                      TN     4/28/2004                     26461
25.       Holiday Inn                   Memphis                      TN     5/7/2004                      26474
26.       Holiday Inn                   Austin                       TX     5/10/2004                     26464
27.       Fairfield Inn                 Colchester                   VT     5/7/2004                      26475
28.       Holiday Inn                   Clarksburg                   WV     5/4/2004                      26478
29.       Holiday Inn                   Morgantown                   WV     5/7/2004                      26477


                                  Exhibit K-2


                                    EXHIBIT L

                       CERTIFICATE REGARDING WORK RESERVES

            THIS CERTIFICATION is made as of __________ by the undersigned (the
"Borrowers") to and for the benefit of: (i) the current holder (the "Holder") of
Loan No. ________ and ________ (the "Loans"), and (ii)
_________________________, as mortgage servicer on behalf of the Holder (the
"Servicer"), in order to induce the Servicer to advance to the Borrower the
aggregate sum of $__________ from the _______________ [describe name of reserve
account] Reserve, as provided under Section 6.7 the Loan and Security Agreement
evidencing the Loan (the "Loan Agreement").

            Capitalized terms used in this Certification that are not otherwise
defined herein shall have the meanings ascribed to such terms in the Loan
Agreement.

            The undersigned hereby certifies to the Holder and Servicer as
follows:

            1.    No event, fact or circumstance has occurred or failed to occur
                  which constitutes, or upon the lapse of time, or the giving of
                  notice, or both, could constitute a Default or an Event of
                  Default under the Loan Documents. The Loan Documents remain
                  the valid and legally binding obligations of the undersigned
                  and are fully enforceable in accordance with their terms.

            2.    The portion of the Work that relates to the subject
                  disbursement request has been delivered or provided to
                  Borrower in a good and workmanlike manner and in accordance
                  with the plans and specifications therefor, if applicable,
                  approved by Lender and in accordance with all legal
                  requirements of governmental authorities having jurisdiction
                  over the Property, or deposits for work or materials that
                  relate to the subject disbursement request have been paid by
                  Borrower, as applicable.

            3.    All of the statements, invoices, receipts and information
                  delivered in connection with the subject disbursement request
                  are true and correct as of the date hereof, and each person
                  that supplied materials or labor in connection with the Work
                  to be funded by the subject disbursement request has been paid
                  in full to date, or will be paid in full to date upon such
                  disbursement, subject to any applicable retainage. The actual
                  costs incurred in connection with the subject disbursement
                  request do not materially exceed the amount budgeted for such
                  Work under the CapEx/FF&E Budget in effect and constitute
                  expenditures for Capital Improvements.

            4.    None of the labor, materials, overhead or other items of
                  expense specified in the disbursement request submitted
                  herewith, other than payments on account of retainage, has
                  previously been the basis of any disbursement request by the
                  Borrower or any payment by the Servicer, other than for

                                    Exhibit L



                  partially completed work or deposits and, when added to all
                  sums previously disbursed by the Servicer on account of the
                  related work, do not exceed the costs of all services
                  completed, installed and/or delivered, or deposits made, as
                  applicable, as of the date of this certificate. In addition,
                  the amount remaining in the subject reserve will be sufficient
                  to pay in full the entire remaining cost of related work
                  required to be completed in accordance with the Loan
                  Agreement.

            5.    None of the materials or other items of expense specified in
                  the disbursement request submitted herewith are stored at any
                  Property unless such materials are properly stored and secured
                  at the applicable Property in accordance with the Borrowers'
                  customary procedures and sound construction practices as
                  reasonably determined by Lender. None of the materials or
                  other items of expense specified in the disbursement request
                  submitted herewith are stored at any location other than at
                  the Properties unless Lender determines in its reasonable
                  discretion that Lender has a perfected first priority security
                  interest in any such materials.

            6.    All permits and approvals required to complete the work in
                  process have been obtained. All conditions to the disbursement
                  have been met in accordance with the terms of the Loan
                  Agreement.

            7.    The individual that is signing below on behalf of the Borrower
                  has made due investigation of the matters herein set forth,
                  and acknowledges that the Servicer is relying upon the
                  certification made herein as a condition to advancing the
                  requested reserve disbursement.

            8.    This Certification shall be deemed to be a "Loan Document" as
                  that term is defined in the Loan Agreement. Accordingly, an
                  uncured breach of any representation or warranty set forth
                  herein shall constitute an Event of Default under the
                  Mortgages and the Loan Documents.

      IN WITNESS WHEREOF, the Borrower has executed this Certification under
seal as of the date written above.

                                         BORROWERS:
                                         Legal Entities listed on "Attachment A"

                                         By: ___________________________________
                                             Name: _____________________________
                                             Title: ____________________________

                                    Exhibit L



                                  ATTACHMENT A

BORROWERS:

                                    Exhibit L



                                   SCHEDULE 1

                                    BORROWERS

            APICO HILLS, INC.
            BRUNSWICK MOTEL ENTERPRISES, INC.
            DOTHAN HOSPITALITY 3053, INC.
            DOTHAN HOSPITALITY 3071, INC.
            GADSDEN HOSPITALITY, INC.
            LODGIAN HOTELS FLOATING, LLC
            LODGIAN BRIDGEPORT LLC
            LODGIAN COLCHESTER LLC
            LODGIAN MEMPHIS PROPERTY OWNER, LLC
            LODGIAN JACKSON LLC
            LODGIAN HAMBURG LLC
            LODGIAN MEMPHIS LLC
            LODIGAN FLORENCE LLC
            LODGIAN MORGANTOWN LLC
            SERVICO JAMESTOWN, INC.
            SERVICO LANSING, INC.
            SERVICO MARYLAND, INC.
            SERVICO PENSACOLA 7200, INC.
            SERVICO PENSACOLA 7330, INC.
            SERVICO CEDAR RAPIDS, INC.
            SERVICO WINTER HAVEN, INC.
            SERVICO AUSTIN, INC.
            SERVICO GRAND ISLAND, INC.
            SERVICO NIAGARA FALLS, INC.
            SERVICO NEW YORK, INC.
            SHEFFIELD MOTEL ENTERPRISES, INC.

                                   Schedule 1



                                  SCHEDULE 2.4
                                  AMORTIZATION
                                    SCHEDULE

                       LODGIAN FLOATING RATE MORTGAGE LOAN
                           PRINCIPAL PAYMENT SCHEDULE

*Note: The dates shown are the last calendar day of each month. The actual
payment date is the last business day which may be earlier than the date shown.



                           LOAN          SCHEDULED      BALLOON
PERIOD      DATE*         BALANCE        PRINCIPAL     PRINCIPAL
- ------      -----         -------        ---------     ---------
                                           
   0      06/30/04    110,000,000.00
   1      07/31/04    109,917,317.37     82,682.63
   2      08/31/04    109,834,036.66     83,280.70
   3      09/30/04    109,724,525.62    109,511.04
   4      10/31/04    109,639,850.39     84,675.23
   5      11/30/04    109,528,980.04    110,870.35
   6      12/31/04    109,442,890.36     86,089.68
   7      01/31/05    109,356,177.97     86,712.39
   8      02/28/05    109,192,289.03    163,888.94
   9      03/31/05    109,103,763.96     88,525.08
  10      04/30/05    108,989,141.00    114,622.95
  11      05/31/05    108,899,146.49     89,994.51
  12      06/30/05    108,783,091.22    116,055.27
  13      07/31/05    108,691,606.28     91,484.94
  14      08/31/05    108,599,459.59     92,146.68
  15      09/30/05    108,481,306.51    118,153.08
  16      10/31/05    108,387,638.66     93,667.85
  17      11/30/05    108,268,002.83    119,635.83
  18      12/31/05    108,172,792.09     95,210.75
  19      01/31/06    108,076,892.65     95,899.44
  20      02/28/06    107,904,645.71    172,246.93
  21      03/31/06    107,806,806.69     97,839.03
  22      04/30/06    107,683,105.03    123,701.65
  23      05/31/06    107,583,663.53     99,441.51
  24      06/30/06    107,458,399.87    125,263.66
  25      07/31/06    107,357,333.00    101,066.87
  26      08/31/06    107,255,535.07    101,797.92
  27      09/30/06    107,127,974.52    127,560.55
  28      10/31/06    107,024,517.57    103,456.95
  29      11/30/06    106,895,339.89    129,177.68
  30      12/31/06    106,790,200.21    105,139.67
  31      01/31/07    106,684,300.03    105,900.19
  32      02/28/07    106,502,954.82    181,345.21
  33      03/31/07    106,394,976.90    107,977.93
  34      04/30/07    106,261,392.43    133,584.46
  35      05/31/07    106,151,667.21    109,725.23
  36      06/30/07    106,016,379.58    135,287.63
  37      07/31/07    105,904,882.09    111,497.49
  38      08/31/07    105,792,578.10    112,303.99
  39      09/30/07    105,654,776.85    137,801.25
  40      10/31/07    105,540,663.77    114,113.08
  41      11/30/07    105,401,099.11    139,564.65
  42      12/31/07    105,285,151.10    115,948.02
  43      01/31/08    105,168,364.39    116,786.71
  44      02/29/08    105,001,654.36    166,710.03
  45      03/31/08    104,882,817.02    118,837.33
  46      04/30/08    104,738,647.44    144,169.58
  47      05/31/08    104,617,907.69    120,739.75
  48      06/30/08    104,471,883.75    146,023.95
  49      07/31/08    104,349,214.40    122,669.34
  50      08/31/08    104,225,657.76    123,556.65
  51      09/30/08    104,076,888.06    148,769.70
  52      10/31/08    103,951,361.58    125,526.48
  53      11/30/08    103,800,671.81    150,689.77
  54      12/31/08    103,673,147.37    127,524.44


                                  Schedule 2.4



                                      
55      01/31/09    103,544,700.51    128,446.87
56      02/28/09    103,342,843.25    201,857.26
57      03/31/09    103,212,007.18    130,836.07
58      04/30/09    103,056,141.93    155,865.25
59      05/31/09    102,923,232.06    132,909.87
60      06/30/09                 -    157,886.68  102,765,345.38



                                  Schedule 2.4



                                 SCHEDULE 3.1(A)

                             LIST OF LOAN DOCUMENTS

1.  Loan and Security Agreement

2.  Note A

3.  Note B

4.  Mortgages

5.  Note and Mortgage Consolidation, Spreader, Severance and Modification
    Agreement

6.  Assignments of Leases

7.  Assignments of Agreements, Licenses, Permits and Contracts

8.  Assignments of Hotel Management Agreements

9.  Guaranty of Recourse Obligations

10. Environmental Indemnity

11. Deposit Account Agreements

12. Assignment of Rate Cap

13. Financing Statements

14. Cash Management Agreement

15. Borrower's Closing Certificate under Section 3.1(D)

16. Closing Certificate of Lodgian, Inc. re: financial data

17. Cooperation Agreement

18. Agreement Regarding Right of First Offer

19. Contribution Agreement

20. Post Closing Agreement

                                 Schedule 3.1(A)



                                 SCHEDULE 4.1(C)

                    ORGANIZATIONAL CHART FOR BORROWER PARTIES

                                 Schedule 4.1(C)



                                  SCHEDULE 4.2

                                    CONSENTS

                                      None

                                  Schedule 4.2



                                  SCHEDULE 4.5

                            CONDEMNATION PROCEEDINGS

City of St. Louis, Missouri versus BNS Lodging Associates, I, et al., filed in
May 14, 2002 in the County of St. Louis, Missouri, under Cause number
02CC-001903.

                                  Schedule 4.5



                                 SCHEDULE 4.5(A)

                    RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER



                                                 DATE OF AGREEMENT OR AMENDMENT       RIGHT OF FIRST REFUSAL SECTION
 FRANCHISOR                 LOCATION             GRANTING RIGHT OF FIRST REFUSAL         OF AGREEMENT OR AMENDMENT
 ----------          ------------------------    -------------------------------      ------------------------------
                                                                             
Holiday Inn          4900 Hatch Blvd.                      12/11/1998                      Section 14.G; page 26
Sheffield, AL        Sheffield, AL 35660
Fairfield Inn        1311 St. Augustine Road               12/23/98                        Section A; page 2
Valdosta, GA         Valdosta, Ga
Holiday Inn          915 Brinton Road                      12/11/1998                      Section 14.G; page 26
Parkway East, PA     Pittsburgh, PA 15221
Fairfield Inn        535 Wiley Parker Road                 12/23/98                        Section A; page 2
Jackson, TN          Jackson, TN 38305


                                 Schedule 4.5(A)



                                 SCHEDULE 4.7(B)

                                    RENT ROLL



                                                                                                              BASE RENT AND
                       TYPE OF                                                                      SECURITY    PERCENTAGE
STATE    PROPERTY     AGREEMENT    LANDLORD        TENANT       AREA (sf)            TERM            DEPOSIT   RENT, IF ANY
- -----    --------     ---------    --------        ------       ---------            ----            -------   ------------
                                                                                      
NY      Holiday      Post Office  Servico New   United States   4,409 sf    June 1, 2003 - May 31,     N/A      $2,000 per
        Inn Select   Lease        York, Inc.    Postal Service              2008; no further option             month
        - Niagara
        Falls


                                 Schedule 4.7(B)



                                 SCHEDULE 4.7(E)

                               FRANCHISE DEFAULTS



        HOTEL                 CITY           STATE    REASON FOR DEFAULT
        -----                 ----           -----    ------------------
                                             
Holiday Inn Morgantown     Morgantown         WV         OSI Failure
Fairfield Inn Jackson      Jackson            TN         GSS Red Zone


                                 Schedule 4.7(E)



                                  SCHEDULE 4.9

                                   LITIGATION

                                      None.

                                  Schedule 4.9



                                  SCHEDULE 4.14

                                   ERISA PLANS

1.  Lodgian, Inc. 401(k) Plan.

2.  Lodgian, Inc. Employee Health & Welfare Plan.

                                  Schedule 4.14



                                  SCHEDULE 4.20

                                    INSURANCE

                             Schedule 4.20, Page 35



                                  SCHEDULE 4.28

                        COLLECTIVE BARGAINING AGREEMENTS



           HOTEL                    BORROWER                           UNION                     DATE OF AGREEMENT
           -----                    --------                           -----                     -----------------
                                                                                        
   Holiday Inn - Niagara     Servico New York, Inc.       Hotel Employees and Restaurant              2/25/04
         Falls, NY                                            Employees Union Local 4
Holiday Inn - Jamestown, NY  Servico Jamestown, Inc.      Hotel Employees and Restaurant             5/1/2004
                                                             Employees Union, Local 4


                                  Schedule 4.28



                                  SCHEDULE 4.29

                         CONDOMINIUM PROPERTY DOCUMENTS

            1. Declaration for Silver Spring Plaza Condominium, dated as of
April 21, 2000, by Servico Maryland, Inc.

            2. Articles of Incorporation for Council of Unit Owners of Silver
Spring Plaza Condominium, Inc., dated as of June 22, 2000.

            3. By-Laws of Council of Unit Owners of Silver Spring Plaza
Condominium.

            4. Silver Spring Plaza Condominium, Unanimous Written Consent of the
Board of Directors in Lieu of the Annual Meeting, scheduled to be held on May 4,
2000.

            5. Resignation and Appointment of Directors of the Counsel of Unit
Owners of Silver Spring Plaza Condominium, effective as of May 4, 2000.

                                  Schedule 4.29



                                  SCHEDULE 4.30

                                  GROUND LEASES

      1.    LODGIAN MEMPHIS PROPERTY OWNER, LLC
            FRENCH QUARTER SUITES, LOCATED AT 2144 MADISON AVENUE, MEMPHIS, TN

      Lease, dated April 26, 1972, between J. Murry Davis and wife, Mary Alice
      Davis, as lessor, and W. H. Welch, Jr., Meredith L. McCullar, Fred Don
      Alfonso and Ernie Barrasso, as lessee, recorded as Instrument No. H3 3366
      in the Register's Office of Shelby County, Tennessee, as amended and
      assigned by that certain Agreement Assigning, Modifying and Extending
      Lease and Granting Certain Rights, dated as of February 29, 1976, between
      J. Murry Davis, as lessor, and Waymon H. Welch, Jr. and Waymon H. Welch,
      Sr., as existing lessee, and The Group, Inc., as new lessee, recorded in
      said Register's Office as Instrument No. L1 8178, as further amended by
      that certain Agreement Modifying and Extending Lease, dated January 19,
      1983, between Bill Sutton and Martha Sutton, as lessor, and J. Garnett
      Murphy, as lessee, recorded in said Register's Office as Instrument No. U6
      8978, as further amended by that certain Lease Modification Agreement,
      dated June 4, 1983, by Bill Sutton and Martha Sutton, as lessor, and J.
      Garnett Murphy, as lessee, recorded in said Register's Office as
      Instrument No. U3 3420, as further amended by that certain Lease
      Modification and Extension Agreement, dated October 6, 1983, between
      Martha Sutton, as lessor, and M.K. Partners, a partnership composed of J.
      Garnett Murphy and Ronald L. Kirkpatrick, as lessee, recorded in said
      Register's Office as Instrument No. U6 8978, as further amended by that
      certain Warranty Deed, dated November 29, 1983, by M.K. Partners to French
      Quarter Inn of Memphis, recorded in said Register's Office as Instrument
      No. U8 0878, as further assigned by that certain Assignment of Ground
      Leases, dated January 15, 1991, by Middlesex Development Corporation, a
      California corporation d/b/a "French Quarter Inn of Memphis," as assignor,
      and Memphis Lodging Associates, Inc., a Florida corporation, as assignee,
      recorded in said Register's Office as Instrument No. CA 3996, as further
      assigned by that certain Assignment of Ground Lease, dated March 12, 1997,
      by Memphis Lodging Associates, Inc., a Florida corporation, as assignor,
      to Impac Hotels, I, L.L.C., a Georgia limited liability company, as
      assignee, recorded in said Register's Office as Instrument No. GM 0294, as
      further amended by that certain Amendment of Ground Lease, dated September
      17, 1997, by Bill Sutton and Martha Sutton, as landlord, and Impac Hotels,
      I, L.L.C., a Georgia limited liability company, as tenant, recorded in
      said Register's Office as Instrument No. HC 9439.

      2.    LODGIAN MEMPHIS PROPERTY OWNER, LLC
            FRENCH QUARTER SUITES, LOCATED AT 2144 MADISON AVENUE, MEMPHIS, TN

      Lease, dated August 24, 1972, between Horace Proctor and Ann Proctor, as
      lessor, and W. H. Welch, Jr., Meredith L. McCullar, Fred Don Alfonso and
      Ernie Barrasso, as lessee, recorded as Instrument No. H2 3640 in the
      Register's Office of Shelby County, Tennessee, as amended and assigned by
      that certain Agreement Assigning, Modifying and Extending Lease and
      Granting Certain Rights, dated as of February 29, 1976, between Horace
      Proctor and Ann Proctor, as lessor, Waymon H. Welch, Jr. and Waymon

                              Schedule 4.30, Page 1



      H. Welch, Sr., as existing lessee, and The Group, Inc., as new lessee,
      recorded as Instrument No. Ll 8176 3640 in said Register's Office, as
      further amended by that certain Agreement Modifying and Extending Lease,
      dated December 30, 1982, between Horace Proctor and Ann Proctor, as
      lessor, and J. Garnett Murphy, as lessee, recorded as Instrument No. U6
      8504 3640 in said Register's Office, as further amended by that certain
      Lease Modification Agreement, dated June 2, 1983, by Horace Proctor and
      Ann Proctor, as lessor, and J. Garnett Murphy, as lessee, recorded as
      Instrument No. U3 3419 3640 in said Register's Office, as further amended
      by that certain Lease Modification and Extension Agreement, dated October
      7, 1983, between Horace Proctor and Ann Proctor, as lessor, and M. K.
      Partners, a partnership composed of J. Garnett Murpny and Ronald L.
      Kirkpatrick, as lessee, recorded as Instrument No. U6 8504 3640 in said
      Register's Office, as further amended by that certain Warranty Deed, dated
      November 29, 1983, between M. K. Partners, as grantor, and French Quarter
      Inn of Memphis, as grantee, recorded as Instrument No. U8 0878 3640 in
      said Register's Office, as further assigned by that certain Assignment of
      Ground Leases, dated January 15, 1991, by Middlesex Development
      Corporation, a California corporation d/b/a "French Quarter Inn of
      Memphis," as assignor, and Memphis Lodging Associates, Inc., a Florida
      corporation, as assignee, recorded as Instrument No. CA 3996 3640 in said
      Register's Office, as further assigned by that certain Assignment of
      Ground Leases, dated March 12, 1997, by Memphis Lodging Associates, Inc.,
      a Florida corporation, as assignor, to Impac Hotels, I, L.L.C., a Georgia
      limited liability company, as assignee, recorded as Instrument No. GM 0294
      3640 in said Register's Office, as further amended by that certain
      Amendment of Ground Lease, dated September 24, 1997, by Horace Proctor and
      Ann Proctor, as landlord, and Impac Hotels I, L.L.C., a Georgia limited
      liability company, as tenant, recorded as Instrument No. HC 9438 3 640 in
      said Register's Office.

      3.    SHEFFIELD MOTEL ENTERPRISES, INC.
            HOLIDAY INN, LOCATED AT 4900 HATCH BLVD., SHEFFIELD, AL

      Lease, dated as of February 6, 1981, between City of Sheffield, Alabama,
      as lessor, and Sheffield Motel Enterprises, Inc., as lessee, recorded on
      February 6, 2002 in Book 391, Page 079-122, among the land records for
      Colbert County, Alabama, as amended by that certain Amendment of Lease,
      dated January 24, 1995 and recorded in Book 9714, Page 786, among the
      aforesaid land records, as further amended by that certain Second
      Amendment of Lease dated June 16, 1997 and recorded in Book 9714, Page
      790, among the aforesaid land records.

      4.    SERVICO CEDAR RAPIDS, INC.
            CROWNE PLAZA, LOCATED AT 350 1ST AVENUE, NE, CEDAR RAPIDS, IA

      (a)   Lease of Air Rights originally executed October 14, 1976 by and
      between the City of Cedar Rapids, as Lessor, and Five Seasons Inn, Inc.,
      as Lessee, recorded in Volume 1733, at Page I of the Records of Linn
      County, Iowa as amended pursuant to that certain Agreement to Correct
      Legal Description dated January 4, 1978 and recorded May 29, 1997 in Book
      3494 at Page 655 of the Records of Linn County, Iowa and subsequently

                              Schedule 4.30, Page 2



      amended pursuant to that certain Proposed Amendment to Air Rights Lease
      dated June 28, 1995 referred to in instrument recorded May 29, 1997 in
      Book 3494 at page 684;

      (b)   Lease of Air Rights originally executed May 23, 1979 by and between
      the City of Cedar Rapids, as Lessor, and Five Seasons, as Lessee, as
      amended pursuant to that certain Amendment to Lease Originally Executed
      May 23. 1979 by and between the City and Five Seasons dated as of January
      3, 1984 and subsequently amended pursuant to that certain Amendment to
      Lease originally executed May 23, 1979 by and between the City and Five
      Seasons dated as of May 22, 1985 and further supplemented or otherwise
      affected by that certain Memorandum of Understanding dated June 30, 1995
      between the City of Cedar Rapids, acting through the Five Seasons Center
      Commission, and C.R.I. Hotel Associates, L.P.;

      (c)   Leasehold and other agreement based use rights of Servico Cedar
      Rapids, Inc. including but not limited to (a) that certain Ballroom Rental
      Agreement dated October 26, 1977 by and between Five Seasons Inn, Inc. and
      the City of Cedar Rapids, Iowa, as amended by Proposed Amendment to
      Ballroom Rental Agreement dated February 17, 1993 by and between C.R.I.
      Hotel Associates, L.P. and the City of Cedar Rapids, Iowa and further
      supplemented or otherwise affected by that certain Memorandum of
      Understanding dated June 30, 1995 between the City of Cedar Rapids, acting
      through the Five Seasons Center Commission, and C.R.I. Hotel Associates,
      L.P. (b) that certain Skyway Agreement dated April 11, 1979 and (c) that
      certain Parking Space Agreement dated May 18, 1977 by and between Five
      Seasons Inn, Inc. and the City of Cedar Rapids, Iowa, each of the above
      referenced agreements as disclosed by that certain Consent, Certificate
      and Agreement of Lessor dated as of April 23, 1997 by and between Servico
      Cedar Rapids, Inc., City of Cedar Rapids, Iowa, and C.R.I. Hotel
      Associates, L,P. and recorded May 29, 1997 in Book 3494 at Page 620.

                              Schedule 4.30, Page 3



      5.    LODGIAN COLCHESTER LLC
            FAIRFIELD INN, LOCATED AT 15 SOUTH PARK DRIVE, COLCHESTER, VERMONT

      (a)   Ground Lease dated February 18, 1986, between Mountaha Handy, an
      individual, as Landlord, and Pizzagalli Investment Company, a Vermont
      general partnership, as Tenant, a memorandum of which, dated as of
      February 18, 1986, is recorded in Volume 109, Page 437 in the Town of
      Colchester, Vermont Land Records, as amended by that certain Ground Lease
      Amendment dated March 10, 1986 which is recorded in Volume 110, Page 330
      in the Town of Colchester, Vermont Land Records relating to certain
      parcels of land located in the Town of Colchester, County of Chittenden,
      State of Vermont;

      (b)   Ground Sublease dated May 16, 1989, between Pizzagalli Properties,
      LLC, a Vermont limited liability company, successor by merger to
      Pizzagalli Investment Company, a Vermont general partnership, as Sublessor
      and Marriott Corporation, a Delaware corporation, as Sublessee, relating
      to a certain parcel of land located in the Town of Colchester, County of
      Chittenden, State of Vermont (further described in a Short Form Ground
      Sublease dated June 20, 1989, and recorded in Town of Colchester, Vermont
      Land Records on June 20, 1989, at Volume 158, Page 9, as amended by First
      Amendment to Short Form Ground Sublease dated May 14, 1990, and recorded
      in the Town of Colchester, Vermont Land Records on May 18, 1990, in Volume
      168, Page 189), which Ground Sublease was assigned by Assignment of
      Sublease and Assumption of Obligations dated September 1, 1993, by
      Marriott Corporation to HMH Properties, Inc., a Delaware corporation and
      wholly owned subsidiary of Marriott Corporation of record in Volume 231,
      Page 304 of the Town of Colchester, Vermont Land Records, as corrected by
      Corrective Assignment of Sublease and Assumption of Obligations between
      Marriott Corporation and HMH Properties, Inc., dated April 27, 1995, of
      record in Volume 246, Page 228 of the Town of Colchester, Vermont Land
      Records, which Ground Sublease was assigned by HMH Properties, Inc. to MFI
      IV Partners, L.P., a Delaware limited partnership by Assignment of
      Lessee's Interest in Ground Sublease and Transfer of Leasehold
      Improvements, dated April 28, 1995, of record in Volume 246, Page 235 of
      the Town of Colchester, Vermont Land Records, which Ground Sublease was
      thereafter amended by "Second Amendment to Ground Sublease", dated April
      28, 1995, by and between Pizzagalli Properties, LLC and MFI IV Partners,
      L.P., which Ground Sublease was assigned by MFI IV Partners, L.P. to Impac
      Hotels III, L.L.C., a Georgia limited liability company by Assignment of
      Lessee's Interest in Ground Sublease and Transfer of Leasehold
      Improvements, dated October 30, 1997, of record in Volume 285, Page 157 of
      the Town of Colchester, Vermont Land Records, which Ground Sublease was
      assigned by Impac Hotels III, L.L.C. to Lodgian Colchester LLC, a Delaware
      limited liability company, dated May 22, 2003, of record in Volume 441,
      Page 1 of the Town of Colchester, Vermont Land Records.

                              Schedule 4.30, Page 4



                                  SCHEDULE 5.14

                               MATERIAL AGREEMENTS

Agreement between PFG Broadline and Lodgian, Inc. dated July 2, 2003.

Individual "Participating Hotel Agreements" between On Command Video Corporation
and each of the Floating Rate Borrowers.

                                  Schedule 5.14



                                  SCHEDULE 6.5

                          REQUIRED CAPITAL IMPROVEMENTS

                                  Schedule 6.5



                                  SCHEDULE 6.6

                               ENVIRONMENTAL WORK

                                  Schedule 6.6



LODGIAN HOTEL PORTFOLIO
REQUIRED ENVIRONMENTAL WORK



 ML   LODGIAN LOCATION
CODE   CODE    CODE     PROPERTY NAME         ADDRESS         CITY    STATE  REQUIRED ENVIRONMENTAL WORK
- ----   ----    ----     -------------         -------         ----    -----  ---------------------------
                                                       
FIXED FLOATING LOAN

 18   ssp     1720     Holiday Inn -     8777 Georgia Ave. Silver       MD  None
                       Silver Spring                       Spring

 43   lan     3970     Holiday Inn -     7501 W. Saginaw   Lansing      MI  (1) Develop and implement an
                       Lansing           Hwy                                asbestos Operations and
                                                                            Maintenance Program ($495).

 63   cwv     4899     Holiday Inn  -    100 Lodgeville    Bridgeport   WV  Asbestos was found in the tan
                       Bridgeport        Road                               vinyl floor tiles, tan vinyl
                                                                            floor tile mastic, and grey
                                                                            vinyl floor tiles, based on
                                                                            laboratory results from
                                                                            samples taken by Building
                                                                            Evaluation Services and
                                                                            Technology and review of a
                                                                            previous report. Building
                                                                            Evaluation Services and
                                                                            Technology recommends that the
                                                                            subject property continue to
                                                                            follow the Asbestos Operations
                                                                            and Maintenance Program
                                                                            prepared by Building
                                                                            Evaluation Services and
                                                                            Technology, dated March 11,
                                                                            2003, for the tan vinyl floor
                                                                            tiles, tan vinyl floor tile
                                                                            mastic, and grey vinyl floor
                                                                            tiles, that is currently in
                                                                            place at the subject property.

  1   shf      210     Holiday Inn -     4900 Hatch Blvd.  Sheffield    AL  None
                       Sheffield

  3   dha      230     Holiday Inn       3071 Ross Clark   Dothan       AL  None
                       Express - Dothan  Circle

  9   uma     1116     Holiday Inn -     7200 Plantation   Pensacola    FL  (1) Abate a limited quantity
                       Pensacola         Rd.                                of damaged asbestos-containing
                                                                            floor tile ($700-900) and
                                                                            continue to implement the
                                                                            existing asbestos Operations
                                                                            and Maintenance Program. (2)
                                                                            In-house personnel to clean up
                                                                            limited quantities of suspect
                                                                            mold on textured ceiling
                                                                            material.

 12   brw     1206     Holiday Inn -     5252 New Jesup    Brunswick    GA  None
                       Brunswick         Hwy

 11   pns     1168     Holiday Inn       7330 Plantation   Pensacola    FL  None
                       Express  -        Rd.
                       Pensacola

 16   vhi     1285     Holiday Inn -     1309 St.          Valdosta     GA  (1) Develop and implement an
                       Valdosta          Augustine Rd.                      asbestos Operations and
                                                                            Maintenance Program ($495).
                                                                            (2) Limited area of suspect
                                                                            mold can be cleaned up by
                                                                            in-house maintenance staff.

 10   wnh     1132     Holiday Inn -     1150 3rd St., SW  Winter       FL  (1) Develop and implement an
                       Winter Haven                        Haven            asbestos Operations and
                                                                            Maintenance Program ($495) and
                                                                            abate damaged ACM
                                                                            ($1,500-2,000). (2) Remove
                                                                            propane UST ($5,000-8,000).
                                                                            (3) Conduct mold assessment on
                                                                            unused building in the event
                                                                            that it is to be used in the
                                                                            future. (4) A monitoring well
                                                                            was observed at Project. The
                                                                            well is associated with the
                                                                            adjacent


 ML   LODGIAN LOCATION                   REMEDIATION     REQUIRED
CODE   CODE    CODE     PROPERTY NAME       COSTS    COMPLETION DATE
- ----   ----    ----     -------------       -----    ---------------
                                      
FIXED FLOATING LOAN

 18   ssp     1720     Holiday Inn -       $     0       Not Applicable
                       Silver Spring

 43   lan     3970     Holiday Inn -       $   495        July 31, 2004
                       Lansing

 63   cwv     4899     Holiday Inn  -      $     0        July 31, 2004
                       Bridgeport

  1   shf      210     Holiday Inn -       $     0       Not Applicable
                       Sheffield

  3   dha      230     Holiday Inn         $     0       Not Applicable
                       Express - Dothan

  9   uma     1116     Holiday Inn -       $   900   September 30, 2004
                       Pensacola

 12   brw     1206     Holiday Inn -       $     0       Not Applicable
                       Brunswick

 11   pns     1168     Holiday Inn         $     0       Not Applicable
                       Express  -
                       Pensacola

 16   vhi     1285     Holiday Inn -       $   495        July 31, 2004
                       Valdosta

 10   wnh     1132     Holiday Inn -       $10,495   September 30, 2004
                       Winter Haven                     (Except O&M
                                                      Program should be
                                                      in place by July
                                                          31, 2004)


                                  Schedule 6.6



                                                                                   
                                                                   LUST site, who is the
                                                                   Responsible Party for the
                                                                   release. As such, no further
                                                                   investigation is recommended.

15  vfi  1280  Marriott          1311 St.          Valdosta    GA  (1) Develop and implement an     $   495        July 31, 2004
               Fairfield Inn -   Augustine Rd.                     asbestos Operations and
               Valdosta                                            Maintenance Program ($495).

58  jtn  4205  Marriott          535 Wiley Parker  Jackson     TN  None                             $     0       Not Applicable
               Fairfield Inn  -  Road
               Jackson

56  ham  3398  Holiday Inn  -    5440 Camp Road    Hamburg     NY  Asbestos was found in the tan    $     0        July 31, 2004
               Hamburg                                             floor tiles, based on
                                                                   laboratory results from
                                                                   samples taken by Building
                                                                   Evaluation Services and
                                                                   Technology. Therefore,
                                                                   Building Evaluation Services
                                                                   and Technology recommends that
                                                                   the subject property continue
                                                                   to follow the Asbestos
                                                                   Operations and Maintenance
                                                                   Program prepared by Building
                                                                   Evaluation Services and
                                                                   Technology, dated March 14,
                                                                   2003, for the tan floor tiles,
                                                                   that is currently in place at
                                                                   the subject property.

34  jam  3330  Holiday Inn -     150 W. 4th St.    Jamestown   NY  Provide tank closure             $   750   September 30, 2004
               Jamestown                                           documentation for review to
                                                                   confirm proper closure
                                                                   activities ($125 per hour not
                                                                   to exceed $750).

 4  gad   240  Holiday Inn       801 Cleveland     Attalla     AL  (1) Develop and implement an     $   495        July 31, 2004
               Express -                                           asbestos Operations and
               Attalla           Ave.                              Maintenance Program ($495).

28  lvl  2040  Clarion Hotel -   9700 Blue Grass   Louisville  KY  (1) Previously conducted mold    $   495        July 31, 2004
               Louisville        Parkway                           survey identified areas of
                                                                   water damaged and mold - all
                                                                   areas have been remediated.
                                                                   The On-site Point of Contact
                                                                   indicated that the property
                                                                   has a mold prevention program.
                                                                   EMG recommends the continued
                                                                   implementation of the existing
                                                                   mold prevention program.

46  mem  4215  French Quarter    2144 Madison Ave. Memphis     TN  None                             $     0       Not Applicable
               Suites - Memphis

46  bvt  4545  Marriott          15 South Park     Colchester  VT  None                             $     0       Not Applicable
               Fairfield Inn -   Drive
               Colchester

60  dhi   220  Quality Inn -     3053 Ross Clark   Dothan      AL  None                             $     0       Not Applicable
               Dothan

 2  ced  1840  Crowne Plaza -    350 1st Ave, NE   Cedar       IA  None                             $     0       Not Applicable
               Cedar Rapids                        Rapids

24  sln  2222  Holiday Inn -     4545 N.           St. Louis   MO  (1) Develop and implement an     $   495        July 31, 2004
               St. Louis         Lindbergh Blvd.                   asbestos Operations and
                                                                   Maintenance Program ($495).

29  nia  3314  Holiday Inn       300 Third St.     Niagara     NY  (1) Develop and implement an     $   495        July 31, 2004
               Select - Niagara                    Falls           asbestos Operations and
               Falls                                               Maintenance Program ($495).

32  mwv  4848  Holiday Inn -     1400 Saratoga     Morgantown  WV  Asbestos was found in the        $     0        July 31, 2004
               Morgantown        Avenue                            acoustic ceiling texturing and
                                                                   white boiler insulation, based
                                                                   on laboratory results from
                                                                   samples taken by Building
                                                                   Evaluation Services and
                                                                   Technology and review of a
                                                                   previous report. Building
                                                                   Evaluation Services and
                                                                   Technology recommends that the
                                                                   subject property continue to
                                                                   follow the "Operations and
                                                                   Maintenance Program For
                                                                   Asbestos-Containing Building
                                                                   Materials," developed by
                                                                   United Consulting Group, Ltd.,
                                                                   dated November 13, 1996,



                                  Schedule 6.6



                                                                                       
                                                                   for the acoustic ceiling
                                                                   texturing and any remaining
                                                                   white boiler insulation, that
                                                                   is currently in place at the
                                                                   subject property.

62  nfa  3326  Four Points -     114 Buffalo Ave.  Niagara     NY  (1) Develop and implement an     $   495        July 31, 2004
               Niagara Falls                       Falls           asbestos Operations and
                                                                   Maintenance Program ($495).

33  aus  4375  Holiday Inn -     3401 South I-35   Austin      TX  None                             $     0       Not Applicable
               Austin

49  gil  3345  Holiday Inn -     100 Whitehaven    Grand       NY  (1) Develop and implement an     $   495        July 31, 2004
               Grand Island      Rd.               Island          asbestos Operations and
                                                                   Maintenance Program ($495).

35  fhi  2050  Holiday Inn -     8055 Holiday      Florence    KY  Asbestos was found in the        $     0        July 31, 2004
               Florence          Drive                             textured ceiling material,
                                                                   floor tiles, and floor tile
                                                                   mastic, based on review of a
                                                                   previous report. Therefore,
                                                                   Building Evaluation Services
                                                                   and Technology recommends that
                                                                   the property continue to
                                                                   follow the Asbestos Operations
                                                                   and Maintenance Program,
                                                                   prepared by United Consulting
                                                                   Group, Ltd., dated November
                                                                   13, 1996, that is currently in
                                                                   place for the textured ceiling
                                                                   materials, floor tiles, and
                                                                   floor tile mastic.

54  prk  3804  Holiday Inn -     915 Brinton Rd.   Pittsburgh  PA  (1) Develop and implement an     $   495        July 31, 2004
               Pittsburgh                                          asbestos Operations and
                                                                   Maintenance Program ($495).

38  mhi  4242  Holiday Inn -     6101 Shelby Oaks  Memphis     TN  None                             $     0       Not Applicable
               Memphis           Drive
59

                                                                   TOTAL REMEDIATION COST           $17,095
                                                                   RESERVE AMOUNT @ 125%            $21,369



                                  Schedule 6.6


                                  SCHEDULE 6.7

                           RESERVE FUNDING CONDITIONS

            1. The Borrowers shall have submitted to Lender a written request
for disbursement at least five (5) days prior to the date on which the Borrowers
request such disbursement be made, specifying the specific Work or for which the
disbursement is requested and such other information (such as the price of
materials and the cost of contracted labor or other services) as Lender may
reasonably require, which request must be on a form specified or approved by
Lender;

            2. On the date such request is received by Lender and on the date
such payment is to be made, no Event of Default shall exist and remain uncured;

            3. Lender shall have received a certificate from the Borrowers
stating that all Work at the Property to be funded by the requested disbursement
have been completed in a good and workmanlike manner and in accordance with any
plans and specifications approved by Lender and all legal requirements of any
Governmental Authority having jurisdiction over the Property, such certificate
to be accompanied, in either case, by a copy of any license, permit or other
approval by any Governmental Authority required to commence (only for the first
advance with respect to each distinct item of work) and/or complete (only for
the final advance with respect to each distinct item of work) such Work;

            4. Lender shall have received a certificate from the Borrowers
stating that each Person that supplied materials or labor in connection with the
Work to be funded by the requested disbursement has been paid in full or will be
paid in full upon such disbursement, such certificate to be accompanied by
copies of invoices for all items or materials purchased and all contracted labor
or services provided, and, with respect to Work relating to mold, a certificate
of a Certified Industrial Hygienist that the such Work has been completed in
conformity with applicable mold clean-up procedures promulgated by the
applicable Governmental Authority within the state in which the applicable
Property is located, or, if no such procedures exist, in conformity with the New
York City Department of Health or the United States Environmental Protection
guidelines for mold related clean-up work;

            5. Lender shall have received appropriate lien waivers (including
final lien waivers) from each contractor, supplier, materialman, mechanic or
subcontractor who receives payment in an amount equal to or greater than $10,000
for completion of its work or delivery of its materials, which lien waivers
shall conform to the requirements of applicable law and shall cover all work
performed and materials supplied (including equipment and fixtures) for a
Property by that contractor, supplier, subcontractor, mechanic or materialman
through the date covered by the current disbursement request; and

            6. At Lender's option, Lender shall have received a title search for
the Property effective to the date of the disbursement, which search shows that
no mechanic's or materialmen's liens or other Liens of any nature have been
placed against the Property since the date of recordation of the applicable
Mortgage and that title to the Property is free and clear of all Liens (other
than the Permitted Encumbrances).

                                  Schedule 6.7

EX-10.1.2

                                                                 EXHIBIT 10.1.2


                               PROMISSORY NOTE A

$72,000,000.00

                                                                  JUNE 25, 2004

      FOR VALUE RECEIVED, the undersigned, each having an address c/o Lodgian,
Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a
"BORROWER", and collectively, "BORROWERS"), jointly and severally, promise to
pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation
(together with its successors and assigns, "LENDER"), at Four World Financial
Center, New York, New York 10080, or such other place as Lender may designate in
writing, the principal sum of SEVENTY TWO MILLION AND NO/100 DOLLARS
($72,000,000.00), representing Component A (as defined in the Loan Agreement
(hereinafter defined)), with interest on the unpaid principal balance from the
date of this Note, until paid, at the Component A Rate in effect from time to
time under (and as defined in) the Loan Agreement. This Promissory Note may be
referred to herein as the "NOTE," and the loan evidenced hereby may be referred
to herein as the "LOAN." Capitalized terms used but not otherwise defined herein
shall have the respective meanings given thereto in the Loan Agreement.

      PAYMENTS OF PRINCIPAL AND INTEREST. Borrowers shall make payments of
principal and interest on the outstanding principal balance of this Note in
accordance with the terms and provisions of Sections 2.4 and 2.5 of the Loan
Agreement.

      The entire outstanding principal balance of the Loan, all accrued and
unpaid interest thereon (including interest through the end of the Interest
Accrual Period then in effect) and all other amounts due hereunder and under the
other Loan Documents (collectively, the "DEBT") if not sooner paid (and unless
Borrowers shall extend the term of the Loan for the First Extension Term, the
Second Extension Term, or all Extension Terms) shall be due and payable on June
30, 2006 (the "SCHEDULED MATURITY DATE"). Subject to the terms and conditions of
Section 2.5(B) of the Loan Agreement, Borrowers may extend the term of the Loan
for the Extension Terms. The Scheduled Maturity Date, as the same may be
extended for the First Extension Term, the Second Extension Term, or the Third
Extension Term (subject to the terms and conditions of Section 2.5(B) of the
Loan Agreement), or such other date on which the final payment of the Debt
becomes due hereunder or under the Loan Agreement or the other Loan Documents,
whether at such stated maturity date, by acceleration, or otherwise, shall be
referred to herein as the "MATURITY DATE".

      Interest on the principal sum of this Note shall be calculated on the
basis of a 360 day year, and shall be charged for the actual number of days
elapsed during any month or other accrual period.

      SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered
pursuant to that certain Loan and Security Agreement, dated as of the date
hereof (as amended, modified or restated from time to time, the "LOAN
AGREEMENT"), among Borrowers and Lender, to which reference is hereby made for
the terms and conditions governing this Note, including the terms




and conditions under which this Note may be prepaid or its maturity accelerated.
This Note is secured by, among other things, those certain Mortgages/Deeds of
Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security
Agreements, dated as of the date hereof (as amended, modified or restated from
time to time, collectively, the "INSTRUMENT"), executed by the Borrower named
therein, encumbering such Borrower's fee simple or leasehold interest in and to
certain real property as more particularly described therein (collectively, the
"PROPERTY"). This Note, the Loan Agreement, the Instrument, and all other
documents or instruments given by Borrowers or any one of them or any guarantor
and accepted by Lender for purposes of evidencing, securing, perfecting, or
guaranteeing the indebtedness evidenced by this Note may be referred to as the
"LOAN DOCUMENTS."

      PREPAYMENT; PREPAYMENT CONSIDERATION. Borrowers shall have no right to
prepay the Loan in whole or in part except as expressly provided in Section 2.6
of the Loan Agreement.

      EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the
continuance of any Event of Default, at the option of Lender and without notice,
the entire principal amount and all interest accrued and outstanding hereunder
and all other amounts outstanding under any of the Loan Documents shall at once
become due and payable, and Lender may exercise any and all of its rights and
remedies under any of the Loan Documents or pursuant to applicable law. Lender
may so accelerate such obligations and exercise such remedies at any time after
the occurrence of any Event of Default, regardless of any prior forbearance.

      LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to
non-payment of any principal, interest or other sums due under this Note or
under any of the other Loan Documents shall occur, then Borrowers shall pay to
Lender, in addition to all sums otherwise due and payable, a late charge in an
amount equal to five percent (5.0%) of such principal, interest or other sums
due hereunder or under any other Loan Document (or, in the case of a partial
payment, the unpaid portion thereof), such late charge to be immediately due and
payable without demand by Lender.

      Upon the occurrence and during the continuance of an Event of Default and
in any event from and after the Maturity Date of the Loan, the outstanding
principal balance of this Note and all other Obligations shall bear interest
until paid in full at a rate per annum (the "DEFAULT RATE") equal to the sum of
(i) four percent (4.0%) and (ii) the Interest Rate otherwise applicable under
this Note.

      Borrowers agree that such late charge and Default Rate of interest are
reasonable and do not constitute a penalty.

      INTEREST LAWS. Notwithstanding any provision to the contrary contained in
this Note, the Loan Agreement or the other Loan Documents, Borrowers shall not
be required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by law ("EXCESS
INTEREST"). If any Excess Interest is provided for or determined by a court of
competent jurisdiction to have been provided for in this Note, the Loan
Agreement or in any of the other Loan Documents, then in such event: (i) the
provisions of this subsection shall govern and control; (ii) Borrowers shall not
be obligated to pay any Excess


                                       2


Interest; (iii) any Excess Interest that Lender may have received hereunder
shall be, at Lender's option, (a) applied as a credit against either or both of
the outstanding principal balance of the Loan or accrued and unpaid interest
thereunder (not to exceed the maximum amount permitted by law), (b) refunded to
the payor thereof, or (c) any combination of the foregoing; (iv) the interest
rate(s) provided for herein shall be automatically reduced to the maximum lawful
rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and
this Note, the Loan Agreement and the other Loan Documents shall be deemed to
have been and shall be, reformed and modified to reflect such reduction; and (v)
Borrowers shall not have any action against Lender for any damages arising out
of the payment or collection of any Excess Interest. Notwithstanding the
foregoing, if for any period of time interest on any Obligation is calculated at
the Maximum Rate rather than the applicable rate under this Note, and thereafter
such applicable rate becomes less than the Maximum Rate, the rate of interest
payable on such Obligations shall, to the extent permitted by law, remain at the
Maximum Rate until Lender shall have received or accrued the amount of interest
which Lender would have received or accrued during such period on Obligations
had the rate of interest not been limited to the Maximum Rate during such
period. If the Default Rate shall be finally determined to be unlawful, then the
Interest Rate shall be applicable during any time when the Default Rate would
have been applicable hereunder, provided however that if the Maximum Rate is
greater or lesser than the Interest Rate, then the foregoing provisions of this
paragraph shall apply.

      CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the
obligation of Borrowers or their successors or assigns to pay the outstanding
principal balance of this Note, interest thereon and other amounts due hereunder
and to observe the covenants contained herein, in the Loan Agreement, the
Instrument or in any other Loan Document, without affecting the guaranty of any
person or entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of any Borrower or its
successors or assigns or any guarantors or indemnitor, and without liability on
the part of Lender, Lender may, at its option, extend the time for payment of
the outstanding principal balance of this Note or any part thereof, reduce the
payments thereon, release anyone liable for payment of all or a portion of said
indebtedness, accept a renewal of this Note, modify the terms and time of
payment of said outstanding principal balance, join in any extension or
subordination agreement, release any security given herefor, take or release
other or additional security, and agree in writing with the undersigned to
modify the rate of interest or period of amortization of this Note or change the
amount of the monthly installments payable hereunder.

      Presentment, notice of dishonor, and protest are hereby waived by
Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note
shall be binding upon Borrowers and their successors and assigns.

      EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE
INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.

                                       3


      ASSIGNMENT AND TRANSFER OF NOTE. Lender shall have the right to assign or
transfer, in whole or in part (including the right to grant participation
interests in) any or all of its obligations under this Note, the Loan Agreement,
the Instrument and any or all of the other Loan Documents, subject to the terms
of the Loan Agreement. Lender shall be released of any obligations accruing
after the date of such assignment or transfer to the extent that the same are so
assigned or transferred, and the rights and obligations of "LENDER" hereunder
shall become the rights and obligations of the transferee holder. Lender agrees
to provide Borrowers with notice of any such assignment; provided, however, that
no Borrower's consent shall be required in connection with any such assignment
and no failure or delay by Lender in delivering such notice shall limit the
effectiveness of such assignment.

      LIMITATION ON RECOURSE. The obligations of Borrowers hereunder are subject
to limitations on recourse as provided in Article XII of the Loan Agreement.
This provision shall not limit any rights of Lender under the Guaranty of
Recourse Obligations or the Environmental Indemnity, each dated as of the date
hereof.

      ATTORNEYS' FEES, COSTS OF COLLECTION. Borrowers shall pay to Lender on
demand all reasonable out-of-pocket costs and expenses, including reasonable
attorneys' fees and expenses, incurred by Lender in collecting the indebtedness
arising hereunder or under any other Loan Documents or secured thereby or
otherwise exercising any rights or remedies of Lender hereunder or thereunder or
at law or in equity or enforcing the obligations of any parties hereto or
thereto, or as a consequence of any breach or default by any Borrower or any
guarantor hereunder or thereunder, or otherwise as a consequence of any right
evidenced or secured by this Note or the Loan Documents. Without limitation,
such costs and expenses to be reimbursed by Borrowers shall include reasonable
attorneys' fees and expenses incurred in any bankruptcy case or proceeding and
in any appeal.

      APPLICABLE LAW. This Note shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and
performed in the State of New York and any applicable laws of the United States
of America.

      TIME OF ESSENCE. Subject to the terms of the Loan Agreement, time shall be
of the essence as to all of the terms, covenants and conditions of this Note. If
the due date of any payment due hereunder or under any of the other Loan
Documents shall fall on a day other than a Business Day, Borrowers shall be
required to make such payment on the next succeeding Business Day.

      JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of
Borrowers hereunder shall be joint and several.

                       [NO ADDITIONAL TEXT ON THIS PAGE]

                                       4


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

                                   BORROWERS:

                                   APICO HILLS, INC.
                                   BRUNSWICK MOTEL ENTERPRISES, INC.
                                   DOTHAN HOSPITALITY 3053, INC.
                                   DOTHAN HOSPITALITY 3071, INC.
                                   GADSDEN HOSPITALITY, INC.
                                   LODGIAN BRIDGEPORT LLC
                                   LODGIAN COLCHESTER LLC
                                   LODGIAN FLORENCE LLC
                                   LODGIAN HAMBURG LLC
                                   LODGIAN HOTELS FLOATING, LLC
                                   LODGIAN JACKSON LLC
                                   LODGIAN MEMPHIS LLC
                                   LODGIAN MEMPHIS PROPERTY OWNER, LLC
                                   LODGIAN MORGANTOWN LLC
                                   SERVICO AUSTIN, INC.
                                   SERVICO CEDAR RAPIDS, INC.
                                   SERVICO GRAND ISLAND, INC.
                                   SERVICO JAMESTOWN, INC.
                                   SERVICO LANSING, INC.
                                   SERVICO MARYLAND, INC.
                                   SERVICO NEW YORK, INC.
                                   SERVICO NIAGARA FALLS, INC.
                                   SERVICO PENSACOLA 7200, INC.
                                   SERVICO PENSACOLA 7330, INC.
                                   SERVICO WINTER HAVEN, INC.
                                   SHEFFIELD MOTEL ENTERPRISES, INC.

                                   By: /s/ Daniel E. Ellis
                                       ---------------------------------------
                                       Name:  Daniel E. Ellis
                                       Title: Vice President and Secretary, or
                                              Authorized Signatory for each of
                                              the entities listed above

EX-10.1.3

                                                                  EXHIBIT 10.1.3

                                PROMISSORY NOTE B

$38,000,000.00                                                     JUNE 25, 2004

      FOR VALUE RECEIVED, the undersigned, each having an address c/o Lodgian,
Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a
"BORROWER", and collectively, "BORROWERS"), jointly and severally, promise to
pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation
(together with its successors and assigns, "LENDER"), at Four World Financial
Center, New York, New York 10080, or such other place as Lender may designate in
writing, the principal sum of THIRTY EIGHT MILLION AND NO/100 DOLLARS
($38,000,000.00), representing Component B (as defined in the Loan Agreement
(hereinafter defined)), with interest on the unpaid principal balance from the
date of this Note, until paid, at the Component B Rate in effect from time to
time under (and as defined in) the Loan Agreement. This Promissory Note may be
referred to herein as the "NOTE," and the loan evidenced hereby may be referred
to herein as the "LOAN." Capitalized terms used but not otherwise defined herein
shall have the respective meanings given thereto in the Loan Agreement.

      PAYMENTS OF PRINCIPAL AND INTEREST. Borrowers shall make payments of
principal and interest on the outstanding principal balance of this Note in
accordance with the terms and provisions of Sections 2.4 and 2.5 of the Loan
Agreement.

      The entire outstanding principal balance of the Loan, all accrued and
unpaid interest thereon (including interest through the end of the Interest
Accrual Period then in effect) and all other amounts due hereunder and under the
other Loan Documents (collectively, the "DEBT") if not sooner paid (and unless
Borrowers shall extend the term of the Loan for the First Extension Term, the
Second Extension Term, or all Extension Terms) shall be due and payable on June
30, 2006 (the "SCHEDULED MATURITY DATE"). Subject to the terms and conditions of
Section 2.5(B) of the Loan Agreement, Borrowers may extend the term of the Loan
for the Extension Terms. The Scheduled Maturity Date, as the same may be
extended for the First Extension Term, the Second Extension Term, or the Third
Extension Term (subject to the terms and conditions of Section 2.5(B) of the
Loan Agreement), or such other date on which the final payment of the Debt
becomes due hereunder or under the Loan Agreement or the other Loan Documents,
whether at such stated maturity date, by acceleration, or otherwise, shall be
referred to herein as the "MATURITY DATE".

      Interest on the principal sum of this Note shall be calculated on the
basis of a 360 day year, and shall be charged for the actual number of days
elapsed during any month or other accrual period.

      SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered
pursuant to that certain Loan and Security Agreement, dated as of the date
hereof (as amended, modified or restated from time to time, the "LOAN
AGREEMENT"), among Borrowers and Lender, to which reference is hereby made for
the terms



and conditions governing this Note, including the terms and conditions
under which this Note may be prepaid or its maturity accelerated. This Note is
secured by, among other things, those certain Mortgages/Deeds of Trust/Deeds to
Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as
of the date hereof (as amended, modified or restated from time to time,
collectively, the "INSTRUMENT"), executed by the Borrower named therein,
encumbering such Borrower's fee simple or leasehold interest in and to certain
real property as more particularly described therein (collectively, the
"PROPERTY"). This Note, the Loan Agreement, the Instrument, and all other
documents or instruments given by Borrowers or any one of them or any guarantor
and accepted by Lender for purposes of evidencing, securing, perfecting, or
guaranteeing the indebtedness evidenced by this Note may be referred to as the
"LOAN DOCUMENTS."

      PREPAYMENT; PREPAYMENT CONSIDERATION. Borrowers shall have no right to
prepay the Loan in whole or in part except as expressly provided in Section 2.6
of the Loan Agreement.

      EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the
continuance of any Event of Default, at the option of Lender and without notice,
the entire principal amount and all interest accrued and outstanding hereunder
and all other amounts outstanding under any of the Loan Documents shall at once
become due and payable, and Lender may exercise any and all of its rights and
remedies under any of the Loan Documents or pursuant to applicable law. Lender
may so accelerate such obligations and exercise such remedies at any time after
the occurrence of any Event of Default, regardless of any prior forbearance.

      LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to
non-payment of any principal, interest or other sums due under this Note or
under any of the other Loan Documents shall occur, then Borrowers shall pay to
Lender, in addition to all sums otherwise due and payable, a late charge in an
amount equal to five percent (5.0%) of such principal, interest or other sums
due hereunder or under any other Loan Document (or, in the case of a partial
payment, the unpaid portion thereof), such late charge to be immediately due and
payable without demand by Lender.

      Upon the occurrence and during the continuance of an Event of Default and
in any event from and after the Maturity Date of the Loan, the outstanding
principal balance of this Note and all other Obligations shall bear interest
until paid in full at a rate per annum (the "DEFAULT RATE") equal to the sum of
(i) four percent (4.0%) and (ii) the Interest Rate otherwise applicable under
this Note.

      Borrowers agree that such late charge and Default Rate of interest are
reasonable and do not constitute a penalty.

      INTEREST LAWS. Notwithstanding any provision to the contrary contained in
this Note, the Loan Agreement or the other Loan Documents, Borrowers shall not
be required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by law ("EXCESS
INTEREST"). If any Excess Interest is provided for or determined by a court of
competent jurisdiction to have been provided for in this Note, the Loan
Agreement or in any of the other Loan Documents, then in such event: (i) the
provisions of this subsection shall govern and control; (ii) Borrowers shall not
be obligated to pay any Excess

                                       2


Interest; (iii) any Excess Interest that Lender may have received hereunder
shall be, at Lender's option, (a) applied as a credit against either or both of
the outstanding principal balance of the Loan or accrued and unpaid interest
thereunder (not to exceed the maximum amount permitted by law), (b) refunded to
the payor thereof, or (c) any combination of the foregoing; (iv) the interest
rate(s) provided for herein shall be automatically reduced to the maximum lawful
rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and
this Note, the Loan Agreement and the other Loan Documents shall be deemed to
have been and shall be, reformed and modified to reflect such reduction; and (v)
Borrowers shall not have any action against Lender for any damages arising out
of the payment or collection of any Excess Interest. Notwithstanding the
foregoing, if for any period of time interest on any Obligation is calculated at
the Maximum Rate rather than the applicable rate under this Note, and thereafter
such applicable rate becomes less than the Maximum Rate, the rate of interest
payable on such Obligations shall, to the extent permitted by law, remain at the
Maximum Rate until Lender shall have received or accrued the amount of interest
which Lender would have received or accrued during such period on Obligations
had the rate of interest not been limited to the Maximum Rate during such
period. If the Default Rate shall be finally determined to be unlawful, then the
Interest Rate shall be applicable during any time when the Default Rate would
have been applicable hereunder, provided however that if the Maximum Rate is
greater or lesser than the Interest Rate, then the foregoing provisions of this
paragraph shall apply.

      CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the
obligation of Borrowers or their successors or assigns to pay the outstanding
principal balance of this Note, interest thereon and other amounts due hereunder
and to observe the covenants contained herein, in the Loan Agreement, the
Instrument or in any other Loan Document, without affecting the guaranty of any
person or entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of any Borrower or its
successors or assigns or any guarantors or indemnitor, and without liability on
the part of Lender, Lender may, at its option, extend the time for payment of
the outstanding principal balance of this Note or any part thereof, reduce the
payments thereon, release anyone liable for payment of all or a portion of said
indebtedness, accept a renewal of this Note, modify the terms and time of
payment of said outstanding principal balance, join in any extension or
subordination agreement, release any security given herefor, take or release
other or additional security, and agree in writing with the undersigned to
modify the rate of interest or period of amortization of this Note or change the
amount of the monthly installments payable hereunder.

      Presentment, notice of dishonor, and protest are hereby waived by
Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note
shall be binding upon Borrowers and their successors and assigns.

      EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE
INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.

                                        3


      ASSIGNMENT AND TRANSFER OF NOTE. Lender shall have the right to assign or
transfer, in whole or in part (including the right to grant participation
interests in) any or all of its obligations under this Note, the Loan Agreement,
the Instrument and any or all of the other Loan Documents, subject to the terms
of the Loan Agreement. Lender shall be released of any obligations accruing
after the date of such assignment or transfer to the extent that the same are so
assigned or transferred, and the rights and obligations of "LENDER" hereunder
shall become the rights and obligations of the transferee holder. Lender agrees
to provide Borrowers with notice of any such assignment; provided, however, that
no Borrower's consent shall be required in connection with any such assignment
and no failure or delay by Lender in delivering such notice shall limit the
effectiveness of such assignment.

      LIMITATION ON RECOURSE. The obligations of Borrowers hereunder are subject
to limitations on recourse as provided in Article XII of the Loan Agreement.
This provision shall not limit any rights of Lender under the Guaranty of
Recourse Obligations or the Environmental Indemnity, each dated as of the date
hereof.

      ATTORNEYS' FEES, COSTS OF COLLECTION. Borrowers shall pay to Lender on
demand all reasonable out-of-pocket costs and expenses, including reasonable
attorneys' fees and expenses, incurred by Lender in collecting the indebtedness
arising hereunder or under any other Loan Documents or secured thereby or
otherwise exercising any rights or remedies of Lender hereunder or thereunder or
at law or in equity or enforcing the obligations of any parties hereto or
thereto, or as a consequence of any breach or default by any Borrower or any
guarantor hereunder or thereunder, or otherwise as a consequence of any right
evidenced or secured by this Note or the Loan Documents. Without limitation,
such costs and expenses to be reimbursed by Borrowers shall include reasonable
attorneys' fees and expenses incurred in any bankruptcy case or proceeding and
in any appeal.

      APPLICABLE LAW. This Note shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and
performed in the State of New York and any applicable laws of the United States
of America.

      TIME OF ESSENCE. Subject to the terms of the Loan Agreement, time shall be
of the essence as to all of the terms, covenants and conditions of this Note. If
the due date of any payment due hereunder or under any of the other Loan
Documents shall fall on a day other than a Business Day, Borrowers shall be
required to make such payment on the next succeeding Business Day.

      JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of
Borrowers hereunder shall be joint and several.

                        [NO ADDITIONAL TEXT ON THIS PAGE]

                                        4


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

                                         BORROWERS:

                                         APICO HILLS, INC.
                                         BRUNSWICK MOTEL ENTERPRISES, INC.
                                         DOTHAN HOSPITALITY 3053, INC.
                                         DOTHAN HOSPITALITY 3071, INC.
                                         GADSDEN HOSPITALITY, INC.
                                         LODGIAN BRIDGEPORT LLC
                                         LODGIAN COLCHESTER LLC
                                         LODGIAN FLORENCE LLC
                                         LODGIAN HAMBURG LLC
                                         LODGIAN HOTELS FLOATING, LLC
                                         LODGIAN JACKSON LLC
                                         LODGIAN MEMPHIS LLC
                                         LODGIAN MEMPHIS PROPERTY OWNER, LLC
                                         LODGIAN MORGANTOWN LLC
                                         SERVICO AUSTIN, INC.
                                         SERVICO CEDAR RAPIDS, INC.
                                         SERVICO GRAND ISLAND, INC.
                                         SERVICO JAMESTOWN, INC.
                                         SERVICO LANSING, INC.
                                         SERVICO MARYLAND, INC.
                                         SERVICO NEW YORK, INC.
                                         SERVICO NIAGARA FALLS, INC.
                                         SERVICO PENSACOLA 7200, INC.
                                         SERVICO PENSACOLA 7330, INC.
                                         SERVICO WINTER HAVEN, INC.
                                         SHEFFIELD MOTEL ENTERPRISES, INC.


                                         By: /s/ Daniel E. Ellis
                                            ------------------------------------
                                            Name:  Daniel E. Ellis
                                            Title: Vice President and Secretary,
                                                   or Authorized Signatory for
                                                   each of the entities listed
                                                   above

EX-10.1.4

                                                                 EXHIBIT 10.1.4

                        GUARANTY OF RECOURSE OBLIGATIONS

            This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of
June 25, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"),
having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326,
in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at 4 World Financial Center, New York, New York 10080 (together with
its successors, transferees and assigns, "LENDER").

                                R E C I T A L S:

            A. Pursuant to that certain Loan and Security Agreement, dated as of
the date hereof (as the same may be amended, modified, supplemented or restated
from time to time, the "LOAN AGREEMENT"), among the Borrowers named therein
(each, a "BORROWER", and collectively, "BORROWERS"), and Lender, Lender has
agreed to make a loan to Borrowers in the aggregate original principal amount of
up to One Hundred and Ten Million and No/100 Dollars ($110,000,000.00) (the
"LOAN"), subject to the terms and conditions of the Loan Agreement;

            B. As a condition to Lender's making the Loan, Lender is requiring
that Guarantor execute and deliver to Lender this Guaranty; and

            C. Guarantor hereby acknowledges that Guarantor holds a direct
and/or indirect ownership interest in each Borrower and that Guarantor will
materially benefit from Lender's agreeing to make the Loan.

            NOW, THEREFORE, in consideration of the premises set forth herein
and as an inducement for and in consideration of the agreement of Lender to make
the Loan pursuant to the Loan Agreement and the other Loan Documents, Guarantor
hereby agrees, covenants, represents and warrants to Lender as follows:

            SECTION 1. DEFINITIONS. All capitalized terms used and not defined
herein shall have the respective meanings given such terms in the Loan
Agreement.

            SECTION 2. GUARANTY.

            (a) Guarantor (but not its members, partners, employees,
shareholders, agents, directors or officers) hereby irrevocably, absolutely and
unconditionally assumes liability for, guarantees payment to Lender of, and
agrees to pay, protect, defend, indemnify and save harmless Lender from and
against any and all Guaranteed Recourse Obligations of Borrowers (as hereinafter
defined).

The obligations which are the subject of the guaranty referred to in this
Section 2 are hereinafter collectively referred to as the "GUARANTEED
OBLIGATIONS".



            (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF BORROWERS" as used
in this Guaranty shall mean all obligations and liabilities of Borrowers for
which Borrowers shall be personally liable under the provisions of Section 12.2
of the Loan Agreement.

            (c) All sums payable to Lender under this Guaranty shall be payable
on demand and without reduction for any offset, claim, counterclaim or defense.

            SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby
represents and warrants to Lender as follows (which representations and
warranties shall be given as of the date hereof and shall survive the execution
and delivery of this Guaranty):

            (a) DUE EXECUTION. This Guaranty has been duly executed and
delivered by Guarantor.

            (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and
binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally, or application of general principles
of equity in any legal proceeding.

            (c) NO VIOLATION. The execution, delivery and performance by
Guarantor of its obligations under this Guaranty do not violate any law,
regulation, order, writ, injunction or decree of any court or governmental body,
agency or other instrumentality applicable to Guarantor, or result in a breach
of any of the terms, conditions or provisions of, or constitute a default under,
or result in the creation or imposition of any mortgage, lien, charge or
encumbrance of any nature whatsoever upon any of the assets of Guarantor
pursuant to the terms of any mortgage, indenture, agreement or instrument to
which Guarantor is a party or by which it or any of its properties is bound.
Guarantor is not in default under any other guaranty which it has provided to
Lender.

            (d) NO LITIGATION. Except as disclosed on Schedule 4.9 to the Loan
Agreement, there are no actions, suits or proceedings at law or at equity,
pending or, to Guarantor's knowledge, threatened against or affecting Guarantor
or which involve or could reasonably be expected to involve the validity or
enforceability of this Guaranty or which might materially adversely affect the
financial condition of Guarantor or the ability of Guarantor to perform any of
its obligations under this Guaranty. Guarantor is not in default beyond any
applicable grace or cure period with respect to any order, writ, injunction,
decree or demand of any Governmental Authority which might materially adversely
affect the financial condition of Guarantor or the ability of Guarantor to
perform any of its obligations under this Guaranty.

            (e) CONSENTS. All consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, all Governmental Authorities
(collectively, the "CONSENTS") that are required in connection with the valid
execution, delivery and performance by Guarantor of this Guaranty have been
obtained and Guarantor agrees that all Consents required in connection with the
carrying out or performance of any of Guarantor's obligations under this
Guaranty will be obtained when required.

            (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial
statements of Guarantor heretofore delivered to Lender fairly present the
financial condition of Guarantor as of

                                       2


the respective dates thereof, and no materially adverse change has occurred in
the financial conditions reflected therein since the respective dates thereof.
None of the aforesaid financial statements or any certificate or statement
furnished to Lender by or on behalf of Guarantor in connection with the
transactions contemplated hereby, and none of the representations and warranties
in this Guaranty contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein not materially misleading. Guarantor is not insolvent within
the meaning of the Bankruptcy Code or any other applicable law, code or
regulation and the execution, delivery and performance of this Guaranty will not
render Guarantor insolvent.

            SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the
benefit of Lender that Guarantor will deliver to Lender each of the financial
statements required to be delivered pursuant to Section 5.1 of the Loan
Agreement.

            SECTION 5. INTENTIONALLY DELETED.

            SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR.

            (a) The obligations of Guarantor hereunder shall be irrevocable,
absolute and unconditional, irrespective of the validity, regularity or
enforceability, in whole or in part, of the Note, the Loan Agreement, the Deeds
of Trust or the other Loan Documents or any provision thereof, or the absence of
any action to enforce the same, any waiver or consent with respect to any
provision thereof, the recovery of any judgment against any Borrower, Guarantor
or any other Person or any action to enforce the same, any failure or delay in
the enforcement of the obligations of Borrowers under the Note, the Loan
Agreement, the Deeds of Trust or any other Loan Documents or Guarantor under
this Guaranty, or any setoff, counterclaim, and irrespective of any other
circumstances which might otherwise limit recourse against Guarantor by Lender
or constitute a legal or equitable discharge or defense of a guarantor or
surety. Lender may enforce the obligations of Guarantor under this Guaranty by a
proceeding at law, in equity or otherwise, independent of any loan foreclosure
or similar proceeding or any deficiency action against Borrowers or any other
Person at any time, either before or after an action against the Properties or
any of them or any part thereof, Borrowers or any other Person. THIS GUARANTY IS
A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION.
Guarantor waives diligence, notice of acceptance of this Guaranty, filing of
claims with any court, any proceeding to enforce any provision of the Note, the
Loan Agreement, the Deeds of Trust or any other Loan Documents, against
Guarantor, Borrowers or any other Person, any right to require a proceeding
first against Borrowers or any other Person, or to exhaust any security
(including, without limitation, the Properties or any of them or any part
thereof) for the performance of the Guaranteed Obligations or any other
obligations of Borrowers or any other Person, or any protest, presentment,
notice of default (except as may be expressly required under the Loan Documents)
or other notice or demand whatsoever, and Guarantor hereby covenants and agrees
that Guarantor shall not be discharged of its obligations hereunder.

            (b) The obligations of Guarantor under this Guaranty, and the rights
of Lender to enforce the same by proceedings, whether by action at law, suit in
equity or otherwise, shall not be in any way affected by any of the following:

                                       3


                  (i) any insolvency, bankruptcy, liquidation, reorganization,
      readjustment, composition, dissolution, receivership, conservatorship,
      winding up or other similar proceeding involving or affecting any
      Borrower, any Property or any part thereof, Guarantor or any other Person;

                  (ii) any failure by Lender or any other Person, whether or not
      without fault on its part, to perform or comply with any of the terms of
      the Loan Agreement, or any other Loan Documents, or any document or
      instrument relating thereto;

                  (iii) except (A) with respect to activities occurring after
      the date of a Permitted Assumption or, (B) activities relating to a
      Released Property after the date of a Release with respect thereto, the
      sale, transfer or conveyance of any Property or any interest therein to
      any Person, whether now or hereafter having or acquiring an interest in
      any Property or any interest therein and whether or not pursuant to any
      foreclosure, trustee sale or similar proceeding against any Borrower or
      any Property or any interest therein;

                  (iv) the conveyance to Lender, any Affiliate of Lender or
      Lender's nominee of any Property or any interest therein by a deed-in-lieu
      of foreclosure;

                  (v) the release of any Borrower or any other Person from the
      performance or observance of any of the agreements, covenants, terms or
      conditions contained in any of the Loan Documents by operation of law or
      otherwise;

                  (vi) the release in whole or in part of any collateral for any
      or all Guaranteed Obligations or for the Loan or any portion thereof; or

                  (vii) the exercise by Mezzanine Lender of any remedies made
      available to Mezzanine Lender pursuant to the terms of the Mezzanine Loan
      Documents, including, without limitation, foreclosure or similar remedies
      under any pledge agreement encumbering Mezzanine Borrower's interest in
      any General Partner, any Member, and/or any Borrower except with respect
      to actions taken by the Mezzanine Lender following the Mezzanine Lender
      succeeding to the interests of the Mezzanine Borrowers in and to the
      Borrowers.

      (c) Except as otherwise specifically provided in this Guaranty, Guarantor
hereby expressly and irrevocably waives all defenses in an action brought by
Lender to enforce this Guaranty based on claims of waiver, release, surrender,
alteration or compromise and all setoffs, reductions, or impairments, whether
arising hereunder or otherwise.

      (d) Lender may deal with Borrowers and Affiliates of Borrowers in the same
manner and as freely as if this Guaranty did not exist and shall be entitled,
among other things, to grant Borrowers or any other Person such extension or
extensions of time to perform any act or acts as may be deemed advisable by
Lender, at any time and from time to time, without terminating, affecting or
impairing the validity of this Guaranty or the obligations of Guarantor
hereunder.

      (e) No compromise, alteration, amendment, modification, extension,
renewal, release or other change of, or waiver, consent, delay, omission,
failure to act or other action with

                                       4


respect to, any liability or obligation under or with respect to, or of any of
the terms, covenants or conditions of, the Note, the Loan Agreement, the Deeds
of Trust or the other Loan Documents or any amendment, modification or other
change of any legal requirement shall in any way alter, impair or affect any of
the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan
Documents are modified with Lender's consent, the Guaranteed Obligations shall
automatically be deemed modified to include such modifications.

            (f) Lender may proceed to protect and enforce any or all of its
rights under this Guaranty by suit in equity or action at law, whether for the
specific performance of any covenants or agreements contained in this Guaranty
or otherwise, or to take any action authorized or permitted under applicable
law, and shall be entitled to require and enforce the performance of all acts
and things required to be performed hereunder by Guarantor. Each and every
remedy of Lender shall, to the extent permitted by law, be cumulative and shall
be in addition to any other remedy given hereunder or now or hereafter existing
at law or in equity.

            (g) No waiver shall be deemed to have been made by Lender of any
rights hereunder unless the same shall be in writing and signed by Lender, and
any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of Lender or the obligations of
Guarantor to Lender in any other respect or at any other time.

            (h) At the option of Lender, Guarantor may be joined in any action
or proceeding commenced by Lender against Borrowers in connection with or based
upon the Note, the Loan Agreement, the Deeds of Trust or any other Loan
Documents and recovery may be had against Guarantor in such action or proceeding
or in any independent action or proceeding against Guarantor to the extent of
Guarantor's liability hereunder, without any requirement that Lender first
assert, prosecute or exhaust any remedy or claim against Borrowers or any other
Person, or any security for the obligations of Borrowers or any other Person.

            (i) Guarantor agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
is made by Borrowers or Guarantor to Lender and such payment is rescinded or
must otherwise be returned by Lender (as determined by Lender in its sole and
absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar proceeding involving or affecting any Borrower or Guarantor,
all as though such payment had not been made.

            (j) In the event that Guarantor shall advance or become obligated to
pay any sums under this Guaranty or in connection with the Guaranteed
Obligations or in the event that for any reason whatsoever any Borrower or any
subsequent owner of any Property or any part thereof is now, or shall hereafter
become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums
and of such indebtedness and all interest thereon shall at all times be
subordinate as to the lien, the time of payment and in all other respects to all
sums, including principal and interest and other amounts, at any time owed to
Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to
enforce or receive payment thereof until all principal, interest and other sums
due pursuant to the Loan Documents have been paid in full. Nothing herein
contained is intended or shall be construed to give Guarantor any right of
subrogation in or under the Loan Documents or any right to participate in any
way therein, or in the right, title or interest of Lender

                                       5


in or to any collateral for the Loan, notwithstanding any payments made by
Guarantor under this Guaranty, until the actual and irrevocable receipt by
Lender of payment in full of all principal, interest and other sums due with
respect to the Loan or otherwise payable under the Loan Documents. If any amount
shall be paid to Guarantor on account of such subrogation rights at any time
when any such sums due and owing to Lender shall not have been fully paid, such
amount shall be paid by Guarantor to Lender for credit and application against
such sums due and owing to Lender. The foregoing shall not prohibit Borrowers
from using the proceeds of the Loan for any permitted use under the Loan
Agreement, including, without limitation, the making of distributions to
Guarantor.

            (k) Guarantor's obligations hereunder shall survive a foreclosure,
delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or
similar proceeding involving any Property or any part thereof and the exercise
by Lender of any of all of its remedies pursuant to the Loan Documents.
Notwithstanding the foregoing to the contrary, the obligations and liabilities
of Guarantor under this Guaranty shall survive for a period of two (2) years
following payment in full of the Obligations in accordance with the terms of the
Loan Documents, provided, however, in the event that any Guaranteed Obligations
or liabilities of the Guarantor under this Guaranty shall have arisen prior to
the expiration of such period, then in any such event the foregoing survival
period shall not apply and the obligations and liabilities of Guarantor
hereunder shall survive.

            SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. THIS INSTRUMENT REPRESENTS
THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER
HEREOF. THE TERMS OF THIS GUARANTY SHALL NOT BE WAIVED, ALTERED, MODIFIED,
AMENDED, SUPPLEMENTED OR TERMINATED IN ANY MANNER WHATSOEVER EXCEPT BY WRITTEN
INSTRUMENT SIGNED BY LENDER AND GUARANTOR.

            SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding
upon Guarantor, and its successors and assigns, may not be assigned or delegated
by Guarantor and shall inure to the benefit of Lender and its successors and
assigns. Lender shall have the right to assign this Guaranty and the obligations
hereunder in connection with any assignment or transfer of all or any portion of
the Loan or any interest therein. All references to "Lender" hereunder shall be
deemed to include the successors and assigns of Lender and the parties hereto
acknowledge that actions taken by Lender hereunder may be taken by Lender's
agents and by the agents of the successors and assigns of Lender.

            SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty
shall be governed by, and construed in accordance with, the substantive laws of
the State of New York. Guarantor irrevocably (a) agrees that any suit, action or
other legal proceeding arising out of or relating to this Guaranty may be
brought in a court of record in the City and County of New York or in the Courts
of the United States of America located in the Southern District of New York,
(b) consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which it may have to the laying of venue
of any such suit, action or proceeding in any of such courts and any claim that
any such suit, action or proceeding has been brought in an inconvenient forum.
Guarantor irrevocably consents to the service of any and all process in any such
suit, action or proceeding by service of copies of such process to Guarantor at
its address set forth on the first page hereof. Nothing in this Section 9,
however, shall affect the right of Lender to serve legal process in any other
manner permitted by law or affect the

                                       6


right of Lender to bring any suit, action or proceeding against Guarantor or its
property in the courts of any other jurisdictions.

            SECTION 10. SECTION HEADINGS. The headings of the sections and
paragraphs of this Guaranty have been inserted for convenience of reference only
and shall in no way define, modify, limit or amplify any of the terms or
provisions hereof.

            SECTION 11. SEVERABILITY. Any provision of this Guaranty which may
be determined by any competent authority to be prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Guarantor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.

            SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND LENDER
HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING
ARISING HEREUNDER OR IN CONNECTION THEREWITH.

            SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL
LIABILITY.

            (a) The obligations of Guarantor hereunder are separate and distinct
from, and in addition to, the obligations of Guarantor now or hereafter arising
under the other guaranties pursuant to which Guarantor has guaranteed the
payment and performance of certain other obligations of Borrowers described
therein.

            (b) If there is more than one entity comprising Guarantor, all
references to Guarantor herein shall be to Guarantor (but not its members,
partners, employees, shareholders, agents, directors or officers) or any one or
more of them. All obligations and liabilities of Guarantor hereunder are in
addition to, not in lieu of and are independent of: (i) all obligations of
Borrowers under any other Loan Document, including the Note and the Loan
Agreement; and (ii) any obligation of Guarantor under any other Loan Document to
which Guarantor is a party.

            (c) If there is more than one entity comprising Guarantor, all
obligations of Guarantor hereunder shall be joint and several.

            SECTION 14. NOTICES. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder to
Lender or Guarantor or which are given to Lender or Guarantor with respect to
this Guaranty shall be in writing and shall be delivered to Lender at the
address set forth in Section 14.5 of the Loan Agreement and to Guarantor at the
address set forth on the first page hereof, each in the manner provided in
Section 14.5 of the Loan Agreement. Guarantor agrees to give Lender not less
than ten (10) days' prior written notice of any change in the location of
Guarantor's principal place of business.

            SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its
execution hereof acknowledges receipt of true copies of all of the Loan
Documents, the terms and conditions of which are hereby incorporated herein by
reference.

                                       7


            SECTION 16. INTEREST; EXPENSES.

            (a) If Guarantor fails to pay all or any sums due hereunder within
ten (10) days of demand by Lender, the amount of such sums payable by Guarantor
to Lender shall bear interest from the date of demand until paid at the Default
Rate in effect from time to time.

            (b) Guarantor hereby agrees to pay all reasonable out of pocket
costs, charges and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, that may be incurred by Lender in enforcing
the covenants, agreements, obligations and liabilities of Guarantor under this
Guaranty.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       8


      IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date
first above written.

                                                     GUARANTOR:

                                                     LODGIAN, INC., a Delaware
                                                     corporation

                                                     By: /s/ Daniel E. Ellis
                                                        ------------------------
                                                        Name:  Daniel E. Ellis
                                                        Title: Senior Vice
                                                               President

EX-10.1.5

                                                                  EXHIBIT 10.1.5

              CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT

                  This CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT,
dated as of June 25, 2004 (this "AGREEMENT"), made by LODGIAN MANAGEMENT CORP.,
a Delaware corporation, having an address at 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30826 ("HOTEL MANAGER"), and the undersigned, each having an
address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30826 (each a "BORROWER and collectively, "BORROWERS"), to and for the
benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080, its
successors, transferees and assigns ("LENDER").

                  A.       Hotel Manager has entered into a certain Management
Agreement (each a "CONTRACT" and collectively, the "CONTRACTS") with each
Borrower, a true, correct and complete copy of which has been delivered to
Lender on or prior to the date hereof and the form of which is attached hereto
as EXHIBIT A, providing for the performance by Hotel Manager of certain
management obligations more particularly described therein with respect to the
management and operation of the property as more particularly described therein
(each, a "PROPERTY" and collectively, the "PROPERTIES").

                  B.       This Agreement is being executed in order to amend
each Contract, to conditionally assign each Borrower's interest therein to
Lender, and to subordinate Hotel Manager's rights to payment under the Contracts
to Lender's lien on the Properties in connection with Lender's making a loan to
Borrowers and certain other borrowers (collectively, the "MORTGAGE BORROWERS")
in the original principal amount of up to One Hundred Ten Million
($110,000,000.00) (the "LOAN") pursuant to that certain Loan and Security
Agreement, dated as of even date herewith (as amended, modified or restated, the
"LOAN AGREEMENT"), among Mortgage Borrowers and Lender. The Loan is evidenced by
those certain Promissory Notes, dated of even date herewith (as amended,
modified or restated, and any replacements or substitutes therefor, by means of
multiple notes or otherwise, collectively, the "NOTE"), made by Mortgage
Borrowers in favor of Lender and is secured by, among other things, those
certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and
Rents and Security Agreements, dated as of even date herewith (as amended,
modified, restated, spread or consolidated, collectively, the "SECURITY
INSTRUMENT"), in favor of Lender (the Note, the Security Instrument, the Loan
Agreement, this Agreement and all other documents executed in connection with
the Loan are collectively referred to as the "LOAN DOCUMENTS"). All capitalized
terms used and not defined herein shall have the respective meanings given to
such terms in the Loan Agreement, a copy of which Hotel Manager hereby
acknowledges having received.

                  NOW, THEREFORE, in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Hotel Manager and Borrowers hereby represent,
warrant and covenant to Lender as follows:



                  1.       As additional collateral security for the Loan, each
Borrower hereby conditionally transfers, sets over and assigns to Lender all of
such Borrower's right, title and interest in and to its Contract, said transfer
and assignment to automatically become a present, unconditional assignment, at
Lender's option, upon the occurrence and during the continuance of an Event of
Default by Borrowers under any of the Loan Documents.

                  2.       Hotel Manager hereby agrees that each Contract, all
rights, interests and privileges of Hotel Manager thereunder, and all management
fees and other payment obligations of each Borrower to Hotel Manager for
services rendered by Hotel Manager for the management and operation of its
Property, as such services are more particularly described in such Contract, are
hereby subordinated to the Loan Documents and the liens in favor of Lender
provided for therein, and to all rights of Lender to receive payment from
Borrowers under the Note and all other amounts which may be due Lender under the
Loan Documents. Hotel Manager recognizes and agrees that so long as the Note is
being paid in strict accordance with its terms and no Event of Default has
occurred and is continuing or will by virtue of payments to Hotel Manager occur,
Hotel Manager shall, subject to the requirements of the Loan Documents,
including any such requirements governing management and application of the
Properties and Borrower revenues and cash flow, be entitled to receive payments
provided for under such Contract in accordance with the terms thereof. Hotel
Manager hereby releases, discharges and waives any and all liens, claims,
demands of any kind or nature, against each Property, either now or in the
future, arising from the services provided by Hotel Manager for the management
and operation of such Property.

                  3.       In the event that such Borrower defaults under the
terms of its Contract, Hotel Manager agrees that before exercising any rights or
remedies with respect thereto, it will notify Lender of such default. Upon
Lender's request, Hotel Manager will continue to perform under such Contract
until such time as Lender may elect to terminate such Contract, provided that
Hotel Manager shall continue to receive all fees payable to it under such
Contract. Subject to the foregoing, Hotel Manager agrees that it shall not be
entitled to receive any management fee or other fee, commission or other amount
payable under the Contract or otherwise for and during any period of time that
any Event of Default has occurred and is continuing, provided that Hotel Manager
shall not be obligated to return or refund to Lender any management fee or other
fee, commission or other amount already received by Hotel Manager prior to the
occurrence of the Event of Default, and to which Hotel Manager was entitled
under paragraph 2 above. In all events, Hotel Manager recognizes that the
maximum amount that shall be due and payable under each Contract is the amount
stated therein (such amount being adequate to complete the services called for
in such Contract), and that Hotel Manager will not claim any incidental,
consequential, or exemplary damages of any nature as a condition to completing
its performance under the Contract.

                  4.       In the event that (a) Hotel Manager becomes
insolvent, or (b) an Event of Default occurs and is continuing, or (c) any
default occurs by Hotel Manager under the Management Agreement beyond the
expiration of any notice and cure periods, or (d) any other event occurs which,
under the terms of the Loan Documents, entitles Lender to direct Borrower to
replace Hotel Manager, Lender may exercise its rights under the Loan Documents
and direct any Borrower to terminate its Contract and/or to replace Hotel
Manager with a management company chosen by such Borrower and reasonably
acceptable to Lender. Upon receiving notice

                                       2


of any such election, Hotel Manager shall abide by such direction to terminate
and cooperate with any replacement manager approved or designated by Lender. No
termination fee or other compensation shall be due or owing under such Contract
as a result of any such termination other than accrued unpaid fees.

                  5.       Without limiting the foregoing, subject to the second
sentence of paragraph 3 hereof, in the event Lender forecloses or otherwise
succeeds to the rights of any Borrower with respect to any Property, Lender
shall have the option upon written notice to Hotel Manager delivered within
thirty (30) days following foreclosure by Lender or other acquisition of such
Property by Lender, either to (a) terminate the applicable Contract without any
obligation or liability of Lender to pay the termination fees, if any; or (b)
continue such Contract in effect upon all of the terms and provisions provided
in such Contract, except that Lender shall have no obligation to pay any sums
due and owing under the Contract as of the date of foreclosure or other
acquisition of such Property, and Lender shall have the right after it elects to
continue such Contract under subparagraph (b) hereof to terminate such Contract
without cause upon thirty (30) days written notice to Hotel Manager without any
obligation or liability of Lender to pay the termination fees, if any other than
accrued unpaid fees. Hotel Manager acknowledges and agrees with Lender that
Lender has not assumed any obligations or liabilities of such Borrower to Hotel
Manager under such Contract. If Lender chooses not to continue any Contract
following a foreclosure or other acquisition of any Property, the only
compensation from Lender for which Hotel Manager shall be entitled under such
Contract shall be for the period commencing with the date of such foreclosure or
other acquisition and ending upon the subsequent termination by Lender of such
Contract. Notwithstanding the foregoing to the contrary, in the event Lender
forecloses or otherwise succeeds to the rights of any Borrower with respect to
its Property, upon Lender's request, Hotel Manager agrees to transfer and assign
to Lender, or its designee, to the extent possible, all applicable licenses
(including, without limitation, each liquor license and beer permit), permits
and approvals required for the use, occupancy, operation and maintenance of each
of the Property and held by or in the name of Hotel Manager, and, if requested
by Lender and permitted by applicable law, enter into such reasonable concession
or use agreements with Lender or its designee (subject to appropriate
indemnification) as are reasonably necessary to allow Lender or its designee to
offer, or cause to be offered, liquor and beer for sale at such Property. For
this purpose, Hotel Manager constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution to complete or undertake the
assignment of each of the items referenced in the preceding sentence in the name
of Hotel Manager pursuant to this paragraph 5. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked.

                  6.       Hotel Manager agrees (a) not to resign as Hotel
Manager without ninety (90) days prior written notice to Lender, and (b) not to
amend any Contract in any material respect without Lender's prior written
approval, which approval shall not be unreasonably withheld or delayed.

                  7.       Hotel Manager acknowledges and agrees that any and
all rents, room rents, credit card receipts, other receipts, profits or other
sums, including any management fees in excess of the management fees to which
Hotel Manager is entitled pursuant to paragraph 2 hereof, and receipts derived
from the sale of alcoholic beverages (collectively herein called "PROPERTY
PROCEEDS") collected or received by Hotel Manager from the Properties are
subject to

                                       3


a security interest of Lender pursuant to the Loan Documents, and shall be
collected and held by Hotel Manager in trust for the benefit of the applicable
Borrower and Lender. Any such Property Proceeds shall be deposited by Hotel
Manager within two (2) Business Days of receipt into a deposit account (the
"DEPOSIT ACCOUNT") in the name of the Lender and identified in that certain
Deposit Account Agreement or other similar agreement dated as of the date hereof
(as amended, restated, modified, replaced or supplemented from time to time,
each, a "DEPOSIT ACCOUNT AGREEMENT") among the applicable Borrower, Lender,
Hotel Manager and the bank named therein. Upon transfer of any such Property
Proceeds to Hotel Manager from the Lock Box Account (as defined in that certain
Cash Management Agreement dated as of even date herewith (as amended, restated,
modified, replaced or supplemented from time to time, the "CASH MANAGEMENT
AGREEMENT"), among Mortgage Borrowers, Lender, Hotel Manager and Wachovia Bank,
National Association) as directed by the applicable Borrower pursuant to Section
3.3 of the Cash Management Agreement, such Property Proceeds shall be used by
Hotel Manager for proper expenses and costs of managing and operating the
applicable Property as permitted under the applicable Contract, subject, in all
instances, to compliance with the Operating Budget and FF&E Budget then in
effect and limitations on distributions to Borrowers, each as more fully
described in the Loan Agreement. Hotel Manager hereby disclaims any and all
interests in the Deposit Account, the Lock Box Account (and any Sub-Accounts
thereof), the Property Operating Account and in any of the Property Proceeds.
Upon written notice from Lender that an Event of Default has occurred under the
Loan Agreement and/or other Loan Documents, Hotel Manager agrees to apply
Property Proceeds as instructed by Lender.

                  8.       Hotel Manager represents and warrants that (a) a
true, correct and complete copy of each Contract has been delivered to Lender on
or prior to the date hereof, the form of which is attached hereto as EXHIBIT A,
(b) each Contract is in full force and effect and has not been modified, amended
or assigned, except in favor of Lender or its predecessor-in-interest (c)
neither Hotel Manager nor, to Hotel Manager's knowledge, any Borrower is in
default under any of the terms, covenants or provisions of its Contract, and
Hotel Manager knows of no event which, with the giving of notice or the passage
of time, or both, would constitute a default under any Contract, (d) Hotel
Manager has no knowledge of and has not commenced any action or given or
received any notice for the purpose of terminating any Contract, and (e) all
management fees, commissions and other sums due and payable to the Hotel Manager
under each Contract as of the date hereof have been paid in full.

                  9.       This Agreement shall be deemed to be a contract
entered into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of the State of New York.

                  10.      All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder shall be in
writing and shall be delivered to Lender and Borrowers at the addresses set
forth in Section 14.5 of the Loan Agreement and to Hotel Manager at the address
set forth on the first page hereof, with a copy to Morris Manning & Martin LLP,
Attention: Tom Gryboski, Esq., Fax: (404) 365-9532, each in the manner provided
in Section 14.5 of the Loan Agreement.

                  11.      This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to

                                       4


act on the part of Lender or any other party, but only by an agreement in
writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

                  12.      If any term, covenant or condition of this Agreement
is held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such provision. If any conflict exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                  13. This Agreement may be executed in any number of duplicate
originals and each duplicate original shall be deemed to be an original. This
Agreement may be executed in several counterparts, each of which counterparts
shall be deemed an original and all of which together shall constitute a single
agreement. The failure of any party hereto to execute this Agreement, or any
counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.

                  14. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa.

                  15. This Agreement shall be binding upon Hotel Manager and its
heirs, devisees, representatives, successors and assigns, and shall inure to the
benefit of and may be enforced by and binding upon Lender and its heirs,
successors, legal representatives, substitutes and assigns. Except as permitted
under the Loan Agreement, Hotel Manager shall not assign any of its rights or
obligations under this Agreement. Subject to the terms of the Loan Agreement,
Lender shall have the right to assign this Agreement and the obligations
hereunder in connection with any assignment or transfer of all or any portion of
the Loan or any interest therein. The parties hereto acknowledge that following
the execution and delivery of this Agreement, Lender may sell, transfer and
assign this Agreement and certain other Loan Documents. All references to
"Lender" hereunder shall be deemed to include the successors and assigns of
Lender and the parties hereto acknowledge that actions taken by Lender hereunder
may be taken by Lender's agents and by the agents of the successors and assigns
of Lender.

                  16. This Agreement is intended solely for the benefit of
Lender and its heirs, successors, legal representatives, substitutes and
assigns, and no third party shall have any right or interest in this Agreement,
nor any right to enforce this Agreement against any party hereto.

                  17. Hotel Manager acknowledges and agrees that pursuant to the
Loan Agreement, each Deposit Account Agreement and the Cash Management Agreement
(for purposes of this paragraph 17, collectively, the "AGREEMENTS") (the terms,
conditions and agreements of the Agreements being hereby incorporated herein
with the same force as is fully set forth herein), certain requirements are
specified with respect to the Property Proceeds and other payments due under any
Lease (as defined in the Security Instrument) or otherwise with respect to the
Properties, and Hotel Manager covenants and agrees to observe and, as and to the
extent applicable to Hotel Manager, perform all such requirements, including,
without limitation, ensuring that all Property Proceeds received by Hotel
Manager are properly deposited into the applicable Deposit Account.

                                       5


                  18.      The obligations of Borrowers and Hotel Manager
hereunder are subject to limitations on recourse as provided in Article XII of
the Loan Agreement.

                                       6


                  EXECUTED as of the day and year first above written.

                                    BORROWERS:

                                    APICO HILLS, INC.
                                    BRUNSWICK MOTEL ENTERPRISES, INC.
                                    DOTHAN HOSPITALITY 3053, INC.
                                    DOTHAN HOSPITALITY 3071, INC.
                                    GADSDEN HOSPITALITY, INC.
                                    LODGIAN BRIDGEPORT LLC
                                    LODGIAN COLCHESTER LLC
                                    LODGIAN FLORENCE LLC
                                    LODGIAN HAMBURG LLC
                                    LODGIAN HOTELS FLOATING, LLC
                                    LODGIAN JACKSON LLC
                                    LODGIAN MEMPHIS LLC
                                    LODGIAN MEMPHIS PROPERTY OWNER, LLC
                                    LODGIAN MORGANTOWN LLC
                                    SERVICO AUSTIN, INC.
                                    SERVICO CEDAR RAPIDS, INC.
                                    SERVICO GRAND ISLAND, INC.
                                    SERVICO JAMESTOWN, INC.
                                    SERVICO LANSING, INC.
                                    SERVICO MARYLAND, INC.
                                    SERVICO NEW YORK, INC.
                                    SERVICO NIAGARA FALLS, INC.
                                    SERVICO PENSACOLA 7200, INC.
                                    SERVICO PENSACOLA 7330, INC.
                                    SERVICO WINTER HAVEN, INC.
                                    SHEFFIELD MOTEL ENTERPRISES, INC.

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of the
                                           entities listed above



                                    HOTEL MANAGER:

                                    LODGIAN MANAGEMENT CORP.,
                                    a Delaware corporation

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary



                                    EXHIBIT A

                      COPY OF FORM OF MANAGEMENT AGREEMENT

EX-10.1.6

                                                                  EXHIBIT 10.1.6

              CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT

                  This CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT,
dated as of June 25, 2004 (this "AGREEMENT"), made by LODGIAN MANAGEMENT CORP.,
a Delaware corporation, having an address at 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30826 ("HOTEL MANAGER"), and the undersigned, each having an
address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30826 (each a "BORROWER and collectively, "BORROWERS"), to and for the
benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080, its
successors, transferees and assigns ("LENDER").

                  A.       Hotel Manager has entered into a certain Management
Agreement (each a "CONTRACT" and collectively, the "CONTRACTS") with each
Borrower, a true, correct and complete copy of which has been delivered to
Lender on or prior to the date hereof and the form of which is attached hereto
as EXHIBIT A, providing for the performance by Hotel Manager of certain
management obligations more particularly described therein with respect to the
management and operation of the property as more particularly described therein
(each, a "PROPERTY" and collectively, the "PROPERTIES").

                  B.       This Agreement is being executed in order to amend
each Contract, to conditionally assign each Borrower's interest therein to
Lender, and to subordinate Hotel Manager's rights to payment under the Contracts
to Lender's lien on the Properties in connection with Lender's making a loan to
Borrowers and certain other borrowers (collectively, the "MORTGAGE BORROWERS")
in the original principal amount of up to One Hundred Ten Million
($110,000,000.00)(the "LOAN") pursuant to that certain Loan and Security
Agreement, dated as of even date herewith (as amended, modified or restated, the
"LOAN AGREEMENT"), among Mortgage Borrowers and Lender. The Loan is evidenced by
those certain Promissory Notes, each of even date herewith (as amended, modified
or restated, and any replacements or substitutes therefor (by means of multiple
notes or otherwise), collectively, the "NOTE"), made by Mortgage Borrowers in
favor of Lender and is secured by, among other things, those certain
Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents
and Security Agreements, dated as of even date herewith (as amended, modified,
restated, spread or consolidated, collectively, the "SECURITY INSTRUMENT"), in
favor of Lender (the Note, the Security Instrument, the Loan Agreement, this
Agreement and all other documents executed in connection with the Loan are
collectively referred to as the "LOAN DOCUMENTS"). All capitalized terms used
and not defined herein shall have the respective meanings given to such terms in
the Loan Agreement, a copy of which Hotel Manager hereby acknowledges having
received.

                  NOW, THEREFORE, in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Hotel Manager and Borrowers hereby represent,
warrant and covenant to Lender as follows:



                  1.       As additional collateral security for the Loan, each
Borrower hereby conditionally transfers, sets over and assigns to Lender all of
such Borrower's right, title and interest in and to its Contract, said transfer
and assignment to automatically become a present, unconditional assignment, at
Lender's option, upon the occurrence and during the continuance of an Event of
Default by Borrowers under any of the Loan Documents.

                  2.       Hotel Manager hereby agrees that each Contract, all
rights, interests and privileges of Hotel Manager thereunder, and all management
fees and other payment obligations of each Borrower to Hotel Manager for
services rendered by Hotel Manager for the management and operation of its
Property, as such services are more particularly described in such Contract, are
hereby subordinated to the Loan Documents and the liens in favor of Lender
provided for therein, and to all rights of Lender to receive payment from
Borrowers under the Note and all other amounts which may be due Lender under the
Loan Documents. Hotel Manager recognizes and agrees that so long as the Note is
being paid in strict accordance with its terms and no Event of Default has
occurred and is continuing or will by virtue of payments to Hotel Manager occur,
Hotel Manager shall, subject to the requirements of the Loan Documents,
including any such requirements governing management and application of the
Properties and Borrower revenues and cash flow, be entitled to receive payments
provided for under such Contract in accordance with the terms thereof. Hotel
Manager hereby releases, discharges and waives any and all liens, claims,
demands of any kind or nature, against each Property, either now or in the
future, arising from the services provided by Hotel Manager for the management
and operation of such Property.

                  3.       In the event that such Borrower defaults under the
terms of its Contract, Hotel Manager agrees that before exercising any rights or
remedies with respect thereto, it will notify Lender of such default. Upon
Lender's request, Hotel Manager will continue to perform under such Contract
until such time as Lender may elect to terminate such Contract, provided that
Hotel Manager shall continue to receive all fees payable to it under such
Contract. Subject to the foregoing, Hotel Manager agrees that it shall not be
entitled to receive any management fee or other fee, commission or other amount
payable under the Contract or otherwise for and during any period of time that
any Event of Default has occurred and is continuing, provided that Hotel Manager
shall not be obligated to return or refund to Lender any management fee or other
fee, commission or other amount already received by Hotel Manager prior to the
occurrence of the Event of Default, and to which Hotel Manager was entitled
under paragraph 2 above. In all events, Hotel Manager recognizes that the
maximum amount that shall be due and payable under each Contract is the amount
stated therein (such amount being adequate to complete the services called for
in such Contract), and that Hotel Manager will not claim any incidental,
consequential, or exemplary damages of any nature as a condition to completing
its performance under the Contract.

                  4.       In the event that (a) Hotel Manager becomes
insolvent, or (b) an Event of Default occurs and is continuing, or (c) any
default occurs by Hotel Manager under the Management Agreement beyond the
expiration of any notice and cure periods, or (d) any other event occurs which,
under the terms of the Loan Documents, entitles Lender to direct Borrower to
replace Hotel Manager, Lender may exercise its rights under the Loan Documents
and direct any Borrower to terminate its Contract and/or to replace Hotel
Manager with a management

                                       2


company chosen by such Borrower and reasonably acceptable to Lender. Upon
receiving notice of any such election, Hotel Manager shall abide by such
direction to terminate and cooperate with any replacement manager approved or
designated by Lender. No termination fee or other compensation shall be due or
owing under such Contract as a result of any such termination other than accrued
unpaid fees.

                  5.       Without limiting the foregoing, subject to the second
sentence of paragraph 3 hereof, in the event Lender forecloses or otherwise
succeeds to the rights of any Borrower with respect to any Property, Lender
shall have the option upon written notice to Hotel Manager delivered within
thirty (30) days following foreclosure by Lender or other acquisition of such
Property by Lender, either to (a) terminate the applicable Contract without any
obligation or liability of Lender to pay the termination fees, if any; or (b)
continue such Contract in effect upon all of the terms and provisions provided
in such Contract, except that Lender shall have no obligation to pay any sums
due and owing under the Contract as of the date of foreclosure or other
acquisition of such Property, and Lender shall have the right after it elects to
continue such Contract under subparagraph (b) hereof to terminate such Contract
without cause upon thirty (30) days written notice to Hotel Manager without any
obligation or liability of Lender to pay the termination fees, if any other than
accrued unpaid fees. Hotel Manager acknowledges and agrees with Lender that
Lender has not assumed any obligations or liabilities of such Borrower to Hotel
Manager under such Contract. If Lender chooses not to continue any Contract
following a foreclosure or other acquisition of any Property, the only
compensation from Lender for which Hotel Manager shall be entitled under such
Contract shall be for the period commencing with the date of such foreclosure or
other acquisition and ending upon the subsequent termination by Lender of such
Contract. Notwithstanding the foregoing to the contrary, in the event Lender
forecloses or otherwise succeeds to the rights of any Borrower with respect to
its Property, upon Lender's request, Hotel Manager agrees to transfer and assign
to Lender, or its designee, to the extent possible, all applicable licenses
(including, without limitation, each liquor license and beer permit), permits
and approvals required for the use, occupancy, operation and maintenance of each
of the Property and held by or in the name of Hotel Manager, and, if requested
by Lender and permitted by applicable law, enter into such reasonable concession
or use agreements with Lender or its designee (subject to appropriate
indemnification) as are reasonably necessary to allow Lender or its designee to
offer, or cause to be offered, liquor and beer for sale at such Property. For
this purpose, Hotel Manager constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution to complete or undertake the
assignment of each of the items referenced in the preceding sentence in the name
of Hotel Manager pursuant to this paragraph 5. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked.

                  6.       Hotel Manager agrees (a) not to resign as Hotel
Manager without ninety (90) days prior written notice to Lender, and (b) not to
amend any Contract in any material respect without Lender's prior written
approval, which approval shall not be unreasonably withheld or delayed.

                  7.       Hotel Manager acknowledges and agrees that any and
all rents, room rents, credit card receipts, other receipts, profits or other
sums, including any management fees in excess of the management fees to which
Hotel Manager is entitled pursuant to paragraph 2

                                       3


hereof, and receipts derived from the sale of alcoholic beverages, to the extent
permitted by law (collectively herein called "PROPERTY PROCEEDS"), collected or
received by Hotel Manager from the Properties are subject to a security interest
of Lender pursuant to the Loan Documents, and shall be collected and held by
Hotel Manager in trust for the benefit of the applicable Borrower and Lender.
Any such Property Proceeds shall be deposited by Hotel Manager within two (2)
Business Days of receipt into a deposit account (the "DEPOSIT ACCOUNT") in the
name of the Lender and identified in that certain Deposit Account Agreement or
other similar agreement dated as of the date hereof (as amended, restated,
modified, replaced or supplemented from time to time, each, a "DEPOSIT ACCOUNT
AGREEMENT") among the applicable Borrower, Lender, Hotel Manager and the bank
named therein. Upon transfer of any such Property Proceeds to Hotel Manager from
the Lock Box Account (as defined in that certain Cash Management Agreement dated
as of even date herewith (as amended, restated, modified, replaced or
supplemented from time to time, the "CASH MANAGEMENT AGREEMENT"), among Mortgage
Borrowers, Lender, Hotel Manager and Wachovia Bank, National Association) as
directed by the applicable Borrower pursuant to Section 3.3 of the Cash
Management Agreement, such Property Proceeds shall be used by Hotel Manager for
proper expenses and costs of managing and operating the applicable Property as
permitted under the applicable Contract, subject, in all instances, to
compliance with the Operating Budget and FF&E Budget then in effect and
limitations on distributions to Borrowers, each as more fully described in the
Loan Agreement. Hotel Manager hereby disclaims any and all interests in the
Deposit Account, the Lock Box Account (and any Sub-Accounts thereof), the
Property Operating Account and in any of the Property Proceeds. Upon written
notice from Lender that an Event of Default has occurred under the Loan
Agreement and/or other Loan Documents, Hotel Manager agrees to apply Property
Proceeds as instructed by Lender.

                  8.       Hotel Manager represents and warrants that (a) a
true, correct and complete copy of each Contract has been delivered to Lender on
or prior to the date hereof, the form of which is attached hereto as EXHIBIT A,
(b) each Contract is in full force and effect and has not been modified, amended
or assigned, except in favor of Lender or its predecessor-in-interest (c)
neither Hotel Manager nor, to Hotel Manager's knowledge, any Borrower is in
default under any of the terms, covenants or provisions of its Contract, and
Hotel Manager knows of no event which, with the giving of notice or the passage
of time, or both, would constitute a default under any Contract, (d) Hotel
Manager has no knowledge of and has not commenced any action or given or
received any notice for the purpose of terminating any Contract, and (e) all
management fees, commissions and other sums due and payable to the Hotel Manager
under each Contract as of the date hereof have been paid in full.

                  9.       This Agreement shall be deemed to be a contract
entered into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of the State of New York.

                  10.      All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder shall be in
writing and shall be delivered to Lender and Borrowers at the addresses set
forth in Section 14.5 of the Loan Agreement and to Hotel Manager at the address
set forth on the first page hereof, with a copy to

                                       4


Morris Manning & Martin LLP, Attention: Tom Gryboski, Esq., Fax: (404) 365-9532,
each in the manner provided in Section 14.5 of the Loan Agreement.

                  11.      This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of Lender or any other party, but only
by an agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.

                  12.      If any term, covenant or condition of this Agreement
is held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such provision. If any conflict exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                  13.      This Agreement may be executed in any number of
duplicate originals and each duplicate original shall be deemed to be an
original. This Agreement may be executed in several counterparts, each of which
counterparts shall be deemed an original and all of which together shall
constitute a single agreement. The failure of any party hereto to execute this
Agreement, or any counterpart hereof, shall not relieve the other signatories
from their obligations hereunder.

                  14.      Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns and pronouns shall include the plural and vice versa.

                  15.      This Agreement shall be binding upon Hotel Manager
and its heirs, devisees, representatives, successors and assigns, and shall
inure to the benefit of and may be enforced by and binding upon Lender and its
heirs, successors, legal representatives, substitutes and assigns. Except as
permitted under the Loan Agreement, Hotel Manager shall not assign any of its
rights or obligations under this Agreement. Subject to the terms of the Loan
Agreement, Lender shall have the right to assign this Agreement and the
obligations hereunder in connection with any assignment or transfer of all or
any portion of the Loan or any interest therein. The parties hereto acknowledge
that following the execution and delivery of this Agreement, Lender may sell,
transfer and assign this Agreement and certain other Loan Documents. All
references to "Lender" hereunder shall be deemed to include the successors and
assigns of Lender and the parties hereto acknowledge that actions taken by
Lender hereunder may be taken by Lender's agents and by the agents of the
successors and assigns of Lender.

                  16.      This Agreement is intended solely for the benefit of
Lender and its heirs, successors, legal representatives, substitutes and
assigns, and no third party shall have any right or interest in this Agreement,
nor any right to enforce this Agreement against any party hereto.

                  17.      Hotel Manager acknowledges and agrees that pursuant
to the Loan Agreement, each Deposit Account Agreement and the Cash Management
Agreement (for purposes of this paragraph 17, collectively, the "AGREEMENTS")
(the terms, conditions and agreements of the Agreements being hereby
incorporated herein with the same force as is fully set forth herein), certain
requirements are specified with respect to the Property Proceeds and

                                       5


other payments due under any Lease (as defined in the Security Instrument) or
otherwise with respect to the Properties, and Hotel Manager covenants and agrees
to observe and, as and to the extent applicable to Hotel Manager, perform all
such requirements, including, without limitation, ensuring that all Property
Proceeds received by Hotel Manager are properly deposited into the applicable
Deposit Account.

                  18.      The obligations of Borrowers and Hotel Manager
hereunder are subject to limitations on recourse as provided in Article XII of
the Loan Agreement.

                                       6


                  EXECUTED as of the day and year first above written.

                                    BORROWERS:

                                    APICO HILLS, INC.
                                    BRUNSWICK MOTEL ENTERPRISES, INC.
                                    DOTHAN HOSPITALITY 3053, INC.
                                    DOTHAN HOSPITALITY 3071, INC.
                                    GADSDEN HOSPITALITY, INC.
                                    LODGIAN BRIDGEPORT LLC
                                    LODGIAN COLCHESTER LLC
                                    LODGIAN FLORENCE LLC
                                    LODGIAN HAMBURG LLC
                                    LODGIAN HOTELS FLOATING, LLC
                                    LODGIAN JACKSON LLC
                                    LODGIAN MEMPHIS LLC
                                    LODGIAN MEMPHIS PROPERTY OWNER, LLC
                                    LODGIAN MORGANTOWN LLC
                                    SERVICO AUSTIN, INC.
                                    SERVICO CEDAR RAPIDS, INC.
                                    SERVICO GRAND ISLAND, INC.
                                    SERVICO JAMESTOWN, INC.
                                    SERVICO LANSING, INC.
                                    SERVICO MARYLAND, INC.
                                    SERVICO NEW YORK, INC.
                                    SERVICO NIAGARA FALLS, INC.
                                    SERVICO PENSACOLA 7200, INC.
                                    SERVICO PENSACOLA 7330, INC.
                                    SERVICO WINTER HAVEN, INC.
                                    SHEFFIELD MOTEL ENTERPRISES, INC.

                                    By:/s/ Daniel E. Ellis
                                       -------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of the
                                           entities listed above



                                    HOTEL MANAGER:

                                    LODGIAN MANAGEMENT CORP.,
                                    a Delaware corporation

                                    By:/s/ Daniel E. Ellis
                                       -------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary



                                    EXHIBIT A

                      COPY OF FORM OF MANAGEMENT AGREEMENT

EX-10.1.7

                                                                  EXHIBIT 10.1.7

                       ASSIGNMENT OF AGREEMENTS, LICENSES,
                              PERMITS AND CONTRACTS

                  This ASSIGNMENT OF AGREEMENTS, LICENSES, PERMITS AND
CONTRACTS, dated as of June 25, 2004 (this "ASSIGNMENT"), made by the
undersigned, each having an address at c/o Lodgian, Inc., 3445 Peachtree Road,
NE, Suite 700, Atlanta, Georgia 30326 (collectively, "BORROWER"), to MERRILL
LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an address at 4
World Financial Center, New York, New York 10080 (together with its successors,
transferees and assigns, "LENDER").

                              W I T N E S S E T H:

                  WHEREAS:

                  A.       Borrower is the owner of a fee simple and leasehold
interest, as the case may be, in those certain parcels of real property
(collectively, the "PREMISES") described in EXHIBIT A attached hereto, and the
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and other improvements now or hereafter
located thereon (the "IMPROVEMENTS"; together with the Premises, collectively,
the "PROPERTY");

                  B.       Borrower and Lender have entered into a certain Loan
and Security Agreement, dated as of the date hereof (as amended, modified or
restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has
agreed to make a loan to Borrower as more particularly described below.
Capitalized terms used herein and not herein defined shall have the meanings
assigned to such terms in the Loan Agreement.

                  C.       Pursuant to the Loan Agreement, Lender is making a
Loan to Borrower in the aggregate original principal amount of up to One Hundred
Ten million and No/100 Dollars ($110,000,000.00) (the "LOAN"). The Loan is
evidenced by those certain Promissory Notes, each dated as of the date hereof
(as amended, modified or restated from time to time, collectively, the "NOTE")
and secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds to
Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as
of the date hereof (as amended, modified or restated from time to time,
collectively, the "SECURITY INSTRUMENT"), with respect to the Property and
Improvements.

                  D.       To induce Lender to make the Loan and to secure
payment of the Note, together with interest thereon, Borrower has agreed to the
execution and delivery of this Assignment.

                  NOW, THEREFORE, in consideration of the sum of Ten Dollars
($10) and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the Borrower hereby absolutely grants a first
lien on and security interest in, and hereby assigns, transfers and sets over to
Lender as additional security for the payment of the Loan and the observance and
performance by the Borrower of the terms, covenants and conditions of the Loan



Documents on the part of the Borrower to be observed or performed, all of the
Borrower's right, title and interest in and to the following:

                           (a)      to the extent assignable, all of Borrower's
right, title and interest in, to and under the documents, contracts,
instruments, plans, permits, licenses (including, without limitation, all liquor
licenses and other beverage permits), approvals, applications, trade names and
trademarks (including, without limitation, any licenses of, or agreements to
license, trade names or trademarks now or hereafter entered into by or on behalf
of Borrower or Manager in connection with the operation of the Property),
insurance policies, equipment leases, purchase and sale agreements, and other
instruments described or existing with respect to the Property or any portion
thereof, and any amendments or modifications thereto, any replacements thereof
executed during the term of the Note and any other similar documents or
instruments with respect to the Property or any portion thereof, now in
existence or hereafter executed by Borrower or now in the possession of Borrower
or hereafter obtained by Borrower (collectively, the "DOCUMENTS");

                           (b)      to the extent assignable, all rights,
powers, privileges, claims, remedies and causes of action of every kind which
Borrower now has or may in the future have with respect to or by reason of its
interest in the Documents; and

                           (c)      to the extent assignable, any and all
proceeds (including non-cash proceeds) of any of the foregoing (the items
enumerated in the preceding subparagraphs (a) and (b) and in this subparagraph
(c) being hereinafter collectively referred to as the "COLLATERAL").

                  1.       This Assignment is given to secure the obligations of
Borrower under and in respect of (a) the Note and (b) the other Loan Documents.
The parties intend that this Assignment shall be a present, actual, absolute and
unconditional assignment and shall, immediately upon execution, give Lender the
right to assume Borrower's interest in the Collateral; provided, however, that
unless an Event of Default under any of the Loan Documents shall have occurred
and be continuing, Borrower shall have a license to utilize the Collateral in
accordance with the terms thereof. If an Event of Default shall have occurred
and be continuing under any of the Loan Documents, Borrower's license mentioned
in the immediately preceding sentence shall cease and terminate, without the
execution of any further instrument or document or the taking of any other act
on the part of Lender, and in such event, subject to the terms of the Loan
Agreement and the other Loan Documents, Lender shall be entitled to utilize the
Collateral in Borrower's place and stead, in the name of Borrower or otherwise,
and in furtherance thereof, subject to the terms of the Loan Agreement and the
other Loan Documents, Lender may enter upon the Property and take possession of
the Property by its officers, agents or employees, or by a court-appointed
receiver, and for the operation, protection, repair and maintenance of the
Property, and in connection therewith, Lender shall be entitled to take
possession of and use all books of account and financial records of Borrower and
its property managers or representatives relating to the Property.

                  2.       Neither this Assignment nor any action or inaction on
the part of Lender shall constitute an assumption on the part of Lender of any
duty or obligation with respect to the Collateral, nor shall Lender have any
duty or obligation to make any payment to be made by Borrower under the
Collateral, or to present or file any claim, or to take any other action to

                                      -2-


collect or enforce the payment of any amounts or the performance of any
obligations which have been assigned to Lender or to which it may be entitled
hereunder at any time or times. No action or inaction on the part of Lender
shall adversely affect or limit in any way the rights of Lender hereunder or
under the Collateral, and Lender shall not incur any liability on account of any
action taken (or not taken) by it or on its behalf in connection with the
Collateral in good faith, whether or not the same shall prove to be improper,
inadequate or invalid, in whole or in part.

                  3.       Borrower shall indemnify and hold Lender harmless
from and against any and all liabilities, losses and damages which Lender may
incur by reason of this Assignment and any actions of Lender taken (or not
taken) in connection with the Collateral, and from and against any and all
claims and demands whatsoever which may be asserted against Lender by reason of
any alleged obligations to be performed or discharged by Lender by reason of
this Assignment, and the amount thereof, including reasonable costs, expenses
and reasonable attorneys' fees and disbursements, together with interest on such
amount, at the Default Rate under the Note from the date such costs, expenses
and fees were incurred by Lender to the date of payment thereof to Lender by
Borrower, shall be secured hereby and by the other Loan Documents, and Borrower
shall reimburse Lender therefor within twenty (20) days after demand, and upon
the failure of Borrower to do so, the same shall be deemed an Event of Default
under the Loan Agreement for which Lender shall be entitled to exercise any and
all rights and remedies provided therein or at law or in equity; provided,
however, that in no event shall Borrower be required to indemnify or hold
harmless Lender for any liabilities, losses or damages resulting from Lender's
bad faith, gross negligence or willful misconduct. It is further understood that
this Assignment shall not operate to constitute Lender as a lender in possession
of the Property, or to place responsibility for the control, care, management or
repair of the Improvements upon Lender, nor shall it operate to make Lender
responsible or liable (as to Borrower) for any waste committed with respect to
the Property by any party, or for any Hazardous Material placed upon or found at
the Property, or for any dangerous or defective condition of the Improvements or
for any negligence in the management, up-keep, repair or control of the
Improvements resulting in loss, injury, death or damage to any contractor,
sub-contractor, licensee, invitee, employee, or other party, or for any other
thing or matter whatsoever.

                  4.       Borrower shall remain liable to, and shall, perform
all of its obligations under and with respect to the Collateral and shall, at
its sole cost and expense, enforce the Collateral in the ordinary course of
business and comply in all material respects with all of its obligations under
the Collateral and all the terms thereof. Borrower shall give Lender prompt
notice of any material default by any party under the Collateral. So long as (a)
Borrower is acting in the ordinary course of business, and (b) no Event of
Default has occurred and is continuing under any of the Loan Documents, except
as otherwise provided in the Loan Agreement, Borrower may alter, amend, extend,
modify, change, cancel or terminate any of the Collateral, provided that such
alterations, amendments, extensions, modifications, changes, cancellations and
terminations, taken as a whole, are not likely to result in a Material Adverse
Effect, and, except as otherwise provided in the Loan Agreement, Borrower may
enter into new Collateral on commercially reasonable terms without Lender's
prior written consent in each instance; provided, however, that Borrower shall
provide Lender with copies of any such alterations, amendments, extensions,
modifications, changes, cancellations, and terminations of

                                      -3-


the Collateral upon request of Lender unless otherwise required to be provided
pursuant to the Loan Agreement.

                  5.       Upon the occurrence and during the continuance of an
Event of Default under any of the Loan Documents, Lender shall be entitled to
all of the rights, remedies, powers and privileges available to a secured party
under the Uniform Commercial Code in any jurisdiction whose laws may apply and
this Assignment shall constitute a direction to and full authority to any person
or entity which has contracted with or is a party to any of the Documents
(collectively, the "CONTRACTING PARTIES", and individually, a "CONTRACTING
PARTY") to perform its obligations under the Documents for the benefit of Lender
without proof to any Contracting Party of the default of Borrower. In addition,
Borrower agrees that it shall, promptly upon request of Lender following such
Event of Default, execute and deliver notices to the Contracting Parties
directing that future performance of such Contracting Parties' obligations be
made at the direction of Lender. Borrower hereby irrevocably authorizes each of
the Contracting Parties to rely upon and comply with any notice or demand by
Lender for the performance by any such Contracting Party of its obligations
under any Document for the benefit of Lender, and no Contracting Party shall
have any right or duty to inquire whether an Event of Default has actually
occurred, and Borrower shall have no right to countermand its authorization
herein to the Contracting Parties to perform for the benefit of Lender.

                  6.       Borrower represents and warrants that it has full
right, power and authority, pursuant to its certificate of limited partnership
and limited partnership agreement, certificate of formation and limited
liability company agreement, or certification of incorporation and by-laws, as
the case may be, to assign the Collateral assigned hereby and that (a) to
Borrower's knowledge, the Documents in existence on the date hereof, are in full
force and effect in accordance with their respective terms, (b) Borrower has
delivered to Lender true and complete copies of the material Documents in
existence as of the date hereof, (c) neither the Collateral nor any part thereof
has been assigned, pledged or encumbered by Borrower except pursuant to this
Assignment and the other Loan Documents, (d) to Borrower's knowledge, no default
or event of default which remains uncured beyond the expiration of any
applicable grace or notice period which could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing hereunder and no Event of
Default or Default has occurred, (e) to Borrower's knowledge, none of the
Contracting Parties has any defense, set-off or counterclaim against Borrower to
the performance of any obligations of such respective Contracting Party, and (f)
its principal place of business is its address for notices as set forth in the
Loan Agreement

                  7.       Borrower, at its expense, shall execute and deliver
all such instruments and take all such action as Lender, from time to time, may
reasonably request in order to obtain the full benefits of this Assignment and
of the rights and powers herein created and to maintain and perfect the security
interest granted in this Assignment. To the extent permitted by law, Borrower
irrevocably authorizes Lender, at the expense of Borrower, to file financing
statements and continuation statements with respect to the Collateral that
Lender deems appropriate or desirable without the signature of Borrower.

                  8.       Wherever there is any conflict or inconsistency
between any terms or provisions of this Assignment and the Loan Agreement, the
terms and provisions of the Loan Agreement shall control.

                                      -4-


                  9.       All rights and remedies herein conferred may be
exercised whether or not sale proceedings are pending under the Security
Instrument or any other action or proceeding has been commenced under any of the
other Loan Documents. Lender shall not be required to resort first to the
security of this Assignment before resorting to the security of the Security
Instrument or any of the other Loan Documents and Lender may exercise the
security hereof or thereof concurrently or independently and in any order of
preference.

                  10.      This Assignment shall automatically terminate upon
payment in full of all sums due Lender under the Note, the Loan Agreement, and
the other Loan Documents, and any other indebtedness secured by the Security
Instrument.

                  11.      All notices, demands, consents, or requests which are
either required or desired to be given or furnished hereunder shall be sent and
shall be effective in the manner set forth in Section 14.5 of the Loan
Agreement.

                  12.      The provisions of this Assignment shall be binding
upon Borrower, its successors and assigns, and all persons claiming under or
through Borrower or any such successor or assign, and shall inure to the benefit
of and be enforceable by Lender and its successors and assigns. Subject to the
terms of the Loan Agreement, Lender shall have the right to assign this
Assignment and the obligations hereunder in connection with any assignment or
transfer of all or any portion of the Loan or any interest therein. The parties
hereto acknowledge that following the execution and delivery of this Assignment,
Lender may sell, transfer and assign this Assignment and certain other Loan
Documents. All references to "Lender" hereunder shall be deemed to include the
assigns of Lender and the parties hereto acknowledge that actions taken by
Lender hereunder may be taken by Lender's agents and by the agents of the
assigns of Lender.

                  13.      This Assignment shall constitute a security agreement
for all purposes under the Uniform Commercial Code as in effect in the State
where the applicable Property is located.

                  14.      This Assignment and the obligations arising hereunder
shall be governed by and construed in accordance with the laws of the State of
New York and any applicable laws of the United States of America, except that at
all times the provisions for the creation, perfection, attachment and
enforcement of the liens and the security interests created pursuant to this
Assignment shall be governed by the laws of the State where the applicable
Property is located.

                  15.      Neither this Assignment nor any provision hereof may
be changed, waived or terminated orally, but only by an instrument in writing
signed by Lender and Borrower.

                  16.      If any of the provisions of this Assignment, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Assignment, or the application
of such provision or provisions to persons or circumstances other than those to
whom or which it is held invalid or unenforceable, shall not be affected thereby
and every provision of this Assignment shall be valid and enforceable to the
fullest extent permitted by law.

                                      -5-


                  17.      The obligations of Borrower hereunder are subject to
limitations on recourse as provided in Article XII of the Loan Agreement.

                                      -6-


                  IN WITNESS WHEREOF, the Borrower has duly executed this
instrument as of the day and year first above written.

                                    BORROWERS:

                                    APICO HILLS, INC.
                                    BRUNSWICK MOTEL ENTERPRISES, INC.
                                    DOTHAN HOSPITALITY 3053, INC.
                                    DOTHAN HOSPITALITY 3071, INC.
                                    GADSDEN HOSPITALITY, INC.
                                    LODGIAN BRIDGEPORT LLC
                                    LODGIAN COLCHESTER LLC
                                    LODGIAN FLORENCE LLC
                                    LODGIAN HAMBURG LLC
                                    LODGIAN HOTELS FLOATING, LLC
                                    LODGIAN JACKSON LLC
                                    LODGIAN MEMPHIS LLC
                                    LODGIAN MEMPHIS PROPERTY OWNER, LLC
                                    LODGIAN MORGANTOWN LLC
                                    SERVICO AUSTIN, INC.
                                    SERVICO CEDAR RAPIDS, INC.
                                    SERVICO GRAND ISLAND, INC.
                                    SERVICO JAMESTOWN, INC.
                                    SERVICO LANSING, INC.
                                    SERVICO MARYLAND, INC.
                                    SERVICO NEW YORK, INC.
                                    SERVICO NIAGARA FALLS, INC.
                                    SERVICO PENSACOLA 7200, INC.
                                    SERVICO PENSACOLA 7330, INC.
                                    SERVICO WINTER HAVEN, INC.
                                    SHEFFIELD MOTEL ENTERPRISES, INC.

                                    By:/s/ Daniel E. Ellis
                                       ------------------------------------
                                       Name:  Daniel E. Ellis
                                       Title: Vice President and Secretary, or
                                              Authorized Signatory for each of
                                              the entities listed above



                                   EXHIBITS A

                                   PROPERTIES



     CHAIN/NAME                     CITY                           ST
- ---------------------      -----------------------                 --
                                                             
Holiday Inn Express        Dothan (ex Hampton)                     AL
Quality Inn                Dothan                                  AL
Holiday Inn Express        Gadsden (Attalla)                       AL
Holiday Inn                Sheffield                               AL
Holiday Inn                Pensacola                               FL
Holiday Inn Express        Pensacola  (ex Hampton)                 FL
Holiday Inn                Winter Haven                            FL
Holiday Inn                Brunswick                               GA
Holiday Inn                Valdosta                                GA
Fairfield Inn              Valdosta                                GA
Crowne Plaza               Cedar Rapids                            IA
Holiday Inn                Florence                                KY
Clarion Hotel              Louisville                              KY
Holiday Inn                Silver Spring                           MD
Holiday Inn                Lansing                                 MI
Holiday Inn                St. Louis North                         MO
Holiday Inn                Grand Island                            NY
Holiday Inn                Hamburg                                 NY
Holiday Inn                Jamestown                               NY
Holiday Inn Select         Niagara Falls                           NY
Four Points Sheraton       Niagara Falls                           NY
Holiday Inn                Pittsburgh (Pkwy East)                  PA
Fairfield Inn              Jackson                                 TN
French Quarter Suites      Memphis                                 TN
Holiday Inn                Memphis                                 TN
Holiday Inn                Austin                                  TX
Fairfield Inn              Colchester                              VT
Holiday Inn                Clarksburg (Bridgeport)                 WV
Holiday Inn                Morgantown                              WV

EX-10.1.8

                                                                  EXHIBIT 10.1.8

                              COOPERATION AGREEMENT

                  THIS COOPERATION AGREEMENT (this "AGREEMENT") is made as of
the 25th day of June, 2004, by and between the Mortgage Borrowers listed on the
signature page hereof (collectively, the "MORTGAGE BORROWERS"), LODGIAN
MEZZANINE FLOATING, LLC (the "MEZZANINE BORROWER"), and MERRILL LYNCH MORTGAGE
LENDING, INC., in its capacity as both mortgage lender and mezzanine lender
("LENDER").

                                    RECITALS:

                  A.       The Mortgage Borrowers, by those certain Promissory
Notes of even date herewith given to Lender (the "MORTGAGE NOTE"), are indebted
to Lender in the original principal sum of One Hundred Ten Million and No/100
Dollars ($110,000,000.00) (the "MORTGAGE LOAN") as governed by that certain Loan
and Security Agreement of even date herewith between the Mortgage Borrowers and
Lender (together with all extensions, renewals, modifications, substitutions and
amendments thereof, the "MORTGAGE LOAN AGREEMENT").

                  B.       The Mezzanine Borrower, by that certain Mezzanine
Note of even date herewith given to Lender (the "MEZZANINE NOTE"), is indebted
to Lender in the aggregate principal sum of One Hundred and No/100 Dollars
$100.00 (the "MEZZANINE LOAN") as governed by that certain Mezzanine Loan
Agreement of even date herewith between the Mezzanine Borrower and Lender
(together with all extensions, renewals, modifications, substitutions and
amendments thereof, the "MEZZANINE LOAN AGREEMENT").

                  C.       Lender has required as a condition to making the
Mortgage Loan and the Mezzanine Loan that the Mortgage Borrowers and the
Mezzanine Borrower enter into this Agreement with Lender.

                                    AGREEMENT

                  For ten ($10) dollars and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:

                  Section 1. Adjustment of Mortgage Loan and Mezzanine Loan/Loan
Modification. Lender shall have the right in its sole discretion, at any time
prior to the final Securitization of the Mortgage Loan, to separately adjust the
principal amount and applicable interest rates of the Mortgage Loan and the
Mezzanine Loan (each, a "LOAN MODIFICATION") provided that: (i) the aggregate
principal amount of the Mortgage Loan and the Mezzanine Loan immediately after
such adjustment shall equal the aggregate outstanding principal balance of the
Mortgage Loan and the Mezzanine Loan immediately prior to such adjustment, (ii)
the weighted average spread used in calculating the interest rate of the
Mortgage Loan and the Mezzanine Loan immediately after such adjustment shall
equal the weighted average spread used in calculating the interest rate which
was applicable to the Mortgage Loan and the Mezzanine Loan immediately prior to
such adjustment, (iii) the aggregate debt service payments on the Mortgage Loan



and the Mezzanine Loan immediately after such adjustment shall equal the
aggregate debt service payments which were due under the Mortgage Loan and the
Mezzanine Loan immediately prior to such adjustment, and (iv) the other material
terms and provisions of each of the Mortgage Loan and the Mezzanine Loan shall
remain unchanged and none of the foregoing adjustments shall increase the
obligations or reduce the rights of the Mortgage Borrowers, the Mezzanine
Borrower or Guarantor in any material respect. Any Loan Modification shall be
subject to the following:

                  (a)      If Lender elects to increase the principal amount of
the Mezzanine Loan, the Mezzanine Borrower shall contribute to the Mortgage
Borrowers such additional loan proceeds to be applied to repay, dollar for
dollar, the Mortgage Note (in an amount and as designated by Lender), and the
Lender under the Mortgage Note will accept such prepayment without penalty,
premium or additional costs to the Mortgage Borrowers (except as provided
herein). If Lender elects to increase the principal amount of the Mortgage Loan
and reduce the principal amount of the Mezzanine Loan, the Mortgage Borrowers
shall distribute to the Mezzanine Borrower such additional loan proceeds to be
applied to repay, dollar for dollar, the Mezzanine Note (in an amount and as
designated by Lender), and the Lender under the Mezzanine Note will accept such
prepayment without penalty, premium or additional costs to the Mezzanine
Borrower (except as provided herein);

                  (b)      The Mortgage Borrowers and the Mezzanine Borrower
shall cooperate, and shall cause Guarantor and any Affiliates thereof (the
"LODGIAN PARTIES") to cooperate, with all reasonable requests of Lender in
connection with any Loan Modification including, without limitation (x)
execution and delivery of such documents as shall reasonably be required by
Lender in connection therewith (including amended and restated notes, amended
and restated loan agreements, replacement Mortgages, replacement Assignments of
Leases, and ratifications by Guarantor of any of its obligations under any
guaranties or indemnities provided under the Mortgage Loan or the Mezzanine
Loan), and (y) adjustment of each Cap (as such term is defined in the Mortgage
Loan Agreement and the Mezzanine Loan Agreement) such that, following adjustment
of the principal amount of the Mortgage Loan and the Mezzanine Loan pursuant to
the terms hereof, (i) the Cap delivered in connection with the Mortgage Loan
shall have a notional amount equal to the then outstanding principal balance of
the Mortgage Loan, and (ii) the Cap delivered (or, if none is required by Lender
at Closing, to be delivered) in connection with the Mezzanine Loan shall have a
notional amount equal to the then outstanding principal balance of the Mezzanine
Loan;

                  (c)      The Mortgage Borrowers and the Mezzanine Borrower
hereby absolutely and irrevocably appoint Lender their true and lawful attorney
coupled with an interest, in their name and stead to make and execute all
documents necessary to effect the Loan Modification, provided, however, that
Lender shall not make or execute any such documents under such power until ten
(10) days after notice by Lender to Mortgage Borrowers and Mezzanine Borrower of
such intent to exercise its right under such power;

                  (d)      At Lender's request, in connection with any Loan
Modification the Mortgage Borrowers and the Mezzanine Borrower shall deliver to
Lender, at the Mortgage Borrowers' and the Mezzanine Borrower's expense,
replacement opinion letters in form and substance similar to the opinion letters
delivered on the Closing Date addressed to any

                                       2


subsequent holders of the Mortgage Loan or the Mezzanine Loan or any interest
therein (including, without limitation, each trustee holding the Mortgage Loan
or the Mezzanine Loan) with respect to any opinion letter delivered in
connection with the Mortgage Loan and the Mezzanine Loan;

                  (e)      Lender shall pay all reasonable out-of-pocket costs
and expenses incurred by the Mortgage Borrowers and the Mezzanine Borrower in
connection with a Loan Modification (other than the Mortgage Borrowers',
Mezzanine Borrower's and Guarantor's internal costs and expenses, and the costs
and expenses of their respective counsel, mortgage recording fees and taxes,
required endorsements, if any, to the Title Policies (as such term is defined in
the Mortgage Loan Agreement and the Mezzanine Loan Agreement), and costs
incurred in adjusting each Cap).

                  Section 2. Capitalized Terms; Notices. Capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Mortgage Loan Agreement. Any notices, requests, demands or other communications
required or permitted hereunder shall be delivered as specified in the Mortgage
Loan Agreement and the Mezzanine Loan Agreement.

                  Section 3. Event of Default. It shall be an Event of Default
under the Mortgage Loan and the Mezzanine Loan if any of the Mortgage Borrowers,
the Mezzanine Borrower, or the Lodgian Parties fail to comply with any of the
terms, covenants or conditions of this Agreement within ten (10) Business Days
after receipt of written request from Lender.

                  Section 4. Governing Law. This Agreement shall be governed,
construed, applied and enforced in accordance with the laws of the State of New
York and the applicable laws of the United States of America.

                  Section 5. No Oral Change. This Agreement, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of the Mortgage
Borrowers, the Mezzanine Borrower, Guarantor, or Lender, but only by an
agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.

                  Section 6. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Mortgage Borrowers, the Mezzanine
Borrower, Guarantor, and Lender and their respective successors and assigns
forever.

                  Section 7. Inapplicable Provisions. If any term, covenant or
condition of this Agreement is held to be invalid, illegal or unenforceable in
any respect, this Agreement shall be construed without such provision.

                  Section 8. Headings, etc. The headings and captions of various
paragraphs of this Agreement are for convenience of reference only and are not
to be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.

                  Section 9. Duplicate Originals, Counterparts. This Agreement
may be executed in any number of duplicate originals and each duplicate original
shall be deemed to be an original. This Agreement may be executed in several
counterparts, each of which

                                       3


counterparts shall be deemed an original instrument and all of which together
shall constitute a single Agreement. The failure of any party hereto to execute
this Agreement, or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder.

                         [NO FURTHER TEXT ON THIS PAGE]

                                       4


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

                                     LENDER:

                                     MERRILL LYNCH MORTGAGE
                                     LENDING, INC.

                                     By:/s/ Richard Spinna
                                        --------------------------------------
                                     Name:  Richard Spinna
                                     Title: Vice President

                       [signatures continue on next page]



                                     MEZZANINE BORROWER:

                                     LODGIAN MEZZANINE FLOATING, LLC

                                     By:/s/ Daniel E. Ellis
                                        --------------------------------------
                                     Name: Daniel E. Ellis
                                     Title: Vice President and Secretary

                                     MORTGAGE BORROWERS:

                                     APICO HILLS, INC.
                                     BRUNSWICK MOTEL ENTERPRISES, INC.
                                     DOTHAN HOSPITALITY 3053, INC.
                                     DOTHAN HOSPITALITY 3071, INC.
                                     GADSDEN HOSPITALITY, INC.
                                     LODGIAN BRIDGEPORT LLC
                                     LODGIAN COLCHESTER LLC
                                     LODGIAN FLORENCE LLC
                                     LODGIAN HAMBURG LLC
                                     LODGIAN HOTELS FLOATING, LLC
                                     LODGIAN JACKSON LLC
                                     LODGIAN MEMPHIS LLC
                                     LODGIAN MEMPHIS PROPERTY OWNER, LLC
                                     LODGIAN MORGANTOWN LLC
                                     SERVICO AUSTIN, INC.
                                     SERVICO CEDAR RAPIDS, INC.
                                     SERVICO GRAND ISLAND, INC.
                                     SERVICO JAMESTOWN, INC.
                                     SERVICO LANSING, INC.
                                     SERVICO MARYLAND, INC.
                                     SERVICO NEW YORK, INC.
                                     SERVICO NIAGARA FALLS, INC.
                                     SERVICO PENSACOLA 7200, INC.
                                     SERVICO PENSACOLA 7330, INC.
                                     SERVICO WINTER HAVEN, INC.
                                     SHEFFIELD MOTEL ENTERPRISES, INC.

                                     By:/s/ Daniel E. Ellis
                                        --------------------------------------
                                     Name:  Daniel E. Ellis
                                     Title: Vice President and Secretary, or
                                            Authorized Signatory for each of the
                                            entities listed above



                                     GUARANTOR:

                                     LODGIAN, INC.

                                     By:/s/ Daniel E. Ellis
                                        --------------------------------------
                                     Name:  Daniel E. Ellis
                                     Title: Senior Vice President

EX-10.1.9

                                                                  EXHIBIT 10.1.9

           COLLATERAL ASSIGNMENT OF INTEREST RATE PROTECTION AGREEMENT

            This COLLATERAL ASSIGNMENT OF INTEREST RATE PROTECTION AGREEMENT,
dated as of June 25, 2004 (this "ASSIGNMENT"), made by the undersigned, each
having an address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30326 (collectively, "ASSIGNOR"), in favor of MERRILL LYNCH
MORTGAGE LENDING, INC., a Delaware corporation, having an address at Four World
Financial Center, New York, New York 10080 (together with its successors,
transferees and assigns, "ASSIGNEE"). Capitalized terms used but not defined
herein shall have the meanings assigned such terms in that certain Loan and
Security Agreement, dated as of the date hereof (as amended, modified or
restated, the "LOAN AGREEMENT"), between Assignor and Assignee.

            1. For good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Assignor hereby pledges, assigns, transfers and
grants a security interest to Assignee in and to all its right, title and
interest in, to and under (a) the interest rate hedge or protection agreement
and any related confirmation described on EXHIBIT A attached hereto and made a
part hereof (such agreement(s) and confirmation(s), as same may be amended or
modified, and any renewals or replacements thereof, or successor agreements
thereto, collectively, the "RATE PROTECTION AGREEMENT"), with the counterparty
indicated on the signature page hereof (the "COUNTERPARTY"), and (b) all amounts
received or receivable under the Rate Protection Agreement and all "proceeds"
(as defined in the Uniform Commercial Code adopted in the State of New York (the
"UCC")) thereof, to have and to hold the same, unto Assignee, its successors and
assigns. This Assignment constitutes additional security for payment by
Borrowers of that certain loan in the original principal amount of One Hundred
and Ten Million and No/100 Dollars ($110,000,000.00) from Lender to Borrowers
evidenced by or arising pursuant to the Loan Agreement and pursuant to the other
Loan Documents.

            2. Counterparty hereby consents to the above collateral assignment
by Assignor of the Rate Protection Agreement and agrees that Counterparty will
make any payments to become payable under or pursuant to the Rate Protection
Agreement to, or at the direction of, Assignee from time to time, until such
time as this Assignment is terminated or otherwise canceled, at which time
Counterparty will be instructed to make payments to, or at the direction of,
Assignor. Assignor hereby irrevocably instructs and authorizes Counterparty to
make any payments payable pursuant to the Rate Protection Agreement to Assignee
by wire transfer to the Lock Box Account at the following address:

                           Wachovia Bank, National Association
                           ABA #:     053-000-219
                           Account #: 5000000053793
                           Account Name: Merrill Lynch Mortgage Lending, Inc. as
                                         Mortgagee of Lodgian, Inc.

Collateral Assignment of Interest
Rate Protection Agreement [FL]



            3. Upon the occurrence and during the continuance of an Event of
Default, Assignee shall be entitled to exercise all remedies provided under the
UCC with respect to the Rate Protection Agreement and the other related
collateral pledged hereunder.

            4. Assignor hereby covenants and agrees that Assignor shall not,
without first obtaining Assignee's written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, convey, assign, sell, mortgage,
encumber, pledge, hypothecate, grant a security interest in, grant an option or
options with respect to, or otherwise dispose of (directly or indirectly,
voluntarily or involuntarily, by operation of law or otherwise, and whether or
not for consideration) the Rate Protection Agreement or any interest therein,
provided, however, Assignor shall be permitted to assign or otherwise transfer
the Rate Protection Agreement in connection with a Permitted Assumption pursuant
to Section 11.3 of the Loan Agreement. Assignor and Counterparty hereby covenant
and agree that Assignor and Counterparty shall not, without first obtaining
Assignee's written consent, which consent shall not be unreasonably withheld,
conditioned or delayed, amend, modify, cancel or terminate the Rate Protection
Agreement.

            5. This Assignment shall be governed by and construed in accordance
with the laws of the State of New York, without regard to conflicts of law
principles.

            6. This Assignment shall terminate upon payment in full of the
Obligations of Borrowers under the Loan Documents.

            7. This Assignment shall be binding upon Assignor and its successors
and assigns and shall inure to the benefit of Assignee and its successors and
assigns.

            8. Subject to the terms of the Loan Agreement, Assignee shall have
the right to assign this Assignment and the obligations hereunder in connection
with any assignment or transfer of all or any portion of the Loan or any
interest therein. The parties hereto acknowledge that following the execution
and delivery of this Assignment, Assignee may sell, transfer and assign this
Assignment and certain other Loan Documents. All references to "Assignee"
hereunder shall be deemed to include the successors and assigns of Assignee and
the parties hereto acknowledge that actions taken by Assignee hereunder may be
taken by Assignee's agents and by the agents of the successors and assigns of
Assignee.

            9. In consideration of the foregoing agreement by Counterparty,
Borrower agrees that (a) Counterparty shall be entitled to conclusively rely
(without any independent investigation) on any notice or instructions from
Lender in respect of the Rate Protection Agreement, and (b) Counterparty shall
be held harmless and shall be fully indemnified by Borrower, from and against
any and all claims, other than those ultimately determined to be founded on
gross negligence or willful misconduct of Counterparty, and from and against any
damages, penalties, judgments, liabilities, losses or expenses (including
reasonable attorney's fees and disbursements) incurred by Counterparty as a
result of the assertion of any claim, by any person or entity, arising out of,
or otherwise related to, any actions taken or omitted to be taken by
Counterparty in reliance upon any such instructions or notice provided by Lender
in accordance herewith and the Loan Agreement.

                                       2

Collateral Assignment of Interest
Rate Protection Agreement [FL]



            10. This Assignment may be executed in any number of counterparts
each of which shall be an original, but all of which shall constitute one
instrument.

            11. The obligations of Assignor hereunder are subject to limitations
on recourse as provided in Article XII of the Loan Agreement.

                            [SIGNATURE PAGES FOLLOW]

                                       3

Collateral Assignment of Interest
Rate Protection Agreement [FL]



                          ASSIGNOR:

                          APICO HILLS, INC.
                          BRUNSWICK MOTEL ENTERPRISES, INC.
                          DOTHAN HOSPITALITY 3053, INC.
                          DOTHAN HOSPITALITY 3071, INC.
                          GADSDEN HOSPITALITY, INC.
                          LODGIAN BRIDGEPORT LLC
                          LODGIAN COLCHESTER LLC
                          LODGIAN FLORENCE LLC
                          LODGIAN HAMBURG LLC
                          LODGIAN HOTELS FLOATING, LLC
                          LODGIAN JACKSON LLC
                          LODGIAN MEMPHIS LLC
                          LODGIAN MEMPHIS PROPERTY OWNER, LLC
                          LODGIAN MORGANTOWN LLC
                          SERVICO AUSTIN, INC.
                          SERVICO CEDAR RAPIDS, INC.
                          SERVICO GRAND ISLAND, INC.
                          SERVICO JAMESTOWN, INC.
                          SERVICO LANSING, INC.
                          SERVICO MARYLAND, INC.
                          SERVICO NEW YORK, INC.
                          SERVICO NIAGARA FALLS, INC.
                          SERVICO PENSACOLA 7200, INC.
                          SERVICO PENSACOLA 7330, INC.
                          SERVICO WINTER HAVEN, INC.
                          SHEFFIELD MOTEL ENTERPRISES, INC.

                          By: /s/ Daniel E. Ellis
                              -----------------------------------------
                          Name:    Daniel E. Ellis
                          Title:   Vice President and Secretary, or
                                   Authorized Signatory for each of the
                                   entities listed above

Collateral Assignment of Interest
Rate Protection Agreement [FL]



                          ACKNOWLEDGED AND AGREED BY COUNTERPARTY:

                          MERRILL LYNCH MORTGAGE LENDING, INC.

                          By: /s/ Robert Spuler
                              --------------------------------------------
                          Name: Robert Spuler
                          Title: Senior Vice President

Collateral Assignment of Interest
Rate Protection Agreement [FL]



                                    EXHIBIT A

                       (Description of Rate Cap Agreement)

Confirmation dated as of June 24, 2004 and effective as of June 24, 2004, by and
between SWISS RE FINANCIAL PRODUCTS CORPORATION, as Party A, and Assignor, as
Party B, and any replacements thereof confirming the Transaction (as defined
therein), together with Guaranty of SWISS REINSURANCE COMPANY, dated as of March
25, 2004, and made with respect to all Guaranteed Obligations (as defined in
such Guaranty) of Party A, including the Rate Protection Agreement.

Collateral Assignment of Interest
Rate Protection Agreement [FL]

EX-10.1.10

                                                                 EXHIBIT 10.1.10

                            CASH MANAGEMENT AGREEMENT

                           Dated: as of June 25, 2004

                                      among

                                  THE BORROWERS
                      LISTED ON THE SIGNATURE PAGES HERETO,
                                  as Borrowers,

                      MERRILL LYNCH MORTGAGE LENDING, INC.
                                   as Lender,

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                                    as Agent

                                       and

                LODGIAN MANAGEMENT CORP., a Delaware corporation,
                                   as Manager



                            CASH MANAGEMENT AGREEMENT

                  CASH MANAGEMENT AGREEMENT (this "AGREEMENT"), dated as of June
25, 2004, among the Borrowers listed on the signature pages hereto, each having
an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30326 (each, a "BORROWER", and collectively, "BORROWERS"), WACHOVIA
BANK, NATIONAL ASSOCIATION, having an address at 8739 Research Drive, URP4,
Charlotte, North Carolina 28288-1075 ("AGENT"), MERRILL LYNCH MORTGAGE LENDING,
INC., a Delaware corporation having an office at Four World Financial Center,
New York, New York 10080 ("LENDER"), and LODGIAN MANAGEMENT CORP., a Delaware
corporation, having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite
700, Atlanta, Georgia 30326 ("MANAGER").

                              W I T N E S S E T H:

                  WHEREAS, pursuant to a certain Loan and Security Agreement,
dated as of the date hereof (together with all extensions, renewals,
modifications, substitutions and amendments thereof, the "LOAN AGREEMENT"),
between the Borrowers and Lender, Lender has made a loan to the Borrowers in the
principal amount of One Hundred Ten Million and No/100 Dollars ($110,000,000.00)
(the "LOAN"), which Loan is evidenced by a Promissory Note, dated as of the date
hereof (together with all extensions, renewals, modifications, restatements,
replacements, substitutions, by means of multiple notes or otherwise, and
amendments thereof, collectively, the "NOTE"), made by the Borrowers, as makers,
to Lender, as payee, and secured by, among other things, (i) those certain
Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents,
Security Agreements and Fixture Filings, each dated as of the date hereof
(together with all extensions, renewals, modifications, restatements,
substitutions and amendments thereof, each a "SECURITY INSTRUMENT" and,
collectively, the "SECURITY INSTRUMENTS"), each made by a Borrower for the
benefit of Lender and covering the properties as more particularly described
therein (collectively, the "PROPERTIES"), (ii) those certain Assignments of
Leases and Rents, dated as of the date hereof (together with all extensions,
renewals, modifications, restatements, substitutions and amendments thereof,
collectively, the "ASSIGNMENT OF LEASES"), made by the applicable Borrower, as
assignor, to Lender, as assignee, and (iii) the other Loan Documents (as defined
in the Loan Agreement);

                  WHEREAS, pursuant to the Security Instruments and the
Assignment of Leases, the Borrowers have each granted to Lender a security
interest in all of the Borrowers' right, title and interest in, to and under the
Rents (as defined in the Security Instruments) and other revenues derived from
and otherwise attributable or allocable to the Properties, and have assigned and
conveyed to Lender all of the Borrowers' right, title and interest in, to and
under the Operating Revenues due and to become due to each of the Borrowers or
to which any of the Borrowers are now or may hereafter become entitled, arising
out of the Property or any part or parts thereof;

                  WHEREAS, the Borrowers and Manager have entered into
Management Agreements with respect to the Properties pursuant to which Manager
has agreed to manage the Properties; and



                  WHEREAS, Manager has agreed to subordinate any right, title
and interest that Manager may have in and to the Operating Revenues and any
other income and revenues from the Properties to the interests of Lender under
the Loan Agreement and the Loan Documents; and

                  WHEREAS, in order to fulfill all of the Borrowers' obligations
under the Loan Agreement, the Borrowers and Manager have agreed that all
Operating Revenues and other revenues from the Properties will be deposited
directly into the Deposit Account or the Lock Box Account (as such terms are
hereinafter defined), transferred to a Lock Box Account (if not deposited
directly therein) established hereunder with Agent and allocated and/or
disbursed in accordance with the terms and conditions hereof.

                  NOW, THEREFORE, in consideration of the covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

                  I.       DEFINITIONS

                  Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Loan Agreement. As used herein, the following terms
shall have the following definitions:

                  "ACCOUNTS" shall mean, collectively, the Deposit Account, the
Lock Box Account, the Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds
Account, and any other accounts pledged to Lender pursuant to this Agreement or
any of the other Loan Documents.

                  "AGENT" shall mean Wachovia Bank, National Association, as
agent under this Agreement, together with its successors and assigns.

                  "AGREEMENT" shall mean this Cash Management Agreement among
the Borrowers, Manager, Agent and Lender, as amended, supplemented, restated or
otherwise modified from time to time.

                  "APPROVED OPERATING BUDGET" shall mean, for any period, each
Borrower's Operating Budget as approved or deemed approved by Lender from time
to time in accordance with Section 5.1(D) of the Loan Agreement, setting forth
such Borrower's reasonable estimate of Operating Revenues and Operating Expenses
for the applicable Property for such period.

                  "BORROWERS" as defined in the Preamble, together with their
successors and permitted assigns.

                  "BUSINESS INTERRUPTION INSURANCE" as defined in Section
2.1(d).

                  "CAP" means the interest rate cap agreement to be provided by
the Borrowers pursuant to Section 2.3 of the Loan Agreement.

                  "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

                                       2


                  "CASH TRAP EVENT" as defined in Section 6.8 of the Loan
Agreement.

                  "CASH TRAP RESERVE SUB-ACCOUNT" as defined in Section 2.1(c).

                  "COLLATERAL"  as defined in Section 5.1.

                  "CREDIT CARD COMPANIES" as defined in Section 2.2(a).

                  "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" as defined
in Section 2.2(a).

                  "DEBT SERVICE SUB-ACCOUNT" as defined in Section 2.1(c).

                  "DEPOSIT ACCOUNT" as defined in Section 2.1(a).

                  "DEPOSIT ACCOUNT AGREEMENT" as defined in Section 2.1(a).

                  "DEPOSIT BANK" as defined in Section 2.1(a).

                  "ELIGIBLE ACCOUNT" shall mean a separate and identifiable
account from all other funds held by the holding institution, which account is
either (i) an account maintained with an Eligible Bank or (ii) a segregated
trust account maintained by a corporate trust department of a federal depository
institution or a state chartered depository institution subject to regulations
regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulation Section 9.10(b), which, in either case, has corporate trust powers
and is acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.

                  "ELIGIBLE BANK" shall mean a bank that satisfies the Rating
Criteria.

                  "EXCESS CASH FLOW" means any and all amounts available for
distribution in any calendar month after allocations and/or distribution of all
amounts required to be allocated under Sections 3.3(a)(i) through (ix) hereof.

                  "EXTRAORDINARY EXPENSES" shall mean any extraordinary
Operating Expense or Capital Expenditure not set forth in the Approved Operating
Budget then in effect for the Property.

                  "EXTRAORDINARY RECEIPTS" shall mean any receipts of the
Borrowers not included within the definition of Operating Revenues under the
Loan Agreement, including, without limitation, receipts from litigation
proceedings and tax certiorari proceedings.

                  "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" as defined in Section
2.1(e).

                  "FF&E RESERVE ACCOUNT" as defined in Section 2.1(f).

                  "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT" as
defined in Section 2.1(c).

                                       3


                  "IMPOSITIONS AND INSURANCE RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

                  "LENDER" shall mean Merrill Lynch Mortgage Lending, Inc.,
together with its successors and assigns.

                  "LOCK BOX ACCOUNT" as defined in Section 2.1(b).

                  "LOSS PROCEEDS ACCOUNT" as defined in Section 2.1(d).

                  "MANAGER" shall mean Lodgian Management Corp., together with
its successors and permitted assigns.

                  "MEZZANINE BORROWER" as defined in the Loan Agreement.

                  "MEZZANINE LENDER" as defined in the Loan Agreement.

                  "MEZZANINE LENDER'S PERCENTAGE" as defined in the Loan
Agreement.

                  "MEZZANINE LOAN" as defined in the Loan Agreement.

                  "MEZZANINE LOAN AGREEMENT" means that certain Mezzanine Loan
Agreement dated as of the date hereof, between Mezzanine Lender and Mezzanine
Borrower.

                  "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" as defined in
Section 2.1(c).

                  "MEZZANINE SERVICER" means the Servicer as such term is
defined in the Mezzanine Loan Agreement.

                  "MEZZANINE SERVICING FEE" shall mean the monthly Servicing Fee
(as defined in the Mezzanine Loan Agreement) for which the Mezzanine Borrower is
responsible pursuant to Section 2.11 of the Mezzanine Loan Agreement.

                  "MINIMUM BALANCE" as defined in Section 2.1(g).

                  "MINIMUM BALANCE SUB-ACCOUNT" as defined in Section 2.1(c).

                  "MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean the monthly
payment of principal and interest on the Loan required to be paid on each
Monthly Payment Date during the term of the Loan.

                  "MONTHLY FF&E PAYMENT" shall mean the monthly deposit required
to be made to the FF&E Reserve pursuant to Section 6.4 of the Loan Agreement for
any month provided that if at the time of determination thereof the actual
Operating Revenues utilized in calculating the Monthly FF&E Payment have not
been determined for the prior calendar month (the "Measurement Month"), such
calculation shall be based upon the Operating Revenues set forth for the
Measurement Month in the applicable Operating Budget (the "Estimated Monthly
FF&E Payment"), and, upon determination of the actual Operating Revenues for the
Measurement Month, funds from the Lock Box Account in an amount equal to any
deficit between the

                                       4


Estimated Monthly FF&E Payment and the Monthly FF&E Payment required to be
allocated to the FF&E Reserve based upon the actual Operating Revenues for the
Measurement Month, shall be allocated (or if funds available in the Lock Box
Account and not otherwise required to be deposited in any other Sub-Account for
the applicable month are not sufficient to cover such deficit, paid by the
Borrowers) to the FF&E Reserve within five (5) Business Days of such
determination. Any excess of the Estimated Monthly FF&E Payment allocated to the
FF&E Reserve for the applicable month over the Monthly FF&E Payment based upon
the actual Operating Revenues for the Measurement Month shall be made available
for allocation to the other Sub-Accounts or disbursed in accordance with Section
3.3(a) hereof.

                  "MONTHLY IMPOSITIONS AND INSURANCE AMOUNT" shall mean the
aggregate monthly deposit for Impositions and Insurance Premiums required to be
paid pursuant to Section 6.3 of the Loan Agreement.

                  "MONTHLY MEZZANINE DEBT SERVICE PAYMENT AMOUNT" shall mean the
monthly payment of principal and interest on the Mezzanine Loan required to be
paid on each Monthly Payment Date to Mezzanine Lender pursuant to the Mezzanine
Loan Agreement.

                  "MONTHLY OPERATING EXPENSE BUDGET AMOUNT" shall mean, with
respect to each month, an amount equal to the Operating Expenses plus estimated
sales, use, occupancy and similar taxes relating to the Properties (excluding
therefrom Impositions, Insurance Premiums, FF&E expenditures, and management
fees payable to any Manager that is an Affiliate of the Borrowers) set forth in
the Approved Operating Budget for the applicable month of determination.

                  "MONTHLY PAYMENT DATE" means the date that is the last day of
each calendar month occurring during the term of the Loan (or if such last day
of such calendar month is not a Business Day, the immediately preceding day that
is a Business Day).

                  "MORTGAGE LENDER'S PERCENTAGE" as defined in the Loan
Agreement.

                  "OPERATING EXPENSES" as defined in the Loan Agreement.

                  "OPERATING EXPENSE SUB-ACCOUNT" as defined in Section 2.1(c).

                  "OPERATING REVENUES" as defined in the Loan Agreement.

                  "PERMITTED INVESTMENTS" shall mean any one or more of the
following obligations or securities acquired at a purchase price of not greater
than par, including those issued by any Servicer, the trustee under any
Securitization or any of their respective Affiliates, payable on demand or
having a maturity date not later than the Business Day immediately prior to the
date on which the invested sums are required for payment of an obligation for
which the related Sub-Account was created and meeting one of the appropriate
standards set forth below:

                           (i)      obligations of, or obligations fully
         guaranteed as to payment of principal and interest by, the United
         States or any agency or instrumentality thereof, provided such
         obligations are backed by the full faith and credit of the United
         States of America including, without limitation, obligations of: the
         U.S. Treasury (all direct or

                                       5


         fully guaranteed obligations), the Farmers Home Administration
         (certificates of beneficial ownership), the General Services
         Administration (participation certificates), the U.S. Maritime
         Administration (guaranteed Title XI financing), the Small Business
         Administration (guaranteed participation certificates and guaranteed
         pool certificates), the U.S. Department of Housing and Urban
         Development (local authority bonds) and the Washington Metropolitan
         Area Transit Authority (guaranteed transit bonds); provided, however,
         that the investments described in this clause (i) must (A) have a
         predetermined fixed dollar amount of principal due at maturity that
         cannot vary or change, (B) if rated by S&P, not have an "r" highlighter
         affixed to their rating, (C) if such investments have a variable rate
         of interest, have an interest rate tied to a single interest rate index
         plus a fixed spread (if any) and must move proportionately with that
         index, and (D) not be subject to liquidation prior to their maturity;

                           (ii)     Federal Housing Administration debentures;

                           (iii)    obligations of the following United States
         government sponsored agencies: Federal Home Loan Mortgage Corp. (debt
         obligations), the Farm Credit System (consolidated systemwide bonds and
         notes), the Federal Home Loan Banks (consolidated debt obligations),
         the Federal National Mortgage Association (debt obligations), the
         Student Loan Marketing Association (debt obligations), the Financing
         Corp. (debt obligations), and the Resolution Funding Corp. (debt
         obligations); provided, however, that the investments described in this
         clause (iii) must (A) have a predetermined fixed dollar amount of
         principal due at maturity that cannot vary or change, (B) if rated by
         S&P, not have an "r" highlighter affixed to their rating, (C) if such
         investments have a variable rate of interest, have an interest rate
         tied to a single interest rate index plus a fixed spread (if any) and
         must move proportionately with that index, and (D) not be subject to
         liquidation prior to their maturity;

                           (iv)     federal funds, unsecured certificates of
         deposit, time deposits, bankers' acceptances and repurchase agreements
         with maturities of not more than 365 days of any bank, the short term
         obligations of which at all times are rated in the highest short term
         rating category by each Rating Agency (or, if not rated by all Rating
         Agencies, rated by at least one Rating Agency in the highest short term
         rating category and otherwise acceptable to each other Rating Agency,
         as confirmed in writing that such investment would not, in and of
         itself, result in a downgrade, qualification or withdrawal of the
         initial or, if higher, then current ratings assigned to any class of
         certificates or other securities issued in connection with any
         Securitization backed in whole or in part by the Loan (collectively the
         "CERTIFICATES"); provided, however, that the investments described in
         this clause (iv) must (A) have a predetermined fixed dollar amount of
         principal due at maturity that cannot vary or change, (B) if rated by
         S&P, not have an "r" highlighter affixed to their rating, (C) if such
         investments have a variable rate of interest, have an interest rate
         tied to a single interest rate index plus a fixed spread (if any) and
         must move proportionately with that index, and (D) not be subject to
         liquidation prior to their maturity;

                           (v)      fully Federal Deposit Insurance
         Corporation-insured demand and time deposits in, or certificates of
         deposit of, or bankers' acceptances issued by, any

                                       6


         bank or trust company, savings and loan association or savings bank,
         the short term obligations of which at all times are rated in the
         highest short term rating category by each Rating Agency (or, if not
         rated by all Rating Agencies, rated by at least one Rating Agency in
         the highest short term rating category and otherwise acceptable to each
         other Rating Agency, as confirmed in writing that such investment would
         not, in and of itself, result in a downgrade, qualification or
         withdrawal of the initial or, if higher, then current ratings assigned
         to any class of Certificates); provided, however, that the investments
         described in this clause (v) must (A) have a predetermined fixed dollar
         of principal due at maturity that cannot vary or change, (B) if rated
         by S&P, not have a "r" highlighter affixed to their rating, (C) if such
         investments have a variable rate of interest, have an interest rate
         tied to a single interest rate index plus a fixed spread (if any) and
         must move proportionately with that index, and (D) not be subject to
         liquidation prior to their maturity;

                           (vi)     debt obligations with maturities of not more
         than 365 days and at all times rated by each Rating Agency (or, if not
         rated by all Rating Agencies, rated by at least one Rating Agency and
         otherwise acceptable to each other Rating Agency, as confirmed in
         writing that such investments would not, in and of itself, result in a
         downgrade, qualification or withdrawal of the initial or, if higher,
         then current ratings assigned to the Certificates) in its highest
         long-term unsecured debt rating category; provided, however, that the
         investments described in this clause (vi) must (A) have a predetermined
         fixed dollar amount of principal due at maturity that cannot vary or
         change, (B) if rated by S&P, not have an "r" highlighter affixed to
         their rating, (C) if such investments have a variable rate of interest,
         have an interest rate tied to a single interest rate index plus a fixed
         spread (if any) and must move proportionately with that index, (D) not
         be subject to liquidation prior to their maturity, and (E) if such
         investment has a maturity of (1) less than one month, have a long-term
         rating of at least "A2" by Moody's, (2) up to three months, have a
         long-term rating of at least "Aa" by Moody's, (3) up to six months,
         have a long-term rating of at least "Aa3" by Moody's, and (4) over six
         months, have a long-term rating of at least "Aaa" by Moody's;

                           (vii)    commercial paper (including both
         non-interest-bearing discount obligations and interest-bearing
         obligations payable on demand or on a specified date not more than one
         year after the date of issuance thereof) with maturities of not more
         than 365 days and that at all times is rated by each Rating Agency (or,
         if not rated by all Rating Agencies, rated by at least one Rating
         Agency and otherwise acceptable to each other Rating Agency, as
         confirmed in writing that such investment would not, in and of itself,
         result in a downgrade, qualification or withdrawal of the initial or,
         if higher, then current ratings assigned to any class of Certificates)
         in its highest short-term unsecured debt rating; provided, however,
         that the investments described in this clause (vii) must (A) have a
         predetermined fixed dollar amount of principal due at maturity that
         cannot vary or change, (B) if rated by S&P, not have a "r" highlighter
         affixed to their rating, (C) if such investments have a variable rate
         of interest, have an interest rate tied to a single interest rate index
         plus a fixed spread (if any) and must move proportionately with that
         index, and (D) not be subject to liquidation prior to their maturity;

                                       7


                           (viii)   units of taxable money market funds or
         mutual funds, which funds are regulated investment companies, seek to
         maintain a constant net asset value per share and have the highest
         rating from each Rating Agency (or, if not rated by all Rating
         Agencies, rated by at least one Rating Agency and otherwise acceptable
         to each other Rating Agency, as confirmed in writing that such
         investment would not, in and of itself, result in a downgrade,
         qualification or withdrawal of the initial or, if higher, then current
         ratings assigned to any class of Certificates) for money market funds
         or mutual funds; and

                           (ix)     any other security, obligation or investment
         which has been approved as a Permitted Investment in writing by (a)
         Lender and (b) each Rating Agency, as evidenced by a written
         confirmation that the designation of such security, obligation or
         investment as a Permitted Investment will not, in and of itself, result
         in a downgrade, qualification or withdrawal of the initial or, if
         higher, then current ratings assigned to any class of Certificates by
         such Rating Agency;

provided, however, that such instrument continues to qualify as a "CASH FLOW
INVESTMENT" pursuant to Code Section 860G(a)(6) earning a passive return in the
nature of interest and no obligation or security shall be a Permitted Investment
if (A) such obligation or security evidences a right to receive only interest
payments or (B) the right to receive principal and interest payments on such
obligation or security are derived from an underlying investment that provides a
yield to maturity in excess of 120% of the yield to maturity at par of such
underlying investment; and provided, further, no obligation or security, other
than an obligation or security constituting real estate assets, cash, cash items
or Government securities pursuant to Code Section 856(c)(4)(A), shall be a
Permitted Investment if the value of such obligation or security exceeds ten
percent (10%) of the total value of the outstanding securities of any one
issuer.

                  "RATING CRITERIA" with respect to any Person, shall mean that
(i) the short-term unsecured debt obligations of such Person are rated at least
"A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such
Person for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa3" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.

                  "SERVICING FEE" shall mean the monthly Servicing Fee (as
defined in the Loan Agreement) for which the Borrowers are responsible under
Section 2.11 of the Loan Agreement.

                  "SPECIAL PAYMENTS" shall mean (x) any Release Price paid
pursuant to the Loan Agreement, (y) any principal prepayments made pursuant to
Sections 2.5(B)(iii), 5.5(C) or 6.8 of the Loan Agreement, and (z) any
Prepayment Consideration due on any of the foregoing principal prepayments
received pursuant to the terms of the Loan Agreement.

                  "SUB-ACCOUNTS" shall mean, collectively, the Debt Service
Sub-Account, the Impositions and Insurance Reserve Sub-Account, the Mezzanine
Loan Debt Service Sub-Account, the Capital Improvement Reserve Sub-Account, the
Hazardous Materials Remediation Reserve Sub-Account, the Extraordinary Receipts
Sub-Account, the Cash Trap Reserve Sub-

                                       8


Account, the Operating Expense Sub-Account, the Minimum Balance Sub-Account and
any other sub-accounts of the Lock Box Account which may hereafter be
established by Lender hereunder.

                  "UCC" as defined in Section 5.1(a)(iv).

                  II.      THE ACCOUNTS

                  SECTION 2.1 ESTABLISHMENT OF DEPOSIT ACCOUNT, LOCK BOX ACCOUNT
AND SUB-ACCOUNTS.

                  (a)      DEPOSIT ACCOUNT. On or before the Closing Date, one
or more deposit accounts (collectively, the "DEPOSIT ACCOUNT") shall be
established at the Borrowers' sole cost and expense with financial institutions
approved by Lender (collectively, the "DEPOSIT BANK"), each pursuant to an
agreement (collectively, the "DEPOSIT ACCOUNT AGREEMENT") in form and substance
reasonably acceptable to Lender, executed and delivered by each Borrower and the
applicable Deposit Bank. Among other things, the Deposit Account Agreement shall
provide that the Borrowers shall have no access to or control over the Deposit
Account, and that all available funds on deposit in the Deposit Account shall be
deposited by wire transfer (or transfer via the ACH System) on each Business Day
by the Deposit Bank into the Lock Box Account.

                  (b)      LOCK BOX ACCOUNT. On or before the Closing Date, an
Eligible Account shall be established with Agent for the purposes specified
herein, which shall be entitled "Lock Box Account for the benefit of Merrill
Lynch Mortgage Lending, Inc., its successors and assigns, as secured party"
(said account, and any account replacing the same in accordance with this
Agreement, the "LOCK BOX ACCOUNT"). The Lock Box Account shall be under the sole
dominion and control of Lender and/or its designee, including any Servicer of
the Loan, and the Borrowers shall have no rights to control or direct the
investment or payment of funds therein except as may be expressly provided
herein.

                  Any amounts that Lender may hold in reserve pursuant to the
Loan Agreement may be held by Lender in the Lock Box Account (including in a
Sub-Account thereof) or may be held in another account or manner as specified in
Articles VI or VII of the Loan Agreement.

                  (c)      SUB-ACCOUNTS OF THE LOCK BOX ACCOUNT. The Lock Box
Account shall be deemed to contain, among others, the following Sub-Accounts
(which may be maintained as separate ledger accounts):

                           (i)      "DEBT SERVICE SUB-ACCOUNT" shall mean the
         Sub-Account established for the purpose of depositing the amounts
         required for payments of principal and interest under the Loan and all
         other amounts then due under the Note and the Loan Agreement;

                           (ii)     "IMPOSITION AND INSURANCE RESERVE
         SUB-ACCOUNT" shall mean the Sub-Account established for the purpose of
         depositing the sums required to be deposited pursuant to Section 6.3 of
         the Loan Agreement;

                                       9


                           (iii)    "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT"
         shall mean the Sub-Account established for the purpose of depositing
         the sums required to be deposited pursuant to Section 6.5 of the Loan
         Agreement;

                           (iv)     "HAZARDOUS MATERIALS REMEDIATION RESERVE
         SUB-ACCOUNT" shall mean the Sub-Account established for the purpose of
         depositing sums required to be deposited pursuant to Section 6.6 of the
         Loan Agreement;

                           (v)      "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT"
         shall mean the Sub-Account established for the purpose of depositing
         the amounts required for payments of the Monthly Mezzanine Debt Service
         Payment Amount;

                           (vi)     "CASH TRAP RESERVE SUB-ACCOUNT" shall mean
         the Sub-Account established for the purpose of depositing Excess Cash
         Flow when required to be deposited pursuant to Section 6.8 of the Loan
         Agreement;

                           (vii)    "OPERATING EXPENSE SUB-ACCOUNT" shall mean
         the Sub-Account established for the purpose of depositing the Monthly
         Operating Expense Budget Amount, Extraordinary Expenses approved by
         Lender, if any, and fees due to the Manager; and

                           (viii)   "MINIMUM BALANCE SUB-ACCOUNT" shall mean the
         Sub-Account established for the purpose of depositing and maintaining
         the Minimum Balance as and to the extent required under Section 2.1(g)
         hereof.

                  (d)      If the proceeds of any business interruption or rent
loss insurance maintained under Section 5.4 of the Loan Agreement (any such
insurance, "BUSINESS INTERRUPTION INSURANCE") paid upon the occurrence of any
fire or casualty to any Property shall be paid in a lump sum (rather than on a
monthly basis), the Borrowers and Lender shall establish a separate Eligible
Account with Agent hereunder entitled "Loss Proceeds Account for the benefit of
Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as secured
party" (said account, the "LOSS PROCEEDS ACCOUNT") for deposit of such Business
Interruption Insurance proceeds and such proceeds shall be held, allocated and
disbursed in accordance with the terms and conditions hereof and of the Loan
Agreement. The Loss Proceeds Account shall be under the sole dominion and
control of Lender and/or its designee, including any Servicer of the Loan, and
the Borrowers shall have no rights to control or direct the investment or
payment of funds therein except as expressly provided herein.

                  (e)      If any Extraordinary Receipts are received by any
Borrower, such amounts shall be paid to the Lock Box Account to be retained in a
subaccount thereof (the "EXTRAORDINARY RECEIPTS SUB-ACCOUNT"). Amounts held in
the Extraordinary Receipts Sub-Account shall be disbursed to the Lock Box
Account and allocated and distributed in accordance with Section 3.3 upon
receipt by Lender of evidence reasonably satisfactory to Lender that (x) with
respect to Extraordinary Receipts received in connection with any pending
litigation, action, or similar matter, such action has been concluded in favor
of the Borrowers and no appeal has been timely filed within the applicable
appeal period, (y) with respect to Extraordinary Receipts received with respect
to work at, or other conditions with respect to, any of the Properties, the

                                       10


item of work or other condition has been completed or corrected and paid for to
the reasonable satisfaction of Lender, and (z) with respect to Extraordinary
Receipts received in any other circumstance, the Borrowers are not liable
directly, or indirectly, to refund or repay any such amounts; provided however,
all Extraordinary Receipts with respect to lease termination payments, advance
booking terminations, and similar payments or fees, shall be retained in the
Extraordinary Receipts Sub-Account and disbursed in equal monthly installments
during the period of time for which such payments relate in accordance with
Section 3.3. The Extraordinary Receipts Sub-Account shall be under the sole
dominion and control of Lender and/or its designee, including any Servicer of
the Loan, and the Borrowers shall have no rights to control or direct the
investment or payment of funds therein except as expressly provided herein.

                  (f)      On or before the Closing Date, the Borrowers shall
establish a separate Eligible Account hereunder entitled "FF&E Reserve Account
for the benefit of Merrill Lynch Mortgage Lending, Inc., its successors and
assigns, as secured party" (said account, the "FF&E RESERVE ACCOUNT") with Agent
for the purpose of depositing Monthly FF&E Reserve Payments pursuant to Section
6.4 of the Loan Agreement, to be held, allocated and disbursed in accordance
with the terms and conditions hereof and of the Loan Agreement. The FF&E Reserve
Account shall be under the sole dominion and control of Lender and/or its
designee, including any Servicer of the Loan, and the Borrowers shall have no
rights to control or direct the investment or payment of funds therein except as
expressly provided herein and in the Loan Agreement. Notwithstanding the
foregoing, the Borrowers shall, in accordance with the terms of this Agreement
and the Loan Agreement, have access to and the right to withdraw funds held in
the FF&E Reserve Account on or prior to (x) the occurrence and during the
continuance of an Event of Default, or (y) the failure of the Borrowers or
Manager to comply with the reporting requirements set forth in Section 5.1(A)(v)
of the Loan Agreement, at which time Agent, upon receipt of notice from Lender,
shall (i) cease to honor checks drawn by Manager or any Borrower on the FF&E
Reserve Account, (ii) cease to disburse funds from the FF&E Reserve Account to
either the Manager or the Borrowers except in accordance with written
instructions received from Lender, and (iii) deposit the amounts in the FF&E
Reserve Account, together with any funds from time to time held or deposited or
received into the FF&E Reserve Account, in accordance with Lender's instructions
from time to time on the day such instructions are received, if such
instructions are received prior to 12:00 p.m. on such day, or, if received after
12:00 p.m., on the following Business Day. The Borrowers shall not withdraw any
funds from the FF&E Reserve Account in violation of this Agreement or the Loan
Agreement.

                  (g)      Upon the occurrence and during the continuance of a
Cash Trap Event or an Event of Default, the Borrowers shall be required to
deposit, from and at the time of the allocations from the Lock Box Account
pursuant to Section 3.3(a)(ix) hereof, and maintain in the Minimum Balance
Sub-Account an amount equal to $50,000 (the "MINIMUM BALANCE"). In the event
that, during the continuance of a Cash Trap Event, funds available in a Deposit
Account are insufficient to pay the amount of any checks deposited into such
Deposit Account which are returned for insufficient or uncollected funds
(collectively "CHARGEBACKS"), and such Chargebacks are required to be paid by
the applicable Borrower to the applicable Deposit Account Bank pursuant to the
terms of the applicable Deposit Account Agreement, provided that no Event of
Default exists, funds shall be made available from the Minimum Balance
Sub-Account to the applicable Borrower to pay the amount of such Chargebacks due
to such Deposit Account Bank (or to reimburse the applicable Borrower for any
such amounts as may have been

                                       11


previously paid by or on behalf of such Borrower from other funds on account of
any Chargebacks at a time when insufficient amounts were available therefor in
the Minimum Balance Sub-Account) promptly after delivery to Lender of evidence
reasonably satisfactory to Lender that such amounts are due (or have been paid
by or on behalf of the applicable Borrower). In the event that during a Cash
Trap Event, as a result of any such disbursement or otherwise, the Minimum
Balance Sub-Account shall contain less than the Minimum Balance, the Borrowers
shall be required to deposit such deficiency from and at the time of allocations
from the Lock Box Account pursuant to Section 3.3(a)(ix) hereof.

                  SECTION 2.2 DEPOSITS INTO ACCOUNTS. The Borrowers and Manager
represent, warrant and covenant that:

                  (a)      Each Borrower and Manager shall cause all Operating
Revenues and other income and revenues received by such Borrower or Manager to
be deposited directly into the Deposit Account for each applicable Property. The
Borrowers shall obtain an agreement (each, a "CREDIT CARD RECEIVABLES PAYMENT
DIRECTION LETTER") from each of the Persons paying or disbursing credit card
receivables (each, a "CREDIT CARD COMPANY" and collectively, the "CREDIT CARD
COMPANIES"), in substantially the form of EXHIBIT A attached hereto or as
otherwise approved by Lender in its reasonable discretion, pursuant to which the
Credit Card Companies agree to pay all credit card receivables for the
Properties directly into the Lock Box Account, and acknowledge and agree that
Lender shall have a first priority perfected security interest in such credit
card receivables. Pursuant to the Deposit Account Agreement, all available funds
on deposit in the applicable Deposit Account shall be deposited directly by the
Deposit Bank into the Lock Box Account by wire transfer on each Business Day.

                  (b)      If any Borrower or Manager receives any Operating
Revenues or other income or revenues from any Property, or any Extraordinary
Receipts, then such receipt shall not constitute a Default provided (i) such
amounts shall be deemed to be Collateral and shall be held in trust for the
benefit, and as the property, of Lender, and (ii) such Borrower or Manager shall
deposit such amounts into the applicable Deposit Account within two (2) Business
Days of receipt.

                  (c)      Without the prior written consent of Lender, which
shall not be unreasonably withheld, delayed or conditioned, neither the
Borrowers nor Manager shall (i) terminate, amend, revoke or modify any Credit
Card Receivables Payment Direction Letter in any manner whatsoever, or (ii)
direct or cause any Credit Card Company to pay any amount in any manner other
than as provided in the related Credit Card Receivables Payment Direction
Letter, unless a replacement Credit Card Receivables Payment Direction Letter in
form reasonably acceptable to Lender is executed and delivered to Lender by any
proposed replacement Credit Card Company prior to termination of the then
effective Credit Card Receivables Payment Direction Letter.

                  (d)      Each Borrower and Manager shall also cause the
proceeds of any Business Interruption Insurance to be deposited directly into
the Lock Box Account as same are paid (or, if any such proceeds are received by
such Borrower or Manager, same shall be deposited into the Lock Box Account
within two (2) Business Days after receipt thereof) and such proceeds shall be
allocated and disbursed in accordance with Section 3.3 hereof. If the proceeds
of any such

                                       12


Business Interruption Insurance are paid in a lump sum, such proceeds shall be
deposited into the Loss Proceeds Account. Agent shall cause monthly amounts to
be transferred from the Loss Proceeds Account to the Lock Box Account as
directed by Lender (based upon a ratable allocation of such proceeds over the
casualty restoration period as reasonably determined by Lender) on the first
(1st) Business Day of each calendar month during the period of restoration of
the Property, and after transfer of same to the Lock Box Account, such amounts
shall be allocated and disbursed in accordance with Section 3.3 hereof.

                  (e)      The Borrowers and Manager shall also cause any
payments and proceeds payable to the Borrowers under any Cap entered into by or
for the benefit of the Borrowers and pledged to Lender in accordance with the
terms of the Loan Agreement to be deposited directly into the Lock Box Account
by the applicable Cap Provider (or, if any such proceeds are received by any
Borrower or Manager, same shall be deposited into the Lock Box Account within
two (2) Business Days after receipt thereof) and such proceeds shall be
allocated, disbursed and applied in accordance with Section 3.3 hereof.

                  SECTION 2.3 ACCOUNT NAME. The Accounts shall each be in the
names set forth herein; provided, however, that if Lender transfers or assigns
the Loan, Agent, at Lender's request (with respect to the Accounts other than
the Deposit Account), and each Deposit Bank (with respect to its Deposit
Account) shall change the name of each Account to the name of the transferee or
assignee. If Lender retains a Servicer to service the Loan, Agent, at Lender's
request, shall change the name of each Account to the name of Servicer, as agent
for Lender.

                  SECTION 2.4 ELIGIBLE ACCOUNTS/CHARACTERIZATION OF ACCOUNTS.
The Borrowers and Agent shall maintain each Account (other than the Deposit
Account) as an Eligible Account. Each Account (other than the Deposit Account)
is and shall be treated as a "SECURITIES ACCOUNT" as such term is defined in
Section 8-501(a) of the UCC. Agent hereby agrees that each item of property
(whether investment property, financial asset, securities, securities
entitlement, instrument, cash or other property) credited to each Account shall
be treated as a "FINANCIAL ASSET" within the meaning of Section 8-102(a)(9) of
the UCC. Agent shall, subject to the terms of this Agreement, treat Lender as
entitled to exercise the rights that comprise any financial asset credited to
each Account. All securities or other property underlying any financial assets
credited to each Account (other than cash) shall be registered in the name of
Agent, indorsed to Agent or in blank or credited to another securities account
maintained in the name of Agent and in no case will any financial asset credited
to any Account be registered in the name of any Borrower, payable to the order
of any Borrower or specially indorsed to any Borrower.

                  SECTION 2.5 PERMITTED INVESTMENTS. Sums on deposit in the
Accounts may, at the Borrowers' election, be invested in Permitted Investments,
provided that, notwithstanding the foregoing, in no event will funds in the
Deposit Account be subject to any investment. Except during the existence of any
Event of Default, the Borrowers shall have the right to direct Agent to invest
sums on deposit in the Accounts in Permitted Investments. After an Event of
Default and during the continuance thereof, Lender may direct Agent to invest
sums on deposit in the Accounts in Permitted Investments as Lender shall
determine in its sole discretion. The Borrowers hereby irrevocably authorize and
direct Agent to apply any income earned from Permitted Investments to the
respective Accounts. The amount of actual losses sustained on a

                                       13


liquidation of a Permitted Investment shall be deposited into the Lock Box
Account by the Borrowers no later than three (3) Business Days following such
liquidation. The Borrowers shall be responsible for payment of any federal,
state or local income or other tax applicable to income earned from Permitted
Investments. The Accounts shall be assigned the federal tax identification
number of the applicable Borrowers, which numbers are set forth on the signature
page hereof. Any interest, dividends or other earnings which may accrue on the
Accounts shall be added to the balance in the applicable Account and allocated
and/or disbursed in accordance with the terms hereof.

                  III.     DEPOSITS

                  SECTION 3.1 INITIAL DEPOSITS.

                  (a)      The Borrowers shall deposit in the Debt Service
Sub-Account on the date hereof the amount of $86,166.67.

                  (b)      The Borrowers shall deposit in the Impositions and
Insurance Reserve Sub-Account on the date hereof the amount of $2,162,828.40.

                  (c)      The Borrowers shall deposit in the Hazardous
Materials Remediation Reserve Sub-Account on the date hereof the amount of
$21,368.75.

                  (d)      The Borrowers shall deposit in the FF&E Reserve
Account on the date hereof the amount of -0-.

                  (e)      The Borrowers shall deposit in the Capital
Improvement Reserve Sub-Account on the date hereof the amount of $16,019,622.00.

                  SECTION 3.2 ADDITIONAL DEPOSITS; SPECIAL PAYMENTS. The
Borrowers shall make such additional deposits into the Accounts as may be
required by the Loan Agreement. In addition, any Special Payments received by
Lender under the Loan Agreement, together with interest thereon through the
immediately following Payment Date pursuant to the Loan Agreement and the
Mezzanine Loan Agreement, shall be deposited by Lender in the Lock Box Account
and shall, at any time other than after the occurrence and during the
continuance of an Event of Default, be distributed by Agent on the immediately
following Monthly Payment Date, or on such earlier date as may be reasonably
requested by Lender, as follows: (i) to Lender, the Mortgage Lender's Percentage
of such Special Payment together with any interest due thereon pursuant to the
terms of the Loan Agreement, and (ii) to Mezzanine Lender, the Mezzanine
Lender's Percentage of such Special Payment together with any interest due
thereon pursuant to the terms of the Mezzanine Loan Agreement. Lender and
Mezzanine Lender shall apply such portions of the Special Payments as provided
in the Loan Agreement and in the Mezzanine Loan Agreement, as applicable.

                  SECTION 3.3 ALLOCATION OF FUNDS FROM THE LOCK BOX ACCOUNT.

                  (a)      At any time other than after the occurrence and
during the continuance of an Event of Default, Agent shall allocate and deposit,
as applicable, all available funds on

                                       14


deposit in the Lock Box Account on each Business Day of each calendar month (or
such other period of time as set forth below) in the following amounts and order
of priority:

                           (i)      First, to the Impositions and Insurance
         Reserve Sub-Account, the Monthly Impositions and Insurance Amount for
         the next Monthly Payment Date;

                           (ii)     Second, (A) to the Agent, as Servicer, the
         monthly Servicing Fee on the Loan and then (B) to the Debt Service
         Sub-Account, the Monthly Debt Service Payment Amount due under the Loan
         Agreement for the next Monthly Payment Date;

                           (iii)    Third, to the FF&E Reserve Account, the
         Monthly FF&E Payment for the next Monthly Payment Date;

                           (iv)     Fourth, to the Operating Expense
         Sub-Account, funds sufficient to pay the Monthly Operating Expense
         Budget Amount for the next calendar Month;

                           (v)      Fifth, to the Operating Expense Sub-Account,
         funds in an amount necessary to pay Extraordinary Expenses approved by
         Lender, if any;

                           (vi)     Sixth, to the Operating Expense Sub-Account,
         subject to the terms and conditions of the Assignment of Management
         Agreement, any management fees due and owing to Manager which have not
         previously been paid to Manager, together with any fees payable to
         Manager for the next calendar month pursuant to the Management
         Agreement not otherwise paid pursuant to (iv) above;

                           (vii)    Seventh, to the Debt Service Sub-Account any
         late payment charges, default interest, and any other amounts (other
         than interest and principal paid pursuant to (ii) above) then due and
         owing under the Loan Agreement;

                           (viii)   Eighth, for so long as the Mezzanine Loan is
         outstanding, (A) to the Mezzanine Servicer, the monthly Mezzanine
         Servicing Fee, and then (B) to the Mezzanine Loan Debt Service
         Sub-Account, an amount equal to the Monthly Mezzanine Debt Service
         Payment Amount due for the next Monthly Payment Date under the
         Mezzanine Loan Agreement;

                           (ix)     Ninth, if a Cash Trap Event shall have
         occurred and is continuing and the balance then held in the Minimum
         Balance SubAccount is less than the Minimum Balance, to the Minimum
         Balance Sub-Account until such Sub-Account contains the Minimum
         Balance;

                           (x)      Tenth, if a Cash Trap Event shall have
         occurred and is continuing, any amounts remaining in the Lock Box
         Account after deposits for items (i) through (ix) above shall be
         deposited into the Cash Trap Reserve Sub-Account; and

                           (xi)     Eleventh, if no Cash Trap Event shall have
         occurred and is continuing, any amounts remaining in the Lock Box
         Account after deposits for items (i) through (viii) above shall be paid
         to, or as directed by, the Borrowers.

                                       15


                  (b)      If there are insufficient funds in the Lock Box
Account for the deposits required by Sections 3.3(a)(i) through (iii) and (vii)
above, the Borrowers shall deposit such deficiency into the Lock Box Account on
or before the applicable Monthly Payment Date. Except as expressly provided in
Section 6.8 of the Loan Agreement, under no circumstances shall Lender be
required to utilize the Cash Trap Reserve or funds in any other Sub-Account to
cure any deficiencies in any other Sub-Accounts. The deposit by the Borrowers of
any such deficiency pursuant to this Section 3.3(b) shall satisfy the obligation
of the Borrowers to make the related deposit under the Loan Agreement.

                  (c)      The Borrowers shall use, or caused to be used, all
disbursements made to it under Sections 3.3(a)(iv) and (v) solely to pay
Operating Expenses in accordance with the Approved Operating Budget and to pay
Extraordinary Expenses for which Lender has approved disbursements under Section
3.3(a)(v) above.

                  (d)      Notwithstanding anything to the contrary contained
herein, Lender shall not be obligated to make any disbursement from the Lock Box
Account (under Sections 3.3(a)(iv) and (v) or otherwise) to pay for any costs or
expenses (including legal fees) in connection with any dispute or defense of the
Borrowers under any of the Loan Documents.

                  (e)      Upon the expiration of a Cash Trap Event in
accordance with Section 6.8 of the Loan Agreement, any funds remaining in the
Cash Trap Reserve Sub-Account and in the Minimum Balance Sub-Account will be
disbursed pursuant to Section 6.8 of the Loan Agreement.

                  (f)      Notwithstanding anything herein to the contrary, upon
the occurrence and during the continuance of an Event of Default, all funds on
deposit in the Lock Box Account, the Sub-Accounts, the FF&E Reserve Account, and
any Loss Proceeds Account shall be disbursed to or as directed by Lender, it
being agreed that application of any such amounts shall be in Lender's sole
discretion and shall not be subject to the terms of Section 3.3(a) hereof.

                  (g)      Except as otherwise agreed to by Lender in writing,
no funds shall be withdrawn from the FF&E Reserve Account other than in
accordance with the CapEx/FF&E Budget.

                  SECTION 3.4 DISBURSEMENTS FOR OPERATING EXPENSE AMOUNTS. The
Borrowers shall provide on a monthly basis (a) a reasonably detailed explanation
of any variances of ten percent (10%) or more between budgeted (as set forth in
the Approved Operating Budget) and actual Operating Expense amounts for any
month in the aggregate, and (b) with respect to any individual item with a cost
of $10,000 or more and not otherwise covered by the Approved Operating Budget,
all invoices or other backup requested by Lender to substantiate the amount
disbursed to the Borrowers pursuant to Section 3.3(a)(iv) and (v).

                  IV.      PAYMENT OF FUNDS FROM SUB-ACCOUNTS

                  SECTION 4.1 PAYMENTS FROM SUB-ACCOUNTS.

                  (a)      Impositions and Insurance Reserve Sub-Account. Lender
shall have the right to withdraw amounts on deposit in the Impositions and
Insurance Reserve Sub-Account to

                                       16


pay (or reimburse any Borrower for repayment of) Impositions and Insurance
Premiums in accordance with the Loan Agreement.

                  (b)      Debt Service Sub-Account. Lender shall have the right
to withdraw amounts from the Debt Service Sub-Account to pay: (i) default
interest and late charges, if any, and any amounts then due and payable under
the Note and the Loan Agreement, and (ii) the Monthly Debt Service Payment
Amount on each Monthly Payment Date on which same are due and payable under the
Loan Agreement.

                  (c)      Operating Expense Sub-Account. Funds deposited into
the Operating Expense Sub-Account pursuant to Sections 3.3(a)(iv) through (vi)
shall be distributed to the Borrowers on each Business Day.

                  (d)      Mezzanine Loan Debt Service Sub-Account. On each
Monthly Payment Date, all funds held in the Mezzanine Loan Debt Service
Sub-Account shall be distributed to Mezzanine Lender, and such distribution
shall be deemed to have been distributed by the Borrowers to the Mezzanine
Borrowers and shall be applied by Mezzanine Borrowers to the obligations under
the Mezzanine Loan Agreement.

                  (e)      Distributions to the Borrowers. Following the date in
each month that Borrower has made all required deposits pursuant to Section
3.3(i) through (viii), to the extent that Excess Cash Flow is to be distributed
to the Borrowers pursuant to Section 3.3(a)(xi) above, such funds shall be
distributed to the Borrowers on each Business Day.

                  (f)      FF&E Reserve Account. Distributions from the FF&E
Reserve Account will be made in accordance with Section 2.1(f).

                  (g)      Minimum Balance Sub-Account. Distributions from the
Minimum Balance Sub-Account will be made in accordance with Section 2.1(g).

                  SECTION 4.2 REQUESTS FOR WITHDRAWALS FROM THE HAZARDOUS
MATERIALS REMEDIATION RESERVE SUB-ACCOUNT AND CAPITAL IMPROVEMENT RESERVE
SUB-ACCOUNT. Agent shall disburse funds on deposit in the Hazardous Materials
Remediation Reserve Sub-Account and the Capital Improvement Reserve Sub-Account
within five (5) Business Days after written request made from time to time (but
not more often than twice per calendar month) by the Borrowers in accordance
with the terms and conditions of Section 6.7 of the Loan Agreement.

                  SECTION 4.3 SOLE DOMINION AND CONTROL. The Borrowers and
Manager acknowledge and agree that the Accounts are subject to the sole
dominion, control and discretion of Lender, its authorized agents or designees,
including Agent, subject to the terms hereof and the Loan Agreement. Neither the
Borrowers nor Manager shall have any right of withdrawal with respect to any
Account except, subject to the terms and conditions hereof and the Loan
Agreement, the FF&E Reserve Account. Agent shall have the right and agrees to
comply with the instructions of Lender with respect to the Accounts without the
further consent of the Borrowers or Manager. Agent shall comply with all
"entitlement orders" (as defined in Section 8-102(a)(8) of the UCC) and
instructions originated by Lender without further consent by the Borrowers or
any other Person.

                                       17


                  V.       PLEDGE OF ACCOUNTS

                  SECTION 5.1 SECURITY FOR OBLIGATIONS. (a) To secure the full
and punctual payment and performance of all Obligations of the Borrowers under
the Loan Agreement, the Note, the Security Instruments, this Agreement and all
other Loan Documents, the Borrowers hereby grant to Lender a first priority
continuing security interest in and to the following property of the Borrowers,
whether now owned or existing or hereafter acquired or arising and regardless of
where located (all of the same, collectively, the "COLLATERAL"):

                           (i)      the Deposit Account, the Lock Box Account,
         each of the Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds
         Account and all cash, checks, drafts, certificates and instruments, if
         any, from time to time deposited or held in the Lock Box Account, each
         of the Sub-Accounts, any Loss Proceeds Account and the FF&E Reserve
         Account, including, without limitation, all deposits or wire transfers
         made to the Deposit Account, the Lock Box Account, each of the
         Sub-Accounts, the FF&E Reserve Account, and any Loss Proceeds Account;

                           (ii)     any and all amounts invested in Permitted
         Investments;

                           (iii)    all interest, dividends, cash, instruments
         and other property from time to time received, receivable or otherwise
         payable in respect of, or in exchange for, any or all of the foregoing;
         and

                           (iv)     to the extent not covered by clauses (i),
         (ii) or (iii) above, all "proceeds" (as defined under the Uniform
         Commercial Code as in effect in the State of New York (the "UCC")) of
         any or all of the foregoing.

                  (b)      Lender and Agent, as agent for Lender, shall have
with respect to the Collateral, in addition to the rights and remedies herein
set forth, all of the rights and remedies available to a secured party under the
UCC, as if such rights and remedies were fully set forth herein.

                  SECTION 5.2 RIGHTS ON DEFAULT. Upon the occurrence and during
the continuance of an Event of Default, Lender shall promptly notify Agent of
such Event of Default and, without notice from Lender, (a) the Borrowers shall
have no further right in respect of (including, without limitation, the right to
instruct Lender or Agent to transfer from) the Accounts, (b) Lender may direct
Agent to liquidate and transfer any amounts then invested in Permitted
Investments to the Accounts or reinvest such amounts in other Permitted
Investments as Lender may reasonably determine is necessary to perfect or
protect any security interest granted or purported to be granted hereby or to
enable Agent, as agent for Lender, or Lender to exercise and enforce Lender's
rights and remedies hereunder with respect to any Collateral, and (c) Lender may
apply any Collateral to any Obligations in such order of priority as Lender may
determine. The proceeds of any disposition of the Collateral, or any part
thereof, may be applied by Lender to the payment of the Obligations in such
priority and proportions as Lender in its discretion shall deem proper.

                  SECTION 5.3 FINANCING STATEMENT; FURTHER ASSURANCES.
Simultaneously herewith, the Borrowers shall deliver to Lender for filing a
financing statement or statements in

                                       18


connection with the Collateral in the form reasonably required by Lender to
properly perfect Lender's security interest therein to the extent a security
interest in the Collateral may also be perfected by filing. The Borrowers agree
that at any time and from time to time, at the expense of the Borrowers, the
Borrowers will promptly execute and deliver all further instruments and
documents, and take all further actions, that may be reasonably necessary, or
that Agent or Lender may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby (including, without
limitation, any security interest in and to any Permitted Investments) or to
enable Agent or Lender to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. In the event of any change in name, identity or
structure of any Borrower, such Borrower shall notify Lender thereof and
promptly after Lender's reasonable request shall file and record, or deliver to
Lender, such UCC financing statements (if any) as are necessary to maintain the
priority of Lender's lien upon and security interest in the Collateral, and
shall pay all expenses and fees in connection with the filing and recording
thereof. If Lender shall require the filing or recording of additional UCC
financing or continuation statements, the Borrowers shall, promptly after
request, execute, if necessary, file and record such UCC financing or
continuation statements as Lender shall deem reasonably necessary, and shall pay
all reasonable expenses and fees in connection with the filing and recording
thereof.

                  SECTION 5.4 TERMINATION OF AGREEMENT. This Agreement shall
create a continuing security interest in the Collateral and shall remain in full
force and effect until payment in full of the Obligations. Upon payment and
performance in full of the Obligations, this Agreement shall terminate and the
Borrowers shall be entitled to the return, at their expense, of such of the
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof, and Agent and/or Lender shall execute such instruments and
documents as may be reasonably requested by the Borrowers to evidence such
termination and the release of the lien hereof including, without limitation,
letters to Credit Card Companies, as applicable, prepared by the Borrowers and
reasonably acceptable to Lender rescinding the instructions set forth in the
Credit Card Receivables Payment Direction Letter and UCC-3 termination
statements.

                  VI.      RIGHTS AND DUTIES OF LENDER AND AGENT

                  SECTION 6.1 REASONABLE CARE. Beyond the exercise of reasonable
care in the custody thereof or as otherwise expressly provided herein, neither
Agent nor Lender shall have any duty as to any Collateral in its possession or
control as agent therefor or bailee thereof or any income thereon or the
preservation of rights against any Person or otherwise with respect thereto.
Agent and Lender each shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which Agent or Lender accords
its own property, it being understood that Agent and/or Lender shall not be
liable or responsible for any loss or damage to any of the Collateral, or for
any diminution in value thereof, by reason of the act or omission of Agent or
Lender, its Affiliates, agents, employees or bailees, except to the extent that
such loss or damage results from such Person's gross negligence or willful
misconduct, provided that nothing in this Article VI shall be deemed to relieve
Agent from the duties and standard of care which, as a commercial bank, it
generally owes to depositors. Neither Lender nor Agent shall have any liability
for any loss resulting from the investment of funds in Permitted Investments in
accordance with the terms and conditions of this Agreement.

                                       19


                  SECTION 6.2 INDEMNITY. Agent, in its capacity as agent
hereunder, shall be responsible for the performance only of such duties as are
specifically set forth herein, and no duty shall be implied from any provision
hereof. Agent shall not be under any obligation or duty to perform any act which
would involve it in expense or liability or to institute or defend any suit in
respect hereof, or to advance any of its own monies. The Borrowers shall
indemnify and hold Agent and Lender, their respective employees, officers,
directors and agents harmless from and against any loss, liability, cost or
damage (including, without limitation, reasonable attorneys' fees and
disbursements) incurred by Agent or Lender in connection with the transactions
contemplated hereby, except to the extent that such loss or damage results from
such Person's gross negligence or willful misconduct. The foregoing indemnity
shall survive the termination of this Agreement and the resignation and removal
of Agent.

                  SECTION 6.3 RELIANCE. Agent shall be protected in acting upon
any notice, resolution, request, consent, order, certificate, report, opinion,
bond or other paper, document or signature believed by it to be genuine, and it
may be assumed that any person purporting to act on behalf of any Person giving
any of the foregoing in connection with the provisions hereof has been duly
authorized to do so. Agent may consult with legal counsel, and the advice or
opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken or suffered by it hereunder and in good faith in
accordance therewith. Agent shall not be liable for any act or omission done or
omitted to be done by Agent in reliance upon any instruction, direction or
certification received by Agent and without gross negligence or willful or
reckless misconduct. Agent shall be entitled to execute any of the powers
hereunder or perform any duties hereunder either directly or through agents or
attorneys; provided, however, that the execution of such powers by any such
agents or attorneys shall not diminish, or relieve Agent for, responsibility
therefor to the same degree as if Agent itself had executed such powers.

                  SECTION 6.4 RESIGNATION OF AGENT.

                  (a)      Agent shall have the right to resign as Agent
hereunder upon sixty (60) days' prior written notice to the Borrowers and
Lender, and in the event of such resignation, the Borrowers shall appoint a
successor Agent which must be an Eligible Bank. No such resignation by Agent
shall become effective until a successor Agent shall have accepted such
appointment and executed an instrument by which it shall have assumed all of the
rights and obligations of Agent hereunder. If no such successor Agent is
appointed within sixty (60) days after receipt of the resigning Agent's notice
of resignation, the resigning Agent may petition a court for the appointment of
a successor Agent.

                  (b)      In connection with any resignation by Agent, (i) the
resigning Agent shall, (A) duly assign, transfer and deliver to the successor
Agent this Agreement and all cash and Permitted Investments held by it
hereunder, (B) deliver such financing statements and execute and deliver such
other instruments prepared by the Borrowers and reasonably approved by Lender or
prepared by Lender as may be reasonably necessary to assign to the successor
Agent, as agent for Lender, any security interest in the Collateral existing in
favor of the retiring Agent hereunder and to otherwise give effect to such
succession and (C) take such other actions as may be reasonably required by
Lender or the successor Agent in connection with the foregoing and (ii) the
successor Agent shall establish in Lender's name, as secured party, cash
collateral accounts, which shall become the Accounts for purposes of this
Agreement upon the succession

                                       20


of such Agent, and which Accounts shall also be "securities accounts" within the
meaning of the UCC.

                  (c)      Lender at its sole discretion shall have the right,
upon thirty (30) days notice to Agent, to substitute Agent with a successor
Agent that satisfies the requirements of an Eligible Bank or to have one or more
of the Accounts held by another Eligible Bank, provided that such successor
Agent shall perform the duties of Agent pursuant to the terms of this Agreement.

                  SECTION 6.5 LENDER APPOINTED ATTORNEY-IN-FACT. The Borrowers
hereby irrevocably constitute and appoint Lender as the Borrowers' true and
lawful attorney-in-fact, coupled with an interest and with full power of
substitution, to exercise and enforce every right, power, remedy, option and
privilege of the Borrowers with respect to the Collateral, and do in the name,
place and stead of the Borrowers, all such acts, things and deeds for and on
behalf of and in the name of the Borrowers, which the Borrowers are required to
do hereunder or under the other Loan Documents or which Agent or Lender may
reasonably deem necessary to more fully vest in Lender the rights and remedies
provided for herein and to accomplish the purposes of this Agreement including,
without limitation, the filing of any UCC financing statements or continuation
statements in appropriate public filing offices on behalf of the Borrowers, in
any of the foregoing cases, upon the Borrowers' failure to take any of the
foregoing actions within ten (10) days after notice from Lender. The foregoing
powers of attorney are irrevocable and coupled with an interest. If any Borrower
fails to perform any agreement herein contained and such failure shall continue
for ten (10) days after notice of such failure is given to such Borrower, Lender
may perform or cause performance of any such agreement, and any reasonable
expenses of Lender and Agent in connection therewith shall be paid by the
Borrowers.

                  SECTION 6.6 ACKNOWLEDGMENT OF LIEN/OFFSET RIGHTS. Agent hereby
acknowledges and agrees with respect to the Accounts that (a) the Accounts shall
be held by Agent in the names set forth herein, (b) all funds held in the
Accounts shall be held for the benefit of Lender, (c) the Borrowers have granted
to Lender a first priority security interest in the Collateral, (d) Agent shall
not disburse any funds from the Accounts except as provided herein, and (e)
Agent shall invest and reinvest any balance of the Accounts in Permitted
Investments in accordance with Section 2.5 hereof. Agent hereby waives any right
of offset, banker's lien or similar rights against, or any assignment, security
interest or other interest in, the Collateral.

                  SECTION 6.7 REPORTING PROCEDURES.

                  Agent shall provide the Borrowers and Lender with a record of
all checks and any other items deposited to the Lock Box Account or processed
for collection. Agent shall send a daily credit advice to the Borrowers and
Manager, which credit advice shall specify the amount of each receipt deposited
into each Account on such date. Agent shall send a monthly report to the
Borrowers, Manager and Lender, which monthly report shall specify the credits
and charges to the Accounts for the previous calendar month. Agent shall, at the
request of Lender, establish Lender and its designated Servicer, and the
Borrowers, as users of Agent's electronic data transfer system in accordance
with Agent's standard procedures; provided that, the Borrowers' access shall be
limited to information services and shall under no circumstances provide the
Borrowers with transaction rights in any such account. Upon request of Lender or
its designated

                                       21


Servicer, (i) Agent shall send to Lender or its designated Servicer, as
applicable, either (x) copies of the daily credit advices and any other advices
or reports furnished by Agent to the Borrowers and/or Manager hereunder or (y)
information on Account balances, to the extent said balances in the Accounts
have changed from the previous report, the aggregate amount of withdrawals from
the Accounts and other similar information via the electronic data transfer
system or facsimile transmission on a daily basis, and (ii) Agent shall advise
Lender or its designated Servicer, as applicable, of the amount of available
funds in the Accounts and shall deliver to Lender or its designated Servicer
copies of all statements and other information concerning the Accounts, to the
extent that the balances in the Accounts have changed from the previous report,
as Lender or its designated Servicer shall reasonably request. In the event
Agent shall resign as Agent hereunder, Agent shall provide the Borrowers with a
final written accounting, including closing statements, with respect to the
Accounts within thirty (30) days of resignation.

                  VII.     REMEDIES

                  SECTION 7.1 REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, Lender or Agent at the direction of Lender,
as agent for Lender, may:

                  (a)      without notice to the Borrowers, except as required
by law, and at any time or from time to time, charge, set-off and otherwise
apply all or any part of the Collateral against the Obligations or any part
thereof, including, without limitation, reasonable costs and expenses set forth
in Section 8.4 hereof;

                  (b)      in its sole discretion, at any time and from time to
time, exercise any and all rights and remedies available to it under this
Agreement, and/or as a secured party under the UCC and/or under any other
applicable law or in equity; and

                  (c)      demand, collect, take possession of, receive, settle,
compromise, adjust, sue for, foreclose or realize upon the Collateral (or any
portion thereof) as Lender may determine in its sole discretion.

                  SECTION 7.2 WAIVER. The Borrowers hereby expressly waive, to
the fullest extent permitted by law, presentment, demand, protest or any notice
of any kind in connection with this Agreement or the Collateral. The Borrowers
acknowledge and agree that ten (10) days' prior written notice of the time and
place of any public sale of the Collateral or any other intended disposition
thereof shall be reasonable and sufficient notice to the Borrowers within the
meaning of the UCC.

                  VIII.    MISCELLANEOUS

                  SECTION 8.1 TRANSFERS AND OTHER LIENS. Each Borrower agrees
that it will not (i) sell or otherwise dispose of any of the Collateral or (ii)
create or permit to exist any Lien upon or with respect to all or any of the
Collateral, except for the Lien granted under this Agreement.

                  SECTION 8.2 LENDER'S RIGHT TO PERFORM BORROWER'S OBLIGATIONS;
NO LIABILITY OF LENDER. If any Borrower fails to perform any of the covenants or
obligations contained herein, and such failure shall continue for a period ten
(10) Business Days after such Borrower's receipt of written notice thereof from
Lender, Lender may itself perform, or cause

                                       22


performance of, such covenants or obligations, and the reasonable expenses of
Lender incurred in connection therewith shall be payable by the Borrowers to
Lender. Notwithstanding Lender's right to perform certain obligations of the
Borrowers, it is acknowledged and agreed that the Borrowers retain control of
the Property and operation thereof and notwithstanding anything contained herein
or Agent's or Lender's exercise of any of its rights or remedies hereunder,
under the Loan Documents or otherwise at law or in equity, neither Agent nor
Lender shall be deemed to be a mortgagee-in-possession nor shall Lender be
subject to any liability with respect to the Property or otherwise based upon
any claim of lender liability except as a result of Lender's gross negligence or
willful misconduct.

                  SECTION 8.3 NO WAIVER. The rights and remedies provided in
this Agreement and the other Loan Documents are cumulative and may be exercised
independently or concurrently, and are not exclusive of any other right or
remedy provided at law or in equity. No failure to exercise or delay by Agent or
Lender in exercising any right or remedy hereunder or under the Loan Documents
shall impair or prohibit the exercise of any such rights or remedies in the
future or be deemed to constitute a waiver or limitation of any such right or
remedy or acquiescence therein. Every right and remedy granted to Agent and/or
Lender hereunder or by law may be exercised by Agent and/or Lender at any time
and from time to time, and as often as Agent and/or Lender may deem it
expedient. Any and all of Agent's and/or Lender's rights with respect to the
lien and security interest granted hereunder shall continue unimpaired, and the
Borrowers shall be and remain obligated in accordance with the terms hereof,
notwithstanding (a) any proceeding of the Borrowers under the Federal Bankruptcy
Code or any bankruptcy, insolvency or reorganization laws or statutes of any
state, (b) the release or substitution of Collateral at any time, or of any
rights or interests therein or (c) any delay, extension of time, renewal,
compromise or other indulgence granted by the Agent and/or Lender in the event
of any default, with respect to the Collateral or otherwise hereunder. No delay
or extension of time by Agent and/or Lender in exercising any power of sale,
option or other right or remedy hereunder, and no notice or demand which may be
given to or made upon the Borrowers by Agent and/or Lender, shall constitute a
waiver thereof, or limit, impair or prejudice Agent's and/or Lender's right,
without notice or demand, to take any action against the Borrowers or to
exercise any other power of sale, option or any other right or remedy.

                  SECTION 8.4 EXPENSES. Agent shall deduct from the Lock Box
Account for its own account the monthly Servicing Fee for which the Borrowers
are responsible pursuant to Section 2.11 of the Loan Agreement prior to making
any disbursements pursuant to Section 3.3(a)(ii) hereof, and, for so long as the
Mezzanine Loan is outstanding, Agent shall deduct from the Lock Box Account the
monthly Mezzanine Servicing Fee for which the Mezzanine Borrower is responsible
pursuant to Section 2.11 of the Mezzanine Loan Agreement to be remitted to the
Mezzanine Servicer prior to making any disbursements pursuant to Section
3.3(a)(viii) hereof. The Collateral shall secure, and the Borrowers shall pay to
Agent and Lender within five (5) Business Days of the written demand therefor,
from time to time, all reasonable costs and expenses (including, but not limited
to, reasonable attorneys' fees and disbursements, and transfer, recording and
filing fees, taxes and other charges) of, or incidental to, the creation or
perfection of any lien or security interest granted or intended to be granted
hereby, the custody, care, sale, transfer, administration, collection of or
realization on the Collateral, or in any way relating to the enforcement,
protection or preservation of the rights or remedies of Agent and/or Lender
under this Agreement, the Loan Agreement, the Note, the Security Instruments, or
the

                                       23


other Loan Documents. Standard and customary fees and charges associated with
the Accounts shall be included on a monthly consolidated account analysis
statement which Agent shall submit to the Borrowers for the Borrowers' payment.
This statement shall set forth the fees and charges payable for such month,
including, but not limited to reasonable fees and reasonable expenses incurred
in connection with this Agreement and be accompanied by reasonably detailed
supporting documentation. Agent shall be entitled to charge the Accounts for
such reasonable fees and expenses as indicated by the analysis statement.

                  SECTION 8.5 ENTIRE AGREEMENT. This Agreement constitutes the
entire and final agreement between the parties with respect to the subject
matter hereof and may not be changed, terminated or otherwise varied, except by
a writing duly executed by the parties.

                  SECTION 8.6 NO WAIVER. No waiver of any term or condition of
this Agreement, whether by delay, omission or otherwise, shall be effective
unless in writing and signed by the party sought to be charged, and then such
waiver shall be effective only in the specific instance and for the purpose for
which given.

                  SECTION 8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, their respective
successors and permitted assigns.

                  SECTION 8.8 NOTICES. All notices, demands, requests, consents,
approvals and other communications (any of the foregoing, a "NOTICE") required,
permitted, or desired to be given hereunder to the Borrowers, Lender or Manager
shall be in writing and delivered to such parties at the addresses and in the
manner provided in Section 14.5 of the Loan Agreement. Notices to the Agent
shall be addressed as follows:

                           Wachovia Bank, National Association
                           8739 Research Drive
                           URP4
                           Charlotte, North Carolina 28288-1075
                           Attention: David Tucker
                           Facsimile No.: (704) 593-7737

                  SECTION 8.9 CAPTIONS. All captions in this Agreement are
included herein for convenience of reference only and shall not constitute part
of this Agreement for any other purpose.

                  SECTION 8.10 GOVERNING LAW. This Agreement shall be governed
by and construed and enforced in all respects in accordance with the laws of the
State of New York without regard to conflicts of law principles of such State.

                  SECTION 8.11 COUNTERPARTS. This Agreement may be executed in
any number of counterparts.

                  SECTION 8.12 EXCULPATION. The provisions of Article XII of the
Loan Agreement are hereby incorporated by reference into this Agreement as to
the liability of the Borrowers hereunder to the same extent and with the same
force as if fully set forth herein, and shall apply equally to Manager to the
same extent and with the same force as if fully set forth

                                       24


herein, provided, however, that notwithstanding the foregoing, there shall be
personal liability to the Borrowers and Manager for the payment to Lender of all
losses, damages, costs and expenses suffered or incurred by Lender and arising
from the failure of the Borrowers and/or Manager to comply with the provisions
of Section 2.2 of this Agreement.

                  SECTION 8.13 LOAN AGREEMENT. If any inconsistency exists
between the terms of this Agreement and the terms of the Loan Agreement, the
terms of the Loan Agreement shall prevail.

                                       25


                  IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                    LENDER:

                                    MERRILL LYNCH MORTGAGE LENDING, INC.

                                    By:/s/ Robert Spinna
                                       -------------------------------------
                                       Name: Robert Spinna
                                       Title: Vice President

                                    AGENT:

                                    WACHOVIA BANK, NATIONAL ASSOCIATION

                                    By:/s/ David C. Tucker
                                       -------------------------------------
                                       Name: David C. Tucker
                                       Title: Vice President

                                    MANAGER:

                                    LODGIAN MANAGEMENT CORP.

                                    By:/s/ Daniel E. Ellis
                                       -------------------------------------
                                       Name: Daniel E. Ellis
                                       Title: Vice President

                   [SIGNATURES CONTINUE ON THE FOLLOWING PAGE]



                                    BORROWERS:

                                    APICO HILLS, INC.
                                    BRUNSWICK MOTEL ENTERPRISES, INC.
                                    DOTHAN HOSPITALITY 3053, INC.
                                    DOTHAN HOSPITALITY 3071, INC.
                                    GADSDEN HOSPITALITY, INC.
                                    LODGIAN BRIDGEPORT LLC
                                    LODGIAN COLCHESTER LLC
                                    LODGIAN FLORENCE LLC
                                    LODGIAN HAMBURG LLC
                                    LODGIAN HOTELS FLOATING, LLC
                                    LODGIAN JACKSON LLC
                                    LODGIAN MEMPHIS LLC
                                    LODGIAN MEMPHIS PROPERTY OWNER, LLC
                                    LODGIAN MORGANTOWN LLC
                                    SERVICO AUSTIN, INC.
                                    SERVICO CEDAR RAPIDS, INC.
                                    SERVICO GRAND ISLAND, INC.
                                    SERVICO JAMESTOWN, INC.
                                    SERVICO LANSING, INC.
                                    SERVICO MARYLAND, INC.
                                    SERVICO NEW YORK, INC.
                                    SERVICO NIAGARA FALLS, INC.
                                    SERVICO PENSACOLA 7200, INC.
                                    SERVICO PENSACOLA 7330, INC.
                                    SERVICO WINTER HAVEN, INC.
                                    SHEFFIELD MOTEL ENTERPRISES, INC.

                                    By: /s/ Daniel E. Ellis
                                        -----------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of the
                                           entities listed above



                                    EXHIBIT A

            Form of Credit Card Receivables Payment Direction Letter

                                     [Date]

___________________________
___________________________
___________________________

                  Re:  _______________________ (the "COMPANY")

Gentlemen:

         ________________ (the "PROCESSOR") has entered into arrangements
pursuant to which Processor acts as credit card processing service provider with
respect to certain credit card and debit card sales by Company and makes
payments to Company in respect of such sales as set forth in the [Merchant
Services Bankcard Agreement], dated _____________ between Processor and Company
(and together with any replacement agreement thereto, referred to herein as the
"CARD PROCESSING AGREEMENT").

         Please be advised that Company has entered or is about to enter into
financing arrangements with Merrill Lynch Mortgage Lending, Inc. (the "LENDER")
pursuant to which Lender may from time to time make loans and advances and
provide other financial accommodations to Company, secured by, among other
things, all of Company's right, title and interest in and to all deposit and
other bank accounts and proceeds of the foregoing, including all amounts at any
time payable by Processor to Company pursuant to the Card Processing Agreement
or otherwise.

         Notwithstanding anything to the contrary contained in the Card
Processing Agreement or any prior instructions to Processor, unless and until
Processor receives written instructions from Lender to the contrary, effective
as of the day after the date of Processor's written acknowledgement below all
amounts payable by Processor to Company pursuant to the Card Processing
Agreement or otherwise shall be sent by federal funds wire transfer or
electronic depository transfer to the following bank account of Lender:

                           ___________ (the "BANK")
                           ABA Number: ___________

For the Account of: Lock Box Account for the benefit of Merrill Lynch Mortgage
                    Lending, Inc., its successors and assigns
                          Account Number: ____________
                      Attn: ____________, Fax: ____________

         In the event Processor at any time receives any other instructions from
Lender with respect to the disposition of amounts payable by or through
Processor to Company pursuant to

                                      A-1


the Card Processing Agreement or otherwise, Processor is hereby irrevocably
authorized and directed to follow such instructions, without inquiry as to
Lender's right or authority to give such instructions. Company and Lender
acknowledge that (a) any instructions from Lender to Processor to change the
account to which funds must be sent by a vice president or other officer of
Lender to ____________; (b) such instructions shall only provide for funds to be
sent to a single deposit account of Lender, in a manner with respect to the
nature of the funds transfer and at times consistent with the payment practices
of Processor as then in effect, unless otherwise agreed by Processor. The
Company agrees to hold harmless Processor for any action taken by Processor in
accordance with the terms of this letter and the Card Processing Agreement; and
Lender shall complete such account change forms as Processor may require. The
Company hereby acknowledges that the account set forth above is owned by Company
but is under the control of Lender.

         Lender and Company hereby confirm and agree as follows: (i) the Card
Processing Agreement is in full force and effect and (ii) this Payment Direction
Letter does not prohibit or limit any rights Processor possesses under the Card
Processing Agreement, including but not limited to Processor's right to debit,
offset or charge back any amount owing to Processor under the Card Processing
Agreement or any replacement or renewal thereof, against funds sent to or to be
sent to the above referenced bank account.

         This Payment Direction Letter cannot be changed, modified, or
terminated, except by written agreement signed by Lender, Company and Processor.
Processor agrees to use reasonable efforts to ensure payment instructions are
followed, but Lender and Company herein acknowledge that Processor shall incur
no liability for changes or modifications wherein Processor has received
instructions from Company or Lender to change deposit instructions. The terms of
this Payment Direction Letter shall be governed by the laws of the State of New
York.

         Please acknowledge your receipt of, and agreement to, the foregoing by
signing in the space provided below.

                                         Very truly yours,
                                         ________________ (the "COMPANY")

                                         By: ___________________________________
                                             Name:
                                             Title:

                                         Date: _________________________________

Agreed to by Processor:

________________________________

By:_____________________________
   Name:
   Title:

                                      A-2

EX-10.1.11

                                                                 EXHIBIT 10.1.11

                             ENVIRONMENTAL INDEMNITY

                  This ENVIRONMENTAL INDEMNITY, made as of June 25, 2004 (this
"AGREEMENT"), by the Borrowers named on the signature pages hereto, each having
an address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30326 (each, a "BORROWER" and collectively, "BORROWERS"), by LODGIAN,
INC., a Delaware corporation, having an address at 3445 Peachtree Road, NE,
Suite 700, Atlanta, Georgia 30326 ("OBLIGOR"), jointly and severally (Borrowers
and Obligor being referred to herein collectively as "INDEMNITORS" and
individually as an "INDEMNITOR"), in favor of MERRILL LYNCH MORTGAGE LENDING,
INC., a Delaware corporation, having an address at 4 World Financial Center, New
York, New York, 10080 (together with its successors, transferees and assigns,
"LENDER").

                              W I T N E S S E T H:

                  WHEREAS:

                  A.       Borrowers are the owners of fee simple or leasehold
title, as applicable, to those certain parcels of real property (collectively,
the "PREMISES") described in EXHIBIT A attached hereto, and the buildings,
structures, fixtures, additions, enlargements, extensions, modifications,
repairs, replacements and other improvements now or hereafter located thereon
(the "IMPROVEMENTS"; together with the Premises, collectively, the "PROPERTY").

                  B.       Borrowers and Lender have entered into a certain Loan
and Security Agreement, dated as of the date hereof (as amended, modified or
restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has
agreed to make a loan to Borrowers as more particularly described below.
Capitalized terms used herein and not herein defined shall have the meanings
assigned to such terms in the Loan Agreement.

                  C.       Pursuant to the Loan Agreement, Lender is making a
Loan to Borrower in the aggregate original principal amount of up to One Hundred
Ten Million and No/100 Dollars ($110,000,000.00) (the "LOAN"). The Loan is
evidenced by those certain Promissory Notes, each dated as of the date hereof
(as amended, modified, restated or split from time to time, collectively, the
"NOTE") and secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds
to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated
as of the date hereof (as amended, modified or restated from time to time,
collectively, the "SECURITY INSTRUMENT"), with respect to the Property.

                  D.       As a condition to Lender's making the Loan, Lender is
requiring that Indemnitors indemnify the Indemnified Parties (as hereinafter
defined) with respect to environmental conditions or liabilities on, in, under
or affecting the Property as hereinafter set forth.

                  E.       Obligor holds a direct and/or indirect ownership
interest in Borrower and will derive substantial economic benefit from Lender
making the Loan to Borrower.



                  NOW, THEREFORE, to induce Lender to extend the Loan to
Borrower and in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Indemnitors hereby covenant and agree for the benefit of the
Indemnified Parties as follows:

         1.       DEFINITIONS. The following terms shall have the following
meanings when used herein:

                  "COSTS" shall mean, collectively, all liens, damages, losses,
fines, liabilities (including, without limitation, any strict liability),
obligations, settlements, penalties, assessments, citations, directives, claims,
litigations, demands, response costs (including, without limitation,
investigation, removal, remediation, mitigation, containment, post-closure and
monitoring costs), defenses, judgments, suits, proceedings, costs, laboratory
fees, disbursements and expenses of any kind or nature whatsoever (including,
without limitation, reasonable attorneys', consultants' and experts' fees and
disbursements). Costs shall also include any future reduction in sales price of,
or unmarketability and consequent inability of Lender to foreclose on or
otherwise sell, the Property and the lost opportunity costs resulting from the
inability of Lender to sell or dispose of its interest in the Property, all as a
consequence of any event described in paragraph 2 herein to the extent that such
loss in value results in Lender receiving in any foreclosure, or deed in lieu
thereof, of the Properties less than the full amount of the Obligations by
reason of any matter set forth in Section 2.

                  "ENVIRONMENTAL LAWS" shall have the meaning given to such term
in the Loan Agreement.

                  "HAZARDOUS MATERIAL" shall have the meaning given to such term
in the Loan Agreement.

                  "INDEMNIFIED PARTY" shall mean Lender, any subsequent holder
of the Note and each of their officers, directors, shareholders, principals,
partners, representatives, employees, agents, successors and assigns.

                  "TENANTS" shall mean all tenants, lessees, subtenants and
other occupants of the Property.

         2.       INDEMNITY.

                  (a)      Except as provided in Section 2(b) below, Indemnitors
hereby assume liability for, and agree to pay, protect, defend, indemnify and
save all Indemnified Parties harmless from and against any and all Costs which
may be imposed upon, incurred by or asserted or awarded against any of the
Indemnified Parties or the Property, and arising directly or indirectly from:
(i) the violation or alleged violation of any Environmental Laws relating to or
affecting the Property, whether or not caused by or within the control of
Indemnitors; (ii) the actual or alleged presence, release or threat of release
of, or exposure to any Hazardous Material on, in, under or affecting all or any
portion of the Property or any surrounding areas, regardless of whether or not
caused by or within the control of Indemnitors; (iii) any actual or alleged
personal injury or property damage arising out of or related to Hazardous
Material on the Property; (iv) any acts or omissions that exacerbate an existing
condition at the Property and give

                                       2


rise to liability under any Environmental Law; (v) the failure by Indemnitors to
comply fully with the terms and conditions of this Agreement in all material
respects; (vi) a material breach of any representation or warranty contained in
this Agreement; (vii) the enforcement of this Agreement; or (viii) assessment,
investigation, containment, monitoring, remediation and/or removal of any and
all Hazardous Material from the Property or any surrounding areas, and costs
incurred to comply with Environmental Laws in connection with the Property or
any surrounding areas.

                  (b)      Notwithstanding any provision hereof to the contrary,
Indemnitors shall have no liability under this Agreement with respect to Costs
relating to Hazardous Material which is initially placed on, in or under the
Property after the earlier of (i) Lender or any receiver appointed at the
request of Lender taking actual possession and control of the Property following
an Event of Default, and (ii) Lender completing a foreclosure or other sale
pursuant to which Lender takes title to the Property. Indemnitors shall have no
liability under this Agreement to any Indemnified Party with respect to Costs
which result from such Indemnified Party's willful misconduct or gross
negligence. In addition to the foregoing, Obligor shall have no liability
pursuant to this Agreement with respect to costs relating to Hazardous Material
which is initially placed on, in or under the Property after the transfer of the
Mezzanine Borrowers' equity interest in the applicable Borrower to the Mezzanine
Lender or its designee by reason of, or in lieu of, enforcement of the Mezzanine
Lender's rights under the Mezzanine Loan Documents.

                  (c)      Indemnitors' obligation to defend the Indemnified
Parties hereunder shall include defense at both the trial and appellate levels
and shall be with attorneys, consultants and experts selected by Indemnitor and
subject to the reasonable approval of the Indemnified Parties.

         3.       REPRESENTATIONS REGARDING HAZARDOUS MATERIAL. Indemnitors
hereby represent and warrant to agree with the Indemnified Parties as follows:

                  (a)      Indemnitors, the Property and all businesses or
operations conducted thereon are in compliance with all applicable Environmental
Laws in all material respects;

                  (b)      Except as previously disclosed to Lender in the Phase
I Reports, no Hazardous Material has been disposed of on or released (as used
herein, "RELEASE" shall have the meaning provided in 42 U.S.C. Section 9601(22))
at, onto or under the Property by any Indemnitor or, to Indemnitors' knowledge,
by any other Person that has not been remediated in accordance with applicable
Environmental Laws or that is present at or under the Property at a level in
excess of that allowed by applicable Environmental Laws;

                  (c)      Except as previously disclosed to Lender in the Phase
I Reports, no Hazardous Material is located in, on or under, or has been
handled, generated, stored, processed or discharged from the Property in
violation of applicable Environmental Laws by any Indemnitor or, to the
Indemnitors' knowledge, by any other Person, except for those materials used by
Borrowers, Manager or tenants of the Property ("TENANTS") in the ordinary course
of their business in material compliance with all applicable Environmental Laws
and not reasonably expected to give rise to liability under applicable
Environmental Laws;

                                       3


                  (d)      Indemnitors have received no written notice that the
Property is subject to any private or governmental lien or judicial or
administrative notice or action relating to or arising under applicable
Environmental Laws;

                  (e)      Except as previously disclosed to Lender in the Phase
I Reports, there are no underground storage receptacles or surface impoundments,
landfills or dumps for Hazardous Material on the Property;

                  (f)      Indemnitors have received no notice of, and to
Indemnitors' knowledge there exists no investigation, action, proceeding or
claim by any agency, authority or unit of government or by any third party
asserted or threatened which could result in any liability, penalty, sanction or
judgment under any applicable Environmental Laws with respect to any condition,
use or operation of the Property, nor do Indemnitors know of any basis for any
of the foregoing;

                  (g)      Except as previously disclosed to Lender in the Phase
I Reports or the Property Condition Reports, there is no asbestos-containing
material or lead-based paint at the Property nor are there any polychlorinated
biphenyls ("PCB'S"), endangered species' habitats or wetlands at the Property;

                  (h)      Indemnitors have received no notice that, and to
Indemnitors' knowledge, there has been no claim by any party that, any use,
operation or condition of the Property has caused any nuisance or any other
liability or adverse condition on any other property nor do Indemnitors know of
any basis for such a claim relating to Hazardous Material;

                  (i)      Except as previously disclosed in writing to Lender,
Indemnitor has not knowingly waived or released any Person's liability with
regard to Hazardous Material in, on, under or around the Property nor retained
or assumed, contractually or otherwise, any other Person's liability relative to
Hazardous Material or any claim, action or proceeding relating thereto; and

                  (j)      Except as previously disclosed to Lender in the Phase
I Reports, neither the Property nor any other property owned by any Borrower (i)
is included or, to Indemnitor's knowledge, proposed for inclusion on the
National Priorities List issued pursuant to CERCLA (hereinafter defined) by the
United States Environmental Protection Agency (the "EPA") or on any of the
inventories of other potential "Problem" sites issued by the EPA or other
applicable Governmental Authority nor (ii) otherwise identified by the EPA as a
potential CERCLA site or included or, to Indemnitor's knowledge, proposed for
inclusion on any such list or inventory issued pursuant to any other applicable
Environmental Law or issued by any other Governmental Authority.

         4.       COVENANTS OF INDEMNITORS.

                  (a)      So long as any Borrower or Affiliate thereof owns or
is in possession of the Property, Indemnitors shall, and shall use commercially
reasonable efforts to cause all property managers, agents, employees and Tenants
to: (i) comply with all Environmental Laws applicable to the Property, (ii) keep
or cause the Property to be kept free from Hazardous Material (except those
materials used by Borrower, Manager or Tenants in the ordinary course of

                                       4


their business, in compliance with applicable Environmental Laws), (iii) not
install or use, or permit the installation or use of, any underground
receptacles containing Hazardous Material on the Property, (iv) expressly
prohibit the use, generation, handling, storage, production, release, processing
and disposal of Hazardous Material by all future Tenants and Managers (except
those substances used by such Tenants or Managers in the ordinary course of
their business in compliance with all applicable Environmental Laws) and use all
commercially reasonable efforts to prevent existing Tenants, Managers and other
permitted occupants of the Property from taking any such actions, (v) in any
event, not install on the Property or permit to be installed on the Property
PCB's, urea formaldehyde insulation, asbestos or any substance containing
asbestos or any material containing lead-based paint, (vi) prohibit the disposal
and/or release of any Hazardous Material in violation of applicable
Environmental Laws on, at or beneath, the Property, (vii) operate and maintain,
or cause to be operated and maintained, the HVAC systems at the Property in
accordance with standards for operation of similar systems located at properties
that are similar (including, without limitation, the manner, class of operation,
and/or Franchisor standards) to the Property, (viii) cause the Required Capital
Improvements which relate to mold to be completed in accordance with the
standards and time frames set forth in Section 6.5 of the Loan Agreement, and
(ix) not permit any Lien imposed pursuant to any applicable Environmental Law to
be imposed or, subject to Section 4(c) below, to remain on the Property.

                  (b)      Indemnitors shall promptly notify Lender in writing
should any Indemnitor become aware of (i) any release, disposal or discharge of
Hazardous Material in violation of applicable Environmental Laws, or other
material actual environmental problem or liability, with respect to or affecting
the Property, (ii) any lien, action or notice of violation or potential
liability affecting the Property or Borrowers and arising under any applicable
Environmental Law, (iii) the institution of any investigation, inquiry or
proceeding concerning Borrowers or the Property pursuant to any applicable
Environmental Law or otherwise relating to Hazardous Material affecting the
Property, (iv) the discovery of any occurrence, condition or state of facts
which would render any representation or warranty contained in this Agreement
incorrect or incomplete in any material respect if made at the time of such
discovery, (v) any remedial action taken by Indemnitors or, if actually known by
Indemnitor, any other Person in response to any Hazardous Material on, under or
at the Property, (vi) the discovery by Indemnitors of any occurrence or
condition on any real property adjoining or in the vicinity of the Property that
would reasonably be expected to cause the Property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or use
thereof under any applicable Environmental Laws, and (vii) any request for
information from any governmental agency that indicates such agency is
investigating whether Indemnitors may be potentially responsible for a release,
disposal or discharge of Hazardous Material. Borrowers shall promptly notify
Lender of any proposed action to be taken pertaining in any way to the Property
to commence any operations that could reasonably be expected to subject any
Borrower or the Property to additional obligations or liabilities under
applicable Environmental Laws, including laws, rules and regulations requiring
additional or amended environmental permits or licenses which could reasonably
be expected to subject any Borrower to any material obligations or requirements
under any applicable Environmental Laws. Borrowers shall, at their own expense,
provide copies of such documents or information as Lender may reasonably request
in relation to any matters disclosed pursuant to this Section. Indemnitor shall
promptly transmit to Lender

                                       5


copies of any and all material citations, orders, notices and all other
communications sent or received by any Borrower relating to any of the foregoing
provisions of this paragraph.

                  (c)      Regardless of the source of contamination,
Indemnitors shall, at their own expense, promptly take or cause to be taken and
diligently prosecute all actions required by applicable Environmental Laws for
the clean-up of the Property and other property affected by contamination in,
on, under or at the Property, including, without limitation, all investigative,
monitoring, removal, containment and remedial actions in accordance with and
required by all applicable Environmental Laws (and in all events in a manner
satisfactory to the applicable Governmental Authority and reasonably
satisfactory to Lender). Indemnitor shall further pay or cause to be paid, at no
expense to any Indemnified Party, all clean-up, administrative and enforcement
costs of applicable governmental agencies which may be asserted against the
Property. In the event Indemnitors fail to do so, or following an Event of
Default, Lender may, at its sole election, cause the Property or other affected
property to be freed from any Hazardous Material located thereon at a level in
excess of that allowed by applicable Environmental Laws, or otherwise be brought
into compliance with applicable Environmental Laws, and any cost incurred in
connection therewith shall be included in Costs. Borrowers hereby grant to
Lender access to the Property and an irrevocable license to remove any Hazardous
Material and to do all things necessary to bring the Property into compliance in
all material respects with applicable Environmental Laws. However, Lender shall
have no obligation to inspect or clean up any Hazardous Material. Lender shall
not be deemed a generator of any Hazardous Material removed from the Property.

                  (d)      Upon the request of Lender, at any time (i) after the
occurrence of an Event of Default or (ii) Lender has reasonable grounds to
believe that (A) Hazardous Material is or has been released, stored or disposed
of, or existing, on or around the Property at a level in excess of that allowed
by applicable Environmental Laws or (B) the Property may be in material
violation of applicable Environmental Laws, Indemnitors shall cause an
investigation or audit of the Property to be undertaken by a hydrogeologist or
environmental engineer or other appropriate consultant reasonably approved by
Lender to determine whether any Hazardous Material is located on, at, beneath,
or near the Property and/or whether the Property is in compliance in all
material respects with Environmental Laws. The scope of any investigation or
audit shall be approved by Lender in Lender's reasonable discretion. If
Indemnitors fail to provide reports of such investigation or audit within thirty
(30) days after such request, Lender may, but shall have no obligation to, order
the same. Borrowers hereby grant to Lender and Lender's contractors access to
the Property and an irrevocable license to undertake such investigation or audit
provided that such investigation is conducted in a manner so as not to
unreasonably affect Borrowers' operations at the Property. All reasonable costs
of any such investigation or audit shall be included in Costs and shall be paid
by Indemnitors in accordance with the terms of paragraph 5(c) hereof.

                  (e)      In the event that a Lien is filed against the
Property pursuant to any applicable Environmental Law, Indemnitors shall, within
ten (10) Business Days from the date that any Borrower receives notice of such
Lien (but in any event ten (10) days prior to the date of any contemplated sale
pursuant to such Lien), either (i) pay the claim and remove the Lien from the
Property, or (ii) furnish, at Indemnitor's option, (A) a bond satisfactory to
Lender in the amount of the claim out of which the Lien arises, (B) a cash
deposit in the amount of the claim

                                       6


out of which the Lien arises, (C) other security reasonably satisfactory to
Lender in an amount sufficient to discharge the claim out of which the Lien
arises, or (D) security in a form and amount satisfactory to the applicable
Governmental Authority pursuant to a valid consent or other order, and
Indemnitors shall promptly arrange for the removal of the Lien. Notwithstanding
the foregoing, Indemnitors shall prevent a sale pursuant to any Lien.

                  (f)      The amount of Indemnitors' liability hereunder is
unrelated to the amount of the Loan and any failure of the Loan to be repaid in
full. The enforcement of this Agreement by the Indemnified Parties shall not be
construed by Indemnitors as an indirect attempt to recover any Loan deficiency
or loss relating to the failure of the Loan to be repaid in full. Indemnitors
acknowledge that they may have liability hereunder even if the Loan is repaid in
full by reason of a full credit bid at any foreclosure sale under the Security
Instrument, and that the amount of Indemnitor's liability hereunder could exceed
the entire amount paid by Borrower for the Property.

         5.       INDEMNIFICATION PROCEDURES.

                  (a)      If any action, proceeding, litigation or claim shall
be brought or asserted against any Indemnified Party for any matter which the
Indemnified Parties are indemnified hereunder (each, a "CLAIM"), such
Indemnified Party shall notify Indemnitors in writing thereof and Indemnitors
shall promptly assume the defense thereof, including, without limitation, the
employment of counsel selected by the Indemnitor and approved by the Indemnified
Party, such approval not to be unreasonably withheld, conditioned or delayed,
and the negotiation of any settlement. Any failure of such Indemnified Party to
notify Indemnitors of such matter shall not impair or reduce the obligations of
Indemnitors hereunder. The Indemnified Parties shall have the right, at the
reasonable expense of Indemnitors (which expense shall be included in Costs), if
an Indemnified Party has reason to believe that its interests are not being
adequately represented or diverge from other interests being represented by such
counsel, to employ separate counsel in any such action and to participate in the
defense thereof at such Indemnitor's sole cost and expense. In the event
Indemnitors shall fail to discharge or undertake to defend any Indemnified Party
against any Claim, such failure shall constitute an Event of Default and the
Indemnified Party may, at its sole election, defend or settle such Claim. The
liability of Indemnitors to such Indemnified Party hereunder for any settlement
by such Indemnified Party shall be conclusively established by any settlement
entered into by the Indemnified Party in good faith. The amount of Indemnitors'
liability hereunder shall include the settlement consideration and all other
Costs, which shall be paid by the Indemnitors as hereinafter provided. Costs
incurred in connection with a Claim shall be reimbursed by Indemnitors without
the requirement of waiting for the ultimate outcome of such Claim.

                  (b)      Indemnitors shall not, without the prior written
consent of the Indemnified Party, which consent will not be unreasonably
withheld, conditioned or delayed, settle or compromise any Claim in any manner
or consent to the entry of any judgment (i) in which the claimant or plaintiff
does not unconditionally release the Indemnified Party from all liability and
obligations in respect of such Claim and obtain a dismissal of such Claim with
prejudice; or (ii) that may adversely affect the Indemnified Party (as
determined in the reasonable discretion of such Indemnified Party) or obligate
the Indemnified Party to pay any sum or perform any obligation.

                                       7


                  (c)      Indemnitors shall pay to the applicable Indemnified
Party any and all Costs within fifteen (15) days after written notice from such
Indemnified Party. All Costs shall be immediately reimbursable to the
Indemnified Party or, upon request of the Indemnified Party, paid directly to
the party sending a bill or other statement to the Indemnified Party. Any Costs
not paid within the aforementioned fifteen (15) day period shall bear interest
at the Default Rate from the date incurred until the date paid in full.

         6.       REINSTATEMENT OF OBLIGATIONS. If at any time all or any part
of any payment received by an Indemnified Party pursuant to this Agreement shall
be rescinded or returned for any reason whatsoever, including, without
limitation, the insolvency, bankruptcy or reorganization of any Indemnitor, then
the obligations of Indemnitors hereunder shall, to the extent of such rescinded
or returned payment, be reinstated and shall continue as though such previous
payment received by the Indemnified Party had never occurred.

         7.       WAIVERS BY INDEMNITORS. To the extent permitted by law,
Indemnitors hereby waive and agree not to assert or take advantage of:

                  (a)      Any right to require an Indemnified Party (i) to
proceed against Borrower or any other Person, (ii) to proceed against or exhaust
any security held by any Indemnified Party at any time or (iii) to pursue any
other remedy in such Indemnified Party's power or under any other agreement, in
any case, before proceeding against Indemnitors hereunder;

                  (b)      Any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other Person or the
failure of an Indemnified Party to file or enforce a claim against the estate
(in administration, bankruptcy or any other proceeding) of any other Person;

                  (c)      Demand, presentment for payment, protest and notice
of protest, demand, dishonor and nonpayment and all other notices except as
expressly required in the Loan Documents, including, without limitation, notice
of new or additional indebtedness or obligations or of any action or non-action
on the part of Borrower, Lender, any endorser or creditor of Borrower or of
Indemnitor or of any other Person whomsoever under this Agreement or any other
Loan Document;

                  (d)      Any defense based upon an election of remedies,
splitting a cause of action or merger of judgments by any Indemnified Party;

                  (e)      Any right or claim of right to cause a marshaling of
the assets of Indemnitors;

                  (f)      Any principle or provision of law, statutory or
otherwise, which is or might be in conflict with the terms and provisions of
this Agreement;

                  (g)      Any duty on the part of any Indemnified Party to
disclose to Indemnitors any facts such Indemnified Party may now or hereafter
know about Borrower or the Property, regardless of whether such Indemnified
Party (i) has reason to believe that any such facts materially increase the risk
beyond that which Indemnitors intend to assume, (ii) has reason to believe that
such facts are unknown to Indemnitors or (iii) has a reasonable opportunity to

                                       8


communicate such facts to Indemnitors, it being understood and agreed that
Indemnitors are fully responsible for being informed of the financial condition
of Borrower, the condition of the Property and of all other circumstances
bearing on the risk that liability may be incurred by Indemnitors hereunder;

                  (h)      Any invalidity, irregularity or unenforceability, in
whole or in part, of any one or more of the Loan Documents;

                  (i)      Any lack of commercial reasonableness in dealing with
the collateral for the Loan;

                  (j)      Any deficiencies in the collateral for the Loan or
any deficiency in the ability of Lender to collect or to obtain performance from
any Persons now or hereafter liable for the payment and performance of any
obligation hereby guaranteed;

                  (k)      An assertion or claim that the automatic stay
provided by 11 U.S.C. Section 362 (arising upon the voluntary or involuntary
bankruptcy proceeding of Borrower) or any other stay provided under any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, shall operate or be interpreted to stay, interdict, condition,
reduce or inhibit the ability of Lender to enforce any of its rights, whether
now existing or hereafter acquired, which Lender may have against any Indemnitor
or the collateral for the Loan;

                  (l)      Any modifications of the Loan Documents or any
obligation of Borrower relating to the Loan by operation of law or by action of
any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or
any other debtor relief law (whether statutory, common law, case law or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or
otherwise;

                  (m)      Any action, occurrence, event or matter consented to
by Indemnitors under Section 8(j) hereof, under any other provision hereof, or
otherwise; and

                  (n)      the failure of any representation and/or warranties
made by Borrower, Indemnitor or any other party to be true, complete or correct
when given, or at any time thereafter.

Indemnitors covenant and agree that upon the commencement of a voluntary or
involuntary bankruptcy proceeding by or against any Borrower, neither such
Indemnitor shall seek a supplemental stay or otherwise pursuant to 11 U.S.C.
Section 105 or any other provision of the Bankruptcy Reform Act of 1978, as
amended, or any other debtor relief law (whether statutory, common law, case
law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect,
which may be or become applicable, to stay, interdict, condition, reduce or
inhibit the ability of Lender to enforce any rights of Lender against such
Indemnitor by virtue of this Agreement or otherwise.

                                       9


         8.       GENERAL PROVISIONS.

                  (a)      Fully Recourse. Notwithstanding any provision of any
other Loan Document to the contrary, all of the terms and provisions of this
Agreement are recourse obligations of Indemnitors and not restricted by any
limitation on personal liability.

                  (b)      Right to Indemnification Not Affected by Knowledge.
An Indemnified Party's right to defense, indemnification, payment of Costs or
other rights and remedies pursuant to this Agreement shall not be diminished or
affected in any way by any investigation conducted by or on behalf of such
Indemnified Party or other knowledge acquired (or capable of being acquired) by
such Indemnified Party through any means at any time.

                  (c)      Reliance. Indemnitors hereby acknowledge that Lender
would not make the Loan without being able to rely upon the covenants and
obligations of Indemnitors set forth herein. Accordingly, Indemnitors
intentionally and unconditionally enter into this Agreement.

                  (d)      Obligations Unsecured. Indemnitors acknowledge that
even though the representations, warranties and covenants of Indemnitors
contained herein may be identical or substantially similar to those of Borrower
set forth in the Security Instrument, the obligations of Indemnitors hereunder
are independent obligations which are not secured by the Security Instrument or
the other Loan Documents. The Indemnitors further acknowledge that it is the
intent of Lender to create separate obligations of Indemnitors hereunder which
can be enforced against Indemnitors without regard to the existence of the
Security Instrument or the other Loan Documents or the liens or security
interests created therein.

                  (e)      Survival. This Agreement shall be deemed to be
continuing in nature, remain in full force and effect and survive indefinitely,
notwithstanding the exercise of any remedy by Lender under the Security
Instrument or any of the other Loan Documents, including, without limitation,
any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the
Loan is paid or satisfied in full. Notwithstanding the foregoing to the
contrary, the obligations and liabilities of Indemnitors under this Agreement
shall survive following payment in full of the Obligations in accordance with
the terms of the Loan Documents for a period equal to the lesser of (x) five (5)
years, or (y) if Borrowers deliver Phase I environmental reports for each of the
Properties to Lender, acceptable to Lender in all respects, and which Lender
determines in its sole discretion demonstrates that no condition exists which
may cause any of the liabilities of Indemnitors to arise after delivery thereof,
two (2) years following the delivery of such Phase I environmental reports,
provided, however, in the event that (a) any obligations or liabilities of the
Indemnitors under this Agreement shall have arisen from any Hazardous Material
which existed on, in, under or affecting the Property prior to the expiration of
such period or (b) if, prior to payment in full of the Loan, Lender shall have
exercised any rights or remedies after an Event of Default or any of the Loan
Documents shall have been modified or amended or any provision thereof waived
pursuant to any workout or restructuring of the Loan (and if, as a consequence
thereof, at any time after the expiration of the survival period specified
above, Lender shall be unable to avail itself of any exemption from liability
available to lenders under any applicable Environmental Law or shall be required
to defend any claim or action relating to any Hazardous Material), then in any
such event the foregoing survival period shall not apply and the obligations and
liabilities of Indemnitors hereunder shall survive.

                                       10


                  (f)      Subordination; No Recourse Against Lender. Obligor
hereby subordinates any and all indebtedness of Borrower now or hereafter owed
to Obligor to all indebtedness of Borrower to Lender. Obligor shall not demand
or accept any payment of principal or interest from Borrower, shall not claim
any offset or other reduction of Obligor's obligations hereunder because of any
such indebtedness and shall not take any action to obtain any of the collateral
for the Loan. Further, Indemnitors shall not have any right of recourse against
any Indemnified Party by reason of any action such Indemnified Party may take or
omit to take under the provisions of this Agreement or any other Loan Documents.

                  (g)      Reservation of Rights. Nothing contained in this
Agreement shall prevent or in any way diminish or interfere with any rights or
remedies, including, without limitation, the right to cost recovery or
contribution, which any Indemnified Party may have against either Indemnitor or
any other party under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (codified at Title 42 U.S.C. Section 9601 et seq.), as it
may be amended from time to time ("CERCLA"), or any other applicable Federal,
state or local laws, all such rights being hereby expressly reserved.

                  (h)      Financial Statements. Each Indemnitor hereby agrees
to furnish Lender such financial statements and other information as is required
to be delivered pursuant to Section 5.1 of the Loan Agreement.

                  (i)      Nature of Obligations. The obligations of Indemnitors
hereunder are independent of the obligations of Borrower under the other Loan
Documents. In the event of any default hereunder, a separate action or actions
may be brought and prosecuted against Indemnitors whether or not Indemnitors are
the alter ego of Borrower and whether or not Borrower is joined therein or a
separate action or actions are brought against Borrower. Lender's rights
hereunder shall not be exhausted until all of the obligations of Indemnitor
hereunder have been fully paid and performed.

                  (j)      No Limitation on Liability. Indemnitors hereby
consent and agree that any of the following may occur from time to time, without
notice or consideration to, or consent of, Indemnitors, and the liability of
Indemnitors hereunder shall remain unconditional and absolute and shall in no
way be impaired or limited by reason thereof:

                           (i)      any extension of time for performance
required by any of the Loan Documents or otherwise granted by Lender or any
extension or renewal of the Note;

                           (ii)     any sale, assignment or foreclosure of the
Note, the Security Instrument or any of the other Loan Documents or any sale or
transfer of the Property, except as set forth in Section 2(b);

                           (iii)    any change in the composition of Borrower,
including, without limitation, the voluntary or involuntary withdrawal or
removal of Indemnitors from any current or future position of ownership,
management or control of Borrower;

                           (iv)     the release of Borrower or of any other
Person from performance or observance of any of the agreements, covenants, terms
or conditions contained in any of the Loan Documents by operation of law,
Lender's voluntary act or otherwise;

                                       11


                           (v)      the release or substitution in whole or in
part of any security for the Loan;

                           (vi)     Lender's failure to record the Security
Instrument or to file any financing statement (or Lender's improper recording or
filing thereof) or to otherwise perfect, protect, secure or insure any lien or
security interest given as security for the Loan;

                           (vii)    the modification of the terms of any one or
more of the Loan Documents;

                           (viii)   subject to Section 2(b) hereof, the exercise
by Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant
to the terms of the Mezzanine Loan Documents, including, without limitation,
foreclosure or similar remedies under any pledge agreement encumbering Mezzanine
Borrower's interest in General Partner, Member or any Borrower; or

                           (ix)     the taking or failure to take any action of
any type whatsoever. No such action which Lender shall take or fail to take in
connection with the Loan Documents or any collateral for the Loan, nor any
course of dealing with Borrower or any other Person, shall limit, impair or
release Indemnitor's obligations hereunder, affect this Agreement in any way or
afford Indemnitors any recourse against any Indemnified Party. Nothing contained
in this Section shall be construed to require any Indemnified Party to take or
refrain from taking any action referred to herein.

                  (k)      Representations. Each Indemnitor represents and
warrants that there is no bankruptcy, reorganization or insolvency proceeding
pending or, to its knowledge, threatened against it.

                  (l)      Professionals' Fees. In the event it is necessary for
any Indemnified Party to retain the services of an attorney or any other
consultants in order to enforce this Agreement, or any portion hereof,
Indemnitors agree to pay to such Indemnified Party any and all reasonable costs
and expenses, including, without limitation, reasonable attorneys' and
consultants' fees and disbursements, incurred by such Indemnified Party as a
result thereof and all such amounts shall be included in Costs.

                  (m)      Successive Actions. A separate right of action
hereunder shall arise each time an Indemnified Party acquires knowledge of any
matter indemnified or guaranteed by Indemnitors hereunder. Separate and
successive actions may be brought hereunder to enforce any of the provisions
hereof at any time and from time to time and no action hereunder shall preclude
any subsequent action.

                  (n)      No Waiver; Remedies Cumulative. No failure or delay
on the part of Lender in exercising any right, remedy, power or privilege
hereunder or under the other Loan Documents and no course of dealing between
Borrower and Lender shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder or under the
other Loan Documents preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege hereunder or thereunder.
The rights and remedies provided herein and in the other Loan Documents are
cumulative and not exclusive

                                       12


of any rights or remedies provided by law. The giving of notice to or demand on
Borrower which notice or demand is not required hereunder or under the other
Loan Documents shall not entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights,
remedies, powers or privileges of Lender in any circumstances not requiring
notice or demand.

                  (o)      Notices. All notices, requests and other
communications to any party hereunder or under the Note shall be given in the
manner set forth in Section 14.5 of the Loan Agreement, to Lender and Borrower
at such party's address set forth in Section 14.5 of the Loan Agreement and to
each Obligor at its address set forth above, or such other address as
Indemnitors or Lender shall hereafter specify by not less than ten (10) days
prior written notice as provided herein; provided, however, that notwithstanding
any provision of this Section to the contrary, such notice of change of address
shall be deemed given only upon actual receipt thereof. Rejection or other
refusal to accept or the inability to deliver because of changed addresses of
which no notice was given as herein required shall be deemed to be receipt of
the notice, demand, statement, request or consent.

                  (p)      Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
and the applicable laws of the United States of America. Indemnitors hereby
irrevocably submit to the jurisdiction of any court of competent jurisdiction
located in the State of New York and in any state in which the Property is
located in connection with any proceeding out of or relating to this Agreement.

                  (q)      Invalid Provisions. If any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect, this
Agreement shall be construed without such provision.

                  (r)      Amendments. The terms of this Agreement, together
with the terms of the other Loan Documents, constitute the entire understanding
and agreement of the parties hereto and supersede all prior agreements,
understandings and negotiations between Indemnitors and Lender with respect to
the obligations contained herein. This Agreement, and any provisions hereof, may
not be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act on the part of Borrower or Lender, but only by an agreement
in writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

                  (s)      Parties Bound; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives; provided, however, that except as
provided in the Loan Agreement or herein, Indemnitors may not, without the prior
written consent of Lender, assign any of their rights, powers, duties or
obligations hereunder.

                  (t)      Headings; Construction of Documents. The headings and
captions of various sections of this Agreement are for convenience of reference
only and are not to be construed as defining or limiting, in any way, the scope
or intent of the provisions hereof. Indemnitors acknowledge that they were
represented by competent counsel in connection with the negotiation and drafting
of this Agreement and the other Loan Documents and that neither

                                       13


this Agreement nor the other Loan Documents shall be subject to the principle of
construing the meaning against the Person who drafted same.

                  (u)      Recitals. The recital and introductory paragraphs
hereof are a part hereof, form a basis for this Agreement and shall be
considered prima facie evidence of the facts and documents referred to therein.

                  (v)      Counterparts. To facilitate execution, this Agreement
may be executed in as many counterparts as may be convenient or required. It
shall not be necessary that the signature or acknowledgment of, or on behalf of,
each party, or that the signature of all Persons required to bind any party, or
the acknowledgment of such party, appear on each counterpart. All counterparts
shall collectively constitute a single instrument. It shall not be necessary in
making proof of this Agreement to produce or account for more than a single
counterpart containing the respective signatures of, or on behalf of, and the
respective acknowledgments of, each of the parties hereto. Any signature or
acknowledgment page to any counterpart may be detached from such counterpart
without impairing the legal effect of the signatures or acknowledgments thereon
and thereafter attached to another counterpart identical thereto except having
attached to it additional signature or acknowledgment pages.

                  (w)      Cumulative Rights. The rights of Lender under this
Agreement shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled, subject to the terms of this Agreement, to
every right and remedy now or hereafter afforded by law.

                  (x)      Waiver of Counterclaim and Right to Trial by Jury.
Indemnitors hereby waive the right to assert a counterclaim, other than a
compulsory counterclaim, in any action or proceeding brought against it by
Lender or its agents, and Lender and Indemnitors waive trial by jury in any
action or proceeding brought by either party hereto against the other or in any
counterclaim any other party may be permitted to assert hereunder or which may
be asserted by any party or its agents, against Indemnitors, or in any matters
whatsoever arising out of or in any way connected with this Agreement, the debt
or the obligations contained herein.

                  (y)      Singular and Plural; Joint and Several Liability.

                           (i)      If there is more than one entity comprising
Obligor, all references to Obligor herein shall be to Obligor, or any one or
more of them. All references to Indemnitors herein shall be to Indemnitors or
any one or more of them. All obligations and liabilities of Indemnitors
hereunder are in addition to, not in lieu of and are independent of: (A) all
obligations of Borrower under any other Loan Document, including the Note and
the Loan Agreement; and (B) any obligation of Obligor under any other Loan
Document to which Obligor is a party.

                           (ii)     All obligations of Indemnitors hereunder
shall be joint and several.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       14


                  IN WITNESS WHEREOF, Indemnitors have executed this Agreement
as of the day and year first above written.

                                  BORROWERS:

                                  APICO HILLS, INC.
                                  BRUNSWICK MOTEL ENTERPRISES, INC.
                                  DOTHAN HOSPITALITY 3053, INC.
                                  DOTHAN HOSPITALITY 3071, INC.
                                  GADSDEN HOSPITALITY, INC.
                                  LODGIAN BRIDGEPORT LLC
                                  LODGIAN COLCHESTER LLC
                                  LODGIAN FLORENCE LLC
                                  LODGIAN HAMBURG LLC
                                  LODGIAN HOTELS FLOATING, LLC
                                  LODGIAN JACKSON LLC
                                  LODGIAN MEMPHIS LLC
                                  LODGIAN MEMPHIS PROPERTY OWNER, LLC
                                  LODGIAN MORGANTOWN LLC
                                  SERVICO AUSTIN, INC.
                                  SERVICO CEDAR RAPIDS, INC.
                                  SERVICO GRAND ISLAND, INC.
                                  SERVICO JAMESTOWN, INC.
                                  SERVICO LANSING, INC.
                                  SERVICO MARYLAND, INC.
                                  SERVICO NEW YORK, INC.
                                  SERVICO NIAGARA FALLS, INC.
                                  SERVICO PENSACOLA 7200, INC.
                                  SERVICO PENSACOLA 7330, INC.
                                  SERVICO WINTER HAVEN, INC.
                                  SHEFFIELD MOTEL ENTERPRISES, INC.

                                  By:/s/ Daniel E. Ellis
                                     --------------------------------------
                                     Name:  Daniel E. Ellis
                                     Title: Vice President and Secretary, or
                                            Authorized Signatory for each of the
                                            entities listed above



                                  OBLIGOR:

                                  LODGIAN, INC., a Delaware
                                  corporation

                                  By:/s/ Daniel E. Ellis
                                     --------------------------------------
                                     Name: Daniel E. Ellis
                                     Title: Senior Vice President



                                   EXHIBITS A

                                   PROPERTIES



     CHAIN/NAME                          CITY                  ST
- ---------------------           -----------------------        --
                                                         
Holiday Inn Express             Dothan (ex Hampton)            AL
Quality Inn                     Dothan                         AL
Holiday Inn Express             Gadsden (Attalla)              AL
Holiday Inn                     Sheffield                      AL
Holiday Inn                     Pensacola                      FL
Holiday Inn Express             Pensacola  (ex Hampton)        FL
Holiday Inn                     Winter Haven                   FL
Holiday Inn                     Brunswick                      GA
Holiday Inn                     Valdosta                       GA
Fairfield Inn                   Valdosta                       GA
Crowne Plaza                    Cedar Rapids                   IA
Holiday Inn                     Florence                       KY
Clarion Hotel                   Louisville                     KY
Holiday Inn                     Silver Spring                  MD
Holiday Inn                     Lansing                        MI
Holiday Inn                     St. Louis North                MO
Holiday Inn                     Grand Island                   NY
Holiday Inn                     Hamburg                        NY
Holiday Inn                     Jamestown                      NY
Holiday Inn Select              Niagara Falls                  NY
Four Points Sheraton            Niagara Falls                  NY
Holiday Inn                     Pittsburgh (Pkwy East)         PA
Fairfield Inn                   Jackson                        TN
French Quarter Suites           Memphis                        TN
Holiday Inn                     Memphis                        TN
Holiday Inn                     Austin                         TX
Fairfield Inn                   Colchester                     VT
Holiday Inn                     Clarksburg (Bridgeport)        WV
Holiday Inn                     Morgantown                     WV

EX-10.2.1

                                                                 EXHIBIT 10.2.1

                           LOAN AND SECURITY AGREEMENT
                                 (FIXED RATE #1)

                            DATED AS OF JUNE 25, 2004

                                     BETWEEN

                    THE BORROWERS LISTED ON SCHEDULE 1 HERETO
                                  AS BORROWERS

                                       AND

                      MERRILL LYNCH MORTGAGE LENDING, INC.
                                    AS LENDER




                                TABLE OF CONTENTS



                                                                                                                    Page
                                                                                                                    ----
                                                                                                                 
                                                       ARTICLE I
DEFINITIONS.....................................................................................................      1

SECTION 1.1       CERTAIN DEFINED TERMS.........................................................................      1
SECTION 1.2       ACCOUNTING TERMS..............................................................................     23
SECTION 1.3       OTHER DEFINITIONAL PROVISIONS.................................................................     23

                                                       ARTICLE II
TERMS OF THE LOAN...............................................................................................     24

SECTION 2.1       LOAN..........................................................................................     24
SECTION 2.2       INTEREST......................................................................................     24
SECTION 2.3       RESERVED......................................................................................     25
SECTION 2.4       PAYMENTS......................................................................................     25
SECTION 2.5       MATURITY......................................................................................     26
SECTION 2.6       PREPAYMENT....................................................................................     26
SECTION 2.7       OUTSTANDING BALANCE...........................................................................     27
SECTION 2.8       TAXES.........................................................................................     27
SECTION 2.9       REASONABLENESS OF CHARGES.....................................................................     27
SECTION 2.10      RESERVED......................................................................................     28
SECTION 2.11      SERVICING/SPECIAL SERVICING...................................................................     28
SECTION 2.12      CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF CROSS-COLLATERALIZATION.....................     28

                                                      ARTICLE III
CONDITIONS TO LOAN..............................................................................................     33

SECTION 3.1       CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE.........................................

                                                      ARTICLE IV
REPRESENTATIONS AND WARRANTIES..................................................................................     39

SECTION 4.1       ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS.................................     39
SECTION 4.2       AUTHORIZATION OF BORROWING, ETC...............................................................     39
SECTION 4.3       FINANCIAL STATEMENTS..........................................................................     40
SECTION 4.4       INDEBTEDNESS AND CONTINGENT OBLIGATIONS.......................................................     40
SECTION 4.5       TITLE TO THE PROPERTIES.......................................................................     40
SECTION 4.6       ZONING; COMPLIANCE WITH LAWS..................................................................     41
SECTION 4.7       LEASES; AGREEMENTS............................................................................     41
SECTION 4.8       CONDITION OF THE PROPERTIES...................................................................     43
SECTION 4.9       LITIGATION; ADVERSE FACTS.....................................................................     43
SECTION 4.10      PAYMENT OF TAXES..............................................................................     43
SECTION 4.11      ADVERSE CONTRACTS..............................................................................    43
SECTION 4.12      PERFORMANCE OF AGREEMENTS.....................................................................     44
SECTION 4.13      GOVERNMENTAL REGULATION.......................................................................     44
SECTION 4.14      EMPLOYEE BENEFIT PLANS........................................................................     44
SECTION 4.15      BROKER'S FEES.................................................................................     44
SECTION 4.16      INTENTIONALLY DELETED.........................................................................     44
SECTION 4.17      SOLVENCY......................................................................................     44
SECTION 4.18      DISCLOSURE....................................................................................     44
SECTION 4.19      USE OF PROCEEDS AND MARGIN SECURITY...........................................................     45
SECTION 4.20      INSURANCE.....................................................................................     45
SECTION 4.21      SEPARATE TAX LOTS.............................................................................     45
SECTION 4.22      INVESTMENTS...................................................................................     45
SECTION 4.23      BANKRUPTCY....................................................................................     45
SECTION 4.24      DEFAULTS......................................................................................     45
SECTION 4.25      NO PLAN ASSETS................................................................................     45
SECTION 4.26      GOVERNMENTAL PLAN.............................................................................     46
SECTION 4.27      NOT FOREIGN PERSON. ..........................................................................     46
SECTION 4.28      NO COLLECTIVE BARGAINING AGREEMENTS...........................................................     46
SECTION 4.29      RESERVED......................................................................................     46
SECTION 4.30      GROUND LEASES.................................................................................     46
SECTION 4.31      NO PROHIBITED PERSONS.........................................................................     47


                                        i



                                                                                                                 
                                                       ARTICLE V
COVENANTS OF BORROWER PARTIES...................................................................................     47

SECTION 5.1       FINANCIAL STATEMENTS AND OTHER REPORTS........................................................     47
SECTION 5.2       EXISTENCE; QUALIFICATION......................................................................     52
SECTION 5.3       PAYMENT OF IMPOSITIONS AND CLAIMS.............................................................     52
SECTION 5.4       MAINTENANCE OF INSURANCE......................................................................     53
SECTION 5.5       OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY.........................................     57
SECTION 5.6       INSPECTION....................................................................................     60
SECTION 5.7       O&M PLAN......................................................................................     60
SECTION 5.8       RESERVED......................................................................................     60
SECTION 5.9       COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS..............................................     60
SECTION 5.10      FURTHER ASSURANCES............................................................................     61
SECTION 5.11      PERFORMANCE OF AGREEMENTS AND LEASES..........................................................     61
SECTION 5.12      LEASES........................................................................................     61
SECTION 5.13      MANAGEMENT; FRANCHISE AGREEMENTS..............................................................     62
SECTION 5.14      MATERIAL AGREEMENTS...........................................................................     65
SECTION 5.15      DEPOSITS; APPLICATION OF RECEIPTS.............................................................     65
SECTION 5.16      ESTOPPEL CERTIFICATES.........................................................................     65
SECTION 5.17      INDEBTEDNESS..................................................................................     65
SECTION 5.18      NO LIENS......................................................................................     66
SECTION 5.19      CONTINGENT OBLIGATIONS........................................................................     66
SECTION 5.20      RESTRICTION ON FUNDAMENTAL CHANGES............................................................     66
SECTION 5.21      TRANSACTIONS WITH RELATED PERSONS.............................................................     66
SECTION 5.22      BANKRUPTCY, RECEIVERS, SIMILAR MATTERS........................................................     67
SECTION 5.23      ERISA.........................................................................................     67
SECTION 5.24      PRESS RELEASE.................................................................................     68
SECTION 5.25      Ground Leases.................................................................................     68
SECTION 5.26      RESERVED......................................................................................     71
SECTION 5.27      LENDER'S EXPENSES.............................................................................     71
SECTION 5.28      DISTRIBUTIONS.................................................................................     71
SECTION 5.29      CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS............................................     71
SECTION 5.30      PROHIBITED PERSONS............................................................................     71

                                                       ARTICLE VI
RESERVES........................................................................................................     72

SECTION 6.1       SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES...........................     72
SECTION 6.2       FUNDS DEPOSITED WITH LENDER...................................................................     72
SECTION 6.3       IMPOSITIONS AND INSURANCE RESERVE.............................................................     73
SECTION 6.4       FF&E RESERVE..................................................................................     73
SECTION 6.5       CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS....................................     74
SECTION 6.6       HAZARDOUS MATERIALS REMEDIATION RESERVE.......................................................     74
SECTION 6.7       CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL
                  IMPROVEMENT RESERVE; PERFORMANCE OF WORK......................................................     75
SECTION 6.8       CASH TRAP RESERVE.............................................................................     79

                                                      ARTICLE VII
DEPOSIT ACCOUNT; LOCK BOX ACCOUNT; CASH MANAGEMENT..............................................................     80

SECTION 7.1       ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT.........................................     80
SECTION 7.2       APPLICATION OF FUNDS IN LOCK BOX ACCOUNT......................................................     82
SECTION 7.3       APPLICATION OF FUNDS AFTER EVENT OF DEFAULT...................................................     82

                                                      ARTICLE VIII
DEFAULT, RIGHTS AND REMEDIES....................................................................................     82

SECTION 8.1       EVENT OF DEFAULT..............................................................................     82
SECTION 8.2       ACCELERATION AND REMEDIES.....................................................................     85
SECTION 8.3       PERFORMANCE BY LENDER.........................................................................     86
SECTION 8.4       EVIDENCE OF COMPLIANCE........................................................................     87

                                                       ARTICLE IX
SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS.....................................     87

SECTION 9.1       APPLICABLE TO ALL PRIMARY BORROWER PARTIES....................................................     87
SECTION 9.2       APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER...........................................     89

                                                       ARTICLE X
RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS...............................................................     91

SECTION 10.1      SECONDARY MARKET TRANSACTIONS GENERALLY.......................................................     91
SECTION 10.2      COOPERATION; LIMITATIONS......................................................................     92
SECTION 10.3      INFORMATION...................................................................................     92
SECTION 10.4      ADDITIONAL PROVISIONS.........................................................................     94



                                       ii

                                                                                                                 
                                                          ARTICLE XI
RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES...........................................     94
SECTION 11.1      RESTRICTIONS ON TRANSFER AND ENCUMBRANCE......................................................     94
SECTION 11.2      TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS................................................     94
SECTION 11.3      ASSUMABILITY..................................................................................     95
SECTION 11.4      RELEASE OF PROPERTIES.........................................................................     96
SECTION 11.5      RESERVED......................................................................................     98
SECTION 11.6      SALE OF BUILDING EQUIPMENT....................................................................     98
SECTION 11.7      IMMATERIAL TRANSFERS AND EASEMENTS, ETC.......................................................     98

                                                         ARTICLE XII
RECOURSE; LIMITATIONS ON RECOURSE...............................................................................     99
SECTION 12.1      LIMITATIONS ON RECOURSE.......................................................................     99
SECTION 12.2      PARTIAL RECOURSE; FULL RECOURSE...............................................................     99
SECTION 12.3      MISCELLANEOUS.................................................................................    100

                                                        ARTICLE XIII
WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES..................................................................    100
SECTION 13.1      WAIVERS.......................................................................................    100

                                                         ARTICLE XIV
MISCELLANEOUS...................................................................................................    102
SECTION 14.1      EXPENSES AND ATTORNEYS' FEES..................................................................    102
SECTION 14.2      INDEMNITY.....................................................................................    103
SECTION 14.3      AMENDMENTS AND WAIVERS........................................................................    103
SECTION 14.4      RETENTION OF THE BORROWERS' DOCUMENTS.........................................................    104
SECTION 14.5      NOTICES.......................................................................................    104
SECTION 14.6      SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS.................................................    105
SECTION 14.7      FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.........................................    105
SECTION 14.8      MARSHALING; PAYMENTS SET ASIDE................................................................    105
SECTION 14.9      SEVERABILITY..................................................................................    106
SECTION 14.10     HEADINGS......................................................................................    106
SECTION 14.11     APPLICABLE LAW................................................................................    106
SECTION 14.12     SUCCESSORS AND ASSIGNS........................................................................    106
SECTION 14.13     SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP............................    106
SECTION 14.14     REASONABLENESS OF DETERMINATIONS..............................................................    107
SECTION 14.15     LIMITATION OF LIABILITY.......................................................................    107
SECTION 14.16     NO DUTY.......................................................................................    107
SECTION 14.17     ENTIRE AGREEMENT..............................................................................    107
SECTION 14.18     CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT.....................................................    107
SECTION 14.19     CONSENT TO JURISDICTION.......................................................................    108
SECTION 14.20     WAIVER OF JURY TRIAL..........................................................................    108
SECTION 14.21     COUNTERPARTS; EFFECTIVENESS...................................................................    109
SECTION 14.22     SERVICER......................................................................................    109
SECTION 14.23     OBLIGATIONS OF BORROWER PARTIES...............................................................    109
SECTION 14.24     ADDITIONAL INSPECTIONS; REPORTS...............................................................    109




                                      iii


                         LIST OF EXHIBITS AND SCHEDULES

Exhibit A            -   Properties
Exhibit B            -   Environmental Reports
Exhibit C            -   Franchise Agreements
Exhibit D            -   Allocated Loan Amounts/Aggregate Allocated Loan Amounts
Exhibit E            -   Management Agreements
Exhibit F            -   [Reserved]
Exhibit G            -   Property Improvement Plans
Exhibit H            -   [Reserved]
Exhibit I            -   Acceptable Franchisors
Exhibit J            -   Property Condition Reports
Exhibit K            -   Zoning Reports
Exhibit L            -   Certificate re: Work Reserves

Schedule 1           -   Borrowers
Schedule 2.4         -   Scheduled Mortgage Principal Payments
Schedule 2.12(G)     -   Crossed Loans/Crossed Borrowers
Schedule 3.1(A)      -   List of Loan Documents
Schedule 4.1(C)      -   Organizational Chart for Borrower Parties
Schedule 4.2         -   Consents
Schedule 4.5         -   Condemnation Proceedings
Schedule 4.5(A)      -   Rights to Purchase/Rights of First Offer
Schedule 4.7(B)      -   Rent Roll
Schedule 4.7(E)      -   Franchise Defaults
Schedule 4.9         -   Litigation
Schedule 4.14            ERISA Plans
Schedule 4.20        -   Insurance
Schedule 4.28        -   Collective Bargaining Agreements
Schedule 4.30        -   Ground Leases
Schedule 5.14        -   Material Agreements
Schedule 6.5         -   Required Capital Improvements
Schedule 6.6         -   Environmental Work/O&M Plans
Schedule 6.7         -   Reserve Funding Conditions

                                        i



                           LOAN AND SECURITY AGREEMENT

            This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as
of June 25, 2004 and entered into by and between the parties listed as Borrowers
on SCHEDULE 1 hereto (collectively, "BORROWERS", and individually, each a
"BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation
(together with its successors and assigns, "LENDER").

            NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrowers and Lender agree as
follows:

                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan
Agreement as so defined. Terms defined in the preamble and recitals to this Loan
Agreement are used in this Loan Agreement as so defined.

      "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the
franchisors identified on EXHIBIT I.

      "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate
of the Borrowers and, upon receipt of a Rating Confirmation, another reputable
hotel management company with at least five (5) years experience managing hotel
properties similar to the Properties and which at the time of its engagement is
managing at least 5,000 hotel rooms (exclusive of the Properties).

      "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest
in and to the Accounts, the Reserves, all monies and amounts which may from time
to time be on deposit therein, all monies, checks, notes, instruments,
documents, deposits, and credits from time to time in the possession of Lender
representing or evidencing such Accounts and Reserves and all earnings and
investments held therein and proceeds thereof.

      "ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any
Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any
other accounts pledged to Lender pursuant to this Loan Agreement or any other
Loan Document.

      "AFFILIATE" means in relation to any Person, any other Person: (i)
directly or indirectly controlling, controlled by, or under common control with,
the first Person; (ii) directly or indirectly owning or holding fifty percent
(50%) or more of any equity interest in the first Person; or (iii) fifty percent
(50%) or more of whose voting stock or other equity interest is directly or
indirectly owned or held by the first Person. In addition, the Affiliates of
each Borrower Party include, without limitation, all other Borrower Parties,
irrespective of whether they now or hereafter satisfy the foregoing criteria.
For purposes of this definition, "CONTROL" (including with correlative meanings,
the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means
the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Where expressions such
as "[name of party] or



any Affiliate" are used, the same shall refer to the named party and any
Affiliate of the named party. Further, the Affiliates of any Person that is an
entity shall include all natural persons who are officers, directors, managing
members, or general partners of the entity.

      "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the
Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT
D.

      "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of
determination, the aggregate outstanding principal balance of the Mezzanine Loan
and the Loan.

      "ALLOCABLE PORTION" means 24.54%.

      "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each
Property as set forth on EXHIBIT D.

      "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers,
Deloitte & Touche or KPMG Peat Marwick or any successor entity.

      "APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in
Section 6.7.

      "APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section
6.7.

      "APPROVED EXPENDITURES" has the meaning set forth in Section 6.7.

      "ARCHITECT" has the meaning set forth in Section 5.5.

      "ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and
Rents of even date herewith from each of the Borrowers to Lender, constituting
assignments of each Borrower's right, title and interest in the Leases and
proceeds therefrom for each of their respective Properties as Collateral for the
Loan, as same may be amended or modified from time to time.

      "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain
Conditional Assignments of Hotel Management Agreements of even date herewith
executed by each of the Borrowers and the applicable Manager, constituting an
assignment of each Management Agreement as Collateral for the Loan, as same may
be amended or modified from time to time.

      "ASSUMPTION" has the meaning set forth in Section 11.3.

      "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended
from time to time, and all rules and regulations promulgated thereunder.

      "BEVERAGE COMPANY" means any Person (other than any of the Borrowers)
holding, or entitled to any proceeds from, any liquor license or other beverage
permit for the sale of alcoholic beverages at any Property.

                                       2


      "BOARD OF MANAGERS" means the board of managers, or similar governing
entity, established for the governance of the condominium association
established pursuant to the terms of the Condominium Property Documents.

      "BORROWER" and "BORROWERS" have the meanings set forth in the preamble;
provided that, following a Release, "BORROWERS" means each of the Borrowers
remaining as a party to the Loan Documents, and whose Properties remain
encumbered by the Mortgages as Collateral for the Loan and "BORROWER" means any
of such remaining parties.

      "BORROWER PARTY" and "BORROWER PARTIES" means, individually or
collectively, the Borrowers, General Partner, Member and Guarantor.

      "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1.

      "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii)
any day which is a legal holiday under the laws of the State of New York, the
state or states where the servicing offices of the Servicer, and, if the Loan
becomes a "specially serviced mortgage loan" pursuant to the terms of any trust
and servicing agreement entered into in connection with any Securitization
backed in whole or in part by the Loan, the special servicer, are located or the
state in which the corporate trust office of the trustee in connection with any
such Securitization is located, and (iv) any day on which banking institutions
located in such state are generally not open for the conduct of regular
business.

      "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event,
the last day of each calendar quarter, and (y) during the continuance of a Cash
Trap Event, the last day of each calendar month.

      "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other
expenditures for FF&E and Capital Expenditures set forth in an annual budget
approved by Lender in writing (such approval not to be unreasonably withheld or
delayed as long as the budget is consistent with the form of the CapEx/FF&E
Budget provided to Lender prior to Closing), covering the planned FF&E
expenditures and Capital Expenditures for the period covered by such budget, as
same may be amended pursuant to Section 5.1(D) hereof.

      "CAPITAL EXPENDITURES" means expenditures for Capital Improvements.

      "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations
(including any improvements, repairs or alterations required pursuant to a
Property Improvement Plan), FF&E and other capital items (whether paid in cash
or property or accrued as liabilities) made by the Borrowers that, in conformity
with GAAP, would not be included in the Borrowers' annual financial statements
as an Operating Expense of the Properties.

      "CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5.

      "CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even
date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank.

      "CASH TRAP EVENT" has the meaning set forth in Section 6.8.

                                       3


      "CASH TRAP RESERVE" has the meaning set forth in Section 6.8.

      "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier
3 Hotel category.

      "CLAIMS" has the meaning set forth in Section 5.3.

      "CLOSING" means the funding of the Loan.

      "CLOSING DATE" means the date on which the Closing occurs.

      "COLLATERAL" means rights, interests, and property of every kind, real and
personal, tangible and intangible, which is granted, pledged, liened, or
encumbered as security for the Loan or any of the other Obligations under this
Loan Agreement, the Mortgages, the Cash Management Agreement or other Loan
Documents, including without limitation the Properties and the Account
Collateral.

      "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1.

      "CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (A) with respect to
any indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto; (B) with respect to any
letter of credit issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings; (C) under any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect against
fluctuations in interest rates; or (D) under any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect that Person against fluctuations in currency values. Contingent
Obligations shall include (i) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making (other than the Loan), discounting with recourse or sale with recourse
by such Person of the obligation of another, (ii) the obligation to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement, and (iii) any liability of such Person
for the obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance sheet item or level of
income of another. The amount of any Contingent Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported or, if not a fixed
and determined amount, the maximum amount so guaranteed.

      "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject, other than the Loan Documents.

                                       4


      "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1.

      "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set
forth in Section 7.1.

      "CROSS GUARANTIES" shall mean (i) those certain Guaranties of the Loan,
each dated as of the date hereof, executed by each of the Crossed Borrowers, and
(ii) those certain Guaranties of each of the Crossed Loans, each dated as of the
date hereof, executed by each of the Borrowers.

      "CROSS RELEASE NOTICE" has the meaning set forth in Section 2.12(G).

      "CROSSED BORROWERS" shall mean the mortgage loan borrowers (other than the
Borrowers) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof,
subject to modification pursuant to Section 2.12(G) hereof.

      "CROSSED INDEBTEDNESS" shall mean the Crossed Loans and all other
"Indebtedness" as defined in each Crossed Loan Agreement.

      "CROSSED LOANS" shall mean each of the mortgage loans (other than the
Loan) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof with
respect to each Crossed Borrower, subject to modification pursuant to Section
2.12(G) hereof.

      "CROSSED LOAN AGREEMENTS" shall mean those certain Loan Agreements, each
dated as of the date hereof, between Lender and the Crossed Borrowers for the
respective Crossed Loans, each as amended, modified, supplemented or restated
from time to time, subject to modification pursuant to Section 2.12(G) hereof.

      "CROSSED LOAN DEFAULT" shall mean any "Event of Default" as defined in any
Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G)
hereof.

      "CROSSED LOAN DOCUMENTS" shall mean the "Loan Documents" as defined in
each Crossed Loan Agreement for each Crossed Loan, including without limitation
the promissory note(s), Crossed Mortgages and Crossed Loan Agreement evidencing
and/or securing each Crossed Loan, and each of the Crossed Guaranties relating
to the respective Crossed Loans, subject to modification pursuant to Section
2.12(G) hereof.

      "CROSSED MORTGAGES" shall mean each of the mortgages, deeds of trust and
deeds to secure debt, each dated as of the date hereof, from each Crossed
Borrower to Lender, constituting a Lien on such Crossed Borrower's Crossed
Property as security for the respective Crossed Loans, each as amended,
modified, supplemented or restated from time to time, subject to modification
pursuant to Section 2.12(G) hereof.

      "CROSSED PROPERTIES" shall mean the properties securing each Crossed Loan,
as described in the respective Crossed Loan Agreement, subject to modification
pursuant to Section 2.12(G) hereof.

      "D&O INSURANCE" has the meaning set forth in Section 5.4.

                                       5


      "DEBT SERVICE COVERAGE RATIO" OR "DSCR" means, at any time of
determination, Net Cash Flow for the trailing twelve (12) month period divided
by the amount of interest that will be required to be paid over the succeeding
twelve (12) months on the Loan and the Allocable Portion of the Mezzanine Loan,
plus principal amortization of the Loan and the Allocable Portion of the
Mezzanine Loan that would be required in respect of the then outstanding
principal amount of the Loan and the Allocable Portion of the Mezzanine Loan
over the succeeding twelve (12) months based on a twenty-five (25) year
amortization schedule, calculated using the Interest Rate for the Loan and the
actual interest rate on the Mezzanine Loan.

      "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1.

      "DEBT YIELD" means, at any time of determination, Net Cash Flow for the
trailing twelve (12) month period divided by the then outstanding principal
balance of the Loan and the Allocable Portion of the Mezzanine Loan.

      "DEFAULT" means any breach or default under any of the Loan Documents,
whether or not the same is an Event of Default, and also any condition or event
that, after notice or lapse of time or both, would constitute an Event of
Default if that condition or event were not cured or removed within any
applicable grace or cure period.

      "DEFAULT RATE" has the meaning set forth in Section 2.2.

      "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1.

      "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1.

      "DEPOSIT BANK" has the meaning set forth in Section 7.1.

      "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3.

      "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by
Moody's or A-1 or better by S&P or similarly rated by any successor to either of
such rating services, (b) obligations of the United States government or any
agency thereof which are backed by the full faith and credit of the United
States, or (c) deposits, including certificates of deposit, in any commercial
bank or trust company (i) which is registered to do business in any state of the
United States, (ii) which has capital and surplus in excess of $100,000,000 and
(iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or
better by Moody's or is similarly rated by any successor thereof, provided that
each such item of commercial paper, each such obligation, and each such time
deposit has a maturity date not later than thirty days after the date of
purchase thereof.

      "DOLLARS" and the sign "$" mean the lawful money of the United States of
America.

      "ELIGIBLE ACCOUNT" means a separate and identifiable account from all
other funds held by the holding institution, which account is either (i) an
account maintained with an Eligible Bank or (ii) a segregated trust account
maintained by a corporate trust department of a federal depository institution
or a state chartered depository institution subject to regulations regarding

                                       6


fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulations Section 9.10(b), which, in either case, has corporate trust powers
and is acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.

      "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria.

      "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning
of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is
maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii)
which has at any time within the preceding six (6) years been maintained for the
employees of any of the Borrowers or any current or former ERISA Affiliate or
(iii) for which any of the Borrowers or any ERISA Affiliate has any liability,
including contingent liability.

      "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date
herewith from the Borrowers and Guarantor to Lender, as same may be amended or
modified from time to time.

      "ENVIRONMENTAL LAWS" means all present and future local, state, federal or
other governmental authority, statutes, ordinances, codes, orders, decrees,
laws, rules or regulations pertaining to or imposing liability or standards of
conduct concerning environmental regulation (including, without limitation,
regulations concerning health and safety), contamination or clean-up or the
handling, generation, release or storage of Hazardous Material affecting the
Properties including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know
Act of 1986, as amended, the Hazardous Substances Transportation Act, as
amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as
amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as
amended, the Safe Drinking Water Act, as amended, the Occupational Safety and
Health Act, as amended, any state superlien and environmental clean-up statutes
and all regulations adopted in respect of the foregoing laws whether now or
hereafter in effect.

      "ENVIRONMENTAL REPORTS" means those certain environmental reports and
audits for the Properties as described on EXHIBIT B.

      "ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6.

      "EO13224" has the meaning set forth in Section 4.31.

      "ERISA" means the Employee Retirement Income Security Act of 1974, and all
rules and regulations promulgated thereunder.

      "ERISA AFFILIATE" means, in relation to any Person, any other Person under
common control with the first Person, within the meaning of Section 4001(a)(14)
of ERISA.

      "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of
London, England are generally open for interbank or foreign exchange
transactions and which is also a Business Day.

                                       7


      "EVENT OF DEFAULT" has the meaning set forth in Section 8.1.

      "EXCESS CASH FLOW" has the meaning set forth in the Cash Management
Agreement.

      "EXCESS INTEREST" has the meaning set forth in Section 2.2.

      "EXCLUDED BORROWER" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED GUARANTIES" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED LOAN" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED LOAN AGREEMENT" has the meaning set forth in Section 2.12(G)
hereof.

      "EXCLUDED LOAN DOCUMENTS" has the meaning set forth in Section 2.12(G)
hereof.

      "EXCLUDED PROPERTY" has the meaning set forth in Section 2.12(G) hereof.

      "EXCULPATED PARTIES" has the meaning set forth in Section 12.2.

      "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash
Management Agreement.

      "FF&E" means all machinery, furniture, furnishings, equipment, fixtures
(including, without limitation, all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures), inventory and articles of
personal property and accessions, renewals and replacements thereof and
substitutions therefor (including, without limitation, beds, bureaus,
chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs,
carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings,
pictures, divans, couches, luggage carts, luggage racks, stools, sofas,
chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry
cleaning facilities, dining room wagons, tools, keys or other entry systems,
bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock
radios, television sets, intercom and paging equipment, electric and electronic
equipment, dictating equipment, private telephone systems, medical equipment,
potted plants, heating, lighting and plumbing fixtures, fire prevention and
extinguishing apparatus, cooling and air-conditioning systems, elevators,
escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry
machines, tools, machinery, engines, dynamos, motors, boilers, incinerators,
switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning,
waxing and polishing equipment, call systems, brackets, electrical signs, bulbs,
bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment,
dishwashers, garbage disposals, washer and dryers), other customary hotel
equipment and other tangible property of every kind and nature whatsoever owned
by the Borrowers, or in which the Borrowers have or shall have an interest, now
or hereafter located at the Properties, or appurtenant thereto, and useable in
connection with the present or future operation and occupancy of the Properties
and all building equipment, material and supplies of any nature whatsoever owned
by the Borrowers, or in which the Borrowers have or shall have an interest, now
or hereafter located at the Properties, or appurtenant thereto, and useable in
connection with the present or future operation, enjoyment and occupancy of the
Properties.

                                       8


      "FF&E RESERVE" means the reserve established pursuant to Section 6.4.

      "FINANCIAL STATEMENTS" means statements of operations and retained
earnings, statements of cash flow and balance sheets.

      "FINANCING STATEMENTS" means the Uniform Commercial Code Financing
Statements naming the applicable Borrower Parties as debtor, and Lender as
secured party, required under applicable state law to perfect the security
interests created hereunder or under the other Loan Documents.

      "FITCH" means Fitch, Inc.

      "FORCE MAJEURE" means acts of god, governmental restrictions, stays,
judgments, orders, decrees, enemy actions, civil commotion, fire, casualty,
strikes or work stoppages which are industry-wide and not aimed at the Borrowers
or their Affiliates, or other causes beyond the reasonable control of the
Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of
itself shall not be deemed a cause beyond the control of the Borrowers.

      "FRANCHISE AGREEMENTS" means, collectively, those certain agreements
described in EXHIBIT C and any replacement franchise agreement which may
hereafter be entered into in accordance with the terms and conditions hereof by
any of the Borrowers, as franchisee, pursuant to which the Borrowers have the
right to operate the Properties under names and hotel systems controlled by the
Franchisor.

      "FRANCHISOR" means the current hotel franchisor or licensor with respect
to each Property or any other successor franchisor or licensor permitted
pursuant to Section 5.13.

      "FRANCHISOR LETTER" means, with respect to each Property, a comfort
letter(s), and/or similar instrument(s) from the related Franchisor to Lender
acknowledging the Loan and providing certain assurances, reasonably satisfactory
to Lender, with respect thereto.

      "FUNDING LOSSES" has the meaning set forth in Section 2.10.

      "FUNDING PARTY" means any bank or other entity, if any, which is
indirectly or directly funding Lender with respect to the Loan, in whole or in
part, including, without limitation, any direct or indirect assignee of, or
participant in, the Loan.

      "GAAP" means generally accepted accounting principles as set forth in
Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting
Fairly in Conformity with Generally Accepted Accounting Principles in the
Independent Auditor's Report" issued by the Auditing Standards Board of the
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board to the extent such principles are
applicable to the facts and circumstances as of the date of determination.

      "GENERAL PARTNER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "General Partners", and any other entity which
is now or hereafter becomes a general partner of any of the Borrowers under such
Borrower's limited partnership agreement.

                                       9


      "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or
state government or other political subdivision thereof and any entity,
including any regulatory or administrative authority or court, exercising
executive, legislative, judicial, regulatory or administrative or
quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal in each case having jurisdiction over such
applicable Person or such Person's property, and any stock exchange on which
shares of capital stock of such Person are listed or admitted for trading.

      "GROUND LEASE DEFAULT" has the meaning set forth in Section 4.30.

      "GROUND LEASED PROPERTIES" means the Properties subject to the Ground
Leases described on SCHEDULE 4.30 attached hereto.

      "GROUND LEASES" means the ground leases described on SCHEDULE 4.30
attached hereto.

      "GROUND LESSORS" means the lessors under the Ground Leases described on
SCHEDULE 4.30 attached hereto.

      "GUARANTOR" means Lodgian, Inc., a Delaware corporation.

      "GUARANTY" means the Guaranty of Recourse Obligations and the
Environmental Indemnity.

      "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse
Obligations of even date herewith from Guarantor to Lender, as same may be
amended or modified from time to time.

      "HAZARDOUS MATERIAL" means all or any of the following: (A) substances,
materials, compounds, wastes, products, emissions and vapors that are defined or
listed in, regulated by, or otherwise classified pursuant to, any applicable
Environmental Laws, including any so defined, listed, regulated or classified as
"hazardous substances", "hazardous materials", "hazardous wastes", "toxic
substances", "pollutants", "contaminants", or any other formulation intended to
regulate, define, list or classify substances by reason of deleterious, harmful
or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources; (C)
any flammable substances or explosives or any radioactive materials; (D)
asbestos in any form; (E) electrical or hydraulic equipment which contains any
oil or dielectric fluid containing polychlorinated biphenyls; (F) radon; (G)
mold; or (H) urea formaldehyde, provided, however, such definition shall not
include cleaning materials and other substances commonly used in the ordinary
course of the Borrowers' business, which materials exist only in reasonable
quantities and are stored, contained, transported, used, released, and disposed
of in accordance with all applicable Environmental Laws.

      "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established
pursuant to Section 6.6.

                                       10


      "IMPOSITIONS" means (i) all real estate and personal property taxes, and
vault charges and all other taxes, levies, assessments and other similar
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, of every kind and nature whatsoever (including any payments in lieu
of taxes), which at any time prior to, at or after the execution hereof may be
assessed, levied or imposed by, in each case, a governmental authority upon any
of the Properties or the rents relating thereto or upon the ownership, use,
occupancy or enjoyment thereof, and any interest, cost or penalties imposed by
such governmental authority with respect to any of the foregoing and (ii) all
rent and other amounts payable by the Borrowers under each of the Ground Leases
and under the Condominium Property Documents. Impositions shall not include (x)
any sales or use taxes payable by the Borrowers, (y) taxes payable by tenants or
guests occupying any portions of the Properties, or (z) taxes or other charges
payable by any Manager or Franchisor unless such taxes are being paid on behalf
of the Borrowers.

      "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant
to Section 6.3.

      "IMPROVEMENTS" means all buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
of every kind and nature now or hereafter located on the Properties.

      "INDEBTEDNESS" or "INDEBTEDNESS", means, for any Person, without
duplication: (i) all indebtedness of such Person for borrowed money, for amounts
drawn under a letter of credit, or for the deferred purchase price of property
for which such Person or its assets is liable, (ii) all unfunded amounts under a
loan agreement, letter of credit (unless secured in full by Dollars), or other
credit facility for which such Person would be liable if such amounts were
advanced thereunder, (iii) all amounts required to be paid by such Person as a
guaranteed payment to partners or a preferred or special dividend, including any
mandatory redemption of shares or interests but not any preferred return or
special dividend paid solely from, and to the extent of, excess cash flow after
the payment of all operating expenses, capital improvements and debt service on
all Indebtedness, (iv) all obligations under leases that constitute capital
leases for which such Person is liable, and (v) all obligations of such Person
under interest rate swaps, caps, floors, collars and other interest hedge
agreements, in each case whether such Person is liable contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which
obligations such Person otherwise assures a creditor against loss.

      "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2.

      "INDEMNITEES" has the meaning set forth in Section 14.2.

      "INDEPENDENT DIRECTOR" means an individual who shall not have been at the
time of such individual's appointment or at any time while serving as a director
of General Partner, Member, any of the Borrowers or any of their respective
Affiliates, and may not have been at any time during the preceding five years
(i) a stockholder, director (other than as an independent director/member),
officer, employee, partner, attorney or counsel of General Partner, Member,
Guarantor, any of the Borrowers or any Affiliate of any of them (except that
such individual may be an independent director of any other Affiliate of the
foregoing), (ii) a customer, supplier or other Person who derives any of its
purchases or revenues from its activities with General

                                       11


Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them
(other than a company that provides professional independent directors and which
also may provide other ancillary corporate, partnership, company or trust
services to the Borrowers, Member, General Partner or their Affiliates in the
ordinary course of business (for example, The Corporation Trust Company)), (iii)
a Person or other entity controlling or under common control with any such
stockholder, partner, customer, supplier or other Person, or (iv) a member of
the immediate family of any such stockholder, director, officer, employee,
partner, customer, supplier or other Person. As used in this definition, the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management, policies or activities of a
Person, whether through ownership of voting securities, by contract or
otherwise.

      "INITIAL TERM" means the period from the Closing Date to the Scheduled
Maturity Date.

      "INSURANCE POLICIES" has the meaning set forth in Section 5.4.

      "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance
policies required to be maintained by the Borrowers with respect to the
Properties under Section 5.4.

      "INTERESTED PARTIES" has the meaning set forth in Section 10.3.

      "INTEREST RATE" has the meaning set forth in Section 2.2.

      "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section
5.22.

      "IRC" means the Internal Revenue Code of 1986, and any rule or regulation
promulgated thereunder from time to time, in each case as amended from time to
time.

      "IRS" means the Internal Revenue Service or any successor thereto.

      "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents,
or in any document or certificate executed on behalf of any Borrower Party
pursuant to this Loan Agreement or any of the Loan Documents, reference is made
to the knowledge of the Borrowers or any other Borrower Party (whether by use of
the words "knowledge" or "known", or other words of similar meaning, and whether
or not the same are capitalized), such shall be deemed to refer to the knowledge
(without independent investigation or inquiry unless otherwise specified) of (i)
the individuals who have significant responsibility for any policy making, major
decisions or financial affairs of the applicable entity; (ii) the general
manager for the applicable Property; (iii) the regional vice president of
operations for Guarantor, the president of each Borrower and Member, with
respect to operational issues of any Property or any of the Borrowers; (iv) the
chief operating officer of Guarantor, with respect to representations regarding
Guarantor; and (v) the person signing such document or certificate.

      "LEASE" means any lease, tenancy, license, assignment and/or other rental
or occupancy agreement or other agreement or arrangement (including, without
limitation, any and all guaranties of any of the foregoing) heretofore or
hereafter entered into affecting the use, enjoyment or occupancy of, or the
conduct of any activity upon or in, the Properties or any portion thereof,
including any extensions, renewals, modifications or amendments thereof.

                                       12


      "LENDER" is defined in the preamble.

      "LENDER'S CONSULTANT" has the meaning set forth in Section 6.7

      "LETTER OF CREDIT" means an irrevocable, unconditional, transferable,
clean sight draft letter of credit (either an evergreen letter of credit or one
which does not expire until at least thirty (30) days after the Maturity Date
(the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw
thereon in New York, New York based solely on a statement executed by an officer
or authorized signatory of Lender, in form and substance reasonably acceptable
to Lender and issued by an Eligible Bank. If at any time (a) the institution
issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if
the Letter of Credit is due to expire prior to the LC Expiration Date, Lender
shall have the right immediately to draw down the same in full and hold the
proceeds thereof in accordance with the provisions of this Loan Agreement,
unless the Borrowers shall deliver a replacement Letter of Credit from an
Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers
written notice to the Borrowers that the institution issuing the Letter of
Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty
(20) days prior to the expiration date of said Letter of Credit.

      "LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).

      "LOAN" has the meaning set forth in Section 2.1.

      "LOAN AGREEMENT" means this Loan and Security Agreement, as same may be
amended, modified or restated from time to time (including all schedules,
exhibits, annexes and appendices hereto).

      "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgages, the
Assignments of Leases, the Assignments of Management Agreements, the Guaranty,
the Financing Statements, the Cash Management Agreement and any and all other
documents and agreements from any of the Borrowers, General Partner, Member,
Guarantor or Manager and accepted by Lender for the purposes of evidencing
and/or securing the Loan, excluding the Mezzanine Loan Documents.

      "LOAN YEAR" means the twelve (12) month period commencing on July 1st of
any calendar year during the term of the Loan and ending on June 30th of the
following calendar year - provided that the first Loan Year shall commence on
the Closing Date and end on June 30, 2005.

      "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1.

      "MANAGEMENT AGREEMENTS" means those certain Management Agreements
described in EXHIBIT E, between each Borrower and the applicable Manager
described therein, and any management agreement which may hereafter be entered
into in accordance with the terms and conditions hereof, pursuant to which any
subsequent Manager may hereafter manage one or more of the Properties.

                                       13


      "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the
terms of the Management Agreements.

      "MANAGERS" means the managers described in EXHIBIT E or an Acceptable
Manager as may hereafter be charged with management of one or more of the
Properties approved by Lender in accordance with the terms and conditions
hereof.

      "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable
discretion, (A) a material adverse effect (which may include economic or
political events) upon the business, operations, properties, assets or condition
(financial or otherwise) of any of the Borrowers or Guarantor, or (B) the
impairment of the ability of any of the Borrowers or Guarantor to perform its
obligations under any Loan Documents, or (C) the impairment of the ability of
Lender to enforce or collect any of the Obligations as such Obligations become
due. In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then occurring events and existing
conditions would result in a Material Adverse Effect.

      "MATERIAL AGREEMENT" means any contract or agreement relating to the
ownership, management, development, use, operation, leasing, maintenance, repair
or improvement of the Properties under which there is an obligation of the
Borrowers, in the aggregate, to pay, or under which any of the Borrowers
receives in compensation, more than $500,000 per annum, other than (i) the
Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement
under which (x) there is an obligation of the Borrowers, in the aggregate, to
pay, or under which any of the Borrowers (or all the Borrowers in the aggregate)
receives in compensation, not more than $1,000,000 per annum and (y) which is
terminable by the Borrowers on not more than sixty (60) days prior written
notice without any fee or penalty.

      "MATERIAL ALTERATION" means any improvement or alteration to a Property
(other than decorative work such as painting, wallpapering and carpeting), the
cost of which exceeds the greater of (x) five percent (5%) of the Aggregate
Allocated Loan Amount with respect to the applicable Property or (y) $250,000,
and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget
then in effect, or as approved Work under Section 6.7 hereof.

      "MATERIAL LEASE" means any Lease of space in a Property which (i) is with
an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other
payments in an amount equal to or greater than $100,000, or has a term
(including all extensions and renewals which are unilaterally exercisable by the
tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by
either party thereto on thirty (30) days' notice without payment of a
termination fee, penalty or other cancellation fee, (iii) demises in excess of
2000 square feet of space, or (iv) obligates the Borrowers to make any
improvements to the Properties either directly or through cash allowances
(including, without limitation, free rent, tenant improvement allowances, or
landlord's construction work) to the applicable tenant in excess of $25,000. For
purposes of this definition only, in determining the square footage demised
under any Lease, all space in the applicable Property which may in the future be
demised to the tenant under such Lease by reason of such tenant exercising any
right or option contained in such Lease shall be included in the calculation of
the square footage demised under such Lease.

                                       14


      "MATURITY DATE" means July 1, 2009, or such other date on which the final
payment of principal of the Note becomes due and payable as herein provided,
whether at such stated maturity date, by acceleration, or otherwise.

      "MAXIMUM RATE" has the meaning set forth in Section 2.2.

      "MEMBER" means, individually or collectively, those parties identified on
SCHEDULE 4.1(C) as "Members" (being the managing or sole members of each of the
Borrowers which are limited liability companies) and any other entity which is
now or hereafter becomes the managing or sole member of any of the Borrowers
under such Borrower's limited liability company operating agreement.

      "MERRILL LYNCH" has the meaning set forth in Section 10.3.

      "MEZZANINE BORROWER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "Mezzanine Borrower".

      "MEZZANINE LENDER" means Merrill Lynch Mortgage Lending, Inc., its
successors and assigns.

      "MEZZANINE LOAN" means that certain loan being made on the date hereof
from Mezzanine Lender to Mezzanine Borrower.

      "MEZZANINE LOAN DOCUMENTS" means the documents evidencing and securing the
Mezzanine Loan, as same may be amended, modified or restated from time to time.

      "MINIMUM DEBT YIELD" means (i) during the first (1st) Loan Year, 9%, (ii)
during the second (2nd) Loan Year, 10%, (iii) during the third (3rd) Loan Year,
11%, (iv) during the fourth (4th) Loan Year, 12%, and (v) during the fifth (5th)
Loan Year, 13%.

      "MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4.

      "MOODY'S" means Moody's Investors Service.

      "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments
of Leases and Security Agreements, (ii) those certain Deeds of Trust,
Assignments of Leases and Security Agreements, and (iii) those certain Deeds to
Secure Debt, Assignment of Leases and Security Agreements, each of even date
herewith, from each Borrower to Lender (or deed trustee on behalf of Lender, as
applicable), constituting a Lien on such Borrower's respective Property as
Collateral for the Loan as same may be modified or amended from time to time.

      "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any
Affiliate is making, or is accruing an obligation to make, contributions or has
made, or been obligated to make, contributions within the preceding six (6)
years, or for which any of the Borrowers or any Affiliate has any liability,
including contingent liability.

                                       15


      "NET CASH FLOW" means Net Operating Income for any period less (i) a base
management fee equal to the greater of (A) the actual base management fee for
such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve
for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due
to all Franchisors for such period.

      "NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which
Operating Revenues exceed Operating Expenses (excluding Management Fees,
interest, income taxes, depreciation, amortization, FF&E reserves, and fees due
to all Franchisors for such period).

      "NOTE" has the meaning set forth in Section 2.1.

      "OBLIGATIONS" means the Loan and all obligations, liabilities and
indebtedness of every nature to be paid or performed by the Borrowers under the
Loan Documents, including the principal amount of the Loan, interest accrued
thereon and all fees, costs and expenses, and other sums now or hereafter owing,
due or payable and whether before or after the filing of a proceeding under the
Bankruptcy Code by or against any of the Borrowers, and the performance of all
other terms, conditions and covenants under the Loan Documents.

      "OFAC" has the meaning set forth in Section 4.31.

      "O&M PLANS" has the meaning set forth in Section 5.7.

      "OPERATING BUDGET" means, collectively, for any period, the Borrowers'
budgets setting forth the Borrowers' best estimate, after due consideration, of
all Operating Revenues and Operating Expenses and any other revenues, costs and
expenses for each of the Properties for such period, which budgets have been
approved by Lender in accordance herewith, as same may be amended pursuant to
Section 5.1(D) hereof.

      "OPERATING EXPENSES" means, for any period, without duplication, all costs
and expenses of operating, maintaining and managing the Properties determined in
accordance with GAAP, including, without limitation, Impositions (due and
payable during the applicable period of determination), Insurance Premiums,
repair and maintenance costs, Management Fees and costs, fees payable to all
Franchisors, utilities, accounting, legal and other professional fees, fees
relating to environmental and financial audits, wages, salaries, payroll taxes
and benefits, business franchise taxes, tips and gratuities paid to employees
and staff and other personnel expenses, costs and expenses related to operating
and maintaining all guest rooms, restaurants (including inventory and supplies),
retail stores and shops, bars, meeting rooms, banquet rooms, apartments, parking
and recreational facilities, and all other "costs and expenses" as defined in
the Uniform System; but excluding principal and interest payments on the Loan,
fees and expenses of a non-operating nature and fees and expenses due and
payable to or for the benefit of Lender under this Loan Agreement or any of the
other Loan Documents (including, without limitation, all loan servicing fees and
expenses, and expenses related to a Cap), expenses which, in accordance with
GAAP, should be capitalized, any expense paid by a tenant that would otherwise
be an Operating Expense, capital expenditures, tenant improvement allowances and
leasing commissions, if any, asset management fees, any payment or expense for
which each Borrower was or is to be reimbursed from proceeds of the Loan or
insurance or by any third

                                       16


party, any fees or expenses paid to any partner or member of the Borrowers for
services provided to any of the Borrowers and any non-cash charges such as
depreciation and amortization. Operating Expenses shall not include federal,
state or local income taxes or legal and other professional fees unrelated to
the operation of the Properties.

      "OPERATING REVENUES" means, without duplication, all revenues and receipts
of the Borrowers from operation of the Properties or otherwise arising in
respect of the Properties which are properly allocable to the Properties for the
applicable period in accordance with GAAP, including, without limitation, all
hotel receipts, revenues and credit card receipts collected from guest rooms,
restaurants and bars (including without limitation, service charges for
employees and staff), mini-bars, meeting rooms, banquet rooms, apartments,
parking and recreational facilities, health club membership fees, food and
beverage wholesale and retail sales, service charges, convention services,
special events, audio-visual services, boat cruises, travel agency fees,
internet booking fees, telephone charges, laundry services, vending machines and
otherwise, all rents, revenues and receipts now existing or hereafter arising or
created out of the sale, lease, sublease, license, concession or other grant of
the right of the possession, use or occupancy of all or any portion of the
Properties or personalty located thereon, or rendering of service by any of the
Borrowers or any operator or manager of the hotel or commercial space
(including, without limitation, from the rental of any office space, retail
space, guest rooms or other space, halls, stores and deposits securing
reservations of such space (only to the extent such deposits are not required to
be returned or refunded to the depositor)), proceeds from rental or business
interruption insurance relating to business interruption or loss of income for
the period in question and any other items of revenue which would be included in
operating revenues under the Uniform System; but excluding proceeds from the
sale of FF&E, abatements, reductions or refunds of real estate or personal
property taxes relating to the Properties, dividends on insurance policies
relating to the Properties, condemnation proceeds arising from a temporary
taking of all or a part of any Properties, security and other deposits until
they are forfeited by the depositor, advance rentals until they are earned,
proceeds from a sale, financing or other disposition of the Properties or any
part thereof or interest therein and other non-recurring revenues as determined
by Lender, insurance proceeds (other than proceeds from rental or business
interruption insurance), other condemnation proceeds, capital contributions or
loans to any of the Borrowers, disbursements to any of the Borrowers from the
Reserves, sales, use and occupancy taxes collected from customers or patrons of
the Properties to be remitted to the applicable taxing authorities, and
gratuities or service charges collected on behalf of and remitted to employees
or contractors of the Properties.

      "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1.

      "PAYMENT DATE" means the first day of each calendar month occurring during
the term of the Loan (or if such day is not a Business Day, the immediately
succeeding Business Day).

      "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3.

      "PERMITTED ENCUMBRANCES" means, collectively, (i) the Mortgages and the
other Liens of the Loan Documents in favor of Lender, (ii) the items shown in
Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not
yet due and payable or Liens arising after the date hereof which are being
contested in good faith by appropriate proceedings promptly

                                       17


instituted and diligently conducted in accordance with Section 5.3(B) hereof;
(iv) in the case of Liens arising after the date hereof, statutory Liens of
carriers, warehousemen, mechanics, materialmen and other similar Liens arising
by operation of law, which are incurred in the ordinary course of business and
discharged by the Borrowers by payment, bonding or otherwise within forty-five
(45) days after the filing thereof or which are being contested in good faith in
accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and
customary purchase money financing of personal property and equipment leasing to
the extent the same are created in the ordinary course of business in accordance
with Section 5.17(B) hereof; (vi) all easements, rights-of-way, restrictions and
other similar charges or non-monetary encumbrances against real property which
do not materially adversely affect (A) the ability of the Borrowers to pay any
of their obligations to any Person as and when due, (B) the marketability of
title to the Properties, (C) the fair market value of the Properties, or (D) the
use or operation of the Properties as of the Closing Date and thereafter; (vii)
rights of existing and future tenants, as tenants only, pursuant to the Leases;
(viii) any other Lien to which Lender may expressly consent in writing; and (ix)
Liens of the Mezzanine Loan Documents in favor of Mezzanine Lender.

      "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17.

      "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management
Agreement.

      "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in
Section 11.2.

      "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies
the requirements of Article IX hereof) controlled by, and more than 51% of which
is owned by, one of the following:

      (i) a pension fund, pension trust or pension account that (a) has total
real estate assets of at least $2.5 Billion and (b) is managed by a Person who
controls real estate equity assets (not including the Properties) having a fair
market value of at least $1.25 Billion; or

      (ii) a pension fund advisor who (a) immediately prior to such transfer,
controls at least $1 Billion of real estate equity assets and (b) is acting on
behalf of one or more pension funds that, in the aggregate, satisfy the
requirements of clause (i) of this definition; or

      (iii) an insurance company which is subject to supervision by the
insurance commissioner, or a similar official or agency, of a state or territory
of the United States (including the District of Columbia) (a) with a net worth,
as of the date immediately prior to the date of the transfer, of at least $1
Billion and (b) who, immediately prior to such transfer, controls real estate
equity assets (not including the Properties) having a fair market value of at
least $2.5 Billion; or

      (iv) a corporation organized under the banking laws of the United States
or any state or territory of the United States (including the District of
Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b)
who, immediately prior to such transfer, controls real estate equity assets (not
including the Properties) having a fair market value of at least $5 Billion; or

                                       18


      (v) any other Person (a) with a long-term unsecured debt rating from the
Rating Agencies of at least investment grade and (b) that owns or operates at
least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior
to the date of such transfer, of at least $750 Million and (iii) immediately
prior to such transfer, controls real estate equity assets (not including the
Properties) having a fair market value of at least $1.5 Billion.

      "PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof
and their respective permitted successors and assigns (or in the case of a
governmental Person, the successor functional equivalent of such Person).

      "PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5.

      "PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6.

      "PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General
Partner and Member.

      "PROHIBITED PERSON" has the meaning set forth in Section 4.31.

      "PROPERTIES" and "PROPERTY" means, collectively or individually, the
properties (including land and Improvements) described in EXHIBIT A, together
with all Improvements now or hereafter located thereon and all related
facilities, amenities and FF&E owned by the Borrowers and which shall be
encumbered by and are more particularly described in the respective Mortgages:
provided that, following a Release, "PROPERTIES" means each of the Properties
that remain encumbered by the Mortgages as Collateral for the Loan.

      "PROPERTY CONDITION REPORT" means those certain property condition reports
for the Properties as described on EXHIBIT J.

      "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property
improvement plans for the Properties described on EXHIBIT G and any future
Property Improvement Plans required to be implemented by the applicable
Franchisor.

      "PROPERTY RELEASE" has the meaning set forth in Section 11.4.

      "RATING AGENCY" means, prior to a securitization, any of S&P, Moody's and
Fitch or any other nationally-recognized statistical rating organization
designated by Lender in its sole discretion, and, after a Securitization, each
Rating Agency which has rated the Securities that are the subject of the
Securitization.

      "RATING CONFIRMATION" with respect to the transaction or matter in
question, means: (i) if all or any portion of the Loan, by itself or together
with other loans, has been the subject of a Securitization, then each applicable
Rating Agency shall have confirmed in writing that such transaction or matter
shall not result in a downgrade, qualification, or withdrawal of any rating then
in effect for any certificate or other securities issued in connection with such
Securitization;

                                       19


and (ii) if all of the Loan has not been the subject of a Securitization, then
Lender shall have determined in its reasonable discretion (taking into
consideration such factors as Lender may in good faith determine, including the
attributes of the loan pool in which the Loan might reasonably be expected to be
securitized) that no rating for any certificate or other securities that would
be issued in connection with a Securitization of such portion of the Loan will
be downgraded, qualified, or withheld by reason of such transaction or matter.

      "RATING CRITERIA" with respect to any Person, means that (i) the
short-term unsecured debt obligations of such Person are rated at least "A-1" by
S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person
for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.

      "RECEIPTS" means all revenues, receipts and other payments of every kind
arising from ownership or operation of the Properties, including without
limitation, all warrants, stock options, or equity interests in any tenant,
licensee or other Person occupying space at, or providing services related to or
for the benefit of, the Properties received by the Borrowers or any Related
Person of the Borrowers in lieu of rent or other payment.

      "RELATED PERSON" means any Person in which any of the Borrowers or the
Guarantor holds greater than a ten percent (10%) equity interest.

      "RELEASE" has the meaning set forth in Section 11.4.

      "RELEASE DATE" has the meaning set forth in Section 11.4.

      "RELEASE PRICE" means an amount equal to one hundred twenty-five percent
(125%) of the Allocated Loan Amount of the applicable Property.

      "RENT ROLL" has the meaning set forth in Section 3.1.

      "RENTS" has the meaning set forth in the Mortgages.

      "REPLACEMENTS" has the meaning set forth in Section 6.4.

      "REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5.

      "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1.

      "RESERVES" means the reserves held by or on behalf of Lender pursuant to
this Loan Agreement or the other Loan Document, including without limitation,
the reserves established pursuant to Article VI.

      "RESTORATION" has the meaning set forth in Section 5.5.

                                       20


      "RESTORATION THRESHOLD" means the greater of (x) $250,000 or (y) five
percent (5%) of the Aggregate Allocated Loan amount of the applicable Property,
not to exceed $500,000, per Property per occurrence.

      "REVPAR" means average room revenues per available room per day.

      "S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.

      "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" means the monthly payments of
principal for each Payment Date as set forth on SCHEDULE 2.4 attached hereto;
which payment amounts were calculated based upon a twenty-five (25) year
amortization schedule at the Interest Rate. In the event that the amount of
principal prepayments on the Loan from application of casualty insurance
proceeds or condemnation awards under Section 5.5 shall exceed $10,000,000, in
the aggregate, from the Closing Date or from the date of the last
re-amortization of the Loan under this sentence, Lender shall recalculate the
Scheduled Mortgage Principal Payments based upon the then remaining principal
amount of the Loan and the foregoing assumptions and deliver a revised SCHEDULE
2.4 to the Borrowers, which revised schedule shall replace SCHEDULE 2.4 hereto
in its entirety.

      "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1.

      "SECURITIES" (whether or not capitalized) means any stock, shares, voting
trust certificates, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.

      "SECURITIZATION" means a rated offering of securities representing direct
or indirect interests in the Loan or the right to receive income therefrom.

      "SERVICER" means a servicer selected by Lender from time to time in its
sole discretion to service the Loan.

      "SERVICING FEE" has the meaning set forth in Section 2.11.

      "SPE EFFECTIVE DATE" means the later of (x) November 25, 2002, or (y) the
date of formation of the applicable Person in its respective jurisdiction of
formation.

      "SUB-ACCOUNTS" has the meaning set forth in Section 7.1.

      "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the
budgeted income and expenses and the actual income and expenses for the prior
calendar year or corresponding calendar quarter for such prior year, (ii) a
calculation of the average daily rate, RevPAR and average occupancy statistics
for the Properties for the applicable period, (iii) a calculation of the Debt
Service Coverage Ratio and the Debt Yield for the applicable period (which shall
not be

                                       21


binding on Lender), and (iv) such other financial reports as the subject entity
shall routinely and regularly prepare.

      "SURVEY" has the meaning set forth in Section 3.1.

      "TAX LIABILITIES" has the meaning set forth in Section 2.9.

      "TIER 1 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, as
applicable, identified in the "Tier 1" category on EXHIBIT I.

      "TIER 2 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 2" category on EXHIBIT I.

      "TIER 3 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 3" category on EXHIBIT I.

      "TITLE COMPANIES" means LandAmerica Title Insurance Company and Stewart
Title Insurance Company, as co-insurers, and/or such other national title
insurance company as may be acceptable to Lender.

      "TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title
insurance pertaining to the Mortgages issued by the Title Companies to Lender in
connection with the Closing.

      "TRANSFER" has the meaning set forth in Section 11.2.

      "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3.

      "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary
termination of any Franchise Agreement, (y) the failure to pay to any Franchisor
any amount due under any Franchise Agreement (a, "FRANCHISE PAYMENT DEFAULT")
and the continuance thereof beyond any applicable notice and grace period under
such Franchise Agreement or the occurrence of one or more breaches or defaults
(other than Franchise Payment Defaults) and the continuance thereof beyond all
applicable notice and grace periods, if any, under such Franchise Agreements (or
such other cure periods as may be provided by the applicable Franchisors in
writing) covering Properties with Allocated Loan Amounts of ten percent (10%) or
more of the outstanding principal balance of the Loan; provided, however, no
Uncured Franchise Default shall be deemed to have occurred under clause (x)
above with respect to any Property following the voluntary or involuntary
termination of the applicable Franchise Agreement if (a) within ten (10)
Business Days of the termination of such Franchise Agreement (and at the time of
delivery of each report pursuant to Section 5.1(A)(v)), the applicable Borrower
delivers to Lender evidence reasonably satisfactory to Lender that such Borrower
is diligently pursuing efforts to enter into a new Franchise Agreement with an
Acceptable Franchisor for the applicable Property and such Borrower shall
thereafter diligently and continuously pursue such efforts to enter into a new
Franchise Agreement, (b) at the time of such termination no other Property shall
be in

                                       22


operation without being subject to a Franchise Agreement, (c) the Allocated Loan
Amount of the Property covered by such Franchise Agreement is not more than five
percent (5%) of the outstanding principal balance of the Loan or such Property
shall not be in operation for more than five (5) consecutive days without being
subject to a Franchise Agreement, and (d) no Property shall be without a
Franchise Agreement in place for a period in excess of six (6) months from the
termination of the applicable Franchise Agreement.

      "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging
Industry promulgated by the American Hotel and Motel Association, as in effect
from time to time.

      "WAIVING PARTY" has the meaning set forth in Section 13.1.

      "WORK" has the meaning set forth in Section 6.7.

      "WORK RESERVES" has the meaning set forth in Section 6.7.

      "ZONING REPORTS" means those certain zoning and site requirements
summaries for the Properties as described on EXHIBIT K.

SECTION 1.2 ACCOUNTING TERMS.

      For purposes of this Loan Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to such terms in conformity with
GAAP or the Uniform System, as the case may be.

SECTION 1.3 OTHER DEFINITIONAL PROVISIONS.

      References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and
"SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules,
respectively, of this Loan Agreement unless otherwise specifically provided. Any
of the terms defined in Section 1.1 may, unless the context otherwise requires,
be used in the singular or the plural depending on the reference. In this Loan
Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer
to this Loan Agreement as a whole and not merely to the specific article,
section, subsection, paragraph or clause in which the respective word appears;
words importing any gender include the other genders; references to "WRITING"
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be
deemed to be followed by the words "without limitation"; and any reference to
any statute or regulation may include any amendments of same and any successor
statutes and regulations. Further, (i) any reference to any agreement or other
document may include subsequent amendments, assignments, and other modifications
thereto, and (ii) any reference to any Person may include such Person's
respective permitted successors and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons.

                                       23


                                   ARTICLE II
                                TERMS OF THE LOAN

SECTION 2.1 LOAN.

      (A) LOAN. Subject to the terms and conditions of this Loan Agreement and
in reliance upon the representations and warranties of the Borrowers contained
herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to
borrow from Lender, a loan in the original principal amount of $63,801,000 (the
"LOAN").

      (B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to
Lender a Promissory Note, dated of even date herewith (as amended, modified or
restated, and any replacement or substitute notes therefor, by means of multiple
notes or otherwise, collectively, the "NOTE"), made by the Borrowers to the
order of Lender, in the original principal amount of $63,801,000.

      (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be
used to (i) refinance existing indebtedness; (ii) pay all recording fees and
taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses
incurred by Lender, including reasonable legal fees and expenses of counsel to
Lender, and other costs and expenses approved by Lender (which approval will not
be unreasonably withheld) related to the Loan; (iii) establish the Reserves
required hereunder; and (iv) provide for general corporate purposes, including,
without limitation, payment of transaction costs and expenses incurred by the
Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or
as otherwise directed by the Borrowers.

SECTION 2.2 INTEREST.

      (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall
bear interest at a rate per annum equal to six and five hundred seventy-seven
one thousandths percent (6.577%) (the "INTEREST RATE").

      (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and
during the continuance of an Event of Default and in any event from and after
the Maturity Date of the Loan and until the Loan and all other Obligations are
satisfied in full, the outstanding principal balance of the Loan and all other
Obligations shall bear interest until paid in full at a rate per annum that is
four percent (4%) in excess of the Interest Rate otherwise applicable under this
Loan Agreement and the Note (the "DEFAULT RATE").

      (C) COMPUTATION OF INTEREST. Interest on the Loan and all other
Obligations owing to Lender shall be computed on the basis of a 360-day year,
and shall be charged for the actual number of days elapsed during any month or
other accrual period. Interest shall be payable in arrears.

      (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained
in this Loan Agreement or the other Loan Documents, the Borrowers shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by law ("EXCESS
INTEREST"). If any Excess Interest is provided for or determined by a court of
competent jurisdiction to have been provided for in this Loan Agreement or in
any of the other Loan Documents, then in such event: (1) the provisions of this

                                       24


subsection shall govern and control; (2) the Borrowers shall not be obligated to
pay any Excess Interest; (3) any Excess Interest that Lender may have received
hereunder shall be, at Lender's option, (a) applied as a credit against either
or both of the outstanding principal balance of the Loan or accrued and unpaid
interest thereunder (not to exceed the maximum amount permitted by law), (b)
refunded to the payor thereof, or (c) any combination of the foregoing; (4) the
interest rate(s) provided for herein shall be automatically reduced to the
maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM
RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to
have been and shall be, reformed and modified to reflect such reduction; and (5)
the Borrowers shall not have any action against Lender for any damages arising
out of the payment or collection of any Excess Interest. Notwithstanding the
foregoing, if for any period of time interest on any Obligation is calculated at
the Maximum Rate rather than the applicable rate under this Loan Agreement, and
thereafter such applicable rate becomes less than the Maximum Rate, the rate of
interest payable on such Obligations shall, to the extent permitted by law,
remain at the Maximum Rate until Lender shall have received or accrued the
amount of interest which Lender would have received or accrued during such
period on Obligations had the rate of interest not been limited to the Maximum
Rate during such period. If the Default Rate shall be finally determined to be
unlawful, then the Interest Rate shall be applicable during any time when the
Default Rate would have been applicable hereunder, provided however that if the
Maximum Rate is greater or lesser than the Interest Rate, then the foregoing
provisions of this paragraph shall apply.

      (E) LATE CHARGES. If an Event of Default regarding non-payment of
principal, interest or other sums due hereunder or under any of the other Loan
Documents shall occur, then the Borrowers shall pay to Lender, in addition to
all sums otherwise due and payable, a late fee in an amount equal to five
percent (5.0%) of such principal, interest or other sums due hereunder or under
any other Loan Document, such late charge to be immediately due and payable
without demand by Lender.

SECTION 2.3 RESERVED.

SECTION 2.4 PAYMENTS.

      (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments
of interest and principal on the Note as follows:

            (i) The Borrowers shall make a payment to Lender of interest only on
the Closing Date for the period from and including the Closing Date through and
including the last day of the calendar month in which the Closing occurs; and

            (ii) Commencing on August 1, 2004 and on each Payment Date
thereafter through but not including the Maturity Date, the Borrowers shall make
a payment of interest on the Loan for the prior calendar month, and in addition
shall make a payment of principal on the Loan in an amount equal to the
Scheduled Mortgage Principal Payment for such Payment Date.

      (B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for
payments on the Loan which are transferred to the account of Lender as provided
below (i) on the day that such funds are received by Lender if such receipt
occurs by 2:00 p.m. (New York time) on such

                                       25


day, or (ii) on the next succeeding Business Day after such funds are received
by Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any
payment to be made hereunder shall be stated to be due on a day that is not a
Business Day, the payment may be made on the next succeeding Business Day.

      (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to
pay all of the Obligations relating to the Loan as such amounts become due or
are declared due pursuant to the terms of this Loan Agreement. All payments by
the Borrowers on the Loan shall be made without deduction, defense, set off or
counterclaim and in immediately available funds delivered to Lender by wire
transfer to such accounts at such banks as Lender may from time to time
designate. Prior to an Event of Default, each payment shall be applied first to
pay late charges and the charges and expenses of Lender, Servicer and any
special servicer as provided hereunder, second to accrued and unpaid interest,
and the balance to principal. Prior to an Event of Default, to the extent
sufficient funds are contained in the Lock Box Account, or an Account or
Sub-Account thereof, to make the required monthly payments to the applicable
Reserves and Sub-Account on such Payment Date, the Borrowers shall be deemed to
have satisfied their obligations to make such payments. Upon the occurrence and
during the continuance of an Event of Default, payments shall be applied to the
Obligations in such order as Lender shall determine in its sole and absolute
discretion.

SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance
with the Loan Documents, the then outstanding principal balance of the Loan, all
accrued and unpaid interest thereon, and all other sums then owing to Lender
hereunder and under the Note, the Mortgages and the other Loan Documents, shall
be due and payable on the Maturity Date.

SECTION 2.6 PREPAYMENT.

      (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON
ACCELERATION. The Borrowers shall have no right to prepay the Loan in whole or
in part at any time, except as expressly set forth in this provision. On and
after May 1, 2009, the Borrowers may prepay the Loan in whole, but not in part,
without payment of Prepayment Consideration, provided that (i) the Borrowers
shall provide to Lender not less than fifteen (15) days prior written notice of
such prepayment, (ii) together with such prepayment the Borrowers also shall pay
all accrued and unpaid interest and all other Obligations then due and owing,
(iii) if such prepayment occurs on any day other than a Payment Date, then
together therewith the Borrowers also shall pay to Lender the amount of interest
that would have accrued on the amount being prepaid from and including the date
of such prepayment to the end of such calendar month.

      (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion
of the Loan shall occur prior to May 1 2009, on account of acceleration of the
Loan (whether or not due to an Event of Default), or otherwise, then except only
as expressly provided in this Loan Agreement or the other Loan Documents to the
contrary, the Borrowers shall pay the Prepayment Consideration on the amount
prepaid to Lender together with such prepayment, as liquidated damages and
compensation for costs incurred, and in addition to all other amounts due and
owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will
be due as to a prepayment of the Loan in connection with (i) application of
insurance or condemnation proceeds required by Lender pursuant to this Loan
Agreement or the Mortgages in the absence of

                                       26


an Event of Default, (ii) Scheduled Mortgage Principal Payments. The foregoing
designation of any amount of Prepayment Consideration in this Agreement shall
not create a right to prepay at any time or in any circumstances where this
Agreement does not expressly state that such a right exists.

      (C) DEFINITIONS. The following terms shall have the meanings indicated:

            "PREPAYMENT CONSIDERATION" shall mean an amount equal to the greater
of (i) one percent (1%) of the Loan balance at the time of prepayment and (ii)
the Yield Maintenance Amount.

            "YIELD MAINTENANCE AMOUNT" shall mean the positive difference, if
any, between (i) the present value on the date of prepayment (by acceleration or
otherwise) of all future installments of principal and interest which the
Borrowers would otherwise be required to pay under the Note from the date of
such prepayment until the Maturity Date absent such prepayment, including the
unpaid principal amount which might otherwise be due upon the Maturity Date
absent such prepayment, with such present value being determined by the use of a
discount rate equal to the yield to maturity (adjusted to a "Mortgage Equivalent
Basis" pursuant to the standards and practices of the Securities Industry
Association), on the date of such prepayment of the United States Treasury
Security having the term to maturity closest to what otherwise would have been
the remaining term hereof absent such prepayment and (ii) the principal balance
of the Loan on the date of such prepayment.

SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall
be presumptive evidence (absent manifest error) of the amounts owing to Lender
by the Borrowers; provided that any failure to record any transaction affecting
such balance or any error in so recording shall not limit or otherwise affect
the Borrowers' obligation to pay the Obligations.

SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or
under the Note shall be made free and clear of and without deduction for any and
all taxes, withholding taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto arising out of or in
connection with the transactions contemplated by the Loan Documents (all such
taxes, levies, imposts, deductions, charges or withholdings and all liabilities
with respect thereto (excluding taxes imposed on net income in accordance with
the following sentence) herein "TAX LIABILITIES"). Notwithstanding the
foregoing, the Borrowers shall not be liable for taxes imposed on the net income
of Lender by the jurisdiction under the laws of which Lender is organized or
doing business or any political subdivision thereof and taxes imposed on its net
income by the jurisdiction of Lender's applicable lending office or any
political subdivision thereof. If the Borrowers shall be required by law to
deduct any such Tax Liabilities (or amounts in estimation or reimbursement for
the same) from or in respect of any sum payable hereunder to Lender, then the
sum payable hereunder shall be increased as may be necessary so that, after
making all required deductions, Lender receives an amount equal to the sum it
would have received had no such deductions been made.

SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the
actual costs and damages that Lender would suffer by reason of an Event of
Default (exclusive of the attorneys' fees and other costs incurred in connection
with enforcement of Lender's rights under

                                       27


the Loan Documents) or a prepayment would be difficult and needlessly expensive
to calculate and establish, and (ii) the amounts of the Default Rate, the late
charges, and the Prepayment Consideration are reasonable, taking into
consideration the circumstances known to the parties at this time, and (iii)
such Default Rate and late charges and Lender's reasonable attorneys' fees and
other costs and expenses incurred in connection with enforcement of Lender's
rights under the Loan Documents shall be due and payable as provided herein, and
(iv) such interest at the Default Rate, late charges, Prepayment Consideration,
and the obligation to pay Lender's reasonable attorneys' fees and other
enforcement costs do not, individually or collectively, constitute a penalty.

SECTION 2.10 RESERVED.

SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from
time to time without the consent of the Borrowers, on prior written notice to
the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's
fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths
of one percent (.05%) per annum on the outstanding principal balance of the
Loan, payable in monthly installments, and if the Loan becomes a specially
serviced loan, any fees of the special servicer, shall be payable by the
Borrowers and shall constitute a portion of the Obligations; provided, however,
that at no time shall the Borrowers be liable for Servicing Fees or special
servicing fees in excess of those fees charged to Lender by the Servicer or any
special servicer.

SECTION 2.12 CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF
CROSS-COLLATERALIZATION.

      (A) Until repayment of the Indebtedness and the Crossed Indebtedness and
satisfaction of all obligations under this Agreement and the Crossed Loan
Agreement, each Borrower acknowledges and agrees (subject to Lender's
election(s) at Lender's sole discretion from time to time pursuant to Section
2.12(G) below): (i) that the Properties shall secure not only the Loan but also
the Crossed Loans, and that the Liens of the Loan Documents shall constitute
Liens securing not only the Loan but also the Crossed Loans; (ii) that the
Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured
by such Crossed Properties; and (iii) that Lender would not make the Loan to the
Borrowers or the loans constituting the Crossed Loans unless the Borrowers and
the Crossed Borrowers granted liens on the Properties and, in addition, the
Crossed Properties of the Crossed Borrowers to secure the payment of the Loan
and the Crossed Loans.

      (B) Until the date that all of the Loan and the Crossed Loans shall have
been paid and satisfied in full, the Borrowers (i) shall have no right of
subrogation with respect to the Crossed Loans and (ii) waive any right to
enforce any remedy which Lender now has or may hereafter have against the
Crossed Borrowers, any endorser or any guarantor of all or any part of the
Crossed Loans or any other individual or entity, and the Borrowers waive any
benefit of, and any right to participate in, any security or collateral given to
Lender to secure the payment or performance of all or any part of the Crossed
Loans or any other liability of any of the Crossed Borrowers to Lender. Should
any Borrower have the right, notwithstanding the foregoing, to exercise its
subrogation rights, each Borrower hereby expressly and irrevocably (1)
subordinates any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off that such
Borrower may have to the payment in full in cash of the Loan

                                       28


and the Crossed Loans and (2) waives any and all defenses available to a surety,
guarantor or accommodation co-obligor until the Loan and the Crossed Loans are
paid in full in cash. Each Borrower acknowledges and agrees that this
subordination is intended to benefit Lender and shall not limit or otherwise
affect any Borrower's liability hereunder or the enforceability of this Loan
Agreement or the Crossed Loan Documents.

      (C) Each Borrower agrees that any and all claims of such Borrower against
any of the Crossed Borrowers or any endorser or any guarantor of all or any part
of the Crossed Loans (collectively, the "CROSSED OBLIGORS") with respect to any
obligations, liabilities or indebtedness now or hereafter owing by the Crossed
Obligors, or any of them, to such Borrower, or otherwise existing or claimed to
be owed or to exist on the part of any of the Crossed Obligors, or against any
of their respective properties (collectively, the "CROSSED PARTY OBLIGATIONS")
shall be subordinate and subject in right of payment to the prior payment, in
full and in cash, of all the Loan and the Crossed Loans. Notwithstanding any
right of any Borrower to ask, demand, sue for, take or receive any payment from
any of the Crossed Obligors, all rights, liens and security interests of each
Borrower, whether now or hereafter arising and howsoever existing, in and to any
assets of any of the Crossed Obligors shall be and are subordinated to the
rights of Lender in those assets under the Loan Documents, the Crossed Loan
Documents or otherwise, and no Borrower shall, until the date that all of the
Loan and the Crossed Loans shall have been paid and satisfied in full, (i)
assert, collect, sue upon, or enforce all or any part of the Crossed Party
Obligations; (ii) commence or join with any other creditors of any of the
Crossed Obligors in commencing any bankruptcy, reorganization, receivership or
insolvency proceeding against any of the Crossed Obligors; (iii) take, accept,
ask for, sue for, receive, set off or demand any payments upon the Crossed Party
Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to
be created liens, security interests, mortgages, deeds of trust or pledges of or
with respect to any of the assets of any of the Crossed Obligors in favor of or
for the benefit of such Borrower.

      (D) If all or any part of the assets of any of the Crossed Obligors, or
the proceeds thereof, are subject to any distribution, division or application
to the creditors of such Crossed Obligor, whether partial or complete, voluntary
or involuntary, and whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding, or if the business of any such Crossed Obligor is dissolved or if
substantially all of the assets of any such Crossed Obligor are sold, then, and
in any such event (such events being herein referred to as an "CROSSED OBLIGOR
INSOLVENCY EVENT"), any payment or distribution of any kind or character, either
in cash, securities or other property, which shall be payable or deliverable to
any Borrower upon or with respect to any Crossed Party Obligations shall be paid
or delivered directly to the Lender for application on the Loan and the Crossed
Loans, due or to become due, until such Loan and Crossed Loans shall have first
been fully paid and satisfied (in cash). Should any payment, distribution,
security or instrument or proceeds thereof be received by any Borrower upon or
with respect to the Crossed Party Obligations after any Crossed Obligor
Insolvency Event and prior to the payment in full and satisfaction of all of the
Loan and Crossed Loans, such Borrower shall receive and hold the same in trust,
as trustee, for the benefit of Lender and shall forthwith deliver the same to
Lender in precisely the form received (except for the endorsement or assignment
of such Borrower where necessary), for application to any of the Loan or Crossed
Loans, due or not due, and, until so delivered, the same shall be held in trust
by such Borrower as the property of Lender. If such Borrower fails to make

                                       29


any such endorsement or assignment to Lender, Lender or any of its officers or
employees is irrevocably authorized to make the same. Each Borrower agrees that
until the Loan and Crossed Loans have been paid in full (in cash) and satisfied,
no Borrower will assign or transfer to any individual or entity (other than
Lender) any claim such Borrower has or may have against any Crossed Obligor.

      (E) Subject to the provisions of Section 2.12(G), to the extent that any
collection upon any of the Loan or the Crossed Loans is made by Lender from one
of the Crossed Borrowers or the Crossed Properties or other assets of the
Crossed Borrowers (a "CROSSED LOANS COLLECTION") which, taking into account all
other Crossed Loans Collections then previously or concurrently made by such
Crossed Borrower, exceeds the amount which otherwise would have been collected
from such Crossed Borrower if each Borrower and each Crossed Borrower had paid
the portion of the Loan and Crossed Loans satisfied by such Crossed Loans
Collection in the same proportion as such Crossed Borrower's Allocable Amount
(as defined below) (as determined immediately prior to such Crossed Loans
Collection) bore to the aggregate Allocable Amounts of each Borrower and each
Crossed Borrower as determined immediately prior to the making of such Crossed
Loans Collection, then, following payment in full in cash of the entire Loan and
Crossed Loans, such Crossed Borrower shall be entitled to receive contribution
and indemnification payments from, and be reimbursed by, each Borrower and each
of the other Crossed Borrowers for the amount of such excess, pro rata based
upon their respective Allocable Amounts in effect immediately prior to such
Crossed Loans Collection. As of any date of determination, the "ALLOCABLE
AMOUNT" of any Borrower or any Crossed Borrower shall be equal to the maximum
amount of the claim which could then be recovered from such Borrower or Crossed
Borrower under the Loan Documents and Crossed Loan Documents without rendering
such claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law. The
foregoing provision shall be for the benefit of each of the Crossed Borrowers
and Lender, but shall be subject to modification as provided in Section 2.12(G)
below and to amendment by agreement of the Borrowers and Lender, in each case
without necessity of any agreement, acknowledgment or approval of any Crossed
Borrower or any notice to any Crossed Borrower. Section 2.12(E) of each of the
Crossed Loan Agreements contains provisions similar to this Section 2.12(E) for
the benefit of Lender and (subject to the terms thereof) the Crossed Borrowers.
This Section 2.12(E) and Section 2.12(E) of each of the Crossed Loan Agreements
are intended only to define the relative rights of the Borrowers and Crossed
Borrowers, and nothing set forth in this Section 2.12(E) or in Section 2.12(E)
of each of the Crossed Loan Agreements is intended to or shall impair the liens
and security interests of the Loan Documents and the Crossed Loan Documents or
the obligations of the Borrowers and the Crossed Borrowers thereunder. Each
Borrower acknowledges that the rights of contribution and indemnification under
this Section 2.12(E) and under Section 2.12(E) of the Crossed Loan Agreements
constitute assets of the Borrowers or Crossed Borrowers to which such
contribution and indemnification is owing, and any such right of contribution
and indemnification owing to any Borrower under Section 2.12(E) of any of the
Crossed Loan Agreements shall constitute additional Crossed Party Obligations
for all purposes under this Section 2.12.

      (F) Each Borrower hereby consents and agrees to each of the following, and
agrees that such Borrower's obligations under this Loan Agreement and the other
Loan Documents and

                                       30


the Liens created under this Loan Agreement and the other Loan Documents
securing the Loan and the Crossed Loans shall not be released, diminished,
impaired, reduced or adversely affected by any of the following, and waives any
common law, equitable, statutory or other rights (including without limitation
rights to notice) that such Borrower might otherwise have as a result of or in
connection with any of the following:

            (i) Any renewal, extension, increase, modification, alteration or
rearrangement of all or any part of the Crossed Loans, the Crossed Loan
Documents, or other document, instrument, contract or understanding between the
Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed
Loans or any failure of Lender to notify such Borrower of any such action.

            (ii) Any adjustment, indulgence, forbearance or compromise that
might be granted or given by Lender to the Crossed Borrowers.

            (iii) The insolvency, bankruptcy, arrangement, adjustment,
composition, liquidation, disability, dissolution or lack of power of any of the
Crossed Borrowers or any other party at any time liable for the payment of all
or part of the Crossed Loans; or any dissolution of any of the Crossed
Borrowers, or any sale, lease or transfer of any or all of the assets of any of
the Crossed Borrowers, or any changes in the shareholders, partners or members
of any of the Crossed Borrowers; or any reorganization of any of the Crossed
Borrowers.

            (iv) The invalidity, illegality or unenforceability of all or any
part of the Crossed Loans, or any document or agreement executed in connection
therewith, for any reason whatsoever, including without limitation the fact that
(A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law,
(B) the act of creating the Crossed Loans or any part thereof is ultra vires,
(C) the officers or representatives executing the Crossed Loan Documents or
otherwise creating the Crossed Loans acted in excess of their authority, (D) the
Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have
valid defenses, claims or offsets (whether at law, in equity or by agreement)
which render the Crossed Loans wholly or partially uncollectible from the
Crossed Borrowers, (F) the creation, performance or repayment of the Crossed
Loans (or the execution, delivery and performance of any document or instrument
representing part of the Crossed Loans or executed in connection with the
Crossed Loans, or given to secure the repayment of the Crossed Loans) is
illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan
Documents have been forged or otherwise are irregular or not genuine or
authentic, it being agreed that each Borrower shall remain liable hereon
regardless of whether the Crossed Borrowers or any other person be found not
liable on the Crossed Loans or any part thereof for any reason.

            (v) Any full or partial release of the liability of the Crossed
Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or
any other person or entity now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally, to pay, perform,
guarantee or assure the payment of the Crossed Loans, or any part thereof, it
being recognized, acknowledged and agreed by each Borrower that such Borrower
has not been induced to enter into this Loan Agreement or the other Loan
Documents on the basis of a contemplation, belief, understanding or agreement
that other parties will be liable to pay or

                                       31


perform the Loan or such Borrower's obligations under the Loan Agreement or the
other Loan Documents, or that Lender will look to other parties to pay or
perform the Crossed Loans.

            (vi) The taking or accepting of any other security, collateral or
guaranty, or other assurance of payment, for all or any part of the Crossed
Loans.

            (vii) Any release, surrender, exchange, subordination,
deterioration, waste, loss or impairment (including without limitation
negligent, willful, unreasonable or unjustifiable impairment) of any collateral,
property or security, at any time existing in connection with, or assuring or
securing payment of, all or any part of the Crossed Loans.

            (viii) The failure of or refusal of Lender or any other party acting
on behalf of Lender to exercise diligence or reasonable care in the
preservation, protection, enforcement, sale or other handling or treatment of
all or any part of such collateral, property or security, including but not
limited to any neglect, delay, omission, failure or refusal of Lender (A) to
take or prosecute any action for the collection of any of the Crossed Loans, (B)
to foreclose, or initiate any action to foreclose, or, once commenced, prosecute
to completion any action to foreclose upon any security therefor, or (C) to take
or prosecute any action in connection with any instrument or agreement
evidencing or securing all or any part of the Crossed Loans.

            (ix) The fact that any collateral, security, security interest or
lien contemplated or intended to be given, created or granted as security for
the repayment of the Crossed Loans, or any part thereof, shall not be properly
perfected or created, or shall prove to be unenforceable or subordinate to any
other security interest or lien, it being recognized and agreed by each Borrower
that it is not entering into this Loan Agreement in reliance on, or in
contemplation of the benefits of, the validity, enforceability, collectibility
or value of any of the collateral for the Crossed Loans.

            (x) Any payment by any of the Crossed Borrowers to Lender is held to
constitute a preference under bankruptcy laws, or for any reason Lender is
required to refund such payment or pay such amount to any of the Crossed
Borrowers or someone else.

            (xi) Any other action taken or omitted to be taken with respect to
the Crossed Loan Documents, the Crossed Loans, or the security and collateral
therefor.

      (G) Notwithstanding anything to the contrary set forth in this Loan
Agreement, Lender may, at its sole option and in its sole discretion, from time
to time (one or more times) deliver written notice to the Borrowers stating that
this Loan Agreement, the Mortgages and the other Loan Documents shall no longer
secure one or more (at Lender's sole election) of the Crossed Loans (each a
"CROSS RELEASE NOTICE"), whereupon (i) this Loan Agreement and the other Loan
Documents shall no longer secure any of the Crossed Loans for which a Cross
Release Notice is given (any such Crossed Loan, an "EXCLUDED LOAN", and,
collectively, the "EXCLUDED LOAN(S)"; each Crossed Borrower which is the
borrower with respect to an Excluded Loan is herein referred to as an "EXCLUDED
BORROWER", and the Crossed Loan Agreement, Crossed Mortgages, Cross Side
Agreement and other Crossed Loan Documents executed and delivered by the
Excluded Borrowers with respect to any Excluded Loan are herein referred to as
the "EXCLUDED LOAN AGREEMENT", "EXCLUDED MORTGAGES", "EXCLUDED SIDE AGREEMENT"
and

                                       32


"EXCLUDED LOAN DOCUMENTS", respectively, and each Crossed Property encumbered by
the Excluded Loan Documents is herein referred to as an "EXCLUDED PROPERTY"),
(ii) each Cross Guaranty of the Loan executed by each Excluded Borrower,
together with each Cross Guaranty of an Excluded Loan executed by the Borrowers
(herein collectively referred to as the "EXCLUDED GUARANTIES") shall be deemed
automatically terminated and of no further force or effect, (iii) each reference
herein and in the other Loan Documents to the "Crossed Loans" shall be deemed to
exclude the Excluded Loans, (iv) each reference herein and in the other Loan
Documents to the "Crossed Loan Agreements", "Crossed Mortgages", "Crossed Loan
Documents", "Crossed Properties", "Cross Side Agreements" and "Cross Guaranties"
shall be deemed to exclude the Excluded Loan Agreement, the Excluded Mortgages,
the Excluded Loan Documents, the Excluded Property, the Excluded Side Agreements
and the Excluded Guaranties, respectively, (v) each reference herein and in the
other Loan Documents to the "Crossed Borrowers" and the "Crossed Obligors" shall
be deemed to exclude each Excluded Borrower, (vi) the provisions of Section
2.12(E) of this Loan Agreement shall not apply to any Crossed Loans Collection
from any Excluded Borrower or its Excluded Property and the Borrowers shall have
no obligation or liability on account thereof; and (vii) Borrowers shall no
longer be beneficiaries of the covenants and agreements set forth in Section
2.12(E) of any Excluded Loan Agreement, and the Borrowers shall have no rights
or claims on account of any contribution or indemnification obligations of any
Excluded Borrower under Section 2.12(E) of any Excluded Loan Agreement. In
addition to and without limiting the foregoing, the Borrowers hereby agree to
fully cooperate with Lender, if Lender is considering the termination of the
cross collateralization and cross default of the Loan and Loan Documents with
any of the Crossed Loans, including, but not limited to (x) amending this Loan
Agreement and the other Loan Documents as may be required by Lender to
effectuate such termination of the cross collateralization and cross default
provisions thereof, and (y) updating and/or endorsing the title insurance
policies (at Lender's cost as to additional premium charges, if any) to reflect
the continuation of the first priority lien of this Loan Agreement.

      (H) In the event the Loan is repaid or defeased in full in accordance with
the provisions of this Loan Agreement and the other Loan Documents, then
provided no Event of Default then exists hereunder, and no "Event of Default"
(as defined in any of the Other Crossed Loan Agreements) exists under any of the
Other Crossed Loan Documents, the cross collateralization and cross default of
the Loan and Loan Documents with the Other Crossed Loans shall terminate and all
the Other Crossed Loans shall be deemed Excluded Loans with respect to the Loan
and the provisions of Section 2.12(G) above shall become automatically
applicable with respect thereto.

                                   ARTICLE III
                               CONDITIONS TO LOAN

SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The
obligation of Lender to fund the Loan are subject to the prior or concurrent
satisfaction or waiver of the conditions set forth below, and to satisfaction of
any other conditions specified herein or elsewhere in the Loan Documents. With
respect to facts and circumstances actually known to Lender at Closing, by
funding the Loan Lender shall be deemed to have acknowledged that each of the
conditions set forth below has been satisfied or waived (except as otherwise set
forth in any other agreement in writing between the Borrowers and Lender). Where
in this Section any

                                       33


documents, instruments or information are to be delivered to Lender, then the
condition shall not be satisfied unless (i) the same shall be in form and
substance satisfactory to Lender, and (ii) if so required by Lender, the
Borrowers shall deliver to Lender a certificate duly executed by the Borrowers
stating that the applicable document, instrument or information is true and
complete and does not omit to state any information without which the same might
reasonably be deemed materially misleading.

      (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall
execute and deliver and cause to be executed and delivered to Lender all of the
Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan
Documents as may be reasonably required by Lender, each, unless otherwise noted,
of even date herewith, duly executed, in form and substance satisfactory to
Lender and in quantities designated by Lender (except for the Note, of which
only one shall be signed), which Loan Documents shall become effective upon the
Closing.

      (B) DEPOSITS. The deposits required herein, including without limitation,
the initial deposits into the Reserves and Accounts, shall have been made (and
at the Borrowers' option, the same may be made from the proceeds of the Loan).

      (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES.
Each Borrower Party and all other Persons executing any agreement on behalf of
any Borrower Party shall have performed in all material respects all agreements
which this Loan Agreement provides shall be performed on or before the Closing
Date. The representations and warranties contained herein and in the other Loan
Documents shall be true, correct and complete in all material respects on and as
of the Closing Date.

      (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have
received certificates of even date herewith executed on behalf of each Borrower
by the chief financial officer (or similar officer of the Borrowers) stating
that: (i) on such date, to the Borrowers' Knowledge no Default exists; (ii) no
material adverse change in the financial condition or operations of the business
of the Borrowers or the projected cash flow of the Borrowers or the Properties,
in each case taken as a whole, has occurred since the delivery to Lender of any
financial statements, budgets, proformas, or similar materials (or if there has
been any change, specifying such change in detail), and that, to the Borrowers'
Knowledge after due inquiry, such financial materials fairly present the
financial condition and results of operations of the Borrowers and the
Properties, in each case taken as a whole, and all other materials delivered to
Lender are complete and accurate in all material respects; and (iii) the
representations and warranties set forth in this Loan Agreement are true and
correct in all material respects on and as of such date with the same effect as
though made on and as of such date (or if any such representations or warranties
require qualification, specifying such qualification in detail) and (iv) to the
Borrowers' Knowledge, there are no material facts or conditions concerning the
Properties or any Borrower Party that have not been disclosed to Lender which
could have a Material Adverse Effect.

      (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have
received from Morris, Manning & Martin, LLP or other legal counsel for the
Borrowers satisfactory to Lender, written legal opinions, each in form and
substance acceptable to Lender, as to such

                                       34


matters as Lender shall request, including opinions to the effect that (i) each
of the Borrower Parties is duly formed, validly existing, and in good standing
in its state of organization and, in the case of each Borrower, in each state
where its Property is located, (ii) this Loan Agreement and the Loan Documents
have been duly authorized, executed and delivered and are enforceable in
accordance with their terms subject to customary qualifications for bankruptcy,
general equitable principles, and other customary assumptions and
qualifications; (iii) the Deposit Account Agreement and Cash Management
Agreement have been duly authorized, executed and delivered by Borrower and
Manager and are enforceable in accordance with their terms and the security
interests in favor of Lender in the Account Collateral have been validly created
and perfected; and (iv) no Borrower, Member or General Partner would be
consolidated in any bankruptcy proceeding affecting Guarantor or certain other
Affiliates of the Borrower Parties specified by Lender. Also on or before the
Closing Date, Lender shall have received the following legal opinions, each in
form and substance acceptable to Lender: (a) an opinion of the Borrowers' local
counsel in each state where the Properties are located as to the enforceability
of, and the creation and perfection of Liens under, the Mortgages and the
Assignments of Leases and such other matters as Lender may reasonably request;
(b) [intentionally omitted]; (c) opinions of Richards, Layton & Finger or other
Delaware legal counsel, acceptable to Lender, for each Borrower that is a single
member limited liability company formed under the laws of the State of Delaware
that, among other matters, (1) under Delaware law (x) the prior unanimous
written consent of Member (and the unanimous written consent of the board of
directors of Member including the Independent Directors, or the unanimous prior
written consent of the board of managers' of each Borrower, including the
Independent Directors') would be required for a voluntary bankruptcy filing by
each such Borrower, (y) the prior unanimous written consent of the board of
directors of Member (including the Independent Directors) would be required for
a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements
are enforceable against Member in accordance with their terms; (2) under
Delaware law the bankruptcy or dissolution of Member would not cause the
dissolution of any of the Borrowers and the bankruptcy or dissolution of the
sole shareholder or member would not cause the dissolution of Member; (3) under
Delaware law, creditors of Member shall have no legal or equitable remedies with
respect to the assets of any of the Borrowers and creditors of Guarantor shall
have no legal or equitable remedies with respect to the assets of Member; and
(4) a federal bankruptcy court would hold that Delaware law governs the
determination of what Persons have authority to file a voluntary bankruptcy
petition on behalf of each Borrower and Member; and (d) such other legal
opinions as Lender may reasonably request.

      (F) TITLE POLICIES. On or before the Closing Date, Lender shall have
received and approved pro forma Title Policies for the Mortgages, and as of the
Closing, each Title Company shall be irrevocably committed and prepared
immediately to issue the Title Policies or binding commitments. The Title
Policies shall be in form and substance satisfactory to Lender. Without
limitation, each Title Policy shall be issued on an ALTA form acceptable to
Lender by each Title Company or if an ALTA form is not available in the
applicable jurisdiction, another form acceptable to Lender, together with such
reinsurance and direct access agreements as Lender may require, insuring that
the Mortgages are valid first and prior enforceable liens on each Borrower's fee
simple interest or ground leasehold interest, as the case may be, in the
applicable Property (including any easements appurtenant thereto) subject only
to such exceptions to coverage as are acceptable to Lender, including the
Permitted Exceptions. Each Title Policy shall contain such endorsements as
Lender may require (to the extent available in the state where

                                       35


the Properties is located) in form acceptable to Lender, including deletion of
the creditors' rights exception and affirmative endorsement coverage for
creditors' rights risks.

      (G) SURVEY. Lender shall have received a survey of each of the Properties,
certified to Lender and its successors, assigns and designees and to each Title
Company by a surveyor reasonably satisfactory to Lender (the "SURVEY"), or
Lender shall have received both (x) a "no change" affidavit from each Borrower
with respect to such Borrower's most recent Survey sufficient to cause the Title
Company to provide current survey coverage to Lender in the applicable Title
Policy without exception for matters that would be revealed by a current and
accurate survey of the applicable Property, except for matters specifically
shown on such most recent Survey, and (y) a reliance letter (to the extent any
such surveys are not currently addressed to Lender) in form and substance
satisfactory to Lender, permitting Lender to rely on the Survey (and any
certification thereof) as if originally addressed and certified to Lender. Each
Survey shall contain the minimum detail for land surveys as most recently
adopted by ALTA/ASCM, shall comply with Lender's survey requirements and shall
contain Lender's standard form certification, and shall show no state of facts
or conditions reasonably objectionable to Lender.

      (H) ZONING. On or before the Closing Date, Lender shall have received
evidence reasonably satisfactory to Lender as to the zoning and subdivision
compliance of each of the Properties.

      (I) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing
Date, Lender shall have received copies of the organizational documents and
filings of each Borrower Party, together with good standing certificates (or
similar documentation) (including verification of tax status) from the state of
its formation and from all states in which the laws thereof require such Person
to be qualified and/or licensed to do business (including without limitation,
each state in which the Properties are located for the applicable Borrower(s)
and, to the extent required by law, Member and General Partner). Each such
certificate shall be dated not more than 30 days prior to the Closing Date, as
applicable, and certified by the applicable Secretary of State or other
authorized governmental entity. In addition, on or before the Closing Date the
secretary or corresponding officer of each Borrower Party, or the secretary or
corresponding officer of the partner, trustee, or other Person as required by
such Borrower Party's organizational documents (as the case may be, the
"BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating
that the copies of the organizational documents as delivered to Lender are true
and complete and are in full force and effect, and that the same have not been
amended except by such amendments as have been so delivered to Lender.

      (J) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing
Date, Lender shall have received certificates of incumbency and resolutions of
each Borrower Party and its constituents as requested by Lender, approving and
authorizing the Loan and the execution, delivery and performance of the Loan
Documents, certified as of the Closing Date by the Borrower Party Secretary as
being in full force and effect without modification or amendment.

      (K) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have
received such financial statements and other financial information as shall be
satisfactory to Lender for each Borrower Party (including for Guarantor) and for
the Properties. If any such

                                       36


statements are not available for the Properties, then the Borrowers shall
provide such financial reports as are available. All such financial statements
shall be certified to Lender by the applicable Borrower Party (through its chief
financial officer or other officer charged with similar duties), which
certification shall be in form and substance reasonably satisfactory to Lender.

      (L) OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date,
Lender shall have received and approved the Operating Budget and CapEx/FF&E
Budget for the Properties for the remainder of the current calendar year.

      (M) AGREEMENTS. On or before the Closing Date, Lender shall have received
a list of all Material Agreements and, to the extent requested by Lender, copies
thereof.

      (N) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing
Date, Lender shall have received copies of the Management Agreements and any
leasing brokerage agreements pertaining to the Properties and the Assignments of
Management Agreements, duly executed by each Manager and the applicable
Borrower. On or before the Closing Date, Lender shall have received copies of
the existing Franchise Agreements (including any Property Improvement Plan) and
Franchisor Letters for each of the Properties duly executed by the applicable
Franchisors.

      (O) RENT ROLL. Prior to the Closing, Lender shall have received from the
Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL")
in form and substance satisfactory to Lender. The Rent Roll shall constitute a
true, correct, and complete list of each and every Material Lease, together with
all extensions and amendments thereof, and shall accurately and completely
disclose all annual and monthly rents payable by all tenants, including all
percentage rents, if any, and expiration dates of such Material Leases, and the
amount of security deposit being held by the Borrowers under each Material
Lease, if any.

      (P) MATERIAL LEASES. Prior to the Closing, Lender shall have received
true, correct and complete copies of the Material Leases, as amended.

      (Q) LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender
shall have received copies of the final, unconditional certificates of occupancy
issued with respect to each of the Properties, together with all other
applicable licenses (including, without limitation, each liquor license and beer
permit), permits and approvals required for each Borrower to own, use, occupy,
operate and maintain each of the Properties as a hotel.

      (R) INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date,
Lender shall have received copies of certificates of insurance (dated not more
than twenty (20) days prior to the Closing Date) regarding insurance required to
be maintained under this Loan Agreement and the other Loan Documents, together
with endorsements satisfactory to Lender naming Lender as an additional insured
and loss payee, as required by this Loan Agreement, under such policies. In
addition, as to any insurance matters arising under Environmental Laws or
pertaining to any environmental insurance that any of the Borrowers has with
respect to any Property, the same shall be endorsed to Lender as required by
this Loan Agreement and shall name Lender as an insured, additional insured
and/or loss payee, as applicable.

                                       37


      (S) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental
Reports relating to each of the Properties, together with a letter from each
preparer thereof entitling Lender and its successors and assigns to rely upon
said Environmental Report.

      (T) PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender
shall have received a property condition report for each of the Properties,
which shall be prepared by an engineer or other consultant satisfactory to
Lender and otherwise shall be in form and substance satisfactory to Lender in
its sole discretion. Each such report shall set forth any items of deferred
maintenance at the applicable Property.

      (U) APPRAISAL. On or before the Closing Date, Lender shall have received
an independent appraisal of each of the Properties from a state certified
appraiser engaged by Lender. Each such appraisal shall conform in all respects
to the criteria for appraisals set forth in the Financial Institutions Reform
and Recovery Act of 1989 and the regulations promulgated thereunder (as if
Lender were an institution under the jurisdiction thereof) and the Uniform
Standards of Professional Appraisal Practices of the Appraisal Foundation.

      (V) SEARCHES. Prior to the Closing Date, Lender shall have received copies
of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation search
reports with respect to the Borrowers, Guarantor, Managers, General Partner and
Member, all dated not more than thirty (30) days prior to the Closing Date.

      (W) DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2) days
prior to the Closing Date, Lender shall have received payoff demand letters and
wiring instructions from each lender or other obligee of any existing
indebtedness which is required to be repaid pursuant to this Loan Agreement.

      (X) LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and
all reasonable legal fees and expenses of counsel to Lender, together with all
recording fees and taxes, title insurance premiums, and other reasonable costs
and expenses related to the Closing.

      (Y) COMMITMENT CONDITIONS. If a commitment letter or similar agreement
shall have been issued by Lender for the Loan, such additional conditions as
shall be specified in such commitment shall have been satisfied.

      (Z) OTHER REVIEW. Lender shall have completed all other review of the
Borrower Parties, the Properties, and such other items as it reasonably
determines relevant, and shall have determined based upon such review to fund
the Loan. The Borrower Parties shall have satisfied such other reasonable
criteria as Lender may reasonably specify.

      (AA) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing
Date, Lender shall have received (i) true and complete copies of each of the
Ground Leases, certified by the Borrowers, and (ii) estoppels and agreements
acceptable to Lender, duly executed by each Ground Lessor.

                                       38


                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

      In order to induce Lender to enter into this Loan Agreement and to make
the Loan, each Borrower represents and warrants to Lender that the statements
set forth in this Article IV, after giving effect to the Closing, will be, true,
correct and complete in all material respects as of the Closing Date.

SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS.

      (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized,
validly existing and in good standing under the laws of the state of its
formation. Each Borrower Party has all requisite power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
to be conducted, and to enter into each Loan Document to which it is a party and
to perform the terms thereof.

      (B) QUALIFICATION. Each Borrower Party is duly qualified and in good
standing in the state of its formation. In addition, each Borrower Party is duly
qualified and in good standing in each state where necessary to carry on its
present business and operations, except in jurisdictions in which the failure to
be qualified and in good standing could not reasonably be expected to have a
Material Adverse Effect.

      (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C)
accurately sets forth the direct and indirect ownership structure of the
Borrowers, General Partners and Members.

SECTION 4.2 AUTHORIZATION OF BORROWING, ETC.

      (A) AUTHORIZATION OF BORROWING. The Borrowers have the power and authority
to incur the Indebtedness evidenced by the Note. The execution, delivery and
performance by each Borrower Party of each of the Loan Documents to which it is
a party and the consummation of the transactions contemplated thereby have been
duly authorized by all necessary limited liability company, partnership,
trustee, corporate or other action, as the case may be.

      (B) NO CONFLICT. The execution, delivery and performance by each Borrower
Party of the Loan Documents to which it is a party and the consummation of the
transactions contemplated thereby do not and will not: (1) violate (x) any
provision of law applicable to any Borrower Party; (y) the partnership
agreement, certificate of limited partnership, certificate of incorporation,
bylaws, declaration of trust, operating agreement or other organizational
documents, as the case may be, of each Borrower Party; or (z) any order,
judgment or decree of any Governmental Authority binding on any Borrower Party
or any of its Affiliates; (2) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any Contractual
Obligation of any Borrower Party or any of its Affiliates (except where such
breach will not cause a Material Adverse Effect); (3) result in or require the
creation or imposition of any material Lien (other than the Lien of the Loan
Documents) upon the Properties or assets of any Borrower Party; or (4) except as
set forth on SCHEDULE 4.2, require any approval or consent of any Person under
any material Contractual Obligation of any Borrower Party, which approvals or
consents as set forth on SCHEDULE 4.2 have been obtained on or before the

                                       39


dates required under such material Contractual Obligation, but in no event later
than the Closing Date.

      (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower
Party of the Loan Documents to which it is a party, and the consummation of the
transactions contemplated thereby do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
Governmental Authority.

      (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents,
including the Note, when executed and delivered will be, the legally valid and
binding obligations of each Borrower Party that is a party thereto, enforceable
against each of the Borrower Parties, as applicable, in accordance with their
respective terms, subject to bankruptcy, insolvency, moratorium, reorganization
and other similar laws affecting creditor's rights. No Borrower Party has any
defense or offset to any of its obligations under the Loan Documents to which it
is a party. No Borrower Party has any claim against Lender or any Affiliate of
Lender.

SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the
Borrowers, their Affiliates and the Properties which have been furnished by or
on behalf of the Borrowers to Lender pursuant to this Loan Agreement present
fairly the financial condition of the Persons covered thereby as of the dates
thereof and the results of their operations for the periods then ended, and, to
the Borrowers' Knowledge after due inquiry, have been prepared in accordance
with GAAP consistently applied (except as disclosed therein). Since the date of
the financial statements delivered to Lender, there has been no material adverse
change in the financial condition, operations or business of the Borrower
Parties or the Properties from that set forth in said financial statements.

SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the
Borrowers shall have no outstanding Indebtedness or Contingent Obligations other
than the Obligations or any other Permitted Indebtedness.

SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee
simple title (or, in the case of the Ground Leased Properties, leasehold title)
to the Properties, free and clear of all Liens except for the Permitted
Encumbrances. The Borrowers own and will own at all times all FF&E relating to
the Properties (other than personal property which is either owned by tenants of
such Property, not used or necessary for the operation of the applicable
Property, or leased by the Borrowers as permitted hereunder), subject only to
the Permitted Encumbrances. The Mortgages, when properly recorded in the
appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (i) a
valid, perfected first lien on each of the Properties, subject only to the
Permitted Encumbrances, and (ii) perfected first priority security interests in
and to, and perfected collateral assignments of, all personalty (including the
Rents, the Leases, and the FF&E), all in accordance with the terms thereof, in
each case subject only to any applicable Permitted Encumbrances. Lender will
have a perfected first priority security interest in and to the FF&E owned by
the Borrowers, if any, not located at the Properties. To the Borrowers'
Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in
condemnation or eminent domain affecting any of the Properties, and to the
actual Knowledge of the Borrowers, none is threatened. Except as set forth on
SCHEDULE 4.5(A), no Person has any option or other right to

                                       40


purchase all or any portion of any of the Properties or any interest therein. To
the Borrowers' Knowledge, there are no mechanic's, materialman's or other
similar liens or claims which have been filed for work, labor or materials
affecting the Properties which are or will be liens prior to, or equal or
coordinate with, the lien of any of the Mortgages. None of the Permitted
Encumbrances, individually or in the aggregate, materially interfere with the
benefits of the security intended to be provided by the Mortgages and this Loan
Agreement, materially and adversely affect the value of any of the Properties,
impair the use or operations of the Properties or impair the Borrowers' ability
to pay its obligations in a timely manner.

SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as
set forth in the Zoning Reports for the Properties delivered to Lender, the
Properties and the use thereof comply in all material respects with all
applicable zoning, subdivision and land use laws, regulations and ordinances,
all applicable health, fire, building codes, parking laws and all other laws,
statutes, codes, ordinances, rules and regulations applicable to the Properties,
or any of them, including without limitation the Americans with Disabilities
Act. To the Borrowers' Knowledge, there are no illegal activities relating to
controlled substances on any of the Properties. To the Borrower's Knowledge,
except as set forth in the Zoning Reports for the Properties delivered to
Lender, all material permits, licenses and certificates for the lawful use,
occupancy and operation of each component of each of the Properties in the
manner in which it is currently being used, occupied and operated, including,
but not limited to liquor licenses and certificates of occupancy, or the
equivalent, have been obtained and are current and in full force and effect. To
the Borrower's Knowledge, except as set forth in the Zoning Reports for the
Properties delivered to Lender, in the event that all or any part of the
Improvements located on any Property is destroyed or damaged, said Improvements
can be legally reconstructed to their condition prior to such damage or
destruction, and thereafter exist for the same use without violating any zoning
or other ordinances applicable thereto and without the necessity of obtaining
any variances or special permits, other than customary demolition, building and
other construction related permits. To the Borrowers' Knowledge, no legal
proceedings are pending or threatened with respect to the zoning of any
Property. To the Borrowers' Knowledge, except as set forth in the Title Policies
and/or the Surveys, neither the zoning nor any other right to construct, use or
operate any Property is in any way dependent upon or related to any real estate
other than such Property. No tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded by the
Borrowers with respect to any Property without Lender's prior written consent,
which consent shall not be unreasonably withheld, delayed or conditioned.

SECTION 4.7 LEASES; AGREEMENTS.

      (A) LEASES; AGREEMENTS. The Borrowers have delivered to Lender true and
complete copies (in all material respects) of all (i) Leases for more than five
hundred (500) square feet of space at any Property and (ii) Material Agreements
affecting the operation and management of the Properties, and such Leases and
Material Agreements have not been modified or amended except pursuant to
amendments or modifications delivered to Lender. Except for the rights of each
of the current Managers pursuant to the existing Management Agreements, no
Person has any right or obligation to manage any of the Properties or to receive
compensation in connection with such management. Except for the parties to any
leasing brokerage agreement that has been delivered to Lender, no Person has any
right or obligation to lease or solicit tenants for the

                                       41


Properties, or (except for cooperating outside brokers) to receive compensation
in connection with such leasing.

      (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is
attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described
in the Rent Roll, none of the Properties are subject to any Material Leases.
Except only as specified in the Rent Roll, or as otherwise disclosed to Lender
in the estoppel certificates delivered to Lender at Closing, to the Borrowers'
Knowledge, (i) the Material Leases are in full force and effect; (ii) the
Borrowers have not given any notice of default to any tenant under any Material
Lease which remains uncured; (iii) no tenant has any set off, claim or defense
to the enforcement of any Material Lease; (iv) no tenant is in arrears in the
payment of rent, additional rent or any other charges whatsoever due under any
Material Lease, or is materially in default in the performance of any other
obligations under such Material Lease; (v) the Borrowers have completed all work
or alterations required of the landlord or lessor under each Material Lease, and
all of the other obligations of landlord or lessor under the Material Leases
have been performed; and (vi) there are no rent concessions (whether in form of
cash contributions, work agreements, assumption of an existing tenant's other
obligations, or otherwise) or extensions of time whatsoever not reflected in
such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge
of the Borrowers, threatened) against the Borrowers by any tenant or former
tenant. No rental in excess of one month's rent has been prepaid under any of
the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is
valid and binding on the parties thereto in accordance with its terms.

      (C) NO RESIDENTIAL UNITS. There are no residential units in any of the
Properties and, to each Borrower's Knowledge, no person (other than a site
manager employed by Manager) occupies any part of the Properties for dwelling
purposes other than on a transient basis.

      (D) MANAGEMENT AGREEMENTS. The Borrowers have delivered to Lender a true
and complete copy of each of the Management Agreements to which they are a party
that will be in effect on the Closing Date, and such Management Agreements have
not been modified or amended except pursuant to amendments or modifications
delivered to Lender. The Management Agreements are in full force and effect and
no default by any of the Borrowers or Manager exists thereunder.

      (E) FRANCHISE AGREEMENTS; PROPERTY IMPROVEMENT PLANS. The Borrowers have
delivered to Lender a true and complete copy of each of the Franchise Agreements
to which they are a party, and such Franchise Agreements have not been modified
or amended except pursuant to amendments or modifications delivered to Lender.
To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full
force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material
default by the Borrowers, Manager or the applicable Franchisor exists
thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the
aggregate, do not and will not have a Material Adverse Effect. Except for the
Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no
other property improvement plans or similar capital improvement plans or
obligations required by any Franchisor pursuant to any Franchise Agreement, in
effect for any of the Properties.

                                       42


SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as
set forth in the Property Condition Reports for the Properties delivered to
Lender, all Improvements including, without limitation, the roof and all
structural components, plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior doors, parking facilities,
sidewalks and landscaping are in good condition and repair. Except as disclosed
in the Property Condition Reports, (i) the Borrowers are not aware of any latent
or patent structural or other material defect or deficiency in the Properties
and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary
sewers, and electrical, gas (if applicable) and telephone facilities are
available to each of the Properties within the boundary lines of each of the
Properties (except as may be shown on the applicable Survey), are fully
connected to the Improvements and are fully operational, are sufficient to meet
the reasonable needs of each of the Properties as now used or presently
contemplated to be used, and no other utility facilities are necessary to meet
the reasonable needs of each of the Properties as now used or presently
contemplated. Except as may be shown on the applicable Survey, to the Borrowers'
Knowledge no part of any of the Properties is within a flood plain and none of
the Improvements create encroachments over, across or upon the Properties'
boundary lines, rights of way or easements, and no building or other
improvements on adjoining land create such an encroachment which could
reasonably be expected to have a Material Adverse Effect. All public roads and
streets necessary for service of and access to each of the Properties for the
current and contemplated uses thereof have been completed and are serviceable
and are physically and legally open for use by the public. To the Borrowers'
Knowledge after due inquiry, and except as disclosed in the Property Condition
Reports, any septic system located at any of the Properties is in good and safe
condition and repair and in compliance with all applicable law.

SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9,
there are no judgments outstanding against any Borrower Party, or affecting any
of the Properties or any property of any Borrower, nor is there any action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration now pending or, to the Borrowers' Knowledge, threatened against any
Borrower Party that could reasonably be expected to result in a Material Adverse
Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges,
claims, demand, suits, proceedings, petitions, investigations and arbitrations
set forth on SCHEDULE 4.9 are not reasonably expected to result, either
individually or in the aggregate, in any Material Adverse Effect.

SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and
reports of each Primary Borrower Party required to be filed have been timely
filed (or each Borrower has timely filed for an extension and the applicable
extension has not expired), and all taxes, assessments, fees and other
governmental charges (including any payments in lieu of taxes) upon such Person
and upon its properties, assets, income and franchises which are due and payable
have been paid. To the Borrowers' Knowledge, there is not presently pending any
special assessment against any of the Properties or any part thereof.

SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the
Primary Borrower Parties is a party to or bound by, nor is any property of such
Person subject to or bound by, any contract or other agreement which restricts
such Person's ability to conduct its business in the ordinary course as
currently conducted that, either individually or in the aggregate, has a
Material Adverse Effect or could reasonably be expected to have a Material
Adverse Effect.

                                       43


SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation of any such Person which
could reasonably be expected to have a Material Adverse Effect, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default which could reasonably be expected to have a Material
Adverse Effect.

SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940 or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.

SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no
Primary Borrower Party maintains or contributes to, or has any obligation
(including a contingent obligation) under, any Employee Benefit Plans.

SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar
compensation will be payable by or pursuant to any contract or other obligation
of any Primary Borrower Party with respect to the making of the Loan or any of
the other transactions contemplated hereby or by any of the Loan Documents. The
Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from
any and all broker's or finder's fees claimed to be due in connection with the
making of the Loan arising from any Borrower Parties' actions.

SECTION 4.16 INTENTIONALLY DELETED.

SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction
or any Loan Document with the actual intent to hinder, delay, or defraud any
creditor and (b) received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the Loan, the aggregate
fair saleable value of the Borrowers' assets exceed and will, immediately
following the making of the Loan, exceed the Borrowers' total liabilities,
including, without limitation, subordinated, unliquidated, disputed and
Contingent Obligations. The aggregate fair saleable value of the Borrowers'
assets is and will, immediately following the making of the Loan, be greater
than the Borrowers' probable total liabilities, including the maximum amount of
their Contingent Obligations on their debts as such debts become absolute and
matured. Each Borrower's assets do not and, immediately following the making of
the Loan will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. The Borrowers do not
intend to, and do not believe that they will, incur Indebtedness and liabilities
(including Contingent Obligations and other commitments) beyond their ability to
pay such Indebtedness and liabilities as they mature (taking into account the
timing and amounts of cash to be received by the Borrowers and the amounts to be
payable on or in respect of obligations of the Borrowers).

SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on
behalf of any Borrower Party contains any untrue representation, warranty or
statement of a material fact, or omits to state a material fact necessary in
order to make the statements contained therein not misleading. No Loan Document
or any other document, certificate or written statement for use in connection
with the Loan and prepared by any Borrower Party, or any information provided

                                       44


by any Borrower Party and contained in, or used in preparation of, any document
or certificate for use in connection with the Loan, contains any untrue
representation, warranty or statement of a material fact, or omits to state a
material fact necessary in order to make the statements contained therein not
misleading. There is no material fact actually known to the Borrowers that has
had or could reasonably be expected to have a Material Adverse Effect and that
has not been disclosed in writing to Lender by the Borrowers.

SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the
proceeds of the Loan only for the purposes set forth herein and consistent with
all applicable laws, statutes, rules and regulations. No portion of the proceeds
of the Loan shall be used by the Borrowers or any Person in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation T, Regulation U or Regulation X or any other regulation of the Board
of Governors of the Federal Reserve System.

SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate
description of all policies of insurance for each Borrower that are in effect as
of the Closing Date. No notice of cancellation has been received with respect to
such policies, and, to each Borrower's Knowledge, the Borrowers are in
compliance with all conditions contained in such policies.

SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1)
or more parcels which constitute separate tax lots. No part of any of the
Properties is included or assessed under or as part of another tax lot or
parcel, and no part of any other property is included or assessed under or as
part of the tax lots or parcels comprising any of the Properties.

SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest
in, including without limitation stock, partnership interest or other securities
of, any other Person (other than the Beverage Companies), or (ii) direct or
indirect loan, advance or capital contribution to any other Person, including
all indebtedness and accounts receivable from that other Person.

SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any
of them (including any Property) is property of the estate, in any voluntary or
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or other similar law now or hereafter in effect. No
Borrower Party and no property of any of them is under the possession or control
of a receiver, trustee or other custodian. No Borrower Party has made any
assignment for the benefit of creditors. No such assignment or bankruptcy or
similar case or proceeding is now contemplated. Notwithstanding the foregoing,
Lender acknowledges that case #01-16402 involving Impac Hotels I, L.L.C. remains
pending in the Bankruptcy Court for the Southern District of New York. Borrower
represents that the Plan of Reorganization for this case has been approved by
the bankruptcy court and that the case remains open solely for the purposes of
resolution of certain unsecured claims, which remaining claims are payable
solely out of a disputed claims reserve established by Guarantor pursuant to the
Plan of Reorganization.

SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to
Lender in writing herein or in any of the Loan Documents, no Default exists.

SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an
employee benefit plan as defined in Section 3(3) of ERISA which is subject to
ERISA, (ii) a plan as defined in

                                       45


Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or
(iii) an entity whose underlying assets constitute "plan assets" of any such
employee benefit plan or plan for purposes of Title I of ERISA of Section 4975
of the IRC; provided that, in making such representation, the Borrowers have
assumed that (i) no portion of the Loan shall be funded with plan assets of any
employee benefit plan that is subject to Title I of ERISA or any plan that is
covered by Section 4975 of the Code unless the Lender is eligible to apply one
or more exemptions such that the Loan will not constitute a nonexempt prohibited
transaction under Section 406 of ERISA or that could subject a Borrower Party or
its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such
assumption in the preceding clause is true and correct with respect to any party
to which Lender transfers or assigns any portion of the Loan.

SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with the Borrowers are not and will not be subject to state
statutes applicable to the Borrowers' regulating investments of and fiduciary
obligations with obligations with respect to governmental plans.

SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person"
within the meaning of Section 1445(f)(3) of the IRC.

SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on
SCHEDULE 4.28 no Primary Borrower Party is a party to any collective bargaining
agreement.

SECTION 4.29 RESERVED.

SECTION 4.30 GROUND LEASES.

      (A) Each Ground Lease contains the entire agreement of the Ground Lessor
and the applicable Borrower pertaining to each Ground Leased Property covered
thereby. The Borrowers have no estate, right, title or interest in or to the
Ground Leased Properties except under and pursuant to the Ground Leases. The
Borrowers have delivered true and correct copies of each of the Ground Leases to
Lender and the Ground Leases have not been modified, amended or assigned except
as set forth on SCHEDULE 4.30.

      (B) To the Knowledge of the Borrowers, each Ground Lessor is the exclusive
fee simple owner of its Ground Leased Property, subject only to the Ground Lease
and the Permitted Encumbrances, and each Ground Lessor is the sole owner of the
lessor's interest in the applicable Ground Lease.

      (C) There are no rights to terminate any Ground Lease other than any
Ground Lessor's right to terminate by reason of default, casualty, condemnation
or other reasons, in each case as expressly set forth in the applicable Ground
Lease.

      (D) Each Ground Lease is in full force and effect and to the Borrowers'
Knowledge, no breach or default or event that with the giving of notice or
passage of time would constitute a breach or default under any Ground Lease (a
"GROUND LEASE DEFAULT") exists or has occurred on the part of the Borrowers or
on the part of any Ground Lessor under any Ground Lease. All base rent and
additional rent due and payable under the Ground Leases has been paid through
the date hereof and the Borrowers are not required to pay any deferred or
accrued rent after the date

                                       46


hereof under any of the Ground Leases. The Borrowers have not received any
written notice that a Ground Lease Default has occurred or exists, or that any
Ground Lessor or any third party alleges the same to have occurred or exist.

      (E) The applicable Borrower set forth on SCHEDULE 4.30 is the exclusive
owner of the lessee's interest under and pursuant to the applicable Ground Lease
and has not assigned, transferred, or encumbered its interest in, to, or under
any Ground Lease (other than assignments that will terminate on or prior to
Closing), except in favor of Lender pursuant to this Loan Agreement and the
other Loan Documents.

SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their
respective officers, directors, partners, members, Affiliates or, to the
knowledge of the Borrowers, shareholders is an entity or person: (i) that is
listed in the Annex to, or is otherwise subject to the provisions of Executive
Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on
the United States Treasury Department's Office of Foreign Assets Control
("OFAC") most current list of "Specifically Designated National and Blocked
Persons" (which list may be published from time to time in various mediums
including, but not limited to, the OFAC website,
http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or
supports "terrorism", as that term is defined in EO 13224; or (iv) who is
otherwise affiliated with any entity or person listed above (any and all parties
or persons described in clauses (i) through (iv) above are herein referred to as
a "PROHIBITED PERSON").

                                    ARTICLE V
                          COVENANTS OF BORROWER PARTIES

      The Borrowers covenant and agree that until payment in full of the Loan,
all accrued and unpaid interest and all other Obligations, the Borrowers shall
perform and comply with all covenants in this Article V applicable to such
Person.

SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.

      (A) FINANCIAL STATEMENTS.

            (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the
end of each calendar year, the Borrowers (on a consolidated basis), and within
ninety (90) days after the end of each calendar year, Guarantor shall provide
true and complete copies of their Financial Statements for such year to Lender.
All such Financial Statements shall be audited by an Approved Accounting Firm or
by other independent certified public accountants reasonably acceptable to
Lender, and shall bear the unqualified certification of such accountants that
such Financial Statements present fairly in all material respects the financial
position of the subject company. The annual Financial Statements shall be
accompanied by Supplemental Financial Information for such calendar year. The
annual Financial Statements for the Borrowers (on a consolidated basis) and
Guarantor shall also be accompanied by a certification executed by the entity's
chief executive officer or chief financial officer (or other officer with
similar duties), satisfying the criteria set forth in Section 5.1(A)(viii)
below, and a Compliance Certificate (as defined below).

                                       47


            (ii) QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days
after the end of each calendar quarter, the Borrowers on a consolidated basis
(other than with respect to income statements, which shall be on an individual
property basis) shall provide copies of their Financial Statements for such
quarter to Lender, together with a certification executed on behalf of each of
the Borrowers by their respective chief executive officers or chief financial
officers (or other officer with similar duties) in accordance with the criteria
set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements
shall be accompanied by Supplemental Financial Information and a Compliance
Certificate for such quarter.

            (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days
after the end of each calendar quarter, Guarantor shall provide copies of its
Financial Statements for such quarter to Lender, together with a certification
executed on behalf of Guarantor by its chief executive officer or chief
financial officer (or other officer with similar duties) in accordance with the
criteria set forth in Section 5.1(A)(viii) below.

            (iv) LEASING REPORTS. Within forty-five (45) days after the end of
each calendar year, each Borrower shall provide to Lender a certified Rent Roll
and a schedule of security deposits held under Material Leases, each in form and
substance reasonably acceptable to Lender. Within forty-five (45) days after the
end of each calendar year, each Borrower shall also provide to Lender (a) a
schedule of any retail Material Leases that expired during such calendar year
and a schedule of retail Material Leases scheduled to expire within the next
calendar year and (b) to the extent the Borrowers received notice thereof, a
list of any retail tenants under Material Leases that filed bankruptcy,
insolvency or reorganization proceedings during such calendar year. Within
ninety (90) days after the end of each calendar year, each Borrower shall
provide to Lender a statement of income and expenses for all retail space at
each of the Properties owned and operated by the Borrowers and, to the extent
provided to the Borrowers and not subject to confidentiality restrictions, sales
reports for retail tenants for such year.

            (v) MONTHLY REPORTING. Within thirty (30) days after the end of each
calendar month, each Borrower shall provide, or cause Manager to provide, to
Lender the following items determined on an accrual basis: (a) a calculation of
the average daily rate, RevPAR and occupancy calculations and statistics for
each of the Properties for the subject month; (b) Smith Travel Research "STAR"
reports then available; (c) monthly, and year to date operating statements
prepared for such calendar month and for the trailing twelve (12) month period
then ended, noting Net Operating Income, Net Cash Flow and including budgeted
and last year results for the same year-to-date period and other information
necessary and sufficient under GAAP to fairly represent the results of operation
of each of the Properties during such calendar month, all in form reasonably
satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects
completed during such calendar month (including a detailed explanation for any
material deviations from budget) and setting forth that all disbursements and/or
withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E
Reserve have been made with respect to items of Capital Improvement only (as
opposed to items that, in accordance with GAAP, would be included as an
Operating Expense); (e) monthly and year to date detailed reports of Operating
Expenses for each of the Properties, including supporting documentation
satisfactory to Lender in its sole discretion for each item of Extraordinary
Expense (as such term is defined in the Cash Management Agreement) for which
Lender has approved a disbursement

                                       48


from the Cash Trap Reserve pursuant to the terms of Section 3.3(a)(v) of the
Cash Management Agreement; (f) most recently available "OSI", or similar quality
index, scores (including detailed information regarding criteria and
thresholds); (g) prior to Securitization of the Loan, market segmentation
reports for the trailing twelve (12) month period for each of the Properties;
and (h) a report setting forth (i) the date of termination by Property for each
Franchise Agreement that has been terminated after the Closing Date and not
replaced with an Approved Franchisor, (ii) the number of Properties for which a
default has occurred and has continued beyond applicable notice and grace
periods under the applicable Franchise Agreement (including the percentage of
the original Aggregate Allocated Loan Amount represented by such Properties),
(iii) a summary report establishing that the Borrowers are diligently continuing
to pursue reflagging efforts with respect to each such Property, and (iv) a
summary report including (a) the aggregate number of Properties for which the
Borrowers have entered into new Franchise Agreements as permitted by Sections
5.13(D)(i) and 5.13(D)(iv) together with the resulting Category of each such
Property, and (b) the aggregate number of Properties for which any replacement
(and, if more than one replacement has occurred to a single Property, the number
of replacements with respect to such Property) of the applicable Franchise
Agreements has occurred pursuant to the terms of Sections 5.13(D)(ii) and
5.13(D)(iii) together with the percentage of the Aggregate Outstanding Principal
Balance represented by such Properties and including the resulting Category of
each such Property. All of the above statements, reports and information shall
be provided to Lender by email in Microsoft Excel format or other spreadsheet
format reasonably acceptable to Lender (in the case of any statements, reports
or information provided by third parties that are not Affiliates of the
Borrowers, to the extent same are available in such format). Along with such
operating statements, each Borrower shall deliver to Lender a Compliance
Certificate of such Borrower's chief executive officer or chief financial
officer (or other officer with similar duties) satisfying the criteria set forth
in Section 5.1(A)(viii) below.

            (vi) ADDITIONAL REPORTING. In addition to the foregoing, the
Borrowers shall, and shall cause Guarantor and Manager to, promptly provide to
Lender such further documents and information concerning its operations,
properties, ownership, and finances as Lender shall from time to time reasonably
request upon prior written notice to the Borrowers.

            (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause
Guarantor and Manager to, maintain systems of accounting established and
administered in accordance with sound business practices and sufficient in all
respects to permit preparation of Financial Statements in conformity with GAAP
and the Uniform System. All Financial Statements shall be prepared in accordance
with GAAP and the Uniform System, consistently applied; provided, however, in
the event of a conflict between the Uniform System and GAAP, GAAP will be
followed.

            (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS,
COMPLIANCE CERTIFICATE. Together with the Financial Statements and other
documents and information provided to Lender by or on behalf of the Borrowers or
Guarantor under this Section, the Borrowers or Guarantor also shall deliver to
Lender a certification to Lender, executed on behalf of the Borrowers or
Guarantor by their respective chief executive officer or chief financial officer
(or other officer with similar duties), stating that to their Knowledge after
due inquiry such quarterly and annual Financial Statements and information
fairly present the financial condition and results of operations of the
Borrowers, Guarantor and/or the Properties

                                       49


for the period(s) covered thereby, and do not omit to state any material
information without which the same might reasonably be misleading, and all other
non-financial documents submitted to Lender (whether monthly, quarterly or
annually) are true, correct, accurate and complete in all material respects. In
addition, where this Loan Agreement requires a "COMPLIANCE CERTIFICATE", the
Person required to submit the same shall deliver a certificate duly executed on
behalf of such Person by its chief executive officer or chief financial officer
(or other officer with similar duties) stating (a) that, to their Knowledge
after due inquiry, there does not exist any Default or Event of Default under
the Loan Documents (or if any exists, specifying the same in detail), and (b)
the Borrowers and Guarantor have complied with the applicable reporting
requirements of this Section 5.1.

            (ix) FISCAL YEAR. Each Borrower represents that its fiscal year and
that of the Guarantor ends on December 31, and agrees that no change shall be
made to each such fiscal year, without Lender's prior written consent.

      (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower
will deliver copies of all material reports submitted by independent public
accountants in connection with each annual, interim or special audit of the
Financial Statements or other business operations of such Borrower made by such
accountants, including the comment letter submitted by such accountants to
management in connection with the annual audit.

      (C) TAX RETURNS. Within thirty (30) days after filing the same, each
Borrower shall deliver to Lender a copy of its Federal income tax returns (or
the return of the applicable Person into which such Borrower's Federal income
tax return is consolidated) certified on its behalf by its chief financial
officer (or similar position) to be true and correct.

      (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 15 of
each calendar year, each Borrower shall deliver to Lender for its review for its
Property a proposed Operating Budget and CapEx/FF&E Budget (in each case
presented on a monthly and annual basis) for such calendar year. Each Operating
Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall
not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap
Event or Event of Default exists, the Borrowers may make changes to the
Operating Budget and the CapEx/FF&E Budget from time to time as deemed
reasonably necessary by the Borrower, provided no such modification (together
with all prior modifications taken as a whole) shall alter any single line item
(or the applicable Budget as a whole) by more than ten percent (10%) without
Lender's prior written approval, which approval shall not be unreasonably
withheld; provided, however, notwithstanding the foregoing during a Cash Trap
Event, increases to the Operating Budget for any Property (not to exceed ten
percent (10%) of the Operating Budget for such Property as a whole) will be
permitted without Lender's consent for actual verifiable increases in utilities,
water and sewer assessments and charges and real property taxes for the
applicable Property over the amounts therefor set forth in the Operating Budget
for such Property for the prior period. Notice of any modifications to the
Operating Budget and the CapEx/FF&E Budget shall be delivered to Lender at the
time of delivery of the next financial reporting required pursuant to Section
5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget
and the CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating
Budget shall identify and set forth each Borrower's reasonable estimate, after
due consideration, of all revenue, costs, and expenses, and shall specify
Operating

                                       50


Revenues and Operating Expenses on a line-item basis consistent with the form of
Operating Budget delivered to Lender prior to Closing. If any of said budgets or
plans requiring Lender's approval is not in form and substance reasonably
satisfactory to Lender, Lender may disapprove the same and specify the reasons
therefor in writing, and the Borrowers shall promptly amend and resubmit for
approval revised budgets or plans, as applicable, making such changes as are
necessary to comply with the reasonable requirements of Lender. Until any such
budget or plan for any year requiring Lender's approval has been approved or
deemed approved, the applicable budget or plan for the previous year shall
remain in effect until the new budget or plan is approved or deemed approved.
Lender's consent to any budget, plan or amendments thereto shall be deemed
given, if the first correspondence from the Borrowers to Lender requesting such
approval is in an envelope marked "PRIORITY" and contains a bold-faced,
conspicuous legend at the top of the first page thereof stating that "IF YOU
FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING
WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied
by the information and documents required above and any other information
reasonably requested by Lender in writing prior to the expiration of such
fifteen (15) day period in order to adequately review the same has been
delivered and, if Lender fails to respond or to expressly deny such request for
approval in writing within the fifteen (15) day period, a second notice is
delivered to Lender from the Borrowers in an envelope marked "PRIORITY"
requesting approval containing a bold-faced, conspicuous legend at the top of
the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY
THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL
BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request
for approval within the ten (10) day period.

      (E) MATERIAL NOTICES.

            (i) The Borrowers shall promptly deliver, or cause to be delivered,
copies of all notices given or received with respect to a default under any term
or condition related to any Permitted Indebtedness of any Borrower, and shall
notify Lender within five (5) Business Days of any potential or actual event of
default with respect to any such Permitted Indebtedness.

            (ii) The Borrowers shall promptly deliver to Lender copies of any
and all material notices (including without limitation any notice alleging any
default or breach which is reasonably expected to result in a termination)
received with respect to any Material Agreement or any Lease, including, without
limitation, any inspection report and any progress reports related to any
Property Improvement Plan received from a Franchisor related to such Borrower's
Property.

      (F) EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining
knowledge of any of the following events or conditions, such Borrower shall
deliver a certificate executed on its behalf by its chief financial officer or
similar officer specifying the nature and period of existence of such condition
or event and what action such Borrower or any Affiliate thereof has taken, is
taking and proposes to take with respect thereto: (i) any condition or event
that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii)
any actual or alleged breach or default or assertion of (or written threat to
assert) remedies under any Management Agreement, Franchise Agreement or Ground
Lease.

                                       51


      (G) LITIGATION. Promptly upon any of the Borrowers obtaining knowledge of
(1) the institution of any action, suit, proceeding, governmental investigation
or arbitration against the Borrowers or any of the Properties not previously
disclosed in writing by the Borrowers to Lender which would be reasonably likely
to have a Material Adverse Effect or is not covered by insurance or (2) any
material development in any action, suit, proceeding, governmental investigation
or arbitration at any time pending against or affecting the Borrowers or the
Properties which, in each case, if adversely determined would reasonably be
expected to have a Material Adverse Effect, the Borrowers will give notice
thereof to Lender and, upon request from Lender, provide such other information
as may be reasonably available to them to enable Lender and its counsel to
evaluate such matter.

      (H) INSURANCE. At least five (5) Business Days prior to the end of each
insurance policy period of the Borrowers, the Borrowers will deliver
certificates, reports, and/or other information (all in form and substance
reasonably satisfactory to Lender), (i) outlining all material insurance
coverage maintained as of the date thereof by the Borrowers and all material
insurance coverage planned to be maintained by the Borrowers in the subsequent
insurance policy period and (ii) evidencing payment in full of the premiums for
such insurance policies.

      (I) OTHER INFORMATION. With reasonable promptness, Borrowers will deliver
such other information and data with respect to such Person and its Affiliates
or the Properties as from time to time may be reasonably requested by Lender.

SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve
and keep in full force and effect their existence as a limited partnership,
limited liability company, or corporation, as the case may be, and all rights
and franchises material to its business, including their qualification to do
business in each state where it is required by law to so qualify. Without
limitation of the foregoing, each Borrower and, to the extent required by
applicable law, General Partner and Member, shall at all times be qualified to
do business in each of the states where the Properties are located.

SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS.

      (A) Except for those matters being contested pursuant to clause (B) below,
the Borrowers will pay (i) all Impositions; (ii) all claims (including claims
for labor, services, materials and supplies) for sums that have become due and
payable and that by law have or may become a Lien upon any of its properties or
assets (hereinafter referred to as the "CLAIMS"); and (iii) all federal, state
and local income taxes, sales taxes, excise taxes and all other taxes and
assessments of the Borrowers on their business, income or assets; in each
instance before any penalty or fine is incurred with respect thereto.

      (B) The Borrowers shall not be required to pay, discharge or remove any
Imposition or Claim relating to a Property so long as the Borrowers contest in
good faith such Imposition, Claim or the validity, applicability or amount
thereof by an appropriate legal proceeding which operates to prevent the
collection of such amounts and the sale of the applicable Property or any
portion thereof, and so long as: (i) no Event of Default shall have occurred and
be continuing, (ii) prior to the date on which such Imposition or Claim would
otherwise have become delinquent, the Borrowers shall have given Lender prior
written notice of their intent to contest

                                       52


said Imposition or Claim; (iii) prior to the date on which such Imposition or
Claim would otherwise have become delinquent, the Borrowers shall have deposited
with Lender (or with a court of competent jurisdiction or other appropriate body
reasonably approved by Lender) such additional amounts as are necessary to keep
on deposit at all times, an amount by way of cash, Dollar Equivalents, or a
Letter of Credit, equal to at least one hundred twenty-five percent (125%) (or
such higher amount as may be required by applicable law) of the total of (x) the
balance of such Imposition or Claim then remaining unpaid, and (y) all interest,
penalties, costs and charges accrued or accumulated thereon; (iv) no risk of
sale, forfeiture or loss of any interest in the applicable Property or any part
thereof arises, in Lender's reasonable judgment, during the pendency of such
contest; (v) such contest does not, in Lender's reasonable determination, have a
Material Adverse Effect; and (vi) such contest is based on bona fide, material,
and reasonable claims or defenses. Any such contest shall be prosecuted with due
diligence, and the Borrowers shall promptly pay the amount of such Imposition or
Claim as finally determined, together with all interest and penalties payable in
connection therewith. Lender shall have full power and authority, but no
obligation, to apply any amount deposited with Lender under this subsection to
the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture
of the applicable Property for non-payment thereof, if Lender reasonably
believes that such sale or forfeiture is threatened. Any surplus retained by
Lender after payment of the Imposition or Claim for which a deposit was made
shall be promptly repaid to the Borrowers unless an Event of Default shall have
occurred, in which case said surplus may be retained by Lender to be applied to
the Obligations. Notwithstanding any provision of this Section to the contrary,
the Borrowers shall pay any Imposition or Claim which they might otherwise be
entitled to contest if an Event of Default shall occur and be continuing, or if,
in the reasonable determination of Lender, the applicable Property is in danger
of being forfeited or foreclosed. If the Borrowers refuse to pay any such
Imposition or Claim, Lender may (but shall not be obligated to) make such
payment and the Borrowers shall reimburse Lender on demand for all such
advances.

SECTION 5.4 MAINTENANCE OF INSURANCE.

      The Borrowers will continuously maintain the following described policies
of insurance on each of the respective Properties without cost to Lender (the
"INSURANCE POLICIES"):

            (i) Property insurance against loss and damage by all risks of
physical loss or damage, including fire, sprinkler leakage, windstorm,
hurricane, terrorism, and other risks covered by the so-called extended coverage
endorsement covering the Improvements and personal property in amounts not less
than the full insurable replacement value of all Improvements (less building
foundations and footings) and personal property from time to time on the
Properties and without sublimits, and bearing a replacement cost agreed-amount
endorsement;

            (ii) Commercial general liability insurance, including death, bodily
injury, innkeeper legal liability and broad form property damage coverage with a
combined single limit in an amount not less than One Million Dollars
($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the
aggregate for any policy year;

            (iii) If any of the Properties are in an area prone to geological
phenomena, including, but not limited to, sinkholes, mine subsidence or
earthquakes, insurance covering such

                                       53


risks in an amount equal to 100% of the full replacement cost of all
improvements (without any deductions for depreciation) and with a maximum
permissible deductible equal to the lesser of $25,000 or 10% of the face value
of the policy;

            (iv) For each Property located in whole or in part in a federally
designated "special flood hazard area", flood insurance in the maximum available
amount;

            (v) An umbrella excess liability policy with a limit of not less
than Twenty Million Dollars ($20,000,000) over primary insurance, which policy
shall include coverage for so-called assumed and contractual liability coverage
and automobile liability coverage, and coverage for safeguarding of personalty
and shall also include such additional coverages and insured risks which are
acceptable to Lender;

            (vi) Business interruption and/or rent loss insurance with an
aggregate limit equal to at least the gross income from the Properties for an
indemnity period commencing on the date of such casualty and ending at least six
(6) months after completion of the Restoration (such amount being adjusted
annually);

            (vii) Crime protection insurance covering all employees with access
to funds and located in Guarantor's corporate offices with a limit of not less
than One Million Dollars ($1,000,000) and with the same coverages and
deductibles as currently in place at the Properties;

            (viii) Steam boiler, machinery and pressurized vessel insurance
insuring against breakdown or explosion of such equipment on a replacement cost
value basis, which shall not contain any exclusions for testing procedures;

            (ix) Worker's Compensation Insurance in statutory amounts, if any,
at all times;

            (x) Insurance against loss or damage from (A) leakage of sprinkler
systems and (B) explosion of steam boilers, air conditioning equipment, high
pressure piping, machinery and equipment, pressure vessels or similar apparatus
now or hereafter installed in the Improvements (without exclusion for
explosions), in an amount at least equal to the Aggregate Allocated Loan Amount;

            (xi) During any period of construction, repair or restoration,
builder's "all risk" insurance in an amount equal to not less than the full
insurable value of the Properties (excluding building foundations and footings)
against such risks (including, without limitation, fire and extended coverage
and collapse of the Improvements to agreed limits) as Lender may reasonably
request;

            (xii) If the Properties are or become a "non-conforming use" under
applicable zoning and building ordinances, or other requirements of the
applicable Governmental Authority, law or ordinance coverage to compensate for
the cost of demolition and the increased cost of construction, if available;

            (xiii) If the Borrowers, Manager or any of their respective
Affiliates holds a liquor license for the Properties, liquor liability insurance
(including "dram shop" liability) in an

                                       54


amount not less than $1,000,000 for each common cause and $3,000,000 in the
aggregate; provided that if such liquor license is held by any tenant under a
Lease, the Borrowers shall cause such tenant to cause liquor liability insurance
in an amount not less than the limits set forth above to be carried in such
tenant's name, and shall include the Borrowers and Lender as additional insureds
thereunder;

            (xiv) If reasonably required by Lender as a result of the release,
disposal or existence of any Hazardous Materials on or about any Property after
the date hereof (or as to which Lender obtains knowledge after the date hereof)
or if such insurance is then customarily required by institutional lenders for
securitized loans, environmental insurance, including mold coverage, in form and
with coverages (including business interruption coverage) reasonably
satisfactory to Lender; provided, however, without limiting or affecting
Lender's right to require such environmental insurance with respect to any other
Properties after the date hereof, Lender acknowledges that, as of the date
hereof, environmental insurance shall only be required with respect to the
Property known as the Holiday Inn, located at 363 Roberts Street, East Hartford,
Connecticut;

            (xv) Fiduciary liability insurance and directors and officers
liability insurance ("D&O INSURANCE") with coverages at levels in effect as of
the Closing Date;

            (xvi) Insurance against acts of terrorism, or insurance policies
without an exclusion for damages resulting from acts of terrorism on terms
consistent with the commercial property insurance policies required under
subsection (i), (ii), (v) and (vi) above;

            (xvii) Such other insurance as may from time to time be reasonably
required by Lender and which is then customarily required by institutional
lenders for securitized loans secured by similar properties similarly situated,
against other insurable hazards, including, but not limited to, malicious
mischief, vandalism, windstorm and or earthquake, due regard to be given to the
size and type of the Properties, Improvements, fixtures and equipment and their
location, construction and use. Additionally, the Borrowers shall carry such
insurance coverage as Lender may from time to time require if the failure to
carry such insurance would result in a downgrade, qualification or withdrawal of
any class of securities issued in connection with a Securitization.

      All Insurance Policies shall be in content (including, without limitation,
endorsements or exclusions, if any), form, and amounts, and issued by companies,
satisfactory to Lender from time to time and shall name Lender and its
successors and assignees as their interests may appear as (x) an "additional
insured" for each of the liability policies under this Section 5.4 hereof, and
(y) a "mortgagee" for each of the property and casualty policies under this
Section hereof, and shall (except for Worker's Compensation Insurance) contain a
waiver of subrogation clause reasonably acceptable to Lender. Other than with
respect to D&O Insurance, an insurance company shall not be satisfactory unless
such insurance company (a) is licensed or authorized to issue insurance in the
State where the applicable Property is located and (b) has a claims paying
ability rating by the Rating Agencies of AA- (or its equivalent).
Notwithstanding the foregoing, a carrier which does not meet the foregoing
ratings requirement shall nevertheless be deemed acceptable hereunder provided
that such carrier is reasonably acceptable to Lender and the Borrowers shall
obtain and deliver to Lender a Rating Confirmation with respect to such carrier

                                       55


from each of the Rating Agencies, provided, however, that: (a) if any insurance
coverage required under this Section 5.4 is maintained by a syndicate of
insurers, the preceding ratings requirements shall be deemed satisfied (without
any required Rating Confirmation) as long as at least seventy five percent (75%)
of the coverage (if there are four or fewer members of the syndicate) or at
least sixty percent (60%) of the coverage (if there are five or more members of
the syndicate) is maintained with carriers meeting the claims-paying ability
ratings requirements by S&P and Moody's (if applicable) set forth above and all
carriers in such syndicate have a claims-paying ability rating by S&P of not
less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by
Moody's); (b) Lender hereby approves Zurich Insurance Company as the carrier
providing the insurance described in clause (ii) above, so long as such carrier
maintains a claims paying ability of not less than A- by S&P (and the equivalent
from each of the other Rating Agencies to the extent rated thereby) and (c)
until the expiration of the current term of the applicable policies, Lender
hereby approves Landmark American as the carrier providing the insurance
described in clauses (i), (iv) and (vi) above (covering losses over the first
$25,000,000 of coverage), so long as thereafter such carrier or any other
carrier providing the above coverages maintains a claims paying ability of not
less than A by S&P (and the equivalent from each of the other Rating Agencies to
the extent rated thereby). All Insurance Policies under Sections 5.4 (i), (iv),
(vi), (vii), (x), (xi) and (xii) hereof shall contain a Non-Contributory
Standard mortgagee clause and a mortgagee's Loss Payable Endorsement (Form 438
BFU NS), or their equivalents (such endorsements shall entitle Lender to collect
any and all proceeds payable under all such insurance, with the insurance
company waiving any claim or defense against Lender for premium payment,
deductible, self-insured retention or claims reporting provisions). All
Insurance Policies shall provide that the coverage shall not be modified without
(30) days' advance written notice to Lender and shall provide that no claims
shall be paid thereunder to a Person other than Lender without ten (10) days'
advance written notice to Lender. The Borrowers may obtain any insurance
required by this Section through blanket policies; provided, however, that such
blanket policies shall separately set forth the amount of insurance in force
with respect to the Properties (which shall not be reduced by reason of events
occurring on property other than the Properties) and shall afford all the
protections to Lender as are required under this Section. Except as may be
expressly provided above, all policies of insurance required hereunder shall
contain no annual aggregate limit of liability, other than with respect to
liability insurance. If a blanket policy is issued, a certified copy of said
policy shall be furnished, together with a certificate indicating that Lender is
an additional insured (and, if applicable, loss payee) under such policy in the
designated amount. The Borrowers will deliver duplicate originals of all
Insurance Policies, premium prepaid through the current expiration dates of such
Insurance Policies, to Lender and, in case of Insurance Policies about to
expire, the Borrowers will deliver duplicate originals of replacement policies
satisfying the requirements hereof to Lender not less than ten (10) days prior
to the date of expiration; provided, however, if such replacement policy is not
yet available, the Borrowers shall provide Lender with an insurance certificate
executed by the insurer or its authorized agent evidencing that the insurance
required hereunder is being maintained under such policy, which certificate
shall be acceptable to Lender on an interim basis until the duplicate original
of the policy is available. The Borrowers shall furnish Lender receipts for the
payment of premiums on such insurance policies or other evidence of such payment
reasonably satisfactory to Lender in the event that such premiums have not been
paid by Lender pursuant to the Loan Agreement. The requirements of this Section
5.4 shall apply to any separate policies of insurance taken out by the Borrowers

                                       56


concurrent in form or contributing in the event of loss with the Insurance
Policies. Losses shall be payable to Lender notwithstanding (1) any act, failure
to act or negligence of the Borrowers or their agents or employees, Lender or
any other insured party which might, absent such agreement, result in a
forfeiture or all or part of such insurance payment, other than the willful
misconduct of Lender knowingly in violation of the conditions of such policy,
(2) the occupation or use of the Properties or any part thereof for purposes
more hazardous than permitted by the terms of such policy, (3) any foreclosure
or other action or proceeding taken pursuant to this Loan Agreement or (4) any
change in title to or ownership of the Properties or any part thereof. The
property insurance and the boiler and machinery insurance described in Sections
5.4(i) and (x) hereof shall include "underground hazards" coverage; "time
element" coverage by which Lender shall be assured payment of all amounts due
under the Note, this Loan Agreement and the other Loan Documents; "extra
expense" (i.e., soft costs), clean-up, transit and ordinary payroll coverage;
and "expediting expense" coverage to facilitate rapid repair or restoration of
the Properties. The Insurance Policies shall not contain any deductible in
excess of $250,000.

SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY.

      (A) The Borrowers will operate and maintain the Properties as is necessary
to maintain hotel standards at least as high as those that currently apply to
each Property, subject to ordinary wear and tear, as reasonably determined by
the Borrowers, and otherwise in compliance with the standards under the
applicable Franchise Agreement and shall maintain or cause to be maintained in
good repair, working order and condition all material property used in the
business of each Borrower, including the applicable Property, and will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Without limitation of the foregoing, each Borrower will operate and maintain its
Property substantially in accordance with the applicable Operating Budget and
the CapEx/FF&E Budget. All work required or permitted under this Loan Agreement
shall be performed in a workmanlike manner and in compliance with all applicable
laws.

      So long as no Event of Default has occurred and is continuing, the
Borrowers may, without Lender's consent, perform alterations to the Properties
which do not constitute a Material Alteration. The Borrowers shall not perform
any Material Alteration without Lender's prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed; provided, however,
that Lender may, in its sole and absolute discretion, withhold consent to any
Material Alteration which is likely to result in a decrease of Net Operating
Income (taking into consideration all Material Alterations being undertaken at
the Properties at such time) by 5% or more below that which was in effect prior
to the commencement of the first such Material Alteration being undertaken at
the time of determination for a period of sixty (60) days or longer; provided,
further, however, the Borrowers may perform a Material Alteration without
Lender's consent if (i) the delay caused by obtaining Lender's prior consent may
result in injury or death at, or further destruction or deterioration of, the
applicable Property, (ii) such Material Alteration is necessary to prevent the
likelihood of injury or death at, or further destruction or deterioration of,
the applicable Property, and (iii) the Borrowers deliver notice to Lender within
two (2) Business Days of commencement of such Material Alteration together with
such supporting documentation as Lender may require with respect to such
Material Alteration. Lender may, as a condition to giving its consent to a
Material Alteration, require that the Borrowers deliver to Lender evidence
reasonably satisfactory to Lender that the Borrowers have cash available for

                                       57


payment of the cost of such Material Alteration or, if the Borrowers fail to
deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an
amount equal to 125% of the cost of such Material Alteration as reasonably
estimated by Lender. Cash deposited by the Borrowers with Lender in connection
with any Material Alteration pursuant to the foregoing sentence shall be held by
Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers
to pay for the cost of such Material Alteration as such work progresses subject
to satisfaction of the conditions for disbursement of amounts from the Capital
Improvement Reserve under Section 6.5 (including the requirements set forth
under Section 6.7). Upon completion of the Material Alteration, the Borrowers
shall provide evidence reasonably satisfactory to Lender that (i) the Material
Alteration was constructed in accordance with all material applicable laws and
substantially in accordance with plans and specifications approved by Lender
(which approval shall not be unreasonably withheld or delayed), (ii) all
contractors, subcontractors, materialmen and professionals who provided work,
materials or services in connection with the Material Alteration have been paid
in full and have delivered unconditional releases of lien and (iii) all material
licenses necessary for the use, operation and occupancy of the Material
Alteration (other than those which depend on the performance of tenant
improvement work) have been issued. The Borrowers shall reimburse Lender upon
demand for all reasonable out-of-pocket costs and expenses (including the
reasonable fees of any architect, engineer or other professional engaged by
Lender) incurred by Lender in reviewing plans and specifications or in making
any determinations necessary to implement the provisions of this Section 5.5(A).

      (B) In the event of casualty or loss at any of the Properties, the
Borrowers shall give immediate written notice of the same to the insurance
carrier and to Lender and shall promptly commence and diligently prosecute to
completion, in accordance with the terms hereof, the repair and restoration of
the Property as nearly as possible to the Pre-Existing Condition (a
"RESTORATION"). The Borrowers hereby authorize and empower Lender as
attorney-in-fact for the Borrowers (jointly with the Borrowers unless an Event
of Default has occurred and is continuing), or any of them, to make proof of
loss, to adjust and compromise any claim under insurance policies, to appear in
and prosecute any action arising from such insurance policies, to collect and
receive insurance proceeds, and to deduct therefrom Lender's expenses incurred
in the collection of such proceeds; provided however, that nothing contained in
this Section shall require Lender to incur any expense or take any action
hereunder. The Borrowers further authorize Lender, at Lender's option, (i) to
hold the balance of such proceeds to be used to reimburse the Borrowers for the
cost of Restoration of any of the Properties or (ii) subject to Subsection
5.5(C), to apply such proceeds to payment of the Obligations whether or not then
due, in any order. Notwithstanding the foregoing, in the event of a casualty
where the loss does not exceed the Restoration Threshold, the Borrowers may
settle and adjust such claim; provided that (a) no Event of Default has occurred
and is continuing and (b) such adjustment is carried out in a commercially
reasonable and timely manner.

      (C) Lender shall not exercise Lender's option to apply insurance proceeds
to payment of the Obligations if all of the following conditions are met: (i) no
Event of Default then exists; (ii) Lender reasonably determines that there will
be sufficient funds to complete the Restoration of the Property to at least
substantially the Pre-Existing Condition and to timely make all payments due
under the Loan Documents during the Restoration of the affected Property; (iii)
Lender reasonably determines that the Net Operating Income of the Properties
(including rental income or business interruption insurance) will be sufficient
to pay principal and interest

                                       58


on the Loan and the Mezzanine Loan and Operating Revenues of the Properties,
after the Restoration thereof to the Pre-Existing Condition, will be sufficient
to meet all Operating Expenses, payments for Reserves and payments of principal
and interest under the Note and the Mezzanine Loan; (iv) Lender determines that
the Restoration of the affected Property to the Pre-Existing Condition will be
completed not later than five (5) months prior to the expiration of any business
interruption insurance, but in no event later than six (6) months prior to the
Maturity Date; (v) less than fifty percent (50%) of the total floor area of the
Improvements has been damaged, destroyed or rendered unusable as a result of
such fire or other casualty; and (vi) such Property can be restored and repaired
substantially to the condition it was in immediately prior to such casualty and
in compliance with all applicable zoning, building and other laws and codes (the
"PRE-EXISTING CONDITION"). If Lender elects to apply insurance proceeds to
payment of the Obligations, such application shall be made on the Payment Date
immediately following such election in accordance with the terms of the Cash
Management Agreement.

      (D) If Lender elects or is obligated to make the insurance proceeds
available for the Restoration of any Property and Lender is holding such
proceeds, the Borrowers agree that, if at any time during the Restoration, the
cost of completing such Restoration, as reasonably determined by Lender, exceeds
the undisbursed insurance proceeds, the Borrowers shall, within ten (10)
Business Days following the written demand by Lender, deposit the amount of such
excess with Lender, and Lender shall first disburse such deposit to pay for the
costs of such Restoration on the same terms and conditions as the insurance
proceeds are disbursed. If the Borrowers deposit such excess with Lender and if,
after completion of the Restoration, any funds remain from the combination of
insurance proceeds and the funds so deposited with Lender by the Borrowers, and
if no Event of Default shall have occurred and be continuing, then Lender shall
promptly disburse to the Borrowers such remaining funds.

      (E) Lender may, at Lender's option, condition disbursement of any
insurance proceeds on Lender's approval (which approval shall not be
unreasonably withheld) of plans and specifications of an independent architect
licensed in the state where the Property is located and reasonably satisfactory
to Lender (the "ARCHITECT"), any and all contractors, subcontractors and
materialmen engaged in the Restoration and the contracts under which they have
been engaged, contractor's cost estimates, architect's certificates, waivers of
liens, sworn statements of mechanics and materialmen and such other evidence of
costs, percentage completion of construction, application of payments, and
satisfaction of liens as Lender may reasonably require. Lender shall not be
obligated to disburse insurance proceeds more frequently than once every
calendar month. If insurance proceeds are applied to the payment of the
Obligations and provided no Event of Default exists, any such application of
proceeds to principal shall be without any Prepayment Consideration and shall
not extend or postpone the due dates of the monthly payments due under the Note
or otherwise under the Loan Documents, or change the amounts of such payments.
If Lender elects to apply all of such insurance proceeds toward the repayment of
the Obligations, the Borrowers shall (subject to compliance with clauses (A),
(B), (D) and (F) of Section 11.4) be entitled to obtain from Lender a Property
Release (without representation or warranty) of the applicable Property from the
Lien of the Mortgage relating to such Property (in which event the Borrowers
shall not be obligated to restore the applicable Property pursuant to Section
5.5(B) above) provided that the Borrowers pay to Lender the amount, if any, by
which the Release Price for such Property exceeds the insurance proceeds
received by Lender and applied to repayment of the Obligations. If any proceeds
are applied to

                                       59


reduce the Obligations under this Section 5.5, provided that no Event of Default
has occurred and is continuing, no Prepayment Consideration shall be due and
payable in connection with such application. Any amount of insurance proceeds
remaining in Lender's possession after full and final payment and discharge of
all Obligations shall be refunded to, or as directed by, the Borrowers or
otherwise paid in accordance with applicable law. If the Property is sold at
foreclosure or if Lender acquires title to the Property, Lender shall have all
of the right, title and interest of the applicable Borrower in and to any
insurance policies and unearned premiums thereon and in and to the proceeds
resulting from any damage to such Property prior to such sale or acquisition.

      (F) In no event shall Lender be obligated to make disbursements of
insurance proceeds in excess of an amount equal to the costs actually incurred
from time to time for work in place as part of the Restoration, as certified by
the Architect, less a retainage equal to the lesser of (x) the actual retainage
required pursuant to the permitted contract, or (y) ten percent (10%) of such
costs incurred until the Restoration has been completed. The retainage shall in
no event be less than the amount actually held back by the Borrowers from
contractors, subcontractors and materialmen engaged in the Restoration. The
retainage shall not be released until the Architect certifies to Lender, or, if
no Architect has been retained by Lender, Lender is reasonably satisfied, that
the Restoration has been completed in accordance with the provisions of this
Section 5.5 and that all approvals necessary for the re-occupancy and use of the
Property have been obtained from all appropriate governmental authorities, and
Lender receives final lien waivers and such other evidence reasonably
satisfactory to Lender that the costs of the Restoration have been paid in full
or will be paid in full out of the retainage.

SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized
representatives designated by Lender to visit and inspect during normal business
hours its Property and its business, including its financial and accounting
records, and to make copies and take extracts therefrom and to discuss its
affairs, finances and business with its officers and independent public
accountants (with such Borrower's representative(s) present), at such reasonable
times during normal business hours and as often as may be reasonably requested.
Unless an Event of Default has occurred and is continuing, Lender shall provide
advance written notice of at least three (3) Business Days prior to visiting or
inspecting any Property or such Borrower's offices.

SECTION 5.7 O&M PLAN. The applicable Borrowers shall cause to be prepared and
delivered to Lender operations and maintenance programs (the "O&M PLANS") with
respect to suspected asbestos, asbestos-containing materials, and/or mold
located in certain Properties as set forth on Schedule 6.6 attached hereto,
which conditions were disclosed in the applicable Environmental Reports for such
Properties. Each applicable Borrower shall at all times implement and carry out
the O&M Plan in accordance with its terms. Lender's requirement that the
applicable Borrowers develop and comply with the O&M Plan shall not be deemed to
constitute a waiver or modification of any covenants or agreements of the
Borrowers or Guarantor with respect to Hazardous Material or Environmental Laws
as set forth in the Environmental Indemnity.

SECTION 5.8 RESERVED.

SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will
(A) comply with the requirements of all present and future applicable laws,
rules, regulations and

                                       60


orders of any governmental authority in all jurisdictions in which it is now
doing business or may hereafter be doing business, other than those laws, rules,
regulations and orders the noncompliance with which would not reasonably be
expected to have, either individually or in the aggregate, a material adverse
effect on the operation or value of any Property, (B) maintain all licenses and
permits now held or hereafter acquired by any Borrower, the loss, suspension, or
revocation of which, or failure to renew, could have a material adverse effect
on the operation or value of any Property and (C) perform, observe, comply and
fulfill all of its material obligations, covenants and conditions contained in
any Contractual Obligation.

SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute
and/or deliver such documents, instruments, agreements, financing statements,
and perform such acts as Lender at any time may reasonably request to evidence,
preserve and/or protect the Collateral at any time securing or intended to
secure the Obligations and/or to better and more effectively carry out the
purposes of this Loan Agreement and the other Loan Documents.

SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party
shall duly and punctually perform, observe and comply in all material respects
with all of the terms, provisions, conditions, covenants and agreements on its
part to be performed, observed and complied with (i) hereunder and under the
other Loan Documents to which it is a party, (ii) under all Material Agreements
and Leases and (iii) all other agreements entered into or assumed by such Person
in connection with the Properties, and will not suffer or permit any material
default or event of default (giving effect to any applicable notice requirements
and cure periods) to exist under any of the foregoing except where the failure
to perform, observe or comply with any agreement referred to in this clause
(iii) would not reasonably be expected to have a material adverse effect on the
operation or value of any Property.

SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which
shall not be unreasonably withheld or delayed, the Borrowers shall not, nor
shall the Borrowers authorize Manager or any other Person to, (i) enter into any
Material Lease; (ii) cancel or terminate any Material Lease (except to enforce
any such Lease after a default thereunder); (iii) amend or modify any Material
Lease (except for minor modifications and amendments entered into in the
ordinary course of business, consistent with prudent property management
practices, not materially and adversely affecting the economic terms of the
Material Lease); (iv) approve any assignment, sublease or underlease of any
Material Lease (except as required pursuant to the express terms of any existing
Lease or Lease hereafter approved by Lender); or (v) cancel or modify any
guaranty, or release any security deposit, letter of credit, or other item
constituting security pertaining to any Material Lease (except as required
pursuant to the express terms of any existing Lease or Lease hereafter approved
by Lender).

      (B) Any request for approval of any Material Lease or assignment,
termination, amendment or modification of any Material Lease shall be made to
Lender in writing and together with such request the Borrowers shall furnish to
Lender: (i) such biographical and financial information about the proposed
tenant as Lender may reasonably require in conjunction with its review, (ii) a
copy of the proposed form of Lease (or amendment or modification), and (iii) a
summary of the material terms of such proposed Lease (or amendment or
modification) including, without limitation, rental terms and the term of the
proposed Lease and any options. Lender's approval of any Material Lease or
assignment, termination, amendment or modification

                                       61


of any Material Lease, shall be deemed given, if the first correspondence from
the Borrowers to Lender requesting such approval is in an envelope marked
"PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first
page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS
REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE
DEEMED GIVEN", and is accompanied by the information and documents required
above and any other information reasonably requested by Lender in writing prior
to the expiration of such fifteen (15) day period in order to adequately review
the same has been delivered and, if Lender fails to respond or to expressly deny
such request for approval in writing within the fifteen (15) day period, a
second notice is delivered to Lender from the Borrowers in an envelope marked
"PRIORITY" requesting approval containing a bold-faced, conspicuous legend at
the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR
APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny
each request for approval within the ten (10) day period.

      Except for security deposits, no Material Lease executed after the Closing
Date shall provide for payment of rent more than one month in advance, and the
Borrowers shall not under any circumstances collect any such rent more than one
month in advance. The Borrowers, at Lender's request, shall furnish Lender with
executed copies of all Material Leases hereafter made. Each new Material Lease
or a separate agreement with the tenant of such Material Lease shall be in
recordable form and shall specifically provide that such Material Lease (i) is
subordinate to the Mortgages; (ii) that the tenant attorns to Lender, such
attornment to be effective upon Lender's acquisition of title to the Property;
(iii) that the tenant agrees to execute such further evidences of attornment as
Lender may from time to time request; (iv) that the attornment of the tenant
shall not be terminated by foreclosure; (v) that in no event shall Lender, as
holder of the Mortgages or as successor landlord, be liable to the tenant for
any act or omission of any prior landlord or for any liability or obligation of
any prior landlord occurring prior to the date that Lender or any subsequent
owner acquire title to the Property; and (vi) that Lender may, at Lender's
option, accept or reject such attornment.

SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS.

      (A) The Borrowers shall cause each Manager to manage the Properties in
accordance with the Management Agreements including, without limitation,
maintaining inventory in amounts and types customary for hotels comparable to
each Property. The Borrowers shall (i) perform and observe all of the material
terms, covenants and conditions of the Management Agreement on the part of each
Borrower to be performed and observed, and (ii) promptly notify Lender of any
notice to any of the Borrowers of any material default under the Management
Agreement of which it is aware. If any of the Borrowers shall default in the
performance or observance of any material term, covenant or condition of the
applicable Management Agreement on the part of the Borrowers to be performed or
observed, then, without limiting Lender's other rights or remedies under this
Agreement or the other Loan Documents, and without waiving or releasing the
Borrowers from any of their obligations hereunder or under the applicable
Management Agreement, Lender shall have the right, upon prior written notice to
the Borrower, but shall be under no obligation, to pay any sums and to perform
any act as may be

                                       62


reasonably appropriate to cause such material conditions of the applicable
Management Agreement on the part of the Borrowers to be performed or observed.

      (B) The Borrowers shall not surrender, terminate, cancel, modify (other
than non-material changes), renew or extend the Management Agreement, or enter
into any other Management Agreement with Manager or any new Manager, or consent
to the assignment by the Manager of its interest under the Management Agreement,
in each case without (i) prior to a Securitization, the express consent of
Lender, which consent shall not be unreasonably withheld, or (ii) after a
Securitization, delivery of Rating Confirmations from each of the Rating
Agencies. The Borrowers shall cause any new Manager with respect to any Property
to execute and deliver a subordination of management agreement in substantially
the form delivered in connection with the closing of the Loan.

      (C) Lender shall have the right to require any of the Borrowers to replace
any Manager with a Person chosen by the Borrowers and reasonably acceptable to
Lender (unless such proposed Manager is an Acceptable Manager) and the
applicable Franchisor (to the extent the applicable Franchisor has consent
rights), upon the earliest to occur of any one or more of the following events:
(i) upon the occurrence and during the continuance of an Event of Default; (ii)
thirty (30) days after notice from Lender to the Borrowers if Manager has
engaged in fraud, gross negligence or willful misconduct arising from or in
connection with its performance under the applicable Management Agreement; or
(iii) upon a change of control of the current Manager.

      (D) The Borrowers shall not terminate or enter into any Franchise
Agreement without Lender's prior written consent, which may be granted or
withheld in Lender's sole discretion. Notwithstanding the foregoing, the
following changes to Franchise Agreements shall be permitted without Lender's
prior written consent:

            (i)   Replacement of any Franchise Agreement with a new Franchise
                  Agreement in form substantially similar to a form previously
                  approved by Lender with any Franchisor that would cause a Tier
                  3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or
                  that would cause a Tier 2 Hotel to become a Tier 1 Hotel;

            (ii)  Replacement of any Franchise Agreement with a new Franchise
                  Agreement in form substantially similar to a form previously
                  approved by Lender with another Franchisor within the same
                  Category, provided that the Borrowers shall not replace
                  Franchise Agreements (in the aggregate) pursuant to this
                  Section 5.13(D)(ii) with respect to more than the lesser of
                  (x) two (2) Properties, or (y) Properties with Aggregate
                  Allocated Loan Amounts (in the aggregate) of ten percent (10%)
                  of the Aggregate Outstanding Principal Balance;

            (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with
                  a new Franchise Agreement in form substantially similar to a
                  form previously approved by Lender for Tier 3 Hotels, provided
                  that the Borrowers shall not replace Franchise Agreements for
                  more than one (1) Property, or for any Property with an
                  Allocated Loan Amount of more than five percent

                                       63


                  (5%) of the outstanding principal balance of the Loan pursuant
                  to this Section 5.13(D)(iii); and

            (iv)  Entering into new Franchise Agreements (or amendments or
                  addenda to existing Franchise Agreements) with the existing
                  Franchisors for the applicable Properties for the same
                  franchise brand, each in form substantially similar to the
                  forms previously approved for the respective Properties by
                  Lender, as required by the existing Franchisors under the
                  respective Franchise Agreements in connection with the
                  transfers of the applicable Properties and the direct and
                  indirect ownership interests in the Borrowers made by the
                  Borrower Parties and their Affiliates in connection with the
                  Closing of the Loan.

      In connection with the replacement of any Franchisors permitted hereunder,
the applicable Borrower shall, within ten (10) Business Days of the execution of
such Franchise Agreement, deliver to Lender a Franchisor Letter from any
replacement Franchisor in form and substance reasonably acceptable to Lender. In
all cases, each Borrower shall (a) cause the hotel located on the applicable
Property to be operated pursuant to the applicable Franchise Agreement; (b)
promptly perform and observe in all material respects all of the covenants
required to be performed and observed by it under the applicable Franchise
Agreement (including the requirements of any Property Improvement Plan); (c)
promptly notify Lender of any material default under the applicable Franchise
Agreement of which it is aware; and (d) promptly enforce in a commercially
reasonable manner the performance and observance of all of the material
covenants required to be performed and observed by the Franchisor under the
Franchise Agreement. In addition, the Borrowers shall not, without Lender's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed: (x) increase or consent to the increase of the aggregate
amount of any fees under any Franchise Agreement; or (y) otherwise materially
modify, change, supplement, alter or amend, or waive or release any of its
material rights and remedies under, any Franchise Agreement.

      Lender's consent to any replacement of any Franchise Agreement, or the
termination, renewal, extension or modification of an existing Franchise
Agreement, shall be deemed given, if the first correspondence from the Borrowers
to Lender requesting such consent is in an envelope marked "PRIORITY" and
contains a bold-faced, conspicuous legend at the top of the first page thereof
stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR
APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED
GIVEN", and is accompanied by the information and documents required above and
any other information reasonably requested by Lender in writing prior to the
expiration of such fifteen (15) day period in order to adequately review the
same has been delivered and, if Lender fails to respond or to expressly deny
such request for approval in writing within the fifteen (15) day period, a
second notice is delivered to Lender from the Borrowers in an envelope marked
"PRIORITY" requesting approval containing a bold-faced, conspicuous legend at
the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR
APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny
each request for approval within the ten (10) day period.

                                       64


SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become
obligated under any Material Agreement pertaining to any Property without
Lender's prior written approval, which approval shall not be unreasonably
withheld or conditioned; except that the following Material Agreements shall not
require Lender approval: (i) any Lease that does not require Lender's approval
under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii)
any Management Agreement that does not require Lender's approval under, and
otherwise complies with, the provisions of Section 5.13 hereof (provided,
however, that the foregoing shall not affect Borrowers' obligation to deliver
Rating Confirmations with respect to any such Management Agreement if required
under Section 5.13), (iii) the existing Material Agreements described on
SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not
require Lender's approval under, and otherwise complies with, the provisions of
Section 5.13(E) or (v) any other agreement that may be terminated without cause
and without payment of a penalty or premium, on not more than thirty (30) days'
prior written notice.

SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all
Receipts from the Properties into, and otherwise comply with, the Accounts
established from time to time hereunder. Subject to Article VII hereof and the
Cash Management Agreement, each Borrower shall promptly apply all Receipts to
the payment of all current and past due Operating Expenses, and to the repayment
of all sums currently due or past due under the Loan Documents, including all
payments into the Reserves.

SECTION 5.16 ESTOPPEL CERTIFICATES.

      (A) Within ten (10) Business Days following a request by Lender, the
Borrowers shall provide to Lender a duly acknowledged written statement
confirming (i) the amount of the outstanding principal balance of the Loan, (ii)
the terms of payment and maturity date of the Note, (iii) the date to which
interest has been paid, (iv) whether any offsets or defenses exist against the
Obligations, and if any such offsets or defenses are alleged to exist, the
nature thereof shall be set forth in detail and (v) that this Loan Agreement,
the Note, the Mortgages and the other Loan Documents are legal, valid and
binding obligations of the Borrowers and have not been modified or amended, or
if modified or amended, describing such modification or amendments.

      (B) Within ten (10) Business Days following a written request by the
Borrowers, Lender shall provide to the Borrowers a duly acknowledged written
statement setting forth the amount of the outstanding principal balance of the
Loan, the date to which interest has been paid, and whether Lender has provided
the Borrowers with written notice of any Event of Default. Compliance by Lender
with the requirements of this Section shall be for informational purposes only
and shall not be deemed to be a waiver of any rights or remedies of Lender
hereunder or under any other Loan Document.

SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly
create, incur, assume, guaranty, or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness except for the following
(collectively, "PERMITTED INDEBTEDNESS"):

      (A) the Obligations and Crossed Indebtedness;

                                       65

      (B) (i) unsecured trade payables not evidenced by a note and arising out
of purchases of goods or services in the ordinary course of business and (ii)
Indebtedness incurred in the financing of equipment or other personal property
used at any Property in the ordinary course of business, provided that (a) each
such trade payable is payable not later than ninety (90) days after the original
invoice date and is not overdue by more than thirty (30) days, and (b) the
aggregate amount of such trade payables and Indebtedness relating to financing
of equipment and personal property or otherwise referred to in clauses (i) and
(ii) above (excluding therefrom utility expenses of the Properties and fees
payable to the Franchisors pursuant to the terms of the Franchise Agreements)
outstanding does not, at any time, exceed five percent (5%) of the outstanding
principal balance of the Loan; and

      (C) the Mezzanine Loan.

In no event shall any Indebtedness other than the Loan be secured, in whole or
in part, by the Properties or any portion thereof or interest therein.

SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are
in addition to and not in limitation of its obligations under Article XI herein.
The Borrower shall not create, incur, assume or permit to exist any Lien on or
with respect to the Properties, any other Collateral or any direct or indirect
ownership interest in the Borrowers, except the Permitted Encumbrances and Liens
on the ownership interests in the Borrowers securing the Mezzanine Loan.

SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no
Primary Borrower Party shall directly or indirectly create or become or be
liable with respect to any Contingent Obligation.

SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly
permitted in this Loan Agreement, no Primary Borrower Party shall, or shall
permit any other Person to, (i) amend, modify or waive any term or provision of
such Borrower Party's partnership agreement, certificate of limited partnership,
articles of incorporation, by-laws, articles of organization, operating
agreement or other organizational documents so as to violate or permit the
violation of the single-purpose entity provisions set forth in Article IX,
unless required by law; or (ii) liquidate, wind-up or dissolve such Primary
Borrower Party.

SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses
payable to the Manager under the Management Agreement, the Borrowers shall not
pay any management, consulting, director or similar fees to any Related Person
of the Borrowers or to any director, officer or employee of the Borrowers. The
Borrowers shall not directly or indirectly enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Related Person of any of the Borrowers or
with any director, officer or employee of any Borrower Party, except
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of the Borrowers and upon fair and reasonable terms
and which are no less favorable to any of the Borrowers than would be obtained
in a comparable arm's length transaction with a Person that is not a Related
Person of any Borrower. The Borrowers shall not make any payment or permit any
payment to be made to any

                                       66


Related Person of any of the Borrowers when or as to any time when any Event of
Default shall exist.

SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS.

      (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary
case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect.

      (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not
apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or
collude to cause the appointment of or taking possession by, a receiver, trustee
or other custodian for all or a substantial part of the assets of any Borrower.
As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, in which any of the
Borrowers is a debtor or any portion of the Properties is property of the estate
therein. The Borrowers shall not file a petition for, consent to the filing of a
petition for, or aid, solicit, support, or otherwise act, cooperate or collude
to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any
Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior
written consent of Lender, consent to the entry of any order, file any motion,
or support any motion (irrespective of the subject of the motion), and the
Borrowers shall not file or support any plan of reorganization. The Borrowers
having any interest in any Involuntary Borrower Bankruptcy shall do all things
reasonably requested by Lender to assist Lender in obtaining such relief as
Lender shall seek, and shall in all events vote as directed by Lender. Without
limitation of the foregoing, each such Borrower shall do all things reasonably
requested by Lender to support any motion for relief from stay or plan of
reorganization proposed or supported by Lender.

SECTION 5.23 ERISA.

      (A) NO ERISA PLANS. None of the Primary Borrower Parties will establish
any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence
making contributions to (or become obligated to make contributions to) any
Employee Benefit Plan, Pension Plan or Multiemployer Plan.

      (B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any
non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the IRC; or (ii) except as may be necessary to comply with applicable laws,
establish or amend any Employee Benefit Plan which establishment or amendment
could result in liability to the Borrowers or any ERISA Affiliate or increase
the obligation of the Borrowers, provided that the Borrower shall not be in
default of this covenant if, in either case, any portion of the Loan has been,
or will be, funded with plan assets of any employee benefit plan that either (x)
is subject to Title I of ERISA or any plan that is covered by Section 4975 of
the Code (unless the Lender is eligible to apply for one or more exemptions such
that the Loan will not constitute a nonexempt prohibited transaction under
Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to
an excise tax under Section 4975 of the IRC.

                                       67


      (C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of
this Loan Agreement become (1) an employee benefit plan defined in Section 3(3)
of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1)
of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental
plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose
underlying assets constitute "plan assets" of any such employee benefit plan,
plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the
IRC or any state statutes applicable to the Borrowers regulating investments of
governmental plans.

SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any
other Person within its control to, disclose the name of Lender or terms of this
Loan Agreement or the Loan Documents in any press release without the prior
written consent of Lender, which shall not be unreasonably withheld.
Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted
to make such filings and disclosures with respect to the Loan as are required by
law.

SECTION 5.25 Ground Leases.

      (A) NO MODIFICATION. The Borrowers shall not modify or amend, or terminate
or surrender any Ground Lease, in each case without the prior written consent of
Lender, which consent may be withheld by Lender in its sole and absolute
discretion. Any attempted or purported modification, amendment, or any surrender
or termination of any Ground Lease without Lender's prior written consent shall
be null and void and of no force or effect.

      (B) PERFORMANCE OF GROUND LEASES. The Borrowers shall fully perform as and
when due each and all of its obligations under each Ground Lease in accordance
with the terms of such Ground Lease, and shall not cause or suffer to occur any
material breach or default in any of such obligations. The Borrowers shall keep
and maintain each Ground Lease in full force and effect. The Borrowers shall
exercise any option to renew or extend any Ground Lease and give written
confirmation thereof to Lender within thirty (30) days after such option is
exercised. Notwithstanding that certain of the obligations of the Borrowers
under this Loan Agreement may be similar or identical to certain of the
obligations of the Borrowers under the Ground Leases, all of the obligations of
the Borrowers under this Loan Agreement are and shall be separate from and in
addition to its obligations under the Ground Leases.

      (C) NOTICE OF DEFAULT. If any of the Borrowers shall have or receive any
written notice that any Ground Lease Default has occurred, then the Borrowers
immediately shall notify Lender in writing of the same and immediately deliver
to Lender a true and complete copy of each such notice. Further, the Borrowers
shall provide such documents and information as Lender shall reasonably request
concerning the Ground Lease Default.

      (D) LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and be
continuing, or if any Ground Lessor asserts that a Ground Lease Default has
occurred (whether or not the Borrowers question or deny such assertion), then,
subject to the terms and conditions of the applicable Ground Lease, Lender, upon
five (5) Business Days' prior written notice to the Borrowers, unless Lender
reasonably determines that a shorter period (or no period) of notice is
necessary to protect Lender's interest in the Ground Lease, may (but shall not
be obligated to) take any action that Lender deems reasonably necessary,
including, without limitation,

                                       68


(i) performance or attempted performance of the applicable Borrower's
obligations under the applicable Ground Lease, (ii) curing or attempting to cure
any actual or purported Ground Lease Default, (iii) mitigating or attempting to
mitigate any damages or consequences of the same and (iv) entry upon the
applicable Ground Leased Property for any or all of such purposes. Upon Lender's
request, each Borrower shall submit satisfactory evidence of payment or
performance of any of its obligations under each Ground Lease. Lender may pay
and expend such sums of money as Lender in its sole discretion deems necessary
or desirable for any such purpose, and the Borrowers shall pay to Lender within
five (5) Business Days of the written demand of Lender all such sums so paid or
expended by Lender, together with interest thereon from the date of expenditure
at the Default Rate.

      (E) LEGAL ACTION. The Borrowers shall not commence any action or
proceeding against any Ground Lessor or affecting or potentially affecting any
Ground Lease or the Borrowers' or Lender's interest therein, the effect of which
could cause an event of default or termination of any such Ground Lease, without
the prior written consent of Lender, which consent shall not be unreasonably
withheld, conditioned or delayed. The Borrowers shall notify Lender immediately
if any action or proceeding shall be commenced between any Ground Lessor and
either Borrower, or affecting or potentially affecting any Ground Lease or
either Borrower's or Lender's interest therein (including, without limitation,
any case commenced by or against any Ground Lessor under the Bankruptcy Code).
Lender shall have the option, exercisable upon notice from Lender to the
Borrowers, to participate in any such action or proceeding with counsel of
Lender's choice. The Borrowers shall cooperate with Lender, comply with the
reasonable instructions of Lender, execute any and all powers, authorizations,
consents or other documents reasonably required by Lender in connection
therewith, and shall not settle any such action or proceeding without the prior
written consent of Lender, which consent shall not be unreasonably withheld,
conditioned or delayed.

      (F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the
applicable Ground Lease, from time to time, at Lender's request, the Borrowers
shall use commercially reasonable efforts to obtain and deliver to Lender within
the time period required under the applicable Ground Lease, an estoppel
certificate from each Ground Lessor setting forth (A) (i) the identities of the
original lessor and lessee under the applicable Ground Lease and each of their
respective successors, (ii) that the Ground Lease has not been modified or, if
it has been modified, the date of each modification (together with copies of
each such modification), (iii) the rent payable under the Ground Lease, (iv) the
dates to which all rent and other charges have been paid, (v) whether there are
any alleged Ground Lease Defaults and, if so, setting forth the nature thereof
in reasonable detail, and (vi) such other matters as Lender may reasonably
request or (B) the matters required to be certified by the Ground Lessor under
the applicable Ground Lease. The Borrowers shall not be required to request an
estoppel from any Ground Lessor more than two (2) times in any calendar year.

      (G) BANKRUPTCY.

            (i) If any Ground Lessor shall reject any Ground Lease under or
pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrowers shall
not elect to treat the Ground Lease as terminated but shall elect to remain in
possession of the applicable Ground Leased Property and the leasehold estate
under such Ground Lease. The lien of the Mortgage covering

                                       69


such Property does and shall encumber and attach to all of the Borrowers' rights
and remedies at any time arising under or pursuant to Section 365 of the
Bankruptcy Code, including without limitation, all of such Borrower's rights to
remain in possession of such Property and the leasehold estate.

            (ii) The Borrowers acknowledge and agree that in any case commenced
by or against the Borrowers under the Bankruptcy Code, Lender by reason of the
liens and rights granted under the Mortgage covering such Property and the Loan
Documents shall have a substantial and material interest in the treatment and
preservation of such Borrower's rights and obligations under such Ground Lease,
and that such Borrower shall, in any such bankruptcy case, provide to Lender
immediate and continuous reasonably adequate protection of such interests. Each
Borrower and Lender agree that such adequate protection shall include but shall
not necessarily be limited to the following:

                  (a) Lender shall be deemed a party to the Ground Lease (but
shall not have any obligations thereunder) for purposes of Section 365 of the
Bankruptcy Code, and shall, provided that, prior to an Event of Default, no such
action by Lender would adversely and materially affect the Borrowers' ability to
prosecute, or defend, any such claims asserted therein, have standing to appear
and act as a party in interest in relation to any matter arising out of or
related to the Ground Lease or such Property.

                  (b) The Borrowers shall serve Lender with copies of all
notices, pleadings and other documents relating to or affecting the Ground Lease
or the applicable Property. Any notice, pleading or document served by the
Borrowers on any other party in the bankruptcy case shall be contemporaneously
served by such Borrower on Lender, and any notice, pleading or document served
upon or received by such Borrower from any other party in the bankruptcy case
shall be served by such Borrower on Lender promptly upon receipt by such
Borrower.

                  (c) Upon written request of Lender, the Borrowers shall assume
the Ground Lease, and shall take such steps as are necessary to preserve such
Borrower's right to assume the Ground Lease, including without limitation using
commercially reasonable efforts to obtain extensions of time to assume or reject
the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it
is applicable.

      (H) ASSUMPTION AND ASSIGNMENT. If the Borrowers or the applicable Ground
Lessor seeks to reject any Ground Lease or have the Ground Lease deemed
rejected, then prior to the hearing on such rejection Lender shall, subject to
applicable law, be given no less than twenty (20) days' notice and opportunity
to elect in lieu of rejection to have the Ground Lease assumed and assigned to a
nominee of Lender. If Lender shall so elect to assume and assign the Ground
Lease, then the Borrowers shall, subject to applicable law, continue any request
to reject the Ground Lease until after the motion to assume and assign has been
heard. If Lender shall not elect to assume and assign the Ground Lease, then
Lender may, subject to applicable law, obtain in connection with the rejection
of the Ground Lease a determination that the applicable Ground Lessor, at
Lender's option, shall (1) agree to terminate the Ground Lease and enter into a
new lease with Lender on the same terms and conditions as the Ground Lease, for
the remaining term of the Ground Lease, or (2) treat the Ground Lease as
breached and provide Lender with the

                                       70


rights to cure defaults under the Ground Lease and to assume the rights and
benefits of the Ground Lease.

            Each Borrower shall join with and support any request by Lender to
grant and approve the foregoing as necessary for adequate protection of Lender's
interests. Notwithstanding the foregoing, Lender may seek additional terms and
conditions, including such economic and monetary protections as it deems
reasonably appropriate to adequately protect its interests, and any request for
such additional terms or conditions shall not delay or limit Lender's right to
receive the specific elements of adequate protection set forth herein.

            Each Borrower hereby appoints Lender as its attorney in fact to act
on behalf of Lender in connection with all matters relating to or arising out of
the assumption or rejection of any Ground Lease, in which the other party to the
lease is a debtor in a case under the Bankruptcy Code. This grant of power of
attorney is present, unconditional, irrevocable, durable and coupled with an
interest.

SECTION 5.26 RESERVED.

SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender,
all reasonable out-of-pocket expenses, charges, costs and fees (including
reasonable attorneys' fees and expenses) in connection with the negotiation,
documentation, closing, administration, servicing, enforcement interpretation,
and collection of the Loan and the Loan Documents, and in the preservation and
protection of Lender's rights hereunder and thereunder. Without limitation the
Borrowers shall pay all costs and expenses, including reasonable attorneys'
fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or
any law succeeding or replacing any of the same). At the Closing, Lender is
authorized to pay directly from the proceeds of the Loan any or all of the
foregoing expenses then or theretofore incurred and approved by the Borrowers.

SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and
at any time that a Cash Trap Event is in effect, the Borrowers shall not make
any distributions of cash or other property to any Borrower Party, or make any
payments in lieu thereof, without Lender's prior written approval, which may be
granted or withheld in Lender's sole discretion.

SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless
otherwise specifically provided herein to the contrary, the Borrowers shall not
cancel any indebtedness from any Person owing to any Borrower, or settle any
claims without Lender's prior written consent which shall not be unreasonably
withheld.

SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no
Borrower Party, nor any of their respective Affiliates, officers, directors,
partners or members will knowingly: (i) conduct any business, nor engage in any
transaction or dealing, with any Prohibited Person, including, but not limited
to, the making or receiving of any contribution of funds, goods, or services, to
or for the benefit of a Prohibited Person; or (ii) engage in or conspire to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in
EO13224. The Borrowers further covenants and agrees to deliver (from time to
time) to Lender any such certification or other evidence as may be

                                       71


requested by Lender in its sole and absolute discretion, confirming that: (i)
neither any Borrower Party, nor their respective officers, directors, partners,
members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower
Party, nor their respective officers, directors, partners, members or
Affiliates, has to its Knowledge engaged in any business, transaction or
dealings with a Prohibited Person, including, but not limited to, the making or
receiving of any contribution of funds, goods, or services, to or for the
benefit of a Prohibited Person.

                                   ARTICLE VI
                                    RESERVES

SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES.

      (A) The Borrowers hereby pledge, assign and grant to Lender a security
interest in and to all of the Borrowers' right, title and interest in and to the
Account Collateral, including the Reserves, as security for payment and
performance of all of the Obligations hereunder and under the Note and the other
Loan Documents. The Reserves constitute Account Collateral and are subject to
the security interest in favor of Lender created herein and all provisions of
this Loan Agreement and the other Loan Documents pertaining to Account
Collateral.

      (B) In addition to the rights and remedies provided in Article VII and
elsewhere herein, upon the occurrence and during the continuance of any Event of
Default, Lender shall have all rights and remedies pertaining to the Reserves as
are provided for in any of the Loan Documents or under any applicable law.
Without limiting the foregoing, upon and at all times after the occurrence and
during the continuance of an Event of Default, Lender in its sole and absolute
discretion, may use the Reserves (or any portion thereof) for any purpose,
including but not limited to any combination of the following: (i) payment of
any of the Obligations including the Prepayment Consideration (if any)
applicable upon such payment in such order as Lender may determine in its sole
discretion; provided, however, that such application of funds shall not cure or
be deemed to cure any Default; (ii) reimbursement of Lender for any actual
losses or expenses (including, without limitation, reasonable legal fees)
suffered or incurred as a result of such Event of Default; (iii) payment for the
work or obligation for which such Reserves were reserved or were required to be
reserved; and (iv) application of the Reserves in connection with the exercise
of any and all rights and remedies available to Lender at law or in equity or
under this Loan Agreement or pursuant to any of the other Loan Documents.
Nothing contained in this Loan Agreement shall obligate Lender to apply all or
any portion of the funds contained in the Reserves during the continuance of an
Event of Default to payment of the Loan or in any specific order of priority.

SECTION 6.2 FUNDS DEPOSITED WITH LENDER.

      (A) INTEREST, OFFSETS. Except only as expressly provided otherwise herein,
all funds of the Borrowers which are deposited with Lock Box Account Bank as
Reserves hereunder shall be held by Lock Box Account Bank in one or more
Permitted Investments, such Permitted Investments, prior to an Event of Default,
to be as directed by Borrower. All interest which accrues on the Reserves shall
be taxable to the Borrowers and shall be added to and disbursed in the same
manner and under the same conditions as the principal sum on which said interest
accrued. Additional provisions pertaining to investments are set forth in
Article VII. After

                                       72


repayment of all of the Obligations, all funds held as Reserves will be promptly
returned to, or as directed by, the Borrowers.

      (B) FUNDING AT CLOSING. The Borrowers shall deposit with Lender the
amounts necessary to fund each of the Reserves as set forth below. Deposits into
the Reserves at Closing may occur by deduction from the amount of the Loan that
otherwise would be disbursed to the Borrowers, followed by deposit of the same
into the applicable Sub-Account or Account of the Lock Box Account in accordance
with the Cash Management Agreement on the Closing Date. Notwithstanding such
deductions, the Loan shall be deemed for all purposes to be fully disbursed at
Closing.

SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the
Borrowers shall deposit with Lock Box Account Bank $1,235,704.81 and, pursuant
to the Cash Management Agreement, the Borrowers shall deposit monthly, on each
Payment Date commencing on the Payment date in August 2004, 1/12th of the annual
charges (as reasonably estimated by Lender) for all Impositions and all
Insurance Premiums (other than for D&O Insurance) payable with respect to the
Properties hereunder (said funds, together with any interest thereon and
additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount
of the monthly deposit to be made to the Impositions and Insurance Reserve from
and after the date hereof is $203,202.41. The Borrowers shall also deposit with
Lock Box Account Bank within ten (10) Business Days of the written demand by
Lender, to be added to and included within such reserve, a sum of money which
Lender reasonably estimates, together with such monthly deposits, will be
sufficient to make the payment of each such charge at least ten (10) Business
Days prior to the date initially due. The Borrowers shall provide Lender with
bills and all other documents necessary for the payment of the foregoing charges
at least thirty (30) days prior to the date on which each payment shall first
become subject to penalty or interest if not paid. So long as (i) no Event of
Default has occurred and is continuing, (ii) the Borrowers have provided Lender
with the foregoing bills and other documents in a timely manner, and (iii)
sufficient funds are held by Lender for the payment of the Impositions and
Insurance Premiums relating to each of the Properties, Lender shall pay said
items or disburse to the Borrowers from such Reserve an amount sufficient to pay
said items. Interest shall accrue in favor of the Borrowers on funds in the
Impositions and Insurance Reserve and be added to the balance thereof and
disbursed in accordance with the terms hereof.

SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on
behalf of Lender shall establish and maintain with Lock Box Bank an account for
the purpose of creating a reserve for replacements of FF&E at or in, or used in
connection with, the Properties (the "REPLACEMENTS") in accordance with the
applicable CapEx/FF&E Budget approved by Lender (said funds, together with any
interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve
shall be held in an Eligible Account entitled "FF&E Reserve Account for the
benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account
shall be under the sole dominion and control of Lender, subject to the terms of
the Cash Management Agreement. Pursuant to the Cash Management Agreement, the
Borrowers shall deposit monthly, on each Payment Date commencing with the
Payment Date in August 2004, an amount equal to 4.0% of the Operating Revenues
generated from the Properties for the prior calendar month (such amount, the
"MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the
Borrowers, subject in all instances to the terms of the Cash Management

                                       73


Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds
held in the FF&E Reserve shall be used in connection with the Required Capital
Improvements. Upon and at all times after the occurrence and during the
continuance of an Event of Default, no draws will be permitted from the FF&E
Reserve other than Replacements subject, in each instance, to Manager's
compliance with the FF&E reporting requirements set forth in Section
5.1(A)(v)(d).

SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At
Closing, the Borrowers shall deposit with Lock Box Account Bank
$2,985,668.00 (said funds, together with any interest thereon, the "CAPITAL
IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers
solely for payment of certain Capital Improvements required to be made to the
Properties and designated as "Required Capital Improvements" on SCHEDULE 6.5
attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by
the Borrowers for purposes for which any other Reserve is established or for any
other purpose other than completion of the Required Capital Improvements. The
Borrowers shall promptly commence and diligently prosecute to completion,
subject to Force Majeure, the Required Capital Improvements within the time
periods for each Required Capital Improvement set forth on SCHEDULE 6.5. Funds
held in the Capital Improvement Reserve shall be disbursed in accordance with
Section 6.7. Subject to the foregoing conditions, but also subject to the last
paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining
balance in the Capital Improvement Reserve when all Required Capital
Improvements are complete, and paid for, in accordance with the terms hereof.

SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers
shall deposit with Lock Box Account Bank, an amount equal to $1,612.50
(said funds, together with any interest thereon and additions thereto, the
"HAZARDOUS MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous
Materials on the Properties as indicated in the Environmental Reports for the
Properties prepared and delivered prior to the Closing and as such work is more
particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the
earlier of (x) the date required by any applicable Governmental Authority or (y)
nine (9) months after the Closing, the Borrowers shall, subject to Force
Majeure, complete such Environmental Work and shall provide to Lender such
closure reports, no-further-action letters, or other evidence of compliance with
law as Lender may reasonably require. The funds contained in the Hazardous
Materials Remediation Reserve shall be utilized by the Borrowers solely for
performance of the Environmental Work in accordance with the Environmental
Reports, and shall not be used by the Borrowers for purposes for which any other
Reserve is established. Subject to the Borrowers' satisfaction of the applicable
conditions of Section 6.7, the Borrowers shall be entitled to draw upon the
Hazardous Materials Remediation Reserve to pay for costs that have been incurred
by the Borrowers for such Environmental Work, provided that the Borrowers
deliver to Lender such evidence as may be reasonably satisfactory to Lender
that, after payment of such draw, the funds remaining in the Hazardous Materials
Remediation Reserve shall be sufficient to pay for the remainder of such
Environmental Work. Subject to the foregoing conditions, but also subject to the
last paragraph of Section 11.4, the Borrowers shall be entitled to draw any
remaining balance in the Hazardous Materials Remediation Reserve when all such
Environmental Work is complete, and is paid for, in accordance with the terms
hereof.

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SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION
RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK.

      (A) DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND
CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for
disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to
or for the account of the Borrowers (x) from the Hazardous Materials Remediation
Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the
Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for
Environmental Work (the "APPROVED ENVIRONMENTAL EXPENDITURES", and (y) from the
Capital Improvement Reserve, to pay to, or pay on behalf of, the Borrowers for
the amount of the Borrowers' actual bona fide out-of-pocket expenditures or
costs incurred for Required Capital Improvements ("APPROVED CAPITAL IMPROVEMENT
EXPENDITURES"; and together with the Approved Environmental Expenditures,
collectively, "APPROVED EXPENDITURES"; and the related Environmental Work or
Required Capital Improvements to which any such request for disbursement relates
shall be referred to as the "WORK"), upon satisfaction of each of the conditions
listed on SCHEDULE 6.7 and each of the conditions set forth below in Lender's
reasonable discretion:

            (i) Except as provided in this Section 6.7, each request for
disbursement from the Hazardous Materials Remediation Reserve or the Capital
Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for
completion of the Approved Expenditures for which disbursement is requested.

            (ii) A request for disbursement from the Work Reserves may be made
after completion of a portion of the Work under such contract, or for payment of
deposits required in connection with the Work under such Contract, provided (1)
all other conditions in this Loan Agreement for disbursement have been
satisfied, (2) funds remaining in the Hazardous Materials Remediation Reserve
are, in Lender's reasonable judgment, sufficient to complete the Environmental
Work when required and/or funds remaining in the Capital Improvement Reserve
are, in Lender's reasonable judgment, sufficient to complete such item of
Required Capital Improvements and any other Required Capital Improvements
remaining to be performed, as the case may be, and (3) if reasonably required by
Lender, each contractor or subcontractor receiving payments in excess of
$100,000 under such contract shall provide a waiver of lien with respect to
amounts which have been paid to that contractor or subcontractor.

            (iii) To the extent the contract with the relevant contractor or
supplier provides for a retainage, each disbursement from a Work Reserve, except
for a final disbursement, shall be in the amount of actual costs incurred less
the percentage of such costs that the contract with the relevant contractor or
supplier specifies to be retained and advanced as part of the final
disbursement. No funds will be advanced for materials stored at any Property
unless such materials are properly stored and secured at the applicable Property
in accordance with the Borrowers' customary procedures and sound construction
practices as reasonably determined by Lender. No funds will be advanced for
materials stored at any location other than at the Properties unless Lender
determines in its reasonable discretion that Lender has a perfected first
priority security interest in any such materials.

                                       75


            (iv) The amount of all invoices in connection with the Work with
respect to which a disbursement is requested and which has been approved by
Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers
(in which event, the Borrowers covenant and agree to promptly pay such invoices)
or, if an Event of Default has occurred and is continuing, at Lender's option
and in Lender's sole and absolute discretion, directly to the contractor,
supplier, materialman, mechanic or subcontractor indicated on said invoices
unless already paid by the Borrowers and Lender has received satisfactory
evidence of such payment in which case Lender shall reimburse the Borrowers. All
invoices in connection with disbursements from the Capital Improvement Reserve
shall be classified as requests for payment for items of Capital Improvement (as
opposed to items that, in conformity with GAAP, would be included as Operating
Expenses). If the Borrowers request that any amounts be disbursed directly to
the Borrowers pursuant to the foregoing sentence, the Borrowers shall be
required to deliver evidence reasonably acceptable to Lender of payment of all
invoices for which disbursements were previously made to the Borrowers as a
condition to such requested disbursement.

            (v) No more than two (2) disbursements will be made by Lender from
the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve
in any calendar month, and, if made in accordance herewith or otherwise approved
by Lender, requested disbursements will be made within five (5) Business Days
after the request therefor. Lender shall not be required to make any
disbursement from a Work Reserve with respect to the Property unless such
requested disbursement is in an amount equal to or greater than $25,000 (other
than the final disbursement).

            (vi) Lender reserves the right, at its option and as a condition to
any disbursement from a Work Reserve, to approve (which shall not be
unreasonably withheld, delayed or conditioned) (i) all drawings and plans and
specifications, if any, for any Work which require aggregate payments in amounts
exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan
Amount with respect to the applicable Property or (y) $250,000, and (ii) all
contracts and work orders with materialmen, mechanics, suppliers,
subcontractors, contractors and other parties providing labor or materials in
connection with any Work which require aggregate payments in amounts exceeding
the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with
respect to the applicable Property or (y) $250,000. Upon Lender's reasonable
request, the Borrowers shall assign (to the extent assignable) any drawings,
plans and specifications, contracts or subcontracts to Lender. Drawings, plans
and specifications, contracts and work orders approved by Lender shall not be
changed in any material respect without Lender's prior written consent, which
shall not be unreasonably withheld, delayed or conditioned.

            (vii) The Borrowers shall have delivered a certificate to Lender
from an Architect certifying that the Work has been completed in a good and
workmanlike manner in accordance with all applicable laws for any item in excess
of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount
with respect to the applicable Property or (y) $250,000. Lender may retain its
own architect or engineer ("LENDER'S CONSULTANT") to review any plans and
specifications for any item in excess of the greater of (x) five percent (5%) of
the Aggregate Allocated Loan Amount with respect to the applicable Property or
(y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost
and expense.

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            (viii) The Borrowers shall have delivered to Lender a certificate of
the Borrowers substantially in the form of Exhibit L attached hereto certifying
as to the actual costs which were incurred by the Borrowers to complete such
Work, which costs shall not materially exceed the amount budgeted for such Work
under the CapEx/FF&E Budget then in effect unless approved by Lender, which
shall not be unreasonably withheld, delayed or conditioned (together with
supporting documentation reasonably acceptable to Lender).

            (ix) The Borrowers shall have delivered to Lender all necessary
material certificates, authorizations, permits and licenses which are required
to permit the construction and completion of the Work, as issued by the
appropriate Governmental Authority. The Borrowers, to the full extent permitted
by applicable law, hereby assigns to Lender as additional security for the
payment of the Obligations and the observance and performance by the Borrowers
of the terms, covenants and provisions of the Loan Documents all right, title
and interest which the Borrowers may now have or may hereafter acquire in and to
such certificates, authorizations, permits and licenses.

            (x) Lender may require an inspection of the Property prior to making
a monthly disbursement from the applicable Work Reserve in order to verify
completion of the Work for which disbursement is sought in excess of the greater
of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to
the applicable Property or (y) $250,000. Lender may require that such inspection
be conducted by Lender's Consultant and/or may require a copy of a certificate
of completion by an independent qualified architect or engineer acceptable to
Lender prior to the disbursement of any amounts from the applicable Work
Reserve. The Borrowers shall pay the reasonable out-of-pocket expense of such
inspections as reasonably required hereunder, whether such inspections are
conducted by Lender, Servicer, Lender's Consultant or by an independent
qualified professional.

      (B) PERFORMANCE OF WORK.

            (i) The Borrowers shall complete all Work in a good and workmanlike
manner as soon as practicable following the commencement thereof substantially
in accordance with the applicable budget approved by Lender in accordance with
the terms of this Loan Agreement. The insufficiency of the balance in the
applicable Work Reserve shall not relieve the Borrowers from their obligations
to perform and complete the related Work as herein provided or to fulfill all
other preservation and maintenance covenants in the Loan Documents.

            (ii) If Lender determines in its reasonable discretion that any Work
is not being performed in a workmanlike or timely manner or that any Work has
not been completed in a workmanlike manner, Lender shall have the option to
withhold disbursement for such unsatisfactory work and so notify the Borrowers
with reasonable detail regarding the basis for Lender's dissatisfaction and,
after the expiration of forty-five (45) days from the giving of such notice by
Lender to the Borrowers of such unsatisfactory work without the cure thereof
(or, if such unsatisfactory work is susceptible of a cure but cannot reasonably
be cured within said forty-five (45) day period and provided that the Borrowers
shall have commenced to cure such unsatisfactory work within said forty-five
(45) day period and thereafter diligently and expeditiously proceeds to cure the
same, after the expiration of such longer period as is reasonably necessary for
the Borrowers in the exercise of due diligence to cure such

                                       77


unsatisfactory work, up to a maximum of an additional sixty (60) days, subject
to Force Majeure, without the cure thereof), Lender may proceed under existing
contracts or contract with third parties to complete such Work, as the case may
be, and apply amounts contained in the applicable Work Reserve toward the labor
and materials necessary to complete the same, without providing any additional
prior notice to the Borrowers, and exercise any and all other remedies available
to Lender upon and during the continuance of an Event of Default hereunder.

            (iii) In order to facilitate Lender's completion or making of any
Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right
to enter onto each Property during normal business hours after the expiration of
the notice specified above and perform, subject to the rights of tenants, any
and all work and labor necessary to complete the applicable Work and/or employ
watchmen to protect the Property from damage. All sums so expended by Lender
shall be deemed to have been advanced under the Loan to the Borrowers and
secured by the applicable Mortgage. For this purpose, the Borrowers constitute
and appoint Lender their true and lawful attorney-in-fact with full power of
substitution to complete or undertake the applicable Work in the name of the
Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked. Upon the
occurrence and during the continuance of an Event of Default, the Borrowers
empower said attorney-in-fact as follows: (i) to use any funds in the applicable
Work Reserve for the purpose of making or completing any Work; (ii) to make such
additions, changes and corrections to any Work as shall be reasonably necessary
or desirable to complete the same; (iii) to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for such
purposes; (iv) to pay, settle or compromise all existing bills and claims which
are or may become Liens against any Property, or as may be necessary or
desirable for the completion of any Work, or for clearance of title; (v) to
execute all applications and certificates in the name of the Borrowers which may
be required by any of the contract documents; (vi) in its reasonable discretion,
to prosecute and defend all actions or proceedings in connection with any
Property or the rehabilitation and repair of such Property; and (vii) to do any
and every act which the Borrowers might do in their own behalf to fulfill the
terms of this Loan Agreement.

            (iv) Nothing in this Section shall: (i) make Lender responsible for
making or completing any Work; (ii) require Lender to expend funds in addition
to the amounts on deposit in the applicable Work Reserve to make or complete any
Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to
demand from the Borrowers additional sums to make or complete any Work.

            (v) The Borrowers shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer, architect or
inspector) or third parties performing any Work pursuant to this Section 6.7 to
enter onto any Property during normal business hours upon reasonable notice
(subject to the rights of tenants under their Leases) to inspect the progress of
any Work and all materials being used in connection therewith, to examine all
plans and shop drawings relating thereto which are or may be kept at any
Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The
Borrowers shall use commercially reasonable efforts to cause all contractors and
subcontractors to cooperate with Lender or Lender's representatives or such
other persons described above in connection with inspections described in this
Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B).

                                       78


            (vi) All Work and all materials, equipment, fixtures and any other
item comprising a part thereof shall be constructed, installed or completed, as
applicable, free and clear of all mechanic's, materialman's or other liens
(except for the Permitted Encumbrances).

            (vii) All Work shall comply with all applicable legal requirements
of all Governmental Authorities having jurisdiction over the Properties and
applicable insurance requirements, including, without limitation, applicable
building codes, special use permits, environmental regulations and requirements
of insurance underwriters.

      (C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender
harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations, out-of-pocket costs and expenses
(including, without limitation, litigation costs and reasonable attorneys' fees
and expenses) arising from or in any way connected with the performance of the
Work, except to the extent caused by the bad faith, willful misconduct or gross
negligence of Lender. The Borrowers shall assign to Lender all rights and claims
the Borrowers may have against all Persons supplying labor or materials in
connection with the Work; provided, however, that Lender may not pursue any such
right or claim or pursue any other action with respect to such rights and claims
unless an Event of Default has occurred and remains uncured.

SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the
Obligations in full, a Cash Trap Event shall occur, then for so long as such
Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise
expressly provided below) shall be deposited with Lender (or its Servicer or
agent) and held in the Lock Box Account in accordance with the terms of the Cash
Management Agreement (said funds, together with any interest thereon, the "CASH
TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when
the Debt Yield is less than the Minimum Debt Yield for the trailing twelve (12)
month period ending on such Calculation Date and shall continue to exist until
such time as the Minimum Debt Yield test has been satisfied for three (3)
consecutive Calculation Dates (on a trailing twelve (12) month basis) following
the commencement of the applicable Cash Trap Event. Notwithstanding that the
Debt Yield is less than the Minimum Debt Yield as of any Calculation Date, no
Cash Trap Event shall be deemed to have occurred as a result of such event if
the Borrowers make a principal prepayment of the Aggregate Outstanding Principal
Balance (which prepayment amount shall be disbursed on the next Payment Date in
accordance with the terms of the Cash Management Agreement), within three (3)
Business Days after the date of delivery of the financial statements disclosing
the existence of such Cash Trap Event (or the date on which such financial
statements are required to be delivered pursuant to Section 5.1), in an amount
equal to the greater of (x) one percent (1%) of the Aggregate Outstanding
Principal Balance, or (y) 120% of the amount, as determined by Lender in its
reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the
Minimum Debt Yield if such calculation was recalculated as provided above
assuming that such amount was applied to reduce the Aggregate Outstanding
Principal Balance as of the first day of the relevant measuring period. During
the continuance of a Cash Trap Event, provided that no Event of Default shall
have occurred and be continuing, any funds on deposit in the Cash Trap Reserve
may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be
applied to (i) prepayment of the Aggregate Outstanding Principal Balance as
provided above, (ii) Capital Expenditures reasonably approved by Lender, or
(iii) scheduled payments (not to exceed $525,000 in the aggregate) of principal
and interest

                                       79


under the Loan and the Allocable Portion of the Mezzanine Loan (to be applied in
accordance with the terms of the Cash Management Agreement). Any funds on
deposit in the Cash Trap Reserve shall continue to be held as additional
Collateral in accordance with this Section 6.8 until the earlier of (a) the date
that such funds are applied or disbursed pursuant to the foregoing sentence or
(b) the date that the Minimum Debt Yield test has been satisfied for three (3)
consecutive months (as determined above), at which time, provided no Event of
Default exists, and no Cash Trap Event has commenced, such funds, together with
any and all amounts then held in the Minimum Balance Sub-Account (as defined in
the Cash Management Agreement), shall be automatically released to the Borrowers
without any further certification requirements on the part of the Borrowers. The
existence of a Cash Trap Event shall be determined by Lender in its reasonable
good faith determination. If Lender determines that a Cash Trap Event has
occurred, Lender shall send the Borrowers written notice thereof.
Notwithstanding any provision herein to the contrary, if an Event of Default has
occurred and is continuing, all funds on deposit in the Cash Trap Reserve and
any subsequent Excess Cash Flow, while such Event of Default is continuing, may
be applied by Lender to payment of the Loan (including payment of any Prepayment
Consideration) or other Obligations (or to the obligations of the Mezzanine
Borrowers to Mezzanine Lender) as Lender may elect.

                                   ARTICLE VII
                       DEPOSIT ACCOUNT; LOCK BOX ACCOUNT;
                                 CASH MANAGEMENT

SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT.

      (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more
deposit accounts shall be established at the Borrowers' sole cost and expense in
the name of Lender, as secured party hereunder (said accounts, and any accounts
replacing same in accordance with this Loan Agreement and the Deposit Account
Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial
institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"),
pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT
AGREEMENT") substantially similar to Lender's form or otherwise in form and
substance reasonably acceptable to Lender, executed and delivered by the
Borrowers and the Deposit Bank. The Deposit Account shall be under the sole
dominion and control of Lender (which dominion and control may be exercised by
Servicer). Among other things, the Deposit Account Agreement shall provide that
the Borrowers shall have no access to or control over the Deposit Account, that
all available funds on deposit in the Deposit Account shall be transferred by
wire transfer (or transfer via the ACH System) on each Business Day by the
Deposit Bank into the Lock Box Account, for application in accordance with the
Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall
be directed to deliver to the Borrowers copies of bank statements and other
information made available by the Deposit Bank and the Lock Box Account Bank
concerning the Deposit Account and the Lock Box Account.

            (ii) Upon establishing the Deposit Account, (1) the Borrowers shall
cause any and all Operating Revenues, including distributions or other payments
made directly or indirectly to the Borrowers, Manager, or any of their
respective Affiliates, from any Beverage Company, to be deposited promptly into
the Deposit Account and in no event later than two (2) Business Days after the
same are paid to or for the benefit of the Borrowers, and (2) the Borrowers
shall obtain

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agreements (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from
each of the Persons paying or disbursing credit card receivables (the "CREDIT
CARD COMPANIES"), substantially similar to Lender's form or otherwise in form
and substance reasonably acceptable to Lender, pursuant to which the Credit Card
Companies agree to pay all credit card receivables into the Lock Box Account,
and acknowledge and agree that Lender shall have a first priority perfected
security interest in such credit card receivables. To the extent that the
Borrowers or any Person on the Borrowers' behalf holds any Receipts, whether in
accordance with this Loan Agreement or otherwise, the Borrowers shall be deemed
to hold the same in trust for Lender for the protection of the interests of
Lender hereunder and under the Loan Documents. The Borrowers represent and
warrant that, as of the date hereof, the only Credit Card Companies paying or
disbursing credit card receivables with respect to the Property are Chase
Merchant Services, American Express, Discover Financial Service, Diners Club,
JCB (Japanese Credit Bureau), and, if any of the Borrowers shall hereafter enter
into an agreement with any other Credit Card Company pursuant to which such
Credit Card Company shall pay credit card receivables with respect to the
Properties, such Borrower shall promptly obtain a Credit Card Receivables
Payment Direction Letter in form and substance reasonably acceptable to Lender
from such Credit Card Company.

            (iii) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses incurred by Lender in connection with the transactions and other
matters contemplated by this Section 7.1, including but not limited to, Lender's
reasonable attorneys' fees and expenses, and all reasonable fees and expenses of
the Deposit Bank and the Lock Box Account Bank, including without limitation
their reasonable attorneys' fees and expenses.

      (B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms
of the Cash Management Agreement, an Eligible Account shall be established in
the name of Lender, as secured party hereunder, to serve as the "Lock Box
Account" (said account, and any account replacing the same in accordance with
this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT";
and the depositary institution in which the Lock Box Account is maintained, the
"LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion
and control of Lender (which dominion and control may be exercised by Servicer);
and except as expressly provided hereunder and/or in the Cash Management
Agreement, the Borrowers shall not have the right to control or direct the
investment or payment of funds therein during the continuance of an Event of
Default. Lender may elect to change any financial institution in which the Lock
Box Account shall be maintained if such institution is no longer an Eligible
Bank, upon not less than five (5) Business Days' notice to the Borrower. The
Lock Box Account shall be deemed to contain such sub-accounts as Lender may
designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts
and need not be separate Eligible Accounts. The Sub-Accounts shall include the
following as more particularly described in the Cash Management Agreement:

            (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box
Account established for the purposes of reserving for payments of principal and
interest and other amounts due under the Loan Documents (but without duplication
of amounts covered under item (ii) below); and

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            (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box
Account established for the purpose of holding funds in the Reserves including:
(a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Capital
Improvement Reserve Sub-Account"; (c) the "Hazardous Materials Remediation
Reserve Sub-Account"; (d) the "Extraordinary Receipts Sub-Account" (e) the
"Mezzanine Loan Debt Service Sub-Account"; (f) the "Minimum Balance
Sub-Account"; and (g) "Cash Trap Reserve Sub-Account".

SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box
Account shall be allocated to the Sub-Accounts or the other Accounts (or paid,
as the case may be) in accordance with the Cash Management Agreement.

SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default
shall occur and be continuing, then notwithstanding anything to the contrary in
this Section or elsewhere, Lender shall have all rights and remedies available
under applicable law and under the Loan Documents. Without limitation of the
foregoing, for so long as an Event of Default exists, Lender may apply any and
all funds in the Deposit Account, and/or any Sub-Accounts against all or any
portion of any of the Obligations, in any order.

                                  ARTICLE VIII
                          DEFAULT, RIGHTS AND REMEDIES

SECTION 8.1 EVENT OF DEFAULT.

      "EVENT OF DEFAULT" means the occurrence or existence of any one or more of
the following:

      (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled
payment amount when the same is due under this Loan Agreement, the Note, or any
other Loan Documents (whether such amount is interest, principal, Reserves, or
otherwise), or to pay for any Insurance Policies required pursuant to Section
5.4 hereof; or

      (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time
to time owing under this Loan Agreement, the Note, or any other Loan Documents
(other than amounts subject to the preceding paragraph) within ten (10) days
after written notice to the Borrowers; or

      (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to
perform or comply with any term or condition contained in Section 5.1 which
continues for a period of ten (10) days after written notice to the Borrowers
(except that no notice or grace period shall be granted for any breach under
Section 5.1(H)); or

      (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE
PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19,
5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary
Lien under Section 5.18 or 11.1, the same shall not constitute an Event of
Default if (i) within forty-five (45) days after the filing thereof, the
Borrowers shall either cause the same to be removed of record by payment,
bonding or otherwise, or (ii) same is being contested in good faith in
accordance with Section 5.3(B) hereof); or

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      (E) BREACH OF WARRANTY. Any representation, warranty, certification or
other statement made by any Borrower, Guarantor or Manager in any Loan Document
or in any statement or certificate at any time given in writing pursuant to or
in connection with any Loan Document is false in any material respect as of the
date made; or

      (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the
performance of or compliance with any term contained in this Loan Agreement or
the other Loan Documents and such default is not fully cured within thirty (30)
days after receipt by the Borrowers of written notice from Lender of such
default (other than occurrences described in other provisions of this Section
8.1 for which a different grace or cure period is specified or which constitute
immediate Events of Default); provided however that if (i) the default is
capable of cure but with diligence cannot be cured within such period of thirty
(30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced
the cure within such thirty (30) day period and has pursued such cure
diligently, and (iii) each Borrower delivers to Lender promptly following
written demand (which demand may be made from time to time by Lender) evidence
reasonably satisfactory to Lender of the foregoing, then such period shall be
extended for so long as is reasonably necessary for the Borrowers in the
exercise of due diligence to cure such default, but in no event beyond one
hundred and twenty (120) days after the original notice of default; or

      (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court
enters a decree or order for relief with respect to any Borrower Party, in an
Involuntary Borrower Bankruptcy, which decree or order is not stayed or other
similar relief is not granted under any applicable federal or state law unless
dismissed within ninety (90) days; (ii) the occurrence and continuance of any of
the following events for ninety (90) days unless dismissed or discharged within
such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or
order of a court for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over any Borrower
Party or over all or a substantial part of its property, is entered, or (z) an
interim receiver, trustee or other custodian is appointed without the consent of
any Borrower Party, for all or a substantial part of the property of such
Person; or

      (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for
relief is entered with respect to any Borrower Party, or any Borrower Party
commences a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for any Borrower Party or for all or a substantial part of the
property of any Borrower Party; (ii) any Borrower Party makes any assignment for
the benefit of creditors; or (iii) the Board of Directors or other governing
body of any Borrower Party adopts any resolution or otherwise authorizes action
to approve any of the actions referred to in this subsection 8.1(H); or

      (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as
described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the
Collateral becomes property of the estate or subject to the automatic stay in
any case or proceeding under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect (provided that if the
same occurs in the context of an involuntary proceeding, it shall not

                                       83


constitute an Event of Default if it is dismissed or discharged within ninety
(90) days following its occurrence); or

      (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing
its present or prospective inability to pay its debts as they become due; or

      (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of
attachment, or similar process is entered or filed against any Borrower Party or
any of its assets, which claim is not fully covered by insurance (other than
with respect to the amount of commercially reasonable deductibles permitted
hereunder), would have a Material Adverse Effect and remains undischarged,
unvacated, unbonded or unstayed for a period of forty-five (45) days; or

      (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of their business and such order
continues for more than thirty (30) days; or

      (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Mortgage or any
of the Loan Documents for any reason ceases to be in full force and effect or
ceases to be a legally valid, binding and enforceable obligation of the
Borrowers or any Lien securing the Obligations shall, in whole or in part, cease
to be a perfected first priority Lien, subject to the Permitted Encumbrances
(except in any of the foregoing cases in accordance with the terms hereof or
under any other Loan Document) and the Borrowers do not take all actions
requested by Lender to correct such defect within ten (10) days after the
written request by Lender to take such action, or any Person under the control
of the Borrowers or Guarantor who is a party thereto, other than Lender, denies
that it has any further liability (as distinguished from denial of the existence
of a Default or Event of Default) under any Loan Documents to which it is party,
or gives notice to such effect; or

      (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any
applicable grace periods shall occur under any of the other Loan Documents; or

      (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An
Uncured Franchise Default occurs; (ii) or any breach or default shall occur in
the material obligations of the Borrowers under any of the Management
Agreements, and such breach or default either is of such a nature or continues
for such a period of time beyond applicable notice and cure periods, if any,
that Manager shall have the right to exercise material remedies as a consequence
thereof; or

      (P) GROUND LEASE DEFAULT. Any default by any of the Borrowers beyond any
applicable grace period shall occur under any Ground Lease or any actual or
attempted surrender, termination, modification or amendment of any Ground Lease
without Lender's prior written consent.

            If more than one of the foregoing paragraphs shall describe the same
condition or event, then Lender shall have the right to select which paragraph
or paragraphs shall apply. In any such case, Lender shall have the right (but
not the obligation) to designate the paragraph or

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paragraphs which provide for non-written notice (or for no notice) or for a
shorter time to cure (or for no time to cure).

SECTION 8.2 ACCELERATION AND REMEDIES.

      (A) Upon the occurrence and during the continuance of any Event of Default
described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal
amount of and accrued interest and fees on the Loan and all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
requirements of any kind, all of which are hereby expressly waived by the
Borrowers. Upon and at any time after the occurrence of any other Event of
Default, at the option of Lender, which may be exercised without notice or
demand to anyone, all or any portion of the Loan and other Obligations shall
immediately become due and payable.

      (B) Upon the occurrence and during the continuance of an Event of Default,
all or any one or more of the rights, powers, privileges and other remedies
available to Lender against the Borrowers under this Loan Agreement or any of
the other Loan Documents, or at law or in equity, may be exercised by Lender at
any time and from time to time, whether or not all or any of the Obligations
shall be declared due and payable, and whether or not Lender shall have
commenced any foreclosure proceeding or other action for the enforcement of its
rights and remedies under any of the Loan Documents with respect to the
Properties. Any such actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singly, successively, together or otherwise,
at such time and in such order as Lender may determine in its sole discretion,
to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or
as set forth herein or in the other Loan Documents. Without limiting the
generality of the foregoing, if an Event of Default is continuing (i) to the
fullest extent permitted by law, Lender shall not be subject to any "one action"
or "election of remedies" law or rule, and (ii) all liens and other rights,
remedies or privileges provided to Lender shall remain in full force and effect
until Lender has exhausted all of its remedies against each Property and the
Mortgages have been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Obligations or the Obligations have been paid in full.

      (C) Lender shall have the right from time to time to partially foreclose
the Mortgages in any manner and for any amounts secured by the Mortgages then
due and payable as determined by Lender in its sole discretion including,
without limitation, the following circumstances: (i) in the event the Borrowers
default beyond any applicable grace period in the payment of one or more
scheduled payments of principal and interest, Lender may foreclose the Mortgage
to recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose the Mortgage or any of them to recover so much of the
principal balance of the Loan as Lender may accelerate and such other sums
secured by the Mortgage as Lender may elect. Notwithstanding one or more partial
foreclosures, the Property shall remain subject to the Mortgage to secure
payment of sums secured by the Mortgage and not previously recovered.

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      (D) During the continuance of an Event of Default, Lender shall have the
right from time to time to sever the Note and the other Loan Documents into one
or more separate notes, mortgages and other security documents in such
denominations as Lender shall determine in its sole discretion for purposes of
evidencing and enforcing its rights and remedies provided hereunder. The
Borrowers shall execute and deliver to Lender from time to time, within ten (10)
days after the request of Lender, a severance agreement and such other documents
as Lender shall reasonably request in order to effect the severance described in
the preceding sentence, all in form and substance reasonably satisfactory to
Lender. The Borrowers hereby absolutely and irrevocably appoint Lender as their
true and lawful attorney, coupled with an interest, in their name and stead to
make and execute all documents reasonably necessary to effect the aforesaid
severance if the Borrowers fail to do so within ten (10) days of Lender's
written request, the Borrowers ratifying all that their said attorney shall do
by virtue thereof.

      (E) Any amounts recovered from the Properties or any other collateral for
the Loan after an Event of Default may be applied by Lender toward the payment
of any interest and/or principal of the Loan and/or any other amounts due under
the Loan Documents in such order, priority and proportions as Lender in its sole
discretion shall determine.

      (F) The rights, powers and remedies of Lender under this Loan Agreement
shall be cumulative and not exclusive of any other right, power or remedy which
Lender may have against the Borrowers pursuant to this Loan Agreement or the
other Loan Documents, or existing at law or in equity or otherwise. Lender's
rights, powers and remedies may be pursued singly, concurrently or otherwise, at
such time and in such order as Lender may determine in Lender's sole discretion.
No delay or omission to exercise any remedy, right or power accruing upon an
Event of Default shall impair any such remedy, right or power or shall be
construed as a waiver thereof, but any such remedy, right or power may be
exercised from time to time and as often as may be deemed expedient. A waiver of
one Default or Event of Default with respect to the Borrowers shall not be
construed to be a waiver of any subsequent Default or Event of Default by the
Borrowers or to impair any remedy, right or power consequent thereon.

SECTION 8.3 PERFORMANCE BY LENDER.

      (A) Upon the occurrence and during the continuance of an Event of Default,
if any of the Borrowers shall fail to perform, or cause to be performed, any
material covenant, duty or agreement contained in any of the Loan Documents
(subject to applicable notice and cure periods), Lender may perform or attempt
to perform such covenant, duty or agreement on behalf of the Borrowers including
making protective advances on behalf of any Borrower, or, in its sole
discretion, causing the obligations of any of the Borrowers to be satisfied with
the proceeds of any Reserve. In such event, the Borrowers shall, at the request
of Lender, promptly pay to Lender, or reimburse, as applicable, any of the
Reserves, any actual amount reasonably expended or disbursed by Lender in such
performance or attempted performance, together with interest thereon at the
Default Rate (including reimbursement of any applicable Reserves), from the date
of such expenditure or disbursement, until paid. Any amounts advanced or
expended by Lender to perform or attempt to perform any such matter shall be
added to and included within the indebtedness evidenced by the applicable Note
and shall be secured by all of the Collateral securing the applicable Loan.
Notwithstanding the foregoing, it is expressly agreed that Lender shall not have
any liability or responsibility for the performance of any obligation of the

                                       86


Borrowers under this Loan Agreement or any other Loan Document, and it is
further expressly agreed that no such performance by Lender shall cure any Event
of Default hereunder.

      (B) Lender may cease or suspend any and all performance required of Lender
under the Loan Documents upon and at any time after the occurrence and during
the continuance of any Event of Default.

SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each
Borrower shall provide such documents and instruments as shall be reasonably
satisfactory to Lender to evidence compliance with any material provision of the
Loan Documents applicable to the Borrowers.

                                   ARTICLE IX
               SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,
                            WARRANTIES AND COVENANTS

SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower
Party hereby represents, warrants and covenants as of the Closing Date and until
such time as all Obligations are paid in full, that absent express advance
written waiver from Lender, which may be withheld in Lender's sole discretion,
that such Primary Borrower Party:

      (A) does not own and will not own any assets other than the Properties
(including incidental personal property necessary for the operation thereof and
proceeds therefrom) or direct or indirect ownership interests in the Borrowers,
and other wholly owned subsidiaries of the Primary Borrower Parties established
solely for the purpose of holding liquor licenses with respect to one or more of
the Properties, and with respect to Member, direct or indirect ownership
interests in the Crossed Borrowers as of the date of this Agreement (all of the
foregoing ownership interests being referred to herein, collectively, as the
"OWNERSHIP INTERESTS") or, with respect to each of the Primary Borrower Parties,
such incidental assets as are necessary to enable it to discharge its
obligations with respect to the Borrowers;

      (B) is not engaged and will not engage in any business, directly or
indirectly, other than the ownership, management and operation of the
Properties, the Crossed Properties as of the date of this Agreement, or the
Ownership Interests;

      (C) has not at any time since the SPE Effective Date entered into and will
not enter into any contract or agreement with any partner, member, shareholder,
trustee, beneficiary, principal or Affiliate of any Primary Borrower Party
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms-length basis with third
parties other than such Affiliate (including the Management Agreements);

      (D) has not incurred any debt that remains outstanding as of Closing and
will not incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted
Indebtedness, and (iii) the Mezzanine Loan;

      (E) has not made any loans or advances to any Person that remains
outstanding as of Closing and will not make any loan or advances to any Person
(including any of its Affiliates),

                                       87


and has not acquired and will not acquire obligations or securities (other than
the Ownership Interests) of any of its Affiliates other than the other Borrower
Parties;

      (F) is and reasonably expects to remain solvent and pay its own
liabilities, indebtedness, and obligations of any kind from its own separate
assets as the same shall become due;

      (G) has at all times since the SPE Effective Date done or caused to be
done and will do all things necessary to preserve its existence, and will not,
and no partner, member, shareholder, trustee, beneficiary, or principal will,
further amend, modify or otherwise change, its partnership certificate,
partnership agreement, articles of incorporation, by-laws, articles of
organization, operating agreement, or other organizational documents, as
modified, amended, restated or supplemented as of the date hereof, in any manner
with respect to the matters set forth in this Article IX;

      (H) has at all times since the SPE Effective Date continuously maintained
its existence and has at all times since the SPE Effective Date been qualified
to do business, and shall continue to maintain its existence and be qualified to
do, business in all states necessary to carry on its business, specifically
including in the case of each Borrower, the state where its Property is located;

      (I) has at all times since the SPE Effective Date conducted and operated,
and will conduct and operate its business as presently conducted and operated
and otherwise contemplated with respect to the ownership of its Property, or the
ownership of the Ownership Interests, as applicable;

      (J) has at all times since the SPE Effective Date maintained, and will
maintain books and records and bank accounts (other than bank accounts
established hereunder, or established by Manager with respect to the operations
of the Properties pursuant to the Management Agreement) separate from those of
its partners, members, shareholders, trustees, beneficiaries, principals,
Affiliates, and any other Person and has at all times since the SPE Effective
Date maintained and will maintain separate financial statements except that it
may also be included in consolidated financial statements of its Affiliates;

      (K) has at all times since the SPE Effective Date been and held itself out
to the public as, and will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other Person (including
any of its partners, members, shareholders, trustees, beneficiaries, principals
and Affiliates, and any Affiliates of any of the same), and not as a department
or division of any Person and has at all times since the SPE Effective Date
corrected and will correct any known misunderstandings regarding its existence
as a separate legal entity;

      (L) has at all times since the SPE Effective Date paid, and will pay the
salaries of its own employees, if any;

      (M) has at all times since the SPE Effective Date allocated, and will
allocate fairly and reasonably any overhead for shared office space;

                                       88


      (N) has at all times since the SPE Effective Date used, and will use its
own stationery, invoices and checks;

      (O) has at all times since the SPE Effective Date filed, and will file its
own tax returns with respect to itself (or consolidated tax returns, if
applicable) as may be required under applicable law;

      (P) has at all times since the SPE Effective Date maintained, and
reasonably expects to maintain adequate capital (taken as a whole with all of
the other Borrowers) for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;

      (Q) will not seek, acquiesce in, or suffer or permit its liquidation,
dissolution or winding up, in whole or in part;

      (R) will not enter into any transaction of merger or consolidation, and
will not acquire by purchase or otherwise all or substantially all of the
business or assets of, or any stock or beneficial ownership (other than the
Ownership Interests) of, any Person;

      (S) has not at any time since the SPE Effective Date commingled or
permitted to be commingled, and will not commingle or permit to be commingled,
its funds or other assets with those of any other Person (other than, with
respect to the Borrowers, each other Borrower, or as may be held by Manager, as
agent, for each Borrower pursuant to the terms of the Management Agreement, and
except for funds deposited in the Accounts in accordance with the Loan
Documents);

      (T) has at all times since the SPE Effective Date maintained, and will
maintain its assets in such a manner that it is not costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person;

      (U) does not and will not hold itself out to be responsible for the debts
or obligations (other than the Obligations and the Crossed Indebtedness as of
the date of this Agreement) of any other Person;

      (V) has not guaranteed or otherwise become liable in connection with any
obligation of any other Person that remains outstanding, and will not guarantee
or otherwise become liable on or in connection with any obligation (other than
the Obligations and the Crossed Indebtedness as of the date of this Agreement)
of any other Person that remains outstanding;

      (W) except for funds deposited into the Accounts in accordance with the
Loan Documents, shall not hold title to its assets other than in its name; and

      (X) shall comply with all of the assumptions, statements, certifications,
representations, warranties and covenants regarding or made by it contained in
or appended to the nonconsolidation opinion delivered pursuant hereto.

SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to
their respective obligations under Section 9.1, each Borrower, General Partner
and Member hereby

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represents, warrants and covenants, as of the Closing Date and until such time
as all Obligations are paid and satisfied in full, that absent express advance
written waiver from Lender, which may be withheld in Lender's sole discretion:

      (A) each General Partner shall at all times act as the sole general
partner of each Borrower that is a limited partnership, with all of the rights,
powers, obligations and liabilities thereof under the limited partnership
agreement of such Borrower and shall take any and all actions and do any and all
things necessary or appropriate to the accomplishment of the same and will not
engage in any other business;

      (B) Member shall at all times act as the sole member of each Borrower and
Crossed Borrower as of the date of this Agreement that is a limited liability
company with all of the rights, powers, obligations and liabilities thereof
under the limited liability company operating agreement of such Borrower or
Crossed Borrower and shall take any and all actions and will do any and all
things necessary or appropriate to the accomplishment of the same and will not
engage in any other business;

      (C) each Borrower that is a limited liability company shall not, without
the prior written consent of its Member (including the unanimous written consent
of its Member's board of directors including the Independent Directors or the
unanimous written consent of each of the Borrowers' board of managers including
the Independent Directors), and each Borrower that is a limited partnership
shall not, without the prior written consent of its General Partner (including
the unanimous written consent of General Partner's Independent Directors),
institute proceedings for itself to be adjudicated bankrupt or insolvent;
consent to the institution of bankruptcy or insolvency proceedings against
itself; file a petition seeking, or consent to, reorganization or relief under
any applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) for itself or a substantial part of its property; make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;

      (D) each Borrower that is a corporation shall not, without the prior
unanimous written consent of its board of directors, including its Independent
Directors, institute proceedings for itself to be adjudicated bankrupt or
insolvent; consent to the institution of bankruptcy or insolvency proceedings
against it; file a petition seeking, or consent to, reorganization or relief
under any applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) for itself or a substantial part of its property; make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;

      (E) no Member or any General Partner shall, without the unanimous vote of
its board of directors or board of managers, as the case may be, including, in
each case, its Independent Directors, institute proceedings for itself or any
Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of
a bankruptcy or insolvency proceeding against it or any Borrower; file a
petition seeking, or consent to, reorganization or relief under any applicable
federal or state law relating to bankruptcy; consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) for itself or any Borrower; or a

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substantial part of its or any Borrower's property; make any assignment for the
benefit of creditors; or admit in writing its inability to pay its debts
generally as they become due;

      (F) except as otherwise permitted hereunder, no Member or any General
Partner shall for itself or for any of the Borrowers (i) liquidate or dissolve,
in whole or in part; (ii) consolidate, merge or enter into any form of
consolidation with or into any other Person, nor convey, transfer or lease its
or any Borrower's assets substantially as an entirety to any Person nor permit
any Person to consolidate, merge or enter into any form of consolidation with or
into itself or any Borrower, nor convey, transfer or lease its or any Borrower's
assets substantially as an entirety to any Person; or (iii) amend any provisions
of its or any Borrower's organizational documents containing provisions similar
to those contained in this Article IX; and

      (G) each Member, General Partner and Borrower that is a corporation shall
each promptly elect and at all times maintain at least two (2) Independent
Directors on its board of directors, who shall be selected by such Member,
General Partner or Borrower, as applicable, and be reasonably acceptable to
Lender. Each Borrower that is a single member limited liability company shall
promptly appoint and at all times maintain at least two (2) Independent
Directors on its board of managers, who shall be selected by such Borrower, and
be reasonably acceptable to Lender.

                                    ARTICLE X
                RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS

SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the
right to engage in one or more Secondary Market Transactions with respect to the
Loan, and to structure and restructure all or any part of the Loan, including
without limitation in multiple tranches, as a wraparound loan, or for inclusion
in a REMIC or other Securitization. Without limitation, Lender shall have the
right, at Lender's sole cost (other than each Borrower's internal costs and
expenses and the costs and expenses of the Borrowers' counsel), to cause the
Note and any Mortgage to be split into a first and a second mortgage loan, or
into one or more loans evidenced by multiple notes and secured by multiple
mortgages and/or by ownership interests in any of the Borrowers in whatever
proportion Lender determines, and thereafter to engage in Secondary Market
Transactions with respect to all or any part of the indebtedness and loan
documentation. Each of the Borrower Parties acknowledge that it is the intention
of the parties that all or a portion of the Loan will be securitized and that
all or a portion of the Loan will be rated by one or more Rating Agencies. Each
of the Borrower Parties further acknowledge that additional structural
modifications may be required to satisfy issues raised by any Rating Agencies.
As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale,
assignment, or other transfer of all or any portion of the Obligations or the
Loan Documents or any interest therein to one or more investors, (ii) the sale,
assignment, or other transfer of one or more participation interests in the
Obligations or Loan Documents to one or more investors, (iii) the transfer or
deposit of all or any portion of the Obligations or Loan Documents to or with
one or more trusts or other entities which may sell certificates or other
instruments to investors evidencing an ownership interest in the assets of such
trust or the right to receive income or proceeds therefrom or (iv) any other
Securitization backed in whole or in part by the Loan or any interest therein.

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SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all
reasonable efforts and cooperate reasonably and in good faith with Lender in
effecting any such restructuring or Secondary Market Transactions at Lender's
sole cost (other than, with respect to the first successful Securitization and
any related Secondary Market Transaction only (or if the Loan shall be hereafter
split into multiple loans, the first successful Securitization and any related
Secondary Market Transaction with respect to each of such loans), the Borrowers'
internal costs and expenses and the costs and expenses of the Borrower Parties'
counsel). Notwithstanding the foregoing or anything to the contrary contained in
this Article X, it is acknowledged and agreed that in no event shall Lender be
responsible for payment of any Borrower Party's (or its Affiliate's) internal
costs and expenses in connection with any Secondary Market Transaction. Such
cooperation shall include without limitation, executing and delivering such
reasonable amendments to the Loan Documents and the organizational documents of
each Borrower as Lender or any Interested Party (as defined below) may request,
provided however that, no such amendment shall modify (i) the weighted average
interest rate payable under the Note (or notes); (ii) the stated maturity date
of the Note, (iii) the amortization of the principal amount of the Note, (iv)
any other material economic terms of the Obligations, (v) the non-recourse
provisions of the Loan or (vi) any provision, the effect of which would increase
the Borrowers' obligations or decrease the Borrowers' rights under the Loan
Documents except to a de minimis extent. The Borrower Parties shall not be
required to provide additional collateral to effect any such restructuring or
Secondary Market Transaction after the Closing Date. The Borrower Parties shall
not be required to pay any third party (other than, which respect to the first
successful Securitization and any related Secondary Market Transaction only (or
if the Loan shall be hereafter split into multiple loans, the first successful
Securitization and any related Secondary Market Transaction with respect to each
of such loans), the costs and expenses of the Borrowers' counsel) costs and
expenses incurred by Lender in connection with any such Secondary Market
Transaction unless otherwise expressly payable by the Borrower Parties under
this Loan Agreement or the other Loan Documents.

SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense
(other than, with respect to the first successful Securitization and any related
Secondary Market Transaction only (or if the Loan shall be hereafter split into
multiple loans, the first successful Securitization and any related Secondary
Market Transaction with respect to each of such loans), the Borrowers' internal
costs and expenses and the costs and expenses of the Borrower Parties' counsel),
shall provide such access to personnel and such information and documents
relating to the Borrower Parties, Manager, the Properties and Collateral and the
business and operations of all of the foregoing and such opinions of counsel
(including nonconsolidation opinions) as any Rating Agency may request or as
Lender or any other Interested Party may reasonably request in connection with
any such Secondary Market Transaction including, without limitation, updated
financial information, appraisals, market studies, environmental reviews (Phase
I's and, if appropriate, Phase II's), mold inspection, property condition
reports and other due diligence investigations together with appropriate
verification of such updated information and reports through letters of auditors
and consultants and, as of the closing date of the Secondary Market Transaction,
updated representations and warranties made in the Loan Documents and such
additional representations and warranties as any Rating Agency may request or
any purchaser, transferee, assignee, trustee, servicer or potential investor
(the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED
PARTIES") may reasonably request, to the extent such updated representations and
warranties are true. On or prior to the date of closing of any

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Secondary Market Transaction, the Borrowers, at Lender's cost and expense (other
than with respect to the first successful Securitization and any related
Secondary Market Transaction only (or if the Loan shall be hereafter split into
multiple loans, the first successful Securitization and any related Secondary
Market Transaction with respect to each of such loans), the Borrowers' internal
costs and expenses and the costs and expenses of the Borrowers' counsel), shall,
if required by any Rating Agency or reasonably required by Lender, provide
revisions or "bringdowns" to any opinions delivered at Closing (including
nonconsolidation opinions), or if required by the Rating Agencies, new versions
of such opinions, which opinions shall be consistent in substance with the
opinions covered by the original opinions, addressed to Lender, any trustee
under any Securitization backed in whole or in part by the Loan, any Rating
Agency that assigns a rating to any securities in connection therewith and any
investor purchasing securities therein. Lender shall be permitted to share all
such information with the investment banking firms, Rating Agencies, accounting
firms, law firms, other third party advisory firms, potential investors,
servicers and other service providers and other parties directly involved in any
proposed Secondary Market Transaction. The Borrowers understand that any such
information may be incorporated into any offering circular, prospectus,
prospectus supplement, private placement memorandum or other offering documents
for any Secondary Market Transaction. Lender and the Rating Agencies shall be
entitled to rely upon such information. Without limiting the foregoing, the
Borrowers and Guarantor shall provide in connection with each (i) preliminary
and final private placement memorandum or (ii) a preliminary and final
prospectus or prospectus supplement, as applicable, prepared in connection with
any Secondary Market Transaction (the documents referred to in the foregoing
clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement
reasonably satisfactory to the Borrowers and Guarantor certifying that the
Borrowers and Guarantor have examined such Disclosure Documents specified by
Lender and, that the sections of such Disclosure Document describing the
Borrowers, Guarantor, the Properties and Manager do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they
were made, not materially misleading. The Borrowers and Guarantor shall each
indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates,
directors, employees, agents and each Person, if any, who controls Lender,
Merrill Lynch or any such Affiliate within the meaning of Section 15 of the
Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and
any other placement agent or underwriter with respect to any Securitization or
Secondary Market Transaction from and against any losses, claims, damages and
liabilities that arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Disclosure Document as to
the Borrowers, Guarantor, Manager and the Properties or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated in such information or necessary in order to make the
statements in such information not materially misleading; provided, however, the
Borrowers shall not be required to indemnify Merrill Lynch for any liabilities
arising out of untrue statements or omissions that were identified to Lender in
writing or are set forth in any third party report not prepared by the Borrowers
or their Affiliates unless such reports are caused to be incorrect or misleading
based upon information provided by the Borrowers or their Affiliates. Lender may
publicize the existence of the Obligations in connection with Lender's Secondary
Market Transaction activities or otherwise.

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SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender
may transfer its obligations under this Loan Agreement and under the other Loan
Documents (or may transfer the portion thereof corresponding to the transferred
portion of the Obligations), and thereafter Lender shall be relieved of any
obligations hereunder and under the other Loan Documents arising after the date
of said transfer with respect to the transferred interest. Each transferee
investor shall become a "Lender" hereunder.

                                   ARTICLE XI
      RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES

SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or
a Permitted Assumption expressly permitted under this Article XI, Leases entered
into as permitted hereunder, and pledges in connection with the Mezzanine Loan,
the Borrowers shall not cause or suffer to occur or exist, directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, any
sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted
Encumbrances) of (i) all or any part of any Property or any interest therein, or
(ii) any direct or indirect ownership or beneficial interest in any Borrower
(other than to Mezzanine Lender), irrespective of the number of tiers of
ownership, without Lender's consent.

SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following
voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges
(each, a "TRANSFER") of a direct, indirect or beneficial interest in any
Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP
INTEREST TRANSFERS"):

      (A) A Transfer of no more than forty-nine percent (49%) of the direct or
indirect ownership interests in such Borrower (in the aggregate), provided that,
following such Transfer, Guarantor maintains control of such Borrower.

      (B) A Transfer or a series of Transfers that result in the proposed
transferee, together with Affiliates of such transferee, owning in the aggregate
(directly or indirectly) more than forty-nine percent (49%) of the economic and
beneficial interests in such Borrower (where, prior to such Transfer, such
proposed transferee and its Affiliates owned in the aggregate (directly or
indirectly) forty-nine percent (49%) or less of such interests in that
Borrower); and, provided that such Transfer shall not be a Permitted Ownership
Interest Transfer unless Lender receives, prior to such Transfer, both (x)
evidence reasonably satisfactory to Lender (which shall include a legal
non-consolidation opinion reasonably acceptable to Lender and the Rating
Agencies) that the single purpose nature and bankruptcy remoteness of such
Borrower (and its members and general partners, as applicable) following such
Transfer or Transfers will be the same as prior to such Transfer or Transfers
and (y) a Rating Agency Confirmation.

      (C) For so long as Guarantor's (or its successor's) stock is traded
through the "over-the-counter market" or through any recognized stock exchange,
any Transfer of all or any portion of the issued and outstanding capital stock
of Guarantor, or the issuance of additional capital stock of Guarantor
(including common or preferred shares) through the "over-the-counter market" or
through any recognized stock exchange.

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      (D) The pledge of ownership interests granted by the Mezzanine Borrowers
pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan
Agreement).

      For purposes of this Section 11.2, "control" shall have the meaning given
thereto in the definition of "Affiliate" in Section 1.1 and a "change of
control" of any Person shall include the Transfer of legal or equitable
ownership interests in such Person which after giving effect to such Transfer
results in any transferee or pledgee of such interests holding more than a 49%
legal or equitable ownership interest or security interest in such Person.

SECTION 11.3 ASSUMABILITY.

      (A) The Borrowers shall have the right to request that Lender consent to
(i) a transfer of all of the Properties to another Person (the "TRANSFEREE
BORROWER") and the assumption by the Transferee Borrower of all of the
Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor
with new guarantors and indemnitors who shall assume all of the obligations of
the Guarantors arising from and after such date and release of the Borrowers and
Guarantor from obligations arising from and after such date and (iii) the
replacement of the Mezzanine Borrowers with pledgors of the ownership interests
in the Transferee Borrower (collectively, an "ASSUMPTION"), subject to the
conditions set forth in paragraphs (B) and (C) of this Section. Together with
such written application, the Borrowers will pay to Lender a review fee of
$10,000. The Borrowers also shall pay on demand all of the reasonable
out-of-pocket costs and expenses incurred by Lender, including reasonable
attorneys' fees and expenses, and the fees and expenses of the Rating Agencies,
if any, and other outside entities, in connection with considering any proposed
Assumption, whether or not the same is permitted or occurs.

      (B) Lender shall not withhold its consent to an Assumption (any such
Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon
the conditions that:

            (i) No Event of Default shall have occurred and be continuing at the
time of such Assumption;

            (ii) The Borrowers shall have submitted to Lender true, correct and
complete copies of any and all information and documents reasonably requested by
Lender concerning the Transferee Borrower, replacement guarantors and
indemnitors and all of such information and documents shall be reasonably
acceptable to Lender;

            (iii) Evidence reasonably satisfactory to Lender shall have been
provided showing that the Transferee Borrower and such of its Affiliates as
shall reasonably be designated by Lender comply and will comply with Article IX,
as those provisions may be modified by Lender taking into account the ownership
structure of Transferee Borrower and its Affiliates;

            (iv) The Borrowers shall have obtained (and delivered to Lender) a
Rating Confirmation with respect to the Assumption, the Transferee Borrower, the
new guarantors and indemnitors and all related transactions;

            (v) The Borrowers shall have paid all of Lender's reasonable
out-of-pocket costs and expenses in connection with considering the Assumption,
and shall have paid the

                                       95


amount reasonably requested by Lender as a deposit against Lender's reasonable
costs and expenses in connection with effecting the Assumption;

            (vi) The Borrowers, the Transferee Borrower, and the replacement
guarantors and indemnitors shall have indicated in writing in form and substance
reasonably satisfactory to Lender their readiness and ability to satisfy the
conditions set forth in Subsection (C) below;

            (vii) (a) The Transferee Borrower shall be a Permitted Transferee or
(b) the identity, experience and financial condition of the Transferee Borrower
shall otherwise be satisfactory to Lender in its reasonable discretion; and

            (viii) The identity and financial condition of the replacement
guarantors and indemnitors shall be satisfactory to Lender.

      (C) If Lender consents to the proposed Assumption, the Transferee Borrower
and/or Borrowers, as the case may be, shall promptly and as a condition to the
Assumption deliver the following to Lender:

            (i) The Borrowers, the Transferee Borrower, the original and
replacement guarantors and indemnitors shall execute and deliver any and all
documents reasonably required by Lender to evidence the Transfer and Assumption
of the Loan, in form and substance reasonably required by Lender and similar to
those received at Closing;

            (ii) Counsel to the Transferee Borrower and replacement guarantors
and indemnitors shall deliver to Lender opinions in form and substance
reasonably satisfactory to Lender as to such matters as Lender shall reasonably
require in connection with such Assumption, which may include opinions as to
substantially the same matters as were required in connection with the
origination of the Loan including, without limitation, a bankruptcy
non-consolidation opinion;

            (iii) The Borrowers shall cause to be delivered to Lender, an
endorsement (relating to the change in the identity of the Borrowers and
execution and delivery of the Assumption documents) to Lender's policy of title
insurance in form and substance acceptable to Lender, in Lender's reasonable
discretion; and

            (iv) The Borrowers shall deliver to Lender a payment in the amount
of all remaining unpaid reasonable costs incurred by Lender in connection with
the Transfer and Assumption, including but not limited to Lender's reasonable
attorneys' fees and expenses, all recording fees, and all fees payable to the
title company in connection with the Transfer and Assumption.

SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may
obtain the release (each, a "RELEASE") of one or more Properties from the Lien
of the applicable Mortgage(s) in connection with a partial or total defeasance
of the Loan subject to the conditions of the Note and subject to the
satisfaction of the following conditions:

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      (A) Lender shall have received from the Borrowers at least fifteen (15)
days prior written notice of the date proposed for such release (the "RELEASE
DATE") which notice is revocable;

      (B) No Event of Default shall have occurred and be continuing as of the
date of such notice and the Release Date;

      (C) On the date proposed for such Release, the Borrowers shall defease all
or a portion of the Loan by delivering a Defeasance Deposit (as defined in the
Note) in an amount necessary to pay all Scheduled Defeasance Payments (as
defined in the Note) for the entire principal amount of the Loan in the case of
a total defeasance, or in the case of a partial defeasance, relating to the
Release Price of each Property being released (together with all accrued and
unpaid interest on the principal amount being so defeased), and such defeasance
shall be undertaken in accordance with the terms and conditions of the Note, and
Mezzanine Lender shall have received all amounts required to be paid to it in
connection with such Release under the Mezzanine Loan Documents;

      (D) If required by any Rating Agency, the Borrowers at their sole cost and
expense, in connection with any partial defeasance, shall have delivered to
Lender, one or more endorsements to the Title Policies delivered to Lender on
the date hereof in connection with the Mortgages insuring that, after giving
effect to such Release, (i) the Liens created hereby and thereby and insured
under the Title Policies are first priority Liens on the respective remaining
Properties subject only to the Permitted Encumbrances applicable to the
remaining Properties and (ii) that the Title Policies remain in full force and
effect and unaffected by such Release;

      (E) Immediately following any Release in connection with any partial
defeasance, both the Debt Service Coverage Ratio and the Debt Yield (based upon
a trailing twelve (12) month period) shall be equal to or greater than the Debt
Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12)
month period) in effect at Closing, or immediately prior to the Release,
whichever is greater;

      (F) Notwithstanding the foregoing, the Borrowers may not obtain the
Release under this Section 11.4 of any Property or Properties which
individually, or in the aggregate (with all Releases since the Closing Date),
have an aggregate Allocated Loan Amount of more than thirty percent (30%) of the
original principal balance of the Loan except pursuant to a total defeasance;

      (G) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses (including, without limitation, title search costs and endorsement
premiums and reasonable attorney's fees and disbursements) incurred by Lender,
Servicer, and any custodian employed by Lender or Servicer, in connection with
the Release; and

      (H) Immediately following such Property Release, each released Property
will be owned by a Person other than the Borrowers, except as otherwise
permitted in connection with any full or partial defeasance of the Loan in
accordance with the terms and conditions of the Note.

Upon satisfaction of the above conditions, Lender shall effectuate the following
(hereinafter referred to as a "PROPERTY RELEASE"): the security interest of
Lender under the Mortgage and

                                       97


other Loan Documents relating to each released Property shall be released and
Lender will execute and deliver any agreements reasonably requested by the
Borrowers to release and terminate or reassign, at the Borrowers' option, the
Mortgage, the applicable Assignment of Leases, and financing statements as to
each released Property; provided, that such release and termination or
reassignment shall be without recourse to Lender and without any representation
or warranty except that Lender shall be deemed to have represented that such
release and termination or reassignment has been duly authorized and that it has
not assigned or encumbered the Mortgage or the other Loan Documents relating to
any released Property (except as contemplated hereby) and Lender shall return
the originals of any Loan Documents that relate solely to each released Property
to the Borrowers; provided, further, that upon the release and termination or
reassignment of Lender's security interest in the Mortgage relating to a
released Property all references herein to the Mortgage relating to such
released Property shall be deemed deleted, except as otherwise provided herein
with respect to indemnities. In addition, promptly after consummation of any
such Property Release and Lender's receipt of the Defeasance Collateral, any and
all Reserves designated as applicable to each released Property held by or on
behalf of Lender shall be returned to the Borrowers.

SECTION 11.5 RESERVED.

SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the
contrary contained herein, provided no Event of Default exists, the Borrowers
may Transfer or dispose of building equipment which is being replaced or which
is no longer necessary in connection with the operation of the Property free
from the lien of the Mortgage, provided that such transfer or disposal will not
have a Material Adverse Effect on the value of any individual Property or on the
Properties taken as a whole, will not materially impair the utility of any
individual Property or the Properties, taken as a whole, and will not result in
a reduction or abatement of, or right of offset against, the Rents payable under
any Lease, in either case as a result thereof, and provided further that any new
building equipment acquired by the Borrowers (and not so disposed of) shall be
subject to the lien of the Mortgage. Lender shall, from time to time, upon the
reasonable request of any Borrower, execute a written instrument in form
reasonably satisfactory to Lender to confirm that such building equipment which
is to be, or has been, sold or disposed of is free from the lien of the
Mortgage.

SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of
Default exists, the Borrowers may, without the consent of Lender, (i) make
immaterial Transfers of portions of the any Property to Governmental Authorities
for dedication for public use, and (ii) grant easements, restrictions,
covenants, reservations and rights of way with respect to any Property in the
ordinary course of business for access, water and sewer lines, telephone and
telegraph lines, electric lines or other utilities or for other similar
purposes, provided that no such transfer, conveyance or encumbrance set forth in
the foregoing clauses (i) and (ii) shall materially impair the utility and
operation of such Property or have a Material Adverse Effect on the value of
such Property taken as a whole. In connection with any Transfer permitted
pursuant to this Section 11.7, Lender shall execute and deliver any instrument
reasonably necessary or appropriate, in the case of the Transfers referred to in
clause (i) above, to release the portion of such Property affected by such
transfer from the lien of the applicable Mortgage or to subordinate the
applicable Mortgage to any such easement, restriction, covenant, reservation or
right of way within ten (10) days of Lender's receipt of the following:

                                       98


      (A) Ten (10) days prior written notice thereof.

      (B) A copy of the instrument or instruments of transfer.

      (C) An officer's certificate given by the Borrowers stating that such
transfer does not materially impair the utility and operation of the Property,
materially reduce the value of the Property or have a Material Adverse Effect.

      (D) Reimbursement of all of Lender's reasonable, out-of-pocket costs and
expenses incurred in connection with such Transfer.

                                   ARTICLE XII
                        RECOURSE; LIMITATIONS ON RECOURSE

SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article,
and notwithstanding any provision of the Loan Documents other than this Article,
the personal liability of the Borrowers to pay any and all Obligations including
but not limited to the principal of and interest on the debt evidenced by the
Note and any other agreement evidencing the Borrowers' obligations under the
Note shall be limited to (i) the Properties, (ii) the rents, profits, issues,
products and income of the Properties, and (iii) any other Collateral.

Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages
or any of the Loan Documents, Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Obligations secured by the Mortgages or to require that all collateral shall
continue to secure all of the Obligations owing to Lender in accordance with the
Loan Documents.

SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the
Borrowers (but not their members, partners (other than the General Partners),
employees, shareholders agents, directors or officers (the "EXCULPATED
PARTIES")) and Guarantor shall be personally liable to the extent of any
liability, loss, damage, cost or expense (including, without limitation,
reasonable attorneys' fees and expenses) suffered or incurred by Lender
resulting from any and all of the following: (i) fraud of any of the Borrower
Parties or their agents or employees; (ii) any material misrepresentation made
by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan
Document; (iii) insurance proceeds, condemnation awards, or other sums or
payments attributable to the Properties which are not applied in accordance with
the provisions of the Loan Documents; (iv) all rents, profits, issues, products
and income of the Properties received or collected by or on behalf of the
Borrowers or any Borrower Party or Manager and not deposited into the Deposit
Account in accordance with Article VII and the Cash Management Agreement; (v)
failure to turn over to Lender, after an Event of Default, or misappropriation
of any tenant security deposits or rents collected in advance (other than by
Lender or Servicer); (vi) failure to notify Lender of any change in the
principal place of business address of the Borrowers or of any change in the
name of any of the Borrowers or if any of the Borrowers takes any other action
which could make the information set forth in the Financing Statements relating
to the Loan materially misleading; (vii) failure by the Borrowers, or any
indemnitor or guarantor to comply with the covenants, obligations, liabilities,
warranties and

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representations contained in the Environmental Indemnity or otherwise pertaining
to environmental matters; (viii) material waste with respect to any of the
Properties; (ix) all liabilities and expenses under the indemnification
provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) any
material uncured default under Article IX; and (xii) any distributions made in
violation of Section 5.28 (to the extent of any such distribution) including
amounts improperly paid or distributed, directly or indirectly, by Manager in
circumvention of such restrictions. Notwithstanding the preceding sentence or
Section 12.1, the Loan shall be fully recourse to the Borrowers and Guarantor
upon the happening of any of the following: (i) any Borrower Party's defense of
any efforts by Lender to collect or enforce the Obligations following maturity
of the Loan or acceleration of the Loan on account of an Event of Default under
Section 8.1(A), or any other defense of any efforts by Lender to collect or
enforce the Obligations without a good faith basis following any other Event of
Default, and (ii) any condition or event described in any of Subsections 8.1(G),
8.1(H), or 8.1(I) (except that the Borrowers and Guarantor shall not be liable
under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy
unless such involuntary proceeding is solicited, procured, consented to or
acquiesced in by any Borrower, Guarantor or any Affiliate of either of them or
any Involuntary Borrower Bankruptcy caused by Mezzanine Lender following the
exercise by Mezzanine Lender of its rights under the Mezzanine Loan Documents).

SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the
enforcement of the Environmental Indemnity, the Guaranty or any guaranty or
similar agreement executed in connection with the Loan, (ii) release or reduce
the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or
any other security document, (iv) impair the rights of Lender to enforce any
provisions of the Loan Documents, or (v) limit Lender's ability to obtain a
deficiency judgment or judgment on the Note or otherwise against any Borrower
Party but not any Exculpated Party to the extent necessary to obtain any amount
for which such Borrower Party may be liable in accordance with this Article or
any other Loan Document.

                                  ARTICLE XIII
                 WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES

SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article,
a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or
for any other Borrower Party or Affiliate or to have rights or obligations in
the nature of the rights or obligations of a guarantor or surety (whether by
reason of execution of a guaranty, provision of security for the obligations of
another, or otherwise) then this Article shall apply. This Article shall not
affect the rights of the Waiving Party other than to waive or limit rights and
defenses that Waiving Party would have (i) in its capacity as a guarantor or
surety or (ii) in its capacity as one having rights or obligations in the nature
of a guarantor or surety.

      Waiving Party hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of receivership or bankruptcy of any
of the other Borrower Parties, protest or notice with respect to any of the
obligations of any of the other Borrower Parties, setoffs and counterclaims and
all presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance, the benefits
of all statutes of limitation, and all other demands whatsoever (and shall not
require that the same be made on any of the other Borrower Parties as a
condition precedent to the

                                      100


obligations of Waiving Party), and covenants that the Loan Documents will not be
discharged, except by complete payment and performance of the obligations
evidenced and secured thereby, except only as limited by the express contractual
provisions of the Loan Documents. Waiving Party further waives all notices that
the principal amount, or any portion thereof, and/or any interest on any
instrument or document evidencing all or any part of the obligations of any of
the other Borrower Parties to Lender is due, notices of any and all proceedings
to collect from any of the other Borrower Parties or any endorser or any other
guarantor of all or any part of their obligations, or from any other person or
entity, and, to the extent permitted by law, notices of exchange, sale,
surrender or other handling of any security or collateral given to Lender to
secure payment of all or any part of the obligations of any of the other
Borrower Parties.

      Except only to the extent provided otherwise in the express contractual
provisions of the Loan Documents, Waiving Party hereby agrees that all of its
obligations under the Loan Documents shall remain in full force and effect,
without defense, offset or counterclaim of any kind, notwithstanding that any
right of Waiving Party against any of the other Borrower Parties or defense of
Waiving Party against Lender may be impaired, destroyed, or otherwise affected
by reason of any action or inaction on the part of Lender. Waiving Party waives
all rights and defenses arising out of an election of remedies by the Lender,
even though that election of remedies, may have destroyed the Waiving Party's
rights of subrogation and reimbursement against the other Borrower Parties.

      Lender is hereby authorized, without notice or demand, from time to time,
(a) to renew, extend, accelerate or otherwise change the time for payment of, or
other terms relating to, all or any part of the obligations of any of the other
Borrower Parties; (b) to accept partial payments on all or any part of the
obligations of any of the other Borrower Parties; (c) to take and hold security
or collateral for the payment of all or any part of the obligations of any of
the other Borrower Parties; (d) to exchange, enforce, waive and release any such
security or collateral for such obligations; (e) to apply such security or
collateral and direct the order or manner of sale thereof as in its discretion
it may determine; (f) to settle, release, exchange, enforce, waive, compromise
or collect or otherwise liquidate all or any part of such obligations and any
security or collateral for such obligations. Any of the foregoing may be done in
any manner, and Waiving Party agrees that the same shall not affect or impair
the obligations of Waiving Party under the Loan Documents.

      Waiving Party hereby assumes responsibility for keeping itself informed of
the financial condition of all of the other Borrower Parties and any and all
endorsers and/or other guarantors of all or any part of the obligations of the
other Borrower Parties, and of all other circumstances bearing upon the risk of
nonpayment of such obligations, and Waiving Party hereby agrees that Lender
shall have no duty to advise Waiving Party of information known to it regarding
such condition or any such circumstances.

      Waiving Party agrees that neither Lender nor any person or entity acting
for or on behalf of Lender shall be under any obligation to marshal any assets
in favor of Waiving Party or against or in payment of any or all of the
obligations secured hereby. Waiving Party further agrees that, to the extent
that any of the other Borrower Parties or any other guarantor of all or any part
of the obligations of the other Borrower Parties makes a payment or payments to
Lender, or Lender receives any proceeds of collateral for any of the obligations
of the other

                                      101


Borrower Parties, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid or refunded, then, to the extent of such payment or
repayment, the part of such obligations which has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the time immediately preceding such initial payment, reduction or
satisfaction.

      Waiving Party (i) shall have no right of subrogation with respect to the
obligations of the other Borrower Parties; (ii) waives any right to enforce any
remedy that Lender now has or may hereafter have against any of the other
Borrower Parties any endorser or any guarantor of all or any part of such
obligations or any other person; and (iii) waives any benefit of, and any right
to participate in, any security or collateral given to Lender to secure the
payment or performance of all or any part of such obligations or any other
liability of the other parties to Lender.

      Waiving Party agrees that any and all claims that it may have against any
of the other Borrower Parties, any endorser or any other guarantor of all or any
part of the obligations of the other Borrower Parties, or against any of their
respective properties, shall be subordinate and subject in right of payment to
the prior payment in full of all obligations secured hereby. Notwithstanding any
right of any of the Waiving Party to ask, demand, sue for, take or receive any
payment from the other Borrower Parties, all rights, liens and security
interests of Waiving Party, whether now or hereafter arising and howsoever
existing, in any assets of any of the other Borrower Parties (whether
constituting part of the security or collateral given to Lender to secure
payment of all or any part of the obligations of the other Borrower Parties or
otherwise) shall be and hereby are subordinated to the rights of Lender in those
assets.

                                   ARTICLE XIV
                                  MISCELLANEOUS

SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions
contemplated hereby shall be consummated, the Borrowers agree to promptly pay
all reasonable fees, costs and expenses incurred by Lender in connection with
any matters contemplated by or arising out of this Loan Agreement, including the
following, and all such fees, costs and expenses shall be part of the
Obligations, payable on demand: (A) reasonable fees, costs and expenses
(including reasonable attorneys' fees, and other professionals retained by
Lender) incurred in connection with the examination, review, due diligence
investigation, documentation and closing of the financing arrangements evidenced
by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and
expenses (including reasonable attorneys' fees and other professionals retained
by Lender) incurred in connection with the administration of the Loan Documents
and the Loan and any amendments, modifications and waivers relating thereto; (C)
subject to Section 10.2, reasonable fees, costs and expenses (including
reasonable attorneys' fees) incurred in connection with the review,
documentation, negotiation, closing and administration of any subordination or
intercreditor agreements; and (D) reasonable fees, costs and expenses (including
reasonable attorneys' fees and fees of other professionals retained by Lender)
incurred in any action to enforce or interpret this Loan Agreement or the other
Loan Documents or to collect any payments due from the Borrowers under this Loan
Agreement, the Note or any other Loan Document or incurred in connection with
any refinancing or restructuring of the credit arrangements provided under this
Loan Agreement, whether in the nature of a "workout" or in connection with any
insolvency or bankruptcy proceedings or otherwise. Any costs and

                                      102


expenses due and payable to Lender after the Closing Date may be paid to Lender
pursuant to the Cash Management Agreement.

SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required
elsewhere herein, whether or not the transactions contemplated hereby shall be
consummated, the Borrowers agree to indemnify, defend, protect, pay and hold
Lender, Servicer and their successors and assigns (including, without
limitation, the trustee and/or the trust under any trust agreement executed in
connection with any Securitization backed in whole or in part by the Loan and
any other Person which may hereafter be the holder of the Note or any interest
therein), and the officers, directors, stockholders, partners, members,
employees, agents, Affiliates and attorneys of Lender and such successors and
assigns (collectively called the "INDEMNITEES") harmless from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable
costs, expenses and disbursements of any kind or nature whatsoever (including
the reasonable fees and disbursements of outside counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that are imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of (A) the negotiation,
execution, delivery, performance, administration, ownership, or enforcement of
any of the Loan Documents; (B) any of the transactions contemplated by the Loan
Documents; (C) any breach by the Borrowers of any material representation,
warranty, covenant, or other agreement contained in any of the Loan Documents;
(D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any
third party arising out of any condition or occurrence at or pertaining to the
Properties; (F) any design, construction, operation, repair, maintenance, use,
non-use or condition of the Properties or Improvements, including claims or
penalties arising from violation of any applicable laws or insurance
requirements, as well as any claim based on any patent or latent defect, whether
or not discoverable by Lender; (G) any performance of any labor or services or
the furnishing of any materials or other property in respect of the Properties
or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I)
any obligation or undertaking relating to the performance or discharge of any of
the terms, covenants and conditions of the landlord contained in the Leases; or
(J) the use or intended use of the proceeds of any of the Loan (the foregoing
liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES");
provided that the Borrowers shall not have an obligation to an Indemnitee
hereunder with respect to Indemnified Liabilities arising from the fraud, gross
negligence or willful misconduct of such Indemnitee as determined by a court of
competent jurisdiction. The obligations and liabilities of the Borrowers under
this Section 14.2 shall survive the term of the Loan and the exercise by Lender
of any of its rights or remedies under the Loan Documents, including the
acquisition of the Properties by foreclosure or a conveyance in lieu of
foreclosure.

SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
amendment, modification, termination or waiver of any provision of this Loan
Agreement, the Note or any other Loan Document, or consent to any departure
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender and any other party to be charged. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on the Borrowers in any case shall entitle the Borrowers or other Person
to any other or further notice or demand in similar or other circumstances.

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SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance
with Lender's customary practices, destroy or otherwise dispose of all
documents, schedules, invoices or other papers, delivered by the Borrowers to
Lender (other than the Note) unless the Borrowers request in writing that same
be returned. Upon such request and at the Borrowers' expense, Lender shall
return such papers when Lender's actual or anticipated need for same has
terminated.

SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice
or other communication required or permitted to be given shall be in writing and
addressed to the respective party as set forth below. Notices shall be effective
(i) three (3) days after the date such notice is mailed, (ii) on the next
Business Day if sent by a nationally recognized overnight courier service, (iii)
on the date of delivery by personal delivery and (iv) on the date of
transmission if sent by telefax during business hours on a Business Day
(otherwise on the next Business Day).

Notices shall be addressed as follows:

If to the Borrowers or any Borrower Party:

c/o Lodgian
3445 Peachtree Road NE
Suite 700
Atlanta, Georgia 30326
Attention: General Counsel
Facsimile: (404) 364-0088

With a copy to:

Morris, Manning & Martin, LLP
3343 Peachtree Rd., NE
1600 Atlanta Financial Center
Atlanta, Georgia 30326
Attention: Thomas Gryboski, Esq.
Facsimile: (404) 365-9532

If to Lender:

Merrill Lynch Mortgage Lending, Inc.
Four World Financial Center
New York, New York 10080
Attention: Robert Spinna
Facsimile: (212) 449-7684

                                      104


With a copy to:

Sidley Austin Brown & Wood LLP
787 Seventh Avenue
New York, New York 10019
Attn: Robert L. Boyd, Esq.
Facsimile: (212) 839-5599

Any party may change the address at which it is to receive notices to another
address in the United States at which business is conducted (and not a
post-office box or other similar receptacle), by giving notice of such change of
address in accordance with the foregoing. This provision shall not invalidate or
impose additional requirements for the delivery or effectiveness of any notice
(i) given in accordance with applicable statutes or rules of court, or (ii) by
service of process in accordance with applicable law. If there is any assignment
or transfer of Lender's interest in the Loan, then the new Lenders may give
notice to the parties in accordance with this Section, specifying the addresses
at which the new Lenders shall receive notice, and they shall be entitled to
notice at such address in accordance with this Section.

SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Loan Agreement, the making of the Loan hereunder and the
execution and delivery of the Note. Notwithstanding anything in this Loan
Agreement or implied by law to the contrary, the agreements of the Borrowers to
indemnify or release Lender or Persons related to Lender, or to pay Lender's
costs, expenses, or taxes shall survive the payment of the Loan and the
termination of this Loan Agreement.

SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of Lender in the exercise of any power, right or privilege
hereunder or under the Note or any other Loan Document shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Loan Agreement,
the Note and the other Loan Documents are cumulative to, and not exclusive of,
any rights or remedies otherwise available.

SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any
obligation to marshal any assets in favor of any Person or against or in payment
of any or all of the Obligations. To the extent that any Person makes a payment
or payments to Lender, or Lender enforces its remedies or exercises its rights
of set off, and such payment or payments or the proceeds of such enforcement or
set off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
if any, and rights and remedies therefor, shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or set
off had not occurred.

                                      105


SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Loan Agreement, the
Note or other Loan Documents shall not affect or impair the validity, legality
or enforceability of the remaining provisions or obligations under this Loan
Agreement, the Note or other Loan Documents or of such provision or obligation
in any other jurisdiction.

SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Loan Agreement for any other purpose or be given any substantive
effect.

SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE
STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND
THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED
PURSUANT TO EACH MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE
LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE
SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER.

SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns except that the Borrowers may not assign their rights or obligations
hereunder or under any of the other Loan Documents except as expressly provided
in Article XI.

SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY
RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties,
represent, warrant and acknowledge that (i) they are sophisticated real estate
investors, familiar with transactions of this kind, and (ii) they have entered
into this Loan Agreement and the other Loan Documents after conducting their own
assessment of the alternatives available to them in the market, and after
lengthy negotiations in which they have been represented by legal counsel of
their choice. The Borrowers, on behalf of themselves and all Borrower Parties,
also acknowledge and agree that the rights of Lender under this Loan Agreement
and the other Loan Documents are reasonable and appropriate, taking into
consideration all of the facts and circumstances including without limitation
the quantity of the Loan, the nature of the Properties, and the risks incurred
by Lender in this transaction. No provision in this Loan Agreement or in any of
the other Loan Documents

                                      106


and no course of dealing between the parties shall be deemed to create (i) any
partnership or joint venture between Lender and the Borrowers or any other
Person, or (ii) any fiduciary or similar duty by Lender to the Borrowers or any
other Person. The relationship between Lender and the Borrowers is exclusively
the relationship of a creditor and a debtor, and all relationships between
Lender and any other Borrower are ancillary to such creditor/debtor
relationship.

SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any
consent, approval, determination or other action by Lender is, pursuant to the
Loan Documents or applicable law, required to be done reasonably or required not
to be unreasonably withheld, then Lender's action shall be presumed to be
reasonable, and the Borrowers shall bear the burden of proof of showing that the
same was not reasonable. In the event that a claim or adjudication is made that
Lender or its agents have acted unreasonably or unreasonably delayed acting in
any case where, by law or under this Loan Agreement or the other Loan Documents,
Lender or such agent, as the case may be, has an obligation to act reasonably or
promptly, neither Lender nor its agents shall be liable for any monetary
damages, and the Borrowers' sole remedy shall be limited to commencing an action
seeking injunctive relief or declaratory judgment. Any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.

SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate,
officer, director, employee, attorney, or agent of Lender, shall have any
liability with respect to, and each of the Borrowers hereby waives, releases,
and agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by the Borrower
Parties in connection with, arising out of, or in any way related to, this Loan
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Loan Agreement or any of the other Loan Documents, other
than the gross negligence or willful misconduct of Lender. Each of the Borrowers
hereby waives, releases, and agrees not to sue Lender or any of Lender's
Affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Loan Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Loan Agreement or any of the
transactions contemplated hereby, except to the extent the same is caused by the
gross negligence or willful misconduct of Lender.

SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to any of the Borrowers or Affiliates thereof, or any other Person.

SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other
Loan Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties to the Loan
Documents.

SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and
Lender acknowledge that each of them has had the benefit of legal counsel of its
own choice and has

                                      107


been afforded an opportunity to review this Loan Agreement and the other Loan
Documents with its legal counsel and that this Loan Agreement and the other Loan
Documents shall be construed as if jointly drafted by the Borrowers and Lender.
If any term, condition or provision of this Loan Agreement shall be inconsistent
with any term, condition or provision of any other Loan Document, then this Loan
Agreement shall control.

SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS
LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN
SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.

SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR
ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT
MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS
BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND
OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF
ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS
ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND
LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE

                                      108


MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN
AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.

SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan
Documents and any amendments or supplements thereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which counterparts together shall constitute but one and the same
instrument. This Loan Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto.

SECTION 14.22 SERVICER. Lender shall have the right from time to time to
designate and appoint a Servicer and special servicer, and to change or replace
any Servicer or special servicer. Provided that the Borrowers have been notified
of such Servicer's role, all rights of the Lender hereunder may be exercised by
Servicer on behalf of Lender and provided the Borrowers shall not be required to
deal with more than one such servicing entity at any time. Lender shall notify
the Borrowers in writing as to the identity of the Servicer and any special
servicer.

SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than
the Borrowers are parties to this Loan Agreement only with regard to the
representations, warranties, and covenants specifically applicable to them.

SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything
contained in this Loan Agreement to the contrary, if for any reason whatsoever
Lender suspects that any conditions exist or may exist at any Property which
might have a Material Adverse Effect, Lender shall have the right, at the
Borrowers' sole reasonable cost and expense, to cause such inspections and
reports to be prepared and performed with respect to any Property as Lender
shall reasonably determine.

                        [signatures follow on next page]

                                      109

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

                                BORROWERS:

                                LODGIAN HOTELS FIXED I, LLC
                                MACON HOTEL ASSOCIATES, L.L.C.
                                SERVICO NORTHWOODS, INC.
                                IMPAC HOTELS I, L.L.C.
                                LODGIAN DENVER LLC

                                By: /s/ Daniel E. Ellis
                                   ---------------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of the
                                           entities listed above


                                LENDER:


                                MERRILL LYNCH MORTGAGE LENDING, INC.


                                By:/s/ Robert Spinna
                                   ---------------------------------------------
                                          Name:  Robert Spinna
                                          Title: Vice President








                         LIST OF EXHIBITS AND SCHEDULES


Exhibit A         -   Properties
Exhibit B         -   Environmental Reports
Exhibit C         -   Franchise Agreements
Exhibit D         -   Allocated Loan Amounts/Aggregate Allocated Loan Amounts
Exhibit E         -   Management Agreements
Exhibit F         -   [Reserved]
Exhibit G         -   Property Improvement Plans
Exhibit H         -   [Reserved]
Exhibit I         -   Acceptable Franchisors
Exhibit J         -   Property Condition Reports
Exhibit K         -   Zoning Reports
Exhibit L         -   Certificate Re: Work Reserves



Schedule 1        -   Borrowers
Schedule 2.4      -   Scheduled Mortgage Principal Payments
Schedule 2.12(G)  -   Crossed Loans/Crossed Borrowers
Schedule 3.1(A)   -   List of Loan Documents
Schedule 4.1(C)   -   Organizational Chart for Borrower Parties
Schedule 4.2      -   Consents
Schedule 4.5      -   Condemnation Proceedings
Schedule 4.5(A)   -   Rights to Purchase/Rights of First Offer
Schedule 4.7(B)   -   Rent Roll
Schedule 4.7(E)   -   Franchise Defaults
Schedule 4.9      -   Litigation
Schedule 4.14         ERISA Plans
Schedule 4.20     -   Insurance
Schedule 4.28     -   Collective Bargaining Agreements
Schedule 4.30     -   Ground Leases
Schedule 5.14     -   Material Agreements
Schedule 6.5      -   Required Capital Improvements
Schedule 6.6      -   Environmental Work/O&M Plans
Schedule 6.7      -   Reserve Funding Condition






                         List of Exhibits and Schedules



                                   EXHIBIT A

                                   PROPERTIES



1.   Marriott, 16455 E. 40th Circle, Denver (Aurora), CO

2.   Courtyard by Marriott, 3332 Peachtree Road, Atlanta GA

3.   Crowne Plaza, 108 First Street, Macon, GA

4.   Holiday Inn, 2265 Kington Court, Marietta, GA

5.   Holiday Inn Select, 15471 Royalton Road, Strongsville, OH

6.   Holiday Inn, 521 Greenfield Rad, Lancaster, PA

7.   Doubletree Club , 9461 Roosevelt Blvd., Philadelphia, PA

8.   Clarion, 7401 Northwoods Blvd., North Charleston, SC






                                   Exhibit A




                                    EXHIBIT B

                              ENVIRONMENTAL REPORTS



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

 ML  LODGIAN LOCATION                                                                                 ASSESSMENT  REPORT  PROJECT OR
CODE  CODE    CODE    PROPERTY NAME             ADDRESS          CITY     STATE    REPORT                FIRM      DATE   JOB NUMBER
- ---- ------- -------- -------------             -------         ------    -----    ------             ----------  ------- ----------
                                                                                            

FIXED RATE LOAN #1
- ------------------
 51   dia     707     Marriott  -       16455 E. 40th Circle Aurora         CO  Phase I Environmental Building    May 6,  04-109
                        Aurora                                                   Site Assessment      Evaluation   2004    /ams
                                                                                 Report               Services &
                                                                                                      Technology
 13   bkh    1212     Courtyard by
                        Marriott -
                        Atlanta         3332 Peachtree Rd.   Atlanta        GA  Phase I Environmental             May 20,
                                                                                 Site Assessment      EMG          2004    116593
                                                                                 Report
 39   phl    3838     Doubletree Club - 9461 Roosevelt Blvd. Philadelphia   PA  Phase I Environmental             May 21,
                        Philadelphia                                             Site Assessment      EMG          2004    116659
                                                                                 Report
 64   mac    1240     Crowne Plaza  -   108 First Street     Macon          GA  Phase I Environmental             May 20,  116684
                        Macon                                                    Site Assessment      EMG          2004
                                                                                 Report
 36   stg    3515     Holiday Inn       15471 Royalton Rd.   Strongsville   OH  Phase I Environmental             May 19,  116653
                        Select -                                                 Site Assessment      EMG          2004
                        Strongsville                                             Report
 14   mar    1255     Holiday Inn -     2265 Kingston Ct.    Marietta       GA  Phase I Environmental             May 20,  116597
                        Marietta                                                  Site Assessment     EMG          2004
                                                                                  Report
 41   lne    3890     Holiday Inn -     521 Greenfield Rd.   Lancaster      PA  Phase I Environmental             May 20,  116657
                        Lancaster                                                 Site Assessment     EMG          2004
                                                                                  Report
 44   cha    4021     Clarion - North   7401 Northwoods      North          SC  Phase I Environmental             May 21,  116665
                        Charleston        Blvd.               Charleston         Site Assessment      EMG          2004
                                                                                 Report




                                   Exhibit B


                                    EXHIBIT C

                              FRANCHISE AGREEMENTS



                PROPERTY                                                                           AGREEMENT
                  NAME                         STATE                    FRANCHISOR                    DATE
                --------                       -----                    ----------                 ---------
                                                                                          
Marriott  - Aurora                              CO                                  Marriott        5/19/97
Courtyard by Marriott - Atlanta                 GA                                  Marriott        9/18/95
Doubletree Club - Philadelphia                  PA                                    Hilton         3/7/96
Crowne Plaza  - Macon                           GA              Intercontinental Hotel Group        5/21/97
Holiday Inn Select - Strongsville               OH              Intercontinental Hotel Group       12/11/98
Holiday Inn - Marietta                          GA              Intercontinental Hotel Group       12/11/98
Holiday Inn - Lancaster                         PA              Intercontinental Hotel Group        5/28/98
Clarion - North Charleston                      SC                                    Choice        9/28/00






                                   Exhibit C



                                    EXHIBIT D

             ALLOCATED LOAN AMOUNTS/AGGREGATE ALLOCATED LOAN AMOUNTS



 ML    LODGIAN   LOCATION
CODE    CODE     CODE            LEGAL ENTITY                 PROPERTY NAME                ADDRESS             CITY         STATE
- ----   -------   --------        ------------                 -------------                -------             ----         -----
                                                                                                       
FIXED RATE LOAN #1
- ------------------
51       dia       707      Lodgian Denver LLC              Marriott  - Aurora        16455 E. 40th Circle   Aurora           CO
13       bkh       1212     Impac Hotels I, L.L.C.          Courtyard by Marriott -   3332 Peachtree Rd.     Atlanta          GA
                            Atlanta
39       phl       3838     Impac Hotels I, L.L.C.          Doubletree Club -         9461 Roosevelt Blvd.   Philadelphia     PA
                            Philadelphia
64       mac       1240     Macon Hotel Associates, L.L.C.  Crowne Plaza  - Macon     108 First Street       Macon            GA
36       stg       3515     Impac Hotels I, L.L.C.          Holiday Inn Select -      15471 Royalton Rd.     Strongsville     OH
                            Strongsville
14       mar       1255     Impac Hotels I, L.L.C.          Holiday Inn - Marietta    2265 Kingston Ct.      Marietta         GA
41       lne       3890     Lodgian Hotels Fixed I, LLC     Holiday Inn - Lancaster   521 Greenfield Rd.     Lancaster        PA
44       cha       4021     Servico Northwoods, Inc.        Clarion -                 7401 Northwoods Blvd.  North            SC
                            North Charleston                                          Charleston


                                                                                ALLOCATED     AGGREGATE
 ML    LODGIAN   LOCATION                                        ALLOCATED      MEZZANINE     ALLOCATED
CODE    CODE     CODE            LEGAL ENTITY                   LOAN AMOUNT    LOAN AMOUNT   LOAN AMOUNT
- ----   -------   --------   ------------------------            -----------    -----------   -----------
                                                                           
FIXED RATE LOAN #1
- ------------------
51       dia       707      Lodgian Denver LLC                  $17,554,000           $0     $17,554,000
13       bkh       1212     Impac Hotels I, L.L.C.              $15,975,000           $0     $15,975,000

39       phl       3838     Impac Hotels I, L.L.C.              $ 9,768,000           $0     $ 9,768,000

64       mac       1240     Macon Hotel Associates, L.L.C.      $ 6,950,000           $0     $ 6,950,000
36       stg       3515     Impac Hotels I, L.L.C.              $ 6,228,000           $0     $ 6,228,000

14       mar       1255     Impac Hotels I, L.L.C.              $ 2,750,000           $0     $ 2,750,000
41       lne       3890     Lodgian Hotels Fixed I, LLC         $ 2,444,000           $0     $ 2,444,000
44       cha       4021     Servico Northwoods, Inc.            $ 2,132,000           $0     $ 2,132,000

                                            SUBTOTAL            $63,801,000           $0     $63,801,000
                            


                                    Exhibit D




                                    EXHIBIT E

                              MANAGEMENT AGREEMENTS

1.       Management Agreement, dated on or about June 23, 2004, between Lodgian
         Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re:
         Courtyard by Marriott, Atlanta, GA.

2.       Management Agreement, dated on or about June 23, 2004, between Lodgian
         Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re:
         DoubleTree Club, Philadelphia, PA.

3.       Management Agreement, dated on or about June 23, 2004, between Lodgian
         Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re:
         Holiday Inn Select, Strongsville, OH.

4.       Management Agreement, dated on or about June 23, 2004, between Lodgian
         Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re:
         Holiday Inn Suites, Marietta, GA.

5.       Management Agreement, dated on or about June 23, 2004 between Lodgian
         Management Corp., as manager, and Macon Hotel Associates, L.L.C., as
         owner, re: Crowne Plaza, Macon, GA.

6.       Management Agreement, dated on or about June 23, 2004, between Lodgian
         Management Corp., as manager, and Lodgian Hotels Fixed I, LLC, as
         owner, re: Holiday Inn, Lancaster, PA.

7.       Management Agreement, dated on or about June 23, 2004, between Lodgian
         Management Corp., as manager, and Lodgian Denver LLC, as owner, re:
         Marriott, Aurora, CO.

8.       Management Agreement, dated on or about June 23, 2004, between Lodgian
         Management Corp., as manager, and Servico Northwoods, Inc., as owner,
         re: Clarion Hotel, Charleston, SC.


                                   Exhibit E





                                    EXHIBIT F

                                   [RESERVED]




                                   Exhibit F





                                    EXHIBIT G

                           PROPERTY IMPROVEMENT PLANS



                                      None.





                                   Exhibit G





                                    EXHIBIT H

                                   [RESERVED]




                                   Exhibit H






                                    EXHIBIT I

                             ACCEPTABLE FRANCHISORS


                                     TIER 1

                                 
Six Continents                      Crowne Plaza
Hilton Hotels Corp.                 Hilton
Hilton Hotels Corp.                 Doubletree
Hilton Hotels Corp.                 Homewood Suites
Hilton Hotels Corp.                 Hilton Garden Inn
Starwood Hotels & Resorts           Westin
Starwood Hotels & Resorts           Sheraton
Starwood Hotels & Resorts           W
US Franchise Systems, Inc.          Hawthorn
Marriott International, Inc.        Marriott
Marriott International, Inc.        Renaissance
Marriott International, Inc.        Courtyard
Marriott International, Inc.        Residence Inn
Wyndham International               Wyndham Hotel
Carlson Hotels Worldwide            Radisson


                         TIER 2 (WITH FOOD AND BEVERAGE)

Six Continents                      Holiday Inn
Six Continents                      Holiday Inn Select
Six Continents                      Holiday Inn SunSpree Resort
Choice Hotels International         Clarion
Best Western International, Inc.    Best Western
Cendant Corporation                 Ramada
Starwood Hotels & Resorts           Four Points
Choice Hotels International         Quality
Wyndham International               Wyndham Gardens

                        TIER 3 (WITHOUT FOOD AND BEVERAGE)

Six Continents                      Holiday Inn Express
Hilton Hotels Corp.                 Hampton Inn
Marriott International, Inc.        Fairfield
Choice Hotels International         Comfort Inn
Choice Hotels International         Comfort Suites



                                    Exhibit I





                                    EXHIBIT J

                           PROPERTY CONDITION REPORTS



           LODGIAN LOCATION
 ML CODE    CODE     CODE       PROPERTY NAME                 ADDRESS                    CITY          STATE
 -------   ------- --------     -------------                 -------                    ----          -----
                                                                                     
FIXED RATE LOAN #1
    51       dia     707     Marriott  - Aurora            16455 E. 40th Circle       Aurora            CO

    13       bkh    1212     Courtyard by Marriott -       3332 Peachtree Rd.         Atlanta           GA
                             Atlanta
    39       phl    3838     Doubletree Club -             9461 Roosevelt Blvd.       Philadelphia      PA
                             Philadelphia
    64       mac    1240     Crowne Plaza  - Macon         108 First Street           Macon             GA

    36       stg    3515     Holiday Inn Select -          15471 Royalton Rd.         Strongsville      OH
                             Strongsville
    14       mar    1255     Holiday Inn - Marietta        2265 Kingston Ct.          Marietta          GA

    41       lne    3890     Holiday Inn - Lancaster       521 Greenfield Rd.         Lancaster         PA

    44       cha    4021     Clarion - North Charleston    7401 Northwoods Blvd.      North             SC
                                                                                      Charleston


                                                                                    PROJECT OR
         REPORT                           ASSESSMENT FIRM           REPORT DATE       NUMBER
         ------                           ---------------           -----------     ----------
                                                                           
Property Condition Assessment Report     Building Evaluation        May 6, 2004     04-111/Ec
                                          Services & Technology
Property Condition Assessment Report     EMG                        May 24, 2004    116594

Property Condition Assessment Report     EMG                        May 20, 2004    116660

Property Condition Assessment Report     EMG                        May 24, 2004    116685

Property Condition Assessment Report     EMG                        May 24, 2004    116654

Property Condition Assessment Report     EMG                        May 20, 2004    116598

Property Condition Assessment Report     EMG                        May 24, 2004    116658

Property Condition Assessment Report     EMG                        May 21, 2004    116666



                                    Exhibit J




                                    EXHIBIT K

                                 ZONING REPORTS*



CHAIN NAME         CITY             ST     DATE OF REPORT          PZR SITE NUMBER
- ----------         ----             --     --------------          ---------------
                                                       
Marriott          Aurora            CO     5/3/2004                  26466
                                           Revised 5/17/2004
Courtyard by      Atlanta           GA     5/5/2004                  26428
Marriott
Doubletree        Philadelphia      PA     4/29/2004                 26454
Club
Holiday Inn       Strongsville      OH     4/28/2004                 26451
Select
Crowne Plaza      Macon             GA     5/5/2004                  26479

Holiday Inn       Marietta          GA     4/28/2004                 26429

Holiday Inn       Lancaster         PA     4/27/2004                 26456

Clarion           Charleston        SC     4/27/2004                 26459


- -------------------
* All reports were prepared for Merrill Lynch Mortgage Lending, Inc. by the
Planning & Zoning Resource Corporation.


                                    Exhibit K




                                    EXHIBIT L

                          CERTIFICATE RE: WORK RESERVES


                            BORROWER'S CERTIFICATION


         THIS CERTIFICATION is made as of __________ by the undersigned (the
"Borrowers") to and for the benefit of: (i) the current holder (the "Holder") of
Loan No. ________ and ________ (the "Loans"), and (ii)
_________________________, as mortgage servicer on behalf of the Holder (the
"Servicer"), in order to induce the Servicer to advance to the Borrower the
aggregate sum of $__________ from the _______________ [describe name of reserve
account] Reserve, as provided under Section 6.7 the Loan and Security Agreement
evidencing the Loan (the "Loan Agreement").

         Capitalized terms used in this Certification that are not otherwise
defined herein shall have the meanings ascribed to such terms in the Loan
Agreement.

         The undersigned hereby certifies to the Holder and Servicer as follows:

1.       No event, fact or circumstance has occurred or failed to occur which
constitutes, or upon the lapse of time, or the giving of notice, or both, could
constitute a Default or an Event of Default under the Loan Documents. The Loan
Documents remain the valid and legally binding obligations of the undersigned
and are fully enforceable in accordance with their terms.

2.       The portion of the Work that relates to the subject disbursement
request has been delivered or provided to Borrower in a good and workmanlike
manner and in accordance with the plans and specifications therefor, if
applicable, approved by Lender and in accordance with all legal requirements of
governmental authorities having jurisdiction over the Property, or deposits for
work or materials that relate to the subject disbursement request have been paid
by Borrower, as applicable.

3.       All of the statements, invoices, receipts and information delivered in
connection with the subject disbursement request are true and correct as of the
date hereof, and each person that supplied materials or labor in connection with
the Work to be funded by the subject disbursement request has been paid in full
to date, or will be paid in full to date upon such disbursement, subject to any
applicable retainage. The actual costs incurred in connection with the subject
disbursement request do not materially exceed the amount budgeted for such Work
under the CapEx/FF&E Budget in effect and constitute expenditures for Capital
Improvements.

4.       None of the labor, materials, overhead or other items of expense
specified in the disbursement request submitted herewith, other than payments on
account of retainage, has previously been the basis of any disbursement request
by the Borrower or any payment by the Servicer, other than for partially
completed work or deposits and, when added to all sums previously disbursed by
the Servicer on account of the related work, do not exceed the costs of all
services completed, installed and/or delivered, or deposits made, as applicable,
as of the date of this certificate. In addition, the amount remaining in the
subject reserve will be sufficient to



                                  Exhibit L-1




pay in full the entire remaining cost of related work required to be completed
in accordance with the Loan Agreement.

5.       None of the materials or other items of expense specified in the
disbursement request submitted herewith are stored at any Property unless such
materials are properly stored and secured at the applicable Property in
accordance with the Borrowers' customary procedures and sound construction
practices as reasonably determined by Lender. None of the materials or other
items of expense specified in the disbursement request submitted herewith are
stored at any location other than at the Properties unless Lender determines in
its reasonable discretion that Lender has a perfected first priority security
interest in any such materials.

6.       All permits and approvals required to complete the work in process have
been obtained. All conditions to the disbursement have been met in accordance
with the terms of the Loan Agreement.

7.       The individual that is signing below on behalf of the Borrower has made
due investigation of the matters herein set forth, and acknowledges that the
Servicer is relying upon the certification made herein as a condition to
advancing the requested reserve disbursement.

8.       This Certification shall be deemed to be a "Loan Document" as that term
is defined in the Loan Agreement. Accordingly, an uncured breach of any
representation or warranty set forth herein shall constitute an Event of Default
under the Mortgages and the Loan Documents.


         IN WITNESS WHEREOF, the Borrower has executed this Certification under
seal as of the date written above.


                                     BORROWERS:
                                     Legal Entities listed on "Attachment A"

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


                                   Exhibit L-2




                                  ATTACHMENT A

BORROWERS:





                                   Exhibit L-3




                                   SCHEDULE 1

                                    BORROWERS



     IMPAC HOTELS I, L.L.C.
     LODGIAN DENVER LLC
     MACON HOTEL ASSOCIATES, L.L.C
     SERVICO NORTHWOODS, INC.
     LODGIAN HOTELS FIXED I, LLC.




                                   Schedule 1




                                  SCHEDULE 2.4

                      SCHEDULED MORTGAGE PRINCIPAL PAYMENTS



                                             SCHEDULED                 SCHEDULED                  TOTAL
PERIOD              DATE                     INTEREST                  PRINCIPAL                 PAYMENT
- ------              ----                     --------                  ---------                 -------
                                                                                    
   1              8/1/2004                  361,338.74                 72,524.97                433,863.71
   2              9/1/2004                  360,927.99                 72,935.72                433,863.71
   3              10/1/2004                 348,885.40                 84,978.31                433,863.71
   4              11/1/2004                 360,033.64                 73,830.07                433,863.71
   5              12/1/2004                 348,015.00                 85,848.71                433,863.71
   6              1/1/2005                  359,129.29                 74,734.42                433,863.71
   7              2/1/2005                  358,706.03                 75,157.68                433,863.71
   8              3/1/2005                  323,608.08                110,255.63                433,863.71
   9              4/1/2005                  357,655.94                 76,207.77                433,863.71
  10              5/1/2005                  345,700.97                 88,162.74                433,863.71
  11              6/1/2005                  356,725.02                 77,138.69                433,863.71
  12              7/1/2005                  344,794.98                 89,068.73                433,863.71
  13              8/1/2005                  355,783.70                 78,080.01                433,863.71
  14              9/1/2005                  355,341.49                 78,522.22                433,863.71
  15              10/1/2005                 343,448.50                 90,415.21                433,863.71
  16              11/1/2005                 354,384.71                 79,479.00                433,863.71
  17              12/1/2005                 342,517.34                 91,346.37                433,863.71
  18              1/1/2006                  353,417.24                 80,446.47                433,863.71
  19              2/1/2006                  352,961.63                 80,902.08                433,863.71
  20              3/1/2006                  318,390.20                115,473.51                433,863.71
  21              4/1/2006                  351,849.45                 82,014.26                433,863.71
  22              5/1/2006                  340,049.96                 93,813.75                433,863.71
  23              6/1/2006                  350,853.64                 83,010.07                433,863.71
  24              7/1/2006                  339,080.82                 94,782.89                433,863.71
  25              8/1/2006                  349,846.71                 84,017.00                433,863.71
  26              9/1/2006                  349,370.87                 84,492.84                433,863.71
  27              10/1/2006                 337,637.75                 96,225.96                433,863.71
  28              11/1/2006                 348,347.37                 85,516.34                433,863.71
  29              12/1/2006                 336,641.65                 97,222.06                433,863.71
  30              1/1/2007                  347,312.42                 86,551.29                433,863.71
  31              2/1/2007                  346,822.24                 87,041.47                433,863.71
  32              3/1/2007                  312,813.54                121,050.17                433,863.71
  33              4/1/2007                  345,643.70                 88,220.01                433,863.71
  34              5/1/2007                  334,010.39                 99,853.32                433,863.71
  35              6/1/2007                  344,578.55                 89,285.16                433,863.71
  36              7/1/2007                  332,973.75                100,889.96                433,863.71
  37              8/1/2007                  343,501.48                 90,362.23                433,863.71
  38              9/1/2007                  342,989.72                 90,873.99                433,863.71
  39              10/1/2007                 331,427.47                102,436.24                433,863.71
  40              11/1/2007                 341,894.90                 91,968.81                433,863.71
  41              12/1/2007                 330,361.96                103,501.75                433,863.71
  42              1/1/2008                  340,787.84                 93,075.87                433,863.71
  43              2/1/2008                  340,260.71                 93,603.00                433,863.71
  44              3/1/2008                  317,812.48                116,051.23                433,863.71
  45              4/1/2008                  339,073.32                 94,790.39                433,863.71
  46              5/1/2008                  327,615.94                106,247.77                433,863.71
  47              6/1/2008                  337,934.74                 95,928.97                433,863.71
  48              7/1/2008                  326,507.85                107,355.86                433,863.71
  49              8/1/2008                  336,783.43                 97,080.28                433,863.71
  50              9/1/2008                  336,233.61                 97,630.10                433,863.71
  51              10/1/2008                 324,852.27                109,011.44                433,863.71
  52              11/1/2008                 335,063.29                 98,800.42                433,863.71
  53              12/1/2008                 323,713.29                110,150.42                433,863.71



                                  Schedule 2.4





                                                                               
54              1/1/2009                  333,879.89                 99,983.82                433,863.71
55              2/1/2009                  333,313.63                100,550.08                433,863.71
56              3/1/2009                  300,543.12                133,320.59                433,863.71
57              4/1/2009                  331,989.10                101,874.61                433,863.71
58              5/1/2009                  320,721.42                113,142.29                433,863.71
59              6/1/2009                  330,771.35                103,092.36                433,863.71
60              7/1/2009                  319,536.27             58,300,672.61             58,620,208.88






                                  Schedule 2.4




                                SCHEDULE 2.12(G)

                         CROSSED LOANS/CROSSED BORROWERS

         1.       Pool 2 Loan: A Loan in the amount of $67,864,000 ("Pool 2
Loan"), which Pool 2 Loan is evidenced by a Promissory Note, dated as of the
date hereof ("Note 2"), made by the Pool 2 Borrowers to Lender and is further
evidenced and secured by a Loan and Security Agreement, dated as of the date
hereof ("Loan Agreement 2"), between Albany Hotels, Inc., AMI Operating
Partners, L.P., Apico Inns of GreenTree, Inc., Dedham Lodging Associates I,
Limited Partnership, Lodgian Hotels Fixed II, Inc., Lodgian Augusta LLC, Lodgian
Lafayette LLC and Lodgian Tulsa LLC (collectively, the "Pool 2 Borrowers") and
Lender;

         2.       Pool 3 Loan: A Loan in the amount of $66,818,500 ("Pool 3
Loan"), which Pool 3 Loan is evidenced by a Promissory Note, dated as of the
date hereof ("Note 3"), made by the Pool 3 Borrowers to Lender and is further
evidenced and secured by a Loan and Security Agreement, dated as of the date
hereof ("Loan Agreement 3"), between Lodgian Hotels Fixed III, LLC, Lodgian AMI,
Inc., Minneapolis Motel Enterprises, Inc. and Servico Centre Associates, Ltd.
(collectively, the "Pool 3 Borrowers") and Lender; and


         3.       Pool 4 Loan: A Loan in the amount of $61,516,500 ("Pool 4
Loan") which Pool 4 Loan is evidenced by a Promissory Note, dated as of the date
hereof ("Note 4"), made by the Pool 4 Borrowers to Lender and is further
evidenced and secured by a Loan and Security Agreement, dated as of the date
hereof ("Loan Agreement 4"), between Lodgian Hotels Fixed IV, L.P., Little Rock
Lodging Associates I, Limited Partnership, Lodgian Fairmont LLC, NH Motel
Enterprises, Inc., Servico Columbia, Inc. and Servico Houston, Inc.
(collectively, the "Pool 4 Borrowers") and Lender.


         "Crossed Loans" shall mean, collectively, the Pool 2 Loan, the Pool 3
Loan and the Pool 4 Loan.

         "Crossed Borrowers" shall mean, collectively, the Pool 2 Borrowers, the
Pool 3 Borrowers and the Pool 4 Borrowers.


                                Schedule 2.12(G)





                                 SCHEDULE 3.1(A)

                             LIST OF LOAN DOCUMENTS

1.       Loan and Security Agreement
2.       Note
3.       Mortgages
4.       Assignments of Leases
5.       Assignments of Agreements, Licenses, Permits and Contracts
6.       Assignments of Hotel Management Agreements
7.       Guaranty of Recourse Obligations
8.       Environmental Indemnity
9.       Deposit Account Agreements
10.      Financing Statements
11.      Cash Management Agreement
12.      Borrower's Closing Certificate under Section 3.1(D)
13.      Closing Certificate of Lodgian, Inc.
14.      Cooperation Agreement
15.      Agreement Regarding Right of First Offer
16.      Contribution Agreement
17.      Cross-Guaranty
18.      Post Closing Agreement




                                 Schedule 3.1(A)




                                 SCHEDULE 4.1(C)

                    ORGANIZATIONAL CHART FOR BORROWER PARTIES




                                Schedule 4.1(C)




                                  SCHEDULE 4.2

                                    CONSENTS

                                      None.




                                  Schedule 4.2





                                  SCHEDULE 4.5

                            CONDEMNATION PROCEEDINGS

                                      None.



                                  Schedule 4.5




                                 SCHEDULE 4.5(A)

                    RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER



                                                           DATE OF AGREEMENT OR AMENDMENT       RIGHT OF FIRST REFUSAL SECTION
FRANCHISOR               LOCATION                          GRANTING RIGHT OF FIRST REFUSAL      OF AGREEMENT OR AMENDMENT
- ----------               --------                          -------------------------------      -------------------------
                                                                                       
Marriott Hotel           Gateway Park                      12/23/98 (Amendment)                 Section A.; page 2
Denver Airport           16455 E. 40th Circle
                         Aurora, CO 80011


Courtyard by Marriott    3322 Peachtree Road NE            12/23/98 (Amendment)                 Section A.; page 2
Atlanta, GA              Atlanta, GA 30326





                                Schedule 4.5(A)




                                 SCHEDULE 4.7(B)

                                    RENT ROLL

                                      None.




                                Schedule 4.7(B)




                                 SCHEDULE 4.7(E)

                               FRANCHISE DEFAULTS

                                      None.



                                 Schedule 4.7(E)





                                  SCHEDULE 4.9

                                   LITIGATION



                                      None.



                                  Schedule 4.9




                                  SCHEDULE 4.14

                                   ERISA PLANS

1.       Lodgian, Inc. 401(k) Plan.

2.       Lodgian, Inc. Employee Health & Welfare Plan.

3.       Multiemployer Plans covering employees of the following unions:

         Hotel Employees & Restaurant Employees Local 274 (Philadelphia, PA)
         (pension, welfare)




                                  Schedule 4.14




                                  SCHEDULE 4.20

                                    INSURANCE




                                 Schedule 4.20







                                  SCHEDULE 4.28

                        COLLECTIVE BARGAINING AGREEMENTS




                                                                                        DATE OF
      HOTEL                 BORROWER                         UNION                     AGREEMENT
      -----                 --------                         -----                     ---------
                                                                              
Doubletree Hotel -     Impac Hotels I, L.L.C.    Hotel Employees and Restaurant         10/1/03
 Philadelphia, PA                                 Employees Union, Local 274





                                 Schedule 4.28




                                  SCHEDULE 4.30

                                  GROUND LEASES


1.       Lodgian AMI, Inc.

         Holiday Inn, located at 521 Greenfield Road, Lancaster, PA

         Lease Agreement, dated January 30, 1969, between Paul A. Herr and
         Dorothy H. Herr, as lessor, Republic Motor Inns, Inc., as lessee, and
         American Motor Inns, Inc., as guarantor, recorded with the Recorder of
         Deeds, Lancaster, PA in Record Book W59, Page 755, as affected by that
         certain Addendum dated January 16, 1971 and recorded with the Recorder
         of Deeds, Lancaster, PA in Record Book R60, Page 233, as amended by
         that certain Amendment dated March 15, 1985 and recorded with the
         Recorder of Deeds, Lancaster, PA in Record Book W91, Page 434, as
         further amended by that certain Amendment to Lease dated December 20,
         1986 and recorded with the Recorder of Deeds, Lancaster, PA in Record
         Book Y96, Page 660, as assigned by that certain Assignment of Lease and
         Indemnification Agreement, December 23, 1986, between Republic Motor
         Inns, Inc. and AMI Operating Partners, L.P., recorded with the Recorder
         of Deeds, Lancaster, PA in Record Book Y96, Page 669, as further
         assigned by that certain Assignment and Assumption of Lessee's Interest
         in Ground Lease, dated November 24, 1998, between AMI Operating
         Partners, L.P. and Lodgian AMI Inc., recorded with the Recorder of
         Deeds, Lancaster, PA in Record Book 604, Page 638, as further affected
         by that certain Acknowledgment, Estoppel Certificate and Agreement,
         dated November 24, 1998, between Dorothy H. Herr and AMI Operating
         Partners LP, recorded with the Recorder of Deeds, Lancaster, PA in
         Record Book 6045, Page 1, as further assigned to Lodgian Hotels Fixed
         I, LLC.



                                 Schedule 4.30





                                  SCHEDULE 5.14

                               MATERIAL AGREEMENTS


Agreement between PFG Broadline and Lodgian, Inc. dated July 2, 2003.

Agreement between Harbor Lien and Lodgian, Inc. dated March 1, 2002.

Various agreements between the Borrowers and On Command Video Corporation.




                                 Schedule 5.14





                                  SCHEDULE 6.5

                          REQUIRED CAPITAL IMPROVEMENTS




                                  Schedule 6.5




                                  SCHEDULE 6.6

                          ENVIRONMENTAL WORK/ O&M PLANS



           LODGIAN  LOCATION
ML CODE     CODE      CODE      PROPERTY NAME          ADDRESS                CITY         STATE
- -------     ----    --------    -------------          -------                ----         -----
                                                                         
FIXED RATE LOAN #1
- ------------------
   51       dia      707    Marriott  - Aurora      16455 E. 40th Circle     Aurora          CO
   13       bkh      1212   Courtyard by Marriott   3332 Peachtree Rd.       Atlanta         GA
                            - Atlanta
   39       phl      3838   Doubletree Club -       9461 Roosevelt  Blvd.    Philadelphia    PA
                            Philadelphia
   64       mac      1240   Crowne Plaza  - Macon   108 First Street         Macon           GA

   36       stg      3515   Holiday Inn Select -    15471 Royalton Rd.       Strongsville    OH
                            Strongsville
   14       mar      1255   Holiday Inn - Marietta  2265 Kingston Ct.        Marietta        GA
   41       lne      3890   Holiday Inn - Lancaster 521 Greenfield Rd.       Lancaster       PA

   44       cha      4021   Clarion - North         7401 Northwoods Blvd.    North           SC
                            Charleston                                       Charleston


                                                            REMEDIATION   REQUIRED COMPLETION
       REQUIRED ENVIRONMENTAL WORK                             COSTS              DATE
       ---------------------------                          -----------   -------------------
                                                                    
None                                                              $0       Not Applicable
None                                                              $0       Not Applicable

None                                                              $0       Not Applicable

(1) Properly dispose of oil-soaked rags from clean up           $795       September 30, 2004
following repair of elevator operating unit                                (Except O&M Program
($200-300).  (2) Develop and implement asbestos                            should be in place
Operations and Maintenance Program ($495).  (3) Limited                    by July 31, 2004)
areas of water damage and suspect mold identified - can
be addressed by in-house maintenance staff.
None                                                              $0       Not Applicable

None                                                              $0       Not Applicable
(1) Develop and implement an asbestos Operations and            $495       July 31, 2004
Maintenance Program ($495).
None                                                              $0       Not Applicable




                                  Schedule 6.6




                                  SCHEDULE 6.7

                           RESERVE FUNDING CONDITIONS

         1.       The Borrowers shall have submitted to Lender a written request
for disbursement at least five (5) days prior to the date on which the Borrowers
request such disbursement be made, specifying the specific Work or for which the
disbursement is requested and such other information (such as the price of
materials and the cost of contracted labor or other services) as Lender may
reasonably require, which request must be on a form specified or approved by
Lender;

         2.       On the date such request is received by Lender and on the date
such payment is to be made, no Event of Default shall exist and remain uncured;

         3.       Lender shall have received a certificate from the Borrowers
stating that all Work at the Property to be funded by the requested disbursement
have been completed in a good and workmanlike manner and in accordance with any
plans and specifications approved by Lender and all legal requirements of any
Governmental Authority having jurisdiction over the Property, such certificate
to be accompanied, in either case, by a copy of any license, permit or other
approval by any Governmental Authority required to commence (only for the first
advance with respect to each distinct item of work) and/or complete (only for
the final advance with respect to each distinct item of work) such Work;

         4.       Lender shall have received a certificate from the Borrowers
stating that each Person that supplied materials or labor in connection with the
Work to be funded by the requested disbursement has been paid in full or will be
paid in full upon such disbursement, such certificate to be accompanied by
copies of invoices for all items or materials purchased and all contracted labor
or services provided, and, with respect to Work relating to mold, a certificate
of a Certified Industrial Hygienist that the such Work has been completed in
conformity with applicable mold clean-up procedures promulgated by the
applicable Governmental Authority within the state in which the applicable
Property is located, or, if no such procedures exist, in conformity with the New
York City Department of Health or the United States Environmental Protection
guidelines for mold related clean-up work;

         5.       Lender shall have received appropriate lien waivers (including
final lien waivers) from each contractor, supplier, materialman, mechanic or
subcontractor who receives payment in an amount equal to or greater than $10,000
for completion of its work or delivery of its materials, which lien waivers
shall conform to the requirements of applicable law and shall cover all work
performed and materials supplied (including equipment and fixtures) for a
Property by that contractor, supplier, subcontractor, mechanic or materialman
through the date covered by the current disbursement request; and

         6.       At Lender's option, Lender shall have received a title search
for the Property effective to the date of the disbursement, which search shows
that no mechanic's or materialmen's liens or other Liens of any nature have been
placed against the Property since the date of recordation of the applicable
Mortgage and that title to the Property is free and clear of all Liens (other
than the Permitted Encumbrances).


                                  Schedule 6.7

EX-10.2.2

                                                                  EXHIBIT 10.2.2

                             FORM OF PROMISSORY NOTE

$63,801,000.00                                                     JUNE 25, 2004

      FOR VALUE RECEIVED, the undersigned, each having an address at c/o
Lodgian, 3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 (each, a
"Borrower" and, collectively, the "Borrowers"), jointly and severally, promise
to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware
corporation (together with its successors and assigns, "Lender"), having an
address at Four World Financial Center, New York, New York 10080, or such other
place as Lender may designate in writing, the principal sum of Sixty Three
Million Eight Hundred and One Thousand and No/100 Dollars ($63,801,000.00), with
interest on the unpaid principal balance from the date of this Note, until paid,
at the Interest Rate (as hereinafter defined) in effect from time to time
hereunder. This Promissory Note may be referred to herein as the "Note," and the
loan evidenced hereby may be referred to herein as the "Loan."

      PAYMENTS OF PRINCIPAL AND INTEREST. The Borrowers shall make a payment on
the date hereof to Lender of interest only on the outstanding principal balance
of this Note at the Interest Rate (hereinafter defined), from the date hereof
through and including the last day of the calendar month in which this Note is
executed. Commencing on August 1, 2004 (the "First Payment Date") and on the
first day of each calendar month (each, a "Payment Date") thereafter to and
including the Maturity Date (hereinafter defined), the Borrowers shall make
payments to Lender of interest and principal in monthly installments in the
amounts set forth on Schedule 1 attached hereto and made a part hereof (the
"Monthly Debt Service Payment Amounts"). The entire outstanding principal
balance of the Loan, all accrued and unpaid interest thereon and all other
amounts due hereunder and under the other Loan Documents (collectively the
"Debt") if not sooner paid, shall be due and payable on July 1, 2009 (the
"Maturity Date").

      Interest on the principal sum of this Note shall be calculated on the
basis of a 360 day year, and shall be charged for the actual number of days
elapsed during any month or other accrual period. Interest on this Note shall be
payable in arrears.

      DEFINITIONS. The term "Interest Rate" as used in this Note shall have the
meaning set forth in Section 2.2 of the Loan Agreement (hereinafter defined).

      SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered
pursuant to that certain Loan and Security Agreement, dated as of the date
hereof (the "Loan Agreement"), among the Borrowers and Lender and is secured by,
among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt,
Assignments of Leases and Rents and Security Agreements, each dated as of the
date hereof (collectively, the "Mortgages"), each executed by the applicable
Borrower, encumbering the fee interests or ground lessee's interests of such
Borrower, as applicable, in and to certain properties more particularly
described therein (collectively, the "Properties"). This Note, the Loan
Agreement, the Mortgages, and all other documents or instruments given by the
Borrowers or any of them or any guarantor and accepted by Lender for purposes of
evidencing, securing, perfecting, or guaranteeing the indebtedness


evidenced by this Note may be referred to as the "Loan Documents." Capitalized
terms used but not otherwise defined herein shall have the respective meanings
given thereto in the Loan Agreement.

      DEFEASANCE.

      A. Notwithstanding anything to the contrary contained in this Note, the
Mortgages or the other Loan Documents, at any time after the earlier to occur of
(x) the second (2nd) anniversary of the date that is the "startup day," within
the meaning of Section 860G of the Internal Revenue Code of 1986, as amended
from time to time or any successor statute (the "Code"), of a "real estate
mortgage investment conduit," within the meaning of Section 860D of the Code,
that holds this Note and (y) forty-eight (48) months after the date of this
Note, the Borrowers shall have the right to defease all or any portion of the
Loan evidenced by this Note with U.S. Government Securities (a "Defeasance");
provided that a partial Defeasance of this Note shall be permitted only in
connection with the release of one or more of the Properties from the lien of
the Mortgages and the other Loan Documents in accordance with Section 11.4 of
the Loan Agreement and upon the satisfaction of the following conditions
precedent (all of which conditions shall become covenants upon occurrence of the
Defeasance):

            (i) The Borrowers shall provide to Lender not less than thirty (30)
days' prior written notice specifying the date on which the Defeasance Deposit
(hereinafter defined) is to be made (the date so specified may be referred to as
the "Defeasance Election Date").

            (ii) The Borrowers shall pay to Lender on the Defeasance Election
Date all interest accrued and unpaid on the outstanding principal amount of this
Note due through the Defeasance Election Date, or through the end of the
Interest Accrual Period during which the Defeasance Election Date occurs if the
Defeasance Election Date is other than a Payment Date, and the scheduled
principal amortization payment due on such Defeasance Election Date, or due upon
the next succeeding Payment Date if the Defeasance Election Date is other than a
Payment Date, together with all other amounts, if any, then due and payable
under this Note, the Mortgages and the other Loan Documents.

            (iii) The Borrowers shall irrevocably deposit with Lender an amount
of U.S. Government Securities (hereinafter defined) which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms will provide, not later than the due dates of the payments owing
hereunder, cash in an amount sufficient, without reinvestment, in the opinion of
a firm of independent certified public accountants reasonably acceptable to
Lender expressed in a written certification thereof delivered to Lender (the
"CPA Certificate"), (1) with respect to a total Defeasance, to pay and discharge
the Scheduled Defeasance Payments (hereinafter defined) for the principal
balance of this Note or (2) with respect to a partial Defeasance in connection
with the release of one or more Properties, to pay and discharge the Scheduled
Defeasance Payments relating to the Release Price for such Property or
Properties (the U.S. Government Securities so deposited together with any
interest or other increase from the issuer of the securities earned thereon, and
any replacements thereof, shall be referred to herein as the "Defeasance
Deposit"). All such U.S. Government Securities, if in registered form, shall be
registered in the name of Lender or its nominee (and, if registered in nominee's
name, endorsed to Lender or in blank) and, if issued in book-entry form, the
name of Lender or its

                                       2



nominee shall appear as the owner of such securities on the books of the Federal
Reserve Bank or other party maintaining such book-entry system.

            (iv) The Borrowers shall cause the following to be delivered to
Lender on or prior to the Defeasance Election Date, all in form and substance
reasonably satisfactory to Lender:

                  (a) a security agreement, in form and substance reasonably
satisfactory to Lender, creating a first priority lien on the Defeasance Deposit
(the "Defeasance Security Agreement");

                  (b) the CPA Certificate;

                  (c) a certificate of the Borrowers certifying that all
requirements for the Defeasance set forth herein have been satisfied;

                  (d) an opinion of counsel for the Borrowers in form and
substance reasonably satisfactory to Lender to the effect that (i) Lender has a
perfected first priority security interest in the Defeasance Deposit, (ii) the
holder of this Note will not recognize additional income, gain or loss for
United States federal income tax purposes as a result of the Defeasance and will
be subject to United States federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if the Defeasance had
not occurred, (iii) any holder, trustee or custodian of this Note which is a
"real estate mortgage investment conduit" within the meaning of Section 860D of
the Code will not fail to maintain its status as such as a result of the
Defeasance and (iv) the Defeasance Security Agreement is enforceable against the
Borrowers in accordance with its terms;

                  (e) evidence in writing from the applicable Rating Agencies
for any Securities backed in whole or in part by this Note, to the effect that
the Defeasance will not result in a downgrading, withdrawal, or qualification of
the ratings in effect immediately prior to such Defeasance for any class of such
then outstanding Securities;

                  (f) evidence reasonably satisfactory to Lender that each of
the Borrowers remains validly existing and in good standing under the laws of
the state where it is organized and, to the extent required by applicable law,
qualified to do business in the state where its respective Property is located;
and the Borrowers shall maintain such existence during the time thereafter when
this Note shall be outstanding (unless a Successor Borrower (hereinafter
defined) assumes the obligations of each of the Borrowers or the Defeasing
Borrower(s) (as hereinafter defined), as the case may be, under this Note); and

                  (g) a certificate of the Borrowers certifying that all of the
representations, and warranties contained in the Loan Agreement and the other
Loan Documents are true and correct in all material respects as of the
Defeasance Election Date and ratifying all of the covenants and obligations of
the Borrowers under the Loan Documents as of such date and such other
certificates, documents or instruments as Lender may reasonably request or as
may be required by the Rating Agencies referred to above, provided that such
certificates, documents or instruments shall not increase the Borrowers'
obligations or decrease the Borrowers' rights under the Loan Documents.

                                       3



            (v) Either (1) each of the Borrowers in the case of a total
Defeasance, or the Defeasing Borrower(s) in the case of a partial Defeasance
shall deliver to Lender a certificate stating that at all times following the
Defeasance, the Borrowers or the Defeasing Borrower(s), as the case may be,
shall have no interest in any assets other than the Defeasance Deposit, or (2)
such Borrower(s) shall satisfy all of the requirements of Section C below.

            (vi) The Borrowers shall pay to Lender all reasonable out-of-pocket
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements) incurred by Lender in connection with the Defeasance.

            (vii) In the event only a portion of the Loan evidenced by this Note
is the subject of the Defeasance in connection with the release of any Lien of
any applicable Mortgage on one or more individual Properties under Section 11.4
of the Loan Agreement, the Borrowers shall execute and deliver all necessary
documents to amend and restate this Note and issue two substitute promissory
notes therefor: one note having a principal balance equal to the defeased
portion of the original Note (the "Defeased Note") and one note having a
principal balance equal to the undefeased portion of the original Note (the
"Undefeased Note"). The Defeased Note and the Undefeased Note shall have
identical terms as the original Note (and the Defeased Note and the Undefeased
Note or Notes shall be cross-defaulted with each other), except for the
principal balance. A Defeased Note cannot be the subject of any further
Defeasance. An Undefeased Note may be the subject of a further Defeasance in
accordance with the terms of this Note and the Loan Agreement (the term "Note",
as used above in this clause (vii) for these purposes, being deemed to refer to
the Undefeased Note that is the subject of further defeasance); provided,
however, that no such partial Defeasance shall take place unless the conditions
hereof and the conditions of Section 11.4 of the Loan Agreement are satisfied.

      B. Upon compliance with the requirements of Section A above and compliance
with the requirements of Section 11.4 of the Loan Agreement, Lender shall cause
each of the Properties, in the case of a total Defeasance, or each Defeased
Property (as hereinafter defined), in the case of a partial Defeasance, to be
released from the lien of the applicable Mortgages and the other applicable Loan
Documents. The obligations under the Loan Documents with respect to the
Properties or each Defeased Property, as the case may be, shall no longer be
applicable, and the Defeasance Deposit shall be the sole source of collateral
securing this Note or the Defeased Note, as the case may be. Lender shall apply
the Defeasance Deposit and the payments received therefrom to the payment of all
scheduled principal and interest payments due on all successive Payment Dates
under this Note or the Defeased Note, as the case may be, after the Defeasance
Election Date to and including the Maturity Date and to payment of the entire
remaining Debt or the entire remaining principal balance, accrued and unpaid
interest and other sums due under the Defeased Note, as the case may be, on the
Maturity Date (collectively, the "Scheduled Defeasance Payments"). The
Borrowers, pursuant to the Defeasance Security Agreement or other appropriate
document, shall direct that the payments received from the Defeasance Deposit
shall be made directly to Lender and applied to satisfy the obligations of the
Borrowers under this Note or the Defeased Note, as the case may be.

      C. If, after the Defeasance, the Borrowers, in the case of a total
Defeasance, or the Defeasing Borrower(s), in the case of a partial Defeasance,
will own any assets other than the Defeasance Deposit, the Borrowers or the
Defeasing Borrower(s), as the case may be, shall

                                       4



establish or designate a single-purpose, bankruptcy-remote successor entity
acceptable to Lender (the "Successor Borrower"), with respect to which a
nonconsolidation opinion reasonably satisfactory in form and substance to Lender
and any applicable Rating Agencies shall be delivered to Lender and such Rating
Agencies, in which case the Borrowers or the Defeasing Borrower(s), as the case
may be, shall transfer and assign to the Successor Borrower all of their
respective obligations, rights and duties under this Note or the Defeased Note,
as the case may be, and the Defeasance Security Agreement, together with the
pledged Defeasance Deposit. The Successor Borrower shall assume the obligations
of the Borrowers or the Defeasing Borrower(s), as the case may be, under this
Note or the Defeased Note, as the case may be, and the Defeasance Security
Agreement, and such Borrower(s) shall be relieved and released of their
respective obligations hereunder and thereunder. Each of the Borrowers or the
applicable Defeasing Borrower(s), as the case may be, shall pay not less than
$1,000 to the Successor Borrower as consideration for assuming such Borrower's
obligations.

      D. As used herein, the following terms shall have the following meanings:

            (i) "Defeased Property" shall mean any Property being released from
the lien of the Mortgage relating to such Property pursuant to a partial
Defeasance in accordance with the provisions of this Note and Section 11.4 of
the Loan Agreement.

            (ii) "U.S. Government Securities" shall mean securities that are (i)
direct obligations of the United States of America for the full and timely
payment of which its full faith and credit is pledged or (ii) obligations of an
entity controlled or supervised by and acting as an agency or instrumentality
and guaranteed as a full faith and credit obligation which shall be fully and
timely paid by the United States of America, which in either case are not
callable or redeemable at the option of the issuer thereof (including a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the United
States Securities Act)) as custodian with respect to any such U.S. Government
Securities or a specific payment of principal of or interest on any such U.S.
Government Securities held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the securities or the specific payment of principal of or interest on
the securities evidenced by such depository receipt.

            (iii) "Defeasing Borrower" shall mean the Borrower owning or
leasing, as the case may be, a Defeased Property.

            (iv) "Release Price" shall have the meaning set forth in the Loan
Agreement.

      E. If, after payment in full of all obligations evidenced by this Note or
any other of the Loan Documents, any of the Defeasance Deposit remains, such
remaining balance of the Defeasance Deposit shall be returned to the Borrowers
(or to the Successor Borrower, as the case may be) or Lender shall assign to the
Borrowers (or the Successor Borrower, as the case may be) all of Lender's right,
title, and interest in the Government Securities constituting the Defeasance
Deposit.

                                       5



      PREPAYMENT; PREPAYMENT CONSIDERATION. The Borrowers may not prepay this
Note in whole or in part at any time except as expressly provided in Section 2.6
of the Loan Agreement.

      EVENTS OF DEFAULT; ACCELERATION. Upon and at any time following the
occurrence of any Event of Default, then at the option of Lender and without
notice, the entire principal amount and all interest accrued and outstanding
hereunder and all other amounts outstanding under any of the Loan Documents
shall at once become due and payable, and Lender may exercise any and all of its
rights and remedies under any of the Loan Documents or pursuant to applicable
law. Lender may so accelerate such obligations and exercise such remedies at any
time after the occurrence of any Event of Default, regardless of any prior
forbearance.

      LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to
non-payment of any principal, interest or other sums due under this Note or
under any of the other Loan Documents shall occur, then the Borrowers shall pay
to Lender, in addition to all sums otherwise due and payable, a late fee in an
amount equal to five percent (5.0%) of such principal, interest or other sums
due hereunder or under any other Loan Document (or, in the case of a partial
payment, the unpaid portion thereof), such late charge to be immediately due and
payable without demand by Lender.

      Upon the occurrence and during the continuance of an Event of Default and
in any event from and after the Maturity Date of the Loan, the outstanding
principal balance of this Note shall bear interest until paid in full at a rate
per annum (the "Default Rate") equal to the sum of (i) four percent (4.0%) and
(ii) the Interest Rate otherwise applicable under this Note.

      The Borrowers agree that such late charges and Default Rate of interest
are reasonable and do not constitute a penalty.

      LAWFUL INTEREST. Notwithstanding any provision to the contrary contained
in this Note, the Loan Agreement or the other Loan Documents, the Borrowers
shall not be required to pay, and Lender shall not be permitted to collect, any
amount of interest in excess of the maximum amount of interest permitted by law
("Excess Interest"). If any Excess Interest is provided for or determined by a
court of competent jurisdiction to have been provided for in this Note, the Loan
Agreement or in any of the other Loan Documents, then in such event: (1) the
provisions of this subsection shall govern and control; (2) the Borrowers shall
not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender
may have received hereunder shall be, at Lender's option, (a) applied as a
credit against either or both of the outstanding principal balance of the Loan
or accrued and unpaid interest thereunder (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any combination of
the foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to time under
applicable law (the "Maximum Rate"), and this Note, the Loan Agreement and the
other Loan Documents shall be deemed to have been and shall be, reformed and
modified to reflect such reduction; and (5) the Borrowers shall not have any
action against Lender for any damages arising out of the payment or collection
of any Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligation is calculated at the Maximum Rate rather than the
applicable rate under this Note or the Loan Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate,

                                       6



the rate of interest payable on such Obligations shall, to the extent permitted
by law, remain at the Maximum Rate until Lender shall have received or accrued
the amount of interest which Lender would have received or accrued during such
period on Obligations had the rate of interest not been limited to the Maximum
Rate during such period. If the Default Rate shall be finally determined to be
unlawful, then the applicable Interest Rate shall be applicable during any time
when the Default Rate would have been applicable hereunder, provided however
that if the Maximum Rate is greater or lesser than the applicable Interest Rate,
then the foregoing provisions of this paragraph shall apply.

      CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the
obligation of the Borrowers or their successors or assigns to pay the
outstanding principal balance of this Note, interest thereon and other amounts
due hereunder and to observe the covenants contained herein, in the Loan
Agreement, the Mortgages or in any other Loan Document, without affecting the
guaranty of any person or entity for payment of the outstanding principal
balance of this Note, without giving notice to or obtaining the consent of any
Borrower or its successors or assigns or any guarantors or indemnitor, and
without liability on the part of Lender, Lender may, at its option, extend the
time for payment of the outstanding principal balance of this Note or any part
thereof, reduce the payments thereon, release anyone liable for payment of all
or a portion of said indebtedness, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.

      Presentment, notice of dishonor, and protest are hereby waived by the
Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note
shall be binding upon the Borrowers and their successors and assigns.

      EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE
INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.

      ASSIGNMENT AND TRANSFER OF NOTE. Subject to the provisions of the Loan
Agreement, Lender shall have the right to assign or transfer, in whole or in
part (including the right to grant participation interests in) any or all of its
obligations under this Note, the Loan Agreement, the Mortgages and any or all of
the other Loan Documents. Lender shall be released of any obligations to the
extent that the same are so assigned or transferred, and the rights and
obligations of "Lender" hereunder shall become the rights and obligations of the
transferee holder.

      LIMITATION ON RECOURSE. Lender's rights of recourse for the obligations of
the Borrowers hereunder are limited in accordance with Article XII of the Loan
Agreement. This

                                       7



provision shall not limit any rights of Lender under the Guaranty of Recourse
Obligations or the Environmental Indemnity, each dated as of the date hereof.

      ATTORNEYS' FEES, COSTS OF COLLECTION. The Borrowers shall pay to Lender on
demand all out-of-pocket costs and expenses, including reasonable attorneys'
fees and expenses, incurred by Lender in collecting the indebtedness arising
hereunder or under any other Loan Documents or secured thereby or otherwise
exercising any rights or remedies of Lender hereunder or thereunder or at law or
in equity or enforcing the obligations of any parties hereto or thereto, or as a
consequence of any breach or default by any Borrower or any guarantor hereunder
or thereunder, or otherwise as a consequence of any right evidenced or secured
by this Note or the Loan Documents. Without limitation, such costs and expenses
to be reimbursed by the Borrowers shall include reasonable attorneys' fees and
expenses incurred in any bankruptcy case or proceeding and in any appeal.

      APPLICABLE LAW. This Note shall be governed by and construed in accordance
with the laws of the State of New York and applicable federal law.

      TIME OF ESSENCE. Time shall be of the essence as to all of the terms,
covenants and conditions of this Note. If the due date of any payment due
hereunder or under any of the other Loan Documents shall fall on a day other
than a Business Day, the Borrowers shall be required to make such payment on the
next succeeding Business Day.

      JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of the
Borrowers hereunder shall be joint and several.

                        [NO ADDITIONAL TEXT ON THIS PAGE]

                                       8



      IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as
of the date first written above.

                    BORROWERS:

                    IMPAC HOTELS I, L.L.C.
                    LODGIAN DENVER LLC
                    LODGIAN HOTELS FIXED I, LLC
                    MACON HOTEL ASSOCIATES, L.L.C.
                    SERVICO NORTHWOODS, INC.

                    By: /s/ Daniel E. Ellis
                       -------------------------------------
                           Name: Daniel E. Ellis
                           Title: Vice President and Secretary, or
                                  Authorized Signatory for each of the entities
                                  listed above


                                   SCHEDULE 1

                      MONTHLY DEBT SERVICE PAYMENT AMOUNTS



                                              SCHEDULED                 SCHEDULED                   TOTAL
  PERIOD              DATE                    INTEREST                  PRINCIPAL                  PAYMENT
  ------              ----                    ---------                 ---------                  -------
                                                                                      
     1               8/1/2004                 361,338.74                 72,524.97                433,863.71
     2               9/1/2004                 360,927.99                 72,935.72                433,863.71
     3              10/1/2004                 348,885.40                 84,978.31                433,863.71
     4              11/1/2004                 360,033.64                 73,830.07                433,863.71
     5              12/1/2004                 348,015.00                 85,848.71                433,863.71
     6               1/1/2005                 359,129.29                 74,734.42                433,863.71
     7               2/1/2005                 358,706.03                 75,157.68                433,863.71
     8               3/1/2005                 323,608.08                110,255.63                433,863.71
     9               4/1/2005                 357,655.94                 76,207.77                433,863.71
    10               5/1/2005                 345,700.97                 88,162.74                433,863.71
    11               6/1/2005                 356,725.02                 77,138.69                433,863.71
    12               7/1/2005                 344,794.98                 89,068.73                433,863.71
    13               8/1/2005                 355,783.70                 78,080.01                433,863.71
    14               9/1/2005                 355,341.49                 78,522.22                433,863.71
    15              10/1/2005                 343,448.50                 90,415.21                433,863.71
    16              11/1/2005                 354,384.71                 79,479.00                433,863.71
    17              12/1/2005                 342,517.34                 91,346.37                433,863.71
    18               1/1/2006                 353,417.24                 80,446.47                433,863.71
    19               2/1/2006                 352,961.63                 80,902.08                433,863.71
    20               3/1/2006                 318,390.20                115,473.51                433,863.71
    21               4/1/2006                 351,849.45                 82,014.26                433,863.71
    22               5/1/2006                 340,049.96                 93,813.75                433,863.71
    23               6/1/2006                 350,853.64                 83,010.07                433,863.71
    24               7/1/2006                 339,080.82                 94,782.89                433,863.71
    25               8/1/2006                 349,846.71                 84,017.00                433,863.71
    26               9/1/2006                 349,370.87                 84,492.84                433,863.71
    27              10/1/2006                 337,637.75                 96,225.96                433,863.71
    28              11/1/2006                 348,347.37                 85,516.34                433,863.71
    29              12/1/2006                 336,641.65                 97,222.06                433,863.71
    30               1/1/2007                 347,312.42                 86,551.29                433,863.71
    31               2/1/2007                 346,822.24                 87,041.47                433,863.71
    32               3/1/2007                 312,813.54                121,050.17                433,863.71
    33               4/1/2007                 345,643.70                 88,220.01                433,863.71
    34               5/1/2007                 334,010.39                 99,853.32                433,863.71
    35               6/1/2007                 344,578.55                 89,285.16                433,863.71
    36               7/1/2007                 332,973.75                100,889.96                433,863.71
    37               8/1/2007                 343,501.48                 90,362.23                433,863.71
    38               9/1/2007                 342,989.72                 90,873.99                433,863.71
    39              10/1/2007                 331,427.47                102,436.24                433,863.71
    40              11/1/2007                 341,894.90                 91,968.81                433,863.71
    41              12/1/2007                 330,361.96                103,501.75                433,863.71
    42               1/1/2008                 340,787.84                 93,075.87                433,863.71
    43               2/1/2008                 340,260.71                 93,603.00                433,863.71
    44               3/1/2008                 317,812.48                116,051.23                433,863.71
    45               4/1/2008                 339,073.32                 94,790.39                433,863.71
    46               5/1/2008                 327,615.94                106,247.77                433,863.71
    47               6/1/2008                 337,934.74                 95,928.97                433,863.71
    48               7/1/2008                 326,507.85                107,355.86                433,863.71
    49               8/1/2008                 336,783.43                 97,080.28                433,863.71
    50               9/1/2008                 336,233.61                 97,630.10                433,863.71
    51              10/1/2008                 324,852.27                109,011.44                433,863.71
    52              11/1/2008                 335,063.29                 98,800.42                433,863.71
    53              12/1/2008                 323,713.29                110,150.42                433,863.71
    54               1/1/2009                 333,879.89                 99,983.82                433,863.71
    55               2/1/2009                 333,313.63                100,550.08                433,863.71
    56               3/1/2009                 300,543.12                133,320.59                433,863.71
    57               4/1/2009                 331,989.10                101,874.61                433,863.71
    58               5/1/2009                 320,721.42                113,142.29                433,863.71
    59               6/1/2009                 330,771.35                103,092.36                433,863.71
    60               7/1/2009                 319,536.27             58,300,672.61             58,620,208.88

EX-10.2.3

                                                                  EXHIBIT 10.2.3

                        GUARANTY OF RECOURSE OBLIGATIONS

            This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of
June 25, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"),
having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326,
in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080 (together
with its successors, transferees and assigns, "LENDER").

                                R E C I T A L S:

            A. Pursuant to that certain Loan and Security Agreement, dated as of
the date hereof (as the same may be amended, modified, supplemented or restated
from time to time, the "LOAN AGREEMENT"), among the Borrowers named therein
(each, a "BORROWER", and collectively, "BORROWERS"), and Lender, Lender has
agreed to make a loan to Borrowers in the aggregate original principal amount of
up to Sixty Three Million Eight Hundred and One Thousand and No/100
Dollars($63,801,000.00) (the "LOAN"), subject to the terms and conditions of the
Loan Agreement;

            B. As a condition to Lender's making the Loan, Lender is requiring
that Guarantor execute and deliver to Lender this Guaranty; and

            C. Guarantor hereby acknowledges that Guarantor holds a direct
and/or indirect ownership interest in each Borrower and that Guarantor will
materially benefit from Lender's agreeing to make the Loan.

            NOW, THEREFORE, in consideration of the premises set forth herein
and as an inducement for and in consideration of the agreement of Lender to make
the Loan pursuant to the Loan Agreement and the other Loan Documents, Guarantor
hereby agrees, covenants, represents and warrants to Lender as follows:

            SECTION 1. DEFINITIONS. All capitalized terms used and not defined
herein shall have the respective meanings given such terms in the Loan
Agreement.

            SECTION 2. GUARANTY.

            (a) Guarantor (but not its members, partners, employees,
shareholders, agents, directors or officers) hereby irrevocably, absolutely and
unconditionally assumes liability for, guarantees payment to Lender of, and
agrees to pay, protect, defend, indemnify and save harmless Lender from and
against any and all Guaranteed Recourse Obligations of Borrowers (as hereinafter
defined).

The obligations which are the subject of the guaranty referred to in this
Section 2 are hereinafter collectively referred to as the "GUARANTEED
OBLIGATIONS".





            (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF BORROWERS" as used
in this Guaranty shall mean all obligations and liabilities of Borrowers for
which Borrowers shall be personally liable under the provisions of Section 12.2
of the Loan Agreement.

            (c) All sums payable to Lender under this Guaranty shall be payable
on demand and without reduction for any offset, claim, counterclaim or defense.

            SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby
represents and warrants to Lender as follows (which representations and
warranties shall be given as of the date hereof and shall survive the execution
and delivery of this Guaranty):

            (a) DUE EXECUTION. This Guaranty has been duly executed and
delivered by Guarantor.

            (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and
binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally, or application of general principles
of equity in any legal proceeding.

            (c) NO VIOLATION. The execution, delivery and performance by
Guarantor of its obligations under this Guaranty do not violate any law,
regulation, order, writ, injunction or decree of any court or governmental body,
agency or other instrumentality applicable to Guarantor, or result in a breach
of any of the terms, conditions or provisions of, or constitute a default under,
or result in the creation or imposition of any mortgage, lien, charge or
encumbrance of any nature whatsoever upon any of the assets of Guarantor
pursuant to the terms of any mortgage, indenture, agreement or instrument to
which Guarantor is a party or by which it or any of its properties is bound.
Guarantor is not in default under any other guaranty which it has provided to
Lender.

            (d) NO LITIGATION. Except as disclosed on Schedule 4.9 to the Loan
Agreement, there are no actions, suits or proceedings at law or at equity,
pending or, to Guarantor's knowledge, threatened against or affecting Guarantor
or which involve or could reasonably be expected to involve the validity or
enforceability of this Guaranty or which might materially adversely affect the
financial condition of Guarantor or the ability of Guarantor to perform any of
its obligations under this Guaranty. Guarantor is not in default beyond any
applicable grace or cure period with respect to any order, writ, injunction,
decree or demand of any Governmental Authority which might materially adversely
affect the financial condition of Guarantor or the ability of Guarantor to
perform any of its obligations under this Guaranty.

            (e) CONSENTS. All consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, all Governmental Authorities
(collectively, the "CONSENTS") that are required in connection with the valid
execution, delivery and performance by Guarantor of this Guaranty have been
obtained and Guarantor agrees that all Consents required in connection with the
carrying out or performance of any of Guarantor's obligations under this
Guaranty will be obtained when required.

            (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial
statements of Guarantor heretofore delivered to Lender fairly present the
financial condition of Guarantor as of

                                       2


the respective dates thereof, and no materially adverse change has occurred in
the financial conditions reflected therein since the respective dates thereof.
None of the aforesaid financial statements or any certificate or statement
furnished to Lender by or on behalf of Guarantor in connection with the
transactions contemplated hereby, and none of the representations and warranties
in this Guaranty contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein not materially misleading. Guarantor is not insolvent within
the meaning of the Bankruptcy Code or any other applicable law, code or
regulation and the execution, delivery and performance of this Guaranty will not
render Guarantor insolvent.

            SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the
benefit of Lender that Guarantor will deliver to Lender each of the financial
statements required to be delivered pursuant to Section 5.1 of the Loan
Agreement.

            SECTION 5. INTENTIONALLY DELETED.

            SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR.

            (a) The obligations of Guarantor hereunder shall be irrevocable,
absolute and unconditional, irrespective of the validity, regularity or
enforceability, in whole or in part, of the Note, the Loan Agreement, the
Mortgages or the other Loan Documents or any provision thereof, or the absence
of any action to enforce the same, any waiver or consent with respect to any
provision thereof, the recovery of any judgment against any Borrower, Guarantor
or any other Person or any action to enforce the same, any failure or delay in
the enforcement of the obligations of Borrowers under the Note, the Loan
Agreement, the Mortgages or any other Loan Documents or Guarantor under this
Guaranty, or any setoff, counterclaim, and irrespective of any other
circumstances which might otherwise limit recourse against Guarantor by Lender
or constitute a legal or equitable discharge or defense of a guarantor or
surety. Lender may enforce the obligations of Guarantor under this Guaranty by a
proceeding at law, in equity or otherwise, independent of any loan foreclosure
or similar proceeding or any deficiency action against Borrowers or any other
Person at any time, either before or after an action against the Properties or
any of them or any part thereof, Borrowers or any other Person. THIS GUARANTY IS
A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION.
Guarantor waives diligence, notice of acceptance of this Guaranty, filing of
claims with any court, any proceeding to enforce any provision of the Note, the
Loan Agreement, the Mortgages or any other Loan Documents, against Guarantor,
Borrowers or any other Person, any right to require a proceeding first against
Borrowers or any other Person, or to exhaust any security (including, without
limitation, the Properties or any of them or any part thereof) for the
performance of the Guaranteed Obligations or any other obligations of Borrowers
or any other Person, or any protest, presentment, notice of default (except as
may be expressly required under the Loan Documents) or other notice or demand
whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not
be discharged of its obligations hereunder.

            (b) The obligations of Guarantor under this Guaranty, and the rights
of Lender to enforce the same by proceedings, whether by action at law, suit in
equity or otherwise, shall not be in any way affected by any of the following:

                                       3


                  (i) any insolvency, bankruptcy, liquidation, reorganization,
      readjustment, composition, dissolution, receivership, conservatorship,
      winding up or other similar proceeding involving or affecting any
      Borrower, any Property or any part thereof, Guarantor or any other Person;

                  (ii) any failure by Lender or any other Person, whether or not
      without fault on its part, to perform or comply with any of the terms of
      the Loan Agreement, or any other Loan Documents, or any document or
      instrument relating thereto;

                  (iii) except (A) with respect to activities occurring after
      the date of a Permitted Assumption or, (B) activities relating to a
      Released Property after the date of a Release with respect thereto, the
      sale, transfer or conveyance of any Property or any interest therein to
      any Person, whether now or hereafter having or acquiring an interest in
      any Property or any interest therein and whether or not pursuant to any
      foreclosure, trustee sale or similar proceeding against any Borrower or
      any Property or any interest therein;

                  (iv) the conveyance to Lender, any Affiliate of Lender or
      Lender's nominee of any Property or any interest therein by a deed-in-lieu
      of foreclosure;

                  (v) the release of any Borrower or any other Person from the
      performance or observance of any of the agreements, covenants, terms or
      conditions contained in any of the Loan Documents by operation of law or
      otherwise;

                  (vi) the release in whole or in part of any collateral for any
      or all Guaranteed Obligations or for the Loan or any portion thereof; or

                  (vii) the exercise by Mezzanine Lender of any remedies made
      available to Mezzanine Lender pursuant to the terms of the Mezzanine Loan
      Documents, including, without limitation, foreclosure or similar remedies
      under any pledge agreement encumbering Mezzanine Borrower's interest in
      any General Partner, any Member, and/or any Borrower except with respect
      to actions taken by the Mezzanine Lender following the Mezzanine Lender
      succeeding to the interests of the Mezzanine Borrowers in and to the
      Borrowers.

            (c) Except as otherwise specifically provided in this Guaranty,
Guarantor hereby expressly and irrevocably waives all defenses in an action
brought by Lender to enforce this Guaranty based on claims of waiver, release,
surrender, alteration or compromise and all setoffs, reductions, or impairments,
whether arising hereunder or otherwise.

            (d) Lender may deal with Borrowers and Affiliates of Borrowers in
the same manner and as freely as if this Guaranty did not exist and shall be
entitled, among other things, to grant Borrowers or any other Person such
extension or extensions of time to perform any act or acts as may be deemed
advisable by Lender, at any time and from time to time, without terminating,
affecting or impairing the validity of this Guaranty or the obligations of
Guarantor hereunder.

            (e) No compromise, alteration, amendment, modification, extension,
renewal, release or other change of, or waiver, consent, delay, omission,
failure to act or other action with

                                       4


respect to, any liability or obligation under or with respect to, or of any of
the terms, covenants or conditions of, the Note, the Loan Agreement, the
Mortgages or the other Loan Documents or any amendment, modification or other
change of any legal requirement shall in any way alter, impair or affect any of
the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan
Documents are modified with Lender's consent, the Guaranteed Obligations shall
automatically be deemed modified to include such modifications.

            (f) Lender may proceed to protect and enforce any or all of its
rights under this Guaranty by suit in equity or action at law, whether for the
specific performance of any covenants or agreements contained in this Guaranty
or otherwise, or to take any action authorized or permitted under applicable
law, and shall be entitled to require and enforce the performance of all acts
and things required to be performed hereunder by Guarantor. Each and every
remedy of Lender shall, to the extent permitted by law, be cumulative and shall
be in addition to any other remedy given hereunder or now or hereafter existing
at law or in equity.

            (g) No waiver shall be deemed to have been made by Lender of any
rights hereunder unless the same shall be in writing and signed by Lender, and
any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of Lender or the obligations of
Guarantor to Lender in any other respect or at any other time.

            (h) At the option of Lender, Guarantor may be joined in any action
or proceeding commenced by Lender against Borrowers in connection with or based
upon the Note, the Loan Agreement, the Mortgages or any other Loan Documents and
recovery may be had against Guarantor in such action or proceeding or in any
independent action or proceeding against Guarantor to the extent of Guarantor's
liability hereunder, without any requirement that Lender first assert, prosecute
or exhaust any remedy or claim against Borrowers or any other Person, or any
security for the obligations of Borrowers or any other Person.

            (i) Guarantor agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
is made by Borrowers or Guarantor to Lender and such payment is rescinded or
must otherwise be returned by Lender (as determined by Lender in its sole and
absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar proceeding involving or affecting any Borrower or Guarantor,
all as though such payment had not been made.

            (j) In the event that Guarantor shall advance or become obligated to
pay any sums under this Guaranty or in connection with the Guaranteed
Obligations or in the event that for any reason whatsoever any Borrower or any
subsequent owner of any Property or any part thereof is now, or shall hereafter
become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums
and of such indebtedness and all interest thereon shall at all times be
subordinate as to the lien, the time of payment and in all other respects to all
sums, including principal and interest and other amounts, at any time owed to
Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to
enforce or receive payment thereof until all principal, interest and other sums
due pursuant to the Loan Documents have been paid in full. Nothing herein
contained is intended or shall be construed to give Guarantor any right of
subrogation in or under the Loan Documents or any right to participate in any
way therein, or in the right, title or interest of Lender

                                       5


in or to any collateral for the Loan, notwithstanding any payments made by
Guarantor under this Guaranty, until the actual and irrevocable receipt by
Lender of payment in full of all principal, interest and other sums due with
respect to the Loan or otherwise payable under the Loan Documents. If any amount
shall be paid to Guarantor on account of such subrogation rights at any time
when any such sums due and owing to Lender shall not have been fully paid, such
amount shall be paid by Guarantor to Lender for credit and application against
such sums due and owing to Lender. The foregoing shall not prohibit Borrowers
from using the proceeds of the Loan for any permitted use under the Loan
Agreement, including, without limitation, the making of distributions to
Guarantor.

            (k) Guarantor's obligations hereunder shall survive a foreclosure,
delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or
similar proceeding involving any Property or any part thereof and the exercise
by Lender of any of all of its remedies pursuant to the Loan Documents.
Notwithstanding the foregoing to the contrary, the obligations and liabilities
of Guarantor under this Guaranty shall survive for a period of two (2) years
following payment in full of the Obligations in accordance with the terms of the
Loan Documents, provided, however, in the event that any Guaranteed Obligations
or liabilities of the Guarantor under this Guaranty shall have arisen prior to
the expiration of such period, then in any such event the foregoing survival
period shall not apply and the obligations and liabilities of Guarantor
hereunder shall survive.

            SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. THIS INSTRUMENT REPRESENTS
THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER
HEREOF. THE TERMS OF THIS GUARANTY SHALL NOT BE WAIVED, ALTERED, MODIFIED,
AMENDED, SUPPLEMENTED OR TERMINATED IN ANY MANNER WHATSOEVER EXCEPT BY WRITTEN
INSTRUMENT SIGNED BY LENDER AND GUARANTOR.

            SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding
upon Guarantor, and its successors and assigns, may not be assigned or delegated
by Guarantor and shall inure to the benefit of Lender and its successors and
assigns. Lender shall have the right to assign this Guaranty and the obligations
hereunder in connection with any assignment or transfer of all or any portion of
the Loan or any interest therein. All references to "Lender" hereunder shall be
deemed to include the successors and assigns of Lender and the parties hereto
acknowledge that actions taken by Lender hereunder may be taken by Lender's
agents and by the agents of the successors and assigns of Lender.

            SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty
shall be governed by, and construed in accordance with, the substantive laws of
the State of New York. Guarantor irrevocably (a) agrees that any suit, action or
other legal proceeding arising out of or relating to this Guaranty may be
brought in a court of record in the City and County of New York or in the Courts
of the United States of America located in the Southern District of New York,
(b) consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which it may have to the laying of venue
of any such suit, action or proceeding in any of such courts and any claim that
any such suit, action or proceeding has been brought in an inconvenient forum.
Guarantor irrevocably consents to the service of any and all process in any such
suit, action or proceeding by service of copies of such process to Guarantor at
its address set forth on the first page hereof. Nothing in this Section 9,
however, shall affect the right of Lender to serve legal process in any other
manner permitted by law or affect the right of

                                       6


Lender to bring any suit, action or proceeding against Guarantor or its property
in the courts of any other jurisdictions.

            SECTION 10. SECTION HEADINGS. The headings of the sections and
paragraphs of this Guaranty have been inserted for convenience of reference only
and shall in no way define, modify, limit or amplify any of the terms or
provisions hereof.

            SECTION 11. SEVERABILITY. Any provision of this Guaranty which may
be determined by any competent authority to be prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Guarantor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.

            SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND LENDER
HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING
ARISING HEREUNDER OR IN CONNECTION THEREWITH.

            SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL
LIABILITY.

            (a) The obligations of Guarantor hereunder are separate and distinct
from, and in addition to, the obligations of Guarantor now or hereafter arising
under the other guaranties pursuant to which Guarantor has guaranteed the
payment and performance of certain other obligations of Borrowers described
therein.

            (b) If there is more than one entity comprising Guarantor, all
references to Guarantor herein shall be to Guarantor (but not its members,
partners, employees, shareholders, agents, directors or officers) or any one or
more of them. All obligations and liabilities of Guarantor hereunder are in
addition to, not in lieu of and are independent of: (i) all obligations of
Borrowers under any other Loan Document, including the Note and the Loan
Agreement; and (ii) any obligation of Guarantor under any other Loan Document to
which Guarantor is a party.

            (c) If there is more than one entity comprising Guarantor, all
obligations of Guarantor hereunder shall be joint and several.

            SECTION 14. NOTICES. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder to
Lender or Guarantor or which are given to Lender or Guarantor with respect to
this Guaranty shall be in writing and shall be delivered to Lender at the
address set forth in Section 14.5 of the Loan Agreement and to Guarantor at the
address set forth on the first page hereof, each in the manner provided in
Section 14.5 of the Loan Agreement. Guarantor agrees to give Lender not less
than ten (10) days' prior written notice of any change in the location of
Guarantor's principal place of business.

            SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its
execution hereof acknowledges receipt of true copies of all of the Loan
Documents, the terms and conditions of which are hereby incorporated herein by
reference.

                                       7


            SECTION 16. INTEREST; EXPENSES.

            (a) If Guarantor fails to pay all or any sums due hereunder within
ten (10) days of demand by Lender, the amount of such sums payable by Guarantor
to Lender shall bear interest from the date of demand until paid at the Default
Rate in effect from time to time.

            (b) Guarantor hereby agrees to pay all reasonable out of pocket
costs, charges and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, that may be incurred by Lender in enforcing
the covenants, agreements, obligations and liabilities of Guarantor under this
Guaranty.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       8


            IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the
date first above written.

                                          GUARANTOR:

                                          LODGIAN, INC., a Delaware
                                          corporation

                                          By: /s/ Daniel E. Ellis
                                              ----------------------------------
                                                 Name: Daniel E. Ellis
                                                 Title: Senior Vice-President

EX-10.2.4

                                                                  EXHIBIT 10.2.4

                                 CROSS-GUARANTY

            THIS CROSS-GUARANTY (this "Agreement" or "Guaranty"), made as of
June 25, 2004, from the parties listed as Guarantors on the signature pages
hereto (collectively, the "Guarantors"), each having an address at c/o Lodgian,
3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 to MERRILL LYNCH
MORTGAGE LENDING, INC., a Delaware corporation, having an office at Four World
Financial Center, 16th Floor, 250 Vesey Street, New York, New York 10080
(together with its successors and assigns, "Lender").

                                   WITNESSETH:

            WHEREAS, Lender has agreed to make three (3) loans (respectively,
the "Pool 2 Loan," "Pool 3 Loan," and "Pool 4 Loan," and collectively, the
"Loans") to the respective borrowers described on Exhibit A (respectively, the
"Pool 2 Borrowers," "Pool 3 Borrowers," and "Pool 4 Borrowers," and
collectively, the "Borrowers"), in the amounts set forth on Exhibit A; and

            WHEREAS, to evidence the respective Loans, the respective Borrowers
have executed and delivered those certain Promissory Notes, each dated as of the
date hereof, in the principal amounts of the respective Loans (respectively,
"Note 2," "Note 3" and "Note 4," and collectively, the "Notes"), pursuant to
those certain Loan and Security Agreements, each dated as of the date hereof,
among the respective Borrowers and Lender as more particularly described on
Exhibit A (respectively, "Loan Agreement 2," "Loan Agreement 3" and "Loan
Agreement 4," and collectively, the "Loan Agreements"); and

            WHEREAS, capitalized terms used but not otherwise defined herein
shall have the respective meanings given thereto in the respective Loan
Agreements or Guarantor Loan Agreement (hereinafter defined), as applicable; and

            WHEREAS, the Notes shall be secured by, among other things, the
Mortgages encumbering the Properties; and

            WHEREAS, simultaneously with the making of the Loans, Guarantors are
obtaining a loan in the amount of $63,801,000 (the "Guarantor Loan") from Lender
pursuant to that certain Loan and Security Agreement, dated as of the date
hereof, by and between the Guarantors and Lender (the "Guarantor Loan
Agreement"; and together with the other documents and agreements evidencing
and/or securing the Guarantor Loan, collectively, the "Guarantor Loan
Documents"); and

            WHEREAS, it is a condition precedent to Lender making the Guarantor
Loan to Guarantors that Guarantors, among other things, guaranty the Loans
pursuant to this Guaranty and grant to Lender Mortgages on the Properties (as
defined in the Guarantor Loan Agreement, and hereinafter referred to as the
"Guarantor Properties") as security for their obligations hereunder; and

            WHEREAS, Guarantors shall derive substantial economic benefits from
the simultaneous making of the Guarantor Loan and Loans by Lender to Guarantors
and Borrowers, respectively; and

            WHEREAS, as a condition precedent to the making of the Loans,
Borrowers have agreed to procure and deliver to Lender this Agreement; and

Cross-Guaranty (Fixed 1)



            WHEREAS, Lender has declined to make the Loans or the Guarantor Loan
unless this Agreement is duly executed by Guarantors and delivered to Lender.

            NOW, THEREFORE, in consideration for, and as an inducement to,
Lender's making the Loans and the Guarantor Loan, and for other good and
valuable consideration the legal sufficiency of which and receipt thereof are
hereby acknowledged, and notwithstanding any provision to the contrary contained
in the Guarantor Loan Agreement, the Guarantor Loan Documents, the Loan
Agreements, the Notes, the Mortgages or any of the other Loan Documents, but
subject to the provisions of Article XII of the Guarantor Loan Agreement, Lender
and Guarantors do hereby agree as follows:

            1.    Guarantors, on behalf of themselves and their successors and
assigns (collectively, "Successors") do hereby absolutely, unconditionally,
irrevocably and personally: (i) guaranty to Lender the full and prompt payment
and performance when due of the Loans and all other Obligations of the Borrowers
under the Loan Agreements and (ii) agree to reimburse Lender for, and hold
Lender harmless from and against, any and all losses, damages, claims, expenses,
deficiencies, liabilities and costs (including, without limitation, reasonable
attorneys' fees and disbursements) incurred, suffered or sustained by Lender
and/or its successors and assigns as a result of or arising out of, in
connection with or resulting from, the enforcement of this Agreement against
Guarantors (the obligations of Guarantors under clauses (i) and (ii) above being
referred to hereinafter, collectively, as "Guarantors' Obligations").

            Notwithstanding the foregoing, or anything else to the contrary
contained herein, in the event that any of the Guarantors shall become an
Excluded Borrower and the Guarantor Loan shall become an Excluded Loan pursuant
to Lender's election under Section 2.12(G) of the Guarantor Loan Agreement to
cause any of the Loans to no longer be secured by the Guarantor Properties, this
Guaranty shall automatically terminate and shall be of no further force or
effect.

            2.    It is agreed that the obligations of Guarantors hereunder
shall be primary and this Agreement shall be enforceable against Guarantors and
their Successors without the necessity for any suit or proceeding of any kind or
nature whatsoever brought by Lender against Borrowers or their respective
successors or assigns or any other party or against any security for the payment
of the Guarantors' Obligations and without the necessity of any notice of
non-payment or non-observance or of any notice of acceptance of this Agreement
or of any notice of demand to which Guarantors might otherwise be entitled
(including, without limitation, diligence, presentment, notice of maturity,
extension of time, protest, notice of dishonor or default, change in nature or
form of the Guarantors' Obligations, acceptance of further security, release of
further security, imposition or agreement arrived at as to the amount of or the
terms of the Guarantors' Obligations, notice of adverse change in Borrowers'
financial condition and any other fact that might materially increase the risk
to Guarantors), all of which Guarantors hereby expressly waive. Guarantors
hereby expressly agree that the validity of this Agreement and the obligations
of Guarantors hereunder shall in no way be terminated, affected, diminished,
modified or impaired by reason of the assertion of or the failure to assert by
Lender against Borrowers, or their successors or assigns, any of the rights or
remedies reserved to Lender pursuant to the provisions of the Guarantor Loan
Agreement, the Loan Agreements, the Notes, the Mortgages or any other Loan
Documents.

            3.    Guarantors waive, and covenant and agree that they will not at
any time insist upon, plead or in any manner whatsoever claim or take the
benefit or advantage of, any and all appraisal, valuation, stay, extension,
marshaling-of-assets or redemption laws, or right of homestead or exemption,
whether now or at any time hereafter in force, that may delay, prevent or
otherwise affect the performance by Guarantors of their obligations under, or
the enforcement by Lender of, this Agreement. Guarantors further covenant and
agree not to set up or claim any defense, counterclaim, cross-claim, offset,
set-off, right of recoupment, or other objection of any kind to any action, suit
or proceeding in law, equity or otherwise, or to any demand or claim that may be
instituted or made by Lender hereunder other than the

                                       2

Cross-Guaranty (Fixed 1)



defense of the actual timely performance of Guarantors' Obligations hereunder.
Guarantors represent, warrant and agree that, as of the date hereof, their
obligations under this Agreement are not subject to any counterclaims,
cross-claims, rights of recoupment, offsets or affirmative or other defenses of
any kind against Lender.

            4.    Guarantors agree that any notice or directive given at any
time by Guarantors to Lender that is inconsistent with any waiver contained in
this Agreement shall be void and may be ignored by Lender, and, in addition, may
not be pleaded or introduced as evidence in any litigation relating to this
Agreement for the reason that such pleading or introduction would be at variance
with the written terms of this Agreement, unless Lender has specifically agreed
otherwise in a writing, signed by a duly authorized officer. Guarantors
specifically acknowledge and agree that the foregoing waivers are of the essence
of the Loan transaction and that, but for this Agreement and such waivers,
Lender would not make the Loans to Borrowers.

            5.    The provisions of this Agreement are for the benefit of Lender
and its successors and assigns, and nothing herein contained shall impair, as
between Borrowers and Lender, the obligations of Borrowers under the Loan
Agreements, the Notes, the Mortgages or any of the other Loan Documents.

            6.    This Agreement shall be a continuing guaranty and the
liability of Guarantors hereunder shall in no way be terminated, affected,
modified, impaired or diminished (to the extent permitted by law) by reason of
the happening, from time to time, of any of the following, although without
notice or the further consent of Guarantors:

            (a)   any assignment, amendment, modification or waiver of or change
      in any of the terms, covenants, conditions or provisions of the Guarantor
      Loan Agreement, the Loan Agreements, the Notes, the Mortgages or any of
      the other Loan Documents or the invalidity or unenforceability of any of
      the foregoing; or

            (b)   any extension of time that may be granted by Lender to
      Borrowers, Guarantors or Guarantors' Successors; or

            (c)   any action that Lender or Borrowers may take or fail to take
      under or in respect of any of the Loan Documents or by reason of any
      waiver of, or failure to enforce any of the rights, remedies, powers or
      privileges available to Lender under this Agreement or available to Lender
      at law, equity or otherwise, or any action on the part of Lender or
      Borrowers granting indulgence or extension in any form whatsoever; or

            (d)   any dealing, transaction, matter or thing occurring between
      Lender, Borrowers, Guarantors or Guarantors' Successors; or

            (e)   any sale, exchange, release, or other disposition of any
      property pledged, Mortgaged or conveyed, or any property in which Lender
      has been granted a lien or security interest to secure any indebtedness of
      Borrowers to Lender; or

            (f)   any release of any person or entity who may be liable in any
      manner for the payment and collection of any amounts owed by Borrowers to
      Lender (including the other Guarantors); or

            (g)   the application of any sums by whomsoever paid or however
      realized to any amounts owing by Borrowers to Lender in such manner as
      Lender shall determine in its sole discretion; or

                                        3

Cross-Guaranty (Fixed 1)



            (h)   any Event of Default (as such term is defined in the Guarantor
      Loan Agreement and the Loan Agreements), whether or not Lender has
      exercised any of its rights and remedies as set forth in the Guarantor
      Loan Agreement or the Mortgages upon the happening of any such Event of
      Default; or

            (i)   Borrowers' and/or Guarantors' voluntary or involuntary
      liquidation, dissolution, sale of all or substantially all of their
      respective assets and liabilities, appointment of a trustee, receiver,
      liquidator, sequestrator or conservator for all or any part of Borrowers'
      or Guarantors' assets, insolvency, bankruptcy, assignment for the benefit
      of creditors, reorganization, arrangement, composition or readjustment, or
      the commencement of other similar proceedings affecting Borrowers or
      Guarantors or any of the assets of either of them, including, without
      limitation, (A) the release or discharge of Borrowers from the payment and
      performance of their obligations under any of the Loan Documents by
      operation of law, or (B) the impairment, limitation or modification of the
      liability of Borrowers, their partners or Guarantors in bankruptcy, or of
      any remedy for the enforcement of the Guarantors' Obligations, under any
      of the Loan Documents, or Guarantors' liability under this Agreement,
      resulting from the operation of any present or future provisions of the
      Federal Bankruptcy Code or other present or future federal, state or
      applicable statute of law or from the decision in any court; or

            (j)   any change in or termination of the ownership interest of
      Guarantors in Borrowers (whether direct or indirect); or

            (k)   any conveyance of the Mortgaged Properties, whether or not
      pursuant to a foreclosure sale, a deed in lieu of foreclosure, a transfer
      through bankruptcy, or otherwise.

            7.    Guarantors acknowledge that this Guaranty and Guarantors'
Obligations are and shall at all times continue to be absolute, unconditional
and irrevocable in all respects, and shall at all times be valid and enforceable
irrespective of any other agreement or circumstances of any nature whatsoever
that might otherwise constitute a defense to this Guaranty or the obligations of
any other person or party (including, without limitation, Borrower or any other
guarantor) relating to this Guaranty or the obligations of Guarantors hereunder.

            8.    Guarantors agree that if at any time all or any part of any
payment at any time received by Lender from Borrowers or Guarantors under or
with respect to this Agreement is or must be rescinded or returned by Lender for
any reason whatsoever (including, without limitation, the insolvency, bankruptcy
or reorganization of Borrowers or Guarantors), then Guarantors' Obligations
hereunder shall, to the extent of the payment rescinded or returned, be deemed
to have continued in existence notwithstanding such previous receipt by Lender,
and Guarantors' Obligations hereunder shall continue to be effective or
reinstated, as the case may be, as to such payment, as though such previous
payment to Lender had never been made.

            9.    Until repayment of the Indebtedness (as such term is defined
in the Guarantor Loan Agreement and the Loan Agreements) and satisfaction of all
of the obligations under the Guarantor Loan Agreement, Guarantors and each of
them (a) shall have no right of subrogation against Borrowers, general partner
of any Borrower that is a limited partnership or any other Guarantor by reason
of any payments or acts of performance by a Guarantor in compliance with the
obligations of a Guarantor hereunder; (b) shall have no right of indemnity,
contribution, or any other right or cause of action whatsoever under law or
equity against any other Guarantor by reason of any payments or acts of
performance by a Guarantor in compliance with the obligations of a Guarantor
hereunder; (c) hereby waive any right to enforce any remedy that any Guarantors
now or hereafter shall have against Borrowers, general partner of any Borrower
that is a limited partnership or any other Guarantor by reason of any one

                                        4

Cross-Guaranty (Fixed 1)



or more payments or acts of performance in compliance with the obligations of a
Guarantor hereunder; (d) shall subordinate any liability or indebtedness of
Borrowers, general partner of any Borrower that is a limited partnership or any
Guarantor now or hereafter held by any Guarantor or any affiliate of a Guarantor
to the obligations of Borrowers, general partner of any Borrower that is a
limited partnership or Guarantor to Lender under the Loan Documents; and (e)
shall not file, assert or receive payment on any claim, whether now existing or
hereafter arising, against Borrowers, general partner of any Borrower that is a
limited partnership or any Guarantor in the event of the commencement of a case
by or against Borrowers, general partner of any Borrower that is a limited
partnership or any Guarantor under federal or state insolvency laws.

            10.   Guarantors represent and warrant to Lender, with the knowledge
that Lender is relying upon the same, as follows:

            (a)   Guarantors are solvent and have the legal right to enter into
      this Agreement and to perform their obligations under the terms hereof;

            (b)   to the best of Guarantors' knowledge, there is no action,
      suit, proceeding or investigation pending or threatened against or
      affecting Guarantors at law, in equity, in admiralty or before any
      arbitrator or any governmental department, commission, board, bureau,
      agency or instrumentality (domestic or foreign) that is likely to result
      in any material adverse change in the property, assets or condition
      (financial or otherwise) of Guarantors or that is likely to impair
      materially the ability of Guarantors to perform their obligations under
      this Agreement; and

            (c)   all financial statements that have heretofore been furnished
      by Guarantors to Lender in connection with this Agreement, are true,
      correct and complete; and fairly present the financial condition of
      Guarantors, all as of the respective dates thereof.

            11.   Guarantors and Lender acknowledge and agree that this
Agreement is a guaranty of payment and performance and not of collection and
enforcement in respect of any of the Guarantors' Obligations.

            12.   Lender may freely assign any or all of its rights under this
Agreement, but any such assignment shall be made only to the subsequent holder
of any of the Notes and no such assignment shall increase Guarantors'
Obligations or diminish its rights hereunder. In the event of any such
assignment, the consent of Guarantors shall not be required for any such
assignment and failure to give notice of such assignment shall not affect the
validity or enforceability of any such assignment or subject Lender to any
liability and Guarantors shall continue to remain bound by and obligated to
perform under and with respect to this Agreement. Guarantors shall not assign
any of their obligations under this Agreement without the prior consent of the
Lender.

            13.   The representations, warranties and obligations of Guarantor
set forth in this Agreement shall survive until this Agreement shall terminate
in accordance with the terms hereof.

            14.   This Agreement contains the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements relating to such subject matter and may not be modified,
amended, supplemented or discharged except by a written agreement signed by
Guarantors and Lender. This Agreement also may be discharged by full performance
of the Guarantors' Obligations in accordance with the terms hereof, or as
otherwise provided herein.

            15.   If all or any portion of any provision contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, such provision or portion

                                        5

Cross-Guaranty (Fixed 1)



thereof shall be deemed stricken and severed from this Agreement and the
remaining provision and portions thereof shall continue in full force and
effect.

            16.   All notices, requests, demands and other communications under
or in connection with this Agreement shall be in writing and shall be deemed to
have been given or made (i) three (3) days after the date such notice is mailed,
(ii) on the next Business Day if sent by a nationally recognized overnight
courier service, (iii) on the date of delivery by personal delivery and (iv) on
the date of transmission if sent by telefax during business hours on a Business
Day (otherwise the next Business Day). Notices shall be addressed as follows:

            If to Guarantors:     The address listed above

            With a copy to:       Morris Manning & Martin, LLP
                                  3343 Peachtree Rd., NE
                                  1600 Atlanta Financial Center
                                  Atlanta, Georgia  30326
                                  Attn.:  Thomas Gryboski, Esq.
                                  Facsimile: (404) 365-9532

            If to Lender:         The address listed above

            With a copy to:       Sidley Austin Brown & Wood LLP
                                  787 Seventh Avenue
                                  New York, New York  10019
                                  Attn.:  Robert L. Boyd, Esq.
                                  Facsimile: (212) 839-5599

The above addresses may be changed on written notice given as hereinabove
provided. Notices may be sent by a party hereto or on its behalf by its
attorney.

            17.   This Agreement shall be binding upon Guarantors and their
Successors and shall inure to the benefit of Lender and its successors and
assigns.

            18.   The failure of Lender to enforce any right or remedy
hereunder, or promptly to enforce any such right or remedy, shall not constitute
a waiver thereof, nor give rise to any estoppel against Lender, nor excuse
Guarantors from their obligations hereunder. Any waiver of any such right or
remedy to be enforceable against Lender must be expressly set forth in writing
signed by Lender.

            19.   (a) Any suit initiated by Lender against Guarantors or in
      connection with or arising, directly or indirectly, out of or relating to,
      this Agreement (an "Action") may, at Lender's option, be brought in any
      state or federal court in the State of New York, or any state or federal
      court in which the property is located, having jurisdiction over the
      subject matter hereof. Guarantors hereby submit themselves to the
      jurisdiction of any such court and agree that service of process against
      Guarantors in any such action may be effected by any means permissible
      under federal law or under the laws of the state in which such Action is
      brought. Guarantors hereby agree that insofar as is permitted under
      applicable law, this consent to personal jurisdiction shall be
      self-operative and no further instrument or action, other than service of
      process in one of the manners specified in this Guaranty, or as otherwise
      permitted by law, shall be necessary in order to confer jurisdiction upon
      Guarantors.

                                       6

Cross-Guaranty (Fixed 1)



            (b)   Guarantors agree that, provided that service of process is
      effected upon Guarantors in any manner permitted by law, Guarantors
      irrevocably waive, to the fullest extent permitted by law, and agree not
      to assert, by way of motion, as a defense or otherwise, (i) any objection
      that Guarantors may have or may hereafter have to the laying of the venue
      of any Action brought in any court as provided for by this Agreement, (ii)
      any claim that any Action brought in any such court has been brought in an
      inconvenient forum, or (iii) any claim that Guarantors are not personally
      subject to the jurisdiction of such court. Guarantors agree that, provided
      that service of process is effected upon Guarantors in one of the manners
      specified in this Guaranty or as otherwise permitted by law, a final
      judgment from which Guarantors have not appealed or may not appeal in any
      Action brought in any such court shall be conclusive and binding upon
      Guarantors and may, so far as permitted under applicable law, be enforced
      in the courts of any state or any federal court or in any other courts to
      the jurisdiction of which it is subject, by a suit upon such judgment and
      that Guarantors shall not assert any defense, counterclaim or set-off in
      any such suit upon such judgment.

            (c)   To the extent that Guarantors have or hereafter may acquire
      any immunity from jurisdiction of any court or from any legal process
      (whether through service or notice, attachment before judgment, attachment
      in aid of execution, execution or otherwise) with respect to Guarantors or
      Guarantors' property, Guarantors hereby irrevocably waive such immunity in
      respect of its obligations under this Agreement.

            (d)   As a further inducement to Lender's making of the Loans to
      Borrowers, and in consideration thereof, Lender and Guarantors each
      covenant and agree that in any action or proceeding brought on, under or
      by virtue of this Agreement, Lender and Guarantors each shall and do
      hereby unconditionally and irrevocably waive trial by jury.

            (e)   Guarantors hereby further covenant and agree to and with
      Lender that Guarantors may be joined in any action against Borrowers in
      connection with the Guarantor Loan Agreement, the Loan Agreements, the
      Notes, the Mortgages, or any of the other Loan Documents, solely with
      respect to the subject matter of this Agreement.

            (f)   Guarantors covenant and agree to indemnify and save Lender
      harmless of and from, and defend it against, all losses, costs,
      liabilities, expenses, damages or claims suffered by reason of Guarantors'
      failure to perform its obligations hereunder.

            20.   All of Lender's rights and remedies under the Guarantor Loan
Agreement, the Loan Agreements, the Notes, the Mortgages or any of the other
Loan Documents or under this Agreement are intended to be distinct, separate and
cumulative and no such right or remedy therein or herein mentioned is intended
to be in exclusion of or a waiver of any other right or remedy available to
Lender.

            21.   Guarantors hereby consent that from time to time, before or
after any default by Borrower, with or without further notice to or assent from
Guarantors, any security at any time held by or available to Lender for any
obligation of Borrowers, or any security at any time held by or available to
Lender for any obligation of any other person or party secondarily or otherwise
liable for all or any portion of the Loans, may be exchanged, surrendered or
released and any obligation of Borrowers, or of any such other person or party,
may be changed, altered, renewed, extended, continued, surrendered, compromised,
waived or released in whole or in part, or any default with respect thereto
waived, and Lender may fail to set off and may release, in whole or in part, any
balance of any deposit account or credit on its books in favor of Borrowers, or
of any such other person or party, and may extend further credit in any manner
whatsoever to Borrowers, and generally deal with Borrowers or any such security
or other person or party as Lender may see fit; and Guarantors shall remain
bound under this Agreement

                                        7

Cross-Guaranty (Fixed 1)



notwithstanding any such exchange, surrender, release, change, alteration,
renewal, extension, continuance, compromise, waiver, action, inaction, extension
of further credit or other dealing. This Agreement is independent of, and in
addition to, all collateral granted, pledged or assigned under the Loan
Documents.

            22.   The terms of this Agreement have been negotiated, and this
Agreement has been executed and delivered in the State of New York, and it is
the intention of the parties hereto that this Agreement be construed and
enforced in accordance with the laws of such State.

            23.   This Agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.

            24.   This Agreement may be executed in counterparts, which together
shall constitute the same instrument.

            25.   All representations, warranties, covenants (both affirmative
and negative) and all other obligations under this Guaranty shall be the joint
and several obligation of each of the Guarantors and any default under this
Guaranty by any Guarantor shall be deemed a default by all such Guarantors.

                         [NO FURTHER TEXT ON THIS PAGE]

                                       8

Cross-Guaranty (Fixed 1)



            IN WITNESS WHEREOF, Guarantor has executed and delivered this
Agreement as of the date and year first above written.

                                GUARANTORS:

                                IMPAC HOTELS I, L.L.C.
                                LODGIAN DENVER LLC
                                LODGIAN HOTELS FIXED I, LLC
                                MACON HOTEL ASSOCIATES, L.L.C.
                                SERVICO NORTHWOODS, INC.

                                By: /s/ Daniel E. Ellis
                                    --------------------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

Cross-Guaranty (Fixed 1)



                                    EXHIBIT A

1.    Pool 2 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 2"), between Albany Hotel, Inc., AMI
      Operating Partners, L.P., Apico Inns of GreenTree, Inc., Dedham Lodging
      Associates I, Limited Partnership, Lodgian Hotels Fixed II, Inc., Lodgian
      Augusta LLC, Lodgian Lafayette LLC and Lodgian Tulsa LLC (collectively,
      the "Pool 2 Borrowers") and Lender, Lender has made a loan in the amount
      of $67,864,000 ("Pool 2 Loan"), which Loan is evidenced by a Promissory
      Note dated as of the date hereof ("Note 2"), made by the Pool 2 Borrowers
      to Lender;

2.    Pool 3 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 3"), between Lodgian Hotels Fixed III, LLC,
      Lodgian AMI, Inc., Minneapolis Motel Enterprises, Inc. and Servico Centre
      Associates, Ltd. (collectively, the "Pool 3 Borrowers") and Lender, Lender
      has made a loan in the amount of $66,818,500 ("Pool 3 Loan"), which Loan
      is evidenced by a Promissory Note, dated as of the date hereof ("Note 3"),
      made by the Pool 3 Borrowers to Lender; and

3.    Pool 4 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 4"), between Lodgian Hotels Fixed IV, L.P.,
      Little Rock Lodging Associates I, Limited Partnership, Lodgian Fairmont
      LLC, NH Motel Enterprises, Inc., Servico Columbia, Inc. and Servico
      Houston, Inc. (collectively, the "Pool 4 Borrowers") and Lender, Lender
      has made a loan in the amount of $61,516,500 ("Pool 4 Loan") which Loan is
      evidenced by a Promissory Note, dated as of the date hereof ("Note 4"),
      made by the Pool 4 Borrowers to Lender.

Cross-Guaranty (Fixed 1)

EX-10.2.5

                                                                  EXHIBIT 10.2.5

              CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT

                  This CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT,
dated as of June 25, 2004 (this "AGREEMENT"), made by LODGIAN MANAGEMENT CORP.,
a Delaware corporation, having an address at 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30826 ("HOTEL MANAGER"), and the undersigned, each having an
address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30826 (each a "BORROWER and collectively, "BORROWERS"), to and for the
benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080, its
successors, transferees and assigns ("LENDER").

                  A.       Hotel Manager has entered into a certain Management
Agreement (each a "CONTRACT" and collectively, the "CONTRACTS") with each
Borrower, a true, correct and complete copy of which has been delivered to
Lender on or prior to the date hereof and the form of which is attached hereto
as EXHIBIT A, providing for the performance by Hotel Manager of certain
management obligations more particularly described therein with respect to the
management and operation of the property as more particularly described therein
(each, a "PROPERTY" and collectively, the "PROPERTIES").

                  B.       This Agreement is being executed in order to amend
each Contract, to conditionally assign each Borrower's interest therein to
Lender, and to subordinate Hotel Manager's rights to payment under the Contracts
to Lender's lien on the Properties in connection with Lender's making a loan to
Borrowers and certain other borrowers (collectively, the "MORTGAGE BORROWERS")
in the original principal amount of up to Sixty Three Million Eight Hundred and
One Thousand and No/100 Dollars ($63,801,000.00) (the "LOAN") pursuant to that
certain Loan and Security Agreement, dated as of even date herewith (as amended,
modified or restated, the "LOAN AGREEMENT"), among Mortgage Borrowers and
Lender. The Loan is evidenced by a certain Promissory Note, dated of even date
herewith (as amended, modified or restated, and any replacements or substitutes
therefor, (by means of multiple notes or otherwise), the "NOTE"), made by
Mortgage Borrowers in favor of Lender and is secured by, among other things,
those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of
Leases and Rents and Security Agreements, dated as of even date herewith (as
amended, modified, restated, spread or consolidated, collectively, the "SECURITY
INSTRUMENT"), in favor of Lender (the Note, the Security Instrument, the Loan
Agreement, this Agreement and all other documents executed in connection with
the Loan are collectively referred to as the "LOAN DOCUMENTS"). All capitalized
terms used and not defined herein shall have the respective meanings given to
such terms in the Loan Agreement, a copy of which Hotel Manager hereby
acknowledges having received.

                  NOW, THEREFORE, in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Hotel Manager and Borrowers hereby represent,
warrant and covenant to Lender as follows:



                  1.       As additional collateral security for the Loan, each
Borrower hereby conditionally transfers, sets over and assigns to Lender all of
such Borrower's right, title and interest in and to its Contract, said transfer
and assignment to automatically become a present, unconditional assignment, at
Lender's option, upon the occurrence and during the continuance of an Event of
Default by Borrowers under any of the Loan Documents.

                  2.       Hotel Manager hereby agrees that each Contract, all
rights, interests and privileges of Hotel Manager thereunder, and all management
fees and other payment obligations of each Borrower to Hotel Manager for
services rendered by Hotel Manager for the management and operation of its
Property, as such services are more particularly described in such Contract, are
hereby subordinated to the Loan Documents and the liens in favor of Lender
provided for therein, and to all rights of Lender to receive payment from
Borrowers under the Note and all other amounts which may be due Lender under the
Loan Documents. Hotel Manager recognizes and agrees that so long as the Note is
being paid in strict accordance with its terms and no Event of Default has
occurred and is continuing or will by virtue of payments to Hotel Manager occur,
Hotel Manager shall, subject to the requirements of the Loan Documents,
including any such requirements governing management and application of the
Properties and Borrower revenues and cash flow, be entitled to receive payments
provided for under such Contract in accordance with the terms thereof. Hotel
Manager hereby releases, discharges and waives any and all liens, claims,
demands of any kind or nature, against each Property, either now or in the
future, arising from the services provided by Hotel Manager for the management
and operation of such Property.

                  3.       In the event that such Borrower defaults under the
terms of its Contract, Hotel Manager agrees that before exercising any rights or
remedies with respect thereto, it will notify Lender of such default. Upon
Lender's request, Hotel Manager will continue to perform under such Contract
until such time as Lender may elect to terminate such Contract, provided that
Hotel Manager shall continue to receive all fees payable to it under such
Contract. Subject to the foregoing, Hotel Manager agrees that it shall not be
entitled to receive any management fee or other fee, commission or other amount
payable under the Contract or otherwise for and during any period of time that
any Event of Default has occurred and is continuing, provided that Hotel Manager
shall not be obligated to return or refund to Lender any management fee or other
fee, commission or other amount already received by Hotel Manager prior to the
occurrence of the Event of Default, and to which Hotel Manager was entitled
under paragraph 2 above. In all events, Hotel Manager recognizes that the
maximum amount that shall be due and payable under each Contract is the amount
stated therein (such amount being adequate to complete the services called for
in such Contract), and that Hotel Manager will not claim any incidental,
consequential, or exemplary damages of any nature as a condition to completing
its performance under the Contract.

                  4.       In the event that (a) Hotel Manager becomes
insolvent, or (b) an Event of Default occurs and is continuing, or (c) any
default occurs by Hotel Manager under the Management Agreement beyond the
expiration of any notice and cure periods, or (d) any other event occurs which,
under the terms of the Loan Documents, entitles Lender to direct Borrower to
replace Hotel Manager, Lender may exercise its rights under the Loan Documents
and direct any Borrower to terminate its Contract and/or to replace Hotel
Manager with a management company chosen by such Borrower and reasonably
acceptable to Lender. Upon receiving notice

                                       2


of any such election, Hotel Manager shall abide by such direction to terminate
and cooperate with any replacement manager approved or designated by Lender. No
termination fee or other compensation shall be due or owing under such Contract
as a result of any such termination other than accrued unpaid fees.

                  5.       Without limiting the foregoing, subject to the second
sentence of paragraph 3 hereof, in the event Lender forecloses or otherwise
succeeds to the rights of any Borrower with respect to any Property, Lender
shall have the option upon written notice to Hotel Manager delivered within
thirty (30) days following foreclosure by Lender or other acquisition of such
Property by Lender, either to (a) terminate the applicable Contract without any
obligation or liability of Lender to pay the termination fees, if any; or (b)
continue such Contract in effect upon all of the terms and provisions provided
in such Contract, except that Lender shall have no obligation to pay any sums
due and owing under the Contract as of the date of foreclosure or other
acquisition of such Property, and Lender shall have the right after it elects to
continue such Contract under subparagraph (b) hereof to terminate such Contract
without cause upon thirty (30) days written notice to Hotel Manager without any
obligation or liability of Lender to pay the termination fees, if any other than
accrued unpaid fees. Hotel Manager acknowledges and agrees with Lender that
Lender has not assumed any obligations or liabilities of such Borrower to Hotel
Manager under such Contract. If Lender chooses not to continue any Contract
following a foreclosure or other acquisition of any Property, the only
compensation from Lender for which Hotel Manager shall be entitled under such
Contract shall be for the period commencing with the date of such foreclosure or
other acquisition and ending upon the subsequent termination by Lender of such
Contract. Notwithstanding the foregoing to the contrary, in the event Lender
forecloses or otherwise succeeds to the rights of any Borrower with respect to
its Property, upon Lender's request, Hotel Manager agrees to transfer and assign
to Lender, or its designee, to the extent possible, all applicable licenses
(including, without limitation, each liquor license and beer permit), permits
and approvals required for the use, occupancy, operation and maintenance of each
of the Property and held by or in the name of Hotel Manager, and, if requested
by Lender and permitted by applicable law, enter into such reasonable concession
or use agreements with Lender or its designee (subject to appropriate
indemnification) as are reasonably necessary to allow Lender or its designee to
offer, or cause to be offered, liquor and beer for sale at such Property. For
this purpose, Hotel Manager constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution to complete or undertake the
assignment of each of the items referenced in the preceding sentence in the name
of Hotel Manager pursuant to this paragraph 5. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked.

                  6.       Hotel Manager agrees (a) not to resign as Hotel
Manager without ninety (90) days prior written notice to Lender, and (b) not to
amend any Contract in any material respect without Lender's prior written
approval, which approval shall not be unreasonably withheld or delayed.

                  7.       Hotel Manager acknowledges and agrees that any and
all rents, room rents, credit card receipts, other receipts, profits or other
sums, including any management fees in excess of the management fees to which
Hotel Manager is entitled pursuant to paragraph 2 hereof, and receipts derived
from the sale of alcoholic beverages (collectively herein called "PROPERTY
PROCEEDS") collected or received by Hotel Manager from the Properties are
subject to

                                       3


a security interest of Lender pursuant to the Loan Documents, and shall be
collected and held by Hotel Manager in trust for the benefit of the applicable
Borrower and Lender. Any such Property Proceeds shall be deposited by Hotel
Manager within two (2) Business Days of receipt into a deposit account (the
"DEPOSIT ACCOUNT") in the name of the Lender and identified in that certain
Deposit Account Agreement or other similar agreement dated as of the date hereof
(as amended, restated, modified, replaced or supplemented from time to time,
each, a "DEPOSIT ACCOUNT AGREEMENT") among the applicable Borrower, Lender,
Hotel Manager and the bank named therein. Upon transfer of any such Property
Proceeds to Hotel Manager from the Lock Box Account (as defined in that certain
Cash Management Agreement dated as of even date herewith (as amended, restated,
modified, replaced or supplemented from time to time, the "CASH MANAGEMENT
AGREEMENT"), among Mortgage Borrowers, Lender, Hotel Manager and Wachovia Bank,
National Association) as directed by the applicable Borrower pursuant to Section
3.3 of the Cash Management Agreement, such Property Proceeds shall be used by
Hotel Manager for proper expenses and costs of managing and operating the
applicable Property as permitted under the applicable Contract, subject, in all
instances, to compliance with the Operating Budget and FF&E Budget then in
effect and limitations on distributions to Borrowers, each as more fully
described in the Loan Agreement. Hotel Manager hereby disclaims any and all
interests in the Deposit Account, the Lock Box Account (and any Sub-Accounts
thereof), the Property Operating Account and in any of the Property Proceeds.
Upon written notice from Lender that an Event of Default has occurred under the
Loan Agreement and/or other Loan Documents, Hotel Manager agrees to apply
Property Proceeds as instructed by Lender.

                  8.       Hotel Manager represents and warrants that (a) a
true, correct and complete copy of each Contract has been delivered to Lender on
or prior to the date hereof, the form of which is attached hereto as EXHIBIT A,
(b) each Contract is in full force and effect and has not been modified, amended
or assigned, except in favor of Lender or its predecessor-in-interest (c)
neither Hotel Manager nor, to Hotel Manager's knowledge, any Borrower is in
default under any of the terms, covenants or provisions of its Contract, and
Hotel Manager knows of no event which, with the giving of notice or the passage
of time, or both, would constitute a default under any Contract, (d) Hotel
Manager has no knowledge of and has not commenced any action or given or
received any notice for the purpose of terminating any Contract, and (e) all
management fees, commissions and other sums due and payable to the Hotel Manager
under each Contract as of the date hereof have been paid in full.

                  9.       This Agreement shall be deemed to be a contract
entered into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of the State of New York.

                  10.      All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder shall be in
writing and shall be delivered to Lender and Borrowers at the addresses set
forth in Section 14.5 of the Loan Agreement and to Hotel Manager at the address
set forth on the first page hereof, with a copy to Morris Manning & Martin LLP,
Attention: Tom Gryboski, Esq., Fax: (404) 365-9532, each in the manner provided
in Section 14.5 of the Loan Agreement.

                  11.      This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to

                                       4


act on the part of Lender or any other party, but only by an agreement in
writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

                  12.      If any term, covenant or condition of this Agreement
is held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such provision. If any conflict exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                  13. This Agreement may be executed in any number of duplicate
originals and each duplicate original shall be deemed to be an original. This
Agreement may be executed in several counterparts, each of which counterparts
shall be deemed an original and all of which together shall constitute a single
agreement. The failure of any party hereto to execute this Agreement, or any
counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.

                  14. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa.

                  15. This Agreement shall be binding upon Hotel Manager and its
heirs, devisees, representatives, successors and assigns, and shall inure to the
benefit of and may be enforced by and binding upon Lender and its heirs,
successors, legal representatives, substitutes and assigns. Except as permitted
under the Loan Agreement, Hotel Manager shall not assign any of its rights or
obligations under this Agreement. Subject to the terms of the Loan Agreement,
Lender shall have the right to assign this Agreement and the obligations
hereunder in connection with any assignment or transfer of all or any portion of
the Loan or any interest therein. The parties hereto acknowledge that following
the execution and delivery of this Agreement, Lender may sell, transfer and
assign this Agreement and certain other Loan Documents. All references to
"Lender" hereunder shall be deemed to include the successors and assigns of
Lender and the parties hereto acknowledge that actions taken by Lender hereunder
may be taken by Lender's agents and by the agents of the successors and assigns
of Lender.

                  16. This Agreement is intended solely for the benefit of
Lender and its heirs, successors, legal representatives, substitutes and
assigns, and no third party shall have any right or interest in this Agreement,
nor any right to enforce this Agreement against any party hereto.

                  17. Hotel Manager acknowledges and agrees that pursuant to the
Loan Agreement, each Deposit Account Agreement and the Cash Management Agreement
(for purposes of this paragraph 17, collectively, the "AGREEMENTS") (the terms,
conditions and agreements of the Agreements being hereby incorporated herein
with the same force as is fully set forth herein), certain requirements are
specified with respect to the Property Proceeds and other payments due under any
Lease (as defined in the Security Instrument) or otherwise with respect to the
Properties, and Hotel Manager covenants and agrees to observe and, as and to the
extent applicable to Hotel Manager, perform all such requirements, including,
without limitation, ensuring that all Property Proceeds received by Hotel
Manager are properly deposited into the applicable Deposit Account.

                                       5


                  18.      The obligations of Borrowers and Hotel Manager
hereunder are subject to limitations on recourse as provided in Article XII of
the Loan Agreement.

                                       6


                  EXECUTED as of the day and year first above written.

                                    BORROWERS:

                                    IMPAC HOTELS I, L.L.C.
                                    LODGIAN DENVER, LLC
                                    LODGIAN HOTELS FIXED I, LLC
                                    MACON HOTEL ASSOCIATES, L.L.C.
                                    SERVICO NORTHWOODS, INC.

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of the
                                           entities listed above



                                    HOTEL MANAGER:

                                    LODGIAN MANAGEMENT CORP.,
                                    a Delaware corporation

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary



                                    EXHIBIT A

                      COPY OF FORM OF MANAGEMENT AGREEMENT

EX-10.2.6

                                                                  EXHIBIT 10.2.6

                       ASSIGNMENT OF AGREEMENTS, LICENSES,
                              PERMITS AND CONTRACTS

                  This ASSIGNMENT OF AGREEMENTS, LICENSES, PERMITS AND
CONTRACTS, dated as of June 25, 2004 (this "ASSIGNMENT"), made by the
undersigned, each having an address at c/o Lodgian, Inc., 3445 Peachtree Road,
NE, Suite 700, Atlanta, Georgia 30326 (collectively, "BORROWER"), to MERRILL
LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an address at 4
World Financial Center, New York, New York 10080 (together with its successors,
transferees and assigns, "LENDER").

                              W I T N E S S E T H:

                  WHEREAS:

                  A.       Borrower is the owner of a fee simple and leasehold
interest, as the case may be, in those certain parcels of real property
(collectively, the "PREMISES") described in EXHIBIT A attached hereto, and the
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and other improvements now or hereafter
located thereon (the "IMPROVEMENTS"; together with the Premises, collectively,
the "PROPERTY");

                  B.       Borrower and Lender have entered into a certain Loan
and Security Agreement, dated as of the date hereof (as amended, modified or
restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has
agreed to make a loan to Borrower as more particularly described below.
Capitalized terms used herein and not herein defined shall have the meanings
assigned to such terms in the Loan Agreement.

                  C.       Pursuant to the Loan Agreement, Lender is making a
Loan to Borrower in the aggregate original principal amount of up $63,801,000
(the "LOAN"). The Loan is evidenced by a certain Promissory Note, dated as of
the date hereof (as amended, modified or restated from time to time, the "NOTE")
and secured by, inter alia, those certain Mortgages/ Deeds of Trust/Deeds to
Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as
of the date hereof (as amended, modified or restated from time to time,
collectively, the "SECURITY INSTRUMENT"), with respect to the Property and
Improvements.

                  D.       To induce Lender to make the Loan and to secure
payment of the Note, together with interest thereon, Borrower has agreed to the
execution and delivery of this Assignment.

                  NOW, THEREFORE, in consideration of the sum of Ten Dollars
($10) and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the Borrower hereby absolutely grants a first
lien on and security interest in, and hereby assigns, transfers and sets over to
Lender as additional security for the payment of the Loan and the observance and
performance by the Borrower of the terms, covenants and conditions of the Loan



Documents on the part of the Borrower to be observed or performed, all of the
Borrower's right, title and interest in and to the following:

                           (a)      to the extent assignable, all of Borrower's
right, title and interest in, to and under the documents, contracts,
instruments, plans, permits, licenses (including, without limitation, all liquor
licenses and other beverage permits), approvals, applications, trade names and
trademarks (including, without limitation, any licenses of, or agreements to
license, trade names or trademarks now or hereafter entered into by or on behalf
of Borrower or Manager in connection with the operation of the Property),
insurance policies, equipment leases, purchase and sale agreements, and other
instruments described or existing with respect to the Property or any portion
thereof, and any amendments or modifications thereto, any replacements thereof
executed during the term of the Note and any other similar documents or
instruments with respect to the Property or any portion thereof, now in
existence or hereafter executed by Borrower or now in the possession of Borrower
or hereafter obtained by Borrower (collectively, the "DOCUMENTS");

                           (b)      to the extent assignable, all rights,
powers, privileges, claims, remedies and causes of action of every kind which
Borrower now has or may in the future have with respect to or by reason of its
interest in the Documents; and

                           (c)      to the extent assignable, any and all
proceeds (including non-cash proceeds) of any of the foregoing (the items
enumerated in the preceding subparagraphs (a) and (b) and in this subparagraph
(c) being hereinafter collectively referred to as the "COLLATERAL").

                  1.       This Assignment is given to secure the obligations of
Borrower under and in respect of (a) the Note and (b) the other Loan Documents.
The parties intend that this Assignment shall be a present, actual, absolute and
unconditional assignment and shall, immediately upon execution, give Lender the
right to assume Borrower's interest in the Collateral; provided, however, that
unless an Event of Default under any of the Loan Documents shall have occurred
and be continuing, Borrower shall have a license to utilize the Collateral in
accordance with the terms thereof. If an Event of Default shall have occurred
and be continuing under any of the Loan Documents, Borrower's license mentioned
in the immediately preceding sentence shall cease and terminate, without the
execution of any further instrument or document or the taking of any other act
on the part of Lender, and in such event, subject to the terms of the Loan
Agreement and the other Loan Documents, Lender shall be entitled to utilize the
Collateral in Borrower's place and stead, in the name of Borrower or otherwise,
and in furtherance thereof, subject to the terms of the Loan Agreement and the
other Loan Documents, Lender may enter upon the Property and take possession of
the Property by its officers, agents or employees, or by a court-appointed
receiver, and for the operation, protection, repair and maintenance of the
Property, and in connection therewith, Lender shall be entitled to take
possession of and use all books of account and financial records of Borrower and
its property managers or representatives relating to the Property.

                  2.       Neither this Assignment nor any action or inaction on
the part of Lender shall constitute an assumption on the part of Lender of any
duty or obligation with respect to the Collateral, nor shall Lender have any
duty or obligation to make any payment to be made by Borrower under the
Collateral, or to present or file any claim, or to take any other action to

                                      -2-


collect or enforce the payment of any amounts or the performance of any
obligations which have been assigned to Lender or to which it may be entitled
hereunder at any time or times. No action or inaction on the part of Lender
shall adversely affect or limit in any way the rights of Lender hereunder or
under the Collateral, and Lender shall not incur any liability on account of any
action taken (or not taken) by it or on its behalf in connection with the
Collateral in good faith, whether or not the same shall prove to be improper,
inadequate or invalid, in whole or in part.

                  3.       Borrower shall indemnify and hold Lender harmless
from and against any and all liabilities, losses and damages which Lender may
incur by reason of this Assignment and any actions of Lender taken (or not
taken) in connection with the Collateral, and from and against any and all
claims and demands whatsoever which may be asserted against Lender by reason of
any alleged obligations to be performed or discharged by Lender by reason of
this Assignment, and the amount thereof, including reasonable costs, expenses
and reasonable attorneys' fees and disbursements, together with interest on such
amount, at the Default Rate under the Note from the date such costs, expenses
and fees were incurred by Lender to the date of payment thereof to Lender by
Borrower, shall be secured hereby and by the other Loan Documents, and Borrower
shall reimburse Lender therefor within twenty (20) days after demand, and upon
the failure of Borrower to do so, the same shall be deemed an Event of Default
under the Loan Agreement for which Lender shall be entitled to exercise any and
all rights and remedies provided therein or at law or in equity; provided,
however, that in no event shall Borrower be required to indemnify or hold
harmless Lender for any liabilities, losses or damages resulting from Lender's
bad faith, gross negligence or willful misconduct. It is further understood that
this Assignment shall not operate to constitute Lender as a lender in possession
of the Property, or to place responsibility for the control, care, management or
repair of the Improvements upon Lender, nor shall it operate to make Lender
responsible or liable (as to Borrower) for any waste committed with respect to
the Property by any party, or for any Hazardous Material placed upon or found at
the Property, or for any dangerous or defective condition of the Improvements or
for any negligence in the management, up-keep, repair or control of the
Improvements resulting in loss, injury, death or damage to any contractor,
sub-contractor, licensee, invitee, employee, or other party, or for any other
thing or matter whatsoever.

                  4.       Borrower shall remain liable to, and shall, perform
all of its obligations under and with respect to the Collateral and shall, at
its sole cost and expense, enforce the Collateral in the ordinary course of
business and comply in all material respects with all of its obligations under
the Collateral and all the terms thereof. Borrower shall give Lender prompt
notice of any material default by any party under the Collateral. So long as (a)
Borrower is acting in the ordinary course of business, and (b) no Event of
Default has occurred and is continuing under any of the Loan Documents, except
as otherwise provided in the Loan Agreement, Borrower may alter, amend, extend,
modify, change, cancel or terminate any of the Collateral, provided that such
alterations, amendments, extensions, modifications, changes, cancellations and
terminations, taken as a whole, are not likely to result in a Material Adverse
Effect, and, except as otherwise provided in the Loan Agreement, Borrower may
enter into new Collateral on commercially reasonable terms without Lender's
prior written consent in each instance; provided, however, that Borrower shall
provide Lender with copies of any such alterations, amendments, extensions,
modifications, changes, cancellations, and terminations of

                                      -3-


the Collateral upon request of Lender unless otherwise required to be provided
pursuant to the Loan Agreement.

                  5.       Upon the occurrence and during the continuance of an
Event of Default under any of the Loan Documents, Lender shall be entitled to
all of the rights, remedies, powers and privileges available to a secured party
under the Uniform Commercial Code in any jurisdiction whose laws may apply and
this Assignment shall constitute a direction to and full authority to any person
or entity which has contracted with or is a party to any of the Documents
(collectively, the "CONTRACTING PARTIES", and individually, a "CONTRACTING
PARTY") to perform its obligations under the Documents for the benefit of Lender
without proof to any Contracting Party of the default of Borrower. In addition,
Borrower agrees that it shall, promptly upon request of Lender following such
Event of Default, execute and deliver notices to the Contracting Parties
directing that future performance of such Contracting Parties' obligations be
made at the direction of Lender. Borrower hereby irrevocably authorizes each of
the Contracting Parties to rely upon and comply with any notice or demand by
Lender for the performance by any such Contracting Party of its obligations
under any Document for the benefit of Lender, and no Contracting Party shall
have any right or duty to inquire whether an Event of Default has actually
occurred, and Borrower shall have no right to countermand its authorization
herein to the Contracting Parties to perform for the benefit of Lender.

                  6.       Borrower represents and warrants that it has full
right, power and authority, pursuant to its certificate of limited partnership
and limited partnership agreement, certificate of formation and limited
liability company agreement, or certification of incorporation and by-laws, as
the case may be, to assign the Collateral assigned hereby and that (a) to
Borrower's knowledge, the Documents in existence on the date hereof, are in full
force and effect in accordance with their respective terms, (b) Borrower has
delivered to Lender true and complete copies of the material Documents in
existence as of the date hereof, (c) neither the Collateral nor any part thereof
has been assigned, pledged or encumbered by Borrower except pursuant to this
Assignment and the other Loan Documents, (d) to Borrower's knowledge, no default
or event of default which remains uncured beyond the expiration of any
applicable grace or notice period which could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing hereunder and no Event of
Default or Default has occurred, (e) to Borrower's knowledge, none of the
Contracting Parties has any defense, set-off or counterclaim against Borrower to
the performance of any obligations of such respective Contracting Party, and (f)
its principal place of business is its address for notices as set forth in the
Loan Agreement

                  7.       Borrower, at its expense, shall execute and deliver
all such instruments and take all such action as Lender, from time to time, may
reasonably request in order to obtain the full benefits of this Assignment and
of the rights and powers herein created and to maintain and perfect the security
interest granted in this Assignment. To the extent permitted by law, Borrower
irrevocably authorizes Lender, at the expense of Borrower, to file financing
statements and continuation statements with respect to the Collateral that
Lender deems appropriate or desirable without the signature of Borrower.

                  8.       Wherever there is any conflict or inconsistency
between any terms or provisions of this Assignment and the Loan Agreement, the
terms and provisions of the Loan Agreement shall control.

                                      -4-


                  9.       All rights and remedies herein conferred may be
exercised whether or not sale proceedings are pending under the Security
Instrument or any other action or proceeding has been commenced under any of the
other Loan Documents. Lender shall not be required to resort first to the
security of this Assignment before resorting to the security of the Security
Instrument or any of the other Loan Documents and Lender may exercise the
security hereof or thereof concurrently or independently and in any order of
preference.

                  10.      This Assignment shall automatically terminate upon
payment in full of all sums due Lender under the Note, the Loan Agreement, and
the other Loan Documents, and any other indebtedness secured by the Security
Instrument.

                  11.      All notices, demands, consents, or requests which are
either required or desired to be given or furnished hereunder shall be sent and
shall be effective in the manner set forth in Section 14.5 of the Loan
Agreement.

                  12.      The provisions of this Assignment shall be binding
upon Borrower, its successors and assigns, and all persons claiming under or
through Borrower or any such successor or assign, and shall inure to the benefit
of and be enforceable by Lender and its successors and assigns. Subject to the
terms of the Loan Agreement, Lender shall have the right to assign this
Assignment and the obligations hereunder in connection with any assignment or
transfer of all or any portion of the Loan or any interest therein. The parties
hereto acknowledge that following the execution and delivery of this Assignment,
Lender may sell, transfer and assign this Assignment and certain other Loan
Documents. All references to "Lender" hereunder shall be deemed to include the
assigns of Lender and the parties hereto acknowledge that actions taken by
Lender hereunder may be taken by Lender's agents and by the agents of the
assigns of Lender.

                  13.      This Assignment shall constitute a security agreement
for all purposes under the Uniform Commercial Code as in effect in the State
where the applicable Property is located.

                  14.      This Assignment and the obligations arising hereunder
shall be governed by and construed in accordance with the laws of the State of
New York and any applicable laws of the United States of America, except that at
all times the provisions for the creation, perfection, attachment and
enforcement of the liens and the security interests created pursuant to this
Assignment shall be governed by the laws of the State where the applicable
Property is located.

                  15.      Neither this Assignment nor any provision hereof may
be changed, waived or terminated orally, but only by an instrument in writing
signed by Lender and Borrower.

                  16.      If any of the provisions of this Assignment, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Assignment, or the application
of such provision or provisions to persons or circumstances other than those to
whom or which it is held invalid or unenforceable, shall not be affected thereby
and every provision of this Assignment shall be valid and enforceable to the
fullest extent permitted by law.

                                      -5-


                  17.      The obligations of Borrower hereunder are subject to
limitations on recourse as provided in Article XII of the Loan Agreement.

                                      -6-


                  IN WITNESS WHEREOF, the Borrower has duly executed this
instrument as of the day and year first above written.

                                    BORROWERS:

                                    IMPAC HOTELS I, L.L.C.
                                    LODGIAN DENVER LLC
                                    LODGIAN HOTELS FIXED I, LLC
                                    MACON HOTEL ASSOCIATES, L.L.C.
                                    SERVICO NORTHWOODS, INC.

                                    By:/s/ Daniel E. Ellis
                                       ------------------------------------
                                       Name:  Daniel E. Ellis
                                       Title: Vice President and Secretary, or
                                              Authorized Signatory for each of
                                              the entities listed above



                                   EXHIBITS A

                                   PROPERTIES



     CHAIN/NAME                     CITY                           ST
- ---------------------      -----------------------                 --
                                                             
Marriott                   Denver (Aurora)                         CO
Courtyard by Marriott      Atlanta                                 GA
Crown Plaza                Macon                                   GA
Holiday Inn                Marietta (hotel & suites)               GA
Holiday Inn Select         Strongsville                            OH
Holiday Inn                Lancaster                               PA
Doubletree Club            Philadelphia                            PA
Clarion                    North Charleston                        SC

EX-10.2.7

                                                                  EXHIBIT 10.2.7

                              COOPERATION AGREEMENT

            THIS COOPERATION AGREEMENT (this "AGREEMENT") is made as of the 25th
day of June, 2004, by and between the Mortgage Borrowers listed on the signature
page hereof (collectively, the "MORTGAGE BORROWERS"), Lodgian Mezzanine Fixed,
LLC (the "MEZZANINE BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., in its
capacity as both mortgage lender and mezzanine lender ("LENDER").

                                    RECITALS:

            A.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 1
Borrowers" (collectively, the "POOL 1 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 1"), are indebted to
Lender in the original principal sum of $63,801,000 ("MORTGAGE LOAN 1") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 1 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
1").

            B.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 2
Borrowers" (collectively, the "POOL 2 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 2"), are indebted to
Lender in the original principal sum of $67,864,000 ("MORTGAGE LOAN 2") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 2 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
2").

            C.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 3
Borrowers" (collectively, the "POOL 3 BORROWERS") by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 3"), are indebted to
Lender in the original principal sum of $66,818,500 ("MORTGAGE LOAN 3") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 3 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
3").

            D.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 4
Borrowers" (collectively, the "POOL 4 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 4", and together with
Mortgage Note 1, Mortgage Note 2, and Mortgage Note 3, collectively, the
"MORTGAGE NOTES"), are indebted to Lender in the original principal sum of
$61,516,500 ("MORTGAGE LOAN 4", and together with Mortgage Loan 1, Mortgage Loan
2, and Mortgage Loan 3, collectively, the "MORTGAGE LOANS") as governed by that
certain Loan and Security Agreement of even date herewith between the Pool 4
Borrowers and Lender (together with all extensions, renewals, modifications,
substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT 4", and together
with Mortgage Loan Agreement 1, Mortgage Loan Agreement 2, and Mortgage Loan
Agreement 3, collectively, the "MORTGAGE LOAN AGREEMENTS").

[Fixed Loan]



            E.    Mortgage Loan 1, Mortgage Loan 2, Mortgage Loan 3, and
Mortgage Loan 4 are secured, in part, by Mortgages on the respective pools of
Properties identified on Schedule 2 (each, a "POOL", and collectively, the
"POOLS").

            F.    The Mezzanine Borrower, by that certain Mezzanine Note of even
date herewith given to Lender (the "MEZZANINE NOTE"), is indebted to Lender in
the aggregate principal sum of One Hundred and No/100 ($100.00) (the "MEZZANINE
LOAN") as governed by that certain Mezzanine Loan Agreement of even date
herewith between the Mezzanine Borrower and Lender (together with all
extensions, renewals, modifications, substitutions and amendments thereof, the
"MEZZANINE LOAN AGREEMENT").

            G.    Lender has required as a condition to making the Mortgage
Loans and the Mezzanine Loan that the Mortgage Borrowers and the Mezzanine
Borrower enter into this Agreement with Lender.

                                    AGREEMENT

            For ten ($10) dollars and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:

            Section 1. Adjustment of Mortgage Loans and Mezzanine Loan/Loan
Modification. Lender shall have the right in its sole discretion, at any time
prior to the final Securitization of the last of the Mortgage Loans to be
securitized, to cause any of the following to occur (each, a "LOAN
MODIFICATION"):

            (1)   separately adjust the principal amount and applicable interest
            rates of any of the Mortgage Loans and the Mezzanine Loan, provided
            that (i) the aggregate principal amount of the Mortgage Loans and
            the Mezzanine Loan immediately after such adjustment shall equal the
            aggregate outstanding principal balance of the Mortgage Loans and
            the Mezzanine Loan immediately prior to such adjustment, (ii) the
            weighted average interest rate of the Mortgage Loans and the
            Mezzanine Loan immediately after such adjustment shall equal the
            weighted average interest rate which was applicable to the Mortgage
            Loans and the Mezzanine Loan immediately prior to such adjustment,
            (iii) the aggregate debt service payments on the Mortgage Loans and
            the Mezzanine Loan immediately after such adjustment shall equal the
            aggregate debt service payments which were due under the Mortgage
            Loans and the Mezzanine Loan immediately prior to such adjustment,
            and (iv) the other material terms and provisions of each of the
            Mortgage Loans and the Mezzanine Loan shall remain unchanged and
            none of the foregoing adjustments shall increase the obligations or
            reduce the rights of the Mortgage Borrowers, the Mezzanine Borrower
            or Guarantor in any material respect; and/or

            (2)   cause any of the Properties in any one or more of the Pools to
            become Collateral for any other Pool.

Any Loan Modification shall be subject to the following:

                                       2





            (a)   (i) If Lender elects to increase the principal amount of the
Mezzanine Loan, the Mezzanine Borrower shall contribute to the Mortgage
Borrowers such additional loan proceeds to be applied to repay, dollar for
dollar, the Mortgage Notes (in an amount and as designated by Lender), and the
Lender under the Mortgage Notes will accept such prepayment without penalty,
premium or additional costs (except as provided herein) to the Mortgage
Borrowers; (ii) If Lender elects to increase the principal amount of the
Mortgage Loans, or any of them, and reduce the principal amount of the Mezzanine
Loan, the Mortgage Borrowers shall distribute to the Mezzanine Borrower such
additional loan proceeds to be applied to repay, dollar for dollar, the
Mezzanine Note, and the Lender under the Mezzanine Note will accept such
prepayment without penalty, premium or additional costs to the Mezzanine
Borrower (except as provided herein); and (iii) If Lender elects to increase the
principal amount of any of the Mortgage Loans and decrease the amount of any of
the other Mortgage Loans, the applicable Mortgage Borrowers shall distribute to
the Mezzanine Borrower such additional loan proceeds and the Mezzanine Borrower
shall contribute to the applicable Mortgage Borrowers (whose Mortgage Loans are
to be decreased) such additional loan proceeds to be applied to repay, dollar
for dollar, the applicable Mortgage Notes, and the Lender under the applicable
Mortgage Notes will accept such prepayment without penalty, premium or
additional costs to the Mortgage Borrowers (except as provided herein).

            (b)   The Mortgage Borrowers and the Mezzanine Borrower shall
cooperate, and shall cause Guarantor and any Affiliates thereof (the "LODGIAN
PARTIES") to cooperate, with all reasonable requests of Lender in connection
with any Loan Modification including, without limitation (x) execution and
delivery of such documents as shall reasonably be required by Lender in
connection therewith (including amended and restated notes, amended and restated
loan agreements, replacement Mortgages, replacement Assignments of Leases, and
ratifications by Guarantor of any of its obligations under any guaranties or
indemnities provided under the Mortgage Loan or the Mezzanine Loan), and (y)
transfers of one or more Properties among the Mortgage Borrowers, to the extent
required to comply with the terms of Article IX of the Mortgage Loan Agreements;

            (c)   The Mortgage Borrowers and the Mezzanine Borrower hereby
absolutely and irrevocably appoint Lender their true and lawful attorney coupled
with an interest, in their name and stead to make and execute all documents
necessary to effect any Loan Modification, provided, however, that Lender shall
not make or execute any such documents under such power until ten (10) days
after notice by Lender to Mortgage Borrowers and Mezzanine Borrower of such
intent to exercise its right under such power;

            (d)   At Lender's request, in connection with any Loan Modification
the Mortgage Borrowers and the Mezzanine Borrower shall deliver to Lender, at
the Mortgage Borrowers' and the Mezzanine Borrower' expense, replacement opinion
letters in form and substance similar to the opinion letters delivered on the
Closing Date addressed to any subsequent holders of any of the Mortgage Loans or
the Mezzanine Loan or any interest therein (including, without limitation, each
trustee holding any of the Mortgage Loans or the Mezzanine Loan) with respect to
any opinion letter delivered in connection with the Mortgage Loans and the
Mezzanine Loan;

                                       3




            (e)   Lender shall pay all reasonable out-of-pocket costs and'
expenses incurred by the Mortgage Borrowers and the Mezzanine Borrower in
connection with a Loan Modification (other than the Mortgage Borrowers',
Mezzanine Borrower's and Guarantor's internal costs and expenses, and the costs
and expenses of their respective counsel, mortgage recording fees and taxes,
required endorsements, if any, to the Title Policies (as such term is defined in
the Mortgage Loan Agreement and the Mezzanine Loan Agreement), and Property
transfer costs).

            Section 2. Capitalized Terms; Notices. Capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Mortgage Loan Agreements. Any notices, requests, demands or other communications
required or permitted hereunder shall be delivered as specified in the Mortgage
Loan Agreements and the Mezzanine Loan Agreement.

            Section 3. Event of Default. It shall be an Event of Default under
the Mortgage Loans and the Mezzanine Loan if any of the Mortgage Borrowers, the
Mezzanine Borrower, or the Lodgian Parties fail to comply with any of the terms,
covenants or conditions of this Agreement within ten (10) Business Days after
receipt of written request from Lender.

            Section 4. Governing Law. This Agreement shall be governed,
construed, applied and enforced in accordance with the laws of the State of New
York and the applicable laws of the United States of America.

            Section 5. No Oral Change. This Agreement, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of the Mortgage
Borrowers, the Mezzanine Borrower, Guarantor, or Lender, but only by an
agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.

            Section 6. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Mortgage Borrowers, the Mezzanine Borrower,
Guarantor, and Lender and their respective successors and assigns forever.

            Section 7. Inapplicable Provisions. If any term, covenant or
condition of this Agreement is held to be invalid, illegal or unenforceable in
any respect, this Agreement shall be construed without such provision.

            Section 8. Headings, etc. The headings and captions of various
paragraphs of this Agreement are for convenience of reference only and are not
to be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.

            Section 9. Duplicate Originals, Counterparts. This Agreement may be
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. This Agreement may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Agreement. The failure of
any party hereto to execute this Agreement, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.

                         [NO FURTHER TEXT ON THIS PAGE]

                                       4




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

                                LENDER:

                                MERRILL LYNCH MORTGAGE
                                LENDING, INC.

                                By: /s/ Robert Spinna
                                    -----------------------------
                                Name: Robert Spinna
                                Title:  Vice President

                       [signatures continue on next page]





                                MEZZANINE BORROWER:

                                LODGIAN MEZZANINE FIXED, LLC

                                By: /s/ Daniel E. Ellis
                                    ---------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary

                                MORTGAGE BORROWERS:

                                IMPAC HOTELS I, L.L.C.
                                LODGIAN DENVER LLC
                                LODGIAN HOTELS FIXED I, LLC
                                MACON HOTEL ASSOCIATES, L.L.C.
                                SERVICO NORTHWOODS, INC.

                                By: /s/ Daniel E. Ellis
                                    ---------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of
                                       the entities listed above

                                ALBANY HOTEL, INC.
                                APICO INNS OF GREEN TREE, INC.
                                LODGIAN AUGUSTA LLC
                                LODGIAN HOTELS FIXED II, INC.
                                LODGIAN LAFAYETTE LLC
                                LODGIAN TULSA LLC

                                By:/s/ Daniel E. Ellis
                                    ---------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above



                                AMI OPERATING PARTNERS, L.P.

                                By: AMIOP ACQUISITION GENERAL
                                    PARTNER SPE CORP., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ---------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                DEDHAM LODGING ASSOCIATES I, LIMITED
                                PARTNERSHIP

                                By: DEDHAM LODGING SPE, INC., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ---------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                        Authorized Signatory

                                LODGIAN AMI, INC.
                                LODGIAN HOTELS FIXED III, LLC
                                MINNEAPOLIS MOTEL ENTERPRISES, INC.

                                By: /s/ Daniel E. Ellis
                                    ---------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                        entities listed above



                                SERVICO CENTRE ASSOCIATES, LTD.

                                By: SERVICO PALM BEACH GENERAL
                                    PARTNER SPE, INC., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ---------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                LODGIAN FAIRMONT LLC
                                NH MOTEL ENTERPRISES, INC.
                                SERVICO COLUMBIA, INC.
                                SERVICO HOUSTON, INC.

                                By: /s/ Daniel E. Ellis
                                    ---------------------------------
                                Name: Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

                                LITTLE ROCK LODGING ASSOCIATES I,
                                LIMITED PARTNERSHIP

                                By: LODGIAN LITTLE ROCK SPE, INC.,
                                    a Delaware corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ---------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory



                                LODGIAN HOTELS FIXED IV, L.P.

                                By: LODGIAN HOTELS FIXED IV GP, INC.,
                                    a Delaware corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ---------------------------------
                                Name: Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                GUARANTOR:

                                LODGIAN, INC.

                                By: /s/ Daniel E. Ellis
                                    ---------------------------------
                                Name:  Daniel E. Ellis
                                Title: Senior Vice President



                                   SCHEDULE 1

                               MORTGAGE BORROWERS

Pool 1 Borrowers

Lodgian Hotels Fixed I, LLC
Macon Hotel Associates, L.L.C.
Servico Northwoods, Inc.
Impac Hotels I, L.L.C.
Lodgian Denver LLC

Pool 2 Borrowers

AMI Operating Partners, L.P.
Albany Hotel, Inc.
Apico Inns of Green Tree, Inc.
Lodgian Tulsa LLC
Lodgian Augusta LLC
Lodgian Lafayette LLC
Dedham Lodging Associates I, Limited Partnership
Lodgian Hotels Fixed II, Inc.

Pool 3 Borrowers

Minneapolis Motel Enterprises, Inc.
Servico Centre Associates, Ltd.
Lodgian Hotels Fixed III, LLC -
Lodgian AMI, Inc.

Pool 4 Borrowers

NH Motel Enterprises, Inc.
Servico Columbia, Inc.
Lodgian Fairmont LLC
Little Rock Lodging Associates I, Limited Partnership
Lodgian Hotels Fixed IV, L.P.
Servico Houston, Inc.

[Fixed Loan]



                                   SCHEDULE 2

                                   PROPERTIES

Pool 1
Marriott  - Aurora
Courtyard by Marriott - Atlanta
Doubletree Club - Philadelphia
Holiday Inn Select - Strongsville
Crowne Plaza - Macon
Holiday Inn - Marietta
Holiday Inn - Lancaster
Clarion - North Charleston

Pool 2
Crowne Plaza - Albany
Holiday Inn - Linthicum
Residence Inn - Dedham
Courtyard by Marriott  - Tulsa
Courtyard by Marriott  - Lafayette
Holiday Inn - Pittsburgh
Marriott Fairfield Inn  - Augusta
Holiday Inn - York
Holiday Inn - E. Hartford

Pool 3
Holiday Inn - Baltimore
Crowne Plaza - West Palm Beach
Holiday Inn - Glen Burnie
Courtyard by Marriott - Bentonville
Holiday Inn - Towson
Holiday Inn - St. Paul
Courtyard by Marriott - Florence
Holiday Inn SunSpree - Surfside Beach
Marriott Fairfield Inn - Merrimack

Pool 4
Crowne Plaza - Houston
Hilton  - Columbia
Hilton  - Troy
Holiday Inn Select - Irving
Residence Inn - Little Rock
Holiday Inn - Frederick
Courtyard by Marriott - Paducah
Courtyard by Marriott - Abilene
Holiday Inn  - Fairmont

EX-10.2.8

                                                                  EXHIBIT 10.2.8

                            CASH MANAGEMENT AGREEMENT

                           Dated: as of June 25, 2004

                                      among

                                  THE BORROWERS
                      LISTED ON THE SIGNATURE PAGES HERETO,
                                  as Borrowers,

                      MERRILL LYNCH MORTGAGE LENDING, INC.

                                   as Lender,

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                                    as Agent

                                       and

                LODGIAN MANAGEMENT CORP., a Delaware corporation,
                                   as Manager

Cash Management Agreement (FX1)



                            CASH MANAGEMENT AGREEMENT

            CASH MANAGEMENT AGREEMENT (this "AGREEMENT"), dated as of June 25,
2004, among the Borrowers listed on the signature pages hereto, each having an
address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia
30326 (each, a "BORROWER", and collectively, "BORROWERS"), WACHOVIA BANK,
NATIONAL ASSOCIATION, having an address at 8739 Research Drive, URP4, Charlotte,
North Carolina 28288-1075 ("AGENT"), MERRILL LYNCH MORTGAGE LENDING, INC., a
Delaware corporation having an office at Four World Financial Center, New York,
New York 10080 ("LENDER"), and LODGIAN MANAGEMENT CORP., a Delaware corporation,
having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30326 ("MANAGER").

                              W I T N E S S E T H:

            WHEREAS, pursuant to a certain Loan and Security Agreement, dated as
of the date hereof (together with all extensions, renewals, modifications,
substitutions and amendments thereof, the "LOAN AGREEMENT"), between the
Borrowers and Lender, Lender has made a loan to the Borrowers in the principal
amount of Sixty Three Million Eight Hundred and One Thousand and No/100 Dollars
($63,801,000.00) (the "LOAN"), which Loan is evidenced by a Promissory Note,
dated as of the date hereof (together with all extensions, renewals,
modifications, restatements, replacements, substitutions, by means of multiple
notes or otherwise, and amendments thereof, collectively, the "NOTE"), made by
the Borrowers, as makers, to Lender, as payee, and secured by, among other
things, (i) those certain Mortgages/Deeds of Trust/Deeds to Secure Debt,
Assignments of Leases and Rents, Security Agreements and Fixture Filings, each
dated as of the date hereof (together with all extensions, renewals,
modifications, restatements, substitutions and amendments thereof, each a
"SECURITY INSTRUMENT" and, collectively, the "SECURITY INSTRUMENTS"), each made
by a Borrower for the benefit of Lender and covering the properties as more
particularly described therein (collectively, the "PROPERTIES"), (ii) those
certain Assignments of Leases and Rents, dated as of the date hereof (together
with all extensions, renewals, modifications, restatements, substitutions and
amendments thereof, collectively, the "ASSIGNMENT OF LEASES"), made by the
applicable Borrower, as assignor, to Lender, as assignee, and (iii) the other
Loan Documents (as defined in the Loan Agreement);

            WHEREAS, pursuant to the Security Instruments and the Assignment of
Leases, the Borrowers have each granted to Lender a security interest in all of
the Borrowers' right, title and interest in, to and under the Rents (as defined
in the Security Instruments) and other revenues derived from and otherwise
attributable or allocable to the Properties, and have assigned and conveyed to
Lender all of the Borrowers' right, title and interest in, to and under the
Operating Revenues due and to become due to each of the Borrowers or to which
any of the Borrowers are now or may hereafter become entitled, arising out of
the Property or any part or parts thereof;

            WHEREAS, the Borrowers and Manager have entered into Management
Agreements with respect to the Properties pursuant to which Manager has agreed
to manage the Properties; and

Cash Management Agreement (FX1)



            WHEREAS, Manager has agreed to subordinate any right, title and
interest that Manager may have in and to the Operating Revenues and any other
income and revenues from the Properties to the interests of Lender under the
Loan Agreement and the Loan Documents; and

            WHEREAS, in order to fulfill all of the Borrowers' obligations under
the Loan Agreement, the Borrowers and Manager have agreed that all Operating
Revenues and other revenues from the Properties will be deposited directly into
the Deposit Account or the Lock Box Account (as such terms are hereinafter
defined), transferred to a Lock Box Account (if not deposited directly therein)
established hereunder with Agent and allocated and/or disbursed in accordance
with the terms and conditions hereof.

            NOW, THEREFORE, in consideration of the covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

            I.    DEFINITIONS

            Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Loan Agreement. As used herein, the following terms
shall have the following definitions:

            "ACCOUNTS" shall mean, collectively, the Deposit Account, the Lock
Box Account, the Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds
Account, and any other accounts pledged to Lender pursuant to this Agreement or
any of the other Loan Documents.

            "AGENT" shall mean Wachovia Bank, National Association, as agent
under this Agreement, together with its successors and assigns.

            "AGREEMENT" shall mean this Cash Management Agreement among the
Borrowers, Manager, Agent and Lender, as amended, supplemented, restated or
otherwise modified from time to time.

            "ALLOCABLE MEZZANINE SERVICING FEE" shall mean the Allocable Portion
of the monthly Servicing Fee (as defined in the Mezzanine Loan Agreement) for
which the Mezzanine Borrower is responsible pursuant to Section 2.11 of the
Mezzanine Loan Agreement.

            "ALLOCABLE PORTION" as defined in the Loan Agreement.

            "APPROVED OPERATING BUDGET" shall mean, for any period, each
Borrower's Operating Budget as approved or deemed approved by Lender from time
to time in accordance with Section 5.1(D) of the Loan Agreement, setting forth
such Borrower's reasonable estimate of Operating Revenues and Operating Expenses
for the applicable Property for such period.

            "BORROWERS" as defined in the Preamble, together with their
successors and permitted assigns.

            "BUSINESS INTERRUPTION INSURANCE" as defined in Section 2.1(d).

                                        2

Cash Management Agreement (FX1)



            "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" as defined in Section
2.1(c).

            "CASH TRAP EVENT" as defined in Section 6.8 of the Loan Agreement.

            "CASH TRAP RESERVE SUB-ACCOUNT" as defined in Section 2.1(c).

            "COLLATERAL" as defined in Section 5.1.

            "CREDIT CARD COMPANIES" as defined in Section 2.2(a).

            "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" as defined in
Section 2.2(a).

            "DEBT SERVICE SUB-ACCOUNT" as defined in Section 2.1(c).

            "DEPOSIT ACCOUNT" as defined in Section 2.1(a).

            "DEPOSIT ACCOUNT AGREEMENT" as defined in Section 2.1(a).

            "DEPOSIT BANK" as defined in Section 2.1(a).

            "ELIGIBLE ACCOUNT" shall mean a separate and identifiable account
from all other funds held by the holding institution, which account is either
(i) an account maintained with an Eligible Bank or (ii) a segregated trust
account maintained by a corporate trust department of a federal depository
institution or a state chartered depository institution subject to regulations
regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulation Section 9.10(b), which, in either case, has corporate trust powers
and is acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.

            "ELIGIBLE BANK" shall mean a bank that satisfies the Rating
Criteria.

            "EXCESS CASH FLOW" means any and all amounts available for
distribution in any calendar month after allocations and/or distribution of all
amounts required to be allocated under Sections 3.3(a)(i) through (ix) hereof.

            "EXTRAORDINARY EXPENSES" shall mean any extraordinary Operating
Expense or Capital Expenditure not set forth in the Approved Operating Budget
then in effect for the Property.

            "EXTRAORDINARY RECEIPTS" shall mean any receipts of the Borrowers
not included within the definition of Operating Revenues under the Loan
Agreement, including, without limitation, receipts from litigation proceedings
and tax certiorari proceedings.

            "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" as defined in Section 2.1(e).

            "FF&E RESERVE ACCOUNT" as defined in Section 2.1(f).

            "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

                                        3

Cash Management Agreement (FX1)



            "IMPOSITIONS AND INSURANCE RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

            "LENDER" shall mean Merrill Lynch Mortgage Lending, Inc., together
with its successors and assigns.

            "LOCK BOX ACCOUNT" as defined in Section 2.1(b).

            "LOSS PROCEEDS ACCOUNT" as defined in Section 2.1(d).

            "MANAGER" shall mean Lodgian Management Corp., together with its
successors and permitted assigns.

            "MEZZANINE BORROWER" as defined in the Loan Agreement.

            "MEZZANINE LENDER" as defined in the Loan Agreement.

            "MEZZANINE LOAN" as defined in the Loan Agreement.

            "MEZZANINE LOAN AGREEMENT" means that certain Mezzanine Loan
Agreement dated as of the date hereof, between Mezzanine Lender and Mezzanine
Borrower.

            "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" as defined in Section
2.1(c).

            "MEZZANINE SERVICER" means the Servicer as such term is defined in
the Mezzanine Loan Agreement.

            "MINIMUM BALANCE" as defined in Section 2.1(g).

            "MINIMUM BALANCE SUB-ACCOUNT" as defined in Section 2.1(c).

            "MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean the monthly payment
of principal and interest on the Loan required to be paid on each Monthly
Payment Date during the term of the Loan.

            "MONTHLY FF&E PAYMENT" shall mean the monthly deposit required to be
made to the FF&E Reserve pursuant to Section 6.4 of the Loan Agreement for any
month provided that if at the time of determination thereof the actual Operating
Revenues utilized in calculating the Monthly FF&E Payment have not been
determined for the prior calendar month (the "Measurement Month"), such
calculation shall be based upon the Operating Revenues set forth for the
Measurement Month in the applicable Operating Budget (the "Estimated Monthly
FF&E Payment"), and, upon determination of the actual Operating Revenues for the
Measurement Month, funds from the Lock Box Account in an amount equal to any
deficit between the Estimated Monthly FF&E Payment and the Monthly FF&E Payment
required to be allocated to the FF&E Reserve based upon the actual Operating
Revenues for the Measurement Month, shall be allocated (or if funds available in
the Lock Box Account and not otherwise required to be deposited in any other
Sub-Account for the applicable month are not sufficient to cover such deficit,
paid by the Borrowers) to the FF&E Reserve within five (5) Business Days of such

                                        4

Cash Management Agreement (FX1)



determination. Any excess of the Estimated Monthly FF&E Payment allocated to the
FF&E Reserve for the applicable month over the Monthly FF&E Payment based upon
the actual Operating Revenues for the Measurement Month shall be made available
for allocation to the other Sub-Accounts or disbursed in accordance with Section
3.3(a) hereof.

            "MONTHLY IMPOSITIONS AND INSURANCE AMOUNT" shall mean the aggregate
monthly deposit for Impositions and Insurance Premiums required to be paid
pursuant to Section 6.3 of the Loan Agreement.

            "MONTHLY MEZZANINE DEBT SERVICE PAYMENT AMOUNT" shall mean the
Allocable Portion of the monthly payment of principal and interest on the
Mezzanine Loan required to be paid on each Monthly Payment Date to Mezzanine
Lender.

            "MONTHLY OPERATING EXPENSE BUDGET AMOUNT" shall mean, with respect
to each month, an amount equal to the Operating Expenses plus estimated sales,
use, occupancy and similar taxes relating to the Properties (excluding therefrom
Impositions, Insurance Premiums, FF&E expenditures, and management fees payable
to any Manager that is an Affiliate of the Borrowers) set forth in the Approved
Operating Budget for the applicable month of determination.

            "MONTHLY PAYMENT DATE" means the first (1st) day of each calendar
month occurring during the term of the Loan (or if such day is not a Business
Day, the immediately succeeding Business Day).

            "OPERATING EXPENSES" as defined in the Loan Agreement.

            "OPERATING EXPENSE SUB-ACCOUNT" as defined in Section 2.1(c).

            "OPERATING REVENUES" as defined in the Loan Agreement.

            "PERMITTED INVESTMENTS" shall mean any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
including those issued by any Servicer, the trustee under any Securitization or
any of their respective Affiliates, payable on demand or having a maturity date
not later than the Business Day immediately prior to the date on which the
invested sums are required for payment of an obligation for which the related
Sub-Account was created and meeting one of the appropriate standards set forth
below:

                  (i)   obligations of, or obligations fully guaranteed as to
      payment of principal and interest by, the United States or any agency or
      instrumentality thereof, provided such obligations are backed by the full
      faith and credit of the United States of America including, without
      limitation, obligations of: the U.S. Treasury (all direct or fully
      guaranteed obligations), the Farmers Home Administration (certificates of
      beneficial ownership), the General Services Administration (participation
      certificates), the U.S. Maritime Administration (guaranteed Title XI
      financing), the Small Business Administration (guaranteed participation
      certificates and guaranteed pool certificates), the U.S. Department of
      Housing and Urban Development (local authority bonds) and the Washington
      Metropolitan Area Transit Authority (guaranteed transit bonds); provided,
      however, that the investments described in this clause (i) must (A) have a
      predetermined

                                        5

Cash Management Agreement (FX1)



      fixed dollar amount of principal due at maturity that cannot vary or
      change, (B) if rated by S&P, not have an "r" highlighter affixed to their
      rating, (C) if such investments have a variable rate of interest, have an
      interest rate tied to a single interest rate index plus a fixed spread (if
      any) and must move proportionately with that index, and (D) not be subject
      to liquidation prior to their maturity;

                  (ii)  Federal Housing Administration debentures;

                  (iii) obligations of the following United States government
      sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations),
      the Farm Credit System (consolidated systemwide bonds and notes), the
      Federal Home Loan Banks (consolidated debt obligations), the Federal
      National Mortgage Association (debt obligations), the Student Loan
      Marketing Association (debt obligations), the Financing Corp. (debt
      obligations), and the Resolution Funding Corp. (debt obligations);
      provided, however, that the investments described in this clause (iii)
      must (A) have a predetermined fixed dollar amount of principal due at
      maturity that cannot vary or change, (B) if rated by S&P, not have an "r"
      highlighter affixed to their rating, (C) if such investments have a
      variable rate of interest, have an interest rate tied to a single interest
      rate index plus a fixed spread (if any) and must move proportionately with
      that index, and (D) not be subject to liquidation prior to their maturity;

                  (iv)  federal funds, unsecured certificates of deposit, time
      deposits, bankers' acceptances and repurchase agreements with maturities
      of not more than 365 days of any bank, the short term obligations of which
      at all times are rated in the highest short term rating category by each
      Rating Agency (or, if not rated by all Rating Agencies, rated by at least
      one Rating Agency in the highest short term rating category and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investment would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of certificates or other securities issued
      in connection with any Securitization backed in whole or in part by the
      Loan (collectively the "CERTIFICATES"); provided, however, that the
      investments described in this clause (iv) must (A) have a predetermined
      fixed dollar amount of principal due at maturity that cannot vary or
      change, (B) if rated by S&P, not have an "r" highlighter affixed to their
      rating, (C) if such investments have a variable rate of interest, have an
      interest rate tied to a single interest rate index plus a fixed spread (if
      any) and must move proportionately with that index, and (D) not be subject
      to liquidation prior to their maturity;

                  (v)   fully Federal Deposit Insurance Corporation-insured
      demand and time deposits in, or certificates of deposit of, or bankers'
      acceptances issued by, any bank or trust company, savings and loan
      association or savings bank, the short term obligations of which at all
      times are rated in the highest short term rating category by each Rating
      Agency (or, if not rated by all Rating Agencies, rated by at least one
      Rating Agency in the highest short term rating category and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investment would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of Certificates); provided, however, that
      the investments

                                        6

Cash Management Agreement (FX1)


      described in this clause (v) must (A) have a predetermined fixed dollar of
      principal due at maturity that cannot vary or change, (B) if rated by S&P,
      not have a "r" highlighter affixed to their rating, (C) if such
      investments have a variable rate of interest, have an interest rate tied
      to a single interest rate index plus a fixed spread (if any) and must move
      proportionately with that index, and (D) not be subject to liquidation
      prior to their maturity;

                  (vi)  debt obligations with maturities of not more than 365
      days and at all times rated by each Rating Agency (or, if not rated by all
      Rating Agencies, rated by at least one Rating Agency and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investments would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to the Certificates) in its highest long-term unsecured
      debt rating category; provided, however, that the investments described in
      this clause (vi) must (A) have a predetermined fixed dollar amount of
      principal due at maturity that cannot vary or change, (B) if rated by S&P,
      not have an "r" highlighter affixed to their rating, (C) if such
      investments have a variable rate of interest, have an interest rate tied
      to a single interest rate index plus a fixed spread (if any) and must move
      proportionately with that index, (D) not be subject to liquidation prior
      to their maturity, and (E) if such investment has a maturity of (1) less
      than one month, have a long-term rating of at least "A2" by Moody's, (2)
      up to three months, have a long-term rating of at least "Aa" by Moody's,
      (3) up to six months, have a long-term rating of at least "Aa3" by
      Moody's, and (4) over six months, have a long-term rating of at least
      "Aaa" by Moody's;

                  (vii) commercial paper (including both non-interest-bearing
      discount obligations and interest-bearing obligations payable on demand or
      on a specified date not more than one year after the date of issuance
      thereof) with maturities of not more than 365 days and that at all times
      is rated by each Rating Agency (or, if not rated by all Rating Agencies,
      rated by at least one Rating Agency and otherwise acceptable to each other
      Rating Agency, as confirmed in writing that such investment would not, in
      and of itself, result in a downgrade, qualification or withdrawal of the
      initial or, if higher, then current ratings assigned to any class of
      Certificates) in its highest short-term unsecured debt rating; provided,
      however, that the investments described in this clause (vii) must (A) have
      a predetermined fixed dollar amount of principal due at maturity that
      cannot vary or change, (B) if rated by S&P, not have a "r" highlighter
      affixed to their rating, (C) if such investments have a variable rate of
      interest, have an interest rate tied to a single interest rate index plus
      a fixed spread (if any) and must move proportionately with that index, and
      (D) not be subject to liquidation prior to their maturity;

                  (viii) units of taxable money market funds or mutual funds,
      which funds are regulated investment companies, seek to maintain a
      constant net asset value per share and have the highest rating from each
      Rating Agency (or, if not rated by all Rating Agencies, rated by at least
      one Rating Agency and otherwise acceptable to each other Rating Agency, as
      confirmed in writing that such investment would not, in and of itself,
      result in a downgrade, qualification or withdrawal of the initial or, if
      higher, then current ratings assigned to any class of Certificates) for
      money market funds or mutual funds; and

                                       7

Cash Management Agreement (FX1)



                  (ix)  any other security, obligation or investment which has
      been approved as a Permitted Investment in writing by (a) Lender and (b)
      each Rating Agency, as evidenced by a written confirmation that the
      designation of such security, obligation or investment as a Permitted
      Investment will not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of Certificates by such Rating Agency;

provided, however, that such instrument continues to qualify as a "CASH FLOW
INVESTMENT" pursuant to Code Section 860G(a)(6) earning a passive return in the
nature of interest and no obligation or security shall be a Permitted Investment
if (A) such obligation or security evidences a right to receive only interest
payments or (B) the right to receive principal and interest payments on such
obligation or security are derived from an underlying investment that provides a
yield to maturity in excess of 120% of the yield to maturity at par of such
underlying investment; and provided, further, no obligation or security, other
than an obligation or security constituting real estate assets, cash, cash items
or Government securities pursuant to Code Section 856(c)(4)(A), shall be a
Permitted Investment if the value of such obligation or security exceeds ten
percent (10%) of the total value of the outstanding securities of any one
issuer.

            "RATING CRITERIA" with respect to any Person, shall mean that (i)
the short-term unsecured debt obligations of such Person are rated at least
"A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such
Person for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa3" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.

            "SERVICING FEE" shall mean the monthly Servicing Fee (as defined in
the Loan Agreement) for which the Borrowers are responsible under Section 2.11
of the Loan Agreement.

            "SUB-ACCOUNTS" shall mean, collectively, the Debt Service
Sub-Account, the Impositions and Insurance Reserve Sub-Account, the Mezzanine
Loan Debt Service Sub-Account, the Capital Improvement Reserve Sub-Account, the
Hazardous Materials Remediation Reserve Sub-Account, the Extraordinary Receipts
Sub-Account, the Cash Trap Reserve Sub-Account, the Operating Expense
Sub-Account, the Minimum Balance Sub-Account and any other sub-accounts of the
Lock Box Account which may hereafter be established by Lender hereunder.

            "UCC" as defined in Section 5.1(a)(iv).

            II.   THE ACCOUNTS

            SECTION 2.1 ESTABLISHMENT OF DEPOSIT ACCOUNT, LOCK BOX ACCOUNT AND
SUB-ACCOUNTS.

            (a)   DEPOSIT ACCOUNT. On or before the Closing Date, one or more
deposit accounts (collectively, the "DEPOSIT ACCOUNT") shall be established at
the Borrowers' sole cost and expense with financial institutions approved by
Lender (collectively, the "DEPOSIT BANK"), each pursuant to an agreement
(collectively, the "DEPOSIT ACCOUNT AGREEMENT") in form and

                                        8

Cash Management Agreement (FX1)



substance reasonably acceptable to Lender, executed and delivered by each
Borrower and the applicable Deposit Bank. Among other things, the Deposit
Account Agreement shall provide that the Borrowers shall have no access to or
control over the Deposit Account, and that all available funds on deposit in the
Deposit Account shall be deposited by wire transfer (or transfer via the ACH
System) on each Business Day by the Deposit Bank into the Lock Box Account.

            (b)   LOCK BOX ACCOUNT. On or before the Closing Date, an Eligible
Account shall be established with Agent for the purposes specified herein, which
shall be entitled "Lock Box Account for the benefit of Merrill Lynch Mortgage
Lending, Inc., its successors and assigns, as secured party" (said account, and
any account replacing the same in accordance with this Agreement, the "LOCK BOX
ACCOUNT"). The Lock Box Account shall be under the sole dominion and control of
Lender and/or its designee, including any Servicer of the Loan, and the
Borrowers shall have no rights to control or direct the investment or payment of
funds therein except as may be expressly provided herein.

            Any amounts that Lender may hold in reserve pursuant to the Loan
Agreement may be held by Lender in the Lock Box Account (including in a
Sub-Account thereof) or may be held in another account or manner as specified in
Articles VI or VII of the Loan Agreement.

            (c)   SUB-ACCOUNTS OF THE LOCK BOX ACCOUNT. The Lock Box Account
shall be deemed to contain, among others, the following Sub-Accounts (which may
be maintained as separate ledger accounts):

                  (i)   "DEBT SERVICE SUB-ACCOUNT" shall mean the Sub-Account
      established for the purpose of depositing the amounts required for
      payments of principal and interest under the Loan and all other amounts
      then due under the Note and the Loan Agreement;

                  (ii)  "IMPOSITION AND INSURANCE RESERVE SUB-ACCOUNT" shall
      mean the Sub-Account established for the purpose of depositing the sums
      required to be deposited pursuant to Section 6.3 of the Loan Agreement;

                  (iii) "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the sums required to
      be deposited pursuant to Section 6.5 of the Loan Agreement;

                  (iv)  "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT"
      shall mean the Sub-Account established for the purpose of depositing sums
      required to be deposited pursuant to Section 6.6 of the Loan Agreement;

                  (v)   "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the amounts required
      for payments of the Monthly Mezzanine Debt Service Payment Amount;

                  (vi)  "CASH TRAP RESERVE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing Excess Cash Flow
      when required to be deposited pursuant to Section 6.8 of the Loan
      Agreement;

                                        9

Cash Management Agreement (FX1)



                  (vii) "OPERATING EXPENSE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the Monthly
      Operating Expense Budget Amount, Extraordinary Expenses approved by
      Lender, if any, and fees due to the Manager; and

                  (viii) "MINIMUM BALANCE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing and maintaining the
      Minimum Balance as and to the extent required under Section 2.1(g)
      hereof..

            (d)   If the proceeds of any business interruption or rent loss
insurance maintained under Section 5.4 of the Loan Agreement (any such
insurance, "BUSINESS INTERRUPTION INSURANCE") paid upon the occurrence of any
fire or casualty to any Property shall be paid in a lump sum (rather than on a
monthly basis), the Borrowers and Lender shall establish a separate Eligible
Account with Agent hereunder entitled "Loss Proceeds Account for the benefit of
Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as secured
party" (said account, the "LOSS PROCEEDS ACCOUNT") for deposit of such Business
Interruption Insurance proceeds and such proceeds shall be held, allocated and
disbursed in accordance with the terms and conditions hereof and of the Loan
Agreement. The Loss Proceeds Account shall be under the sole dominion and
control of Lender and/or its designee, including any Servicer of the Loan, and
the Borrowers shall have no rights to control or direct the investment or
payment of funds therein except as expressly provided herein.

            (e)   If any Extraordinary Receipts are received by any Borrower,
such amounts shall be paid to the Lock Box Account to be retained in a
subaccount thereof (the "EXTRAORDINARY RECEIPTS SUB-ACCOUNT"). Amounts held in
the Extraordinary Receipts Sub-Account shall be disbursed to the Lock Box
Account and allocated and distributed in accordance with Section 3.3 upon
receipt by Lender of evidence reasonably satisfactory to Lender that (x) with
respect to Extraordinary Receipts received in connection with any pending
litigation, action, or similar matter, such action has been concluded in favor
of the Borrowers and no appeal has been timely filed within the applicable
appeal period, (y) with respect to Extraordinary Receipts received with respect
to work at, or other conditions with respect to, any of the Properties, the item
of work or other condition has been completed or corrected and paid for to the
reasonable satisfaction of Lender, and (z) with respect to Extraordinary
Receipts received in any other circumstance, the Borrowers are not liable
directly, or indirectly, to refund or repay any such amounts; provided however,
all Extraordinary Receipts with respect to lease termination payments, advance
booking terminations, and similar payments or fees, shall be retained in the
Extraordinary Receipts Sub-Account and disbursed in equal monthly installments
during the period of time for which such payments relate in accordance with
Section 3.3. The Extraordinary Receipts Sub-Account shall be under the sole
dominion and control of Lender and/or its designee, including any Servicer of
the Loan, and the Borrowers shall have no rights to control or direct the
investment or payment of funds therein except as expressly provided herein.

            (f)   On or before the Closing Date, the Borrowers shall establish a
separate Eligible Account hereunder entitled "FF&E Reserve Account for the
benefit of Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as
secured party" (said account, the "FF&E RESERVE ACCOUNT") with Agent for the
purpose of depositing Monthly FF&E Reserve Payments

                                       10

Cash Management Agreement (FX1)



pursuant to Section 6.4 of the Loan Agreement, to be held, allocated and
disbursed in accordance with the terms and conditions hereof and of the Loan
Agreement. The FF&E Reserve Account shall be under the sole dominion and control
of Lender and/or its designee, including any Servicer of the Loan, and the
Borrowers shall have no rights to control or direct the investment or payment of
funds therein except as expressly provided herein and in the Loan Agreement.
Notwithstanding the foregoing, the Borrowers shall, in accordance with the terms
of this Agreement and the Loan Agreement, have access to and the right to
withdraw funds held in the FF&E Reserve Account on or prior to (x) the
occurrence and during the continuance of an Event of Default, or (y) the failure
of the Borrowers or Manager to comply with the reporting requirements set forth
in Section 5.1(A)(v) of the Loan Agreement, at which time Agent, upon receipt of
notice from Lender, shall (i) cease to honor checks drawn by Manager or any
Borrower on the FF&E Reserve Account, (ii) cease to disburse funds from the FF&E
Reserve Account to either the Manager or the Borrowers except in accordance with
written instructions received from Lender, and (iii) deposit the amounts in the
FF&E Reserve Account, together with any funds from time to time held or
deposited or received into the FF&E Reserve Account, in accordance with Lender's
instructions from time to time on the day such instructions are received, if
such instructions are received prior to 12:00 p.m. on such day, or, if received
after 12:00 p.m., on the following Business Day. Neither the Borrowers nor
Manager shall withdraw any funds from the FF&E Reserve Account in violation of
this Agreement or the Loan Agreement.

            (g)   Upon the occurrence and during the continuance of a Cash Trap
Event or an Event of Default, the Borrowers shall be required to deposit, from
and at the time of the allocations from the Lock Box Account pursuant to Section
3.3(a)(ix) hereof, and maintain in the Minimum Balance Sub-Account an amount
equal to $50,000 (the "MINIMUM BALANCE"). In the event that, during the
continuance of a Cash Trap Event, funds available in a Deposit Account are
insufficient to pay the amount of any checks deposited into such Deposit Account
which are returned for insufficient or uncollected funds (collectively
"CHARGEBACKS"), and such Chargebacks are required to be paid by the applicable
Borrower to the applicable Deposit Account Bank pursuant to the terms of the
applicable Deposit Account Agreement, provided that no Event of Default exists,
funds shall be made available from the Minimum Balance Sub-Account to the
applicable Borrower to pay the amount of such Chargebacks due to such Deposit
Account Bank (or to reimburse the applicable Borrower for any such amounts as
may have been previously paid by or on behalf of such Borrower from other funds
on account of any Chargebacks at a time when insufficient amounts were available
therefor in the Minimum Balance Sub-Account) promptly after delivery to Lender
of evidence reasonably satisfactory to Lender that such amounts are due (or have
been paid by or on behalf of the applicable Borrower). In the event that during
a Cash Trap Event, as a result of any such disbursement or otherwise, the
Minimum Balance Sub-Account shall contain less than the Minimum Balance, the
Borrowers shall be required to deposit such deficiency from and at the time of
allocations from the Lock Box Account pursuant to Section 3.3(a)(ix) hereof.

            SECTION 2.2 DEPOSITS INTO ACCOUNTS. The Borrowers and Manager
represent, warrant and covenant that:

            (a)   Each Borrower and Manager shall cause all Operating Revenues
and other income and revenues received by such Borrower or Manager to be
deposited directly into the

                                       11

Cash Management Agreement (FX1)



Deposit Account for each applicable Property. The Borrowers shall obtain an
agreement (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from each
of the Persons paying or disbursing credit card receivables (each, a "CREDIT
CARD COMPANY" and collectively, the "CREDIT CARD COMPANIES"), in substantially
the form of EXHIBIT A attached hereto or as otherwise approved by Lender in its
reasonable discretion, pursuant to which the Credit Card Companies agree to pay
all credit card receivables for the Properties directly into the Lock Box
Account, and acknowledge and agree that Lender shall have a first priority
perfected security interest in such credit card receivables. Pursuant to the
Deposit Account Agreement, all available funds on deposit in the applicable
Deposit Account shall be deposited directly by the Deposit Bank into the Lock
Box Account by wire transfer on each Business Day.

            (b)   If any Borrower or Manager receives any Operating Revenues or
other income or revenues from any Property, or any Extraordinary Receipts, then
such receipt shall not constitute a Default provided (i) such amounts shall be
deemed to be Collateral and shall be held in trust for the benefit, and as the
property, of Lender, and (ii) such Borrower or Manager shall deposit such
amounts into the applicable Deposit Account within two (2) Business Days of
receipt.

            (c)   Without the prior written consent of Lender, which shall not
be unreasonably withheld, delayed or conditioned, neither the Borrowers nor
Manager shall (i) terminate, amend, revoke or modify any Credit Card Receivables
Payment Direction Letter in any manner whatsoever, or (ii) direct or cause any
Credit Card Company to pay any amount in any manner other than as provided in
the related Credit Card Receivables Payment Direction Letter, unless a
replacement Credit Card Receivables Payment Direction Letter in form reasonably
acceptable to Lender is executed and delivered to Lender by any proposed
replacement Credit Card Company prior to termination of the then effective
Credit Card Receivables Payment Direction Letter.

            (d)   Each Borrower and Manager shall also cause the proceeds of any
Business Interruption Insurance to be deposited directly into the Lock Box
Account as same are paid (or, if any such proceeds are received by such Borrower
or Manager, same shall be deposited into the Lock Box Account within two (2)
Business Days after receipt thereof) and such proceeds shall be allocated and
disbursed in accordance with Section 3.3 hereof. If the proceeds of any such
Business Interruption Insurance are paid in a lump sum, such proceeds shall be
deposited into the Loss Proceeds Account. Agent shall cause monthly amounts to
be transferred from the Loss Proceeds Account to the Lock Box Account as
directed by Lender (based upon a ratable allocation of such proceeds over the
casualty restoration period as reasonably determined by Lender) on the first
(1st) Business Day of each calendar month during the period of restoration of
the Property, and after transfer of same to the Lock Box Account, such amounts
shall be allocated and disbursed in accordance with Section 3.3 hereof.

            SECTION 2.3 ACCOUNT NAME. The Accounts shall each be in the names
set forth herein; provided, however, that if Lender transfers or assigns the
Loan, Agent, at Lender's request (with respect to the Accounts other than the
Deposit Account), and each Deposit Bank (with respect to its Deposit Account)
shall change the name of each Account to the name of the transferee or assignee.
If Lender retains a Servicer to service the Loan, Agent, at Lender's request,
shall change the name of each Account to the name of Servicer, as agent for
Lender.

                                       12

Cash Management Agreement (FX1)



            SECTION 2.4 ELIGIBLE ACCOUNTS/CHARACTERIZATION OF ACCOUNTS. The
Borrowers and Agent shall maintain each Account (other than the Deposit Account)
as an Eligible Account. Each Account (other than the Deposit Account) is and
shall be treated as a "SECURITIES ACCOUNT" as such term is defined in Section
8-501(a) of the UCC. Agent hereby agrees that each item of property (whether
investment property, financial asset, securities, securities entitlement,
instrument, cash or other property) credited to each Account shall be treated as
a "FINANCIAL ASSET" within the meaning of Section 8-102(a)(9) of the UCC. Agent
shall, subject to the terms of this Agreement, treat Lender as entitled to
exercise the rights that comprise any financial asset credited to each Account.
All securities or other property underlying any financial assets credited to
each Account (other than cash) shall be registered in the name of Agent,
indorsed to Agent or in blank or credited to another securities account
maintained in the name of Agent and in no case will any financial asset credited
to any Account be registered in the name of any Borrower, payable to the order
of any Borrower or specially indorsed to any Borrower.

            SECTION 2.5 PERMITTED INVESTMENTS. Sums on deposit in the Accounts
may, at the Borrowers' election, be invested in Permitted Investments, provided
that, notwithstanding the foregoing, in no event will funds in the Deposit
Account be subject to any investment. Except during the existence of any Event
of Default, the Borrowers shall have the right to direct Agent to invest sums on
deposit in the Accounts in Permitted Investments. After an Event of Default and
during the continuance thereof, Lender may direct Agent to invest sums on
deposit in the Accounts in Permitted Investments as Lender shall determine in
its sole discretion. The Borrowers hereby irrevocably authorize and direct Agent
to apply any income earned from Permitted Investments to the respective
Accounts. The amount of actual losses sustained on a liquidation of a Permitted
Investment shall be deposited into the Lock Box Account by the Borrowers no
later than three (3) Business Days following such liquidation. The Borrowers
shall be responsible for payment of any federal, state or local income or other
tax applicable to income earned from Permitted Investments. The Accounts shall
be assigned the federal tax identification number of the applicable Borrowers,
which numbers are set forth on the signature page hereof. Any interest,
dividends or other earnings which may accrue on the Accounts shall be added to
the balance in the applicable Account and allocated and/or disbursed in
accordance with the terms hereof.

            III.  DEPOSITS

            SECTION 3.1 INITIAL DEPOSITS.

            (a)   The Borrowers shall deposit in the Debt Service Sub-Account on
the date hereof the amount of $69,936.53.

            (b)   The Borrowers shall deposit in the Impositions and Insurance
Reserve Sub-Account on the date hereof the amount of $1,235,704.81.

            (c)   The Borrowers shall deposit in the Hazardous Materials
Remediation Reserve Sub-Account on the date hereof the amount of $1,612.50.

                                       13

Cash Management Agreement (FX1)



            (d)   The Borrowers shall deposit in the FF&E Reserve Account on the
date hereof the amount of $0.00.

            (e)   The Borrowers shall deposit in the Capital Improvement Reserve
Sub-Account on the date hereof the amount of $2,985,668.00.

            SECTION 3.2 ADDITIONAL DEPOSITS. The Borrowers shall make such
additional deposits into the Accounts as may be required by the Loan Agreement.

            SECTION 3.3 ALLOCATION OF FUNDS FROM THE LOCK BOX ACCOUNT.

            (a)   At any time other than after the occurrence and during the
continuance of an Event of Default, Agent shall allocate and deposit, as
applicable, all available funds on deposit in the Lock Box Account on each
Business Day of each calendar month (or such other period of time as set forth
below) in the following amounts and order of priority:

                  (i)   First, to the Impositions and Insurance Reserve
      Sub-Account, the Monthly Impositions and Insurance Amount for the next
      Monthly Payment Date;

                  (ii)  Second, (A) to the Agent, as Servicer, the monthly
      Servicing Fee on the Loan, and then (B) to the Debt Service Sub-Account,
      the Monthly Debt Service Payment Amount due under the Loan Agreement for
      the next Monthly Payment Date;

                  (iii) Third, to the FF&E Reserve Account, the Monthly FF&E
      Payment for the next Monthly Payment Date;

                  (iv)  Fourth, to the Operating Expense Sub-Account, funds
      sufficient to pay the Monthly Operating Expense Budget Amount for the next
      calendar Month;

                  (v)   Fifth, to the Operating Expense Sub-Account, funds in an
      amount necessary to pay Extraordinary Expenses approved by Lender, if any;

                  (vi)  Sixth, to the Operating Expense Sub-Account, subject to
      the terms and conditions of the Assignment of Management Agreement, any
      management fees due and owing to Manager which have not previously been
      paid to Manager, together with any fees payable to Manager for the next
      calendar month pursuant to the Management Agreement not otherwise paid
      pursuant to (iv) above;

                  (vii) Seventh, to the Debt Service Sub-Account any late
      payment charges, default interest, and any other amounts (other than
      interest and principal paid pursuant to (ii) above) then due and owing
      under the Loan Agreement;

                  (viii) Eighth, for so long as the Mezzanine Loan is
      outstanding, (A) to the Mezzanine Servicer, the monthly Allocable
      Mezzanine Servicing Fee, and then (B) to the Mezzanine Loan Debt Service
      Sub-Account, an amount equal to the Monthly Mezzanine Debt Service Payment
      Amount due for the next Monthly Payment Date under the Mezzanine Loan
      Agreement;

                                       14

Cash Management Agreement (FX1)



                  (ix)  Ninth, if a Cash Trap Event shall have occurred and is
      continuing and the balance then held in the Minimum Balance SubAccount is
      less than the Minimum Balance, to the Minimum Balance Sub-Account until
      such Sub-Account contains the Minimum Balance;

                  (x)   Tenth, if a Cash Trap Event shall have occurred and is
      continuing, any amounts remaining in the Lock Box Account after deposits
      for items (i) through (ix) above shall be deposited into the Cash Trap
      Reserve Sub-Account; and

                  (xi)  Eleventh, if no Cash Trap Event shall have occurred and
      is continuing, any amounts remaining in the Lock Box Account after
      deposits for items (i) through (viii) above shall be paid to, or as
      directed by, the Borrowers.

            (b)   If there are insufficient funds in the Lock Box Account for
the deposits required by Sections 3.3(a)(i) through (iii) and (vii) above, the
Borrowers shall deposit such deficiency into the Lock Box Account on or before
the applicable Monthly Payment Date. Except as expressly provided in Section 6.8
of the Loan Agreement, under no circumstances shall Lender be required to
utilize the Cash Trap Reserve or funds in any other Sub-Account to cure any
deficiencies in any other Sub-Accounts. The deposit by the Borrowers of any such
deficiency pursuant to this Section 3.3(b) shall satisfy the obligation of the
Borrowers to make the related deposit under the Loan Agreement.

            (c)   The Borrowers shall use, or caused to be used, all
disbursements made to it under Sections 3.3(a)(iv) and (v) solely to pay
Operating Expenses in accordance with the Approved Operating Budget and to pay
Extraordinary Expenses for which Lender has approved disbursements under Section
3.3(a)(v) above.

            (d)   Notwithstanding anything to the contrary contained herein,
Lender shall not be obligated to make any disbursement from the Lock Box Account
(under Sections 3.3(a)(iv) and (v) or otherwise) to pay for any costs or
expenses (including legal fees) in connection with any dispute or defense of the
Borrowers under any of the Loan Documents.

            (e)   Upon the expiration of a Cash Trap Event in accordance with
Section 6.8 of the Loan Agreement, any funds remaining in the Cash Trap Reserve
Sub-Account and in the Minimum Balance Sub-Account will be disbursed pursuant to
Section 6.8 of the Loan Agreement.

            (f)   Notwithstanding anything herein to the contrary, upon the
occurrence and during the continuance of an Event of Default, all funds on
deposit in the Lock Box Account, the Sub-Accounts, the FF&E Reserve Account, and
any Loss Proceeds Account shall be disbursed to or as directed by Lender, it
being agreed that application of any such amounts shall be in Lender's sole
discretion and shall not be subject to the terms of Section 3.3(a) hereof.

            (g)   Except as otherwise agreed to by Lender in writing, no funds
shall be withdrawn from the FF&E Reserve Account other than in accordance with
the CapEx/FF&E Budget.

                                       15

Cash Management Agreement (FX1)



            SECTION 3.4 DISBURSEMENTS FOR OPERATING EXPENSE AMOUNTS. The
Borrowers shall provide on a monthly basis (a) a reasonably detailed explanation
of any variances of ten percent (10%) or more between budgeted (as set forth in
the Approved Operating Budget) and actual Operating Expense amounts for any
month in the aggregate, and (b) with respect to any individual item with a cost
of $10,000 or more and not otherwise covered by the Approved Operating Budget,
all invoices or other backup requested by Lender to substantiate the amount
disbursed to the Borrowers pursuant to Section 3.3(a)(iv) and (v).

            IV.   PAYMENT OF FUNDS FROM SUB-ACCOUNTS

            SECTION 4.1 PAYMENTS FROM SUB-ACCOUNTS.

            (a)   Impositions and Insurance Reserve Sub-Account. Lender shall
have the right to withdraw amounts on deposit in the Impositions and Insurance
Reserve Sub-Account to pay (or reimburse any Borrower for repayment of)
Impositions and Insurance Premiums in accordance with the Loan Agreement.

            (b)   Debt Service Sub-Account. Lender shall have the right to
withdraw amounts from the Debt Service Sub-Account to pay: (i) default interest
and late charges, if any, and any amounts then due and payable under the Note
and the Loan Agreement, and (ii) the Monthly Debt Service Payment Amount on each
Monthly Payment Date on which same are due and payable under the Loan Agreement.

            (c)   Operating Expense Sub-Account. Funds deposited into the
Operating Expense Sub-Account pursuant to Sections 3.3(a)(iv) through (vi) shall
be distributed to the Borrowers on each Business Day.

            (d)   Mezzanine Loan Debt Service Sub-Account. On each Monthly
Payment Date, all funds held in the Mezzanine Loan Debt Service Sub-Account
shall be distributed to Mezzanine Lender, and such distribution shall be deemed
to have been distributed by the Borrowers to the Mezzanine Borrowers and shall
be applied by Mezzanine Borrowers to the obligations under the Mezzanine Loan
Agreement.

            (e)   Distributions to the Borrowers. Following the date in each
month that Borrower has made all required deposits pursuant to Section 3.3(i)
through (viii), to the extent that Excess Cash Flow is to be distributed to the
Borrowers pursuant to Section 3.3(a)(xi) above, such funds shall be distributed
to the Borrowers on each Business Day.

            (f)   FF&E Reserve Account. Distributions from the FF&E Reserve
Account will be made in accordance with Section 2.1(f).

            (g)   Minimum Balance Sub-Account. Distributions from the Minimum
Balance Sub-Account will be made in accordance with Section 2.1(g).

            SECTION 4.2 REQUESTS FOR WITHDRAWALS FROM THE HAZARDOUS MATERIALS
REMEDIATION RESERVE SUB-ACCOUNT AND CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT.
Agent shall disburse funds on deposit in the Hazardous Materials Remediation
Reserve Sub-Account and the Capital Improvement Reserve Sub-Account within five
(5) Business Days after written

                                       16

Cash Management Agreement (FX1)



request made from time to time (but not more often than twice per calendar
month) by the Borrowers in accordance with the terms and conditions of Section
6.7 of the Loan Agreement.

            SECTION 4.3 SOLE DOMINION AND CONTROL. The Borrowers and Manager
acknowledge and agree that the Accounts are subject to the sole dominion,
control and discretion of Lender, its authorized agents or designees, including
Agent, subject to the terms hereof and the Loan Agreement. Neither the Borrowers
nor Manager shall have any right of withdrawal with respect to any Account
except, subject to the terms and conditions hereof and the Loan Agreement, the
FF&E Reserve Account. Agent shall have the right and agrees to comply with the
instructions of Lender with respect to the Accounts without the further consent
of the Borrowers or Manager. Agent shall comply with all "entitlement orders"
(as defined in Section 8-102(a)(8) of the UCC) and instructions originated by
Lender without further consent by the Borrowers or any other Person.

            V.    PLEDGE OF ACCOUNTS

            SECTION 5.1 SECURITY FOR OBLIGATIONS. (a) To secure the full and
punctual payment and performance of all Obligations of the Borrowers under the
Loan Agreement, the Note, the Security Instruments, this Agreement and all other
Loan Documents, the Borrowers hereby grant to Lender a first priority continuing
security interest in and to the following property of the Borrowers, whether now
owned or existing or hereafter acquired or arising and regardless of where
located (all of the same, collectively, the "COLLATERAL"):

                  (i)   the Deposit Account, the Lock Box Account, each of the
      Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds Account and all
      cash, checks, drafts, certificates and instruments, if any, from time to
      time deposited or held in the Lock Box Account, each of the Sub-Accounts,
      any Loss Proceeds Account and the FF&E Reserve Account, including, without
      limitation, all deposits or wire transfers made to the Deposit Account,
      the Lock Box Account, each of the Sub-Accounts, the FF&E Reserve Account,
      and any Loss Proceeds Account;

                  (ii)  any and all amounts invested in Permitted Investments;

                  (iii) all interest, dividends, cash, instruments and other
      property from time to time received, receivable or otherwise payable in
      respect of, or in exchange for, any or all of the foregoing; and

                  (iv)  to the extent not covered by clauses (i), (ii) or (iii)
      above, all "proceeds" (as defined under the Uniform Commercial Code as in
      effect in the State of New York (the "UCC")) of any or all of the
      foregoing.

            (b)   Lender and Agent, as agent for Lender, shall have with respect
to the Collateral, in addition to the rights and remedies herein set forth, all
of the rights and remedies available to a secured party under the UCC, as if
such rights and remedies were fully set forth herein.

            SECTION 5.2 RIGHTS ON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, Lender shall promptly notify Agent of such
Event of Default

                                       17

Cash Management Agreement (FX1)



and, without notice from Lender, (a) the Borrowers shall have no further right
in respect of (including, without limitation, the right to instruct Lender or
Agent to transfer from) the Accounts, (b) Lender may direct Agent to liquidate
and transfer any amounts then invested in Permitted Investments to the Accounts
or reinvest such amounts in other Permitted Investments as Lender may reasonably
determine is necessary to perfect or protect any security interest granted or
purported to be granted hereby or to enable Agent, as agent for Lender, or
Lender to exercise and enforce Lender's rights and remedies hereunder with
respect to any Collateral, and (c) Lender may apply any Collateral to any
Obligations in such order of priority as Lender may determine. The proceeds of
any disposition of the Collateral, or any part thereof, may be applied by Lender
to the payment of the Obligations in such priority and proportions as Lender in
its discretion shall deem proper.

            SECTION 5.3 FINANCING STATEMENT; FURTHER ASSURANCES. Simultaneously
herewith, the Borrowers shall deliver to Lender for filing a financing statement
or statements in connection with the Collateral in the form reasonably required
by Lender to properly perfect Lender's security interest therein to the extent a
security interest in the Collateral may also be perfected by filing. The
Borrowers agree that at any time and from time to time, at the expense of the
Borrowers, the Borrowers will promptly execute and deliver all further
instruments and documents, and take all further actions, that may be reasonably
necessary, or that Agent or Lender may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted hereby
(including, without limitation, any security interest in and to any Permitted
Investments) or to enable Agent or Lender to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. In the event of any change in
name, identity or structure of any Borrower, such Borrower shall notify Lender
thereof and promptly after Lender's reasonable request shall file and record, or
deliver to Lender, such UCC financing statements (if any) as are necessary to
maintain the priority of Lender's lien upon and security interest in the
Collateral, and shall pay all expenses and fees in connection with the filing
and recording thereof. If Lender shall require the filing or recording of
additional UCC financing or continuation statements, the Borrowers shall,
promptly after request, execute, if necessary, file and record such UCC
financing or continuation statements as Lender shall deem reasonably necessary,
and shall pay all reasonable expenses and fees in connection with the filing and
recording thereof.

            SECTION 5.4 TERMINATION OF AGREEMENT. This Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until payment in full of the Obligations. Upon payment and
performance in full of the Obligations, this Agreement shall terminate and the
Borrowers shall be entitled to the return, at their expense, of such of the
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof, and Agent and/or Lender shall execute such instruments and
documents as may be reasonably requested by the Borrowers to evidence such
termination and the release of the lien hereof including, without limitation,
letters to Credit Card Companies, as applicable, prepared by the Borrowers and
reasonably acceptable to Lender rescinding the instructions set forth in the
Credit Card Receivables Payment Direction Letter and UCC-3 termination
statements.

                                       18

Cash Management Agreement (FX1)



            VI.   RIGHTS AND DUTIES OF LENDER AND AGENT

            SECTION 6.1 REASONABLE CARE. Beyond the exercise of reasonable care
in the custody thereof or as otherwise expressly provided herein, neither Agent
nor Lender shall have any duty as to any Collateral in its possession or control
as agent therefor or bailee thereof or any income thereon or the preservation of
rights against any Person or otherwise with respect thereto. Agent and Lender
each shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Agent or Lender accords its own
property, it being understood that Agent and/or Lender shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in value thereof, by reason of the act or omission of Agent or
Lender, its Affiliates, agents, employees or bailees, except to the extent that
such loss or damage results from such Person's gross negligence or willful
misconduct, provided that nothing in this Article VI shall be deemed to relieve
Agent from the duties and standard of care which, as a commercial bank, it
generally owes to depositors. Neither Lender nor Agent shall have any liability
for any loss resulting from the investment of funds in Permitted Investments in
accordance with the terms and conditions of this Agreement.

            SECTION 6.2 INDEMNITY. Agent, in its capacity as agent hereunder,
shall be responsible for the performance only of such duties as are specifically
set forth herein, and no duty shall be implied from any provision hereof. Agent
shall not be under any obligation or duty to perform any act which would involve
it in expense or liability or to institute or defend any suit in respect hereof,
or to advance any of its own monies. The Borrowers shall indemnify and hold
Agent and Lender, their respective employees, officers, directors and agents
harmless from and against any loss, liability, cost or damage (including,
without limitation, reasonable attorneys' fees and disbursements) incurred by
Agent or Lender in connection with the transactions contemplated hereby, except
to the extent that such loss or damage results from such Person's gross
negligence or willful misconduct. The foregoing indemnity shall survive the
termination of this Agreement and the resignation and removal of Agent.

            SECTION 6.3 RELIANCE. Agent shall be protected in acting upon any
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other paper, document or signature believed by it to be genuine, and it may
be assumed that any person purporting to act on behalf of any Person giving any
of the foregoing in connection with the provisions hereof has been duly
authorized to do so. Agent may consult with legal counsel, and the advice or
opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken or suffered by it hereunder and in good faith in
accordance therewith. Agent shall not be liable for any act or omission done or
omitted to be done by Agent in reliance upon any instruction, direction or
certification received by Agent and without gross negligence or willful or
reckless misconduct. Agent shall be entitled to execute any of the powers
hereunder or perform any duties hereunder either directly or through agents or
attorneys; provided, however, that the execution of such powers by any such
agents or attorneys shall not diminish, or relieve Agent for, responsibility
therefor to the same degree as if Agent itself had executed such powers.

                                       19

Cash Management Agreement (FX1)



            SECTION 6.4 RESIGNATION OF AGENT.

            (a)   Agent shall have the right to resign as Agent hereunder upon
sixty (60) days' prior written notice to the Borrowers and Lender, and in the
event of such resignation, the Borrowers shall appoint a successor Agent which
must be an Eligible Bank. No such resignation by Agent shall become effective
until a successor Agent shall have accepted such appointment and executed an
instrument by which it shall have assumed all of the rights and obligations of
Agent hereunder. If no such successor Agent is appointed within sixty (60) days
after receipt of the resigning Agent's notice of resignation, the resigning
Agent may petition a court for the appointment of a successor Agent.

            (b)   In connection with any resignation by Agent, (i) the resigning
Agent shall, (A) duly assign, transfer and deliver to the successor Agent this
Agreement and all cash and Permitted Investments held by it hereunder, (B)
deliver such financing statements and execute and deliver such other instruments
prepared by the Borrowers and reasonably approved by Lender or prepared by
Lender as may be reasonably necessary to assign to the successor Agent, as agent
for Lender, any security interest in the Collateral existing in favor of the
retiring Agent hereunder and to otherwise give effect to such succession and (C)
take such other actions as may be reasonably required by Lender or the successor
Agent in connection with the foregoing and (ii) the successor Agent shall
establish in Lender's name, as secured party, cash collateral accounts, which
shall become the Accounts for purposes of this Agreement upon the succession of
such Agent, and which Accounts shall also be "securities accounts" within the
meaning of the UCC.

            (c)   Lender at its sole discretion shall have the right, upon
thirty (30) days notice to Agent, to substitute Agent with a successor Agent
that satisfies the requirements of an Eligible Bank or to have one or more of
the Accounts held by another Eligible Bank, provided that such successor Agent
shall perform the duties of Agent pursuant to the terms of this Agreement.

            SECTION 6.5 LENDER APPOINTED ATTORNEY-IN-FACT. The Borrowers hereby
irrevocably constitute and appoint Lender as the Borrowers' true and lawful
attorney-in-fact, coupled with an interest and with full power of substitution,
to exercise and enforce every right, power, remedy, option and privilege of the
Borrowers with respect to the Collateral, and do in the name, place and stead of
the Borrowers, all such acts, things and deeds for and on behalf of and in the
name of the Borrowers, which the Borrowers are required to do hereunder or under
the other Loan Documents or which Agent or Lender may reasonably deem necessary
to more fully vest in Lender the rights and remedies provided for herein and to
accomplish the purposes of this Agreement including, without limitation, the
filing of any UCC financing statements or continuation statements in appropriate
public filing offices on behalf of the Borrowers, in any of the foregoing cases,
upon the Borrowers' failure to take any of the foregoing actions within ten (10)
days after notice from Lender. The foregoing powers of attorney are irrevocable
and coupled with an interest. If any Borrower fails to perform any agreement
herein contained and such failure shall continue for ten (10) days after notice
of such failure is given to such Borrower, Lender may perform or cause
performance of any such agreement, and any reasonable expenses of Lender and
Agent in connection therewith shall be paid by the Borrowers.

                                       20

Cash Management Agreement (FX1)



            SECTION 6.6 ACKNOWLEDGMENT OF LIEN/OFFSET RIGHTS. Agent hereby
acknowledges and agrees with respect to the Accounts that (a) the Accounts shall
be held by Agent in the names set forth herein, (b) all funds held in the
Accounts shall be held for the benefit of Lender, (c) the Borrowers have granted
to Lender a first priority security interest in the Collateral, (d) Agent shall
not disburse any funds from the Accounts except as provided herein, and (e)
Agent shall invest and reinvest any balance of the Accounts in Permitted
Investments in accordance with Section 2.5 hereof. Agent hereby waives any right
of offset, banker's lien or similar rights against, or any assignment, security
interest or other interest in, the Collateral.

            SECTION 6.7 REPORTING PROCEDURES.

            Agent shall provide the Borrowers and Lender with a record of all
checks and any other items deposited to the Lock Box Account or processed for
collection. Agent shall send a daily credit advice to the Borrowers and Manager,
which credit advice shall specify the amount of each receipt deposited into each
Account on such date. Agent shall send a monthly report to the Borrowers,
Manager and Lender, which monthly report shall specify the credits and charges
to the Accounts for the previous calendar month. Agent shall, at the request of
Lender, establish Lender and its designated Servicer, and the Borrowers, as
users of Agent's electronic data transfer system in accordance with Agent's
standard procedures; provided that, the Borrowers' access shall be limited to
information services and shall under no circumstances provide the Borrowers with
transaction rights in any such account. Upon request of Lender or its designated
Servicer, (i) Agent shall send to Lender or its designated Servicer, as
applicable, either (x) copies of the daily credit advices and any other advices
or reports furnished by Agent to the Borrowers and/or Manager hereunder or (y)
information on Account balances, to the extent said balances in the Accounts
have changed from the previous report, the aggregate amount of withdrawals from
the Accounts and other similar information via the electronic data transfer
system or facsimile transmission on a daily basis, and (ii) Agent shall advise
Lender or its designated Servicer, as applicable, of the amount of available
funds in the Accounts and shall deliver to Lender or its designated Servicer
copies of all statements and other information concerning the Accounts, to the
extent that the balances in the Accounts have changed from the previous report,
as Lender or its designated Servicer shall reasonably request. In the event
Agent shall resign as Agent hereunder, Agent shall provide the Borrowers with a
final written accounting, including closing statements, with respect to the
Accounts within thirty (30) days of resignation.

            VII.  REMEDIES

            SECTION 7.1 REMEDIES. Upon the occurrence and during the continuance
of an Event of Default, Lender or Agent at the direction of Lender, as agent for
Lender, may:

            (a)   without notice to the Borrowers, except as required by law,
and at any time or from time to time, charge, set-off and otherwise apply all or
any part of the Collateral against the Obligations or any part thereof,
including, without limitation, reasonable costs and expenses set forth in
Section 8.4 hereof;

            (b)   in its sole discretion, at any time and from time to time,
exercise any and all rights and remedies available to it under this Agreement,
and/or as a secured party under the UCC and/or under any other applicable law or
in equity; and

                                       21

Cash Management Agreement (FX1)



            (c)   demand, collect, take possession of, receive, settle,
compromise, adjust, sue for, foreclose or realize upon the Collateral (or any
portion thereof) as Lender may determine in its sole discretion.

            SECTION 7.2 WAIVER. The Borrowers hereby expressly waive, to the
fullest extent permitted by law, presentment, demand, protest or any notice of
any kind in connection with this Agreement or the Collateral. The Borrowers
acknowledge and agree that ten (10) days' prior written notice of the time and
place of any public sale of the Collateral or any other intended disposition
thereof shall be reasonable and sufficient notice to the Borrowers within the
meaning of the UCC.

            VIII. MISCELLANEOUS

            SECTION 8.1 TRANSFERS AND OTHER LIENS. Each Borrower agrees that it
will not (i) sell or otherwise dispose of any of the Collateral or (ii) create
or permit to exist any Lien upon or with respect to all or any of the
Collateral, except for the Lien granted under this Agreement.

            SECTION 8.2 LENDER'S RIGHT TO PERFORM BORROWER'S OBLIGATIONS; NO
LIABILITY OF LENDER. If any Borrower fails to perform any of the covenants or
obligations contained herein, and such failure shall continue for a period ten
(10) Business Days after such Borrower's receipt of written notice thereof from
Lender, Lender may itself perform, or cause performance of, such covenants or
obligations, and the reasonable expenses of Lender incurred in connection
therewith shall be payable by the Borrowers to Lender. Notwithstanding Lender's
right to perform certain obligations of the Borrowers, it is acknowledged and
agreed that the Borrowers retain control of the Property and operation thereof
and notwithstanding anything contained herein or Agent's or Lender's exercise of
any of its rights or remedies hereunder, under the Loan Documents or otherwise
at law or in equity, neither Agent nor Lender shall be deemed to be a
mortgagee-in-possession nor shall Lender be subject to any liability with
respect to the Property or otherwise based upon any claim of lender liability
except as a result of Lender's gross negligence or willful misconduct.

            SECTION 8.3 NO WAIVER. The rights and remedies provided in this
Agreement and the other Loan Documents are cumulative and may be exercised
independently or concurrently, and are not exclusive of any other right or
remedy provided at law or in equity. No failure to exercise or delay by Agent or
Lender in exercising any right or remedy hereunder or under the Loan Documents
shall impair or prohibit the exercise of any such rights or remedies in the
future or be deemed to constitute a waiver or limitation of any such right or
remedy or acquiescence therein. Every right and remedy granted to Agent and/or
Lender hereunder or by law may be exercised by Agent and/or Lender at any time
and from time to time, and as often as Agent and/or Lender may deem it
expedient. Any and all of Agent's and/or Lender's rights with respect to the
lien and security interest granted hereunder shall continue unimpaired, and the
Borrowers shall be and remain obligated in accordance with the terms hereof,
notwithstanding (a) any proceeding of the Borrowers under the Federal Bankruptcy
Code or any bankruptcy, insolvency or reorganization laws or statutes of any
state, (b) the release or substitution of Collateral at any time, or of any
rights or interests therein or (c) any delay, extension of time, renewal,
compromise or other indulgence granted by the Agent and/or Lender in the event
of any default, with respect to the Collateral or otherwise hereunder. No delay
or extension of time by

                                       22

Cash Management Agreement (FX1)



Agent and/or Lender in exercising any power of sale, option or other right or
remedy hereunder, and no notice or demand which may be given to or made upon the
Borrowers by Agent and/or Lender, shall constitute a waiver thereof, or limit,
impair or prejudice Agent's and/or Lender's right, without notice or demand, to
take any action against the Borrowers or to exercise any other power of sale,
option or any other right or remedy.

            SECTION 8.4 EXPENSES. Agent shall be entitled to deduct from the
Lock Box Account for its own account the monthly Servicing Fee for which the
Borrowers are responsible pursuant to Section 2.11 of the Loan Agreement prior
to making any disbursements pursuant to Section 3.3(a)(ii) hereof, and, for so
long as the Mezzanine Loan is outstanding, Agent shall deduct from the Lock Box
Account the monthly Allocable Mezzanine Servicing Fee for which the Mezzanine
Borrower is responsible pursuant to Section 2.11 of the Mezzanine Loan Agreement
to be remitted to the Mezzanine Servicer prior to making any disbursements
pursuant to Section 3.3(a)(viii) hereof. The Collateral shall secure, and the
Borrowers shall pay to Agent and Lender within five (5) Business Days of the
written demand therefor, from time to time, all reasonable costs and expenses
(including, but not limited to, reasonable attorneys' fees and disbursements,
and transfer, recording and filing fees, taxes and other charges) of, or
incidental to, the creation or perfection of any lien or security interest
granted or intended to be granted hereby, the custody, care, sale, transfer,
administration, collection of or realization on the Collateral, or in any way
relating to the enforcement, protection or preservation of the rights or
remedies of Agent and/or Lender under this Agreement, the Loan Agreement, the
Note, the Security Instruments, or the other Loan Documents. Standard and
customary fees and charges associated with the Accounts shall be included on a
monthly consolidated account analysis statement which Agent shall submit to the
Borrowers for the Borrowers' payment. This statement shall set forth the fees
and charges payable for such month, including, but not limited to reasonable
fees and reasonable expenses incurred in connection with this Agreement and be
accompanied by reasonably detailed supporting documentation. Agent shall be
entitled to charge the Accounts for such reasonable fees and expenses as
indicated by the analysis statement.

            SECTION 8.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
and final agreement between the parties with respect to the subject matter
hereof and may not be changed, terminated or otherwise varied, except by a
writing duly executed by the parties.

            SECTION 8.6 NO WAIVER. No waiver of any term or condition of this
Agreement, whether by delay, omission or otherwise, shall be effective unless in
writing and signed by the party sought to be charged, and then such waiver shall
be effective only in the specific instance and for the purpose for which given.

            SECTION 8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their respective successors
and permitted assigns.

            SECTION 8.8 NOTICES. All notices, demands, requests, consents,
approvals and other communications (any of the foregoing, a "NOTICE") required,
permitted, or desired to be given hereunder to the Borrowers, Lender or Manager
shall be in writing and delivered to such parties at the addresses and in the
manner provided in Section 14.5 of the Loan Agreement. Notices to the Agent
shall be addressed as follows:

                                       23

Cash Management Agreement (FX1)



                                 Wachovia Bank, National Association
                                 8739 Research Drive
                                 URP4
                                 Charlotte, North Carolina  28288-1075
                                 Attention: David Tucker
                                 Facsimile No.: (704) 593-7737

            SECTION 8.9 CAPTIONS. All captions in this Agreement are included
herein for convenience of reference only and shall not constitute part of this
Agreement for any other purpose.

            SECTION 8.10 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in all respects in accordance with the laws of the State
of New York without regard to conflicts of law principles of such State.

            SECTION 8.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts.

            SECTION 8.12 EXCULPATION. The provisions of Article XII of the Loan
Agreement are hereby incorporated by reference into this Agreement as to the
liability of the Borrowers hereunder to the same extent and with the same force
as if fully set forth herein, and shall apply equally to Manager to the same
extent and with the same force as if fully set forth herein, provided, however,
that notwithstanding the foregoing, there shall be personal liability to the
Borrowers and Manager for the payment to Lender of all losses, damages, costs
and expenses suffered or incurred by Lender and arising from the failure of the
Borrowers and/or Manager to comply with the provisions of Section 2.2 of this
Agreement.

            SECTION 8.13 LOAN AGREEMENT. If any inconsistency exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                                       24

Cash Management Agreement (FX1)



            IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                LENDER:

                                MERRILL LYNCH MORTGAGE LENDING, INC.

                                By: /s/ Robert Spinna
                                    --------------------------------
                                Name: Robert Spinna
                                Title: Vice President

                                AGENT:

                                WACHOVIA BANK, NATIONAL ASSOCIATION

                                By: /s/ David C. Tucker
                                    --------------------------
                                Name: David C. Tucker
                                Title: Vice President

                                MANAGER:

                                LODGIAN MANAGEMENT CORP.

                                By: /s/ Daniel E. Ellis
                                    ------------------------------
                                Name: Daniel E. Ellis
                                Title:  Vice President and Secretary

                   [SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

Cash Management Agreement (FX1)



                                BORROWERS:

                                MPAC HOTELS I, L.L.C.
                                LODGIAN DENVER LLC
                                LODGIAN HOTELS FIXED I, LLC
                                MACON HOTEL ASSOCIATES, L.L.C.
                                SERVICO NORTHWOODS, INC.

                                By: /s/ Daniel E. Ellis
                                    -----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

Cash Management Agreement (FX1)



                                    EXHIBIT A

            Form of Credit Card Receivables Payment Direction Letter

                                     [Date]

___________________________
___________________________
___________________________

            Re:   _______________________ (the "COMPANY")

Gentlemen:

            ________________ (the "PROCESSOR") has entered into arrangements
pursuant to which Processor acts as credit card processing service provider with
respect to certain credit card and debit card sales by Company and makes
payments to Company in respect of such sales as set forth in the [Merchant
Services Bankcard Agreement], dated _____________ between Processor and Company
(and together with any replacement agreement thereto, referred to herein as the
"CARD PROCESSING AGREEMENT").

            Please be advised that Company has entered or is about to enter into
financing arrangements with Merrill Lynch Mortgage Lending, Inc. (the "LENDER")
pursuant to which Lender may from time to time make loans and advances and
provide other financial accommodations to Company, secured by, among other
things, all of Company's right, title and interest in and to all deposit and
other bank accounts and proceeds of the foregoing, including all amounts at any
time payable by Processor to Company pursuant to the Card Processing Agreement
or otherwise.

            Notwithstanding anything to the contrary contained in the Card
Processing Agreement or any prior instructions to Processor, unless and until
Processor receives written instructions from Lender to the contrary, effective
as of the day after the date of Processor's written acknowledgement below all
amounts payable by Processor to Company pursuant to the Card Processing
Agreement or otherwise shall be sent by federal funds wire transfer or
electronic depository transfer to the following bank account of Lender:

                            ___________ (the "BANK")
                             ABA Number: ___________
 For the Account of: Lock Box Account for the benefit of Merrill Lynch Mortgage
                    Lending, Inc., its successors and assigns
                          Account Number: ____________
                      Attn: ____________, Fax: ____________

            In the event Processor at any time receives any other instructions
from Lender with respect to the disposition of amounts payable by or through
Processor to Company pursuant to

                                       A-1

Cash Management Agreement (FX1)



the Card Processing Agreement or otherwise, Processor is hereby irrevocably
authorized and directed to follow such instructions, without inquiry as to
Lender's right or authority to give such instructions. Company and Lender
acknowledge that (a) any instructions from Lender to Processor to change the
account to which funds must be sent by a vice president or other officer of
Lender to ____________; (b) such instructions shall only provide for funds to be
sent to a single deposit account of Lender, in a manner with respect to the
nature of the funds transfer and at times consistent with the payment practices
of Processor as then in effect, unless otherwise agreed by Processor. The
Company agrees to hold harmless Processor for any action taken by Processor in
accordance with the terms of this letter and the Card Processing Agreement; and
Lender shall complete such account change forms as Processor may require. The
Company hereby acknowledges that the account set forth above is owned by Company
but is under the control of Lender.

            Lender and Company hereby confirm and agree as follows: (i) the Card
Processing Agreement is in full force and effect and (ii) this Payment Direction
Letter does not prohibit or limit any rights Processor possesses under the Card
Processing Agreement, including but not limited to Processor's right to debit,
offset or charge back any amount owing to Processor under the Card Processing
Agreement or any replacement or renewal thereof, against funds sent to or to be
sent to the above referenced bank account.

            This Payment Direction Letter cannot be changed, modified, or
terminated, except by written agreement signed by Lender, Company and Processor.
Processor agrees to use reasonable efforts to ensure payment instructions are
followed, but Lender and Company herein acknowledge that Processor shall incur
no liability for changes or modifications wherein Processor has received
instructions from Company or Lender to change deposit instructions. The terms of
this Payment Direction Letter shall be governed by the laws of the State of New
York.

         Please acknowledge your receipt of, and agreement to, the foregoing by
signing in the space provided below.

                                    Very truly yours,
                                    ________________ (the "COMPANY")

                                    By:   ___________________________
                                          Name:
                                          Title:
                                    Date: ____________________________

Agreed to by Processor:

________________________________

By:_____________________________
Name:
Title:

                                       A-2

Cash Management Agreement (FX1)

EX-10.2.9

                                                                 EXHIBIT 10.2.9

                             ENVIRONMENTAL INDEMNITY

                  This ENVIRONMENTAL INDEMNITY, made as of June 25, 2004 (this
"AGREEMENT"), by the Borrowers named on the signature pages hereto, each having
an address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30326 (each, a "BORROWER" and collectively, "BORROWERS"), by LODGIAN,
INC., a Delaware corporation, having an address at 3445 Peachtree Road, NE,
Suite 700, Atlanta, Georgia 30326 ("OBLIGOR"), jointly and severally (Borrowers
and Obligor being referred to herein collectively as "INDEMNITORS" and
individually as an "INDEMNITOR"), in favor of MERRILL LYNCH MORTGAGE LENDING,
INC., a Delaware corporation, having an address at 4 World Financial Center, New
York, New York, 10080 (together with its successors, transferees and assigns,
"LENDER").

                              W I T N E S S E T H:

                  WHEREAS:

                  A.       Borrowers are the owners of fee simple or leasehold
title, as applicable, to those certain parcels of real property (collectively,
the "PREMISES") described in EXHIBIT A attached hereto, and the buildings,
structures, fixtures, additions, enlargements, extensions, modifications,
repairs, replacements and other improvements now or hereafter located thereon
(the "IMPROVEMENTS"; together with the Premises, collectively, the "PROPERTY").

                  B.       Borrowers and Lender have entered into a certain Loan
and Security Agreement, dated as of the date hereof (as amended, modified or
restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has
agreed to make a loan to Borrowers as more particularly described below.
Capitalized terms used herein and not herein defined shall have the meanings
assigned to such terms in the Loan Agreement.

                  C.       Pursuant to the Loan Agreement, Lender is making a
Loan to Borrower in the aggregate original principal amount of up to $63,801,000
(the "LOAN"). The Loan is evidenced by a certain Promissory Note, dated as of
the date hereof (as amended, modified, restated or split from time to time, the
"NOTE") and secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds
to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated
as of the date hereof (as amended, modified or restated from time to time,
collectively, the "SECURITY INSTRUMENT"), with respect to the Property.

                  D.       As a condition to Lender's making the Loan, Lender is
requiring that Indemnitors indemnify the Indemnified Parties (as hereinafter
defined) with respect to environmental conditions or liabilities on, in, under
or affecting the Property as hereinafter set forth.

                  E.       Obligor holds a direct and/or indirect ownership
interest in Borrower and will derive substantial economic benefit from Lender
making the Loan to Borrower.



                  NOW, THEREFORE, to induce Lender to extend the Loan to
Borrower and in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Indemnitors hereby covenant and agree for the benefit of the
Indemnified Parties as follows:

         1.       DEFINITIONS. The following terms shall have the following
meanings when used herein:

                  "COSTS" shall mean, collectively, all liens, damages, losses,
fines, liabilities (including, without limitation, any strict liability),
obligations, settlements, penalties, assessments, citations, directives, claims,
litigations, demands, response costs (including, without limitation,
investigation, removal, remediation, mitigation, containment, post-closure and
monitoring costs), defenses, judgments, suits, proceedings, costs, laboratory
fees, disbursements and expenses of any kind or nature whatsoever (including,
without limitation, reasonable attorneys', consultants' and experts' fees and
disbursements). Costs shall also include any future reduction in sales price of,
or unmarketability and consequent inability of Lender to foreclose on or
otherwise sell, the Property and the lost opportunity costs resulting from the
inability of Lender to sell or dispose of its interest in the Property, all as a
consequence of any event described in paragraph 2 herein to the extent that such
loss in value results in Lender receiving in any foreclosure, or deed in lieu
thereof, of the Properties less than the full amount of the Obligations by
reason of any matter set forth in Section 2.

                  "ENVIRONMENTAL LAWS" shall have the meaning given to such term
in the Loan Agreement.

                  "HAZARDOUS MATERIAL" shall have the meaning given to such term
in the Loan Agreement.

                  "INDEMNIFIED PARTY" shall mean Lender, any subsequent holder
of the Note and each of their officers, directors, shareholders, principals,
partners, representatives, employees, agents, successors and assigns.

                  "TENANTS" shall mean all tenants, lessees, subtenants and
other occupants of the Property.

         2.       INDEMNITY.

                  (a)      Except as provided in Section 2(b) below, Indemnitors
hereby assume liability for, and agree to pay, protect, defend, indemnify and
save all Indemnified Parties harmless from and against any and all Costs which
may be imposed upon, incurred by or asserted or awarded against any of the
Indemnified Parties or the Property, and arising directly or indirectly from:
(i) the violation or alleged violation of any Environmental Laws relating to or
affecting the Property, whether or not caused by or within the control of
Indemnitors; (ii) the actual or alleged presence, release or threat of release
of, or exposure to any Hazardous Material on, in, under or affecting all or any
portion of the Property or any surrounding areas, regardless of whether or not
caused by or within the control of Indemnitors; (iii) any actual or alleged
personal injury or property damage arising out of or related to Hazardous
Material on the Property; (iv) any acts or omissions that exacerbate an existing
condition at the Property and give

                                       2


rise to liability under any Environmental Law; (v) the failure by Indemnitors to
comply fully with the terms and conditions of this Agreement in all material
respects; (vi) a material breach of any representation or warranty contained in
this Agreement; (vii) the enforcement of this Agreement; or (viii) assessment,
investigation, containment, monitoring, remediation and/or removal of any and
all Hazardous Material from the Property or any surrounding areas, and costs
incurred to comply with Environmental Laws in connection with the Property or
any surrounding areas.

                  (b)      Notwithstanding any provision hereof to the contrary,
Indemnitors shall have no liability under this Agreement with respect to Costs
relating to Hazardous Material which is initially placed on, in or under the
Property after the earlier of (i) Lender or any receiver appointed at the
request of Lender taking actual possession and control of the Property following
an Event of Default, and (ii) Lender completing a foreclosure or other sale
pursuant to which Lender takes title to the Property. Indemnitors shall have no
liability under this Agreement to any Indemnified Party with respect to Costs
which result from such Indemnified Party's willful misconduct or gross
negligence. In addition to the foregoing, Obligor shall have no liability
pursuant to this Agreement with respect to costs relating to Hazardous Material
which is initially placed on, in or under the Property after the transfer of the
Mezzanine Borrowers' equity interest in the applicable Borrower to the Mezzanine
Lender or its designee by reason of, or in lieu of, enforcement of the Mezzanine
Lender's rights under the Mezzanine Loan Documents.

                  (c)      Indemnitors' obligation to defend the Indemnified
Parties hereunder shall include defense at both the trial and appellate levels
and shall be with attorneys, consultants and experts selected by Indemnitor and
subject to the reasonable approval of the Indemnified Parties.

         3.       REPRESENTATIONS REGARDING HAZARDOUS MATERIAL. Indemnitors
hereby represent and warrant to agree with the Indemnified Parties as follows:

                  (a)      Indemnitors, the Property and all businesses or
operations conducted thereon are in compliance with all applicable Environmental
Laws in all material respects;

                  (b)      Except as previously disclosed to Lender in the Phase
I Reports, no Hazardous Material has been disposed of on or released (as used
herein, "RELEASE" shall have the meaning provided in 42 U.S.C. Section 9601(22))
at, onto or under the Property by any Indemnitor or, to Indemnitors' knowledge,
by any other Person that has not been remediated in accordance with applicable
Environmental Laws or that is present at or under the Property at a level in
excess of that allowed by applicable Environmental Laws;

                  (c)      Except as previously disclosed to Lender in the Phase
I Reports, no Hazardous Material is located in, on or under, or has been
handled, generated, stored, processed or discharged from the Property in
violation of applicable Environmental Laws by any Indemnitor or, to the
Indemnitors' knowledge, by any other Person, except for those materials used by
Borrowers, Manager or tenants of the Property ("TENANTS") in the ordinary course
of their business in material compliance with all applicable Environmental Laws
and not reasonably expected to give rise to liability under applicable
Environmental Laws;

                                       3


                  (d)      Indemnitors have received no written notice that the
Property is subject to any private or governmental lien or judicial or
administrative notice or action relating to or arising under applicable
Environmental Laws;

                  (e)      Except as previously disclosed to Lender in the Phase
I Reports, there are no underground storage receptacles or surface impoundments,
landfills or dumps for Hazardous Material on the Property;

                  (f)      Indemnitors have received no notice of, and to
Indemnitors' knowledge there exists no investigation, action, proceeding or
claim by any agency, authority or unit of government or by any third party
asserted or threatened which could result in any liability, penalty, sanction or
judgment under any applicable Environmental Laws with respect to any condition,
use or operation of the Property, nor do Indemnitors know of any basis for any
of the foregoing;

                  (g)      Except as previously disclosed to Lender in the Phase
I Reports or the Property Condition Reports, there is no asbestos-containing
material or lead-based paint at the Property nor are there any polychlorinated
biphenyls ("PCB'S"), endangered species' habitats or wetlands at the Property;

                  (h)      Indemnitors have received no notice that, and to
Indemnitors' knowledge, there has been no claim by any party that, any use,
operation or condition of the Property has caused any nuisance or any other
liability or adverse condition on any other property nor do Indemnitors know of
any basis for such a claim relating to Hazardous Material;

                  (i)      Except as previously disclosed in writing to Lender,
Indemnitor has not knowingly waived or released any Person's liability with
regard to Hazardous Material in, on, under or around the Property nor retained
or assumed, contractually or otherwise, any other Person's liability relative to
Hazardous Material or any claim, action or proceeding relating thereto; and

                  (j)      Except as previously disclosed to Lender in the Phase
I Reports, neither the Property nor any other property owned by any Borrower (i)
is included or, to Indemnitor's knowledge, proposed for inclusion on the
National Priorities List issued pursuant to CERCLA (hereinafter defined) by the
United States Environmental Protection Agency (the "EPA") or on any of the
inventories of other potential "Problem" sites issued by the EPA or other
applicable Governmental Authority nor (ii) otherwise identified by the EPA as a
potential CERCLA site or included or, to Indemnitor's knowledge, proposed for
inclusion on any such list or inventory issued pursuant to any other applicable
Environmental Law or issued by any other Governmental Authority.

         4.       COVENANTS OF INDEMNITORS.

                  (a)      So long as any Borrower or Affiliate thereof owns or
is in possession of the Property, Indemnitors shall, and shall use commercially
reasonable efforts to cause all property managers, agents, employees and Tenants
to: (i) comply with all Environmental Laws applicable to the Property, (ii) keep
or cause the Property to be kept free from Hazardous Material (except those
materials used by Borrower, Manager or Tenants in the ordinary course of

                                       4


their business, in compliance with applicable Environmental Laws), (iii) not
install or use, or permit the installation or use of, any underground
receptacles containing Hazardous Material on the Property, (iv) expressly
prohibit the use, generation, handling, storage, production, release, processing
and disposal of Hazardous Material by all future Tenants and Managers (except
those substances used by such Tenants or Managers in the ordinary course of
their business in compliance with all applicable Environmental Laws) and use all
commercially reasonable efforts to prevent existing Tenants, Managers and other
permitted occupants of the Property from taking any such actions, (v) in any
event, not install on the Property or permit to be installed on the Property
PCB's, urea formaldehyde insulation, asbestos or any substance containing
asbestos or any material containing lead-based paint, (vi) prohibit the disposal
and/or release of any Hazardous Material in violation of applicable
Environmental Laws on, at or beneath, the Property, (vii) operate and maintain,
or cause to be operated and maintained, the HVAC systems at the Property in
accordance with standards for operation of similar systems located at properties
that are similar (including, without limitation, the manner, class of operation,
and/or Franchisor standards) to the Property, (viii) cause the Required Capital
Improvements which relate to mold to be completed in accordance with the
standards and time frames set forth in Section 6.5 of the Loan Agreement, and
(ix) not permit any Lien imposed pursuant to any applicable Environmental Law to
be imposed or, subject to Section 4(c) below, to remain on the Property.

                  (b)      Indemnitors shall promptly notify Lender in writing
should any Indemnitor become aware of (i) any release, disposal or discharge of
Hazardous Material in violation of applicable Environmental Laws, or other
material actual environmental problem or liability, with respect to or affecting
the Property, (ii) any lien, action or notice of violation or potential
liability affecting the Property or Borrowers and arising under any applicable
Environmental Law, (iii) the institution of any investigation, inquiry or
proceeding concerning Borrowers or the Property pursuant to any applicable
Environmental Law or otherwise relating to Hazardous Material affecting the
Property, (iv) the discovery of any occurrence, condition or state of facts
which would render any representation or warranty contained in this Agreement
incorrect or incomplete in any material respect if made at the time of such
discovery, (v) any remedial action taken by Indemnitors or, if actually known by
Indemnitor, any other Person in response to any Hazardous Material on, under or
at the Property, (vi) the discovery by Indemnitors of any occurrence or
condition on any real property adjoining or in the vicinity of the Property that
would reasonably be expected to cause the Property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or use
thereof under any applicable Environmental Laws, and (vii) any request for
information from any governmental agency that indicates such agency is
investigating whether Indemnitors may be potentially responsible for a release,
disposal or discharge of Hazardous Material. Borrowers shall promptly notify
Lender of any proposed action to be taken pertaining in any way to the Property
to commence any operations that could reasonably be expected to subject any
Borrower or the Property to additional obligations or liabilities under
applicable Environmental Laws, including laws, rules and regulations requiring
additional or amended environmental permits or licenses which could reasonably
be expected to subject any Borrower to any material obligations or requirements
under any applicable Environmental Laws. Borrowers shall, at their own expense,
provide copies of such documents or information as Lender may reasonably request
in relation to any matters disclosed pursuant to this Section. Indemnitor shall
promptly transmit to Lender

                                       5


copies of any and all material citations, orders, notices and all other
communications sent or received by any Borrower relating to any of the foregoing
provisions of this paragraph.

                  (c)      Regardless of the source of contamination,
Indemnitors shall, at their own expense, promptly take or cause to be taken and
diligently prosecute all actions required by applicable Environmental Laws for
the clean-up of the Property and other property affected by contamination in,
on, under or at the Property, including, without limitation, all investigative,
monitoring, removal, containment and remedial actions in accordance with and
required by all applicable Environmental Laws (and in all events in a manner
satisfactory to the applicable Governmental Authority and reasonably
satisfactory to Lender). Indemnitor shall further pay or cause to be paid, at no
expense to any Indemnified Party, all clean-up, administrative and enforcement
costs of applicable governmental agencies which may be asserted against the
Property. In the event Indemnitors fail to do so, or following an Event of
Default, Lender may, at its sole election, cause the Property or other affected
property to be freed from any Hazardous Material located thereon at a level in
excess of that allowed by applicable Environmental Laws, or otherwise be brought
into compliance with applicable Environmental Laws, and any cost incurred in
connection therewith shall be included in Costs. Borrowers hereby grant to
Lender access to the Property and an irrevocable license to remove any Hazardous
Material and to do all things necessary to bring the Property into compliance in
all material respects with applicable Environmental Laws. However, Lender shall
have no obligation to inspect or clean up any Hazardous Material. Lender shall
not be deemed a generator of any Hazardous Material removed from the Property.

                  (d)      Upon the request of Lender, at any time (i) after the
occurrence of an Event of Default or (ii) Lender has reasonable grounds to
believe that (A) Hazardous Material is or has been released, stored or disposed
of, or existing, on or around the Property at a level in excess of that allowed
by applicable Environmental Laws or (B) the Property may be in material
violation of applicable Environmental Laws, Indemnitors shall cause an
investigation or audit of the Property to be undertaken by a hydrogeologist or
environmental engineer or other appropriate consultant reasonably approved by
Lender to determine whether any Hazardous Material is located on, at, beneath,
or near the Property and/or whether the Property is in compliance in all
material respects with Environmental Laws. The scope of any investigation or
audit shall be approved by Lender in Lender's reasonable discretion. If
Indemnitors fail to provide reports of such investigation or audit within thirty
(30) days after such request, Lender may, but shall have no obligation to, order
the same. Borrowers hereby grant to Lender and Lender's contractors access to
the Property and an irrevocable license to undertake such investigation or audit
provided that such investigation is conducted in a manner so as not to
unreasonably affect Borrowers' operations at the Property. All reasonable costs
of any such investigation or audit shall be included in Costs and shall be paid
by Indemnitors in accordance with the terms of paragraph 5(c) hereof.

                  (e)      In the event that a Lien is filed against the
Property pursuant to any applicable Environmental Law, Indemnitors shall, within
ten (10) Business Days from the date that any Borrower receives notice of such
Lien (but in any event ten (10) days prior to the date of any contemplated sale
pursuant to such Lien), either (i) pay the claim and remove the Lien from the
Property, or (ii) furnish, at Indemnitor's option, (A) a bond satisfactory to
Lender in the amount of the claim out of which the Lien arises, (B) a cash
deposit in the amount of the claim

                                       6


out of which the Lien arises, (C) other security reasonably satisfactory to
Lender in an amount sufficient to discharge the claim out of which the Lien
arises, or (D) security in a form and amount satisfactory to the applicable
Governmental Authority pursuant to a valid consent or other order, and
Indemnitors shall promptly arrange for the removal of the Lien. Notwithstanding
the foregoing, Indemnitors shall prevent a sale pursuant to any Lien.

                  (f)      The amount of Indemnitors' liability hereunder is
unrelated to the amount of the Loan and any failure of the Loan to be repaid in
full. The enforcement of this Agreement by the Indemnified Parties shall not be
construed by Indemnitors as an indirect attempt to recover any Loan deficiency
or loss relating to the failure of the Loan to be repaid in full. Indemnitors
acknowledge that they may have liability hereunder even if the Loan is repaid in
full by reason of a full credit bid at any foreclosure sale under the Security
Instrument, and that the amount of Indemnitor's liability hereunder could exceed
the entire amount paid by Borrower for the Property.

         5.       INDEMNIFICATION PROCEDURES.

                  (a)      If any action, proceeding, litigation or claim shall
be brought or asserted against any Indemnified Party for any matter which the
Indemnified Parties are indemnified hereunder (each, a "CLAIM"), such
Indemnified Party shall notify Indemnitors in writing thereof and Indemnitors
shall promptly assume the defense thereof, including, without limitation, the
employment of counsel selected by the Indemnitor and approved by the Indemnified
Party, such approval not to be unreasonably withheld, conditioned or delayed,
and the negotiation of any settlement. Any failure of such Indemnified Party to
notify Indemnitors of such matter shall not impair or reduce the obligations of
Indemnitors hereunder. The Indemnified Parties shall have the right, at the
reasonable expense of Indemnitors (which expense shall be included in Costs), if
an Indemnified Party has reason to believe that its interests are not being
adequately represented or diverge from other interests being represented by such
counsel, to employ separate counsel in any such action and to participate in the
defense thereof at such Indemnitor's sole cost and expense. In the event
Indemnitors shall fail to discharge or undertake to defend any Indemnified Party
against any Claim, such failure shall constitute an Event of Default and the
Indemnified Party may, at its sole election, defend or settle such Claim. The
liability of Indemnitors to such Indemnified Party hereunder for any settlement
by such Indemnified Party shall be conclusively established by any settlement
entered into by the Indemnified Party in good faith. The amount of Indemnitors'
liability hereunder shall include the settlement consideration and all other
Costs, which shall be paid by the Indemnitors as hereinafter provided. Costs
incurred in connection with a Claim shall be reimbursed by Indemnitors without
the requirement of waiting for the ultimate outcome of such Claim.

                  (b)      Indemnitors shall not, without the prior written
consent of the Indemnified Party, which consent will not be unreasonably
withheld, conditioned or delayed, settle or compromise any Claim in any manner
or consent to the entry of any judgment (i) in which the claimant or plaintiff
does not unconditionally release the Indemnified Party from all liability and
obligations in respect of such Claim and obtain a dismissal of such Claim with
prejudice; or (ii) that may adversely affect the Indemnified Party (as
determined in the reasonable discretion of such Indemnified Party) or obligate
the Indemnified Party to pay any sum or perform any obligation.

                                       7


                  (c)      Indemnitors shall pay to the applicable Indemnified
Party any and all Costs within fifteen (15) days after written notice from such
Indemnified Party. All Costs shall be immediately reimbursable to the
Indemnified Party or, upon request of the Indemnified Party, paid directly to
the party sending a bill or other statement to the Indemnified Party. Any Costs
not paid within the aforementioned fifteen (15) day period shall bear interest
at the Default Rate from the date incurred until the date paid in full.

         6.       REINSTATEMENT OF OBLIGATIONS. If at any time all or any part
of any payment received by an Indemnified Party pursuant to this Agreement shall
be rescinded or returned for any reason whatsoever, including, without
limitation, the insolvency, bankruptcy or reorganization of any Indemnitor, then
the obligations of Indemnitors hereunder shall, to the extent of such rescinded
or returned payment, be reinstated and shall continue as though such previous
payment received by the Indemnified Party had never occurred.

         7.       WAIVERS BY INDEMNITORS. To the extent permitted by law,
Indemnitors hereby waive and agree not to assert or take advantage of:

                  (a)      Any right to require an Indemnified Party (i) to
proceed against Borrower or any other Person, (ii) to proceed against or exhaust
any security held by any Indemnified Party at any time or (iii) to pursue any
other remedy in such Indemnified Party's power or under any other agreement, in
any case, before proceeding against Indemnitors hereunder;

                  (b)      Any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other Person or the
failure of an Indemnified Party to file or enforce a claim against the estate
(in administration, bankruptcy or any other proceeding) of any other Person;

                  (c)      Demand, presentment for payment, protest and notice
of protest, demand, dishonor and nonpayment and all other notices except as
expressly required in the Loan Documents, including, without limitation, notice
of new or additional indebtedness or obligations or of any action or non-action
on the part of Borrower, Lender, any endorser or creditor of Borrower or of
Indemnitor or of any other Person whomsoever under this Agreement or any other
Loan Document;

                  (d)      Any defense based upon an election of remedies,
splitting a cause of action or merger of judgments by any Indemnified Party;

                  (e)      Any right or claim of right to cause a marshaling of
the assets of Indemnitors;

                  (f)      Any principle or provision of law, statutory or
otherwise, which is or might be in conflict with the terms and provisions of
this Agreement;

                  (g)      Any duty on the part of any Indemnified Party to
disclose to Indemnitors any facts such Indemnified Party may now or hereafter
know about Borrower or the Property, regardless of whether such Indemnified
Party (i) has reason to believe that any such facts materially increase the risk
beyond that which Indemnitors intend to assume, (ii) has reason to believe that
such facts are unknown to Indemnitors or (iii) has a reasonable opportunity to

                                       8


communicate such facts to Indemnitors, it being understood and agreed that
Indemnitors are fully responsible for being informed of the financial condition
of Borrower, the condition of the Property and of all other circumstances
bearing on the risk that liability may be incurred by Indemnitors hereunder;

                  (h)      Any invalidity, irregularity or unenforceability, in
whole or in part, of any one or more of the Loan Documents;

                  (i)      Any lack of commercial reasonableness in dealing with
the collateral for the Loan;

                  (j)      Any deficiencies in the collateral for the Loan or
any deficiency in the ability of Lender to collect or to obtain performance from
any Persons now or hereafter liable for the payment and performance of any
obligation hereby guaranteed;

                  (k)      An assertion or claim that the automatic stay
provided by 11 U.S.C. Section 362 (arising upon the voluntary or involuntary
bankruptcy proceeding of Borrower) or any other stay provided under any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, shall operate or be interpreted to stay, interdict, condition,
reduce or inhibit the ability of Lender to enforce any of its rights, whether
now existing or hereafter acquired, which Lender may have against any Indemnitor
or the collateral for the Loan;

                  (l)      Any modifications of the Loan Documents or any
obligation of Borrower relating to the Loan by operation of law or by action of
any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or
any other debtor relief law (whether statutory, common law, case law or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or
otherwise;

                  (m)      Any action, occurrence, event or matter consented to
by Indemnitors under Section 8(j) hereof, under any other provision hereof, or
otherwise; and

                  (n)      the failure of any representation and/or warranties
made by Borrower, Indemnitor or any other party to be true, complete or correct
when given, or at any time thereafter.

Indemnitors covenant and agree that upon the commencement of a voluntary or
involuntary bankruptcy proceeding by or against any Borrower, neither such
Indemnitor shall seek a supplemental stay or otherwise pursuant to 11 U.S.C.
Section 105 or any other provision of the Bankruptcy Reform Act of 1978, as
amended, or any other debtor relief law (whether statutory, common law, case
law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect,
which may be or become applicable, to stay, interdict, condition, reduce or
inhibit the ability of Lender to enforce any rights of Lender against such
Indemnitor by virtue of this Agreement or otherwise.

                                       9


         8.       GENERAL PROVISIONS.

                  (a)      Fully Recourse. Notwithstanding any provision of any
other Loan Document to the contrary, all of the terms and provisions of this
Agreement are recourse obligations of Indemnitors and not restricted by any
limitation on personal liability.

                  (b)      Right to Indemnification Not Affected by Knowledge.
An Indemnified Party's right to defense, indemnification, payment of Costs or
other rights and remedies pursuant to this Agreement shall not be diminished or
affected in any way by any investigation conducted by or on behalf of such
Indemnified Party or other knowledge acquired (or capable of being acquired) by
such Indemnified Party through any means at any time.

                  (c)      Reliance. Indemnitors hereby acknowledge that Lender
would not make the Loan without being able to rely upon the covenants and
obligations of Indemnitors set forth herein. Accordingly, Indemnitors
intentionally and unconditionally enter into this Agreement.

                  (d)      Obligations Unsecured. Indemnitors acknowledge that
even though the representations, warranties and covenants of Indemnitors
contained herein may be identical or substantially similar to those of Borrower
set forth in the Security Instrument, the obligations of Indemnitors hereunder
are independent obligations which are not secured by the Security Instrument or
the other Loan Documents. The Indemnitors further acknowledge that it is the
intent of Lender to create separate obligations of Indemnitors hereunder which
can be enforced against Indemnitors without regard to the existence of the
Security Instrument or the other Loan Documents or the liens or security
interests created therein.

                  (e)      Survival. This Agreement shall be deemed to be
continuing in nature, remain in full force and effect and survive indefinitely,
notwithstanding the exercise of any remedy by Lender under the Security
Instrument or any of the other Loan Documents, including, without limitation,
any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the
Loan is paid or satisfied in full. Notwithstanding the foregoing to the
contrary, the obligations and liabilities of Indemnitors under this Agreement
shall survive following payment in full of the Obligations in accordance with
the terms of the Loan Documents for a period equal to the lesser of (x) five (5)
years, or (y) if Borrowers deliver Phase I environmental reports for each of the
Properties to Lender, acceptable to Lender in all respects, and which Lender
determines in its sole discretion demonstrates that no condition exists which
may cause any of the liabilities of Indemnitors to arise after delivery thereof,
two (2) years following the delivery of such Phase I environmental reports,
provided, however, in the event that (a) any obligations or liabilities of the
Indemnitors under this Agreement shall have arisen from any Hazardous Material
which existed on, in, under or affecting the Property prior to the expiration of
such period or (b) if, prior to payment in full of the Loan, Lender shall have
exercised any rights or remedies after an Event of Default or any of the Loan
Documents shall have been modified or amended or any provision thereof waived
pursuant to any workout or restructuring of the Loan (and if, as a consequence
thereof, at any time after the expiration of the survival period specified
above, Lender shall be unable to avail itself of any exemption from liability
available to lenders under any applicable Environmental Law or shall be required
to defend any claim or action relating to any Hazardous Material), then in any
such event the foregoing survival period shall not apply and the obligations and
liabilities of Indemnitors hereunder shall survive.

                                       10


                  (f)      Subordination; No Recourse Against Lender. Obligor
hereby subordinates any and all indebtedness of Borrower now or hereafter owed
to Obligor to all indebtedness of Borrower to Lender. Obligor shall not demand
or accept any payment of principal or interest from Borrower, shall not claim
any offset or other reduction of Obligor's obligations hereunder because of any
such indebtedness and shall not take any action to obtain any of the collateral
for the Loan. Further, Indemnitors shall not have any right of recourse against
any Indemnified Party by reason of any action such Indemnified Party may take or
omit to take under the provisions of this Agreement or any other Loan Documents.

                  (g)      Reservation of Rights. Nothing contained in this
Agreement shall prevent or in any way diminish or interfere with any rights or
remedies, including, without limitation, the right to cost recovery or
contribution, which any Indemnified Party may have against either Indemnitor or
any other party under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (codified at Title 42 U.S.C. Section 9601 et seq.), as it
may be amended from time to time ("CERCLA"), or any other applicable Federal,
state or local laws, all such rights being hereby expressly reserved.

                  (h)      Financial Statements. Each Indemnitor hereby agrees
to furnish Lender such financial statements and other information as is required
to be delivered pursuant to Section 5.1 of the Loan Agreement.

                  (i)      Nature of Obligations. The obligations of Indemnitors
hereunder are independent of the obligations of Borrower under the other Loan
Documents. In the event of any default hereunder, a separate action or actions
may be brought and prosecuted against Indemnitors whether or not Indemnitors are
the alter ego of Borrower and whether or not Borrower is joined therein or a
separate action or actions are brought against Borrower. Lender's rights
hereunder shall not be exhausted until all of the obligations of Indemnitor
hereunder have been fully paid and performed.

                  (j)      No Limitation on Liability. Indemnitors hereby
consent and agree that any of the following may occur from time to time, without
notice or consideration to, or consent of, Indemnitors, and the liability of
Indemnitors hereunder shall remain unconditional and absolute and shall in no
way be impaired or limited by reason thereof:

                           (i)      any extension of time for performance
required by any of the Loan Documents or otherwise granted by Lender or any
extension or renewal of the Note;

                           (ii)     any sale, assignment or foreclosure of the
Note, the Security Instrument or any of the other Loan Documents or any sale or
transfer of the Property, except as set forth in Section 2(b);

                           (iii)    any change in the composition of Borrower,
including, without limitation, the voluntary or involuntary withdrawal or
removal of Indemnitors from any current or future position of ownership,
management or control of Borrower;

                           (iv)     the release of Borrower or of any other
Person from performance or observance of any of the agreements, covenants, terms
or conditions contained in any of the Loan Documents by operation of law,
Lender's voluntary act or otherwise;

                                       11


                           (v)      the release or substitution in whole or in
part of any security for the Loan;

                           (vi)     Lender's failure to record the Security
Instrument or to file any financing statement (or Lender's improper recording or
filing thereof) or to otherwise perfect, protect, secure or insure any lien or
security interest given as security for the Loan;

                           (vii)    the modification of the terms of any one or
more of the Loan Documents;

                           (viii)   subject to Section 2(b) hereof, the exercise
by Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant
to the terms of the Mezzanine Loan Documents, including, without limitation,
foreclosure or similar remedies under any pledge agreement encumbering Mezzanine
Borrower's interest in General Partner, Member or any Borrower; or

                           (ix)     the taking or failure to take any action of
any type whatsoever. No such action which Lender shall take or fail to take in
connection with the Loan Documents or any collateral for the Loan, nor any
course of dealing with Borrower or any other Person, shall limit, impair or
release Indemnitor's obligations hereunder, affect this Agreement in any way or
afford Indemnitors any recourse against any Indemnified Party. Nothing contained
in this Section shall be construed to require any Indemnified Party to take or
refrain from taking any action referred to herein.

                  (k)      Representations. Each Indemnitor represents and
warrants that there is no bankruptcy, reorganization or insolvency proceeding
pending or, to its knowledge, threatened against it.

                  (l)      Professionals' Fees. In the event it is necessary for
any Indemnified Party to retain the services of an attorney or any other
consultants in order to enforce this Agreement, or any portion hereof,
Indemnitors agree to pay to such Indemnified Party any and all reasonable costs
and expenses, including, without limitation, reasonable attorneys' and
consultants' fees and disbursements, incurred by such Indemnified Party as a
result thereof and all such amounts shall be included in Costs.

                  (m)      Successive Actions. A separate right of action
hereunder shall arise each time an Indemnified Party acquires knowledge of any
matter indemnified or guaranteed by Indemnitors hereunder. Separate and
successive actions may be brought hereunder to enforce any of the provisions
hereof at any time and from time to time and no action hereunder shall preclude
any subsequent action.

                  (n)      No Waiver; Remedies Cumulative. No failure or delay
on the part of Lender in exercising any right, remedy, power or privilege
hereunder or under the other Loan Documents and no course of dealing between
Borrower and Lender shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder or under the
other Loan Documents preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege hereunder or thereunder.
The rights and remedies provided herein and in the other Loan Documents are
cumulative and not exclusive

                                       12


of any rights or remedies provided by law. The giving of notice to or demand on
Borrower which notice or demand is not required hereunder or under the other
Loan Documents shall not entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights,
remedies, powers or privileges of Lender in any circumstances not requiring
notice or demand.

                  (o)      Notices. All notices, requests and other
communications to any party hereunder or under the Note shall be given in the
manner set forth in Section 14.5 of the Loan Agreement, to Lender and Borrower
at such party's address set forth in Section 14.5 of the Loan Agreement and to
each Obligor at its address set forth above, or such other address as
Indemnitors or Lender shall hereafter specify by not less than ten (10) days
prior written notice as provided herein; provided, however, that notwithstanding
any provision of this Section to the contrary, such notice of change of address
shall be deemed given only upon actual receipt thereof. Rejection or other
refusal to accept or the inability to deliver because of changed addresses of
which no notice was given as herein required shall be deemed to be receipt of
the notice, demand, statement, request or consent.

                  (p)      Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
and the applicable laws of the United States of America. Indemnitors hereby
irrevocably submit to the jurisdiction of any court of competent jurisdiction
located in the State of New York and in any state in which the Property is
located in connection with any proceeding out of or relating to this Agreement.

                  (q)      Invalid Provisions. If any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect, this
Agreement shall be construed without such provision.

                  (r)      Amendments. The terms of this Agreement, together
with the terms of the other Loan Documents, constitute the entire understanding
and agreement of the parties hereto and supersede all prior agreements,
understandings and negotiations between Indemnitors and Lender with respect to
the obligations contained herein. This Agreement, and any provisions hereof, may
not be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act on the part of Borrower or Lender, but only by an agreement
in writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

                  (s)      Parties Bound; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives; provided, however, that except as
provided in the Loan Agreement or herein, Indemnitors may not, without the prior
written consent of Lender, assign any of their rights, powers, duties or
obligations hereunder.

                  (t)      Headings; Construction of Documents. The headings and
captions of various sections of this Agreement are for convenience of reference
only and are not to be construed as defining or limiting, in any way, the scope
or intent of the provisions hereof. Indemnitors acknowledge that they were
represented by competent counsel in connection with the negotiation and drafting
of this Agreement and the other Loan Documents and that neither

                                       13


this Agreement nor the other Loan Documents shall be subject to the principle of
construing the meaning against the Person who drafted same.

                  (u)      Recitals. The recital and introductory paragraphs
hereof are a part hereof, form a basis for this Agreement and shall be
considered prima facie evidence of the facts and documents referred to therein.

                  (v)      Counterparts. To facilitate execution, this Agreement
may be executed in as many counterparts as may be convenient or required. It
shall not be necessary that the signature or acknowledgment of, or on behalf of,
each party, or that the signature of all Persons required to bind any party, or
the acknowledgment of such party, appear on each counterpart. All counterparts
shall collectively constitute a single instrument. It shall not be necessary in
making proof of this Agreement to produce or account for more than a single
counterpart containing the respective signatures of, or on behalf of, and the
respective acknowledgments of, each of the parties hereto. Any signature or
acknowledgment page to any counterpart may be detached from such counterpart
without impairing the legal effect of the signatures or acknowledgments thereon
and thereafter attached to another counterpart identical thereto except having
attached to it additional signature or acknowledgment pages.

                  (w)      Cumulative Rights. The rights of Lender under this
Agreement shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled, subject to the terms of this Agreement, to
every right and remedy now or hereafter afforded by law.

                  (x)      Waiver of Counterclaim and Right to Trial by Jury.
Indemnitors hereby waive the right to assert a counterclaim, other than a
compulsory counterclaim, in any action or proceeding brought against it by
Lender or its agents, and Lender and Indemnitors waive trial by jury in any
action or proceeding brought by either party hereto against the other or in any
counterclaim any other party may be permitted to assert hereunder or which may
be asserted by any party or its agents, against Indemnitors, or in any matters
whatsoever arising out of or in any way connected with this Agreement, the debt
or the obligations contained herein.

                  (y)      Singular and Plural; Joint and Several Liability.

                           (i)      If there is more than one entity comprising
Obligor, all references to Obligor herein shall be to Obligor, or any one or
more of them. All references to Indemnitors herein shall be to Indemnitors or
any one or more of them. All obligations and liabilities of Indemnitors
hereunder are in addition to, not in lieu of and are independent of: (A) all
obligations of Borrower under any other Loan Document, including the Note and
the Loan Agreement; and (B) any obligation of Obligor under any other Loan
Document to which Obligor is a party.

                           (ii)     All obligations of Indemnitors hereunder
shall be joint and several.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       14


                  IN WITNESS WHEREOF, Indemnitors have executed this Agreement
as of the day and year first above written.

                                  BORROWERS:

                                  IMPAC  HOTELS I, L.L.C.
                                  LODGIAN DENVER LLC
                                  LODGIAN HOTELS FIXED I, LLC
                                  MACON HOTEL ASSOCIATES, L.L.C.
                                  SERVICO NORTHWOODS, INC.

                                  By:/s/ Daniel E. Ellis
                                     --------------------------------------
                                     Name:  Daniel E. Ellis
                                     Title: Vice President and Secretary, or
                                            Authorized Signatory for each of the
                                            entities listed above



                                  OBLIGOR:

                                  LODGIAN, INC., a Delaware
                                  corporation

                                  By:/s/ Daniel E. Ellis
                                     -------------------------------
                                     Name: Daniel E. Ellis
                                     Title: Senior Vice President



                                   EXHIBITS A

                                   PROPERTIES



     CHAIN/NAME                          CITY                  ST
- ---------------------           -----------------------        --
                                                         
Marriott                        Denver (Aurora)                CO
Courtyard by Marriott           Atlanta                        GA
Crowne Plaza                    Macon                          GA
Holiday Inn                     Marietta (hotel & suites)      GA
Holiday Inn Select              Strongville                    OH
Holiday Inn                     Lancaster                      PA
Doubletree Club                 Philadelphia                   PA
Clarion                         North Charleston               SC

EX-10.3.1

                                                                  EXHIBIT 10.3.1

                           LOAN AND SECURITY AGREEMENT
                                 (FIXED RATE #2)

                            DATED AS OF JUNE 25, 2004

                                     BETWEEN

                    THE BORROWERS LISTED ON SCHEDULE 1 HERETO
                                  AS BORROWERS

                                       AND

                      MERRILL LYNCH MORTGAGE LENDING, INC.
                                    AS LENDER




                                TABLE OF CONTENTS



                                                                                                                  Page
                                                                                                                  ----
                                                                                                               
                                                       ARTICLE I
DEFINITIONS.....................................................................................................     1

Section 1.1       Certain Defined Terms.........................................................................     1
Section 1.2       Accounting Terms..............................................................................    23
Section 1.3       Other Definitional Provisions.................................................................    23

                                                       ARTICLE II
TERMS OF THE LOAN...............................................................................................    24

Section 2.1       Loan..........................................................................................    24
Section 2.2       Interest......................................................................................    24
Section 2.3       Interest Rate Cap Agreement...................................................................    25
Section 2.4       Payments......................................................................................    25
Section 2.5       Maturity......................................................................................    26
Section 2.6       Prepayment....................................................................................    26
Section 2.7       Outstanding Balance...........................................................................    27
Section 2.8       Taxes.........................................................................................    27
Section 2.9       Reasonableness of Charges.....................................................................    27
Section 2.10      Reserved......................................................................................    28
Section 2.11      Servicing/Special Servicing...................................................................    28
Section 2.12      Cross-Collateralization; Contribution; Release of Cross-Collateralization.....................    28

                                                      ARTICLE III
CONDITIONS TO LOAN..............................................................................................    33

Section 3.1       Conditions to Funding of the Loan on the Closing Date.........................................    33

                                                       ARTICLE IV
REPRESENTATIONS AND WARRANTIES..................................................................................    39

Section 4.1       Organization, Powers, Capitalization, Good Standing, Business.................................    39
Section 4.2       Authorization of Borrowing, etc...............................................................    39
Section 4.3       Financial Statements..........................................................................    40
Section 4.4       Indebtedness and Contingent Obligations.......................................................    40
Section 4.5       Title to the Properties.......................................................................    40
Section 4.6       Zoning; Compliance with Laws..................................................................    41
Section 4.7       Leases; Agreements............................................................................    41
Section 4.8       Condition of the Properties...................................................................    43
Section 4.9       Litigation; Adverse Facts.....................................................................    43
Section 4.10      Payment of Taxes..............................................................................    43
Section 4.11      Adverse Contracts.............................................................................    43
Section 4.12      Performance of Agreements.....................................................................    44
Section 4.13      Governmental Regulation.......................................................................    44
Section 4.14      Employee Benefit Plans........................................................................    44


                                       i



                                                                                                                 
Section 4.15      Broker's Fees.................................................................................    44
Section 4.16      Intentionally Deleted.........................................................................    44
Section 4.17      Solvency......................................................................................    44
Section 4.18      Disclosure....................................................................................    44
Section 4.19      Use of Proceeds and Margin Security...........................................................    45
Section 4.20      Insurance.....................................................................................    45
Section 4.21      Separate Tax Lots.............................................................................    45
Section 4.22      Investments...................................................................................    45
Section 4.23      Bankruptcy....................................................................................    45
Section 4.24      Defaults......................................................................................    45
Section 4.25      No Plan Assets................................................................................    45
Section 4.26      Governmental Plan.............................................................................    46
Section 4.27      Not Foreign Person............................................................................    46
Section 4.28      No Collective Bargaining Agreements...........................................................    46
Section 4.29      Reserved......................................................................................    46
Section 4.30      Ground Leases.................................................................................    46
Section 4.31      No Prohibited Persons.........................................................................    47

                                                       ARTICLE V
COVENANTS OF BORROWER PARTIES...................................................................................    47

Section 5.1       Financial Statements and Other Reports........................................................    47
Section 5.2       Existence; Qualification......................................................................    52
Section 5.3       Payment of Impositions and Claims.............................................................    52
Section 5.4       Maintenance of Insurance......................................................................    53
Section 5.5       Operation and Maintenance of the Properties; Casualty.........................................    57
Section 5.6       Inspection....................................................................................    60
Section 5.7       O&M Plan......................................................................................    60
Section 5.8       Reserved......................................................................................    60
Section 5.9       Compliance with Laws and Contractual Obligations..............................................    60
Section 5.10      Further Assurances............................................................................    61
Section 5.11      Performance of Agreements and Leases..........................................................    61
Section 5.12      Leases........................................................................................    61
Section 5.13      Management; Franchise Agreement...............................................................    62
Section 5.14      Material Agreements...........................................................................    65
Section 5.15      Deposits; Application of Receipts.............................................................    65
Section 5.16      Estoppel Certificates.........................................................................    65
Section 5.17      Indebtedness..................................................................................    65
Section 5.18      No Liens......................................................................................    66
Section 5.19      Contingent Obligations........................................................................    66
Section 5.20      Restriction on Fundamental Changes............................................................    66
Section 5.21      Transactions with Related Persons.............................................................    66
Section 5.22      Bankruptcy, Receivers, Similar Matters........................................................    67
Section 5.23      ERISA.........................................................................................    67
Section 5.24      Press Release.................................................................................    68
Section 5.25      Ground Leases.................................................................................    68
Section 5.26      Reserved......................................................................................    72



                                       ii



                                                                                                                 
Section 5.27      Lender's Expenses.............................................................................    71
Section 5.28      Distributions.................................................................................    71
Section 5.29      Cancellation of Indebtedness; Settlement of Claims............................................    71
Section 5.30      Prohibited Persons............................................................................    71

                                                       ARTICLE VI
RESERVES........................................................................................................    72

Section 6.1       Security Interest in Reserves; Other Matters Pertaining to Reserves...........................    72
Section 6.2       Funds Deposited with Lender...................................................................    72
Section 6.3       Impositions and Insurance Reserve.............................................................    73
Section 6.4       FF&E Reserve..................................................................................    73
Section 6.5       Capital Improvement Reserve; Required Capital Improvements....................................    74
Section 6.6       Hazardous Materials Remediation Reserve.......................................................    74
Section 6.7       Conditions to Disbursements from Hazardous Materials Remediation Reserve and Capital
                  Improvement Reserve; Performance of Work......................................................    75
Section 6.8       Cash Trap Reserve.............................................................................    79

                                                      ARTICLE VII
LOCK BOX; CLEARING ACCOUNT; CENTRAL ACCOUNT; CASH MANAGEMENT....................................................    80

Section 7.1       Establishment of Deposit Account and Lock Box Account.........................................    80
Section 7.2       Application of Funds in Lock Box Account......................................................    82
Section 7.3       Application of Funds After Event of Default...................................................    82

                                                      ARTICLE VIII
DEFAULT, RIGHTS AND REMEDIES....................................................................................    82

Section 8.1       Event of Default..............................................................................    82
Section 8.2       Acceleration and Remedies.....................................................................    85
Section 8.3       Performance by Lender.........................................................................    86
Section 8.4       Evidence of Compliance........................................................................    87

                                                       ARTICLE IX
SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS.....................................    87

Section 9.1       Applicable to all Primary Borrower Parties....................................................    87
Section 9.2       Applicable to Borrowers, General Partner and Member...........................................    89

                                                       ARTICLE X
RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS...............................................................    91

Section 10.1      Secondary Market Transactions Generally.......................................................    91
Section 10.2      Cooperation; Limitations......................................................................    91
Section 10.3      Information...................................................................................    92
Section 10.4      Additional Provisions.........................................................................    91



                                      iii



                                                                                                                
                                                       ARTICLE XI
RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES...........................................    94

Section 11.1      Restrictions on Transfer and Encumbrance......................................................    94
Section 11.2      Transfers of Beneficial Interests in Borrowers................................................    94
Section 11.3      Assumability..................................................................................    95
Section 11.4      Release of Properties.........................................................................    96
Section 11.5      Reserved......................................................................................    98
Section 11.6      Sale of Building Equipment....................................................................    98
Section 11.7      Immaterial Transfers and Easements, etc.......................................................    98

                                                      ARTICLE XII
RECOURSE; LIMITATIONS ON RECOURSE...............................................................................    99

Section 12.1      Limitations on Recourse.......................................................................    99
Section 12.2      Partial Recourse..............................................................................    99
Section 12.3      Miscellaneous.................................................................................   100

                                                      ARTICLE XIII
WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES..................................................................   100

Section 13.1      Waivers.......................................................................................   100

                                                      ARTICLE XIV
MISCELLANEOUS...................................................................................................   102

Section 14.1      Expenses and Attorneys' Fees..................................................................   102
Section 14.2      Indemnity.....................................................................................   102
Section 14.3      Amendments and Waivers........................................................................   103
Section 14.4      Retention of the Borrowers' Documents.........................................................   103
Section 14.5      Notices.......................................................................................   104
Section 14.6      Survival of Warranties and Certain Agreements.................................................   105
Section 14.7      Failure or Indulgence Not Waiver; Remedies Cumulative.........................................   105
Section 14.8      Marshaling; Payments Set Aside................................................................   105
Section 14.9      Severability..................................................................................   106
Section 14.10     Headings......................................................................................   106
Section 14.11     APPLICABLE LAW................................................................................   106
Section 14.12     Successors and Assigns........................................................................   106
Section 14.13     Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship............................   106
Section 14.14     Reasonableness of Determinations..............................................................   107
Section 14.15     Limitation of Liability.......................................................................   107
Section 14.16     No Duty.......................................................................................   107
Section 14.17     Entire Agreement..............................................................................   107
Section 14.18     Construction; Supremacy of Loan Agreement.....................................................   107
Section 14.19     Consent to Jurisdiction.......................................................................   108
Section 14.20     Waiver of Jury Trial..........................................................................   108
Section 14.21     Counterparts; Effectiveness...................................................................   109



                                       iv



                                                                                                                
Section 14.22     Servicer......................................................................................   109
Section 14.23     Obligations of Borrower Parties...............................................................   109
Section 14.24     Additional Inspections; Reports...............................................................   109



                                       v



                         LIST OF EXHIBITS AND SCHEDULES

Exhibit A         -    Properties
Exhibit B         -    Environmental Reports
Exhibit C         -    Franchise Agreements
Exhibit D         -    Allocated Loan Amounts/Aggregate Allocated Loan Amounts
Exhibit E         -    Management Agreements
Exhibit F         -    [Reserved]
Exhibit G         -    Property Improvement Plans
Exhibit H         -    [Reserved]
Exhibit I         -    Acceptable Franchisors
Exhibit J         -    Property Condition Reports
Exhibit K         -    Zoning Reports
Exhibit L         -    Certificate re: Work Reserves

Schedule 1        -    Borrowers
Schedule 2.4      -    Scheduled Mortgage Principal Payments
Schedule 2.12(G)  -    Crossed Loans/Crossed Borrowers
Schedule 3.1(A)   -    List of Loan Documents
Schedule 4.1(C)   -    Organizational Chart for Borrower Parties
Schedule 4.2      -    Consents
Schedule 4.5      -    Condemnation Proceedings
Schedule 4.5(A)   -    Rights to Purchase/Rights of First Offer
Schedule 4.7(B)   -    Rent Roll
Schedule 4.7(E)   -    Franchise Defaults
Schedule 4.9      -    Litigation
Schedule 4.14          ERISA Plans
Schedule 4.20     -    Insurance
Schedule 4.28     -    Collective Bargaining Agreements
Schedule 4.30     -    Ground Leases
Schedule 5.14     -    Material Agreements
Schedule 6.5      -    Required Capital Improvements
Schedule 6.6      -    Environmental Work/O&M Plans
Schedule 6.7      -    Reserve Funding Conditions

                                       i



                           LOAN AND SECURITY AGREEMENT

      This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as of
June 25, 2004 and entered into by and between the parties listed as Borrowers on
SCHEDULE 1 hereto (collectively, "BORROWERS", and individually, each a
"BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation
(together with its successors and assigns, "LENDER").

      NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrowers and Lender agree as
follows:

                                   ARTICLE I
                                   DEFINITIONS

SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan
Agreement as so defined. Terms defined in the preamble and recitals to this Loan
Agreement are used in this Loan Agreement as so defined.

      "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the
franchisors identified on EXHIBIT I.

      "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate
of the Borrowers and, upon receipt of a Rating Confirmation, another reputable
hotel management company with at least five (5) years experience managing hotel
properties similar to the Properties and which at the time of its engagement is
managing at least 5,000 hotel rooms (exclusive of the Properties).

      "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest
in and to the Accounts, the Reserves, all monies and amounts which may from time
to time be on deposit therein, all monies, checks, notes, instruments,
documents, deposits, and credits from time to time in the possession of Lender
representing or evidencing such Accounts and Reserves and all earnings and
investments held therein and proceeds thereof.

      "ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any
Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any
other accounts pledged to Lender pursuant to this Loan Agreement or any other
Loan Document.

      "AFFILIATE" means in relation to any Person, any other Person: (i)
directly or indirectly controlling, controlled by, or under common control with,
the first Person; (ii) directly or indirectly owning or holding fifty percent
(50%) or more of any equity interest in the first Person; or (iii) fifty percent
(50%) or more of whose voting stock or other equity interest is directly or
indirectly owned or held by the first Person. In addition, the Affiliates of
each Borrower Party include, without limitation, all other Borrower Parties,
irrespective of whether they now or hereafter satisfy the foregoing criteria.
For purposes of this definition, "CONTROL" (including with correlative meanings,
the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means
the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Where expressions such
as "[name of party] or



any Affiliate" are used, the same shall refer to the named party and any
Affiliate of the named party. Further, the Affiliates of any Person that is an
entity shall include all natural persons who are officers, directors, managing
members, or general partners of the entity.

      "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the
Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT
D.

      "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of
determination, the aggregate outstanding principal balance of the Mezzanine Loan
and the Loan.

      "ALLOCABLE PORTION" means 26.10%.

      "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each
Property as set forth on EXHIBIT D.

      "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers,
Deloitte & Touche or KPMG Peat Marwick or any successor entity.

      "APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in
Section 6.7.

      "APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section
6.7.

      "APPROVED EXPENDITURES" has the meaning set forth in Section 6.7.

      "ARCHITECT" has the meaning set forth in Section 5.5.

      "ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and
Rents of even date herewith from each of the Borrowers to Lender, constituting
assignments of each Borrower's right, title and interest in the Leases and
proceeds therefrom for each of their respective Properties as Collateral for the
Loan, as same may be amended or modified from time to time.

      "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain
Conditional Assignments of Hotel Management Agreements of even date herewith
executed by each of the Borrowers and the applicable Manager, constituting an
assignment of each Management Agreement as Collateral for the Loan, as same may
be amended or modified from time to time.

      "ASSUMPTION" has the meaning set forth in Section 11.3.

      "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended
from time to time, and all rules and regulations promulgated thereunder.

      "BEVERAGE COMPANY" means any Person (other than any of the Borrowers)
holding, or entitled to any proceeds from, any liquor license or other beverage
permit for the sale of alcoholic beverages at any Property.

                                       2


      "BOARD OF MANAGERS" means the board of managers, or similar governing
entity, established for the governance of the condominium association
established pursuant to the terms of the Condominium Property Documents.

      "BORROWER" and "BORROWERS" have the meanings set forth in the preamble;
provided that, following a Release, "BORROWERS" means each of the Borrowers
remaining as a party to the Loan Documents, and whose Properties remain
encumbered by the Mortgages as Collateral for the Loan and "BORROWER" means any
of such remaining parties.

      "BORROWER PARTY" and "BORROWER PARTIES" means, individually or
collectively, the Borrowers, General Partner, Member and Guarantor.

      "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1.

      "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii)
any day which is a legal holiday under the laws of the State of New York, the
state or states where the servicing offices of the Servicer, and, if the Loan
becomes a "specially serviced mortgage loan" pursuant to the terms of any trust
and servicing agreement entered into in connection with any Securitization
backed in whole or in part by the Loan, the special servicer, are located or the
state in which the corporate trust office of the trustee in connection with any
such Securitization is located, and (iv) any day on which banking institutions
located in such state are generally not open for the conduct of regular
business.

      "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event,
the last day of each calendar quarter, and (y) during the continuance of a Cash
Trap Event, the last day of each calendar month.

      "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other
expenditures for FF&E and Capital Expenditures set forth in an annual budget
approved by Lender in writing (such approval not to be unreasonably withheld or
delayed as long as the budget is consistent with the form of the CapEx/FF&E
Budget provided to Lender prior to Closing), covering the planned FF&E
expenditures and Capital Expenditures for the period covered by such budget, as
same may be amended pursuant to Section 5.1(D) hereof.

      "CAPITAL EXPENDITURES" means expenditures for Capital Improvements.

      "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations
(including any improvements, repairs or alterations required pursuant to a
Property Improvement Plan), FF&E and other capital items (whether paid in cash
or property or accrued as liabilities) made by the Borrowers that, in conformity
with GAAP, would not be included in the Borrowers' annual financial statements
as an Operating Expense of the Properties.

      "CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5.

      "CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even
date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank.

      "CASH TRAP EVENT" has the meaning set forth in Section 6.8.

                                       3


      "CASH TRAP RESERVE" has the meaning set forth in Section 6.8.

      "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier
3 Hotel category.

      "CLAIMS" has the meaning set forth in Section 5.3.

      "CLOSING" means the funding of the Loan.

      "CLOSING DATE" means the date on which the Closing occurs.

      "COLLATERAL" means rights, interests, and property of every kind, real and
personal, tangible and intangible, which is granted, pledged, liened, or
encumbered as security for the Loan or any of the other Obligations under this
Loan Agreement, the Mortgages, the Cash Management Agreement or other Loan
Documents, including without limitation the Properties and the Account
Collateral.

      "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1.

      "CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (A) with respect to
any indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto; (B) with respect to any
letter of credit issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings; (C) under any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect against
fluctuations in interest rates; or (D) under any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect that Person against fluctuations in currency values. Contingent
Obligations shall include (i) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making (other than the Loan), discounting with recourse or sale with recourse
by such Person of the obligation of another, (ii) the obligation to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement, and (iii) any liability of such Person
for the obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance sheet item or level of
income of another. The amount of any Contingent Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported or, if not a fixed
and determined amount, the maximum amount so guaranteed.

      "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject, other than the Loan Documents.

                                       4


      "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1.

      "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set
forth in Section 7.1.

      "CROSS GUARANTIES" shall mean (i) those certain Guaranties of the Loan,
each dated as of the date hereof, executed by each of the Crossed Borrowers, and
(ii) those certain Guaranties of each of the Crossed Loans, each dated as of the
date hereof, executed by each of the Borrowers.

      "CROSS RELEASE NOTICE" has the meaning set forth in Section 2.12(G).

      "CROSSED BORROWERS" shall mean the mortgage loan borrowers (other than the
Borrowers) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof,
subject to modification pursuant to Section 2.12(G) hereof.

      "CROSSED INDEBTEDNESS" shall mean the Crossed Loans and all other
"Indebtedness" as defined in each Crossed Loan Agreement.

      "CROSSED LOANS" shall mean each of the mortgage loans (other than the
Loan) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof with
respect to each Crossed Borrower, subject to modification pursuant to Section
2.12(G) hereof.

      "CROSSED LOAN AGREEMENTS" shall mean those certain Loan Agreements, each
dated as of the date hereof, between Lender and the Crossed Borrowers for the
respective Crossed Loans, each as amended, modified, supplemented or restated
from time to time, subject to modification pursuant to Section 2.12(G) hereof.

      "CROSSED LOAN DEFAULT" shall mean any "Event of Default" as defined in any
Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G)
hereof.

      "CROSSED LOAN DOCUMENTS" shall mean the "Loan Documents" as defined in
each Crossed Loan Agreement for each Crossed Loan, including without limitation
the promissory note(s), Crossed Mortgages and Crossed Loan Agreement evidencing
and/or securing each Crossed Loan, and each of the Crossed Guaranties relating
to the respective Crossed Loans, subject to modification pursuant to Section
2.12(G) hereof.

      "CROSSED MORTGAGES" shall mean each of the mortgages, deeds of trust and
deeds to secure debt, each dated as of the date hereof, from each Crossed
Borrower to Lender, constituting a Lien on such Crossed Borrower's Crossed
Property as security for the respective Crossed Loans, each as amended,
modified, supplemented or restated from time to time, subject to modification
pursuant to Section 2.12(G) hereof.

      "CROSSED PROPERTIES" shall mean the properties securing each Crossed Loan,
as described in the respective Crossed Loan Agreement, subject to modification
pursuant to Section 2.12(G) hereof.

      "D&O INSURANCE" has the meaning set forth in Section 5.4.

                                       5


      "DEBT SERVICE COVERAGE RATIO" OR "DSCR" means, at any time of
determination, Net Cash Flow for the trailing twelve (12) month period divided
by the amount of interest that will be required to be paid over the succeeding
twelve (12) months on the Loan and the Allocable Portion of the Mezzanine Loan,
plus principal amortization of the Loan and the Allocable Portion of the
Mezzanine Loan that would be required in respect of the then outstanding
principal amount of the Loan and the Allocable Portion of the Mezzanine Loan
over the succeeding twelve (12) months based on a twenty-five (25) year
amortization schedule, calculated using the Interest Rate for the Loan and the
actual interest rate on the Mezzanine Loan.

      "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1.

      "DEBT YIELD" means, at any time of determination, Net Cash Flow for the
trailing twelve (12) month period divided by the then outstanding principal
balance of the Loan and the Mezzanine Loan.

      "DEFAULT" means any breach or default under any of the Loan Documents,
whether or not the same is an Event of Default, and also any condition or event
that, after notice or lapse of time or both, would constitute an Event of
Default if that condition or event were not cured or removed within any
applicable grace or cure period.

      "DEFAULT RATE" has the meaning set forth in Section 2.2.

      "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1.

      "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1.

      "DEPOSIT BANK" has the meaning set forth in Section 7.1.

      "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3.

      "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by
Moody's or A-1 or better by S&P or similarly rated by any successor to either of
such rating services, (b) obligations of the United States government or any
agency thereof which are backed by the full faith and credit of the United
States, or (c) deposits, including certificates of deposit, in any commercial
bank or trust company (i) which is registered to do business in any state of the
United States, (ii) which has capital and surplus in excess of $100,000,000 and
(iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or
better by Moody's or is similarly rated by any successor thereof, provided that
each such item of commercial paper, each such obligation, and each such time
deposit has a maturity date not later than thirty days after the date of
purchase thereof.

      "DOLLARS" and the sign "$" mean the lawful money of the United States of
America.

      "ELIGIBLE ACCOUNT" means a separate and identifiable account from all
other funds held by the holding institution, which account is either (i) an
account maintained with an Eligible Bank or (ii) a segregated trust account
maintained by a corporate trust department of a federal depository institution
or a state chartered depository institution subject to regulations regarding

                                       6


fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulations Section 9.10(b), which, in either case, has corporate trust powers
and is acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.

      "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria.

      "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning
of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is
maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii)
which has at any time within the preceding six (6) years been maintained for the
employees of any of the Borrowers or any current or former ERISA Affiliate or
(iii) for which any of the Borrowers or any ERISA Affiliate has any liability,
including contingent liability.

      "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date
herewith from the Borrowers and Guarantor to Lender, as same may be amended or
modified from time to time.

      "ENVIRONMENTAL LAWS" means all present and future local, state, federal or
other governmental authority, statutes, ordinances, codes, orders, decrees,
laws, rules or regulations pertaining to or imposing liability or standards of
conduct concerning environmental regulation (including, without limitation,
regulations concerning health and safety), contamination or clean-up or the
handling, generation, release or storage of Hazardous Material affecting the
Properties including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know
Act of 1986, as amended, the Hazardous Substances Transportation Act, as
amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as
amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as
amended, the Safe Drinking Water Act, as amended, the Occupational Safety and
Health Act, as amended, any state superlien and environmental clean-up statutes
and all regulations adopted in respect of the foregoing laws whether now or
hereafter in effect.

      "ENVIRONMENTAL REPORTS" means those certain environmental reports and
audits for the Properties as described on EXHIBIT B.

      "ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6.

      "EO13224" has the meaning set forth in Section 4.31.

      "ERISA" means the Employee Retirement Income Security Act of 1974, and all
rules and regulations promulgated thereunder.

      "ERISA AFFILIATE" means, in relation to any Person, any other Person under
common control with the first Person, within the meaning of Section 4001(a)(14)
of ERISA.

      "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of
London, England are generally open for interbank or foreign exchange
transactions and which is also a Business Day.

                                       7


      "EVENT OF DEFAULT" has the meaning set forth in Section 8.1.

      "EXCESS CASH FLOW" has the meaning set forth in the Cash Management
Agreement.

      "EXCESS INTEREST" has the meaning set forth in Section 2.2.

      "EXCLUDED BORROWER" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED GUARANTIES" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED LOAN" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED LOAN AGREEMENT" has the meaning set forth in Section 2.12(G)
hereof.

      "EXCLUDED LOAN DOCUMENTS" has the meaning set forth in Section 2.12(G)
hereof.

      "EXCLUDED PROPERTY" has the meaning set forth in Section 2.12(G) hereof.

      "EXCULPATED PARTIES" has the meaning set forth in Section 12.2.

      "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash
Management Agreement.

      "FF&E" means all machinery, furniture, furnishings, equipment, fixtures
(including, without limitation, all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures), inventory and articles of
personal property and accessions, renewals and replacements thereof and
substitutions therefor (including, without limitation, beds, bureaus,
chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs,
carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings,
pictures, divans, couches, luggage carts, luggage racks, stools, sofas,
chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry
cleaning facilities, dining room wagons, tools, keys or other entry systems,
bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock
radios, television sets, intercom and paging equipment, electric and electronic
equipment, dictating equipment, private telephone systems, medical equipment,
potted plants, heating, lighting and plumbing fixtures, fire prevention and
extinguishing apparatus, cooling and air-conditioning systems, elevators,
escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry
machines, tools, machinery, engines, dynamos, motors, boilers, incinerators,
switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning,
waxing and polishing equipment, call systems, brackets, electrical signs, bulbs,
bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment,
dishwashers, garbage disposals, washer and dryers), other customary hotel
equipment and other tangible property of every kind and nature whatsoever owned
by the Borrowers, or in which the Borrowers have or shall have an interest, now
or hereafter located at the Properties, or appurtenant thereto, and useable in
connection with the present or future operation and occupancy of the Properties
and all building equipment, material and supplies of any nature whatsoever owned
by the Borrowers, or in which the Borrowers have or shall have an interest, now
or hereafter located at the Properties, or appurtenant thereto, and useable in
connection with the present or future operation, enjoyment and occupancy of the
Properties.

                                       8



      "FF&E RESERVE" means the reserve established pursuant to Section 6.4.

      "FINANCIAL STATEMENTS" means statements of operations and retained
earnings, statements of cash flow and balance sheets.

      "FINANCING STATEMENTS" means the Uniform Commercial Code Financing
Statements naming the applicable Borrower Parties as debtor, and Lender as
secured party, required under applicable state law to perfect the security
interests created hereunder or under the other Loan Documents.

      "FITCH" means Fitch, Inc.

      "FORCE MAJEURE" means acts of god, governmental restrictions, stays,
judgments, orders, decrees, enemy actions, civil commotion, fire, casualty,
strikes or work stoppages which are industry-wide and not aimed at the Borrowers
or their Affiliates, or other causes beyond the reasonable control of the
Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of
itself shall not be deemed a cause beyond the control of the Borrowers.

      "FRANCHISE AGREEMENTS" means, collectively, those certain agreements
described in EXHIBIT C and any replacement franchise agreement which may
hereafter be entered into in accordance with the terms and conditions hereof by
any of the Borrowers, as franchisee, pursuant to which the Borrowers have the
right to operate the Properties under names and hotel systems controlled by the
Franchisor.

      "FRANCHISOR" means the current hotel franchisor or licensor with respect
to each Property or any other successor franchisor or licensor permitted
pursuant to Section 5.13.

      "FRANCHISOR LETTER" means, with respect to each Property, a comfort
letter(s), and/or similar instrument(s) from the related Franchisor to Lender
acknowledging the Loan and providing certain assurances, reasonably satisfactory
to Lender, with respect thereto.

      "FUNDING LOSSES" has the meaning set forth in Section 2.10.

      "FUNDING PARTY" means any bank or other entity, if any, which is
indirectly or directly funding Lender with respect to the Loan, in whole or in
part, including, without limitation, any direct or indirect assignee of, or
participant in, the Loan.

      "GAAP" means generally accepted accounting principles as set forth in
Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting
Fairly in Conformity with Generally Accepted Accounting Principles in the
Independent Auditor's Report" issued by the Auditing Standards Board of the
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board to the extent such principles are
applicable to the facts and circumstances as of the date of determination.

      "GENERAL PARTNER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "General Partners", and any other entity which
is now or hereafter becomes a general partner of any of the Borrowers under such
Borrower's limited partnership agreement.

                                       9


      "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or
state government or other political subdivision thereof and any entity,
including any regulatory or administrative authority or court, exercising
executive, legislative, judicial, regulatory or administrative or
quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal in each case having jurisdiction over such
applicable Person or such Person's property, and any stock exchange on which
shares of capital stock of such Person are listed or admitted for trading.

      "GROUND LEASE DEFAULT" has the meaning set forth in Section 4.30.

      "GROUND LEASED PROPERTIES" means the Properties subject to the Ground
Leases described on SCHEDULE 4.30 attached hereto.

      "GROUND LEASES" means the ground leases described on SCHEDULE 4.30
attached hereto.

      "GROUND LESSORS" means the lessors under the Ground Leases described on
SCHEDULE 4.30 attached hereto.

      "GUARANTOR" means Lodgian, Inc., a Delaware corporation.

      "GUARANTY" means the Guaranty of Recourse Obligations and the
Environmental Indemnity.

      "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse
Obligations of even date herewith from Guarantor to Lender, as same may be
amended or modified from time to time.

      "HAZARDOUS MATERIAL" means all or any of the following: (A) substances,
materials, compounds, wastes, products, emissions and vapors that are defined or
listed in, regulated by, or otherwise classified pursuant to, any applicable
Environmental Laws, including any so defined, listed, regulated or classified as
"hazardous substances", "hazardous materials", "hazardous wastes", "toxic
substances", "pollutants", "contaminants", or any other formulation intended to
regulate, define, list or classify substances by reason of deleterious, harmful
or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources; (C)
any flammable substances or explosives or any radioactive materials; (D)
asbestos in any form; (E) electrical or hydraulic equipment which contains any
oil or dielectric fluid containing polychlorinated biphenyls; (F) radon; (G)
mold; or (H) urea formaldehyde, provided, however, such definition shall not
include cleaning materials and other substances commonly used in the ordinary
course of the Borrowers' business, which materials exist only in reasonable
quantities and are stored, contained, transported, used, released, and disposed
of in accordance with all applicable Environmental Laws.

      "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established
pursuant to Section 6.6.

                                       10


      "IMPOSITIONS" means (i) all real estate and personal property taxes, and
vault charges and all other taxes, levies, assessments and other similar
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, of every kind and nature whatsoever (including any payments in lieu
of taxes), which at any time prior to, at or after the execution hereof may be
assessed, levied or imposed by, in each case, a governmental authority upon any
of the Properties or the rents relating thereto or upon the ownership, use,
occupancy or enjoyment thereof, and any interest, cost or penalties imposed by
such governmental authority with respect to any of the foregoing and (ii) all
rent and other amounts payable by the Borrowers under each of the Ground Leases
and under the Condominium Property Documents. Impositions shall not include (x)
any sales or use taxes payable by the Borrowers, (y) taxes payable by tenants or
guests occupying any portions of the Properties, or (z) taxes or other charges
payable by any Manager or Franchisor unless such taxes are being paid on behalf
of the Borrowers.

      "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant
to Section 6.3.

      "IMPROVEMENTS" means all buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
of every kind and nature now or hereafter located on the Properties.

      "INDEBTEDNESS" or "INDEBTEDNESS", means, for any Person, without
duplication: (i) all indebtedness of such Person for borrowed money, for amounts
drawn under a letter of credit, or for the deferred purchase price of property
for which such Person or its assets is liable, (ii) all unfunded amounts under a
loan agreement, letter of credit (unless secured in full by Dollars), or other
credit facility for which such Person would be liable if such amounts were
advanced thereunder, (iii) all amounts required to be paid by such Person as a
guaranteed payment to partners or a preferred or special dividend, including any
mandatory redemption of shares or interests but not any preferred return or
special dividend paid solely from, and to the extent of, excess cash flow after
the payment of all operating expenses, capital improvements and debt service on
all Indebtedness, (iv) all obligations under leases that constitute capital
leases for which such Person is liable, and (v) all obligations of such Person
under interest rate swaps, caps, floors, collars and other interest hedge
agreements, in each case whether such Person is liable contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which
obligations such Person otherwise assures a creditor against loss.

      "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2.

      "INDEMNITEES" has the meaning set forth in Section 14.2.

      "INDEPENDENT DIRECTOR" means an individual who shall not have been at the
time of such individual's appointment or at any time while serving as a director
of General Partner, Member, any of the Borrowers or any of their respective
Affiliates, and may not have been at any time during the preceding five years
(i) a stockholder, director (other than as an independent director/member),
officer, employee, partner, attorney or counsel of General Partner, Member,
Guarantor, any of the Borrowers or any Affiliate of any of them (except that
such individual may be an independent director of any other Affiliate of the
foregoing), (ii) a customer, supplier or other Person who derives any of its
purchases or revenues from its activities with General

                                       11


Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them
(other than a company that provides professional independent directors and which
also may provide other ancillary corporate, partnership, company or trust
services to the Borrowers, Member, General Partner or their Affiliates in the
ordinary course of business (for example, The Corporation Trust Company)), (iii)
a Person or other entity controlling or under common control with any such
stockholder, partner, customer, supplier or other Person, or (iv) a member of
the immediate family of any such stockholder, director, officer, employee,
partner, customer, supplier or other Person. As used in this definition, the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management, policies or activities of a
Person, whether through ownership of voting securities, by contract or
otherwise.

      "INITIAL TERM" means the period from the Closing Date to the Scheduled
Maturity Date.

      "INSURANCE POLICIES" has the meaning set forth in Section 5.4.

      "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance
policies required to be maintained by the Borrowers with respect to the
Properties under Section 5.4.

      "INTERESTED PARTIES" has the meaning set forth in Section 10.3.

      "INTEREST RATE" has the meaning set forth in Section 2.2.

      "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section
5.22.

      "IRC" means the Internal Revenue Code of 1986, and any rule or regulation
promulgated thereunder from time to time, in each case as amended from time to
time.

      "IRS" means the Internal Revenue Service or any successor thereto.

      "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents,
or in any document or certificate executed on behalf of any Borrower Party
pursuant to this Loan Agreement or any of the Loan Documents, reference is made
to the knowledge of the Borrowers or any other Borrower Party (whether by use of
the words "knowledge" or "known", or other words of similar meaning, and whether
or not the same are capitalized), such shall be deemed to refer to the knowledge
(without independent investigation or inquiry unless otherwise specified) of (i)
the individuals who have significant responsibility for any policy making, major
decisions or financial affairs of the applicable entity; (ii) the general
manager for the applicable Property; (iii) the regional vice president of
operations for Guarantor, the president of each Borrower and Member, with
respect to operational issues of any Property or any of the Borrowers; (iv) the
chief operating officer of Guarantor, with respect to representations regarding
Guarantor; and (v) the person signing such document or certificate.

      "LEASE" means any lease, tenancy, license, assignment and/or other rental
or occupancy agreement or other agreement or arrangement (including, without
limitation, any and all guaranties of any of the foregoing) heretofore or
hereafter entered into affecting the use, enjoyment or occupancy of, or the
conduct of any activity upon or in, the Properties or any portion thereof,
including any extensions, renewals, modifications or amendments thereof.

                                       12


      "LENDER" is defined in the preamble.

      "LENDER'S CONSULTANT" has the meaning set forth in Section 6.7

      "LETTER OF CREDIT" means an irrevocable, unconditional, transferable,
clean sight draft letter of credit (either an evergreen letter of credit or one
which does not expire until at least thirty (30) days after the Maturity Date
(the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw
thereon in New York, New York based solely on a statement executed by an officer
or authorized signatory of Lender, in form and substance reasonably acceptable
to Lender and issued by an Eligible Bank. If at any time (a) the institution
issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if
the Letter of Credit is due to expire prior to the LC Expiration Date, Lender
shall have the right immediately to draw down the same in full and hold the
proceeds thereof in accordance with the provisions of this Loan Agreement,
unless the Borrowers shall deliver a replacement Letter of Credit from an
Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers
written notice to the Borrowers that the institution issuing the Letter of
Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty
(20) days prior to the expiration date of said Letter of Credit.

      "LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).

      "LOAN" has the meaning set forth in Section 2.1.

      "LOAN AGREEMENT" means this Loan and Security Agreement, as same may be
amended, modified or restated from time to time (including all schedules,
exhibits, annexes and appendices hereto).

      "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgages, the
Assignments of Leases, the Assignments of Management Agreements, the Guaranty,
the Financing Statements, the Cash Management Agreement and any and all other
documents and agreements from any of the Borrowers, General Partner, Member,
Guarantor or Manager and accepted by Lender for the purposes of evidencing
and/or securing the Loan, excluding the Mezzanine Loan Documents.

      "LOAN YEAR" means the twelve (12) month period commencing on July 1st of
any calendar year during the term of the Loan and ending on June 30th of the
following calendar year - provided that the first Loan Year shall commence on
the Closing Date and end on June 30, 2005.

      "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1.

      "MANAGEMENT AGREEMENTS" means those certain Management Agreements
described in EXHIBIT E, between each Borrower and the applicable Manager
described therein, and any management agreement which may hereafter be entered
into in accordance with the terms and conditions hereof, pursuant to which any
subsequent Manager may hereafter manage one or more of the Properties.

                                       13


      "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the
terms of the Management Agreements.

      "MANAGERS" means the managers described in EXHIBIT E or an Acceptable
Manager as may hereafter be charged with management of one or more of the
Properties approved by Lender in accordance with the terms and conditions
hereof.

      "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable
discretion, (A) a material adverse effect (which may include economic or
political events) upon the business, operations, properties, assets or condition
(financial or otherwise) of any of the Borrowers or Guarantor, or (B) the
impairment of the ability of any of the Borrowers or Guarantor to perform its
obligations under any Loan Documents, or (C) the impairment of the ability of
Lender to enforce or collect any of the Obligations as such Obligations become
due. In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then occurring events and existing
conditions would result in a Material Adverse Effect.

      "MATERIAL AGREEMENT" means any contract or agreement relating to the
ownership, management, development, use, operation, leasing, maintenance, repair
or improvement of the Properties under which there is an obligation of the
Borrowers, in the aggregate, to pay, or under which any of the Borrowers
receives in compensation, more than $500,000 per annum, other than (i) the
Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement
under which (x) there is an obligation of the Borrowers, in the aggregate, to
pay, or under which any of the Borrowers (or all the Borrowers in the aggregate)
receives in compensation, not more than $1,000,000 per annum and (y) which is
terminable by the Borrowers on not more than sixty (60) days prior written
notice without any fee or penalty.

      "MATERIAL ALTERATION" means any improvement or alteration to a Property
(other than decorative work such as painting, wallpapering and carpeting), the
cost of which exceeds the greater of (x) five percent (5%) of the Aggregate
Allocated Loan Amount with respect to the applicable Property or (y) $250,000,
and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget
then in effect, or as approved Work under Section 6.7 hereof.

      "MATERIAL LEASE" means any Lease of space in a Property which (i) is with
an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other
payments in an amount equal to or greater than $100,000, or has a term
(including all extensions and renewals which are unilaterally exercisable by the
tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by
either party thereto on thirty (30) days' notice without payment of a
termination fee, penalty or other cancellation fee, (iii) demises in excess of
2000 square feet of space, or (iv) obligates the Borrowers to make any
improvements to the Properties either directly or through cash allowances
(including, without limitation, free rent, tenant improvement allowances, or
landlord's construction work) to the applicable tenant in excess of $25,000. For
purposes of this definition only, in determining the square footage demised
under any Lease, all space in the applicable Property which may in the future be
demised to the tenant under such Lease by reason of such tenant exercising any
right or option contained in such Lease shall be included in the calculation of
the square footage demised under such Lease.

                                       14


      "MATURITY DATE" means July 1, 2009, or such other date on which the final
payment of principal of the Note becomes due and payable as herein provided,
whether at such stated maturity date, by acceleration, or otherwise.

      "MAXIMUM RATE" has the meaning set forth in Section 2.2.

      "MEMBER" means, individually or collectively, those parties identified on
SCHEDULE 4.1(C) as "Members" (being the managing or sole members of each of the
Borrowers which are limited liability companies) and any other entity which is
now or hereafter becomes the managing or sole member of any of the Borrowers
under such Borrower's limited liability company operating agreement.

      "MERRILL LYNCH" has the meaning set forth in Section 10.3.

      "MEZZANINE BORROWER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "Mezzanine Borrower".

      "MEZZANINE LENDER" means Merrill Lynch Mortgage Lending, Inc., its
successors and assigns.

      "MEZZANINE LOAN" means that certain loan being made on the date hereof
from Mezzanine Lender to Mezzanine Borrower.

      "MEZZANINE LOAN DOCUMENTS" means the documents evidencing and securing the
Mezzanine Loan, as same may be amended, modified or restated from time to time.

      "MINIMUM DEBT YIELD" means (i) during the first (1st) Loan Year, 9%, (ii)
during the second (2nd) Loan Year, 10%, (iii) during the third (3rd) Loan Year,
11%, (iv) during the fourth (4th) Loan Year, 12%, and (v) during the fifth (5th)
Loan Year, 13%.

      "MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4.

      "MOODY'S" means Moody's Investors Service.

      "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments
of Leases and Security Agreements, (ii) those certain Deeds of Trust,
Assignments of Leases and Security Agreements, and (iii) those certain Deeds to
Secure Debt, Assignment of Leases and Security Agreements, each of even date
herewith, from each Borrower to Lender (or deed trustee on behalf of Lender, as
applicable), constituting a Lien on such Borrower's respective Property as
Collateral for the Loan as same may be modified or amended from time to time.

      "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any
Affiliate is making, or is accruing an obligation to make, contributions or has
made, or been obligated to make, contributions within the preceding six (6)
years, or for which any of the Borrowers or any Affiliate has any liability,
including contingent liability.

                                       15


      "NET CASH FLOW" means Net Operating Income for any period less (i) a base
management fee equal to the greater of (A) the actual base management fee for
such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve
for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due
to all Franchisors for such period.

      "NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which
Operating Revenues exceed Operating Expenses (excluding Management Fees,
interest, income taxes, depreciation, amortization, FF&E reserves, and fees due
to all Franchisors for such period).

      "NOTE" has the meaning set forth in Section 2.1.

      "OBLIGATIONS" means the Loan and all obligations, liabilities and
indebtedness of every nature to be paid or performed by the Borrowers under the
Loan Documents, including the principal amount of the Loan, interest accrued
thereon and all fees, costs and expenses, and other sums now or hereafter owing,
due or payable and whether before or after the filing of a proceeding under the
Bankruptcy Code by or against any of the Borrowers, and the performance of all
other terms, conditions and covenants under the Loan Documents.

      "OFAC" has the meaning set forth in Section 4.31.

      "O&M PLANS" has the meaning set forth in Section 5.7.

      "OPERATING BUDGET" means, collectively, for any period, the Borrowers'
budgets setting forth the Borrowers' best estimate, after due consideration, of
all Operating Revenues and Operating Expenses and any other revenues, costs and
expenses for each of the Properties for such period, which budgets have been
approved by Lender in accordance herewith, as same may be amended pursuant to
Section 5.1(D) hereof.

      "OPERATING EXPENSES" means, for any period, without duplication, all costs
and expenses of operating, maintaining and managing the Properties determined in
accordance with GAAP, including, without limitation, Impositions (due and
payable during the applicable period of determination), Insurance Premiums,
repair and maintenance costs, Management Fees and costs, fees payable to all
Franchisors, utilities, accounting, legal and other professional fees, fees
relating to environmental and financial audits, wages, salaries, payroll taxes
and benefits, business franchise taxes, tips and gratuities paid to employees
and staff and other personnel expenses, costs and expenses related to operating
and maintaining all guest rooms, restaurants (including inventory and supplies),
retail stores and shops, bars, meeting rooms, banquet rooms, apartments, parking
and recreational facilities, and all other "costs and expenses" as defined in
the Uniform System; but excluding principal and interest payments on the Loan,
fees and expenses of a non-operating nature and fees and expenses due and
payable to or for the benefit of Lender under this Loan Agreement or any of the
other Loan Documents (including, without limitation, all loan servicing fees and
expenses, and expenses related to a Cap), expenses which, in accordance with
GAAP, should be capitalized, any expense paid by a tenant that would otherwise
be an Operating Expense, capital expenditures, tenant improvement allowances and
leasing commissions, if any, asset management fees, any payment or expense for
which each Borrower was or is to be reimbursed from proceeds of the Loan or
insurance or by any third

                                       16


party, any fees or expenses paid to any partner or member of the Borrowers for
services provided to any of the Borrowers and any non-cash charges such as
depreciation and amortization. Operating Expenses shall not include federal,
state or local income taxes or legal and other professional fees unrelated to
the operation of the Properties.

      "OPERATING REVENUES" means, without duplication, all revenues and receipts
of the Borrowers from operation of the Properties or otherwise arising in
respect of the Properties which are properly allocable to the Properties for the
applicable period in accordance with GAAP, including, without limitation, all
hotel receipts, revenues and credit card receipts collected from guest rooms,
restaurants and bars (including without limitation, service charges for
employees and staff), mini-bars, meeting rooms, banquet rooms, apartments,
parking and recreational facilities, health club membership fees, food and
beverage wholesale and retail sales, service charges, convention services,
special events, audio-visual services, boat cruises, travel agency fees,
internet booking fees, telephone charges, laundry services, vending machines and
otherwise, all rents, revenues and receipts now existing or hereafter arising or
created out of the sale, lease, sublease, license, concession or other grant of
the right of the possession, use or occupancy of all or any portion of the
Properties or personalty located thereon, or rendering of service by any of the
Borrowers or any operator or manager of the hotel or commercial space
(including, without limitation, from the rental of any office space, retail
space, guest rooms or other space, halls, stores and deposits securing
reservations of such space (only to the extent such deposits are not required to
be returned or refunded to the depositor)), proceeds from rental or business
interruption insurance relating to business interruption or loss of income for
the period in question and any other items of revenue which would be included in
operating revenues under the Uniform System; but excluding proceeds from the
sale of FF&E, abatements, reductions or refunds of real estate or personal
property taxes relating to the Properties, dividends on insurance policies
relating to the Properties, condemnation proceeds arising from a temporary
taking of all or a part of any Properties, security and other deposits until
they are forfeited by the depositor, advance rentals until they are earned,
proceeds from a sale, financing or other disposition of the Properties or any
part thereof or interest therein and other non-recurring revenues as determined
by Lender, insurance proceeds (other than proceeds from rental or business
interruption insurance), other condemnation proceeds, capital contributions or
loans to any of the Borrowers, disbursements to any of the Borrowers from the
Reserves, sales, use and occupancy taxes collected from customers or patrons of
the Properties to be remitted to the applicable taxing authorities, and
gratuities or service charges collected on behalf of and remitted to employees
or contractors of the Properties.

      "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1.

      "PAYMENT DATE" means the first day of each calendar month occurring during
the term of the Loan (or if such day is not a Business Day, the immediately
succeeding Business Day).

      "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3.

      "PERMITTED ENCUMBRANCES" means, collectively, (i) the Mortgages and the
other Liens of the Loan Documents in favor of Lender, (ii) the items shown in
Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not
yet due and payable or Liens arising after the date hereof which are being
contested in good faith by appropriate proceedings promptly

                                       17


instituted and diligently conducted in accordance with Section 5.3(B) hereof;
(iv) in the case of Liens arising after the date hereof, statutory Liens of
carriers, warehousemen, mechanics, materialmen and other similar Liens arising
by operation of law, which are incurred in the ordinary course of business and
discharged by the Borrowers by payment, bonding or otherwise within forty-five
(45) days after the filing thereof or which are being contested in good faith in
accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and
customary purchase money financing of personal property and equipment leasing to
the extent the same are created in the ordinary course of business in accordance
with Section 5.17(B) hereof; (vi) all easements, rights-of-way, restrictions and
other similar charges or non-monetary encumbrances against real property which
do not materially adversely affect (A) the ability of the Borrowers to pay any
of their obligations to any Person as and when due, (B) the marketability of
title to the Properties, (C) the fair market value of the Properties, or (D) the
use or operation of the Properties as of the Closing Date and thereafter; (vii)
rights of existing and future tenants, as tenants only, pursuant to the Leases;
(viii) any other Lien to which Lender may expressly consent in writing; and (ix)
Liens of the Mezzanine Loan Documents in favor of Mezzanine Lender.

      "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17.

      "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management
Agreement.

      "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in
Section 11.2.

      "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies
the requirements of Article IX hereof) controlled by, and more than 51% of which
is owned by, one of the following:

      (i)   a pension fund, pension trust or pension account that (a) has total
real estate assets of at least $2.5 Billion and (b) is managed by a Person who
controls real estate equity assets (not including the Properties) having a fair
market value of at least $1.25 Billion; or

      (ii)  a pension fund advisor who (a) immediately prior to such transfer,
controls at least $1 Billion of real estate equity assets and (b) is acting on
behalf of one or more pension funds that, in the aggregate, satisfy the
requirements of clause (i) of this definition; or

      (iii) an insurance company which is subject to supervision by the
insurance commissioner, or a similar official or agency, of a state or territory
of the United States (including the District of Columbia) (a) with a net worth,
as of the date immediately prior to the date of the transfer, of at least $1
Billion and (b) who, immediately prior to such transfer, controls real estate
equity assets (not including the Properties) having a fair market value of at
least $2.5 Billion; or

      (iv)  a corporation organized under the banking laws of the United States
or any state or territory of the United States (including the District of
Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b)
who, immediately prior to such transfer, controls real estate equity assets (not
including the Properties) having a fair market value of at least $5 Billion; or

                                       18


      (v)   any other Person (a) with a long-term unsecured debt rating from the
Rating Agencies of at least investment grade and (b) that owns or operates at
least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior
to the date of such transfer, of at least $750 Million and (iii) immediately
prior to such transfer, controls real estate equity assets (not including the
Properties) having a fair market value of at least $1.5 Billion.

      "PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof
and their respective permitted successors and assigns (or in the case of a
governmental Person, the successor functional equivalent of such Person).

      "PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5.

      "PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6.

      "PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General
Partner and Member.

      "PROHIBITED PERSON" has the meaning set forth in Section 4.31.

      "PROPERTIES" and "PROPERTY" means, collectively or individually, the
properties (including land and Improvements) described in EXHIBIT A, together
with all Improvements now or hereafter located thereon and all related
facilities, amenities and FF&E owned by the Borrowers and which shall be
encumbered by and are more particularly described in the respective Mortgages:
provided that, following a Release, "PROPERTIES" means each of the Properties
that remain encumbered by the Mortgages as Collateral for the Loan.

      "PROPERTY CONDITION REPORT" means those certain property condition reports
for the Properties as described on EXHIBIT J.

      "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property
improvement plans for the Properties described on EXHIBIT G and any future
Property Improvement Plans required to be implemented by the applicable
Franchisor.

      "PROPERTY RELEASE" has the meaning set forth in Section 11.4.

      "RATING AGENCY" means, prior to a securitization, any of S&P, Moody's and
Fitch or any other nationally-recognized statistical rating organization
designated by Lender in its sole discretion, and, after a Securitization, each
Rating Agency which has rated the Securities that are the subject of the
Securitization.

      "RATING CONFIRMATION" with respect to the transaction or matter in
question, means: (i) if all or any portion of the Loan, by itself or together
with other loans, has been the subject of a Securitization, then each applicable
Rating Agency shall have confirmed in writing that such transaction or matter
shall not result in a downgrade, qualification, or withdrawal of any rating then
in effect for any certificate or other securities issued in connection with such
Securitization;

                                       19


and (ii) if all of the Loan has not been the subject of a Securitization, then
Lender shall have determined in its reasonable discretion (taking into
consideration such factors as Lender may in good faith determine, including the
attributes of the loan pool in which the Loan might reasonably be expected to be
securitized) that no rating for any certificate or other securities that would
be issued in connection with a Securitization of such portion of the Loan will
be downgraded, qualified, or withheld by reason of such transaction or matter.

      "RATING CRITERIA" with respect to any Person, means that (i) the
short-term unsecured debt obligations of such Person are rated at least "A-1" by
S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person
for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.

      "RECEIPTS" means all revenues, receipts and other payments of every kind
arising from ownership or operation of the Properties, including without
limitation, all warrants, stock options, or equity interests in any tenant,
licensee or other Person occupying space at, or providing services related to or
for the benefit of, the Properties received by the Borrowers or any Related
Person of the Borrowers in lieu of rent or other payment.

      "RELATED PERSON" means any Person in which any of the Borrowers or the
Guarantor holds greater than a ten percent (10%) equity interest.

      "RELEASE" has the meaning set forth in Section 11.4.

      "RELEASE DATE" has the meaning set forth in Section 11.4.

      "RELEASE PRICE" means an amount equal to one hundred twenty-five percent
(125%) of the Allocated Loan Amount of the applicable Property.

      "RENT ROLL" has the meaning set forth in Section 3.1.

      "RENTS" has the meaning set forth in the Mortgages.

      "REPLACEMENTS" has the meaning set forth in Section 6.4.

      "REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5.

      "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1.

      "RESERVES" means the reserves held by or on behalf of Lender pursuant to
this Loan Agreement or the other Loan Document, including without limitation,
the reserves established pursuant to Article VI.

      "RESTORATION" has the meaning set forth in Section 5.5.

                                       20



      "RESTORATION THRESHOLD" means the greater of (x) $250,000 or (y) five
percent (5%) of the Aggregate Allocated Loan amount of the applicable Property,
not to exceed $500,000, per Property per occurrence.

      "REVPAR" means average room revenues per available room per day.

      "S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.

      "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" means the monthly payments of
principal for each Payment Date as set forth on SCHEDULE 2.4 attached hereto;
which payment amounts were calculated based upon a twenty-five (25) year
amortization schedule at the Interest Rate. In the event that the amount of
principal prepayments on the Loan from application of casualty insurance
proceeds or condemnation awards under Section 5.5 shall exceed $10,000,000, in
the aggregate, from the Closing Date or from the date of the last
re-amortization of the Loan under this sentence, Lender shall recalculate the
Scheduled Mortgage Principal Payments based upon the then remaining principal
amount of the Loan and the foregoing assumptions and deliver a revised SCHEDULE
2.4 to the Borrowers, which revised schedule shall replace SCHEDULE 2.4 hereto
in its entirety.

      "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1.

      "SECURITIES" (whether or not capitalized) means any stock, shares, voting
trust certificates, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.

      "SECURITIZATION" means a rated offering of securities representing direct
or indirect interests in the Loan or the right to receive income therefrom.

      "SERVICER" means a servicer selected by Lender from time to time in its
sole discretion to service the Loan.

      "SERVICING FEE" has the meaning set forth in Section 2.11.

      "SPE EFFECTIVE DATE" means the later of (x) November 25, 2002, or (y) the
date of formation of the applicable Person in its respective jurisdiction of
formation.

      "SUB-ACCOUNTS" has the meaning set forth in Section 7.1.

      "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the
budgeted income and expenses and the actual income and expenses for the prior
calendar year or corresponding calendar quarter for such prior year, (ii) a
calculation of the average daily rate, RevPAR and average occupancy statistics
for the Properties for the applicable period, (iii) a calculation of the Debt
Service Coverage Ratio and the Debt Yield for the applicable period (which shall
not be

                                       21


binding on Lender), and (iv) such other financial reports as the subject entity
shall routinely and regularly prepare.

      "SURVEY" has the meaning set forth in Section 3.1.

      "TAX LIABILITIES" has the meaning set forth in Section 2.9.

      "TIER 1 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, as
applicable, identified in the "Tier 1" category on EXHIBIT I.

      "TIER 2 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 2" category on EXHIBIT I.

      "TIER 3 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 3" category on EXHIBIT I.

      "TITLE COMPANIES" means LandAmerica Title Insurance Company and Stewart
Title Insurance Company, as co-insurers, and/or such other national title
insurance company as may be acceptable to Lender.

      "TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title
insurance pertaining to the Mortgages issued by the Title Companies to Lender in
connection with the Closing.

      "TRANSFER" has the meaning set forth in Section 11.2.

      "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3.

      "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary
termination of any Franchise Agreement, (y) the failure to pay to any Franchisor
any amount due under any Franchise Agreement (a, "FRANCHISE PAYMENT DEFAULT")
and the continuance thereof beyond any applicable notice and grace period under
such Franchise Agreement or the occurrence of one or more breaches or defaults
(other than Franchise Payment Defaults) and the continuance thereof beyond all
applicable notice and grace periods, if any, under such Franchise Agreements (or
such other cure periods as may be provided by the applicable Franchisors in
writing) covering Properties with Allocated Loan Amounts of ten percent (10%) or
more of the outstanding principal balance of the Loan; provided, however, no
Uncured Franchise Default shall be deemed to have occurred under clause (x)
above with respect to any Property following the voluntary or involuntary
termination of the applicable Franchise Agreement if (a) within ten (10)
Business Days of the termination of such Franchise Agreement (and at the time of
delivery of each report pursuant to Section 5.1(A)(v)), the applicable Borrower
delivers to Lender evidence reasonably satisfactory to Lender that such Borrower
is diligently pursuing efforts to enter into a new Franchise Agreement with an
Acceptable Franchisor for the applicable Property and such Borrower shall
thereafter diligently and continuously pursue such efforts to enter into a new
Franchise Agreement, (b) at the time of such termination no other Property shall
be in

                                       22


operation without being subject to a Franchise Agreement, (c) the Allocated Loan
Amount of the Property covered by such Franchise Agreement is not more than five
percent (5%) of the outstanding principal balance of the Loan or such Property
shall not be in operation for more than five (5) consecutive days without being
subject to a Franchise Agreement, and (d) no Property shall be without a
Franchise Agreement in place for a period in excess of six (6) months from the
termination of the applicable Franchise Agreement.

      "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging
Industry promulgated by the American Hotel and Motel Association, as in effect
from time to time.

      "WAIVING PARTY" has the meaning set forth in Section 13.1.

      "WORK" has the meaning set forth in Section 6.7.

      "WORK RESERVES" has the meaning set forth in Section 6.7.

      "ZONING REPORTS" means those certain zoning and site requirements
summaries for the Properties as described on EXHIBIT K.

SECTION 1.2 ACCOUNTING TERMS.

      For purposes of this Loan Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to such terms in conformity with
GAAP or the Uniform System, as the case may be.

SECTION 1.3 OTHER DEFINITIONAL PROVISIONS.

      References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and
"SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules,
respectively, of this Loan Agreement unless otherwise specifically provided. Any
of the terms defined in Section 1.1 may, unless the context otherwise requires,
be used in the singular or the plural depending on the reference. In this Loan
Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer
to this Loan Agreement as a whole and not merely to the specific article,
section, subsection, paragraph or clause in which the respective word appears;
words importing any gender include the other genders; references to "WRITING"
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be
deemed to be followed by the words "without limitation"; and any reference to
any statute or regulation may include any amendments of same and any successor
statutes and regulations. Further, (i) any reference to any agreement or other
document may include subsequent amendments, assignments, and other modifications
thereto, and (ii) any reference to any Person may include such Person's
respective permitted successors and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons.

                                       23

\
                                   ARTICLE II
                                TERMS OF THE LOAN

SECTION 2.1 LOAN.

      (A) LOAN. Subject to the terms and conditions of this Loan Agreement and
in reliance upon the representations and warranties of the Borrowers contained
herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to
borrow from Lender, a loan in the original principal amount of $67,864,000 (the
"LOAN").

      (B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to
Lender a Promissory Note, dated of even date herewith (as amended, modified or
restated, and any replacement or substitute notes therefor, by means of multiple
notes or otherwise, collectively, the "NOTE"), made by the Borrowers to the
order of Lender, in the original principal amount of $67,864,000.

      (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be
used to (i) refinance existing indebtedness; (ii) pay all recording fees and
taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses
incurred by Lender, including reasonable legal fees and expenses of counsel to
Lender, and other costs and expenses approved by Lender (which approval will not
be unreasonably withheld) related to the Loan; (iii) establish the Reserves
required hereunder; and (iv) provide for general corporate purposes, including,
without limitation, payment of transaction costs and expenses incurred by the
Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or
as otherwise directed by the Borrowers.

SECTION 2.2 INTEREST.

      (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall
bear interest at a rate per annum equal to six and five hundred seventy-seven
one-thousandths percent (6.577%) (the "INTEREST RATE").

      (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and
during the continuance of an Event of Default and in any event from and after
the Maturity Date of the Loan and until the Loan and all other Obligations are
satisfied in full, the outstanding principal balance of the Loan and all other
Obligations shall bear interest until paid in full at a rate per annum that is
four percent (4%) in excess of the Interest Rate otherwise applicable under this
Loan Agreement and the Note (the "DEFAULT RATE").

      (C) COMPUTATION OF INTEREST. Interest on the Loan and all other
Obligations owing to Lender shall be computed on the basis of a 360-day year,
and shall be charged for the actual number of days elapsed during any month or
other accrual period. Interest shall be payable in arrears.

      (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained
in this Loan Agreement or the other Loan Documents, the Borrowers shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by law ("EXCESS
INTEREST"). If any Excess Interest is provided for or determined by a court of
competent jurisdiction to have been provided for in this Loan Agreement or in
any of the other Loan Documents, then in such event: (1) the provisions of this

                                       24


subsection shall govern and control; (2) the Borrowers shall not be obligated to
pay any Excess Interest; (3) any Excess Interest that Lender may have received
hereunder shall be, at Lender's option, (a) applied as a credit against either
or both of the outstanding principal balance of the Loan or accrued and unpaid
interest thereunder (not to exceed the maximum amount permitted by law), (b)
refunded to the payor thereof, or (c) any combination of the foregoing; (4) the
interest rate(s) provided for herein shall be automatically reduced to the
maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM
RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to
have been and shall be, reformed and modified to reflect such reduction; and (5)
the Borrowers shall not have any action against Lender for any damages arising
out of the payment or collection of any Excess Interest. Notwithstanding the
foregoing, if for any period of time interest on any Obligation is calculated at
the Maximum Rate rather than the applicable rate under this Loan Agreement, and
thereafter such applicable rate becomes less than the Maximum Rate, the rate of
interest payable on such Obligations shall, to the extent permitted by law,
remain at the Maximum Rate until Lender shall have received or accrued the
amount of interest which Lender would have received or accrued during such
period on Obligations had the rate of interest not been limited to the Maximum
Rate during such period. If the Default Rate shall be finally determined to be
unlawful, then the Interest Rate shall be applicable during any time when the
Default Rate would have been applicable hereunder, provided however that if the
Maximum Rate is greater or lesser than the Interest Rate, then the foregoing
provisions of this paragraph shall apply.

      (E) LATE CHARGES. If an Event of Default regarding non-payment of
principal, interest or other sums due hereunder or under any of the other Loan
Documents shall occur, then the Borrowers shall pay to Lender, in addition to
all sums otherwise due and payable, a late fee in an amount equal to five
percent (5.0%) of such principal, interest or other sums due hereunder or under
any other Loan Document, such late charge to be immediately due and payable
without demand by Lender.

SECTION 2.3 RESERVED.

SECTION 2.4 PAYMENTS.

      (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments
of interest and principal on the Note as follows:

            (i)   The Borrowers shall make a payment to Lender of interest only
on the Closing Date for the period from and including the Closing Date through
and including the last day of the calendar month in which the Closing occurs;
and

            (ii)  Commencing on August 1, 2004 and on each Payment Date
thereafter through but not including the Maturity Date, the Borrowers shall make
a payment of interest on the Loan for the prior calendar month, and in addition
shall make a payment of principal on the Loan in an amount equal to the
Scheduled Mortgage Principal Payment for such Payment Date.

      (B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for
payments on the Loan which are transferred to the account of Lender as provided
below (i) on the day that such funds are received by Lender if such receipt
occurs by 2:00 p.m. (New York time) on such day,

                                       25


or (ii) on the next succeeding Business Day after such funds are received by
Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any
payment to be made hereunder shall be stated to be due on a day that is not a
Business Day, the payment may be made on the next succeeding Business Day.

      (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to
pay all of the Obligations relating to the Loan as such amounts become due or
are declared due pursuant to the terms of this Loan Agreement. All payments by
the Borrowers on the Loan shall be made without deduction, defense, set off or
counterclaim and in immediately available funds delivered to Lender by wire
transfer to such accounts at such banks as Lender may from time to time
designate. Prior to an Event of Default, each payment shall be applied first to
pay late charges and the charges and expenses of Lender, Servicer and any
special servicer as provided hereunder, second to accrued and unpaid interest,
and the balance to principal. Prior to an Event of Default, to the extent
sufficient funds are contained in the Lock Box Account, or an Account or
Sub-Account thereof, to make the required monthly payments to the applicable
Reserves and Sub-Account on such Payment Date, the Borrowers shall be deemed to
have satisfied their obligations to make such payments. Upon the occurrence and
during the continuance of an Event of Default, payments shall be applied to the
Obligations in such order as Lender shall determine in its sole and absolute
discretion.

SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance
with the Loan Documents, the then outstanding principal balance of the Loan, all
accrued and unpaid interest thereon, and all other sums then owing to Lender
hereunder and under the Note, the Mortgages and the other Loan Documents, shall
be due and payable on the Maturity Date.

SECTION 2.6 PREPAYMENT.

      (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON
ACCELERATION. The Borrowers shall have no right to prepay the Loan in whole or
in part at any time, except as expressly set forth in this provision. On and
after May 1, 2009, the Borrowers may prepay the Loan in whole, but not in part,
without payment of Prepayment Consideration, provided that (i) the Borrowers
shall provide to Lender not less than fifteen (15) days prior written notice of
such prepayment, (ii) together with such prepayment the Borrowers also shall pay
all accrued and unpaid interest and all other Obligations then due and owing,
(iii) if such prepayment occurs on any day other than a Payment Date, then
together therewith the Borrowers also shall pay to Lender the amount of interest
that would have accrued on the amount being prepaid from and including the date
of such prepayment to the end of such calendar month.

      (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion
of the Loan shall occur prior to May 1 2009, on account of acceleration of the
Loan (whether or not due to an Event of Default), or otherwise, then except only
as expressly provided in this Loan Agreement or the other Loan Documents to the
contrary, the Borrowers shall pay the Prepayment Consideration on the amount
prepaid to Lender together with such prepayment, as liquidated damages and
compensation for costs incurred, and in addition to all other amounts due and
owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will
be due as to a prepayment of the Loan in connection with (i) application of
insurance or condemnation proceeds required by Lender pursuant to this Loan
Agreement or the Mortgages in the absence of

                                       26


an Event of Default, (ii) Scheduled Mortgage Principal Payments. The foregoing
designation of any amount of Prepayment Consideration in this Agreement shall
not create a right to prepay at any time or in any circumstances where this
Agreement does not expressly state that such a right exists.

      (C) DEFINITIONS. The following terms shall have the meanings indicated:

            "PREPAYMENT CONSIDERATION" shall mean an amount equal to the greater
of (i) one percent (1%) of the Loan balance at the time of prepayment and (ii)
the Yield Maintenance Amount.

            "YIELD MAINTENANCE AMOUNT" shall mean the positive difference, if
any, between (i) the present value on the date of prepayment (by acceleration or
otherwise) of all future installments of principal and interest which the
Borrowers would otherwise be required to pay under the Note from the date of
such prepayment until the Maturity Date absent such prepayment, including the
unpaid principal amount which might otherwise be due upon the Maturity Date
absent such prepayment, with such present value being determined by the use of a
discount rate equal to the yield to maturity (adjusted to a "Mortgage Equivalent
Basis" pursuant to the standards and practices of the Securities Industry
Association), on the date of such prepayment of the United States Treasury
Security having the term to maturity closest to what otherwise would have been
the remaining term hereof absent such prepayment and (ii) the principal balance
of the Loan on the date of such prepayment.

SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall
be presumptive evidence (absent manifest error) of the amounts owing to Lender
by the Borrowers; provided that any failure to record any transaction affecting
such balance or any error in so recording shall not limit or otherwise affect
the Borrowers' obligation to pay the Obligations.

SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or
under the Note shall be made free and clear of and without deduction for any and
all taxes, withholding taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto arising out of or in
connection with the transactions contemplated by the Loan Documents (all such
taxes, levies, imposts, deductions, charges or withholdings and all liabilities
with respect thereto (excluding taxes imposed on net income in accordance with
the following sentence) herein "TAX LIABILITIES"). Notwithstanding the
foregoing, the Borrowers shall not be liable for taxes imposed on the net income
of Lender by the jurisdiction under the laws of which Lender is organized or
doing business or any political subdivision thereof and taxes imposed on its net
income by the jurisdiction of Lender's applicable lending office or any
political subdivision thereof. If the Borrowers shall be required by law to
deduct any such Tax Liabilities (or amounts in estimation or reimbursement for
the same) from or in respect of any sum payable hereunder to Lender, then the
sum payable hereunder shall be increased as may be necessary so that, after
making all required deductions, Lender receives an amount equal to the sum it
would have received had no such deductions been made.

SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the
actual costs and damages that Lender would suffer by reason of an Event of
Default (exclusive of the attorneys' fees and other costs incurred in connection
with enforcement of Lender's rights under

                                       27


the Loan Documents) or a prepayment would be difficult and needlessly expensive
to calculate and establish, and (ii) the amounts of the Default Rate, the late
charges, and the Prepayment Consideration are reasonable, taking into
consideration the circumstances known to the parties at this time, and (iii)
such Default Rate and late charges and Lender's reasonable attorneys' fees and
other costs and expenses incurred in connection with enforcement of Lender's
rights under the Loan Documents shall be due and payable as provided herein, and
(iv) such interest at the Default Rate, late charges, Prepayment Consideration,
and the obligation to pay Lender's reasonable attorneys' fees and other
enforcement costs do not, individually or collectively, constitute a penalty.

SECTION 2.10 RESERVED.

SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from
time to time without the consent of the Borrowers, on prior written notice to
the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's
fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths
of one percent (.05%) per annum on the outstanding principal balance of the
Loan, payable in monthly installments, and if the Loan becomes a specially
serviced loan, any fees of the special servicer, shall be payable by the
Borrowers and shall constitute a portion of the Obligations; provided, however,
that at no time shall the Borrowers be liable for Servicing Fees or special
servicing fees in excess of those fees charged to Lender by the Servicer or any
special servicer.

SECTION 2.12 CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF
CROSS-COLLATERALIZATION.


      (A) Until repayment of the Indebtedness and the Crossed Indebtedness and
satisfaction of all obligations under this Agreement and the Crossed Loan
Agreement, each Borrower acknowledges and agrees (subject to Lender's
election(s) at Lender's sole discretion from time to time pursuant to Section
2.12(G) below): (i) that the Properties shall secure not only the Loan but also
the Crossed Loans, and that the Liens of the Loan Documents shall constitute
Liens securing not only the Loan but also the Crossed Loans; (ii) that the
Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured
by such Crossed Properties; and (iii) that Lender would not make the Loan to the
Borrowers or the loans constituting the Crossed Loans unless the Borrowers and
the Crossed Borrowers granted liens on the Properties and, in addition, the
Crossed Properties of the Crossed Borrowers to secure the payment of the Loan
and the Crossed Loans.

      (B) Until the date that all of the Loan and the Crossed Loans shall have
been paid and satisfied in full, the Borrowers (i) shall have no right of
subrogation with respect to the Crossed Loans and (ii) waive any right to
enforce any remedy which Lender now has or may hereafter have against the
Crossed Borrowers, any endorser or any guarantor of all or any part of the
Crossed Loans or any other individual or entity, and the Borrowers waive any
benefit of, and any right to participate in, any security or collateral given to
Lender to secure the payment or performance of all or any part of the Crossed
Loans or any other liability of any of the Crossed Borrowers to Lender. Should
any Borrower have the right, notwithstanding the foregoing, to exercise its
subrogation rights, each Borrower hereby expressly and irrevocably (1)
subordinates any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off that such
Borrower may have to the payment in full in cash of the Loan

                                       28


and the Crossed Loans and (2) waives any and all defenses available to a surety,
guarantor or accommodation co-obligor until the Loan and the Crossed Loans are
paid in full in cash. Each Borrower acknowledges and agrees that this
subordination is intended to benefit Lender and shall not limit or otherwise
affect any Borrower's liability hereunder or the enforceability of this Loan
Agreement or the Crossed Loan Documents.

      (C) Each Borrower agrees that any and all claims of such Borrower against
any of the Crossed Borrowers or any endorser or any guarantor of all or any part
of the Crossed Loans (collectively, the "CROSSED OBLIGORS") with respect to any
obligations, liabilities or indebtedness now or hereafter owing by the Crossed
Obligors, or any of them, to such Borrower, or otherwise existing or claimed to
be owed or to exist on the part of any of the Crossed Obligors, or against any
of their respective properties (collectively, the "CROSSED PARTY OBLIGATIONS")
shall be subordinate and subject in right of payment to the prior payment, in
full and in cash, of all the Loan and the Crossed Loans. Notwithstanding any
right of any Borrower to ask, demand, sue for, take or receive any payment from
any of the Crossed Obligors, all rights, liens and security interests of each
Borrower, whether now or hereafter arising and howsoever existing, in and to any
assets of any of the Crossed Obligors shall be and are subordinated to the
rights of Lender in those assets under the Loan Documents, the Crossed Loan
Documents or otherwise, and no Borrower shall, until the date that all of the
Loan and the Crossed Loans shall have been paid and satisfied in full, (i)
assert, collect, sue upon, or enforce all or any part of the Crossed Party
Obligations; (ii) commence or join with any other creditors of any of the
Crossed Obligors in commencing any bankruptcy, reorganization, receivership or
insolvency proceeding against any of the Crossed Obligors; (iii) take, accept,
ask for, sue for, receive, set off or demand any payments upon the Crossed Party
Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to
be created liens, security interests, mortgages, deeds of trust or pledges of or
with respect to any of the assets of any of the Crossed Obligors in favor of or
for the benefit of such Borrower.

      (D) If all or any part of the assets of any of the Crossed Obligors, or
the proceeds thereof, are subject to any distribution, division or application
to the creditors of such Crossed Obligor, whether partial or complete, voluntary
or involuntary, and whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding, or if the business of any such Crossed Obligor is dissolved or if
substantially all of the assets of any such Crossed Obligor are sold, then, and
in any such event (such events being herein referred to as an "CROSSED OBLIGOR
INSOLVENCY EVENT"), any payment or distribution of any kind or character, either
in cash, securities or other property, which shall be payable or deliverable to
any Borrower upon or with respect to any Crossed Party Obligations shall be paid
or delivered directly to the Lender for application on the Loan and the Crossed
Loans, due or to become due, until such Loan and Crossed Loans shall have first
been fully paid and satisfied (in cash). Should any payment, distribution,
security or instrument or proceeds thereof be received by any Borrower upon or
with respect to the Crossed Party Obligations after any Crossed Obligor
Insolvency Event and prior to the payment in full and satisfaction of all of the
Loan and Crossed Loans, such Borrower shall receive and hold the same in trust,
as trustee, for the benefit of Lender and shall forthwith deliver the same to
Lender in precisely the form received (except for the endorsement or assignment
of such Borrower where necessary), for application to any of the Loan or Crossed
Loans, due or not due, and, until so delivered, the same shall be held in trust
by such Borrower as the property of Lender. If such Borrower fails to make

                                       29


any such endorsement or assignment to Lender, Lender or any of its officers or
employees is irrevocably authorized to make the same. Each Borrower agrees that
until the Loan and Crossed Loans have been paid in full (in cash) and satisfied,
no Borrower will assign or transfer to any individual or entity (other than
Lender) any claim such Borrower has or may have against any Crossed Obligor.

      (E) Subject to the provisions of Section 2.12(G), to the extent that any
collection upon any of the Loan or the Crossed Loans is made by Lender from one
of the Crossed Borrowers or the Crossed Properties or other assets of the
Crossed Borrowers (a "CROSSED LOANS COLLECTION") which, taking into account all
other Crossed Loans Collections then previously or concurrently made by such
Crossed Borrower, exceeds the amount which otherwise would have been collected
from such Crossed Borrower if each Borrower and each Crossed Borrower had paid
the portion of the Loan and Crossed Loans satisfied by such Crossed Loans
Collection in the same proportion as such Crossed Borrower's Allocable Amount
(as defined below) (as determined immediately prior to such Crossed Loans
Collection) bore to the aggregate Allocable Amounts of each Borrower and each
Crossed Borrower as determined immediately prior to the making of such Crossed
Loans Collection, then, following payment in full in cash of the entire Loan and
Crossed Loans, such Crossed Borrower shall be entitled to receive contribution
and indemnification payments from, and be reimbursed by, each Borrower and each
of the other Crossed Borrowers for the amount of such excess, pro rata based
upon their respective Allocable Amounts in effect immediately prior to such
Crossed Loans Collection. As of any date of determination, the "ALLOCABLE
AMOUNT" of any Borrower or any Crossed Borrower shall be equal to the maximum
amount of the claim which could then be recovered from such Borrower or Crossed
Borrower under the Loan Documents and Crossed Loan Documents without rendering
such claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law. The
foregoing provision shall be for the benefit of each of the Crossed Borrowers
and Lender, but shall be subject to modification as provided in Section 2.12(G)
below and to amendment by agreement of the Borrowers and Lender, in each case
without necessity of any agreement, acknowledgment or approval of any Crossed
Borrower or any notice to any Crossed Borrower. Section 2.12(E) of each of the
Crossed Loan Agreements contains provisions similar to this Section 2.12(E) for
the benefit of Lender and (subject to the terms thereof) the Crossed Borrowers.
This Section 2.12(E) and Section 2.12(E) of each of the Crossed Loan Agreements
are intended only to define the relative rights of the Borrowers and Crossed
Borrowers, and nothing set forth in this Section 2.12(E) or in Section 2.12(E)
of each of the Crossed Loan Agreements is intended to or shall impair the liens
and security interests of the Loan Documents and the Crossed Loan Documents or
the obligations of the Borrowers and the Crossed Borrowers thereunder. Each
Borrower acknowledges that the rights of contribution and indemnification under
this Section 2.12(E) and under Section 2.12(E) of the Crossed Loan Agreements
constitute assets of the Borrowers or Crossed Borrowers to which such
contribution and indemnification is owing, and any such right of contribution
and indemnification owing to any Borrower under Section 2.12(E) of any of the
Crossed Loan Agreements shall constitute additional Crossed Party Obligations
for all purposes under this Section 2.12.

      (F) Each Borrower hereby consents and agrees to each of the following, and
agrees that such Borrower's obligations under this Loan Agreement and the other
Loan Documents and the

                                       30


Liens created under this Loan Agreement and the other Loan Documents securing
the Loan and the Crossed Loans shall not be released, diminished, impaired,
reduced or adversely affected by any of the following, and waives any common
law, equitable, statutory or other rights (including without limitation rights
to notice) that such Borrower might otherwise have as a result of or in
connection with any of the following:

            (i)    Any renewal, extension, increase, modification, alteration or
rearrangement of all or any part of the Crossed Loans, the Crossed Loan
Documents, or other document, instrument, contract or understanding between the
Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed
Loans or any failure of Lender to notify such Borrower of any such action.

            (ii)   Any adjustment, indulgence, forbearance or compromise that
might be granted or given by Lender to the Crossed Borrowers.

            (iii)  The insolvency, bankruptcy, arrangement, adjustment,
composition, liquidation, disability, dissolution or lack of power of any of the
Crossed Borrowers or any other party at any time liable for the payment of all
or part of the Crossed Loans; or any dissolution of any of the Crossed
Borrowers, or any sale, lease or transfer of any or all of the assets of any of
the Crossed Borrowers, or any changes in the shareholders, partners or members
of any of the Crossed Borrowers; or any reorganization of any of the Crossed
Borrowers.

            (iv)   The invalidity, illegality or unenforceability of all or any
part of the Crossed Loans, or any document or agreement executed in connection
therewith, for any reason whatsoever, including without limitation the fact that
(A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law,
(B) the act of creating the Crossed Loans or any part thereof is ultra vires,
(C) the officers or representatives executing the Crossed Loan Documents or
otherwise creating the Crossed Loans acted in excess of their authority, (D) the
Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have
valid defenses, claims or offsets (whether at law, in equity or by agreement)
which render the Crossed Loans wholly or partially uncollectible from the
Crossed Borrowers, (F) the creation, performance or repayment of the Crossed
Loans (or the execution, delivery and performance of any document or instrument
representing part of the Crossed Loans or executed in connection with the
Crossed Loans, or given to secure the repayment of the Crossed Loans) is
illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan
Documents have been forged or otherwise are irregular or not genuine or
authentic, it being agreed that each Borrower shall remain liable hereon
regardless of whether the Crossed Borrowers or any other person be found not
liable on the Crossed Loans or any part thereof for any reason.

            (v)    Any full or partial release of the liability of the Crossed
Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or
any other person or entity now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally, to pay, perform,
guarantee or assure the payment of the Crossed Loans, or any part thereof, it
being recognized, acknowledged and agreed by each Borrower that such Borrower
has not been induced to enter into this Loan Agreement or the other Loan
Documents on the basis of a contemplation, belief, understanding or agreement
that other parties will be liable to pay or

                                       31


perform the Loan or such Borrower's obligations under the Loan Agreement or the
other Loan Documents, or that Lender will look to other parties to pay or
perform the Crossed Loans.

            (vi)   The taking or accepting of any other security, collateral or
guaranty, or other assurance of payment, for all or any part of the Crossed
Loans.

            (vii)  Any release, surrender, exchange, subordination,
deterioration, waste, loss or impairment (including without limitation
negligent, willful, unreasonable or unjustifiable impairment) of any collateral,
property or security, at any time existing in connection with, or assuring or
securing payment of, all or any part of the Crossed Loans.

            (viii) The failure of or refusal of Lender or any other party acting
on behalf of Lender to exercise diligence or reasonable care in the
preservation, protection, enforcement, sale or other handling or treatment of
all or any part of such collateral, property or security, including but not
limited to any neglect, delay, omission, failure or refusal of Lender (A) to
take or prosecute any action for the collection of any of the Crossed Loans, (B)
to foreclose, or initiate any action to foreclose, or, once commenced, prosecute
to completion any action to foreclose upon any security therefor, or (C) to take
or prosecute any action in connection with any instrument or agreement
evidencing or securing all or any part of the Crossed Loans.

            (ix)   The fact that any collateral, security, security interest or
lien contemplated or intended to be given, created or granted as security for
the repayment of the Crossed Loans, or any part thereof, shall not be properly
perfected or created, or shall prove to be unenforceable or subordinate to any
other security interest or lien, it being recognized and agreed by each Borrower
that it is not entering into this Loan Agreement in reliance on, or in
contemplation of the benefits of, the validity, enforceability, collectibility
or value of any of the collateral for the Crossed Loans.

            (x)    Any payment by any of the Crossed Borrowers to Lender is held
to constitute a preference under bankruptcy laws, or for any reason Lender is
required to refund such payment or pay such amount to any of the Crossed
Borrowers or someone else.

            (xi)   Any other action taken or omitted to be taken with respect to
the Crossed Loan Documents, the Crossed Loans, or the security and collateral
therefor.

      (G) Notwithstanding anything to the contrary set forth in this Loan
Agreement, Lender may, at its sole option and in its sole discretion, from time
to time (one or more times) deliver written notice to the Borrowers stating that
this Loan Agreement, the Mortgages and the other Loan Documents shall no longer
secure one or more (at Lender's sole election) of the Crossed Loans (each a
"CROSS RELEASE NOTICe"), whereupon (i) this Loan Agreement and the other Loan
Documents shall no longer secure any of the Crossed Loans for which a Cross
Release Notice is given (any such Crossed Loan, an "EXCLUDED LOAN", and,
collectively, the "EXCLUDED LOAN(S)"; each Crossed Borrower which is the
borrower with respect to an Excluded Loan is herein referred to as an "EXCLUDED
BORROWER", and the Crossed Loan Agreement, Crossed Mortgages, Cross Side
Agreement and other Crossed Loan Documents executed and delivered by the
Excluded Borrowers with respect to any Excluded Loan are herein referred to as
the "EXCLUDED LOAN AGREEMENT", "EXCLUDED MORTGAGES", "EXCLUDED SIDE AGREEMENT"
and "EXCLUDED

                                       32


LOAN DOCUMENTS", respectively, and each Crossed Property encumbered by the
Excluded Loan Documents is herein referred to as an "EXCLUDED PROPERTY"), (ii)
each Cross Guaranty of the Loan executed by each Excluded Borrower, together
with each Cross Guaranty of an Excluded Loan executed by the Borrowers (herein
collectively referred to as the "EXCLUDED GUARANTIES") shall be deemed
automatically terminated and of no further force or effect, (iii) each reference
herein and in the other Loan Documents to the "Crossed Loans" shall be deemed to
exclude the Excluded Loans, (iv) each reference herein and in the other Loan
Documents to the "Crossed Loan Agreements", "Crossed Mortgages", "Crossed Loan
Documents", "Crossed Properties", "Cross Side Agreements" and "Cross Guaranties"
shall be deemed to exclude the Excluded Loan Agreement, the Excluded Mortgages,
the Excluded Loan Documents, the Excluded Property, the Excluded Side Agreements
and the Excluded Guaranties, respectively, (v) each reference herein and in the
other Loan Documents to the "Crossed Borrowers" and the "Crossed Obligors" shall
be deemed to exclude each Excluded Borrower, (vi) the provisions of Section
2.12(E) of this Loan Agreement shall not apply to any Crossed Loans Collection
from any Excluded Borrower or its Excluded Property and the Borrowers shall have
no obligation or liability on account thereof; and (vii) Borrowers shall no
longer be beneficiaries of the covenants and agreements set forth in Section
2.12(E) of any Excluded Loan Agreement, and the Borrowers shall have no rights
or claims on account of any contribution or indemnification obligations of any
Excluded Borrower under Section 2.12(E) of any Excluded Loan Agreement. In
addition to and without limiting the foregoing, the Borrowers hereby agree to
fully cooperate with Lender, if Lender is considering the termination of the
cross collateralization and cross default of the Loan and Loan Documents with
any of the Crossed Loans, including, but not limited to (x) amending this Loan
Agreement and the other Loan Documents as may be required by Lender to
effectuate such termination of the cross collateralization and cross default
provisions thereof, and (y) updating and/or endorsing the title insurance
policies (at Lender's cost as to additional premium charges, if any) to reflect
the continuation of the first priority lien of this Loan Agreement.

      (H) In the event the Loan is repaid or defeased in full in accordance with
the provisions of this Loan Agreement and the other Loan Documents, then
provided no Event of Default then exists hereunder, and no "Event of Default"
(as defined in any of the Other Crossed Loan Agreements) exists under any of the
Other Crossed Loan Documents, the cross collateralization and cross default of
the Loan and Loan Documents with the Other Crossed Loans shall terminate and all
the Other Crossed Loans shall be deemed Excluded Loans with respect to the Loan
and the provisions of Section 2.12(G) above shall become automatically
applicable with respect thereto.

                                  ARTICLE III
                               CONDITIONS TO LOAN

SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The
obligation of Lender to fund the Loan are subject to the prior or concurrent
satisfaction or waiver of the conditions set forth below, and to satisfaction of
any other conditions specified herein or elsewhere in the Loan Documents. With
respect to facts and circumstances actually known to Lender at Closing, by
funding the Loan Lender shall be deemed to have acknowledged that each of the
conditions set forth below has been satisfied or waived (except as otherwise set
forth in any other agreement in writing between the Borrowers and Lender). Where
in this Section any documents, instruments or information are to be delivered to
Lender, then the condition shall not

                                       33


be satisfied unless (i) the same shall be in form and substance satisfactory to
Lender, and (ii) if so required by Lender, the Borrowers shall deliver to Lender
a certificate duly executed by the Borrowers stating that the applicable
document, instrument or information is true and complete and does not omit to
state any information without which the same might reasonably be deemed
materially misleading.

      (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall
execute and deliver and cause to be executed and delivered to Lender all of the
Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan
Documents as may be reasonably required by Lender, each, unless otherwise noted,
of even date herewith, duly executed, in form and substance satisfactory to
Lender and in quantities designated by Lender (except for the Note, of which
only one shall be signed), which Loan Documents shall become effective upon the
Closing.

      (B) DEPOSITS. The deposits required herein, including without limitation,
the initial deposits into the Reserves and Accounts, shall have been made (and
at the Borrowers' option, the same may be made from the proceeds of the Loan).

      (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES.
Each Borrower Party and all other Persons executing any agreement on behalf of
any Borrower Party shall have performed in all material respects all agreements
which this Loan Agreement provides shall be performed on or before the Closing
Date. The representations and warranties contained herein and in the other Loan
Documents shall be true, correct and complete in all material respects on and as
of the Closing Date.

      (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have
received certificates of even date herewith executed on behalf of each Borrower
by the chief financial officer (or similar officer of the Borrowers) stating
that: (i) on such date, to the Borrowers' Knowledge no Default exists; (ii) no
material adverse change in the financial condition or operations of the business
of the Borrowers or the projected cash flow of the Borrowers or the Properties,
in each case taken as a whole, has occurred since the delivery to Lender of any
financial statements, budgets, proformas, or similar materials (or if there has
been any change, specifying such change in detail), and that, to the Borrowers'
Knowledge after due inquiry, such financial materials fairly present the
financial condition and results of operations of the Borrowers and the
Properties, in each case taken as a whole, and all other materials delivered to
Lender are complete and accurate in all material respects; and (iii) the
representations and warranties set forth in this Loan Agreement are true and
correct in all material respects on and as of such date with the same effect as
though made on and as of such date (or if any such representations or warranties
require qualification, specifying such qualification in detail) and (iv) to the
Borrowers' Knowledge, there are no material facts or conditions concerning the
Properties or any Borrower Party that have not been disclosed to Lender which
could have a Material Adverse Effect.

      (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have
received from Morris, Manning & Martin, LLP or other legal counsel for the
Borrowers satisfactory to Lender, written legal opinions, each in form and
substance acceptable to Lender, as to such matters as Lender shall request,
including opinions to the effect that (i) each of the Borrower

                                       34


Parties is duly formed, validly existing, and in good standing in its state of
organization and, in the case of each Borrower, in each state where its Property
is located, (ii) this Loan Agreement and the Loan Documents have been duly
authorized, executed and delivered and are enforceable in accordance with their
terms subject to customary qualifications for bankruptcy, general equitable
principles, and other customary assumptions and qualifications; (iii) the
Deposit Account Agreement and Cash Management Agreement have been duly
authorized, executed and delivered by Borrower and Manager and are enforceable
in accordance with their terms and the security interests in favor of Lender in
the Account Collateral have been validly created and perfected; and (iv) no
Borrower, Member or General Partner would be consolidated in any bankruptcy
proceeding affecting Guarantor or certain other Affiliates of the Borrower
Parties specified by Lender. Also on or before the Closing Date, Lender shall
have received the following legal opinions, each in form and substance
acceptable to Lender: (a) an opinion of the Borrowers' local counsel in each
state where the Properties are located as to the enforceability of, and the
creation and perfection of Liens under, the Mortgages and the Assignments of
Leases and such other matters as Lender may reasonably request; (b)
[intentionally omitted]; (c) opinions of Richards, Layton & Finger or other
Delaware legal counsel, acceptable to Lender, for each Borrower that is a single
member limited liability company formed under the laws of the State of Delaware
that, among other matters, (1) under Delaware law (x) the prior unanimous
written consent of Member (and the unanimous written consent of the board of
directors of Member including the Independent Directors, or the unanimous prior
written consent of the board of managers' of each Borrower, including the
Independent Directors') would be required for a voluntary bankruptcy filing by
each such Borrower, (y) the prior unanimous written consent of the board of
directors of Member (including the Independent Directors) would be required for
a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements
are enforceable against Member in accordance with their terms; (2) under
Delaware law the bankruptcy or dissolution of Member would not cause the
dissolution of any of the Borrowers and the bankruptcy or dissolution of the
sole shareholder or member would not cause the dissolution of Member; (3) under
Delaware law, creditors of Member shall have no legal or equitable remedies with
respect to the assets of any of the Borrowers and creditors of Guarantor shall
have no legal or equitable remedies with respect to the assets of Member; and
(4) a federal bankruptcy court would hold that Delaware law governs the
determination of what Persons have authority to file a voluntary bankruptcy
petition on behalf of each Borrower and Member; and (d) such other legal
opinions as Lender may reasonably request.

     (F) TITLE POLICIES. On or before the Closing Date, Lender shall have
received and approved pro forma Title Policies for the Mortgages, and as of the
Closing, each Title Company shall be irrevocably committed and prepared
immediately to issue the Title Policies or binding commitments. The Title
Policies shall be in form and substance satisfactory to Lender. Without
limitation, each Title Policy shall be issued on an ALTA form acceptable to
Lender by each Title Company or if an ALTA form is not available in the
applicable jurisdiction, another form acceptable to Lender, together with such
reinsurance and direct access agreements as Lender may require, insuring that
the Mortgages are valid first and prior enforceable liens on each Borrower's fee
simple interest or ground leasehold interest, as the case may be, in the
applicable Property (including any easements appurtenant thereto) subject only
to such exceptions to coverage as are acceptable to Lender, including the
Permitted Exceptions. Each Title Policy shall contain such endorsements as
Lender may require (to the extent available in the state where

                                       35



the Properties is located) in form acceptable to Lender, including deletion of
the creditors' rights exception and affirmative endorsement coverage for
creditors' rights risks.

     (G) SURVEY. Lender shall have received a survey of each of the Properties,
certified to Lender and its successors, assigns and designees and to each Title
Company by a surveyor reasonably satisfactory to Lender (the "SURVEY"), or
Lender shall have received both (x) a "no change" affidavit from each Borrower
with respect to such Borrower's most recent Survey sufficient to cause the Title
Company to provide current survey coverage to Lender in the applicable Title
Policy without exception for matters that would be revealed by a current and
accurate survey of the applicable Property, except for matters specifically
shown on such most recent Survey, and (y) a reliance letter (to the extent any
such surveys are not currently addressed to Lender) in form and substance
satisfactory to Lender, permitting Lender to rely on the Survey (and any
certification thereof) as if originally addressed and certified to Lender. Each
Survey shall contain the minimum detail for land surveys as most recently
adopted by ALTA/ASCM, shall comply with Lender's survey requirements and shall
contain Lender's standard form certification, and shall show no state of facts
or conditions reasonably objectionable to Lender.

     (H) ZONING. On or before the Closing Date, Lender shall have received
evidence reasonably satisfactory to Lender as to the zoning and subdivision
compliance of each of the Properties.

     (I) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing
Date, Lender shall have received copies of the organizational documents and
filings of each Borrower Party, together with good standing certificates (or
similar documentation) (including verification of tax status) from the state of
its formation and from all states in which the laws thereof require such Person
to be qualified and/or licensed to do business (including without limitation,
each state in which the Properties are located for the applicable Borrower(s)
and, to the extent required by law, Member and General Partner). Each such
certificate shall be dated not more than 30 days prior to the Closing Date, as
applicable, and certified by the applicable Secretary of State or other
authorized governmental entity. In addition, on or before the Closing Date the
secretary or corresponding officer of each Borrower Party, or the secretary or
corresponding officer of the partner, trustee, or other Person as required by
such Borrower Party's organizational documents (as the case may be, the
"BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating
that the copies of the organizational documents as delivered to Lender are true
and complete and are in full force and effect, and that the same have not been
amended except by such amendments as have been so delivered to Lender.

     (J) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing
Date, Lender shall have received certificates of incumbency and resolutions of
each Borrower Party and its constituents as requested by Lender, approving and
authorizing the Loan and the execution, delivery and performance of the Loan
Documents, certified as of the Closing Date by the Borrower Party Secretary as
being in full force and effect without modification or amendment.

     (K) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have
received such financial statements and other financial information as shall be
satisfactory to Lender for each Borrower Party (including for Guarantor) and for
the Properties. If any such statements are

                                       36


not available for the Properties, then the Borrowers shall provide such
financial reports as are available. All such financial statements shall be
certified to Lender by the applicable Borrower Party (through its chief
financial officer or other officer charged with similar duties), which
certification shall be in form and substance reasonably satisfactory to Lender.

     (L) OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date, Lender
shall have received and approved the Operating Budget and CapEx/FF&E Budget for
the Properties for the remainder of the current calendar year.

     (M) AGREEMENTS. On or before the Closing Date, Lender shall have received a
list of all Material Agreements and, to the extent requested by Lender, copies
thereof.

     (N) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing
Date, Lender shall have received copies of the Management Agreements and any
leasing brokerage agreements pertaining to the Properties and the Assignments of
Management Agreements, duly executed by each Manager and the applicable
Borrower. On or before the Closing Date, Lender shall have received copies of
the existing Franchise Agreements (including any Property Improvement Plan) and
Franchisor Letters for each of the Properties duly executed by the applicable
Franchisors.

     (O) RENT ROLL. Prior to the Closing, Lender shall have received from the
Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL")
in form and substance satisfactory to Lender. The Rent Roll shall constitute a
true, correct, and complete list of each and every Material Lease, together with
all extensions and amendments thereof, and shall accurately and completely
disclose all annual and monthly rents payable by all tenants, including all
percentage rents, if any, and expiration dates of such Material Leases, and the
amount of security deposit being held by the Borrowers under each Material
Lease, if any.

     (P) MATERIAL LEASES. Prior to the Closing, Lender shall have received true,
correct and complete copies of the Material Leases, as amended.

     (Q) LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender
shall have received copies of the final, unconditional certificates of occupancy
issued with respect to each of the Properties, together with all other
applicable licenses (including, without limitation, each liquor license and beer
permit), permits and approvals required for each Borrower to own, use, occupy,
operate and maintain each of the Properties as a hotel.

     (R) INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date,
Lender shall have received copies of certificates of insurance (dated not more
than twenty (20) days prior to the Closing Date) regarding insurance required to
be maintained under this Loan Agreement and the other Loan Documents, together
with endorsements satisfactory to Lender naming Lender as an additional insured
and loss payee, as required by this Loan Agreement, under such policies. In
addition, as to any insurance matters arising under Environmental Laws or
pertaining to any environmental insurance that any of the Borrowers has with
respect to any Property, the same shall be endorsed to Lender as required by
this Loan Agreement and shall name Lender as an insured, additional insured
and/or loss payee, as applicable.

                                       37


     (S) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental
Reports relating to each of the Properties, together with a letter from each
preparer thereof entitling Lender and its successors and assigns to rely upon
said Environmental Report.

     (T) PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender shall
have received a property condition report for each of the Properties, which
shall be prepared by an engineer or other consultant satisfactory to Lender and
otherwise shall be in form and substance satisfactory to Lender in its sole
discretion. Each such report shall set forth any items of deferred maintenance
at the applicable Property.

     (U) APPRAISAL. On or before the Closing Date, Lender shall have received an
independent appraisal of each of the Properties from a state certified appraiser
engaged by Lender. Each such appraisal shall conform in all respects to the
criteria for appraisals set forth in the Financial Institutions Reform and
Recovery Act of 1989 and the regulations promulgated thereunder (as if Lender
were an institution under the jurisdiction thereof) and the Uniform Standards of
Professional Appraisal Practices of the Appraisal Foundation.

     (V) SEARCHES. Prior to the Closing Date, Lender shall have received copies
of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation search
reports with respect to the Borrowers, Guarantor, Managers, General Partner and
Member, all dated not more than thirty (30) days prior to the Closing Date.

     (W) DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2) days
prior to the Closing Date, Lender shall have received payoff demand letters and
wiring instructions from each lender or other obligee of any existing
indebtedness which is required to be repaid pursuant to this Loan Agreement.

     (X) LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and all
reasonable legal fees and expenses of counsel to Lender, together with all
recording fees and taxes, title insurance premiums, and other reasonable costs
and expenses related to the Closing.

     (Y) COMMITMENT CONDITIONS. If a commitment letter or similar agreement
shall have been issued by Lender for the Loan, such additional conditions as
shall be specified in such commitment shall have been satisfied.

     (Z) OTHER REVIEW. Lender shall have completed all other review of the
Borrower Parties, the Properties, and such other items as it reasonably
determines relevant, and shall have determined based upon such review to fund
the Loan. The Borrower Parties shall have satisfied such other reasonable
criteria as Lender may reasonably specify.

     (AA) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing Date,
Lender shall have received (i) true and complete copies of each of the Ground
Leases, certified by the Borrowers, and (ii) estoppels and agreements acceptable
to Lender, duly executed by each Ground Lessor.

                                       38


                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

     In order to induce Lender to enter into this Loan Agreement and to make the
Loan, each Borrower represents and warrants to Lender that the statements set
forth in this Article IV, after giving effect to the Closing, will be, true,
correct and complete in all material respects as of the Closing Date.

SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS.

     (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized, validly
existing and in good standing under the laws of the state of its formation. Each
Borrower Party has all requisite power and authority to own and operate its
properties, to carry on its business as now conducted and proposed to be
conducted, and to enter into each Loan Document to which it is a party and to
perform the terms thereof.

     (B) QUALIFICATION. Each Borrower Party is duly qualified and in good
standing in the state of its formation. In addition, each Borrower Party is duly
qualified and in good standing in each state where necessary to carry on its
present business and operations, except in jurisdictions in which the failure to
be qualified and in good standing could not reasonably be expected to have a
Material Adverse Effect.

     (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C)
accurately sets forth the direct and indirect ownership structure of the
Borrowers, General Partners and Members.

SECTION 4.2 AUTHORIZATION OF BORROWING, ETC.

     (A) AUTHORIZATION OF BORROWING. The Borrowers have the power and authority
to incur the Indebtedness evidenced by the Note. The execution, delivery and
performance by each Borrower Party of each of the Loan Documents to which it is
a party and the consummation of the transactions contemplated thereby have been
duly authorized by all necessary limited liability company, partnership,
trustee, corporate or other action, as the case may be.

     (B) NO CONFLICT. The execution, delivery and performance by each Borrower
Party of the Loan Documents to which it is a party and the consummation of the
transactions contemplated thereby do not and will not: (1) violate (x) any
provision of law applicable to any Borrower Party; (y) the partnership
agreement, certificate of limited partnership, certificate of incorporation,
bylaws, declaration of trust, operating agreement or other organizational
documents, as the case may be, of each Borrower Party; or (z) any order,
judgment or decree of any Governmental Authority binding on any Borrower Party
or any of its Affiliates; (2) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any Contractual
Obligation of any Borrower Party or any of its Affiliates (except where such
breach will not cause a Material Adverse Effect); (3) result in or require the
creation or imposition of any material Lien (other than the Lien of the Loan
Documents) upon the Properties or assets of any Borrower Party; or (4) except as
set forth on SCHEDULE 4.2, require any approval or consent of any Person under
any material Contractual Obligation of any Borrower Party, which approvals or
consents as set forth on SCHEDULE 4.2 have been obtained on or before the

                                       39


dates required under such material Contractual Obligation, but in no event later
than the Closing Date.

     (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower
Party of the Loan Documents to which it is a party, and the consummation of the
transactions contemplated thereby do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
Governmental Authority.

     (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents,
including the Note, when executed and delivered will be, the legally valid and
binding obligations of each Borrower Party that is a party thereto, enforceable
against each of the Borrower Parties, as applicable, in accordance with their
respective terms, subject to bankruptcy, insolvency, moratorium, reorganization
and other similar laws affecting creditor's rights. No Borrower Party has any
defense or offset to any of its obligations under the Loan Documents to which it
is a party. No Borrower Party has any claim against Lender or any Affiliate of
Lender.

SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the
Borrowers, their Affiliates and the Properties which have been furnished by or
on behalf of the Borrowers to Lender pursuant to this Loan Agreement present
fairly the financial condition of the Persons covered thereby as of the dates
thereof and the results of their operations for the periods then ended, and, to
the Borrowers' Knowledge after due inquiry, have been prepared in accordance
with GAAP consistently applied (except as disclosed therein). Since the date of
the financial statements delivered to Lender, there has been no material adverse
change in the financial condition, operations or business of the Borrower
Parties or the Properties from that set forth in said financial statements.

SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the
Borrowers shall have no outstanding Indebtedness or Contingent Obligations other
than the Obligations or any other Permitted Indebtedness.

SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee
simple title (or, in the case of the Ground Leased Properties, leasehold title)
to the Properties, free and clear of all Liens except for the Permitted
Encumbrances. The Borrowers own and will own at all times all FF&E relating to
the Properties (other than personal property which is either owned by tenants of
such Property, not used or necessary for the operation of the applicable
Property, or leased by the Borrowers as permitted hereunder), subject only to
the Permitted Encumbrances. The Mortgages, when properly recorded in the
appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (i) a
valid, perfected first lien on each of the Properties, subject only to the
Permitted Encumbrances, and (ii) perfected first priority security interests in
and to, and perfected collateral assignments of, all personalty (including the
Rents, the Leases, and the FF&E), all in accordance with the terms thereof, in
each case subject only to any applicable Permitted Encumbrances. Lender will
have a perfected first priority security interest in and to the FF&E owned by
the Borrowers, if any, not located at the Properties. To the Borrowers'
Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in
condemnation or eminent domain affecting any of the Properties, and to the
actual Knowledge of the Borrowers, none is threatened. Except as set forth on
SCHEDULE 4.5(A), no Person has any option or other right to

                                       40


purchase all or any portion of any of the Properties or any interest therein. To
the Borrowers' Knowledge, there are no mechanic's, materialman's or other
similar liens or claims which have been filed for work, labor or materials
affecting the Properties which are or will be liens prior to, or equal or
coordinate with, the lien of any of the Mortgages. None of the Permitted
Encumbrances, individually or in the aggregate, materially interfere with the
benefits of the security intended to be provided by the Mortgages and this Loan
Agreement, materially and adversely affect the value of any of the Properties,
impair the use or operations of the Properties or impair the Borrowers' ability
to pay its obligations in a timely manner.

SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as
set forth in the Zoning Reports for the Properties delivered to Lender, the
Properties and the use thereof comply in all material respects with all
applicable zoning, subdivision and land use laws, regulations and ordinances,
all applicable health, fire, building codes, parking laws and all other laws,
statutes, codes, ordinances, rules and regulations applicable to the Properties,
or any of them, including without limitation the Americans with Disabilities
Act. To the Borrowers' Knowledge, there are no illegal activities relating to
controlled substances on any of the Properties. To the Borrower's Knowledge,
except as set forth in the Zoning Reports for the Properties delivered to
Lender, all material permits, licenses and certificates for the lawful use,
occupancy and operation of each component of each of the Properties in the
manner in which it is currently being used, occupied and operated, including,
but not limited to liquor licenses and certificates of occupancy, or the
equivalent, have been obtained and are current and in full force and effect. To
the Borrower's Knowledge, except as set forth in the Zoning Reports for the
Properties delivered to Lender, in the event that all or any part of the
Improvements located on any Property is destroyed or damaged, said Improvements
can be legally reconstructed to their condition prior to such damage or
destruction, and thereafter exist for the same use without violating any zoning
or other ordinances applicable thereto and without the necessity of obtaining
any variances or special permits, other than customary demolition, building and
other construction related permits. To the Borrowers' Knowledge, no legal
proceedings are pending or threatened with respect to the zoning of any
Property. To the Borrowers' Knowledge, except as set forth in the Title Policies
and/or the Surveys, neither the zoning nor any other right to construct, use or
operate any Property is in any way dependent upon or related to any real estate
other than such Property. No tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded by the
Borrowers with respect to any Property without Lender's prior written consent,
which consent shall not be unreasonably withheld, delayed or conditioned.

SECTION 4.7 LEASES; AGREEMENTS.

     (A) LEASES; AGREEMENTS. The Borrowers have delivered to Lender true and
complete copies (in all material respects) of all (i) Leases for more than five
hundred (500) square feet of space at any Property and (ii) Material Agreements
affecting the operation and management of the Properties, and such Leases and
Material Agreements have not been modified or amended except pursuant to
amendments or modifications delivered to Lender. Except for the rights of each
of the current Managers pursuant to the existing Management Agreements, no
Person has any right or obligation to manage any of the Properties or to receive
compensation in connection with such management. Except for the parties to any
leasing brokerage agreement that has been delivered to Lender, no Person has any
right or obligation to lease or solicit tenants for the

                                       41


Properties, or (except for cooperating outside brokers) to receive compensation
in connection with such leasing.

     (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is
attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described
in the Rent Roll, none of the Properties are subject to any Material Leases.
Except only as specified in the Rent Roll, or as otherwise disclosed to Lender
in the estoppel certificates delivered to Lender at Closing, to the Borrowers'
Knowledge, (i) the Material Leases are in full force and effect; (ii) the
Borrowers have not given any notice of default to any tenant under any Material
Lease which remains uncured; (iii) no tenant has any set off, claim or defense
to the enforcement of any Material Lease; (iv) no tenant is in arrears in the
payment of rent, additional rent or any other charges whatsoever due under any
Material Lease, or is materially in default in the performance of any other
obligations under such Material Lease; (v) the Borrowers have completed all work
or alterations required of the landlord or lessor under each Material Lease, and
all of the other obligations of landlord or lessor under the Material Leases
have been performed; and (vi) there are no rent concessions (whether in form of
cash contributions, work agreements, assumption of an existing tenant's other
obligations, or otherwise) or extensions of time whatsoever not reflected in
such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge
of the Borrowers, threatened) against the Borrowers by any tenant or former
tenant. No rental in excess of one month's rent has been prepaid under any of
the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is
valid and binding on the parties thereto in accordance with its terms.

     (C) NO RESIDENTIAL UNITS. There are no residential units in any of the
Properties and, to each Borrower's Knowledge, no person (other than a site
manager employed by Manager) occupies any part of the Properties for dwelling
purposes other than on a transient basis.

     (D) MANAGEMENT AGREEMENTS. The Borrowers have delivered to Lender a true
and complete copy of each of the Management Agreements to which they are a party
that will be in effect on the Closing Date, and such Management Agreements have
not been modified or amended except pursuant to amendments or modifications
delivered to Lender. The Management Agreements are in full force and effect and
no default by any of the Borrowers or Manager exists thereunder.

     (E) FRANCHISE AGREEMENTS; PROPERTY IMPROVEMENT PLANS. The Borrowers have
delivered to Lender a true and complete copy of each of the Franchise Agreements
to which they are a party, and such Franchise Agreements have not been modified
or amended except pursuant to amendments or modifications delivered to Lender.
To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full
force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material
default by the Borrowers, Manager or the applicable Franchisor exists
thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the
aggregate, do not and will not have a Material Adverse Effect. Except for the
Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no
other property improvement plans or similar capital improvement plans or
obligations required by any Franchisor pursuant to any Franchise Agreement, in
effect for any of the Properties.

                                       42


SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as
set forth in the Property Condition Reports for the Properties delivered to
Lender, all Improvements including, without limitation, the roof and all
structural components, plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior doors, parking facilities,
sidewalks and landscaping are in good condition and repair. Except as disclosed
in the Property Condition Reports, (i) the Borrowers are not aware of any latent
or patent structural or other material defect or deficiency in the Properties
and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary
sewers, and electrical, gas (if applicable) and telephone facilities are
available to each of the Properties within the boundary lines of each of the
Properties (except as may be shown on the applicable Survey), are fully
connected to the Improvements and are fully operational, are sufficient to meet
the reasonable needs of each of the Properties as now used or presently
contemplated to be used, and no other utility facilities are necessary to meet
the reasonable needs of each of the Properties as now used or presently
contemplated. Except as may be shown on the applicable Survey, to the Borrowers'
Knowledge no part of any of the Properties is within a flood plain and none of
the Improvements create encroachments over, across or upon the Properties'
boundary lines, rights of way or easements, and no building or other
improvements on adjoining land create such an encroachment which could
reasonably be expected to have a Material Adverse Effect. All public roads and
streets necessary for service of and access to each of the Properties for the
current and contemplated uses thereof have been completed and are serviceable
and are physically and legally open for use by the public. To the Borrowers'
Knowledge after due inquiry, and except as disclosed in the Property Condition
Reports, any septic system located at any of the Properties is in good and safe
condition and repair and in compliance with all applicable law.

SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9,
there are no judgments outstanding against any Borrower Party, or affecting any
of the Properties or any property of any Borrower, nor is there any action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration now pending or, to the Borrowers' Knowledge, threatened against any
Borrower Party that could reasonably be expected to result in a Material Adverse
Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges,
claims, demand, suits, proceedings, petitions, investigations and arbitrations
set forth on SCHEDULE 4.9 are not reasonably expected to result, either
individually or in the aggregate, in any Material Adverse Effect.

SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and
reports of each Primary Borrower Party required to be filed have been timely
filed (or each Borrower has timely filed for an extension and the applicable
extension has not expired), and all taxes, assessments, fees and other
governmental charges (including any payments in lieu of taxes) upon such Person
and upon its properties, assets, income and franchises which are due and payable
have been paid. To the Borrowers' Knowledge, there is not presently pending any
special assessment against any of the Properties or any part thereof.

SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the
Primary Borrower Parties is a party to or bound by, nor is any property of such
Person subject to or bound by, any contract or other agreement which restricts
such Person's ability to conduct its business in the ordinary course as
currently conducted that, either individually or in the aggregate, has a
Material Adverse Effect or could reasonably be expected to have a Material
Adverse Effect.

                                       43


SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation of any such Person which
could reasonably be expected to have a Material Adverse Effect, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default which could reasonably be expected to have a Material
Adverse Effect.

SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940 or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.

SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no
Primary Borrower Party maintains or contributes to, or has any obligation
(including a contingent obligation) under, any Employee Benefit Plans.

SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar
compensation will be payable by or pursuant to any contract or other obligation
of any Primary Borrower Party with respect to the making of the Loan or any of
the other transactions contemplated hereby or by any of the Loan Documents. The
Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from
any and all broker's or finder's fees claimed to be due in connection with the
making of the Loan arising from any Borrower Parties' actions.

SECTION 4.16 INTENTIONALLY DELETED.

SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction
or any Loan Document with the actual intent to hinder, delay, or defraud any
creditor and (b) received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the Loan, the aggregate
fair saleable value of the Borrowers' assets exceed and will, immediately
following the making of the Loan, exceed the Borrowers' total liabilities,
including, without limitation, subordinated, unliquidated, disputed and
Contingent Obligations. The aggregate fair saleable value of the Borrowers'
assets is and will, immediately following the making of the Loan, be greater
than the Borrowers' probable total liabilities, including the maximum amount of
their Contingent Obligations on their debts as such debts become absolute and
matured. Each Borrower's assets do not and, immediately following the making of
the Loan will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. The Borrowers do not
intend to, and do not believe that they will, incur Indebtedness and liabilities
(including Contingent Obligations and other commitments) beyond their ability to
pay such Indebtedness and liabilities as they mature (taking into account the
timing and amounts of cash to be received by the Borrowers and the amounts to be
payable on or in respect of obligations of the Borrowers).

SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on
behalf of any Borrower Party contains any untrue representation, warranty or
statement of a material fact, or omits to state a material fact necessary in
order to make the statements contained therein not misleading. No Loan Document
or any other document, certificate or written statement for use in connection
with the Loan and prepared by any Borrower Party, or any information provided

                                       44


by any Borrower Party and contained in, or used in preparation of, any document
or certificate for use in connection with the Loan, contains any untrue
representation, warranty or statement of a material fact, or omits to state a
material fact necessary in order to make the statements contained therein not
misleading. There is no material fact actually known to the Borrowers that has
had or could reasonably be expected to have a Material Adverse Effect and that
has not been disclosed in writing to Lender by the Borrowers.

SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the
proceeds of the Loan only for the purposes set forth herein and consistent with
all applicable laws, statutes, rules and regulations. No portion of the proceeds
of the Loan shall be used by the Borrowers or any Person in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation T, Regulation U or Regulation X or any other regulation of the Board
of Governors of the Federal Reserve System.

SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate
description of all policies of insurance for each Borrower that are in effect as
of the Closing Date. No notice of cancellation has been received with respect to
such policies, and, to each Borrower's Knowledge, the Borrowers are in
compliance with all conditions contained in such policies.

SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1)
or more parcels which constitute separate tax lots. No part of any of the
Properties is included or assessed under or as part of another tax lot or
parcel, and no part of any other property is included or assessed under or as
part of the tax lots or parcels comprising any of the Properties.

SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest
in, including without limitation stock, partnership interest or other securities
of, any other Person (other than the Beverage Companies), or (ii) direct or
indirect loan, advance or capital contribution to any other Person, including
all indebtedness and accounts receivable from that other Person.

SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any
of them (including any Property) is property of the estate, in any voluntary or
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or other similar law now or hereafter in effect. No
Borrower Party and no property of any of them is under the possession or control
of a receiver, trustee or other custodian. No Borrower Party has made any
assignment for the benefit of creditors. No such assignment or bankruptcy or
similar case or proceeding is now contemplated.

SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to
Lender in writing herein or in any of the Loan Documents, no Default exists.

SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an
employee benefit plan as defined in Section 3(3) of ERISA which is subject to
ERISA, (ii) a plan as defined in Section 4975(e)(1) of the IRC which is subject
to Section 4975 of the IRC, or (iii) an entity whose underlying assets
constitute "plan assets" of any such employee benefit plan or plan for purposes
of Title I of ERISA of Section 4975 of the IRC; provided that, in making such
representation, the Borrowers have assumed that (i) no portion of the Loan shall
be funded with plan assets of any employee benefit plan that is subject to Title
I of ERISA or any plan that is

                                       45


covered by Section 4975 of the Code unless the Lender is eligible to apply one
or more exemptions such that the Loan will not constitute a nonexempt prohibited
transaction under Section 406 of ERISA or that could subject a Borrower Party or
its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such
assumption in the preceding clause is true and correct with respect to any party
to which Lender transfers or assigns any portion of the Loan.

SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with the Borrowers are not and will not be subject to state
statutes applicable to the Borrowers' regulating investments of and fiduciary
obligations with obligations with respect to governmental plans.

SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person"
within the meaning of Section 1445(f)(3) of the IRC.

SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on
SCHEDULE 4.28, no Primary Borrower Party is a party to any collective bargaining
agreement.

SECTION 4.29 RESERVED.

SECTION 4.30 GROUND LEASES.

     (A) Each Ground Lease contains the entire agreement of the Ground Lessor
and the applicable Borrower pertaining to each Ground Leased Property covered
thereby. The Borrowers have no estate, right, title or interest in or to the
Ground Leased Properties except under and pursuant to the Ground Leases. The
Borrowers have delivered true and correct copies of each of the Ground Leases to
Lender and the Ground Leases have not been modified, amended or assigned except
as set forth on SCHEDULE 4.30.

     (B) To the Knowledge of the Borrowers, each Ground Lessor is the exclusive
fee simple owner of its Ground Leased Property, subject only to the Ground Lease
and the Permitted Encumbrances, and each Ground Lessor is the sole owner of the
lessor's interest in the applicable Ground Lease.

     (C) There are no rights to terminate any Ground Lease other than any Ground
Lessor's right to terminate by reason of default, casualty, condemnation or
other reasons, in each case as expressly set forth in the applicable Ground
Lease.

     (D) Each Ground Lease is in full force and effect and to the Borrowers'
Knowledge, no breach or default or event that with the giving of notice or
passage of time would constitute a breach or default under any Ground Lease (a
"GROUND LEASE DEFAULT") exists or has occurred on the part of the Borrowers or
on the part of any Ground Lessor under any Ground Lease. All base rent and
additional rent due and payable under the Ground Leases has been paid through
the date hereof and the Borrowers are not required to pay any deferred or
accrued rent after the date hereof under any of the Ground Leases except for
certain deferred rental obligations payable under the Ground Lease for the
Crowne Plaza, Albany, New York as set forth in the estoppel executed by the
Ground Lessor under such Ground Lease and delivered to Lender prior to Closing.
The Borrowers have not received any written notice that a Ground Lease Default
has

                                       46


occurred or exists, or that any Ground Lessor or any third party alleges the
same to have occurred or exist.

     (E) The applicable Borrower set forth on SCHEDULE 4.30 is the exclusive
owner of the lessee's interest under and pursuant to the applicable Ground Lease
and has not assigned, transferred, or encumbered its interest in, to, or under
any Ground Lease (other than assignments that will terminate on or prior to
Closing), except in favor of Lender pursuant to this Loan Agreement and the
other Loan Documents.

SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their
respective officers, directors, partners, members, Affiliates or, to the
knowledge of the Borrowers, shareholders is an entity or person: (i) that is
listed in the Annex to, or is otherwise subject to the provisions of Executive
Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on
the United States Treasury Department's Office of Foreign Assets Control
("OFAC") most current list of "Specifically Designated National and Blocked
Persons" (which list may be published from time to time in various mediums
including, but not limited to, the OFAC website,
http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or
supports "terrorism", as that term is defined in EO 13224; or (iv) who is
otherwise affiliated with any entity or person listed above (any and all parties
or persons described in clauses (i) through (iv) above are herein referred to as
a "PROHIBITED PERSON").

                                   ARTICLE V
                          COVENANTS OF BORROWER PARTIES

     The Borrowers covenant and agree that until payment in full of the Loan,
all accrued and unpaid interest and all other Obligations, the Borrowers shall
perform and comply with all covenants in this Article V applicable to such
Person.

SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.

     (A) FINANCIAL STATEMENTS.

          (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the
end of each calendar year, the Borrowers (on a consolidated basis), and within
ninety (90) days after the end of each calendar year, Guarantor shall provide
true and complete copies of their Financial Statements for such year to Lender.
All such Financial Statements shall be audited by an Approved Accounting Firm or
by other independent certified public accountants reasonably acceptable to
Lender, and shall bear the unqualified certification of such accountants that
such Financial Statements present fairly in all material respects the financial
position of the subject company. The annual Financial Statements shall be
accompanied by Supplemental Financial Information for such calendar year. The
annual Financial Statements for the Borrowers (on a consolidated basis) and
Guarantor shall also be accompanied by a certification executed by the entity's
chief executive officer or chief financial officer (or other officer with
similar duties), satisfying the criteria set forth in Section 5.1(A)(viii)
below, and a Compliance Certificate (as defined below).

          (ii) QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days
after the end of each calendar quarter, the Borrowers on a consolidated basis
(other than with respect to

                                       47


income statements, which shall be on an individual property basis) shall provide
copies of their Financial Statements for such quarter to Lender, together with a
certification executed on behalf of each of the Borrowers by their respective
chief executive officers or chief financial officers (or other officer with
similar duties) in accordance with the criteria set forth in Section
5.1(A)(viii) below. Such quarterly Financial Statements shall be accompanied by
Supplemental Financial Information and a Compliance Certificate for such
quarter.

          (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days
after the end of each calendar quarter, Guarantor shall provide copies of its
Financial Statements for such quarter to Lender, together with a certification
executed on behalf of Guarantor by its chief executive officer or chief
financial officer (or other officer with similar duties) in accordance with the
criteria set forth in Section 5.1(A)(viii) below.

          (iv) LEASING REPORTS. Within forty-five (45) days after the end of
each calendar year, each Borrower shall provide to Lender a certified Rent Roll
and a schedule of security deposits held under Material Leases, each in form and
substance reasonably acceptable to Lender. Within forty-five (45) days after the
end of each calendar year, each Borrower shall also provide to Lender (a) a
schedule of any retail Material Leases that expired during such calendar year
and a schedule of retail Material Leases scheduled to expire within the next
calendar year and (b) to the extent the Borrowers received notice thereof, a
list of any retail tenants under Material Leases that filed bankruptcy,
insolvency or reorganization proceedings during such calendar year. Within
ninety (90) days after the end of each calendar year, each Borrower shall
provide to Lender a statement of income and expenses for all retail space at
each of the Properties owned and operated by the Borrowers and, to the extent
provided to the Borrowers and not subject to confidentiality restrictions, sales
reports for retail tenants for such year.

          (v) MONTHLY REPORTING. Within thirty (30) days after the end of each
calendar month, each Borrower shall provide, or cause Manager to provide, to
Lender the following items determined on an accrual basis: (a) a calculation of
the average daily rate, RevPAR and occupancy calculations and statistics for
each of the Properties for the subject month; (b) Smith Travel Research "STAR"
reports then available; (c) monthly, and year to date operating statements
prepared for such calendar month and for the trailing twelve (12) month period
then ended, noting Net Operating Income, Net Cash Flow and including budgeted
and last year results for the same year-to-date period and other information
necessary and sufficient under GAAP to fairly represent the results of operation
of each of the Properties during such calendar month, all in form reasonably
satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects
completed during such calendar month (including a detailed explanation for any
material deviations from budget) and setting forth that all disbursements and/or
withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E
Reserve have been made with respect to items of Capital Improvement only (as
opposed to items that, in accordance with GAAP, would be included as an
Operating Expense); (e) monthly and year to date detailed reports of Operating
Expenses for each of the Properties, including supporting documentation
satisfactory to Lender in its sole discretion for each item of Extraordinary
Expense (as such term is defined in the Cash Management Agreement) for which
Lender has approved a disbursement from the Cash Trap Reserve pursuant to the
terms of Section 3.3(a)(v) of the Cash Management Agreement; (f) most recently
available "OSI", or similar quality index, scores (including detailed

                                       48


information regarding criteria and thresholds); (g) prior to Securitization of
the Loan, market segmentation reports for the trailing twelve (12) month period
for each of the Properties; and (h) a report setting forth (i) the date of
termination by Property for each Franchise Agreement that has been terminated
after the Closing Date and not replaced with an Approved Franchisor, (ii) the
number of Properties for which a default has occurred and has continued beyond
applicable notice and grace periods under the applicable Franchise Agreement
(including the percentage of the original Aggregate Allocated Loan Amount
represented by such Properties), (iii) a summary report establishing that the
Borrowers are diligently continuing to pursue reflagging efforts with respect to
each such Property, and (iv) a summary report including (a) the aggregate number
of Properties for which the Borrowers have entered into new Franchise Agreements
as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting
Category of each such Property, and (b) the aggregate number of Properties for
which any replacement (and, if more than one replacement has occurred to a
single Property, the number of replacements with respect to such Property) of
the applicable Franchise Agreements has occurred pursuant to the terms of
Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the
Aggregate Outstanding Principal Balance represented by such Properties and
including the resulting Category of each such Property. All of the above
statements, reports and information shall be provided to Lender by email in
Microsoft Excel format or other spreadsheet format reasonably acceptable to
Lender (in the case of any statements, reports or information provided by third
parties that are not Affiliates of the Borrowers, to the extent same are
available in such format). Along with such operating statements, each Borrower
shall deliver to Lender a Compliance Certificate of such Borrower's chief
executive officer or chief financial officer (or other officer with similar
duties) satisfying the criteria set forth in Section 5.1(A)(viii) below.

          (vi) ADDITIONAL REPORTING. In addition to the foregoing, the Borrowers
shall, and shall cause Guarantor and Manager to, promptly provide to Lender such
further documents and information concerning its operations, properties,
ownership, and finances as Lender shall from time to time reasonably request
upon prior written notice to the Borrowers.

          (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause
Guarantor and Manager to, maintain systems of accounting established and
administered in accordance with sound business practices and sufficient in all
respects to permit preparation of Financial Statements in conformity with GAAP
and the Uniform System. All Financial Statements shall be prepared in accordance
with GAAP and the Uniform System, consistently applied; provided, however, in
the event of a conflict between the Uniform System and GAAP, GAAP will be
followed.

          (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS,
COMPLIANCE CERTIFICATE. Together with the Financial Statements and other
documents and information provided to Lender by or on behalf of the Borrowers or
Guarantor under this Section, the Borrowers or Guarantor also shall deliver to
Lender a certification to Lender, executed on behalf of the Borrowers or
Guarantor by their respective chief executive officer or chief financial officer
(or other officer with similar duties), stating that to their Knowledge after
due inquiry such quarterly and annual Financial Statements and information
fairly present the financial condition and results of operations of the
Borrowers, Guarantor and/or the Properties for the period(s) covered thereby,
and do not omit to state any material information without which the same might
reasonably be misleading, and all other non-financial documents

                                       49


submitted to Lender (whether monthly, quarterly or annually) are true, correct,
accurate and complete in all material respects. In addition, where this Loan
Agreement requires a "COMPLIANCE CERTIFICATE", the Person required to submit the
same shall deliver a certificate duly executed on behalf of such Person by its
chief executive officer or chief financial officer (or other officer with
similar duties) stating (a) that, to their Knowledge after due inquiry, there
does not exist any Default or Event of Default under the Loan Documents (or if
any exists, specifying the same in detail), and (b) the Borrowers and Guarantor
have complied with the applicable reporting requirements of this Section 5.1.

          (ix) FISCAL YEAR. Each Borrower represents that its fiscal year and
that of the Guarantor ends on December 31, and agrees that no change shall be
made to each such fiscal year, without Lender's prior written consent.

     (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower will
deliver copies of all material reports submitted by independent public
accountants in connection with each annual, interim or special audit of the
Financial Statements or other business operations of such Borrower made by such
accountants, including the comment letter submitted by such accountants to
management in connection with the annual audit.

     (C) TAX RETURNS. Within thirty (30) days after filing the same, each
Borrower shall deliver to Lender a copy of its Federal income tax returns (or
the return of the applicable Person into which such Borrower's Federal income
tax return is consolidated) certified on its behalf by its chief financial
officer (or similar position) to be true and correct.

     (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 15 of
each calendar year, each Borrower shall deliver to Lender for its review for its
Property a proposed Operating Budget and CapEx/FF&E Budget (in each case
presented on a monthly and annual basis) for such calendar year. Each Operating
Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall
not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap
Event or Event of Default exists, the Borrowers may make changes to the
Operating Budget and the CapEx/FF&E Budget from time to time as deemed
reasonably necessary by the Borrower, provided no such modification (together
with all prior modifications taken as a whole) shall alter any single line item
(or the applicable Budget as a whole) by more than ten percent (10%) without
Lender's prior written approval, which approval shall not be unreasonably
withheld; provided, however, notwithstanding the foregoing during a Cash Trap
Event, increases to the Operating Budget for any Property (not to exceed ten
percent (10%) of the Operating Budget for such Property as a whole) will be
permitted without Lender's consent for actual verifiable increases in utilities,
water and sewer assessments and charges and real property taxes for the
applicable Property over the amounts therefor set forth in the Operating Budget
for such Property for the prior period. Notice of any modifications to the
Operating Budget and the CapEx/FF&E Budget shall be delivered to Lender at the
time of delivery of the next financial reporting required pursuant to Section
5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget
and the CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating
Budget shall identify and set forth each Borrower's reasonable estimate, after
due consideration, of all revenue, costs, and expenses, and shall specify
Operating Revenues and Operating Expenses on a line-item basis consistent with
the form of Operating Budget delivered to Lender prior to Closing. If any of
said budgets or plans requiring Lender's

                                       50


approval is not in form and substance reasonably satisfactory to Lender, Lender
may disapprove the same and specify the reasons therefor in writing, and the
Borrowers shall promptly amend and resubmit for approval revised budgets or
plans, as applicable, making such changes as are necessary to comply with the
reasonable requirements of Lender. Until any such budget or plan for any year
requiring Lender's approval has been approved or deemed approved, the applicable
budget or plan for the previous year shall remain in effect until the new budget
or plan is approved or deemed approved. Lender's consent to any budget, plan or
amendments thereto shall be deemed given, if the first correspondence from the
Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY"
and contains a bold-faced, conspicuous legend at the top of the first page
thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS
REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE
DEEMED GIVEN", and is accompanied by the information and documents required
above and any other information reasonably requested by Lender in writing prior
to the expiration of such fifteen (15) day period in order to adequately review
the same has been delivered and, if Lender fails to respond or to expressly deny
such request for approval in writing within the fifteen (15) day period, a
second notice is delivered to Lender from the Borrowers in an envelope marked
"PRIORITY" requesting approval containing a bold-faced, conspicuous legend at
the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR
APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny
each request for approval within the ten (10) day period.

     (E) MATERIAL NOTICES.

          (i) The Borrowers shall promptly deliver, or cause to be delivered,
copies of all notices given or received with respect to a default under any term
or condition related to any Permitted Indebtedness of any Borrower, and shall
notify Lender within five (5) Business Days of any potential or actual event of
default with respect to any such Permitted Indebtedness.

          (ii) The Borrowers shall promptly deliver to Lender copies of any and
all material notices (including without limitation any notice alleging any
default or breach which is reasonably expected to result in a termination)
received with respect to any Material Agreement or any Lease, including, without
limitation, any inspection report and any progress reports related to any
Property Improvement Plan received from a Franchisor related to such Borrower's
Property.

     (F) EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining
knowledge of any of the following events or conditions, such Borrower shall
deliver a certificate executed on its behalf by its chief financial officer or
similar officer specifying the nature and period of existence of such condition
or event and what action such Borrower or any Affiliate thereof has taken, is
taking and proposes to take with respect thereto: (i) any condition or event
that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii)
any actual or alleged breach or default or assertion of (or written threat to
assert) remedies under any Management Agreement, Franchise Agreement or Ground
Lease.

                                       51


     (G) LITIGATION. Promptly upon any of the Borrowers obtaining knowledge of
(1) the institution of any action, suit, proceeding, governmental investigation
or arbitration against the Borrowers or any of the Properties not previously
disclosed in writing by the Borrowers to Lender which would be reasonably likely
to have a Material Adverse Effect or is not covered by insurance or (2) any
material development in any action, suit, proceeding, governmental investigation
or arbitration at any time pending against or affecting the Borrowers or the
Properties which, in each case, if adversely determined would reasonably be
expected to have a Material Adverse Effect, the Borrowers will give notice
thereof to Lender and, upon request from Lender, provide such other information
as may be reasonably available to them to enable Lender and its counsel to
evaluate such matter.

     (H) INSURANCE. At least five (5) Business Days prior to the end of each
insurance policy period of the Borrowers, the Borrowers will deliver
certificates, reports, and/or other information (all in form and substance
reasonably satisfactory to Lender), (i) outlining all material insurance
coverage maintained as of the date thereof by the Borrowers and all material
insurance coverage planned to be maintained by the Borrowers in the subsequent
insurance policy period and (ii) evidencing payment in full of the premiums for
such insurance policies.

     (I) OTHER INFORMATION. With reasonable promptness, Borrowers will deliver
such other information and data with respect to such Person and its Affiliates
or the Properties as from time to time may be reasonably requested by Lender.

SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve
and keep in full force and effect their existence as a limited partnership,
limited liability company, or corporation, as the case may be, and all rights
and franchises material to its business, including their qualification to do
business in each state where it is required by law to so qualify. Without
limitation of the foregoing, each Borrower and, to the extent required by
applicable law, General Partner and Member, shall at all times be qualified to
do business in each of the states where the Properties are located.

SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS.

     (A) Except for those matters being contested pursuant to clause (B) below,
the Borrowers will pay (i) all Impositions; (ii) all claims (including claims
for labor, services, materials and supplies) for sums that have become due and
payable and that by law have or may become a Lien upon any of its properties or
assets (hereinafter referred to as the "CLAIMS"); and (iii) all federal, state
and local income taxes, sales taxes, excise taxes and all other taxes and
assessments of the Borrowers on their business, income or assets; in each
instance before any penalty or fine is incurred with respect thereto.

     (B) The Borrowers shall not be required to pay, discharge or remove any
Imposition or Claim relating to a Property so long as the Borrowers contest in
good faith such Imposition, Claim or the validity, applicability or amount
thereof by an appropriate legal proceeding which operates to prevent the
collection of such amounts and the sale of the applicable Property or any
portion thereof, and so long as: (i) no Event of Default shall have occurred and
be continuing, (ii) prior to the date on which such Imposition or Claim would
otherwise have become delinquent, the Borrowers shall have given Lender prior
written notice of their intent to contest

                                       52


said Imposition or Claim; (iii) prior to the date on which such Imposition or
Claim would otherwise have become delinquent, the Borrowers shall have deposited
with Lender (or with a court of competent jurisdiction or other appropriate body
reasonably approved by Lender) such additional amounts as are necessary to keep
on deposit at all times, an amount by way of cash, Dollar Equivalents, or a
Letter of Credit, equal to at least one hundred twenty-five percent (125%) (or
such higher amount as may be required by applicable law) of the total of (x) the
balance of such Imposition or Claim then remaining unpaid, and (y) all interest,
penalties, costs and charges accrued or accumulated thereon; (iv) no risk of
sale, forfeiture or loss of any interest in the applicable Property or any part
thereof arises, in Lender's reasonable judgment, during the pendency of such
contest; (v) such contest does not, in Lender's reasonable determination, have a
Material Adverse Effect; and (vi) such contest is based on bona fide, material,
and reasonable claims or defenses. Any such contest shall be prosecuted with due
diligence, and the Borrowers shall promptly pay the amount of such Imposition or
Claim as finally determined, together with all interest and penalties payable in
connection therewith. Lender shall have full power and authority, but no
obligation, to apply any amount deposited with Lender under this subsection to
the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture
of the applicable Property for non-payment thereof, if Lender reasonably
believes that such sale or forfeiture is threatened. Any surplus retained by
Lender after payment of the Imposition or Claim for which a deposit was made
shall be promptly repaid to the Borrowers unless an Event of Default shall have
occurred, in which case said surplus may be retained by Lender to be applied to
the Obligations. Notwithstanding any provision of this Section to the contrary,
the Borrowers shall pay any Imposition or Claim which they might otherwise be
entitled to contest if an Event of Default shall occur and be continuing, or if,
in the reasonable determination of Lender, the applicable Property is in danger
of being forfeited or foreclosed. If the Borrowers refuse to pay any such
Imposition or Claim, Lender may (but shall not be obligated to) make such
payment and the Borrowers shall reimburse Lender on demand for all such
advances.

SECTION 5.4 MAINTENANCE OF INSURANCE.

     The Borrowers will continuously maintain the following described policies
of insurance on each of the respective Properties without cost to Lender (the
"INSURANCE POLICIES"):

          (i) Property insurance against loss and damage by all risks of
physical loss or damage, including fire, sprinkler leakage, windstorm,
hurricane, terrorism, and other risks covered by the so-called extended coverage
endorsement covering the Improvements and personal property in amounts not less
than the full insurable replacement value of all Improvements (less building
foundations and footings) and personal property from time to time on the
Properties and without sublimits, and bearing a replacement cost agreed-amount
endorsement;

          (ii) Commercial general liability insurance, including death, bodily
injury, innkeeper legal liability and broad form property damage coverage with a
combined single limit in an amount not less than One Million Dollars
($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the
aggregate for any policy year;

          (iii) If any of the Properties are in an area prone to geological
phenomena, including, but not limited to, sinkholes, mine subsidence or
earthquakes, insurance covering such

                                       53


risks in an amount equal to 100% of the full replacement cost of all
improvements (without any deductions for depreciation) and with a maximum
permissible deductible equal to the lesser of $25,000 or 10% of the face value
of the policy;

          (iv) For each Property located in whole or in part in a federally
designated "special flood hazard area", flood insurance in the maximum available
amount;

          (v) An umbrella excess liability policy with a limit of not less than
Twenty Million Dollars ($20,000,000) over primary insurance, which policy shall
include coverage for so-called assumed and contractual liability coverage and
automobile liability coverage, and coverage for safeguarding of personalty and
shall also include such additional coverages and insured risks which are
acceptable to Lender;

          (vi) Business interruption and/or rent loss insurance with an
aggregate limit equal to at least the gross income from the Properties for an
indemnity period commencing on the date of such casualty and ending at least six
(6) months after completion of the Restoration (such amount being adjusted
annually);

          (vii) Crime protection insurance covering all employees with access to
funds and located in Guarantor's corporate offices with a limit of not less than
One Million Dollars ($1,000,000) and with the same coverages and deductibles as
currently in place at the Properties;

          (viii) Steam boiler, machinery and pressurized vessel insurance
insuring against breakdown or explosion of such equipment on a replacement cost
value basis, which shall not contain any exclusions for testing procedures;

          (ix) Worker's Compensation Insurance in statutory amounts, if any, at
all times;

          (x) Insurance against loss or damage from (A) leakage of sprinkler
systems and (B) explosion of steam boilers, air conditioning equipment, high
pressure piping, machinery and equipment, pressure vessels or similar apparatus
now or hereafter installed in the Improvements (without exclusion for
explosions), in an amount at least equal to the Aggregate Allocated Loan Amount;

          (xi) During any period of construction, repair or restoration,
builder's "all risk" insurance in an amount equal to not less than the full
insurable value of the Properties (excluding building foundations and footings)
against such risks (including, without limitation, fire and extended coverage
and collapse of the Improvements to agreed limits) as Lender may reasonably
request;

          (xii) If the Properties are or become a "non-conforming use" under
applicable zoning and building ordinances, or other requirements of the
applicable Governmental Authority, law or ordinance coverage to compensate for
the cost of demolition and the increased cost of construction, if available;

          (xiii) If the Borrowers, Manager or any of their respective Affiliates
holds a liquor license for the Properties, liquor liability insurance (including
"dram shop" liability) in an

                                       54


amount not less than $1,000,000 for each common cause and $3,000,000 in the
aggregate; provided that if such liquor license is held by any tenant under a
Lease, the Borrowers shall cause such tenant to cause liquor liability insurance
in an amount not less than the limits set forth above to be carried in such
tenant's name, and shall include the Borrowers and Lender as additional insureds
thereunder;

          (xiv) If reasonably required by Lender as a result of the release,
disposal or existence of any Hazardous Materials on or about any Property after
the date hereof (or as to which Lender obtains knowledge after the date hereof)
or if such insurance is then customarily required by institutional lenders for
securitized loans, environmental insurance, including mold coverage, in form and
with coverages (including business interruption coverage) reasonably
satisfactory to Lender; provided, however, without limiting or affecting
Lender's right to require such environmental insurance with respect to any other
Properties after the date hereof, Lender acknowledges that, as of the date
hereof, environmental insurance shall only be required with respect to the
Property known as the Holiday Inn, located at 363 Roberts Street, East Hartford,
Connecticut;

          (xv) Fiduciary liability insurance and directors and officers
liability insurance ("D&O INSURANCE") with coverages at levels in effect as of
the Closing Date;

          (xvi) Insurance against acts of terrorism, or insurance policies
without an exclusion for damages resulting from acts of terrorism on terms
consistent with the commercial property insurance policies required under
subsection (i), (ii), (v) and (vi) above;

          (xvii) Such other insurance as may from time to time be reasonably
required by Lender and which is then customarily required by institutional
lenders for securitized loans secured by similar properties similarly situated,
against other insurable hazards, including, but not limited to, malicious
mischief, vandalism, windstorm and or earthquake, due regard to be given to the
size and type of the Properties, Improvements, fixtures and equipment and their
location, construction and use. Additionally, the Borrowers shall carry such
insurance coverage as Lender may from time to time require if the failure to
carry such insurance would result in a downgrade, qualification or withdrawal of
any class of securities issued in connection with a Securitization.

     All Insurance Policies shall be in content (including, without limitation,
endorsements or exclusions, if any), form, and amounts, and issued by companies,
satisfactory to Lender from time to time and shall name Lender and its
successors and assignees as their interests may appear as (x) an "additional
insured" for each of the liability policies under this Section 5.4 hereof, and
(y) a "mortgagee" for each of the property and casualty policies under this
Section hereof, and shall (except for Worker's Compensation Insurance) contain a
waiver of subrogation clause reasonably acceptable to Lender. Other than with
respect to D&O Insurance, an insurance company shall not be satisfactory unless
such insurance company (a) is licensed or authorized to issue insurance in the
State where the applicable Property is located and (b) has a claims paying
ability rating by the Rating Agencies of AA- (or its equivalent).
Notwithstanding the foregoing, a carrier which does not meet the foregoing
ratings requirement shall nevertheless be deemed acceptable hereunder provided
that such carrier is reasonably acceptable to Lender and the Borrowers shall
obtain and deliver to Lender a Rating Confirmation with respect to such carrier

                                       55


from each of the Rating Agencies, provided, however, that: (a) if any insurance
coverage required under this Section 5.4 is maintained by a syndicate of
insurers, the preceding ratings requirements shall be deemed satisfied (without
any required Rating Confirmation) as long as at least seventy five percent (75%)
of the coverage (if there are four or fewer members of the syndicate) or at
least sixty percent (60%) of the coverage (if there are five or more members of
the syndicate) is maintained with carriers meeting the claims-paying ability
ratings requirements by S&P and Moody's (if applicable) set forth above and all
carriers in such syndicate have a claims-paying ability rating by S&P of not
less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by
Moody's); (b) Lender hereby approves Zurich Insurance Company as the carrier
providing the insurance described in clause (ii) above, so long as such carrier
maintains a claims paying ability of not less than A- by S&P (and the equivalent
from each of the other Rating Agencies to the extent rated thereby) and (c)
until the expiration of the current term of the applicable policies, Lender
hereby approves Landmark American as the carrier providing the insurance
described in clauses (i), (iv) and (vi) above (covering losses over the first
$25,000,000 of coverage), so long as thereafter such carrier or any other
carrier providing the above coverages maintains a claims paying ability of not
less than A by S&P (and the equivalent from each of the other Rating Agencies to
the extent rated thereby). All Insurance Policies under Sections 5.4 (i), (iv),
(vi), (vii), (x), (xi) and (xii) hereof shall contain a Non-Contributory
Standard mortgagee clause and a mortgagee's Loss Payable Endorsement (Form 438
BFU NS), or their equivalents (such endorsements shall entitle Lender to collect
any and all proceeds payable under all such insurance, with the insurance
company waiving any claim or defense against Lender for premium payment,
deductible, self-insured retention or claims reporting provisions). All
Insurance Policies shall provide that the coverage shall not be modified without
(30) days' advance written notice to Lender and shall provide that no claims
shall be paid thereunder to a Person other than Lender without ten (10) days'
advance written notice to Lender. The Borrowers may obtain any insurance
required by this Section through blanket policies; provided, however, that such
blanket policies shall separately set forth the amount of insurance in force
with respect to the Properties (which shall not be reduced by reason of events
occurring on property other than the Properties) and shall afford all the
protections to Lender as are required under this Section. Except as may be
expressly provided above, all policies of insurance required hereunder shall
contain no annual aggregate limit of liability, other than with respect to
liability insurance. If a blanket policy is issued, a certified copy of said
policy shall be furnished, together with a certificate indicating that Lender is
an additional insured (and, if applicable, loss payee) under such policy in the
designated amount. The Borrowers will deliver duplicate originals of all
Insurance Policies, premium prepaid through the current expiration dates of such
Insurance Policies, to Lender and, in case of Insurance Policies about to
expire, the Borrowers will deliver duplicate originals of replacement policies
satisfying the requirements hereof to Lender not less than ten (10) days prior
to the date of expiration; provided, however, if such replacement policy is not
yet available, the Borrowers shall provide Lender with an insurance certificate
executed by the insurer or its authorized agent evidencing that the insurance
required hereunder is being maintained under such policy, which certificate
shall be acceptable to Lender on an interim basis until the duplicate original
of the policy is available. The Borrowers shall furnish Lender receipts for the
payment of premiums on such insurance policies or other evidence of such payment
reasonably satisfactory to Lender in the event that such premiums have not been
paid by Lender pursuant to the Loan Agreement. The requirements of this Section
5.4 shall apply to any separate policies of insurance taken out by the Borrowers

                                       56


concurrent in form or contributing in the event of loss with the Insurance
Policies. Losses shall be payable to Lender notwithstanding (1) any act, failure
to act or negligence of the Borrowers or their agents or employees, Lender or
any other insured party which might, absent such agreement, result in a
forfeiture or all or part of such insurance payment, other than the willful
misconduct of Lender knowingly in violation of the conditions of such policy,
(2) the occupation or use of the Properties or any part thereof for purposes
more hazardous than permitted by the terms of such policy, (3) any foreclosure
or other action or proceeding taken pursuant to this Loan Agreement or (4) any
change in title to or ownership of the Properties or any part thereof. The
property insurance and the boiler and machinery insurance described in Sections
5.4(i) and (x) hereof shall include "underground hazards" coverage; "time
element" coverage by which Lender shall be assured payment of all amounts due
under the Note, this Loan Agreement and the other Loan Documents; "extra
expense" (i.e., soft costs), clean-up, transit and ordinary payroll coverage;
and "expediting expense" coverage to facilitate rapid repair or restoration of
the Properties. The Insurance Policies shall not contain any deductible in
excess of $250,000.

SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY.

     (A) The Borrowers will operate and maintain the Properties as is necessary
to maintain hotel standards at least as high as those that currently apply to
each Property, subject to ordinary wear and tear, as reasonably determined by
the Borrowers, and otherwise in compliance with the standards under the
applicable Franchise Agreement and shall maintain or cause to be maintained in
good repair, working order and condition all material property used in the
business of each Borrower, including the applicable Property, and will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Without limitation of the foregoing, each Borrower will operate and maintain its
Property substantially in accordance with the applicable Operating Budget and
the CapEx/FF&E Budget. All work required or permitted under this Loan Agreement
shall be performed in a workmanlike manner and in compliance with all applicable
laws.

     So long as no Event of Default has occurred and is continuing, the
Borrowers may, without Lender's consent, perform alterations to the Properties
which do not constitute a Material Alteration. The Borrowers shall not perform
any Material Alteration without Lender's prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed; provided, however,
that Lender may, in its sole and absolute discretion, withhold consent to any
Material Alteration which is likely to result in a decrease of Net Operating
Income (taking into consideration all Material Alterations being undertaken at
the Properties at such time) by 5% or more below that which was in effect prior
to the commencement of the first such Material Alteration being undertaken at
the time of determination for a period of sixty (60) days or longer; provided,
further, however, the Borrowers may perform a Material Alteration without
Lender's consent if (i) the delay caused by obtaining Lender's prior consent may
result in injury or death at, or further destruction or deterioration of, the
applicable Property, (ii) such Material Alteration is necessary to prevent the
likelihood of injury or death at, or further destruction or deterioration of,
the applicable Property, and (iii) the Borrowers deliver notice to Lender within
two (2) Business Days of commencement of such Material Alteration together with
such supporting documentation as Lender may require with respect to such
Material Alteration. Lender may, as a condition to giving its consent to a
Material Alteration, require that the Borrowers deliver to Lender evidence
reasonably satisfactory to Lender that the Borrowers have cash available for

                                       57


payment of the cost of such Material Alteration or, if the Borrowers fail to
deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an
amount equal to 125% of the cost of such Material Alteration as reasonably
estimated by Lender. Cash deposited by the Borrowers with Lender in connection
with any Material Alteration pursuant to the foregoing sentence shall be held by
Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers
to pay for the cost of such Material Alteration as such work progresses subject
to satisfaction of the conditions for disbursement of amounts from the Capital
Improvement Reserve under Section 6.5 (including the requirements set forth
under Section 6.7). Upon completion of the Material Alteration, the Borrowers
shall provide evidence reasonably satisfactory to Lender that (i) the Material
Alteration was constructed in accordance with all material applicable laws and
substantially in accordance with plans and specifications approved by Lender
(which approval shall not be unreasonably withheld or delayed), (ii) all
contractors, subcontractors, materialmen and professionals who provided work,
materials or services in connection with the Material Alteration have been paid
in full and have delivered unconditional releases of lien and (iii) all material
licenses necessary for the use, operation and occupancy of the Material
Alteration (other than those which depend on the performance of tenant
improvement work) have been issued. The Borrowers shall reimburse Lender upon
demand for all reasonable out-of-pocket costs and expenses (including the
reasonable fees of any architect, engineer or other professional engaged by
Lender) incurred by Lender in reviewing plans and specifications or in making
any determinations necessary to implement the provisions of this Section 5.5(A).

     (B) In the event of casualty or loss at any of the Properties, the
Borrowers shall give immediate written notice of the same to the insurance
carrier and to Lender and shall promptly commence and diligently prosecute to
completion, in accordance with the terms hereof, the repair and restoration of
the Property as nearly as possible to the Pre-Existing Condition (a
"RESTORATION"). The Borrowers hereby authorize and empower Lender as
attorney-in-fact for the Borrowers (jointly with the Borrowers unless an Event
of Default has occurred and is continuing), or any of them, to make proof of
loss, to adjust and compromise any claim under insurance policies, to appear in
and prosecute any action arising from such insurance policies, to collect and
receive insurance proceeds, and to deduct therefrom Lender's expenses incurred
in the collection of such proceeds; provided however, that nothing contained in
this Section shall require Lender to incur any expense or take any action
hereunder. The Borrowers further authorize Lender, at Lender's option, (i) to
hold the balance of such proceeds to be used to reimburse the Borrowers for the
cost of Restoration of any of the Properties or (ii) subject to Subsection
5.5(C), to apply such proceeds to payment of the Obligations whether or not then
due, in any order. Notwithstanding the foregoing, in the event of a casualty
where the loss does not exceed the Restoration Threshold, the Borrowers may
settle and adjust such claim; provided that (a) no Event of Default has occurred
and is continuing and (b) such adjustment is carried out in a commercially
reasonable and timely manner.

     (C) Lender shall not exercise Lender's option to apply insurance proceeds
to payment of the Obligations if all of the following conditions are met: (i) no
Event of Default then exists; (ii) Lender reasonably determines that there will
be sufficient funds to complete the Restoration of the Property to at least
substantially the Pre-Existing Condition and to timely make all payments due
under the Loan Documents during the Restoration of the affected Property; (iii)
Lender reasonably determines that the Net Operating Income of the Properties
(including rental income or business interruption insurance) will be sufficient
to pay principal and interest

                                       58


on the Loan and the Mezzanine Loan and Operating Revenues of the Properties,
after the Restoration thereof to the Pre-Existing Condition, will be sufficient
to meet all Operating Expenses, payments for Reserves and payments of principal
and interest under the Note and the Mezzanine Loan; (iv) Lender determines that
the Restoration of the affected Property to the Pre-Existing Condition will be
completed not later than five (5) months prior to the expiration of any business
interruption insurance, but in no event later than six (6) months prior to the
Maturity Date; (v) less than fifty percent (50%) of the total floor area of the
Improvements has been damaged, destroyed or rendered unusable as a result of
such fire or other casualty; and (vi) such Property can be restored and repaired
substantially to the condition it was in immediately prior to such casualty and
in compliance with all applicable zoning, building and other laws and codes (the
"PRE-EXISTING CONDITION"). If Lender elects to apply insurance proceeds to
payment of the Obligations, such application shall be made on the Payment Date
immediately following such election in accordance with the terms of the Cash
Management Agreement.

     (D) If Lender elects or is obligated to make the insurance proceeds
available for the Restoration of any Property and Lender is holding such
proceeds, the Borrowers agree that, if at any time during the Restoration, the
cost of completing such Restoration, as reasonably determined by Lender, exceeds
the undisbursed insurance proceeds, the Borrowers shall, within ten (10)
Business Days following the written demand by Lender, deposit the amount of such
excess with Lender, and Lender shall first disburse such deposit to pay for the
costs of such Restoration on the same terms and conditions as the insurance
proceeds are disbursed. If the Borrowers deposit such excess with Lender and if,
after completion of the Restoration, any funds remain from the combination of
insurance proceeds and the funds so deposited with Lender by the Borrowers, and
if no Event of Default shall have occurred and be continuing, then Lender shall
promptly disburse to the Borrowers such remaining funds.

     (E) Lender may, at Lender's option, condition disbursement of any insurance
proceeds on Lender's approval (which approval shall not be unreasonably
withheld) of plans and specifications of an independent architect licensed in
the state where the Property is located and reasonably satisfactory to Lender
(the "ARCHITECT"), any and all contractors, subcontractors and materialmen
engaged in the Restoration and the contracts under which they have been engaged,
contractor's cost estimates, architect's certificates, waivers of liens, sworn
statements of mechanics and materialmen and such other evidence of costs,
percentage completion of construction, application of payments, and satisfaction
of liens as Lender may reasonably require. Lender shall not be obligated to
disburse insurance proceeds more frequently than once every calendar month. If
insurance proceeds are applied to the payment of the Obligations and provided no
Event of Default exists, any such application of proceeds to principal shall be
without any Prepayment Consideration and shall not extend or postpone the due
dates of the monthly payments due under the Note or otherwise under the Loan
Documents, or change the amounts of such payments. If Lender elects to apply all
of such insurance proceeds toward the repayment of the Obligations, the
Borrowers shall (subject to compliance with clauses (A), (B), (D) and (F) of
Section 11.4) be entitled to obtain from Lender a Property Release (without
representation or warranty) of the applicable Property from the Lien of the
Mortgage relating to such Property (in which event the Borrowers shall not be
obligated to restore the applicable Property pursuant to Section 5.5(B) above)
provided that the Borrowers pay to Lender the amount, if any, by which the
Release Price for such Property exceeds the insurance proceeds received by
Lender and applied to repayment of the Obligations. If any proceeds are applied
to

                                       59


reduce the Obligations under this Section 5.5, provided that no Event of Default
has occurred and is continuing, no Prepayment Consideration shall be due and
payable in connection with such application. Any amount of insurance proceeds
remaining in Lender's possession after full and final payment and discharge of
all Obligations shall be refunded to, or as directed by, the Borrowers or
otherwise paid in accordance with applicable law. If the Property is sold at
foreclosure or if Lender acquires title to the Property, Lender shall have all
of the right, title and interest of the applicable Borrower in and to any
insurance policies and unearned premiums thereon and in and to the proceeds
resulting from any damage to such Property prior to such sale or acquisition.

     (F) In no event shall Lender be obligated to make disbursements of
insurance proceeds in excess of an amount equal to the costs actually incurred
from time to time for work in place as part of the Restoration, as certified by
the Architect, less a retainage equal to the lesser of (x) the actual retainage
required pursuant to the permitted contract, or (y) ten percent (10%) of such
costs incurred until the Restoration has been completed. The retainage shall in
no event be less than the amount actually held back by the Borrowers from
contractors, subcontractors and materialmen engaged in the Restoration. The
retainage shall not be released until the Architect certifies to Lender, or, if
no Architect has been retained by Lender, Lender is reasonably satisfied, that
the Restoration has been completed in accordance with the provisions of this
Section 5.5 and that all approvals necessary for the re-occupancy and use of the
Property have been obtained from all appropriate governmental authorities, and
Lender receives final lien waivers and such other evidence reasonably
satisfactory to Lender that the costs of the Restoration have been paid in full
or will be paid in full out of the retainage.

SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized
representatives designated by Lender to visit and inspect during normal business
hours its Property and its business, including its financial and accounting
records, and to make copies and take extracts therefrom and to discuss its
affairs, finances and business with its officers and independent public
accountants (with such Borrower's representative(s) present), at such reasonable
times during normal business hours and as often as may be reasonably requested.
Unless an Event of Default has occurred and is continuing, Lender shall provide
advance written notice of at least three (3) Business Days prior to visiting or
inspecting any Property or such Borrower's offices.

SECTION 5.7 O&M PLAN. The applicable Borrowers shall cause to be prepared and
delivered to Lender operations and maintenance programs (the "O&M PLANS") with
respect to suspected asbestos, asbestos-containing materials, and/or mold
located in certain Properties as set forth on Schedule 6.6 attached hereto,
which conditions were disclosed in the applicable Environmental Reports for such
Properties. Each applicable Borrower shall at all times implement and carry out
the O&M Plan in accordance with its terms. Lender's requirement that the
applicable Borrowers develop and comply with the O&M Plan shall not be deemed to
constitute a waiver or modification of any covenants or agreements of the
Borrowers or Guarantor with respect to Hazardous Material or Environmental Laws
as set forth in the Environmental Indemnity.

SECTION 5.8 INTENTIONALLY DELETED.

SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers
will (A) comply with the requirements of all present and future applicable laws,
rules, regulations and

                                       60


orders of any governmental authority in all jurisdictions in which it is now
doing business or may hereafter be doing business, other than those laws, rules,
regulations and orders the noncompliance with which would not reasonably be
expected to have, either individually or in the aggregate, a material adverse
effect on the operation or value of any Property, (B) maintain all licenses and
permits now held or hereafter acquired by any Borrower, the loss, suspension, or
revocation of which, or failure to renew, could have a material adverse effect
on the operation or value of any Property and (C) perform, observe, comply and
fulfill all of its material obligations, covenants and conditions contained in
any Contractual Obligation.

SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute
and/or deliver such documents, instruments, agreements, financing statements,
and perform such acts as Lender at any time may reasonably request to evidence,
preserve and/or protect the Collateral at any time securing or intended to
secure the Obligations and/or to better and more effectively carry out the
purposes of this Loan Agreement and the other Loan Documents.

SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party
shall duly and punctually perform, observe and comply in all material respects
with all of the terms, provisions, conditions, covenants and agreements on its
part to be performed, observed and complied with (i) hereunder and under the
other Loan Documents to which it is a party, (ii) under all Material Agreements
and Leases and (iii) all other agreements entered into or assumed by such Person
in connection with the Properties, and will not suffer or permit any material
default or event of default (giving effect to any applicable notice requirements
and cure periods) to exist under any of the foregoing except where the failure
to perform, observe or comply with any agreement referred to in this clause
(iii) would not reasonably be expected to have a material adverse effect on the
operation or value of any Property.

SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which
shall not be unreasonably withheld or delayed, the Borrowers shall not, nor
shall the Borrowers authorize Manager or any other Person to, (i) enter into any
Material Lease; (ii) cancel or terminate any Material Lease (except to enforce
any such Lease after a default thereunder); (iii) amend or modify any Material
Lease (except for minor modifications and amendments entered into in the
ordinary course of business, consistent with prudent property management
practices, not materially and adversely affecting the economic terms of the
Material Lease); (iv) approve any assignment, sublease or underlease of any
Material Lease (except as required pursuant to the express terms of any existing
Lease or Lease hereafter approved by Lender); or (v) cancel or modify any
guaranty, or release any security deposit, letter of credit, or other item
constituting security pertaining to any Material Lease (except as required
pursuant to the express terms of any existing Lease or Lease hereafter approved
by Lender).

     (B) Any request for approval of any Material Lease or assignment,
termination, amendment or modification of any Material Lease shall be made to
Lender in writing and together with such request the Borrowers shall furnish to
Lender: (i) such biographical and financial information about the proposed
tenant as Lender may reasonably require in conjunction with its review, (ii) a
copy of the proposed form of Lease (or amendment or modification), and (iii) a
summary of the material terms of such proposed Lease (or amendment or
modification) including, without limitation, rental terms and the term of the
proposed Lease and any options. Lender's approval of any Material Lease or
assignment, termination, amendment or modification

                                       61


of any Material Lease, shall be deemed given, if the first correspondence from
the Borrowers to Lender requesting such approval is in an envelope marked
"PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first
page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS
REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE
DEEMED GIVEN", and is accompanied by the information and documents required
above and any other information reasonably requested by Lender in writing prior
to the expiration of such fifteen (15) day period in order to adequately review
the same has been delivered and, if Lender fails to respond or to expressly deny
such request for approval in writing within the fifteen (15) day period, a
second notice is delivered to Lender from the Borrowers in an envelope marked
"PRIORITY" requesting approval containing a bold-faced, conspicuous legend at
the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR
APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny
each request for approval within the ten (10) day period.

     Except for security deposits, no Material Lease executed after the Closing
Date shall provide for payment of rent more than one month in advance, and the
Borrowers shall not under any circumstances collect any such rent more than one
month in advance. The Borrowers, at Lender's request, shall furnish Lender with
executed copies of all Material Leases hereafter made. Each new Material Lease
or a separate agreement with the tenant of such Material Lease shall be in
recordable form and shall specifically provide that such Material Lease (i) is
subordinate to the Mortgages; (ii) that the tenant attorns to Lender, such
attornment to be effective upon Lender's acquisition of title to the Property;
(iii) that the tenant agrees to execute such further evidences of attornment as
Lender may from time to time request; (iv) that the attornment of the tenant
shall not be terminated by foreclosure; (v) that in no event shall Lender, as
holder of the Mortgages or as successor landlord, be liable to the tenant for
any act or omission of any prior landlord or for any liability or obligation of
any prior landlord occurring prior to the date that Lender or any subsequent
owner acquire title to the Property; and (vi) that Lender may, at Lender's
option, accept or reject such attornment.

SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS.

     (A) The Borrowers shall cause each Manager to manage the Properties in
accordance with the Management Agreements including, without limitation,
maintaining inventory in amounts and types customary for hotels comparable to
each Property. The Borrowers shall (i) perform and observe all of the material
terms, covenants and conditions of the Management Agreement on the part of each
Borrower to be performed and observed, and (ii) promptly notify Lender of any
notice to any of the Borrowers of any material default under the Management
Agreement of which it is aware. If any of the Borrowers shall default in the
performance or observance of any material term, covenant or condition of the
applicable Management Agreement on the part of the Borrowers to be performed or
observed, then, without limiting Lender's other rights or remedies under this
Agreement or the other Loan Documents, and without waiving or releasing the
Borrowers from any of their obligations hereunder or under the applicable
Management Agreement, Lender shall have the right, upon prior written notice to
the Borrower, but shall be under no obligation, to pay any sums and to perform
any act as may be reasonably appropriate to

                                       62


cause such material conditions of the applicable Management Agreement on the
part of the Borrowers to be performed or observed.

     (B) The Borrowers shall not surrender, terminate, cancel, modify (other
than non-material changes), renew or extend the Management Agreement, or enter
into any other Management Agreement with Manager or any new Manager, or consent
to the assignment by the Manager of its interest under the Management Agreement,
in each case without (i) prior to a Securitization, the express consent of
Lender, which consent shall not be unreasonably withheld, or (ii) after a
Securitization, delivery of Rating Confirmations from each of the Rating
Agencies. The Borrowers shall cause any new Manager with respect to any Property
to execute and deliver a subordination of management agreement in substantially
the form delivered in connection with the closing of the Loan.

     (C) Lender shall have the right to require any of the Borrowers to replace
any Manager with a Person chosen by the Borrowers and reasonably acceptable to
Lender (unless such proposed Manager is an Acceptable Manager) and the
applicable Franchisor (to the extent the applicable Franchisor has consent
rights), upon the earliest to occur of any one or more of the following events:
(i) upon the occurrence and during the continuance of an Event of Default; (ii)
thirty (30) days after notice from Lender to the Borrowers if Manager has
engaged in fraud, gross negligence or willful misconduct arising from or in
connection with its performance under the applicable Management Agreement; or
(iii) upon a change of control of the current Manager.

     (D) The Borrowers shall not terminate or enter into any Franchise Agreement
without Lender's prior written consent, which may be granted or withheld in
Lender's sole discretion. Notwithstanding the foregoing, the following changes
to Franchise Agreements shall be permitted without Lender's prior written
consent:

               (i)  Replacement of any Franchise Agreement with a new Franchise
                    Agreement in form substantially similar to a form previously
                    approved by Lender with any Franchisor that would cause a
                    Tier 3 Hotel to become either a Tier 2 Hotel or a Tier 1
                    Hotel, or that would cause a Tier 2 Hotel to become a Tier 1
                    Hotel;

               (ii) Replacement of any Franchise Agreement with a new Franchise
                    Agreement in form substantially similar to a form previously
                    approved by Lender with another Franchisor within the same
                    Category, provided that the Borrowers shall not replace
                    Franchise Agreements (in the aggregate) pursuant to this
                    Section 5.13(D)(ii) with respect to more than the lesser of
                    (x) two (2) Properties, or (y) Properties with Aggregate
                    Allocated Loan Amounts (in the aggregate) of ten percent
                    (10%) of the Aggregate Outstanding Principal Balance;

               (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel
                    with a new Franchise Agreement in form substantially similar
                    to a form previously approved by Lender for Tier 3 Hotels,
                    provided that the Borrowers shall not replace Franchise
                    Agreements for more than one (1) Property, or for any
                    Property with an Allocated Loan Amount of more than five
                    percent

                                       63


                    (5%) of the outstanding principal balance of the Loan
                    pursuant to this Section 5.13(D)(iii); and

               (iv) Entering into new Franchise Agreements (or amendments or
                    addenda to existing Franchise Agreements) with the existing
                    Franchisors for the applicable Properties for the same
                    franchise brand, each in form substantially similar to the
                    forms previously approved for the respective Properties by
                    Lender, as required by the existing Franchisors under the
                    respective Franchise Agreements in connection with the
                    transfers of the applicable Properties and the direct and
                    indirect ownership interests in the Borrowers made by the
                    Borrower Parties and their Affiliates in connection with the
                    Closing of the Loan.

     In connection with the replacement of any Franchisors permitted hereunder,
the applicable Borrower shall, within ten (10) Business Days of the execution of
such Franchise Agreement, deliver to Lender a Franchisor Letter from any
replacement Franchisor in form and substance reasonably acceptable to Lender. In
all cases, each Borrower shall (a) cause the hotel located on the applicable
Property to be operated pursuant to the applicable Franchise Agreement; (b)
promptly perform and observe in all material respects all of the covenants
required to be performed and observed by it under the applicable Franchise
Agreement (including the requirements of any Property Improvement Plan); (c)
promptly notify Lender of any material default under the applicable Franchise
Agreement of which it is aware; and (d) promptly enforce in a commercially
reasonable manner the performance and observance of all of the material
covenants required to be performed and observed by the Franchisor under the
Franchise Agreement. In addition, the Borrowers shall not, without Lender's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed: (x) increase or consent to the increase of the aggregate
amount of any fees under any Franchise Agreement; or (y) otherwise materially
modify, change, supplement, alter or amend, or waive or release any of its
material rights and remedies under, any Franchise Agreement.

     Lender's consent to any replacement of any Franchise Agreement, or the
termination, renewal, extension or modification of an existing Franchise
Agreement, shall be deemed given, if the first correspondence from the Borrowers
to Lender requesting such consent is in an envelope marked "PRIORITY" and
contains a bold-faced, conspicuous legend at the top of the first page thereof
stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR
APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED
GIVEN", and is accompanied by the information and documents required above and
any other information reasonably requested by Lender in writing prior to the
expiration of such fifteen (15) day period in order to adequately review the
same has been delivered and, if Lender fails to respond or to expressly deny
such request for approval in writing within the fifteen (15) day period, a
second notice is delivered to Lender from the Borrowers in an envelope marked
"PRIORITY" requesting approval containing a bold-faced, conspicuous legend at
the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR
APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny
each request for approval within the ten (10) day period.

                                       64


SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become
obligated under any Material Agreement pertaining to any Property without
Lender's prior written approval, which approval shall not be unreasonably
withheld or conditioned; except that the following Material Agreements shall not
require Lender approval: (i) any Lease that does not require Lender's approval
under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii)
any Management Agreement that does not require Lender's approval under, and
otherwise complies with, the provisions of Section 5.13 hereof (provided,
however, that the foregoing shall not affect Borrowers' obligation to deliver
Rating Confirmations with respect to any such Management Agreement if required
under Section 5.13), (iii) the existing Material Agreements described on
SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not
require Lender's approval under, and otherwise complies with, the provisions of
Section 5.13(E) or (v) any other agreement that may be terminated without cause
and without payment of a penalty or premium, on not more than thirty (30) days'
prior written notice.

SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all
Receipts from the Properties into, and otherwise comply with, the Accounts
established from time to time hereunder. Subject to Article VII hereof and the
Cash Management Agreement, each Borrower shall promptly apply all Receipts to
the payment of all current and past due Operating Expenses, and to the repayment
of all sums currently due or past due under the Loan Documents, including all
payments into the Reserves.

SECTION 5.16 ESTOPPEL CERTIFICATES.

     (A) Within ten (10) Business Days following a request by Lender, the
Borrowers shall provide to Lender a duly acknowledged written statement
confirming (i) the amount of the outstanding principal balance of the Loan, (ii)
the terms of payment and maturity date of the Note, (iii) the date to which
interest has been paid, (iv) whether any offsets or defenses exist against the
Obligations, and if any such offsets or defenses are alleged to exist, the
nature thereof shall be set forth in detail and (v) that this Loan Agreement,
the Note, the Mortgages and the other Loan Documents are legal, valid and
binding obligations of the Borrowers and have not been modified or amended, or
if modified or amended, describing such modification or amendments.

     (B) Within ten (10) Business Days following a written request by the
Borrowers, Lender shall provide to the Borrowers a duly acknowledged written
statement setting forth the amount of the outstanding principal balance of the
Loan, the date to which interest has been paid, and whether Lender has provided
the Borrowers with written notice of any Event of Default. Compliance by Lender
with the requirements of this Section shall be for informational purposes only
and shall not be deemed to be a waiver of any rights or remedies of Lender
hereunder or under any other Loan Document.

SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly
create, incur, assume, guaranty, or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness except for the following
(collectively, "PERMITTED INDEBTEDNESS"):

     (A) the Obligations and Crossed Indebtedness;

                                       65


     (B) (i) unsecured trade payables not evidenced by a note and arising out of
purchases of goods or services in the ordinary course of business and (ii)
Indebtedness incurred in the financing of equipment or other personal property
used at any Property in the ordinary course of business, provided that (a) each
such trade payable is payable not later than ninety (90) days after the original
invoice date and is not overdue by more than thirty (30) days, and (b) the
aggregate amount of such trade payables and Indebtedness relating to financing
of equipment and personal property or otherwise referred to in clauses (i) and
(ii) above (excluding therefrom utility expenses of the Properties and fees
payable to the Franchisors pursuant to the terms of the Franchise Agreements)
outstanding does not, at any time, exceed five percent (5%) of the outstanding
principal balance of the Loan; and

     (C) the Mezzanine Loan.

In no event shall any Indebtedness other than the Loan be secured, in whole or
in part, by the Properties or any portion thereof or interest therein.

SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are
in addition to and not in limitation of its obligations under Article XI herein.
The Borrower shall not create, incur, assume or permit to exist any Lien on or
with respect to the Properties, any other Collateral or any direct or indirect
ownership interest in the Borrowers, except the Permitted Encumbrances and Liens
on the ownership interests in the Borrowers securing the Mezzanine Loan.

SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no
Primary Borrower Party shall directly or indirectly create or become or be
liable with respect to any Contingent Obligation.

SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly
permitted in this Loan Agreement, no Primary Borrower Party shall, or shall
permit any other Person to, (i) amend, modify or waive any term or provision of
such Borrower Party's partnership agreement, certificate of limited partnership,
articles of incorporation, by-laws, articles of organization, operating
agreement or other organizational documents so as to violate or permit the
violation of the single-purpose entity provisions set forth in Article IX,
unless required by law; or (ii) liquidate, wind-up or dissolve such Primary
Borrower Party.

SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses
payable to the Manager under the Management Agreement, the Borrowers shall not
pay any management, consulting, director or similar fees to any Related Person
of the Borrowers or to any director, officer or employee of the Borrowers. The
Borrowers shall not directly or indirectly enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Related Person of any of the Borrowers or
with any director, officer or employee of any Borrower Party, except
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of the Borrowers and upon fair and reasonable terms
and which are no less favorable to any of the Borrowers than would be obtained
in a comparable arm's length transaction with a Person that is not a Related
Person of any Borrower. The Borrowers shall not make any payment or permit any
payment to be made to any

                                       66


Related Person of any of the Borrowers when or as to any time when any Event of
Default shall exist.

SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS.

     (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary
case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect.

     (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not apply
for, consent to, or aid, solicit, support, or otherwise act, cooperate or
collude to cause the appointment of or taking possession by, a receiver, trustee
or other custodian for all or a substantial part of the assets of any Borrower.
As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, in which any of the
Borrowers is a debtor or any portion of the Properties is property of the estate
therein. The Borrowers shall not file a petition for, consent to the filing of a
petition for, or aid, solicit, support, or otherwise act, cooperate or collude
to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any
Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior
written consent of Lender, consent to the entry of any order, file any motion,
or support any motion (irrespective of the subject of the motion), and the
Borrowers shall not file or support any plan of reorganization. The Borrowers
having any interest in any Involuntary Borrower Bankruptcy shall do all things
reasonably requested by Lender to assist Lender in obtaining such relief as
Lender shall seek, and shall in all events vote as directed by Lender. Without
limitation of the foregoing, each such Borrower shall do all things reasonably
requested by Lender to support any motion for relief from stay or plan of
reorganization proposed or supported by Lender.

SECTION 5.23 ERISA.

     (A) NO ERISA PLANS. None of the Primary Borrower Parties will establish any
Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence
making contributions to (or become obligated to make contributions to) any
Employee Benefit Plan, Pension Plan or Multiemployer Plan.

     (B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any
non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the IRC; or (ii) except as may be necessary to comply with applicable laws,
establish or amend any Employee Benefit Plan which establishment or amendment
could result in liability to the Borrowers or any ERISA Affiliate or increase
the obligation of the Borrowers, provided that the Borrower shall not be in
default of this covenant if, in either case, any portion of the Loan has been,
or will be, funded with plan assets of any employee benefit plan that either (x)
is subject to Title I of ERISA or any plan that is covered by Section 4975 of
the Code (unless the Lender is eligible to apply for one or more exemptions such
that the Loan will not constitute a nonexempt prohibited transaction under
Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to
an excise tax under Section 4975 of the IRC.

                                       67


     (C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of
this Loan Agreement become (1) an employee benefit plan defined in Section 3(3)
of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1)
of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental
plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose
underlying assets constitute "plan assets" of any such employee benefit plan,
plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the
IRC or any state statutes applicable to the Borrowers regulating investments of
governmental plans.

SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any
other Person within its control to, disclose the name of Lender or terms of this
Loan Agreement or the Loan Documents in any press release without the prior
written consent of Lender, which shall not be unreasonably withheld.
Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted
to make such filings and disclosures with respect to the Loan as are required by
law.

SECTION 5.25 GROUND LEASES.

     (A) NO MODIFICATION. The Borrowers shall not modify or amend, or terminate
or surrender any Ground Lease, in each case without the prior written consent of
Lender, which consent may be withheld by Lender in its sole and absolute
discretion. Any attempted or purported modification, amendment, or any surrender
or termination of any Ground Lease without Lender's prior written consent shall
be null and void and of no force or effect.

     (B) PERFORMANCE OF GROUND LEASES. The Borrowers shall fully perform as and
when due each and all of its obligations under each Ground Lease in accordance
with the terms of such Ground Lease, and shall not cause or suffer to occur any
material breach or default in any of such obligations. The Borrowers shall keep
and maintain each Ground Lease in full force and effect. The Borrowers shall
exercise any option to renew or extend any Ground Lease and give written
confirmation thereof to Lender within thirty (30) days after such option is
exercised. Notwithstanding that certain of the obligations of the Borrowers
under this Loan Agreement may be similar or identical to certain of the
obligations of the Borrowers under the Ground Leases, all of the obligations of
the Borrowers under this Loan Agreement are and shall be separate from and in
addition to its obligations under the Ground Leases.

     (C) NOTICE OF DEFAULT. If any of the Borrowers shall have or receive any
written notice that any Ground Lease Default has occurred, then the Borrowers
immediately shall notify Lender in writing of the same and immediately deliver
to Lender a true and complete copy of each such notice. Further, the Borrowers
shall provide such documents and information as Lender shall reasonably request
concerning the Ground Lease Default.

     (D) LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and be
continuing, or if any Ground Lessor asserts that a Ground Lease Default has
occurred (whether or not the Borrowers question or deny such assertion), then,
subject to the terms and conditions of the applicable Ground Lease, Lender, upon
five (5) Business Days' prior written notice to the Borrowers, unless Lender
reasonably determines that a shorter period (or no period) of notice is
necessary to protect Lender's interest in the Ground Lease, may (but shall not
be obligated to) take any action that Lender deems reasonably necessary,
including, without limitation,

                                       68


(i) performance or attempted performance of the applicable Borrower's
obligations under the applicable Ground Lease, (ii) curing or attempting to cure
any actual or purported Ground Lease Default, (iii) mitigating or attempting to
mitigate any damages or consequences of the same and (iv) entry upon the
applicable Ground Leased Property for any or all of such purposes. Upon Lender's
request, each Borrower shall submit satisfactory evidence of payment or
performance of any of its obligations under each Ground Lease. Lender may pay
and expend such sums of money as Lender in its sole discretion deems necessary
or desirable for any such purpose, and the Borrowers shall pay to Lender within
five (5) Business Days of the written demand of Lender all such sums so paid or
expended by Lender, together with interest thereon from the date of expenditure
at the Default Rate.

     (E) LEGAL ACTION. The Borrowers shall not commence any action or proceeding
against any Ground Lessor or affecting or potentially affecting any Ground Lease
or the Borrowers' or Lender's interest therein, the effect of which could cause
an event of default or termination of any such Ground Lease, without the prior
written consent of Lender, which consent shall not be unreasonably withheld,
conditioned or delayed. The Borrowers shall notify Lender immediately if any
action or proceeding shall be commenced between any Ground Lessor and either
Borrower, or affecting or potentially affecting any Ground Lease or either
Borrower's or Lender's interest therein (including, without limitation, any case
commenced by or against any Ground Lessor under the Bankruptcy Code). Lender
shall have the option, exercisable upon notice from Lender to the Borrowers, to
participate in any such action or proceeding with counsel of Lender's choice.
The Borrowers shall cooperate with Lender, comply with the reasonable
instructions of Lender, execute any and all powers, authorizations, consents or
other documents reasonably required by Lender in connection therewith, and shall
not settle any such action or proceeding without the prior written consent of
Lender, which consent shall not be unreasonably withheld, conditioned or
delayed.

     (F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the
applicable Ground Lease, from time to time, at Lender's request, the Borrowers
shall use commercially reasonable efforts to obtain and deliver to Lender within
the time period required under the applicable Ground Lease, an estoppel
certificate from each Ground Lessor setting forth (A) (i) the identities of the
original lessor and lessee under the applicable Ground Lease and each of their
respective successors, (ii) that the Ground Lease has not been modified or, if
it has been modified, the date of each modification (together with copies of
each such modification), (iii) the rent payable under the Ground Lease, (iv) the
dates to which all rent and other charges have been paid, (v) whether there are
any alleged Ground Lease Defaults and, if so, setting forth the nature thereof
in reasonable detail, and (vi) such other matters as Lender may reasonably
request or (B) the matters required to be certified by the Ground Lessor under
the applicable Ground Lease. The Borrowers shall not be required to request an
estoppel from any Ground Lessor more than two (2) times in any calendar year.

     (G) BANKRUPTCY.

          (i) If any Ground Lessor shall reject any Ground Lease under or
pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrowers shall
not elect to treat the Ground Lease as terminated but shall elect to remain in
possession of the applicable Ground Leased Property and the leasehold estate
under such Ground Lease. The lien of the Mortgage covering

                                       69


such Property does and shall encumber and attach to all of the Borrowers' rights
and remedies at any time arising under or pursuant to Section 365 of the
Bankruptcy Code, including without limitation, all of such Borrower's rights to
remain in possession of such Property and the leasehold estate.

          (ii) The Borrowers acknowledge and agree that in any case commenced by
or against the Borrowers under the Bankruptcy Code, Lender by reason of the
liens and rights granted under the Mortgage covering such Property and the Loan
Documents shall have a substantial and material interest in the treatment and
preservation of such Borrower's rights and obligations under such Ground Lease,
and that such Borrower shall, in any such bankruptcy case, provide to Lender
immediate and continuous reasonably adequate protection of such interests. Each
Borrower and Lender agree that such adequate protection shall include but shall
not necessarily be limited to the following:

               (a) Lender shall be deemed a party to the Ground Lease (but shall
not have any obligations thereunder) for purposes of Section 365 of the
Bankruptcy Code, and shall, provided that, prior to an Event of Default, no such
action by Lender would adversely and materially affect the Borrowers' ability to
prosecute, or defend, any such claims asserted therein, have standing to appear
and act as a party in interest in relation to any matter arising out of or
related to the Ground Lease or such Property.

               (b) The Borrowers shall serve Lender with copies of all notices,
pleadings and other documents relating to or affecting the Ground Lease or the
applicable Property. Any notice, pleading or document served by the Borrowers on
any other party in the bankruptcy case shall be contemporaneously served by such
Borrower on Lender, and any notice, pleading or document served upon or received
by such Borrower from any other party in the bankruptcy case shall be served by
such Borrower on Lender promptly upon receipt by such Borrower.

               (c) Upon written request of Lender, the Borrowers shall assume
the Ground Lease, and shall take such steps as are necessary to preserve such
Borrower's right to assume the Ground Lease, including without limitation using
commercially reasonable efforts to obtain extensions of time to assume or reject
the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it
is applicable.

     (H) ASSUMPTION AND ASSIGNMENT. If the Borrowers or the applicable Ground
Lessor seeks to reject any Ground Lease or have the Ground Lease deemed
rejected, then prior to the hearing on such rejection Lender shall, subject to
applicable law, be given no less than twenty (20) days' notice and opportunity
to elect in lieu of rejection to have the Ground Lease assumed and assigned to a
nominee of Lender. If Lender shall so elect to assume and assign the Ground
Lease, then the Borrowers shall, subject to applicable law, continue any request
to reject the Ground Lease until after the motion to assume and assign has been
heard. If Lender shall not elect to assume and assign the Ground Lease, then
Lender may, subject to applicable law, obtain in connection with the rejection
of the Ground Lease a determination that the applicable Ground Lessor, at
Lender's option, shall (1) agree to terminate the Ground Lease and enter into a
new lease with Lender on the same terms and conditions as the Ground Lease, for
the remaining term of the Ground Lease, or (2) treat the Ground Lease as
breached and provide Lender with the

                                       70


rights to cure defaults under the Ground Lease and to assume the rights and
benefits of the Ground Lease.

               Each Borrower shall join with and support any request by Lender
to grant and approve the foregoing as necessary for adequate protection of
Lender's interests. Notwithstanding the foregoing, Lender may seek additional
terms and conditions, including such economic and monetary protections as it
deems reasonably appropriate to adequately protect its interests, and any
request for such additional terms or conditions shall not delay or limit
Lender's right to receive the specific elements of adequate protection set forth
herein.

               Each Borrower hereby appoints Lender as its attorney in fact to
act on behalf of Lender in connection with all matters relating to or arising
out of the assumption or rejection of any Ground Lease, in which the other party
to the lease is a debtor in a case under the Bankruptcy Code. This grant of
power of attorney is present, unconditional, irrevocable, durable and coupled
with an interest.

SECTION 5.26 RESERVED.

SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender,
all reasonable out-of-pocket expenses, charges, costs and fees (including
reasonable attorneys' fees and expenses) in connection with the negotiation,
documentation, closing, administration, servicing, enforcement interpretation,
and collection of the Loan and the Loan Documents, and in the preservation and
protection of Lender's rights hereunder and thereunder. Without limitation the
Borrowers shall pay all costs and expenses, including reasonable attorneys'
fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or
any law succeeding or replacing any of the same). At the Closing, Lender is
authorized to pay directly from the proceeds of the Loan any or all of the
foregoing expenses then or theretofore incurred and approved by the Borrowers.

SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and
at any time that a Cash Trap Event is in effect, the Borrowers shall not make
any distributions of cash or other property to any Borrower Party, or make any
payments in lieu thereof, without Lender's prior written approval, which may be
granted or withheld in Lender's sole discretion.

SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless
otherwise specifically provided herein to the contrary, the Borrowers shall not
cancel any indebtedness from any Person owing to any Borrower, or settle any
claims without Lender's prior written consent which shall not be unreasonably
withheld.

SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no
Borrower Party, nor any of their respective Affiliates, officers, directors,
partners or members will knowingly: (i) conduct any business, nor engage in any
transaction or dealing, with any Prohibited Person, including, but not limited
to, the making or receiving of any contribution of funds, goods, or services, to
or for the benefit of a Prohibited Person; or (ii) engage in or conspire to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in
EO13224. The Borrowers further covenants and agrees to deliver (from time to
time) to Lender any such certification or other evidence as may be

                                       71


requested by Lender in its sole and absolute discretion, confirming that: (i)
neither any Borrower Party, nor their respective officers, directors, partners,
members or Affiliates, is a Prohibited Person; and (ii) neither any Borrower
Party, nor their respective officers, directors, partners, members or
Affiliates, has to its Knowledge engaged in any business, transaction or
dealings with a Prohibited Person, including, but not limited to, the making or
receiving of any contribution of funds, goods, or services, to or for the
benefit of a Prohibited Person.

                                   ARTICLE VI
                                    RESERVES

SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO
RESERVES.

     (A) The Borrowers hereby pledge, assign and grant to Lender a security
interest in and to all of the Borrowers' right, title and interest in and to the
Account Collateral, including the Reserves, as security for payment and
performance of all of the Obligations hereunder and under the Note and the other
Loan Documents. The Reserves constitute Account Collateral and are subject to
the security interest in favor of Lender created herein and all provisions of
this Loan Agreement and the other Loan Documents pertaining to Account
Collateral.

     (B) In addition to the rights and remedies provided in Article VII and
elsewhere herein, upon the occurrence and during the continuance of any Event of
Default, Lender shall have all rights and remedies pertaining to the Reserves as
are provided for in any of the Loan Documents or under any applicable law.
Without limiting the foregoing, upon and at all times after the occurrence and
during the continuance of an Event of Default, Lender in its sole and absolute
discretion, may use the Reserves (or any portion thereof) for any purpose,
including but not limited to any combination of the following: (i) payment of
any of the Obligations including the Prepayment Consideration (if any)
applicable upon such payment in such order as Lender may determine in its sole
discretion; provided, however, that such application of funds shall not cure or
be deemed to cure any Default; (ii) reimbursement of Lender for any actual
losses or expenses (including, without limitation, reasonable legal fees)
suffered or incurred as a result of such Event of Default; (iii) payment for the
work or obligation for which such Reserves were reserved or were required to be
reserved; and (iv) application of the Reserves in connection with the exercise
of any and all rights and remedies available to Lender at law or in equity or
under this Loan Agreement or pursuant to any of the other Loan Documents.
Nothing contained in this Loan Agreement shall obligate Lender to apply all or
any portion of the funds contained in the Reserves during the continuance of an
Event of Default to payment of the Loan or in any specific order of priority.

SECTION 6.2 FUNDS DEPOSITED WITH LENDER.

     (A) INTEREST, OFFSETS. Except only as expressly provided otherwise herein,
all funds of the Borrowers which are deposited with Lock Box Account Bank as
Reserves hereunder shall be held by Lock Box Account Bank in one or more
Permitted Investments, such Permitted Investments, prior to an Event of Default,
to be as directed by Borrower. All interest which accrues on the Reserves shall
be taxable to the Borrowers and shall be added to and disbursed in the same
manner and under the same conditions as the principal sum on which said interest
accrued. Additional provisions pertaining to investments are set forth in
Article VII. After

                                       72


repayment of all of the Obligations, all funds held as Reserves will be promptly
returned to, or as directed by, the Borrowers.

     (B) FUNDING AT CLOSING. The Borrowers shall deposit with Lender the amounts
necessary to fund each of the Reserves as set forth below. Deposits into the
Reserves at Closing may occur by deduction from the amount of the Loan that
otherwise would be disbursed to the Borrowers, followed by deposit of the same
into the applicable Sub-Account or Account of the Lock Box Account in accordance
with the Cash Management Agreement on the Closing Date. Notwithstanding such
deductions, the Loan shall be deemed for all purposes to be fully disbursed at
Closing.

SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the
Borrowers shall deposit with Lock Box Account Bank $1,320,742.18 and, pursuant
to the Cash Management Agreement, the Borrowers shall deposit monthly, on each
Payment Date commencing on the Payment date in August 2004, 1/12th of the annual
charges (as reasonably estimated by Lender) for all Impositions and all
Insurance Premiums (other than for D&O Insurance) payable with respect to the
Properties hereunder (said funds, together with any interest thereon and
additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount
of the monthly deposit to be made to the Impositions and Insurance Reserve from
and after the date hereof is $296,952.14. The Borrowers shall also deposit with
Lock Box Account Bank within ten (10) Business Days of the written demand by
Lender, to be added to and included within such reserve, a sum of money which
Lender reasonably estimates, together with such monthly deposits, will be
sufficient to make the payment of each such charge at least ten (10) Business
Days prior to the date initially due. The Borrowers shall provide Lender with
bills and all other documents necessary for the payment of the foregoing charges
at least thirty (30) days prior to the date on which each payment shall first
become subject to penalty or interest if not paid. So long as (i) no Event of
Default has occurred and is continuing, (ii) the Borrowers have provided Lender
with the foregoing bills and other documents in a timely manner, and (iii)
sufficient funds are held by Lender for the payment of the Impositions and
Insurance Premiums relating to each of the Properties, Lender shall pay said
items or disburse to the Borrowers from such Reserve an amount sufficient to pay
said items. Interest shall accrue in favor of the Borrowers on funds in the
Impositions and Insurance Reserve and be added to the balance thereof and
disbursed in accordance with the terms hereof.

SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer
on behalf of Lender shall establish and maintain with Lock Box Bank an account
for the purpose of creating a reserve for replacements of FF&E at or in, or used
in connection with, the Properties (the "REPLACEMENTS") in accordance with the
applicable CapEx/FF&E Budget approved by Lender (said funds, together with any
interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve
shall be held in an Eligible Account entitled "FF&E Reserve Account for the
benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account
shall be under the sole dominion and control of Lender, subject to the terms of
the Cash Management Agreement. Pursuant to the Cash Management Agreement, the
Borrowers shall deposit monthly, on each Payment Date commencing with the
Payment Date in August 2004, an amount equal to 4.0% of the Operating Revenues
generated from the Properties for the prior calendar month (such amount, the
"MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the
Borrowers, subject in all instances to the terms of the Cash Management

                                       73


Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds
held in the FF&E Reserve shall be used in connection with the Required Capital
Improvements. Upon and at all times after the occurrence and during the
continuance of an Event of Default, no draws will be permitted from the FF&E
Reserve other than Replacements subject, in each instance, to Manager's
compliance with the FF&E reporting requirements set forth in Section
5.1(A)(v)(d).

SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At
Closing, the Borrowers shall deposit with Lock Box Account Bank
$3,329,429.00 (said funds, together with any interest thereon, the "CAPITAL
IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers
solely for payment of certain Capital Improvements required to be made to the
Properties and designated as "Required Capital Improvements" on SCHEDULE 6.5
attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by
the Borrowers for purposes for which any other Reserve is established or for any
other purpose other than completion of the Required Capital Improvements. The
Borrowers shall promptly commence and diligently prosecute to completion,
subject to Force Majeure, the Required Capital Improvements within the time
periods for each Required Capital Improvement set forth on SCHEDULE 6.5. Funds
held in the Capital Improvement Reserve shall be disbursed in accordance with
Section 6.7. Subject to the foregoing conditions, but also subject to the last
paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining
balance in the Capital Improvement Reserve when all Required Capital
Improvements are complete, and paid for, in accordance with the terms hereof.

SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers
shall deposit with Lock Box Account Bank, an amount equal to $1,237.50
(said funds, together with any interest thereon and additions thereto, the
"HAZARDOUS MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous
Materials on the Properties as indicated in the Environmental Reports for the
Properties prepared and delivered prior to the Closing and as such work is more
particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the
earlier of (x) the date required by any applicable Governmental Authority or (y)
nine (9) months after the Closing, the Borrowers shall, subject to Force
Majeure, complete such Environmental Work and shall provide to Lender such
closure reports, no-further-action letters, or other evidence of compliance with
law as Lender may reasonably require. The funds contained in the Hazardous
Materials Remediation Reserve shall be utilized by the Borrowers solely for
performance of the Environmental Work in accordance with the Environmental
Reports, and shall not be used by the Borrowers for purposes for which any other
Reserve is established. Subject to the Borrowers' satisfaction of the applicable
conditions of Section 6.7, the Borrowers shall be entitled to draw upon the
Hazardous Materials Remediation Reserve to pay for costs that have been incurred
by the Borrowers for such Environmental Work, provided that the Borrowers
deliver to Lender such evidence as may be reasonably satisfactory to Lender
that, after payment of such draw, the funds remaining in the Hazardous Materials
Remediation Reserve shall be sufficient to pay for the remainder of such
Environmental Work. Subject to the foregoing conditions, but also subject to the
last paragraph of Section 11.4, the Borrowers shall be entitled to draw any
remaining balance in the Hazardous Materials Remediation Reserve when all such
Environmental Work is complete, and is paid for, in accordance with the terms
hereof.

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SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION
RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK.

      (A) DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND
CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for
disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to
or for the account of the Borrowers (x) from the Hazardous Materials Remediation
Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the
Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for
Environmental Work (the "APPROVED ENVIRONMENTAL EXPENDITURES", and (y) from the
Capital Improvement Reserve, to pay to, or pay on behalf of, the Borrowers for
the amount of the Borrowers' actual bona fide out-of-pocket expenditures or
costs incurred for Required Capital Improvements ("APPROVED CAPITAL IMPROVEMENT
EXPENDITURES"; and together with the Approved Environmental Expenditures,
collectively, "APPROVED EXPENDITURES"; and the related Environmental Work or
Required Capital Improvements to which any such request for disbursement relates
shall be referred to as the "WORK"), upon satisfaction of each of the conditions
listed on SCHEDULE 6.7 and each of the conditions set forth below in Lender's
reasonable discretion:

            (i) Except as provided in this Section 6.7, each request for
disbursement from the Hazardous Materials Remediation Reserve or the Capital
Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for
completion of the Approved Expenditures for which disbursement is requested.

            (ii) A request for disbursement from the Work Reserves may be made
after completion of a portion of the Work under such contract, or for payment of
deposits required in connection with the Work under such Contract, provided (1)
all other conditions in this Loan Agreement for disbursement have been
satisfied, (2) funds remaining in the Hazardous Materials Remediation Reserve
are, in Lender's reasonable judgment, sufficient to complete the Environmental
Work when required and/or funds remaining in the Capital Improvement Reserve
are, in Lender's reasonable judgment, sufficient to complete such item of
Required Capital Improvements and any other Required Capital Improvements
remaining to be performed, as the case may be, and (3) if reasonably required by
Lender, each contractor or subcontractor receiving payments in excess of
$100,000 under such contract shall provide a waiver of lien with respect to
amounts which have been paid to that contractor or subcontractor.

            (iii) To the extent the contract with the relevant contractor or
supplier provides for a retainage, each disbursement from a Work Reserve, except
for a final disbursement, shall be in the amount of actual costs incurred less
the percentage of such costs that the contract with the relevant contractor or
supplier specifies to be retained and advanced as part of the final
disbursement. No funds will be advanced for materials stored at any Property
unless such materials are properly stored and secured at the applicable Property
in accordance with the Borrowers' customary procedures and sound construction
practices as reasonably determined by Lender. No funds will be advanced for
materials stored at any location other than at the Properties unless Lender
determines in its reasonable discretion that Lender has a perfected first
priority security interest in any such materials.

                                       75


            (iv) The amount of all invoices in connection with the Work with
respect to which a disbursement is requested and which has been approved by
Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers
(in which event, the Borrowers covenant and agree to promptly pay such invoices)
or, if an Event of Default has occurred and is continuing, at Lender's option
and in Lender's sole and absolute discretion, directly to the contractor,
supplier, materialman, mechanic or subcontractor indicated on said invoices
unless already paid by the Borrowers and Lender has received satisfactory
evidence of such payment in which case Lender shall reimburse the Borrowers. All
invoices in connection with disbursements from the Capital Improvement Reserve
shall be classified as requests for payment for items of Capital Improvement (as
opposed to items that, in conformity with GAAP, would be included as Operating
Expenses). If the Borrowers request that any amounts be disbursed directly to
the Borrowers pursuant to the foregoing sentence, the Borrowers shall be
required to deliver evidence reasonably acceptable to Lender of payment of all
invoices for which disbursements were previously made to the Borrowers as a
condition to such requested disbursement.

            (v) No more than two (2) disbursements will be made by Lender from
the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve
in any calendar month, and, if made in accordance herewith or otherwise approved
by Lender, requested disbursements will be made within five (5) Business Days
after the request therefor. Lender shall not be required to make any
disbursement from a Work Reserve with respect to the Property unless such
requested disbursement is in an amount equal to or greater than $25,000 (other
than the final disbursement).

            (vi) Lender reserves the right, at its option and as a condition to
any disbursement from a Work Reserve, to approve (which shall not be
unreasonably withheld, delayed or conditioned) (i) all drawings and plans and
specifications, if any, for any Work which require aggregate payments in amounts
exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan
Amount with respect to the applicable Property or (y) $250,000, and (ii) all
contracts and work orders with materialmen, mechanics, suppliers,
subcontractors, contractors and other parties providing labor or materials in
connection with any Work which require aggregate payments in amounts exceeding
the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with
respect to the applicable Property or (y) $250,000. Upon Lender's reasonable
request, the Borrowers shall assign (to the extent assignable) any drawings,
plans and specifications, contracts or subcontracts to Lender. Drawings, plans
and specifications, contracts and work orders approved by Lender shall not be
changed in any material respect without Lender's prior written consent, which
shall not be unreasonably withheld, delayed or conditioned.

            (vii) The Borrowers shall have delivered a certificate to Lender
from an Architect certifying that the Work has been completed in a good and
workmanlike manner in accordance with all applicable laws for any item in excess
of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount
with respect to the applicable Property or (y) $250,000. Lender may retain its
own architect or engineer ("LENDER'S CONSULTANT") to review any plans and
specifications for any item in excess of the greater of (x) five percent (5%) of
the Aggregate Allocated Loan Amount with respect to the applicable Property or
(y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost
and expense.

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            (viii) The Borrowers shall have delivered to Lender a certificate of
the Borrowers substantially in the form of Exhibit L attached hereto certifying
as to the actual costs which were incurred by the Borrowers to complete such
Work, which costs shall not materially exceed the amount budgeted for such Work
under the CapEx/FF&E Budget then in effect unless approved by Lender, which
shall not be unreasonably withheld, delayed or conditioned (together with
supporting documentation reasonably acceptable to Lender).

            (ix) The Borrowers shall have delivered to Lender all necessary
material certificates, authorizations, permits and licenses which are required
to permit the construction and completion of the Work, as issued by the
appropriate Governmental Authority. The Borrowers, to the full extent permitted
by applicable law, hereby assigns to Lender as additional security for the
payment of the Obligations and the observance and performance by the Borrowers
of the terms, covenants and provisions of the Loan Documents all right, title
and interest which the Borrowers may now have or may hereafter acquire in and to
such certificates, authorizations, permits and licenses.

            (x) Lender may require an inspection of the Property prior to making
a monthly disbursement from the applicable Work Reserve in order to verify
completion of the Work for which disbursement is sought in excess of the greater
of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to
the applicable Property or (y) $250,000. Lender may require that such inspection
be conducted by Lender's Consultant and/or may require a copy of a certificate
of completion by an independent qualified architect or engineer acceptable to
Lender prior to the disbursement of any amounts from the applicable Work
Reserve. The Borrowers shall pay the reasonable out-of-pocket expense of such
inspections as reasonably required hereunder, whether such inspections are
conducted by Lender, Servicer, Lender's Consultant or by an independent
qualified professional.

      (B) PERFORMANCE OF WORK.

            (i) The Borrowers shall complete all Work in a good and workmanlike
manner as soon as practicable following the commencement thereof substantially
in accordance with the applicable budget approved by Lender in accordance with
the terms of this Loan Agreement. The insufficiency of the balance in the
applicable Work Reserve shall not relieve the Borrowers from their obligations
to perform and complete the related Work as herein provided or to fulfill all
other preservation and maintenance covenants in the Loan Documents.

            (ii) If Lender determines in its reasonable discretion that any Work
is not being performed in a workmanlike or timely manner or that any Work has
not been completed in a workmanlike manner, Lender shall have the option to
withhold disbursement for such unsatisfactory work and so notify the Borrowers
with reasonable detail regarding the basis for Lender's dissatisfaction and,
after the expiration of forty-five (45) days from the giving of such notice by
Lender to the Borrowers of such unsatisfactory work without the cure thereof
(or, if such unsatisfactory work is susceptible of a cure but cannot reasonably
be cured within said forty-five (45) day period and provided that the Borrowers
shall have commenced to cure such unsatisfactory work within said forty-five
(45) day period and thereafter diligently and expeditiously proceeds to cure the
same, after the expiration of such longer period as is reasonably necessary for
the Borrowers in the exercise of due diligence to cure such

                                       77


unsatisfactory work, up to a maximum of an additional sixty (60) days, subject
to Force Majeure, without the cure thereof), Lender may proceed under existing
contracts or contract with third parties to complete such Work, as the case may
be, and apply amounts contained in the applicable Work Reserve toward the labor
and materials necessary to complete the same, without providing any additional
prior notice to the Borrowers, and exercise any and all other remedies available
to Lender upon and during the continuance of an Event of Default hereunder.

            (iii) In order to facilitate Lender's completion or making of any
Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right
to enter onto each Property during normal business hours after the expiration of
the notice specified above and perform, subject to the rights of tenants, any
and all work and labor necessary to complete the applicable Work and/or employ
watchmen to protect the Property from damage. All sums so expended by Lender
shall be deemed to have been advanced under the Loan to the Borrowers and
secured by the applicable Mortgage. For this purpose, the Borrowers constitute
and appoint Lender their true and lawful attorney-in-fact with full power of
substitution to complete or undertake the applicable Work in the name of the
Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked. Upon the
occurrence and during the continuance of an Event of Default, the Borrowers
empower said attorney-in-fact as follows: (i) to use any funds in the applicable
Work Reserve for the purpose of making or completing any Work; (ii) to make such
additions, changes and corrections to any Work as shall be reasonably necessary
or desirable to complete the same; (iii) to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for such
purposes; (iv) to pay, settle or compromise all existing bills and claims which
are or may become Liens against any Property, or as may be necessary or
desirable for the completion of any Work, or for clearance of title; (v) to
execute all applications and certificates in the name of the Borrowers which may
be required by any of the contract documents; (vi) in its reasonable discretion,
to prosecute and defend all actions or proceedings in connection with any
Property or the rehabilitation and repair of such Property; and (vii) to do any
and every act which the Borrowers might do in their own behalf to fulfill the
terms of this Loan Agreement.

            (iv) Nothing in this Section shall: (i) make Lender responsible for
making or completing any Work; (ii) require Lender to expend funds in addition
to the amounts on deposit in the applicable Work Reserve to make or complete any
Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to
demand from the Borrowers additional sums to make or complete any Work.

            (v) The Borrowers shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer, architect or
inspector) or third parties performing any Work pursuant to this Section 6.7 to
enter onto any Property during normal business hours upon reasonable notice
(subject to the rights of tenants under their Leases) to inspect the progress of
any Work and all materials being used in connection therewith, to examine all
plans and shop drawings relating thereto which are or may be kept at any
Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The
Borrowers shall use commercially reasonable efforts to cause all contractors and
subcontractors to cooperate with Lender or Lender's representatives or such
other persons described above in connection with inspections described in this
Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B).

                                       78


            (vi) All Work and all materials, equipment, fixtures and any other
item comprising a part thereof shall be constructed, installed or completed, as
applicable, free and clear of all mechanic's, materialman's or other liens
(except for the Permitted Encumbrances).

            (vii) All Work shall comply with all applicable legal requirements
of all Governmental Authorities having jurisdiction over the Properties and
applicable insurance requirements, including, without limitation, applicable
building codes, special use permits, environmental regulations and requirements
of insurance underwriters.

      (C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender
harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations, out-of-pocket costs and expenses
(including, without limitation, litigation costs and reasonable attorneys' fees
and expenses) arising from or in any way connected with the performance of the
Work, except to the extent caused by the bad faith, willful misconduct or gross
negligence of Lender. The Borrowers shall assign to Lender all rights and claims
the Borrowers may have against all Persons supplying labor or materials in
connection with the Work; provided, however, that Lender may not pursue any such
right or claim or pursue any other action with respect to such rights and claims
unless an Event of Default has occurred and remains uncured.

SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the
Obligations in full, a Cash Trap Event shall occur, then for so long as such
Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise
expressly provided below) shall be deposited with Lender (or its Servicer or
agent) and held in the Lock Box Account in accordance with the terms of the Cash
Management Agreement (said funds, together with any interest thereon, the "CASH
TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when
the Debt Yield is less than the Minimum Debt Yield for the trailing twelve (12)
month period ending on such Calculation Date and shall continue to exist until
such time as the Minimum Debt Yield test has been satisfied for three (3)
consecutive Calculation Dates (on a trailing twelve (12) month basis) following
the commencement of the applicable Cash Trap Event. Notwithstanding that the
Debt Yield is less than the Minimum Debt Yield as of any Calculation Date, no
Cash Trap Event shall be deemed to have occurred as a result of such event if
the Borrowers make a principal prepayment of the Aggregate Outstanding Principal
Balance (which prepayment amount shall be disbursed on the next Payment Date in
accordance with the terms of the Cash Management Agreement), within three (3)
Business Days after the date of delivery of the financial statements disclosing
the existence of such Cash Trap Event (or the date on which such financial
statements are required to be delivered pursuant to Section 5.1), in an amount
equal to the greater of (x) one percent (1%) of the Aggregate Outstanding
Principal Balance, or (y) 120% of the amount, as determined by Lender in its
reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the
Minimum Debt Yield if such calculation was recalculated as provided above
assuming that such amount was applied to reduce the Aggregate Outstanding
Principal Balance as of the first day of the relevant measuring period. During
the continuance of a Cash Trap Event, provided that no Event of Default shall
have occurred and be continuing, any funds on deposit in the Cash Trap Reserve
may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be
applied to (i) prepayment of the Aggregate Outstanding Principal Balance as
provided above, (ii) Capital Expenditures reasonably approved by Lender, or
(iii) scheduled payments (not to exceed $525,000 in the aggregate) of principal
and interest

                                       79


under the Loan and the Allocable Portion of the Mezzanine Loan (to be applied in
accordance with the terms of the Cash Management Agreement). Any funds on
deposit in the Cash Trap Reserve shall continue to be held as additional
Collateral in accordance with this Section 6.8 until the earlier of (a) the date
that such funds are applied or disbursed pursuant to the foregoing sentence or
(b) the date that the Minimum Debt Yield test has been satisfied for three (3)
consecutive months (as determined above), at which time, provided no Event of
Default exists, and no Cash Trap Event has commenced, such funds, together with
any and all amounts then held in the Minimum Balance Sub-Account (as defined in
the Cash Management Agreement), shall be automatically released to the Borrowers
without any further certification requirements on the part of the Borrowers. The
existence of a Cash Trap Event shall be determined by Lender in its reasonable
good faith determination. If Lender determines that a Cash Trap Event has
occurred, Lender shall send the Borrowers written notice thereof.
Notwithstanding any provision herein to the contrary, if an Event of Default has
occurred and is continuing, all funds on deposit in the Cash Trap Reserve and
any subsequent Excess Cash Flow, while such Event of Default is continuing, may
be applied by Lender to payment of the Loan (including payment of any Prepayment
Consideration) or other Obligations (or to the obligations of the Mezzanine
Borrowers to Mezzanine Lender) as Lender may elect.

                                   ARTICLE VII
                       DEPOSIT ACCOUNT; LOCK BOX ACCOUNT;
                                 CASH MANAGEMENT

SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT.

      (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more
deposit accounts shall be established at the Borrowers' sole cost and expense in
the name of Lender, as secured party hereunder (said accounts, and any accounts
replacing same in accordance with this Loan Agreement and the Deposit Account
Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial
institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"),
pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT
AGREEMENT") substantially similar to Lender's form or otherwise in form and
substance reasonably acceptable to Lender, executed and delivered by the
Borrowers and the Deposit Bank. The Deposit Account shall be under the sole
dominion and control of Lender (which dominion and control may be exercised by
Servicer). Among other things, the Deposit Account Agreement shall provide that
the Borrowers shall have no access to or control over the Deposit Account, that
all available funds on deposit in the Deposit Account shall be transferred by
wire transfer (or transfer via the ACH System) on each Business Day by the
Deposit Bank into the Lock Box Account, for application in accordance with the
Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall
be directed to deliver to the Borrowers copies of bank statements and other
information made available by the Deposit Bank and the Lock Box Account Bank
concerning the Deposit Account and the Lock Box Account.

            (ii) Upon establishing the Deposit Account, (1) the Borrowers shall
cause any and all Operating Revenues, including distributions or other payments
made directly or indirectly to the Borrowers, Manager, or any of their
respective Affiliates, from any Beverage Company, to be deposited promptly into
the Deposit Account and in no event later than two (2) Business Days after the
same are paid to or for the benefit of the Borrowers, and (2) the Borrowers
shall obtain

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agreements (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from
each of the Persons paying or disbursing credit card receivables (the "CREDIT
CARD COMPANIES"), substantially similar to Lender's form or otherwise in form
and substance reasonably acceptable to Lender, pursuant to which the Credit Card
Companies agree to pay all credit card receivables into the Lock Box Account,
and acknowledge and agree that Lender shall have a first priority perfected
security interest in such credit card receivables. To the extent that the
Borrowers or any Person on the Borrowers' behalf holds any Receipts, whether in
accordance with this Loan Agreement or otherwise, the Borrowers shall be deemed
to hold the same in trust for Lender for the protection of the interests of
Lender hereunder and under the Loan Documents. The Borrowers represent and
warrant that, as of the date hereof, the only Credit Card Companies paying or
disbursing credit card receivables with respect to the Property are Chase
Merchant Services, American Express, Discover Financial Service, Diners Club,
JCB (Japanese Credit Bureau), and, if any of the Borrowers shall hereafter enter
into an agreement with any other Credit Card Company pursuant to which such
Credit Card Company shall pay credit card receivables with respect to the
Properties, such Borrower shall promptly obtain a Credit Card Receivables
Payment Direction Letter in form and substance reasonably acceptable to Lender
from such Credit Card Company.

            (iii) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses incurred by Lender in connection with the transactions and other
matters contemplated by this Section 7.1, including but not limited to, Lender's
reasonable attorneys' fees and expenses, and all reasonable fees and expenses of
the Deposit Bank and the Lock Box Account Bank, including without limitation
their reasonable attorneys' fees and expenses.

      (B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms
of the Cash Management Agreement, an Eligible Account shall be established in
the name of Lender, as secured party hereunder, to serve as the "Lock Box
Account" (said account, and any account replacing the same in accordance with
this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT";
and the depositary institution in which the Lock Box Account is maintained, the
"LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion
and control of Lender (which dominion and control may be exercised by Servicer);
and except as expressly provided hereunder and/or in the Cash Management
Agreement, the Borrowers shall not have the right to control or direct the
investment or payment of funds therein during the continuance of an Event of
Default. Lender may elect to change any financial institution in which the Lock
Box Account shall be maintained if such institution is no longer an Eligible
Bank, upon not less than five (5) Business Days' notice to the Borrower. The
Lock Box Account shall be deemed to contain such sub-accounts as Lender may
designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts
and need not be separate Eligible Accounts. The Sub-Accounts shall include the
following as more particularly described in the Cash Management Agreement:

            (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box
Account established for the purposes of reserving for payments of principal and
interest and other amounts due under the Loan Documents (but without duplication
of amounts covered under item (ii) below); and

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            (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box
Account established for the purpose of holding funds in the Reserves including:
(a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Capital
Improvement Reserve Sub-Account"; (c) the "Hazardous Materials Remediation
Reserve Sub-Account"; (d) the "Extraordinary Receipts Sub-Account" (e) the
"Mezzanine Loan Debt Service Sub-Account"; (f) the "Minimum Balance
Sub-Account"; and (g) "Cash Trap Reserve Sub-Account".

SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box
Account shall be allocated to the Sub-Accounts or the other Accounts (or paid,
as the case may be) in accordance with the Cash Management Agreement.

SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default
shall occur and be continuing, then notwithstanding anything to the contrary in
this Section or elsewhere, Lender shall have all rights and remedies available
under applicable law and under the Loan Documents. Without limitation of the
foregoing, for so long as an Event of Default exists, Lender may apply any and
all funds in the Deposit Account, and/or any Sub-Accounts against all or any
portion of any of the Obligations, in any order.

                                  ARTICLE VIII
                          DEFAULT, RIGHTS AND REMEDIES

SECTION 8.1 EVENT OF DEFAULT.

      "EVENT OF DEFAULT" means the occurrence or existence of any one or more of
the following:

      (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled
payment amount when the same is due under this Loan Agreement, the Note, or any
other Loan Documents (whether such amount is interest, principal, Reserves, or
otherwise), or to pay for any Insurance Policies required pursuant to Section
5.4 hereof; or

      (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time
to time owing under this Loan Agreement, the Note, or any other Loan Documents
(other than amounts subject to the preceding paragraph) within ten (10) days
after written notice to the Borrowers; or

      (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to
perform or comply with any term or condition contained in Section 5.1 which
continues for a period of ten (10) days after written notice to the Borrowers
(except that no notice or grace period shall be granted for any breach under
Section 5.1(H)); or

      (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE
PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19,
5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary
Lien under Section 5.18 or 11.1, the same shall not constitute an Event of
Default if (i) within forty-five (45) days after the filing thereof, the
Borrowers shall either cause the same to be removed of record by payment,
bonding or otherwise, or (ii) same is being contested in good faith in
accordance with Section 5.3(B) hereof); or

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      (E) BREACH OF WARRANTY. Any representation, warranty, certification or
other statement made by any Borrower, Guarantor or Manager in any Loan Document
or in any statement or certificate at any time given in writing pursuant to or
in connection with any Loan Document is false in any material respect as of the
date made; or

      (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the
performance of or compliance with any term contained in this Loan Agreement or
the other Loan Documents and such default is not fully cured within thirty (30)
days after receipt by the Borrowers of written notice from Lender of such
default (other than occurrences described in other provisions of this Section
8.1 for which a different grace or cure period is specified or which constitute
immediate Events of Default); provided however that if (i) the default is
capable of cure but with diligence cannot be cured within such period of thirty
(30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced
the cure within such thirty (30) day period and has pursued such cure
diligently, and (iii) each Borrower delivers to Lender promptly following
written demand (which demand may be made from time to time by Lender) evidence
reasonably satisfactory to Lender of the foregoing, then such period shall be
extended for so long as is reasonably necessary for the Borrowers in the
exercise of due diligence to cure such default, but in no event beyond one
hundred and twenty (120) days after the original notice of default; or

      (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court
enters a decree or order for relief with respect to any Borrower Party, in an
Involuntary Borrower Bankruptcy, which decree or order is not stayed or other
similar relief is not granted under any applicable federal or state law unless
dismissed within ninety (90) days; (ii) the occurrence and continuance of any of
the following events for ninety (90) days unless dismissed or discharged within
such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or
order of a court for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over any Borrower
Party or over all or a substantial part of its property, is entered, or (z) an
interim receiver, trustee or other custodian is appointed without the consent of
any Borrower Party, for all or a substantial part of the property of such
Person; or

      (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for
relief is entered with respect to any Borrower Party, or any Borrower Party
commences a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for any Borrower Party or for all or a substantial part of the
property of any Borrower Party; (ii) any Borrower Party makes any assignment for
the benefit of creditors; or (iii) the Board of Directors or other governing
body of any Borrower Party adopts any resolution or otherwise authorizes action
to approve any of the actions referred to in this subsection 8.1(H); or

      (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as
described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the
Collateral becomes property of the estate or subject to the automatic stay in
any case or proceeding under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect (provided that if the
same occurs in the context of an involuntary proceeding, it shall not

                                       83


constitute an Event of Default if it is dismissed or discharged within ninety
(90) days following its occurrence); or

      (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing
its present or prospective inability to pay its debts as they become due; or

      (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of
attachment, or similar process is entered or filed against any Borrower Party or
any of its assets, which claim is not fully covered by insurance (other than
with respect to the amount of commercially reasonable deductibles permitted
hereunder), would have a Material Adverse Effect and remains undischarged,
unvacated, unbonded or unstayed for a period of forty-five (45) days; or

      (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of their business and such order
continues for more than thirty (30) days; or

      (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Mortgage or any
of the Loan Documents for any reason ceases to be in full force and effect or
ceases to be a legally valid, binding and enforceable obligation of the
Borrowers or any Lien securing the Obligations shall, in whole or in part, cease
to be a perfected first priority Lien, subject to the Permitted Encumbrances
(except in any of the foregoing cases in accordance with the terms hereof or
under any other Loan Document) and the Borrowers do not take all actions
requested by Lender to correct such defect within ten (10) days after the
written request by Lender to take such action, or any Person under the control
of the Borrowers or Guarantor who is a party thereto, other than Lender, denies
that it has any further liability (as distinguished from denial of the existence
of a Default or Event of Default) under any Loan Documents to which it is party,
or gives notice to such effect; or

      (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any
applicable grace periods shall occur under any of the other Loan Documents; or

      (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An
Uncured Franchise Default occurs; (ii) or any breach or default shall occur in
the material obligations of the Borrowers under any of the Management
Agreements, and such breach or default either is of such a nature or continues
for such a period of time beyond applicable notice and cure periods, if any,
that Manager shall have the right to exercise material remedies as a consequence
thereof; or

      (P) GROUND LEASE DEFAULT. Any default by any of the Borrowers beyond any
applicable grace period shall occur under any Ground Lease or any actual or
attempted surrender, termination, modification or amendment of any Ground Lease
without Lender's prior written consent.

            If more than one of the foregoing paragraphs shall describe the same
condition or event, then Lender shall have the right to select which paragraph
or paragraphs shall apply. In any such case, Lender shall have the right (but
not the obligation) to designate the paragraph or

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paragraphs which provide for non-written notice (or for no notice) or for a
shorter time to cure (or for no time to cure).

SECTION 8.2 ACCELERATION AND REMEDIES.

      (A) Upon the occurrence and during the continuance of any Event of Default
described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal
amount of and accrued interest and fees on the Loan and all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
requirements of any kind, all of which are hereby expressly waived by the
Borrowers. Upon and at any time after the occurrence of any other Event of
Default, at the option of Lender, which may be exercised without notice or
demand to anyone, all or any portion of the Loan and other Obligations shall
immediately become due and payable.

      (B) Upon the occurrence and during the continuance of an Event of Default,
all or any one or more of the rights, powers, privileges and other remedies
available to Lender against the Borrowers under this Loan Agreement or any of
the other Loan Documents, or at law or in equity, may be exercised by Lender at
any time and from time to time, whether or not all or any of the Obligations
shall be declared due and payable, and whether or not Lender shall have
commenced any foreclosure proceeding or other action for the enforcement of its
rights and remedies under any of the Loan Documents with respect to the
Properties. Any such actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singly, successively, together or otherwise,
at such time and in such order as Lender may determine in its sole discretion,
to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or
as set forth herein or in the other Loan Documents. Without limiting the
generality of the foregoing, if an Event of Default is continuing (i) to the
fullest extent permitted by law, Lender shall not be subject to any "one action"
or "election of remedies" law or rule, and (ii) all liens and other rights,
remedies or privileges provided to Lender shall remain in full force and effect
until Lender has exhausted all of its remedies against each Property and the
Mortgages have been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Obligations or the Obligations have been paid in full.

      (C) Lender shall have the right from time to time to partially foreclose
the Mortgages in any manner and for any amounts secured by the Mortgages then
due and payable as determined by Lender in its sole discretion including,
without limitation, the following circumstances: (i) in the event the Borrowers
default beyond any applicable grace period in the payment of one or more
scheduled payments of principal and interest, Lender may foreclose the Mortgage
to recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose the Mortgage or any of them to recover so much of the
principal balance of the Loan as Lender may accelerate and such other sums
secured by the Mortgage as Lender may elect. Notwithstanding one or more partial
foreclosures, the Property shall remain subject to the Mortgage to secure
payment of sums secured by the Mortgage and not previously recovered.

      (D) During the continuance of an Event of Default, Lender shall have the
right from time to time to sever the Note and the other Loan Documents into one
or more separate notes,

                                       85


mortgages and other security documents in such denominations as Lender shall
determine in its sole discretion for purposes of evidencing and enforcing its
rights and remedies provided hereunder. The Borrowers shall execute and deliver
to Lender from time to time, within ten (10) days after the request of Lender, a
severance agreement and such other documents as Lender shall reasonably request
in order to effect the severance described in the preceding sentence, all in
form and substance reasonably satisfactory to Lender. The Borrowers hereby
absolutely and irrevocably appoint Lender as their true and lawful attorney,
coupled with an interest, in their name and stead to make and execute all
documents reasonably necessary to effect the aforesaid severance if the
Borrowers fail to do so within ten (10) days of Lender's written request, the
Borrowers ratifying all that their said attorney shall do by virtue thereof.

      (E) Any amounts recovered from the Properties or any other collateral for
the Loan after an Event of Default may be applied by Lender toward the payment
of any interest and/or principal of the Loan and/or any other amounts due under
the Loan Documents in such order, priority and proportions as Lender in its sole
discretion shall determine.

      (F) The rights, powers and remedies of Lender under this Loan Agreement
shall be cumulative and not exclusive of any other right, power or remedy which
Lender may have against the Borrowers pursuant to this Loan Agreement or the
other Loan Documents, or existing at law or in equity or otherwise. Lender's
rights, powers and remedies may be pursued singly, concurrently or otherwise, at
such time and in such order as Lender may determine in Lender's sole discretion.
No delay or omission to exercise any remedy, right or power accruing upon an
Event of Default shall impair any such remedy, right or power or shall be
construed as a waiver thereof, but any such remedy, right or power may be
exercised from time to time and as often as may be deemed expedient. A waiver of
one Default or Event of Default with respect to the Borrowers shall not be
construed to be a waiver of any subsequent Default or Event of Default by the
Borrowers or to impair any remedy, right or power consequent thereon.

SECTION 8.3 PERFORMANCE BY LENDER.

      (A) Upon the occurrence and during the continuance of an Event of Default,
if any of the Borrowers shall fail to perform, or cause to be performed, any
material covenant, duty or agreement contained in any of the Loan Documents
(subject to applicable notice and cure periods), Lender may perform or attempt
to perform such covenant, duty or agreement on behalf of the Borrowers including
making protective advances on behalf of any Borrower, or, in its sole
discretion, causing the obligations of any of the Borrowers to be satisfied with
the proceeds of any Reserve. In such event, the Borrowers shall, at the request
of Lender, promptly pay to Lender, or reimburse, as applicable, any of the
Reserves, any actual amount reasonably expended or disbursed by Lender in such
performance or attempted performance, together with interest thereon at the
Default Rate (including reimbursement of any applicable Reserves), from the date
of such expenditure or disbursement, until paid. Any amounts advanced or
expended by Lender to perform or attempt to perform any such matter shall be
added to and included within the indebtedness evidenced by the applicable Note
and shall be secured by all of the Collateral securing the applicable Loan.
Notwithstanding the foregoing, it is expressly agreed that Lender shall not have
any liability or responsibility for the performance of any obligation of the
Borrowers under this Loan Agreement or any other Loan Document, and it is
further expressly agreed that no such performance by Lender shall cure any Event
of Default hereunder.

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      (B) Lender may cease or suspend any and all performance required of Lender
under the Loan Documents upon and at any time after the occurrence and during
the continuance of any Event of Default.

SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each
Borrower shall provide such documents and instruments as shall be reasonably
satisfactory to Lender to evidence compliance with any material provision of the
Loan Documents applicable to the Borrowers.

                                  ARTICLE IX .
               SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,
                            WARRANTIES AND COVENANTS

SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower
Party hereby represents, warrants and covenants as of the Closing Date and until
such time as all Obligations are paid in full, that absent express advance
written waiver from Lender, which may be withheld in Lender's sole discretion,
that such Primary Borrower Party:

      (A) does not own and will not own any assets other than the Properties
(including incidental personal property necessary for the operation thereof and
proceeds therefrom) or direct or indirect ownership interests in the Borrowers,
and other wholly owned subsidiaries of the Primary Borrower Parties established
solely for the purpose of holding liquor licenses with respect to one or more of
the Properties, and with respect to Member, direct or indirect ownership
interests in the Crossed Borrowers as of the date of this Agreement (all of the
foregoing ownership interests being referred to herein, collectively, as the
"OWNERSHIP INTERESTS") or, with respect to each of the Primary Borrower Parties,
such incidental assets as are necessary to enable it to discharge its
obligations with respect to the Borrowers;

      (B) is not engaged and will not engage in any business, directly or
indirectly, other than the ownership, management and operation of the
Properties, the Crossed Properties as of the date of this Agreement, or the
Ownership Interests;

      (C) has not at any time since the SPE Effective Date entered into and will
not enter into any contract or agreement with any partner, member, shareholder,
trustee, beneficiary, principal or Affiliate of any Primary Borrower Party
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms-length basis with third
parties other than such Affiliate (including the Management Agreements);

      (D) has not incurred any debt that remains outstanding as of Closing and
will not incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted
Indebtedness, and (iii) the Mezzanine Loan;

      (E) has not made any loans or advances to any Person that remains
outstanding as of Closing and will not make any loan or advances to any Person
(including any of its Affiliates), and has not acquired and will not acquire
obligations or securities (other than the Ownership Interests) of any of its
Affiliates other than the other Borrower Parties;

                                       87


      (F) is and reasonably expects to remain solvent and pay its own
liabilities, indebtedness, and obligations of any kind from its own separate
assets as the same shall become due;

      (G) has at all times since the SPE Effective Date done or caused to be
done and will do all things necessary to preserve its existence, and will not,
and no partner, member, shareholder, trustee, beneficiary, or principal will,
further amend, modify or otherwise change, its partnership certificate,
partnership agreement, articles of incorporation, by-laws, articles of
organization, operating agreement, or other organizational documents, as
modified, amended, restated or supplemented as of the date hereof, in any manner
with respect to the matters set forth in this Article IX;

      (H) has at all times since the SPE Effective Date continuously maintained
its existence and has at all times since the SPE Effective Date been qualified
to do business, and shall continue to maintain its existence and be qualified to
do, business in all states necessary to carry on its business, specifically
including in the case of each Borrower, the state where its Property is located;

      (I) has at all times since the SPE Effective Date conducted and operated,
and will conduct and operate its business as presently conducted and operated
and otherwise contemplated with respect to the ownership of its Property, or the
ownership of the Ownership Interests, as applicable;

      (J) has at all times since the SPE Effective Date maintained, and will
maintain books and records and bank accounts (other than bank accounts
established hereunder, or established by Manager with respect to the operations
of the Properties pursuant to the Management Agreement) separate from those of
its partners, members, shareholders, trustees, beneficiaries, principals,
Affiliates, and any other Person and has at all times since the SPE Effective
Date maintained and will maintain separate financial statements except that it
may also be included in consolidated financial statements of its Affiliates;

      (K) has at all times since the SPE Effective Date been and held itself out
to the public as, and will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other Person (including
any of its partners, members, shareholders, trustees, beneficiaries, principals
and Affiliates, and any Affiliates of any of the same), and not as a department
or division of any Person and has at all times since the SPE Effective Date
corrected and will correct any known misunderstandings regarding its existence
as a separate legal entity;

      (L) has at all times since the SPE Effective Date paid, and will pay the
salaries of its own employees, if any;

      (M) has at all times since the SPE Effective Date allocated, and will
allocate fairly and reasonably any overhead for shared office space;

      (N) has at all times since the SPE Effective Date used, and will use its
own stationery, invoices and checks;

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      (O) has at all times since the SPE Effective Date filed, and will file its
own tax returns with respect to itself (or consolidated tax returns, if
applicable) as may be required under applicable law;

      (P) has at all times since the SPE Effective Date maintained, and
reasonably expects to maintain adequate capital (taken as a whole with all of
the other Borrowers) for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;

      (Q) will not seek, acquiesce in, or suffer or permit its liquidation,
dissolution or winding up, in whole or in part;

      (R) will not enter into any transaction of merger or consolidation, and
will not acquire by purchase or otherwise all or substantially all of the
business or assets of, or any stock or beneficial ownership (other than the
Ownership Interests) of, any Person;

      (S) has not at any time since the SPE Effective Date commingled or
permitted to be commingled, and will not commingle or permit to be commingled,
its funds or other assets with those of any other Person (other than, with
respect to the Borrowers, each other Borrower, or as may be held by Manager, as
agent, for each Borrower pursuant to the terms of the Management Agreement, and
except for funds deposited in the Accounts in accordance with the Loan
Documents);

      (T) has at all times since the SPE Effective Date maintained, and will
maintain its assets in such a manner that it is not costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person;

      (U) does not and will not hold itself out to be responsible for the debts
or obligations (other than the Obligations and the Crossed Indebtedness as of
the date of this Agreement) of any other Person;

      (V) has not guaranteed or otherwise become liable in connection with any
obligation of any other Person that remains outstanding, and will not guarantee
or otherwise become liable on or in connection with any obligation (other than
the Obligations and the Crossed Indebtedness as of the date of this Agreement)
of any other Person that remains outstanding;

      (W) except for funds deposited into the Accounts in accordance with the
Loan Documents, shall not hold title to its assets other than in its name; and

      (X) shall comply with all of the assumptions, statements, certifications,
representations, warranties and covenants regarding or made by it contained in
or appended to the nonconsolidation opinion delivered pursuant hereto.

SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to
their respective obligations under Section 9.1, each Borrower, General Partner
and Member hereby represents, warrants and covenants, as of the Closing Date and
until such time as all Obligations are paid and satisfied in full, that absent
express advance written waiver from Lender, which may be withheld in Lender's
sole discretion:

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      (A) each General Partner shall at all times act as the sole general
partner of each Borrower that is a limited partnership, with all of the rights,
powers, obligations and liabilities thereof under the limited partnership
agreement of such Borrower and shall take any and all actions and do any and all
things necessary or appropriate to the accomplishment of the same and will not
engage in any other business;

      (B) Member shall at all times act as the sole member of each Borrower and
Crossed Borrower as of the date of this Agreement that is a limited liability
company with all of the rights, powers, obligations and liabilities thereof
under the limited liability company operating agreement of such Borrower or
Crossed Borrower and shall take any and all actions and will do any and all
things necessary or appropriate to the accomplishment of the same and will not
engage in any other business;

      (C) each Borrower that is a limited liability company shall not, without
the prior written consent of its Member (including the unanimous written consent
of its Member's board of directors including the Independent Directors or the
unanimous written consent of each of the Borrowers' board of managers including
the Independent Directors), and each Borrower that is a limited partnership
shall not, without the prior written consent of its General Partner (including
the unanimous written consent of General Partner's Independent Directors),
institute proceedings for itself to be adjudicated bankrupt or insolvent;
consent to the institution of bankruptcy or insolvency proceedings against
itself; file a petition seeking, or consent to, reorganization or relief under
any applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) for itself or a substantial part of its property; make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;

      (D) each Borrower that is a corporation shall not, without the prior
unanimous written consent of its board of directors, including its Independent
Directors, institute proceedings for itself to be adjudicated bankrupt or
insolvent; consent to the institution of bankruptcy or insolvency proceedings
against it; file a petition seeking, or consent to, reorganization or relief
under any applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) for itself or a substantial part of its property; make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;

      (E) no Member or any General Partner shall, without the unanimous vote of
its board of directors or board of managers, as the case may be, including, in
each case, its Independent Directors, institute proceedings for itself or any
Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of
a bankruptcy or insolvency proceeding against it or any Borrower; file a
petition seeking, or consent to, reorganization or relief under any applicable
federal or state law relating to bankruptcy; consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) for itself or any Borrower; or a substantial part of its or any
Borrower's property; make any assignment for the benefit of creditors; or admit
in writing its inability to pay its debts generally as they become due;

      (F) except as otherwise permitted hereunder, no Member or any General
Partner shall for itself or for any of the Borrowers (i) liquidate or dissolve,
in whole or in part; (ii) consolidate,

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merge or enter into any form of consolidation with or into any other Person, nor
convey, transfer or lease its or any Borrower's assets substantially as an
entirety to any Person nor permit any Person to consolidate, merge or enter into
any form of consolidation with or into itself or any Borrower, nor convey,
transfer or lease its or any Borrower's assets substantially as an entirety to
any Person; or (iii) amend any provisions of its or any Borrower's
organizational documents containing provisions similar to those contained in
this Article IX; and

      (G) each Member, General Partner and Borrower that is a corporation shall
each promptly elect and at all times maintain at least two (2) Independent
Directors on its board of directors, who shall be selected by such Member,
General Partner or Borrower, as applicable, and be reasonably acceptable to
Lender. Each Borrower that is a single member limited liability company shall
promptly appoint and at all times maintain at least two (2) Independent
Directors on its board of managers, who shall be selected by such Borrower, and
be reasonably acceptable to Lender.

                                    ARTICLE X
                RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS

SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the
right to engage in one or more Secondary Market Transactions with respect to the
Loan, and to structure and restructure all or any part of the Loan, including
without limitation in multiple tranches, as a wraparound loan, or for inclusion
in a REMIC or other Securitization. Without limitation, Lender shall have the
right, at Lender's sole cost (other than each Borrower's internal costs and
expenses and the costs and expenses of the Borrowers' counsel), to cause the
Note and any Mortgage to be split into a first and a second mortgage loan, or
into one or more loans evidenced by multiple notes and secured by multiple
mortgages and/or by ownership interests in any of the Borrowers in whatever
proportion Lender determines, and thereafter to engage in Secondary Market
Transactions with respect to all or any part of the indebtedness and loan
documentation. Each of the Borrower Parties acknowledge that it is the intention
of the parties that all or a portion of the Loan will be securitized and that
all or a portion of the Loan will be rated by one or more Rating Agencies. Each
of the Borrower Parties further acknowledge that additional structural
modifications may be required to satisfy issues raised by any Rating Agencies.
As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale,
assignment, or other transfer of all or any portion of the Obligations or the
Loan Documents or any interest therein to one or more investors, (ii) the sale,
assignment, or other transfer of one or more participation interests in the
Obligations or Loan Documents to one or more investors, (iii) the transfer or
deposit of all or any portion of the Obligations or Loan Documents to or with
one or more trusts or other entities which may sell certificates or other
instruments to investors evidencing an ownership interest in the assets of such
trust or the right to receive income or proceeds therefrom or (iv) any other
Securitization backed in whole or in part by the Loan or any interest therein.

SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all
reasonable efforts and cooperate reasonably and in good faith with Lender in
effecting any such restructuring or Secondary Market Transactions at Lender's
sole cost (other than, with respect to the first successful Securitization and
any related Secondary Market Transaction only (or if the Loan shall be hereafter
split into multiple loans, the first successful Securitization and any related
Secondary Market Transaction with respect to each of such loans), the Borrowers'
internal costs

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and expenses and the costs and expenses of the Borrower Parties' counsel).
Notwithstanding the foregoing or anything to the contrary contained in this
Article X, it is acknowledged and agreed that in no event shall Lender be
responsible for payment of any Borrower Party's (or its Affiliate's) internal
costs and expenses in connection with any Secondary Market Transaction. Such
cooperation shall include without limitation, executing and delivering such
reasonable amendments to the Loan Documents and the organizational documents of
each Borrower as Lender or any Interested Party (as defined below) may request,
provided however that, no such amendment shall modify (i) the weighted average
interest rate payable under the Note (or notes); (ii) the stated maturity date
of the Note, (iii) the amortization of the principal amount of the Note, (iv)
any other material economic terms of the Obligations, (v) the non-recourse
provisions of the Loan or (vi) any provision, the effect of which would increase
the Borrowers' obligations or decrease the Borrowers' rights under the Loan
Documents except to a de minimis extent. The Borrower Parties shall not be
required to provide additional collateral to effect any such restructuring or
Secondary Market Transaction after the Closing Date. The Borrower Parties shall
not be required to pay any third party (other than, which respect to the first
successful Securitization and any related Secondary Market Transaction only (or
if the Loan shall be hereafter split into multiple loans, the first successful
Securitization and any related Secondary Market Transaction with respect to each
of such loans), the costs and expenses of the Borrowers' counsel) costs and
expenses incurred by Lender in connection with any such Secondary Market
Transaction unless otherwise expressly payable by the Borrower Parties under
this Loan Agreement or the other Loan Documents.

SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense
(other than, with respect to the first successful Securitization and any related
Secondary Market Transaction only (or if the Loan shall be hereafter split into
multiple loans, the first successful Securitization and any related Secondary
Market Transaction with respect to each of such loans), the Borrowers' internal
costs and expenses and the costs and expenses of the Borrower Parties' counsel),
shall provide such access to personnel and such information and documents
relating to the Borrower Parties, Manager, the Properties and Collateral and the
business and operations of all of the foregoing and such opinions of counsel
(including nonconsolidation opinions) as any Rating Agency may request or as
Lender or any other Interested Party may reasonably request in connection with
any such Secondary Market Transaction including, without limitation, updated
financial information, appraisals, market studies, environmental reviews (Phase
I's and, if appropriate, Phase II's), mold inspection, property condition
reports and other due diligence investigations together with appropriate
verification of such updated information and reports through letters of auditors
and consultants and, as of the closing date of the Secondary Market Transaction,
updated representations and warranties made in the Loan Documents and such
additional representations and warranties as any Rating Agency may request or
any purchaser, transferee, assignee, trustee, servicer or potential investor
(the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED
PARTIES") may reasonably request, to the extent such updated representations and
warranties are true. On or prior to the date of closing of any Secondary Market
Transaction, the Borrowers, at Lender's cost and expense (other than with
respect to the first successful Securitization and any related Secondary Market
Transaction only (or if the Loan shall be hereafter split into multiple loans,
the first successful Securitization and any related Secondary Market Transaction
with respect to each of such loans), the Borrowers' internal costs and expenses
and the costs and expenses of the Borrowers' counsel), shall, if required by any
Rating Agency or reasonably required by Lender, provide revisions or

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"bringdowns" to any opinions delivered at Closing (including nonconsolidation
opinions), or if required by the Rating Agencies, new versions of such opinions,
which opinions shall be consistent in substance with the opinions covered by the
original opinions, addressed to Lender, any trustee under any Securitization
backed in whole or in part by the Loan, any Rating Agency that assigns a rating
to any securities in connection therewith and any investor purchasing securities
therein. Lender shall be permitted to share all such information with the
investment banking firms, Rating Agencies, accounting firms, law firms, other
third party advisory firms, potential investors, servicers and other service
providers and other parties directly involved in any proposed Secondary Market
Transaction. The Borrowers understand that any such information may be
incorporated into any offering circular, prospectus, prospectus supplement,
private placement memorandum or other offering documents for any Secondary
Market Transaction. Lender and the Rating Agencies shall be entitled to rely
upon such information. Without limiting the foregoing, the Borrowers and
Guarantor shall provide in connection with each (i) preliminary and final
private placement memorandum or (ii) a preliminary and final prospectus or
prospectus supplement, as applicable, prepared in connection with any Secondary
Market Transaction (the documents referred to in the foregoing clauses (i) and
(ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably
satisfactory to the Borrowers and Guarantor certifying that the Borrowers and
Guarantor have examined such Disclosure Documents specified by Lender and, that
the sections of such Disclosure Document describing the Borrowers, Guarantor,
the Properties and Manager do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made, not
materially misleading. The Borrowers and Guarantor shall each indemnify, defend,
protect and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors,
employees, agents and each Person, if any, who controls Lender, Merrill Lynch or
any such Affiliate within the meaning of Section 15 of the Securities Act of
1933 or Section 20 of the Securities Exchange Act of 1934, and any other
placement agent or underwriter with respect to any Securitization or Secondary
Market Transaction from and against any losses, claims, damages and liabilities
that arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Disclosure Document as to the
Borrowers, Guarantor, Manager and the Properties or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated in such information or necessary in order to make the statements in
such information not materially misleading; provided, however, the Borrowers
shall not be required to indemnify Merrill Lynch for any liabilities arising out
of untrue statements or omissions that were identified to Lender in writing or
are set forth in any third party report not prepared by the Borrowers or their
Affiliates unless such reports are caused to be incorrect or misleading based
upon information provided by the Borrowers or their Affiliates. Lender may
publicize the existence of the Obligations in connection with Lender's Secondary
Market Transaction activities or otherwise.

SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender
may transfer its obligations under this Loan Agreement and under the other Loan
Documents (or may transfer the portion thereof corresponding to the transferred
portion of the Obligations), and thereafter Lender shall be relieved of any
obligations hereunder and under the other Loan Documents arising after the date
of said transfer with respect to the transferred interest. Each transferee
investor shall become a "Lender" hereunder.

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                                   ARTICLE XI
      RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES

SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or
a Permitted Assumption expressly permitted under this Article XI, Leases entered
into as permitted hereunder, and pledges in connection with the Mezzanine Loan,
the Borrowers shall not cause or suffer to occur or exist, directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, any
sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted
Encumbrances) of (i) all or any part of any Property or any interest therein, or
(ii) any direct or indirect ownership or beneficial interest in any Borrower
(other than to Mezzanine Lender), irrespective of the number of tiers of
ownership, without Lender's consent.

SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following
voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges
(each, a "TRANSFER") of a direct, indirect or beneficial interest in any
Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP
INTEREST TRANSFERS"):

      (A) A Transfer of no more than forty-nine percent (49%) of the direct or
indirect ownership interests in such Borrower (in the aggregate), provided that,
following such Transfer, Guarantor maintains control of such Borrower.

      (B) A Transfer or a series of Transfers that result in the proposed
transferee, together with Affiliates of such transferee, owning in the aggregate
(directly or indirectly) more than forty-nine percent (49%) of the economic and
beneficial interests in such Borrower (where, prior to such Transfer, such
proposed transferee and its Affiliates owned in the aggregate (directly or
indirectly) forty-nine percent (49%) or less of such interests in that
Borrower); and, provided that such Transfer shall not be a Permitted Ownership
Interest Transfer unless Lender receives, prior to such Transfer, both (x)
evidence reasonably satisfactory to Lender (which shall include a legal
non-consolidation opinion reasonably acceptable to Lender and the Rating
Agencies) that the single purpose nature and bankruptcy remoteness of such
Borrower (and its members and general partners, as applicable) following such
Transfer or Transfers will be the same as prior to such Transfer or Transfers
and (y) a Rating Agency Confirmation.

      (C) For so long as Guarantor's (or its successor's) stock is traded
through the "over-the-counter market" or through any recognized stock exchange,
any Transfer of all or any portion of the issued and outstanding capital stock
of Guarantor, or the issuance of additional capital stock of Guarantor
(including common or preferred shares) through the "over-the-counter market" or
through any recognized stock exchange.

      (D) The pledge of ownership interests granted by the Mezzanine Borrowers
pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan
Agreement).

      For purposes of this Section 11.2, "control" shall have the meaning given
thereto in the definition of "Affiliate" in Section 1.1 and a "change of
control" of any Person shall include the Transfer of legal or equitable
ownership interests in such Person which after giving effect to such

                                       94


Transfer results in any transferee or pledgee of such interests holding more
than a 49% legal or equitable ownership interest or security interest in such
Person.

SECTION 11.3 ASSUMABILITY.

      (A) The Borrowers shall have the right to request that Lender consent to
(i) a transfer of all of the Properties to another Person (the "TRANSFEREE
BORROWER") and the assumption by the Transferee Borrower of all of the
Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor
with new guarantors and indemnitors who shall assume all of the obligations of
the Guarantors arising from and after such date and release of the Borrowers and
Guarantor from obligations arising from and after such date and (iii) the
replacement of the Mezzanine Borrowers with pledgors of the ownership interests
in the Transferee Borrower (collectively, an "ASSUMPTION"), subject to the
conditions set forth in paragraphs (B) and (C) of this Section. Together with
such written application, the Borrowers will pay to Lender a review fee of
$10,000. The Borrowers also shall pay on demand all of the reasonable
out-of-pocket costs and expenses incurred by Lender, including reasonable
attorneys' fees and expenses, and the fees and expenses of the Rating Agencies,
if any, and other outside entities, in connection with considering any proposed
Assumption, whether or not the same is permitted or occurs.

      (B) Lender shall not withhold its consent to an Assumption (any such
Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon
the conditions that:

            (i) No Event of Default shall have occurred and be continuing at the
time of such Assumption;

            (ii) The Borrowers shall have submitted to Lender true, correct and
complete copies of any and all information and documents reasonably requested by
Lender concerning the Transferee Borrower, replacement guarantors and
indemnitors and all of such information and documents shall be reasonably
acceptable to Lender;

            (iii) Evidence reasonably satisfactory to Lender shall have been
provided showing that the Transferee Borrower and such of its Affiliates as
shall reasonably be designated by Lender comply and will comply with Article IX,
as those provisions may be modified by Lender taking into account the ownership
structure of Transferee Borrower and its Affiliates;

            (iv) The Borrowers shall have obtained (and delivered to Lender) a
Rating Confirmation with respect to the Assumption, the Transferee Borrower, the
new guarantors and indemnitors and all related transactions;

            (v) The Borrowers shall have paid all of Lender's reasonable
out-of-pocket costs and expenses in connection with considering the Assumption,
and shall have paid the amount reasonably requested by Lender as a deposit
against Lender's reasonable costs and expenses in connection with effecting the
Assumption;

            (vi) The Borrowers, the Transferee Borrower, and the replacement
guarantors and indemnitors shall have indicated in writing in form and substance
reasonably satisfactory to Lender their readiness and ability to satisfy the
conditions set forth in Subsection (C) below;

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            (vii) (a) The Transferee Borrower shall be a Permitted Transferee or
(b) the identity, experience and financial condition of the Transferee Borrower
shall otherwise be satisfactory to Lender in its reasonable discretion; and

            (viii) The identity and financial condition of the replacement
guarantors and indemnitors shall be satisfactory to Lender.

      (C) If Lender consents to the proposed Assumption, the Transferee Borrower
and/or Borrowers, as the case may be, shall promptly and as a condition to the
Assumption deliver the following to Lender:

            (i) The Borrowers, the Transferee Borrower, the original and
replacement guarantors and indemnitors shall execute and deliver any and all
documents reasonably required by Lender to evidence the Transfer and Assumption
of the Loan, in form and substance reasonably required by Lender and similar to
those received at Closing;

            (ii) Counsel to the Transferee Borrower and replacement guarantors
and indemnitors shall deliver to Lender opinions in form and substance
reasonably satisfactory to Lender as to such matters as Lender shall reasonably
require in connection with such Assumption, which may include opinions as to
substantially the same matters as were required in connection with the
origination of the Loan including, without limitation, a bankruptcy
non-consolidation opinion;

            (iii) The Borrowers shall cause to be delivered to Lender, an
endorsement (relating to the change in the identity of the Borrowers and
execution and delivery of the Assumption documents) to Lender's policy of title
insurance in form and substance acceptable to Lender, in Lender's reasonable
discretion; and

            (iv) The Borrowers shall deliver to Lender a payment in the amount
of all remaining unpaid reasonable costs incurred by Lender in connection with
the Transfer and Assumption, including but not limited to Lender's reasonable
attorneys' fees and expenses, all recording fees, and all fees payable to the
title company in connection with the Transfer and Assumption.

SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may
obtain the release (each, a "RELEASE") of one or more Properties from the Lien
of the applicable Mortgage(s) in connection with a partial or total defeasance
of the Loan subject to the conditions of the Note and subject to the
satisfaction of the following conditions:

      (A) Lender shall have received from the Borrowers at least fifteen (15)
days prior written notice of the date proposed for such release (the "RELEASE
DATE") which notice is revocable;

      (B) No Event of Default shall have occurred and be continuing as of the
date of such notice and the Release Date;

      (C) On the date proposed for such Release, the Borrowers shall defease all
or a portion of the Loan by delivering a Defeasance Deposit (as defined in the
Note) in an amount necessary to pay all Scheduled Defeasance Payments (as
defined in the Note) for the entire principal amount

                                       96


of the Loan in the case of a total defeasance, or in the case of a partial
defeasance, relating to the Release Price of each Property being released
(together with all accrued and unpaid interest on the principal amount being so
defeased), and such defeasance shall be undertaken in accordance with the terms
and conditions of the Note, and Mezzanine Lender shall have received all amounts
required to be paid to it in connection with such Release under the Mezzanine
Loan Documents;

      (D) If required by any Rating Agency, the Borrowers at their sole cost and
expense, in connection with any partial defeasance, shall have delivered to
Lender, one or more endorsements to the Title Policies delivered to Lender on
the date hereof in connection with the Mortgages insuring that, after giving
effect to such Release, (i) the Liens created hereby and thereby and insured
under the Title Policies are first priority Liens on the respective remaining
Properties subject only to the Permitted Encumbrances applicable to the
remaining Properties and (ii) that the Title Policies remain in full force and
effect and unaffected by such Release;

      (E) Immediately following any Release in connection with any partial
defeasance, both the Debt Service Coverage Ratio and the Debt Yield (based upon
a trailing twelve (12) month period) shall be equal to or greater than the Debt
Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12)
month period) in effect at Closing, or immediately prior to the Release,
whichever is greater;

      (F) Notwithstanding the foregoing, the Borrowers may not obtain the
Release under this Section 11.4 of any Property or Properties which
individually, or in the aggregate (with all Releases since the Closing Date),
have an aggregate Allocated Loan Amount of more than thirty percent (30%) of the
original principal balance of the Loan except pursuant to a total defeasance;

      (G) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses (including, without limitation, title search costs and endorsement
premiums and reasonable attorney's fees and disbursements) incurred by Lender,
Servicer, and any custodian employed by Lender or Servicer, in connection with
the Release; and

      (H) Immediately following such Property Release, each released Property
will be owned by a Person other than the Borrowers, except as otherwise
permitted in connection with any full or partial defeasance of the Loan in
accordance with the terms and conditions of the Note.

Upon satisfaction of the above conditions, Lender shall effectuate the following
(hereinafter referred to as a "PROPERTY RELEASE"): the security interest of
Lender under the Mortgage and other Loan Documents relating to each released
Property shall be released and Lender will execute and deliver any agreements
reasonably requested by the Borrowers to release and terminate or reassign, at
the Borrowers' option, the Mortgage, the applicable Assignment of Leases, and
financing statements as to each released Property; provided, that such release
and termination or reassignment shall be without recourse to Lender and without
any representation or warranty except that Lender shall be deemed to have
represented that such release and termination or reassignment has been duly
authorized and that it has not assigned or encumbered the Mortgage or the other
Loan Documents relating to any released Property (except as contemplated hereby)
and Lender shall return the originals of any Loan Documents that relate solely
to each released Property to the Borrowers; provided, further, that upon the
release and

                                       97


termination or reassignment of Lender's security interest in the Mortgage
relating to a released Property all references herein to the Mortgage relating
to such released Property shall be deemed deleted, except as otherwise provided
herein with respect to indemnities. In addition, promptly after consummation of
any such Property Release and Lender's receipt of the Defeasance Collateral, any
and all Reserves designated as applicable to each released Property held by or
on behalf of Lender shall be returned to the Borrowers.

SECTION 11.5 RESERVED.

SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the
contrary contained herein, provided no Event of Default exists, the Borrowers
may Transfer or dispose of building equipment which is being replaced or which
is no longer necessary in connection with the operation of the Property free
from the lien of the Mortgage, provided that such transfer or disposal will not
have a Material Adverse Effect on the value of any individual Property or on the
Properties taken as a whole, will not materially impair the utility of any
individual Property or the Properties, taken as a whole, and will not result in
a reduction or abatement of, or right of offset against, the Rents payable under
any Lease, in either case as a result thereof, and provided further that any new
building equipment acquired by the Borrowers (and not so disposed of) shall be
subject to the lien of the Mortgage. Lender shall, from time to time, upon the
reasonable request of any Borrower, execute a written instrument in form
reasonably satisfactory to Lender to confirm that such building equipment which
is to be, or has been, sold or disposed of is free from the lien of the
Mortgage.

SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of
Default exists, the Borrowers may, without the consent of Lender, (i) make
immaterial Transfers of portions of the any Property to Governmental Authorities
for dedication for public use, and (ii) grant easements, restrictions,
covenants, reservations and rights of way with respect to any Property in the
ordinary course of business for access, water and sewer lines, telephone and
telegraph lines, electric lines or other utilities or for other similar
purposes, provided that no such transfer, conveyance or encumbrance set forth in
the foregoing clauses (i) and (ii) shall materially impair the utility and
operation of such Property or have a Material Adverse Effect on the value of
such Property taken as a whole. In connection with any Transfer permitted
pursuant to this Section 11.7, Lender shall execute and deliver any instrument
reasonably necessary or appropriate, in the case of the Transfers referred to in
clause (i) above, to release the portion of such Property affected by such
transfer from the lien of the applicable Mortgage or to subordinate the
applicable Mortgage to any such easement, restriction, covenant, reservation or
right of way within ten (10) days of Lender's receipt of the following:

      (A) ten (10) days prior written notice thereof.

      (B) a copy of the instrument or instruments of transfer.

      (C) an officer's certificate given by the Borrowers stating that such
transfer does not materially impair the utility and operation of the Property,
materially reduce the value of the Property or have a Material Adverse Effect.

                                       98


      (D) reimbursement of all of Lender's reasonable, out-of-pocket costs and
expenses incurred in connection with such Transfer.

                                   ARTICLE XII
                        RECOURSE; LIMITATIONS ON RECOURSE

SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article,
and notwithstanding any provision of the Loan Documents other than this Article,
the personal liability of the Borrowers to pay any and all Obligations including
but not limited to the principal of and interest on the debt evidenced by the
Note and any other agreement evidencing the Borrowers' obligations under the
Note shall be limited to (i) the Properties, (ii) the rents, profits, issues,
products and income of the Properties, and (iii) any other Collateral.

Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages
or any of the Loan Documents, Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Obligations secured by the Mortgages or to require that all collateral shall
continue to secure all of the Obligations owing to Lender in accordance with the
Loan Documents.

SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the
Borrowers (but not their members, partners (other than the General Partners),
employees, shareholders agents, directors or officers (the "EXCULPATED
PARTIES")) and Guarantor shall be personally liable to the extent of any
liability, loss, damage, cost or expense (including, without limitation,
reasonable attorneys' fees and expenses) suffered or incurred by Lender
resulting from any and all of the following: (i) fraud of any of the Borrower
Parties or their agents or employees; (ii) any material misrepresentation made
by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan
Document; (iii) insurance proceeds, condemnation awards, or other sums or
payments attributable to the Properties which are not applied in accordance with
the provisions of the Loan Documents; (iv) all rents, profits, issues, products
and income of the Properties received or collected by or on behalf of the
Borrowers or any Borrower Party or Manager and not deposited into the Deposit
Account in accordance with Article VII and the Cash Management Agreement; (v)
failure to turn over to Lender, after an Event of Default, or misappropriation
of any tenant security deposits or rents collected in advance (other than by
Lender or Servicer); (vi) failure to notify Lender of any change in the
principal place of business address of the Borrowers or of any change in the
name of any of the Borrowers or if any of the Borrowers takes any other action
which could make the information set forth in the Financing Statements relating
to the Loan materially misleading; (vii) failure by the Borrowers, or any
indemnitor or guarantor to comply with the covenants, obligations, liabilities,
warranties and representations contained in the Environmental Indemnity or
otherwise pertaining to environmental matters; (viii) material waste with
respect to any of the Properties; (ix) all liabilities and expenses under the
indemnification provisions of Section 10.3; (x) any uncured default under
Section 11.1; (xi) any material uncured default under Article IX; and (xii) any
distributions made in violation of Section 5.28 (to the extent of any such
distribution) including amounts improperly paid or distributed, directly or
indirectly, by Manager in circumvention of such restrictions. Notwithstanding
the preceding sentence or Section 12.1, the Loan shall be fully recourse to the
Borrowers and Guarantor upon the happening of any of the following: (i)

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any Borrower Party's defense of any efforts by Lender to collect or enforce the
Obligations following maturity of the Loan or acceleration of the Loan on
account of an Event of Default under Section 8.1(A), or any other defense of any
efforts by Lender to collect or enforce the Obligations without a good faith
basis following any other Event of Default, and (ii) any condition or event
described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the
Borrowers and Guarantor shall not be liable under this Section 12.2 in
connection with any Involuntary Borrower Bankruptcy unless such involuntary
proceeding is solicited, procured, consented to or acquiesced in by any
Borrower, Guarantor or any Affiliate of either of them or any Involuntary
Borrower Bankruptcy caused by Mezzanine Lender following the exercise by
Mezzanine Lender of its rights under the Mezzanine Loan Documents).

SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the
enforcement of the Environmental Indemnity, the Guaranty or any guaranty or
similar agreement executed in connection with the Loan, (ii) release or reduce
the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or
any other security document, (iv) impair the rights of Lender to enforce any
provisions of the Loan Documents, or (v) limit Lender's ability to obtain a
deficiency judgment or judgment on the Note or otherwise against any Borrower
Party but not any Exculpated Party to the extent necessary to obtain any amount
for which such Borrower Party may be liable in accordance with this Article or
any other Loan Document.

                                  ARTICLE XIII
                 WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES

SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article,
a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or
for any other Borrower Party or Affiliate or to have rights or obligations in
the nature of the rights or obligations of a guarantor or surety (whether by
reason of execution of a guaranty, provision of security for the obligations of
another, or otherwise) then this Article shall apply. This Article shall not
affect the rights of the Waiving Party other than to waive or limit rights and
defenses that Waiving Party would have (i) in its capacity as a guarantor or
surety or (ii) in its capacity as one having rights or obligations in the nature
of a guarantor or surety.

      Waiving Party hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of receivership or bankruptcy of any
of the other Borrower Parties, protest or notice with respect to any of the
obligations of any of the other Borrower Parties, setoffs and counterclaims and
all presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance, the benefits
of all statutes of limitation, and all other demands whatsoever (and shall not
require that the same be made on any of the other Borrower Parties as a
condition precedent to the obligations of Waiving Party), and covenants that the
Loan Documents will not be discharged, except by complete payment and
performance of the obligations evidenced and secured thereby, except only as
limited by the express contractual provisions of the Loan Documents. Waiving
Party further waives all notices that the principal amount, or any portion
thereof, and/or any interest on any instrument or document evidencing all or any
part of the obligations of any of the other Borrower Parties to Lender is due,
notices of any and all proceedings to collect from any of the other Borrower
Parties or any endorser or any other guarantor of all or any part of their
obligations, or from any other person or entity, and, to the extent permitted by
law, notices of

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exchange, sale, surrender or other handling of any security or collateral given
to Lender to secure payment of all or any part of the obligations of any of the
other Borrower Parties.

      Except only to the extent provided otherwise in the express contractual
provisions of the Loan Documents, Waiving Party hereby agrees that all of its
obligations under the Loan Documents shall remain in full force and effect,
without defense, offset or counterclaim of any kind, notwithstanding that any
right of Waiving Party against any of the other Borrower Parties or defense of
Waiving Party against Lender may be impaired, destroyed, or otherwise affected
by reason of any action or inaction on the part of Lender. Waiving Party waives
all rights and defenses arising out of an election of remedies by the Lender,
even though that election of remedies, may have destroyed the Waiving Party's
rights of subrogation and reimbursement against the other Borrower Parties.

      Lender is hereby authorized, without notice or demand, from time to time,
(a) to renew, extend, accelerate or otherwise change the time for payment of, or
other terms relating to, all or any part of the obligations of any of the other
Borrower Parties; (b) to accept partial payments on all or any part of the
obligations of any of the other Borrower Parties; (c) to take and hold security
or collateral for the payment of all or any part of the obligations of any of
the other Borrower Parties; (d) to exchange, enforce, waive and release any such
security or collateral for such obligations; (e) to apply such security or
collateral and direct the order or manner of sale thereof as in its discretion
it may determine; (f) to settle, release, exchange, enforce, waive, compromise
or collect or otherwise liquidate all or any part of such obligations and any
security or collateral for such obligations. Any of the foregoing may be done in
any manner, and Waiving Party agrees that the same shall not affect or impair
the obligations of Waiving Party under the Loan Documents.

      Waiving Party hereby assumes responsibility for keeping itself informed of
the financial condition of all of the other Borrower Parties and any and all
endorsers and/or other guarantors of all or any part of the obligations of the
other Borrower Parties, and of all other circumstances bearing upon the risk of
nonpayment of such obligations, and Waiving Party hereby agrees that Lender
shall have no duty to advise Waiving Party of information known to it regarding
such condition or any such circumstances.

      Waiving Party agrees that neither Lender nor any person or entity acting
for or on behalf of Lender shall be under any obligation to marshal any assets
in favor of Waiving Party or against or in payment of any or all of the
obligations secured hereby. Waiving Party further agrees that, to the extent
that any of the other Borrower Parties or any other guarantor of all or any part
of the obligations of the other Borrower Parties makes a payment or payments to
Lender, or Lender receives any proceeds of collateral for any of the obligations
of the other Borrower Parties, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid or refunded, then, to the extent of such payment or
repayment, the part of such obligations which has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the time immediately preceding such initial payment, reduction or
satisfaction.

      Waiving Party (i) shall have no right of subrogation with respect to the
obligations of the other Borrower Parties; (ii) waives any right to enforce any
remedy that Lender now has or may

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hereafter have against any of the other Borrower Parties any endorser or any
guarantor of all or any part of such obligations or any other person; and (iii)
waives any benefit of, and any right to participate in, any security or
collateral given to Lender to secure the payment or performance of all or any
part of such obligations or any other liability of the other parties to Lender.

      Waiving Party agrees that any and all claims that it may have against any
of the other Borrower Parties, any endorser or any other guarantor of all or any
part of the obligations of the other Borrower Parties, or against any of their
respective properties, shall be subordinate and subject in right of payment to
the prior payment in full of all obligations secured hereby. Notwithstanding any
right of any of the Waiving Party to ask, demand, sue for, take or receive any
payment from the other Borrower Parties, all rights, liens and security
interests of Waiving Party, whether now or hereafter arising and howsoever
existing, in any assets of any of the other Borrower Parties (whether
constituting part of the security or collateral given to Lender to secure
payment of all or any part of the obligations of the other Borrower Parties or
otherwise) shall be and hereby are subordinated to the rights of Lender in those
assets.

                                   ARTICLE XIV
                                  MISCELLANEOUS

SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions
contemplated hereby shall be consummated, the Borrowers agree to promptly pay
all reasonable fees, costs and expenses incurred by Lender in connection with
any matters contemplated by or arising out of this Loan Agreement, including the
following, and all such fees, costs and expenses shall be part of the
Obligations, payable on demand: (A) reasonable fees, costs and expenses
(including reasonable attorneys' fees, and other professionals retained by
Lender) incurred in connection with the examination, review, due diligence
investigation, documentation and closing of the financing arrangements evidenced
by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and
expenses (including reasonable attorneys' fees and other professionals retained
by Lender) incurred in connection with the administration of the Loan Documents
and the Loan and any amendments, modifications and waivers relating thereto; (C)
subject to Section 10.2, reasonable fees, costs and expenses (including
reasonable attorneys' fees) incurred in connection with the review,
documentation, negotiation, closing and administration of any subordination or
intercreditor agreements; and (D) reasonable fees, costs and expenses (including
reasonable attorneys' fees and fees of other professionals retained by Lender)
incurred in any action to enforce or interpret this Loan Agreement or the other
Loan Documents or to collect any payments due from the Borrowers under this Loan
Agreement, the Note or any other Loan Document or incurred in connection with
any refinancing or restructuring of the credit arrangements provided under this
Loan Agreement, whether in the nature of a "workout" or in connection with any
insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due
and payable to Lender after the Closing Date may be paid to Lender pursuant to
the Cash Management Agreement.

SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required
elsewhere herein, whether or not the transactions contemplated hereby shall be
consummated, the Borrowers agree to indemnify, defend, protect, pay and hold
Lender, Servicer and their successors and assigns (including, without
limitation, the trustee and/or the trust under any trust agreement executed in
connection with any Securitization backed in whole or in part by the Loan and
any other Person

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which may hereafter be the holder of the Note or any interest therein), and the
officers, directors, stockholders, partners, members, employees, agents,
Affiliates and attorneys of Lender and such successors and assigns (collectively
called the "INDEMNITEES") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax
Liabilities, broker's or finders fees, reasonable costs, expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of outside counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto) that are
imposed on, incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of (A) the negotiation, execution, delivery,
performance, administration, ownership, or enforcement of any of the Loan
Documents; (B) any of the transactions contemplated by the Loan Documents; (C)
any breach by the Borrowers of any material representation, warranty, covenant,
or other agreement contained in any of the Loan Documents; (D) Lender's
agreement to make the Loan hereunder; (E) any claim brought by any third party
arising out of any condition or occurrence at or pertaining to the Properties;
(F) any design, construction, operation, repair, maintenance, use, non-use or
condition of the Properties or Improvements, including claims or penalties
arising from violation of any applicable laws or insurance requirements, as well
as any claim based on any patent or latent defect, whether or not discoverable
by Lender; (G) any performance of any labor or services or the furnishing of any
materials or other property in respect of the Properties or any part thereof;
(H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or
undertaking relating to the performance or discharge of any of the terms,
covenants and conditions of the landlord contained in the Leases; or (J) the use
or intended use of the proceeds of any of the Loan (the foregoing liabilities
herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that
the Borrowers shall not have an obligation to an Indemnitee hereunder with
respect to Indemnified Liabilities arising from the fraud, gross negligence or
willful misconduct of such Indemnitee as determined by a court of competent
jurisdiction. The obligations and liabilities of the Borrowers under this
Section 14.2 shall survive the term of the Loan and the exercise by Lender of
any of its rights or remedies under the Loan Documents, including the
acquisition of the Properties by foreclosure or a conveyance in lieu of
foreclosure.

SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
amendment, modification, termination or waiver of any provision of this Loan
Agreement, the Note or any other Loan Document, or consent to any departure
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender and any other party to be charged. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on the Borrowers in any case shall entitle the Borrowers or other Person
to any other or further notice or demand in similar or other circumstances.

SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance
with Lender's customary practices, destroy or otherwise dispose of all
documents, schedules, invoices or other papers, delivered by the Borrowers to
Lender (other than the Note) unless the Borrowers request in writing that same
be returned. Upon such request and at the Borrowers' expense, Lender shall
return such papers when Lender's actual or anticipated need for same has
terminated.

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SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice
or other communication required or permitted to be given shall be in writing and
addressed to the respective party as set forth below. Notices shall be effective
(i) three (3) days after the date such notice is mailed, (ii) on the next
Business Day if sent by a nationally recognized overnight courier service, (iii)
on the date of delivery by personal delivery and (iv) on the date of
transmission if sent by telefax during business hours on a Business Day
(otherwise on the next Business Day).

Notices shall be addressed as follows:

If to the Borrowers or any Borrower Party:

c/o Lodgian
3445 Peachtree Road NE
Suite 700
Atlanta, Georgia 30326
Attention: General Counsel
Facsimile: (404) 364-0088

With a copy to:
Morris, Manning & Martin, LLP
3343 Peachtree Rd., NE
1600 Atlanta Financial Center
Atlanta, Georgia 30326
Attention: Thomas Gryboski, Esq.
Facsimile: (404) 365-9532

If to Lender:

Merrill Lynch Mortgage Lending, Inc.
Four World Financial Center
New York, New York 10080
Attention: Robert Spinna
Facsimile: (212) 449-7684

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With a copy to:

Sidley Austin Brown & Wood LLP
787 Seventh Avenue
New York, New York 10019
Attn: Robert L. Boyd, Esq.
Facsimile: (212) 839-5599

Any party may change the address at which it is to receive notices to another
address in the United States at which business is conducted (and not a
post-office box or other similar receptacle), by giving notice of such change of
address in accordance with the foregoing. This provision shall not invalidate or
impose additional requirements for the delivery or effectiveness of any notice
(i) given in accordance with applicable statutes or rules of court, or (ii) by
service of process in accordance with applicable law. If there is any assignment
or transfer of Lender's interest in the Loan, then the new Lenders may give
notice to the parties in accordance with this Section, specifying the addresses
at which the new Lenders shall receive notice, and they shall be entitled to
notice at such address in accordance with this Section.

SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Loan Agreement, the making of the Loan hereunder and the
execution and delivery of the Note. Notwithstanding anything in this Loan
Agreement or implied by law to the contrary, the agreements of the Borrowers to
indemnify or release Lender or Persons related to Lender, or to pay Lender's
costs, expenses, or taxes shall survive the payment of the Loan and the
termination of this Loan Agreement.

SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of Lender in the exercise of any power, right or privilege
hereunder or under the Note or any other Loan Document shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Loan Agreement,
the Note and the other Loan Documents are cumulative to, and not exclusive of,
any rights or remedies otherwise available.

SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any
obligation to marshal any assets in favor of any Person or against or in payment
of any or all of the Obligations. To the extent that any Person makes a payment
or payments to Lender, or Lender enforces its remedies or exercises its rights
of set off, and such payment or payments or the proceeds of such enforcement or
set off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
if any, and rights and remedies therefor, shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or set
off had not occurred.

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SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Loan Agreement, the
Note or other Loan Documents shall not affect or impair the validity, legality
or enforceability of the remaining provisions or obligations under this Loan
Agreement, the Note or other Loan Documents or of such provision or obligation
in any other jurisdiction.

SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Loan Agreement for any other purpose or be given any substantive
effect.

SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE
STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND
THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED
PURSUANT TO EACH MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE
LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE
SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER.

SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns except that the Borrowers may not assign their rights or obligations
hereunder or under any of the other Loan Documents except as expressly provided
in Article XI.

SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY
RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties,
represent, warrant and acknowledge that (i) they are sophisticated real estate
investors, familiar with transactions of this kind, and (ii) they have entered
into this Loan Agreement and the other Loan Documents after conducting their own
assessment of the alternatives available to them in the market, and after
lengthy negotiations in which they have been represented by legal counsel of
their choice. The Borrowers, on behalf of themselves and all Borrower Parties,
also acknowledge and agree that the rights of Lender under this Loan Agreement
and the other Loan Documents are reasonable and appropriate, taking into
consideration all of the facts and circumstances including without limitation
the quantity of the Loan, the nature of the Properties, and the risks incurred
by Lender in this transaction. No provision in this Loan Agreement or in any of
the other Loan Documents

                                      106


and no course of dealing between the parties shall be deemed to create (i) any
partnership or joint venture between Lender and the Borrowers or any other
Person, or (ii) any fiduciary or similar duty by Lender to the Borrowers or any
other Person. The relationship between Lender and the Borrowers is exclusively
the relationship of a creditor and a debtor, and all relationships between
Lender and any other Borrower are ancillary to such creditor/debtor
relationship.

SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any
consent, approval, determination or other action by Lender is, pursuant to the
Loan Documents or applicable law, required to be done reasonably or required not
to be unreasonably withheld, then Lender's action shall be presumed to be
reasonable, and the Borrowers shall bear the burden of proof of showing that the
same was not reasonable. In the event that a claim or adjudication is made that
Lender or its agents have acted unreasonably or unreasonably delayed acting in
any case where, by law or under this Loan Agreement or the other Loan Documents,
Lender or such agent, as the case may be, has an obligation to act reasonably or
promptly, neither Lender nor its agents shall be liable for any monetary
damages, and the Borrowers' sole remedy shall be limited to commencing an action
seeking injunctive relief or declaratory judgment. Any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.

SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate,
officer, director, employee, attorney, or agent of Lender, shall have any
liability with respect to, and each of the Borrowers hereby waives, releases,
and agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by the Borrower
Parties in connection with, arising out of, or in any way related to, this Loan
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Loan Agreement or any of the other Loan Documents, other
than the gross negligence or willful misconduct of Lender. Each of the Borrowers
hereby waives, releases, and agrees not to sue Lender or any of Lender's
Affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Loan Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Loan Agreement or any of the
transactions contemplated hereby, except to the extent the same is caused by the
gross negligence or willful misconduct of Lender.

SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to any of the Borrowers or Affiliates thereof, or any other Person.

SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other
Loan Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties to the Loan
Documents.

SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and
Lender acknowledge that each of them has had the benefit of legal counsel of its
own choice and has

                                      107


been afforded an opportunity to review this Loan Agreement and the other Loan
Documents with its legal counsel and that this Loan Agreement and the other Loan
Documents shall be construed as if jointly drafted by the Borrowers and Lender.
If any term, condition or provision of this Loan Agreement shall be inconsistent
with any term, condition or provision of any other Loan Document, then this Loan
Agreement shall control.

SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS
LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN
SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.

SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR
ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT
MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS
BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND
OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF
ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS
ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND
LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE

                                      108


MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN
AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.

SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan
Documents and any amendments or supplements thereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which counterparts together shall constitute but one and the same
instrument. This Loan Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto.

SECTION 14.22 SERVICER. Lender shall have the right from time to time to
designate and appoint a Servicer and special servicer, and to change or replace
any Servicer or special servicer. Provided that the Borrowers have been notified
of such Servicer's role, all rights of the Lender hereunder may be exercised by
Servicer on behalf of Lender and provided the Borrowers shall not be required to
deal with more than one such servicing entity at any time. Lender shall notify
the Borrowers in writing as to the identity of the Servicer and any special
servicer.

SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than
the Borrowers are parties to this Loan Agreement only with regard to the
representations, warranties, and covenants specifically applicable to them.

SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything
contained in this Loan Agreement to the contrary, if for any reason whatsoever
Lender suspects that any conditions exist or may exist at any Property which
might have a Material Adverse Effect, Lender shall have the right, at the
Borrowers' sole reasonable cost and expense, to cause such inspections and
reports to be prepared and performed with respect to any Property as Lender
shall reasonably determine.

                        [signatures follow on next page]

                                      109


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

                                   BORROWERS:

                                   AMI OPERATING PARTNERS, L.P.

                                   By: AMIOP Acquisition General Partner SPE
                                       Corp., its general partner

                                   By: /s/ Daniel E. Ellis
                                       -----------------------------------------
                                          Name:  Daniel E. Ellis
                                          Title: Vice President and Secretary

                                   ALBANY HOTELS, INC.
                                   APICO INNS OF GREEN TREE, INC.
                                   LODGIAN TULSA LLC
                                   LODGIAN AUGUSTA LLC
                                   LODGIAN LAFAYETTE LLC
                                   LODGIAN HOTELS FIXED II, INC.

                                   By: /s/ Daniel E. Ellis
                                       ----------------------------------------
                                          Name:  Daniel E. Ellis
                                          Title: Vice President and Secretary or
                                                 Authorized Signatory for each
                                                 of the entities listed above

                                   DEDHAM LODGING ASSOCIATES I,
                                      LIMITED PARTNERSHIP

                                   By: Dedham Lodging SPE, Inc., its general
                                       partner

                                   By: /s/ Daniel E. Ellis
                                       -----------------------------------------
                                       Name:  Daniel E. Ellis
                                       Title: Vice President and Secretary

                                   LENDER:

                                   MERRILL LYNCH MORTGAGE LENDING,
                                   INC.

                                   By: /s/ Robert Spinna
                                       -----------------------------------------
                                       Name: Robert Spinna
                                       Title: Vice President

Loan Agreement (FX #2)

                                      110


                         LIST OF EXHIBITS AND SCHEDULES

Exhibit A          -   Properties
Exhibit B          -   Environmental Reports
Exhibit C          -   Franchise Agreements
Exhibit D          -   Allocated Loan Amounts/Aggregate Allocated Loan Amounts
Exhibit E          -   Management Agreements
Exhibit F          -   [Reserved]
Exhibit G          -   Property Improvement Plans
Exhibit H          -   [Reserved]
Exhibit I          -   Acceptable Franchisors
Exhibit J          -   Property Condition Reports
Exhibit K          -   Zoning Reports
Exhibit L          -   Certificate Re: Work Reserves

Schedule 1         -   Borrowers
Schedule 2.4       -   Scheduled Mortgage Principal Payments
Schedule 2.12(G)   -   Crossed Loans/Crossed Borrowers
Schedule 3.1(A)    -   List of Loan Documents
Schedule 4.1(C)    -   Organizational Chart for Borrower Parties
Schedule 4.2       -   Consents
Schedule 4.5       -   Condemnation Proceedings
Schedule 4.5(A)    -   Rights to Purchase/Rights of First Offer
Schedule 4.7(B)    -   Rent Roll
Schedule 4.7(E)    -   Franchise Defaults
Schedule 4.9       -   Litigation
Schedule 4.14          ERISA Plans
Schedule 4.20      -   Insurance
Schedule 4.28      -   Collective Bargaining Agreements
Schedule 4.30      -   Ground Leases
Schedule 5.14      -   Material Agreements
Schedule 6.5       -   Required Capital Improvements
Schedule 6.6       -   Environmental Work/O&M Plans
Schedule 6.7       -   Reserve Funding Condition

                         List of Exhibits and Schedules

Loan Agreement (FX #2)

                                      111


                                    EXHIBIT A

                                   PROPERTIES

1.     Holiday Inn, 363 Roberts Street, East Hartford, CT

2.     Fairfield Inn, 201 Boy Scout Road, Augusta, GA

3.     Courtyard by Marriott, 214 E. Kaliste Saloon Road, Lafayette, LA

4.     Holiday Inn, 890 Elkridge Landing Road, Baltimore (Linthicum), MD

5.     Residence Inn, 259 Elm Street, Dedham , MA

6.     Crowne Plaza , 30 Lodge Street, Albany , NY

7.     Courtyard by Marriott, 3340 South 79th East Avenue, Tulsa, OK

8.     Holiday Inn- Greentree, 401 Holiday Drive, Pittsburgh, PA

9.     Holiday Inn, 334 Arsenal Road, York, PA

                                    Exhibit A

Loan Agreement (FX #2)



                                    EXHIBIT B

                              ENVIRONMENTAL REPORTS



         LODGIAN  LOCATION
ML CODE    CODE     CODE       PROPERTY NAME               ADDRESS                    CITY      STATE          REPORT
- -------    ----     ----       -------------               -------                    ----      -----          ------
                                                                                     
FIXED RATE LOAN #2
   31      alb      3311    Crowne Plaza - Albany      30 Lodge Street                Albany      NY      Phase I Environmental Site
                                                                                                          Assessment Report
   21      bwi      1775    Holiday Inn - Linthicum    890 Elkridge Landing Rd.       Linthicum   MD      Phase I Environmental Site
                                                                                                          Assessment Report
   30      ded      2777    Residence Inn - Dedham     259 Elm St.                    Dedham      MA      Phase I Environmental Site
                                                                                                          Assessment Report
   57      tul      3636    Courtyard by               3340 South 79th                Tulsa       OK      Phase I Environmental Site
                            Marriott - Tulsa           East Avenue                                        Assessment Report
   53      laf      1515    Courtyard by               214 E. Kaliste                 Lafayette   LA      Phase I Environmental Site
                            Marriott - Lafayette       Saloom Road                                        Assessment Report
   37      gtr      3802    Holiday Inn -              401 Holiday Drive              Pittsburgh  PA      Phase I Environmental Site
                            Pittsburgh                                                                    Assessment Report
   52      aug      1265    Marriott Fairfield         201 Boy Scout Road             Augusta     GA      Phase I Environmental Site
                            Inn - Augusta                                                                 Assessment Report
   40      yor      3875    Holiday Inn - York         334 Arsenal Rd.                York        PA      Phase I Environmental Site
                                                                                                          Assessment Report
    7      ehc       850    Holiday Inn - E.           363 Roberts St.                E. Hartford CT      Phase I Environmental Site
                            Hartford                                                                      Assessment Report



                                                                                                   PROJECT
         LODGIAN  LOCATION                                                                         OR JOB
ML CODE   CODE      CODE       PROPERTY NAME           ASSESSMENT FIRM        REPORT DATE           NUMBER
- -------   ----      ----       -------------           ---------------        -----------           ------
                                                                                 
FIXED RATE LOAN #2
   31      alb      3311    Crowne Plaza - Albany            EMG              May 22, 2004           116638

   21      bwi      1775    Holiday Inn - Linthicum          EMG              May 20, 2004           116614
   30      ded      2777    Residence Inn - Dedham           EMG              May 21, 2004           116612

   57      tul      3636    Courtyard by                     Building          May 6, 2004         04-112/ams
                            Marriott - Tulsa                 Evaluation
                                                             Services &
                                                             Technology
   53      laf      1515    Courtyard by                     Building          May 6, 2004         04-111/ams
                            Marriott - Lafayette             Evaluation
                                                             Services &
                                                             Technology
   37      gtr      3802    Holiday Inn - Pittsburgh         EMG              May 21, 2004           116655
   52      aug      1265    Marriott Fairfield               Building          May 6, 2004         04-110/ams
                            Inn - Augusta                    Evaluation
                                                             Services &
                                                             Technology
   40      yor      3875    Holiday Inn - York               EMG              May 20, 2004           116663

    7      ehc       850    Holiday Inn - E.                 EMG              May 24, 2004           116576
                            Hartford


                                   Exhibit B

Loan Agreement (FX #2)


                                    EXHIBIT C

                              FRANCHISE AGREEMENTS



         PROPERTY                                                                       AGREEMENT
          NAME                           STATE                FRANCHISOR                   DATE
          ----                           -----                ----------                   ----
                                                                               
Crowne Plaza - Albany                      NY         Intercontinental Hotel Group        6/20/95
Holiday Inn - Linthicum                    MD         Intercontinental Hotel Group        5/28/98
Residence Inn - Dedham                     MA                             Marriott        7/26/96
Courtyard by Marriott - Tulsa              OK                             Marriott         2/7/96
Courtyard by Marriott - Lafayette          LA                             Marriott         3/4/96
Holiday Inn - Pittsburgh                   PA         Intercontinental Hotel Group       12/11/98
Fairfield Inn - Augusta                    GA                             Marriott        4/28/95
Holiday Inn - York                         PA         Intercontinental Hotel Group        5/28/98
Holiday Inn - E. Hartford                  CT         Intercontinental Hotel Group        5/28/98


                                   Exhibit C

Loan Agreement (FX #2)



                                    EXHIBIT D

             ALLOCATED LOAN AMOUNTS/AGGREGATE ALLOCATED LOAN AMOUNTS



         LODGIAN    LOCATION
ML CODE    CODE       CODE        LEGAL ENTITY                  PROPERTY NAME                          ADDRESS
- -------    ----       ----        ------------                  -------------                          -------
                                                                                   
FIXED RATE LOAN #2
 31       alb         3311   Albany Hotel, Inc.              Crowne Plaza - Albany                30 Lodge Street
 21       bwi         1775   Lodgian Hotels Fixed II, Inc.   Holiday Inn - Linthicum              890 Elkridge Landing Rd.
 30       ded         2777   Dedham Lodging Associates I,    Residence Inn - Dedham               259 Elm St. Limited Partnership
                             Limited Partnership
 57       tul         3636   Lodgian Tulsa LLC               Courtyard by Marriott - Tulsa        3340 South 79th East Avenue
 53       laf         1515   Lodgian Lafayette LLC           Courtyard by Marriott - Lafayette    214 E. Kaliste Saloom Road
 37       gtr         3802   Apico Inns of Greentree, Inc.   Holiday Inn - Pittsburgh             401 Holiday Drive
 52       aug         1265   Lodgian Augusta LLC             Marriott Fairfield Inn - Augusta     201 Boy Scout Road
 40       yor         3875   AMI Operating Partners, L.P.    Holiday Inn - York                   334 Arsenal Rd.
  7       ehc          850   AMI Operating Partners, L.P.    Holiday Inn - E. Hartford            363 Roberts St.
                                                             SUBTOTAL



                                                                         ALLOCATED
                                                                         MEZZANINE     AGGREGATE
         LODGIAN    LOCATION                               ALLOCATED       LOAN      ALLOCATED LOAN
ML CODE    CODE       CODE     CITY         STATE         LOAN AMOUNT      AMOUNT       AMOUNT
- -------    ----       ----     ----         -----         -----------      ------       ------
                                                                
FIXED RATE LOAN #2
 31       alb         3311      Albany         NY         $21,231,000   $         0   $21,231,000
 21       bwi         1775      Linthicum      MD         $21,600,000   $         0   $21,600,000
 30       ded         2777      Dedham         MA         $ 5,355,000   $         0   $ 5,355,000
 57       tul         3636      Tulsa          OK         $ 4,590,000   $         0   $ 4,590,000
 53       laf         1515      Lafayette      LA         $ 5,925,000   $         0   $ 5,925,000
 37       gtr         3802      Pittsburgh     PA         $ 3,588,000   $         0   $ 3,588,000
 52       aug         1265      Augusta        GA         $ 1,900,000   $         0   $ 1,900,000
 40       yor         3875      York           PA         $ 2,475,000   $         0   $ 2,475,000
  7       ehc          850      E. Hartford    CT         $ 1,200,000   $         0   $ 1,200,000
                                                          $67,864,000   $         0   $67,864,000


                                   Exhibit D

Loan Agreement (FX #2)



                                    EXHIBIT E

                              MANAGEMENT AGREEMENTS

1.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Albany Hotel, Inc. as owner, re: Crowne
      Plaza, Albany, NY.

2.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and AMI Operating Partners, L.P., as owner,
      re: Holiday Inn, East Hartford, CT.

3.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and AMI Operating Partners, L.P., as owner,
      re: Holiday Inn, York, PA.

4.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Apico Inns of Green Tree, Inc., as
      owner, re: Holiday Inn Green Tree, Pittsburgh, PA.

5.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Dedham Lodging Associates I, Limited
      Partnership, as owner, re: Residence Inn, Dedham, MA.

6.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Fixed II, Inc., as owner,
      re: Holiday Inn, BWI Airport, Baltimore, MD.

7.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Augusta LLC, as owner, re:
      Fairfield Inn, Augusta, GA.

8.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Lafayette LLC, as owner, re:
      Courtyard by Marriott, Lafayette, LA.

9.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Tulsa LLC, as owner, re:
      Courtyard by Marriott, OK.

                                   Exhibit E

Loan Agreement (FX #2)



                                    EXHIBIT F

                                   [RESERVED]

                                    Exhibit F

Loan Agreement (FX #2)



                                    EXHIBIT G

                           PROPERTY IMPROVEMENT PLANS

                                      None.

                                   Exhibit G

Loan Agreement (FX #2)



                                    EXHIBIT H

                                   [RESERVED]

                                   Exhibit H

Loan Agreement (FX #2)



                                    EXHIBIT I

                             ACCEPTABLE FRANCHISORS

                       TIER 1
Six Continents                   Crowne Plaza
Hilton Hotels Corp.              Hilton
Hilton Hotels Corp.              Doubletree
Hilton Hotels Corp.              Homewood Suites
Hilton Hotels Corp.              Hilton Garden Inn
Starwood Hotels & Resorts        Westin
Starwood Hotels & Resorts        Sheraton
Starwood Hotels & Resorts        W
US Franchise Systems, Inc.       Hawthorn
Marriott International, Inc.     Marriott
Marriott International, Inc.     Renaissance
Marriott International, Inc.     Courtyard
Marriott International, Inc.     Residence Inn
Wyndham International            Wyndham Hotel
Carlson Hotels Worldwide         Radisson

       TIER 2 (WITH FOOD AND BEVERAGE)

Six Continents                   Holiday Inn
Six Continents                   Holiday Inn Select
Six Continents                   Holiday Inn SunSpree Resort
Choice Hotels International      Clarion
Best Western International, Inc. Best Western
Cendant Corporation              Ramada
Starwood Hotels & Resorts        Four Points
Choice Hotels International      Quality
Wyndham International            Wyndham Gardens

          TIER 3 (WITHOUT FOOD AND
                   BEVERAGE)

Six Continents                   Holiday Inn Express
Hilton Hotels Corp.              Hampton Inn
Marriott International, Inc.     Fairfield
Choice Hotels International      Comfort Inn
Choice Hotels International      Comfort Suites

                                    Exhibit I

Loan Agreement (FX #2)

                                    EXHIBIT J

                           PROPERTY CONDITION REPORTS



             LODGIAN  LOCATION
  ML CODE      CODE     CODE          PROPERTY NAME                ADDRESS                  CITY      STATE
  -------      ----     ----          -------------                -------                  ----      -----
                                                                                    
FIXED RATE LOAN #2
     31        alb      3311    Crowne Plaza - Albany      30 Lodge Street              Albany         NY
     21        bwi      1775    Holiday Inn - Linthicum    890 Elkridge Landing Rd.     Linthicum      MD
     30        ded      2777    Residence Inn - Dedham     259 Elm St.                  Dedham         MA
     57        tul      3636    Courtyard by Marriott -    3340 South 79th East Avenue  Tulsa          OK
                                Tulsa
     53        laf      1515    Courtyard by Marriott -    214 E. Kaliste Saloom Road   Lafayette      LA
                                Lafayette
     37        gtr      3802    Holiday Inn - Pittsburgh   401 Holiday Drive            Pittsburgh     PA
     52        aug      1265    Marriott Fairfield Inn  -  201 Boy Scout Road           Augusta        GA
                                Augusta
     40        yor      3875    Holiday Inn - York         334 Arsenal Rd.              York           PA
      7        ehc       850    Holiday Inn - E. Hartford  363 Roberts St.              E. Hartford    CT


             LODGIAN                                                                             PROJECT OR JOB
  ML CODE      CODE                   REPORT                   ASSESSMENT FIRM     REPORT DATE       NUMBER
  -------      ----                   ------                   ---------------     -----------       ------
                                                                                  
FIXED RATE LOAN #2
     31        alb    Property Condition Assessment Report  EMG                    May 24, 2004      116639
     21        bwi    Property Condition Assessment Report  EMG                    May 24, 2004      116615
     30        ded    Property Condition Assessment Report  EMG                    May 20, 2004      116613
     57        tul    Property Condition Assessment Report  Building Evaluation
                                                            Services & Technology   May 6, 2004    04-112/Ec
     53        laf    Property Condition Assessment Report  Building Evaluation
                                                            Services & Technology   May 6, 2004    04-111/Ec
     37        gtr    Property Condition Assessment Report  EMG                    May 22, 2004      116656
     52        aug    Property Condition Assessment Report  Building Evaluation
                                                            Services & Technology   May 6, 2004    04-111/Ec
     40        yor    Property Condition Assessment Report  EMG                    May 20, 2004      116664
      7        ehc    Property Condition Assessment Report  EMG                    May 21, 2004      116577


                                    Exhibit J

Loan Agreement (FX #2)



                                    EXHIBIT K

                                 ZONING REPORTS*



                                                                      PZR SITE
    CHAIN NAME                  CITY      ST      DATE OF REPORT       NUMBER
- ------------------------------------------------------------------------------
                                                          
Crowne Plaza            Albany            NY     5/6/2004              26446
- ------------------------------------------------------------------------------
Holiday Inn             Baltimore - BWI   MD     4/28/2004             26438
                        Airport                  Revised 5/12/2004
- ------------------------------------------------------------------------------
Residence Inn           Dedham            MA     4/27/2004             26445
- ------------------------------------------------------------------------------
Courtyard by Marriott   Tulsa             OK     5/7/2004              26472
- ------------------------------------------------------------------------------
Courtyard by Marriott   Lafayette         LA     5/7/2004              26486
- ------------------------------------------------------------------------------
Holiday Inn             Greentree         PA     4/30/2004             26452
- ------------------------------------------------------------------------------
Fairfield Inn           Augusta           GA     5/3/2004              26467
                                                 Revised 5/6/2004
- ------------------------------------------------------------------------------
Holiday Inn             York              PA     4/28/2004             26455
- ------------------------------------------------------------------------------
Holiday Inn             East Hartford     CT     4/30/2004             26422
                                                 Revised 5/26/2004


- ----------------
* All reports were prepared for Merrill Lynch Mortgage Lending, Inc. by the
Planning & Zoning Resource Corporation.

                                    Exhibit K

Loan Agreement (FX #2)


                                    EXHIBIT L

                          CERTIFICATE RE: WORK RESERVES

                            BORROWER'S CERTIFICATION

      THIS CERTIFICATION is made as of __________ by the undersigned (the
"Borrowers") to and for the benefit of: (i) the current holder (the "Holder") of
Loan No. ________ and ________ (the "Loans"), and (ii)
_________________________, as mortgage servicer on behalf of the Holder (the
"Servicer"), in order to induce the Servicer to advance to the Borrower the
aggregate sum of $__________ from the _______________ [describe name of reserve
account] Reserve, as provided under Section 6.7 the Loan and Security Agreement
evidencing the Loan (the "Loan Agreement").

      Capitalized terms used in this Certification that are not otherwise
defined herein shall have the meanings ascribed to such terms in the Loan
Agreement.

      The undersigned hereby certifies to the Holder and Servicer as follows:

1.    No event, fact or circumstance has occurred or failed to occur which
constitutes, or upon the lapse of time, or the giving of notice, or both, could
constitute a Default or an Event of Default under the Loan Documents. The Loan
Documents remain the valid and legally binding obligations of the undersigned
and are fully enforceable in accordance with their terms.

2.    The portion of the Work that relates to the subject disbursement request
has been delivered or provided to Borrower in a good and workmanlike manner and
in accordance with the plans and specifications therefor, if applicable,
approved by Lender and in accordance with all legal requirements of governmental
authorities having jurisdiction over the Property, or deposits for work or
materials that relate to the subject disbursement request have been paid by
Borrower, as applicable.

3.    All of the statements, invoices, receipts and information delivered in
connection with the subject disbursement request are true and correct as of the
date hereof, and each person that supplied materials or labor in connection with
the Work to be funded by the subject disbursement request has been paid in full
to date, or will be paid in full to date upon such disbursement, subject to any
applicable retainage. The actual costs incurred in connection with the subject
disbursement request do not materially exceed the amount budgeted for such Work
under the CapEx/FF&E Budget in effect and constitute expenditures for Capital
Improvements.

4.    None of the labor, materials, overhead or other items of expense specified
in the disbursement request submitted herewith, other than payments on account
of retainage, has previously been the basis of any disbursement request by the
Borrower or any payment by the Servicer, other than for partially completed work
or deposits and, when added to all sums previously disbursed by the Servicer on
account of the related work, do not exceed the costs of all services completed,
installed and/or delivered, or deposits made, as applicable, as of the date of
this certificate. In addition, the amount remaining in the subject reserve will
be sufficient to

                                  Exhibit L-1

Loan Agreement (FX #2)



pay in full the entire remaining cost of related work required to be completed
in accordance with the Loan Agreement.

5.    None of the materials or other items of expense specified in the
disbursement request submitted herewith are stored at any Property unless such
materials are properly stored and secured at the applicable Property in
accordance with the Borrowers' customary procedures and sound construction
practices as reasonably determined by Lender. None of the materials or other
items of expense specified in the disbursement request submitted herewith are
stored at any location other than at the Properties unless Lender determines in
its reasonable discretion that Lender has a perfected first priority security
interest in any such materials.

6.    All permits and approvals required to complete the work in process have
been obtained. All conditions to the disbursement have been met in accordance
with the terms of the Loan Agreement.

7.    The individual that is signing below on behalf of the Borrower has made
due investigation of the matters herein set forth, and acknowledges that the
Servicer is relying upon the certification made herein as a condition to
advancing the requested reserve disbursement.

8.    This Certification shall be deemed to be a "Loan Document" as that term is
defined in the Loan Agreement. Accordingly, an uncured breach of any
representation or warranty set forth herein shall constitute an Event of Default
under the Mortgages and the Loan Documents.

      IN WITNESS WHEREOF, the Borrower has executed this Certification under
seal as of the date written above.

                                 BORROWERS:
                                 Legal Entities listed on "Attachment A"

                                 By: ___________________________________________
                                    Name:  _____________________________________
                                    Title: _____________________________________

                                  Exhibit L-2

Loan Agreement (FX #2)


                                  ATTACHMENT A

BORROWERS:

                                   Exhibit L-3

Loan Agreement (FX #2)



                                   SCHEDULE 1

                                    BORROWERS

ALBANY HOTELS, INC.
AMI OPERATING PARTNERS, L.P.
APICO INNS OF GREENTREE, INC.
DEDHAM LODGING ASSOCIATES I, Limited Partnership
LODGIAN HOTELS FIXED II, Inc.
LODGIAN AUGUSTA, LLC
LODGIAN LAFAYETTE LLC
LODGIAN TULSA LLC

                                   Schedule 1

Loan Agreement (FX #2)



                                  SCHEDULE 2.4

                      SCHEDULED MORTGAGE PRINCIPAL PAYMENTS



                                       SCHEDULED                  SCHEDULED                  TOTAL
PERIOD              DATE                INTEREST                  PRINCIPAL                 PAYMENT
- ------              ----                --------                  ---------                 -------
                                                                               
  1               8/1/2004             384,349.65                 77,143.54                461,493.19
  2               9/1/2004             383,912.74                 77,580.45                461,493.19
  3              10/1/2004             371,103.26                 90,389.93                461,493.19
  4              11/1/2004             382,961.44                 78,531.75                461,493.19
  5              12/1/2004             370,177.43                 91,315.76                461,493.19
  6               1/1/2005             381,999.50                 79,493.69                461,493.19
  7               2/1/2005             381,549.29                 79,943.90                461,493.19
  8               3/1/2005             344,216.22                117,276.97                461,493.19
  9               4/1/2005             380,432.32                 81,060.87                461,493.19
 10               5/1/2005             367,716.03                 93,777.16                461,493.19
 11               6/1/2005             379,442.12                 82,051.07                461,493.19
 12               7/1/2005             366,752.35                 94,740.84                461,493.19
 13               8/1/2005             378,440.86                 83,052.33                461,493.19
 14               9/1/2005             377,970.49                 83,522.70                461,493.19
 15              10/1/2005             365,320.12                 96,173.07                461,493.19
 16              11/1/2005             376,952.78                 84,540.41                461,493.19
 17              12/1/2005             364,329.66                 97,163.53                461,493.19
 18               1/1/2006             375,923.69                 85,569.50                461,493.19
 19               2/1/2006             375,439.07                 86,054.12                461,493.19
 20               3/1/2006             338,666.05                122,827.14                461,493.19
 21               4/1/2006             374,256.06                 87,237.13                461,493.19
 22               5/1/2006             361,705.15                 99,788.04                461,493.19
 23               6/1/2006             373,196.84                 88,296.35                461,493.19
 24               7/1/2006             360,674.29                100,818.90                461,493.19
 25               8/1/2006             372,125.78                 89,367.41                461,493.19
 26               9/1/2006             371,619.64                 89,873.55                461,493.19
 27              10/1/2006             359,139.33                102,353.86                461,493.19
 28              11/1/2006             370,530.96                 90,962.23                461,493.19
 29              12/1/2006             358,079.80                103,413.39                461,493.19
 30               1/1/2007             369,430.11                 92,063.08                461,493.19
 31               2/1/2007             368,908.70                 92,584.49                461,493.19
 32               3/1/2007             332,734.25                128,758.94                461,493.19
 33               4/1/2007             367,655.12                 93,838.07                461,493.19
 34               5/1/2007             355,280.97                106,212.22                461,493.19
 35               6/1/2007             366,522.13                 94,971.06                461,493.19
 36               7/1/2007             354,178.31                107,314.88                461,493.19
 37               8/1/2007             365,376.48                 96,116.71                461,493.19
 38               9/1/2007             364,832.12                 96,661.07                461,493.19
 39              10/1/2007             352,533.56                108,959.63                461,493.19
 40              11/1/2007             363,667.58                 97,825.61                461,493.19
 41              12/1/2007             351,400.20                110,092.99                461,493.19
 42               1/1/2008             362,490.03                 99,003.16                461,493.19
 43               2/1/2008             361,929.32                 99,563.87                461,493.19
 44               3/1/2008             338,051.54                123,441.65                461,493.19
 45               4/1/2008             360,666.32                100,826.87                461,493.19
 46               5/1/2008             348,479.31                113,013.88                461,493.19
 47               6/1/2008             359,455.23                102,037.96                461,493.19
 48               7/1/2008             347,300.65                114,192.54                461,493.19
 49               8/1/2008             358,230.60                103,262.59                461,493.19
 50               9/1/2008             357,645.77                103,847.42                461,493.19
 51              10/1/2008             345,539.64                115,953.55                461,493.19
 52              11/1/2008             356,400.92                105,092.27                461,493.19


                                  Schedule 2.4

Loan Agreement (FX #2)


                                                                            
  53             12/1/2008             344,328.12                117,165.07                461,493.19
  54              1/1/2009             355,142.16                106,351.03                461,493.19
  55              2/1/2009             354,539.84                106,953.35                461,493.19
  56              3/1/2009             319,682.42                141,810.77                461,493.19
  57              4/1/2009             353,130.96                108,362.23                461,493.19
  58              5/1/2009             341,145.72                120,347.47                461,493.19
  59              6/1/2009             351,835.65                109,657.54                461,493.19
  60              7/1/2009             339,885.10             62,013,398.42             62,353,283.52



                                  Schedule 2.4

Loan Agreement (FX #2)



                                SCHEDULE 2.12(G)

                         CROSSED LOANS/CROSSED BORROWERS

      1.    Pool 1 Loan: A Loan in the amount of $63,801,000 ("Pool 1 Loan"),
which Pool 1 Loan is evidenced by a Promissory Note, dated as of the date hereof
("Note 1"), made by the Pool 1 Borrowers to Lender and is further evidenced and
secured by a Loan and Security Agreement, dated as of the date hereof ("Loan
Agreement 1"), between Impac Hotels I, L.L.C., Lodgian Denver LLC, Macon Hotel
Associates, L.L.C., Servico Northwoods, Inc. and Lodgian Hotels Fixed I, LLC
(collectively, the "Pool 1 Borrowers") and Lender;

      2.    Pool 3 Loan: A Loan in the amount of $66,818,500 ("Pool 3 Loan"),
which Pool 3 Loan is evidenced by a Promissory Note, dated as of the date hereof
("Note 3"), made by the Pool 3 Borrowers to Lender and is further evidenced and
secured by a Loan and Security Agreement, dated as of the date hereof ("Loan
Agreement 3"), between Lodgian Hotels Fixed III, LLC, Lodgian AMI, Inc.,
Minneapolis Motel Enterprises, Inc. and Servico Centre Associates, Ltd.
(collectively, the "Pool 3 Borrowers") and Lender; and

      3.    Pool 4 Loan: A Loan in the amount of $61,516,500 ("Pool 4 Loan")
which Pool 4 Loan is evidenced by a Promissory Note, dated as of the date hereof
("Note 4"), made by the Pool 4 Borrowers to Lender and is further evidenced and
secured by a Loan and Security Agreement, dated as of the date hereof ("Loan
Agreement 4"), between Lodgian Hotels Fixed IV, L.P., Little Rock Lodging
Associates I, Limited Partnership, Lodgian Fairmont LLC, NH Motel Enterprises,
Inc., Servico Columbia, Inc. and Servico Houston, Inc. (collectively, the "Pool
4 Borrowers") and Lender.

      "Crossed Loans" shall mean, collectively, the Pool 1 Loan, the Pool 3 Loan
and the Pool 4 Loan.

      "Crossed Borrowers" shall mean, collectively, the Pool 1 Borrowers, the
Pool 3 Borrowers and the Pool 4 Borrowers.

                                Schedule 2.12(G)

Loan Agreement (FX #2)


                                 SCHEDULE 3.1(A)

                             LIST OF LOAN DOCUMENTS

1.       Loan and Security Agreement
2.       Note
3.       Mortgages
4.       Note and Mortgage Consolidation, Spreader, Severance and Modification
         Agreement
5.       Assignments of Leases
6.       Assignments of Agreements, Licenses, Permits and Contracts
7.       Assignments of Hotel Management Agreements
8.       Guaranty of Recourse Obligations
9.       Environmental Indemnity
10.      Deposit Account Agreements
11.      Financing Statements
12.      Cash Management Agreement
13.      Borrower's Closing Certificate under Section 3.1(D)
14.      Closing Certificate of Lodgian, Inc.
15.      Cooperation Agreement
16.      Agreement Regarding Right of First Offer
17.      Contribution Agreement
18.      Cross-Guaranty
19.      Post Closing Agreement

                                 Schedule 3.1(A)

Loan Agreement (FX #2)



                                 SCHEDULE 4.1(C)

                    ORGANIZATIONAL CHART FOR BORROWER PARTIES

                                Schedule 4.1(C)

Loan Agreement (FX #2)


                                  SCHEDULE 4.2

                                    CONSENTS

                                      None.

                                  Schedule 4.2

Loan Agreement (FX #2)


                                  SCHEDULE 4.5

                            CONDEMNATION PROCEEDINGS

                                      None.

                                  Schedule 4.5

Loan Agreement (FX #2)



                                 SCHEDULE 4.5(A)

                    RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER



                                                           DATE OF AGREEMENT OR                 RIGHT OF FIRST REFUSAL
                                                            AMENDMENT GRANTING                   SECTION OF AGREEMENT
FRANCHISOR                        LOCATION                 RIGHT OF FIRST REFUSAL                   OR AMENDMENT
- ---------------------------------------------------------------------------------------------------------------------
                                                                                       
Holiday Inn              363 Roberts Street                5/28/1998                            Section 14.G; page 24
East Hartford, CT        East Hartford, CT 06108
- ---------------------------------------------------------------------------------------------------------------------
Fairfield Inn            201 Boy Scout Road                12/23/98 (Amendment)                 Section A.; page 2
Augusta, GA              Augusta, GA 30909
- ---------------------------------------------------------------------------------------------------------------------
Courtyard by Marriott    214 E. Kaliste Saloon Road        12/23/98 (Amendment)                 Section A.; page 2
Lafayette, LA            Lafayette, LA 70508
- ---------------------------------------------------------------------------------------------------------------------
Residence Inn by         I-95 & US Rte. T                  12/23/98 (Amendment)                 Section A.;  page 2
Marriott                 Dedham, MA
Dedham, MA
- ---------------------------------------------------------------------------------------------------------------------
Holiday Inn-BWI          890 Elkridge Landing Road         5/28/1998                            Section 14.G.; page 24
Baltimore, MD            Linthicum, MD 21090
- ---------------------------------------------------------------------------------------------------------------------
Courtyard by Marriott    3340 S. 79th East Avenue          12/23/98 (Amendment)                 Section A.; page 2
Tulsa, OK                Interchange Place
                         Tulsa, OK 74145
- ---------------------------------------------------------------------------------------------------------------------
Holiday Inn              334 Arsenal Road                  5/28/1998                            Section 14.G.; page 25
York, PA                 York, PA 17402
Holiday Inn              401 Holiday Drive                 12/11/1998                           Section 14.G.; page 26
Greentree, PA            Pittsburgh, PA 15220
- ---------------------------------------------------------------------------------------------------------------------


                                Schedule 4.5(A)

Loan Agreement (FX #2)



                                 SCHEDULE 4.7(B)

                                    RENT ROLL

                                      None.

                                Schedule 4.7(B)

Loan Agreement (FX #2)


                                 SCHEDULE 4.7(E)

                               FRANCHISE DEFAULTS

                                      None.

                                 Schedule 4.7(E)

Loan Agreement (FX #2)


                                  SCHEDULE 4.9

                                   LITIGATION

                                      None.

                                  Schedule 4.9

Loan Agreement (FX #2)



                                  SCHEDULE 4.14

                                   ERISA PLANS

1.    Lodgian, Inc. 401(k) Plan.

2.    Lodgian, Inc. Employee Health & Welfare Plan.

3.    Multiemployer Plans covering employees of the following unions:

      Hotel, Motel & Restaurant Employees & Bartenders - Local 471 (Albany, NY)
      (pension, welfare)

                                 Schedule 4.14

Loan Agreement (FX #2)



                                  SCHEDULE 4.20

                                    INSURANCE

                                  Schedule 4.20

Loan Agreement (FX #2)


                                  SCHEDULE 4.28

                        COLLECTIVE BARGAINING AGREEMENTS



                                                                                                        DATE OF
      HOTEL                BORROWER                            UNION                                    AGREEMENT
- ------------------------------------------------------------------------------------------------------------------
                                                                                               
 Crowne Plaza -
 Albany, NY             Albany Hotel, Inc.            Hotel, Motel & Restaurant Employee s &              2/1/04
                                                            Bartenders Union, Local 471


                                 Schedule 4.28

Loan Agreement (FX #2)


                                  SCHEDULE 4.30

                                  GROUND LEASES

      1.    ALBANY HOTEL, INC.
            CROWNE PLAZA, LOCATED AT TEN EYCK PLAZA, ALBANY, NY

      Agreement of Lease, dated as of December 20, 1979, between UDC-Ten Eyck
      Development Corporation-III, as lessor, and Ten Eyck Hotel Associates, a
      New York limited partnership ("Ten Eyck"), as lessee, recorded January 4,
      1980 in Liber 2181 of Deeds, Page 1000 in the Office of the Albany County
      Clerk, as amended and restated by that certain Restatement of Agreement of
      Lease, dated as of December 20, 1979, recorded December 17, 1981 in Liber
      2216, Page 1 in the Office of the Albany County Clerk, as assigned by that
      certain Bargain and Sale Deed, dated November 11, 1992, with Ten Eyck, as
      assignor, and Albany Motel Enterprises, Inc., as assignee, and recorded
      January 21, 1993 in Liber 2476, Page 871 in the Office of the Albany
      County Clerk, as corrected by that certain corrective instrument naming
      Albany Hotel, Inc., a Florida corporation, as lessee, dated May 5, 1995
      and recorded August 15, 1995 in Liber 2593 at page 703 In the Office of
      Albany County Clerk.

      Agreement of Lease, dated as of December 20, 1979, between UDC-Ten Eyck
      Development Corporation-II, as lessor, and Ten Eyck, as lessee, recorded
      January 4, 1980 in Liber 2181 of Deeds, Page 845 in the Office of the
      Albany County Clerk, as amended and restated by that certain Restatement
      of Agreement of Lease, dated as of December 20, 1979, recorded December
      17, 1981 in Liber 2216, Page 135 in the Office of Albany County Clerk, as
      assigned by that certain Bargain and Sale Deed, dated November 11, 1992,
      with Albany Motel Enterprises, Inc., as assignee, recorded January 21,
      1993 in Liber 2476, Page 871 in the Office of the Albany County Clerk, as
      corrected by that certain corrective instrument naming Albany Hotel, Inc.,
      a Florida corporation, as lessee, dated May 5, 1995 and recorded August
      15, 1995 in Liber 2593, Page 703 in the Office of the Albany County Clerk.

      2.    AMI OPERATING PARTNERS, L.P.
            HOLIDAY INN, LOCATED AT 363 EAST ROBERTS STREET, EAST HARTFORD, CT

      Lease, dated March 11, 1970, between The Poly Choke Company, Incorporated,
      as lessor, and Hartford Motor Inns, Inc., as lessee, a Notice of which is
      dated April 20, 1977 and recorded in Volume 626, Page 107 of the East
      Hartford Land Records, as amended by that certain unrecorded Amendatory
      Agreement dated September 27, 1971, as further amended by that certain
      unrecorded Second Amendatory Agreement dated July 5, 1972, as further
      amended by that certain unrecorded Third Amendatory Agreement dated March
      15, 1972, as further amended by that certain unrecorded Fourth Amendatory
      Agreement dated May 4, 1973, as further amended by that certain Agreement
      dated May 4, 1973 and recorded in Volume 511, Page 238 of the East
      Hartford Land Records, as further amended by that certain unrecorded Fifth
      Amendatory Agreement dated

                                 Schedule 4.30

Loan Agreement (FX #2)



      September 11, 1978, as further amended by that certain Agreement recorded
      on May 10, 1985 in Volume 911, Page 96 of the East Hartford Land Records,
      as further amended by that certain Agreement dated December 20, 1986 and
      recorded on December 24, 1986 in Volume 1019, Page 59 of the East Hartford
      Land Records, as assigned by that certain instrument, dated December 25,
      1986, to AMI Operating Partners Limited Partnership a/k/a AMI Operating
      Partners, L.P., recorded on December 24, 1986 in Volume 1019, Page 69 of
      the East Hartford Land Records.

      3.    LODGIAN AMI, INC.
            HOLIDAY INN, LOCATED AT 890 ELKRIDGE LANDING ROAD, LINTHICUM, MD

      Lease, dated August 24, 1971, from D.R.H. Investment Company, as lessor,
      to American Motor Inns, Inc., as lessee, recorded among the Land Records
      of Anne Arundel County, Maryland in Liber 3883, Folio 284, as affected by
      that certain Option Agreement, recorded among the aforesaid land records
      in Liber MSH No. 2467, Folio 798, as amended by that certain unrecorded
      First Amendment to Agreement to Construct and Lease, dated May 18, 1972,
      among D.R.H. Investment Co., as landlord, and American Motor Inns,
      Incorporated, as tenant, as further amended by that certain agreement
      between Samuel M. Heffner, et al, and American Motor Inns, Incorporated,
      dated May 18, 1972 and recorded among the aforesaid land records in Liber
      MSH No. 2490, Folio 581, as further affected by that certain Subordination
      Agreement, dated May 18, 1972, between American Motor Inns, Incorporated
      and Trustees for Loyola Federal Savings & Loan Association, recorded among
      the aforesaid land records in Liber 2490, Folio 585, as further affected
      by that certain Nondisturbance and Attornment Agreement, dated September
      8, 1986, between Loyola Federal Savings & Loan Association and American
      Motor Inns, Inc., recorded among the aforesaid land records in Liber 4212,
      Folio 211, as further amended by that certain Consolidated Amendatory
      Agreement, dated May 7, 1984, between Harry W. Rogers, III, et al, and
      American Motor Inns, Incorporated, recorded among the aforesaid land
      records in Liber EAC No. 3883, Folio 325, as further affected by that
      certain unrecorded Notification of Election to Extend Term, dated May 9,
      1985, as further amended by that certain Amendment to Lease, dated
      December 1, 1985, between D.R.H. Investment Co., as landlord, and American
      Motor Inns, Incorporated, as tenant, recorded among the aforesaid land
      records in Liber 4009, Folio 445, as further amended by that certain
      unrecorded Amendment of Lease Agreement, dated December 31, 1985, between
      D.R.H. Investment Co., as landlord, and American Motor Inns, Incorporated,
      as tenant, as further amended by that certain Amendment to Lease
      Agreement, dated December 20, 1986, between Harry W. Rodgers, III, et al,
      and American Motor Inns, Incorporated, recorded among the aforesaid land
      records in Liber 4223, Folio 64, as assigned by that certain Assignment of
      Lease and Indemnification Agreement, dated December 23, 1986, between
      American Motor Inns, Incorporated and ANII Operating Partners, L.P.,
      recorded among the aforesaid land records in Liber 4223, Folio 70, as
      further affected by that certain Assignment of Option Agreement, dated
      December 23, 1986, from American Motors Inns, Incorporated to AMI
      Operating Partners, L.P., recorded among the aforesaid land records in
      Liber 4223, Folio 75, as further affected by that certain unrecorded
      Subordination, Non-Disturbance and Attornment Agreement, dated July 26,
      1995, between AMI Operating Partners, L.P.,

                                 Schedule 4.30

Loan Agreement (FX #2)



      DRH Investment Company and American Enterprise Life Insurance Company, as
      further affected by that certain agreement, dated May 18, 1972, between
      D.R.H. Investment Company and Anne Arundel County, Maryland, recorded
      among the aforesaid land records in Liber M.S.H. No. 2491, Folio 80 (as to
      water and sewer lines and water connection to the insured property), as
      further affected by that certain agreement, dated October 10, 1972,
      between D.R.H. Investment Company and Anne Arundel County, Maryland,
      recorded among the aforesaid land records in Liber M.S.H. No. 2529, Folio
      187 (as to water and sewer lines and water connection to the insured
      property), as further assigned to Lodgian Hotels Fixed III, LLC.

                                 Schedule 4.30

Loan Agreement (FX #2)



                                  SCHEDULE 5.14

                               MATERIAL AGREEMENTS

Group booking contract between Albany Hotel, Inc. and Southwest Airlines
effective November 1, 2002.

                                 Schedule 5.14

Loan Agreement (FX #2)

                                  SCHEDULE 6.5

                         REQUIRED CAPITAL IMPROVEMENTS

                                  Schedule 6.5

Loan Agreement (FX #2)


                                  SCHEDULE 6.6

                          ENVIRONMENTAL WORK/O&M PLANS



 ML  LODGIAN LOCATION                                                                     REQUIRED       REMEDIATION    REQUIRED
CODE  CODE     CODE     PROPERTY NAME           ADDRESS           CITY       STATE   ENVIRONMENTAL WORK     COSTS    COMPLETION DATE
- ---- ------- -------- ------------------  ------------------    -----------  -----   ------------------- ----------- ---------------
                                                                                          
  FIXED RATE LOAN #2
 31   alb      3311   Crowne Plaza -      30 Lodge Street       Albany        NY     (1) Develop and         $495     September 30,
                      Albany                                                         implement an                     2004 (Except
                                                                                     asbestos Operations              O&M Program
                                                                                     and Maintenance                  should be in
                                                                                     Program ($495) (2)               place by July
                                                                                     Minor area of water              31, 2004)
                                                                                     damage and mold from
                                                                                     leaking water tank.
                                                                                     EMG recommends
                                                                                     replacement of water
                                                                                     tank and impacted
                                                                                     building materials
                                                                                     by in-house
                                                                                     maintenance staff

 21   bwi      1775   Holiday Inn -       890 Elkridge Landing  Linthicum     MD     (1) Develop and         $495     July 31, 2004
                      Linthicum           Rd.                                        implement an
                                                                                     asbestos Operations
                                                                                     and Maintenance
                                                                                     Program ($495).

 30   ded      2777   Residence Inn -     259 Elm St.           Dedham        MA     None                    $  0     Not Applicable
                      Dedham

 57   tul      3636   Courtyard by        3340 South 79th East  Tulsa         OK     None                    $  0     Not Applicable
                      Marriott - Tulsa    Avenue

 53   laf      1515   Courtyard by 214    E. Kaliste            Lafayette     LA     None                    $  0     Not Applicable
                      Marriott -          Saloom Road
                      Lafayette

 37   gtr      3802   Holiday Inn -       401 Holiday Drive     Pittsburgh    PA     (1) Minor leak from     $  0     September 30,
                      Pittsburgh                                                     hydraulic elevator                2004
                                                                                     observed - the leak
                                                                                     should be repaired
                                                                                     and staining cleaned
                                                                                     up (within
                                                                                     maintenance budget)

 52   aug      1265   Marriott Fairfield  201 Boy Scout Road    Augusta       GA     None                    $  0     Not Applicable
                      Inn  - Augusta

 40   yor      3875   Holiday Inn - York  334 Arsenal Rd.       York          PA     None                    $  0     Not Applicable

 7    ehc       850   Holiday Inn -       363 Roberts St.       E. Hartford   CT     None                    $  0     Not Applicable
                      E. Hartford


                                  Schedule 6.6



                                  SCHEDULE 6.7

                           RESERVE FUNDING CONDITIONS

            1.    The Borrowers shall have submitted to Lender a written request
for disbursement at least five (5) days prior to the date on which the Borrowers
request such disbursement be made, specifying the specific Work or for which the
disbursement is requested and such other information (such as the price of
materials and the cost of contracted labor or other services) as Lender may
reasonably require, which request must be on a form specified or approved by
Lender;

            2.    On the date such request is received by Lender and on the date
such payment is to be made, no Event of Default shall exist and remain uncured;

            3.    Lender shall have received a certificate from the Borrowers
stating that all Work at the Property to be funded by the requested disbursement
have been completed in a good and workmanlike manner and in accordance with any
plans and specifications approved by Lender and all legal requirements of any
Governmental Authority having jurisdiction over the Property, such certificate
to be accompanied, in either case, by a copy of any license, permit or other
approval by any Governmental Authority required to commence (only for the first
advance with respect to each distinct item of work) and/or complete (only for
the final advance with respect to each distinct item of work) such Work;

            4.    Lender shall have received a certificate from the Borrowers
stating that each Person that supplied materials or labor in connection with the
Work to be funded by the requested disbursement has been paid in full or will be
paid in full upon such disbursement, such certificate to be accompanied by
copies of invoices for all items or materials purchased and all contracted labor
or services provided, and, with respect to Work relating to mold, a certificate
of a Certified Industrial Hygienist that the such Work has been completed in
conformity with applicable mold clean-up procedures promulgated by the
applicable Governmental Authority within the state in which the applicable
Property is located, or, if no such procedures exist, in conformity with the New
York City Department of Health or the United States Environmental Protection
guidelines for mold related clean-up work;

            5.    Lender shall have received appropriate lien waivers (including
final lien waivers) from each contractor, supplier, materialman, mechanic or
subcontractor who receives payment in an amount equal to or greater than $10,000
for completion of its work or delivery of its materials, which lien waivers
shall conform to the requirements of applicable law and shall cover all work
performed and materials supplied (including equipment and fixtures) for a
Property by that contractor, supplier, subcontractor, mechanic or materialman
through the date covered by the current disbursement request; and

            6.    At Lender's option, Lender shall have received a title search
for the Property effective to the date of the disbursement, which search shows
that no mechanic's or materialmen's liens or other Liens of any nature have been
placed against the Property since the date of recordation of the applicable
Mortgage and that title to the Property is free and clear of all Liens (other
than the Permitted Encumbrances).

                                  Schedule 6.7

Loan Agreement (FX #2)

EX-10.3.2

                                                                  EXHIBIT 10.3.2

                                 PROMISSORY NOTE

$67,864,000.00                                                     JUNE 25, 2004

      FOR VALUE RECEIVED, the undersigned, each having an address at c/o
Lodgian, 3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 (each, a
"Borrower" and, collectively, the "Borrowers"), jointly and severally, promise
to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware
corporation (together with its successors and assigns, "Lender"), having an
address at Four World Financial Center, New York, New York 10080, or such other
place as Lender may designate in writing, the principal sum of Sixty Seven
Million Eight Hundred Sixty Four Thousand and No/100 Dollars ($67,864,000.00),
with interest on the unpaid principal balance from the date of this Note, until
paid, at the Interest Rate (as hereinafter defined) in effect from time to time
hereunder. This Promissory Note may be referred to herein as the "Note," and the
loan evidenced hereby may be referred to herein as the "Loan."

      PAYMENTS OF PRINCIPAL AND INTEREST. The Borrowers shall make a payment on
the date hereof to Lender of interest only on the outstanding principal balance
of this Note at the Interest Rate (hereinafter defined), from the date hereof
through and including the last day of the calendar month in which this Note is
executed. Commencing on August 1, 2004 (the "First Payment Date") and on the
first day of each calendar month (each, a "Payment Date") thereafter to and
including the Maturity Date (hereinafter defined), the Borrowers shall make
payments to Lender of interest and principal in monthly installments in the
amounts set forth on Schedule 1 attached hereto and made a part hereof (the
"Monthly Debt Service Payment Amounts"). The entire outstanding principal
balance of the Loan, all accrued and unpaid interest thereon and all other
amounts due hereunder and under the other Loan Documents (collectively the
"Debt") if not sooner paid, shall be due and payable on July 1, 2009 (the
"Maturity Date").

      Interest on the principal sum of this Note shall be calculated on the
basis of a 360 day year, and shall be charged for the actual number of days
elapsed during any month or other accrual period. Interest on this Note shall be
payable in arrears.

      DEFINITIONS. The term "Interest Rate" as used in this Note shall have the
meaning set forth in Section 2.2 of the Loan Agreement (hereinafter defined).

      SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered
pursuant to that certain Loan and Security Agreement, dated as of the date
hereof (the "Loan Agreement"), among the Borrowers and Lender and is secured by,
among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt,
Assignments of Leases and Rents and Security Agreements, each dated as of the
date hereof (collectively, the "Mortgages"), each executed by the applicable
Borrower, encumbering the fee interests or ground lessee's interests of such
Borrower, as applicable, in and to certain properties more particularly
described therein (collectively, the "Properties"). This Note, the Loan
Agreement, the Mortgages, and all other documents or instruments given by the
Borrowers or any of them or any guarantor and accepted by Lender for purposes of
evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by
this Note may be referred to as the "Loan Documents." Capitalized terms used but

Promissory Note (FX-2)



not otherwise defined herein shall have the respective meanings given thereto in
the Loan Agreement.

      DEFEASANCE.

      A.    Notwithstanding anything to the contrary contained in this Note, the
Mortgages or the other Loan Documents, at any time after the earlier to occur of
(x) the second (2nd) anniversary of the date that is the "startup day," within
the meaning of Section 860G of the Internal Revenue Code of 1986, as amended
from time to time or any successor statute (the "Code"), of a "real estate
mortgage investment conduit," within the meaning of Section 860D of the Code,
that holds this Note and (y) forty-eight (48) months after the date of this
Note, the Borrowers shall have the right to defease all or any portion of the
Loan evidenced by this Note with U.S. Government Securities (a "Defeasance");
provided that a partial Defeasance of this Note shall be permitted only in
connection with the release of one or more of the Properties from the lien of
the Mortgages and the other Loan Documents in accordance with Section 11.4 of
the Loan Agreement and upon the satisfaction of the following conditions
precedent (all of which conditions shall become covenants upon occurrence of the
Defeasance):

            (i)   The Borrowers shall provide to Lender not less than thirty
(30) days' prior written notice specifying the date on which the Defeasance
Deposit (hereinafter defined) is to be made (the date so specified may be
referred to as the "Defeasance Election Date").

            (ii)  The Borrowers shall pay to Lender on the Defeasance Election
Date all interest accrued and unpaid on the outstanding principal amount of this
Note due through the Defeasance Election Date, or through the end of the
Interest Accrual Period during which the Defeasance Election Date occurs if the
Defeasance Election Date is other than a Payment Date, and the scheduled
principal amortization payment due on such Defeasance Election Date, or due upon
the next succeeding Payment Date if the Defeasance Election Date is other than a
Payment Date, together with all other amounts, if any, then due and payable
under this Note, the Mortgages and the other Loan Documents.

            (iii) The Borrowers shall irrevocably deposit with Lender an amount
of U.S. Government Securities (hereinafter defined) which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms will provide, not later than the due dates of the payments owing
hereunder, cash in an amount sufficient, without reinvestment, in the opinion of
a firm of independent certified public accountants reasonably acceptable to
Lender expressed in a written certification thereof delivered to Lender (the
"CPA Certificate"), (1) with respect to a total Defeasance, to pay and discharge
the Scheduled Defeasance Payments (hereinafter defined) for the principal
balance of this Note or (2) with respect to a partial Defeasance in connection
with the release of one or more Properties, to pay and discharge the Scheduled
Defeasance Payments relating to the Release Price for such Property or
Properties (the U.S. Government Securities so deposited together with any
interest or other increase from the issuer of the securities earned thereon, and
any replacements thereof, shall be referred to herein as the "Defeasance
Deposit"). All such U.S. Government Securities, if in registered form, shall be
registered in the name of Lender or its nominee (and, if registered in nominee's
name, endorsed to Lender or in blank) and, if issued in book-entry form, the
name of Lender or its

                                       2

Promissory Note (FX-2)



nominee shall appear as the owner of such securities on the books of the Federal
Reserve Bank or other party maintaining such book-entry system.

            (iv)  The Borrowers shall cause the following to be delivered to
Lender on or prior to the Defeasance Election Date, all in form and substance
reasonably satisfactory to Lender:

                  (a)   a security agreement, in form and substance reasonably
satisfactory to Lender, creating a first priority lien on the Defeasance Deposit
(the "Defeasance Security Agreement");

                  (b)   the CPA Certificate;

                  (c)   a certificate of the Borrowers certifying that all
requirements for the Defeasance set forth herein have been satisfied;

                  (d)   an opinion of counsel for the Borrowers in form and
substance reasonably satisfactory to Lender to the effect that (i) Lender has a
perfected first priority security interest in the Defeasance Deposit, (ii) the
holder of this Note will not recognize additional income, gain or loss for
United States federal income tax purposes as a result of the Defeasance and will
be subject to United States federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if the Defeasance had
not occurred, (iii) any holder, trustee or custodian of this Note which is a
"real estate mortgage investment conduit" within the meaning of Section 860D of
the Code will not fail to maintain its status as such as a result of the
Defeasance and (iv) the Defeasance Security Agreement is enforceable against the
Borrowers in accordance with its terms;

                  (e)   evidence in writing from the applicable Rating Agencies
for any Securities backed in whole or in part by this Note, to the effect that
the Defeasance will not result in a downgrading, withdrawal, or qualification of
the ratings in effect immediately prior to such Defeasance for any class of such
then outstanding Securities;

                  (f)   evidence reasonably satisfactory to Lender that each of
the Borrowers remains validly existing and in good standing under the laws of
the state where it is organized and, to the extent required by applicable law,
qualified to do business in the state where its respective Property is located;
and the Borrowers shall maintain such existence during the time thereafter when
this Note shall be outstanding (unless a Successor Borrower (hereinafter
defined) assumes the obligations of each of the Borrowers or the Defeasing
Borrower(s) (as hereinafter defined), as the case may be, under this Note); and

                  (g)   a certificate of the Borrowers certifying that all of
the representations, and warranties contained in the Loan Agreement and the
other Loan Documents are true and correct in all material respects as of the
Defeasance Election Date and ratifying all of the covenants and obligations of
the Borrowers under the Loan Documents as of such date and such other
certificates, documents or instruments as Lender may reasonably request or as
may be required by the Rating Agencies referred to above, provided that such
certificates, documents or instruments shall not increase the Borrowers'
obligations or decrease the Borrowers' rights under the Loan Documents.

                                       3

Promissory Note (FX-2)



            (v)   Either (1) each of the Borrowers in the case of a total
Defeasance, or the Defeasing Borrower(s) in the case of a partial Defeasance
shall deliver to Lender a certificate stating that at all times following the
Defeasance, the Borrowers or the Defeasing Borrower(s), as the case may be,
shall have no interest in any assets other than the Defeasance Deposit, or (2)
such Borrower(s) shall satisfy all of the requirements of Section C below.

            (vi)  The Borrowers shall pay to Lender all reasonable out-of-pocket
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements) incurred by Lender in connection with the Defeasance.

            (vii) In the event only a portion of the Loan evidenced by this Note
is the subject of the Defeasance in connection with the release of any Lien of
any applicable Mortgage on one or more individual Properties under Section 11.4
of the Loan Agreement, the Borrowers shall execute and deliver all necessary
documents to amend and restate this Note and issue two substitute promissory
notes therefor: one note having a principal balance equal to the defeased
portion of the original Note (the "Defeased Note") and one note having a
principal balance equal to the undefeased portion of the original Note (the
"Undefeased Note"). The Defeased Note and the Undefeased Note shall have
identical terms as the original Note (and the Defeased Note and the Undefeased
Note or Notes shall be cross-defaulted with each other), except for the
principal balance. A Defeased Note cannot be the subject of any further
Defeasance. An Undefeased Note may be the subject of a further Defeasance in
accordance with the terms of this Note and the Loan Agreement (the term "Note",
as used above in this clause (vii) for these purposes, being deemed to refer to
the Undefeased Note that is the subject of further defeasance); provided,
however, that no such partial Defeasance shall take place unless the conditions
hereof and the conditions of Section 11.4 of the Loan Agreement are satisfied.

      B.    Upon compliance with the requirements of Section A above and
compliance with the requirements of Section 11.4 of the Loan Agreement, Lender
shall cause each of the Properties, in the case of a total Defeasance, or each
Defeased Property (as hereinafter defined), in the case of a partial Defeasance,
to be released from the lien of the applicable Mortgages and the other
applicable Loan Documents. The obligations under the Loan Documents with respect
to the Properties or each Defeased Property, as the case may be, shall no longer
be applicable, and the Defeasance Deposit shall be the sole source of collateral
securing this Note or the Defeased Note, as the case may be. Lender shall apply
the Defeasance Deposit and the payments received therefrom to the payment of all
scheduled principal and interest payments due on all successive Payment Dates
under this Note or the Defeased Note, as the case may be, after the Defeasance
Election Date to and including the Maturity Date and to payment of the entire
remaining Debt or the entire remaining principal balance, accrued and unpaid
interest and other sums due under the Defeased Note, as the case may be, on the
Maturity Date (collectively, the "Scheduled Defeasance Payments"). The
Borrowers, pursuant to the Defeasance Security Agreement or other appropriate
document, shall direct that the payments received from the Defeasance Deposit
shall be made directly to Lender and applied to satisfy the obligations of the
Borrowers under this Note or the Defeased Note, as the case may be.

      C.    If, after the Defeasance, the Borrowers, in the case of a total
Defeasance, or the Defeasing Borrower(s), in the case of a partial Defeasance,
will own any assets other than the Defeasance Deposit, the Borrowers or the
Defeasing Borrower(s), as the case may be, shall

                                       4

Promissory Note (FX-2)



establish or designate a single-purpose, bankruptcy-remote successor entity
acceptable to Lender (the "Successor Borrower"), with respect to which a
nonconsolidation opinion reasonably satisfactory in form and substance to Lender
and any applicable Rating Agencies shall be delivered to Lender and such Rating
Agencies, in which case the Borrowers or the Defeasing Borrower(s), as the case
may be, shall transfer and assign to the Successor Borrower all of their
respective obligations, rights and duties under this Note or the Defeased Note,
as the case may be, and the Defeasance Security Agreement, together with the
pledged Defeasance Deposit. The Successor Borrower shall assume the obligations
of the Borrowers or the Defeasing Borrower(s), as the case may be, under this
Note or the Defeased Note, as the case may be, and the Defeasance Security
Agreement, and such Borrower(s) shall be relieved and released of their
respective obligations hereunder and thereunder. Each of the Borrowers or the
applicable Defeasing Borrower(s), as the case may be, shall pay not less than
$1,000 to the Successor Borrower as consideration for assuming such Borrower's
obligations.

      D.    As used herein, the following terms shall have the following
meanings:

            (i)   "Defeased Property" shall mean any Property being released
from the lien of the Mortgage relating to such Property pursuant to a partial
Defeasance in accordance with the provisions of this Note and Section 11.4 of
the Loan Agreement.

            (ii)  "U.S. Government Securities" shall mean securities that are
(i) direct obligations of the United States of America for the full and timely
payment of which its full faith and credit is pledged or (ii) obligations of an
entity controlled or supervised by and acting as an agency or instrumentality
and guaranteed as a full faith and credit obligation which shall be fully and
timely paid by the United States of America, which in either case are not
callable or redeemable at the option of the issuer thereof (including a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the United
States Securities Act)) as custodian with respect to any such U.S. Government
Securities or a specific payment of principal of or interest on any such U.S.
Government Securities held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the securities or the specific payment of principal of or interest on
the securities evidenced by such depository receipt.

            (iii) "Defeasing Borrower" shall mean the Borrower owning or
leasing, as the case may be, a Defeased Property.

            (iv)  "Release Price" shall have the meaning set forth in the Loan
Agreement.

      E.    If, after payment in full of all obligations evidenced by this Note
or any other of the Loan Documents, any of the Defeasance Deposit remains, such
remaining balance of the Defeasance Deposit shall be returned to the Borrowers
(or to the Successor Borrower, as the case may be) or Lender shall assign to the
Borrowers (or the Successor Borrower, as the case may be) all of Lender's right,
title, and interest in the Government Securities constituting the Defeasance
Deposit.

                                       5

Promissory Note (FX-2)



      PREPAYMENT; PREPAYMENT CONSIDERATION. The Borrowers may not prepay this
Note in whole or in part at any time except as expressly provided in Section 2.6
of the Loan Agreement.

      EVENTS OF DEFAULT; ACCELERATION. Upon and at any time following the
occurrence of any Event of Default, then at the option of Lender and without
notice, the entire principal amount and all interest accrued and outstanding
hereunder and all other amounts outstanding under any of the Loan Documents
shall at once become due and payable, and Lender may exercise any and all of its
rights and remedies under any of the Loan Documents or pursuant to applicable
law. Lender may so accelerate such obligations and exercise such remedies at any
time after the occurrence of any Event of Default, regardless of any prior
forbearance.

      LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to
non-payment of any principal, interest or other sums due under this Note or
under any of the other Loan Documents shall occur, then the Borrowers shall pay
to Lender, in addition to all sums otherwise due and payable, a late fee in an
amount equal to five percent (5.0%) of such principal, interest or other sums
due hereunder or under any other Loan Document (or, in the case of a partial
payment, the unpaid portion thereof), such late charge to be immediately due and
payable without demand by Lender.

      Upon the occurrence and during the continuance of an Event of Default and
in any event from and after the Maturity Date of the Loan, the outstanding
principal balance of this Note shall bear interest until paid in full at a rate
per annum (the "Default Rate") equal to the sum of (i) four percent (4.0%) and
(ii) the Interest Rate otherwise applicable under this Note.

      The Borrowers agree that such late charges and Default Rate of interest
are reasonable and do not constitute a penalty.

      LAWFUL INTEREST. Notwithstanding any provision to the contrary contained
in this Note, the Loan Agreement or the other Loan Documents, the Borrowers
shall not be required to pay, and Lender shall not be permitted to collect, any
amount of interest in excess of the maximum amount of interest permitted by law
("Excess Interest"). If any Excess Interest is provided for or determined by a
court of competent jurisdiction to have been provided for in this Note, the Loan
Agreement or in any of the other Loan Documents, then in such event: (1) the
provisions of this subsection shall govern and control; (2) the Borrowers shall
not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender
may have received hereunder shall be, at Lender's option, (a) applied as a
credit against either or both of the outstanding principal balance of the Loan
or accrued and unpaid interest thereunder (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any combination of
the foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to time under
applicable law (the "Maximum Rate"), and this Note, the Loan Agreement and the
other Loan Documents shall be deemed to have been and shall be, reformed and
modified to reflect such reduction; and (5) the Borrowers shall not have any
action against Lender for any damages arising out of the payment or collection
of any Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligation is calculated at the Maximum Rate rather than the
applicable rate under this Note or the Loan Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate,

                                       6

Promissory Note (FX-2)



the rate of interest payable on such Obligations shall, to the extent permitted
by law, remain at the Maximum Rate until Lender shall have received or accrued
the amount of interest which Lender would have received or accrued during such
period on Obligations had the rate of interest not been limited to the Maximum
Rate during such period. If the Default Rate shall be finally determined to be
unlawful, then the applicable Interest Rate shall be applicable during any time
when the Default Rate would have been applicable hereunder, provided however
that if the Maximum Rate is greater or lesser than the applicable Interest Rate,
then the foregoing provisions of this paragraph shall apply.

      CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the
obligation of the Borrowers or their successors or assigns to pay the
outstanding principal balance of this Note, interest thereon and other amounts
due hereunder and to observe the covenants contained herein, in the Loan
Agreement, the Mortgages or in any other Loan Document, without affecting the
guaranty of any person or entity for payment of the outstanding principal
balance of this Note, without giving notice to or obtaining the consent of any
Borrower or its successors or assigns or any guarantors or indemnitor, and
without liability on the part of Lender, Lender may, at its option, extend the
time for payment of the outstanding principal balance of this Note or any part
thereof, reduce the payments thereon, release anyone liable for payment of all
or a portion of said indebtedness, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.

      Presentment, notice of dishonor, and protest are hereby waived by the
Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note
shall be binding upon the Borrowers and their successors and assigns.

      EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE
INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.

      ASSIGNMENT AND TRANSFER OF NOTE. Subject to the provisions of the Loan
Agreement, Lender shall have the right to assign or transfer, in whole or in
part (including the right to grant participation interests in) any or all of its
obligations under this Note, the Loan Agreement, the Mortgages and any or all of
the other Loan Documents. Lender shall be released of any obligations to the
extent that the same are so assigned or transferred, and the rights and
obligations of "Lender" hereunder shall become the rights and obligations of the
transferee holder.

      LIMITATION ON RECOURSE. Lender's rights of recourse for the obligations of
the Borrowers hereunder are limited in accordance with Article XII of the Loan
Agreement. This

                                       7

Promissory Note (FX-2)



provision shall not limit any rights of Lender under the Guaranty of Recourse
Obligations or the Environmental Indemnity, each dated as of the date hereof.

      ATTORNEYS' FEES, COSTS OF COLLECTION. The Borrowers shall pay to Lender on
demand all out-of-pocket costs and expenses, including reasonable attorneys'
fees and expenses, incurred by Lender in collecting the indebtedness arising
hereunder or under any other Loan Documents or secured thereby or otherwise
exercising any rights or remedies of Lender hereunder or thereunder or at law or
in equity or enforcing the obligations of any parties hereto or thereto, or as a
consequence of any breach or default by any Borrower or any guarantor hereunder
or thereunder, or otherwise as a consequence of any right evidenced or secured
by this Note or the Loan Documents. Without limitation, such costs and expenses
to be reimbursed by the Borrowers shall include reasonable attorneys' fees and
expenses incurred in any bankruptcy case or proceeding and in any appeal.

      APPLICABLE LAW. This Note shall be governed by and construed in accordance
with the laws of the State of New York and applicable federal law.

      TIME OF ESSENCE. Time shall be of the essence as to all of the terms,
covenants and conditions of this Note. If the due date of any payment due
hereunder or under any of the other Loan Documents shall fall on a day other
than a Business Day, the Borrowers shall be required to make such payment on the
next succeeding Business Day.

      JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of the
Borrowers hereunder shall be joint and several.

                        [NO ADDITIONAL TEXT ON THIS PAGE]

                                       8

Promissory Note (FX-2)



      IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as
of the date first written above.

                                  BORROWERS:

                                  ALBANY HOTEL, INC.
                                  APICO INNS OF GREEN TREE, INC.
                                  LODGIAN AUGUSTA LLC
                                  LODGIAN HOTELS FIXED II, INC.
                                  LODGIAN LAFAYETTE LLC
                                  LODGIAN TULSA LLC

                                  By: /s/ Daniel E. Ellis
                                      ------------------------------------------
                                  Name:  Daniel E. Ellis
                                  Title: Vice President and Secretary, or
                                         Authorized Signatory for each of the
                                         entities listed above

                                  AMI OPERATING PARTNERS, L.P.

                                  By: AMIOP ACQUISITION GENERAL
                                      PARTNER SPE CORP., a Delaware
                                      corporation, its general partner

                                  By: /s/ Daniel E. Ellis
                                      ------------------------------------------
                                  Name:  Daniel E. Ellis
                                  Title: Vice President and Secretary, or
                                         Authorized Signatory

                                  DEDHAM LODGING ASSOCIATES I, LIMITED
                                  PARTNERSHIP

                                  By: DEDHAM LODGING SPE, INC., a Delaware
                                      corporation, its general partner

                                  By: /s/ Daniel E. Ellis
                                      ------------------------------------------
                                  Name:  Daniel E. Ellis
                                  Title: Vice President and Secretary, or
                                         Authorized Signatory

Promissory Note (FX-2)



                                   SCHEDULE 1

                      MONTHLY DEBT SERVICE PAYMENT AMOUNTS



                    SCHEDULED      SCHEDULED         TOTAL
PERIOD     DATE      INTEREST      PRINCIPAL        PAYMENT
- ------     ----      --------      ---------        -------
                                     
   1     8/1/2004   384,349.65       77,143.54      461,493.19
   2     9/1/2004   383,912.74       77,580.45      461,493.19
   3     10/1/2004  371,103.26       90,389.93      461,493.19
   4     11/1/2004  382,961.44       78,531.75      461,493.19
   5     12/1/2004  370,177.43       91,315.76      461,493.19
   6     1/1/2005   381,999.50       79,493.69      461,493.19
   7     2/1/2005   381,549.29       79,943.90      461,493.19
   8     3/1/2005   344,216.22      117,276.97      461,493.19
   9     4/1/2005   380,432.32       81,060.87      461,493.19
  10     5/1/2005   367,716.03       93,777.16      461,493.19
  11     6/1/2005   379,442.12       82,051.07      461,493.19
  12     7/1/2005   366,752.35       94,740.84      461,493.19
  13     8/1/2005   378,440.86       83,052.33      461,493.19
  14     9/1/2005   377,970.49       83,522.70      461,493.19
  15     10/1/2005  365,320.12       96,173.07      461,493.19
  16     11/1/2005  376,952.78       84,540.41      461,493.19
  17     12/1/2005  364,329.66       97,163.53      461,493.19
  18     1/1/2006   375,923.69       85,569.50      461,493.19
  19     2/1/2006   375,439.07       86,054.12      461,493.19
  20     3/1/2006   338,666.05      122,827.14      461,493.19
  21     4/1/2006   374,256.06       87,237.13      461,493.19
  22     5/1/2006   361,705.15       99,788.04      461,493.19
  23     6/1/2006   373,196.84       88,296.35      461,493.19
  24     7/1/2006   360,674.29      100,818.90      461,493.19
  25     8/1/2006   372,125.78       89,367.41      461,493.19
  26     9/1/2006   371,619.64       89,873.55      461,493.19
  27     10/1/2006  359,139.33      102,353.86      461,493.19
  28     11/1/2006  370,530.96       90,962.23      461,493.19
  29     12/1/2006  358,079.80      103,413.39      461,493.19
  30     1/1/2007   369,430.11       92,063.08      461,493.19
  31     2/1/2007   368,908.70       92,584.49      461,493.19
  32     3/1/2007   332,734.25      128,758.94      461,493.19
  33     4/1/2007   367,655.12       93,838.07      461,493.19
  34     5/1/2007   355,280.97      106,212.22      461,493.19
  35     6/1/2007   366,522.13       94,971.06      461,493.19
  36     7/1/2007   354,178.31      107,314.88      461,493.19
  37     8/1/2007   365,376.48       96,116.71      461,493.19
  38     9/1/2007   364,832.12       96,661.07      461,493.19
  39     10/1/2007  352,533.56      108,959.63      461,493.19
  40     11/1/2007  363,667.58       97,825.61      461,493.19
  41     12/1/2007  351,400.20      110,092.99      461,493.19
  42     1/1/2008   362,490.03       99,003.16      461,493.19
  43     2/1/2008   361,929.32       99,563.87      461,493.19
  44     3/1/2008   338,051.54      123,441.65      461,493.19
  45     4/1/2008   360,666.32      100,826.87      461,493.19
  46     5/1/2008   348,479.31      113,013.88      461,493.19
  47     6/1/2008   359,455.23      102,037.96      461,493.19
  48     7/1/2008   347,300.65      114,192.54      461,493.19
  49     8/1/2008   358,230.60      103,262.59      461,493.19
  50     9/1/2008   357,645.77      103,847.42      461,493.19
  51     10/1/2008  345,539.64      115,953.55      461,493.19
  52     11/1/2008  356,400.92      105,092.27      461,493.19




                                           
  53     12/1/2008    344,328.12        117,165.07        461,493.19
  54     1/1/2009     355,142.16        106,351.03        461,493.19
  55     2/1/2009     354,539.84        106,953.35        461,493.19
  56     3/1/2009     319,682.42        141,810.77        461,493.19
  57     4/1/2009     353,130.96        108,362.23        461,493.19
  58     5/1/2009     341,145.72        120,347.47        461,493.19
  59     6/1/2009     351,835.65        109,657.54        461,493.19
  60     7/1/2009     339,885.10     62,013,398.42     62,353,283.52



                                       11

EX-10.3.3

                                                                  EXHIBIT 10.3.3

                        GUARANTY OF RECOURSE OBLIGATIONS

            This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of
June 25, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"),
having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326,
in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080 (together
with its successors, transferees and assigns, "LENDER").

                                R E C I T A L S:

            A. Pursuant to that certain Loan and Security Agreement, dated as of
the date hereof (as the same may be amended, modified, supplemented or restated
from time to time, the "LOAN AGREEMENT"), among the Borrowers named therein
(each, a "BORROWER", and collectively, "BORROWERS"), and Lender, Lender has
agreed to make a loan to Borrowers in the aggregate original principal amount of
up to Sixty Seven Million Eight Hundred Sixty Four Thousand and No/100 Dollars
($67,864,000.00) (the "LOAN"), subject to the terms and conditions of the Loan
Agreement;

            B. As a condition to Lender's making the Loan, Lender is requiring
that Guarantor execute and deliver to Lender this Guaranty; and

            C. Guarantor hereby acknowledges that Guarantor holds a direct
and/or indirect ownership interest in each Borrower and that Guarantor will
materially benefit from Lender's agreeing to make the Loan.

            NOW, THEREFORE, in consideration of the premises set forth herein
and as an inducement for and in consideration of the agreement of Lender to make
the Loan pursuant to the Loan Agreement and the other Loan Documents, Guarantor
hereby agrees, covenants, represents and warrants to Lender as follows:

            SECTION 1. DEFINITIONS. All capitalized terms used and not defined
herein shall have the respective meanings given such terms in the Loan
Agreement.

            SECTION 2. GUARANTY.

            (a) Guarantor (but not its members, partners, employees,
shareholders, agents, directors or officers) hereby irrevocably, absolutely and
unconditionally assumes liability for, guarantees payment to Lender of, and
agrees to pay, protect, defend, indemnify and save harmless Lender from and
against any and all Guaranteed Recourse Obligations of Borrowers (as hereinafter
defined).

The obligations which are the subject of the guaranty referred to in this
Section 2 are hereinafter collectively referred to as the "GUARANTEED
OBLIGATIONS".

Guaranty of Recourse Obligations [FX-2]



            (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF BORROWERS" as used
in this Guaranty shall mean all obligations and liabilities of Borrowers for
which Borrowers shall be personally liable under the provisions of Section 12.2
of the Loan Agreement.

            (c) All sums payable to Lender under this Guaranty shall be payable
on demand and without reduction for any offset, claim, counterclaim or defense.

            SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby
represents and warrants to Lender as follows (which representations and
warranties shall be given as of the date hereof and shall survive the execution
and delivery of this Guaranty):

            (a) DUE EXECUTION. This Guaranty has been duly executed and
delivered by Guarantor.

            (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and
binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally, or application of general principles
of equity in any legal proceeding.

            (c) NO VIOLATION. The execution, delivery and performance by
Guarantor of its obligations under this Guaranty do not violate any law,
regulation, order, writ, injunction or decree of any court or governmental body,
agency or other instrumentality applicable to Guarantor, or result in a breach
of any of the terms, conditions or provisions of, or constitute a default under,
or result in the creation or imposition of any mortgage, lien, charge or
encumbrance of any nature whatsoever upon any of the assets of Guarantor
pursuant to the terms of any mortgage, indenture, agreement or instrument to
which Guarantor is a party or by which it or any of its properties is bound.
Guarantor is not in default under any other guaranty which it has provided to
Lender.

            (d) NO LITIGATION. Except as disclosed on Schedule 4.9 to the Loan
Agreement, there are no actions, suits or proceedings at law or at equity,
pending or, to Guarantor's knowledge, threatened against or affecting Guarantor
or which involve or could reasonably be expected to involve the validity or
enforceability of this Guaranty or which might materially adversely affect the
financial condition of Guarantor or the ability of Guarantor to perform any of
its obligations under this Guaranty. Guarantor is not in default beyond any
applicable grace or cure period with respect to any order, writ, injunction,
decree or demand of any Governmental Authority which might materially adversely
affect the financial condition of Guarantor or the ability of Guarantor to
perform any of its obligations under this Guaranty.

            (e) CONSENTS. All consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, all Governmental Authorities
(collectively, the "CONSENTS") that are required in connection with the valid
execution, delivery and performance by Guarantor of this Guaranty have been
obtained and Guarantor agrees that all Consents required in connection with the
carrying out or performance of any of Guarantor's obligations under this
Guaranty will be obtained when required.

            (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial
statements of Guarantor heretofore delivered to Lender fairly present the
financial condition of Guarantor as of

                                        2

Guaranty of Recourse Obligations [FX-2]


the respective dates thereof, and no materially adverse change has occurred in
the financial conditions reflected therein since the respective dates thereof.
None of the aforesaid financial statements or any certificate or statement
furnished to Lender by or on behalf of Guarantor in connection with the
transactions contemplated hereby, and none of the representations and warranties
in this Guaranty contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein not materially misleading. Guarantor is not insolvent within
the meaning of the Bankruptcy Code or any other applicable law, code or
regulation and the execution, delivery and performance of this Guaranty will not
render Guarantor insolvent.

            SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the
benefit of Lender that Guarantor will deliver to Lender each of the financial
statements required to be delivered pursuant to Section 5.1 of the Loan
Agreement.

            SECTION 5. INTENTIONALLY DELETED.

            SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR.

            (a) The obligations of Guarantor hereunder shall be irrevocable,
absolute and unconditional, irrespective of the validity, regularity or
enforceability, in whole or in part, of the Note, the Loan Agreement, the
Mortgages or the other Loan Documents or any provision thereof, or the absence
of any action to enforce the same, any waiver or consent with respect to any
provision thereof, the recovery of any judgment against any Borrower, Guarantor
or any other Person or any action to enforce the same, any failure or delay in
the enforcement of the obligations of Borrowers under the Note, the Loan
Agreement, the Mortgages or any other Loan Documents or Guarantor under this
Guaranty, or any setoff, counterclaim, and irrespective of any other
circumstances which might otherwise limit recourse against Guarantor by Lender
or constitute a legal or equitable discharge or defense of a guarantor or
surety. Lender may enforce the obligations of Guarantor under this Guaranty by a
proceeding at law, in equity or otherwise, independent of any loan foreclosure
or similar proceeding or any deficiency action against Borrowers or any other
Person at any time, either before or after an action against the Properties or
any of them or any part thereof, Borrowers or any other Person. THIS GUARANTY IS
A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION.
Guarantor waives diligence, notice of acceptance of this Guaranty, filing of
claims with any court, any proceeding to enforce any provision of the Note, the
Loan Agreement, the Mortgages or any other Loan Documents, against Guarantor,
Borrowers or any other Person, any right to require a proceeding first against
Borrowers or any other Person, or to exhaust any security (including, without
limitation, the Properties or any of them or any part thereof) for the
performance of the Guaranteed Obligations or any other obligations of Borrowers
or any other Person, or any protest, presentment, notice of default (except as
may be expressly required under the Loan Documents) or other notice or demand
whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not
be discharged of its obligations hereunder.

            (b) The obligations of Guarantor under this Guaranty, and the rights
of Lender to enforce the same by proceedings, whether by action at law, suit in
equity or otherwise, shall not be in any way affected by any of the following:

                                       3

Guaranty of Recourse Obligations [FX-2]



                  (i) any insolvency, bankruptcy, liquidation, reorganization,
      readjustment, composition, dissolution, receivership, conservatorship,
      winding up or other similar proceeding involving or affecting any
      Borrower, any Property or any part thereof, Guarantor or any other Person;

                  (ii) any failure by Lender or any other Person, whether or not
      without fault on its part, to perform or comply with any of the terms of
      the Loan Agreement, or any other Loan Documents, or any document or
      instrument relating thereto;

                  (iii) except (A) with respect to activities occurring after
      the date of a Permitted Assumption or, (B) activities relating to a
      Released Property after the date of a Release with respect thereto, the
      sale, transfer or conveyance of any Property or any interest therein to
      any Person, whether now or hereafter having or acquiring an interest in
      any Property or any interest therein and whether or not pursuant to any
      foreclosure, trustee sale or similar proceeding against any Borrower or
      any Property or any interest therein;

                  (iv) the conveyance to Lender, any Affiliate of Lender or
      Lender's nominee of any Property or any interest therein by a deed-in-lieu
      of foreclosure;

                  (v) the release of any Borrower or any other Person from the
      performance or observance of any of the agreements, covenants, terms or
      conditions contained in any of the Loan Documents by operation of law or
      otherwise;

                  (vi) the release in whole or in part of any collateral for any
      or all Guaranteed Obligations or for the Loan or any portion thereof; or

                  (vii) the exercise by Mezzanine Lender of any remedies made
      available to Mezzanine Lender pursuant to the terms of the Mezzanine Loan
      Documents, including, without limitation, foreclosure or similar remedies
      under any pledge agreement encumbering Mezzanine Borrower's interest in
      any General Partner, any Member, and/or any Borrower except with respect
      to actions taken by the Mezzanine Lender following the Mezzanine Lender
      succeeding to the interests of the Mezzanine Borrowers in and to the
      Borrowers.

            (c) Except as otherwise specifically provided in this Guaranty,
Guarantor hereby expressly and irrevocably waives all defenses in an action
brought by Lender to enforce this Guaranty based on claims of waiver, release,
surrender, alteration or compromise and all setoffs, reductions, or impairments,
whether arising hereunder or otherwise.

            (d) Lender may deal with Borrowers and Affiliates of Borrowers in
the same manner and as freely as if this Guaranty did not exist and shall be
entitled, among other things, to grant Borrowers or any other Person such
extension or extensions of time to perform any act or acts as may be deemed
advisable by Lender, at any time and from time to time, without terminating,
affecting or impairing the validity of this Guaranty or the obligations of
Guarantor hereunder.

            (e) No compromise, alteration, amendment, modification, extension,
renewal, release or other change of, or waiver, consent, delay, omission,
failure to act or other action with

                                        4

Guaranty of Recourse Obligations [FX-2]



respect to, any liability or obligation under or with respect to, or of any of
the terms, covenants or conditions of, the Note, the Loan Agreement, the
Mortgages or the other Loan Documents or any amendment, modification or other
change of any legal requirement shall in any way alter, impair or affect any of
the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan
Documents are modified with Lender's consent, the Guaranteed Obligations shall
automatically be deemed modified to include such modifications.

            (f) Lender may proceed to protect and enforce any or all of its
rights under this Guaranty by suit in equity or action at law, whether for the
specific performance of any covenants or agreements contained in this Guaranty
or otherwise, or to take any action authorized or permitted under applicable
law, and shall be entitled to require and enforce the performance of all acts
and things required to be performed hereunder by Guarantor. Each and every
remedy of Lender shall, to the extent permitted by law, be cumulative and shall
be in addition to any other remedy given hereunder or now or hereafter existing
at law or in equity.

            (g) No waiver shall be deemed to have been made by Lender of any
rights hereunder unless the same shall be in writing and signed by Lender, and
any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of Lender or the obligations of
Guarantor to Lender in any other respect or at any other time.

            (h) At the option of Lender, Guarantor may be joined in any action
or proceeding commenced by Lender against Borrowers in connection with or based
upon the Note, the Loan Agreement, the Mortgages or any other Loan Documents and
recovery may be had against Guarantor in such action or proceeding or in any
independent action or proceeding against Guarantor to the extent of Guarantor's
liability hereunder, without any requirement that Lender first assert, prosecute
or exhaust any remedy or claim against Borrowers or any other Person, or any
security for the obligations of Borrowers or any other Person.

            (i) Guarantor agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
is made by Borrowers or Guarantor to Lender and such payment is rescinded or
must otherwise be returned by Lender (as determined by Lender in its sole and
absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar proceeding involving or affecting any Borrower or Guarantor,
all as though such payment had not been made.

            (j) In the event that Guarantor shall advance or become obligated to
pay any sums under this Guaranty or in connection with the Guaranteed
Obligations or in the event that for any reason whatsoever any Borrower or any
subsequent owner of any Property or any part thereof is now, or shall hereafter
become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums
and of such indebtedness and all interest thereon shall at all times be
subordinate as to the lien, the time of payment and in all other respects to all
sums, including principal and interest and other amounts, at any time owed to
Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to
enforce or receive payment thereof until all principal, interest and other sums
due pursuant to the Loan Documents have been paid in full. Nothing herein
contained is intended or shall be construed to give Guarantor any right of
subrogation in or under the Loan Documents or any right to participate in any
way therein, or in the right, title or interest of Lender

                                       5

Guaranty of Recourse Obligations [FX-2]



in or to any collateral for the Loan, notwithstanding any payments made by
Guarantor under this Guaranty, until the actual and irrevocable receipt by
Lender of payment in full of all principal, interest and other sums due with
respect to the Loan or otherwise payable under the Loan Documents. If any amount
shall be paid to Guarantor on account of such subrogation rights at any time
when any such sums due and owing to Lender shall not have been fully paid, such
amount shall be paid by Guarantor to Lender for credit and application against
such sums due and owing to Lender. The foregoing shall not prohibit Borrowers
from using the proceeds of the Loan for any permitted use under the Loan
Agreement, including, without limitation, the making of distributions to
Guarantor.

            (k) Guarantor's obligations hereunder shall survive a foreclosure,
delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or
similar proceeding involving any Property or any part thereof and the exercise
by Lender of any of all of its remedies pursuant to the Loan Documents.
Notwithstanding the foregoing to the contrary, the obligations and liabilities
of Guarantor under this Guaranty shall survive for a period of two (2) years
following payment in full of the Obligations in accordance with the terms of the
Loan Documents, provided, however, in the event that any Guaranteed Obligations
or liabilities of the Guarantor under this Guaranty shall have arisen prior to
the expiration of such period, then in any such event the foregoing survival
period shall not apply and the obligations and liabilities of Guarantor
hereunder shall survive.

            SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. THIS INSTRUMENT REPRESENTS
THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER
HEREOF. THE TERMS OF THIS GUARANTY SHALL NOT BE WAIVED, ALTERED, MODIFIED,
AMENDED, SUPPLEMENTED OR TERMINATED IN ANY MANNER WHATSOEVER EXCEPT BY WRITTEN
INSTRUMENT SIGNED BY LENDER AND GUARANTOR.

            SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding
upon Guarantor, and its successors and assigns, may not be assigned or delegated
by Guarantor and shall inure to the benefit of Lender and its successors and
assigns. Lender shall have the right to assign this Guaranty and the obligations
hereunder in connection with any assignment or transfer of all or any portion of
the Loan or any interest therein. All references to "Lender" hereunder shall be
deemed to include the successors and assigns of Lender and the parties hereto
acknowledge that actions taken by Lender hereunder may be taken by Lender's
agents and by the agents of the successors and assigns of Lender.

            SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty
shall be governed by, and construed in accordance with, the substantive laws of
the State of New York. Guarantor irrevocably (a) agrees that any suit, action or
other legal proceeding arising out of or relating to this Guaranty may be
brought in a court of record in the City and County of New York or in the Courts
of the United States of America located in the Southern District of New York,
(b) consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which it may have to the laying of venue
of any such suit, action or proceeding in any of such courts and any claim that
any such suit, action or proceeding has been brought in an inconvenient forum.
Guarantor irrevocably consents to the service of any and all process in any such
suit, action or proceeding by service of copies of such process to Guarantor at
its address set forth on the first page hereof. Nothing in this Section 9,
however, shall affect the right of Lender to serve legal process in any other
manner permitted by law or affect the right of

                                       6

Guaranty of Recourse Obligations [FX-2]



Lender to bring any suit, action or proceeding against Guarantor or its property
in the courts of any other jurisdictions.

            SECTION 10. SECTION HEADINGS. The headings of the sections and
paragraphs of this Guaranty have been inserted for convenience of reference only
and shall in no way define, modify, limit or amplify any of the terms or
provisions hereof.

            SECTION 11. SEVERABILITY. Any provision of this Guaranty which may
be determined by any competent authority to be prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Guarantor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.

            SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND LENDER
HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING
ARISING HEREUNDER OR IN CONNECTION THEREWITH.

            SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL
LIABILITY.

            (a) The obligations of Guarantor hereunder are separate and distinct
from, and in addition to, the obligations of Guarantor now or hereafter arising
under the other guaranties pursuant to which Guarantor has guaranteed the
payment and performance of certain other obligations of Borrowers described
therein.

            (b) If there is more than one entity comprising Guarantor, all
references to Guarantor herein shall be to Guarantor (but not its members,
partners, employees, shareholders, agents, directors or officers) or any one or
more of them. All obligations and liabilities of Guarantor hereunder are in
addition to, not in lieu of and are independent of: (i) all obligations of
Borrowers under any other Loan Document, including the Note and the Loan
Agreement; and (ii) any obligation of Guarantor under any other Loan Document to
which Guarantor is a party.

            (c) If there is more than one entity comprising Guarantor, all
obligations of Guarantor hereunder shall be joint and several.

            SECTION 14. NOTICES. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder to
Lender or Guarantor or which are given to Lender or Guarantor with respect to
this Guaranty shall be in writing and shall be delivered to Lender at the
address set forth in Section 14.5 of the Loan Agreement and to Guarantor at the
address set forth on the first page hereof, each in the manner provided in
Section 14.5 of the Loan Agreement. Guarantor agrees to give Lender not less
than ten (10) days' prior written notice of any change in the location of
Guarantor's principal place of business.

            SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its
execution hereof acknowledges receipt of true copies of all of the Loan
Documents, the terms and conditions of which are hereby incorporated herein by
reference.

                                       7

Guaranty of Recourse Obligations [FX-2]



            SECTION 16. INTEREST; EXPENSES.

            (a) If Guarantor fails to pay all or any sums due hereunder within
ten (10) days of demand by Lender, the amount of such sums payable by Guarantor
to Lender shall bear interest from the date of demand until paid at the Default
Rate in effect from time to time.

            (b) Guarantor hereby agrees to pay all reasonable out of pocket
costs, charges and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, that may be incurred by Lender in enforcing
the covenants, agreements, obligations and liabilities of Guarantor under this
Guaranty.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       8

Guaranty of Recourse Obligations [FX-2]



            IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the
date first above written.

                                    GUARANTOR:

                                    LODGIAN, INC., a Delaware
                                    corporation

                                    By: /s/ Daniel E. Ellis
                                        ----------------------------
                                        Name: Daniel E. Ellis
                                        Title: Senior Vice President

Guaranty of Recourse Obligations [FX-2]

EX-10.3.4

                                                                  EXHIBIT 10.3.4

                                 CROSS-GUARANTY

            THIS CROSS-GUARANTY (this "Agreement" or "Guaranty"), made as of
June 25, 2004, from the parties listed as Guarantors on the signature pages
hereto (collectively, the "Guarantors"), each having an address at c/o Lodgian,
3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 to MERRILL LYNCH
MORTGAGE LENDING, INC., a Delaware corporation, having an office at Four World
Financial Center, 16th Floor, 250 Vesey Street, New York, New York 10080
(together with its successors and assigns, "Lender").

                                   WITNESSETH:

            WHEREAS, Lender has agreed to make three (3) loans (respectively,
the "Pool 1 Loan," "Pool 3 Loan," and "Pool 4 Loan," and collectively, the
"Loans") to the respective borrowers described on Exhibit A (respectively, the
"Pool 1 Borrowers," "Pool 3 Borrowers," and "Pool 4 Borrowers," and
collectively, the "Borrowers"), in the amounts set forth on Exhibit A; and

            WHEREAS, to evidence the respective Loans, the respective Borrowers
have executed and delivered those certain Promissory Notes, each dated as of the
date hereof, in the principal amounts of the respective Loans (respectively,
"Note 1," "Note 3" and "Note 4," and collectively, the "Notes"), pursuant to
those certain Loan and Security Agreements, each dated as of the date hereof,
among the respective Borrowers and Lender as more particularly described on
Exhibit A (respectively, "Loan Agreement 1," "Loan Agreement 3" and "Loan
Agreement 4," and collectively, the "Loan Agreements"); and

            WHEREAS, capitalized terms used but not otherwise defined herein
shall have the respective meanings given thereto in the respective Loan
Agreements or Guarantor Loan Agreement (hereinafter defined), as applicable; and

            WHEREAS, the Notes shall be secured by, among other things, the
Mortgages encumbering the Properties; and

            WHEREAS, simultaneously with the making of the Loans, Guarantors are
obtaining a loan in the amount of $67,864,000 (the "Guarantor Loan") from Lender
pursuant to that certain Loan and Security Agreement, dated as of the date
hereof, by and between the Guarantors and Lender (the "Guarantor Loan
Agreement"; and together with the other documents and agreements evidencing
and/or securing the Guarantor Loan, collectively, the "Guarantor Loan
Documents"); and

            WHEREAS, it is a condition precedent to Lender making the Guarantor
Loan to Guarantors that Guarantors, among other things, guaranty the Loans
pursuant to this Guaranty and grant to Lender Mortgages on the Properties (as
defined in the Guarantor Loan Agreement, and hereinafter referred to as the
"Guarantor Properties") as security for their obligations hereunder; and

            WHEREAS, Guarantors shall derive substantial economic benefits from
the simultaneous making of the Guarantor Loan and Loans by Lender to Guarantors
and Borrowers, respectively; and

            WHEREAS, as a condition precedent to the making of the Loans,
Borrowers have agreed to procure and deliver to Lender this Agreement; and

            WHEREAS, Lender has declined to make the Loans or the Guarantor Loan
unless this Agreement is duly executed by Guarantors and delivered to Lender.

Cross-Guaranty (Fixed 2)



            NOW, THEREFORE, in consideration for, and as an inducement to,
Lender's making the Loans and the Guarantor Loan, and for other good and
valuable consideration the legal sufficiency of which and receipt thereof are
hereby acknowledged, and notwithstanding any provision to the contrary contained
in the Guarantor Loan Agreement, the Guarantor Loan Documents, the Loan
Agreements, the Notes, the Mortgages or any of the other Loan Documents, but
subject to the provisions of Article XII of the Guarantor Loan Agreement, Lender
and Guarantors do hereby agree as follows:

            1.    Guarantors, on behalf of themselves and their successors and
assigns (collectively, "Successors") do hereby absolutely, unconditionally,
irrevocably and personally: (i) guaranty to Lender the full and prompt payment
and performance when due of the Loans and all other Obligations of the Borrowers
under the Loan Agreements and (ii) agree to reimburse Lender for, and hold
Lender harmless from and against, any and all losses, damages, claims, expenses,
deficiencies, liabilities and costs (including, without limitation, reasonable
attorneys' fees and disbursements) incurred, suffered or sustained by Lender
and/or its successors and assigns as a result of or arising out of, in
connection with or resulting from, the enforcement of this Agreement against
Guarantors (the obligations of Guarantors under clauses (i) and (ii) above being
referred to hereinafter, collectively, as "Guarantors' Obligations").

            Notwithstanding the foregoing, or anything else to the contrary
contained herein, in the event that any of the Guarantors shall become an
Excluded Borrower and the Guarantor Loan shall become an Excluded Loan pursuant
to Lender's election under Section 2.12(G) of the Guarantor Loan Agreement to
cause any of the Loans to no longer be secured by the Guarantor Properties, this
Guaranty shall automatically terminate and shall be of no further force or
effect.

            2.    It is agreed that the obligations of Guarantors hereunder
shall be primary and this Agreement shall be enforceable against Guarantors and
their Successors without the necessity for any suit or proceeding of any kind or
nature whatsoever brought by Lender against Borrowers or their respective
successors or assigns or any other party or against any security for the payment
of the Guarantors' Obligations and without the necessity of any notice of
non-payment or non-observance or of any notice of acceptance of this Agreement
or of any notice of demand to which Guarantors might otherwise be entitled
(including, without limitation, diligence, presentment, notice of maturity,
extension of time, protest, notice of dishonor or default, change in nature or
form of the Guarantors' Obligations, acceptance of further security, release of
further security, imposition or agreement arrived at as to the amount of or the
terms of the Guarantors' Obligations, notice of adverse change in Borrowers'
financial condition and any other fact that might materially increase the risk
to Guarantors), all of which Guarantors hereby expressly waive. Guarantors
hereby expressly agree that the validity of this Agreement and the obligations
of Guarantors hereunder shall in no way be terminated, affected, diminished,
modified or impaired by reason of the assertion of or the failure to assert by
Lender against Borrowers, or their successors or assigns, any of the rights or
remedies reserved to Lender pursuant to the provisions of the Guarantor Loan
Agreement, the Loan Agreements, the Notes, the Mortgages or any other Loan
Documents.

            3.    Guarantors waive, and covenant and agree that they will not at
any time insist upon, plead or in any manner whatsoever claim or take the
benefit or advantage of, any and all appraisal, valuation, stay, extension,
marshaling-of-assets or redemption laws, or right of homestead or exemption,
whether now or at any time hereafter in force, that may delay, prevent or
otherwise affect the performance by Guarantors of their obligations under, or
the enforcement by Lender of, this Agreement. Guarantors further covenant and
agree not to set up or claim any defense, counterclaim, cross-claim, offset,
set-off, right of recoupment, or other objection of any kind to any action, suit
or proceeding in law, equity or otherwise, or to any demand or claim that may be
instituted or made by Lender hereunder other than the defense of the actual
timely performance of Guarantors' Obligations hereunder. Guarantors represent,
warrant and agree that, as of the date hereof, their obligations under this
Agreement are not subject to any

                                        2

Cross-Guaranty (Fixed 2)


counterclaims, cross-claims, rights of recoupment, offsets or affirmative or
other defenses of any kind against Lender.

            4.    Guarantors agree that any notice or directive given at any
time by Guarantors to Lender that is inconsistent with any waiver contained in
this Agreement shall be void and may be ignored by Lender, and, in addition, may
not be pleaded or introduced as evidence in any litigation relating to this
Agreement for the reason that such pleading or introduction would be at variance
with the written terms of this Agreement, unless Lender has specifically agreed
otherwise in a writing, signed by a duly authorized officer. Guarantors
specifically acknowledge and agree that the foregoing waivers are of the essence
of the Loan transaction and that, but for this Agreement and such waivers,
Lender would not make the Loans to Borrowers.

            5.    The provisions of this Agreement are for the benefit of Lender
and its successors and assigns, and nothing herein contained shall impair, as
between Borrowers and Lender, the obligations of Borrowers under the Loan
Agreements, the Notes, the Mortgages or any of the other Loan Documents.

            6.    This Agreement shall be a continuing guaranty and the
liability of Guarantors hereunder shall in no way be terminated, affected,
modified, impaired or diminished (to the extent permitted by law) by reason of
the happening, from time to time, of any of the following, although without
notice or the further consent of Guarantors:

            (a)   any assignment, amendment, modification or waiver of or change
      in any of the terms, covenants, conditions or provisions of the Guarantor
      Loan Agreement, the Loan Agreements, the Notes, the Mortgages or any of
      the other Loan Documents or the invalidity or unenforceability of any of
      the foregoing; or

            (b)   any extension of time that may be granted by Lender to
      Borrowers, Guarantors or Guarantors' Successors; or

            (c)   any action that Lender or Borrowers may take or fail to take
      under or in respect of any of the Loan Documents or by reason of any
      waiver of, or failure to enforce any of the rights, remedies, powers or
      privileges available to Lender under this Agreement or available to Lender
      at law, equity or otherwise, or any action on the part of Lender or
      Borrowers granting indulgence or extension in any form whatsoever; or

            (d)   any dealing, transaction, matter or thing occurring between
      Lender, Borrowers, Guarantors or Guarantors' Successors; or

            (e)   any sale, exchange, release, or other disposition of any
      property pledged, Mortgaged or conveyed, or any property in which Lender
      has been granted a lien or security interest to secure any indebtedness of
      Borrowers to Lender; or

            (f)   any release of any person or entity who may be liable in any
      manner for the payment and collection of any amounts owed by Borrowers to
      Lender (including the other Guarantors); or

            (g)   the application of any sums by whomsoever paid or however
      realized to any amounts owing by Borrowers to Lender in such manner as
      Lender shall determine in its sole discretion; or

                                        3

Cross-Guaranty (Fixed 2)



            (h)   any Event of Default (as such term is defined in the Guarantor
      Loan Agreement and the Loan Agreements), whether or not Lender has
      exercised any of its rights and remedies as set forth in the Guarantor
      Loan Agreement or the Mortgages upon the happening of any such Event of
      Default; or

            (i)   Borrowers' and/or Guarantors' voluntary or involuntary
      liquidation, dissolution, sale of all or substantially all of their
      respective assets and liabilities, appointment of a trustee, receiver,
      liquidator, sequestrator or conservator for all or any part of Borrowers'
      or Guarantors' assets, insolvency, bankruptcy, assignment for the benefit
      of creditors, reorganization, arrangement, composition or readjustment, or
      the commencement of other similar proceedings affecting Borrowers or
      Guarantors or any of the assets of either of them, including, without
      limitation, (A) the release or discharge of Borrowers from the payment and
      performance of their obligations under any of the Loan Documents by
      operation of law, or (B) the impairment, limitation or modification of the
      liability of Borrowers, their partners or Guarantors in bankruptcy, or of
      any remedy for the enforcement of the Guarantors' Obligations, under any
      of the Loan Documents, or Guarantors' liability under this Agreement,
      resulting from the operation of any present or future provisions of the
      Federal Bankruptcy Code or other present or future federal, state or
      applicable statute of law or from the decision in any court; or

            (j)   any change in or termination of the ownership interest of
      Guarantors in Borrowers (whether direct or indirect); or

            (k)   any conveyance of the Mortgaged Properties, whether or not
      pursuant to a foreclosure sale, a deed in lieu of foreclosure, a transfer
      through bankruptcy, or otherwise.

            7.    Guarantors acknowledge that this Guaranty and Guarantors'
Obligations are and shall at all times continue to be absolute, unconditional
and irrevocable in all respects, and shall at all times be valid and enforceable
irrespective of any other agreement or circumstances of any nature whatsoever
that might otherwise constitute a defense to this Guaranty or the obligations of
any other person or party (including, without limitation, Borrower or any other
guarantor) relating to this Guaranty or the obligations of Guarantors hereunder.

            8.    Guarantors agree that if at any time all or any part of any
payment at any time received by Lender from Borrowers or Guarantors under or
with respect to this Agreement is or must be rescinded or returned by Lender for
any reason whatsoever (including, without limitation, the insolvency, bankruptcy
or reorganization of Borrowers or Guarantors), then Guarantors' Obligations
hereunder shall, to the extent of the payment rescinded or returned, be deemed
to have continued in existence notwithstanding such previous receipt by Lender,
and Guarantors' Obligations hereunder shall continue to be effective or
reinstated, as the case may be, as to such payment, as though such previous
payment to Lender had never been made.

            9.    Until repayment of the Indebtedness (as such term is defined
in the Guarantor Loan Agreement and the Loan Agreements) and satisfaction of all
of the obligations under the Guarantor Loan Agreement, Guarantors and each of
them (a) shall have no right of subrogation against Borrowers, general partner
of any Borrower that is a limited partnership or any other Guarantor by reason
of any payments or acts of performance by a Guarantor in compliance with the
obligations of a Guarantor hereunder; (b) shall have no right of indemnity,
contribution, or any other right or cause of action whatsoever under law or
equity against any other Guarantor by reason of any payments or acts of
performance by a Guarantor in compliance with the obligations of a Guarantor
hereunder; (c) hereby waive any right to enforce any remedy that any Guarantors
now or hereafter shall have against Borrowers, general partner of any Borrower
that is a limited partnership or any other Guarantor by reason of any one

                                       4

Cross-Guaranty (Fixed 2)



or more payments or acts of performance in compliance with the obligations of a
Guarantor hereunder; (d) shall subordinate any liability or indebtedness of
Borrowers, general partner of any Borrower that is a limited partnership or any
Guarantor now or hereafter held by any Guarantor or any affiliate of a Guarantor
to the obligations of Borrowers, general partner of any Borrower that is a
limited partnership or Guarantor to Lender under the Loan Documents; and (e)
shall not file, assert or receive payment on any claim, whether now existing or
hereafter arising, against Borrowers, general partner of any Borrower that is a
limited partnership or any Guarantor in the event of the commencement of a case
by or against Borrowers, general partner of any Borrower that is a limited
partnership or any Guarantor under federal or state insolvency laws.

            10.   Guarantors represent and warrant to Lender, with the knowledge
that Lender is relying upon the same, as follows:

            (a)   Guarantors are solvent and have the legal right to enter into
      this Agreement and to perform their obligations under the terms hereof;

            (b)   to the best of Guarantors' knowledge, there is no action,
      suit, proceeding or investigation pending or threatened against or
      affecting Guarantors at law, in equity, in admiralty or before any
      arbitrator or any governmental department, commission, board, bureau,
      agency or instrumentality (domestic or foreign) that is likely to result
      in any material adverse change in the property, assets or condition
      (financial or otherwise) of Guarantors or that is likely to impair
      materially the ability of Guarantors to perform their obligations under
      this Agreement; and

            (c)   all financial statements that have heretofore been furnished
      by Guarantors to Lender in connection with this Agreement, are true,
      correct and complete; and fairly present the financial condition of
      Guarantors, all as of the respective dates thereof.

            11.   Guarantors and Lender acknowledge and agree that this
Agreement is a guaranty of payment and performance and not of collection and
enforcement in respect of any of the Guarantors' Obligations.

            12.   Lender may freely assign any or all of its rights under this
Agreement, but any such assignment shall be made only to the subsequent holder
of any of the Notes and no such assignment shall increase Guarantors'
Obligations or diminish its rights hereunder. In the event of any such
assignment, the consent of Guarantors shall not be required for any such
assignment and failure to give notice of such assignment shall not affect the
validity or enforceability of any such assignment or subject Lender to any
liability and Guarantors shall continue to remain bound by and obligated to
perform under and with respect to this Agreement. Guarantors shall not assign
any of their obligations under this Agreement without the prior consent of the
Lender.

            13.   The representations, warranties and obligations of Guarantor
set forth in this Agreement shall survive until this Agreement shall terminate
in accordance with the terms hereof.

            14.   This Agreement contains the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements relating to such subject matter and may not be modified,
amended, supplemented or discharged except by a written agreement signed by
Guarantors and Lender. This Agreement also may be discharged by full performance
of the Guarantors' Obligations in accordance with the terms hereof, or as
otherwise provided herein.

            15.   If all or any portion of any provision contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, such provision or portion

                                        5

Cross-Guaranty (Fixed 2)



thereof shall be deemed stricken and severed from this Agreement and the
remaining provision and portions thereof shall continue in full force and
effect.

            16.   All notices, requests, demands and other communications under
or in connection with this Agreement shall be in writing and shall be deemed to
have been given or made (i) three (3) days after the date such notice is mailed,
(ii) on the next Business Day if sent by a nationally recognized overnight
courier service, (iii) on the date of delivery by personal delivery and (iv) on
the date of transmission if sent by telefax during business hours on a Business
Day (otherwise the next Business Day). Notices shall be addressed as follows:

            If to Guarantors:   The address listed above

            With a copy to:     Morris Manning & Martin, LLP
                                3343 Peachtree Rd., NE
                                1600 Atlanta Financial Center
                                Atlanta, Georgia  30326
                                Attn.: Thomas Gryboski, Esq.
                                Facsimile: (404) 365-9532

            If to Lender:       The address listed above

            With a copy to:     Sidley Austin Brown & Wood LLP
                                787 Seventh Avenue
                                New York, New York  10019
                                Attn.: Robert L. Boyd, Esq.
                                Facsimile: (212) 839-5599

The above addresses may be changed on written notice given as hereinabove
provided. Notices may be sent by a party hereto or on its behalf by its
attorney.

            17.   This Agreement shall be binding upon Guarantors and their
Successors and shall inure to the benefit of Lender and its successors and
assigns.

            18.   The failure of Lender to enforce any right or remedy
hereunder, or promptly to enforce any such right or remedy, shall not constitute
a waiver thereof, nor give rise to any estoppel against Lender, nor excuse
Guarantors from their obligations hereunder. Any waiver of any such right or
remedy to be enforceable against Lender must be expressly set forth in writing
signed by Lender.

            19.   (a) Any suit initiated by Lender against Guarantors or in
      connection with or arising, directly or indirectly, out of or relating to,
      this Agreement (an "Action") may, at Lender's option, be brought in any
      state or federal court in the State of New York, or any state or federal
      court in which the property is located, having jurisdiction over the
      subject matter hereof. Guarantors hereby submit themselves to the
      jurisdiction of any such court and agree that service of process against
      Guarantors in any such action may be effected by any means permissible
      under federal law or under the laws of the state in which such Action is
      brought. Guarantors hereby agree that insofar as is permitted under
      applicable law, this consent to personal jurisdiction shall be
      self-operative and no further instrument or action, other than service of
      process in one of the manners specified in this Guaranty, or as otherwise
      permitted by law, shall be necessary in order to confer jurisdiction upon
      Guarantors.

                                       6

Cross-Guaranty (Fixed 2)



            (b)   Guarantors agree that, provided that service of process is
      effected upon Guarantors in any manner permitted by law, Guarantors
      irrevocably waive, to the fullest extent permitted by law, and agree not
      to assert, by way of motion, as a defense or otherwise, (i) any objection
      that Guarantors may have or may hereafter have to the laying of the venue
      of any Action brought in any court as provided for by this Agreement, (ii)
      any claim that any Action brought in any such court has been brought in an
      inconvenient forum, or (iii) any claim that Guarantors are not personally
      subject to the jurisdiction of such court. Guarantors agree that, provided
      that service of process is effected upon Guarantors in one of the manners
      specified in this Guaranty or as otherwise permitted by law, a final
      judgment from which Guarantors have not appealed or may not appeal in any
      Action brought in any such court shall be conclusive and binding upon
      Guarantors and may, so far as permitted under applicable law, be enforced
      in the courts of any state or any federal court or in any other courts to
      the jurisdiction of which it is subject, by a suit upon such judgment and
      that Guarantors shall not assert any defense, counterclaim or set-off in
      any such suit upon such judgment.

            (c)   To the extent that Guarantors have or hereafter may acquire
      any immunity from jurisdiction of any court or from any legal process
      (whether through service or notice, attachment before judgment, attachment
      in aid of execution, execution or otherwise) with respect to Guarantors or
      Guarantors' property, Guarantors hereby irrevocably waive such immunity in
      respect of its obligations under this Agreement.

            (d)   As a further inducement to Lender's making of the Loans to
      Borrowers, and in consideration thereof, Lender and Guarantors each
      covenant and agree that in any action or proceeding brought on, under or
      by virtue of this Agreement, Lender and Guarantors each shall and do
      hereby unconditionally and irrevocably waive trial by jury.

            (e)   Guarantors hereby further covenant and agree to and with
      Lender that Guarantors may be joined in any action against Borrowers in
      connection with the Guarantor Loan Agreement, the Loan Agreements, the
      Notes, the Mortgages, or any of the other Loan Documents, solely with
      respect to the subject matter of this Agreement.

            (f)   Guarantors covenant and agree to indemnify and save Lender
      harmless of and from, and defend it against, all losses, costs,
      liabilities, expenses, damages or claims suffered by reason of Guarantors'
      failure to perform its obligations hereunder.

            20.   All of Lender's rights and remedies under the Guarantor Loan
Agreement, the Loan Agreements, the Notes, the Mortgages or any of the other
Loan Documents or under this Agreement are intended to be distinct, separate and
cumulative and no such right or remedy therein or herein mentioned is intended
to be in exclusion of or a waiver of any other right or remedy available to
Lender.

            21.   Guarantors hereby consent that from time to time, before or
after any default by Borrower, with or without further notice to or assent from
Guarantors, any security at any time held by or available to Lender for any
obligation of Borrowers, or any security at any time held by or available to
Lender for any obligation of any other person or party secondarily or otherwise
liable for all or any portion of the Loans, may be exchanged, surrendered or
released and any obligation of Borrowers, or of any such other person or party,
may be changed, altered, renewed, extended, continued, surrendered, compromised,
waived or released in whole or in part, or any default with respect thereto
waived, and Lender may fail to set off and may release, in whole or in part, any
balance of any deposit account or credit on its books in favor of Borrowers, or
of any such other person or party, and may extend further credit in any manner
whatsoever to Borrowers, and generally deal with Borrowers or any such security
or other person or party as Lender may see fit; and Guarantors shall remain
bound under this Agreement

                                        7

Cross-Guaranty (Fixed 2)



notwithstanding any such exchange, surrender, release, change, alteration,
renewal, extension, continuance, compromise, waiver, action, inaction, extension
of further credit or other dealing. This Agreement is independent of, and in
addition to, all collateral granted, pledged or assigned under the Loan
Documents.

            22.   The terms of this Agreement have been negotiated, and this
Agreement has been executed and delivered in the State of New York, and it is
the intention of the parties hereto that this Agreement be construed and
enforced in accordance with the laws of such State.

            23.   This Agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.

            24.   This Agreement may be executed in counterparts, which together
shall constitute the same instrument.

            25.   All representations, warranties, covenants (both affirmative
and negative) and all other obligations under this Guaranty shall be the joint
and several obligation of each of the Guarantors and any default under this
Guaranty by any Guarantor shall be deemed a default by all such Guarantors.

                         [NO FURTHER TEXT ON THIS PAGE]

                                       8

Cross-Guaranty (Fixed 2)



            IN WITNESS WHEREOF, Guarantor has executed and delivered this
Agreement as of the date and year first above written.

                                GUARANTORS:

                                ALBANY HOTEL, INC.
                                APICO INNS OF GREEN TREE, INC.
                                LODGIAN AUGUSTA LLC
                                LODGIAN HOTELS FIXED II, INC.
                                LODGIAN LAFAYETTE LLC
                                LODGIAN TULSA LLC

                                By: /s/ Daniel E. Ellis
                                    ----------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

                                AMI OPERATING PARTNERS, L.P.

                                By: AMIOP ACQUISITION GENERAL PARTNER
                                    SPE CORP., a Delaware corporation, its
                                    general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP

                                By: DEDHAM LODGING SPE, INC.,
                                    a Delaware corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

Cross-Guaranty (Fixed 2)



                                    EXHIBIT A

1.    Pool 1 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 1"), between Impac Hotels I, L.L.C., Lodgian
      Denver LLC, Macon Hotel Associates, L.L.C., Servico Northwoods, Inc. and
      Lodgian Hotels Fixed I, LLC (collectively, the "Pool 1 Borrowers") and
      Lender, Lender has made a loan in the amount of $63,801,000 ("Pool 1
      Loan"), which loan is evidenced by a Promissory Note dated as of the date
      hereof ("Note 1"), made by the Pool 1 Borrowers to Lender;

2.    Pool 3 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 3"), between Lodgian Hotels Fixed III, LLC,
      Lodgian AMI, Inc., Minneapolis Motel Enterprises, Inc. and Servico Centre
      Associates, Ltd. (collectively, the "Pool 3 Borrowers") and Lender, Lender
      has made a loan in the amount of $66,818,500 ("Pool 3 Loan"), which Loan
      is evidenced by a Promissory Note, dated as of the date hereof ("Note 3"),
      made by the Pool 3 Borrowers to Lender; and

3.    Pool 4 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 4"), between Lodgian Hotels Fixed IV, L.P.,
      Little Rock Lodging Associates I, Limited Partnership, Lodgian Fairmont
      LLC, NH Motel Enterprises, Inc., Servico Columbia, Inc. and Servico
      Houston, Inc. (collectively, the "Pool 4 Borrowers") and Lender, Lender
      has made a loan in the amount of $61,516,500 ("Pool 4 Loan") which Loan is
      evidenced by a Promissory Note, dated as of the date hereof ("Note 4"),
      made by the Pool 4 Borrowers to Lender.

Cross-Guaranty (Fixed 2)

EX-10.3.5

                                                                  EXHIBIT 10.3.5

              CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT

                  This CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT,
dated as of June 25, 2004 (this "AGREEMENT"), made by LODGIAN MANAGEMENT CORP.,
a Delaware corporation, having an address at 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30826 ("HOTEL MANAGER"), and the undersigned, each having an
address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30826 (each a "BORROWER and collectively, "BORROWERS"), to and for the
benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080, its
successors, transferees and assigns ("LENDER").

                  A.       Hotel Manager has entered into a certain Management
Agreement (each a "CONTRACT" and collectively, the "CONTRACTS") with each
Borrower, a true, correct and complete copy of which has been delivered to
Lender on or prior to the date hereof and the form of which is attached hereto
as EXHIBIT A, providing for the performance by Hotel Manager of certain
management obligations more particularly described therein with respect to the
management and operation of the property as more particularly described therein
(each, a "PROPERTY" and collectively, the "PROPERTIES").

                  B.       This Agreement is being executed in order to amend
each Contract, to conditionally assign each Borrower's interest therein to
Lender, and to subordinate Hotel Manager's rights to payment under the Contracts
to Lender's lien on the Properties in connection with Lender's making a loan to
Borrowers and certain other borrowers (collectively, the "MORTGAGE BORROWERS")
in the original principal amount of up to Sixty Seven Million Eight Hundred
Sixty Four Thousand and no/100 Dollars ($67,864,000.00) (the "LOAN") pursuant
to that certain Loan and Security Agreement, dated as of even date herewith (as
amended, modified or restated, the "LOAN AGREEMENT"), among Mortgage Borrowers
and Lender. The Loan is evidenced by a certain Promissory Note, dated of even
date herewith (as amended, modified or restated, and any replacements or
substitutes therefor (by means of multiple notes or otherwise), (the "NOTE"),
made by Mortgage Borrowers in favor of Lender and is secured by, among other
things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments
of Leases and Rents and Security Agreements, dated as of even date herewith (as
amended, modified, restated, spread or consolidated, collectively, the "SECURITY
INSTRUMENT"), in favor of Lender (the Note, the Security Instrument, the Loan
Agreement, this Agreement and all other documents executed in connection with
the Loan are collectively referred to as the "LOAN DOCUMENTS"). All capitalized
terms used and not defined herein shall have the respective meanings given to
such terms in the Loan Agreement, a copy of which Hotel Manager hereby
acknowledges having received.

                  NOW, THEREFORE, in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Hotel Manager and Borrowers hereby represent,
warrant and covenant to Lender as follows:



                  1.       As additional collateral security for the Loan, each
Borrower hereby conditionally transfers, sets over and assigns to Lender all of
such Borrower's right, title and interest in and to its Contract, said transfer
and assignment to automatically become a present, unconditional assignment, at
Lender's option, upon the occurrence and during the continuance of an Event of
Default by Borrowers under any of the Loan Documents.

                  2.       Hotel Manager hereby agrees that each Contract, all
rights, interests and privileges of Hotel Manager thereunder, and all management
fees and other payment obligations of each Borrower to Hotel Manager for
services rendered by Hotel Manager for the management and operation of its
Property, as such services are more particularly described in such Contract, are
hereby subordinated to the Loan Documents and the liens in favor of Lender
provided for therein, and to all rights of Lender to receive payment from
Borrowers under the Note and all other amounts which may be due Lender under the
Loan Documents. Hotel Manager recognizes and agrees that so long as the Note is
being paid in strict accordance with its terms and no Event of Default has
occurred and is continuing or will by virtue of payments to Hotel Manager occur,
Hotel Manager shall, subject to the requirements of the Loan Documents,
including any such requirements governing management and application of the
Properties and Borrower revenues and cash flow, be entitled to receive payments
provided for under such Contract in accordance with the terms thereof. Hotel
Manager hereby releases, discharges and waives any and all liens, claims,
demands of any kind or nature, against each Property, either now or in the
future, arising from the services provided by Hotel Manager for the management
and operation of such Property.

                  3.       In the event that such Borrower defaults under the
terms of its Contract, Hotel Manager agrees that before exercising any rights or
remedies with respect thereto, it will notify Lender of such default. Upon
Lender's request, Hotel Manager will continue to perform under such Contract
until such time as Lender may elect to terminate such Contract, provided that
Hotel Manager shall continue to receive all fees payable to it under such
Contract. Subject to the foregoing, Hotel Manager agrees that it shall not be
entitled to receive any management fee or other fee, commission or other amount
payable under the Contract or otherwise for and during any period of time that
any Event of Default has occurred and is continuing, provided that Hotel Manager
shall not be obligated to return or refund to Lender any management fee or other
fee, commission or other amount already received by Hotel Manager prior to the
occurrence of the Event of Default, and to which Hotel Manager was entitled
under paragraph 2 above. In all events, Hotel Manager recognizes that the
maximum amount that shall be due and payable under each Contract is the amount
stated therein (such amount being adequate to complete the services called for
in such Contract), and that Hotel Manager will not claim any incidental,
consequential, or exemplary damages of any nature as a condition to completing
its performance under the Contract.

                  4.       In the event that (a) Hotel Manager becomes
insolvent, or (b) an Event of Default occurs and is continuing, or (c) any
default occurs by Hotel Manager under the Management Agreement beyond the
expiration of any notice and cure periods, or (d) any other event occurs which,
under the terms of the Loan Documents, entitles Lender to direct Borrower to
replace Hotel Manager, Lender may exercise its rights under the Loan Documents
and direct any Borrower to terminate its Contract and/or to replace Hotel
Manager with a management company chosen by such Borrower and reasonably
acceptable to Lender. Upon receiving notice

                                       2


of any such election, Hotel Manager shall abide by such direction to terminate
and cooperate with any replacement manager approved or designated by Lender. No
termination fee or other compensation shall be due or owing under such Contract
as a result of any such termination other than accrued unpaid fees.

                  5.       Without limiting the foregoing, subject to the second
sentence of paragraph 3 hereof, in the event Lender forecloses or otherwise
succeeds to the rights of any Borrower with respect to any Property, Lender
shall have the option upon written notice to Hotel Manager delivered within
thirty (30) days following foreclosure by Lender or other acquisition of such
Property by Lender, either to (a) terminate the applicable Contract without any
obligation or liability of Lender to pay the termination fees, if any; or (b)
continue such Contract in effect upon all of the terms and provisions provided
in such Contract, except that Lender shall have no obligation to pay any sums
due and owing under the Contract as of the date of foreclosure or other
acquisition of such Property, and Lender shall have the right after it elects to
continue such Contract under subparagraph (b) hereof to terminate such Contract
without cause upon thirty (30) days written notice to Hotel Manager without any
obligation or liability of Lender to pay the termination fees, if any other than
accrued unpaid fees. Hotel Manager acknowledges and agrees with Lender that
Lender has not assumed any obligations or liabilities of such Borrower to Hotel
Manager under such Contract. If Lender chooses not to continue any Contract
following a foreclosure or other acquisition of any Property, the only
compensation from Lender for which Hotel Manager shall be entitled under such
Contract shall be for the period commencing with the date of such foreclosure or
other acquisition and ending upon the subsequent termination by Lender of such
Contract. Notwithstanding the foregoing to the contrary, in the event Lender
forecloses or otherwise succeeds to the rights of any Borrower with respect to
its Property, upon Lender's request, Hotel Manager agrees to transfer and assign
to Lender, or its designee, to the extent possible, all applicable licenses
(including, without limitation, each liquor license and beer permit), permits
and approvals required for the use, occupancy, operation and maintenance of each
of the Property and held by or in the name of Hotel Manager, and, if requested
by Lender and permitted by applicable law, enter into such reasonable concession
or use agreements with Lender or its designee (subject to appropriate
indemnification) as are reasonably necessary to allow Lender or its designee to
offer, or cause to be offered, liquor and beer for sale at such Property. For
this purpose, Hotel Manager constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution to complete or undertake the
assignment of each of the items referenced in the preceding sentence in the name
of Hotel Manager pursuant to this paragraph 5. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked.

                  6.       Hotel Manager agrees (a) not to resign as Hotel
Manager without ninety (90) days prior written notice to Lender, and (b) not to
amend any Contract in any material respect without Lender's prior written
approval, which approval shall not be unreasonably withheld or delayed.

                  7.       Hotel Manager acknowledges and agrees that any and
all rents, room rents, credit card receipts, other receipts, profits or other
sums, including any management fees in excess of the management fees to which
Hotel Manager is entitled pursuant to paragraph 2 hereof, and receipts derived
from the sale of alcoholic beverages (collectively herein called "PROPERTY
PROCEEDS") collected or received by Hotel Manager from the Properties are
subject to

                                       3


a security interest of Lender pursuant to the Loan Documents, and shall be
collected and held by Hotel Manager in trust for the benefit of the applicable
Borrower and Lender. Any such Property Proceeds shall be deposited by Hotel
Manager within two (2) Business Days of receipt into a deposit account (the
"DEPOSIT ACCOUNT") in the name of the Lender and identified in that certain
Deposit Account Agreement or other similar agreement dated as of the date hereof
(as amended, restated, modified, replaced or supplemented from time to time,
each, a "DEPOSIT ACCOUNT AGREEMENT") among the applicable Borrower, Lender,
Hotel Manager and the bank named therein. Upon transfer of any such Property
Proceeds to Hotel Manager from the Lock Box Account (as defined in that certain
Cash Management Agreement dated as of even date herewith (as amended, restated,
modified, replaced or supplemented from time to time, the "CASH MANAGEMENT
AGREEMENT"), among Mortgage Borrowers, Lender, Hotel Manager and Wachovia Bank,
National Association) as directed by the applicable Borrower pursuant to Section
3.3 of the Cash Management Agreement, such Property Proceeds shall be used by
Hotel Manager for proper expenses and costs of managing and operating the
applicable Property as permitted under the applicable Contract, subject, in all
instances, to compliance with the Operating Budget and FF&E Budget then in
effect and limitations on distributions to Borrowers, each as more fully
described in the Loan Agreement. Hotel Manager hereby disclaims any and all
interests in the Deposit Account, the Lock Box Account (and any Sub-Accounts
thereof), the Property Operating Account and in any of the Property Proceeds.
Upon written notice from Lender that an Event of Default has occurred under the
Loan Agreement and/or other Loan Documents, Hotel Manager agrees to apply
Property Proceeds as instructed by Lender.

                  8.       Hotel Manager represents and warrants that (a) a
true, correct and complete copy of each Contract has been delivered to Lender on
or prior to the date hereof, the form of which is attached hereto as EXHIBIT A,
(b) each Contract is in full force and effect and has not been modified, amended
or assigned, except in favor of Lender or its predecessor-in-interest (c)
neither Hotel Manager nor, to Hotel Manager's knowledge, any Borrower is in
default under any of the terms, covenants or provisions of its Contract, and
Hotel Manager knows of no event which, with the giving of notice or the passage
of time, or both, would constitute a default under any Contract, (d) Hotel
Manager has no knowledge of and has not commenced any action or given or
received any notice for the purpose of terminating any Contract, and (e) all
management fees, commissions and other sums due and payable to the Hotel Manager
under each Contract as of the date hereof have been paid in full.

                  9.       This Agreement shall be deemed to be a contract
entered into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of the State of New York.

                  10.      All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder shall be in
writing and shall be delivered to Lender and Borrowers at the addresses set
forth in Section 14.5 of the Loan Agreement and to Hotel Manager at the address
set forth on the first page hereof, with a copy to Morris Manning & Martin LLP,
Attention: Tom Gryboski, Esq., Fax: (404) 365-9532, each in the manner provided
in Section 14.5 of the Loan Agreement.

                  11.      This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to

                                       4


act on the part of Lender or any other party, but only by an agreement in
writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

                  12.      If any term, covenant or condition of this Agreement
is held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such provision. If any conflict exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                  13. This Agreement may be executed in any number of duplicate
originals and each duplicate original shall be deemed to be an original. This
Agreement may be executed in several counterparts, each of which counterparts
shall be deemed an original and all of which together shall constitute a single
agreement. The failure of any party hereto to execute this Agreement, or any
counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.

                  14. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa.

                  15. This Agreement shall be binding upon Hotel Manager and its
heirs, devisees, representatives, successors and assigns, and shall inure to the
benefit of and may be enforced by and binding upon Lender and its heirs,
successors, legal representatives, substitutes and assigns. Except as permitted
under the Loan Agreement, Hotel Manager shall not assign any of its rights or
obligations under this Agreement. Subject to the terms of the Loan Agreement,
Lender shall have the right to assign this Agreement and the obligations
hereunder in connection with any assignment or transfer of all or any portion of
the Loan or any interest therein. The parties hereto acknowledge that following
the execution and delivery of this Agreement, Lender may sell, transfer and
assign this Agreement and certain other Loan Documents. All references to
"Lender" hereunder shall be deemed to include the successors and assigns of
Lender and the parties hereto acknowledge that actions taken by Lender hereunder
may be taken by Lender's agents and by the agents of the successors and assigns
of Lender.

                  16. This Agreement is intended solely for the benefit of
Lender and its heirs, successors, legal representatives, substitutes and
assigns, and no third party shall have any right or interest in this Agreement,
nor any right to enforce this Agreement against any party hereto.

                  17. Hotel Manager acknowledges and agrees that pursuant to the
Loan Agreement, each Deposit Account Agreement and the Cash Management Agreement
(for purposes of this paragraph 17, collectively, the "AGREEMENTS") (the terms,
conditions and agreements of the Agreements being hereby incorporated herein
with the same force as is fully set forth herein), certain requirements are
specified with respect to the Property Proceeds and other payments due under any
Lease (as defined in the Security Instrument) or otherwise with respect to the
Properties, and Hotel Manager covenants and agrees to observe and, as and to the
extent applicable to Hotel Manager, perform all such requirements, including,
without limitation, ensuring that all Property Proceeds received by Hotel
Manager are properly deposited into the applicable Deposit Account.

                                       5


                  18.      The obligations of Borrowers and Hotel Manager
hereunder are subject to limitations on recourse as provided in Article XII of
the Loan Agreement.

                                       6


                  EXECUTED as of the day and year first above written.

                                    BORROWERS:

                                    ALBANY HOTEL, INC.
                                    APICO INNS OF GREEN TREE, INC.
                                    LODGIAN AUGUSTA LLC
                                    LODGIAN TULSA LLC

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of the
                                           entities listed above


                                    AMI OPERATING PARTNERS, L.P.

                                    By: AMIOP ACQUISITION GENERAL
                                        PARTNER SPE CORP., a Delaware
                                        corporation, its general partner

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary,
                                           or Authorized Signatory


                                    DEDHAM LODGING ASSOCIATES I,
                                    LIMITED PARTNERSHIP

                                    By: DEDHAM LODGING SPE, INC.,
                                        a Delaware corporation, its
                                        general partner

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory


                                    HOTEL MANAGER:

                                    LODGIAN MANAGEMENT CORP.,
                                    a Delaware corporation

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary



                                    EXHIBIT A

                      COPY OF FORM OF MANAGEMENT AGREEMENT

EX-10.3.6

                                                                  EXHIBIT 10.3.6

              CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT

                  This CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT,
dated as of June 25, 2004 (this "AGREEMENT"), made by LODGIAN MANAGEMENT CORP.,
a Delaware corporation, having an address at 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30826 ("HOTEL MANAGER"), and the undersigned, each having an
address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30826 (each a "BORROWER and collectively, "BORROWERS"), to and for the
benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080, its
successors, transferees and assigns ("LENDER").

                  A.       Hotel Manager has entered into a certain Management
Agreement (each a "CONTRACT" and collectively, the "CONTRACTS") with each
Borrower, a true, correct and complete copy of which has been delivered to
Lender on or prior to the date hereof and the form of which is attached hereto
as EXHIBIT A, providing for the performance by Hotel Manager of certain
management obligations more particularly described therein with respect to the
management and operation of the property as more particularly described therein
(each, a "PROPERTY" and collectively, the "PROPERTIES").

                  B.       This Agreement is being executed in order to amend
each Contract, to conditionally assign each Borrower's interest therein to
Lender, and to subordinate Hotel Manager's rights to payment under the Contracts
to Lender's lien on the Properties in connection with Lender's making a loan to
Borrowers and certain other borrowers (collectively, the "MORTGAGE BORROWERS")
in the original principal amount of up to Sixty Seven Million Eight Hundred
Sixty Four Thousand and No/100 dollars ($67,864,000.00) (the "LOAN") pursuant to
that certain Loan and Security Agreement, dated as of even date herewith (as
amended, modified or restated, the "LOAN AGREEMENT"), among Mortgage Borrowers
and Lender. The Loan is evidenced by a certain Promissory Note, dated of even
date herewith (as amended, modified or restated, and any replacements or
substitutes therefor (by means of multiple notes or otherwise), the "NOTE"),
made by Mortgage Borrowers in favor of Lender and is secured by, among other
things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments
of Leases and Rents and Security Agreements, dated as of even date herewith (as
amended, modified, restated, spread or consolidated, collectively, the "SECURITY
INSTRUMENT"), in favor of Lender (the Note, the Security Instrument, the Loan
Agreement, this Agreement and all other documents executed in connection with
the Loan are collectively referred to as the "LOAN DOCUMENTS"). All capitalized
terms used and not defined herein shall have the respective meanings given to
such terms in the Loan Agreement, a copy of which Hotel Manager hereby
acknowledges having received.

                  NOW, THEREFORE, in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Hotel Manager and Borrowers hereby represent,
warrant and covenant to Lender as follows:



                  1.       As additional collateral security for the Loan, each
Borrower hereby conditionally transfers, sets over and assigns to Lender all of
such Borrower's right, title and interest in and to its Contract, said transfer
and assignment to automatically become a present, unconditional assignment, at
Lender's option, upon the occurrence and during the continuance of an Event of
Default by Borrowers under any of the Loan Documents.

                  2.       Hotel Manager hereby agrees that each Contract, all
rights, interests and privileges of Hotel Manager thereunder, and all management
fees and other payment obligations of each Borrower to Hotel Manager for
services rendered by Hotel Manager for the management and operation of its
Property, as such services are more particularly described in such Contract, are
hereby subordinated to the Loan Documents and the liens in favor of Lender
provided for therein, and to all rights of Lender to receive payment from
Borrowers under the Note and all other amounts which may be due Lender under the
Loan Documents. Hotel Manager recognizes and agrees that so long as the Note is
being paid in strict accordance with its terms and no Event of Default has
occurred and is continuing or will by virtue of payments to Hotel Manager occur,
Hotel Manager shall, subject to the requirements of the Loan Documents,
including any such requirements governing management and application of the
Properties and Borrower revenues and cash flow, be entitled to receive payments
provided for under such Contract in accordance with the terms thereof. Hotel
Manager hereby releases, discharges and waives any and all liens, claims,
demands of any kind or nature, against each Property, either now or in the
future, arising from the services provided by Hotel Manager for the management
and operation of such Property.

                  3.       In the event that such Borrower defaults under the
terms of its Contract, Hotel Manager agrees that before exercising any rights or
remedies with respect thereto, it will notify Lender of such default. Upon
Lender's request, Hotel Manager will continue to perform under such Contract
until such time as Lender may elect to terminate such Contract, provided that
Hotel Manager shall continue to receive all fees payable to it under such
Contract. Subject to the foregoing, Hotel Manager agrees that it shall not be
entitled to receive any management fee or other fee, commission or other amount
payable under the Contract or otherwise for and during any period of time that
any Event of Default has occurred and is continuing, provided that Hotel Manager
shall not be obligated to return or refund to Lender any management fee or other
fee, commission or other amount already received by Hotel Manager prior to the
occurrence of the Event of Default, and to which Hotel Manager was entitled
under paragraph 2 above. In all events, Hotel Manager recognizes that the
maximum amount that shall be due and payable under each Contract is the amount
stated therein (such amount being adequate to complete the services called for
in such Contract), and that Hotel Manager will not claim any incidental,
consequential, or exemplary damages of any nature as a condition to completing
its performance under the Contract.

                  4.       In the event that (a) Hotel Manager becomes
insolvent, or (b) an Event of Default occurs and is continuing, or (c) any
default occurs by Hotel Manager under the Management Agreement beyond the
expiration of any notice and cure periods, or (d) any other event occurs which,
under the terms of the Loan Documents, entitles Lender to direct Borrower to
replace Hotel Manager, Lender may exercise its rights under the Loan Documents
and direct any Borrower to terminate its Contract and/or to replace Hotel
Manager with a management

                                       2


company chosen by such Borrower and reasonably acceptable to Lender. Upon
receiving notice of any such election, Hotel Manager shall abide by such
direction to terminate and cooperate with any replacement manager approved or
designated by Lender. No termination fee or other compensation shall be due or
owing under such Contract as a result of any such termination other than accrued
unpaid fees.

                  5.       Without limiting the foregoing, subject to the second
sentence of paragraph 3 hereof, in the event Lender forecloses or otherwise
succeeds to the rights of any Borrower with respect to any Property, Lender
shall have the option upon written notice to Hotel Manager delivered within
thirty (30) days following foreclosure by Lender or other acquisition of such
Property by Lender, either to (a) terminate the applicable Contract without any
obligation or liability of Lender to pay the termination fees, if any; or (b)
continue such Contract in effect upon all of the terms and provisions provided
in such Contract, except that Lender shall have no obligation to pay any sums
due and owing under the Contract as of the date of foreclosure or other
acquisition of such Property, and Lender shall have the right after it elects to
continue such Contract under subparagraph (b) hereof to terminate such Contract
without cause upon thirty (30) days written notice to Hotel Manager without any
obligation or liability of Lender to pay the termination fees, if any other than
accrued unpaid fees. Hotel Manager acknowledges and agrees with Lender that
Lender has not assumed any obligations or liabilities of such Borrower to Hotel
Manager under such Contract. If Lender chooses not to continue any Contract
following a foreclosure or other acquisition of any Property, the only
compensation from Lender for which Hotel Manager shall be entitled under such
Contract shall be for the period commencing with the date of such foreclosure or
other acquisition and ending upon the subsequent termination by Lender of such
Contract. Notwithstanding the foregoing to the contrary, in the event Lender
forecloses or otherwise succeeds to the rights of any Borrower with respect to
its Property, upon Lender's request, Hotel Manager agrees to transfer and assign
to Lender, or its designee, to the extent possible, all applicable licenses
(including, without limitation, each liquor license and beer permit), permits
and approvals required for the use, occupancy, operation and maintenance of each
of the Property and held by or in the name of Hotel Manager, and, if requested
by Lender and permitted by applicable law, enter into such reasonable concession
or use agreements with Lender or its designee (subject to appropriate
indemnification) as are reasonably necessary to allow Lender or its designee to
offer, or cause to be offered, liquor and beer for sale at such Property. For
this purpose, Hotel Manager constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution to complete or undertake the
assignment of each of the items referenced in the preceding sentence in the name
of Hotel Manager pursuant to this paragraph 5. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked.

                  6.       Hotel Manager agrees (a) not to resign as Hotel
Manager without ninety (90) days prior written notice to Lender, and (b) not to
amend any Contract in any material respect without Lender's prior written
approval, which approval shall not be unreasonably withheld or delayed.

                  7.       Hotel Manager acknowledges and agrees that any and
all rents, room rents, credit card receipts, other receipts, profits or other
sums, including any management fees in excess of the management fees to which
Hotel Manager is entitled pursuant to paragraph 2

                                       3


hereof, and receipts derived from the sale of alcoholic beverages, to the extent
permitted by law (collectively herein called "PROPERTY PROCEEDS"), collected or
received by Hotel Manager from the Properties are subject to a security interest
of Lender pursuant to the Loan Documents, and shall be collected and held by
Hotel Manager in trust for the benefit of the applicable Borrower and Lender.
Any such Property Proceeds shall be deposited by Hotel Manager within two (2)
Business Days of receipt into a deposit account (the "DEPOSIT ACCOUNT") in the
name of the Lender and identified in that certain Deposit Account Agreement or
other similar agreement dated as of the date hereof (as amended, restated,
modified, replaced or supplemented from time to time, each, a "DEPOSIT ACCOUNT
AGREEMENT") among the applicable Borrower, Lender, Hotel Manager and the bank
named therein. Upon transfer of any such Property Proceeds to Hotel Manager from
the Lock Box Account (as defined in that certain Cash Management Agreement dated
as of even date herewith (as amended, restated, modified, replaced or
supplemented from time to time, the "CASH MANAGEMENT AGREEMENT"), among Mortgage
Borrowers, Lender, Hotel Manager and Wachovia Bank, National Association) as
directed by the applicable Borrower pursuant to Section 3.3 of the Cash
Management Agreement, such Property Proceeds shall be used by Hotel Manager for
proper expenses and costs of managing and operating the applicable Property as
permitted under the applicable Contract, subject, in all instances, to
compliance with the Operating Budget and FF&E Budget then in effect and
limitations on distributions to Borrowers, each as more fully described in the
Loan Agreement. Hotel Manager hereby disclaims any and all interests in the
Deposit Account, the Lock Box Account (and any Sub-Accounts thereof), the
Property Operating Account and in any of the Property Proceeds. Upon written
notice from Lender that an Event of Default has occurred under the Loan
Agreement and/or other Loan Documents, Hotel Manager agrees to apply Property
Proceeds as instructed by Lender.

                  8.       Hotel Manager represents and warrants that (a) a
true, correct and complete copy of each Contract has been delivered to Lender on
or prior to the date hereof, the form of which is attached hereto as EXHIBIT A,
(b) each Contract is in full force and effect and has not been modified, amended
or assigned, except in favor of Lender or its predecessor-in-interest (c)
neither Hotel Manager nor, to Hotel Manager's knowledge, any Borrower is in
default under any of the terms, covenants or provisions of its Contract, and
Hotel Manager knows of no event which, with the giving of notice or the passage
of time, or both, would constitute a default under any Contract, (d) Hotel
Manager has no knowledge of and has not commenced any action or given or
received any notice for the purpose of terminating any Contract, and (e) all
management fees, commissions and other sums due and payable to the Hotel Manager
under each Contract as of the date hereof have been paid in full.

                  9.       This Agreement shall be deemed to be a contract
entered into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of the State of New York.

                  10.      All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder shall be in
writing and shall be delivered to Lender and Borrowers at the addresses set
forth in Section 14.5 of the Loan Agreement and to Hotel Manager at the address
set forth on the first page hereof, with a copy to

                                       4


Morris Manning & Martin LLP, Attention: Tom Gryboski, Esq., Fax: (404) 365-9532,
each in the manner provided in Section 14.5 of the Loan Agreement.

                  11.      This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of Lender or any other party, but only
by an agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.

                  12.      If any term, covenant or condition of this Agreement
is held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such provision. If any conflict exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                  13.      This Agreement may be executed in any number of
duplicate originals and each duplicate original shall be deemed to be an
original. This Agreement may be executed in several counterparts, each of which
counterparts shall be deemed an original and all of which together shall
constitute a single agreement. The failure of any party hereto to execute this
Agreement, or any counterpart hereof, shall not relieve the other signatories
from their obligations hereunder.

                  14.      Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns and pronouns shall include the plural and vice versa.

                  15.      This Agreement shall be binding upon Hotel Manager
and its heirs, devisees, representatives, successors and assigns, and shall
inure to the benefit of and may be enforced by and binding upon Lender and its
heirs, successors, legal representatives, substitutes and assigns. Except as
permitted under the Loan Agreement, Hotel Manager shall not assign any of its
rights or obligations under this Agreement. Subject to the terms of the Loan
Agreement, Lender shall have the right to assign this Agreement and the
obligations hereunder in connection with any assignment or transfer of all or
any portion of the Loan or any interest therein. The parties hereto acknowledge
that following the execution and delivery of this Agreement, Lender may sell,
transfer and assign this Agreement and certain other Loan Documents. All
references to "Lender" hereunder shall be deemed to include the successors and
assigns of Lender and the parties hereto acknowledge that actions taken by
Lender hereunder may be taken by Lender's agents and by the agents of the
successors and assigns of Lender.

                  16.      This Agreement is intended solely for the benefit of
Lender and its heirs, successors, legal representatives, substitutes and
assigns, and no third party shall have any right or interest in this Agreement,
nor any right to enforce this Agreement against any party hereto.

                  17.      Hotel Manager acknowledges and agrees that pursuant
to the Loan Agreement, each Deposit Account Agreement and the Cash Management
Agreement (for purposes of this paragraph 17, collectively, the "AGREEMENTS")
(the terms, conditions and agreements of the Agreements being hereby
incorporated herein with the same force as is fully set forth herein), certain
requirements are specified with respect to the Property Proceeds and

                                       5


other payments due under any Lease (as defined in the Security Instrument) or
otherwise with respect to the Properties, and Hotel Manager covenants and agrees
to observe and, as and to the extent applicable to Hotel Manager, perform all
such requirements, including, without limitation, ensuring that all Property
Proceeds received by Hotel Manager are properly deposited into the applicable
Deposit Account.

                  18.      The obligations of Borrowers and Hotel Manager
hereunder are subject to limitations on recourse as provided in Article XII of
the Loan Agreement.

                                       6


                  EXECUTED as of the day and year first above written.

                                    BORROWERS:

                                    LODGIAN HOTELS FIXED II, INC.
                                    LODGIAN LAFAYETTE LLC

                                    By:/s/ Daniel E. Ellis
                                       -------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of the
                                           entities listed above



                                    HOTEL MANAGER:

                                    LODGIAN MANAGEMENT CORP.,
                                    a Delaware corporation

                                    By:/s/ Daniel E. Ellis
                                       -------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or



                                    EXHIBIT A

                      COPY OF FORM OF MANAGEMENT AGREEMENT

EX-10.3.7

                                                                  EXHIBIT 10.3.7

                       ASSIGNMENT OF AGREEMENTS, LICENSES,
                              PERMITS AND CONTRACTS

                  This ASSIGNMENT OF AGREEMENTS, LICENSES, PERMITS AND
CONTRACTS, dated as of June 25, 2004 (this "ASSIGNMENT"), made by the
undersigned, each having an address at c/o Lodgian, Inc., 3445 Peachtree Road,
NE, Suite 700, Atlanta, Georgia 30326 (collectively, "BORROWER"), to MERRILL
LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an address at 4
World Financial Center, New York, New York 10080 (together with its successors,
transferees and assigns, "LENDER").

                              W I T N E S S E T H:

                  WHEREAS:

                  A.       Borrower is the owner of a fee simple and leasehold
interest, as the case may be, in those certain parcels of real property
(collectively, the "PREMISES") described in EXHIBIT A attached hereto, and the
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and other improvements now or hereafter
located thereon (the "IMPROVEMENTS"; together with the Premises, collectively,
the "PROPERTY");

                  B.       Borrower and Lender have entered into a certain Loan
and Security Agreement, dated as of the date hereof (as amended, modified or
restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has
agreed to make a loan to Borrower as more particularly described below.
Capitalized terms used herein and not herein defined shall have the meanings
assigned to such terms in the Loan Agreement.

                  C.       Pursuant to the Loan Agreement, Lender is making a
Loan to Borrower in the aggregate original principal amount of up $67,874,000
(the "LOAN"). The Loan is evidenced by a certain Promissory Note, dated as of
the date hereof (as amended, modified or restated from time to time, the "NOTE")
and secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds to
Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as
of the date hereof (as amended, modified or restated from time to time,
collectively, the "SECURITY INSTRUMENT"), with respect to the Property and
Improvements.

                  D.       To induce Lender to make the Loan and to secure
payment of the Note, together with interest thereon, Borrower has agreed to the
execution and delivery of this Assignment.

                  NOW, THEREFORE, in consideration of the sum of Ten Dollars
($10) and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the Borrower hereby absolutely grants a first
lien on and security interest in, and hereby assigns, transfers and sets over to
Lender as additional security for the payment of the Loan and the observance and
performance by the Borrower of the terms, covenants and conditions of the Loan



Documents on the part of the Borrower to be observed or performed, all of the
Borrower's right, title and interest in and to the following:

                           (a)      to the extent assignable, all of Borrower's
right, title and interest in, to and under the documents, contracts,
instruments, plans, permits, licenses (including, without limitation, all liquor
licenses and other beverage permits), approvals, applications, trade names and
trademarks (including, without limitation, any licenses of, or agreements to
license, trade names or trademarks now or hereafter entered into by or on behalf
of Borrower or Manager in connection with the operation of the Property),
insurance policies, equipment leases, purchase and sale agreements, and other
instruments described or existing with respect to the Property or any portion
thereof, and any amendments or modifications thereto, any replacements thereof
executed during the term of the Note and any other similar documents or
instruments with respect to the Property or any portion thereof, now in
existence or hereafter executed by Borrower or now in the possession of Borrower
or hereafter obtained by Borrower (collectively, the "DOCUMENTS");

                           (b)      to the extent assignable, all rights,
powers, privileges, claims, remedies and causes of action of every kind which
Borrower now has or may in the future have with respect to or by reason of its
interest in the Documents; and

                           (c)      to the extent assignable, any and all
proceeds (including non-cash proceeds) of any of the foregoing (the items
enumerated in the preceding subparagraphs (a) and (b) and in this subparagraph
(c) being hereinafter collectively referred to as the "COLLATERAL").

                  1.       This Assignment is given to secure the obligations of
Borrower under and in respect of (a) the Note and (b) the other Loan Documents.
The parties intend that this Assignment shall be a present, actual, absolute and
unconditional assignment and shall, immediately upon execution, give Lender the
right to assume Borrower's interest in the Collateral; provided, however, that
unless an Event of Default under any of the Loan Documents shall have occurred
and be continuing, Borrower shall have a license to utilize the Collateral in
accordance with the terms thereof. If an Event of Default shall have occurred
and be continuing under any of the Loan Documents, Borrower's license mentioned
in the immediately preceding sentence shall cease and terminate, without the
execution of any further instrument or document or the taking of any other act
on the part of Lender, and in such event, subject to the terms of the Loan
Agreement and the other Loan Documents, Lender shall be entitled to utilize the
Collateral in Borrower's place and stead, in the name of Borrower or otherwise,
and in furtherance thereof, subject to the terms of the Loan Agreement and the
other Loan Documents, Lender may enter upon the Property and take possession of
the Property by its officers, agents or employees, or by a court-appointed
receiver, and for the operation, protection, repair and maintenance of the
Property, and in connection therewith, Lender shall be entitled to take
possession of and use all books of account and financial records of Borrower and
its property managers or representatives relating to the Property.

                  2.       Neither this Assignment nor any action or inaction on
the part of Lender shall constitute an assumption on the part of Lender of any
duty or obligation with respect to the Collateral, nor shall Lender have any
duty or obligation to make any payment to be made by Borrower under the
Collateral, or to present or file any claim, or to take any other action to

                                      -2-


collect or enforce the payment of any amounts or the performance of any
obligations which have been assigned to Lender or to which it may be entitled
hereunder at any time or times. No action or inaction on the part of Lender
shall adversely affect or limit in any way the rights of Lender hereunder or
under the Collateral, and Lender shall not incur any liability on account of any
action taken (or not taken) by it or on its behalf in connection with the
Collateral in good faith, whether or not the same shall prove to be improper,
inadequate or invalid, in whole or in part.

                  3.       Borrower shall indemnify and hold Lender harmless
from and against any and all liabilities, losses and damages which Lender may
incur by reason of this Assignment and any actions of Lender taken (or not
taken) in connection with the Collateral, and from and against any and all
claims and demands whatsoever which may be asserted against Lender by reason of
any alleged obligations to be performed or discharged by Lender by reason of
this Assignment, and the amount thereof, including reasonable costs, expenses
and reasonable attorneys' fees and disbursements, together with interest on such
amount, at the Default Rate under the Note from the date such costs, expenses
and fees were incurred by Lender to the date of payment thereof to Lender by
Borrower, shall be secured hereby and by the other Loan Documents, and Borrower
shall reimburse Lender therefor within twenty (20) days after demand, and upon
the failure of Borrower to do so, the same shall be deemed an Event of Default
under the Loan Agreement for which Lender shall be entitled to exercise any and
all rights and remedies provided therein or at law or in equity; provided,
however, that in no event shall Borrower be required to indemnify or hold
harmless Lender for any liabilities, losses or damages resulting from Lender's
bad faith, gross negligence or willful misconduct. It is further understood that
this Assignment shall not operate to constitute Lender as a lender in possession
of the Property, or to place responsibility for the control, care, management or
repair of the Improvements upon Lender, nor shall it operate to make Lender
responsible or liable (as to Borrower) for any waste committed with respect to
the Property by any party, or for any Hazardous Material placed upon or found at
the Property, or for any dangerous or defective condition of the Improvements or
for any negligence in the management, up-keep, repair or control of the
Improvements resulting in loss, injury, death or damage to any contractor,
sub-contractor, licensee, invitee, employee, or other party, or for any other
thing or matter whatsoever.

                  4.       Borrower shall remain liable to, and shall, perform
all of its obligations under and with respect to the Collateral and shall, at
its sole cost and expense, enforce the Collateral in the ordinary course of
business and comply in all material respects with all of its obligations under
the Collateral and all the terms thereof. Borrower shall give Lender prompt
notice of any material default by any party under the Collateral. So long as (a)
Borrower is acting in the ordinary course of business, and (b) no Event of
Default has occurred and is continuing under any of the Loan Documents, except
as otherwise provided in the Loan Agreement, Borrower may alter, amend, extend,
modify, change, cancel or terminate any of the Collateral, provided that such
alterations, amendments, extensions, modifications, changes, cancellations and
terminations, taken as a whole, are not likely to result in a Material Adverse
Effect, and, except as otherwise provided in the Loan Agreement, Borrower may
enter into new Collateral on commercially reasonable terms without Lender's
prior written consent in each instance; provided, however, that Borrower shall
provide Lender with copies of any such alterations, amendments, extensions,
modifications, changes, cancellations, and terminations of

                                      -3-


the Collateral upon request of Lender unless otherwise required to be provided
pursuant to the Loan Agreement.

                  5.       Upon the occurrence and during the continuance of an
Event of Default under any of the Loan Documents, Lender shall be entitled to
all of the rights, remedies, powers and privileges available to a secured party
under the Uniform Commercial Code in any jurisdiction whose laws may apply and
this Assignment shall constitute a direction to and full authority to any person
or entity which has contracted with or is a party to any of the Documents
(collectively, the "CONTRACTING PARTIES", and individually, a "CONTRACTING
PARTY") to perform its obligations under the Documents for the benefit of Lender
without proof to any Contracting Party of the default of Borrower. In addition,
Borrower agrees that it shall, promptly upon request of Lender following such
Event of Default, execute and deliver notices to the Contracting Parties
directing that future performance of such Contracting Parties' obligations be
made at the direction of Lender. Borrower hereby irrevocably authorizes each of
the Contracting Parties to rely upon and comply with any notice or demand by
Lender for the performance by any such Contracting Party of its obligations
under any Document for the benefit of Lender, and no Contracting Party shall
have any right or duty to inquire whether an Event of Default has actually
occurred, and Borrower shall have no right to countermand its authorization
herein to the Contracting Parties to perform for the benefit of Lender.

                  6.       Borrower represents and warrants that it has full
right, power and authority, pursuant to its certificate of limited partnership
and limited partnership agreement, certificate of formation and limited
liability company agreement, or certification of incorporation and by-laws, as
the case may be, to assign the Collateral assigned hereby and that (a) to
Borrower's knowledge, the Documents in existence on the date hereof, are in full
force and effect in accordance with their respective terms, (b) Borrower has
delivered to Lender true and complete copies of the material Documents in
existence as of the date hereof, (c) neither the Collateral nor any part thereof
has been assigned, pledged or encumbered by Borrower except pursuant to this
Assignment and the other Loan Documents, (d) to Borrower's knowledge, no default
or event of default which remains uncured beyond the expiration of any
applicable grace or notice period which could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing hereunder and no Event of
Default or Default has occurred, (e) to Borrower's knowledge, none of the
Contracting Parties has any defense, set-off or counterclaim against Borrower to
the performance of any obligations of such respective Contracting Party, and (f)
its principal place of business is its address for notices as set forth in the
Loan Agreement

                  7.       Borrower, at its expense, shall execute and deliver
all such instruments and take all such action as Lender, from time to time, may
reasonably request in order to obtain the full benefits of this Assignment and
of the rights and powers herein created and to maintain and perfect the security
interest granted in this Assignment. To the extent permitted by law, Borrower
irrevocably authorizes Lender, at the expense of Borrower, to file financing
statements and continuation statements with respect to the Collateral that
Lender deems appropriate or desirable without the signature of Borrower.

                  8.       Wherever there is any conflict or inconsistency
between any terms or provisions of this Assignment and the Loan Agreement, the
terms and provisions of the Loan Agreement shall control.

                                      -4-


                  9.       All rights and remedies herein conferred may be
exercised whether or not sale proceedings are pending under the Security
Instrument or any other action or proceeding has been commenced under any of the
other Loan Documents. Lender shall not be required to resort first to the
security of this Assignment before resorting to the security of the Security
Instrument or any of the other Loan Documents and Lender may exercise the
security hereof or thereof concurrently or independently and in any order of
preference.

                  10.      This Assignment shall automatically terminate upon
payment in full of all sums due Lender under the Note, the Loan Agreement, and
the other Loan Documents, and any other indebtedness secured by the Security
Instrument.

                  11.      All notices, demands, consents, or requests which are
either required or desired to be given or furnished hereunder shall be sent and
shall be effective in the manner set forth in Section 14.5 of the Loan
Agreement.

                  12.      The provisions of this Assignment shall be binding
upon Borrower, its successors and assigns, and all persons claiming under or
through Borrower or any such successor or assign, and shall inure to the benefit
of and be enforceable by Lender and its successors and assigns. Subject to the
terms of the Loan Agreement, Lender shall have the right to assign this
Assignment and the obligations hereunder in connection with any assignment or
transfer of all or any portion of the Loan or any interest therein. The parties
hereto acknowledge that following the execution and delivery of this Assignment,
Lender may sell, transfer and assign this Assignment and certain other Loan
Documents. All references to "Lender" hereunder shall be deemed to include the
assigns of Lender and the parties hereto acknowledge that actions taken by
Lender hereunder may be taken by Lender's agents and by the agents of the
assigns of Lender.

                  13.      This Assignment shall constitute a security agreement
for all purposes under the Uniform Commercial Code as in effect in the State
where the applicable Property is located.

                  14.      This Assignment and the obligations arising hereunder
shall be governed by and construed in accordance with the laws of the State of
New York and any applicable laws of the United States of America, except that at
all times the provisions for the creation, perfection, attachment and
enforcement of the liens and the security interests created pursuant to this
Assignment shall be governed by the laws of the State where the applicable
Property is located.

                  15.      Neither this Assignment nor any provision hereof may
be changed, waived or terminated orally, but only by an instrument in writing
signed by Lender and Borrower.

                  16.      If any of the provisions of this Assignment, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Assignment, or the application
of such provision or provisions to persons or circumstances other than those to
whom or which it is held invalid or unenforceable, shall not be affected thereby
and every provision of this Assignment shall be valid and enforceable to the
fullest extent permitted by law.

                                      -5-


                  17.      The obligations of Borrower hereunder are subject to
limitations on recourse as provided in Article XII of the Loan Agreement.

                                      -6-


                  IN WITNESS WHEREOF, the Borrower has duly executed this
instrument as of the day and year first above written.

                                    BORROWERS:

                                    ALBANY HOTEL, INC.
                                    APICO INNS OF GREEN TREE, INC.
                                    LODGIAN AUGUSTA LLC
                                    LODGIAN HOTELS FIXED II, INC.
                                    LODGIAN LAFAYETTE LLC
                                    LODGIAN TULSA LLC

                                    By:/s/ Daniel E. Ellis
                                       ------------------------------------
                                       Name:  Daniel E. Ellis
                                       Title: Vice President and Secretary, or
                                              Authorized Signatory for each of
                                              the entities listed above

                                    AMI OPERATING PARTNERS, L.P.

                                    By: AMIOP ACQUISITION GENERAL
                                        PARTNER SPE CORP., a Delaware
                                        corporation, its general partner

                                    By:/s/ Daniel E. Ellis
                                       ------------------------------------
                                       Name:  Daniel E. Ellis
                                       Title: Vice President and Secretary, or
                                              Authorized Signatory

                                    DEDHAM LODGING ASSOCIATES I, LIMITED
                                      PARTNERSHIP

                                    By: DEDHAM LODGING SPE, INC., a Delaware
                                        corporation, its general partner


                                    By:/s/ Daniel E. Ellis
                                       ------------------------------------
                                       Name:  Daniel E. Ellis
                                       Title: Vice President and Secretary, or
                                              Authorized Signatory


                                   EXHIBITS A

                                   PROPERTIES



     CHAIN/NAME                     CITY                       ST
- ---------------------      -----------------------             --
                                                         
Holiday Inn                East Hartford                       CT
Fairfield Inn              Augusta                             GA
Courtyard by Marriott      Lafayette                           LA
Holiday Inn                Baltimore -- BWI Airport            MD
                           (Linthicum)
Residence Inn              Dedham                              MA
Crowne Plaza               Albany                              NY
Courtyard by Marriott      Tulsa                               OK
Holiday Inn -- Greentree   Pittsburgh                          PA
Holiday Inn                York                                PA

EX-10.3.8

                                                                  EXHIBIT 10.3.8

                              COOPERATION AGREEMENT

            THIS COOPERATION AGREEMENT (this "AGREEMENT") is made as of the 25th
day of June, 2004, by and between the Mortgage Borrowers listed on the signature
page hereof (collectively, the "MORTGAGE BORROWERS"), Lodgian Mezzanine Fixed,
LLC (the "MEZZANINE BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., in its
capacity as both mortgage lender and mezzanine lender ("LENDER").

                                    RECITALS:

            A.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 1
Borrowers" (collectively, the "POOL 1 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 1"), are indebted to
Lender in the original principal sum of $63,801,000 ("MORTGAGE LOAN 1") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 1 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
1").

            B.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 2
Borrowers" (collectively, the "POOL 2 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 2"), are indebted to
Lender in the original principal sum of $67,864,000 ("MORTGAGE LOAN 2") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 2 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
2").

            C.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 3
Borrowers" (collectively, the "POOL 3 BORROWERS") by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 3"), are indebted to
Lender in the original principal sum of $66,818,500 ("MORTGAGE LOAN 3") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 3 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
3").

            D.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 4
Borrowers" (collectively, the "POOL 4 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 4", and together with
Mortgage Note 1, Mortgage Note 2, and Mortgage Note 3, collectively, the
"MORTGAGE NOTES"), are indebted to Lender in the original principal sum of
$61,516,500 ("MORTGAGE LOAN 4", and together with Mortgage Loan 1, Mortgage Loan
2, and Mortgage Loan 3, collectively, the "MORTGAGE LOANS") as governed by that
certain Loan and Security Agreement of even date herewith between the Pool 4
Borrowers and Lender (together with all extensions, renewals, modifications,
substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT 4", and together
with Mortgage Loan Agreement 1, Mortgage Loan Agreement 2, and Mortgage Loan
Agreement 3, collectively, the "MORTGAGE LOAN AGREEMENTS").

[Fixed Loan]



            E.    Mortgage Loan 1, Mortgage Loan 2, Mortgage Loan 3, and
Mortgage Loan 4 are secured, in part, by Mortgages on the respective pools of
Properties identified on Schedule 2 (each, a "POOL", and collectively, the
"POOLS").

            F.    The Mezzanine Borrower, by that certain Mezzanine Note of even
date herewith given to Lender (the "MEZZANINE NOTE"), is indebted to Lender in
the aggregate principal sum of One Hundred and No/100 ($100.00) (the "MEZZANINE
LOAN") as governed by that certain Mezzanine Loan Agreement of even date
herewith between the Mezzanine Borrower and Lender (together with all
extensions, renewals, modifications, substitutions and amendments thereof, the
"MEZZANINE LOAN AGREEMENT").

            G.    Lender has required as a condition to making the Mortgage
Loans and the Mezzanine Loan that the Mortgage Borrowers and the Mezzanine
Borrower enter into this Agreement with Lender.

                                    AGREEMENT

            For ten ($10) dollars and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:

            Section 1. Adjustment of Mortgage Loans and Mezzanine Loan/Loan
Modification. Lender shall have the right in its sole discretion, at any time
prior to the final Securitization of the last of the Mortgage Loans to be
securitized, to cause any of the following to occur (each, a "LOAN
MODIFICATION"):

            (1)   separately adjust the principal amount and applicable interest
            rates of any of the Mortgage Loans and the Mezzanine Loan, provided
            that (i) the aggregate principal amount of the Mortgage Loans and
            the Mezzanine Loan immediately after such adjustment shall equal the
            aggregate outstanding principal balance of the Mortgage Loans and
            the Mezzanine Loan immediately prior to such adjustment, (ii) the
            weighted average interest rate of the Mortgage Loans and the
            Mezzanine Loan immediately after such adjustment shall equal the
            weighted average interest rate which was applicable to the Mortgage
            Loans and the Mezzanine Loan immediately prior to such adjustment,
            (iii) the aggregate debt service payments on the Mortgage Loans and
            the Mezzanine Loan immediately after such adjustment shall equal the
            aggregate debt service payments which were due under the Mortgage
            Loans and the Mezzanine Loan immediately prior to such adjustment,
            and (iv) the other material terms and provisions of each of the
            Mortgage Loans and the Mezzanine Loan shall remain unchanged and
            none of the foregoing adjustments shall increase the obligations or
            reduce the rights of the Mortgage Borrowers, the Mezzanine Borrower
            or Guarantor in any material respect; and/or

            (2)   cause any of the Properties in any one or more of the Pools to
            become Collateral for any other Pool.

                                       2





Any Loan Modification shall be subject to the following:

            (a)   (i) If Lender elects to increase the principal amount of the
Mezzanine Loan, the Mezzanine Borrower shall contribute to the Mortgage
Borrowers such additional loan proceeds to be applied to repay, dollar for
dollar, the Mortgage Notes (in an amount and as designated by Lender), and the
Lender under the Mortgage Notes will accept such prepayment without penalty,
premium or additional costs (except as provided herein) to the Mortgage
Borrowers; (ii) If Lender elects to increase the principal amount of the
Mortgage Loans, or any of them, and reduce the principal amount of the Mezzanine
Loan, the Mortgage Borrowers shall distribute to the Mezzanine Borrower such
additional loan proceeds to be applied to repay, dollar for dollar, the
Mezzanine Note, and the Lender under the Mezzanine Note will accept such
prepayment without penalty, premium or additional costs to the Mezzanine
Borrower (except as provided herein); and (iii) If Lender elects to increase the
principal amount of any of the Mortgage Loans and decrease the amount of any of
the other Mortgage Loans, the applicable Mortgage Borrowers shall distribute to
the Mezzanine Borrower such additional loan proceeds and the Mezzanine Borrower
shall contribute to the applicable Mortgage Borrowers (whose Mortgage Loans are
to be decreased) such additional loan proceeds to be applied to repay, dollar
for dollar, the applicable Mortgage Notes, and the Lender under the applicable
Mortgage Notes will accept such prepayment without penalty, premium or
additional costs to the Mortgage Borrowers (except as provided herein).

            (b)   The Mortgage Borrowers and the Mezzanine Borrower shall
cooperate, and shall cause Guarantor and any Affiliates thereof (the "LODGIAN
PARTIES") to cooperate, with all reasonable requests of Lender in connection
with any Loan Modification including, without limitation (x) execution and
delivery of such documents as shall reasonably be required by Lender in
connection therewith (including amended and restated notes, amended and restated
loan agreements, replacement Mortgages, replacement Assignments of Leases, and
ratifications by Guarantor of any of its obligations under any guaranties or
indemnities provided under the Mortgage Loan or the Mezzanine Loan), and (y)
transfers of one or more Properties among the Mortgage Borrowers, to the extent
required to comply with the terms of Article IX of the Mortgage Loan Agreements;

            (c)   The Mortgage Borrowers and the Mezzanine Borrower hereby
absolutely and irrevocably appoint Lender their true and lawful attorney coupled
with an interest, in their name and stead to make and execute all documents
necessary to effect any Loan Modification, provided, however, that Lender shall
not make or execute any such documents under such power until ten (10) days
after notice by Lender to Mortgage Borrowers and Mezzanine Borrower of such
intent to exercise its right under such power;

            (d)   At Lender's request, in connection with any Loan Modification
the Mortgage Borrowers and the Mezzanine Borrower shall deliver to Lender, at
the Mortgage Borrowers' and the Mezzanine Borrower' expense, replacement opinion
letters in form and substance similar to the opinion letters delivered on the
Closing Date addressed to any subsequent holders of any of the Mortgage Loans or
the Mezzanine Loan or any interest therein (including, without limitation, each
trustee holding any of the Mortgage Loans or the Mezzanine Loan) with respect to
any opinion letter delivered in connection with the Mortgage Loans and the
Mezzanine Loan;

                                        3


            (e)   Lender shall pay all reasonable out-of-pocket costs and
expenses incurred by the Mortgage Borrowers and the Mezzanine Borrower in
connection with a Loan Modification (other than the Mortgage Borrowers',
Mezzanine Borrower's and Guarantor's internal costs and expenses, and the costs
and expenses of their respective counsel, mortgage recording fees and taxes,
required endorsements, if any, to the Title Policies (as such term is defined in
the Mortgage Loan Agreement and the Mezzanine Loan Agreement), and Property
transfer costs).

            Section 2. Capitalized Terms; Notices. Capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Mortgage Loan Agreements. Any notices, requests, demands or other communications
required or permitted hereunder shall be delivered as specified in the Mortgage
Loan Agreements and the Mezzanine Loan Agreement.

            Section 3. Event of Default. It shall be an Event of Default under
the Mortgage Loans and the Mezzanine Loan if any of the Mortgage Borrowers, the
Mezzanine Borrower, or the Lodgian Parties fail to comply with any of the terms,
covenants or conditions of this Agreement within ten (10) Business Days after
receipt of written request from Lender.

            Section 4. Governing Law. This Agreement shall be governed,
construed, applied and enforced in accordance with the laws of the State of New
York and the applicable laws of the United States of America.

            Section 5. No Oral Change. This Agreement, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of the Mortgage
Borrowers, the Mezzanine Borrower, Guarantor, or Lender, but only by an
agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.

            Section 6. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Mortgage Borrowers, the Mezzanine Borrower,
Guarantor, and Lender and their respective successors and assigns forever.

            Section 7. Inapplicable Provisions. If any term, covenant or
condition of this Agreement is held to be invalid, illegal or unenforceable in
any respect, this Agreement shall be construed without such provision.

            Section 8. Headings, etc. The headings and captions of various
paragraphs of this Agreement are for convenience of reference only and are not
to be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.

            Section 9. Duplicate Originals, Counterparts. This Agreement may be
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. This Agreement may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Agreement. The failure of
any party hereto to execute this Agreement, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.

                         [NO FURTHER TEXT ON THIS PAGE]

                                        4


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

                                LENDER:

                                MERRILL LYNCH MORTGAGE
                                LENDING, INC.

                                By: /s/ Robert Spinna
                                    ----------------------------
                                Name: Robert Spinna
                                Title: Vice President

                       [signatures continue on next page]

[Fixed Loan]



                                MEZZANINE BORROWER:

                                LODGIAN MEZZANINE FIXED, LLC

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary

                                MORTGAGE BORROWERS:

                                IMPAC HOTELS I, L.L.C.
                                LODGIAN DENVER LLC
                                LODGIAN HOTELS FIXED I, LLC
                                MACON HOTEL ASSOCIATES, L.L.C.
                                SERVICO NORTHWOODS, INC.

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of
                                       the entities listed above

                                ALBANY HOTEL, INC.
                                APICO INNS OF GREEN TREE, INC.
                                LODGIAN AUGUSTA LLC
                                LODGIAN HOTELS FIXED II, INC.
                                LODGIAN LAFAYETTE LLC
                                LODGIAN TULSA LLC

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above



                                AMI OPERATING PARTNERS, L.P.

                                By: AMIOP ACQUISITION GENERAL
                                    PARTNER SPE CORP., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                DEDHAM LODGING ASSOCIATES I, LIMITED
                                PARTNERSHIP

                                By: DEDHAM LODGING SPE, INC., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title:  Vice President and Secretary, or
                                        Authorized Signatory

                                LODGIAN AMI, INC.
                                LODGIAN HOTELS FIXED III, LLC
                                MINNEAPOLIS MOTEL ENTERPRISES, INC.

                                By: s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above



                                SERVICO CENTRE ASSOCIATES, LTD.

                                By: SERVICO PALM BEACH GENERAL
                                    PARTNER SPE, INC., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                LODGIAN FAIRMONT LLC
                                NH MOTEL ENTERPRISES, INC.
                                SERVICO COLUMBIA, INC.
                                SERVICO HOUSTON, INC.

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

                                LITTLE ROCK LODGING ASSOCIATES I,
                                LIMITED PARTNERSHIP

                                By: LODGIAN LITTLE ROCK SPE, INC.,
                                    a Delaware corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory



                                LODGIAN HOTELS FIXED IV, L.P.

                                By: LODGIAN HOTELS FIXED IV GP, INC.,
                                    a Delaware corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                GUARANTOR:

                                LODGIAN, INC.

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Senior Vice President



                                   SCHEDULE 1

                               MORTGAGE BORROWERS

Pool 1 Borrowers

Lodgian Hotels Fixed I, LLC
Macon Hotel Associates, L.L.C.
Servico Northwoods, Inc.
Impac Hotels I, L.L.C.
Lodgian Denver LLC

Pool 2 Borrowers

AMI Operating Partners, L.P.
Albany Hotel, Inc.
Apico Inns of Green Tree, Inc.
Lodgian Tulsa LLC
Lodgian Augusta LLC
Lodgian Lafayette LLC
Dedham Lodging Associates I, Limited Partnership
Lodgian Hotels Fixed II, Inc.

Pool 3 Borrowers

Minneapolis Motel Enterprises, Inc.
Servico Centre Associates, Ltd.
Lodgian Hotels Fixed III, LLC -
Lodgian AMI, Inc.

Pool 4 Borrowers

NH Motel Enterprises, Inc.
Servico Columbia, Inc.
Lodgian Fairmont LLC
Little Rock Lodging Associates I, Limited Partnership
Lodgian Hotels Fixed IV, L.P.
Servico Houston, Inc.

[Fixed Loan]



                                   SCHEDULE 2

                                   PROPERTIES

Pool 1
Marriott  - Aurora
Courtyard by Marriott - Atlanta
Doubletree Club - Philadelphia
Holiday Inn Select - Strongsville
Crowne Plaza - Macon
Holiday Inn - Marietta
Holiday Inn - Lancaster
Clarion - North Charleston

Pool 2
Crowne Plaza - Albany
Holiday Inn - Linthicum
Residence Inn - Dedham
Courtyard by Marriott  - Tulsa
Courtyard by Marriott  - Lafayette
Holiday Inn - Pittsburgh
Marriott Fairfield Inn  - Augusta
Holiday Inn - York
Holiday Inn - E. Hartford

Pool 3
Holiday Inn - Baltimore
Crowne Plaza - West Palm Beach
Holiday Inn - Glen Burnie
Courtyard by Marriott - Bentonville
Holiday Inn - Towson
Holiday Inn - St. Paul
Courtyard by Marriott - Florence
Holiday Inn SunSpree - Surfside Beach
Marriott Fairfield Inn - Merrimack

Pool 4
Crowne Plaza - Houston
Hilton  - Columbia
Hilton  - Troy
Holiday Inn Select - Irving
Residence Inn - Little Rock
Holiday Inn - Frederick
Courtyard by Marriott - Paducah
Courtyard by Marriott - Abilene
Holiday Inn  - Fairmont

EX-10.3.9

                                                                  EXHIBIT 10.3.9

                            CASH MANAGEMENT AGREEMENT

                           Dated: as of June 25, 2004

                                      among

                                  THE BORROWERS
                      LISTED ON THE SIGNATURE PAGES HERETO,
                                  as Borrowers,

                      MERRILL LYNCH MORTGAGE LENDING, INC.

                                   as Lender,

                      WACHOVIA BANK, NATIONAL ASSOCIATION,

                                    as Agent

                                       and

                LODGIAN MANAGEMENT CORP., a Delaware corporation,
                                   as Manager

Cash Management Agreement (FX2)



                            CASH MANAGEMENT AGREEMENT

            CASH MANAGEMENT AGREEMENT (this "AGREEMENT"), dated as of June 25,
2004, among the Borrowers listed on the signature pages hereto, each having an
address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia
30326 (each, a "BORROWER", and collectively, "BORROWERS"), WACHOVIA BANK,
NATIONAL ASSOCIATION, having an address at 8739 Research Drive, URP4, Charlotte,
North Carolina 28288-1075 ("AGENT"), MERRILL LYNCH MORTGAGE LENDING, INC., a
Delaware corporation having an office at Four World Financial Center, New York,
New York 10080 ("LENDER"), and LODGIAN MANAGEMENT CORP., a Delaware corporation,
having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30326 ("MANAGER").

                              W I T N E S S E T H:

            WHEREAS, pursuant to a certain Loan and Security Agreement, dated as
of the date hereof (together with all extensions, renewals, modifications,
substitutions and amendments thereof, the "LOAN AGREEMENT"), between the
Borrowers and Lender, Lender has made a loan to the Borrowers in the principal
amount of Sixty Seven Million Eight Hundred Sixty Four Thousand and No/100
Dollars ($67,864,000.00) (the "LOAN"), which Loan is evidenced by a Promissory
Note, dated as of the date hereof (together with all extensions, renewals,
modifications, restatements, replacements, substitutions, by means of multiple
notes or otherwise, and amendments thereof, collectively, the "NOTE"), made by
the Borrowers, as makers, to Lender, as payee, and secured by, among other
things, (i) those certain Mortgages/Deeds of Trust/Deeds to Secure Debt,
Assignments of Leases and Rents, Security Agreements and Fixture Filings, each
dated as of the date hereof (together with all extensions, renewals,
modifications, restatements, substitutions and amendments thereof, each a
"SECURITY INSTRUMENT" and, collectively, the "SECURITY INSTRUMENTS"), each made
by a Borrower for the benefit of Lender and covering the properties as more
particularly described therein (collectively, the "PROPERTIES"), (ii) those
certain Assignments of Leases and Rents, dated as of the date hereof (together
with all extensions, renewals, modifications, restatements, substitutions and
amendments thereof, collectively, the "ASSIGNMENT OF LEASES"), made by the
applicable Borrower, as assignor, to Lender, as assignee, and (iii) the other
Loan Documents (as defined in the Loan Agreement);

            WHEREAS, pursuant to the Security Instruments and the Assignment of
Leases, the Borrowers have each granted to Lender a security interest in all of
the Borrowers' right, title and interest in, to and under the Rents (as defined
in the Security Instruments) and other revenues derived from and otherwise
attributable or allocable to the Properties, and have assigned and conveyed to
Lender all of the Borrowers' right, title and interest in, to and under the
Operating Revenues due and to become due to each of the Borrowers or to which
any of the Borrowers are now or may hereafter become entitled, arising out of
the Property or any part or parts thereof;

Cash Management Agreement (FX2)



            WHEREAS, the Borrowers and Manager have entered into Management
Agreements with respect to the Properties pursuant to which Manager has agreed
to manage the Properties; and

            WHEREAS, Manager has agreed to subordinate any right, title and
interest that Manager may have in and to the Operating Revenues and any other
income and revenues from the Properties to the interests of Lender under the
Loan Agreement and the Loan Documents; and

            WHEREAS, in order to fulfill all of the Borrowers' obligations under
the Loan Agreement, the Borrowers and Manager have agreed that all Operating
Revenues and other revenues from the Properties will be deposited directly into
the Deposit Account or the Lock Box Account (as such terms are hereinafter
defined), transferred to a Lock Box Account (if not deposited directly therein)
established hereunder with Agent and allocated and/or disbursed in accordance
with the terms and conditions hereof.

            NOW, THEREFORE, in consideration of the covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

            I.    DEFINITIONS

            Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Loan Agreement. As used herein, the following terms
shall have the following definitions:

            "ACCOUNTS" shall mean, collectively, the Deposit Account, the Lock
Box Account, the Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds
Account, and any other accounts pledged to Lender pursuant to this Agreement or
any of the other Loan Documents.

            "AGENT" shall mean Wachovia Bank, National Association, as agent
under this Agreement, together with its successors and assigns.

            "AGREEMENT" shall mean this Cash Management Agreement among the
Borrowers, Manager, Agent and Lender, as amended, supplemented, restated or
otherwise modified from time to time.

            "ALLOCABLE MEZZANINE SERVICING FEE" shall mean the Allocable Portion
of the monthly Servicing Fee (as defined in the Mezzanine Loan Agreement) for
which the Mezzanine Borrower is responsible pursuant to Section 2.11 of the
Mezzanine Loan Agreement.

            "ALLOCABLE PORTION" as defined in the Loan Agreement.

            "APPROVED OPERATING BUDGET" shall mean, for any period, each
Borrower's Operating Budget as approved or deemed approved by Lender from time
to time in accordance with Section 5.1(D) of the Loan Agreement, setting forth
such Borrower's reasonable estimate of Operating Revenues and Operating Expenses
for the applicable Property for such period.

                                       2

Cash Management Agreement (FX2)



            "BORROWERS" as defined in the Preamble, together with their
successors and permitted assigns.

            "BUSINESS INTERRUPTION INSURANCE" as defined in Section 2.1(d).

            "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" as defined in Section
2.1(c).

            "CASH TRAP EVENT" as defined in Section 6.8 of the Loan Agreement.

            "CASH TRAP RESERVE SUB-ACCOUNT" as defined in Section 2.1(c).

            "COLLATERAL" as defined in Section 5.1.

            "CREDIT CARD COMPANIES" as defined in Section 2.2(a).

            "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" as defined in
Section 2.2(a).

            "DEBT SERVICE SUB-ACCOUNT" as defined in Section 2.1(c).

            "DEPOSIT ACCOUNT" as defined in Section 2.1(a).

            "DEPOSIT ACCOUNT AGREEMENT" as defined in Section 2.1(a).

            "DEPOSIT BANK" as defined in Section 2.1(a).

            "ELIGIBLE ACCOUNT" shall mean a separate and identifiable account
from all other funds held by the holding institution, which account is either
(i) an account maintained with an Eligible Bank or (ii) a segregated trust
account maintained by a corporate trust department of a federal depository
institution or a state chartered depository institution subject to regulations
regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulation Section 9.10(b), which, in either case, has corporate trust powers
and is acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.

            "ELIGIBLE BANK" shall mean a bank that satisfies the Rating
Criteria.

            "EXCESS CASH FLOW" means any and all amounts available for
distribution in any calendar month after allocations and/or distribution of all
amounts required to be allocated under Sections 3.3(a)(i) through (ix) hereof.

            "EXTRAORDINARY EXPENSES" shall mean any extraordinary Operating
Expense or Capital Expenditure not set forth in the Approved Operating Budget
then in effect for the Property.

            "EXTRAORDINARY RECEIPTS" shall mean any receipts of the Borrowers
not included within the definition of Operating Revenues under the Loan
Agreement, including, without limitation, receipts from litigation proceedings
and tax certiorari proceedings.

            "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" as defined in Section 2.1(e).

                                       3

Cash Management Agreement (FX2)



            "FF&E RESERVE ACCOUNT" as defined in Section 2.1(f).

            "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

            "IMPOSITIONS AND INSURANCE RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

            "LENDER" shall mean Merrill Lynch Mortgage Lending, Inc., together
with its successors and assigns.

            "LOCK BOX ACCOUNT" as defined in Section 2.1(b).

            "LOSS PROCEEDS ACCOUNT" as defined in Section 2.1(d).

            "MANAGER" shall mean Lodgian Management Corp., together with its
successors and permitted assigns.

            "MEZZANINE BORROWER" as defined in the Loan Agreement.

            "MEZZANINE LENDER" as defined in the Loan Agreement.

            "MEZZANINE LOAN" as defined in the Loan Agreement.

            "MEZZANINE LOAN AGREEMENT" means that certain Mezzanine Loan
Agreement dated as of the date hereof, between Mezzanine Lender and Mezzanine
Borrower.

            "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" as defined in Section
2.1(c).

            "MEZZANINE SERVICER" means the Servicer as such term is defined in
the Mezzanine Loan Agreement.

            "MINIMUM BALANCE" as defined in Section 2.1(g).

            "MINIMUM BALANCE SUB-ACCOUNT" as defined in Section 2.1(c).

            "MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean the monthly payment
of principal and interest on the Loan required to be paid on each Monthly
Payment Date during the term of the Loan.

            "MONTHLY FF&E PAYMENT" shall mean the monthly deposit required to be
made to the FF&E Reserve pursuant to Section 6.4 of the Loan Agreement for any
month provided that if at the time of determination thereof the actual Operating
Revenues utilized in calculating the Monthly FF&E Payment have not been
determined for the prior calendar month (the "Measurement Month"), such
calculation shall be based upon the Operating Revenues set forth for the
Measurement Month in the applicable Operating Budget (the "Estimated Monthly
FF&E Payment"), and, upon determination of the actual Operating Revenues for the
Measurement Month, funds from the Lock Box Account in an amount equal to any
deficit between the Estimated Monthly FF&E Payment and the Monthly FF&E Payment
required to be allocated to

                                       4

Cash Management Agreement (FX2)



the FF&E Reserve based upon the actual Operating Revenues for the Measurement
Month, shall be allocated (or if funds available in the Lock Box Account and not
otherwise required to be deposited in any other Sub-Account for the applicable
month are not sufficient to cover such deficit, paid by the Borrowers) to the
FF&E Reserve within five (5) Business Days of such determination. Any excess of
the Estimated Monthly FF&E Payment allocated to the FF&E Reserve for the
applicable month over the Monthly FF&E Payment based upon the actual Operating
Revenues for the Measurement Month shall be made available for allocation to the
other Sub-Accounts or disbursed in accordance with Section 3.3(a) hereof.

            "MONTHLY IMPOSITIONS AND INSURANCE AMOUNT" shall mean the aggregate
monthly deposit for Impositions and Insurance Premiums required to be paid
pursuant to Section 6.3 of the Loan Agreement.

            "MONTHLY MEZZANINE DEBT SERVICE PAYMENT AMOUNT" shall mean the
Allocable Portion of the monthly payment of principal and interest on the
Mezzanine Loan required to be paid on each Monthly Payment Date to Mezzanine
Lender.

            "MONTHLY OPERATING EXPENSE BUDGET AMOUNT" shall mean, with respect
to each month, an amount equal to the Operating Expenses plus estimated sales,
use, occupancy and similar taxes relating to the Properties (excluding therefrom
Impositions, Insurance Premiums, FF&E expenditures, and management fees payable
to any Manager that is an Affiliate of the Borrowers) set forth in the Approved
Operating Budget for the applicable month of determination.

            "MONTHLY PAYMENT DATE" means the first (1st) day of each calendar
month occurring during the term of the Loan (or if such day is not a Business
Day, the immediately succeeding Business Day).

            "OPERATING EXPENSES" as defined in the Loan Agreement.

            "OPERATING EXPENSE SUB-ACCOUNT" as defined in Section 2.1(c).

            "OPERATING REVENUES" as defined in the Loan Agreement.

            "PERMITTED INVESTMENTS" shall mean any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
including those issued by any Servicer, the trustee under any Securitization or
any of their respective Affiliates, payable on demand or having a maturity date
not later than the Business Day immediately prior to the date on which the
invested sums are required for payment of an obligation for which the related
Sub-Account was created and meeting one of the appropriate standards set forth
below:

                  (i) obligations of, or obligations fully guaranteed as to
      payment of principal and interest by, the United States or any agency or
      instrumentality thereof, provided such obligations are backed by the full
      faith and credit of the United States of America including, without
      limitation, obligations of: the U.S. Treasury (all direct or fully
      guaranteed obligations), the Farmers Home Administration (certificates of
      beneficial ownership), the General Services Administration (participation
      certificates), the U.S. Maritime Administration (guaranteed Title XI
      financing), the Small Business

                                        5

Cash Management Agreement (FX2)



      Administration (guaranteed participation certificates and guaranteed pool
      certificates), the U.S. Department of Housing and Urban Development (local
      authority bonds) and the Washington Metropolitan Area Transit Authority
      (guaranteed transit bonds); provided, however, that the investments
      described in this clause (i) must (A) have a predetermined fixed dollar
      amount of principal due at maturity that cannot vary or change, (B) if
      rated by S&P, not have an "r" highlighter affixed to their rating, (C) if
      such investments have a variable rate of interest, have an interest rate
      tied to a single interest rate index plus a fixed spread (if any) and must
      move proportionately with that index, and (D) not be subject to
      liquidation prior to their maturity;

                  (ii) Federal Housing Administration debentures;

                  (iii) obligations of the following United States government
      sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations),
      the Farm Credit System (consolidated systemwide bonds and notes), the
      Federal Home Loan Banks (consolidated debt obligations), the Federal
      National Mortgage Association (debt obligations), the Student Loan
      Marketing Association (debt obligations), the Financing Corp. (debt
      obligations), and the Resolution Funding Corp. (debt obligations);
      provided, however, that the investments described in this clause (iii)
      must (A) have a predetermined fixed dollar amount of principal due at
      maturity that cannot vary or change, (B) if rated by S&P, not have an "r"
      highlighter affixed to their rating, (C) if such investments have a
      variable rate of interest, have an interest rate tied to a single interest
      rate index plus a fixed spread (if any) and must move proportionately with
      that index, and (D) not be subject to liquidation prior to their maturity;

                  (iv) federal funds, unsecured certificates of deposit, time
      deposits, bankers' acceptances and repurchase agreements with maturities
      of not more than 365 days of any bank, the short term obligations of which
      at all times are rated in the highest short term rating category by each
      Rating Agency (or, if not rated by all Rating Agencies, rated by at least
      one Rating Agency in the highest short term rating category and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investment would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of certificates or other securities issued
      in connection with any Securitization backed in whole or in part by the
      Loan (collectively the "CERTIFICATES"); provided, however, that the
      investments described in this clause (iv) must (A) have a predetermined
      fixed dollar amount of principal due at maturity that cannot vary or
      change, (B) if rated by S&P, not have an "r" highlighter affixed to their
      rating, (C) if such investments have a variable rate of interest, have an
      interest rate tied to a single interest rate index plus a fixed spread (if
      any) and must move proportionately with that index, and (D) not be subject
      to liquidation prior to their maturity;

                  (v) fully Federal Deposit Insurance Corporation-insured demand
      and time deposits in, or certificates of deposit of, or bankers'
      acceptances issued by, any bank or trust company, savings and loan
      association or savings bank, the short term obligations of which at all
      times are rated in the highest short term rating category by each Rating
      Agency (or, if not rated by all Rating Agencies, rated by at least one
      Rating

                                        6

Cash Management Agreement (FX2)



      Agency in the highest short term rating category and otherwise acceptable
      to each other Rating Agency, as confirmed in writing that such investment
      would not, in and of itself, result in a downgrade, qualification or
      withdrawal of the initial or, if higher, then current ratings assigned to
      any class of Certificates); provided, however, that the investments
      described in this clause (v) must (A) have a predetermined fixed dollar of
      principal due at maturity that cannot vary or change, (B) if rated by S&P,
      not have a "r" highlighter affixed to their rating, (C) if such
      investments have a variable rate of interest, have an interest rate tied
      to a single interest rate index plus a fixed spread (if any) and must move
      proportionately with that index, and (D) not be subject to liquidation
      prior to their maturity;

                  (vi) debt obligations with maturities of not more than 365
      days and at all times rated by each Rating Agency (or, if not rated by all
      Rating Agencies, rated by at least one Rating Agency and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investments would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to the Certificates) in its highest long-term unsecured
      debt rating category; provided, however, that the investments described in
      this clause (vi) must (A) have a predetermined fixed dollar amount of
      principal due at maturity that cannot vary or change, (B) if rated by S&P,
      not have an "r" highlighter affixed to their rating, (C) if such
      investments have a variable rate of interest, have an interest rate tied
      to a single interest rate index plus a fixed spread (if any) and must move
      proportionately with that index, (D) not be subject to liquidation prior
      to their maturity, and (E) if such investment has a maturity of (1) less
      than one month, have a long-term rating of at least "A2" by Moody's, (2)
      up to three months, have a long-term rating of at least "Aa" by Moody's,
      (3) up to six months, have a long-term rating of at least "Aa3" by
      Moody's, and (4) over six months, have a long-term rating of at least
      "Aaa" by Moody's;

                  (vii) commercial paper (including both non-interest-bearing
      discount obligations and interest-bearing obligations payable on demand or
      on a specified date not more than one year after the date of issuance
      thereof) with maturities of not more than 365 days and that at all times
      is rated by each Rating Agency (or, if not rated by all Rating Agencies,
      rated by at least one Rating Agency and otherwise acceptable to each other
      Rating Agency, as confirmed in writing that such investment would not, in
      and of itself, result in a downgrade, qualification or withdrawal of the
      initial or, if higher, then current ratings assigned to any class of
      Certificates) in its highest short-term unsecured debt rating; provided,
      however, that the investments described in this clause (vii) must (A) have
      a predetermined fixed dollar amount of principal due at maturity that
      cannot vary or change, (B) if rated by S&P, not have a "r" highlighter
      affixed to their rating, (C) if such investments have a variable rate of
      interest, have an interest rate tied to a single interest rate index plus
      a fixed spread (if any) and must move proportionately with that index, and
      (D) not be subject to liquidation prior to their maturity;

                  (viii) units of taxable money market funds or mutual funds,
      which funds are regulated investment companies, seek to maintain a
      constant net asset value per share and have the highest rating from each
      Rating Agency (or, if not rated by all Rating Agencies, rated by at least
      one Rating Agency and otherwise acceptable to each other

                                       7

Cash Management Agreement (FX2)



      Rating Agency, as confirmed in writing that such investment would not, in
      and of itself, result in a downgrade, qualification or withdrawal of the
      initial or, if higher, then current ratings assigned to any class of
      Certificates) for money market funds or mutual funds; and

                  (ix) any other security, obligation or investment which has
      been approved as a Permitted Investment in writing by (a) Lender and (b)
      each Rating Agency, as evidenced by a written confirmation that the
      designation of such security, obligation or investment as a Permitted
      Investment will not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of Certificates by such Rating Agency;

provided, however, that such instrument continues to qualify as a "CASH FLOW
INVESTMENT" pursuant to Code Section 860G(a)(6) earning a passive return in the
nature of interest and no obligation or security shall be a Permitted Investment
if (A) such obligation or security evidences a right to receive only interest
payments or (B) the right to receive principal and interest payments on such
obligation or security are derived from an underlying investment that provides a
yield to maturity in excess of 120% of the yield to maturity at par of such
underlying investment; and provided, further, no obligation or security, other
than an obligation or security constituting real estate assets, cash, cash items
or Government securities pursuant to Code Section 856(c)(4)(A), shall be a
Permitted Investment if the value of such obligation or security exceeds ten
percent (10%) of the total value of the outstanding securities of any one
issuer.

            "RATING CRITERIA" with respect to any Person, shall mean that (i)
the short-term unsecured debt obligations of such Person are rated at least
"A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such
Person for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa3" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.

            "SERVICING FEE" shall mean the monthly Servicing Fee (as defined in
the Loan Agreement) for which the Borrowers are responsible under Section 2.11
of the Loan Agreement.

            "SUB-ACCOUNTS" shall mean, collectively, the Debt Service
Sub-Account, the Impositions and Insurance Reserve Sub-Account, the Mezzanine
Loan Debt Service Sub-Account, the Capital Improvement Reserve Sub-Account, the
Hazardous Materials Remediation Reserve Sub-Account, the Extraordinary Receipts
Sub-Account, the Cash Trap Reserve Sub-Account, the Operating Expense
Sub-Account, the Minimum Balance Sub-Account and any other sub-accounts of the
Lock Box Account which may hereafter be established by Lender hereunder.

            "UCC" as defined in Section 5.1(a)(iv).

                                        8

Cash Management Agreement (FX2)


            II.   THE ACCOUNTS

            SECTION 2.1 ESTABLISHMENT OF DEPOSIT ACCOUNT, LOCK BOX ACCOUNT AND
SUB-ACCOUNTS.

            (a) DEPOSIT ACCOUNT. On or before the Closing Date, one or more
deposit accounts (collectively, the "DEPOSIT ACCOUNT") shall be established at
the Borrowers' sole cost and expense with financial institutions approved by
Lender (collectively, the "DEPOSIT BANK"), each pursuant to an agreement
(collectively, the "DEPOSIT ACCOUNT AGREEMENT") in form and substance reasonably
acceptable to Lender, executed and delivered by each Borrower and the applicable
Deposit Bank. Among other things, the Deposit Account Agreement shall provide
that the Borrowers shall have no access to or control over the Deposit Account,
and that all available funds on deposit in the Deposit Account shall be
deposited by wire transfer (or transfer via the ACH System) on each Business Day
by the Deposit Bank into the Lock Box Account.

            (b) LOCK BOX ACCOUNT. On or before the Closing Date, an Eligible
Account shall be established with Agent for the purposes specified herein, which
shall be entitled "Lock Box Account for the benefit of Merrill Lynch Mortgage
Lending, Inc., its successors and assigns, as secured party" (said account, and
any account replacing the same in accordance with this Agreement, the "LOCK BOX
ACCOUNT"). The Lock Box Account shall be under the sole dominion and control of
Lender and/or its designee, including any Servicer of the Loan, and the
Borrowers shall have no rights to control or direct the investment or payment of
funds therein except as may be expressly provided herein.

            Any amounts that Lender may hold in reserve pursuant to the Loan
Agreement may be held by Lender in the Lock Box Account (including in a
Sub-Account thereof) or may be held in another account or manner as specified in
Articles VI or VII of the Loan Agreement.

            (c) SUB-ACCOUNTS OF THE LOCK BOX ACCOUNT. The Lock Box Account shall
be deemed to contain, among others, the following Sub-Accounts (which may be
maintained as separate ledger accounts):

                  (i) "DEBT SERVICE SUB-ACCOUNT" shall mean the Sub-Account
      established for the purpose of depositing the amounts required for
      payments of principal and interest under the Loan and all other amounts
      then due under the Note and the Loan Agreement;

                  (ii) "IMPOSITION AND INSURANCE RESERVE SUB-ACCOUNT" shall mean
      the Sub-Account established for the purpose of depositing the sums
      required to be deposited pursuant to Section 6.3 of the Loan Agreement;

                  (iii) "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the sums required to
      be deposited pursuant to Section 6.5 of the Loan Agreement;

                  (iv) "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT"
      shall mean the Sub-Account established for the purpose of depositing sums
      required to be deposited pursuant to Section 6.6 of the Loan Agreement;

                                        9

Cash Management Agreement (FX2)


                  (v) "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the amounts required
      for payments of the Monthly Mezzanine Debt Service Payment Amount;

                  (vi) "CASH TRAP RESERVE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing Excess Cash Flow
      when required to be deposited pursuant to Section 6.8 of the Loan
      Agreement;

                  (vii) "OPERATING EXPENSE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the Monthly
      Operating Expense Budget Amount, Extraordinary Expenses approved by
      Lender, if any, and fees due to the Manager; and

                  (viii) "MINIMUM BALANCE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing and maintaining the
      Minimum Balance as and to the extent required under Section 2.1(g)
      hereof..

            (d) If the proceeds of any business interruption or rent loss
insurance maintained under Section 5.4 of the Loan Agreement (any such
insurance, "BUSINESS INTERRUPTION INSURANCE") paid upon the occurrence of any
fire or casualty to any Property shall be paid in a lump sum (rather than on a
monthly basis), the Borrowers and Lender shall establish a separate Eligible
Account with Agent hereunder entitled "Loss Proceeds Account for the benefit of
Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as secured
party" (said account, the "LOSS PROCEEDS ACCOUNT") for deposit of such Business
Interruption Insurance proceeds and such proceeds shall be held, allocated and
disbursed in accordance with the terms and conditions hereof and of the Loan
Agreement. The Loss Proceeds Account shall be under the sole dominion and
control of Lender and/or its designee, including any Servicer of the Loan, and
the Borrowers shall have no rights to control or direct the investment or
payment of funds therein except as expressly provided herein.

            (e) If any Extraordinary Receipts are received by any Borrower, such
amounts shall be paid to the Lock Box Account to be retained in a subaccount
thereof (the "EXTRAORDINARY RECEIPTS SUB-ACCOUNT"). Amounts held in the
Extraordinary Receipts Sub-Account shall be disbursed to the Lock Box Account
and allocated and distributed in accordance with Section 3.3 upon receipt by
Lender of evidence reasonably satisfactory to Lender that (x) with respect to
Extraordinary Receipts received in connection with any pending litigation,
action, or similar matter, such action has been concluded in favor of the
Borrowers and no appeal has been timely filed within the applicable appeal
period, (y) with respect to Extraordinary Receipts received with respect to work
at, or other conditions with respect to, any of the Properties, the item of work
or other condition has been completed or corrected and paid for to the
reasonable satisfaction of Lender, and (z) with respect to Extraordinary
Receipts received in any other circumstance, the Borrowers are not liable
directly, or indirectly, to refund or repay any such amounts; provided however,
all Extraordinary Receipts with respect to lease termination payments, advance
booking terminations, and similar payments or fees, shall be retained in the
Extraordinary Receipts Sub-Account and disbursed in equal monthly installments
during the period of time for which such payments relate in accordance with
Section 3.3. The

                                       10

Cash Management Agreement (FX2)



Extraordinary Receipts Sub-Account shall be under the sole dominion and control
of Lender and/or its designee, including any Servicer of the Loan, and the
Borrowers shall have no rights to control or direct the investment or payment of
funds therein except as expressly provided herein.

            (f) On or before the Closing Date, the Borrowers shall establish a
separate Eligible Account hereunder entitled "FF&E Reserve Account for the
benefit of Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as
secured party" (said account, the "FF&E RESERVE ACCOUNT") with Agent for the
purpose of depositing Monthly FF&E Reserve Payments pursuant to Section 6.4 of
the Loan Agreement, to be held, allocated and disbursed in accordance with the
terms and conditions hereof and of the Loan Agreement. The FF&E Reserve Account
shall be under the sole dominion and control of Lender and/or its designee,
including any Servicer of the Loan, and the Borrowers shall have no rights to
control or direct the investment or payment of funds therein except as expressly
provided herein and in the Loan Agreement. Notwithstanding the foregoing, the
Borrowers shall, in accordance with the terms of this Agreement and the Loan
Agreement, have access to and the right to withdraw funds held in the FF&E
Reserve Account on or prior to (x) the occurrence and during the continuance of
an Event of Default, or (y) the failure of the Borrowers or Manager to comply
with the reporting requirements set forth in Section 5.1(A)(v) of the Loan
Agreement, at which time Agent, upon receipt of notice from Lender, shall (i)
cease to honor checks drawn by Manager or any Borrower on the FF&E Reserve
Account, (ii) cease to disburse funds from the FF&E Reserve Account to either
the Manager or the Borrowers except in accordance with written instructions
received from Lender, and (iii) deposit the amounts in the FF&E Reserve Account,
together with any funds from time to time held or deposited or received into the
FF&E Reserve Account, in accordance with Lender's instructions from time to time
on the day such instructions are received, if such instructions are received
prior to 12:00 p.m. on such day, or, if received after 12:00 p.m., on the
following Business Day. Neither the Borrowers nor Manager shall withdraw any
funds from the FF&E Reserve Account in violation of this Agreement or the Loan
Agreement.

            (g) Upon the occurrence and during the continuance of a Cash Trap
Event or an Event of Default, the Borrowers shall be required to deposit, from
and at the time of the allocations from the Lock Box Account pursuant to Section
3.3(a)(ix) hereof, and maintain in the Minimum Balance Sub-Account an amount
equal to $50,000 (the "MINIMUM BALANCE"). In the event that, during the
continuance of a Cash Trap Event, funds available in a Deposit Account are
insufficient to pay the amount of any checks deposited into such Deposit Account
which are returned for insufficient or uncollected funds (collectively
"CHARGEBACKS"), and such Chargebacks are required to be paid by the applicable
Borrower to the applicable Deposit Account Bank pursuant to the terms of the
applicable Deposit Account Agreement, provided that no Event of Default exists,
funds shall be made available from the Minimum Balance Sub-Account to the
applicable Borrower to pay the amount of such Chargebacks due to such Deposit
Account Bank (or to reimburse the applicable Borrower for any such amounts as
may have been previously paid by or on behalf of such Borrower from other funds
on account of any Chargebacks at a time when insufficient amounts were available
therefor in the Minimum Balance Sub-Account) promptly after delivery to Lender
of evidence reasonably satisfactory to Lender that such amounts are due (or have
been paid by or on behalf of the applicable Borrower). In the event that during
a Cash Trap Event, as a result of any such disbursement or otherwise, the
Minimum Balance Sub-Account shall contain less than the Minimum Balance, the

                                       11

Cash Management Agreement (FX2)



Borrowers shall be required to deposit such deficiency from and at the time of
allocations from the Lock Box Account pursuant to Section 3.3(a)(ix) hereof.

            SECTION 2.2 DEPOSITS INTO ACCOUNTS. The Borrowers and Manager
represent, warrant and covenant that:

            (a) Each Borrower and Manager shall cause all Operating Revenues and
other income and revenues received by such Borrower or Manager to be deposited
directly into the Deposit Account for each applicable Property. The Borrowers
shall obtain an agreement (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION
LETTER") from each of the Persons paying or disbursing credit card receivables
(each, a "CREDIT CARD COMPANY" and collectively, the "CREDIT CARD COMPANIES"),
in substantially the form of EXHIBIT A attached hereto or as otherwise approved
by Lender in its reasonable discretion, pursuant to which the Credit Card
Companies agree to pay all credit card receivables for the Properties directly
into the Lock Box Account, and acknowledge and agree that Lender shall have a
first priority perfected security interest in such credit card receivables.
Pursuant to the Deposit Account Agreement, all available funds on deposit in the
applicable Deposit Account shall be deposited directly by the Deposit Bank into
the Lock Box Account by wire transfer on each Business Day.

            (b) If any Borrower or Manager receives any Operating Revenues or
other income or revenues from any Property, or any Extraordinary Receipts, then
such receipt shall not constitute a Default provided (i) such amounts shall be
deemed to be Collateral and shall be held in trust for the benefit, and as the
property, of Lender, and (ii) such Borrower or Manager shall deposit such
amounts into the applicable Deposit Account within two (2) Business Days of
receipt.

            (c) Without the prior written consent of Lender, which shall not be
unreasonably withheld, delayed or conditioned, neither the Borrowers nor Manager
shall (i) terminate, amend, revoke or modify any Credit Card Receivables Payment
Direction Letter in any manner whatsoever, or (ii) direct or cause any Credit
Card Company to pay any amount in any manner other than as provided in the
related Credit Card Receivables Payment Direction Letter, unless a replacement
Credit Card Receivables Payment Direction Letter in form reasonably acceptable
to Lender is executed and delivered to Lender by any proposed replacement Credit
Card Company prior to termination of the then effective Credit Card Receivables
Payment Direction Letter.

            (d) Each Borrower and Manager shall also cause the proceeds of any
Business Interruption Insurance to be deposited directly into the Lock Box
Account as same are paid (or, if any such proceeds are received by such Borrower
or Manager, same shall be deposited into the Lock Box Account within two (2)
Business Days after receipt thereof) and such proceeds shall be allocated and
disbursed in accordance with Section 3.3 hereof. If the proceeds of any such
Business Interruption Insurance are paid in a lump sum, such proceeds shall be
deposited into the Loss Proceeds Account. Agent shall cause monthly amounts to
be transferred from the Loss Proceeds Account to the Lock Box Account as
directed by Lender (based upon a ratable allocation of such proceeds over the
casualty restoration period as reasonably determined by Lender) on the first
(1st) Business Day of each calendar month during the period of restoration of

                                       12

Cash Management Agreement (FX2)



the Property, and after transfer of same to the Lock Box Account, such amounts
shall be allocated and disbursed in accordance with Section 3.3 hereof.

            SECTION 2.3 ACCOUNT NAME. The Accounts shall each be in the names
set forth herein; provided, however, that if Lender transfers or assigns the
Loan, Agent, at Lender's request (with respect to the Accounts other than the
Deposit Account), and each Deposit Bank (with respect to its Deposit Account)
shall change the name of each Account to the name of the transferee or assignee.
If Lender retains a Servicer to service the Loan, Agent, at Lender's request,
shall change the name of each Account to the name of Servicer, as agent for
Lender.

            SECTION 2.4 ELIGIBLE ACCOUNTS/CHARACTERIZATION OF ACCOUNTS. The
Borrowers and Agent shall maintain each Account (other than the Deposit Account)
as an Eligible Account. Each Account (other than the Deposit Account) is and
shall be treated as a "SECURITIES ACCOUNT" as such term is defined in Section
8-501(a) of the UCC. Agent hereby agrees that each item of property (whether
investment property, financial asset, securities, securities entitlement,
instrument, cash or other property) credited to each Account shall be treated as
a "FINANCIAL ASSET" within the meaning of Section 8-102(a)(9) of the UCC. Agent
shall, subject to the terms of this Agreement, treat Lender as entitled to
exercise the rights that comprise any financial asset credited to each Account.
All securities or other property underlying any financial assets credited to
each Account (other than cash) shall be registered in the name of Agent,
indorsed to Agent or in blank or credited to another securities account
maintained in the name of Agent and in no case will any financial asset credited
to any Account be registered in the name of any Borrower, payable to the order
of any Borrower or specially indorsed to any Borrower.

            SECTION 2.5 PERMITTED INVESTMENTS. Sums on deposit in the Accounts
may, at the Borrowers' election, be invested in Permitted Investments, provided
that, notwithstanding the foregoing, in no event will funds in the Deposit
Account be subject to any investment. Except during the existence of any Event
of Default, the Borrowers shall have the right to direct Agent to invest sums on
deposit in the Accounts in Permitted Investments. After an Event of Default and
during the continuance thereof, Lender may direct Agent to invest sums on
deposit in the Accounts in Permitted Investments as Lender shall determine in
its sole discretion. The Borrowers hereby irrevocably authorize and direct Agent
to apply any income earned from Permitted Investments to the respective
Accounts. The amount of actual losses sustained on a liquidation of a Permitted
Investment shall be deposited into the Lock Box Account by the Borrowers no
later than three (3) Business Days following such liquidation. The Borrowers
shall be responsible for payment of any federal, state or local income or other
tax applicable to income earned from Permitted Investments. The Accounts shall
be assigned the federal tax identification number of the applicable Borrowers,
which numbers are set forth on the signature page hereof. Any interest,
dividends or other earnings which may accrue on the Accounts shall be added to
the balance in the applicable Account and allocated and/or disbursed in
accordance with the terms hereof.

                                       13

Cash Management Agreement (FX2)



            III.  DEPOSITS

            SECTION 3.1 INITIAL DEPOSITS.

            (a) The Borrowers shall deposit in the Debt Service Sub-Account on
the date hereof the amount of $74,390.25.

            (b) The Borrowers shall deposit in the Impositions and Insurance
Reserve Sub-Account on the date hereof the amount of $1,320,742.18.

            (c) The Borrowers shall deposit in the Hazardous Materials
Remediation Reserve Sub-Account on the date hereof the amount of $1,237.50.

            (d) The Borrowers shall deposit in the FF&E Reserve Account on the
date hereof the amount of $0.00.

            (e) The Borrowers shall deposit in the Capital Improvement Reserve
Sub-Account on the date hereof the amount of $$3,329,429.00.

            SECTION 3.2 ADDITIONAL DEPOSITS. The Borrowers shall make such
additional deposits into the Accounts as may be required by the Loan Agreement.

            SECTION 3.3 ALLOCATION OF FUNDS FROM THE LOCK BOX ACCOUNT.

            (a) At any time other than after the occurrence and during the
continuance of an Event of Default, Agent shall allocate and deposit, as
applicable, all available funds on deposit in the Lock Box Account on each
Business Day of each calendar month (or such other period of time as set forth
below) in the following amounts and order of priority:

                  (i) First, to the Impositions and Insurance Reserve
      Sub-Account, the Monthly Impositions and Insurance Amount for the next
      Monthly Payment Date;

                  (ii) Second, (A) to the Agent, as Servicer, the monthly
      Servicing Fee on the Loan, and then (B) to the Debt Service Sub-Account,
      the Monthly Debt Service Payment Amount due under the Loan Agreement for
      the next Monthly Payment Date;

                  (iii) Third, to the FF&E Reserve Account, the Monthly FF&E
      Payment for the next Monthly Payment Date;

                  (iv) Fourth, to the Operating Expense Sub-Account, funds
      sufficient to pay the Monthly Operating Expense Budget Amount for the next
      calendar Month;

                  (v) Fifth, to the Operating Expense Sub-Account, funds in an
      amount necessary to pay Extraordinary Expenses approved by Lender, if any;

                  (vi) Sixth, to the Operating Expense Sub-Account, subject to
      the terms and conditions of the Assignment of Management Agreement, any
      management fees due and owing to Manager which have not previously been
      paid to Manager, together with

                                       14

Cash Management Agreement (FX2)


      any fees payable to Manager for the next calendar month pursuant to the
      Management Agreement not otherwise paid pursuant to (iv) above;

                  (vii) Seventh, to the Debt Service Sub-Account any late
      payment charges, default interest, and any other amounts (other than
      interest and principal paid pursuant to (ii) above) then due and owing
      under the Loan Agreement;

                  (viii) Eighth, for so long as the Mezzanine Loan is
      outstanding, (A) to the Mezzanine Servicer, the monthly Allocable
      Mezzanine Servicing Fee, and then (B) to the Mezzanine Loan Debt Service
      Sub-Account, an amount equal to the Monthly Mezzanine Debt Service Payment
      Amount due for the next Monthly Payment Date under the Mezzanine Loan
      Agreement;

                  (ix) Ninth, if a Cash Trap Event shall have occurred and is
      continuing and the balance then held in the Minimum Balance SubAccount is
      less than the Minimum Balance, to the Minimum Balance Sub-Account until
      such Sub-Account contains the Minimum Balance;

                  (x) Tenth, if a Cash Trap Event shall have occurred and is
      continuing, any amounts remaining in the Lock Box Account after deposits
      for items (i) through (ix) above shall be deposited into the Cash Trap
      Reserve Sub-Account; and

                  (xi) Eleventh, if no Cash Trap Event shall have occurred and
      is continuing, any amounts remaining in the Lock Box Account after
      deposits for items (i) through (viii) above shall be paid to, or as
      directed by, the Borrowers.

            (b) If there are insufficient funds in the Lock Box Account for the
deposits required by Sections 3.3(a)(i) through (iii) and (vii) above, the
Borrowers shall deposit such deficiency into the Lock Box Account on or before
the applicable Monthly Payment Date. Except as expressly provided in Section 6.8
of the Loan Agreement, under no circumstances shall Lender be required to
utilize the Cash Trap Reserve or funds in any other Sub-Account to cure any
deficiencies in any other Sub-Accounts. The deposit by the Borrowers of any such
deficiency pursuant to this Section 3.3(b) shall satisfy the obligation of the
Borrowers to make the related deposit under the Loan Agreement.

            (c) The Borrowers shall use, or caused to be used, all disbursements
made to it under Sections 3.3(a)(iv) and (v) solely to pay Operating Expenses in
accordance with the Approved Operating Budget and to pay Extraordinary Expenses
for which Lender has approved disbursements under Section 3.3(a)(v) above.

            (d) Notwithstanding anything to the contrary contained herein,
Lender shall not be obligated to make any disbursement from the Lock Box Account
(under Sections 3.3(a)(iv) and (v) or otherwise) to pay for any costs or
expenses (including legal fees) in connection with any dispute or defense of the
Borrowers under any of the Loan Documents.

            (e) Upon the expiration of a Cash Trap Event in accordance with
Section 6.8 of the Loan Agreement, any funds remaining in the Cash Trap Reserve
Sub-Account and in the

                                       15

Cash Management Agreement (FX2)



Minimum Balance Sub-Account will be disbursed pursuant to Section 6.8 of the
Loan Agreement.

            (f) Notwithstanding anything herein to the contrary, upon the
occurrence and during the continuance of an Event of Default, all funds on
deposit in the Lock Box Account, the Sub-Accounts, the FF&E Reserve Account, and
any Loss Proceeds Account shall be disbursed to or as directed by Lender, it
being agreed that application of any such amounts shall be in Lender's sole
discretion and shall not be subject to the terms of Section 3.3(a) hereof.

            (g) Except as otherwise agreed to by Lender in writing, no funds
shall be withdrawn from the FF&E Reserve Account other than in accordance with
the CapEx/FF&E Budget.

            SECTION 3.4 DISBURSEMENTS FOR OPERATING EXPENSE AMOUNTS. The
Borrowers shall provide on a monthly basis (a) a reasonably detailed explanation
of any variances of ten percent (10%) or more between budgeted (as set forth in
the Approved Operating Budget) and actual Operating Expense amounts for any
month in the aggregate, and (b) with respect to any individual item with a cost
of $10,000 or more and not otherwise covered by the Approved Operating Budget,
all invoices or other backup requested by Lender to substantiate the amount
disbursed to the Borrowers pursuant to Section 3.3(a)(iv) and (v).

            IV.   PAYMENT OF FUNDS FROM SUB-ACCOUNTS

            SECTION 4.1 PAYMENTS FROM SUB-ACCOUNTS.

            (a) Impositions and Insurance Reserve Sub-Account. Lender shall have
the right to withdraw amounts on deposit in the Impositions and Insurance
Reserve Sub-Account to pay (or reimburse any Borrower for repayment of)
Impositions and Insurance Premiums in accordance with the Loan Agreement.

            (b) Debt Service Sub-Account. Lender shall have the right to
withdraw amounts from the Debt Service Sub-Account to pay: (i) default interest
and late charges, if any, and any amounts then due and payable under the Note
and the Loan Agreement, and (ii) the Monthly Debt Service Payment Amount on each
Monthly Payment Date on which same are due and payable under the Loan Agreement.

            (c) Operating Expense Sub-Account. Funds deposited into the
Operating Expense Sub-Account pursuant to Sections 3.3(a)(iv) through (vi) shall
be distributed to the Borrowers on each Business Day.

            (d) Mezzanine Loan Debt Service Sub-Account. On each Monthly Payment
Date, all funds held in the Mezzanine Loan Debt Service Sub-Account shall be
distributed to Mezzanine Lender, and such distribution shall be deemed to have
been distributed by the Borrowers to the Mezzanine Borrowers and shall be
applied by Mezzanine Borrowers to the obligations under the Mezzanine Loan
Agreement.

            (e) Distributions to the Borrowers. Following the date in each month
that Borrower has made all required deposits pursuant to Section 3.3(i) through
(viii), to the extent

                                       16

Cash Management Agreement (FX2)


that Excess Cash Flow is to be distributed to the Borrowers pursuant to Section
3.3(a)(xi) above, such funds shall be distributed to the Borrowers on each
Business Day.

            (f) FF&E Reserve Account. Distributions from the FF&E Reserve
Account will be made in accordance with Section 2.1(f).

            (g) Minimum Balance Sub-Account. Distributions from the Minimum
Balance Sub-Account will be made in accordance with Section 2.1(g).

            SECTION 4.2 REQUESTS FOR WITHDRAWALS FROM THE HAZARDOUS MATERIALS
REMEDIATION RESERVE SUB-ACCOUNT AND CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT.
Agent shall disburse funds on deposit in the Hazardous Materials Remediation
Reserve Sub-Account and the Capital Improvement Reserve Sub-Account within five
(5) Business Days after written request made from time to time (but not more
often than twice per calendar month) by the Borrowers in accordance with the
terms and conditions of Section 6.7 of the Loan Agreement.

            SECTION 4.3 SOLE DOMINION AND CONTROL. The Borrowers and Manager
acknowledge and agree that the Accounts are subject to the sole dominion,
control and discretion of Lender, its authorized agents or designees, including
Agent, subject to the terms hereof and the Loan Agreement. Neither the Borrowers
nor Manager shall have any right of withdrawal with respect to any Account
except, subject to the terms and conditions hereof and the Loan Agreement, the
FF&E Reserve Account. Agent shall have the right and agrees to comply with the
instructions of Lender with respect to the Accounts without the further consent
of the Borrowers or Manager. Agent shall comply with all "entitlement orders"
(as defined in Section 8-102(a)(8) of the UCC) and instructions originated by
Lender without further consent by the Borrowers or any other Person.

            V.    PLEDGE OF ACCOUNTS

            SECTION 5.1 SECURITY FOR OBLIGATIONS. (a) To secure the full and
punctual payment and performance of all Obligations of the Borrowers under the
Loan Agreement, the Note, the Security Instruments, this Agreement and all other
Loan Documents, the Borrowers hereby grant to Lender a first priority continuing
security interest in and to the following property of the Borrowers, whether now
owned or existing or hereafter acquired or arising and regardless of where
located (all of the same, collectively, the "COLLATERAL"):

                  (i) the Deposit Account, the Lock Box Account, each of the
      Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds Account and all
      cash, checks, drafts, certificates and instruments, if any, from time to
      time deposited or held in the Lock Box Account, each of the Sub-Accounts,
      any Loss Proceeds Account and the FF&E Reserve Account, including, without
      limitation, all deposits or wire transfers made to the Deposit Account,
      the Lock Box Account, each of the Sub-Accounts, the FF&E Reserve Account,
      and any Loss Proceeds Account;

                  (ii) any and all amounts invested in Permitted Investments;

                                       17

Cash Management Agreement (FX2)



                  (iii) all interest, dividends, cash, instruments and other
      property from time to time received, receivable or otherwise payable in
      respect of, or in exchange for, any or all of the foregoing; and

                  (iv) to the extent not covered by clauses (i), (ii) or (iii)
      above, all "proceeds" (as defined under the Uniform Commercial Code as in
      effect in the State of New York (the "UCC")) of any or all of the
      foregoing.

            (b) Lender and Agent, as agent for Lender, shall have with respect
to the Collateral, in addition to the rights and remedies herein set forth, all
of the rights and remedies available to a secured party under the UCC, as if
such rights and remedies were fully set forth herein.

            SECTION 5.2 RIGHTS ON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, Lender shall promptly notify Agent of such
Event of Default and, without notice from Lender, (a) the Borrowers shall have
no further right in respect of (including, without limitation, the right to
instruct Lender or Agent to transfer from) the Accounts, (b) Lender may direct
Agent to liquidate and transfer any amounts then invested in Permitted
Investments to the Accounts or reinvest such amounts in other Permitted
Investments as Lender may reasonably determine is necessary to perfect or
protect any security interest granted or purported to be granted hereby or to
enable Agent, as agent for Lender, or Lender to exercise and enforce Lender's
rights and remedies hereunder with respect to any Collateral, and (c) Lender may
apply any Collateral to any Obligations in such order of priority as Lender may
determine. The proceeds of any disposition of the Collateral, or any part
thereof, may be applied by Lender to the payment of the Obligations in such
priority and proportions as Lender in its discretion shall deem proper.

            SECTION 5.3 FINANCING STATEMENT; FURTHER ASSURANCES. Simultaneously
herewith, the Borrowers shall deliver to Lender for filing a financing statement
or statements in connection with the Collateral in the form reasonably required
by Lender to properly perfect Lender's security interest therein to the extent a
security interest in the Collateral may also be perfected by filing. The
Borrowers agree that at any time and from time to time, at the expense of the
Borrowers, the Borrowers will promptly execute and deliver all further
instruments and documents, and take all further actions, that may be reasonably
necessary, or that Agent or Lender may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted hereby
(including, without limitation, any security interest in and to any Permitted
Investments) or to enable Agent or Lender to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. In the event of any change in
name, identity or structure of any Borrower, such Borrower shall notify Lender
thereof and promptly after Lender's reasonable request shall file and record, or
deliver to Lender, such UCC financing statements (if any) as are necessary to
maintain the priority of Lender's lien upon and security interest in the
Collateral, and shall pay all expenses and fees in connection with the filing
and recording thereof. If Lender shall require the filing or recording of
additional UCC financing or continuation statements, the Borrowers shall,
promptly after request, execute, if necessary, file and record such UCC
financing or continuation statements as Lender shall deem reasonably necessary,
and shall pay all reasonable expenses and fees in connection with the filing and
recording thereof.

                                       18

Cash Management Agreement (FX2)



            SECTION 5.4 TERMINATION OF AGREEMENT. This Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until payment in full of the Obligations. Upon payment and
performance in full of the Obligations, this Agreement shall terminate and the
Borrowers shall be entitled to the return, at their expense, of such of the
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof, and Agent and/or Lender shall execute such instruments and
documents as may be reasonably requested by the Borrowers to evidence such
termination and the release of the lien hereof including, without limitation,
letters to Credit Card Companies, as applicable, prepared by the Borrowers and
reasonably acceptable to Lender rescinding the instructions set forth in the
Credit Card Receivables Payment Direction Letter and UCC-3 termination
statements.

            VI.   RIGHTS AND DUTIES OF LENDER AND AGENT

            SECTION 6.1 REASONABLE CARE. Beyond the exercise of reasonable care
in the custody thereof or as otherwise expressly provided herein, neither Agent
nor Lender shall have any duty as to any Collateral in its possession or control
as agent therefor or bailee thereof or any income thereon or the preservation of
rights against any Person or otherwise with respect thereto. Agent and Lender
each shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Agent or Lender accords its own
property, it being understood that Agent and/or Lender shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in value thereof, by reason of the act or omission of Agent or
Lender, its Affiliates, agents, employees or bailees, except to the extent that
such loss or damage results from such Person's gross negligence or willful
misconduct, provided that nothing in this Article VI shall be deemed to relieve
Agent from the duties and standard of care which, as a commercial bank, it
generally owes to depositors. Neither Lender nor Agent shall have any liability
for any loss resulting from the investment of funds in Permitted Investments in
accordance with the terms and conditions of this Agreement.

            SECTION 6.2 INDEMNITY. Agent, in its capacity as agent hereunder,
shall be responsible for the performance only of such duties as are specifically
set forth herein, and no duty shall be implied from any provision hereof. Agent
shall not be under any obligation or duty to perform any act which would involve
it in expense or liability or to institute or defend any suit in respect hereof,
or to advance any of its own monies. The Borrowers shall indemnify and hold
Agent and Lender, their respective employees, officers, directors and agents
harmless from and against any loss, liability, cost or damage (including,
without limitation, reasonable attorneys' fees and disbursements) incurred by
Agent or Lender in connection with the transactions contemplated hereby, except
to the extent that such loss or damage results from such Person's gross
negligence or willful misconduct. The foregoing indemnity shall survive the
termination of this Agreement and the resignation and removal of Agent.

            SECTION 6.3 RELIANCE. Agent shall be protected in acting upon any
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other paper, document or signature believed by it to be genuine, and it may
be assumed that any person purporting to act on behalf of any Person giving any
of the foregoing in connection with the provisions hereof has been duly
authorized to do so. Agent may consult with legal counsel, and the advice or
opinion of such counsel shall be full and complete authorization and protection
in respect of any action

                                       19

Cash Management Agreement (FX2)



taken or suffered by it hereunder and in good faith in accordance therewith.
Agent shall not be liable for any act or omission done or omitted to be done by
Agent in reliance upon any instruction, direction or certification received by
Agent and without gross negligence or willful or reckless misconduct. Agent
shall be entitled to execute any of the powers hereunder or perform any duties
hereunder either directly or through agents or attorneys; provided, however,
that the execution of such powers by any such agents or attorneys shall not
diminish, or relieve Agent for, responsibility therefor to the same degree as if
Agent itself had executed such powers.

            SECTION 6.4 RESIGNATION OF AGENT.

            (a) Agent shall have the right to resign as Agent hereunder upon
sixty (60) days' prior written notice to the Borrowers and Lender, and in the
event of such resignation, the Borrowers shall appoint a successor Agent which
must be an Eligible Bank. No such resignation by Agent shall become effective
until a successor Agent shall have accepted such appointment and executed an
instrument by which it shall have assumed all of the rights and obligations of
Agent hereunder. If no such successor Agent is appointed within sixty (60) days
after receipt of the resigning Agent's notice of resignation, the resigning
Agent may petition a court for the appointment of a successor Agent.

            (b) In connection with any resignation by Agent, (i) the resigning
Agent shall, (A) duly assign, transfer and deliver to the successor Agent this
Agreement and all cash and Permitted Investments held by it hereunder, (B)
deliver such financing statements and execute and deliver such other instruments
prepared by the Borrowers and reasonably approved by Lender or prepared by
Lender as may be reasonably necessary to assign to the successor Agent, as agent
for Lender, any security interest in the Collateral existing in favor of the
retiring Agent hereunder and to otherwise give effect to such succession and (C)
take such other actions as may be reasonably required by Lender or the successor
Agent in connection with the foregoing and (ii) the successor Agent shall
establish in Lender's name, as secured party, cash collateral accounts, which
shall become the Accounts for purposes of this Agreement upon the succession of
such Agent, and which Accounts shall also be "securities accounts" within the
meaning of the UCC.

            (c) Lender at its sole discretion shall have the right, upon thirty
(30) days notice to Agent, to substitute Agent with a successor Agent that
satisfies the requirements of an Eligible Bank or to have one or more of the
Accounts held by another Eligible Bank, provided that such successor Agent shall
perform the duties of Agent pursuant to the terms of this Agreement.

            SECTION 6.5 LENDER APPOINTED ATTORNEY-IN-FACT. The Borrowers hereby
irrevocably constitute and appoint Lender as the Borrowers' true and lawful
attorney-in-fact, coupled with an interest and with full power of substitution,
to exercise and enforce every right, power, remedy, option and privilege of the
Borrowers with respect to the Collateral, and do in the name, place and stead of
the Borrowers, all such acts, things and deeds for and on behalf of and in the
name of the Borrowers, which the Borrowers are required to do hereunder or under
the other Loan Documents or which Agent or Lender may reasonably deem necessary
to more fully vest in Lender the rights and remedies provided for herein and to
accomplish the purposes of this Agreement including, without limitation, the
filing of any UCC financing statements or

                                       20

Cash Management Agreement (FX2)



continuation statements in appropriate public filing offices on behalf of the
Borrowers, in any of the foregoing cases, upon the Borrowers' failure to take
any of the foregoing actions within ten (10) days after notice from Lender. The
foregoing powers of attorney are irrevocable and coupled with an interest. If
any Borrower fails to perform any agreement herein contained and such failure
shall continue for ten (10) days after notice of such failure is given to such
Borrower, Lender may perform or cause performance of any such agreement, and any
reasonable expenses of Lender and Agent in connection therewith shall be paid by
the Borrowers.

            SECTION 6.6 ACKNOWLEDGMENT OF LIEN/OFFSET RIGHTS. Agent hereby
acknowledges and agrees with respect to the Accounts that (a) the Accounts shall
be held by Agent in the names set forth herein, (b) all funds held in the
Accounts shall be held for the benefit of Lender, (c) the Borrowers have granted
to Lender a first priority security interest in the Collateral, (d) Agent shall
not disburse any funds from the Accounts except as provided herein, and (e)
Agent shall invest and reinvest any balance of the Accounts in Permitted
Investments in accordance with Section 2.5 hereof. Agent hereby waives any right
of offset, banker's lien or similar rights against, or any assignment, security
interest or other interest in, the Collateral.

            SECTION 6.7 REPORTING PROCEDURES.

            Agent shall provide the Borrowers and Lender with a record of all
checks and any other items deposited to the Lock Box Account or processed for
collection. Agent shall send a daily credit advice to the Borrowers and Manager,
which credit advice shall specify the amount of each receipt deposited into each
Account on such date. Agent shall send a monthly report to the Borrowers,
Manager and Lender, which monthly report shall specify the credits and charges
to the Accounts for the previous calendar month. Agent shall, at the request of
Lender, establish Lender and its designated Servicer, and the Borrowers, as
users of Agent's electronic data transfer system in accordance with Agent's
standard procedures; provided that, the Borrowers' access shall be limited to
information services and shall under no circumstances provide the Borrowers with
transaction rights in any such account. Upon request of Lender or its designated
Servicer, (i) Agent shall send to Lender or its designated Servicer, as
applicable, either (x) copies of the daily credit advices and any other advices
or reports furnished by Agent to the Borrowers and/or Manager hereunder or (y)
information on Account balances, to the extent said balances in the Accounts
have changed from the previous report, the aggregate amount of withdrawals from
the Accounts and other similar information via the electronic data transfer
system or facsimile transmission on a daily basis, and (ii) Agent shall advise
Lender or its designated Servicer, as applicable, of the amount of available
funds in the Accounts and shall deliver to Lender or its designated Servicer
copies of all statements and other information concerning the Accounts, to the
extent that the balances in the Accounts have changed from the previous report,
as Lender or its designated Servicer shall reasonably request. In the event
Agent shall resign as Agent hereunder, Agent shall provide the Borrowers with a
final written accounting, including closing statements, with respect to the
Accounts within thirty (30) days of resignation.

            VII.  REMEDIES

            SECTION 7.1 REMEDIES. Upon the occurrence and during the continuance
of an Event of Default, Lender or Agent at the direction of Lender, as agent for
Lender, may:

                                       21

Cash Management Agreement (FX2)



            (a) without notice to the Borrowers, except as required by law, and
at any time or from time to time, charge, set-off and otherwise apply all or any
part of the Collateral against the Obligations or any part thereof, including,
without limitation, reasonable costs and expenses set forth in Section 8.4
hereof;

            (b) in its sole discretion, at any time and from time to time,
exercise any and all rights and remedies available to it under this Agreement,
and/or as a secured party under the UCC and/or under any other applicable law or
in equity; and

            (c) demand, collect, take possession of, receive, settle,
compromise, adjust, sue for, foreclose or realize upon the Collateral (or any
portion thereof) as Lender may determine in its sole discretion.

            SECTION 7.2 WAIVER. The Borrowers hereby expressly waive, to the
fullest extent permitted by law, presentment, demand, protest or any notice of
any kind in connection with this Agreement or the Collateral. The Borrowers
acknowledge and agree that ten (10) days' prior written notice of the time and
place of any public sale of the Collateral or any other intended disposition
thereof shall be reasonable and sufficient notice to the Borrowers within the
meaning of the UCC.

            VIII. MISCELLANEOUS

            SECTION 8.1 TRANSFERS AND OTHER LIENS. Each Borrower agrees that it
will not (i) sell or otherwise dispose of any of the Collateral or (ii) create
or permit to exist any Lien upon or with respect to all or any of the
Collateral, except for the Lien granted under this Agreement.

            SECTION 8.2 LENDER'S RIGHT TO PERFORM BORROWER'S OBLIGATIONS; NO
LIABILITY OF LENDER. If any Borrower fails to perform any of the covenants or
obligations contained herein, and such failure shall continue for a period ten
(10) Business Days after such Borrower's receipt of written notice thereof from
Lender, Lender may itself perform, or cause performance of, such covenants or
obligations, and the reasonable expenses of Lender incurred in connection
therewith shall be payable by the Borrowers to Lender. Notwithstanding Lender's
right to perform certain obligations of the Borrowers, it is acknowledged and
agreed that the Borrowers retain control of the Property and operation thereof
and notwithstanding anything contained herein or Agent's or Lender's exercise of
any of its rights or remedies hereunder, under the Loan Documents or otherwise
at law or in equity, neither Agent nor Lender shall be deemed to be a
mortgagee-in-possession nor shall Lender be subject to any liability with
respect to the Property or otherwise based upon any claim of lender liability
except as a result of Lender's gross negligence or willful misconduct.

            SECTION 8.3 NO WAIVER. The rights and remedies provided in this
Agreement and the other Loan Documents are cumulative and may be exercised
independently or concurrently, and are not exclusive of any other right or
remedy provided at law or in equity. No failure to exercise or delay by Agent or
Lender in exercising any right or remedy hereunder or under the Loan Documents
shall impair or prohibit the exercise of any such rights or remedies in the
future or be deemed to constitute a waiver or limitation of any such right or
remedy or acquiescence therein. Every right and remedy granted to Agent and/or
Lender hereunder or by

                                       22

Cash Management Agreement (FX2)



law may be exercised by Agent and/or Lender at any time and from time to time,
and as often as Agent and/or Lender may deem it expedient. Any and all of
Agent's and/or Lender's rights with respect to the lien and security interest
granted hereunder shall continue unimpaired, and the Borrowers shall be and
remain obligated in accordance with the terms hereof, notwithstanding (a) any
proceeding of the Borrowers under the Federal Bankruptcy Code or any bankruptcy,
insolvency or reorganization laws or statutes of any state, (b) the release or
substitution of Collateral at any time, or of any rights or interests therein or
(c) any delay, extension of time, renewal, compromise or other indulgence
granted by the Agent and/or Lender in the event of any default, with respect to
the Collateral or otherwise hereunder. No delay or extension of time by Agent
and/or Lender in exercising any power of sale, option or other right or remedy
hereunder, and no notice or demand which may be given to or made upon the
Borrowers by Agent and/or Lender, shall constitute a waiver thereof, or limit,
impair or prejudice Agent's and/or Lender's right, without notice or demand, to
take any action against the Borrowers or to exercise any other power of sale,
option or any other right or remedy.

            SECTION 8.4 EXPENSES. Agent shall be entitled to deduct from the
Lock Box Account for its own account the monthly Servicing Fee for which the
Borrowers are responsible pursuant to Section 2.11 of the Loan Agreement prior
to making any disbursements pursuant to Section 3.3(a)(ii) hereof, and, for so
long as the Mezzanine Loan is outstanding, Agent shall deduct from the Lock Box
Account the monthly Allocable Mezzanine Servicing Fee for which the Mezzanine
Borrower is responsible pursuant to Section 2.11 of the Mezzanine Loan Agreement
to be remitted to the Mezzanine Servicer prior to making any disbursements
pursuant to Section 3.3(a)(viii) hereof. The Collateral shall secure, and the
Borrowers shall pay to Agent and Lender within five (5) Business Days of the
written demand therefor, from time to time, all reasonable costs and expenses
(including, but not limited to, reasonable attorneys' fees and disbursements,
and transfer, recording and filing fees, taxes and other charges) of, or
incidental to, the creation or perfection of any lien or security interest
granted or intended to be granted hereby, the custody, care, sale, transfer,
administration, collection of or realization on the Collateral, or in any way
relating to the enforcement, protection or preservation of the rights or
remedies of Agent and/or Lender under this Agreement, the Loan Agreement, the
Note, the Security Instruments, or the other Loan Documents. Standard and
customary fees and charges associated with the Accounts shall be included on a
monthly consolidated account analysis statement which Agent shall submit to the
Borrowers for the Borrowers' payment. This statement shall set forth the fees
and charges payable for such month, including, but not limited to reasonable
fees and reasonable expenses incurred in connection with this Agreement and be
accompanied by reasonably detailed supporting documentation. Agent shall be
entitled to charge the Accounts for such reasonable fees and expenses as
indicated by the analysis statement.

            SECTION 8.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
and final agreement between the parties with respect to the subject matter
hereof and may not be changed, terminated or otherwise varied, except by a
writing duly executed by the parties.

            SECTION 8.6 NO WAIVER. No waiver of any term or condition of this
Agreement, whether by delay, omission or otherwise, shall be effective unless in
writing and signed by the party sought to be charged, and then such waiver shall
be effective only in the specific instance and for the purpose for which given.

                                       23


            SECTION 8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their respective successors
and permitted assigns.

            SECTION 8.8 NOTICES. All notices, demands, requests, consents,
approvals and other communications (any of the foregoing, a "NOTICE") required,
permitted, or desired to be given hereunder to the Borrowers, Lender or Manager
shall be in writing and delivered to such parties at the addresses and in the
manner provided in Section 14.5 of the Loan Agreement. Notices to the Agent
shall be addressed as follows:

                                 Wachovia Bank, National Association
                                 8739 Research Drive
                                 URP4
                                 Charlotte, North Carolina  28288-1075
                                 Attention: David Tucker
                                 Facsimile No.: (704) 593-7737

            SECTION 8.9 CAPTIONS. All captions in this Agreement are included
herein for convenience of reference only and shall not constitute part of this
Agreement for any other purpose.

            SECTION 8.10 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in all respects in accordance with the laws of the State
of New York without regard to conflicts of law principles of such State.

            SECTION 8.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts.

            SECTION 8.12 EXCULPATION. The provisions of Article XII of the Loan
Agreement are hereby incorporated by reference into this Agreement as to the
liability of the Borrowers hereunder to the same extent and with the same force
as if fully set forth herein, and shall apply equally to Manager to the same
extent and with the same force as if fully set forth herein, provided, however,
that notwithstanding the foregoing, there shall be personal liability to the
Borrowers and Manager for the payment to Lender of all losses, damages, costs
and expenses suffered or incurred by Lender and arising from the failure of the
Borrowers and/or Manager to comply with the provisions of Section 2.2 of this
Agreement.

            SECTION 8.13 LOAN AGREEMENT. If any inconsistency exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                                       24

Cash Management Agreement (FX2)


            IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                LENDER:

                                MERRILL LYNCH MORTGAGE LENDING, INC.

                                By: /s/ Robert Spinna
                                    ------------------------
                                Name:  Robert Spinna
                                Title: Vice President

                                AGENT:

                                WACHOVIA BANK, NATIONAL ASSOCIATION

                                By: /s/ David C. Tucker
                                    ---------------------------
                                    Name: David C. Tucker
                                    Title: Vice President

                                MANAGER:

                                LODGIAN MANAGEMENT CORP.

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name: Daniel E. Ellis
                                Title: Vice President and Secretary

                   [SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

Cash Management Agreement (FX2)



                                BORROWERS:

                                ALBANY HOTEL, INC.
                                APICO INNS OF GREEN TREE, INC.
                                LODGIAN AUGUSTA LLC
                                LODGIAN HOTELS FIXED II, INC.
                                LODGIAN LAFAYETTE LLC
                                LODGIAN TULSA LLC

                                By: /s/ Daniel E. Ellis
                                    --------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

                                AMI OPERATING PARTNERS, L.P.

                                By: AMIOP ACQUISITION GENERAL PARTNER SPE
                                    CORP., a Delaware corporation, its general
                                    partner

                                By: /s/ Daniel E. Ellis
                                    --------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                DEDHAM LODGING ASSOCIATES I, LIMITED
                                PARTNERSHIP

                                By: DEDHAM LODGING SPE, INC., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    --------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

Cash Management Agreement (FX2)



                                    EXHIBIT A

            Form of Credit Card Receivables Payment Direction Letter

                                     [Date]

_____________________________
_____________________________
_____________________________

            Re:   _______________________ (the "COMPANY")

Gentlemen:

            ________________ (the "PROCESSOR") has entered into arrangements
pursuant to which Processor acts as credit card processing service provider with
respect to certain credit card and debit card sales by Company and makes
payments to Company in respect of such sales as set forth in the [Merchant
Services Bankcard Agreement], dated _____________ between Processor and Company
(and together with any replacement agreement thereto, referred to herein as the
"CARD PROCESSING AGREEMENT").

            Please be advised that Company has entered or is about to enter into
financing arrangements with Merrill Lynch Mortgage Lending, Inc. (the "LENDER")
pursuant to which Lender may from time to time make loans and advances and
provide other financial accommodations to Company, secured by, among other
things, all of Company's right, title and interest in and to all deposit and
other bank accounts and proceeds of the foregoing, including all amounts at any
time payable by Processor to Company pursuant to the Card Processing Agreement
or otherwise.

            Notwithstanding anything to the contrary contained in the Card
Processing Agreement or any prior instructions to Processor, unless and until
Processor receives written instructions from Lender to the contrary, effective
as of the day after the date of Processor's written acknowledgement below all
amounts payable by Processor to Company pursuant to the Card Processing
Agreement or otherwise shall be sent by federal funds wire transfer or
electronic depository transfer to the following bank account of Lender:

                            ___________ (the "BANK")
                             ABA Number: ___________

 For the Account of: Lock Box Account for the benefit of Merrill Lynch Mortgage
                   Lending, Inc., its successors and assigns
                          Account Number: ____________
                      Attn: ____________, Fax: ____________

            In the event Processor at any time receives any other instructions
from Lender with respect to the disposition of amounts payable by or through
Processor to Company pursuant to

                                       A-1

Cash Management Agreement (FX2)



the Card Processing Agreement or otherwise, Processor is hereby irrevocably
authorized and directed to follow such instructions, without inquiry as to
Lender's right or authority to give such instructions. Company and Lender
acknowledge that (a) any instructions from Lender to Processor to change the
account to which funds must be sent by a vice president or other officer of
Lender to ____________; (b) such instructions shall only provide for funds to be
sent to a single deposit account of Lender, in a manner with respect to the
nature of the funds transfer and at times consistent with the payment practices
of Processor as then in effect, unless otherwise agreed by Processor. The
Company agrees to hold harmless Processor for any action taken by Processor in
accordance with the terms of this letter and the Card Processing Agreement; and
Lender shall complete such account change forms as Processor may require. The
Company hereby acknowledges that the account set forth above is owned by Company
but is under the control of Lender.

            Lender and Company hereby confirm and agree as follows: (i) the Card
Processing Agreement is in full force and effect and (ii) this Payment Direction
Letter does not prohibit or limit any rights Processor possesses under the Card
Processing Agreement, including but not limited to Processor's right to debit,
offset or charge back any amount owing to Processor under the Card Processing
Agreement or any replacement or renewal thereof, against funds sent to or to be
sent to the above referenced bank account.

            This Payment Direction Letter cannot be changed, modified, or
terminated, except by written agreement signed by Lender, Company and Processor.
Processor agrees to use reasonable efforts to ensure payment instructions are
followed, but Lender and Company herein acknowledge that Processor shall incur
no liability for changes or modifications wherein Processor has received
instructions from Company or Lender to change deposit instructions. The terms of
this Payment Direction Letter shall be governed by the laws of the State of New
York.

            Please acknowledge your receipt of, and agreement to, the foregoing
by signing in the space provided below.

                                    Very truly yours,
                                    ________________ (the "COMPANY")

                                    By:   ___________________________
                                          Name:
                                          Title:
                                    Date: ____________________________

Agreed to by Processor:

________________________________

By: _____________________________
    Name:
    Title:

Cash Management Agreement (FX2)

                                      A-2

EX-10.3.10

                                                                 EXHIBIT 10.3.10

                             ENVIRONMENTAL INDEMNITY

                  This ENVIRONMENTAL INDEMNITY, made as of June 25, 2004 (this
"AGREEMENT"), by the Borrowers named on the signature pages hereto, each having
an address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30326 (each, a "BORROWER" and collectively, "BORROWERS"), by LODGIAN,
INC., a Delaware corporation, having an address at 3445 Peachtree Road, NE,
Suite 700, Atlanta, Georgia 30326 ("OBLIGOR"), jointly and severally (Borrowers
and Obligor being referred to herein collectively as "INDEMNITORS" and
individually as an "INDEMNITOR"), in favor of MERRILL LYNCH MORTGAGE LENDING,
INC., a Delaware corporation, having an address at 4 World Financial Center, New
York, New York, 10080 (together with its successors, transferees and assigns,
"LENDER").

                              W I T N E S S E T H:

                  WHEREAS:

                  A.       Borrowers are the owners of fee simple or leasehold
title, as applicable, to those certain parcels of real property (collectively,
the "PREMISES") described in EXHIBIT A attached hereto, and the buildings,
structures, fixtures, additions, enlargements, extensions, modifications,
repairs, replacements and other improvements now or hereafter located thereon
(the "IMPROVEMENTS"; together with the Premises, collectively, the "PROPERTY").

                  B.       Borrowers and Lender have entered into a certain Loan
and Security Agreement, dated as of the date hereof (as amended, modified or
restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has
agreed to make a loan to Borrowers as more particularly described below.
Capitalized terms used herein and not herein defined shall have the meanings
assigned to such terms in the Loan Agreement.

                  C.       Pursuant to the Loan Agreement, Lender is making a
Loan to Borrower in the aggregate original principal amount of up to $67,864,000
(the "LOAN"). The Loan is evidenced by a certain Promissory Note, dated as of
the date hereof (as amended, modified, restated or split from time to time, the
"NOTE") and secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds
to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated
as of the date hereof (as amended, modified or restated from time to time,
collectively, the "SECURITY INSTRUMENT"), with respect to the Property.

                  D.       As a condition to Lender's making the Loan, Lender is
requiring that Indemnitors indemnify the Indemnified Parties (as hereinafter
defined) with respect to environmental conditions or liabilities on, in, under
or affecting the Property as hereinafter set forth.

                  E.       Obligor holds a direct and/or indirect ownership
interest in Borrower and will derive substantial economic benefit from Lender
making the Loan to Borrower.



                  NOW, THEREFORE, to induce Lender to extend the Loan to
Borrower and in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Indemnitors hereby covenant and agree for the benefit of the
Indemnified Parties as follows:

         1.       DEFINITIONS. The following terms shall have the following
meanings when used herein:

                  "COSTS" shall mean, collectively, all liens, damages, losses,
fines, liabilities (including, without limitation, any strict liability),
obligations, settlements, penalties, assessments, citations, directives, claims,
litigations, demands, response costs (including, without limitation,
investigation, removal, remediation, mitigation, containment, post-closure and
monitoring costs), defenses, judgments, suits, proceedings, costs, laboratory
fees, disbursements and expenses of any kind or nature whatsoever (including,
without limitation, reasonable attorneys', consultants' and experts' fees and
disbursements). Costs shall also include any future reduction in sales price of,
or unmarketability and consequent inability of Lender to foreclose on or
otherwise sell, the Property and the lost opportunity costs resulting from the
inability of Lender to sell or dispose of its interest in the Property, all as a
consequence of any event described in paragraph 2 herein to the extent that such
loss in value results in Lender receiving in any foreclosure, or deed in lieu
thereof, of the Properties less than the full amount of the Obligations by
reason of any matter set forth in Section 2.

                  "ENVIRONMENTAL LAWS" shall have the meaning given to such term
in the Loan Agreement.

                  "HAZARDOUS MATERIAL" shall have the meaning given to such term
in the Loan Agreement.

                  "INDEMNIFIED PARTY" shall mean Lender, any subsequent holder
of the Note and each of their officers, directors, shareholders, principals,
partners, representatives, employees, agents, successors and assigns.

                  "TENANTS" shall mean all tenants, lessees, subtenants and
other occupants of the Property.

         2.       INDEMNITY.

                  (a)      Except as provided in Section 2(b) below, Indemnitors
hereby assume liability for, and agree to pay, protect, defend, indemnify and
save all Indemnified Parties harmless from and against any and all Costs which
may be imposed upon, incurred by or asserted or awarded against any of the
Indemnified Parties or the Property, and arising directly or indirectly from:
(i) the violation or alleged violation of any Environmental Laws relating to or
affecting the Property, whether or not caused by or within the control of
Indemnitors; (ii) the actual or alleged presence, release or threat of release
of, or exposure to any Hazardous Material on, in, under or affecting all or any
portion of the Property or any surrounding areas, regardless of whether or not
caused by or within the control of Indemnitors; (iii) any actual or alleged
personal injury or property damage arising out of or related to Hazardous
Material on the Property; (iv) any acts or omissions that exacerbate an existing
condition at the Property and give

                                       2


rise to liability under any Environmental Law; (v) the failure by Indemnitors to
comply fully with the terms and conditions of this Agreement in all material
respects; (vi) a material breach of any representation or warranty contained in
this Agreement; (vii) the enforcement of this Agreement; or (viii) assessment,
investigation, containment, monitoring, remediation and/or removal of any and
all Hazardous Material from the Property or any surrounding areas, and costs
incurred to comply with Environmental Laws in connection with the Property or
any surrounding areas.

                  (b)      Notwithstanding any provision hereof to the contrary,
Indemnitors shall have no liability under this Agreement with respect to Costs
relating to Hazardous Material which is initially placed on, in or under the
Property after the earlier of (i) Lender or any receiver appointed at the
request of Lender taking actual possession and control of the Property following
an Event of Default, and (ii) Lender completing a foreclosure or other sale
pursuant to which Lender takes title to the Property. Indemnitors shall have no
liability under this Agreement to any Indemnified Party with respect to Costs
which result from such Indemnified Party's willful misconduct or gross
negligence. In addition to the foregoing, Obligor shall have no liability
pursuant to this Agreement with respect to costs relating to Hazardous Material
which is initially placed on, in or under the Property after the transfer of the
Mezzanine Borrowers' equity interest in the applicable Borrower to the Mezzanine
Lender or its designee by reason of, or in lieu of, enforcement of the Mezzanine
Lender's rights under the Mezzanine Loan Documents.

                  (c)      Indemnitors' obligation to defend the Indemnified
Parties hereunder shall include defense at both the trial and appellate levels
and shall be with attorneys, consultants and experts selected by Indemnitor and
subject to the reasonable approval of the Indemnified Parties.

         3.       REPRESENTATIONS REGARDING HAZARDOUS MATERIAL. Indemnitors
hereby represent and warrant to agree with the Indemnified Parties as follows:

                  (a)      Indemnitors, the Property and all businesses or
operations conducted thereon are in compliance with all applicable Environmental
Laws in all material respects;

                  (b)      Except as previously disclosed to Lender in the Phase
I Reports, no Hazardous Material has been disposed of on or released (as used
herein, "RELEASE" shall have the meaning provided in 42 U.S.C. Section 9601(22))
at, onto or under the Property by any Indemnitor or, to Indemnitors' knowledge,
by any other Person that has not been remediated in accordance with applicable
Environmental Laws or that is present at or under the Property at a level in
excess of that allowed by applicable Environmental Laws;

                  (c)      Except as previously disclosed to Lender in the Phase
I Reports, no Hazardous Material is located in, on or under, or has been
handled, generated, stored, processed or discharged from the Property in
violation of applicable Environmental Laws by any Indemnitor or, to the
Indemnitors' knowledge, by any other Person, except for those materials used by
Borrowers, Manager or tenants of the Property ("TENANTS") in the ordinary course
of their business in material compliance with all applicable Environmental Laws
and not reasonably expected to give rise to liability under applicable
Environmental Laws;

                                       3


                  (d)      Indemnitors have received no written notice that the
Property is subject to any private or governmental lien or judicial or
administrative notice or action relating to or arising under applicable
Environmental Laws;

                  (e)      Except as previously disclosed to Lender in the Phase
I Reports, there are no underground storage receptacles or surface impoundments,
landfills or dumps for Hazardous Material on the Property;

                  (f)      Indemnitors have received no notice of, and to
Indemnitors' knowledge there exists no investigation, action, proceeding or
claim by any agency, authority or unit of government or by any third party
asserted or threatened which could result in any liability, penalty, sanction or
judgment under any applicable Environmental Laws with respect to any condition,
use or operation of the Property, nor do Indemnitors know of any basis for any
of the foregoing;

                  (g)      Except as previously disclosed to Lender in the Phase
I Reports or the Property Condition Reports, there is no asbestos-containing
material or lead-based paint at the Property nor are there any polychlorinated
biphenyls ("PCB'S"), endangered species' habitats or wetlands at the Property;

                  (h)      Indemnitors have received no notice that, and to
Indemnitors' knowledge, there has been no claim by any party that, any use,
operation or condition of the Property has caused any nuisance or any other
liability or adverse condition on any other property nor do Indemnitors know of
any basis for such a claim relating to Hazardous Material;

                  (i)      Except as previously disclosed in writing to Lender,
Indemnitor has not knowingly waived or released any Person's liability with
regard to Hazardous Material in, on, under or around the Property nor retained
or assumed, contractually or otherwise, any other Person's liability relative to
Hazardous Material or any claim, action or proceeding relating thereto; and

                  (j)      Except as previously disclosed to Lender in the Phase
I Reports, neither the Property nor any other property owned by any Borrower (i)
is included or, to Indemnitor's knowledge, proposed for inclusion on the
National Priorities List issued pursuant to CERCLA (hereinafter defined) by the
United States Environmental Protection Agency (the "EPA") or on any of the
inventories of other potential "Problem" sites issued by the EPA or other
applicable Governmental Authority nor (ii) otherwise identified by the EPA as a
potential CERCLA site or included or, to Indemnitor's knowledge, proposed for
inclusion on any such list or inventory issued pursuant to any other applicable
Environmental Law or issued by any other Governmental Authority.

         4.       COVENANTS OF INDEMNITORS.

                  (a)      So long as any Borrower or Affiliate thereof owns or
is in possession of the Property, Indemnitors shall, and shall use commercially
reasonable efforts to cause all property managers, agents, employees and Tenants
to: (i) comply with all Environmental Laws applicable to the Property, (ii) keep
or cause the Property to be kept free from Hazardous Material (except those
materials used by Borrower, Manager or Tenants in the ordinary course of

                                       4


their business, in compliance with applicable Environmental Laws), (iii) not
install or use, or permit the installation or use of, any underground
receptacles containing Hazardous Material on the Property, (iv) expressly
prohibit the use, generation, handling, storage, production, release, processing
and disposal of Hazardous Material by all future Tenants and Managers (except
those substances used by such Tenants or Managers in the ordinary course of
their business in compliance with all applicable Environmental Laws) and use all
commercially reasonable efforts to prevent existing Tenants, Managers and other
permitted occupants of the Property from taking any such actions, (v) in any
event, not install on the Property or permit to be installed on the Property
PCB's, urea formaldehyde insulation, asbestos or any substance containing
asbestos or any material containing lead-based paint, (vi) prohibit the disposal
and/or release of any Hazardous Material in violation of applicable
Environmental Laws on, at or beneath, the Property, (vii) operate and maintain,
or cause to be operated and maintained, the HVAC systems at the Property in
accordance with standards for operation of similar systems located at properties
that are similar (including, without limitation, the manner, class of operation,
and/or Franchisor standards) to the Property, (viii) cause the Required Capital
Improvements which relate to mold to be completed in accordance with the
standards and time frames set forth in Section 6.5 of the Loan Agreement, and
(ix) not permit any Lien imposed pursuant to any applicable Environmental Law to
be imposed or, subject to Section 4(c) below, to remain on the Property.

                  (b)      Indemnitors shall promptly notify Lender in writing
should any Indemnitor become aware of (i) any release, disposal or discharge of
Hazardous Material in violation of applicable Environmental Laws, or other
material actual environmental problem or liability, with respect to or affecting
the Property, (ii) any lien, action or notice of violation or potential
liability affecting the Property or Borrowers and arising under any applicable
Environmental Law, (iii) the institution of any investigation, inquiry or
proceeding concerning Borrowers or the Property pursuant to any applicable
Environmental Law or otherwise relating to Hazardous Material affecting the
Property, (iv) the discovery of any occurrence, condition or state of facts
which would render any representation or warranty contained in this Agreement
incorrect or incomplete in any material respect if made at the time of such
discovery, (v) any remedial action taken by Indemnitors or, if actually known by
Indemnitor, any other Person in response to any Hazardous Material on, under or
at the Property, (vi) the discovery by Indemnitors of any occurrence or
condition on any real property adjoining or in the vicinity of the Property that
would reasonably be expected to cause the Property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or use
thereof under any applicable Environmental Laws, and (vii) any request for
information from any governmental agency that indicates such agency is
investigating whether Indemnitors may be potentially responsible for a release,
disposal or discharge of Hazardous Material. Borrowers shall promptly notify
Lender of any proposed action to be taken pertaining in any way to the Property
to commence any operations that could reasonably be expected to subject any
Borrower or the Property to additional obligations or liabilities under
applicable Environmental Laws, including laws, rules and regulations requiring
additional or amended environmental permits or licenses which could reasonably
be expected to subject any Borrower to any material obligations or requirements
under any applicable Environmental Laws. Borrowers shall, at their own expense,
provide copies of such documents or information as Lender may reasonably request
in relation to any matters disclosed pursuant to this Section. Indemnitor shall
promptly transmit to Lender

                                       5


copies of any and all material citations, orders, notices and all other
communications sent or received by any Borrower relating to any of the foregoing
provisions of this paragraph.

                  (c)      Regardless of the source of contamination,
Indemnitors shall, at their own expense, promptly take or cause to be taken and
diligently prosecute all actions required by applicable Environmental Laws for
the clean-up of the Property and other property affected by contamination in,
on, under or at the Property, including, without limitation, all investigative,
monitoring, removal, containment and remedial actions in accordance with and
required by all applicable Environmental Laws (and in all events in a manner
satisfactory to the applicable Governmental Authority and reasonably
satisfactory to Lender). Indemnitor shall further pay or cause to be paid, at no
expense to any Indemnified Party, all clean-up, administrative and enforcement
costs of applicable governmental agencies which may be asserted against the
Property. In the event Indemnitors fail to do so, or following an Event of
Default, Lender may, at its sole election, cause the Property or other affected
property to be freed from any Hazardous Material located thereon at a level in
excess of that allowed by applicable Environmental Laws, or otherwise be brought
into compliance with applicable Environmental Laws, and any cost incurred in
connection therewith shall be included in Costs. Borrowers hereby grant to
Lender access to the Property and an irrevocable license to remove any Hazardous
Material and to do all things necessary to bring the Property into compliance in
all material respects with applicable Environmental Laws. However, Lender shall
have no obligation to inspect or clean up any Hazardous Material. Lender shall
not be deemed a generator of any Hazardous Material removed from the Property.

                  (d)      Upon the request of Lender, at any time (i) after the
occurrence of an Event of Default or (ii) Lender has reasonable grounds to
believe that (A) Hazardous Material is or has been released, stored or disposed
of, or existing, on or around the Property at a level in excess of that allowed
by applicable Environmental Laws or (B) the Property may be in material
violation of applicable Environmental Laws, Indemnitors shall cause an
investigation or audit of the Property to be undertaken by a hydrogeologist or
environmental engineer or other appropriate consultant reasonably approved by
Lender to determine whether any Hazardous Material is located on, at, beneath,
or near the Property and/or whether the Property is in compliance in all
material respects with Environmental Laws. The scope of any investigation or
audit shall be approved by Lender in Lender's reasonable discretion. If
Indemnitors fail to provide reports of such investigation or audit within thirty
(30) days after such request, Lender may, but shall have no obligation to, order
the same. Borrowers hereby grant to Lender and Lender's contractors access to
the Property and an irrevocable license to undertake such investigation or audit
provided that such investigation is conducted in a manner so as not to
unreasonably affect Borrowers' operations at the Property. All reasonable costs
of any such investigation or audit shall be included in Costs and shall be paid
by Indemnitors in accordance with the terms of paragraph 5(c) hereof.

                  (e)      In the event that a Lien is filed against the
Property pursuant to any applicable Environmental Law, Indemnitors shall, within
ten (10) Business Days from the date that any Borrower receives notice of such
Lien (but in any event ten (10) days prior to the date of any contemplated sale
pursuant to such Lien), either (i) pay the claim and remove the Lien from the
Property, or (ii) furnish, at Indemnitor's option, (A) a bond satisfactory to
Lender in the amount of the claim out of which the Lien arises, (B) a cash
deposit in the amount of the claim

                                       6


out of which the Lien arises, (C) other security reasonably satisfactory to
Lender in an amount sufficient to discharge the claim out of which the Lien
arises, or (D) security in a form and amount satisfactory to the applicable
Governmental Authority pursuant to a valid consent or other order, and
Indemnitors shall promptly arrange for the removal of the Lien. Notwithstanding
the foregoing, Indemnitors shall prevent a sale pursuant to any Lien.

                  (f)      The amount of Indemnitors' liability hereunder is
unrelated to the amount of the Loan and any failure of the Loan to be repaid in
full. The enforcement of this Agreement by the Indemnified Parties shall not be
construed by Indemnitors as an indirect attempt to recover any Loan deficiency
or loss relating to the failure of the Loan to be repaid in full. Indemnitors
acknowledge that they may have liability hereunder even if the Loan is repaid in
full by reason of a full credit bid at any foreclosure sale under the Security
Instrument, and that the amount of Indemnitor's liability hereunder could exceed
the entire amount paid by Borrower for the Property.

         5.       INDEMNIFICATION PROCEDURES.

                  (a)      If any action, proceeding, litigation or claim shall
be brought or asserted against any Indemnified Party for any matter which the
Indemnified Parties are indemnified hereunder (each, a "CLAIM"), such
Indemnified Party shall notify Indemnitors in writing thereof and Indemnitors
shall promptly assume the defense thereof, including, without limitation, the
employment of counsel selected by the Indemnitor and approved by the Indemnified
Party, such approval not to be unreasonably withheld, conditioned or delayed,
and the negotiation of any settlement. Any failure of such Indemnified Party to
notify Indemnitors of such matter shall not impair or reduce the obligations of
Indemnitors hereunder. The Indemnified Parties shall have the right, at the
reasonable expense of Indemnitors (which expense shall be included in Costs), if
an Indemnified Party has reason to believe that its interests are not being
adequately represented or diverge from other interests being represented by such
counsel, to employ separate counsel in any such action and to participate in the
defense thereof at such Indemnitor's sole cost and expense. In the event
Indemnitors shall fail to discharge or undertake to defend any Indemnified Party
against any Claim, such failure shall constitute an Event of Default and the
Indemnified Party may, at its sole election, defend or settle such Claim. The
liability of Indemnitors to such Indemnified Party hereunder for any settlement
by such Indemnified Party shall be conclusively established by any settlement
entered into by the Indemnified Party in good faith. The amount of Indemnitors'
liability hereunder shall include the settlement consideration and all other
Costs, which shall be paid by the Indemnitors as hereinafter provided. Costs
incurred in connection with a Claim shall be reimbursed by Indemnitors without
the requirement of waiting for the ultimate outcome of such Claim.

                  (b)      Indemnitors shall not, without the prior written
consent of the Indemnified Party, which consent will not be unreasonably
withheld, conditioned or delayed, settle or compromise any Claim in any manner
or consent to the entry of any judgment (i) in which the claimant or plaintiff
does not unconditionally release the Indemnified Party from all liability and
obligations in respect of such Claim and obtain a dismissal of such Claim with
prejudice; or (ii) that may adversely affect the Indemnified Party (as
determined in the reasonable discretion of such Indemnified Party) or obligate
the Indemnified Party to pay any sum or perform any obligation.

                                       7


                  (c)      Indemnitors shall pay to the applicable Indemnified
Party any and all Costs within fifteen (15) days after written notice from such
Indemnified Party. All Costs shall be immediately reimbursable to the
Indemnified Party or, upon request of the Indemnified Party, paid directly to
the party sending a bill or other statement to the Indemnified Party. Any Costs
not paid within the aforementioned fifteen (15) day period shall bear interest
at the Default Rate from the date incurred until the date paid in full.

         6.       REINSTATEMENT OF OBLIGATIONS. If at any time all or any part
of any payment received by an Indemnified Party pursuant to this Agreement shall
be rescinded or returned for any reason whatsoever, including, without
limitation, the insolvency, bankruptcy or reorganization of any Indemnitor, then
the obligations of Indemnitors hereunder shall, to the extent of such rescinded
or returned payment, be reinstated and shall continue as though such previous
payment received by the Indemnified Party had never occurred.

         7.       WAIVERS BY INDEMNITORS. To the extent permitted by law,
Indemnitors hereby waive and agree not to assert or take advantage of:

                  (a)      Any right to require an Indemnified Party (i) to
proceed against Borrower or any other Person, (ii) to proceed against or exhaust
any security held by any Indemnified Party at any time or (iii) to pursue any
other remedy in such Indemnified Party's power or under any other agreement, in
any case, before proceeding against Indemnitors hereunder;

                  (b)      Any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other Person or the
failure of an Indemnified Party to file or enforce a claim against the estate
(in administration, bankruptcy or any other proceeding) of any other Person;

                  (c)      Demand, presentment for payment, protest and notice
of protest, demand, dishonor and nonpayment and all other notices except as
expressly required in the Loan Documents, including, without limitation, notice
of new or additional indebtedness or obligations or of any action or non-action
on the part of Borrower, Lender, any endorser or creditor of Borrower or of
Indemnitor or of any other Person whomsoever under this Agreement or any other
Loan Document;

                  (d)      Any defense based upon an election of remedies,
splitting a cause of action or merger of judgments by any Indemnified Party;

                  (e)      Any right or claim of right to cause a marshaling of
the assets of Indemnitors;

                  (f)      Any principle or provision of law, statutory or
otherwise, which is or might be in conflict with the terms and provisions of
this Agreement;

                  (g)      Any duty on the part of any Indemnified Party to
disclose to Indemnitors any facts such Indemnified Party may now or hereafter
know about Borrower or the Property, regardless of whether such Indemnified
Party (i) has reason to believe that any such facts materially increase the risk
beyond that which Indemnitors intend to assume, (ii) has reason to believe that
such facts are unknown to Indemnitors or (iii) has a reasonable opportunity to

                                       8


communicate such facts to Indemnitors, it being understood and agreed that
Indemnitors are fully responsible for being informed of the financial condition
of Borrower, the condition of the Property and of all other circumstances
bearing on the risk that liability may be incurred by Indemnitors hereunder;

                  (h)      Any invalidity, irregularity or unenforceability, in
whole or in part, of any one or more of the Loan Documents;

                  (i)      Any lack of commercial reasonableness in dealing with
the collateral for the Loan;

                  (j)      Any deficiencies in the collateral for the Loan or
any deficiency in the ability of Lender to collect or to obtain performance from
any Persons now or hereafter liable for the payment and performance of any
obligation hereby guaranteed;

                  (k)      An assertion or claim that the automatic stay
provided by 11 U.S.C. Section 362 (arising upon the voluntary or involuntary
bankruptcy proceeding of Borrower) or any other stay provided under any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, shall operate or be interpreted to stay, interdict, condition,
reduce or inhibit the ability of Lender to enforce any of its rights, whether
now existing or hereafter acquired, which Lender may have against any Indemnitor
or the collateral for the Loan;

                  (l)      Any modifications of the Loan Documents or any
obligation of Borrower relating to the Loan by operation of law or by action of
any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or
any other debtor relief law (whether statutory, common law, case law or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or
otherwise;

                  (m)      Any action, occurrence, event or matter consented to
by Indemnitors under Section 8(j) hereof, under any other provision hereof, or
otherwise; and

                  (n)      the failure of any representation and/or warranties
made by Borrower, Indemnitor or any other party to be true, complete or correct
when given, or at any time thereafter.

Indemnitors covenant and agree that upon the commencement of a voluntary or
involuntary bankruptcy proceeding by or against any Borrower, neither such
Indemnitor shall seek a supplemental stay or otherwise pursuant to 11 U.S.C.
Section 105 or any other provision of the Bankruptcy Reform Act of 1978, as
amended, or any other debtor relief law (whether statutory, common law, case
law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect,
which may be or become applicable, to stay, interdict, condition, reduce or
inhibit the ability of Lender to enforce any rights of Lender against such
Indemnitor by virtue of this Agreement or otherwise.

                                       9


         8.       GENERAL PROVISIONS.

                  (a)      Fully Recourse. Notwithstanding any provision of any
other Loan Document to the contrary, all of the terms and provisions of this
Agreement are recourse obligations of Indemnitors and not restricted by any
limitation on personal liability.

                  (b)      Right to Indemnification Not Affected by Knowledge.
An Indemnified Party's right to defense, indemnification, payment of Costs or
other rights and remedies pursuant to this Agreement shall not be diminished or
affected in any way by any investigation conducted by or on behalf of such
Indemnified Party or other knowledge acquired (or capable of being acquired) by
such Indemnified Party through any means at any time.

                  (c)      Reliance. Indemnitors hereby acknowledge that Lender
would not make the Loan without being able to rely upon the covenants and
obligations of Indemnitors set forth herein. Accordingly, Indemnitors
intentionally and unconditionally enter into this Agreement.

                  (d)      Obligations Unsecured. Indemnitors acknowledge that
even though the representations, warranties and covenants of Indemnitors
contained herein may be identical or substantially similar to those of Borrower
set forth in the Security Instrument, the obligations of Indemnitors hereunder
are independent obligations which are not secured by the Security Instrument or
the other Loan Documents. The Indemnitors further acknowledge that it is the
intent of Lender to create separate obligations of Indemnitors hereunder which
can be enforced against Indemnitors without regard to the existence of the
Security Instrument or the other Loan Documents or the liens or security
interests created therein.

                  (e)      Survival. This Agreement shall be deemed to be
continuing in nature, remain in full force and effect and survive indefinitely,
notwithstanding the exercise of any remedy by Lender under the Security
Instrument or any of the other Loan Documents, including, without limitation,
any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the
Loan is paid or satisfied in full. Notwithstanding the foregoing to the
contrary, the obligations and liabilities of Indemnitors under this Agreement
shall survive following payment in full of the Obligations in accordance with
the terms of the Loan Documents for a period equal to the lesser of (x) five (5)
years, or (y) if Borrowers deliver Phase I environmental reports for each of the
Properties to Lender, acceptable to Lender in all respects, and which Lender
determines in its sole discretion demonstrates that no condition exists which
may cause any of the liabilities of Indemnitors to arise after delivery thereof,
two (2) years following the delivery of such Phase I environmental reports,
provided, however, in the event that (a) any obligations or liabilities of the
Indemnitors under this Agreement shall have arisen from any Hazardous Material
which existed on, in, under or affecting the Property prior to the expiration of
such period or (b) if, prior to payment in full of the Loan, Lender shall have
exercised any rights or remedies after an Event of Default or any of the Loan
Documents shall have been modified or amended or any provision thereof waived
pursuant to any workout or restructuring of the Loan (and if, as a consequence
thereof, at any time after the expiration of the survival period specified
above, Lender shall be unable to avail itself of any exemption from liability
available to lenders under any applicable Environmental Law or shall be required
to defend any claim or action relating to any Hazardous Material), then in any
such event the foregoing survival period shall not apply and the obligations and
liabilities of Indemnitors hereunder shall survive.

                                       10


                  (f)      Subordination; No Recourse Against Lender. Obligor
hereby subordinates any and all indebtedness of Borrower now or hereafter owed
to Obligor to all indebtedness of Borrower to Lender. Obligor shall not demand
or accept any payment of principal or interest from Borrower, shall not claim
any offset or other reduction of Obligor's obligations hereunder because of any
such indebtedness and shall not take any action to obtain any of the collateral
for the Loan. Further, Indemnitors shall not have any right of recourse against
any Indemnified Party by reason of any action such Indemnified Party may take or
omit to take under the provisions of this Agreement or any other Loan Documents.

                  (g)      Reservation of Rights. Nothing contained in this
Agreement shall prevent or in any way diminish or interfere with any rights or
remedies, including, without limitation, the right to cost recovery or
contribution, which any Indemnified Party may have against either Indemnitor or
any other party under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (codified at Title 42 U.S.C. Section 9601 et seq.), as it
may be amended from time to time ("CERCLA"), or any other applicable Federal,
state or local laws, all such rights being hereby expressly reserved.

                  (h)      Financial Statements. Each Indemnitor hereby agrees
to furnish Lender such financial statements and other information as is required
to be delivered pursuant to Section 5.1 of the Loan Agreement.

                  (i)      Nature of Obligations. The obligations of Indemnitors
hereunder are independent of the obligations of Borrower under the other Loan
Documents. In the event of any default hereunder, a separate action or actions
may be brought and prosecuted against Indemnitors whether or not Indemnitors are
the alter ego of Borrower and whether or not Borrower is joined therein or a
separate action or actions are brought against Borrower. Lender's rights
hereunder shall not be exhausted until all of the obligations of Indemnitor
hereunder have been fully paid and performed.

                  (j)      No Limitation on Liability. Indemnitors hereby
consent and agree that any of the following may occur from time to time, without
notice or consideration to, or consent of, Indemnitors, and the liability of
Indemnitors hereunder shall remain unconditional and absolute and shall in no
way be impaired or limited by reason thereof:

                           (i)      any extension of time for performance
required by any of the Loan Documents or otherwise granted by Lender or any
extension or renewal of the Note;

                           (ii)     any sale, assignment or foreclosure of the
Note, the Security Instrument or any of the other Loan Documents or any sale or
transfer of the Property, except as set forth in Section 2(b);

                           (iii)    any change in the composition of Borrower,
including, without limitation, the voluntary or involuntary withdrawal or
removal of Indemnitors from any current or future position of ownership,
management or control of Borrower;

                           (iv)     the release of Borrower or of any other
Person from performance or observance of any of the agreements, covenants, terms
or conditions contained in any of the Loan Documents by operation of law,
Lender's voluntary act or otherwise;

                                       11


                           (v)      the release or substitution in whole or in
part of any security for the Loan;

                           (vi)     Lender's failure to record the Security
Instrument or to file any financing statement (or Lender's improper recording or
filing thereof) or to otherwise perfect, protect, secure or insure any lien or
security interest given as security for the Loan;

                           (vii)    the modification of the terms of any one or
more of the Loan Documents;

                           (viii)   subject to Section 2(b) hereof, the exercise
by Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant
to the terms of the Mezzanine Loan Documents, including, without limitation,
foreclosure or similar remedies under any pledge agreement encumbering Mezzanine
Borrower's interest in General Partner, Member or any Borrower; or

                           (ix)     the taking or failure to take any action of
any type whatsoever. No such action which Lender shall take or fail to take in
connection with the Loan Documents or any collateral for the Loan, nor any
course of dealing with Borrower or any other Person, shall limit, impair or
release Indemnitor's obligations hereunder, affect this Agreement in any way or
afford Indemnitors any recourse against any Indemnified Party. Nothing contained
in this Section shall be construed to require any Indemnified Party to take or
refrain from taking any action referred to herein.

                  (k)      Representations. Each Indemnitor represents and
warrants that there is no bankruptcy, reorganization or insolvency proceeding
pending or, to its knowledge, threatened against it.

                  (l)      Professionals' Fees. In the event it is necessary for
any Indemnified Party to retain the services of an attorney or any other
consultants in order to enforce this Agreement, or any portion hereof,
Indemnitors agree to pay to such Indemnified Party any and all reasonable costs
and expenses, including, without limitation, reasonable attorneys' and
consultants' fees and disbursements, incurred by such Indemnified Party as a
result thereof and all such amounts shall be included in Costs.

                  (m)      Successive Actions. A separate right of action
hereunder shall arise each time an Indemnified Party acquires knowledge of any
matter indemnified or guaranteed by Indemnitors hereunder. Separate and
successive actions may be brought hereunder to enforce any of the provisions
hereof at any time and from time to time and no action hereunder shall preclude
any subsequent action.

                  (n)      No Waiver; Remedies Cumulative. No failure or delay
on the part of Lender in exercising any right, remedy, power or privilege
hereunder or under the other Loan Documents and no course of dealing between
Borrower and Lender shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder or under the
other Loan Documents preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege hereunder or thereunder.
The rights and remedies provided herein and in the other Loan Documents are
cumulative and not exclusive

                                       12


of any rights or remedies provided by law. The giving of notice to or demand on
Borrower which notice or demand is not required hereunder or under the other
Loan Documents shall not entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights,
remedies, powers or privileges of Lender in any circumstances not requiring
notice or demand.

                  (o)      Notices. All notices, requests and other
communications to any party hereunder or under the Note shall be given in the
manner set forth in Section 14.5 of the Loan Agreement, to Lender and Borrower
at such party's address set forth in Section 14.5 of the Loan Agreement and to
each Obligor at its address set forth above, or such other address as
Indemnitors or Lender shall hereafter specify by not less than ten (10) days
prior written notice as provided herein; provided, however, that notwithstanding
any provision of this Section to the contrary, such notice of change of address
shall be deemed given only upon actual receipt thereof. Rejection or other
refusal to accept or the inability to deliver because of changed addresses of
which no notice was given as herein required shall be deemed to be receipt of
the notice, demand, statement, request or consent.

                  (p)      Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
and the applicable laws of the United States of America. Indemnitors hereby
irrevocably submit to the jurisdiction of any court of competent jurisdiction
located in the State of New York and in any state in which the Property is
located in connection with any proceeding out of or relating to this Agreement.

                  (q)      Invalid Provisions. If any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect, this
Agreement shall be construed without such provision.

                  (r)      Amendments. The terms of this Agreement, together
with the terms of the other Loan Documents, constitute the entire understanding
and agreement of the parties hereto and supersede all prior agreements,
understandings and negotiations between Indemnitors and Lender with respect to
the obligations contained herein. This Agreement, and any provisions hereof, may
not be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act on the part of Borrower or Lender, but only by an agreement
in writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

                  (s)      Parties Bound; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives; provided, however, that except as
provided in the Loan Agreement or herein, Indemnitors may not, without the prior
written consent of Lender, assign any of their rights, powers, duties or
obligations hereunder.

                  (t)      Headings; Construction of Documents. The headings and
captions of various sections of this Agreement are for convenience of reference
only and are not to be construed as defining or limiting, in any way, the scope
or intent of the provisions hereof. Indemnitors acknowledge that they were
represented by competent counsel in connection with the negotiation and drafting
of this Agreement and the other Loan Documents and that neither

                                       13


this Agreement nor the other Loan Documents shall be subject to the principle of
construing the meaning against the Person who drafted same.

                  (u)      Recitals. The recital and introductory paragraphs
hereof are a part hereof, form a basis for this Agreement and shall be
considered prima facie evidence of the facts and documents referred to therein.

                  (v)      Counterparts. To facilitate execution, this Agreement
may be executed in as many counterparts as may be convenient or required. It
shall not be necessary that the signature or acknowledgment of, or on behalf of,
each party, or that the signature of all Persons required to bind any party, or
the acknowledgment of such party, appear on each counterpart. All counterparts
shall collectively constitute a single instrument. It shall not be necessary in
making proof of this Agreement to produce or account for more than a single
counterpart containing the respective signatures of, or on behalf of, and the
respective acknowledgments of, each of the parties hereto. Any signature or
acknowledgment page to any counterpart may be detached from such counterpart
without impairing the legal effect of the signatures or acknowledgments thereon
and thereafter attached to another counterpart identical thereto except having
attached to it additional signature or acknowledgment pages.

                  (w)      Cumulative Rights. The rights of Lender under this
Agreement shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled, subject to the terms of this Agreement, to
every right and remedy now or hereafter afforded by law.

                  (x)      Waiver of Counterclaim and Right to Trial by Jury.
Indemnitors hereby waive the right to assert a counterclaim, other than a
compulsory counterclaim, in any action or proceeding brought against it by
Lender or its agents, and Lender and Indemnitors waive trial by jury in any
action or proceeding brought by either party hereto against the other or in any
counterclaim any other party may be permitted to assert hereunder or which may
be asserted by any party or its agents, against Indemnitors, or in any matters
whatsoever arising out of or in any way connected with this Agreement, the debt
or the obligations contained herein.

                  (y)      Singular and Plural; Joint and Several Liability.

                           (i)      If there is more than one entity comprising
Obligor, all references to Obligor herein shall be to Obligor, or any one or
more of them. All references to Indemnitors herein shall be to Indemnitors or
any one or more of them. All obligations and liabilities of Indemnitors
hereunder are in addition to, not in lieu of and are independent of: (A) all
obligations of Borrower under any other Loan Document, including the Note and
the Loan Agreement; and (B) any obligation of Obligor under any other Loan
Document to which Obligor is a party.

                           (ii)     All obligations of Indemnitors hereunder
shall be joint and several.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       14


                  IN WITNESS WHEREOF, Indemnitors have executed this Agreement
as of the day and year first above written.

                                  BORROWERS:

                                  ALBANY HOTEL, INC.
                                  APICO INNS OF GREEN TREE, INC.
                                  LODGIAN AUGUSTA LLC
                                  LODGIAN HOTELS FIXED II, INC.
                                  LODGIAN LAFAYETTE LLC
                                  LODGIAN TULSA LLC


                                  By: /s/ Daniel E. Ellis
                                     -------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of
                                           the entities listed above


                                  AMI OPERATING PARTNERS, L.P.

                                  By: AMIOP ACQUISITION GENERAL
                                      PARTNER SPE CORP., a Delaware
                                      corporation, its general partner

                                  By:/s/ Daniel E. Ellis
                                     ------------------------------------
                                     Name:  Daniel E. Ellis
                                     Title: Vice President and Secretary, or
                                            Authorized Signatory

                                  DEDHAM LODGING ASSOCIATES I, LIMITED
                                    PARTNERSHIP

                                  By: DEDHAM LODGING SPE, INC., a Delaware
                                      corporation, its general partner


                                  By:/s/ Daniel E. Ellis
                                     ------------------------------------
                                     Name:  Daniel E. Ellis
                                     Title: Vice President and Secretary, or
                                            Authorized Signatory


                                  OBLIGOR:

                                  LODGIAN, INC., a Delaware
                                  corporation

                                  By:/s/ Daniel E. Ellis
                                     --------------------------------------
                                     Name: Daniel E. Ellis
                                     Title: Senior Vice President



                                   EXHIBITS A

                                   PROPERTIES



     CHAIN/NAME                          CITY                  ST
- ---------------------           -----------------------        --
                                                         
Holiday Inn                     East Hartford                  CT
Fairfield Inn                   Augusta                        GA
Courtyard by Marriott           Lafayette                      LA
Holiday Inn                     Baltimore -- BWI Airport       MD
                                (Linthicum)
Residence Inn                   Dedham                         MA
Crowne Plaza                    Albany                         NY
Courtyard by Marriott           Tulsa                          OK
Holiday Inn -- Greentree        Pittsburgh                     PA
Holiday Inn                     York                           PA

EX-10.4.1

                                                                  EXHIBIT 10.4.1

                            LOAN AND SECURITY AGREEMENT
                                 (FIXED RATE #3)

                            DATED AS OF JUNE 25, 2004

                                     BETWEEN

                    THE BORROWERS LISTED ON SCHEDULE 1 HERETO
                                  AS BORROWERS

                                       AND

                      MERRILL LYNCH MORTGAGE LENDING, INC.
                                    AS LENDER



                                TABLE OF CONTENTS



                                                                                                                    Page
                                                                                                                    ----
                                                                                                                 
                                                           ARTICLE I
                                                          DEFINITIONS

Section 1.1       Certain Defined Terms.........................................................................      1
Section 1.2       Accounting Terms..............................................................................     23
Section 1.3       Other Definitional Provisions.................................................................     23

                                                          ARTICLE II
                                                      TERMS OF THE LOAN

Section 2.1       Loan..........................................................................................     24
Section 2.2       Interest......................................................................................     24
Section 2.3       Interest Rate Cap Agreement...................................................................     25
Section 2.4       Payments......................................................................................     25
Section 2.5       Maturity......................................................................................     26
Section 2.6       Prepayment....................................................................................     26
Section 2.7       Outstanding Balance...........................................................................     27
Section 2.8       Taxes.........................................................................................     27
Section 2.9       Reasonableness of Charges.....................................................................     28
Section 2.10      Reserved......................................................................................     28
Section 2.11      Servicing/Special Servicing...................................................................     28
Section 2.12      Cross-Collateralization; Contribution; Release of Cross-Collateralization.....................     28

                                                           ARTICLE III
                                                        CONDITIONS TO LOAN

Section 3.1       Conditions to Funding of the Loan on the Closing Date.........................................     33

                                                            ARTICLE IV
                                                  REPRESENTATIONS AND WARRANTIES

Section 4.1       Organization, Powers, Capitalization, Good Standing, Business.................................     39
Section 4.2       Authorization of Borrowing, etc...............................................................     39
Section 4.3       Financial Statements..........................................................................     40
Section 4.4       Indebtedness and Contingent Obligations.......................................................     40
Section 4.5       Title to the Properties.......................................................................     40
Section 4.6       Zoning; Compliance with Laws..................................................................     41
Section 4.7       Leases; Agreements............................................................................     41
Section 4.8       Condition of the Properties...................................................................     43
Section 4.9       Litigation; Adverse Facts.....................................................................     43
Section 4.10      Payment of Taxes..............................................................................     43
Section 4.11      Adverse Contracts.............................................................................     43
Section 4.12      Performance of Agreements.....................................................................     44
Section 4.13      Governmental Regulation.......................................................................     44
Section 4.14      Employee Benefit Plans........................................................................     44


                                        i



                                                                                                                 
Section 4.15      Broker's Fees.................................................................................     44
Section 4.16      Intentionally Deleted.........................................................................     44
Section 4.17      Solvency......................................................................................     44
Section 4.18      Disclosure....................................................................................     45
Section 4.19      Use of Proceeds and Margin Security...........................................................     45
Section 4.20      Insurance.....................................................................................     45
Section 4.21      Separate Tax Lots.............................................................................     45
Section 4.22      Investments...................................................................................     45
Section 4.23      Bankruptcy....................................................................................     45
Section 4.24      Defaults......................................................................................     45
Section 4.25      No Plan Assets................................................................................     45
Section 4.26      Governmental Plan.............................................................................     46
Section 4.27      Not Foreign Person............................................................................     46
Section 4.28      No Collective Bargaining Agreements...........................................................     46
Section 4.29      Condominium Property Documents................................................................     46
Section 4.30      Ground Leases.................................................................................     46
Section 4.31      No Prohibited Persons.........................................................................     47

                                                        ARTICLE V
                                              COVENANTS OF BORROWER PARTIES

Section 5.1       Financial Statements and Other Reports........................................................     48
Section 5.2       Existence; Qualification......................................................................     52
Section 5.3       Payment of Impositions and Claims.............................................................     53
Section 5.4       Maintenance of Insurance......................................................................     54
Section 5.5       Operation and Maintenance of the Properties; Casualty.........................................     57
Section 5.6       Inspection....................................................................................     60
Section 5.7       O&M Plan......................................................................................     61
Section 5.8       Intentionally Deleted.........................................................................     61
Section 5.9       Compliance with Laws and Contractual Obligations..............................................     61
Section 5.10      Further Assurances............................................................................     61
Section 5.11      Performance of Agreements and Leases..........................................................     61
Section 5.12      Leases........................................................................................     62
Section 5.13      Management; Franchise Agreement...............................................................     63
Section 5.14      Material Agreements...........................................................................     65
Section 5.15      Deposits; Application of Receipts.............................................................     65
Section 5.16      Estoppel Certificates.........................................................................     65
Section 5.17      Indebtedness..................................................................................     66
Section 5.18      No Liens......................................................................................     66
Section 5.19      Contingent Obligations........................................................................     67
Section 5.20      Restriction on Fundamental Changes............................................................     67
Section 5.21      Transactions with Related Persons.............................................................     67
Section 5.22      Bankruptcy, Receivers, Similar Matters........................................................     67
Section 5.23      ERISA.........................................................................................     68
Section 5.24      Press Release.................................................................................     68
Section 5.25      Ground Leases.................................................................................     68
Section 5.26      Condominium Property..........................................................................     71



                                       ii



                                                                                                                 
Section 5.27      Lender's Expenses.............................................................................     73
Section 5.28      Distributions.................................................................................     74
Section 5.29      Completion of Required Capital Improvements...................................................     73
Section 5.30      Cancellation of Indebtedness; Settlement of Claims............................................     74

                                                      ARTICLE VI
                                                       RESERVES

Section 6.1       Security Interest in Reserves; Other Matters Pertaining to Reserves...........................     74
Section 6.2       Funds Deposited with Lender...................................................................     75
Section 6.3       Impositions and Insurance Reserve.............................................................     75
Section 6.4       FF&E Reserve..................................................................................     76
Section 6.5       Capital Improvement Reserve; Required Capital Improvements....................................     76
Section 6.6       Hazardous Materials Remediation Reserve.......................................................     76
Section 6.7       Conditions to Disbursements from Hazardous Materials Remediation Reserve and Capital
                  Improvement Reserve; Performance of Work......................................................     77
Section 6.8       Cash Trap Reserve.............................................................................     81

                                                      ARTICLE VII
                             LOCK BOX; CLEARING ACCOUNT; CENTRAL ACCOUNT; CASH MANAGEMENT

Section 7.1       Establishment of Deposit Account and Lock Box Account.........................................     82
Section 7.2       Application of Funds in Lock Box Account......................................................     84
Section 7.3       Application of Funds After Event of Default...................................................     84

                                                     ARTICLE VIII
                                             DEFAULT, RIGHTS AND REMEDIES

Section 8.1       Event of Default..............................................................................     84
Section 8.2       Acceleration and Remedies.....................................................................     87
Section 8.3       Performance by Lender.........................................................................     89
Section 8.4       Evidence of Compliance........................................................................     89

                                                      ARTICLE IX
                     SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 9.1       Applicable to all Primary Borrower Parties....................................................     89
Section 9.2       Applicable to Borrowers, General Partner and Member...........................................     92

                                                       ARTICLE X
                                   RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS

Section 10.1      Secondary Market Transactions Generally.......................................................     93
Section 10.2      Cooperation; Limitations......................................................................     94
Section 10.3      Information...................................................................................     95
Section 10.4      Additional Provisions.........................................................................     94



                                      iii



                                                                                                                 
                                                      ARTICLE XI
                         RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES

Section 11.1      Restrictions on Transfer and Encumbrance......................................................     96
Section 11.2      Transfers of Beneficial Interests in Borrowers................................................     96
Section 11.3      Assumability..................................................................................     97
Section 11.4      Release of Properties.........................................................................     99
Section 11.5      Reserved......................................................................................    100
Section 11.6      Sale of Building Equipment....................................................................    100
Section 11.7      Immaterial Transfers and Easements, etc.......................................................    101

                                                      ARTICLE XII
                                           RECOURSE; LIMITATIONS ON RECOURSE

Section 12.1      Limitations on Recourse.......................................................................    101
Section 12.2      Partial Recourse..............................................................................    102
Section 12.3      Miscellaneous.................................................................................    102

                                                     ARTICLE XIII
                                    WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES

Section 13.1      Waivers.......................................................................................    103

                                                      ARTICLE XIV
                                                     MISCELLANEOUS

Section 14.1      Expenses and Attorneys' Fees..................................................................    105
Section 14.2      Indemnity.....................................................................................    105
Section 14.3      Amendments and Waivers........................................................................    106
Section 14.4      Retention of the Borrowers' Documents.........................................................    106
Section 14.5      Notices.......................................................................................    106
Section 14.6      Survival of Warranties and Certain Agreements.................................................    107
Section 14.7      Failure or Indulgence Not Waiver; Remedies Cumulative.........................................    107
Section 14.8      Marshaling; Payments Set Aside................................................................    108
Section 14.9      Severability..................................................................................    108
Section 14.10     Headings......................................................................................    108
Section 14.11     APPLICABLE LAW................................................................................    108
Section 14.12     Successors and Assigns........................................................................    109
Section 14.13     Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship............................    109
Section 14.14     Reasonableness of Determinations..............................................................    109
Section 14.15     Limitation of Liability.......................................................................    109
Section 14.16     No Duty.......................................................................................    110
Section 14.17     Entire Agreement..............................................................................    110
Section 14.18     Construction; Supremacy of Loan Agreement.....................................................    110
Section 14.19     Consent to Jurisdiction.......................................................................    110
Section 14.20     Waiver of Jury Trial..........................................................................    110
Section 14.21     Counterparts; Effectiveness...................................................................    111




                                       iv


                                                                                                                 
Section 14.22     Servicer......................................................................................    111
Section 14.23     Obligations of Borrower Parties...............................................................    111
Section 14.24     Additional Inspections; Reports...............................................................    111



                                        v



                         LIST OF EXHIBITS AND SCHEDULES

Exhibit A            -   Properties
Exhibit B            -   Environmental Reports
Exhibit C            -   Franchise Agreements
Exhibit D            -   Allocated Loan Amounts/Aggregate Allocated Loan Amounts
Exhibit E            -   Management Agreements
Exhibit F            -   [Reserved]
Exhibit G            -   Property Improvement Plans
Exhibit H            -   [Reserved]
Exhibit I            -   Acceptable Franchisors
Exhibit J            -   Property Condition Reports
Exhibit K            -   Zoning Reports
Exhibit L            -   Certificate re: Work Reserves


Schedule 1           -   Borrowers
Schedule 2.4         -   Scheduled Mortgage Principal Payments
Schedule 2.12(G)     -   Crossed Loans/Crossed Borrowers
Schedule 3.1(A)      -   List of Loan Documents
Schedule 4.1(C)      -   Organizational Chart for Borrower Parties
Schedule 4.2         -   Consents
Schedule 4.5         -   Condemnation Proceedings
Schedule 4.5(A)      -   Rights to Purchase/Rights of First Offer
Schedule 4.7(B)      -   Rent Roll
Schedule 4.7(E)      -   Franchise Defaults
Schedule 4.9         -   Litigation
Schedule 4.14            ERISA Plans
Schedule 4.20        -   Insurance
Schedule 4.28        -   Collective Bargaining Agreements
Schedule 4.29        -   Condominium Property Documents
Schedule 4.30        -   Ground Leases
Schedule 5.14        -   Material Agreements
Schedule 6.5         -   Required Capital Improvements
Schedule 6.6         -   Environmental Work/O&M Plans
Schedule 6.7         -   Reserve Funding Conditions

                                        i



                           LOAN AND SECURITY AGREEMENT

            This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as
of June 25, 2004 and entered into by and between the parties listed as Borrowers
on SCHEDULE 1 hereto (collectively, "BORROWERS", and individually, each a
"BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation
(together with its successors and assigns, "LENDER").

            NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrowers and Lender agree as
follows:

                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan
Agreement as so defined. Terms defined in the preamble and recitals to this Loan
Agreement are used in this Loan Agreement as so defined.

      "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the
franchisors identified on EXHIBIT I.

      "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate
of the Borrowers and, upon receipt of a Rating Confirmation, another reputable
hotel management company with at least five (5) years experience managing hotel
properties similar to the Properties and which at the time of its engagement is
managing at least 5,000 hotel rooms (exclusive of the Properties).

      "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest
in and to the Accounts, the Reserves, all monies and amounts which may from time
to time be on deposit therein, all monies, checks, notes, instruments,
documents, deposits, and credits from time to time in the possession of Lender
representing or evidencing such Accounts and Reserves and all earnings and
investments held therein and proceeds thereof.

      "ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any
Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any
other accounts pledged to Lender pursuant to this Loan Agreement or any other
Loan Document.

      "AFFILIATE" means in relation to any Person, any other Person: (i)
directly or indirectly controlling, controlled by, or under common control with,
the first Person; (ii) directly or indirectly owning or holding fifty percent
(50%) or more of any equity interest in the first Person; or (iii) fifty percent
(50%) or more of whose voting stock or other equity interest is directly or
indirectly owned or held by the first Person. In addition, the Affiliates of
each Borrower Party include, without limitation, all other Borrower Parties,
irrespective of whether they now or hereafter satisfy the foregoing criteria.
For purposes of this definition, "CONTROL" (including with correlative meanings,
the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means
the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Where expressions such
as "[name of party] or



any Affiliate" are used, the same shall refer to the named party and any
Affiliate of the named party. Further, the Affiliates of any Person that is an
entity shall include all natural persons who are officers, directors, managing
members, or general partners of the entity.

      "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the
Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT
D.

      "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of
determination, the aggregate outstanding principal balance of the Mezzanine Loan
and the Loan.

      "ALLOCABLE PORTION" means 25.70%.

      "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each
Property as set forth on EXHIBIT D.

      "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers,
Deloitte & Touche or KPMG Peat Marwick or any successor entity.

      "APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in
Section 6.7.

      "APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section
6.7.

      "APPROVED EXPENDITURES" has the meaning set forth in Section 6.7.

      "ARCHITECT" has the meaning set forth in Section 5.5.

      "ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and
Rents of even date herewith from each of the Borrowers to Lender, constituting
assignments of each Borrower's right, title and interest in the Leases and
proceeds therefrom for each of their respective Properties as Collateral for the
Loan, as same may be amended or modified from time to time.

      "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain
Conditional Assignments of Hotel Management Agreements of even date herewith
executed by each of the Borrowers and the applicable Manager, constituting an
assignment of each Management Agreement as Collateral for the Loan, as same may
be amended or modified from time to time.

      "ASSUMPTION" has the meaning set forth in Section 11.3.

      "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended
from time to time, and all rules and regulations promulgated thereunder.

      "BEVERAGE COMPANY" means any Person (other than any of the Borrowers)
holding, or entitled to any proceeds from, any liquor license or other beverage
permit for the sale of alcoholic beverages at any Property.

                                        2


      "BOARD OF MANAGERS" means the board of managers, or similar governing
entity, established for the governance of the condominium association
established pursuant to the terms of the Condominium Property Documents.

      "BORROWER" and "BORROWERS" have the meanings set forth in the preamble;
provided that, following a Release, "BORROWERS" means each of the Borrowers
remaining as a party to the Loan Documents, and whose Properties remain
encumbered by the Mortgages as Collateral for the Loan and "BORROWER" means any
of such remaining parties.

      "BORROWER PARTY" and "BORROWER PARTIES" means, individually or
collectively, the Borrowers, General Partner, Member and Guarantor.

      "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1.

      "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii)
any day which is a legal holiday under the laws of the State of New York, the
state or states where the servicing offices of the Servicer, and, if the Loan
becomes a "specially serviced mortgage loan" pursuant to the terms of any trust
and servicing agreement entered into in connection with any Securitization
backed in whole or in part by the Loan, the special servicer, are located or the
state in which the corporate trust office of the trustee in connection with any
such Securitization is located, and (iv) any day on which banking institutions
located in such state are generally not open for the conduct of regular
business.

      "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event,
the last day of each calendar quarter, and (y) during the continuance of a Cash
Trap Event, the last day of each calendar month.

      "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other
expenditures for FF&E and Capital Expenditures set forth in an annual budget
approved by Lender in writing (such approval not to be unreasonably withheld or
delayed as long as the budget is consistent with the form of the CapEx/FF&E
Budget provided to Lender prior to Closing), covering the planned FF&E
expenditures and Capital Expenditures for the period covered by such budget, as
same may be amended pursuant to Section 5.1(D) hereof.

      "CAPITAL EXPENDITURES" means expenditures for Capital Improvements.

      "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations
(including any improvements, repairs or alterations required pursuant to a
Property Improvement Plan), FF&E and other capital items (whether paid in cash
or property or accrued as liabilities) made by the Borrowers that, in conformity
with GAAP, would not be included in the Borrowers' annual financial statements
as an Operating Expense of the Properties.

      "CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5.

      "CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even
date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank.

      "CASH TRAP EVENT" has the meaning set forth in Section 6.8.

                                       3


      "CASH TRAP RESERVE" has the meaning set forth in Section 6.8.

      "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier
3 Hotel category.

      "CLAIMS" has the meaning set forth in Section 5.3.

      "CLOSING" means the funding of the Loan.

      "CLOSING DATE" means the date on which the Closing occurs.

      "COLLATERAL" means rights, interests, and property of every kind, real and
personal, tangible and intangible, which is granted, pledged, liened, or
encumbered as security for the Loan or any of the other Obligations under this
Loan Agreement, the Mortgages, the Cash Management Agreement or other Loan
Documents, including without limitation the Properties and the Account
Collateral.

      "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1.

      "CONDOMINIUM BORROWER" means, Servico Centre Associates, Ltd., the
Borrower that owns the Condominium Property.

      "CONDOMINIUM DEFAULT" has the meaning set forth in Section 4.29.

      "CONDOMINIUM PROPERTY" means the Property currently operated as a Crowne
Plaza, located in West Palm Beach, Florida.

      "CONDOMINIUM PROPERTY DOCUMENTS" means those certain documents identified
on SCHEDULE 4.29.

      "CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (A) with respect to
any indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto; (B) with respect to any
letter of credit issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings; (C) under any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect against
fluctuations in interest rates; or (D) under any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect that Person against fluctuations in currency values. Contingent
Obligations shall include (i) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making (other than the Loan), discounting with recourse or sale with recourse
by such Person of the obligation of another, (ii) the obligation to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement, and (iii) any liability of such Person
for the obligations of another through any agreement to purchase, repurchase or
otherwise

                                       4


acquire such obligation or any property constituting security therefor, to
provide funds for the payment or discharge of such obligation or to maintain the
solvency, financial condition or any balance sheet item or level of income of
another. The amount of any Contingent Obligation shall be equal to the amount of
the obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed.

      "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject, other than the Loan Documents.

      "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1.

      "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set
forth in Section 7.1.

      "CROSS GUARANTIES" shall mean (i) those certain Guaranties of the Loan,
each dated as of the date hereof, executed by each of the Crossed Borrowers, and
(ii) those certain Guaranties of each of the Crossed Loans, each dated as of the
date hereof, executed by each of the Borrowers.

      "CROSS RELEASE NOTICE" has the meaning set forth in Section 2.12(G).

      "CROSSED BORROWERS" shall mean the mortgage loan borrowers (other than the
Borrowers) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof,
subject to modification pursuant to Section 2.12(G) hereof.

      "CROSSED INDEBTEDNESS" shall mean the Crossed Loans and all other
"Indebtedness" as defined in each Crossed Loan Agreement.

      "CROSSED LOANS" shall mean each of the mortgage loans (other than the
Loan) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof with
respect to each Crossed Borrower, subject to modification pursuant to Section
2.12(G) hereof.

      "CROSSED LOAN AGREEMENTS" shall mean those certain Loan Agreements, each
dated as of the date hereof, between Lender and the Crossed Borrowers for the
respective Crossed Loans, each as amended, modified, supplemented or restated
from time to time, subject to modification pursuant to Section 2.12(G) hereof.

      "CROSSED LOAN DEFAULT" shall mean any "Event of Default" as defined in any
Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G)
hereof.

      "CROSSED LOAN DOCUMENTS" shall mean the "Loan Documents" as defined in
each Crossed Loan Agreement for each Crossed Loan, including without limitation
the promissory note(s), Crossed Mortgages and Crossed Loan Agreement evidencing
and/or securing each Crossed Loan, and each of the Crossed Guaranties relating
to the respective Crossed Loans, subject to modification pursuant to Section
2.12(G) hereof.

                                       5


      "CROSSED MORTGAGES" shall mean each of the mortgages, deeds of trust and
deeds to secure debt, each dated as of the date hereof, from each Crossed
Borrower to Lender, constituting a Lien on such Crossed Borrower's Crossed
Property as security for the respective Crossed Loans, each as amended,
modified, supplemented or restated from time to time, subject to modification
pursuant to Section 2.12(G) hereof.

      "CROSSED PROPERTIES" shall mean the properties securing each Crossed Loan,
as described in the respective Crossed Loan Agreement, subject to modification
pursuant to Section 2.12(G) hereof.

      "D&O INSURANCE" has the meaning set forth in Section 5.4.

      "DEBT SERVICE COVERAGE RATIO" OR "DSCR" means, at any time of
determination, Net Cash Flow for the trailing twelve (12) month period divided
by the amount of interest that will be required to be paid over the succeeding
twelve (12) months on the Loan and the Allocable Portion of the Mezzanine Loan,
plus principal amortization of the Loan and the Allocable Portion of the
Mezzanine Loan that would be required in respect of the then outstanding
principal amount of the Loan and the Allocable Portion of the Mezzanine Loan
over the succeeding twelve (12) months based on a twenty-five (25) year
amortization schedule, calculated using the Interest Rate for the Loan and the
actual interest rate on the Mezzanine Loan.

      "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1.

      "DEBT YIELD" means, at any time of determination, Net Cash Flow for the
trailing twelve (12) month period divided by the then outstanding principal
balance of the Loan and the Allocable Portion of the Mezzanine Loan.

      "DEFAULT" means any breach or default under any of the Loan Documents,
whether or not the same is an Event of Default, and also any condition or event
that, after notice or lapse of time or both, would constitute an Event of
Default if that condition or event were not cured or removed within any
applicable grace or cure period.

      "DEFAULT RATE" has the meaning set forth in Section 2.2.

      "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1.

      "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1.

      "DEPOSIT BANK" has the meaning set forth in Section 7.1.

      "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3.

      "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by
Moody's or A-1 or better by S&P or similarly rated by any successor to either of
such rating services, (b) obligations of the United States government or any
agency thereof which are backed by the full faith and credit of the United
States, or (c) deposits, including certificates of deposit, in any commercial
bank or trust company (i) which is registered to do business in any state of the

                                       6


United States, (ii) which has capital and surplus in excess of $100,000,000 and
(iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or
better by Moody's or is similarly rated by any successor thereof, provided that
each such item of commercial paper, each such obligation, and each such time
deposit has a maturity date not later than thirty days after the date of
purchase thereof.

      "DOLLARS" and the sign "$" mean the lawful money of the United States of
America.

      "ELIGIBLE ACCOUNT" means a separate and identifiable account from all
other funds held by the holding institution, which account is either (i) an
account maintained with an Eligible Bank or (ii) a segregated trust account
maintained by a corporate trust department of a federal depository institution
or a state chartered depository institution subject to regulations regarding
fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulations ss. 9.10(b), which, in either case, has corporate trust powers and
is acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.

      "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria.

      "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning
of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is
maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii)
which has at any time within the preceding six (6) years been maintained for the
employees of any of the Borrowers or any current or former ERISA Affiliate or
(iii) for which any of the Borrowers or any ERISA Affiliate has any liability,
including contingent liability.

      "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date
herewith from the Borrowers and Guarantor to Lender, as same may be amended or
modified from time to time.

      "ENVIRONMENTAL LAWS" means all present and future local, state, federal or
other governmental authority, statutes, ordinances, codes, orders, decrees,
laws, rules or regulations pertaining to or imposing liability or standards of
conduct concerning environmental regulation (including, without limitation,
regulations concerning health and safety), contamination or clean-up or the
handling, generation, release or storage of Hazardous Material affecting the
Properties including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know
Act of 1986, as amended, the Hazardous Substances Transportation Act, as
amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as
amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as
amended, the Safe Drinking Water Act, as amended, the Occupational Safety and
Health Act, as amended, any state superlien and environmental clean-up statutes
and all regulations adopted in respect of the foregoing laws whether now or
hereafter in effect.

      "ENVIRONMENTAL REPORTS" means those certain environmental reports and
audits for the Properties as described on EXHIBIT B.

      "ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6.

                                       7


      "EO13224" has the meaning set forth in Section 4.31.

      "ERISA" means the Employee Retirement Income Security Act of 1974, and all
rules and regulations promulgated thereunder.

      "ERISA AFFILIATE" means, in relation to any Person, any other Person under
common control with the first Person, within the meaning of Section 4001(a)(14)
of ERISA.

      "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of
London, England are generally open for interbank or foreign exchange
transactions and which is also a Business Day.

      "EVENT OF DEFAULT" has the meaning set forth in Section 8.1.

      "EXCESS CASH FLOW" has the meaning set forth in the Cash Management
Agreement.

      "EXCESS INTEREST" has the meaning set forth in Section 2.2.

      "EXCLUDED BORROWER" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED GUARANTIES" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED LOAN" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED LOAN AGREEMENT" has the meaning set forth in Section 2.12(G)
hereof.

      "EXCLUDED LOAN DOCUMENTS" has the meaning set forth in Section 2.12(G)
hereof.

      "EXCLUDED PROPERTY" has the meaning set forth in Section 2.12(G) hereof.

      "EXCULPATED PARTIES" has the meaning set forth in Section 12.2.

      "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash
Management Agreement.

      "FF&E" means all machinery, furniture, furnishings, equipment, fixtures
(including, without limitation, all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures), inventory and articles of
personal property and accessions, renewals and replacements thereof and
substitutions therefor (including, without limitation, beds, bureaus,
chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs,
carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings,
pictures, divans, couches, luggage carts, luggage racks, stools, sofas,
chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry
cleaning facilities, dining room wagons, tools, keys or other entry systems,
bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock
radios, television sets, intercom and paging equipment, electric and electronic
equipment, dictating equipment, private telephone systems, medical equipment,
potted plants, heating, lighting and plumbing fixtures, fire prevention and
extinguishing apparatus, cooling and air-conditioning systems, elevators,
escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry
machines, tools, machinery, engines,

                                       8


dynamos, motors, boilers, incinerators, switchboards, conduits, compressors,
vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call
systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets,
lockers, shelving, spotlighting equipment, dishwashers, garbage disposals,
washer and dryers), other customary hotel equipment and other tangible property
of every kind and nature whatsoever owned by the Borrowers, or in which the
Borrowers have or shall have an interest, now or hereafter located at the
Properties, or appurtenant thereto, and useable in connection with the present
or future operation and occupancy of the Properties and all building equipment,
material and supplies of any nature whatsoever owned by the Borrowers, or in
which the Borrowers have or shall have an interest, now or hereafter located at
the Properties, or appurtenant thereto, and useable in connection with the
present or future operation, enjoyment and occupancy of the Properties.

      "FF&E RESERVE" means the reserve established pursuant to Section 6.4.

      "FINANCIAL STATEMENTS" means statements of operations and retained
earnings, statements of cash flow and balance sheets.

      "FINANCING STATEMENTS" means the Uniform Commercial Code Financing
Statements naming the applicable Borrower Parties as debtor, and Lender as
secured party, required under applicable state law to perfect the security
interests created hereunder or under the other Loan Documents.

      "FITCH" means Fitch, Inc.

      "FORCE MAJEURE" means acts of god, governmental restrictions, stays,
judgments, orders, decrees, enemy actions, civil commotion, fire, casualty,
strikes or work stoppages which are industry-wide and not aimed at the Borrowers
or their Affiliates, or other causes beyond the reasonable control of the
Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of
itself shall not be deemed a cause beyond the control of the Borrowers.

      "FRANCHISE AGREEMENTS" means, collectively, those certain agreements
described in EXHIBIT C and any replacement franchise agreement which may
hereafter be entered into in accordance with the terms and conditions hereof by
any of the Borrowers, as franchisee, pursuant to which the Borrowers have the
right to operate the Properties under names and hotel systems controlled by the
Franchisor.

      "FRANCHISOR" means the current hotel franchisor or licensor with respect
to each Property or any other successor franchisor or licensor permitted
pursuant to Section 5.13.

      "FRANCHISOR LETTER" means, with respect to each Property, a comfort
letter(s), and/or similar instrument(s) from the related Franchisor to Lender
acknowledging the Loan and providing certain assurances, reasonably satisfactory
to Lender, with respect thereto.

      "FUNDING LOSSES" has the meaning set forth in Section 2.10.

      "FUNDING PARTY" means any bank or other entity, if any, which is
indirectly or directly funding Lender with respect to the Loan, in whole or in
part, including, without limitation, any direct or indirect assignee of, or
participant in, the Loan.

                                       9


      "GAAP" means generally accepted accounting principles as set forth in
Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting
Fairly in Conformity with Generally Accepted Accounting Principles in the
Independent Auditor's Report" issued by the Auditing Standards Board of the
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board to the extent such principles are
applicable to the facts and circumstances as of the date of determination.

      "GENERAL PARTNER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "General Partners", and any other entity which
is now or hereafter becomes a general partner of any of the Borrowers under such
Borrower's limited partnership agreement.

      "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or
state government or other political subdivision thereof and any entity,
including any regulatory or administrative authority or court, exercising
executive, legislative, judicial, regulatory or administrative or
quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal in each case having jurisdiction over such
applicable Person or such Person's property, and any stock exchange on which
shares of capital stock of such Person are listed or admitted for trading.

      "GROUND LEASE DEFAULT" has the meaning set forth in Section 4.30.

      "GROUND LEASED PROPERTIES" means the Properties subject to the Ground
Leases described on SCHEDULE 4.30 attached hereto.

      "GROUND LEASES" means the ground leases described on SCHEDULE 4.30
attached hereto.

      "GROUND LESSORS" means the lessors under the Ground Leases described on
SCHEDULE 4.30 attached hereto.

      "GUARANTOR" means Lodgian, Inc., a Delaware corporation.

      "GUARANTY" means the Guaranty of Recourse Obligations and the
Environmental Indemnity.

      "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse
Obligations of even date herewith from Guarantor to Lender, as same may be
amended or modified from time to time.

      "HAZARDOUS MATERIAL" means all or any of the following: (A) substances,
materials, compounds, wastes, products, emissions and vapors that are defined or
listed in, regulated by, or otherwise classified pursuant to, any applicable
Environmental Laws, including any so defined, listed, regulated or classified as
"hazardous substances", "hazardous materials", "hazardous wastes", "toxic
substances", "pollutants", "contaminants", or any other formulation intended to
regulate, define, list or classify substances by reason of deleterious, harmful
or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources; (C)
any flammable substances or explosives or any radioactive materials; (D)
asbestos in any

                                       10


form; (E) electrical or hydraulic equipment which contains any oil or dielectric
fluid containing polychlorinated biphenyls; (F) radon; (G) mold; or (H) urea
formaldehyde, provided, however, such definition shall not include cleaning
materials and other substances commonly used in the ordinary course of the
Borrowers' business, which materials exist only in reasonable quantities and are
stored, contained, transported, used, released, and disposed of in accordance
with all applicable Environmental Laws.

      "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established
pursuant to Section 6.6.

      "IMPOSITIONS" means (i) all real estate and personal property taxes, and
vault charges and all other taxes, levies, assessments and other similar
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, of every kind and nature whatsoever (including any payments in lieu
of taxes), which at any time prior to, at or after the execution hereof may be
assessed, levied or imposed by, in each case, a governmental authority upon any
of the Properties or the rents relating thereto or upon the ownership, use,
occupancy or enjoyment thereof, and any interest, cost or penalties imposed by
such governmental authority with respect to any of the foregoing and (ii) all
rent and other amounts payable by the Borrowers under each of the Ground Leases
and under the Condominium Property Documents. Impositions shall not include (x)
any sales or use taxes payable by the Borrowers, (y) taxes payable by tenants or
guests occupying any portions of the Properties, or (z) taxes or other charges
payable by any Manager or Franchisor unless such taxes are being paid on behalf
of the Borrowers.

      "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant
to Section 6.3.

      "IMPROVEMENTS" means all buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
of every kind and nature now or hereafter located on the Properties.

      "INDEBTEDNESS" or "INDEBTEDNESS", means, for any Person, without
duplication: (i) all indebtedness of such Person for borrowed money, for amounts
drawn under a letter of credit, or for the deferred purchase price of property
for which such Person or its assets is liable, (ii) all unfunded amounts under a
loan agreement, letter of credit (unless secured in full by Dollars), or other
credit facility for which such Person would be liable if such amounts were
advanced thereunder, (iii) all amounts required to be paid by such Person as a
guaranteed payment to partners or a preferred or special dividend, including any
mandatory redemption of shares or interests but not any preferred return or
special dividend paid solely from, and to the extent of, excess cash flow after
the payment of all operating expenses, capital improvements and debt service on
all Indebtedness, (iv) all obligations under leases that constitute capital
leases for which such Person is liable, and (v) all obligations of such Person
under interest rate swaps, caps, floors, collars and other interest hedge
agreements, in each case whether such Person is liable contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which
obligations such Person otherwise assures a creditor against loss.

      "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2.

                                       11


      "INDEMNITEES" has the meaning set forth in Section 14.2.

      "INDEPENDENT DIRECTOR" means an individual who shall not have been at the
time of such individual's appointment or at any time while serving as a director
of General Partner, Member, any of the Borrowers or any of their respective
Affiliates, and may not have been at any time during the preceding five years
(i) a stockholder, director (other than as an independent director/member),
officer, employee, partner, attorney or counsel of General Partner, Member,
Guarantor, any of the Borrowers or any Affiliate of any of them (except that
such individual may be an independent director of any other Affiliate of the
foregoing), (ii) a customer, supplier or other Person who derives any of its
purchases or revenues from its activities with General Partner, Member,
Guarantor, any of the Borrowers or any Affiliate of any of them (other than a
company that provides professional independent directors and which also may
provide other ancillary corporate, partnership, company or trust services to the
Borrowers, Member, General Partner or their Affiliates in the ordinary course of
business (for example, The Corporation Trust Company)), (iii) a Person or other
entity controlling or under common control with any such stockholder, partner,
customer, supplier or other Person, or (iv) a member of the immediate family of
any such stockholder, director, officer, employee, partner, customer, supplier
or other Person. As used in this definition, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management, policies or activities of a Person, whether through
ownership of voting securities, by contract or otherwise.

      "INITIAL TERM" means the period from the Closing Date to the Scheduled
Maturity Date.

      "INSURANCE POLICIES" has the meaning set forth in Section 5.4.

      "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance
policies required to be maintained by the Borrowers with respect to the
Properties under Section 5.4.

      "INTERESTED PARTIES" has the meaning set forth in Section 10.3.

      "INTEREST RATE" has the meaning set forth in Section 2.2.

      "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section
5.22.

      "IRC" means the Internal Revenue Code of 1986, and any rule or regulation
promulgated thereunder from time to time, in each case as amended from time to
time.

      "IRS" means the Internal Revenue Service or any successor thereto.

      "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents,
or in any document or certificate executed on behalf of any Borrower Party
pursuant to this Loan Agreement or any of the Loan Documents, reference is made
to the knowledge of the Borrowers or any other Borrower Party (whether by use of
the words "knowledge" or "known", or other words of similar meaning, and whether
or not the same are capitalized), such shall be deemed to refer to the knowledge
(without independent investigation or inquiry unless otherwise specified) of (i)
the individuals who have significant responsibility for any policy making, major
decisions or financial affairs of the applicable entity; (ii) the general
manager for the applicable Property; (iii) the regional vice president of
operations for Guarantor, the president of each Borrower and

                                       12


Member, with respect to operational issues of any Property or any of the
Borrowers; (iv) the chief operating officer of Guarantor, with respect to
representations regarding Guarantor; and (v) the person signing such document or
certificate.

      "LEASE" means any lease, tenancy, license, assignment and/or other rental
or occupancy agreement or other agreement or arrangement (including, without
limitation, any and all guaranties of any of the foregoing) heretofore or
hereafter entered into affecting the use, enjoyment or occupancy of, or the
conduct of any activity upon or in, the Properties or any portion thereof,
including any extensions, renewals, modifications or amendments thereof.

      "LENDER" is defined in the preamble.

      "LENDER'S CONSULTANT" has the meaning set forth in Section 6.7

      "LETTER OF CREDIT" means an irrevocable, unconditional, transferable,
clean sight draft letter of credit (either an evergreen letter of credit or one
which does not expire until at least thirty (30) days after the Maturity Date
(the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw
thereon in New York, New York based solely on a statement executed by an officer
or authorized signatory of Lender, in form and substance reasonably acceptable
to Lender and issued by an Eligible Bank. If at any time (a) the institution
issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if
the Letter of Credit is due to expire prior to the LC Expiration Date, Lender
shall have the right immediately to draw down the same in full and hold the
proceeds thereof in accordance with the provisions of this Loan Agreement,
unless the Borrowers shall deliver a replacement Letter of Credit from an
Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers
written notice to the Borrowers that the institution issuing the Letter of
Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty
(20) days prior to the expiration date of said Letter of Credit.

      "LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).

      "LOAN" has the meaning set forth in Section 2.1.

      "LOAN AGREEMENT" means this Loan and Security Agreement, as same may be
amended, modified or restated from time to time (including all schedules,
exhibits, annexes and appendices hereto).

      "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgages, the
Assignments of Leases, the Assignments of Management Agreements, the Guaranty,
the Financing Statements, the Cash Management Agreement and any and all other
documents and agreements from any of the Borrowers, General Partner, Member,
Guarantor or Manager and accepted by Lender for the purposes of evidencing
and/or securing the Loan, excluding the Mezzanine Loan Documents.

      "LOAN YEAR" means the twelve (12) month period commencing on July 1st of
any calendar year during the term of the Loan and ending on June 30th of the
following calendar year; provided that the first Loan Year shall commence on the
Closing Date and end on June 30, 2005.


                                       13


      "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1.

      "MANAGEMENT AGREEMENTS" means those certain Management Agreements
described in EXHIBIT E, between each Borrower and the applicable Manager
described therein, and any management agreement which may hereafter be entered
into in accordance with the terms and conditions hereof, pursuant to which any
subsequent Manager may hereafter manage one or more of the Properties.

      "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the
terms of the Management Agreements.

      "MANAGERS" means the managers described in EXHIBIT E or an Acceptable
Manager as may hereafter be charged with management of one or more of the
Properties approved by Lender in accordance with the terms and conditions
hereof.

      "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable
discretion, (A) a material adverse effect (which may include economic or
political events) upon the business, operations, properties, assets or condition
(financial or otherwise) of any of the Borrowers or Guarantor, or (B) the
impairment of the ability of any of the Borrowers or Guarantor to perform its
obligations under any Loan Documents, or (C) the impairment of the ability of
Lender to enforce or collect any of the Obligations as such Obligations become
due. In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then occurring events and existing
conditions would result in a Material Adverse Effect.

      "MATERIAL AGREEMENT" means any contract or agreement relating to the
ownership, management, development, use, operation, leasing, maintenance, repair
or improvement of the Properties under which there is an obligation of the
Borrowers, in the aggregate, to pay, or under which any of the Borrowers
receives in compensation, more than $500,000 per annum, other than (i) the
Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement
under which (x) there is an obligation of the Borrowers, in the aggregate, to
pay, or under which any of the Borrowers (or all the Borrowers in the aggregate)
receives in compensation, not more than $1,000,000 per annum and (y) which is
terminable by the Borrowers on not more than sixty (60) days prior written
notice without any fee or penalty.

      "MATERIAL ALTERATION" means any improvement or alteration to a Property
(other than decorative work such as painting, wallpapering and carpeting), the
cost of which exceeds the greater of (x) five percent (5%) of the Aggregate
Allocated Loan Amount with respect to the applicable Property or (y) $250,000,
and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget
then in effect, or as approved Work under Section 6.7 hereof.

      "MATERIAL LEASE" means any Lease of space in a Property which (i) is with
an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other
payments in an amount equal to or greater than $100,000, or has a term
(including all extensions and renewals which are unilaterally exercisable by the
tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by
either party thereto on thirty (30) days' notice without payment of a
termination fee,

                                       14


penalty or other cancellation fee, (iii) demises in excess of 2000 square feet
of space, or (iv) obligates the Borrowers to make any improvements to the
Properties either directly or through cash allowances (including, without
limitation, free rent, tenant improvement allowances, or landlord's construction
work) to the applicable tenant in excess of $25,000. For purposes of this
definition only, in determining the square footage demised under any Lease, all
space in the applicable Property which may in the future be demised to the
tenant under such Lease by reason of such tenant exercising any right or option
contained in such Lease shall be included in the calculation of the square
footage demised under such Lease.

      "MATURITY DATE" means July 1, 2009, or such other date on which the final
payment of principal of the Note becomes due and payable as herein provided,
whether at such stated maturity date, by acceleration, or otherwise.

      "MAXIMUM RATE" has the meaning set forth in Section 2.2.

      "MEMBER" means, individually or collectively, those parties identified on
SCHEDULE 4.1(C) as "Members" (being the managing or sole members of each of the
Borrowers which are limited liability companies) and any other entity which is
now or hereafter becomes the managing or sole member of any of the Borrowers
under such Borrower's limited liability company operating agreement.

      "MERRILL LYNCH" has the meaning set forth in Section 10.3.

      "MEZZANINE BORROWER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "Mezzanine Borrower".

      "MEZZANINE LENDER" means Merrill Lynch Mortgage Lending, Inc., its
successors and assigns.

      "MEZZANINE LOAN" means that certain loan being made on the date hereof
from Mezzanine Lender to Mezzanine Borrower.

      "MEZZANINE LOAN DOCUMENTS" means the documents evidencing and securing the
Mezzanine Loan, as same may be amended, modified or restated from time to time.

      "MINIMUM DEBT YIELD" means (i) during the first (1st) Loan Year, 9%, (ii)
during the second (2nd) Loan Year, 10%, (iii) during the third (3rd) Loan Year,
11%, (iv) during the fourth (4th) Loan Year, 12%, and (v) during the fifth (5th)
Loan Year, 13%.

      "MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4.

      "MOODY'S" means Moody's Investors Service.

      "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments
of Leases and Security Agreements, (ii) those certain Deeds of Trust,
Assignments of Leases and Security Agreements, and (iii) those certain Deeds to
Secure Debt, Assignment of Leases and Security Agreements, each of even date
herewith, from each Borrower to Lender (or deed trustee on

                                       15


behalf of Lender, as applicable), constituting a Lien on such Borrower's
respective Property as Collateral for the Loan as same may be modified or
amended from time to time.

      "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any
Affiliate is making, or is accruing an obligation to make, contributions or has
made, or been obligated to make, contributions within the preceding six (6)
years, or for which any of the Borrowers or any Affiliate has any liability,
including contingent liability.

      "NET CASH FLOW" means Net Operating Income for any period less (i) a base
management fee equal to the greater of (A) the actual base management fee for
such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve
for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due
to all Franchisors for such period.

      "NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which
Operating Revenues exceed Operating Expenses (excluding Management Fees,
interest, income taxes, depreciation, amortization, FF&E reserves, and fees due
to all Franchisors for such period).

      "NOTE" has the meaning set forth in Section 2.1.

      "OBLIGATIONS" means the Loan and all obligations, liabilities and
indebtedness of every nature to be paid or performed by the Borrowers under the
Loan Documents, including the principal amount of the Loan, interest accrued
thereon and all fees, costs and expenses, and other sums now or hereafter owing,
due or payable and whether before or after the filing of a proceeding under the
Bankruptcy Code by or against any of the Borrowers, and the performance of all
other terms, conditions and covenants under the Loan Documents.

      "OFAC" has the meaning set forth in Section 4.31.

      "O&M PLANS" has the meaning set forth in Section 5.7.

      "OPERATING BUDGET" means, collectively, for any period, the Borrowers'
budgets setting forth the Borrowers' best estimate, after due consideration, of
all Operating Revenues and Operating Expenses and any other revenues, costs and
expenses for each of the Properties for such period, which budgets have been
approved by Lender in accordance herewith, as same may be amended pursuant to
Section 5.1(D) hereof.

      "OPERATING EXPENSES" means, for any period, without duplication, all costs
and expenses of operating, maintaining and managing the Properties determined in
accordance with GAAP, including, without limitation, Impositions (due and
payable during the applicable period of determination), Insurance Premiums,
repair and maintenance costs, Management Fees and costs, fees payable to all
Franchisors, utilities, accounting, legal and other professional fees, fees
relating to environmental and financial audits, wages, salaries, payroll taxes
and benefits, business franchise taxes, tips and gratuities paid to employees
and staff and other personnel expenses, costs and expenses related to operating
and maintaining all guest rooms, restaurants (including inventory and supplies),
retail stores and shops, bars, meeting rooms, banquet rooms, apartments, parking
and recreational facilities, and all other "costs and expenses" as defined in

                                       16


the Uniform System; but excluding principal and interest payments on the Loan,
fees and expenses of a non-operating nature and fees and expenses due and
payable to or for the benefit of Lender under this Loan Agreement or any of the
other Loan Documents (including, without limitation, all loan servicing fees and
expenses, and expenses related to a Cap), expenses which, in accordance with
GAAP, should be capitalized, any expense paid by a tenant that would otherwise
be an Operating Expense, capital expenditures, tenant improvement allowances and
leasing commissions, if any, asset management fees, any payment or expense for
which each Borrower was or is to be reimbursed from proceeds of the Loan or
insurance or by any third party, any fees or expenses paid to any partner or
member of the Borrowers for services provided to any of the Borrowers and any
non-cash charges such as depreciation and amortization. Operating Expenses shall
not include federal, state or local income taxes or legal and other professional
fees unrelated to the operation of the Properties.

      "OPERATING REVENUES" means, without duplication, all revenues and receipts
of the Borrowers from operation of the Properties or otherwise arising in
respect of the Properties which are properly allocable to the Properties for the
applicable period in accordance with GAAP, including, without limitation, all
hotel receipts, revenues and credit card receipts collected from guest rooms,
restaurants and bars (including without limitation, service charges for
employees and staff), mini-bars, meeting rooms, banquet rooms, apartments,
parking and recreational facilities, health club membership fees, food and
beverage wholesale and retail sales, service charges, convention services,
special events, audio-visual services, boat cruises, travel agency fees,
internet booking fees, telephone charges, laundry services, vending machines and
otherwise, all rents, revenues and receipts now existing or hereafter arising or
created out of the sale, lease, sublease, license, concession or other grant of
the right of the possession, use or occupancy of all or any portion of the
Properties or personalty located thereon, or rendering of service by any of the
Borrowers or any operator or manager of the hotel or commercial space
(including, without limitation, from the rental of any office space, retail
space, guest rooms or other space, halls, stores and deposits securing
reservations of such space (only to the extent such deposits are not required to
be returned or refunded to the depositor)), proceeds from rental or business
interruption insurance relating to business interruption or loss of income for
the period in question and any other items of revenue which would be included in
operating revenues under the Uniform System; but excluding proceeds from the
sale of FF&E, abatements, reductions or refunds of real estate or personal
property taxes relating to the Properties, dividends on insurance policies
relating to the Properties, condemnation proceeds arising from a temporary
taking of all or a part of any Properties, security and other deposits until
they are forfeited by the depositor, advance rentals until they are earned,
proceeds from a sale, financing or other disposition of the Properties or any
part thereof or interest therein and other non-recurring revenues as determined
by Lender, insurance proceeds (other than proceeds from rental or business
interruption insurance), other condemnation proceeds, capital contributions or
loans to any of the Borrowers, disbursements to any of the Borrowers from the
Reserves, sales, use and occupancy taxes collected from customers or patrons of
the Properties to be remitted to the applicable taxing authorities, and
gratuities or service charges collected on behalf of and remitted to employees
or contractors of the Properties.

      "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1.


                                       17


      "PAYMENT DATE" means the first day of each calendar month occurring during
the term of the Loan (or if such day is not a Business Day, the immediately
succeeding Business Day).

      "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3.

      "PERMITTED ENCUMBRANCES" means, collectively, (i) the Mortgages and the
other Liens of the Loan Documents in favor of Lender, (ii) the items shown in
Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not
yet due and payable or Liens arising after the date hereof which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted in accordance with Section 5.3(B) hereof; (iv) in the case
of Liens arising after the date hereof, statutory Liens of carriers,
warehousemen, mechanics, materialmen and other similar Liens arising by
operation of law, which are incurred in the ordinary course of business and
discharged by the Borrowers by payment, bonding or otherwise within forty-five
(45) days after the filing thereof or which are being contested in good faith in
accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and
customary purchase money financing of personal property and equipment leasing to
the extent the same are created in the ordinary course of business in accordance
with Section 5.17(B) hereof; (vi) all easements, rights-of-way, restrictions and
other similar charges or non-monetary encumbrances against real property which
do not materially adversely affect (A) the ability of the Borrowers to pay any
of their obligations to any Person as and when due, (B) the marketability of
title to the Properties, (C) the fair market value of the Properties, or (D) the
use or operation of the Properties as of the Closing Date and thereafter; (vii)
rights of existing and future tenants, as tenants only, pursuant to the Leases;
(viii) any other Lien to which Lender may expressly consent in writing; and (ix)
Liens of the Mezzanine Loan Documents in favor of Mezzanine Lender.

      "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17.

      "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management
Agreement.

      "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in
Section 11.2.

      "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies
the requirements of Article IX hereof) controlled by, and more than 51% of which
is owned by, one of the following:

      (i) a pension fund, pension trust or pension account that (a) has total
real estate assets of at least $2.5 Billion and (b) is managed by a Person who
controls real estate equity assets (not including the Properties) having a fair
market value of at least $1.25 Billion; or

      (ii) a pension fund advisor who (a) immediately prior to such transfer,
controls at least $1 Billion of real estate equity assets and (b) is acting on
behalf of one or more pension funds that, in the aggregate, satisfy the
requirements of clause (i) of this definition; or

      (iii) an insurance company which is subject to supervision by the
insurance commissioner, or a similar official or agency, of a state or territory
of the United States (including the District of Columbia) (a) with a net worth,
as of the date immediately prior to the date of the transfer, of at least $1
Billion and (b) who, immediately prior to such transfer,


                                       18


controls real estate equity assets (not including the Properties) having a fair
market value of at least $2.5 Billion; or

      (iv) a corporation organized under the banking laws of the United States
or any state or territory of the United States (including the District of
Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b)
who, immediately prior to such transfer, controls real estate equity assets (not
including the Properties) having a fair market value of at least $5 Billion; or

      (v) any other Person (a) with a long-term unsecured debt rating from the
Rating Agencies of at least investment grade and (b) that owns or operates at
least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior
to the date of such transfer, of at least $750 Million and (iii) immediately
prior to such transfer, controls real estate equity assets (not including the
Properties) having a fair market value of at least $1.5 Billion.

      "PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof
and their respective permitted successors and assigns (or in the case of a
governmental Person, the successor functional equivalent of such Person).

      "PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5.

      "PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6.

      "PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General
Partner and Member.

      "PROHIBITED PERSON" has the meaning set forth in Section 4.31.

      "PROPERTIES" and "PROPERTY" means, collectively or individually, the
properties (including land and Improvements) described in EXHIBIT A, together
with all Improvements now or hereafter located thereon and all related
facilities, amenities and FF&E owned by the Borrowers and which shall be
encumbered by and are more particularly described in the respective Mortgages:
provided that, following a Release, "PROPERTIES" means each of the Properties
that remain encumbered by the Mortgages as Collateral for the Loan.

      "PROPERTY CONDITION REPORT" means those certain property condition reports
for the Properties as described on EXHIBIT J.

      "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property
improvement plans for the Properties described on EXHIBIT G and any future
Property Improvement Plans required to be implemented by the applicable
Franchisor.

      "PROPERTY RELEASE" has the meaning set forth in Section 11.4.

                                       19


      "RATING AGENCY" means, prior to a securitization, any of S&P, Moody's and
Fitch or any other nationally-recognized statistical rating organization
designated by Lender in its sole discretion, and, after a Securitization, each
Rating Agency which has rated the Securities that are the subject of the
Securitization.

      "RATING CONFIRMATION" with respect to the transaction or matter in
question, means: (i) if all or any portion of the Loan, by itself or together
with other loans, has been the subject of a Securitization, then each applicable
Rating Agency shall have confirmed in writing that such transaction or matter
shall not result in a downgrade, qualification, or withdrawal of any rating then
in effect for any certificate or other securities issued in connection with such
Securitization; and (ii) if all of the Loan has not been the subject of a
Securitization, then Lender shall have determined in its reasonable discretion
(taking into consideration such factors as Lender may in good faith determine,
including the attributes of the loan pool in which the Loan might reasonably be
expected to be securitized) that no rating for any certificate or other
securities that would be issued in connection with a Securitization of such
portion of the Loan will be downgraded, qualified, or withheld by reason of such
transaction or matter.

      "RATING CRITERIA" with respect to any Person, means that (i) the
short-term unsecured debt obligations of such Person are rated at least "A-1" by
S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person
for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.

      "RECEIPTS" means all revenues, receipts and other payments of every kind
arising from ownership or operation of the Properties, including without
limitation, all warrants, stock options, or equity interests in any tenant,
licensee or other Person occupying space at, or providing services related to or
for the benefit of, the Properties received by the Borrowers or any Related
Person of the Borrowers in lieu of rent or other payment.

      "RELATED PERSON" means any Person in which any of the Borrowers or the
Guarantor holds greater than a ten percent (10%) equity interest.

      "RELEASE" has the meaning set forth in Section 11.4.

      "RELEASE DATE" has the meaning set forth in Section 11.4.

      "RELEASE PRICE" means an amount equal to one hundred twenty-five percent
(125%) of the Allocated Loan Amount of the applicable Property.

      "RENT ROLL" has the meaning set forth in Section 3.1.

      "RENTS" has the meaning set forth in the Mortgages.

      "REPLACEMENTS" has the meaning set forth in Section 6.4.

      "REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5.

                                       20


      "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1.

      "RESERVES" means the reserves held by or on behalf of Lender pursuant to
this Loan Agreement or the other Loan Document, including without limitation,
the reserves established pursuant to Article VI.

      "RESTORATION" has the meaning set forth in Section 5.5.

      "RESTORATION THRESHOLD" means the greater of (x) $250,000 or (y) five
percent (5%) of the Aggregate Allocated Loan amount of the applicable Property,
not to exceed $500,000, per Property per occurrence.

      "REVPAR" means average room revenues per available room per day.

      "S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.

      "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" means the monthly payments of
principal for each Payment Date as set forth on SCHEDULE 2.4 attached hereto;
which payment amounts were calculated based upon a twenty-five (25) year
amortization schedule at the Interest Rate. In the event that the amount of
principal prepayments on the Loan from application of casualty insurance
proceeds or condemnation awards under Section 5.5 shall exceed $10,000,000, in
the aggregate, from the Closing Date or from the date of the last
re-amortization of the Loan under this sentence, Lender shall recalculate the
Scheduled Mortgage Principal Payments based upon the then remaining principal
amount of the Loan and the foregoing assumptions and deliver a revised SCHEDULE
2.4 to the Borrowers, which revised schedule shall replace SCHEDULE 2.4 hereto
in its entirety.

      "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1.

      "SECURITIES" (whether or not capitalized) means any stock, shares, voting
trust certificates, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.

      "SECURITIZATION" means a rated offering of securities representing direct
or indirect interests in the Loan or the right to receive income therefrom.

      "SERVICER" means a servicer selected by Lender from time to time in its
sole discretion to service the Loan.

      "SERVICING FEE" has the meaning set forth in Section 2.11.

      "SPE EFFECTIVE DATE" means the later of (x) November 25, 2002, or (y) the
date of formation of the applicable Person in its respective jurisdiction of
formation.

                                       21


      "SUB-ACCOUNTS" has the meaning set forth in Section 7.1.

      "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the
budgeted income and expenses and the actual income and expenses for the prior
calendar year or corresponding calendar quarter for such prior year, (ii) a
calculation of the average daily rate, RevPAR and average occupancy statistics
for the Properties for the applicable period, (iii) a calculation of the Debt
Service Coverage Ratio and the Debt Yield for the applicable period (which shall
not be binding on Lender), and (iv) such other financial reports as the subject
entity shall routinely and regularly prepare.

      "SURVEY" has the meaning set forth in Section 3.1.

      "TAX LIABILITIES" has the meaning set forth in Section 2.9.

      "TIER 1 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, as
applicable, identified in the "Tier 1" category on EXHIBIT I.

      "TIER 2 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 2" category on EXHIBIT I.

      "TIER 3 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 3" category on EXHIBIT I.

      "TITLE COMPANIES" means LandAmerica Title Insurance Company and Stewart
Title Insurance Company, as co-insurers, and/or such other national title
insurance company as may be acceptable to Lender.

      "TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title
insurance pertaining to the Mortgages issued by the Title Companies to Lender in
connection with the Closing.

      "TRANSFER" has the meaning set forth in Section 11.2.

      "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3.

      "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary
termination of any Franchise Agreement, (y) the failure to pay to any Franchisor
any amount due under any Franchise Agreement (a, "FRANCHISE PAYMENT DEFAULT")
and the continuance thereof beyond any applicable notice and grace period under
such Franchise Agreement or the occurrence of one or more breaches or defaults
(other than Franchise Payment Defaults) and the continuance thereof beyond all
applicable notice and grace periods, if any, under such Franchise Agreements (or
such other cure periods as may be provided by the applicable Franchisors in
writing) covering Properties with Allocated Loan Amounts of ten percent (10%) or
more of the outstanding principal balance of the Loan; provided, however, no
Uncured Franchise Default shall be deemed to have occurred under clause (x)
above with respect to any Property following

                                       22


the voluntary or involuntary termination of the applicable Franchise Agreement
if (a) within ten (10) Business Days of the termination of such Franchise
Agreement (and at the time of delivery of each report pursuant to Section
5.1(A)(v)), the applicable Borrower delivers to Lender evidence reasonably
satisfactory to Lender that such Borrower is diligently pursuing efforts to
enter into a new Franchise Agreement with an Acceptable Franchisor for the
applicable Property and such Borrower shall thereafter diligently and
continuously pursue such efforts to enter into a new Franchise Agreement, (b) at
the time of such termination no other Property shall be in operation without
being subject to a Franchise Agreement, (c) the Allocated Loan Amount of the
Property covered by such Franchise Agreement is not more than five percent (5%)
of the outstanding principal balance of the Loan or such Property shall not be
in operation for more than five (5) consecutive days without being subject to a
Franchise Agreement, and (d) no Property shall be without a Franchise Agreement
in place for a period in excess of six (6) months from the termination of the
applicable Franchise Agreement.

      "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging
Industry promulgated by the American Hotel and Motel Association, as in effect
from time to time.

      "WAIVING PARTY" has the meaning set forth in Section 13.1.

      "WORK" has the meaning set forth in Section 6.7.

      "WORK RESERVES" has the meaning set forth in Section 6.7.

      "ZONING REPORTS" means those certain zoning and site requirements
summaries for the Properties as described on EXHIBIT K.

SECTION 1.2 ACCOUNTING TERMS.

      For purposes of this Loan Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to such terms in conformity with
GAAP or the Uniform System, as the case may be.

SECTION 1.3 OTHER DEFINITIONAL PROVISIONS.

      References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and
"SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules,
respectively, of this Loan Agreement unless otherwise specifically provided. Any
of the terms defined in Section 1.1 may, unless the context otherwise requires,
be used in the singular or the plural depending on the reference. In this Loan
Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer
to this Loan Agreement as a whole and not merely to the specific article,
section, subsection, paragraph or clause in which the respective word appears;
words importing any gender include the other genders; references to "WRITING"
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be
deemed to be followed by the words "without limitation"; and any reference to
any statute or regulation may include any amendments of same and any successor
statutes and regulations. Further, (i) any reference to any agreement or other
document may include subsequent amendments, assignments, and other modifications
thereto, and (ii) any reference to any Person may include such Person's
respective permitted successors and assigns

                                       23


or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons.

                                   ARTICLE II
                                TERMS OF THE LOAN

SECTION 2.1 LOAN.

      (A) LOAN. Subject to the terms and conditions of this Loan Agreement and
in reliance upon the representations and warranties of the Borrowers contained
herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to
borrow from Lender, a loan in the original principal amount of $66,818,500 (the
"LOAN").

      (B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to
Lender a Promissory Note, dated of even date herewith (as amended, modified or
restated, and any replacement or substitute notes therefor, by means of multiple
notes or otherwise, collectively, the "NOTE"), made by the Borrowers to the
order of Lender, in the original principal amount of $66,818,500.

      (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be
used to (i) refinance existing indebtedness; (ii) pay all recording fees and
taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses
incurred by Lender, including reasonable legal fees and expenses of counsel to
Lender, and other costs and expenses approved by Lender (which approval will not
be unreasonably withheld) related to the Loan; (iii) establish the Reserves
required hereunder; and (iv) provide for general corporate purposes, including,
without limitation, payment of transaction costs and expenses incurred by the
Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or
as otherwise directed by the Borrowers.

SECTION 2.2 INTEREST.

      (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall
bear interest at a rate per annum equal to six and five hundred seventy-seven
one-thousandths percent (6.577%) (the "INTEREST RATE").

      (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and
during the continuance of an Event of Default and in any event from and after
the Maturity Date of the Loan and until the Loan and all other Obligations are
satisfied in full, the outstanding principal balance of the Loan and all other
Obligations shall bear interest until paid in full at a rate per annum that is
four percent (4%) in excess of the Interest Rate otherwise applicable under this
Loan Agreement and the Note (the "DEFAULT RATE").

      (C) COMPUTATION OF INTEREST. Interest on the Loan and all other
Obligations owing to Lender shall be computed on the basis of a 360-day year,
and shall be charged for the actual number of days elapsed during any month or
other accrual period. Interest shall be payable in arrears.

      (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained
in this Loan Agreement or the other Loan Documents, the Borrowers shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum

                                       24


amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest
is provided for or determined by a court of competent jurisdiction to have been
provided for in this Loan Agreement or in any of the other Loan Documents, then
in such event: (1) the provisions of this subsection shall govern and control;
(2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any
Excess Interest that Lender may have received hereunder shall be, at Lender's
option, (a) applied as a credit against either or both of the outstanding
principal balance of the Loan or accrued and unpaid interest thereunder (not to
exceed the maximum amount permitted by law), (b) refunded to the payor thereof,
or (c) any combination of the foregoing; (4) the interest rate(s) provided for
herein shall be automatically reduced to the maximum lawful rate allowed from
time to time under applicable law (the "MAXIMUM RATE"), and this Loan Agreement
and the other Loan Documents shall be deemed to have been and shall be, reformed
and modified to reflect such reduction; and (5) the Borrowers shall not have any
action against Lender for any damages arising out of the payment or collection
of any Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligation is calculated at the Maximum Rate rather than the
applicable rate under this Loan Agreement, and thereafter such applicable rate
becomes less than the Maximum Rate, the rate of interest payable on such
Obligations shall, to the extent permitted by law, remain at the Maximum Rate
until Lender shall have received or accrued the amount of interest which Lender
would have received or accrued during such period on Obligations had the rate of
interest not been limited to the Maximum Rate during such period. If the Default
Rate shall be finally determined to be unlawful, then the Interest Rate shall be
applicable during any time when the Default Rate would have been applicable
hereunder, provided however that if the Maximum Rate is greater or lesser than
the Interest Rate, then the foregoing provisions of this paragraph shall apply.

      (E) LATE CHARGES. If an Event of Default regarding non-payment of
principal, interest or other sums due hereunder or under any of the other Loan
Documents shall occur, then the Borrowers shall pay to Lender, in addition to
all sums otherwise due and payable, a late fee in an amount equal to five
percent (5.0%) of such principal, interest or other sums due hereunder or under
any other Loan Document, such late charge to be immediately due and payable
without demand by Lender.

SECTION 2.3 RESERVED.

SECTION 2.4 PAYMENTS.

      (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments
of interest and principal on the Note as follows:

            (i) The Borrowers shall make a payment to Lender of interest only on
the Closing Date for the period from and including the Closing Date through and
including the last day of the calendar month in which the Closing occurs; and

            (ii) Commencing on August 1, 2004 and on each Payment Date
thereafter through but not including the Maturity Date, the Borrowers shall make
a payment of interest on the Loan for the prior calendar month, and in addition
shall make a payment of principal on the Loan in an amount equal to the
Scheduled Mortgage Principal Payment for such Payment Date.

                                       25


      (B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for
payments on the Loan which are transferred to the account of Lender as provided
below (i) on the day that such funds are received by Lender if such receipt
occurs by 2:00 p.m. (New York time) on such day, or (ii) on the next succeeding
Business Day after such funds are received by Lender if such receipt occurs
after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall
be stated to be due on a day that is not a Business Day, the payment may be made
on the next succeeding Business Day.

      (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to
pay all of the Obligations relating to the Loan as such amounts become due or
are declared due pursuant to the terms of this Loan Agreement. All payments by
the Borrowers on the Loan shall be made without deduction, defense, set off or
counterclaim and in immediately available funds delivered to Lender by wire
transfer to such accounts at such banks as Lender may from time to time
designate. Prior to an Event of Default, each payment shall be applied first to
pay late charges and the charges and expenses of Lender, Servicer and any
special servicer as provided hereunder, second to accrued and unpaid interest,
and the balance to principal. Prior to an Event of Default, to the extent
sufficient funds are contained in the Lock Box Account, or an Account or
Sub-Account thereof, to make the required monthly payments to the applicable
Reserves and Sub-Account on such Payment Date, the Borrowers shall be deemed to
have satisfied their obligations to make such payments. Upon the occurrence and
during the continuance of an Event of Default, payments shall be applied to the
Obligations in such order as Lender shall determine in its sole and absolute
discretion.

SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance
with the Loan Documents, the then outstanding principal balance of the Loan, all
accrued and unpaid interest thereon, and all other sums then owing to Lender
hereunder and under the Note, the Mortgages and the other Loan Documents, shall
be due and payable on the Maturity Date.

SECTION 2.6 PREPAYMENT.

      (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON
ACCELERATION. The Borrowers shall have no right to prepay the Loan in whole or
in part at any time, except as expressly set forth in this provision. On and
after May 1, 2009, the Borrowers may prepay the Loan in whole, but not in part,
without payment of Prepayment Consideration, provided that (i) the Borrowers
shall provide to Lender not less than fifteen (15) days prior written notice of
such prepayment, (ii) together with such prepayment the Borrowers also shall pay
all accrued and unpaid interest and all other Obligations then due and owing,
(iii) if such prepayment occurs on any day other than a Payment Date, then
together therewith the Borrowers also shall pay to Lender the amount of interest
that would have accrued on the amount being prepaid from and including the date
of such prepayment to the end of such calendar month.

      (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion
of the Loan shall occur prior to May 1 2009, on account of acceleration of the
Loan (whether or not due to an Event of Default), or otherwise, then except only
as expressly provided in this Loan Agreement or the other Loan Documents to the
contrary, the Borrowers shall pay the Prepayment Consideration on the amount
prepaid to Lender together with such prepayment, as liquidated damages and
compensation for costs incurred, and in addition to all other amounts due

                                       26


and owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration
will be due as to a prepayment of the Loan in connection with (i) application of
insurance or condemnation proceeds required by Lender pursuant to this Loan
Agreement or the Mortgages in the absence of an Event of Default, (ii) Scheduled
Mortgage Principal Payments. The foregoing designation of any amount of
Prepayment Consideration in this Agreement shall not create a right to prepay at
any time or in any circumstances where this Agreement does not expressly state
that such a right exists.

      (C) DEFINITIONS. The following terms shall have the meanings indicated:

            "PREPAYMENT CONSIDERATION" shall mean an amount equal to the greater
of (i) one percent (1%) of the Loan balance at the time of prepayment and (ii)
the Yield Maintenance Amount.

            "YIELD MAINTENANCE AMOUNT" shall mean the positive difference, if
any, between (i) the present value on the date of prepayment (by acceleration or
otherwise) of all future installments of principal and interest which the
Borrowers would otherwise be required to pay under the Note from the date of
such prepayment until the Maturity Date absent such prepayment, including the
unpaid principal amount which might otherwise be due upon the Maturity Date
absent such prepayment, with such present value being determined by the use of a
discount rate equal to the yield to maturity (adjusted to a "Mortgage Equivalent
Basis" pursuant to the standards and practices of the Securities Industry
Association), on the date of such prepayment of the United States Treasury
Security having the term to maturity closest to what otherwise would have been
the remaining term hereof absent such prepayment and (ii) the principal balance
of the Loan on the date of such prepayment.

SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall
be presumptive evidence (absent manifest error) of the amounts owing to Lender
by the Borrowers; provided that any failure to record any transaction affecting
such balance or any error in so recording shall not limit or otherwise affect
the Borrowers' obligation to pay the Obligations.

SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or
under the Note shall be made free and clear of and without deduction for any and
all taxes, withholding taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto arising out of or in
connection with the transactions contemplated by the Loan Documents (all such
taxes, levies, imposts, deductions, charges or withholdings and all liabilities
with respect thereto (excluding taxes imposed on net income in accordance with
the following sentence) herein "TAX LIABILITIES"). Notwithstanding the
foregoing, the Borrowers shall not be liable for taxes imposed on the net income
of Lender by the jurisdiction under the laws of which Lender is organized or
doing business or any political subdivision thereof and taxes imposed on its net
income by the jurisdiction of Lender's applicable lending office or any
political subdivision thereof. If the Borrowers shall be required by law to
deduct any such Tax Liabilities (or amounts in estimation or reimbursement for
the same) from or in respect of any sum payable hereunder to Lender, then the
sum payable hereunder shall be increased as may be necessary so that, after
making all required deductions, Lender receives an amount equal to the sum it
would have received had no such deductions been made.

                                       27


SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the
actual costs and damages that Lender would suffer by reason of an Event of
Default (exclusive of the attorneys' fees and other costs incurred in connection
with enforcement of Lender's rights under the Loan Documents) or a prepayment
would be difficult and needlessly expensive to calculate and establish, and (ii)
the amounts of the Default Rate, the late charges, and the Prepayment
Consideration are reasonable, taking into consideration the circumstances known
to the parties at this time, and (iii) such Default Rate and late charges and
Lender's reasonable attorneys' fees and other costs and expenses incurred in
connection with enforcement of Lender's rights under the Loan Documents shall be
due and payable as provided herein, and (iv) such interest at the Default Rate,
late charges, Prepayment Consideration, and the obligation to pay Lender's
reasonable attorneys' fees and other enforcement costs do not, individually or
collectively, constitute a penalty.

SECTION 2.10 RESERVED.

SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from
time to time without the consent of the Borrowers, on prior written notice to
the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's
fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths
of one percent (.05%) per annum on the outstanding principal balance of the
Loan, payable in monthly installments, and if the Loan becomes a specially
serviced loan, any fees of the special servicer, shall be payable by the
Borrowers and shall constitute a portion of the Obligations; provided, however,
that at no time shall the Borrowers be liable for Servicing Fees or special
servicing fees in excess of those fees charged to Lender by the Servicer or any
special servicer.

SECTION 2.12 CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF
CROSS-COLLATERALIZATION.

      (A) Until repayment of the Indebtedness and the Crossed Indebtedness and
satisfaction of all obligations under this Agreement and the Crossed Loan
Agreement, each Borrower acknowledges and agrees (subject to Lender's
election(s) at Lender's sole discretion from time to time pursuant to Section
2.12(G) below): (i) that the Properties shall secure not only the Loan but also
the Crossed Loans, and that the Liens of the Loan Documents shall constitute
Liens securing not only the Loan but also the Crossed Loans; (ii) that the
Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured
by such Crossed Properties; and (iii) that Lender would not make the Loan to the
Borrowers or the loans constituting the Crossed Loans unless the Borrowers and
the Crossed Borrowers granted liens on the Properties and, in addition, the
Crossed Properties of the Crossed Borrowers to secure the payment of the Loan
and the Crossed Loans.

      (B) Until the date that all of the Loan and the Crossed Loans shall have
been paid and satisfied in full, the Borrowers (i) shall have no right of
subrogation with respect to the Crossed Loans and (ii) waive any right to
enforce any remedy which Lender now has or may hereafter have against the
Crossed Borrowers, any endorser or any guarantor of all or any part of the
Crossed Loans or any other individual or entity, and the Borrowers waive any
benefit of, and any right to participate in, any security or collateral given to
Lender to secure the payment or performance of all or any part of the Crossed
Loans or any other liability of any of the Crossed Borrowers to Lender. Should
any Borrower have the right, notwithstanding the foregoing, to

                                       28


exercise its subrogation rights, each Borrower hereby expressly and irrevocably
(1) subordinates any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off that such
Borrower may have to the payment in full in cash of the Loan and the Crossed
Loans and (2) waives any and all defenses available to a surety, guarantor or
accommodation co-obligor until the Loan and the Crossed Loans are paid in full
in cash. Each Borrower acknowledges and agrees that this subordination is
intended to benefit Lender and shall not limit or otherwise affect any
Borrower's liability hereunder or the enforceability of this Loan Agreement or
the Crossed Loan Documents.

      (C) Each Borrower agrees that any and all claims of such Borrower against
any of the Crossed Borrowers or any endorser or any guarantor of all or any part
of the Crossed Loans (collectively, the "CROSSED OBLIGORS") with respect to any
obligations, liabilities or indebtedness now or hereafter owing by the Crossed
Obligors, or any of them, to such Borrower, or otherwise existing or claimed to
be owed or to exist on the part of any of the Crossed Obligors, or against any
of their respective properties (collectively, the "CROSSED PARTY OBLIGATIONS")
shall be subordinate and subject in right of payment to the prior payment, in
full and in cash, of all the Loan and the Crossed Loans. Notwithstanding any
right of any Borrower to ask, demand, sue for, take or receive any payment from
any of the Crossed Obligors, all rights, liens and security interests of each
Borrower, whether now or hereafter arising and howsoever existing, in and to any
assets of any of the Crossed Obligors shall be and are subordinated to the
rights of Lender in those assets under the Loan Documents, the Crossed Loan
Documents or otherwise, and no Borrower shall, until the date that all of the
Loan and the Crossed Loans shall have been paid and satisfied in full, (i)
assert, collect, sue upon, or enforce all or any part of the Crossed Party
Obligations; (ii) commence or join with any other creditors of any of the
Crossed Obligors in commencing any bankruptcy, reorganization, receivership or
insolvency proceeding against any of the Crossed Obligors; (iii) take, accept,
ask for, sue for, receive, set off or demand any payments upon the Crossed Party
Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to
be created liens, security interests, mortgages, deeds of trust or pledges of or
with respect to any of the assets of any of the Crossed Obligors in favor of or
for the benefit of such Borrower.

      (D) If all or any part of the assets of any of the Crossed Obligors, or
the proceeds thereof, are subject to any distribution, division or application
to the creditors of such Crossed Obligor, whether partial or complete, voluntary
or involuntary, and whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding, or if the business of any such Crossed Obligor is dissolved or if
substantially all of the assets of any such Crossed Obligor are sold, then, and
in any such event (such events being herein referred to as an "CROSSED OBLIGOR
INSOLVENCY EVENT"), any payment or distribution of any kind or character, either
in cash, securities or other property, which shall be payable or deliverable to
any Borrower upon or with respect to any Crossed Party Obligations shall be paid
or delivered directly to the Lender for application on the Loan and the Crossed
Loans, due or to become due, until such Loan and Crossed Loans shall have first
been fully paid and satisfied (in cash). Should any payment, distribution,
security or instrument or proceeds thereof be received by any Borrower upon or
with respect to the Crossed Party Obligations after any Crossed Obligor
Insolvency Event and prior to the payment in full and satisfaction of all of the
Loan and Crossed Loans, such Borrower shall receive and hold the same in trust,
as trustee, for the benefit of Lender and shall forthwith deliver the same to
Lender in precisely the form

                                       29


received (except for the endorsement or assignment of such Borrower where
necessary), for application to any of the Loan or Crossed Loans, due or not due,
and, until so delivered, the same shall be held in trust by such Borrower as the
property of Lender. If such Borrower fails to make any such endorsement or
assignment to Lender, Lender or any of its officers or employees is irrevocably
authorized to make the same. Each Borrower agrees that until the Loan and
Crossed Loans have been paid in full (in cash) and satisfied, no Borrower will
assign or transfer to any individual or entity (other than Lender) any claim
such Borrower has or may have against any Crossed Obligor.

      (E) Subject to the provisions of Section 2.12(G), to the extent that any
collection upon any of the Loan or the Crossed Loans is made by Lender from one
of the Crossed Borrowers or the Crossed Properties or other assets of the
Crossed Borrowers (a "CROSSED LOANS COLLECTION") which, taking into account all
other Crossed Loans Collections then previously or concurrently made by such
Crossed Borrower, exceeds the amount which otherwise would have been collected
from such Crossed Borrower if each Borrower and each Crossed Borrower had paid
the portion of the Loan and Crossed Loans satisfied by such Crossed Loans
Collection in the same proportion as such Crossed Borrower's Allocable Amount
(as defined below) (as determined immediately prior to such Crossed Loans
Collection) bore to the aggregate Allocable Amounts of each Borrower and each
Crossed Borrower as determined immediately prior to the making of such Crossed
Loans Collection, then, following payment in full in cash of the entire Loan and
Crossed Loans, such Crossed Borrower shall be entitled to receive contribution
and indemnification payments from, and be reimbursed by, each Borrower and each
of the other Crossed Borrowers for the amount of such excess, pro rata based
upon their respective Allocable Amounts in effect immediately prior to such
Crossed Loans Collection. As of any date of determination, the "ALLOCABLE
AMOUNT" of any Borrower or any Crossed Borrower shall be equal to the maximum
amount of the claim which could then be recovered from such Borrower or Crossed
Borrower under the Loan Documents and Crossed Loan Documents without rendering
such claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law. The
foregoing provision shall be for the benefit of each of the Crossed Borrowers
and Lender, but shall be subject to modification as provided in Section 2.12(G)
below and to amendment by agreement of the Borrowers and Lender, in each case
without necessity of any agreement, acknowledgment or approval of any Crossed
Borrower or any notice to any Crossed Borrower. Section 2.12(E) of each of the
Crossed Loan Agreements contains provisions similar to this Section 2.12(E) for
the benefit of Lender and (subject to the terms thereof) the Crossed Borrowers.
This Section 2.12(E) and Section 2.12(E) of each of the Crossed Loan Agreements
are intended only to define the relative rights of the Borrowers and Crossed
Borrowers, and nothing set forth in this Section 2.12(E) or in Section 2.12(E)
of each of the Crossed Loan Agreements is intended to or shall impair the liens
and security interests of the Loan Documents and the Crossed Loan Documents or
the obligations of the Borrowers and the Crossed Borrowers thereunder. Each
Borrower acknowledges that the rights of contribution and indemnification under
this Section 2.12(E) and under Section 2.12(E) of the Crossed Loan Agreements
constitute assets of the Borrowers or Crossed Borrowers to which such
contribution and indemnification is owing, and any such right of contribution
and indemnification owing to any Borrower under Section 2.12(E) of any of the
Crossed Loan Agreements shall constitute additional Crossed Party Obligations
for all purposes under this Section 2.12.

                                       30


      (F) Each Borrower hereby consents and agrees to each of the following, and
agrees that such Borrower's obligations under this Loan Agreement and the other
Loan Documents and the Liens created under this Loan Agreement and the other
Loan Documents securing the Loan and the Crossed Loans shall not be released,
diminished, impaired, reduced or adversely affected by any of the following, and
waives any common law, equitable, statutory or other rights (including without
limitation rights to notice) that such Borrower might otherwise have as a result
of or in connection with any of the following:

            (i) Any renewal, extension, increase, modification, alteration or
rearrangement of all or any part of the Crossed Loans, the Crossed Loan
Documents, or other document, instrument, contract or understanding between the
Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed
Loans or any failure of Lender to notify such Borrower of any such action.

            (ii) Any adjustment, indulgence, forbearance or compromise that
might be granted or given by Lender to the Crossed Borrowers.

            (iii) The insolvency, bankruptcy, arrangement, adjustment,
composition, liquidation, disability, dissolution or lack of power of any of the
Crossed Borrowers or any other party at any time liable for the payment of all
or part of the Crossed Loans; or any dissolution of any of the Crossed
Borrowers, or any sale, lease or transfer of any or all of the assets of any of
the Crossed Borrowers, or any changes in the shareholders, partners or members
of any of the Crossed Borrowers; or any reorganization of any of the Crossed
Borrowers.

            (iv) The invalidity, illegality or unenforceability of all or any
part of the Crossed Loans, or any document or agreement executed in connection
therewith, for any reason whatsoever, including without limitation the fact that
(A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law,
(B) the act of creating the Crossed Loans or any part thereof is ultra vires,
(C) the officers or representatives executing the Crossed Loan Documents or
otherwise creating the Crossed Loans acted in excess of their authority, (D) the
Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have
valid defenses, claims or offsets (whether at law, in equity or by agreement)
which render the Crossed Loans wholly or partially uncollectible from the
Crossed Borrowers, (F) the creation, performance or repayment of the Crossed
Loans (or the execution, delivery and performance of any document or instrument
representing part of the Crossed Loans or executed in connection with the
Crossed Loans, or given to secure the repayment of the Crossed Loans) is
illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan
Documents have been forged or otherwise are irregular or not genuine or
authentic, it being agreed that each Borrower shall remain liable hereon
regardless of whether the Crossed Borrowers or any other person be found not
liable on the Crossed Loans or any part thereof for any reason.

            (v) Any full or partial release of the liability of the Crossed
Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or
any other person or entity now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally, to pay, perform,
guarantee or assure the payment of the Crossed Loans, or any part thereof, it
being recognized, acknowledged and agreed by each Borrower that such Borrower
has not been induced to enter into this Loan Agreement or the other Loan
Documents on the basis of a

                                       31


contemplation, belief, understanding or agreement that other parties will be
liable to pay or perform the Loan or such Borrower's obligations under the Loan
Agreement or the other Loan Documents, or that Lender will look to other parties
to pay or perform the Crossed Loans.

            (vi) The taking or accepting of any other security, collateral or
guaranty, or other assurance of payment, for all or any part of the Crossed
Loans.

            (vii) Any release, surrender, exchange, subordination,
deterioration, waste, loss or impairment (including without limitation
negligent, willful, unreasonable or unjustifiable impairment) of any collateral,
property or security, at any time existing in connection with, or assuring or
securing payment of, all or any part of the Crossed Loans.

            (viii) The failure of or refusal of Lender or any other party acting
on behalf of Lender to exercise diligence or reasonable care in the
preservation, protection, enforcement, sale or other handling or treatment of
all or any part of such collateral, property or security, including but not
limited to any neglect, delay, omission, failure or refusal of Lender (A) to
take or prosecute any action for the collection of any of the Crossed Loans, (B)
to foreclose, or initiate any action to foreclose, or, once commenced, prosecute
to completion any action to foreclose upon any security therefor, or (C) to take
or prosecute any action in connection with any instrument or agreement
evidencing or securing all or any part of the Crossed Loans.

            (ix) The fact that any collateral, security, security interest or
lien contemplated or intended to be given, created or granted as security for
the repayment of the Crossed Loans, or any part thereof, shall not be properly
perfected or created, or shall prove to be unenforceable or subordinate to any
other security interest or lien, it being recognized and agreed by each Borrower
that it is not entering into this Loan Agreement in reliance on, or in
contemplation of the benefits of, the validity, enforceability, collectibility
or value of any of the collateral for the Crossed Loans.

            (x) Any payment by any of the Crossed Borrowers to Lender is held to
constitute a preference under bankruptcy laws, or for any reason Lender is
required to refund such payment or pay such amount to any of the Crossed
Borrowers or someone else.

            (xi) Any other action taken or omitted to be taken with respect to
the Crossed Loan Documents, the Crossed Loans, or the security and collateral
therefor.

      (G) Notwithstanding anything to the contrary set forth in this Loan
Agreement, Lender may, at its sole option and in its sole discretion, from time
to time (one or more times) deliver written notice to the Borrowers stating that
this Loan Agreement, the Mortgages and the other Loan Documents shall no longer
secure one or more (at Lender's sole election) of the Crossed Loans (each a
"CROSS RELEASE NOTICe"), whereupon (i) this Loan Agreement and the other Loan
Documents shall no longer secure any of the Crossed Loans for which a Cross
Release Notice is given (any such Crossed Loan, an "EXCLUDED LOAN", and,
collectively, the "EXCLUDED LOAN(S)"; each Crossed Borrower which is the
borrower with respect to an Excluded Loan is herein referred to as an "EXCLUDED
BORROWER", and the Crossed Loan Agreement, Crossed Mortgages, Cross Side
Agreement and other Crossed Loan Documents executed and delivered by the
Excluded Borrowers with respect to any Excluded Loan are herein referred to as

                                       32


the "EXCLUDED LOAN AGREEMENT", "EXCLUDED MORTGAGES", "EXCLUDED SIDE AGREEMENT"
and "EXCLUDED LOAN DOCUMENTS", respectively, and each Crossed Property
encumbered by the Excluded Loan Documents is herein referred to as an "EXCLUDED
PROPERTY"), (ii) each Cross Guaranty of the Loan executed by each Excluded
Borrower, together with each Cross Guaranty of an Excluded Loan executed by the
Borrowers (herein collectively referred to as the "EXCLUDED GUARANTIES") shall
be deemed automatically terminated and of no further force or effect, (iii) each
reference herein and in the other Loan Documents to the "Crossed Loans" shall be
deemed to exclude the Excluded Loans, (iv) each reference herein and in the
other Loan Documents to the "Crossed Loan Agreements", "Crossed Mortgages",
"Crossed Loan Documents", "Crossed Properties", "Cross Side Agreements" and
"Cross Guaranties" shall be deemed to exclude the Excluded Loan Agreement, the
Excluded Mortgages, the Excluded Loan Documents, the Excluded Property, the
Excluded Side Agreements and the Excluded Guaranties, respectively, (v) each
reference herein and in the other Loan Documents to the "Crossed Borrowers" and
the "Crossed Obligors" shall be deemed to exclude each Excluded Borrower, (vi)
the provisions of Section 2.12(E) of this Loan Agreement shall not apply to any
Crossed Loans Collection from any Excluded Borrower or its Excluded Property and
the Borrowers shall have no obligation or liability on account thereof; and
(vii) Borrowers shall no longer be beneficiaries of the covenants and agreements
set forth in Section 2.12(E) of any Excluded Loan Agreement, and the Borrowers
shall have no rights or claims on account of any contribution or indemnification
obligations of any Excluded Borrower under Section 2.12(E) of any Excluded Loan
Agreement. In addition to and without limiting the foregoing, the Borrowers
hereby agree to fully cooperate with Lender, if Lender is considering the
termination of the cross collateralization and cross default of the Loan and
Loan Documents with any of the Crossed Loans, including, but not limited to (x)
amending this Loan Agreement and the other Loan Documents as may be required by
Lender to effectuate such termination of the cross collateralization and cross
default provisions thereof, and (y) updating and/or endorsing the title
insurance policies (at Lender's cost as to additional premium charges, if any)
to reflect the continuation of the first priority lien of this Loan Agreement.

      (H) In the event the Loan is repaid or defeased in full in accordance with
the provisions of this Loan Agreement and the other Loan Documents, then
provided no Event of Default then exists hereunder, and no "Event of Default"
(as defined in any of the Other Crossed Loan Agreements) exists under any of the
Other Crossed Loan Documents, the cross collateralization and cross default of
the Loan and Loan Documents with the Other Crossed Loans shall terminate and all
the Other Crossed Loans shall be deemed Excluded Loans with respect to the Loan
and the provisions of Section 2.12(G) above shall become automatically
applicable with respect thereto.

                                   ARTICLE III
                               CONDITIONS TO LOAN

SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The
obligation of Lender to fund the Loan are subject to the prior or concurrent
satisfaction or waiver of the conditions set forth below, and to satisfaction of
any other conditions specified herein or elsewhere in the Loan Documents. With
respect to facts and circumstances actually known to Lender at Closing, by
funding the Loan Lender shall be deemed to have acknowledged that each of the
conditions set forth below has been satisfied or waived (except as otherwise set
forth in

                                       33


any other agreement in writing between the Borrowers and Lender). Where in this
Section any documents, instruments or information are to be delivered to Lender,
then the condition shall not be satisfied unless (i) the same shall be in form
and substance satisfactory to Lender, and (ii) if so required by Lender, the
Borrowers shall deliver to Lender a certificate duly executed by the Borrowers
stating that the applicable document, instrument or information is true and
complete and does not omit to state any information without which the same might
reasonably be deemed materially misleading.

      (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall
execute and deliver and cause to be executed and delivered to Lender all of the
Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan
Documents as may be reasonably required by Lender, each, unless otherwise noted,
of even date herewith, duly executed, in form and substance satisfactory to
Lender and in quantities designated by Lender (except for the Note, of which
only one shall be signed), which Loan Documents shall become effective upon the
Closing.

      (B) DEPOSITS. The deposits required herein, including without limitation,
the initial deposits into the Reserves and Accounts, shall have been made (and
at the Borrowers' option, the same may be made from the proceeds of the Loan).

      (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES.
Each Borrower Party and all other Persons executing any agreement on behalf of
any Borrower Party shall have performed in all material respects all agreements
which this Loan Agreement provides shall be performed on or before the Closing
Date. The representations and warranties contained herein and in the other Loan
Documents shall be true, correct and complete in all material respects on and as
of the Closing Date.

      (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have
received certificates of even date herewith executed on behalf of each Borrower
by the chief financial officer (or similar officer of the Borrowers) stating
that: (i) on such date, to the Borrowers' Knowledge no Default exists; (ii) no
material adverse change in the financial condition or operations of the business
of the Borrowers or the projected cash flow of the Borrowers or the Properties,
in each case taken as a whole, has occurred since the delivery to Lender of any
financial statements, budgets, proformas, or similar materials (or if there has
been any change, specifying such change in detail), and that, to the Borrowers'
Knowledge after due inquiry, such financial materials fairly present the
financial condition and results of operations of the Borrowers and the
Properties, in each case taken as a whole, and all other materials delivered to
Lender are complete and accurate in all material respects; and (iii) the
representations and warranties set forth in this Loan Agreement are true and
correct in all material respects on and as of such date with the same effect as
though made on and as of such date (or if any such representations or warranties
require qualification, specifying such qualification in detail) and (iv) to the
Borrowers' Knowledge, there are no material facts or conditions concerning the
Properties or any Borrower Party that have not been disclosed to Lender which
could have a Material Adverse Effect.

      (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have
received from Morris, Manning & Martin, LLP or other legal counsel for the
Borrowers satisfactory to

                                       34


Lender, written legal opinions, each in form and substance acceptable to Lender,
as to such matters as Lender shall request, including opinions to the effect
that (i) each of the Borrower Parties is duly formed, validly existing, and in
good standing in its state of organization and, in the case of each Borrower, in
each state where its Property is located, (ii) this Loan Agreement and the Loan
Documents have been duly authorized, executed and delivered and are enforceable
in accordance with their terms subject to customary qualifications for
bankruptcy, general equitable principles, and other customary assumptions and
qualifications; (iii) the Deposit Account Agreement and Cash Management
Agreement have been duly authorized, executed and delivered by Borrower and
Manager and are enforceable in accordance with their terms and the security
interests in favor of Lender in the Account Collateral have been validly created
and perfected; and (iv) no Borrower, Member or General Partner would be
consolidated in any bankruptcy proceeding affecting Guarantor or certain other
Affiliates of the Borrower Parties specified by Lender. Also on or before the
Closing Date, Lender shall have received the following legal opinions, each in
form and substance acceptable to Lender: (a) an opinion of the Borrowers' local
counsel in each state where the Properties are located as to the enforceability
of, and the creation and perfection of Liens under, the Mortgages and the
Assignments of Leases and such other matters as Lender may reasonably request;
(b) [intentionally omitted]; (c) opinions of Richards, Layton & Finger or other
Delaware legal counsel, acceptable to Lender, for each Borrower that is a single
member limited liability company formed under the laws of the State of Delaware
that, among other matters, (1) under Delaware law (x) the prior unanimous
written consent of Member (and the unanimous written consent of the board of
directors of Member including the Independent Directors, or the unanimous prior
written consent of the board of managers' of each Borrower, including the
Independent Directors') would be required for a voluntary bankruptcy filing by
each such Borrower, (y) the prior unanimous written consent of the board of
directors of Member (including the Independent Directors) would be required for
a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements
are enforceable against Member in accordance with their terms; (2) under
Delaware law the bankruptcy or dissolution of Member would not cause the
dissolution of any of the Borrowers and the bankruptcy or dissolution of the
sole shareholder or member would not cause the dissolution of Member; (3) under
Delaware law, creditors of Member shall have no legal or equitable remedies with
respect to the assets of any of the Borrowers and creditors of Guarantor shall
have no legal or equitable remedies with respect to the assets of Member; and
(4) a federal bankruptcy court would hold that Delaware law governs the
determination of what Persons have authority to file a voluntary bankruptcy
petition on behalf of each Borrower and Member; and (d) such other legal
opinions as Lender may reasonably request.

      (F) TITLE POLICIES. On or before the Closing Date, Lender shall have
received and approved pro forma Title Policies for the Mortgages, and as of the
Closing, each Title Company shall be irrevocably committed and prepared
immediately to issue the Title Policies or binding commitments. The Title
Policies shall be in form and substance satisfactory to Lender. Without
limitation, each Title Policy shall be issued on an ALTA form acceptable to
Lender by each Title Company or if an ALTA form is not available in the
applicable jurisdiction, another form acceptable to Lender, together with such
reinsurance and direct access agreements as Lender may require, insuring that
the Mortgages are valid first and prior enforceable liens on each Borrower's fee
simple interest or ground leasehold interest, as the case may be, in the
applicable Property (including any easements appurtenant thereto) subject only
to such exceptions to coverage as are acceptable to Lender, including the
Permitted Exceptions. Each Title Policy

                                       35


shall contain such endorsements as Lender may require (to the extent available
in the state where the Properties is located) in form acceptable to Lender,
including deletion of the creditors' rights exception and affirmative
endorsement coverage for creditors' rights risks.

      (G) SURVEY. Lender shall have received a survey of each of the Properties,
certified to Lender and its successors, assigns and designees and to each Title
Company by a surveyor reasonably satisfactory to Lender (the "SURVEY"), or
Lender shall have received both (x) a "no change" affidavit from each Borrower
with respect to such Borrower's most recent Survey sufficient to cause the Title
Company to provide current survey coverage to Lender in the applicable Title
Policy without exception for matters that would be revealed by a current and
accurate survey of the applicable Property, except for matters specifically
shown on such most recent Survey, and (y) a reliance letter (to the extent any
such surveys are not currently addressed to Lender) in form and substance
satisfactory to Lender, permitting Lender to rely on the Survey (and any
certification thereof) as if originally addressed and certified to Lender. Each
Survey shall contain the minimum detail for land surveys as most recently
adopted by ALTA/ASCM, shall comply with Lender's survey requirements and shall
contain Lender's standard form certification, and shall show no state of facts
or conditions reasonably objectionable to Lender.

      (H) ZONING. On or before the Closing Date, Lender shall have received
evidence reasonably satisfactory to Lender as to the zoning and subdivision
compliance of each of the Properties.

      (I) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing
Date, Lender shall have received copies of the organizational documents and
filings of each Borrower Party, together with good standing certificates (or
similar documentation) (including verification of tax status) from the state of
its formation and from all states in which the laws thereof require such Person
to be qualified and/or licensed to do business (including without limitation,
each state in which the Properties are located for the applicable Borrower(s)
and, to the extent required by law, Member and General Partner). Each such
certificate shall be dated not more than 30 days prior to the Closing Date, as
applicable, and certified by the applicable Secretary of State or other
authorized governmental entity. In addition, on or before the Closing Date the
secretary or corresponding officer of each Borrower Party, or the secretary or
corresponding officer of the partner, trustee, or other Person as required by
such Borrower Party's organizational documents (as the case may be, the
"BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating
that the copies of the organizational documents as delivered to Lender are true
and complete and are in full force and effect, and that the same have not been
amended except by such amendments as have been so delivered to Lender.

      (J) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing
Date, Lender shall have received certificates of incumbency and resolutions of
each Borrower Party and its constituents as requested by Lender, approving and
authorizing the Loan and the execution, delivery and performance of the Loan
Documents, certified as of the Closing Date by the Borrower Party Secretary as
being in full force and effect without modification or amendment.

      (K) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have
received such financial statements and other financial information as shall be
satisfactory to

                                       36


Lender for each Borrower Party (including for Guarantor) and for the Properties.
If any such statements are not available for the Properties, then the Borrowers
shall provide such financial reports as are available. All such financial
statements shall be certified to Lender by the applicable Borrower Party
(through its chief financial officer or other officer charged with similar
duties), which certification shall be in form and substance reasonably
satisfactory to Lender.

      (L) OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date,
Lender shall have received and approved the Operating Budget and CapEx/FF&E
Budget for the Properties for the remainder of the current calendar year.

      (M) AGREEMENTS. On or before the Closing Date, Lender shall have received
a list of all Material Agreements and, to the extent requested by Lender, copies
thereof.

      (N) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing
Date, Lender shall have received copies of the Management Agreements and any
leasing brokerage agreements pertaining to the Properties and the Assignments of
Management Agreements, duly executed by each Manager and the applicable
Borrower. On or before the Closing Date, Lender shall have received copies of
the existing Franchise Agreements (including any Property Improvement Plan) and
Franchisor Letters for each of the Properties duly executed by the applicable
Franchisors.

      (O) RENT ROLL. Prior to the Closing, Lender shall have received from the
Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL")
in form and substance satisfactory to Lender. The Rent Roll shall constitute a
true, correct, and complete list of each and every Material Lease, together with
all extensions and amendments thereof, and shall accurately and completely
disclose all annual and monthly rents payable by all tenants, including all
percentage rents, if any, and expiration dates of such Material Leases, and the
amount of security deposit being held by the Borrowers under each Material
Lease, if any.

      (P) MATERIAL LEASES. Prior to the Closing, Lender shall have received
true, correct and complete copies of the Material Leases, as amended.

      (Q) LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender
shall have received copies of the final, unconditional certificates of occupancy
issued with respect to each of the Properties, together with all other
applicable licenses (including, without limitation, each liquor license and beer
permit), permits and approvals required for each Borrower to own, use, occupy,
operate and maintain each of the Properties as a hotel.

      (R) INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date,
Lender shall have received copies of certificates of insurance (dated not more
than twenty (20) days prior to the Closing Date) regarding insurance required to
be maintained under this Loan Agreement and the other Loan Documents, together
with endorsements satisfactory to Lender naming Lender as an additional insured
and loss payee, as required by this Loan Agreement, under such policies. In
addition, as to any insurance matters arising under Environmental Laws or
pertaining to any environmental insurance that any of the Borrowers has with
respect to any

                                       37


Property, the same shall be endorsed to Lender as required by this Loan
Agreement and shall name Lender as an insured, additional insured and/or loss
payee, as applicable.

      (S) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental
Reports relating to each of the Properties, together with a letter from each
preparer thereof entitling Lender and its successors and assigns to rely upon
said Environmental Report.

      (T) PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender
shall have received a property condition report for each of the Properties,
which shall be prepared by an engineer or other consultant satisfactory to
Lender and otherwise shall be in form and substance satisfactory to Lender in
its sole discretion. Each such report shall set forth any items of deferred
maintenance at the applicable Property.

      (U) APPRAISAL. On or before the Closing Date, Lender shall have received
an independent appraisal of each of the Properties from a state certified
appraiser engaged by Lender. Each such appraisal shall conform in all respects
to the criteria for appraisals set forth in the Financial Institutions Reform
and Recovery Act of 1989 and the regulations promulgated thereunder (as if
Lender were an institution under the jurisdiction thereof) and the Uniform
Standards of Professional Appraisal Practices of the Appraisal Foundation.

      (V) SEARCHES. Prior to the Closing Date, Lender shall have received copies
of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation search
reports with respect to the Borrowers, Guarantor, Managers, General Partner and
Member, all dated not more than thirty (30) days prior to the Closing Date.

      (W) DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2) days
prior to the Closing Date, Lender shall have received payoff demand letters and
wiring instructions from each lender or other obligee of any existing
indebtedness which is required to be repaid pursuant to this Loan Agreement.

      (X) LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and
all reasonable legal fees and expenses of counsel to Lender, together with all
recording fees and taxes, title insurance premiums, and other reasonable costs
and expenses related to the Closing.

      (Y) COMMITMENT CONDITIONS. If a commitment letter or similar agreement
shall have been issued by Lender for the Loan, such additional conditions as
shall be specified in such commitment shall have been satisfied.

      (Z) OTHER REVIEW. Lender shall have completed all other review of the
Borrower Parties, the Properties, and such other items as it reasonably
determines relevant, and shall have determined based upon such review to fund
the Loan. The Borrower Parties shall have satisfied such other reasonable
criteria as Lender may reasonably specify.

      (AA) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing
Date, Lender shall have received (i) true and complete copies of each of the
Ground Leases, certified by the Borrowers, and (ii) estoppels and agreements
acceptable to Lender, duly executed by each Ground Lessor.

                                       38


      (BB) CONDOMINIUM PROPERTY AGREEMENTS. On or before the Closing Date,
Lender shall have received an estoppel and agreement of the Board of Managers
with respect to the Condominium Property Documents in form and substance
reasonably acceptable to Lender.

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

      In order to induce Lender to enter into this Loan Agreement and to make
the Loan, each Borrower represents and warrants to Lender that the statements
set forth in this Article IV, after giving effect to the Closing, will be, true,
correct and complete in all material respects as of the Closing Date.

SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS.

      (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized,
validly existing and in good standing under the laws of the state of its
formation. Each Borrower Party has all requisite power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
to be conducted, and to enter into each Loan Document to which it is a party and
to perform the terms thereof.

      (B) QUALIFICATION. Each Borrower Party is duly qualified and in good
standing in the state of its formation. In addition, each Borrower Party is duly
qualified and in good standing in each state where necessary to carry on its
present business and operations, except in jurisdictions in which the failure to
be qualified and in good standing could not reasonably be expected to have a
Material Adverse Effect.

      (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C)
accurately sets forth the direct and indirect ownership structure of the
Borrowers, General Partners and Members.

SECTION 4.2 AUTHORIZATION OF BORROWING, ETC.

      (A) AUTHORIZATION OF BORROWING. The Borrowers have the power and authority
to incur the Indebtedness evidenced by the Note. The execution, delivery and
performance by each Borrower Party of each of the Loan Documents to which it is
a party and the consummation of the transactions contemplated thereby have been
duly authorized by all necessary limited liability company, partnership,
trustee, corporate or other action, as the case may be.

      (B) NO CONFLICT. The execution, delivery and performance by each Borrower
Party of the Loan Documents to which it is a party and the consummation of the
transactions contemplated thereby do not and will not: (1) violate (x) any
provision of law applicable to any Borrower Party; (y) the partnership
agreement, certificate of limited partnership, certificate of incorporation,
bylaws, declaration of trust, operating agreement or other organizational
documents, as the case may be, of each Borrower Party; or (z) any order,
judgment or decree of any Governmental Authority binding on any Borrower Party
or any of its Affiliates; (2) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any Contractual
Obligation of any Borrower Party or any of its Affiliates (except where such
breach will not cause a Material Adverse Effect); (3) result in or require the
creation or

                                       39


imposition of any material Lien (other than the Lien of the Loan Documents) upon
the Properties or assets of any Borrower Party; or (4) except as set forth on
SCHEDULE 4.2, require any approval or consent of any Person under any material
Contractual Obligation of any Borrower Party, which approvals or consents as set
forth on SCHEDULE 4.2 have been obtained on or before the dates required under
such material Contractual Obligation, but in no event later than the Closing
Date.

      (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower
Party of the Loan Documents to which it is a party, and the consummation of the
transactions contemplated thereby do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
Governmental Authority.

      (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents,
including the Note, when executed and delivered will be, the legally valid and
binding obligations of each Borrower Party that is a party thereto, enforceable
against each of the Borrower Parties, as applicable, in accordance with their
respective terms, subject to bankruptcy, insolvency, moratorium, reorganization
and other similar laws affecting creditor's rights. No Borrower Party has any
defense or offset to any of its obligations under the Loan Documents to which it
is a party. No Borrower Party has any claim against Lender or any Affiliate of
Lender.

SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the
Borrowers, their Affiliates and the Properties which have been furnished by or
on behalf of the Borrowers to Lender pursuant to this Loan Agreement present
fairly the financial condition of the Persons covered thereby as of the dates
thereof and the results of their operations for the periods then ended, and, to
the Borrowers' Knowledge after due inquiry, have been prepared in accordance
with GAAP consistently applied (except as disclosed therein). Since the date of
the financial statements delivered to Lender, there has been no material adverse
change in the financial condition, operations or business of the Borrower
Parties or the Properties from that set forth in said financial statements.

SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the
Borrowers shall have no outstanding Indebtedness or Contingent Obligations other
than the Obligations or any other Permitted Indebtedness.

SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee
simple title (or, in the case of the Ground Leased Properties, leasehold title)
to the Properties, free and clear of all Liens except for the Permitted
Encumbrances. The Borrowers own and will own at all times all FF&E relating to
the Properties (other than personal property which is either owned by tenants of
such Property, not used or necessary for the operation of the applicable
Property, or leased by the Borrowers as permitted hereunder), subject only to
the Permitted Encumbrances. The Mortgages, when properly recorded in the
appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (i) a
valid, perfected first lien on each of the Properties, subject only to the
Permitted Encumbrances, and (ii) perfected first priority security interests in
and to, and perfected collateral assignments of, all personalty (including the
Rents, the Leases, and the FF&E), all in accordance with the terms thereof, in
each case subject only to any applicable Permitted Encumbrances. Lender will
have a perfected first priority security interest in and to the FF&E

                                       40


owned by the Borrowers, if any, not located at the Properties. To the Borrowers'
Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in
condemnation or eminent domain affecting any of the Properties, and to the
actual Knowledge of the Borrowers, none is threatened. Except as set forth on
SCHEDULE 4.5(A), no Person has any option or other right to purchase all or any
portion of any of the Properties or any interest therein. To the Borrowers'
Knowledge, there are no mechanic's, materialman's or other similar liens or
claims which have been filed for work, labor or materials affecting the
Properties which are or will be liens prior to, or equal or coordinate with, the
lien of any of the Mortgages. None of the Permitted Encumbrances, individually
or in the aggregate, materially interfere with the benefits of the security
intended to be provided by the Mortgages and this Loan Agreement, materially and
adversely affect the value of any of the Properties, impair the use or
operations of the Properties or impair the Borrowers' ability to pay its
obligations in a timely manner.

SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as
set forth in the Zoning Reports for the Properties delivered to Lender, the
Properties and the use thereof comply in all material respects with all
applicable zoning, subdivision and land use laws, regulations and ordinances,
all applicable health, fire, building codes, parking laws and all other laws,
statutes, codes, ordinances, rules and regulations applicable to the Properties,
or any of them, including without limitation the Americans with Disabilities
Act. To the Borrowers' Knowledge, there are no illegal activities relating to
controlled substances on any of the Properties. To the Borrower's Knowledge,
except as set forth in the Zoning Reports for the Properties delivered to
Lender, all material permits, licenses and certificates for the lawful use,
occupancy and operation of each component of each of the Properties in the
manner in which it is currently being used, occupied and operated, including,
but not limited to liquor licenses and certificates of occupancy, or the
equivalent, have been obtained and are current and in full force and effect. To
the Borrower's Knowledge, except as set forth in the Zoning Reports for the
Properties delivered to Lender, in the event that all or any part of the
Improvements located on any Property is destroyed or damaged, said Improvements
can be legally reconstructed to their condition prior to such damage or
destruction, and thereafter exist for the same use without violating any zoning
or other ordinances applicable thereto and without the necessity of obtaining
any variances or special permits, other than customary demolition, building and
other construction related permits. To the Borrowers' Knowledge, no legal
proceedings are pending or threatened with respect to the zoning of any
Property. To the Borrowers' Knowledge, except as set forth in the Title Policies
and/or the Surveys, neither the zoning nor any other right to construct, use or
operate any Property is in any way dependent upon or related to any real estate
other than such Property. No tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded by the
Borrowers with respect to any Property without Lender's prior written consent,
which consent shall not be unreasonably withheld, delayed or conditioned.

SECTION 4.7 LEASES; AGREEMENTS.

      (A) LEASES; AGREEMENTS. The Borrowers have delivered to Lender true and
complete copies (in all material respects) of all (i) Leases for more than five
hundred (500) square feet of space at any Property and (ii) Material Agreements
affecting the operation and management of the Properties, and such Leases and
Material Agreements have not been modified or amended except pursuant to
amendments or modifications delivered to Lender. Except for the rights of

                                       41


each of the current Managers pursuant to the existing Management Agreements, no
Person has any right or obligation to manage any of the Properties or to receive
compensation in connection with such management. Except for the parties to any
leasing brokerage agreement that has been delivered to Lender, no Person has any
right or obligation to lease or solicit tenants for the Properties, or (except
for cooperating outside brokers) to receive compensation in connection with such
leasing.

      (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is
attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described
in the Rent Roll, none of the Properties are subject to any Material Leases.
Except only as specified in the Rent Roll, or as otherwise disclosed to Lender
in the estoppel certificates delivered to Lender at Closing, to the Borrowers'
Knowledge, (i) the Material Leases are in full force and effect; (ii) the
Borrowers have not given any notice of default to any tenant under any Material
Lease which remains uncured; (iii) no tenant has any set off, claim or defense
to the enforcement of any Material Lease; (iv) no tenant is in arrears in the
payment of rent, additional rent or any other charges whatsoever due under any
Material Lease, or is materially in default in the performance of any other
obligations under such Material Lease; (v) the Borrowers have completed all work
or alterations required of the landlord or lessor under each Material Lease, and
all of the other obligations of landlord or lessor under the Material Leases
have been performed; and (vi) there are no rent concessions (whether in form of
cash contributions, work agreements, assumption of an existing tenant's other
obligations, or otherwise) or extensions of time whatsoever not reflected in
such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge
of the Borrowers, threatened) against the Borrowers by any tenant or former
tenant. No rental in excess of one month's rent has been prepaid under any of
the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is
valid and binding on the parties thereto in accordance with its terms.

      (C) NO RESIDENTIAL UNITS. There are no residential units in any of the
Properties and, to each Borrower's Knowledge, no person (other than a site
manager employed by Manager) occupies any part of the Properties for dwelling
purposes other than on a transient basis.

      (D) MANAGEMENT AGREEMENTS. The Borrowers have delivered to Lender a true
and complete copy of each of the Management Agreements to which they are a party
that will be in effect on the Closing Date, and such Management Agreements have
not been modified or amended except pursuant to amendments or modifications
delivered to Lender. The Management Agreements are in full force and effect and
no default by any of the Borrowers or Manager exists thereunder.

      (E) FRANCHISE AGREEMENTS; PROPERTY IMPROVEMENT PLANS. The Borrowers have
delivered to Lender a true and complete copy of each of the Franchise Agreements
to which they are a party, and such Franchise Agreements have not been modified
or amended except pursuant to amendments or modifications delivered to Lender.
To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full
force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material
default by the Borrowers, Manager or the applicable Franchisor exists
thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the
aggregate, do not and will not have a Material Adverse Effect. Except for the
Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no
other property improvement plans or similar

                                       42


capital improvement plans or obligations required by any Franchisor pursuant to
any Franchise Agreement, in effect for any of the Properties.

SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as
set forth in the Property Condition Reports for the Properties delivered to
Lender, all Improvements including, without limitation, the roof and all
structural components, plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior doors, parking facilities,
sidewalks and landscaping are in good condition and repair. Except as disclosed
in the Property Condition Reports, (i) the Borrowers are not aware of any latent
or patent structural or other material defect or deficiency in the Properties
and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary
sewers, and electrical, gas (if applicable) and telephone facilities are
available to each of the Properties within the boundary lines of each of the
Properties (except as may be shown on the applicable Survey), are fully
connected to the Improvements and are fully operational, are sufficient to meet
the reasonable needs of each of the Properties as now used or presently
contemplated to be used, and no other utility facilities are necessary to meet
the reasonable needs of each of the Properties as now used or presently
contemplated. Except as may be shown on the applicable Survey, to the Borrowers'
Knowledge no part of any of the Properties is within a flood plain and none of
the Improvements create encroachments over, across or upon the Properties'
boundary lines, rights of way or easements, and no building or other
improvements on adjoining land create such an encroachment which could
reasonably be expected to have a Material Adverse Effect. All public roads and
streets necessary for service of and access to each of the Properties for the
current and contemplated uses thereof have been completed and are serviceable
and are physically and legally open for use by the public. To the Borrowers'
Knowledge after due inquiry, and except as disclosed in the Property Condition
Reports, any septic system located at any of the Properties is in good and safe
condition and repair and in compliance with all applicable law.

SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9,
there are no judgments outstanding against any Borrower Party, or affecting any
of the Properties or any property of any Borrower, nor is there any action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration now pending or, to the Borrowers' Knowledge, threatened against any
Borrower Party that could reasonably be expected to result in a Material Adverse
Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges,
claims, demand, suits, proceedings, petitions, investigations and arbitrations
set forth on SCHEDULE 4.9 are not reasonably expected to result, either
individually or in the aggregate, in any Material Adverse Effect.

SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and
reports of each Primary Borrower Party required to be filed have been timely
filed (or each Borrower has timely filed for an extension and the applicable
extension has not expired), and all taxes, assessments, fees and other
governmental charges (including any payments in lieu of taxes) upon such Person
and upon its properties, assets, income and franchises which are due and payable
have been paid. To the Borrowers' Knowledge, there is not presently pending any
special assessment against any of the Properties or any part thereof.

SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the
Primary Borrower Parties is a party to or bound by, nor is any property of such
Person subject to or bound

                                       43


by, any contract or other agreement which restricts such Person's ability to
conduct its business in the ordinary course as currently conducted that, either
individually or in the aggregate, has a Material Adverse Effect or could
reasonably be expected to have a Material Adverse Effect.

SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation of any such Person which
could reasonably be expected to have a Material Adverse Effect, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default which could reasonably be expected to have a Material
Adverse Effect.

SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940 or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.

SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no
Primary Borrower Party maintains or contributes to, or has any obligation
(including a contingent obligation) under, any Employee Benefit Plans.

SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar
compensation will be payable by or pursuant to any contract or other obligation
of any Primary Borrower Party with respect to the making of the Loan or any of
the other transactions contemplated hereby or by any of the Loan Documents. The
Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from
any and all broker's or finder's fees claimed to be due in connection with the
making of the Loan arising from any Borrower Parties' actions.

SECTION 4.16 INTENTIONALLY DELETED.

SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction
or any Loan Document with the actual intent to hinder, delay, or defraud any
creditor and (b) received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the Loan, the aggregate
fair saleable value of the Borrowers' assets exceed and will, immediately
following the making of the Loan, exceed the Borrowers' total liabilities,
including, without limitation, subordinated, unliquidated, disputed and
Contingent Obligations. The aggregate fair saleable value of the Borrowers'
assets is and will, immediately following the making of the Loan, be greater
than the Borrowers' probable total liabilities, including the maximum amount of
their Contingent Obligations on their debts as such debts become absolute and
matured. Each Borrower's assets do not and, immediately following the making of
the Loan will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. The Borrowers do not
intend to, and do not believe that they will, incur Indebtedness and liabilities
(including Contingent Obligations and other commitments) beyond their ability to
pay such Indebtedness and liabilities as they mature (taking into account the
timing and amounts of cash to be received by the Borrowers and the amounts to be
payable on or in respect of obligations of the Borrowers).

                                       44


SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on
behalf of any Borrower Party contains any untrue representation, warranty or
statement of a material fact, or omits to state a material fact necessary in
order to make the statements contained therein not misleading. No Loan Document
or any other document, certificate or written statement for use in connection
with the Loan and prepared by any Borrower Party, or any information provided by
any Borrower Party and contained in, or used in preparation of, any document or
certificate for use in connection with the Loan, contains any untrue
representation, warranty or statement of a material fact, or omits to state a
material fact necessary in order to make the statements contained therein not
misleading. There is no material fact actually known to the Borrowers that has
had or could reasonably be expected to have a Material Adverse Effect and that
has not been disclosed in writing to Lender by the Borrowers.

SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the
proceeds of the Loan only for the purposes set forth herein and consistent with
all applicable laws, statutes, rules and regulations. No portion of the proceeds
of the Loan shall be used by the Borrowers or any Person in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation T, Regulation U or Regulation X or any other regulation of the Board
of Governors of the Federal Reserve System.

SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate
description of all policies of insurance for each Borrower that are in effect as
of the Closing Date. No notice of cancellation has been received with respect to
such policies, and, to each Borrower's Knowledge, the Borrowers are in
compliance with all conditions contained in such policies.

SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1)
or more parcels which constitute separate tax lots. No part of any of the
Properties is included or assessed under or as part of another tax lot or
parcel, and no part of any other property is included or assessed under or as
part of the tax lots or parcels comprising any of the Properties.

SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest
in, including without limitation stock, partnership interest or other securities
of, any other Person (other than the Beverage Companies), or (ii) direct or
indirect loan, advance or capital contribution to any other Person, including
all indebtedness and accounts receivable from that other Person.

SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any
of them (including any Property) is property of the estate, in any voluntary or
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or other similar law now or hereafter in effect. No
Borrower Party and no property of any of them is under the possession or control
of a receiver, trustee or other custodian. No Borrower Party has made any
assignment for the benefit of creditors. No such assignment or bankruptcy or
similar case or proceeding is now contemplated.

SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to
Lender in writing herein or in any of the Loan Documents, no Default exists.

SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an
employee benefit plan as defined in Section 3(3) of ERISA which is subject to
ERISA, (ii) a plan as defined in

                                       45


Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or
(iii) an entity whose underlying assets constitute "plan assets" of any such
employee benefit plan or plan for purposes of Title I of ERISA of Section 4975
of the IRC; provided that, in making such representation, the Borrowers have
assumed that (i) no portion of the Loan shall be funded with plan assets of any
employee benefit plan that is subject to Title I of ERISA or any plan that is
covered by Section 4975 of the Code unless the Lender is eligible to apply one
or more exemptions such that the Loan will not constitute a nonexempt prohibited
transaction under Section 406 of ERISA or that could subject a Borrower Party or
its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such
assumption in the preceding clause is true and correct with respect to any party
to which Lender transfers or assigns any portion of the Loan.

SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with the Borrowers are not and will not be subject to state
statutes applicable to the Borrowers' regulating investments of and fiduciary
obligations with obligations with respect to governmental plans.

SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person"
within the meaning of Section 1445(f)(3) of the IRC.

SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on
SCHEDULE 4.28, no Primary Borrower Party is a party to any collective bargaining
agreement.

SECTION 4.29 CONDOMINIUM PROPERTY DOCUMENTS.

      (A) The Borrowers have delivered true and correct copies of each of the
Condominium Property Documents to Lender and same have not been modified,
amended or assigned except as set forth on SCHEDULE 4.29, and to the Borrowers'
Knowledge, there are no other material documents or agreements affecting the
Condominium Borrower's interest in the Condominium Property.

      (B) Each of the Condominium Property Documents is in full force and effect
and, to the Condominium Borrower's Knowledge, no breach or default, or event
that, with the giving of notice or the passage of time or both would constitute
a breach or default, under any of the Condominium Property Documents (a
"CONDOMINIUM DEFAULT") exists or has occurred on the part of the Condominium
Borrower or on the part of any other party to any of the Condominium Property
Documents. The Condominium Borrower has not received any written notice that a
default under the Condominium Property Documents has occurred or exists, or that
the Board of Managers or any third party alleges the same to have occurred or
exist.

SECTION 4.30 GROUND LEASES.

      (A) Each Ground Lease contains the entire agreement of the Ground Lessor
and the applicable Borrower pertaining to each Ground Leased Property covered
thereby. The Borrowers have no estate, right, title or interest in or to the
Ground Leased Properties except under and pursuant to the Ground Leases. The
Borrowers have delivered true and correct copies of each of the Ground Leases to
Lender and the Ground Leases have not been modified, amended or assigned except
as set forth on SCHEDULE 4.30.

                                       46


      (B) To the Knowledge of the Borrowers, each Ground Lessor is the exclusive
fee simple owner of its Ground Leased Property, subject only to the Ground Lease
and the Permitted Encumbrances, and each Ground Lessor is the sole owner of the
lessor's interest in the applicable Ground Lease.

      (C) There are no rights to terminate any Ground Lease other than any
Ground Lessor's right to terminate by reason of default, casualty, condemnation
or other reasons, in each case as expressly set forth in the applicable Ground
Lease.

      (D) Each Ground Lease is in full force and effect and to the Borrowers'
Knowledge, no breach or default or event that with the giving of notice or
passage of time would constitute a breach or default under any Ground Lease (a
"GROUND LEASE DEFAULT") exists or has occurred on the part of the Borrowers or
on the part of any Ground Lessor under any Ground Lease. All base rent and
additional rent due and payable under the Ground Leases has been paid through
the date hereof and the Borrowers are not required to pay any deferred or
accrued rent after the date hereof under any of the Ground Leases. The Borrowers
have not received any written notice that a Ground Lease Default has occurred or
exists, or that any Ground Lessor or any third party alleges the same to have
occurred or exist.

      (E) The applicable Borrower set forth on SCHEDULE 4.30 is the exclusive
owner of the lessee's interest under and pursuant to the applicable Ground Lease
and has not assigned, transferred, or encumbered its interest in, to, or under
any Ground Lease (other than assignments that will terminate on or prior to
Closing), except in favor of Lender pursuant to this Loan Agreement and the
other Loan Documents.

SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their
respective officers, directors, partners, members, Affiliates or, to the
knowledge of the Borrowers, shareholders is an entity or person: (i) that is
listed in the Annex to, or is otherwise subject to the provisions of Executive
Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on
the United States Treasury Department's Office of Foreign Assets Control
("OFAC") most current list of "Specifically Designated National and Blocked
Persons" (which list may be published from time to time in various mediums
including, but not limited to, the OFAC website,
http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or
supports "terrorism", as that term is defined in EO 13224; or (iv) who is
otherwise affiliated with any entity or person listed above (any and all parties
or persons described in clauses (i) through (iv) above are herein referred to as
a "PROHIBITED PERSON").

                                    ARTICLE V
                          COVENANTS OF BORROWER PARTIES

      The Borrowers covenant and agree that until payment in full of the Loan,
all accrued and unpaid interest and all other Obligations, the Borrowers shall
perform and comply with all covenants in this Article V applicable to such
Person.

                                       47


SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.

      (A) FINANCIAL STATEMENTS.

            (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the
end of each calendar year, the Borrowers (on a consolidated basis), and within
ninety (90) days after the end of each calendar year, Guarantor shall provide
true and complete copies of their Financial Statements for such year to Lender.
All such Financial Statements shall be audited by an Approved Accounting Firm or
by other independent certified public accountants reasonably acceptable to
Lender, and shall bear the unqualified certification of such accountants that
such Financial Statements present fairly in all material respects the financial
position of the subject company. The annual Financial Statements shall be
accompanied by Supplemental Financial Information for such calendar year. The
annual Financial Statements for the Borrowers (on a consolidated basis) and
Guarantor shall also be accompanied by a certification executed by the entity's
chief executive officer or chief financial officer (or other officer with
similar duties), satisfying the criteria set forth in Section 5.1(A)(viii)
below, and a Compliance Certificate (as defined below).

            (ii) QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days
after the end of each calendar quarter, the Borrowers on a consolidated basis
(other than with respect to income statements, which shall be on an individual
property basis) shall provide copies of their Financial Statements for such
quarter to Lender, together with a certification executed on behalf of each of
the Borrowers by their respective chief executive officers or chief financial
officers (or other officer with similar duties) in accordance with the criteria
set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements
shall be accompanied by Supplemental Financial Information and a Compliance
Certificate for such quarter.

            (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days
after the end of each calendar quarter, Guarantor shall provide copies of its
Financial Statements for such quarter to Lender, together with a certification
executed on behalf of Guarantor by its chief executive officer or chief
financial officer (or other officer with similar duties) in accordance with the
criteria set forth in Section 5.1(A)(viii) below.

            (iv) LEASING REPORTS. Within forty-five (45) days after the end of
each calendar year, each Borrower shall provide to Lender a certified Rent Roll
and a schedule of security deposits held under Material Leases, each in form and
substance reasonably acceptable to Lender. Within forty-five (45) days after the
end of each calendar year, each Borrower shall also provide to Lender (a) a
schedule of any retail Material Leases that expired during such calendar year
and a schedule of retail Material Leases scheduled to expire within the next
calendar year and (b) to the extent the Borrowers received notice thereof, a
list of any retail tenants under Material Leases that filed bankruptcy,
insolvency or reorganization proceedings during such calendar year. Within
ninety (90) days after the end of each calendar year, each Borrower shall
provide to Lender a statement of income and expenses for all retail space at
each of the Properties owned and operated by the Borrowers and, to the extent
provided to the Borrowers and not subject to confidentiality restrictions, sales
reports for retail tenants for such year.

                                       48


            (v) MONTHLY REPORTING. Within thirty (30) days after the end of each
calendar month, each Borrower shall provide, or cause Manager to provide, to
Lender the following items determined on an accrual basis: (a) a calculation of
the average daily rate, RevPAR and occupancy calculations and statistics for
each of the Properties for the subject month; (b) Smith Travel Research "STAR"
reports then available; (c) monthly, and year to date operating statements
prepared for such calendar month and for the trailing twelve (12) month period
then ended, noting Net Operating Income, Net Cash Flow and including budgeted
and last year results for the same year-to-date period and other information
necessary and sufficient under GAAP to fairly represent the results of operation
of each of the Properties during such calendar month, all in form reasonably
satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects
completed during such calendar month (including a detailed explanation for any
material deviations from budget) and setting forth that all disbursements and/or
withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E
Reserve have been made with respect to items of Capital Improvement only (as
opposed to items that, in accordance with GAAP, would be included as an
Operating Expense); (e) monthly and year to date detailed reports of Operating
Expenses for each of the Properties, including supporting documentation
satisfactory to Lender in its sole discretion for each item of Extraordinary
Expense (as such term is defined in the Cash Management Agreement) for which
Lender has approved a disbursement from the Cash Trap Reserve pursuant to the
terms of Section 3.3(a)(v) of the Cash Management Agreement; (f) most recently
available "OSI", or similar quality index, scores (including detailed
information regarding criteria and thresholds); (g) prior to Securitization of
the Loan, market segmentation reports for the trailing twelve (12) month period
for each of the Properties; and (h) a report setting forth (i) the date of
termination by Property for each Franchise Agreement that has been terminated
after the Closing Date and not replaced with an Approved Franchisor, (ii) the
number of Properties for which a default has occurred and has continued beyond
applicable notice and grace periods under the applicable Franchise Agreement
(including the percentage of the original Aggregate Allocated Loan Amount
represented by such Properties), (iii) a summary report establishing that the
Borrowers are diligently continuing to pursue reflagging efforts with respect to
each such Property, and (iv) a summary report including (a) the aggregate number
of Properties for which the Borrowers have entered into new Franchise Agreements
as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting
Category of each such Property, and (b) the aggregate number of Properties for
which any replacement (and, if more than one replacement has occurred to a
single Property, the number of replacements with respect to such Property) of
the applicable Franchise Agreements has occurred pursuant to the terms of
Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the
Aggregate Outstanding Principal Balance represented by such Properties and
including the resulting Category of each such Property. All of the above
statements, reports and information shall be provided to Lender by email in
Microsoft Excel format or other spreadsheet format reasonably acceptable to
Lender (in the case of any statements, reports or information provided by third
parties that are not Affiliates of the Borrowers, to the extent same are
available in such format). Along with such operating statements, each Borrower
shall deliver to Lender a Compliance Certificate of such Borrower's chief
executive officer or chief financial officer (or other officer with similar
duties) satisfying the criteria set forth in Section 5.1(A)(viii) below.

            (vi) ADDITIONAL REPORTING. In addition to the foregoing, the
Borrowers shall, and shall cause Guarantor and Manager to, promptly provide to
Lender such further documents

                                       49


and information concerning its operations, properties, ownership, and finances
as Lender shall from time to time reasonably request upon prior written notice
to the Borrowers.

            (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause
Guarantor and Manager to, maintain systems of accounting established and
administered in accordance with sound business practices and sufficient in all
respects to permit preparation of Financial Statements in conformity with GAAP
and the Uniform System. All Financial Statements shall be prepared in accordance
with GAAP and the Uniform System, consistently applied; provided, however, in
the event of a conflict between the Uniform System and GAAP, GAAP will be
followed.

            (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS,
COMPLIANCE CERTIFICATE. Together with the Financial Statements and other
documents and information provided to Lender by or on behalf of the Borrowers or
Guarantor under this Section, the Borrowers or Guarantor also shall deliver to
Lender a certification to Lender, executed on behalf of the Borrowers or
Guarantor by their respective chief executive officer or chief financial officer
(or other officer with similar duties), stating that to their Knowledge after
due inquiry such quarterly and annual Financial Statements and information
fairly present the financial condition and results of operations of the
Borrowers, Guarantor and/or the Properties for the period(s) covered thereby,
and do not omit to state any material information without which the same might
reasonably be misleading, and all other non-financial documents submitted to
Lender (whether monthly, quarterly or annually) are true, correct, accurate and
complete in all material respects. In addition, where this Loan Agreement
requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same
shall deliver a certificate duly executed on behalf of such Person by its chief
executive officer or chief financial officer (or other officer with similar
duties) stating (a) that, to their Knowledge after due inquiry, there does not
exist any Default or Event of Default under the Loan Documents (or if any
exists, specifying the same in detail), and (b) the Borrowers and Guarantor have
complied with the applicable reporting requirements of this Section 5.1.

            (ix) FISCAL YEAR. Each Borrower represents that its fiscal year and
that of the Guarantor ends on December 31, and agrees that no change shall be
made to each such fiscal year, without Lender's prior written consent.

      (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower
will deliver copies of all material reports submitted by independent public
accountants in connection with each annual, interim or special audit of the
Financial Statements or other business operations of such Borrower made by such
accountants, including the comment letter submitted by such accountants to
management in connection with the annual audit.

      (C) TAX RETURNS. Within thirty (30) days after filing the same, each
Borrower shall deliver to Lender a copy of its Federal income tax returns (or
the return of the applicable Person into which such Borrower's Federal income
tax return is consolidated) certified on its behalf by its chief financial
officer (or similar position) to be true and correct.

      (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 15 of
each calendar year, each Borrower shall deliver to Lender for its review for its
Property a

                                       50


proposed Operating Budget and CapEx/FF&E Budget (in each case presented on a
monthly and annual basis) for such calendar year. Each Operating Budget and
CapEx/FF&E Budget shall be subject to Lender's approval which shall not be
unreasonably withheld, conditioned or delayed. Provided that no Cash Trap Event
or Event of Default exists, the Borrowers may make changes to the Operating
Budget and the CapEx/FF&E Budget from time to time as deemed reasonably
necessary by the Borrower, provided no such modification (together with all
prior modifications taken as a whole) shall alter any single line item (or the
applicable Budget as a whole) by more than ten percent (10%) without Lender's
prior written approval, which approval shall not be unreasonably withheld;
provided, however, notwithstanding the foregoing during a Cash Trap Event,
increases to the Operating Budget for any Property (not to exceed ten percent
(10%) of the Operating Budget for such Property as a whole) will be permitted
without Lender's consent for actual verifiable increases in utilities, water and
sewer assessments and charges and real property taxes for the applicable
Property over the amounts therefor set forth in the Operating Budget for such
Property for the prior period. Notice of any modifications to the Operating
Budget and the CapEx/FF&E Budget shall be delivered to Lender at the time of
delivery of the next financial reporting required pursuant to Section 5.1(A)(v).
Lender acknowledges that it has approved the annual Operating Budget and the
CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating Budget
shall identify and set forth each Borrower's reasonable estimate, after due
consideration, of all revenue, costs, and expenses, and shall specify Operating
Revenues and Operating Expenses on a line-item basis consistent with the form of
Operating Budget delivered to Lender prior to Closing. If any of said budgets or
plans requiring Lender's approval is not in form and substance reasonably
satisfactory to Lender, Lender may disapprove the same and specify the reasons
therefor in writing, and the Borrowers shall promptly amend and resubmit for
approval revised budgets or plans, as applicable, making such changes as are
necessary to comply with the reasonable requirements of Lender. Until any such
budget or plan for any year requiring Lender's approval has been approved or
deemed approved, the applicable budget or plan for the previous year shall
remain in effect until the new budget or plan is approved or deemed approved.
Lender's consent to any budget, plan or amendments thereto shall be deemed
given, if the first correspondence from the Borrowers to Lender requesting such
approval is in an envelope marked "PRIORITY" and contains a bold-faced,
conspicuous legend at the top of the first page thereof stating that "IF YOU
FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING
WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied
by the information and documents required above and any other information
reasonably requested by Lender in writing prior to the expiration of such
fifteen (15) day period in order to adequately review the same has been
delivered and, if Lender fails to respond or to expressly deny such request for
approval in writing within the fifteen (15) day period, a second notice is
delivered to Lender from the Borrowers in an envelope marked "PRIORITY"
requesting approval containing a bold-faced, conspicuous legend at the top of
the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY
THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL
BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request
for approval within the ten (10) day period.

                                       51


      (E) MATERIAL NOTICES.

            (i) The Borrowers shall promptly deliver, or cause to be delivered,
copies of all notices given or received with respect to a default under any term
or condition related to any Permitted Indebtedness of any Borrower, and shall
notify Lender within five (5) Business Days of any potential or actual event of
default with respect to any such Permitted Indebtedness.

            (ii) The Borrowers shall promptly deliver to Lender copies of any
and all material notices (including without limitation any notice alleging any
default or breach which is reasonably expected to result in a termination)
received with respect to any Material Agreement or any Lease, including, without
limitation, any inspection report and any progress reports related to any
Property Improvement Plan received from a Franchisor related to such Borrower's
Property.

      (F) EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining
knowledge of any of the following events or conditions, such Borrower shall
deliver a certificate executed on its behalf by its chief financial officer or
similar officer specifying the nature and period of existence of such condition
or event and what action such Borrower or any Affiliate thereof has taken, is
taking and proposes to take with respect thereto: (i) any condition or event
that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii)
any actual or alleged breach or default or assertion of (or written threat to
assert) remedies under any Management Agreement, Franchise Agreement or Ground
Lease.

      (G) LITIGATION. Promptly upon any of the Borrowers obtaining knowledge of
(1) the institution of any action, suit, proceeding, governmental investigation
or arbitration against the Borrowers or any of the Properties not previously
disclosed in writing by the Borrowers to Lender which would be reasonably likely
to have a Material Adverse Effect or is not covered by insurance or (2) any
material development in any action, suit, proceeding, governmental investigation
or arbitration at any time pending against or affecting the Borrowers or the
Properties which, in each case, if adversely determined would reasonably be
expected to have a Material Adverse Effect, the Borrowers will give notice
thereof to Lender and, upon request from Lender, provide such other information
as may be reasonably available to them to enable Lender and its counsel to
evaluate such matter.

      (H) INSURANCE. At least five (5) Business Days prior to the end of each
insurance policy period of the Borrowers, the Borrowers will deliver
certificates, reports, and/or other information (all in form and substance
reasonably satisfactory to Lender), (i) outlining all material insurance
coverage maintained as of the date thereof by the Borrowers and all material
insurance coverage planned to be maintained by the Borrowers in the subsequent
insurance policy period and (ii) evidencing payment in full of the premiums for
such insurance policies.

      (I) OTHER INFORMATION. With reasonable promptness, Borrowers will deliver
such other information and data with respect to such Person and its Affiliates
or the Properties as from time to time may be reasonably requested by Lender.

SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve
and keep in full force and effect their existence as a limited partnership,
limited liability company, or

                                       52


corporation, as the case may be, and all rights and franchises material to its
business, including their qualification to do business in each state where it is
required by law to so qualify. Without limitation of the foregoing, each
Borrower and, to the extent required by applicable law, General Partner and
Member, shall at all times be qualified to do business in each of the states
where the Properties are located.

SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS.

      (A) Except for those matters being contested pursuant to clause (B) below,
the Borrowers will pay (i) all Impositions; (ii) all claims (including claims
for labor, services, materials and supplies) for sums that have become due and
payable and that by law have or may become a Lien upon any of its properties or
assets (hereinafter referred to as the "CLAIMS"); and (iii) all federal, state
and local income taxes, sales taxes, excise taxes and all other taxes and
assessments of the Borrowers on their business, income or assets; in each
instance before any penalty or fine is incurred with respect thereto.

      (B) The Borrowers shall not be required to pay, discharge or remove any
Imposition or Claim relating to a Property so long as the Borrowers contest in
good faith such Imposition, Claim or the validity, applicability or amount
thereof by an appropriate legal proceeding which operates to prevent the
collection of such amounts and the sale of the applicable Property or any
portion thereof, and so long as: (i) no Event of Default shall have occurred and
be continuing, (ii) prior to the date on which such Imposition or Claim would
otherwise have become delinquent, the Borrowers shall have given Lender prior
written notice of their intent to contest said Imposition or Claim; (iii) prior
to the date on which such Imposition or Claim would otherwise have become
delinquent, the Borrowers shall have deposited with Lender (or with a court of
competent jurisdiction or other appropriate body reasonably approved by Lender)
such additional amounts as are necessary to keep on deposit at all times, an
amount by way of cash, Dollar Equivalents, or a Letter of Credit, equal to at
least one hundred twenty-five percent (125%) (or such higher amount as may be
required by applicable law) of the total of (x) the balance of such Imposition
or Claim then remaining unpaid, and (y) all interest, penalties, costs and
charges accrued or accumulated thereon; (iv) no risk of sale, forfeiture or loss
of any interest in the applicable Property or any part thereof arises, in
Lender's reasonable judgment, during the pendency of such contest; (v) such
contest does not, in Lender's reasonable determination, have a Material Adverse
Effect; and (vi) such contest is based on bona fide, material, and reasonable
claims or defenses. Any such contest shall be prosecuted with due diligence, and
the Borrowers shall promptly pay the amount of such Imposition or Claim as
finally determined, together with all interest and penalties payable in
connection therewith. Lender shall have full power and authority, but no
obligation, to apply any amount deposited with Lender under this subsection to
the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture
of the applicable Property for non-payment thereof, if Lender reasonably
believes that such sale or forfeiture is threatened. Any surplus retained by
Lender after payment of the Imposition or Claim for which a deposit was made
shall be promptly repaid to the Borrowers unless an Event of Default shall have
occurred, in which case said surplus may be retained by Lender to be applied to
the Obligations. Notwithstanding any provision of this Section to the contrary,
the Borrowers shall pay any Imposition or Claim which they might otherwise be
entitled to contest if an Event of Default shall occur and be continuing, or if,
in the reasonable determination of Lender, the applicable Property is in danger
of being forfeited or foreclosed. If the Borrowers refuse to pay

                                       53


any such Imposition or Claim, Lender may (but shall not be obligated to) make
such payment and the Borrowers shall reimburse Lender on demand for all such
advances.

SECTION 5.4 MAINTENANCE OF INSURANCE.

      The Borrowers will continuously maintain the following described policies
of insurance on each of the respective Properties without cost to Lender (the
"INSURANCE POLICIES"):

            (i) Property insurance against loss and damage by all risks of
physical loss or damage, including fire, sprinkler leakage, windstorm,
hurricane, terrorism, and other risks covered by the so-called extended coverage
endorsement covering the Improvements and personal property in amounts not less
than the full insurable replacement value of all Improvements (less building
foundations and footings) and personal property from time to time on the
Properties and without sublimits, and bearing a replacement cost agreed-amount
endorsement;

            (ii) Commercial general liability insurance, including death, bodily
injury, innkeeper legal liability and broad form property damage coverage with a
combined single limit in an amount not less than One Million Dollars
($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the
aggregate for any policy year;

            (iii) If any of the Properties are in an area prone to geological
phenomena, including, but not limited to, sinkholes, mine subsidence or
earthquakes, insurance covering such risks in an amount equal to 100% of the
full replacement cost of all improvements (without any deductions for
depreciation) and with a maximum permissible deductible equal to the lesser of
$25,000 or 10% of the face value of the policy;

            (iv) For each Property located in whole or in part in a federally
designated "special flood hazard area", flood insurance in the maximum available
amount;

            (v) An umbrella excess liability policy with a limit of not less
than Twenty Million Dollars ($20,000,000) over primary insurance, which policy
shall include coverage for so-called assumed and contractual liability coverage
and automobile liability coverage, and coverage for safeguarding of personalty
and shall also include such additional coverages and insured risks which are
acceptable to Lender;

            (vi) Business interruption and/or rent loss insurance with an
aggregate limit equal to at least the gross income from the Properties for an
indemnity period commencing on the date of such casualty and ending at least six
(6) months after completion of the Restoration (such amount being adjusted
annually);

            (vii) Crime protection insurance covering all employees with access
to funds and located in Guarantor's corporate offices with a limit of not less
than One Million Dollars ($1,000,000) and with the same coverages and
deductibles as currently in place at the Properties;

            (viii) Steam boiler, machinery and pressurized vessel insurance
insuring against breakdown or explosion of such equipment on a replacement cost
value basis, which shall not contain any exclusions for testing procedures;

                                       54


            (ix) Worker's Compensation Insurance in statutory amounts, if any,
at all times;

            (x) Insurance against loss or damage from (A) leakage of sprinkler
systems and (B) explosion of steam boilers, air conditioning equipment, high
pressure piping, machinery and equipment, pressure vessels or similar apparatus
now or hereafter installed in the Improvements (without exclusion for
explosions), in an amount at least equal to the Aggregate Allocated Loan Amount;

            (xi) During any period of construction, repair or restoration,
builder's "all risk" insurance in an amount equal to not less than the full
insurable value of the Properties (excluding building foundations and footings)
against such risks (including, without limitation, fire and extended coverage
and collapse of the Improvements to agreed limits) as Lender may reasonably
request;

            (xii) If the Properties are or become a "non-conforming use" under
applicable zoning and building ordinances, or other requirements of the
applicable Governmental Authority, law or ordinance coverage to compensate for
the cost of demolition and the increased cost of construction, if available;

            (xiii) If the Borrowers, Manager or any of their respective
Affiliates holds a liquor license for the Properties, liquor liability insurance
(including "dram shop" liability) in an amount not less than $1,000,000 for each
common cause and $3,000,000 in the aggregate; provided that if such liquor
license is held by any tenant under a Lease, the Borrowers shall cause such
tenant to cause liquor liability insurance in an amount not less than the limits
set forth above to be carried in such tenant's name, and shall include the
Borrowers and Lender as additional insureds thereunder;

            (xiv) If reasonably required by Lender as a result of the release,
disposal or existence of any Hazardous Materials on or about any Property after
the date hereof (or as to which Lender obtains knowledge after the date hereof)
or if such insurance is then customarily required by institutional lenders for
securitized loans, environmental insurance, including mold coverage, in form and
with coverages (including business interruption coverage) reasonably
satisfactory to Lender; provided, however, without limiting or affecting
Lender's right to require such environmental insurance with respect to any other
Properties after the date hereof, Lender acknowledges that, as of the date
hereof, environmental insurance shall only be required with respect to the
Property known as the Holiday Inn, located at 363 Roberts Street, East Hartford,
Connecticut;

            (xv) Fiduciary liability insurance and directors and officers
liability insurance ("D&O INSURANCE") with coverages at levels in effect as of
the Closing Date;

            (xvi) Insurance against acts of terrorism, or insurance policies
without an exclusion for damages resulting from acts of terrorism on terms
consistent with the commercial property insurance policies required under
subsection (i), (ii), (v) and (vi) above;

            (xvii) Such other insurance as may from time to time be reasonably
required by Lender and which is then customarily required by institutional
lenders for securitized loans

                                       55


secured by similar properties similarly situated, against other insurable
hazards, including, but not limited to, malicious mischief, vandalism, windstorm
and or earthquake, due regard to be given to the size and type of the
Properties, Improvements, fixtures and equipment and their location,
construction and use. Additionally, the Borrowers shall carry such insurance
coverage as Lender may from time to time require if the failure to carry such
insurance would result in a downgrade, qualification or withdrawal of any class
of securities issued in connection with a Securitization.

            All Insurance Policies shall be in content (including, without
limitation, endorsements or exclusions, if any), form, and amounts, and issued
by companies, satisfactory to Lender from time to time and shall name Lender and
its successors and assignees as their interests may appear as (x) an "additional
insured" for each of the liability policies under this Section 5.4 hereof, and
(y) a "mortgagee" for each of the property and casualty policies under this
Section hereof, and shall (except for Worker's Compensation Insurance) contain a
waiver of subrogation clause reasonably acceptable to Lender. Other than with
respect to D&O Insurance, an insurance company shall not be satisfactory unless
such insurance company (a) is licensed or authorized to issue insurance in the
State where the applicable Property is located and (b) has a claims paying
ability rating by the Rating Agencies of AA- (or its equivalent).
Notwithstanding the foregoing, a carrier which does not meet the foregoing
ratings requirement shall nevertheless be deemed acceptable hereunder provided
that such carrier is reasonably acceptable to Lender and the Borrowers shall
obtain and deliver to Lender a Rating Confirmation with respect to such carrier
from each of the Rating Agencies, provided, however, that: (a) if any insurance
coverage required under this Section 5.4 is maintained by a syndicate of
insurers, the preceding ratings requirements shall be deemed satisfied (without
any required Rating Confirmation) as long as at least seventy five percent (75%)
of the coverage (if there are four or fewer members of the syndicate) or at
least sixty percent (60%) of the coverage (if there are five or more members of
the syndicate) is maintained with carriers meeting the claims-paying ability
ratings requirements by S&P and Moody's (if applicable) set forth above and all
carriers in such syndicate have a claims-paying ability rating by S&P of not
less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by
Moody's); (b) Lender hereby approves Zurich Insurance Company as the carrier
providing the insurance described in clause (ii) above, so long as such carrier
maintains a claims paying ability of not less than A- by S&P (and the equivalent
from each of the other Rating Agencies to the extent rated thereby) and (c)
until the expiration of the current term of the applicable policies, Lender
hereby approves Landmark American as the carrier providing the insurance
described in clauses (i), (iv) and (vi) above (covering losses over the first
$25,000,000 of coverage), so long as thereafter such carrier or any other
carrier providing the above coverages maintains a claims paying ability of not
less than A by S&P (and the equivalent from each of the other Rating Agencies to
the extent rated thereby). All Insurance Policies under Sections 5.4 (i), (iv),
(vi), (vii), (x), (xi) and (xii) hereof shall contain a Non-Contributory
Standard mortgagee clause and a mortgagee's Loss Payable Endorsement (Form 438
BFU NS), or their equivalents (such endorsements shall entitle Lender to collect
any and all proceeds payable under all such insurance, with the insurance
company waiving any claim or defense against Lender for premium payment,
deductible, self-insured retention or claims reporting provisions). All
Insurance Policies shall provide that the coverage shall not be modified without
(30) days' advance written notice to Lender and shall provide that no claims
shall be paid thereunder to a Person other than Lender without ten (10) days'
advance written notice to Lender. The Borrowers may obtain any insurance
required by this Section through blanket

                                       56


policies; provided, however, that such blanket policies shall separately set
forth the amount of insurance in force with respect to the Properties (which
shall not be reduced by reason of events occurring on property other than the
Properties) and shall afford all the protections to Lender as are required under
this Section. Except as may be expressly provided above, all policies of
insurance required hereunder shall contain no annual aggregate limit of
liability, other than with respect to liability insurance. If a blanket policy
is issued, a certified copy of said policy shall be furnished, together with a
certificate indicating that Lender is an additional insured (and, if applicable,
loss payee) under such policy in the designated amount. The Borrowers will
deliver duplicate originals of all Insurance Policies, premium prepaid through
the current expiration dates of such Insurance Policies, to Lender and, in case
of Insurance Policies about to expire, the Borrowers will deliver duplicate
originals of replacement policies satisfying the requirements hereof to Lender
not less than ten (10) days prior to the date of expiration; provided, however,
if such replacement policy is not yet available, the Borrowers shall provide
Lender with an insurance certificate executed by the insurer or its authorized
agent evidencing that the insurance required hereunder is being maintained under
such policy, which certificate shall be acceptable to Lender on an interim basis
until the duplicate original of the policy is available. The Borrowers shall
furnish Lender receipts for the payment of premiums on such insurance policies
or other evidence of such payment reasonably satisfactory to Lender in the event
that such premiums have not been paid by Lender pursuant to the Loan Agreement.
The requirements of this Section 5.4 shall apply to any separate policies of
insurance taken out by the Borrowers concurrent in form or contributing in the
event of loss with the Insurance Policies. Losses shall be payable to Lender
notwithstanding (1) any act, failure to act or negligence of the Borrowers or
their agents or employees, Lender or any other insured party which might, absent
such agreement, result in a forfeiture or all or part of such insurance payment,
other than the willful misconduct of Lender knowingly in violation of the
conditions of such policy, (2) the occupation or use of the Properties or any
part thereof for purposes more hazardous than permitted by the terms of such
policy, (3) any foreclosure or other action or proceeding taken pursuant to this
Loan Agreement or (4) any change in title to or ownership of the Properties or
any part thereof. The property insurance and the boiler and machinery insurance
described in Sections 5.4(i) and (x) hereof shall include "underground hazards"
coverage; "time element" coverage by which Lender shall be assured payment of
all amounts due under the Note, this Loan Agreement and the other Loan
Documents; "extra expense" (i.e., soft costs), clean-up, transit and ordinary
payroll coverage; and "expediting expense" coverage to facilitate rapid repair
or restoration of the Properties. The Insurance Policies shall not contain any
deductible in excess of $250,000.

SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY.

      (A) The Borrowers will operate and maintain the Properties as is necessary
to maintain hotel standards at least as high as those that currently apply to
each Property, subject to ordinary wear and tear, as reasonably determined by
the Borrowers, and otherwise in compliance with the standards under the
applicable Franchise Agreement and shall maintain or cause to be maintained in
good repair, working order and condition all material property used in the
business of each Borrower, including the applicable Property, and will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Without limitation of the foregoing, each Borrower will operate and maintain its
Property substantially in accordance with the applicable Operating Budget and
the CapEx/FF&E Budget. All work required or permitted

                                       57


under this Loan Agreement shall be performed in a workmanlike manner and in
compliance with all applicable laws.

      So long as no Event of Default has occurred and is continuing, the
Borrowers may, without Lender's consent, perform alterations to the Properties
which do not constitute a Material Alteration. The Borrowers shall not perform
any Material Alteration without Lender's prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed; provided, however,
that Lender may, in its sole and absolute discretion, withhold consent to any
Material Alteration which is likely to result in a decrease of Net Operating
Income (taking into consideration all Material Alterations being undertaken at
the Properties at such time) by 5% or more below that which was in effect prior
to the commencement of the first such Material Alteration being undertaken at
the time of determination for a period of sixty (60) days or longer; provided,
further, however, the Borrowers may perform a Material Alteration without
Lender's consent if (i) the delay caused by obtaining Lender's prior consent may
result in injury or death at, or further destruction or deterioration of, the
applicable Property, (ii) such Material Alteration is necessary to prevent the
likelihood of injury or death at, or further destruction or deterioration of,
the applicable Property, and (iii) the Borrowers deliver notice to Lender within
two (2) Business Days of commencement of such Material Alteration together with
such supporting documentation as Lender may require with respect to such
Material Alteration. Lender may, as a condition to giving its consent to a
Material Alteration, require that the Borrowers deliver to Lender evidence
reasonably satisfactory to Lender that the Borrowers have cash available for
payment of the cost of such Material Alteration or, if the Borrowers fail to
deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an
amount equal to 125% of the cost of such Material Alteration as reasonably
estimated by Lender. Cash deposited by the Borrowers with Lender in connection
with any Material Alteration pursuant to the foregoing sentence shall be held by
Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers
to pay for the cost of such Material Alteration as such work progresses subject
to satisfaction of the conditions for disbursement of amounts from the Capital
Improvement Reserve under Section 6.5 (including the requirements set forth
under Section 6.7). Upon completion of the Material Alteration, the Borrowers
shall provide evidence reasonably satisfactory to Lender that (i) the Material
Alteration was constructed in accordance with all material applicable laws and
substantially in accordance with plans and specifications approved by Lender
(which approval shall not be unreasonably withheld or delayed), (ii) all
contractors, subcontractors, materialmen and professionals who provided work,
materials or services in connection with the Material Alteration have been paid
in full and have delivered unconditional releases of lien and (iii) all material
licenses necessary for the use, operation and occupancy of the Material
Alteration (other than those which depend on the performance of tenant
improvement work) have been issued. The Borrowers shall reimburse Lender upon
demand for all reasonable out-of-pocket costs and expenses (including the
reasonable fees of any architect, engineer or other professional engaged by
Lender) incurred by Lender in reviewing plans and specifications or in making
any determinations necessary to implement the provisions of this Section 5.5(A).

      (B) In the event of casualty or loss at any of the Properties, the
Borrowers shall give immediate written notice of the same to the insurance
carrier and to Lender and shall promptly commence and diligently prosecute to
completion, in accordance with the terms hereof, the repair and restoration of
the Property as nearly as possible to the Pre-Existing Condition (a
"RESTORATION"). The Borrowers hereby authorize and empower Lender as
attorney-in-fact for

                                       58


the Borrowers (jointly with the Borrowers unless an Event of Default has
occurred and is continuing), or any of them, to make proof of loss, to adjust
and compromise any claim under insurance policies, to appear in and prosecute
any action arising from such insurance policies, to collect and receive
insurance proceeds, and to deduct therefrom Lender's expenses incurred in the
collection of such proceeds; provided however, that nothing contained in this
Section shall require Lender to incur any expense or take any action hereunder.
The Borrowers further authorize Lender, at Lender's option, (i) to hold the
balance of such proceeds to be used to reimburse the Borrowers for the cost of
Restoration of any of the Properties or (ii) subject to Subsection 5.5(C), to
apply such proceeds to payment of the Obligations whether or not then due, in
any order. Notwithstanding the foregoing, in the event of a casualty where the
loss does not exceed the Restoration Threshold, the Borrowers may settle and
adjust such claim; provided that (a) no Event of Default has occurred and is
continuing and (b) such adjustment is carried out in a commercially reasonable
and timely manner.

      (C) Lender shall not exercise Lender's option to apply insurance proceeds
to payment of the Obligations if all of the following conditions are met: (i) no
Event of Default then exists; (ii) Lender reasonably determines that there will
be sufficient funds to complete the Restoration of the Property to at least
substantially the Pre-Existing Condition and to timely make all payments due
under the Loan Documents during the Restoration of the affected Property; (iii)
Lender reasonably determines that the Net Operating Income of the Properties
(including rental income or business interruption insurance) will be sufficient
to pay principal and interest on the Loan and the Mezzanine Loan and Operating
Revenues of the Properties, after the Restoration thereof to the Pre-Existing
Condition, will be sufficient to meet all Operating Expenses, payments for
Reserves and payments of principal and interest under the Note and the Mezzanine
Loan; (iv) Lender determines that the Restoration of the affected Property to
the Pre-Existing Condition will be completed not later than five (5) months
prior to the expiration of any business interruption insurance, but in no event
later than six (6) months prior to the Maturity Date; (v) less than fifty
percent (50%) of the total floor area of the Improvements has been damaged,
destroyed or rendered unusable as a result of such fire or other casualty; and
(vi) such Property can be restored and repaired substantially to the condition
it was in immediately prior to such casualty and in compliance with all
applicable zoning, building and other laws and codes (the "PRE-EXISTING
CONDITION"). If Lender elects to apply insurance proceeds to payment of the
Obligations, such application shall be made on the Payment Date immediately
following such election in accordance with the terms of the Cash Management
Agreement.

      (D) If Lender elects or is obligated to make the insurance proceeds
available for the Restoration of any Property and Lender is holding such
proceeds, the Borrowers agree that, if at any time during the Restoration, the
cost of completing such Restoration, as reasonably determined by Lender, exceeds
the undisbursed insurance proceeds, the Borrowers shall, within ten (10)
Business Days following the written demand by Lender, deposit the amount of such
excess with Lender, and Lender shall first disburse such deposit to pay for the
costs of such Restoration on the same terms and conditions as the insurance
proceeds are disbursed. If the Borrowers deposit such excess with Lender and if,
after completion of the Restoration, any funds remain from the combination of
insurance proceeds and the funds so deposited with Lender by the Borrowers, and
if no Event of Default shall have occurred and be continuing, then Lender shall
promptly disburse to the Borrowers such remaining funds.

                                       59


      (E) Lender may, at Lender's option, condition disbursement of any
insurance proceeds on Lender's approval (which approval shall not be
unreasonably withheld) of plans and specifications of an independent architect
licensed in the state where the Property is located and reasonably satisfactory
to Lender (the "ARCHITECT"), any and all contractors, subcontractors and
materialmen engaged in the Restoration and the contracts under which they have
been engaged, contractor's cost estimates, architect's certificates, waivers of
liens, sworn statements of mechanics and materialmen and such other evidence of
costs, percentage completion of construction, application of payments, and
satisfaction of liens as Lender may reasonably require. Lender shall not be
obligated to disburse insurance proceeds more frequently than once every
calendar month. If insurance proceeds are applied to the payment of the
Obligations and provided no Event of Default exists, any such application of
proceeds to principal shall be without any Prepayment Consideration and shall
not extend or postpone the due dates of the monthly payments due under the Note
or otherwise under the Loan Documents, or change the amounts of such payments.
If Lender elects to apply all of such insurance proceeds toward the repayment of
the Obligations, the Borrowers shall (subject to compliance with clauses (A),
(B), (D) and (F) of Section 11.4) be entitled to obtain from Lender a Property
Release (without representation or warranty) of the applicable Property from the
Lien of the Mortgage relating to such Property (in which event the Borrowers
shall not be obligated to restore the applicable Property pursuant to Section
5.5(B) above) provided that the Borrowers pay to Lender the amount, if any, by
which the Release Price for such Property exceeds the insurance proceeds
received by Lender and applied to repayment of the Obligations. If any proceeds
are applied to reduce the Obligations under this Section 5.5, provided that no
Event of Default has occurred and is continuing, no Prepayment Consideration
shall be due and payable in connection with such application. Any amount of
insurance proceeds remaining in Lender's possession after full and final payment
and discharge of all Obligations shall be refunded to, or as directed by, the
Borrowers or otherwise paid in accordance with applicable law. If the Property
is sold at foreclosure or if Lender acquires title to the Property, Lender shall
have all of the right, title and interest of the applicable Borrower in and to
any insurance policies and unearned premiums thereon and in and to the proceeds
resulting from any damage to such Property prior to such sale or acquisition.

      (F) In no event shall Lender be obligated to make disbursements of
insurance proceeds in excess of an amount equal to the costs actually incurred
from time to time for work in place as part of the Restoration, as certified by
the Architect, less a retainage equal to the lesser of (x) the actual retainage
required pursuant to the permitted contract, or (y) ten percent (10%) of such
costs incurred until the Restoration has been completed. The retainage shall in
no event be less than the amount actually held back by the Borrowers from
contractors, subcontractors and materialmen engaged in the Restoration. The
retainage shall not be released until the Architect certifies to Lender, or, if
no Architect has been retained by Lender, Lender is reasonably satisfied, that
the Restoration has been completed in accordance with the provisions of this
Section 5.5 and that all approvals necessary for the re-occupancy and use of the
Property have been obtained from all appropriate governmental authorities, and
Lender receives final lien waivers and such other evidence reasonably
satisfactory to Lender that the costs of the Restoration have been paid in full
or will be paid in full out of the retainage.

SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized
representatives designated by Lender to visit and inspect during normal business
hours its Property and its

                                       60


business, including its financial and accounting records, and to make copies and
take extracts therefrom and to discuss its affairs, finances and business with
its officers and independent public accountants (with such Borrower's
representative(s) present), at such reasonable times during normal business
hours and as often as may be reasonably requested. Unless an Event of Default
has occurred and is continuing, Lender shall provide advance written notice of
at least three (3) Business Days prior to visiting or inspecting any Property or
such Borrower's offices.

SECTION 5.7 O&M PLAN. The applicable Borrowers shall cause to be prepared and
delivered to Lender operations and maintenance programs (the "O&M PLANS") with
respect to suspected asbestos, asbestos-containing materials, and/or mold
located in certain Properties as set forth on SCHEDULE 6.6, which conditions
were disclosed in the applicable Environmental Reports for such Properties. Each
applicable Borrower shall at all times implement and carry out the O&M Plan in
accordance with its terms. Lender's requirement that the applicable Borrowers
develop and comply with the O&M Plan shall not be deemed to constitute a waiver
or modification of any covenants or agreements of the Borrowers or Guarantor
with respect to Hazardous Material or Environmental Laws as set forth in the
Environmental Indemnity.

SECTION 5.8 INTENTIONALLY DELETED.

SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will
(A) comply with the requirements of all present and future applicable laws,
rules, regulations and orders of any governmental authority in all jurisdictions
in which it is now doing business or may hereafter be doing business, other than
those laws, rules, regulations and orders the noncompliance with which would not
reasonably be expected to have, either individually or in the aggregate, a
material adverse effect on the operation or value of any Property, (B) maintain
all licenses and permits now held or hereafter acquired by any Borrower, the
loss, suspension, or revocation of which, or failure to renew, could have a
material adverse effect on the operation or value of any Property and (C)
perform, observe, comply and fulfill all of its material obligations, covenants
and conditions contained in any Contractual Obligation.

SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute
and/or deliver such documents, instruments, agreements, financing statements,
and perform such acts as Lender at any time may reasonably request to evidence,
preserve and/or protect the Collateral at any time securing or intended to
secure the Obligations and/or to better and more effectively carry out the
purposes of this Loan Agreement and the other Loan Documents.

SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party
shall duly and punctually perform, observe and comply in all material respects
with all of the terms, provisions, conditions, covenants and agreements on its
part to be performed, observed and complied with (i) hereunder and under the
other Loan Documents to which it is a party, (ii) under all Material Agreements
and Leases and (iii) all other agreements entered into or assumed by such Person
in connection with the Properties, and will not suffer or permit any material
default or event of default (giving effect to any applicable notice requirements
and cure periods) to exist under any of the foregoing except where the failure
to perform, observe or comply with any agreement referred to in this clause
(iii) would not reasonably be expected to have a material adverse effect on the
operation or value of any Property.

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SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which
shall not be unreasonably withheld or delayed, the Borrowers shall not, nor
shall the Borrowers authorize Manager or any other Person to, (i) enter into any
Material Lease; (ii) cancel or terminate any Material Lease (except to enforce
any such Lease after a default thereunder); (iii) amend or modify any Material
Lease (except for minor modifications and amendments entered into in the
ordinary course of business, consistent with prudent property management
practices, not materially and adversely affecting the economic terms of the
Material Lease); (iv) approve any assignment, sublease or underlease of any
Material Lease (except as required pursuant to the express terms of any existing
Lease or Lease hereafter approved by Lender); or (v) cancel or modify any
guaranty, or release any security deposit, letter of credit, or other item
constituting security pertaining to any Material Lease (except as required
pursuant to the express terms of any existing Lease or Lease hereafter approved
by Lender).

      (B) Any request for approval of any Material Lease or assignment,
termination, amendment or modification of any Material Lease shall be made to
Lender in writing and together with such request the Borrowers shall furnish to
Lender: (i) such biographical and financial information about the proposed
tenant as Lender may reasonably require in conjunction with its review, (ii) a
copy of the proposed form of Lease (or amendment or modification), and (iii) a
summary of the material terms of such proposed Lease (or amendment or
modification) including, without limitation, rental terms and the term of the
proposed Lease and any options. Lender's approval of any Material Lease or
assignment, termination, amendment or modification of any Material Lease, shall
be deemed given, if the first correspondence from the Borrowers to Lender
requesting such approval is in an envelope marked "PRIORITY" and contains a
bold-faced, conspicuous legend at the top of the first page thereof stating that
"IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN
WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is
accompanied by the information and documents required above and any other
information reasonably requested by Lender in writing prior to the expiration of
such fifteen (15) day period in order to adequately review the same has been
delivered and, if Lender fails to respond or to expressly deny such request for
approval in writing within the fifteen (15) day period, a second notice is
delivered to Lender from the Borrowers in an envelope marked "PRIORITY"
requesting approval containing a bold-faced, conspicuous legend at the top of
the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY
THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL
BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request
for approval within the ten (10) day period.

      Except for security deposits, no Material Lease executed after the Closing
Date shall provide for payment of rent more than one month in advance, and the
Borrowers shall not under any circumstances collect any such rent more than one
month in advance. The Borrowers, at Lender's request, shall furnish Lender with
executed copies of all Material Leases hereafter made. Each new Material Lease
or a separate agreement with the tenant of such Material Lease shall be in
recordable form and shall specifically provide that such Material Lease (i) is
subordinate to the Mortgages; (ii) that the tenant attorns to Lender, such
attornment to be effective upon Lender's acquisition of title to the Property;
(iii) that the tenant agrees to execute such further evidences of attornment as
Lender may from time to time request; (iv) that the attornment of the tenant
shall not be terminated by foreclosure; (v) that in no event shall Lender,

                                       62


as holder of the Mortgages or as successor landlord, be liable to the tenant for
any act or omission of any prior landlord or for any liability or obligation of
any prior landlord occurring prior to the date that Lender or any subsequent
owner acquire title to the Property; and (vi) that Lender may, at Lender's
option, accept or reject such attornment.

SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS.

      (A) The Borrowers shall cause each Manager to manage the Properties in
accordance with the Management Agreements including, without limitation,
maintaining inventory in amounts and types customary for hotels comparable to
each Property. The Borrowers shall (i) perform and observe all of the material
terms, covenants and conditions of the Management Agreement on the part of each
Borrower to be performed and observed, and (ii) promptly notify Lender of any
notice to any of the Borrowers of any material default under the Management
Agreement of which it is aware. If any of the Borrowers shall default in the
performance or observance of any material term, covenant or condition of the
applicable Management Agreement on the part of the Borrowers to be performed or
observed, then, without limiting Lender's other rights or remedies under this
Agreement or the other Loan Documents, and without waiving or releasing the
Borrowers from any of their obligations hereunder or under the applicable
Management Agreement, Lender shall have the right, upon prior written notice to
the Borrower, but shall be under no obligation, to pay any sums and to perform
any act as may be reasonably appropriate to cause such material conditions of
the applicable Management Agreement on the part of the Borrowers to be performed
or observed.

      (B) The Borrowers shall not surrender, terminate, cancel, modify (other
than non-material changes), renew or extend the Management Agreement, or enter
into any other Management Agreement with Manager or any new Manager, or consent
to the assignment by the Manager of its interest under the Management Agreement,
in each case without (i) prior to a Securitization, the express consent of
Lender, which consent shall not be unreasonably withheld, or (ii) after a
Securitization, delivery of Rating Confirmations from each of the Rating
Agencies. The Borrowers shall cause any new Manager with respect to any Property
to execute and deliver a subordination of management agreement in substantially
the form delivered in connection with the closing of the Loan.

      (C) Lender shall have the right to require any of the Borrowers to replace
any Manager with a Person chosen by the Borrowers and reasonably acceptable to
Lender (unless such proposed Manager is an Acceptable Manager) and the
applicable Franchisor (to the extent the applicable Franchisor has consent
rights), upon the earliest to occur of any one or more of the following events:
(i) upon the occurrence and during the continuance of an Event of Default; (ii)
thirty (30) days after notice from Lender to the Borrowers if Manager has
engaged in fraud, gross negligence or willful misconduct arising from or in
connection with its performance under the applicable Management Agreement; or
(iii) upon a change of control of the current Manager.

      (D) The Borrowers shall not terminate or enter into any Franchise
Agreement without Lender's prior written consent, which may be granted or
withheld in Lender's sole discretion. Notwithstanding the foregoing, the
following changes to Franchise Agreements shall be permitted without Lender's
prior written consent:

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            (i)   Replacement of any Franchise Agreement with a new Franchise
                  Agreement in form substantially similar to a form previously
                  approved by Lender with any Franchisor that would cause a Tier
                  3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or
                  that would cause a Tier 2 Hotel to become a Tier 1 Hotel;

            (ii)  Replacement of any Franchise Agreement with a new Franchise
                  Agreement in form substantially similar to a form previously
                  approved by Lender with another Franchisor within the same
                  Category, provided that the Borrowers shall not replace
                  Franchise Agreements (in the aggregate) pursuant to this
                  Section 5.13(D)(ii) with respect to more than the lesser of
                  (x) two (2) Properties, or (y) Properties with Aggregate
                  Allocated Loan Amounts (in the aggregate) of ten percent (10%)
                  of the Aggregate Outstanding Principal Balance;

            (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with
                  a new Franchise Agreement in form substantially similar to a
                  form previously approved by Lender for Tier 3 Hotels, provided
                  that the Borrowers shall not replace Franchise Agreements for
                  more than one (1) Property, or for any Property with an
                  Allocated Loan Amount of more than five percent (5%) of the
                  outstanding principal balance of the Loan pursuant to this
                  Section 5.13(D)(iii); and

            (iv)  Entering into new Franchise Agreements (or amendments or
                  addenda to existing Franchise Agreements) with the existing
                  Franchisors for the applicable Properties for the same
                  franchise brand, each in form substantially similar to the
                  forms previously approved for the respective Properties by
                  Lender, as required by the existing Franchisors under the
                  respective Franchise Agreements in connection with the
                  transfers of the applicable Properties and the direct and
                  indirect ownership interests in the Borrowers made by the
                  Borrower Parties and their Affiliates in connection with the
                  Closing of the Loan.

      In connection with the replacement of any Franchisors permitted hereunder,
the applicable Borrower shall, within ten (10) Business Days of the execution of
such Franchise Agreement, deliver to Lender a Franchisor Letter from any
replacement Franchisor in form and substance reasonably acceptable to Lender. In
all cases, each Borrower shall (a) cause the hotel located on the applicable
Property to be operated pursuant to the applicable Franchise Agreement; (b)
promptly perform and observe in all material respects all of the covenants
required to be performed and observed by it under the applicable Franchise
Agreement (including the requirements of any Property Improvement Plan); (c)
promptly notify Lender of any material default under the applicable Franchise
Agreement of which it is aware; and (d) promptly enforce in a commercially
reasonable manner the performance and observance of all of the material
covenants required to be performed and observed by the Franchisor under the
Franchise Agreement. In addition, the Borrowers shall not, without Lender's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed: (x) increase or consent to the increase of the aggregate
amount of any fees under any Franchise Agreement;

                                       64


or (y) otherwise materially modify, change, supplement, alter or amend, or waive
or release any of its material rights and remedies under, any Franchise
Agreement.

      Lender's consent to any replacement of any Franchise Agreement, or the
termination, renewal, extension or modification of an existing Franchise
Agreement, shall be deemed given, if the first correspondence from the Borrowers
to Lender requesting such consent is in an envelope marked "PRIORITY" and
contains a bold-faced, conspicuous legend at the top of the first page thereof
stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR
APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED
GIVEN", and is accompanied by the information and documents required above and
any other information reasonably requested by Lender in writing prior to the
expiration of such fifteen (15) day period in order to adequately review the
same has been delivered and, if Lender fails to respond or to expressly deny
such request for approval in writing within the fifteen (15) day period, a
second notice is delivered to Lender from the Borrowers in an envelope marked
"PRIORITY" requesting approval containing a bold-faced, conspicuous legend at
the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR
APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny
each request for approval within the ten (10) day period.

SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become
obligated under any Material Agreement pertaining to any Property without
Lender's prior written approval, which approval shall not be unreasonably
withheld or conditioned; except that the following Material Agreements shall not
require Lender approval: (i) any Lease that does not require Lender's approval
under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii)
any Management Agreement that does not require Lender's approval under, and
otherwise complies with, the provisions of Section 5.13 hereof (provided,
however, that the foregoing shall not affect Borrowers' obligation to deliver
Rating Confirmations with respect to any such Management Agreement if required
under Section 5.13), (iii) the existing Material Agreements described on
SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not
require Lender's approval under, and otherwise complies with, the provisions of
Section 5.13(E) or (v) any other agreement that may be terminated without cause
and without payment of a penalty or premium, on not more than thirty (30) days'
prior written notice.

SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all
Receipts from the Properties into, and otherwise comply with, the Accounts
established from time to time hereunder. Subject to Article VII hereof and the
Cash Management Agreement, each Borrower shall promptly apply all Receipts to
the payment of all current and past due Operating Expenses, and to the repayment
of all sums currently due or past due under the Loan Documents, including all
payments into the Reserves.

SECTION 5.16 ESTOPPEL CERTIFICATES.

      (A) Within ten (10) Business Days following a request by Lender, the
Borrowers shall provide to Lender a duly acknowledged written statement
confirming (i) the amount of the outstanding principal balance of the Loan, (ii)
the terms of payment and maturity date of the

                                       65


Note, (iii) the date to which interest has been paid, (iv) whether any offsets
or defenses exist against the Obligations, and if any such offsets or defenses
are alleged to exist, the nature thereof shall be set forth in detail and (v)
that this Loan Agreement, the Note, the Mortgages and the other Loan Documents
are legal, valid and binding obligations of the Borrowers and have not been
modified or amended, or if modified or amended, describing such modification or
amendments.

      (B) Within ten (10) Business Days following a written request by the
Borrowers, Lender shall provide to the Borrowers a duly acknowledged written
statement setting forth the amount of the outstanding principal balance of the
Loan, the date to which interest has been paid, and whether Lender has provided
the Borrowers with written notice of any Event of Default. Compliance by Lender
with the requirements of this Section shall be for informational purposes only
and shall not be deemed to be a waiver of any rights or remedies of Lender
hereunder or under any other Loan Document.

SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly
create, incur, assume, guaranty, or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness except for the following
(collectively, "PERMITTED INDEBTEDNESS"):

      (A) the Obligations and Crossed Indebtedness;

      (B) (i) unsecured trade payables not evidenced by a note and arising out
of purchases of goods or services in the ordinary course of business and (ii)
Indebtedness incurred in the financing of equipment or other personal property
used at any Property in the ordinary course of business, provided that (a) each
such trade payable is payable not later than ninety (90) days after the original
invoice date and is not overdue by more than thirty (30) days, and (b) the
aggregate amount of such trade payables and Indebtedness relating to financing
of equipment and personal property or otherwise referred to in clauses (i) and
(ii) above (excluding therefrom utility expenses of the Properties and fees
payable to the Franchisors pursuant to the terms of the Franchise Agreements)
outstanding does not, at any time, exceed five percent (5%) of the outstanding
principal balance of the Loan; and

      (C) that certain unsecured loan in the original principal amount of
$17,686,292, evidenced by a certain replacement promissory note dated as of
November 15, 2002 given by Servico Centre Associates, Ltd. to Servico Palm Beach
General Partner SPE, Inc., the outstanding principal balance of which on the
Closing Date is $10,935,590, and which is subject to the terms of that certain
Subordination and Standstill Agreement given by the holder of such note in favor
of Lender and dated as of the Closing Date; and

      (D) the Mezzanine Loan.

In no event shall any Indebtedness other than the Loan be secured, in whole or
in part, by the Properties or any portion thereof or interest therein.

SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are
in addition to and not in limitation of its obligations under Article XI herein.
The Borrower shall not create, incur, assume or permit to exist any Lien on or
with respect to the Properties, any other Collateral or any direct or indirect
ownership interest in the Borrowers, except the Permitted

                                       66


Encumbrances and Liens on the ownership interests in the Borrowers securing the
Mezzanine Loan.

SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no
Primary Borrower Party shall directly or indirectly create or become or be
liable with respect to any Contingent Obligation.

SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly
permitted in this Loan Agreement, no Primary Borrower Party shall, or shall
permit any other Person to, (i) amend, modify or waive any term or provision of
such Borrower Party's partnership agreement, certificate of limited partnership,
articles of incorporation, by-laws, articles of organization, operating
agreement or other organizational documents so as to violate or permit the
violation of the single-purpose entity provisions set forth in Article IX,
unless required by law; or (ii) liquidate, wind-up or dissolve such Primary
Borrower Party.

SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses
payable to the Manager under the Management Agreement, the Borrowers shall not
pay any management, consulting, director or similar fees to any Related Person
of the Borrowers or to any director, officer or employee of the Borrowers. The
Borrowers shall not directly or indirectly enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Related Person of any of the Borrowers or
with any director, officer or employee of any Borrower Party, except
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of the Borrowers and upon fair and reasonable terms
and which are no less favorable to any of the Borrowers than would be obtained
in a comparable arm's length transaction with a Person that is not a Related
Person of any Borrower. The Borrowers shall not make any payment or permit any
payment to be made to any Related Person of any of the Borrowers when or as to
any time when any Event of Default shall exist.

SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS.

      (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary
case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect.

      (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not
apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or
collude to cause the appointment of or taking possession by, a receiver, trustee
or other custodian for all or a substantial part of the assets of any Borrower.
As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, in which any of the
Borrowers is a debtor or any portion of the Properties is property of the estate
therein. The Borrowers shall not file a petition for, consent to the filing of a
petition for, or aid, solicit, support, or otherwise act, cooperate or collude
to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any
Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior
written consent of Lender, consent to the entry of any order, file any motion,
or support any motion (irrespective of the subject of the motion), and the
Borrowers shall not file or

                                       67


support any plan of reorganization. The Borrowers having any interest in any
Involuntary Borrower Bankruptcy shall do all things reasonably requested by
Lender to assist Lender in obtaining such relief as Lender shall seek, and shall
in all events vote as directed by Lender. Without limitation of the foregoing,
each such Borrower shall do all things reasonably requested by Lender to support
any motion for relief from stay or plan of reorganization proposed or supported
by Lender.

SECTION 5.23 ERISA.

      (A) NO ERISA PLANS. None of the Primary Borrower Parties will establish
any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence
making contributions to (or become obligated to make contributions to) any
Employee Benefit Plan, Pension Plan or Multiemployer Plan.

      (B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any
non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the IRC; or (ii) except as may be necessary to comply with applicable laws,
establish or amend any Employee Benefit Plan which establishment or amendment
could result in liability to the Borrowers or any ERISA Affiliate or increase
the obligation of the Borrowers, provided that the Borrower shall not be in
default of this covenant if, in either case, any portion of the Loan has been,
or will be, funded with plan assets of any employee benefit plan that either (x)
is subject to Title I of ERISA or any plan that is covered by Section 4975 of
the Code (unless the Lender is eligible to apply for one or more exemptions such
that the Loan will not constitute a nonexempt prohibited transaction under
Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to
an excise tax under Section 4975 of the IRC.

      (C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of
this Loan Agreement become (1) an employee benefit plan defined in Section 3(3)
of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1)
of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental
plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose
underlying assets constitute "plan assets" of any such employee benefit plan,
plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the
IRC or any state statutes applicable to the Borrowers regulating investments of
governmental plans.

SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any
other Person within its control to, disclose the name of Lender or terms of this
Loan Agreement or the Loan Documents in any press release without the prior
written consent of Lender, which shall not be unreasonably withheld.
Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted
to make such filings and disclosures with respect to the Loan as are required by
law.

SECTION 5.25 GROUND LEASES.

      (A) NO MODIFICATION. The Borrowers shall not modify or amend, or terminate
or surrender any Ground Lease, in each case without the prior written consent of
Lender, which consent may be withheld by Lender in its sole and absolute
discretion. Any attempted or

                                       68


purported modification, amendment, or any surrender or termination of any Ground
Lease without Lender's prior written consent shall be null and void and of no
force or effect.

      (B) PERFORMANCE OF GROUND LEASES. The Borrowers shall fully perform as and
when due each and all of its obligations under each Ground Lease in accordance
with the terms of such Ground Lease, and shall not cause or suffer to occur any
material breach or default in any of such obligations. The Borrowers shall keep
and maintain each Ground Lease in full force and effect. The Borrowers shall
exercise any option to renew or extend any Ground Lease and give written
confirmation thereof to Lender within thirty (30) days after such option is
exercised. Notwithstanding that certain of the obligations of the Borrowers
under this Loan Agreement may be similar or identical to certain of the
obligations of the Borrowers under the Ground Leases, all of the obligations of
the Borrowers under this Loan Agreement are and shall be separate from and in
addition to its obligations under the Ground Leases.

      (C) NOTICE OF DEFAULT. If any of the Borrowers shall have or receive any
written notice that any Ground Lease Default has occurred, then the Borrowers
immediately shall notify Lender in writing of the same and immediately deliver
to Lender a true and complete copy of each such notice. Further, the Borrowers
shall provide such documents and information as Lender shall reasonably request
concerning the Ground Lease Default.

      (D) LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and be
continuing, or if any Ground Lessor asserts that a Ground Lease Default has
occurred (whether or not the Borrowers question or deny such assertion), then,
subject to the terms and conditions of the applicable Ground Lease, Lender, upon
five (5) Business Days' prior written notice to the Borrowers, unless Lender
reasonably determines that a shorter period (or no period) of notice is
necessary to protect Lender's interest in the Ground Lease, may (but shall not
be obligated to) take any action that Lender deems reasonably necessary,
including, without limitation, (i) performance or attempted performance of the
applicable Borrower's obligations under the applicable Ground Lease, (ii) curing
or attempting to cure any actual or purported Ground Lease Default, (iii)
mitigating or attempting to mitigate any damages or consequences of the same and
(iv) entry upon the applicable Ground Leased Property for any or all of such
purposes. Upon Lender's request, each Borrower shall submit satisfactory
evidence of payment or performance of any of its obligations under each Ground
Lease. Lender may pay and expend such sums of money as Lender in its sole
discretion deems necessary or desirable for any such purpose, and the Borrowers
shall pay to Lender within five (5) Business Days of the written demand of
Lender all such sums so paid or expended by Lender, together with interest
thereon from the date of expenditure at the Default Rate.

      (E) LEGAL ACTION. The Borrowers shall not commence any action or
proceeding against any Ground Lessor or affecting or potentially affecting any
Ground Lease or the Borrowers' or Lender's interest therein, the effect of which
could cause an event of default or termination of any such Ground Lease, without
the prior written consent of Lender, which consent shall not be unreasonably
withheld, conditioned or delayed. The Borrowers shall notify Lender immediately
if any action or proceeding shall be commenced between any Ground Lessor and
either Borrower, or affecting or potentially affecting any Ground Lease or
either Borrower's or Lender's interest therein (including, without limitation,
any case commenced by or against any Ground Lessor under the Bankruptcy Code).
Lender shall have the option,

                                       69


exercisable upon notice from Lender to the Borrowers, to participate in any such
action or proceeding with counsel of Lender's choice. The Borrowers shall
cooperate with Lender, comply with the reasonable instructions of Lender,
execute any and all powers, authorizations, consents or other documents
reasonably required by Lender in connection therewith, and shall not settle any
such action or proceeding without the prior written consent of Lender, which
consent shall not be unreasonably withheld, conditioned or delayed.

      (F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the
applicable Ground Lease, from time to time, at Lender's request, the Borrowers
shall use commercially reasonable efforts to obtain and deliver to Lender within
the time period required under the applicable Ground Lease, an estoppel
certificate from each Ground Lessor setting forth (A) (i) the identities of the
original lessor and lessee under the applicable Ground Lease and each of their
respective successors, (ii) that the Ground Lease has not been modified or, if
it has been modified, the date of each modification (together with copies of
each such modification), (iii) the rent payable under the Ground Lease, (iv) the
dates to which all rent and other charges have been paid, (v) whether there are
any alleged Ground Lease Defaults and, if so, setting forth the nature thereof
in reasonable detail, and (vi) such other matters as Lender may reasonably
request or (B) the matters required to be certified by the Ground Lessor under
the applicable Ground Lease. The Borrowers shall not be required to request an
estoppel from any Ground Lessor more than two (2) times in any calendar year.

      (G) BANKRUPTCY.

            (i) If any Ground Lessor shall reject any Ground Lease under or
pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrowers shall
not elect to treat the Ground Lease as terminated but shall elect to remain in
possession of the applicable Ground Leased Property and the leasehold estate
under such Ground Lease. The lien of the Mortgage covering such Property does
and shall encumber and attach to all of the Borrowers' rights and remedies at
any time arising under or pursuant to Section 365 of the Bankruptcy Code,
including without limitation, all of such Borrower's rights to remain in
possession of such Property and the leasehold estate.

            (ii) The Borrowers acknowledge and agree that in any case commenced
by or against the Borrowers under the Bankruptcy Code, Lender by reason of the
liens and rights granted under the Mortgage covering such Property and the Loan
Documents shall have a substantial and material interest in the treatment and
preservation of such Borrower's rights and obligations under such Ground Lease,
and that such Borrower shall, in any such bankruptcy case, provide to Lender
immediate and continuous reasonably adequate protection of such interests. Each
Borrower and Lender agree that such adequate protection shall include but shall
not necessarily be limited to the following:

                  (a) Lender shall be deemed a party to the Ground Lease (but
shall not have any obligations thereunder) for purposes of Section 365 of the
Bankruptcy Code, and shall, provided that, prior to an Event of Default, no such
action by Lender would adversely and materially affect the Borrowers' ability to
prosecute, or defend, any such claims asserted therein, have standing to appear
and act as a party in interest in relation to any matter arising out of or
related to the Ground Lease or such Property.

                                       70


                  (b) The Borrowers shall serve Lender with copies of all
notices, pleadings and other documents relating to or affecting the Ground Lease
or the applicable Property. Any notice, pleading or document served by the
Borrowers on any other party in the bankruptcy case shall be contemporaneously
served by such Borrower on Lender, and any notice, pleading or document served
upon or received by such Borrower from any other party in the bankruptcy case
shall be served by such Borrower on Lender promptly upon receipt by such
Borrower.

                  (c) Upon written request of Lender, the Borrowers shall assume
the Ground Lease, and shall take such steps as are necessary to preserve such
Borrower's right to assume the Ground Lease, including without limitation using
commercially reasonable efforts to obtain extensions of time to assume or reject
the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it
is applicable.

      (H) ASSUMPTION AND ASSIGNMENT. If the Borrowers or the applicable Ground
Lessor seeks to reject any Ground Lease or have the Ground Lease deemed
rejected, then prior to the hearing on such rejection Lender shall, subject to
applicable law, be given no less than twenty (20) days' notice and opportunity
to elect in lieu of rejection to have the Ground Lease assumed and assigned to a
nominee of Lender. If Lender shall so elect to assume and assign the Ground
Lease, then the Borrowers shall, subject to applicable law, continue any request
to reject the Ground Lease until after the motion to assume and assign has been
heard. If Lender shall not elect to assume and assign the Ground Lease, then
Lender may, subject to applicable law, obtain in connection with the rejection
of the Ground Lease a determination that the applicable Ground Lessor, at
Lender's option, shall (1) agree to terminate the Ground Lease and enter into a
new lease with Lender on the same terms and conditions as the Ground Lease, for
the remaining term of the Ground Lease, or (2) treat the Ground Lease as
breached and provide Lender with the rights to cure defaults under the Ground
Lease and to assume the rights and benefits of the Ground Lease.

            Each Borrower shall join with and support any request by Lender to
grant and approve the foregoing as necessary for adequate protection of Lender's
interests. Notwithstanding the foregoing, Lender may seek additional terms and
conditions, including such economic and monetary protections as it deems
reasonably appropriate to adequately protect its interests, and any request for
such additional terms or conditions shall not delay or limit Lender's right to
receive the specific elements of adequate protection set forth herein.

            Each Borrower hereby appoints Lender as its attorney in fact to act
on behalf of Lender in connection with all matters relating to or arising out of
the assumption or rejection of any Ground Lease, in which the other party to the
lease is a debtor in a case under the Bankruptcy Code. This grant of power of
attorney is present, unconditional, irrevocable, durable and coupled with an
interest.

SECTION 5.26 CONDOMINIUM PROPERTY.

      (A) NO MODIFICATION. The Condominium Borrower shall not modify or amend
any material terms of, or terminate any of the Condominium Property Documents,
in each case,


                                       71


without the prior written consent of Lender, which consent shall not be
unreasonably withheld, conditioned or delayed.

      (B) PERFORMANCE OF CONDOMINIUM PROPERTY DOCUMENTS. The Condominium
Borrower shall fully and faithfully pay when due and payable all assessments,
common charges and other charges payable by the Condominium Borrower under the
Condominium Property Documents and shall perform as and when due each of its
material obligations under the Condominium Property Documents in substantial
accordance with their respective terms, and shall not cause or suffer to occur
any breach or default in any of such obligations. The Condominium Borrower shall
keep and maintain each of the Condominium Property Documents in full force and
effect.

      (C) NOTICE OF DEFAULT. If the Condominium Borrower shall receive any
written notice of any Condominium Default, the Condominium Borrower immediately
shall notify Lender of same and deliver to Lender a true and complete copy of
each such notice, and provide such documents and information as Lender may
reasonably request concerning such Condominium Default.

      (D) LENDER'S RIGHT TO CURE. If any Condominium Default shall occur and be
continuing, or if any party to any Condominium Property Document asserts that a
Condominium Default has occurred (whether or not the Borrowers question or deny
such assertion), then, subject to the terms and conditions of the applicable
Condominium Property Documents, after notice to the Condominium Borrower, Lender
upon five (5) Business Days' prior written notice to the Borrowers, unless
Lender reasonably determines that a shorter period (or no period) of notice is
necessary to protect Lender's interest in the Ground Lease, may (but shall not
be obligated to) take any action that Lender deems reasonably necessary to cure
such Condominium Default, including, without limitation, (i) performance or
attempted performance of the Borrowers' obligations under the applicable
Condominium Property Documents, (ii) curing or attempting to cure any actual or
purported Condominium Default, (iii) mitigating or attempting to mitigate any
damages or consequences of the same and (iv) entry upon the Condominium Property
for any or all of such purposes. Upon Lender's request, the Condominium Borrower
shall submit satisfactory evidence of payment or performance of any of its
obligations under each of the Condominium Property Documents. Lender may pay and
expend such sums of money as Lender in its sole discretion deems necessary or
desirable for any such purpose, and the Borrowers shall pay to Lender within
five (5) Business Days of the written demand of Lender all such sums so paid or
expended by Lender pursuant to this Section 5.26, together with interest thereon
from the date of expenditure at the Default Rate.

      (E) PRESERVATION OF CONDOMINIUM. The Condominium Borrower will do all
things necessary to preserve and to keep unimpaired its material rights, powers
and privileges under the Condominium Property Documents and to prevent the
termination or expiration of the Condominium Property Documents, or the
withdrawal of the Condominium Property from a condominium form of ownership
under applicable law, to the end that the Condominium Borrower may enjoy all of
the material rights granted to it as a party to the Condominium Property
Documents.

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      (F) NOTICE OF CONDOMINIUM DEFAULTS. The Condominium Borrower will (i)
promptly notify Lender of the receipt by the Condominium Borrower of any notice
from the Board of Managers, or the owner of any other unit in the condominium,
covering the Condominium Property, asserting or claiming a default by the
Condominium Borrower thereunder or lack of compliance by the Condominium
Borrower with the Condominium Property Documents, (ii) promptly notify Lender of
the receipt by the Condominium Borrower of any notice or request from the Board
of Managers or owner of any unit of the termination or purported termination of
the Condominium Property Documents or to withdraw the Condominium Property from
condominium ownership pursuant to applicable law or to seek any action for
partition, (iii) promptly notify Lender of the receipt by the Condominium
Borrower of any notice or request from the Board of Managers or owner of any
unit of the material modification or change or proposed material modification or
change of the Condominium Property Documents and (iv) promptly cause a copy of
each such notice of request received by the Condominium Borrower from the Board
of Managers or any unit owner, or from a mortgagee of a mortgage on such other
unit, to be delivered to Lender. The Condominium Borrower will permit Lender to
participate in any such partition or withdrawal proceeding to the extent
permitted by law and the Condominium Property Documents (but Lender shall not be
obligated so to do). The Condominium Borrower will promptly deliver to Lender a
copy of each notice, pleading, brief and preliminary, interim and final
determination or decision and other papers received by it in each such partition
or withdrawal proceeding.

      (G) STATEMENTS, NOTICES. The Condominium Borrower will, within twenty (20)
days after demand from Lender (which shall not be required more than two (2)
times in any calendar year), obtain, if and to the extent that the Condominium
Borrower is entitled to the same under the Condominium Property Documents, and
otherwise request from and make good faith efforts to obtain, from the Board of
Managers and deliver to Lender a duly signed and acknowledged certificate
(signed also by the Condominium Borrower) that the Condominium Property
Documents are unmodified and in full force and effect (or, if the same have been
modified in compliance with this Loan Agreement, that the Condominium Property
Documents are in full force and effect as to modified and that there have been
no other modifications), stating the dates to which the assessments, common
charges and other charges payable under the Condominium Property Documents have
been paid and stating whether to each certifying party's knowledge, the
Condominium Borrower is in compliance with the Condominium Property Documents,
or, if not, specifying each default or failure of compliance of which the
certifying party has knowledge. The Condominium Borrower will, promptly upon
receipt thereof by the Condominium Borrower, furnish Lender with a copy of all
notices and statements, however characterized, issued by the Board of Managers
or relating to the Condominium Property Documents including without limitation,
financial statements and projected budgets.

SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender,
all reasonable out-of-pocket expenses, charges, costs and fees (including
reasonable attorneys' fees and expenses) in connection with the negotiation,
documentation, closing, administration, servicing, enforcement interpretation,
and collection of the Loan and the Loan Documents, and in the preservation and
protection of Lender's rights hereunder and thereunder. Without limitation the
Borrowers shall pay all costs and expenses, including reasonable attorneys'
fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or
any law succeeding or replacing any of the same). At the Closing, Lender is
authorized to pay directly from the

                                       73


proceeds of the Loan any or all of the foregoing expenses then or theretofore
incurred and approved by the Borrowers.

SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and
at any time that a Cash Trap Event is in effect, the Borrowers shall not make
any distributions of cash or other property to any Borrower Party, or make any
payments in lieu thereof, without Lender's prior written approval, which may be
granted or withheld in Lender's sole discretion.

SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless
otherwise specifically provided herein to the contrary, the Borrowers shall not
cancel any indebtedness from any Person owing to any Borrower, or settle any
claims without Lender's prior written consent which shall not be unreasonably
withheld.

SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no
Borrower Party, nor any of their respective Affiliates, officers, directors,
partners or members will knowingly: (i) conduct any business, nor engage in any
transaction or dealing, with any Prohibited Person, including, but not limited
to, the making or receiving of any contribution of funds, goods, or services, to
or for the benefit of a Prohibited Person; or (ii) engage in or conspire to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in
EO13224. The Borrowers further covenants and agrees to deliver (from time to
time) to Lender any such certification or other evidence as may be requested by
Lender in its sole and absolute discretion, confirming that: (i) neither any
Borrower Party, nor their respective officers, directors, partners, members or
Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party, nor
their respective officers, directors, partners, members or Affiliates, has to
its Knowledge engaged in any business, transaction or dealings with a Prohibited
Person, including, but not limited to, the making or receiving of any
contribution of funds, goods, or services, to or for the benefit of a Prohibited
Person.

                                   ARTICLE VI
                                    RESERVES

SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES.

      (A) The Borrowers hereby pledge, assign and grant to Lender a security
interest in and to all of the Borrowers' right, title and interest in and to the
Account Collateral, including the Reserves, as security for payment and
performance of all of the Obligations hereunder and under the Note and the other
Loan Documents. The Reserves constitute Account Collateral and are subject to
the security interest in favor of Lender created herein and all provisions of
this Loan Agreement and the other Loan Documents pertaining to Account
Collateral.

      (B) In addition to the rights and remedies provided in Article VII and
elsewhere herein, upon the occurrence and during the continuance of any Event of
Default, Lender shall have all rights and remedies pertaining to the Reserves as
are provided for in any of the Loan Documents or under any applicable law.
Without limiting the foregoing, upon and at all times after the occurrence and
during the continuance of an Event of Default, Lender in its sole and absolute
discretion, may use the Reserves (or any portion thereof) for any purpose,
including but not limited to any combination of the following: (i) payment of
any of the Obligations including

                                       74


the Prepayment Consideration (if any) applicable upon such payment in such order
as Lender may determine in its sole discretion; provided, however, that such
application of funds shall not cure or be deemed to cure any Default; (ii)
reimbursement of Lender for any actual losses or expenses (including, without
limitation, reasonable legal fees) suffered or incurred as a result of such
Event of Default; (iii) payment for the work or obligation for which such
Reserves were reserved or were required to be reserved; and (iv) application of
the Reserves in connection with the exercise of any and all rights and remedies
available to Lender at law or in equity or under this Loan Agreement or pursuant
to any of the other Loan Documents. Nothing contained in this Loan Agreement
shall obligate Lender to apply all or any portion of the funds contained in the
Reserves during the continuance of an Event of Default to payment of the Loan or
in any specific order of priority.

SECTION 6.2 FUNDS DEPOSITED WITH LENDER.

      (A) INTEREST, OFFSETS. Except only as expressly provided otherwise herein,
all funds of the Borrowers which are deposited with Lock Box Account Bank as
Reserves hereunder shall be held by Lock Box Account Bank in one or more
Permitted Investments, such Permitted Investments, prior to an Event of Default,
to be as directed by Borrower. All interest which accrues on the Reserves shall
be taxable to the Borrowers and shall be added to and disbursed in the same
manner and under the same conditions as the principal sum on which said interest
accrued. Additional provisions pertaining to investments are set forth in
Article VII. After repayment of all of the Obligations, all funds held as
Reserves will be promptly returned to, or as directed by, the Borrowers.

      (B) FUNDING AT CLOSING. The Borrowers shall deposit with Lender the
amounts necessary to fund each of the Reserves as set forth below. Deposits into
the Reserves at Closing may occur by deduction from the amount of the Loan that
otherwise would be disbursed to the Borrowers, followed by deposit of the same
into the applicable Sub-Account or Account of the Lock Box Account in accordance
with the Cash Management Agreement on the Closing Date. Notwithstanding such
deductions, the Loan shall be deemed for all purposes to be fully disbursed at
Closing.

SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the
Borrowers shall deposit with Lock Box Account Bank $1,318,789.30 and,
pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly,
on each Payment Date commencing on the Payment date in August 2004, 1/12th of
the annual charges (as reasonably estimated by Lender) for all Impositions and
all Insurance Premiums (other than for D&O Insurance) payable with respect to
the Properties hereunder (said funds, together with any interest thereon and
additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount
of the monthly deposit to be made to the Impositions and Insurance Reserve from
and after the date hereof is $265,344.65. The Borrowers shall also deposit with
Lock Box Account Bank within ten (10) Business Days of the written demand by
Lender, to be added to and included within such reserve, a sum of money which
Lender reasonably estimates, together with such monthly deposits, will be
sufficient to make the payment of each such charge at least ten (10) Business
Days prior to the date initially due. The Borrowers shall provide Lender with
bills and all other documents necessary for the payment of the foregoing charges
at least thirty (30) days prior to the date on which each payment shall first
become subject to penalty or interest if not paid. So

                                       75


long as (i) no Event of Default has occurred and is continuing, (ii) the
Borrowers have provided Lender with the foregoing bills and other documents in a
timely manner, and (iii) sufficient funds are held by Lender for the payment of
the Impositions and Insurance Premiums relating to each of the Properties,
Lender shall pay said items or disburse to the Borrowers from such Reserve an
amount sufficient to pay said items. Interest shall accrue in favor of the
Borrowers on funds in the Impositions and Insurance Reserve and be added to the
balance thereof and disbursed in accordance with the terms hereof.

SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on
behalf of Lender shall establish and maintain with Lock Box Bank an account for
the purpose of creating a reserve for replacements of FF&E at or in, or used in
connection with, the Properties (the "REPLACEMENTS") in accordance with the
applicable CapEx/FF&E Budget approved by Lender (said funds, together with any
interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve
shall be held in an Eligible Account entitled "FF&E Reserve Account for the
benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account
shall be under the sole dominion and control of Lender, subject to the terms of
the Cash Management Agreement. Pursuant to the Cash Management Agreement, the
Borrowers shall deposit monthly, on each Payment Date commencing with the
Payment Date in August 2004, an amount equal to 4.0% of the Operating Revenues
generated from the Properties for the prior calendar month (such amount, the
"MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the
Borrowers, subject in all instances to the terms of the Cash Management
Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds
held in the FF&E Reserve shall be used in connection with the Required Capital
Improvements. Upon and at all times after the occurrence and during the
continuance of an Event of Default, no draws will be permitted from the FF&E
Reserve other than Replacements subject, in each instance, to Manager's
compliance with the FF&E reporting requirements set forth in Section
5.1(A)(v)(d).

SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At
Closing, the Borrowers shall deposit with Lock Box Account Bank
$4,797,522.00 (said funds, together with any interest thereon, the "Capital
IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers
solely for payment of certain Capital Improvements required to be made to the
Properties and designated as "Required Capital Improvements" on SCHEDULE 6.5
attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by
the Borrowers for purposes for which any other Reserve is established or for any
other purpose other than completion of the Required Capital Improvements. The
Borrowers shall promptly commence and diligently prosecute to completion,
subject to Force Majeure, the Required Capital Improvements within the time
periods for each Required Capital Improvement set forth on SCHEDULE 6.5. Funds
held in the Capital Improvement Reserve shall be disbursed in accordance with
section 6.7. subject to the foregoing conditions, but also subject to the last
paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining
balance in the Capital Improvement Reserve when all Required Capital
Improvements are complete, and paid for, in accordance with the terms hereof.

SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers
shall deposit with Lock Box Account Bank, an amount equal to $1,237.50 (said
funds, together with any interest thereon and additions thereto, the "HAZARDOUS
MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous Materials
on the Properties as

                                       76


indicated in the Environmental Reports for the Properties prepared and delivered
prior to the Closing and as such work is more particularly described on SCHEDULE
6.6 (the "ENVIRONMENTAL WORK"). Prior to the earlier of (x) the date required by
any applicable Governmental Authority or (y) nine (9) months after the Closing,
the Borrowers shall, subject to Force Majeure, complete such Environmental Work
and shall provide to Lender such closure reports, no-further-action letters, or
other evidence of compliance with law as Lender may reasonably require. The
funds contained in the Hazardous Materials Remediation Reserve shall be utilized
by the Borrowers solely for performance of the Environmental Work in accordance
with the Environmental Reports, and shall not be used by the Borrowers for
purposes for which any other Reserve is established. Subject to the Borrowers'
satisfaction of the applicable conditions of Section 6.7, the Borrowers shall be
entitled to draw upon the Hazardous Materials Remediation Reserve to pay for
costs that have been incurred by the Borrowers for such Environmental Work,
provided that the Borrowers deliver to Lender such evidence as may be reasonably
satisfactory to Lender that, after payment of such draw, the funds remaining in
the Hazardous Materials Remediation Reserve shall be sufficient to pay for the
remainder of such Environmental Work. Subject to the foregoing conditions, but
also subject to the last paragraph of Section 11.4, the Borrowers shall be
entitled to draw any remaining balance in the Hazardous Materials Remediation
Reserve when all such Environmental Work is complete, and is paid for, in
accordance with the terms hereof.

SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION
RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK.

      (A) DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND
CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for
disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to
or for the account of the Borrowers (x) from the Hazardous Materials Remediation
Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the
Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for
Environmental Work (the "APPROVED ENVIRONMENTAL EXPENDITURES", and (y) from the
Capital Improvement Reserve, to pay to, or pay on behalf of, the Borrowers for
the amount of the Borrowers' actual bona fide out-of-pocket expenditures or
costs incurred for Required Capital Improvements ("APPROVED CAPITAL IMPROVEMENT
EXPENDITURES"; and together with the Approved Environmental Expenditures,
collectively, "APPROVED EXPENDITURES"; and the related Environmental Work or
Required Capital Improvements to which any such request for disbursement relates
shall be referred to as the "WORK"), upon satisfaction of each of the conditions
listed on SCHEDULE 6.7 and each of the conditions set forth below in Lender's
reasonable discretion:

            (i) Except as provided in this Section 6.7, each request for
disbursement from the Hazardous Materials Remediation Reserve or the Capital
Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for
completion of the Approved Expenditures for which disbursement is requested.

            (ii) A request for disbursement from the Work Reserves may be made
after completion of a portion of the Work under such contract, or for payment of
deposits required in connection with the Work under such Contract, provided (1)
all other conditions in this Loan Agreement for disbursement have been
satisfied, (2) funds remaining in the Hazardous Materials

                                       77


Remediation Reserve are, in Lender's reasonable judgment, sufficient to complete
the Environmental Work when required and/or funds remaining in the Capital
Improvement Reserve are, in Lender's reasonable judgment, sufficient to complete
such item of Required Capital Improvements and any other Required Capital
Improvements remaining to be performed, as the case may be, and (3) if
reasonably required by Lender, each contractor or subcontractor receiving
payments in excess of $100,000 under such contract shall provide a waiver of
lien with respect to amounts which have been paid to that contractor or
subcontractor.

            (iii) To the extent the contract with the relevant contractor or
supplier provides for a retainage, each disbursement from a Work Reserve, except
for a final disbursement, shall be in the amount of actual costs incurred less
the percentage of such costs that the contract with the relevant contractor or
supplier specifies to be retained and advanced as part of the final
disbursement. No funds will be advanced for materials stored at any Property
unless such materials are properly stored and secured at the applicable Property
in accordance with the Borrowers' customary procedures and sound construction
practices as reasonably determined by Lender. No funds will be advanced for
materials stored at any location other than at the Properties unless Lender
determines in its reasonable discretion that Lender has a perfected first
priority security interest in any such materials.

            (iv) The amount of all invoices in connection with the Work with
respect to which a disbursement is requested and which has been approved by
Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers
(in which event, the Borrowers covenant and agree to promptly pay such invoices)
or, if an Event of Default has occurred and is continuing, at Lender's option
and in Lender's sole and absolute discretion, directly to the contractor,
supplier, materialman, mechanic or subcontractor indicated on said invoices
unless already paid by the Borrowers and Lender has received satisfactory
evidence of such payment in which case Lender shall reimburse the Borrowers. All
invoices in connection with disbursements from the Capital Improvement Reserve
shall be classified as requests for payment for items of Capital Improvement (as
opposed to items that, in conformity with GAAP, would be included as Operating
Expenses). If the Borrowers request that any amounts be disbursed directly to
the Borrowers pursuant to the foregoing sentence, the Borrowers shall be
required to deliver evidence reasonably acceptable to Lender of payment of all
invoices for which disbursements were previously made to the Borrowers as a
condition to such requested disbursement.

            (v) No more than two (2) disbursements will be made by Lender from
the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve
in any calendar month, and, if made in accordance herewith or otherwise approved
by Lender, requested disbursements will be made within five (5) Business Days
after the request therefor. Lender shall not be required to make any
disbursement from a Work Reserve with respect to the Property unless such
requested disbursement is in an amount equal to or greater than $25,000 (other
than the final disbursement).

            (vi) Lender reserves the right, at its option and as a condition to
any disbursement from a Work Reserve, to approve (which shall not be
unreasonably withheld, delayed or conditioned) (i) all drawings and plans and
specifications, if any, for any Work which require aggregate payments in amounts
exceeding the greater of (x) five percent (5%) of the

                                       78


Aggregate Allocated Loan Amount with respect to the applicable Property or (y)
$250,000, and (ii) all contracts and work orders with materialmen, mechanics,
suppliers, subcontractors, contractors and other parties providing labor or
materials in connection with any Work which require aggregate payments in
amounts exceeding the greater of (x) five percent (5%) of the Aggregate
Allocated Loan Amount with respect to the applicable Property or (y) $250,000.
Upon Lender's reasonable request, the Borrowers shall assign (to the extent
assignable) any drawings, plans and specifications, contracts or subcontracts to
Lender. Drawings, plans and specifications, contracts and work orders approved
by Lender shall not be changed in any material respect without Lender's prior
written consent, which shall not be unreasonably withheld, delayed or
conditioned.

            (vii) The Borrowers shall have delivered a certificate to Lender
from an Architect certifying that the Work has been completed in a good and
workmanlike manner in accordance with all applicable laws for any item in excess
of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount
with respect to the applicable Property or (y) $250,000. Lender may retain its
own architect or engineer ("LENDER'S CONSULTANT") to review any plans and
specifications for any item in excess of the greater of (x) five percent (5%) of
the Aggregate Allocated Loan Amount with respect to the applicable Property or
(y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost
and expense.

            (viii) The Borrowers shall have delivered to Lender a certificate of
the Borrowers substantially in the form of Exhibit L attached hereto certifying
as to the actual costs which were incurred by the Borrowers to complete such
Work, which costs shall not materially exceed the amount budgeted for such Work
under the CapEx/FF&E Budget then in effect unless approved by Lender, which
shall not be unreasonably withheld, delayed or conditioned (together with
supporting documentation reasonably acceptable to Lender).

            (ix) The Borrowers shall have delivered to Lender all necessary
material certificates, authorizations, permits and licenses which are required
to permit the construction and completion of the Work, as issued by the
appropriate Governmental Authority. The Borrowers, to the full extent permitted
by applicable law, hereby assigns to Lender as additional security for the
payment of the Obligations and the observance and performance by the Borrowers
of the terms, covenants and provisions of the Loan Documents all right, title
and interest which the Borrowers may now have or may hereafter acquire in and to
such certificates, authorizations, permits and licenses.

            (x) Lender may require an inspection of the Property prior to making
a monthly disbursement from the applicable Work Reserve in order to verify
completion of the Work for which disbursement is sought in excess of the greater
of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to
the applicable Property or (y) $250,000. Lender may require that such inspection
be conducted by Lender's Consultant and/or may require a copy of a certificate
of completion by an independent qualified architect or engineer acceptable to
Lender prior to the disbursement of any amounts from the applicable Work
Reserve. The Borrowers shall pay the reasonable out-of-pocket expense of such
inspections as reasonably required hereunder, whether such inspections are
conducted by Lender, Servicer, Lender's Consultant or by an independent
qualified professional.

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      (B) PERFORMANCE OF WORK.

            (i) The Borrowers shall complete all Work in a good and workmanlike
manner as soon as practicable following the commencement thereof substantially
in accordance with the applicable budget approved by Lender in accordance with
the terms of this Loan Agreement. The insufficiency of the balance in the
applicable Work Reserve shall not relieve the Borrowers from their obligations
to perform and complete the related Work as herein provided or to fulfill all
other preservation and maintenance covenants in the Loan Documents.

            (ii) If Lender determines in its reasonable discretion that any Work
is not being performed in a workmanlike or timely manner or that any Work has
not been completed in a workmanlike manner, Lender shall have the option to
withhold disbursement for such unsatisfactory work and so notify the Borrowers
with reasonable detail regarding the basis for Lender's dissatisfaction and,
after the expiration of forty-five (45) days from the giving of such notice by
Lender to the Borrowers of such unsatisfactory work without the cure thereof
(or, if such unsatisfactory work is susceptible of a cure but cannot reasonably
be cured within said forty-five (45) day period and provided that the Borrowers
shall have commenced to cure such unsatisfactory work within said forty-five
(45) day period and thereafter diligently and expeditiously proceeds to cure the
same, after the expiration of such longer period as is reasonably necessary for
the Borrowers in the exercise of due diligence to cure such unsatisfactory work,
up to a maximum of an additional sixty (60) days, subject to Force Majeure,
without the cure thereof), Lender may proceed under existing contracts or
contract with third parties to complete such Work, as the case may be, and apply
amounts contained in the applicable Work Reserve toward the labor and materials
necessary to complete the same, without providing any additional prior notice to
the Borrowers, and exercise any and all other remedies available to Lender upon
and during the continuance of an Event of Default hereunder.

            (iii) In order to facilitate Lender's completion or making of any
Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right
to enter onto each Property during normal business hours after the expiration of
the notice specified above and perform, subject to the rights of tenants, any
and all work and labor necessary to complete the applicable Work and/or employ
watchmen to protect the Property from damage. All sums so expended by Lender
shall be deemed to have been advanced under the Loan to the Borrowers and
secured by the applicable Mortgage. For this purpose, the Borrowers constitute
and appoint Lender their true and lawful attorney-in-fact with full power of
substitution to complete or undertake the applicable Work in the name of the
Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked. Upon the
occurrence and during the continuance of an Event of Default, the Borrowers
empower said attorney-in-fact as follows: (i) to use any funds in the applicable
Work Reserve for the purpose of making or completing any Work; (ii) to make such
additions, changes and corrections to any Work as shall be reasonably necessary
or desirable to complete the same; (iii) to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for such
purposes; (iv) to pay, settle or compromise all existing bills and claims which
are or may become Liens against any Property, or as may be necessary or
desirable for the completion of any Work, or for clearance of title; (v) to
execute all applications and certificates in the name of the Borrowers which may
be required by any of the contract documents; (vi) in its reasonable discretion,
to prosecute and defend all actions or proceedings in connection with any
Property or

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the rehabilitation and repair of such Property; and (vii) to do any and every
act which the Borrowers might do in their own behalf to fulfill the terms of
this Loan Agreement.

            (iv) Nothing in this Section shall: (i) make Lender responsible for
making or completing any Work; (ii) require Lender to expend funds in addition
to the amounts on deposit in the applicable Work Reserve to make or complete any
Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to
demand from the Borrowers additional sums to make or complete any Work.

            (v) The Borrowers shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer, architect or
inspector) or third parties performing any Work pursuant to this Section 6.7 to
enter onto any Property during normal business hours upon reasonable notice
(subject to the rights of tenants under their Leases) to inspect the progress of
any Work and all materials being used in connection therewith, to examine all
plans and shop drawings relating thereto which are or may be kept at any
Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The
Borrowers shall use commercially reasonable efforts to cause all contractors and
subcontractors to cooperate with Lender or Lender's representatives or such
other persons described above in connection with inspections described in this
Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B).

            (vi) All Work and all materials, equipment, fixtures and any other
item comprising a part thereof shall be constructed, installed or completed, as
applicable, free and clear of all mechanic's, materialman's or other liens
(except for the Permitted Encumbrances).

            (vii) All Work shall comply with all applicable legal requirements
of all Governmental Authorities having jurisdiction over the Properties and
applicable insurance requirements, including, without limitation, applicable
building codes, special use permits, environmental regulations and requirements
of insurance underwriters.

      (C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender
harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations, out-of-pocket costs and expenses
(including, without limitation, litigation costs and reasonable attorneys' fees
and expenses) arising from or in any way connected with the performance of the
Work, except to the extent caused by the bad faith, willful misconduct or gross
negligence of Lender. The Borrowers shall assign to Lender all rights and claims
the Borrowers may have against all Persons supplying labor or materials in
connection with the Work; provided, however, that Lender may not pursue any such
right or claim or pursue any other action with respect to such rights and claims
unless an Event of Default has occurred and remains uncured.

SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the
Obligations in full, a Cash Trap Event shall occur, then for so long as such
Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise
expressly provided below) shall be deposited with Lender (or its Servicer or
agent) and held in the Lock Box Account in accordance with the terms of the Cash
Management Agreement (said funds, together with any interest thereon, the "CASH
TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when
the

                                       81


Debt Yield is less than the Minimum Debt Yield for the trailing twelve (12)
month period ending on such Calculation Date and shall continue to exist until
such time as the Minimum Debt Yield test has been satisfied for three (3)
consecutive Calculation Dates (on a trailing twelve (12) month basis) following
the commencement of the applicable Cash Trap Event. Notwithstanding that the
Debt Yield is less than the Minimum Debt Yield as of any Calculation Date, no
Cash Trap Event shall be deemed to have occurred as a result of such event if
the Borrowers make a principal prepayment of the Aggregate Outstanding Principal
Balance (which prepayment amount shall be disbursed on the next Payment Date in
accordance with the terms of the Cash Management Agreement), within three (3)
Business Days after the date of delivery of the financial statements disclosing
the existence of such Cash Trap Event (or the date on which such financial
statements are required to be delivered pursuant to Section 5.1), in an amount
equal to the greater of (x) one percent (1%) of the Aggregate Outstanding
Principal Balance, or (y) 120% of the amount, as determined by Lender in its
reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the
Minimum Debt Yield if such calculation was recalculated as provided above
assuming that such amount was applied to reduce the Aggregate Outstanding
Principal Balance as of the first day of the relevant measuring period. During
the continuance of a Cash Trap Event, provided that no Event of Default shall
have occurred and be continuing, any funds on deposit in the Cash Trap Reserve
may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be
applied to (i) prepayment of the Aggregate Outstanding Principal Balance as
provided above, (ii) Capital Expenditures reasonably approved by Lender, or
(iii) scheduled payments (not to exceed $525,000 in the aggregate) of principal
and interest under the Loan and the Allocable Portion of the Mezzanine Loan (to
be applied in accordance with the terms of the Cash Management Agreement). Any
funds on deposit in the Cash Trap Reserve shall continue to be held as
additional Collateral in accordance with this Section 6.8 until the earlier of
(a) the date that such funds are applied or disbursed pursuant to the foregoing
sentence or (b) the date that the Minimum Debt Yield test has been satisfied for
three (3) consecutive months (as determined above), at which time, provided no
Event of Default exists, and no Cash Trap Event has commenced, such funds,
together with any and all amounts then held in the Minimum Balance Sub-Account
(as defined in the Cash Management Agreement), shall be automatically released
to the Borrowers without any further certification requirements on the part of
the Borrowers. The existence of a Cash Trap Event shall be determined by Lender
in its reasonable good faith determination. If Lender determines that a Cash
Trap Event has occurred, Lender shall send the Borrowers written notice thereof.
Notwithstanding any provision herein to the contrary, if an Event of Default has
occurred and is continuing, all funds on deposit in the Cash Trap Reserve and
any subsequent Excess Cash Flow, while such Event of Default is continuing, may
be applied by Lender to payment of the Loan (including payment of any Prepayment
Consideration) or other Obligations (or to the obligations of the Mezzanine
Borrowers to Mezzanine Lender) as Lender may elect.

                                   ARTICLE VII
                       DEPOSIT ACCOUNT; LOCK BOX ACCOUNT;
                                 CASH MANAGEMENT

SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT.

      (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more
deposit accounts shall be established at the Borrowers' sole cost and expense in
the name of Lender, as

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secured party hereunder (said accounts, and any accounts replacing same in
accordance with this Loan Agreement and the Deposit Account Agreement,
collectively, the "DEPOSIT ACCOUNT") with one or more financial institutions
reasonably approved by Lender (collectively, the "DEPOSIT BANK"), pursuant to
one or more agreements (collectively, the "DEPOSIT ACCOUNT AGREEMENT")
substantially similar to Lender's form or otherwise in form and substance
reasonably acceptable to Lender, executed and delivered by the Borrowers and the
Deposit Bank. The Deposit Account shall be under the sole dominion and control
of Lender (which dominion and control may be exercised by Servicer). Among other
things, the Deposit Account Agreement shall provide that the Borrowers shall
have no access to or control over the Deposit Account, that all available funds
on deposit in the Deposit Account shall be transferred by wire transfer (or
transfer via the ACH System) on each Business Day by the Deposit Bank into the
Lock Box Account, for application in accordance with the Cash Management
Agreement. The Deposit Bank and the Lock Box Account Bank shall be directed to
deliver to the Borrowers copies of bank statements and other information made
available by the Deposit Bank and the Lock Box Account Bank concerning the
Deposit Account and the Lock Box Account.

            (ii) Upon establishing the Deposit Account, (1) the Borrowers shall
cause any and all Operating Revenues, including distributions or other payments
made directly or indirectly to the Borrowers, Manager, or any of their
respective Affiliates, from any Beverage Company, to be deposited promptly into
the Deposit Account and in no event later than two (2) Business Days after the
same are paid to or for the benefit of the Borrowers, and (2) the Borrowers
shall obtain agreements (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION
LETTER") from each of the Persons paying or disbursing credit card receivables
(the "CREDIT CARD COMPANIES"), substantially similar to Lender's form or
otherwise in form and substance reasonably acceptable to Lender, pursuant to
which the Credit Card Companies agree to pay all credit card receivables into
the Lock Box Account, and acknowledge and agree that Lender shall have a first
priority perfected security interest in such credit card receivables. To the
extent that the Borrowers or any Person on the Borrowers' behalf holds any
Receipts, whether in accordance with this Loan Agreement or otherwise, the
Borrowers shall be deemed to hold the same in trust for Lender for the
protection of the interests of Lender hereunder and under the Loan Documents.
The Borrowers represent and warrant that, as of the date hereof, the only Credit
Card Companies paying or disbursing credit card receivables with respect to the
Property are Chase Merchant Services, American Express, Discover Financial
Service, Diners Club, JCB (Japanese Credit Bureau), and, if any of the Borrowers
shall hereafter enter into an agreement with any other Credit Card Company
pursuant to which such Credit Card Company shall pay credit card receivables
with respect to the Properties, such Borrower shall promptly obtain a Credit
Card Receivables Payment Direction Letter in form and substance reasonably
acceptable to Lender from such Credit Card Company.

            (iii) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses incurred by Lender in connection with the transactions and other
matters contemplated by this Section 7.1, including but not limited to, Lender's
reasonable attorneys' fees and expenses, and all reasonable fees and expenses of
the Deposit Bank and the Lock Box Account Bank, including without limitation
their reasonable attorneys' fees and expenses.

      (B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms
of the Cash Management Agreement, an Eligible Account shall be established in
the name of Lender,

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as secured party hereunder, to serve as the "Lock Box Account" (said account,
and any account replacing the same in accordance with this Loan Agreement and
the Cash Management Agreement, the "LOCK BOX ACCOUNT"; and the depositary
institution in which the Lock Box Account is maintained, the "LOCK BOX ACCOUNT
BANK"). The Lock Box Account shall be under the sole dominion and control of
Lender (which dominion and control may be exercised by Servicer); and except as
expressly provided hereunder and/or in the Cash Management Agreement, the
Borrowers shall not have the right to control or direct the investment or
payment of funds therein during the continuance of an Event of Default. Lender
may elect to change any financial institution in which the Lock Box Account
shall be maintained if such institution is no longer an Eligible Bank, upon not
less than five (5) Business Days' notice to the Borrower. The Lock Box Account
shall be deemed to contain such sub-accounts as Lender may designate
("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts and need
not be separate Eligible Accounts. The Sub-Accounts shall include the following
as more particularly described in the Cash Management Agreement:

            (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box
Account established for the purposes of reserving for payments of principal and
interest and other amounts due under the Loan Documents (but without duplication
of amounts covered under item (ii) below); and

            (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box
Account established for the purpose of holding funds in the Reserves including:
(a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Capital
Improvement Reserve Sub-Account"; (c) the "Hazardous Materials Remediation
Reserve Sub-Account"; (d) the "Extraordinary Receipts Sub-Account" (e) the
"Mezzanine Loan Debt Service Sub-Account"; (f) the "Minimum Balance
Sub-Account"; and (g) "Cash Trap Reserve Sub-Account".

SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box
Account shall be allocated to the Sub-Accounts or the other Accounts (or paid,
as the case may be) in accordance with the Cash Management Agreement.

SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default
shall occur and be continuing, then notwithstanding anything to the contrary in
this Section or elsewhere, Lender shall have all rights and remedies available
under applicable law and under the Loan Documents. Without limitation of the
foregoing, for so long as an Event of Default exists, Lender may apply any and
all funds in the Deposit Account, and/or any Sub-Accounts against all or any
portion of any of the Obligations, in any order.

                                  ARTICLE VIII
                          DEFAULT, RIGHTS AND REMEDIES

SECTION 8.1 EVENT OF DEFAULT.

      "EVENT OF DEFAULT" means the occurrence or existence of any one or more of
the following:

      (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled
payment amount when the same is due under this Loan Agreement, the Note, or any
other Loan

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Documents (whether such amount is interest, principal, Reserves, or otherwise),
or to pay for any Insurance Policies required pursuant to Section 5.4 hereof; or

      (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time
to time owing under this Loan Agreement, the Note, or any other Loan Documents
(other than amounts subject to the preceding paragraph) within ten (10) days
after written notice to the Borrowers; or

      (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to
perform or comply with any term or condition contained in Section 5.1 which
continues for a period of ten (10) days after written notice to the Borrowers
(except that no notice or grace period shall be granted for any breach under
Section 5.1(H)); or

      (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE
PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19,
5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary
Lien under Section 5.18 or 11.1, the same shall not constitute an Event of
Default if (i) within forty-five (45) days after the filing thereof, the
Borrowers shall either cause the same to be removed of record by payment,
bonding or otherwise, or (ii) same is being contested in good faith in
accordance with Section 5.3(B) hereof); or

      (E) BREACH OF WARRANTY. Any representation, warranty, certification or
other statement made by any Borrower, Guarantor or Manager in any Loan Document
or in any statement or certificate at any time given in writing pursuant to or
in connection with any Loan Document is false in any material respect as of the
date made; or

      (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the
performance of or compliance with any term contained in this Loan Agreement or
the other Loan Documents and such default is not fully cured within thirty (30)
days after receipt by the Borrowers of written notice from Lender of such
default (other than occurrences described in other provisions of this Section
8.1 for which a different grace or cure period is specified or which constitute
immediate Events of Default); provided however that if (i) the default is
capable of cure but with diligence cannot be cured within such period of thirty
(30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced
the cure within such thirty (30) day period and has pursued such cure
diligently, and (iii) each Borrower delivers to Lender promptly following
written demand (which demand may be made from time to time by Lender) evidence
reasonably satisfactory to Lender of the foregoing, then such period shall be
extended for so long as is reasonably necessary for the Borrowers in the
exercise of due diligence to cure such default, but in no event beyond one
hundred and twenty (120) days after the original notice of default; or

      (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court
enters a decree or order for relief with respect to any Borrower Party, in an
Involuntary Borrower Bankruptcy, which decree or order is not stayed or other
similar relief is not granted under any applicable federal or state law unless
dismissed within ninety (90) days; (ii) the occurrence and continuance of any of
the following events for ninety (90) days unless dismissed or discharged within
such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or
order of a court for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other

                                       85


officer having similar powers over any Borrower Party or over all or a
substantial part of its property, is entered, or (z) an interim receiver,
trustee or other custodian is appointed without the consent of any Borrower
Party, for all or a substantial part of the property of such Person; or

      (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for
relief is entered with respect to any Borrower Party, or any Borrower Party
commences a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for any Borrower Party or for all or a substantial part of the
property of any Borrower Party; (ii) any Borrower Party makes any assignment for
the benefit of creditors; or (iii) the Board of Directors or other governing
body of any Borrower Party adopts any resolution or otherwise authorizes action
to approve any of the actions referred to in this subsection 8.1(H); or

      (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as
described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the
Collateral becomes property of the estate or subject to the automatic stay in
any case or proceeding under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect (provided that if the
same occurs in the context of an involuntary proceeding, it shall not constitute
an Event of Default if it is dismissed or discharged within ninety (90) days
following its occurrence); or

      (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing
its present or prospective inability to pay its debts as they become due; or

      (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of
attachment, or similar process is entered or filed against any Borrower Party or
any of its assets, which claim is not fully covered by insurance (other than
with respect to the amount of commercially reasonable deductibles permitted
hereunder), would have a Material Adverse Effect and remains undischarged,
unvacated, unbonded or unstayed for a period of forty-five (45) days; or

      (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of their business and such order
continues for more than thirty (30) days; or

      (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Mortgage or any
of the Loan Documents for any reason ceases to be in full force and effect or
ceases to be a legally valid, binding and enforceable obligation of the
Borrowers or any Lien securing the Obligations shall, in whole or in part, cease
to be a perfected first priority Lien, subject to the Permitted Encumbrances
(except in any of the foregoing cases in accordance with the terms hereof or
under any other Loan Document) and the Borrowers do not take all actions
requested by Lender to correct such defect within ten (10) days after the
written request by Lender to take such action, or any Person under the control
of the Borrowers or Guarantor who is a party thereto, other than Lender, denies
that it has any further liability (as distinguished from denial of the existence
of a

                                       86


Default or Event of Default) under any Loan Documents to which it is party, or
gives notice to such effect; or

      (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any
applicable grace periods shall occur under any of the other Loan Documents; or

      (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An
Uncured Franchise Default occurs; (ii) or any breach or default shall occur in
the material obligations of the Borrowers under any of the Management
Agreements, and such breach or default either is of such a nature or continues
for such a period of time beyond applicable notice and cure periods, if any,
that Manager shall have the right to exercise material remedies as a consequence
thereof; or

      (P) GROUND LEASE/CONDOMINIUM DOCUMENT DEFAULT. Any default by any of the
Borrowers beyond any applicable grace period shall occur under any Ground Lease
or any Condominium Property Document or any actual or attempted surrender,
termination, modification or amendment of any Ground Lease or any Condominium
Property Document without Lender's prior written consent.

            If more than one of the foregoing paragraphs shall describe the same
condition or event, then Lender shall have the right to select which paragraph
or paragraphs shall apply. In any such case, Lender shall have the right (but
not the obligation) to designate the paragraph or paragraphs which provide for
non-written notice (or for no notice) or for a shorter time to cure (or for no
time to cure).

SECTION 8.2 ACCELERATION AND REMEDIES.

      (A) Upon the occurrence and during the continuance of any Event of Default
described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal
amount of and accrued interest and fees on the Loan and all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
requirements of any kind, all of which are hereby expressly waived by the
Borrowers. Upon and at any time after the occurrence of any other Event of
Default, at the option of Lender, which may be exercised without notice or
demand to anyone, all or any portion of the Loan and other Obligations shall
immediately become due and payable.

      (B) Upon the occurrence and during the continuance of an Event of Default,
all or any one or more of the rights, powers, privileges and other remedies
available to Lender against the Borrowers under this Loan Agreement or any of
the other Loan Documents, or at law or in equity, may be exercised by Lender at
any time and from time to time, whether or not all or any of the Obligations
shall be declared due and payable, and whether or not Lender shall have
commenced any foreclosure proceeding or other action for the enforcement of its
rights and remedies under any of the Loan Documents with respect to the
Properties. Any such actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singly, successively, together or otherwise,
at such time and in such order as Lender may determine in its sole discretion,
to the fullest extent permitted by law, without impairing or otherwise affecting

                                       87


the other rights and remedies of Lender permitted by law, equity or contract or
as set forth herein or in the other Loan Documents. Without limiting the
generality of the foregoing, if an Event of Default is continuing (i) to the
fullest extent permitted by law, Lender shall not be subject to any "one action"
or "election of remedies" law or rule, and (ii) all liens and other rights,
remedies or privileges provided to Lender shall remain in full force and effect
until Lender has exhausted all of its remedies against each Property and the
Mortgages have been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Obligations or the Obligations have been paid in full.

      (C) Lender shall have the right from time to time to partially foreclose
the Mortgages in any manner and for any amounts secured by the Mortgages then
due and payable as determined by Lender in its sole discretion including,
without limitation, the following circumstances: (i) in the event the Borrowers
default beyond any applicable grace period in the payment of one or more
scheduled payments of principal and interest, Lender may foreclose the Mortgage
to recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose the Mortgage or any of them to recover so much of the
principal balance of the Loan as Lender may accelerate and such other sums
secured by the Mortgage as Lender may elect. Notwithstanding one or more partial
foreclosures, the Property shall remain subject to the Mortgage to secure
payment of sums secured by the Mortgage and not previously recovered.

      (D) During the continuance of an Event of Default, Lender shall have the
right from time to time to sever the Note and the other Loan Documents into one
or more separate notes, mortgages and other security documents in such
denominations as Lender shall determine in its sole discretion for purposes of
evidencing and enforcing its rights and remedies provided hereunder. The
Borrowers shall execute and deliver to Lender from time to time, within ten (10)
days after the request of Lender, a severance agreement and such other documents
as Lender shall reasonably request in order to effect the severance described in
the preceding sentence, all in form and substance reasonably satisfactory to
Lender. The Borrowers hereby absolutely and irrevocably appoint Lender as their
true and lawful attorney, coupled with an interest, in their name and stead to
make and execute all documents reasonably necessary to effect the aforesaid
severance if the Borrowers fail to do so within ten (10) days of Lender's
written request, the Borrowers ratifying all that their said attorney shall do
by virtue thereof.

      (E) Any amounts recovered from the Properties or any other collateral for
the Loan after an Event of Default may be applied by Lender toward the payment
of any interest and/or principal of the Loan and/or any other amounts due under
the Loan Documents in such order, priority and proportions as Lender in its sole
discretion shall determine.

      (F) The rights, powers and remedies of Lender under this Loan Agreement
shall be cumulative and not exclusive of any other right, power or remedy which
Lender may have against the Borrowers pursuant to this Loan Agreement or the
other Loan Documents, or existing at law or in equity or otherwise. Lender's
rights, powers and remedies may be pursued singly, concurrently or otherwise, at
such time and in such order as Lender may determine in Lender's sole discretion.
No delay or omission to exercise any remedy, right or power accruing upon an
Event of Default shall impair any such remedy, right or power or shall be
construed as a waiver thereof, but any such remedy, right or power may be
exercised from time to time and as often as

                                       88


may be deemed expedient. A waiver of one Default or Event of Default with
respect to the Borrowers shall not be construed to be a waiver of any subsequent
Default or Event of Default by the Borrowers or to impair any remedy, right or
power consequent thereon.

SECTION 8.3 PERFORMANCE BY LENDER.

      (A) Upon the occurrence and during the continuance of an Event of Default,
if any of the Borrowers shall fail to perform, or cause to be performed, any
material covenant, duty or agreement contained in any of the Loan Documents
(subject to applicable notice and cure periods), Lender may perform or attempt
to perform such covenant, duty or agreement on behalf of the Borrowers including
making protective advances on behalf of any Borrower, or, in its sole
discretion, causing the obligations of any of the Borrowers to be satisfied with
the proceeds of any Reserve. In such event, the Borrowers shall, at the request
of Lender, promptly pay to Lender, or reimburse, as applicable, any of the
Reserves, any actual amount reasonably expended or disbursed by Lender in such
performance or attempted performance, together with interest thereon at the
Default Rate (including reimbursement of any applicable Reserves), from the date
of such expenditure or disbursement, until paid. Any amounts advanced or
expended by Lender to perform or attempt to perform any such matter shall be
added to and included within the indebtedness evidenced by the applicable Note
and shall be secured by all of the Collateral securing the applicable Loan.
Notwithstanding the foregoing, it is expressly agreed that Lender shall not have
any liability or responsibility for the performance of any obligation of the
Borrowers under this Loan Agreement or any other Loan Document, and it is
further expressly agreed that no such performance by Lender shall cure any Event
of Default hereunder.

      (B) Lender may cease or suspend any and all performance required of Lender
under the Loan Documents upon and at any time after the occurrence and during
the continuance of any Event of Default.

SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each
Borrower shall provide such documents and instruments as shall be reasonably
satisfactory to Lender to evidence compliance with any material provision of the
Loan Documents applicable to the Borrowers.

                                  ARTICLE IX
               SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,
                            WARRANTIES AND COVENANTS

SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower
Party hereby represents, warrants and covenants as of the Closing Date and until
such time as all Obligations are paid in full, that absent express advance
written waiver from Lender, which may be withheld in Lender's sole discretion,
that such Primary Borrower Party:

      (A) does not own and will not own any assets other than the Properties
(including incidental personal property necessary for the operation thereof and
proceeds therefrom) or direct or indirect ownership interests in the Borrowers,
and other wholly owned subsidiaries of the Primary Borrower Parties established
solely for the purpose of holding liquor licenses with respect to one or more of
the Properties, and with respect to Member, direct or indirect

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ownership interests in the Crossed Borrowers as of the date of this Agreement
(all of the foregoing ownership interests being referred to herein,
collectively, as the "OWNERSHIP INTERESTS") or, with respect to each of the
Primary Borrower Parties, such incidental assets as are necessary to enable it
to discharge its obligations with respect to the Borrowers;

      (B) is not engaged and will not engage in any business, directly or
indirectly, other than the ownership, management and operation of the
Properties, the Crossed Properties as of the date of this Agreement, or the
Ownership Interests;

      (C) has not at any time since the SPE Effective Date entered into and will
not enter into any contract or agreement with any partner, member, shareholder,
trustee, beneficiary, principal or Affiliate of any Primary Borrower Party
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms-length basis with third
parties other than such Affiliate (including the Management Agreements);

      (D) has not incurred any debt that remains outstanding as of Closing and
will not incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted
Indebtedness, and (iii) the Mezzanine Loan;

      (E) has not made any loans or advances to any Person that remains
outstanding as of Closing and will not make any loan or advances to any Person
(including any of its Affiliates), and has not acquired and will not acquire
obligations or securities (other than the Ownership Interests) of any of its
Affiliates other than the other Borrower Parties;

      (F) is and reasonably expects to remain solvent and pay its own
liabilities, indebtedness, and obligations of any kind from its own separate
assets as the same shall become due;

      (G) has at all times since the SPE Effective Date done or caused to be
done and will do all things necessary to preserve its existence, and will not,
and no partner, member, shareholder, trustee, beneficiary, or principal will,
further amend, modify or otherwise change, its partnership certificate,
partnership agreement, articles of incorporation, by-laws, articles of
organization, operating agreement, or other organizational documents, as
modified, amended, restated or supplemented as of the date hereof, in any manner
with respect to the matters set forth in this Article IX;

      (H) has at all times since the SPE Effective Date continuously maintained
its existence and has at all times since the SPE Effective Date been qualified
to do business, and shall continue to maintain its existence and be qualified to
do, business in all states necessary to carry on its business, specifically
including in the case of each Borrower, the state where its Property is located;

      (I) has at all times since the SPE Effective Date conducted and operated,
and will conduct and operate its business as presently conducted and operated
and otherwise contemplated with respect to the ownership of its Property, or the
ownership of the Ownership Interests, as applicable;

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      (J) has at all times since the SPE Effective Date maintained, and will
maintain books and records and bank accounts (other than bank accounts
established hereunder, or established by Manager with respect to the operations
of the Properties pursuant to the Management Agreement) separate from those of
its partners, members, shareholders, trustees, beneficiaries, principals,
Affiliates, and any other Person and has at all times since the SPE Effective
Date maintained and will maintain separate financial statements except that it
may also be included in consolidated financial statements of its Affiliates;

      (K) has at all times since the SPE Effective Date been and held itself out
to the public as, and will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other Person (including
any of its partners, members, shareholders, trustees, beneficiaries, principals
and Affiliates, and any Affiliates of any of the same), and not as a department
or division of any Person and has at all times since the SPE Effective Date
corrected and will correct any known misunderstandings regarding its existence
as a separate legal entity;

      (L) has at all times since the SPE Effective Date paid, and will pay the
salaries of its own employees, if any;

      (M) has at all times since the SPE Effective Date allocated, and will
allocate fairly and reasonably any overhead for shared office space;

      (N) has at all times since the SPE Effective Date used, and will use its
own stationery, invoices and checks;

      (O) has at all times since the SPE Effective Date filed, and will file its
own tax returns with respect to itself (or consolidated tax returns, if
applicable) as may be required under applicable law;

      (P) has at all times since the SPE Effective Date maintained, and
reasonably expects to maintain adequate capital (taken as a whole with all of
the other Borrowers) for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;

      (Q) will not seek, acquiesce in, or suffer or permit its liquidation,
dissolution or winding up, in whole or in part;

      (R) will not enter into any transaction of merger or consolidation, and
will not acquire by purchase or otherwise all or substantially all of the
business or assets of, or any stock or beneficial ownership (other than the
Ownership Interests) of, any Person;

      (S) has not at any time since the SPE Effective Date commingled or
permitted to be commingled, and will not commingle or permit to be commingled,
its funds or other assets with those of any other Person (other than, with
respect to the Borrowers, each other Borrower, or as may be held by Manager, as
agent, for each Borrower pursuant to the terms of the Management Agreement, and
except for funds deposited in the Accounts in accordance with the Loan
Documents);

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      (T) has at all times since the SPE Effective Date maintained, and will
maintain its assets in such a manner that it is not costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person;

      (U) does not and will not hold itself out to be responsible for the debts
or obligations (other than the Obligations and the Crossed Indebtedness as of
the date of this Agreement) of any other Person;

      (V) has not guaranteed or otherwise become liable in connection with any
obligation of any other Person that remains outstanding, and will not guarantee
or otherwise become liable on or in connection with any obligation (other than
the Obligations and the Crossed Indebtedness as of the date of this Agreement)
of any other Person that remains outstanding;

      (W) except for funds deposited into the Accounts in accordance with the
Loan Documents, shall not hold title to its assets other than in its name; and

      (X) shall comply with all of the assumptions, statements, certifications,
representations, warranties and covenants regarding or made by it contained in
or appended to the nonconsolidation opinion delivered pursuant hereto.

SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In
addition to their respective obligations under Section 9.1, each Borrower,
General Partner and Member hereby represents, warrants and covenants, as of the
Closing Date and until such time as all Obligations are paid and satisfied in
full, that absent express advance written waiver from Lender, which may be
withheld in Lender's sole discretion:

      (A) each General Partner shall at all times act as the sole general
partner of each Borrower that is a limited partnership, with all of the rights,
powers, obligations and liabilities thereof under the limited partnership
agreement of such Borrower and shall take any and all actions and do any and all
things necessary or appropriate to the accomplishment of the same and will not
engage in any other business;

      (B) Member shall at all times act as the sole member of each Borrower and
Crossed Borrower as of the date of this Agreement that is a limited liability
company with all of the rights, powers, obligations and liabilities thereof
under the limited liability company operating agreement of such Borrower or
Crossed Borrower and shall take any and all actions and will do any and all
things necessary or appropriate to the accomplishment of the same and will not
engage in any other business;

      (C) each Borrower that is a limited liability company shall not, without
the prior written consent of its Member (including the unanimous written consent
of its Member's board of directors including the Independent Directors or the
unanimous written consent of each of the Borrowers' board of managers including
the Independent Directors), and each Borrower that is a limited partnership
shall not, without the prior written consent of its General Partner (including
the unanimous written consent of General Partner's Independent Directors),
institute proceedings for itself to be adjudicated bankrupt or insolvent;
consent to the institution of bankruptcy or insolvency proceedings against
itself; file a petition seeking, or consent to, reorganization or relief under
any applicable federal or state law relating to bankruptcy; consent to the
appointment

                                       92


of a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) for itself or a substantial part of its property; make any assignment
for the benefit of creditors; or admit in writing its inability to pay its debts
generally as they become due;

      (D) each Borrower that is a corporation shall not, without the prior
unanimous written consent of its board of directors, including its Independent
Directors, institute proceedings for itself to be adjudicated bankrupt or
insolvent; consent to the institution of bankruptcy or insolvency proceedings
against it; file a petition seeking, or consent to, reorganization or relief
under any applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) for itself or a substantial part of its property; make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;

      (E) no Member or any General Partner shall, without the unanimous vote of
its board of directors or board of managers, as the case may be, including, in
each case, its Independent Directors, institute proceedings for itself or any
Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of
a bankruptcy or insolvency proceeding against it or any Borrower; file a
petition seeking, or consent to, reorganization or relief under any applicable
federal or state law relating to bankruptcy; consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) for itself or any Borrower; or a substantial part of its or any
Borrower's property; make any assignment for the benefit of creditors; or admit
in writing its inability to pay its debts generally as they become due;

      (F) except as otherwise permitted hereunder, no Member or any General
Partner shall for itself or for any of the Borrowers (i) liquidate or dissolve,
in whole or in part; (ii) consolidate, merge or enter into any form of
consolidation with or into any other Person, nor convey, transfer or lease its
or any Borrower's assets substantially as an entirety to any Person nor permit
any Person to consolidate, merge or enter into any form of consolidation with or
into itself or any Borrower, nor convey, transfer or lease its or any Borrower's
assets substantially as an entirety to any Person; or (iii) amend any provisions
of its or any Borrower's organizational documents containing provisions similar
to those contained in this Article IX; and

      (G) each Member, General Partner and Borrower that is a corporation shall
each promptly elect and at all times maintain at least two (2) Independent
Directors on its board of directors, who shall be selected by such Member,
General Partner or Borrower, as applicable, and be reasonably acceptable to
Lender. Each Borrower that is a single member limited liability company shall
promptly appoint and at all times maintain at least two (2) Independent
Directors on its board of managers, who shall be selected by such Borrower, and
be reasonably acceptable to Lender.

                                    ARTICLE X
                RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS

SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the
right to engage in one or more Secondary Market Transactions with respect to the
Loan, and to structure and restructure all or any part of the Loan, including
without limitation in multiple tranches, as a wraparound loan, or for inclusion
in a REMIC or other Securitization. Without limitation,

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Lender shall have the right, at Lender's sole cost (other than each Borrower's
internal costs and expenses and the costs and expenses of the Borrowers'
counsel), to cause the Note and any Mortgage to be split into a first and a
second mortgage loan, or into one or more loans evidenced by multiple notes and
secured by multiple mortgages and/or by ownership interests in any of the
Borrowers in whatever proportion Lender determines, and thereafter to engage in
Secondary Market Transactions with respect to all or any part of the
indebtedness and loan documentation. Each of the Borrower Parties acknowledge
that it is the intention of the parties that all or a portion of the Loan will
be securitized and that all or a portion of the Loan will be rated by one or
more Rating Agencies. Each of the Borrower Parties further acknowledge that
additional structural modifications may be required to satisfy issues raised by
any Rating Agencies. As used herein, "SECONDARY MARKET TRANSACTION" means any of
(i) the sale, assignment, or other transfer of all or any portion of the
Obligations or the Loan Documents or any interest therein to one or more
investors, (ii) the sale, assignment, or other transfer of one or more
participation interests in the Obligations or Loan Documents to one or more
investors, (iii) the transfer or deposit of all or any portion of the
Obligations or Loan Documents to or with one or more trusts or other entities
which may sell certificates or other instruments to investors evidencing an
ownership interest in the assets of such trust or the right to receive income or
proceeds therefrom or (iv) any other Securitization backed in whole or in part
by the Loan or any interest therein.

SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all
reasonable efforts and cooperate reasonably and in good faith with Lender in
effecting any such restructuring or Secondary Market Transactions at Lender's
sole cost (other than, with respect to the first successful Securitization and
any related Secondary Market Transaction only (or if the Loan shall be hereafter
split into multiple loans, the first successful Securitization and any related
Secondary Market Transaction with respect to each of such loans), the Borrowers'
internal costs and expenses and the costs and expenses of the Borrower Parties'
counsel). Notwithstanding the foregoing or anything to the contrary contained in
this Article X, it is acknowledged and agreed that in no event shall Lender be
responsible for payment of any Borrower Party's (or its Affiliate's) internal
costs and expenses in connection with any Secondary Market Transaction. Such
cooperation shall include without limitation, executing and delivering such
reasonable amendments to the Loan Documents and the organizational documents of
each Borrower as Lender or any Interested Party (as defined below) may request,
provided however that, no such amendment shall modify (i) the weighted average
interest rate payable under the Note (or notes); (ii) the stated maturity date
of the Note, (iii) the amortization of the principal amount of the Note, (iv)
any other material economic terms of the Obligations, (v) the non-recourse
provisions of the Loan or (vi) any provision, the effect of which would increase
the Borrowers' obligations or decrease the Borrowers' rights under the Loan
Documents except to a de minimis extent. The Borrower Parties shall not be
required to provide additional collateral to effect any such restructuring or
Secondary Market Transaction after the Closing Date. The Borrower Parties shall
not be required to pay any third party (other than, which respect to the first
successful Securitization and any related Secondary Market Transaction only (or
if the Loan shall be hereafter split into multiple loans, the first successful
Securitization and any related Secondary Market Transaction with respect to each
of such loans), the costs and expenses of the Borrowers' counsel) costs and
expenses incurred by Lender in connection with any such Secondary Market
Transaction unless otherwise expressly payable by the Borrower Parties under
this Loan Agreement or the other Loan Documents.

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SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense
(other than, with respect to the first successful Securitization and any related
Secondary Market Transaction only (or if the Loan shall be hereafter split into
multiple loans, the first successful Securitization and any related Secondary
Market Transaction with respect to each of such loans), the Borrowers' internal
costs and expenses and the costs and expenses of the Borrower Parties' counsel),
shall provide such access to personnel and such information and documents
relating to the Borrower Parties, Manager, the Properties and Collateral and the
business and operations of all of the foregoing and such opinions of counsel
(including nonconsolidation opinions) as any Rating Agency may request or as
Lender or any other Interested Party may reasonably request in connection with
any such Secondary Market Transaction including, without limitation, updated
financial information, appraisals, market studies, environmental reviews (Phase
I's and, if appropriate, Phase II's), mold inspection, property condition
reports and other due diligence investigations together with appropriate
verification of such updated information and reports through letters of auditors
and consultants and, as of the closing date of the Secondary Market Transaction,
updated representations and warranties made in the Loan Documents and such
additional representations and warranties as any Rating Agency may request or
any purchaser, transferee, assignee, trustee, servicer or potential investor
(the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED
PARTIES") may reasonably request, to the extent such updated representations and
warranties are true. On or prior to the date of closing of any Secondary Market
Transaction, the Borrowers, at Lender's cost and expense (other than with
respect to the first successful Securitization and any related Secondary Market
Transaction only (or if the Loan shall be hereafter split into multiple loans,
the first successful Securitization and any related Secondary Market Transaction
with respect to each of such loans), the Borrowers' internal costs and expenses
and the costs and expenses of the Borrowers' counsel), shall, if required by any
Rating Agency or reasonably required by Lender, provide revisions or
"bringdowns" to any opinions delivered at Closing (including nonconsolidation
opinions), or if required by the Rating Agencies, new versions of such opinions,
which opinions shall be consistent in substance with the opinions covered by the
original opinions, addressed to Lender, any trustee under any Securitization
backed in whole or in part by the Loan, any Rating Agency that assigns a rating
to any securities in connection therewith and any investor purchasing securities
therein. Lender shall be permitted to share all such information with the
investment banking firms, Rating Agencies, accounting firms, law firms, other
third party advisory firms, potential investors, servicers and other service
providers and other parties directly involved in any proposed Secondary Market
Transaction. The Borrowers understand that any such information may be
incorporated into any offering circular, prospectus, prospectus supplement,
private placement memorandum or other offering documents for any Secondary
Market Transaction. Lender and the Rating Agencies shall be entitled to rely
upon such information. Without limiting the foregoing, the Borrowers and
Guarantor shall provide in connection with each (i) preliminary and final
private placement memorandum or (ii) a preliminary and final prospectus or
prospectus supplement, as applicable, prepared in connection with any Secondary
Market Transaction (the documents referred to in the foregoing clauses (i) and
(ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably
satisfactory to the Borrowers and Guarantor certifying that the Borrowers and
Guarantor have examined such Disclosure Documents specified by Lender and, that
the sections of such Disclosure Document describing the Borrowers, Guarantor,
the Properties and Manager do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made, in the

                                       95


light of the circumstances under which they were made, not materially
misleading. The Borrowers and Guarantor shall each indemnify, defend, protect
and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MERRILL LYNCH"), and their respective Affiliates, directors, employees, agents
and each Person, if any, who controls Lender, Merrill Lynch or any such
Affiliate within the meaning of Section 15 of the Securities Act of 1933 or
Section 20 of the Securities Exchange Act of 1934, and any other placement agent
or underwriter with respect to any Securitization or Secondary Market
Transaction from and against any losses, claims, damages and liabilities that
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Disclosure Document as to the Borrowers,
Guarantor, Manager and the Properties or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated in such information or necessary in order to make the statements in such
information not materially misleading; provided, however, the Borrowers shall
not be required to indemnify Merrill Lynch for any liabilities arising out of
untrue statements or omissions that were identified to Lender in writing or are
set forth in any third party report not prepared by the Borrowers or their
Affiliates unless such reports are caused to be incorrect or misleading based
upon information provided by the Borrowers or their Affiliates. Lender may
publicize the existence of the Obligations in connection with Lender's Secondary
Market Transaction activities or otherwise.

SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender
may transfer its obligations under this Loan Agreement and under the other Loan
Documents (or may transfer the portion thereof corresponding to the transferred
portion of the Obligations), and thereafter Lender shall be relieved of any
obligations hereunder and under the other Loan Documents arising after the date
of said transfer with respect to the transferred interest. Each transferee
investor shall become a "Lender" hereunder.

                                   ARTICLE XI
           RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF
                                   PROPERTIES

SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or
a Permitted Assumption expressly permitted under this Article XI, Leases entered
into as permitted hereunder, and pledges in connection with the Mezzanine Loan,
the Borrowers shall not cause or suffer to occur or exist, directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, any
sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted
Encumbrances) of (i) all or any part of any Property or any interest therein, or
(ii) any direct or indirect ownership or beneficial interest in any Borrower
(other than to Mezzanine Lender), irrespective of the number of tiers of
ownership, without Lender's consent.

SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following
voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges
(each, a "TRANSFER") of a direct, indirect or beneficial interest in any
Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP
INTEREST TRANSFERS"):

      (A) A Transfer of no more than forty-nine percent (49%) of the direct or
indirect ownership interests in such Borrower (in the aggregate), provided that,
following such Transfer, Guarantor maintains control of such Borrower.

                                       96


      (B) A Transfer or a series of Transfers that result in the proposed
transferee, together with Affiliates of such transferee, owning in the aggregate
(directly or indirectly) more than forty-nine percent (49%) of the economic and
beneficial interests in such Borrower (where, prior to such Transfer, such
proposed transferee and its Affiliates owned in the aggregate (directly or
indirectly) forty-nine percent (49%) or less of such interests in that
Borrower); and, provided that such Transfer shall not be a Permitted Ownership
Interest Transfer unless Lender receives, prior to such Transfer, both (x)
evidence reasonably satisfactory to Lender (which shall include a legal
non-consolidation opinion reasonably acceptable to Lender and the Rating
Agencies) that the single purpose nature and bankruptcy remoteness of such
Borrower (and its members and general partners, as applicable) following such
Transfer or Transfers will be the same as prior to such Transfer or Transfers
and (y) a Rating Agency Confirmation.

      (C) For so long as Guarantor's (or its successor's) stock is traded
through the "over-the-counter market" or through any recognized stock exchange,
any Transfer of all or any portion of the issued and outstanding capital stock
of Guarantor, or the issuance of additional capital stock of Guarantor
(including common or preferred shares) through the "over-the-counter market" or
through any recognized stock exchange.

      (D) The pledge of ownership interests granted by the Mezzanine Borrowers
pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan
Agreement).

      For purposes of this Section 11.2, "control" shall have the meaning given
thereto in the definition of "Affiliate" in Section 1.1 and a "change of
control" of any Person shall include the Transfer of legal or equitable
ownership interests in such Person which after giving effect to such Transfer
results in any transferee or pledgee of such interests holding more than a 49%
legal or equitable ownership interest or security interest in such Person.

SECTION 11.3 ASSUMABILITY.

      (A) The Borrowers shall have the right to request that Lender consent to
(i) a transfer of all of the Properties to another Person (the "TRANSFEREE
BORROWER") and the assumption by the Transferee Borrower of all of the
Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor
with new guarantors and indemnitors who shall assume all of the obligations of
the Guarantors arising from and after such date and release of the Borrowers and
Guarantor from obligations arising from and after such date and (iii) the
replacement of the Mezzanine Borrowers with pledgors of the ownership interests
in the Transferee Borrower (collectively, an "ASSUMPTION"), subject to the
conditions set forth in paragraphs (B) and (C) of this Section. Together with
such written application, the Borrowers will pay to Lender a review fee of
$10,000. The Borrowers also shall pay on demand all of the reasonable
out-of-pocket costs and expenses incurred by Lender, including reasonable
attorneys' fees and expenses, and the fees and expenses of the Rating Agencies,
if any, and other outside entities, in connection with considering any proposed
Assumption, whether or not the same is permitted or occurs.

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      (B) Lender shall not withhold its consent to an Assumption (any such
Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon
the conditions that:

            (i) No Event of Default shall have occurred and be continuing at the
time of such Assumption;

            (ii) The Borrowers shall have submitted to Lender true, correct and
complete copies of any and all information and documents reasonably requested by
Lender concerning the Transferee Borrower, replacement guarantors and
indemnitors and all of such information and documents shall be reasonably
acceptable to Lender;

            (iii) Evidence reasonably satisfactory to Lender shall have been
provided showing that the Transferee Borrower and such of its Affiliates as
shall reasonably be designated by Lender comply and will comply with Article IX,
as those provisions may be modified by Lender taking into account the ownership
structure of Transferee Borrower and its Affiliates;

            (iv) The Borrowers shall have obtained (and delivered to Lender) a
Rating Confirmation with respect to the Assumption, the Transferee Borrower, the
new guarantors and indemnitors and all related transactions;

            (v) The Borrowers shall have paid all of Lender's reasonable
out-of-pocket costs and expenses in connection with considering the Assumption,
and shall have paid the amount reasonably requested by Lender as a deposit
against Lender's reasonable costs and expenses in connection with effecting the
Assumption;

            (vi) The Borrowers, the Transferee Borrower, and the replacement
guarantors and indemnitors shall have indicated in writing in form and substance
reasonably satisfactory to Lender their readiness and ability to satisfy the
conditions set forth in Subsection (C) below;

            (vii) (a) The Transferee Borrower shall be a Permitted Transferee or
(b) the identity, experience and financial condition of the Transferee Borrower
shall otherwise be satisfactory to Lender in its reasonable discretion; and

            (viii) The identity and financial condition of the replacement
guarantors and indemnitors shall be satisfactory to Lender.

      (C) If Lender consents to the proposed Assumption, the Transferee Borrower
and/or Borrowers, as the case may be, shall promptly and as a condition to the
Assumption deliver the following to Lender:

            (i) The Borrowers, the Transferee Borrower, the original and
replacement guarantors and indemnitors shall execute and deliver any and all
documents reasonably required by Lender to evidence the Transfer and Assumption
of the Loan, in form and substance reasonably required by Lender and similar to
those received at Closing;

            (ii) Counsel to the Transferee Borrower and replacement guarantors
and indemnitors shall deliver to Lender opinions in form and substance
reasonably satisfactory to Lender as to such matters as Lender shall reasonably
require in connection with such

                                       98


Assumption, which may include opinions as to substantially the same matters as
were required in connection with the origination of the Loan including, without
limitation, a bankruptcy non-consolidation opinion;

            (iii) The Borrowers shall cause to be delivered to Lender, an
endorsement (relating to the change in the identity of the Borrowers and
execution and delivery of the Assumption documents) to Lender's policy of title
insurance in form and substance acceptable to Lender, in Lender's reasonable
discretion; and

            (iv) The Borrowers shall deliver to Lender a payment in the amount
of all remaining unpaid reasonable costs incurred by Lender in connection with
the Transfer and Assumption, including but not limited to Lender's reasonable
attorneys' fees and expenses, all recording fees, and all fees payable to the
title company in connection with the Transfer and Assumption.

SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may
obtain the release (each, a "RELEASE") of one or more Properties from the Lien
of the applicable Mortgage(s) in connection with a partial or total defeasance
of the Loan subject to the conditions of the Note and subject to the
satisfaction of the following conditions:

      (A) Lender shall have received from the Borrowers at least fifteen (15)
days prior written notice of the date proposed for such release (the "RELEASE
DATE") which notice is revocable;

      (B) No Event of Default shall have occurred and be continuing as of the
date of such notice and the Release Date;

      (C) On the date proposed for such Release, the Borrowers shall defease all
or a portion of the Loan by delivering a Defeasance Deposit (as defined in the
Note) in an amount necessary to pay all Scheduled Defeasance Payments (as
defined in the Note) for the entire principal amount of the Loan in the case of
a total defeasance, or in the case of a partial defeasance, relating to the
Release Price of each Property being released (together with all accrued and
unpaid interest on the principal amount being so defeased), and such defeasance
shall be undertaken in accordance with the terms and conditions of the Note, and
Mezzanine Lender shall have received all amounts required to be paid to it in
connection with such Release under the Mezzanine Loan Documents;

      (D) If required by any Rating Agency, the Borrowers at their sole cost and
expense, in connection with any partial defeasance, shall have delivered to
Lender, one or more endorsements to the Title Policies delivered to Lender on
the date hereof in connection with the Mortgages insuring that, after giving
effect to such Release, (i) the Liens created hereby and thereby and insured
under the Title Policies are first priority Liens on the respective remaining
Properties subject only to the Permitted Encumbrances applicable to the
remaining Properties and (ii) that the Title Policies remain in full force and
effect and unaffected by such Release;

      (E) Immediately following any Release in connection with any partial
defeasance, both the Debt Service Coverage Ratio and the Debt Yield (based upon
a trailing twelve (12) month period) shall be equal to or greater than the Debt
Service Coverage Ratio and the Debt

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Yield (based upon a trailing twelve (12) month period) in effect at Closing, or
immediately prior to the Release, whichever is greater;

      (A) Notwithstanding the foregoing, the Borrowers may not obtain the
Release under this Section 11.4 of any Property or Properties which
individually, or in the aggregate (with all Releases since the Closing Date),
have an aggregate Allocated Loan Amount of more than thirty percent (30%) of the
original principal balance of the Loan except pursuant to a total defeasance;

      (F) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses (including, without limitation, title search costs and endorsement
premiums and reasonable attorney's fees and disbursements) incurred by Lender,
Servicer, and any custodian employed by Lender or Servicer, in connection with
the Release; and

      (G) Immediately following such Property Release, each released Property
will be owned by a Person other than the Borrowers, except as otherwise
permitted in connection with any full or partial defeasance of the Loan in
accordance with the terms and conditions of the Note.

Upon satisfaction of the above conditions, Lender shall effectuate the following
(hereinafter referred to as a "PROPERTY RELEASE"): the security interest of
Lender under the Mortgage and other Loan Documents relating to each released
Property shall be released and Lender will execute and deliver any agreements
reasonably requested by the Borrowers to release and terminate or reassign, at
the Borrowers' option, the Mortgage, the applicable Assignment of Leases, and
financing statements as to each released Property; provided, that such release
and termination or reassignment shall be without recourse to Lender and without
any representation or warranty except that Lender shall be deemed to have
represented that such release and termination or reassignment has been duly
authorized and that it has not assigned or encumbered the Mortgage or the other
Loan Documents relating to any released Property (except as contemplated hereby)
and Lender shall return the originals of any Loan Documents that relate solely
to each released Property to the Borrowers; provided, further, that upon the
release and termination or reassignment of Lender's security interest in the
Mortgage relating to a released Property all references herein to the Mortgage
relating to such released Property shall be deemed deleted, except as otherwise
provided herein with respect to indemnities. In addition, promptly after
consummation of any such Property Release and Lender's receipt of the Defeasance
Collateral, any and all Reserves designated as applicable to each released
Property held by or on behalf of Lender shall be returned to the Borrowers.

SECTION 11.5 RESERVED.

SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the
contrary contained herein, provided no Event of Default exists, the Borrowers
may Transfer or dispose of building equipment which is being replaced or which
is no longer necessary in connection with the operation of the Property free
from the lien of the Mortgage, provided that such transfer or disposal will not
have a Material Adverse Effect on the value of any individual Property or on the
Properties taken as a whole, will not materially impair the utility of any
individual Property or the Properties, taken as a whole, and will not result in
a reduction or abatement of, or right of offset against, the Rents payable under
any Lease, in either case as a result thereof, and provided

                                      100


further that any new building equipment acquired by the Borrowers (and not so
disposed of) shall be subject to the lien of the Mortgage. Lender shall, from
time to time, upon the reasonable request of any Borrower, execute a written
instrument in form reasonably satisfactory to Lender to confirm that such
building equipment which is to be, or has been, sold or disposed of is free from
the lien of the Mortgage.

SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of
Default exists, the Borrowers may, without the consent of Lender, (i) make
immaterial Transfers of portions of the any Property to Governmental Authorities
for dedication for public use, and (ii) grant easements, restrictions,
covenants, reservations and rights of way with respect to any Property in the
ordinary course of business for access, water and sewer lines, telephone and
telegraph lines, electric lines or other utilities or for other similar
purposes, provided that no such transfer, conveyance or encumbrance set forth in
the foregoing clauses (i) and (ii) shall materially impair the utility and
operation of such Property or have a Material Adverse Effect on the value of
such Property taken as a whole. In connection with any Transfer permitted
pursuant to this Section 11.7, Lender shall execute and deliver any instrument
reasonably necessary or appropriate, in the case of the Transfers referred to in
clause (i) above, to release the portion of such Property affected by such
transfer from the lien of the applicable Mortgage or to subordinate the
applicable Mortgage to any such easement, restriction, covenant, reservation or
right of way within ten (10) days of Lender's receipt of the following:

      (A) ten (10) days prior written notice thereof.

      (B) a copy of the instrument or instruments of transfer.

      (C) an officer's certificate given by the Borrowers stating that such
transfer does not materially impair the utility and operation of the Property,
materially reduce the value of the Property or have a Material Adverse Effect.

      (D) reimbursement of all of Lender's reasonable, out-of-pocket costs and
expenses incurred in connection with such Transfer.

                                   ARTICLE XII
                        RECOURSE; LIMITATIONS ON RECOURSE

SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article,
and notwithstanding any provision of the Loan Documents other than this Article,
the personal liability of the Borrowers to pay any and all Obligations including
but not limited to the principal of and interest on the debt evidenced by the
Note and any other agreement evidencing the Borrowers' obligations under the
Note shall be limited to (i) the Properties, (ii) the rents, profits, issues,
products and income of the Properties, and (iii) any other Collateral.

Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages
or any of the Loan Documents, Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Obligations secured by the Mortgages or to require that all collateral shall
continue to secure all of the Obligations owing to Lender in accordance with the
Loan Documents.

                                      101


SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the
Borrowers (but not their members, partners (other than the General Partners),
employees, shareholders agents, directors or officers (the "EXCULPATED
PARTIES")) and Guarantor shall be personally liable to the extent of any
liability, loss, damage, cost or expense (including, without limitation,
reasonable attorneys' fees and expenses) suffered or incurred by Lender
resulting from any and all of the following: (i) fraud of any of the Borrower
Parties or their agents or employees; (ii) any material misrepresentation made
by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan
Document; (iii) insurance proceeds, condemnation awards, or other sums or
payments attributable to the Properties which are not applied in accordance with
the provisions of the Loan Documents; (iv) all rents, profits, issues, products
and income of the Properties received or collected by or on behalf of the
Borrowers or any Borrower Party or Manager and not deposited into the Deposit
Account in accordance with Article VII and the Cash Management Agreement; (v)
failure to turn over to Lender, after an Event of Default, or misappropriation
of any tenant security deposits or rents collected in advance (other than by
Lender or Servicer); (vi) failure to notify Lender of any change in the
principal place of business address of the Borrowers or of any change in the
name of any of the Borrowers or if any of the Borrowers takes any other action
which could make the information set forth in the Financing Statements relating
to the Loan materially misleading; (vii) failure by the Borrowers, or any
indemnitor or guarantor to comply with the covenants, obligations, liabilities,
warranties and representations contained in the Environmental Indemnity or
otherwise pertaining to environmental matters; (viii) material waste with
respect to any of the Properties; (ix) all liabilities and expenses under the
indemnification provisions of Section 10.3; (x) any uncured default under
Section 11.1; (xi) any material uncured default under Article IX; and (xii) any
distributions made in violation of Section 5.28 (to the extent of any such
distribution) including amounts improperly paid or distributed, directly or
indirectly, by Manager in circumvention of such restrictions. Notwithstanding
the preceding sentence or Section 12.1, the Loan shall be fully recourse to the
Borrowers and Guarantor upon the happening of any of the following: (i) any
Borrower Party's defense of any efforts by Lender to collect or enforce the
Obligations following maturity of the Loan or acceleration of the Loan on
account of an Event of Default under Section 8.1(A), or any other defense of any
efforts by Lender to collect or enforce the Obligations without a good faith
basis following any other Event of Default, and (ii) any condition or event
described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the
Borrowers and Guarantor shall not be liable under this Section 12.2 in
connection with any Involuntary Borrower Bankruptcy unless such involuntary
proceeding is solicited, procured, consented to or acquiesced in by any
Borrower, Guarantor or any Affiliate of either of them or any Involuntary
Borrower Bankruptcy caused by Mezzanine Lender following the exercise by
Mezzanine Lender of its rights under the Mezzanine Loan Documents).

SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the
enforcement of the Environmental Indemnity, the Guaranty or any guaranty or
similar agreement executed in connection with the Loan, (ii) release or reduce
the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or
any other security document, (iv) impair the rights of Lender to enforce any
provisions of the Loan Documents, or (v) limit Lender's ability to obtain a
deficiency judgment or judgment on the Note or otherwise against any Borrower
Party but not any Exculpated Party to the extent necessary to obtain any amount
for which such Borrower Party may be liable in accordance with this Article or
any other Loan Document.

                                      102


                                  ARTICLE XIII
                 WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES

SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article,
a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or
for any other Borrower Party or Affiliate or to have rights or obligations in
the nature of the rights or obligations of a guarantor or surety (whether by
reason of execution of a guaranty, provision of security for the obligations of
another, or otherwise) then this Article shall apply. This Article shall not
affect the rights of the Waiving Party other than to waive or limit rights and
defenses that Waiving Party would have (i) in its capacity as a guarantor or
surety or (ii) in its capacity as one having rights or obligations in the nature
of a guarantor or surety.

      Waiving Party hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of receivership or bankruptcy of any
of the other Borrower Parties, protest or notice with respect to any of the
obligations of any of the other Borrower Parties, setoffs and counterclaims and
all presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance, the benefits
of all statutes of limitation, and all other demands whatsoever (and shall not
require that the same be made on any of the other Borrower Parties as a
condition precedent to the obligations of Waiving Party), and covenants that the
Loan Documents will not be discharged, except by complete payment and
performance of the obligations evidenced and secured thereby, except only as
limited by the express contractual provisions of the Loan Documents. Waiving
Party further waives all notices that the principal amount, or any portion
thereof, and/or any interest on any instrument or document evidencing all or any
part of the obligations of any of the other Borrower Parties to Lender is due,
notices of any and all proceedings to collect from any of the other Borrower
Parties or any endorser or any other guarantor of all or any part of their
obligations, or from any other person or entity, and, to the extent permitted by
law, notices of exchange, sale, surrender or other handling of any security or
collateral given to Lender to secure payment of all or any part of the
obligations of any of the other Borrower Parties.

      Except only to the extent provided otherwise in the express contractual
provisions of the Loan Documents, Waiving Party hereby agrees that all of its
obligations under the Loan Documents shall remain in full force and effect,
without defense, offset or counterclaim of any kind, notwithstanding that any
right of Waiving Party against any of the other Borrower Parties or defense of
Waiving Party against Lender may be impaired, destroyed, or otherwise affected
by reason of any action or inaction on the part of Lender. Waiving Party waives
all rights and defenses arising out of an election of remedies by the Lender,
even though that election of remedies, may have destroyed the Waiving Party's
rights of subrogation and reimbursement against the other Borrower Parties.

      Lender is hereby authorized, without notice or demand, from time to time,
(a) to renew, extend, accelerate or otherwise change the time for payment of, or
other terms relating to, all or any part of the obligations of any of the other
Borrower Parties; (b) to accept partial payments on all or any part of the
obligations of any of the other Borrower Parties; (c) to take and hold security
or collateral for the payment of all or any part of the obligations of any of
the other Borrower Parties; (d) to exchange, enforce, waive and release any such
security or collateral for such obligations; (e) to apply such security or
collateral and direct the order or manner of sale

                                      103


thereof as in its discretion it may determine; (f) to settle, release, exchange,
enforce, waive, compromise or collect or otherwise liquidate all or any part of
such obligations and any security or collateral for such obligations. Any of the
foregoing may be done in any manner, and Waiving Party agrees that the same
shall not affect or impair the obligations of Waiving Party under the Loan
Documents.

      Waiving Party hereby assumes responsibility for keeping itself informed of
the financial condition of all of the other Borrower Parties and any and all
endorsers and/or other guarantors of all or any part of the obligations of the
other Borrower Parties, and of all other circumstances bearing upon the risk of
nonpayment of such obligations, and Waiving Party hereby agrees that Lender
shall have no duty to advise Waiving Party of information known to it regarding
such condition or any such circumstances.

      Waiving Party agrees that neither Lender nor any person or entity acting
for or on behalf of Lender shall be under any obligation to marshal any assets
in favor of Waiving Party or against or in payment of any or all of the
obligations secured hereby. Waiving Party further agrees that, to the extent
that any of the other Borrower Parties or any other guarantor of all or any part
of the obligations of the other Borrower Parties makes a payment or payments to
Lender, or Lender receives any proceeds of collateral for any of the obligations
of the other Borrower Parties, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid or refunded, then, to the extent of such payment or
repayment, the part of such obligations which has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the time immediately preceding such initial payment, reduction or
satisfaction.

      Waiving Party (i) shall have no right of subrogation with respect to the
obligations of the other Borrower Parties; (ii) waives any right to enforce any
remedy that Lender now has or may hereafter have against any of the other
Borrower Parties any endorser or any guarantor of all or any part of such
obligations or any other person; and (iii) waives any benefit of, and any right
to participate in, any security or collateral given to Lender to secure the
payment or performance of all or any part of such obligations or any other
liability of the other parties to Lender.

      Waiving Party agrees that any and all claims that it may have against any
of the other Borrower Parties, any endorser or any other guarantor of all or any
part of the obligations of the other Borrower Parties, or against any of their
respective properties, shall be subordinate and subject in right of payment to
the prior payment in full of all obligations secured hereby. Notwithstanding any
right of any of the Waiving Party to ask, demand, sue for, take or receive any
payment from the other Borrower Parties, all rights, liens and security
interests of Waiving Party, whether now or hereafter arising and howsoever
existing, in any assets of any of the other Borrower Parties (whether
constituting part of the security or collateral given to Lender to secure
payment of all or any part of the obligations of the other Borrower Parties or
otherwise) shall be and hereby are subordinated to the rights of Lender in those
assets.

                                      104


                                   ARTICLE XIV
                                  MISCELLANEOUS

SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions
contemplated hereby shall be consummated, the Borrowers agree to promptly pay
all reasonable fees, costs and expenses incurred by Lender in connection with
any matters contemplated by or arising out of this Loan Agreement, including the
following, and all such fees, costs and expenses shall be part of the
Obligations, payable on demand: (A) reasonable fees, costs and expenses
(including reasonable attorneys' fees, and other professionals retained by
Lender) incurred in connection with the examination, review, due diligence
investigation, documentation and closing of the financing arrangements evidenced
by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and
expenses (including reasonable attorneys' fees and other professionals retained
by Lender) incurred in connection with the administration of the Loan Documents
and the Loan and any amendments, modifications and waivers relating thereto; (C)
subject to Section 10.2, reasonable fees, costs and expenses (including
reasonable attorneys' fees) incurred in connection with the review,
documentation, negotiation, closing and administration of any subordination or
intercreditor agreements; and (D) reasonable fees, costs and expenses (including
reasonable attorneys' fees and fees of other professionals retained by Lender)
incurred in any action to enforce or interpret this Loan Agreement or the other
Loan Documents or to collect any payments due from the Borrowers under this Loan
Agreement, the Note or any other Loan Document or incurred in connection with
any refinancing or restructuring of the credit arrangements provided under this
Loan Agreement, whether in the nature of a "workout" or in connection with any
insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due
and payable to Lender after the Closing Date may be paid to Lender pursuant to
the Cash Management Agreement.

SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required
elsewhere herein, whether or not the transactions contemplated hereby shall be
consummated, the Borrowers agree to indemnify, defend, protect, pay and hold
Lender, Servicer and their successors and assigns (including, without
limitation, the trustee and/or the trust under any trust agreement executed in
connection with any Securitization backed in whole or in part by the Loan and
any other Person which may hereafter be the holder of the Note or any interest
therein), and the officers, directors, stockholders, partners, members,
employees, agents, Affiliates and attorneys of Lender and such successors and
assigns (collectively called the "INDEMNITEES") harmless from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable
costs, expenses and disbursements of any kind or nature whatsoever (including
the reasonable fees and disbursements of outside counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that are imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of (A) the negotiation,
execution, delivery, performance, administration, ownership, or enforcement of
any of the Loan Documents; (B) any of the transactions contemplated by the Loan
Documents; (C) any breach by the Borrowers of any material representation,
warranty, covenant, or other agreement contained in any of the Loan Documents;
(D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any
third party arising out of any condition or occurrence at or pertaining to the
Properties; (F) any design, construction, operation, repair, maintenance, use,
non-use or condition of the Properties or Improvements, including

                                      105


claims or penalties arising from violation of any applicable laws or insurance
requirements, as well as any claim based on any patent or latent defect, whether
or not discoverable by Lender; (G) any performance of any labor or services or
the furnishing of any materials or other property in respect of the Properties
or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I)
any obligation or undertaking relating to the performance or discharge of any of
the terms, covenants and conditions of the landlord contained in the Leases; or
(J) the use or intended use of the proceeds of any of the Loan (the foregoing
liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES");
provided that the Borrowers shall not have an obligation to an Indemnitee
hereunder with respect to Indemnified Liabilities arising from the fraud, gross
negligence or willful misconduct of such Indemnitee as determined by a court of
competent jurisdiction. The obligations and liabilities of the Borrowers under
this Section 14.2 shall survive the term of the Loan and the exercise by Lender
of any of its rights or remedies under the Loan Documents, including the
acquisition of the Properties by foreclosure or a conveyance in lieu of
foreclosure.

SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
amendment, modification, termination or waiver of any provision of this Loan
Agreement, the Note or any other Loan Document, or consent to any departure
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender and any other party to be charged. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on the Borrowers in any case shall entitle the Borrowers or other Person
to any other or further notice or demand in similar or other circumstances.

SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance
with Lender's customary practices, destroy or otherwise dispose of all
documents, schedules, invoices or other papers, delivered by the Borrowers to
Lender (other than the Note) unless the Borrowers request in writing that same
be returned. Upon such request and at the Borrowers' expense, Lender shall
return such papers when Lender's actual or anticipated need for same has
terminated.

SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice
or other communication required or permitted to be given shall be in writing and
addressed to the respective party as set forth below. Notices shall be effective
(i) three (3) days after the date such notice is mailed, (ii) on the next
Business Day if sent by a nationally recognized overnight courier service, (iii)
on the date of delivery by personal delivery and (iv) on the date of
transmission if sent by telefax during business hours on a Business Day
(otherwise on the next Business Day).

Notices shall be addressed as follows:

If to the Borrowers or any Borrower Party:

c/o Lodgian
3445 Peachtree Road NE
Suite 700
Atlanta, Georgia 30326

                                      106


Attention: General Counsel
Facsimile: (404) 364-0088

With a copy to:

Morris, Manning & Martin, LLP
3343 Peachtree Rd., NE
1600 Atlanta Financial Center
Atlanta, Georgia 30326
Attention: Thomas Gryboski, Esq.
Facsimile: (404) 365-9532

If to Lender:

Merrill Lynch Mortgage Lending, Inc.
Four World Financial Center
New York, New York 10080
Attention: Robert Spinna
Facsimile: (212) 449-7684

With a copy to:

Sidley Austin Brown & Wood LLP
787 Seventh Avenue
New York, New York 10019
Attn: Robert L. Boyd, Esq.
Facsimile: (212) 839-5599

Any party may change the address at which it is to receive notices to another
address in the United States at which business is conducted (and not a
post-office box or other similar receptacle), by giving notice of such change of
address in accordance with the foregoing. This provision shall not invalidate or
impose additional requirements for the delivery or effectiveness of any notice
(i) given in accordance with applicable statutes or rules of court, or (ii) by
service of process in accordance with applicable law. If there is any assignment
or transfer of Lender's interest in the Loan, then the new Lenders may give
notice to the parties in accordance with this Section, specifying the addresses
at which the new Lenders shall receive notice, and they shall be entitled to
notice at such address in accordance with this Section.

SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Loan Agreement, the making of the Loan hereunder and the
execution and delivery of the Note. Notwithstanding anything in this Loan
Agreement or implied by law to the contrary, the agreements of the Borrowers to
indemnify or release Lender or Persons related to Lender, or to pay Lender's
costs, expenses, or taxes shall survive the payment of the Loan and the
termination of this Loan Agreement.

SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of Lender in the exercise of any power, right or privilege
hereunder or under the Note

                                      107


or any other Loan Document shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Loan Agreement, the Note and the other
Loan Documents are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any
obligation to marshal any assets in favor of any Person or against or in payment
of any or all of the Obligations. To the extent that any Person makes a payment
or payments to Lender, or Lender enforces its remedies or exercises its rights
of set off, and such payment or payments or the proceeds of such enforcement or
set off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
if any, and rights and remedies therefor, shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or set
off had not occurred.

SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Loan Agreement, the
Note or other Loan Documents shall not affect or impair the validity, legality
or enforceability of the remaining provisions or obligations under this Loan
Agreement, the Note or other Loan Documents or of such provision or obligation
in any other jurisdiction.

SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Loan Agreement for any other purpose or be given any substantive
effect.

SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE
STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND
THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED
PURSUANT TO EACH MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE
LAWS OF THE STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE
SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE

                                      108


LAWS OF THE STATE OF NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION
OF LENDER.

SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns except that the Borrowers may not assign their rights or obligations
hereunder or under any of the other Loan Documents except as expressly provided
in Article XI.

SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY
RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties,
represent, warrant and acknowledge that (i) they are sophisticated real estate
investors, familiar with transactions of this kind, and (ii) they have entered
into this Loan Agreement and the other Loan Documents after conducting their own
assessment of the alternatives available to them in the market, and after
lengthy negotiations in which they have been represented by legal counsel of
their choice. The Borrowers, on behalf of themselves and all Borrower Parties,
also acknowledge and agree that the rights of Lender under this Loan Agreement
and the other Loan Documents are reasonable and appropriate, taking into
consideration all of the facts and circumstances including without limitation
the quantity of the Loan, the nature of the Properties, and the risks incurred
by Lender in this transaction. No provision in this Loan Agreement or in any of
the other Loan Documents and no course of dealing between the parties shall be
deemed to create (i) any partnership or joint venture between Lender and the
Borrowers or any other Person, or (ii) any fiduciary or similar duty by Lender
to the Borrowers or any other Person. The relationship between Lender and the
Borrowers is exclusively the relationship of a creditor and a debtor, and all
relationships between Lender and any other Borrower are ancillary to such
creditor/debtor relationship.

SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any
consent, approval, determination or other action by Lender is, pursuant to the
Loan Documents or applicable law, required to be done reasonably or required not
to be unreasonably withheld, then Lender's action shall be presumed to be
reasonable, and the Borrowers shall bear the burden of proof of showing that the
same was not reasonable. In the event that a claim or adjudication is made that
Lender or its agents have acted unreasonably or unreasonably delayed acting in
any case where, by law or under this Loan Agreement or the other Loan Documents,
Lender or such agent, as the case may be, has an obligation to act reasonably or
promptly, neither Lender nor its agents shall be liable for any monetary
damages, and the Borrowers' sole remedy shall be limited to commencing an action
seeking injunctive relief or declaratory judgment. Any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.

SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate,
officer, director, employee, attorney, or agent of Lender, shall have any
liability with respect to, and each of the Borrowers hereby waives, releases,
and agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by the Borrower
Parties in connection with, arising out of, or in any way related to, this Loan
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Loan Agreement or any of the other Loan Documents, other
than the gross negligence or willful misconduct of Lender. Each of the Borrowers
hereby waives, releases, and agrees not to sue Lender or any of Lender's
Affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in

                                      109


respect of any claim in connection with, arising out of, or in any way related
to, this Loan Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Loan Agreement or any of the transactions
contemplated hereby, except to the extent the same is caused by the gross
negligence or willful misconduct of Lender.

SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to any of the Borrowers or Affiliates thereof, or any other Person.

SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other
Loan Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties to the Loan
Documents.

SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and
Lender acknowledge that each of them has had the benefit of legal counsel of its
own choice and has been afforded an opportunity to review this Loan Agreement
and the other Loan Documents with its legal counsel and that this Loan Agreement
and the other Loan Documents shall be construed as if jointly drafted by the
Borrowers and Lender. If any term, condition or provision of this Loan Agreement
shall be inconsistent with any term, condition or provision of any other Loan
Document, then this Loan Agreement shall control.

SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS
LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN
SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.

SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR
ANY DEALINGS BETWEEN

                                      110


ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN
TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH
OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY
UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF
THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY
BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS AND
LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS
LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE.
EACH OF THE BORROWERS AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN
DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE
EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.

SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan
Documents and any amendments or supplements thereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which counterparts together shall constitute but one and the same
instrument. This Loan Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto.

SECTION 14.22 SERVICER. Lender shall have the right from time to time to
designate and appoint a Servicer and special servicer, and to change or replace
any Servicer or special servicer. Provided that the Borrowers have been notified
of such Servicer's role, all rights of the Lender hereunder may be exercised by
Servicer on behalf of Lender and provided the Borrowers shall not be required to
deal with more than one such servicing entity at any time. Lender shall notify
the Borrowers in writing as to the identity of the Servicer and any special
servicer.

SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than
the Borrowers are parties to this Loan Agreement only with regard to the
representations, warranties, and covenants specifically applicable to them.

SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything
contained in this Loan Agreement to the contrary, if for any reason whatsoever
Lender suspects that any conditions exist or may exist at any Property which
might have a Material Adverse Effect,

                                      111


Lender shall have the right, at the Borrowers' sole reasonable cost and expense,
to cause such inspections and reports to be prepared and performed with respect
to any Property as Lender shall reasonably determine.

                        [signatures follow on next page]

                                      112



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

                                BORROWERS:

                                MINNEAPOLIS MOTEL ENTERPRISES, INC.
                                LODGIAN AMI, INC.
                                LODGIAN HOTELS FIXED III, LLC

                                By: /s/ Daniel E. Ellis
                                    --------------------------------------------
                                        Name:  Daniel E. Ellis
                                        Title: Vice President and Secretary, or
                                        Authorized Signatory for each of the
                                        entities listed above

                                SERVICO CENTRE ASSOCIATES, LTD.

                                By: Servico Palm Beach General Partner SPE,
                                    Inc., its general partner

                                By: /s/ Daniel E. Ellis
                                    --------------------------------------------
                                        Name:  Daniel E. Ellis
                                        Title: Vice President and Secretary

                                LENDER:

                                MERRILL LYNCH MORTGAGE LENDING, INC.

                                By: /s/ Robert Spinna
                                    --------------------------------------------
                                        Name: Robert Spinna
                                        Title: Vice President

Loan Agreement (FX #3)



                         LIST OF EXHIBITS AND SCHEDULES

Exhibit A              -   Properties
Exhibit B              -   Environmental Reports
Exhibit C              -   Franchise Agreements
Exhibit D              -   Allocated Loan Amounts/Aggregate Allocated Loan
                           Amounts
Exhibit E              -   Management Agreements
Exhibit F              -   [Reserved]
Exhibit G              -   Property Improvement Plans
Exhibit H              -   [Reserved]
Exhibit I              -   Acceptable Franchisors
Exhibit J              -   Property Condition Reports
Exhibit K              -   Zoning Reports
Exhibit L              -   Certificate Re: Work Reserves

Schedule 1             -   Borrowers
Schedule 2.4           -   Scheduled Mortgage Principal Payments
Schedule 2.12(G)       -   Crossed Loans/Crossed Borrowers
Schedule 3.1(A)        -   List of Loan Documents
Schedule 4.1(C)        -   Organizational Chart for Borrower Parties
Schedule 4.2           -   Consents
Schedule 4.5           -   Condemnation Proceedings
Schedule 4.5(A)        -   Rights to Purchase/Rights of First Offer
Schedule 4.7(B)        -   Rent Roll
Schedule 4.7(E)        -   Franchise Defaults
Schedule 4.9           -   Litigation
Schedule 4.14              ERISA Plans
Schedule 4.20          -   Insurance
Schedule 4.28          -   Collective Bargaining Agreements
Schedule 4.29          -   Condominium Property Documents
Schedule 4.30          -   Ground Leases
Schedule 5.14          -   Material Agreements
Schedule 6.5           -   Required Capital Improvements
Schedule 6.6           -   Environmental Work/O&M Plans
Schedule 6.7           -   Reserve Funding Condition

                         List of Exhibits and Schedules

Loan Agreement (FX #3)



                                    EXHIBIT A

                                   PROPERTIES

1.    Courtyard by Marriott, 1001 McClain Rd., Bentonville, AR

2.    Crowne Plaza, 1601 Belvedere Road, West Palm Beach, FL

3.    Courtyard by Marriott, 46 Cavalier Blvd., Florence, KY

4.    Holiday Inn, 301 W. Lombard St., Baltimore, Inner Harbor, MD

5.    Holiday Inn, 6323 Ritchie Highway, Glen Burnie, MD

6.    Holiday Inn, 1000 Cromwell Bridge Rd., Towson (Cromwell Bridge), MD

7.    Holiday Inn, 1201 West Country Rd. East, St. Paul, MN

8.    Fairfield Inn, 4 Amherst Rd., Merrimack, NH

9.    Holiday Inn Sunspree, 1601 No. Ocean Blvd., Myrtle Beach (Surfside Beach),
      SC

                                    Exhibit A

Loan Agreement (FX #3)



                                    EXHIBIT B

                              ENVIRONMENTAL REPORTS



           LODGIAN   LOCATION
 ML CODE    CODE       CODE             PROPERTY NAME                  ADDRESS                  CITY          STATE
- --------   -------   --------           -------------                  -------                  ----          -----
                                                                                               
FIXED RATE LOAN #3
   19        har     1765 Holiday Inn - Baltimore                301 W. Lombard St.         Baltimore          MD
    8        wpb     1108 Crowne Plaza - West Palm Beach         1601 Belvedere Rd.         West Palm Beach    FL
   20        gln     1770 Holiday Inn - Glen Burnie              323 Ritchie Highway        Glen Burnie        MD
    5        ben     505  Courtyard by Marriott - Bentonville    1001 McClain Rd.           Bentonville        AR
   23        crb     1780 Holiday Inn - Towson                   1100 Cromwell Bridge Rd.   Towson             MD
   25        stp     1910 Holiday Inn - St. Paul                 1201 West Country Rd. E    St. Paul           MN
   45        myr     4040 Holiday Inn SunSpree - Surfside Beach  1601 N. Ocean Blvd.        Surfside Beach     SC
   55        mmk     2828 Marriott Fairfield Inn - Merrimack     4 Amherst Road             Merrimack          NH
   27        flo     2035 Courtyard by Marriott - Florence       46 Cavalier Blvd.          Florence           KY


           LODGIAN                                                                                     PROJECT OR
 ML CODE    CODE                       REPORT                      ASSESSMENT FIRM      REPORT DATE    JOB NUMBER
- --------   -------                     ------                      ---------------      ------------   ----------
                                                                                        
FIXED RATE LOAN #3
   19        har     Phase I Environmental Site Assessment Report   EMG                 May 20, 2004     116616
    8        wpb     Phase I Environmental Site Assessment Report   EMG                 May 22, 2004     116589
   20        gln     Phase I Environmental Site Assessment Report   EMG                 May 20, 2004     116622
    5        ben     Phase I Environmental Site Assessment Report   EMG                 May 24, 2004     116572
   23        crb     Phase I Environmental Site Assessment Report   EMG                 May 22, 2004     116626
   25        stp     Phase I Environmental Site Assessment Report   EMG                 May 24, 2004     116634
   45        myr     Phase I Environmental Site Assessment Report   EMG                 May 21, 2004     116667
   55        mmk     Phase I Environmental Site Assessment Report   Building            May 6, 2004    04-116/skt
                                                                    Evaluation
                                                                    Services &
                                                                    Technology
   27        flo     Phase I Environmental Site Assessment Report   EMG                 May 20, 2004     116606


                                    Exhibit B

Loan Agreement (FX #3)



                                    EXHIBIT C

                              FRANCHISE AGREEMENTS



               PROPERTY                                                                   AGREEMENT
                 NAME                   STATE                 FRANCHISOR                     DATE
               --------                 -----                 ----------                  ---------
                                                                                 
Holiday Inn - Baltimore                  MD             Intercontinental Hotel Group        5/28/98
Crowne Plaza - West Palm Beach           FL             Intercontinental Hotel Group         6/9/95
Holiday Inn - Glen Burnie                MD             Intercontinental Hotel Group        5/28/98
Courtyard by Marriott - Bentonville      AR                                 Marriott        1/15/96
Holiday Inn - Towson                     MD             Intercontinental Hotel Group        5/28/98
Holiday Inn - St. Paul                   MN             Intercontinental Hotel Group        6/21/94
Holiday Inn SunSpree - Surfside Beach    SC             Intercontinental Hotel Group        2/11/98

Fairfield Inn - Merrimack                NH                                 Marriott        4/28/95
Courtyard by Marriott - Florence         KY                                 Marriott        9/22/95


                                    Exhibit C

Loan Agreement (FX #3)



                                    EXHIBIT D

             ALLOCATED LOAN AMOUNTS/AGGREGATE ALLOCATED LOAN AMOUNTS



           LODGIAN LOCATION
 ML CODE    CODE     CODE               LEGAL ENTITY                  PROPERTY NAME                ADDRESS            CITY     STATE
- --------   ------- -------              ------------                  -------------                -------            ----     -----
                                                                                                          
FIXED RATE LOAN #3
    19       har     1765   Lodgian AMI, Inc.                    Holiday Inn - Baltimore    301 W. Lombard St.    Baltimore      MD
    8        wpb     1108   Servico Centre Associates, Ltd.      Crowne Plaza - West        1601 Belvedere Rd.    West Palm      FL
                                                                 Palm Beach                                       Beach
    20       gln     1770   Lodgian AMI, Inc.                    Holiday Inn - Glen Burnie  6323 Ritchie Highway  Glen Burnie    MD

    5        ben     505    Lodgian Hotels Fixed III, LLC        Courtyard by Marriott -    1001 McClain Rd.      Bentonville    AR
                                                                 Bentonville
    23       crb     1780   Lodgian Hotels Fixed III, LLC        Holiday Inn - Towson       1100 Cromwell Bridge  Towson         MD
                                                                                            Rd.
    25       stp     1910   Minneapolis Motel Enterprises, Inc.  Holiday Inn - St. Paul     1201 West Country     St. Paul       MN
                                                                                            Rd. E
    45       myr     4040   Lodgian Hotels Fixed III, LLC        Holiday Inn SunSpree -     1601 N. Ocean Blvd.   Surfside       SC
                                                                 Surfside Beach                                   Beach
    55       mmk     2828   Lodgian Hotels Fixed III, LLC        Marriott Fairfield Inn     4 Amherst Road        Merrimack      NH
                                                                 - Merrimack
    27       flo     2035   Lodgian Hotels Fixed III, LLC        Courtyard by Marriott -    46 Cavalier Blvd.     Florence       KY
                                                                 Florence
                                                                 SUBTOTAL

                                                                                ALLOCATED      AGGREGATE
           LODGIAN LOCATION                                       ALLOCATED     MEZZANINE      ALLOCATED
 ML CODE    CODE     CODE               LEGAL ENTITY             LOAN AMOUNT   LOAN AMOUNT    LOAN AMOUNT
- --------   ------- -------              ------------             -----------   -----------    -----------
                                                                            
FIXED RATE LOAN #3
    19       har     1765   Lodgian AMI, Inc.                    $26,360,000        $0        $26,360,000
    8        wpb     1108   Servico Centre Associates, Ltd.      $12,450,000        $0        $12,450,000

    20       gln     1770   Lodgian AMI, Inc.                    $ 5,625,000        $0        $ 5,625,000

    5        ben     505    Lodgian Hotels Fixed III, LLC        $ 5,362,500        $0        $ 5,362,500

    23       crb     1780   Lodgian Hotels Fixed III, LLC        $ 5,175,000        $0        $ 5,175,000

    25       stp     1910   Minneapolis Motel Enterprises, Inc.  $ 4,264,000        $0        $ 4,264,000

    45       myr     4040   Lodgian Hotels Fixed III, LLC        $ 2,772,000        $0        $ 2,772,000

    55       mmk     2828   Lodgian Hotels Fixed III, LLC        $ 1,960,000        $0        $ 1,960,000

    27       flo     2035   Lodgian Hotels Fixed III, LLC        $ 2,850,000        $0        $ 2,850,000

                                                                 $66,818,500        $0        $66,818,500


                                    Exhibit D

Loan Agreement (FX #3)



                                    EXHIBIT E

                              MANAGEMENT AGREEMENTS

1.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Fixed III, LLC, as owner,
      re: Holiday Inn, Cromwell Bridge, MD.

2.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Fixed III, LLC, as owner,
      re: Courtyard by Marriott, Florence, KY.

3.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Fixed III, LLC, as owner,
      re: Courtyard by Marriott, Bentonville, AR.

4.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Fixed III, LLC, as owner,
      re: Holiday Inn, Myrtle Beach, SC.

5.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian AMI, Inc., as owner, re: Holiday
      Inn, Inner Harbor, Baltimore, MD.

6.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian AMI, Inc., as owner, re: Holiday
      Inn, Glen Burnie, MD.

7.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Fixed III, LLC, as owner,
      re: Fairfield Inn, Merrimack, NH.

8.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Minneapolis Motel Enterprises, Inc., as
      owner, re: Holiday Inn, St. Paul, MN.

9.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Centre Associates, Ltd., as
      owner, re: Crowne Plaza, West Palm Beach, FL.

                                    Exhibit E

Loan Agreement (FX #3)



                                    EXHIBIT F

                                   [RESERVED]

                                    Exhibit F

Loan Agreement (FX #3)



                                    EXHIBIT G

                           PROPERTY IMPROVEMENT PLANS

                                      None.

                                    Exhibit G

Loan Agreement (FX #3)



                                    EXHIBIT H

                                   [RESERVED]

                                    Exhibit H

Loan Agreement (FX #3)



                                    EXHIBIT I

                             ACCEPTABLE FRANCHISORS

                                     TIER 1


Six Continents                   Crowne Plaza
Hilton Hotels Corp.              Hilton
Hilton Hotels Corp.              Doubletree
Hilton Hotels Corp.              Homewood Suites
Hilton Hotels Corp.              Hilton Garden Inn
Starwood Hotels & Resorts        Westin
Starwood Hotels & Resorts        Sheraton
Starwood Hotels & Resorts        W
US Franchise Systems, Inc.       Hawthorn
Marriott International, Inc.     Marriott
Marriott International, Inc.     Renaissance
Marriott International, Inc.     Courtyard
Marriott International, Inc.     Residence Inn
Wyndham International            Wyndham Hotel
Carlson Hotels Worldwide         Radisson

                         TIER 2 (WITH FOOD AND BEVERAGE)


Six Continents                   Holiday Inn
Six Continents                   Holiday Inn Select
Six Continents                   Holiday Inn SunSpree Resort
Choice Hotels International      Clarion
Best Western International, Inc. Best Western
Cendant Corporation              Ramada
Starwood Hotels & Resorts        Four Points
Choice Hotels International      Quality
Wyndham International            Wyndham Gardens

                            TIER 3 (WITHOUT FOOD AND
                                    BEVERAGE)

Six Continents                       Holiday Inn Express
Hilton Hotels Corp.                  Hampton Inn
Marriott International, Inc       .  Fairfield
Choice Hotels International          Comfort Inn
Choice Hotels International          Comfort Suites

                                    Exhibit I

Loan Agreement (FX #3)



                                    EXHIBIT J

                           PROPERTY CONDITION REPORTS



          LODGIAN LOCATION
 ML CODE   CODE     CODE        PROPERTY NAME             ADDRESS           CITY      STATE                 REPORT
- --------  ------- --------      -------------             -------           ----      -----                 ------
                                                                         
FIXED RATE LOAN #3
    19       har    1765   Holiday Inn - Baltimore  301 W. Lombard St.    Baltimore    MD     Property Condition Assessment
                                                                                              Report
    8        wpb    1108   Crowne Plaza - West      1601 Belvedere Rd.    West Palm    FL     Property Condition Assessment
                           Palm Beach                                     Beach               Report
    20       gln    1770   Holiday Inn - Glen       6323 Ritchie Highway  Glen         MD     Property Condition Assessment
                           Burnie                                         Burnie              Report
    5        ben     505   Courtyard by Marriott -  1001 McClain Rd.      Bentonville  AR     Property Condition Assessment
                           Bentonville                                                        Report
    23       crb    1780   Holiday Inn - Towson     1100 Cromwell Bridge  Towson       MD     Property Condition Assessment
                                                    Rd.                                       Report
    25       stp    1910   Holiday Inn - St. Paul   1201 West Country     St. Paul     MN     Property Condition Assessment
                                                    Rd. E                                     Report
    45       myr    4040   Holiday Inn SunSpree -   1601 N. Ocean Blvd.   Surfside     SC     Property Condition Assessment
                           Surfside Beach                                 Beach               Report
    55       mmk    2828   Marriott Fairfield Inn   4 Amherst Road        Merrimack    NH     Property Condition Assessment
                           - Merrimack                                                        Report
    27       flo    2035   Courtyard by Marriott -  46 Cavalier Blvd.     Florence     KY     Property Condition Assessment
                           Florence                                                          Report


          LODGIAN LOCATION                                                          PROJECT OR JOB
 ML CODE   CODE     CODE        PROPERTY NAME       ASSESSMENT FIRM   REPORT DATE       NUMBER
- --------  ------- --------      -------------       ---------------   -----------   --------------
                                                                  
FIXED RATE LOAN #3
    19       har    1765   Holiday Inn - Baltimore    EMG             May 24, 2004     116617
    8        wpb    1108   Crowne Plaza - West        EMG             May 24, 2004     116590
                           Palm Beach
    20       gln    1770   Holiday Inn - Glen         EMG             May 24, 2004     116623
                           Burnie
    5        ben     505   Courtyard by Marriott -    EMG             May 22, 2004     116573
                           Bentonville
    23       crb    1780   Holiday Inn - Towson       EMG             May 24, 2004     116627
    25       stp    1910   Holiday Inn - St. Paul     EMG             May 24, 2004     116635
    45       myr    4040   Holiday Inn SunSpree -     EMG             May 22, 2004     116668
                           Surfside Beach
    55       mmk    2828   Marriott Fairfield Inn     Building        May 6, 2004     04-116/Ec
                           - Merrimack                Evaluation
                                                      Services &
                                                      Technology
    27       flo    2035   Courtyard by Marriott -    EMG             May 20, 2004     116607
                           Florence


                                    Exhibit J

Loan Agreement (FX #3)



                                    EXHIBIT K

                                 ZONING REPORTS*



                                                                                         PZR SITE
                 CHAIN NAME               CITY            ST     DATE OF REPORT           NUMBER
- -------------------------------------------------------------------------------------------------
                                                                          
1.           Holiday Inn           Baltimore              MD     4/28/2004                 26434
2.           Crowne Plaza          West Palm Beach        FL     5/7/2004                  26423
3.           Holiday Inn           Glen Burnie            MD     4/28/2004                 26435
4.           Courtyard by          Bentonville            AR     4/26/2004                 26420
             Marriott
5.           Holiday Inn           Towson                 MD     4/28/2004                 26438
                                                                 Revised 5/12/04
6.           Holiday Inn           Arden Hills/St. Paul   MN     4/28/2004                 26440
7.           Courtyard by          Florence               KY     5/5/2004                  26442
             Marriott
8.           Holiday Inn SunSpree  Myrtle Beach           SC     4/30/2004                 26460
9.           Fairfield Inn         Merrimack              NH     5/6/2004                  26470


- ----------------
* All reports were prepared for Merrill Lynch Mortgage Lending, Inc. by the
Planning & Zoning Resource Corporation.

                                    Exhibit K

Loan Agreement (FX #3)



                                    EXHIBIT L

                          CERTIFICATE RE: WORK RESERVES

                            BORROWER'S CERTIFICATION

      THIS CERTIFICATION is made as of __________ by the undersigned (the
"Borrowers") to and for the benefit of: (i) the current holder (the "Holder") of
Loan No. ________ and ________ (the "Loans"), and (ii)
_________________________, as mortgage servicer on behalf of the Holder (the
"Servicer"), in order to induce the Servicer to advance to the Borrower the
aggregate sum of $__________ from the _______________ [describe name of reserve
account] Reserve, as provided under Section 6.7 the Loan and Security Agreement
evidencing the Loan (the "Loan Agreement").

      Capitalized terms used in this Certification that are not otherwise
defined herein shall have the meanings ascribed to such terms in the Loan
Agreement.

      The undersigned hereby certifies to the Holder and Servicer as follows:

1.    No event, fact or circumstance has occurred or failed to occur which
constitutes, or upon the lapse of time, or the giving of notice, or both, could
constitute a Default or an Event of Default under the Loan Documents. The Loan
Documents remain the valid and legally binding obligations of the undersigned
and are fully enforceable in accordance with their terms.

2.    The portion of the Work that relates to the subject disbursement request
has been delivered or provided to Borrower in a good and workmanlike manner and
in accordance with the plans and specifications therefor, if applicable,
approved by Lender and in accordance with all legal requirements of governmental
authorities having jurisdiction over the Property, or deposits for work or
materials that relate to the subject disbursement request have been paid by
Borrower, as applicable.

3.    All of the statements, invoices, receipts and information delivered in
connection with the subject disbursement request are true and correct as of the
date hereof, and each person that supplied materials or labor in connection with
the Work to be funded by the subject disbursement request has been paid in full
to date, or will be paid in full to date upon such disbursement, subject to any
applicable retainage. The actual costs incurred in connection with the subject
disbursement request do not materially exceed the amount budgeted for such Work
under the CapEx/FF&E Budget in effect and constitute expenditures for Capital
Improvements.

4.    None of the labor, materials, overhead or other items of expense specified
in the disbursement request submitted herewith, other than payments on account
of retainage, has previously been the basis of any disbursement request by the
Borrower or any payment by the Servicer, other than for partially completed work
or deposits and, when added to all sums previously disbursed by the Servicer on
account of the related work, do not exceed the costs of all services completed,
installed and/or delivered, or deposits made, as applicable, as of the date of
this certificate. In addition, the amount remaining in the subject reserve will
be sufficient to

                                   Exhibit L-1
Loan Agreement (FX #3)



pay in full the entire remaining cost of related work required to be completed
in accordance with the Loan Agreement.

5.    None of the materials or other items of expense specified in the
disbursement request submitted herewith are stored at any Property unless such
materials are properly stored and secured at the applicable Property in
accordance with the Borrowers' customary procedures and sound construction
practices as reasonably determined by Lender. None of the materials or other
items of expense specified in the disbursement request submitted herewith are
stored at any location other than at the Properties unless Lender determines in
its reasonable discretion that Lender has a perfected first priority security
interest in any such materials.

6.    All permits and approvals required to complete the work in process have
been obtained. All conditions to the disbursement have been met in accordance
with the terms of the Loan Agreement.

7.    The individual that is signing below on behalf of the Borrower has made
due investigation of the matters herein set forth, and acknowledges that the
Servicer is relying upon the certification made herein as a condition to
advancing the requested reserve disbursement.

8.    This Certification shall be deemed to be a "Loan Document" as that term is
defined in the Loan Agreement. Accordingly, an uncured breach of any
representation or warranty set forth herein shall constitute an Event of Default
under the Mortgages and the Loan Documents.

      IN WITNESS WHEREOF, the Borrower has executed this Certification under
seal as of the date written above.

                                 BORROWERS:
                                 Legal Entities listed on "Attachment A"

                                 By:   _________________________________________
                                       Name:  __________________________________
                                       Title: __________________________________

                                   Exhibit L-2

Loan Agreement (FX #3)



                                  ATTACHMENT A

BORROWERS:

                                   Exhibit L-3

Loan Agreement (FX #3)



                                   SCHEDULE 1

                                    BORROWERS

LODGIAN HOTELS FIXED III, LLC
LODGIAN AMI, INC.
MINNEAPOLIS MOTEL ENTERPRISES, INC.
SERVICO CENTRE ASSOCIATES, LTD.

                                   Schedule 1

Loan Agreement (FX #3)



                                  SCHEDULE 2.4

                    SCHEDULED MORTGAGE PRINCIPAL PAYMENTS



                                             SCHEDULED               SCHEDULED                    TOTAL
PERIOD              DATE                     INTEREST                PRINCIPAL                   PAYMENT
- ------            ---------                 ----------               ----------                 ----------
                                                                                    
   1              8/1/2004                  378,428.43                75,955.08                 454,383.51
   2              9/1/2004                  377,998.26                76,385.25                 454,383.51
   3              10/1/2004                 365,386.11                88,997.40                 454,383.51
   4              11/1/2004                 377,061.61                77,321.90                 454,383.51
   5              12/1/2004                 364,474.54                89,908.97                 454,383.51
   6              1/1/2005                  376,114.49                78,269.02                 454,383.51
   7              2/1/2005                  375,671.21                78,712.30                 454,383.51
   8              3/1/2005                  338,913.29               115,470.22                 454,383.51
   9              4/1/2005                  374,571.45                79,812.06                 454,383.51
  10              5/1/2005                  362,051.07                92,332.44                 454,383.51
  11              6/1/2005                  373,596.51                80,787.00                 454,383.51
  12              7/1/2005                  361,102.23                93,281.28                 454,383.51
  13              8/1/2005                  372,610.67                81,772.84                 454,383.51
  14              9/1/2005                  372,147.55                82,235.96                 454,383.51
  15              10/1/2005                 359,692.06                94,691.45                 454,383.51
  16              11/1/2005                 371,145.51                83,238.00                 454,383.51
  17              12/1/2005                 358,716.86                95,666.65                 454,383.51
  18              1/1/2006                  370,132.28                84,251.23                 454,383.51
  19              2/1/2006                  369,655.12                84,728.39                 454,383.51
  20              3/1/2006                  333,448.62               120,934.89                 454,383.51
  21              4/1/2006                  368,490.34                85,893.17                 454,383.51
  22              5/1/2006                  356,132.79                98,250.72                 454,383.51
  23              6/1/2006                  367,447.44                86,936.07                 454,383.51
  24              7/1/2006                  355,117.81                99,265.70                 454,383.51
  25              8/1/2006                  366,392.88                87,990.63                 454,383.51
  26              9/1/2006                  365,894.54                88,488.97                 454,383.51
  27              10/1/2006                 353,606.50               100,777.01                 454,383.51
  28              11/1/2006                 364,822.63                89,560.88                 454,383.51
  29              12/1/2006                 352,563.29               101,820.22                 454,383.51
  30              1/1/2007                  363,738.74                90,644.77                 454,383.51
  31              2/1/2007                  363,225.37                91,158.14                 454,383.51
  32              3/1/2007                  327,608.21               126,775.30                 454,383.51
  33              4/1/2007                  361,991.10                92,392.41                 454,383.51
  34              5/1/2007                  349,807.58               104,575.93                 454,383.51
  35              6/1/2007                  360,875.56                93,507.95                 454,383.51
  36              7/1/2007                  348,721.91               105,661.60                 454,383.51
  37              8/1/2007                  359,747.56                94,635.95                 454,383.51
  38              9/1/2007                  359,211.58                95,171.93                 454,383.51
  39              10/1/2007                 347,102.49               107,281.02                 454,383.51
  40              11/1/2007                 358,064.99                96,318.52                 454,383.51
  41              12/1/2007                 345,986.60               108,396.91                 454,383.51
  42              1/1/2008                  356,905.57                97,477.94                 454,383.51
  43              2/1/2008                  356,353.51                98,030.00                 454,383.51
  44              3/1/2008                  332,843.58               121,539.93                 454,383.51
  45              4/1/2008                  355,109.97                99,273.54                 454,383.51
  46              5/1/2008                  343,110.70               111,272.81                 454,383.51
  47              6/1/2008                  353,917.53               100,465.98                 454,383.51
  48              7/1/2008                  341,950.20               112,433.31                 454,383.51
  49              8/1/2008                  352,711.77               101,671.74                 454,383.51
  50              9/1/2008                  352,135.95               102,247.56                 454,383.51
  51              10/1/2008                 340,216.32               114,167.19                 454,383.51
  52              11/1/2008                 350,910.28               103,473.23                 454,383.51


                                  Schedule 2.4

Loan Agreement (FX #3)



                                                                                    
  53              12/1/2008                 339,023.47               115,360.04                 454,383.51
  54              1/1/2009                  349,670.91               104,712.60                 454,383.51
  55              2/1/2009                  349,077.87               105,305.64                 454,383.51
  56              3/1/2009                  314,757.45               139,626.06                 454,383.51
  57              4/1/2009                  347,690.69               106,692.82                 454,383.51
  58              5/1/2009                  335,890.09               118,493.42                 454,383.51
  59              6/1/2009                  346,415.34               107,968.17                 454,383.51
  60              7/1/2009                  334,648.90            61,058,031.88              61,392,680.78



                                  Schedule 2.4

Loan Agreement (FX #3)



                                SCHEDULE 2.12(G)

                         CROSSED LOANS/CROSSED BORROWERS

            1.    Pool 1 Loan: A Loan in the amount of $63,801,000 ("Pool 1
Loan"), which Pool 1 Loan is evidenced by a Promissory Note, dated as of the
date hereof ("Note 1"), made by the Pool 1 Borrowers to Lender and is further
evidenced and secured by a Loan and Security Agreement, dated as of the date
hereof ("Loan Agreement 1"), between Impac Hotels I, L.L.C., Lodgian Denver LLC,
Macon Hotel Associates, L.L.C., Servico Northwoods, Inc. and Lodgian Hotels
Fixed I, LLC (collectively, the "Pool 1 Borrowers") and Lender;

            2.    Pool 2 Loan: A Loan in the amount of $67,864,000 ("Pool 2
Loan"), which Pool 2 Loan is evidenced by a Promissory Note, dated as of the
date hereof ("Note 2"), made by the Pool 2 Borrowers to Lender and is further
evidenced and secured by a Loan and Security Agreement, dated as of the date
hereof ("Loan Agreement 2"), between Albany Hotels, Inc., AMI Operating
Partners, L.P., Apico Inns of GreenTree, Inc., Dedham Lodging Associates I,
Limited Partnership, Lodgian Hotels Fixed II, Inc., Lodgian Augusta LLC, Lodgian
Lafayette LLC and Lodgian Tulsa LLC (collectively, the "Pool 2 Borrowers") and
Lender; and

            3.    Pool 4 Loan: A Loan in the amount of $61,516,500 ("Pool 4
Loan") which Pool 4 Loan is evidenced by a Promissory Note, dated as of the date
hereof ("Note 4"), made by the Pool 4 Borrowers to Lender and is further
evidenced and secured by a Loan and Security Agreement, dated as of the date
hereof ("Loan Agreement 4"), between Lodgian Hotels Fixed IV, L.P., Little Rock
Lodging Associates I, Limited Partnership, Lodgian Fairmont LLC, NH Motel
Enterprises, Inc., Servico Columbia, Inc. and Servico Houston, Inc.
(collectively, the "Pool 4 Borrowers") and Lender.

            "Crossed Loans" shall mean, collectively, the Pool 1 Loan, the Pool
2 Loan and Pool 4 Loan.

            "Crossed Borrowers" shall mean, collectively, the Pool 1 Borrowers,
the Pool 2 Borrowers and the Pool 4 Borrowers.

                                Schedule 2.12(G)

Loan Agreement (FX #3)



                                 SCHEDULE 3.1(A)

                             LIST OF LOAN DOCUMENTS

1.    Loan and Security Agreement

2.    Note

3.    Mortgages

4.    Assignments of Leases

5.    Assignments of Agreements, Licenses, Permits and Contracts

6.    Assignments of Hotel Management Agreements

7.    Guaranty of Recourse Obligations

8.    Environmental Indemnity

9.    Deposit Account Agreements

10.   Financing Statements

11.   Cash Management Agreement

12.   Borrower's Closing Certificate under Section 3.1(D)

13.   Closing Certificate of Lodgian, Inc.

14.   Cooperation Agreement

15.   Agreement Regarding Right of First Offer

16.   Subordination and Standstill Agreement

17.   Contribution Agreement

18.   Cross-Guaranty

19.   Post Closing Agreement

                                 Schedule 3.1(A)
Loan Agreement (FX #3)



                                 SCHEDULE 4.1(C)

                    ORGANIZATIONAL CHART FOR BORROWER PARTIES

                                 Schedule 4.1(C)

Loan Agreement (FX #3)



                                  SCHEDULE 4.2

                                    CONSENTS

                                      None.

                                  Schedule 4.2

Loan Agreement (FX #3)



                                  SCHEDULE 4.5

                            CONDEMNATION PROCEEDINGS

                                      None

                                  Schedule 4.5

Loan Agreement (FX #3)



                                 SCHEDULE 4.5(A)

                    RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER



                                                           DATE OF AGREEMENT OR                 RIGHT OF FIRST REFUSAL
                                                           AMENDMENT GRANTING                    SECTION OF AGREEMENT
      FRANCHISOR               LOCATION                    RIGHT OF FIRST REFUSAL                     OR AMENDMENT
      ----------               --------                    ----------------------                     ------------
                                                                                       
Courtyard by Marriott    1001 McClain Road                 12/23/98 (Amendment)                 Section A.; page 2
Bentonville, AR          Bentonville, AK 72712

Courtyard by Marriott    46 Cavalier Boulevard             12/23/98 (Amendment)                 Section A.; page 2
Florence, KY             Florence, KY 41042

Holiday Inn - Inner      301 West Lombard Street           5/28/1998                            Section 14.G.; page 25
Harbor                   Baltimore, MD 21201
Baltimore, MD

Holiday Inn              6323 Ritchie Highway              5/28/1998                            Section 14.G.; page 25
Glen Burnie, MD          Glen Burnie, MD 21061

Holiday Inn Cromwell     1100 Cromwell Bridge Road         5/28/1998                            Section 14.G.; page 24
Bridge Road              Baltimore, MD 21204
Baltimore, MD

Fairfield Inn            4 Amherst                         12/23/98 (Amendment)                 Section A.; page 2
Merrimack, NH            Merrimack, NH 03054


                                 Schedule 4.5(A)

Loan Agreement (FX #3)



                                 SCHEDULE 4.7(B)

                                    RENT ROLL



                                                                                                                    BASE RENT AND
                         TYPE OF                                        AREA                          SECURITY  PERCENTAGE RENT, IF
STATE   PROPERTY       AGREEMENT          LANDLORD       TENANT        (SF)           TERM            DEPOSIT           ANY
- -----   --------       ---------          --------       ------        ----           ----            -------           ---
                                                                                        
MD     Holiday Inn   Parking License   Lodgian AMI,   PMS Parking,   193      Commencing              N/A       $12,000 per month
       - Inner       Agreement         Inc.           Inc.           parking  May 1, 2000, expiring
       Harbor,                                                       spaces   April 30, 2010
       Baltimore


                                 Schedule 4.7(B)

Loan Agreement (FX #3)



                                 SCHEDULE 4.7(E)

                               FRANCHISE DEFAULTS

                                      None.

                                 Schedule 4.7(E)

Loan Agreement (FX #3)



                                  SCHEDULE 4.9

                                   LITIGATION

                                      None.

                                  Schedule 4.9

Loan Agreement (FX #3)



                                  SCHEDULE 4.14

                                   ERISA PLANS

1.    Lodgian, Inc. 401(k) Plan.

2.    Lodgian, Inc. Employee Health & Welfare Plan.

3.    Multiemployer Plans covering employees of the following unions:

      Hotel Employees & Restaurant Employees Local 17 (St. Paul, MN) (pension,
      welfare)

                                  Schedule 4.14

Loan Agreement (FX #3)



                                  SCHEDULE 4.20

                                    INSURANCE

                                  Schedule 4.20

Loan Agreement (FX #3)



                                  SCHEDULE 4.28

                        COLLECTIVE BARGAINING AGREEMENTS



           HOTEL                        BORROWER                                  UNION                         DATE OF AGREEMENT
           -----                        --------                                  -----                         -----------------
                                                                                                       
Holiday Inn - St. Paul, MN         Minneapolis Motel            Hotel Employees and Restaurant Employees,            10/1/01
                                   Enterprises, Inc.                            Local 17


                                  Schedule 4.28

Loan Agreement (FX #3)



                                  SCHEDULE 4.29

                         CONDOMINIUM PROPERTY DOCUMENTS

                  1. Declaration for West Palm Beach Condominium, dated as of
August 15, 2003, by Servico Centre Associates, Ltd.

                  2. Survey of Condominium and Certification of Surveyor, dated
August 19, 2003.

                  4. By-Laws of Condominium Association, dated August 15, 2003.

                  5. Certificate of Good Standing for Servico Centre Condominium
Association, Inc., dated April 28, 2003.

                  6. Articles of Incorporation for Servico Centre Condominium
Association, Inc., dated as of March 14, 2003.

                                  Schedule 4.29

Loan Agreement (FX #3)



                                  SCHEDULE 4.30

                                  GROUND LEASES

1.    LODGIAN AMI, INC.
      HOLIDAY INN, LOCATED AT 301 WEST LOMBARD STREET, BALTIMORE, MD

      Lease between Kalliope Pappas, Helen P. Thomas and Basil A. Thomas,
      husband & wife, George H. Pappas & Louisa N. Pappas, husband & wife,
      Alexander H. Pappas & Chrysanthe A. Pappas, husband & wife, and Harry P.
      Pappas and Anna Pappas, husband & wife, as lessor, and Coliseum Motor
      Inns, Inc., as lessee, dated December 31, 1962 and recorded among the Land
      Records of Baltimore City in Liber JFC No. 1447, Folio 1, as affected by
      that certain unrecorded Memorandum of Amendment to Lease, dated February
      11, 1963, between Kalliope Pappas, widow, Helen P. Thomas and Basil A.
      Thomas, her husband, George H. Pappas and Louisa N. Pappas, his wife,
      Alexander H. Pappas and Chrysanthe A. Pappas, his wife, Harry P. Pappas
      and Anna Pappas, his wife, collectively, as lessor, Coliseum Motor Inns,
      Inc., as lessee, and Motels of Maryland, Inc., as guarantor, as further
      affected by that certain Agreement of Modification and Extension, dated
      September 10, 1964, between Harry G. Pappas & Sons, a Maryland general
      partnership, by its general partners, Basil A. Thomas, George H. Pappas,
      Alexander H. Pappas, Harry P. Pappas, Helen P. Thomas, Louisa N. Pappas,
      Chrysanthe A. Pappas, Anna Z. Pappas, Kalliope H. Pappas, as lessor, and
      Coliseum Motor Inns, Inc., as lessee, and Motels of Maryland, Inc. and
      American Motor Inns, Inc., as guarantors, recorded in the Land Records of
      Baltimore City, in Liber 1757, Page 403, as amended by that certain
      Amendment to Lease, dated January 26, 1966, between Basil A. Thomas,
      Kalliope Pappas, Helen P. Thomas, Louisa Pappas, Chrysanthe Pappas, Anna
      Pappas, George H. Pappas, Alexander A. Pappas, Harry P. Pappas, as lessor,
      and Coliseum Motor Inns, Inc., as lessee, recorded among the Land Records
      of Baltimore City in Liber JFC No. 2069, Folio 524, as further amended by
      that certain unrecorded Amendment to Lease Agreement dated March 15, 1985,
      between Basil A. Thomas, Steven A. Thomas, George H. Pappas, Louisa
      Pappas, Alexander Pappas, Chrysanthe Pappas, Harry P. Pappas, Anna Pappas
      and Coliseum Motors Inns, Inc., et al, as further affected by that certain
      unrecorded Notice of Intent to Extend Contract, dated May 9, 1985, as
      further amended by that certain Lease Agreement between said parties
      December 20, 1986 and recorded in Liber SEB No. 1117, Folio 50 and that
      certain Addendum to Amendment of Lease between said parties dated December
      20, 1986 and recorded among the aforesaid Land Records in Liber 1117,
      Folio 62, as assigned by that certain Assignment of Lease and
      Indemnification Agreement, dated December 23, 1986, between Coliseum Motor
      Inns, Inc., as assignor, and AMI Operating Partners, L.P., as assignee,
      recorded among the Land Records of Baltimore City in Liber SEB No. 1117,
      Folio 069, as further amended by that certain unrecorded Amendment to
      Lease dated December 31, 1997, by AMI Operating Partners, L.P. in favor of
      Harry G. Pappas & Sons, LLC, as further assigned by that certain
      Assignment and Assumption of Lessee's Interest in Ground Lease, dated
      December 8, 1998, between AMI Operating Partners, L.P. and Lodgian AMI,
      Inc., recorded among the Land Records of Baltimore City in Liber FMC 8033,
      Folio 295 (providing constructive notice of all unrecorded documents

                                  Schedule 4.30

Loan Agreement (FX #3)



      noted above), as further affected by that certain unrecorded Notice of
      Extension to the Lease, dated November 8, 2002.

2.    LODGIAN AMI, INC.
      HOLIDAY INN, LOCATED AT 6323 GOVERNOR RITCHIE HWY., GLEN BURNIE, MD

      Unrecorded Lease Agreement, dated May 10, 1968, between David H. Greenberg
      and Janice C. Greenberg and A.O. Krisch, Joel Krisch and Rosalie K.
      Shaftman, as assigned by that certain unrecorded Assignment of Lease,
      dated January 18, 1971, from A.O. Krisch, Joel Krisch and Rosalie K.
      Shaftman to American Motor Inns, Inc., as further assigned by that certain
      unrecorded Assignment of Lease, dated January 18, 1971, from American
      Motors Inns, Inc. to Connecticut Motor Inns, Inc., as amended by that
      certain Amendment to Lease, dated February 24, 1971, from David H.
      Greenberg and Janice C. Greenberg, his wife, as lessors, to Connecticut
      Motor Ins, Inc. et al, as lessees, recorded among the Land Records of Anne
      Arundel County in Liber 2395, Folio 270, as further amended by that
      certain unrecorded Second Amendment to Lease, dated August 22, 1975,
      between David H. Greenberg and Janice C. Greenberg, as lessors, and
      Connecticut Motor Inns, Inc., as lessee, and American Motor Inns, Inc., as
      further amended by that certain Amendment to Lease Agreement, dated
      December 20, 1986, between General Motor Inns, Inc. and Connecticut Motor
      Inns, Inc. and American Motor Inns, Inc., recorded among the Land Records
      of Anne Arundel County, Maryland in Liber 4223, Folio 137, as further
      assigned by that certain Assignment of Lease and Indemnification
      Agreement, dated December 23, 1986, between Connecticut Motor Inns, Inc.
      and AMI Operating Partners, L.P., recorded among the Land Records of Anne
      Arundel County, Maryland in Liber 4223, Folio 145, as further assigned by
      that certain Assignment and Assumption of Lessee's Interest in Ground
      Lease, dated December 8, 1998, between AMI Operating Partners, L.P. and
      Lodgian AMI, Inc., recorded among the Land Records of Anne Arundel County,
      Maryland in Liber 8904, Folio 94 (providing constructive notice of all
      unrecorded documents noted above).

                                  Schedule 4.30

Loan Agreement (FX #3)



                                  SCHEDULE 5.14

                               MATERIAL AGREEMENTS

Agreement between PFG Broadline and Lodgian, Inc. dated July 2, 2003.

                                  Schedule 5.14

Loan Agreement (FX #3)



                                  SCHEDULE 6.5

                          REQUIRED CAPITAL IMPROVEMENTS

                                  Schedule 6.6

Loan Agreement (FX #3)



                                  SCHEDULE 6.6

                          ENVIRONMENTAL WORK/O&M PLANS



         LODGIAN  LOCATION
ML CODE    CODE     CODE     PROPERTY NAME            ADDRESS               CITY       STATE
- ------   -------  -------- -------------------   --------------------    -----------   -----
                                                                     
FIXED RATE LOAN #3
   19       har     1765   Holiday Inn -         301 W. Lombard St.      Baltimore       MD
                           Baltimore
    8       wpb     1108   Crowne Plaza - West   1601 Belvedere Rd.      West Palm       FL
                           Palm Beach                                    Beach
   20       gln     1770   Holiday Inn - Glen    6323 Ritchie Highway    Glen Burnie     MD
                           Burnie
    5       ben      505   Courtyard by          1001 McClain Rd.        Bentonville     AR
                           Marriott -
                           Bentonville
   23       crb     1780   Holiday Inn - Towson  1100 Cromwell Bridge    Towson          MD
                                                 Rd.
   25       stp     1910   Holiday Inn - St.     1201 West Country Rd. E St. Paul        MN
                           Paul


   45       myr     4040   Holiday Inn SunSpree  1601 N. Ocean Blvd.     Surfside        SC
                           - Surfside Beach                              Beach
   55       mmk     2828   Marriott Fairfield    4 Amherst Road          Merrimack       NH
                           Inn  - Merrimack
   27       flo     2035   Courtyard by          46 Cavalier Blvd.       Florence        KY
                           MARRIOTT - FLORENCE


         LODGIAN  LOCATION                                                        REMEDIATION       REQUIRED
ML CODE    CODE     CODE                  REQUIRED ENVIRONMENTAL WORK               COSTS       COMPLETION DATE
- ------   -------  --------                ---------------------------            -----------    ---------------
                                                                                   
FIXED RATE LOAN #3
   19       har     1765   None                                                       $  0      Not Applicable

    8       wpb     1108   None                                                       $  0      Not Applicable

   20       gln     1770   None                                                       $  0      Not Applicable

    5       ben      505   None                                                       $  0      Not Applicable


   23       crb     1780   None                                                       $  0      Not Applicable

   25       stp     1910                                                              $495     September 30, 2004
                                                                                              (Except O&M Program
                                                                                             should be in place by
                                                                                                July 31, 2004)
   45       myr     4040   (1) Develop and implement an asbestos Operations and       $495      July 31, 2004
                           Maintenance Program ($495).
   55       mmk     2828   None                                                       $  0      Not Applicable

   27       flo     2035   None                                                       $  0      Not Applicable


                                  Schedule 6.6

Loan Agreement (FX #3)



                                  Schedule 6.7

                           RESERVE FUNDING CONDITIONS

            1.    The Borrowers shall have submitted to Lender a written request
for disbursement at least five (5) days prior to the date on which the Borrowers
request such disbursement be made, specifying the specific Work or for which the
disbursement is requested and such other information (such as the price of
materials and the cost of contracted labor or other services) as Lender may
reasonably require, which request must be on a form specified or approved by
Lender;

            2.    On the date such request is received by Lender and on the date
such payment is to be made, no Event of Default shall exist and remain uncured;

            3.    Lender shall have received a certificate from the Borrowers
stating that all Work at the Property to be funded by the requested disbursement
have been completed in a good and workmanlike manner and in accordance with any
plans and specifications approved by Lender and all legal requirements of any
Governmental Authority having jurisdiction over the Property, such certificate
to be accompanied, in either case, by a copy of any license, permit or other
approval by any Governmental Authority required to commence (only for the first
advance with respect to each distinct item of work) and/or complete (only for
the final advance with respect to each distinct item of work) such Work;

            4.    Lender shall have received a certificate from the Borrowers
stating that each Person that supplied materials or labor in connection with the
Work to be funded by the requested disbursement has been paid in full or will be
paid in full upon such disbursement, such certificate to be accompanied by
copies of invoices for all items or materials purchased and all contracted labor
or services provided, and, with respect to Work relating to mold, a certificate
of a Certified Industrial Hygienist that the such Work has been completed in
conformity with applicable mold clean-up procedures promulgated by the
applicable Governmental Authority within the state in which the applicable
Property is located, or, if no such procedures exist, in conformity with the New
York City Department of Health or the United States Environmental Protection
guidelines for mold related clean-up work;

            5.    Lender shall have received appropriate lien waivers (including
final lien waivers) from each contractor, supplier, materialman, mechanic or
subcontractor who receives payment in an amount equal to or greater than $10,000
for completion of its work or delivery of its materials, which lien waivers
shall conform to the requirements of applicable law and shall cover all work
performed and materials supplied (including equipment and fixtures) for a
Property by that contractor, supplier, subcontractor, mechanic or materialman
through the date covered by the current disbursement request; and

            6.    At Lender's option, Lender shall have received a title search
for the Property effective to the date of the disbursement, which search shows
that no mechanic's or materialmen's liens or other Liens of any nature have been
placed against the Property since the date of recordation of the applicable
Mortgage and that title to the Property is free and clear of all Liens (other
than the Permitted Encumbrances).

                                  Schedule 6.7

Loan Agreement (FX #3)

EX-10.4.2

                                                                 EXHIBIT 10.4.2

                              PROMISSORY NOTE

$66,818,500.00                                                    JUNE 25, 2004

      FOR VALUE RECEIVED, the undersigned, each having an address at c/o
Lodgian, 3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 (each, a
"Borrower" and, collectively, the "Borrowers"), jointly and severally, promise
to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware
corporation (together with its successors and assigns, "Lender"), having an
address at Four World Financial Center, New York, New York 10080, or such other
place as Lender may designate in writing, the principal sum of Sixty Six Million
Eight Hundred and Eighteen Thousand Five Hundred and No/100 Dollars
($66,818,500.00), with interest on the unpaid principal balance from the date of
this Note, until paid, at the Interest Rate (as hereinafter defined) in effect
from time to time hereunder. This Promissory Note may be referred to herein as
the "Note," and the loan evidenced hereby may be referred to herein as the
"Loan."

      PAYMENTS OF PRINCIPAL AND INTEREST. The Borrowers shall make a payment on
the date hereof to Lender of interest only on the outstanding principal balance
of this Note at the Interest Rate (hereinafter defined), from the date hereof
through and including the last day of the calendar month in which this Note is
executed. Commencing on August 1, 2004 (the "First Payment Date") and on the
first day of each calendar month (each, a "Payment Date") thereafter to and
including the Maturity Date (hereinafter defined), the Borrowers shall make
payments to Lender of interest and principal in monthly installments in the
amounts set forth on Schedule 1 attached hereto and made a part hereof (the
"Monthly Debt Service Payment Amounts"). The entire outstanding principal
balance of the Loan, all accrued and unpaid interest thereon and all other
amounts due hereunder and under the other Loan Documents (collectively the
"Debt") if not sooner paid, shall be due and payable on July 1, 2009 (the
"Maturity Date").

      Interest on the principal sum of this Note shall be calculated on the
basis of a 360 day year, and shall be charged for the actual number of days
elapsed during any month or other accrual period. Interest on this Note shall be
payable in arrears.

      DEFINITIONS. The term "Interest Rate" as used in this Note shall have the
meaning set forth in Section 2.2 of the Loan Agreement (hereinafter defined).

      SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered
pursuant to that certain Loan and Security Agreement, dated as of the date
hereof (the "Loan Agreement"), among the Borrowers and Lender and is secured by,
among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt,
Assignments of Leases and Rents and Security Agreements, each dated as of the
date hereof (collectively, the "Mortgages"), each executed by the applicable
Borrower, encumbering the fee interests or ground lessee's interests of such
Borrower, as applicable, in and to certain properties more particularly
described therein (collectively, the "Properties"). This Note, the Loan
Agreement, the Mortgages, and all other documents or instruments given by the
Borrowers or any of them or any guarantor and accepted by Lender for purposes of
evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by
this Note may be referred to as the "Loan Documents." Capitalized terms used but




not otherwise defined herein shall have the respective meanings given thereto in
the Loan Agreement.

      DEFEASANCE.

      A.    Notwithstanding anything to the contrary contained in this Note, the
Mortgages or the other Loan Documents, at any time after the earlier to occur of
(x) the second (2nd) anniversary of the date that is the "startup day," within
the meaning of Section 860G of the Internal Revenue Code of 1986, as amended
from time to time or any successor statute (the "Code"), of a "real estate
mortgage investment conduit," within the meaning of Section 860D of the Code,
that holds this Note and (y) forty-eight (48) months after the date of this
Note, the Borrowers shall have the right to defease all or any portion of the
Loan evidenced by this Note with U.S. Government Securities (a "Defeasance");
provided that a partial Defeasance of this Note shall be permitted only in
connection with the release of one or more of the Properties from the lien of
the Mortgages and the other Loan Documents in accordance with Section 11.4 of
the Loan Agreement and upon the satisfaction of the following conditions
precedent (all of which conditions shall become covenants upon occurrence of the
Defeasance):

            (i)   The Borrowers shall provide to Lender not less than thirty
(30) days' prior written notice specifying the date on which the Defeasance
Deposit (hereinafter defined) is to be made (the date so specified may be
referred to as the "Defeasance Election Date").

            (ii)  The Borrowers shall pay to Lender on the Defeasance Election
Date all interest accrued and unpaid on the outstanding principal amount of this
Note due through the Defeasance Election Date, or through the end of the
Interest Accrual Period during which the Defeasance Election Date occurs if the
Defeasance Election Date is other than a Payment Date, and the scheduled
principal amortization payment due on such Defeasance Election Date, or due upon
the next succeeding Payment Date if the Defeasance Election Date is other than a
Payment Date, together with all other amounts, if any, then due and payable
under this Note, the Mortgages and the other Loan Documents.

            (iii) The Borrowers shall irrevocably deposit with Lender an amount
of U.S. Government Securities (hereinafter defined) which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms will provide, not later than the due dates of the payments owing
hereunder, cash in an amount sufficient, without reinvestment, in the opinion of
a firm of independent certified public accountants reasonably acceptable to
Lender expressed in a written certification thereof delivered to Lender (the
"CPA Certificate"), (1) with respect to a total Defeasance, to pay and discharge
the Scheduled Defeasance Payments (hereinafter defined) for the principal
balance of this Note or (2) with respect to a partial Defeasance in connection
with the release of one or more Properties, to pay and discharge the Scheduled
Defeasance Payments relating to the Release Price for such Property or
Properties (the U.S. Government Securities so deposited together with any
interest or other increase from the issuer of the securities earned thereon, and
any replacements thereof, shall be referred to herein as the "Defeasance
Deposit"). All such U.S. Government Securities, if in registered form, shall be
registered in the name of Lender or its nominee (and, if registered in nominee's
name, endorsed to Lender or in blank) and, if issued in book-entry form, the
name of Lender or its

                                       2



nominee shall appear as the owner of such securities on the books of the Federal
Reserve Bank or other party maintaining such book-entry system.

            (iv)  The Borrowers shall cause the following to be delivered to
Lender on or prior to the Defeasance Election Date, all in form and substance
reasonably satisfactory to Lender:

                  (a)   a security agreement, in form and substance reasonably
satisfactory to Lender, creating a first priority lien on the Defeasance Deposit
(the "Defeasance Security Agreement");

                  (b)   the CPA Certificate;

                  (c)   a certificate of the Borrowers certifying that all
requirements for the Defeasance set forth herein have been satisfied;

                  (d)   an opinion of counsel for the Borrowers in form and
substance reasonably satisfactory to Lender to the effect that (i) Lender has a
perfected first priority security interest in the Defeasance Deposit, (ii) the
holder of this Note will not recognize additional income, gain or loss for
United States federal income tax purposes as a result of the Defeasance and will
be subject to United States federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if the Defeasance had
not occurred, (iii) any holder, trustee or custodian of this Note which is a
"real estate mortgage investment conduit" within the meaning of Section 860D of
the Code will not fail to maintain its status as such as a result of the
Defeasance and (iv) the Defeasance Security Agreement is enforceable against the
Borrowers in accordance with its terms;

                  (e)   evidence in writing from the applicable Rating Agencies
for any Securities backed in whole or in part by this Note, to the effect that
the Defeasance will not result in a downgrading, withdrawal, or qualification of
the ratings in effect immediately prior to such Defeasance for any class of such
then outstanding Securities;

                  (f)   evidence reasonably satisfactory to Lender that each of
the Borrowers remains validly existing and in good standing under the laws of
the state where it is organized and, to the extent required by applicable law,
qualified to do business in the state where its respective Property is located;
and the Borrowers shall maintain such existence during the time thereafter when
this Note shall be outstanding (unless a Successor Borrower (hereinafter
defined) assumes the obligations of each of the Borrowers or the Defeasing
Borrower(s) (as hereinafter defined), as the case may be, under this Note); and

                  (g)   a certificate of the Borrowers certifying that all of
the representations, and warranties contained in the Loan Agreement and the
other Loan Documents are true and correct in all material respects as of the
Defeasance Election Date and ratifying all of the covenants and obligations of
the Borrowers under the Loan Documents as of such date and such other
certificates, documents or instruments as Lender may reasonably request or as
may be required by the Rating Agencies referred to above, provided that such
certificates, documents or instruments shall not increase the Borrowers'
obligations or decrease the Borrowers' rights under the Loan Documents.

                                       3



            (v)   Either (1) each of the Borrowers in the case of a total
Defeasance, or the Defeasing Borrower(s) in the case of a partial Defeasance
shall deliver to Lender a certificate stating that at all times following the
Defeasance, the Borrowers or the Defeasing Borrower(s), as the case may be,
shall have no interest in any assets other than the Defeasance Deposit, or (2)
such Borrower(s) shall satisfy all of the requirements of Section C below.

            (vi)  The Borrowers shall pay to Lender all reasonable out-of-pocket
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements) incurred by Lender in connection with the Defeasance.

            (vii) In the event only a portion of the Loan evidenced by this Note
is the subject of the Defeasance in connection with the release of any Lien of
any applicable Mortgage on one or more individual Properties under Section 11.4
of the Loan Agreement, the Borrowers shall execute and deliver all necessary
documents to amend and restate this Note and issue two substitute promissory
notes therefor: one note having a principal balance equal to the defeased
portion of the original Note (the "Defeased Note") and one note having a
principal balance equal to the undefeased portion of the original Note (the
"Undefeased Note"). The Defeased Note and the Undefeased Note shall have
identical terms as the original Note (and the Defeased Note and the Undefeased
Note or Notes shall be cross-defaulted with each other), except for the
principal balance. A Defeased Note cannot be the subject of any further
Defeasance. An Undefeased Note may be the subject of a further Defeasance in
accordance with the terms of this Note and the Loan Agreement (the term "Note",
as used above in this clause (vii) for these purposes, being deemed to refer to
the Undefeased Note that is the subject of further defeasance); provided,
however, that no such partial Defeasance shall take place unless the conditions
hereof and the conditions of Section 11.4 of the Loan Agreement are satisfied.

      B.    Upon compliance with the requirements of Section A above and
compliance with the requirements of Section 11.4 of the Loan Agreement, Lender
shall cause each of the Properties, in the case of a total Defeasance, or each
Defeased Property (as hereinafter defined), in the case of a partial Defeasance,
to be released from the lien of the applicable Mortgages and the other
applicable Loan Documents. The obligations under the Loan Documents with respect
to the Properties or each Defeased Property, as the case may be, shall no longer
be applicable, and the Defeasance Deposit shall be the sole source of collateral
securing this Note or the Defeased Note, as the case may be. Lender shall apply
the Defeasance Deposit and the payments received therefrom to the payment of all
scheduled principal and interest payments due on all successive Payment Dates
under this Note or the Defeased Note, as the case may be, after the Defeasance
Election Date to and including the Maturity Date and to payment of the entire
remaining Debt or the entire remaining principal balance, accrued and unpaid
interest and other sums due under the Defeased Note, as the case may be, on the
Maturity Date (collectively, the "Scheduled Defeasance Payments"). The
Borrowers, pursuant to the Defeasance Security Agreement or other appropriate
document, shall direct that the payments received from the Defeasance Deposit
shall be made directly to Lender and applied to satisfy the obligations of the
Borrowers under this Note or the Defeased Note, as the case may be.

      C.    If, after the Defeasance, the Borrowers, in the case of a total
Defeasance, or the Defeasing Borrower(s), in the case of a partial Defeasance,
will own any assets other than the Defeasance Deposit, the Borrowers or the
Defeasing Borrower(s), as the case may be, shall

                                       4


establish or designate a single-purpose, bankruptcy-remote successor entity
acceptable to Lender (the "Successor Borrower"), with respect to which a
nonconsolidation opinion reasonably satisfactory in form and substance to Lender
and any applicable Rating Agencies shall be delivered to Lender and such Rating
Agencies, in which case the Borrowers or the Defeasing Borrower(s), as the case
may be, shall transfer and assign to the Successor Borrower all of their
respective obligations, rights and duties under this Note or the Defeased Note,
as the case may be, and the Defeasance Security Agreement, together with the
pledged Defeasance Deposit. The Successor Borrower shall assume the obligations
of the Borrowers or the Defeasing Borrower(s), as the case may be, under this
Note or the Defeased Note, as the case may be, and the Defeasance Security
Agreement, and such Borrower(s) shall be relieved and released of their
respective obligations hereunder and thereunder. Each of the Borrowers or the
applicable Defeasing Borrower(s), as the case may be, shall pay not less than
$1,000 to the Successor Borrower as consideration for assuming such Borrower's
obligations.

      D.    As used herein, the following terms shall have the following
meanings:

            (i)   "Defeased Property" shall mean any Property being released
from the lien of the Mortgage relating to such Property pursuant to a partial
Defeasance in accordance with the provisions of this Note and Section 11.4 of
the Loan Agreement.

            (ii)  "U.S. Government Securities" shall mean securities that are
(i) direct obligations of the United States of America for the full and timely
payment of which its full faith and credit is pledged or (ii) obligations of an
entity controlled or supervised by and acting as an agency or instrumentality
and guaranteed as a full faith and credit obligation which shall be fully and
timely paid by the United States of America, which in either case are not
callable or redeemable at the option of the issuer thereof (including a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the United
States Securities Act)) as custodian with respect to any such U.S. Government
Securities or a specific payment of principal of or interest on any such U.S.
Government Securities held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the securities or the specific payment of principal of or interest on
the securities evidenced by such depository receipt.

            (iii) "Defeasing Borrower" shall mean the Borrower owning or
leasing, as the case may be, a Defeased Property.

            (iv)  "Release Price" shall have the meaning set forth in the Loan
Agreement.

      E.    If, after payment in full of all obligations evidenced by this Note
or any other of the Loan Documents, any of the Defeasance Deposit remains, such
remaining balance of the Defeasance Deposit shall be returned to the Borrowers
(or to the Successor Borrower, as the case may be) or Lender shall assign to the
Borrowers (or the Successor Borrower, as the case may be) all of Lender's right,
title, and interest in the Government Securities constituting the Defeasance
Deposit.

                                       5


      PREPAYMENT; PREPAYMENT CONSIDERATION. The Borrowers may not prepay this
Note in whole or in part at any time except as expressly provided in Section 2.6
of the Loan Agreement.

      EVENTS OF DEFAULT; ACCELERATION. Upon and at any time following the
occurrence of any Event of Default, then at the option of Lender and without
notice, the entire principal amount and all interest accrued and outstanding
hereunder and all other amounts outstanding under any of the Loan Documents
shall at once become due and payable, and Lender may exercise any and all of its
rights and remedies under any of the Loan Documents or pursuant to applicable
law. Lender may so accelerate such obligations and exercise such remedies at any
time after the occurrence of any Event of Default, regardless of any prior
forbearance.

      LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to
non-payment of any principal, interest or other sums due under this Note or
under any of the other Loan Documents shall occur, then the Borrowers shall pay
to Lender, in addition to all sums otherwise due and payable, a late fee in an
amount equal to five percent (5.0%) of such principal, interest or other sums
due hereunder or under any other Loan Document (or, in the case of a partial
payment, the unpaid portion thereof), such late charge to be immediately due and
payable without demand by Lender.

      Upon the occurrence and during the continuance of an Event of Default and
in any event from and after the Maturity Date of the Loan, the outstanding
principal balance of this Note shall bear interest until paid in full at a rate
per annum (the "Default Rate") equal to the sum of (i) four percent (4.0%) and
(ii) the Interest Rate otherwise applicable under this Note.

      The Borrowers agree that such late charges and Default Rate of interest
are reasonable and do not constitute a penalty.

      LAWFUL INTEREST. Notwithstanding any provision to the contrary contained
in this Note, the Loan Agreement or the other Loan Documents, the Borrowers
shall not be required to pay, and Lender shall not be permitted to collect, any
amount of interest in excess of the maximum amount of interest permitted by law
("Excess Interest"). If any Excess Interest is provided for or determined by a
court of competent jurisdiction to have been provided for in this Note, the Loan
Agreement or in any of the other Loan Documents, then in such event: (1) the
provisions of this subsection shall govern and control; (2) the Borrowers shall
not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender
may have received hereunder shall be, at Lender's option, (a) applied as a
credit against either or both of the outstanding principal balance of the Loan
or accrued and unpaid interest thereunder (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any combination of
the foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to time under
applicable law (the "Maximum Rate"), and this Note, the Loan Agreement and the
other Loan Documents shall be deemed to have been and shall be, reformed and
modified to reflect such reduction; and (5) the Borrowers shall not have any
action against Lender for any damages arising out of the payment or collection
of any Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligation is calculated at the Maximum Rate rather than the
applicable rate under this Note or the Loan Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate,

                                       6


the rate of interest payable on such Obligations shall, to the extent permitted
by law, remain at the Maximum Rate until Lender shall have received or accrued
the amount of interest which Lender would have received or accrued during such
period on Obligations had the rate of interest not been limited to the Maximum
Rate during such period. If the Default Rate shall be finally determined to be
unlawful, then the applicable Interest Rate shall be applicable during any time
when the Default Rate would have been applicable hereunder, provided however
that if the Maximum Rate is greater or lesser than the applicable Interest Rate,
then the foregoing provisions of this paragraph shall apply.

      CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the
obligation of the Borrowers or their successors or assigns to pay the
outstanding principal balance of this Note, interest thereon and other amounts
due hereunder and to observe the covenants contained herein, in the Loan
Agreement, the Mortgages or in any other Loan Document, without affecting the
guaranty of any person or entity for payment of the outstanding principal
balance of this Note, without giving notice to or obtaining the consent of any
Borrower or its successors or assigns or any guarantors or indemnitor, and
without liability on the part of Lender, Lender may, at its option, extend the
time for payment of the outstanding principal balance of this Note or any part
thereof, reduce the payments thereon, release anyone liable for payment of all
or a portion of said indebtedness, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.

      Presentment, notice of dishonor, and protest are hereby waived by the
Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note
shall be binding upon the Borrowers and their successors and assigns.

      EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE
INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.

      ASSIGNMENT AND TRANSFER OF NOTE. Subject to the provisions of the Loan
Agreement, Lender shall have the right to assign or transfer, in whole or in
part (including the right to grant participation interests in) any or all of its
obligations under this Note, the Loan Agreement, the Mortgages and any or all of
the other Loan Documents. Lender shall be released of any obligations to the
extent that the same are so assigned or transferred, and the rights and
obligations of "Lender" hereunder shall become the rights and obligations of the
transferee holder.

      LIMITATION ON RECOURSE. Lender's rights of recourse for the obligations of
the Borrowers hereunder are limited in accordance with Article XII of the Loan
Agreement. This

                                       7



provision shall not limit any rights of Lender under the Guaranty of Recourse
Obligations or the Environmental Indemnity, each dated as of the date hereof.

      ATTORNEYS' FEES, COSTS OF COLLECTION. The Borrowers shall pay to Lender on
demand all out-of-pocket costs and expenses, including reasonable attorneys'
fees and expenses, incurred by Lender in collecting the indebtedness arising
hereunder or under any other Loan Documents or secured thereby or otherwise
exercising any rights or remedies of Lender hereunder or thereunder or at law or
in equity or enforcing the obligations of any parties hereto or thereto, or as a
consequence of any breach or default by any Borrower or any guarantor hereunder
or thereunder, or otherwise as a consequence of any right evidenced or secured
by this Note or the Loan Documents. Without limitation, such costs and expenses
to be reimbursed by the Borrowers shall include reasonable attorneys' fees and
expenses incurred in any bankruptcy case or proceeding and in any appeal.

      APPLICABLE LAW. This Note shall be governed by and construed in accordance
with the laws of the State of New York and applicable federal law.

      TIME OF ESSENCE. Time shall be of the essence as to all of the terms,
covenants and conditions of this Note. If the due date of any payment due
hereunder or under any of the other Loan Documents shall fall on a day other
than a Business Day, the Borrowers shall be required to make such payment on the
next succeeding Business Day.

      JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of the
Borrowers hereunder shall be joint and several.

                        [NO ADDITIONAL TEXT ON THIS PAGE]

                                       8


      IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as
of the date first written above.



                                  BORROWERS:

                                  LODGIAN AMI, INC.
                                  LODGIAN HOTELS FIXED III, LLC
                                  MINNEAPOLIS MOTEL ENTERPRISES, INC.

                                  By:/s/ Daniel E. Ellis
                                     ------------------------------------------
                                  Name: Daniel E. Ellis
                                  Title: Vice President and Secretary, or
                                         Authorized Signatory for each of the
                                         entities listed above

                                  SERVICO CENTRE ASSOCIATES, LTD.

                                  By: SERVICO PALM BEACH GENERAL
                                      PARTNER SPE, INC., a Delaware corporation,
                                      its general partner

                                  By:/s/ Daniel E. Ellis
                                     ------------------------------------------
                                  Name: Daniel E. Ellis
                                  Title: Vice President and Secretary, or
                                         Authorized Signatory

                                   SCHEDULE 1

                      MONTHLY DEBT SERVICE PAYMENT AMOUNTS



                    SCHEDULED    SCHEDULED        TOTAL
PERIOD    DATE      INTEREST     PRINCIPAL       PAYMENT
- -----------------------------------------------------------
                                  
   1    8/1/2004   378,428.43      75,955.08     454,383.51
   2    9/1/2004   377,998.26      76,385.25     454,383.51
   3    10/1/2004  365,386.11      88,997.40     454,383.51
   4    11/1/2004  377,061.61      77,321.90     454,383.51
   5    12/1/2004  364,474.54      89,908.97     454,383.51
   6    1/1/2005   376,114.49      78,269.02     454,383.51
   7    2/1/2005   375,671.21      78,712.30     454,383.51
   8    3/1/2005   338,913.29     115,470.22     454,383.51
   9    4/1/2005   374,571.45      79,812.06     454,383.51
  10    5/1/2005   362,051.07      92,332.44     454,383.51
  11    6/1/2005   373,596.51      80,787.00     454,383.51
  12    7/1/2005   361,102.23      93,281.28     454,383.51
  13    8/1/2005   372,610.67      81,772.84     454,383.51
  14    9/1/2005   372,147.55      82,235.96     454,383.51
  15    10/1/2005  359,692.06      94,691.45     454,383.51
  16    11/1/2005  371,145.51      83,238.00     454,383.51
  17    12/1/2005  358,716.86      95,666.65     454,383.51
  18    1/1/2006   370,132.28      84,251.23     454,383.51
  19    2/1/2006   369,655.12      84,728.39     454,383.51
  20    3/1/2006   333,448.62     120,934.89     454,383.51
  21    4/1/2006   368,490.34      85,893.17     454,383.51
  22    5/1/2006   356,132.79      98,250.72     454,383.51
  23    6/1/2006   367,447.44      86,936.07     454,383.51
  24    7/1/2006   355,117.81      99,265.70     454,383.51
  25    8/1/2006   366,392.88      87,990.63     454,383.51
  26    9/1/2006   365,894.54      88,488.97     454,383.51
  27    10/1/2006  353,606.50     100,777.01     454,383.51
  28    11/1/2006  364,822.63      89,560.88     454,383.51
  29    12/1/2006  352,563.29     101,820.22     454,383.51
  30    1/1/2007   363,738.74      90,644.77     454,383.51
  31    2/1/2007   363,225.37      91,158.14     454,383.51
  32    3/1/2007   327,608.21     126,775.30     454,383.51
  33    4/1/2007   361,991.10      92,392.41     454,383.51
  34    5/1/2007   349,807.58     104,575.93     454,383.51
  35    6/1/2007   360,875.56      93,507.95     454,383.51
  36    7/1/2007   348,721.91     105,661.60     454,383.51
  37    8/1/2007   359,747.56      94,635.95     454,383.51
  38    9/1/2007   359,211.58      95,171.93     454,383.51
  39    10/1/2007  347,102.49     107,281.02     454,383.51
  40    11/1/2007  358,064.99      96,318.52     454,383.51
  41    12/1/2007  345,986.60     108,396.91     454,383.51
  42    1/1/2008   356,905.57      97,477.94     454,383.51
  43    2/1/2008   356,353.51      98,030.00     454,383.51
  44    3/1/2008   332,843.58     121,539.93     454,383.51
  45    4/1/2008   355,109.97      99,273.54     454,383.51
  46    5/1/2008   343,110.70     111,272.81     454,383.51
  47    6/1/2008   353,917.53     100,465.98     454,383.51
  48    7/1/2008   341,950.20     112,433.31     454,383.51
  49    8/1/2008   352,711.77     101,671.74     454,383.51
  50    9/1/2008   352,135.95     102,247.56     454,383.51
  51    10/1/2008  340,216.32     114,167.19     454,383.51
  52    11/1/2008  350,910.28     103,473.23     454,383.51



                                
  53    12/1/2008  339,023.47     115,360.04     454,383.51
  54    1/1/2009   349,670.91     104,712.60     454,383.51
  55    2/1/2009   349,077.87     105,305.64     454,383.51
  56    3/1/2009   314,757.45     139,626.06     454,383.51
  57    4/1/2009   347,690.69     106,692.82     454,383.51
  58    5/1/2009   335,890.09     118,493.42     454,383.51
  59    6/1/2009   346,415.34     107,968.17     454,383.51
  60    7/1/2009   334,648.90  61,058,031.88  61,392,680.78

  

                                       3

EX-10.4.3

                                                                  EXHIBIT 10.4.3

                        GUARANTY OF RECOURSE OBLIGATIONS

            This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of
June 25, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"),
having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326,
in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080 (together
with its successors, transferees and assigns, "LENDER").

                                R E C I T A L S:

            A. Pursuant to that certain Loan and Security Agreement, dated as of
the date hereof (as the same may be amended, modified, supplemented or restated
from time to time, the "LOAN AGREEMENT"), among the Borrowers named therein
(each, a "BORROWER", and collectively, "BORROWERS"), and Lender, Lender has
agreed to make a loan to Borrowers in the aggregate original principal amount of
up to Sixty Six Million Eight Hundred and Eighteen Thousand Five Hundred and
No/100 Dollars ($66,818,500.00) (the "LOAN"), subject to the terms and
conditions of the Loan Agreement;

            B. As a condition to Lender's making the Loan, Lender is requiring
that Guarantor execute and deliver to Lender this Guaranty; and

            C. Guarantor hereby acknowledges that Guarantor holds a direct
and/or indirect ownership interest in each Borrower and that Guarantor will
materially benefit from Lender's agreeing to make the Loan.

            NOW, THEREFORE, in consideration of the premises set forth herein
and as an inducement for and in consideration of the agreement of Lender to make
the Loan pursuant to the Loan Agreement and the other Loan Documents, Guarantor
hereby agrees, covenants, represents and warrants to Lender as follows:

            SECTION 1. DEFINITIONS. All capitalized terms used and not defined
herein shall have the respective meanings given such terms in the Loan
Agreement.

            SECTION 2. GUARANTY.

            (a) Guarantor (but not its members, partners, employees,
shareholders, agents, directors or officers) hereby irrevocably, absolutely and
unconditionally assumes liability for, guarantees payment to Lender of, and
agrees to pay, protect, defend, indemnify and save harmless Lender from and
against any and all Guaranteed Recourse Obligations of Borrowers (as hereinafter
defined).

The obligations which are the subject of the guaranty referred to in this
Section 2 are hereinafter collectively referred to as the "GUARANTEED
OBLIGATIONS".

Guaranty of Recourse Obligations [FX-3]



            (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF BORROWERS" as used
in this Guaranty shall mean all obligations and liabilities of Borrowers for
which Borrowers shall be personally liable under the provisions of Section 12.2
of the Loan Agreement.

            (c) All sums payable to Lender under this Guaranty shall be payable
on demand and without reduction for any offset, claim, counterclaim or defense.

            SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby
represents and warrants to Lender as follows (which representations and
warranties shall be given as of the date hereof and shall survive the execution
and delivery of this Guaranty):

            (a) DUE EXECUTION. This Guaranty has been duly executed and
delivered by Guarantor.

            (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and
binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally, or application of general principles
of equity in any legal proceeding.

            (c) NO VIOLATION. The execution, delivery and performance by
Guarantor of its obligations under this Guaranty do not violate any law,
regulation, order, writ, injunction or decree of any court or governmental body,
agency or other instrumentality applicable to Guarantor, or result in a breach
of any of the terms, conditions or provisions of, or constitute a default under,
or result in the creation or imposition of any mortgage, lien, charge or
encumbrance of any nature whatsoever upon any of the assets of Guarantor
pursuant to the terms of any mortgage, indenture, agreement or instrument to
which Guarantor is a party or by which it or any of its properties is bound.
Guarantor is not in default under any other guaranty which it has provided to
Lender.

            (d) NO LITIGATION. Except as disclosed on Schedule 4.9 to the Loan
Agreement, there are no actions, suits or proceedings at law or at equity,
pending or, to Guarantor's knowledge, threatened against or affecting Guarantor
or which involve or could reasonably be expected to involve the validity or
enforceability of this Guaranty or which might materially adversely affect the
financial condition of Guarantor or the ability of Guarantor to perform any of
its obligations under this Guaranty. Guarantor is not in default beyond any
applicable grace or cure period with respect to any order, writ, injunction,
decree or demand of any Governmental Authority which might materially adversely
affect the financial condition of Guarantor or the ability of Guarantor to
perform any of its obligations under this Guaranty.

            (e) CONSENTS. All consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, all Governmental Authorities
(collectively, the "CONSENTS") that are required in connection with the valid
execution, delivery and performance by Guarantor of this Guaranty have been
obtained and Guarantor agrees that all Consents required in connection with the
carrying out or performance of any of Guarantor's obligations under this
Guaranty will be obtained when required.

            (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial
statements of Guarantor heretofore delivered to Lender fairly present the
financial condition of Guarantor as of

                                       2

Guaranty of Recourse Obligations [FX-3]


the respective dates thereof, and no materially adverse change has occurred in
the financial conditions reflected therein since the respective dates thereof.
None of the aforesaid financial statements or any certificate or statement
furnished to Lender by or on behalf of Guarantor in connection with the
transactions contemplated hereby, and none of the representations and warranties
in this Guaranty contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein not materially misleading. Guarantor is not insolvent within
the meaning of the Bankruptcy Code or any other applicable law, code or
regulation and the execution, delivery and performance of this Guaranty will not
render Guarantor insolvent.

            SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the
benefit of Lender that Guarantor will deliver to Lender each of the financial
statements required to be delivered pursuant to Section 5.1 of the Loan
Agreement.

            SECTION 5. INTENTIONALLY DELETED.

            SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR.

            (a) The obligations of Guarantor hereunder shall be irrevocable,
absolute and unconditional, irrespective of the validity, regularity or
enforceability, in whole or in part, of the Note, the Loan Agreement, the
Mortgages or the other Loan Documents or any provision thereof, or the absence
of any action to enforce the same, any waiver or consent with respect to any
provision thereof, the recovery of any judgment against any Borrower, Guarantor
or any other Person or any action to enforce the same, any failure or delay in
the enforcement of the obligations of Borrowers under the Note, the Loan
Agreement, the Mortgages or any other Loan Documents or Guarantor under this
Guaranty, or any setoff, counterclaim, and irrespective of any other
circumstances which might otherwise limit recourse against Guarantor by Lender
or constitute a legal or equitable discharge or defense of a guarantor or
surety. Lender may enforce the obligations of Guarantor under this Guaranty by a
proceeding at law, in equity or otherwise, independent of any loan foreclosure
or similar proceeding or any deficiency action against Borrowers or any other
Person at any time, either before or after an action against the Properties or
any of them or any part thereof, Borrowers or any other Person. THIS GUARANTY IS
A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION.
Guarantor waives diligence, notice of acceptance of this Guaranty, filing of
claims with any court, any proceeding to enforce any provision of the Note, the
Loan Agreement, the Mortgages or any other Loan Documents, against Guarantor,
Borrowers or any other Person, any right to require a proceeding first against
Borrowers or any other Person, or to exhaust any security (including, without
limitation, the Properties or any of them or any part thereof) for the
performance of the Guaranteed Obligations or any other obligations of Borrowers
or any other Person, or any protest, presentment, notice of default (except as
may be expressly required under the Loan Documents) or other notice or demand
whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not
be discharged of its obligations hereunder.

            (b) The obligations of Guarantor under this Guaranty, and the rights
of Lender to enforce the same by proceedings, whether by action at law, suit in
equity or otherwise, shall not be in any way affected by any of the following:

                                        3

Guaranty of Recourse Obligations [FX-3]



                  (i) any insolvency, bankruptcy, liquidation, reorganization,
      readjustment, composition, dissolution, receivership, conservatorship,
      winding up or other similar proceeding involving or affecting any
      Borrower, any Property or any part thereof, Guarantor or any other Person;

                  (ii) any failure by Lender or any other Person, whether or not
      without fault on its part, to perform or comply with any of the terms of
      the Loan Agreement, or any other Loan Documents, or any document or
      instrument relating thereto;

                  (iii) except (A) with respect to activities occurring after
      the date of a Permitted Assumption or, (B) activities relating to a
      Released Property after the date of a Release with respect thereto, the
      sale, transfer or conveyance of any Property or any interest therein to
      any Person, whether now or hereafter having or acquiring an interest in
      any Property or any interest therein and whether or not pursuant to any
      foreclosure, trustee sale or similar proceeding against any Borrower or
      any Property or any interest therein;

                  (iv) the conveyance to Lender, any Affiliate of Lender or
      Lender's nominee of any Property or any interest therein by a deed-in-lieu
      of foreclosure;

                  (v) the release of any Borrower or any other Person from the
      performance or observance of any of the agreements, covenants, terms or
      conditions contained in any of the Loan Documents by operation of law or
      otherwise;

                  (vi) the release in whole or in part of any collateral for any
      or all Guaranteed Obligations or for the Loan or any portion thereof; or

                  (vii) the exercise by Mezzanine Lender of any remedies made
      available to Mezzanine Lender pursuant to the terms of the Mezzanine Loan
      Documents, including, without limitation, foreclosure or similar remedies
      under any pledge agreement encumbering Mezzanine Borrower's interest in
      any General Partner, any Member, and/or any Borrower except with respect
      to actions taken by the Mezzanine Lender following the Mezzanine Lender
      succeeding to the interests of the Mezzanine Borrowers in and to the
      Borrowers.

            (c) Except as otherwise specifically provided in this Guaranty,
Guarantor hereby expressly and irrevocably waives all defenses in an action
brought by Lender to enforce this Guaranty based on claims of waiver, release,
surrender, alteration or compromise and all setoffs, reductions, or impairments,
whether arising hereunder or otherwise.

            (d) Lender may deal with Borrowers and Affiliates of Borrowers in
the same manner and as freely as if this Guaranty did not exist and shall be
entitled, among other things, to grant Borrowers or any other Person such
extension or extensions of time to perform any act or acts as may be deemed
advisable by Lender, at any time and from time to time, without terminating,
affecting or impairing the validity of this Guaranty or the obligations of
Guarantor hereunder.

            (e) No compromise, alteration, amendment, modification, extension,
renewal, release or other change of, or waiver, consent, delay, omission,
failure to act or other action with

                                      4

Guaranty of Recourse Obligations [FX-3]


\
respect to, any liability or obligation under or with respect to, or of any of
the terms, covenants or conditions of, the Note, the Loan Agreement, the
Mortgages or the other Loan Documents or any amendment, modification or other
change of any legal requirement shall in any way alter, impair or affect any of
the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan
Documents are modified with Lender's consent, the Guaranteed Obligations shall
automatically be deemed modified to include such modifications.

            (f) Lender may proceed to protect and enforce any or all of its
rights under this Guaranty by suit in equity or action at law, whether for the
specific performance of any covenants or agreements contained in this Guaranty
or otherwise, or to take any action authorized or permitted under applicable
law, and shall be entitled to require and enforce the performance of all acts
and things required to be performed hereunder by Guarantor. Each and every
remedy of Lender shall, to the extent permitted by law, be cumulative and shall
be in addition to any other remedy given hereunder or now or hereafter existing
at law or in equity.

            (g) No waiver shall be deemed to have been made by Lender of any
rights hereunder unless the same shall be in writing and signed by Lender, and
any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of Lender or the obligations of
Guarantor to Lender in any other respect or at any other time.

            (h) At the option of Lender, Guarantor may be joined in any action
or proceeding commenced by Lender against Borrowers in connection with or based
upon the Note, the Loan Agreement, the Mortgages or any other Loan Documents and
recovery may be had against Guarantor in such action or proceeding or in any
independent action or proceeding against Guarantor to the extent of Guarantor's
liability hereunder, without any requirement that Lender first assert, prosecute
or exhaust any remedy or claim against Borrowers or any other Person, or any
security for the obligations of Borrowers or any other Person.

            (i) Guarantor agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
is made by Borrowers or Guarantor to Lender and such payment is rescinded or
must otherwise be returned by Lender (as determined by Lender in its sole and
absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar proceeding involving or affecting any Borrower or Guarantor,
all as though such payment had not been made.

            (j) In the event that Guarantor shall advance or become obligated to
pay any sums under this Guaranty or in connection with the Guaranteed
Obligations or in the event that for any reason whatsoever any Borrower or any
subsequent owner of any Property or any part thereof is now, or shall hereafter
become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums
and of such indebtedness and all interest thereon shall at all times be
subordinate as to the lien, the time of payment and in all other respects to all
sums, including principal and interest and other amounts, at any time owed to
Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to
enforce or receive payment thereof until all principal, interest and other sums
due pursuant to the Loan Documents have been paid in full. Nothing herein
contained is intended or shall be construed to give Guarantor any right of
subrogation in or under the Loan Documents or any right to participate in any
way therein, or in the right, title or interest of Lender

                                        5

Guaranty of Recourse Obligations [FX-3]


in or to any collateral for the Loan, notwithstanding any payments made by
Guarantor under this Guaranty, until the actual and irrevocable receipt by
Lender of payment in full of all principal, interest and other sums due with
respect to the Loan or otherwise payable under the Loan Documents. If any amount
shall be paid to Guarantor on account of such subrogation rights at any time
when any such sums due and owing to Lender shall not have been fully paid, such
amount shall be paid by Guarantor to Lender for credit and application against
such sums due and owing to Lender. The foregoing shall not prohibit Borrowers
from using the proceeds of the Loan for any permitted use under the Loan
Agreement, including, without limitation, the making of distributions to
Guarantor.

            (k) Guarantor's obligations hereunder shall survive a foreclosure,
delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or
similar proceeding involving any Property or any part thereof and the exercise
by Lender of any of all of its remedies pursuant to the Loan Documents.
Notwithstanding the foregoing to the contrary, the obligations and liabilities
of Guarantor under this Guaranty shall survive for a period of two (2) years
following payment in full of the Obligations in accordance with the terms of the
Loan Documents, provided, however, in the event that any Guaranteed Obligations
or liabilities of the Guarantor under this Guaranty shall have arisen prior to
the expiration of such period, then in any such event the foregoing survival
period shall not apply and the obligations and liabilities of Guarantor
hereunder shall survive.

            SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. THIS INSTRUMENT REPRESENTS
THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER
HEREOF. THE TERMS OF THIS GUARANTY SHALL NOT BE WAIVED, ALTERED, MODIFIED,
AMENDED, SUPPLEMENTED OR TERMINATED IN ANY MANNER WHATSOEVER EXCEPT BY WRITTEN
INSTRUMENT SIGNED BY LENDER AND GUARANTOR.

            SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding
upon Guarantor, and its successors and assigns, may not be assigned or delegated
by Guarantor and shall inure to the benefit of Lender and its successors and
assigns. Lender shall have the right to assign this Guaranty and the obligations
hereunder in connection with any assignment or transfer of all or any portion of
the Loan or any interest therein. All references to "Lender" hereunder shall be
deemed to include the successors and assigns of Lender and the parties hereto
acknowledge that actions taken by Lender hereunder may be taken by Lender's
agents and by the agents of the successors and assigns of Lender.

            SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty
shall be governed by, and construed in accordance with, the substantive laws of
the State of New York. Guarantor irrevocably (a) agrees that any suit, action or
other legal proceeding arising out of or relating to this Guaranty may be
brought in a court of record in the City and County of New York or in the Courts
of the United States of America located in the Southern District of New York,
(b) consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which it may have to the laying of venue
of any such suit, action or proceeding in any of such courts and any claim that
any such suit, action or proceeding has been brought in an inconvenient forum.
Guarantor irrevocably consents to the service of any and all process in any such
suit, action or proceeding by service of copies of such process to Guarantor at
its address set forth on the first page hereof. Nothing in this Section 9,
however, shall affect the right of

                                        6

Guaranty of Recourse Obligations [FX-3]


Lender to serve legal process in any other manner permitted by law or affect the
right of Lender to bring any suit, action or proceeding against Guarantor or its
property in the courts of any other jurisdictions.

            SECTION 10. SECTION HEADINGS. The headings of the sections and
paragraphs of this Guaranty have been inserted for convenience of reference only
and shall in no way define, modify, limit or amplify any of the terms or
provisions hereof.

            SECTION 11. SEVERABILITY. Any provision of this Guaranty which may
be determined by any competent authority to be prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Guarantor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.

            SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND LENDER
HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING
ARISING HEREUNDER OR IN CONNECTION THEREWITH.

            SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL
LIABILITY.

            (a) The obligations of Guarantor hereunder are separate and distinct
from, and in addition to, the obligations of Guarantor now or hereafter arising
under the other guaranties pursuant to which Guarantor has guaranteed the
payment and performance of certain other obligations of Borrowers described
therein.

            (b) If there is more than one entity comprising Guarantor, all
references to Guarantor herein shall be to Guarantor (but not its members,
partners, employees, shareholders, agents, directors or officers) or any one or
more of them. All obligations and liabilities of Guarantor hereunder are in
addition to, not in lieu of and are independent of: (i) all obligations of
Borrowers under any other Loan Document, including the Note and the Loan
Agreement; and (ii) any obligation of Guarantor under any other Loan Document to
which Guarantor is a party.

            (c) If there is more than one entity comprising Guarantor, all
obligations of Guarantor hereunder shall be joint and several.

            SECTION 14. NOTICES. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder to
Lender or Guarantor or which are given to Lender or Guarantor with respect to
this Guaranty shall be in writing and shall be delivered to Lender at the
address set forth in Section 14.5 of the Loan Agreement and to Guarantor at the
address set forth on the first page hereof, each in the manner provided in
Section 14.5 of the Loan Agreement. Guarantor agrees to give Lender not less
than ten (10) days' prior written notice of any change in the location of
Guarantor's principal place of business.

            SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its
execution hereof acknowledges receipt of true copies of all of the Loan
Documents, the terms and conditions of which are hereby incorporated herein by
reference.

                                        7

Guaranty of Recourse Obligations [FX-3]



            SECTION 16. INTEREST; EXPENSES.

            (a) If Guarantor fails to pay all or any sums due hereunder within
ten (10) days of demand by Lender, the amount of such sums payable by Guarantor
to Lender shall bear interest from the date of demand until paid at the Default
Rate in effect from time to time.

            (b) Guarantor hereby agrees to pay all reasonable out of pocket
costs, charges and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, that may be incurred by Lender in enforcing
the covenants, agreements, obligations and liabilities of Guarantor under this
Guaranty.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       8

Guaranty of Recourse Obligations [FX-3]



            IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the
date first above written.

                                       GUARANTOR:

                                       LODGIAN, INC., a Delaware
                                       corporation

                                       By: /s/ Daniel E. Ellis
                                           --------------------------------
                                           Name:  Daniel E. Ellis
                                           Title: Senior Vice President

Guaranty of Recourse Obligations [FX-3]

EX-10.4.4

                                                                  EXHIBIT 10.4.4

                                 CROSS-GUARANTY

            THIS CROSS-GUARANTY (this "Agreement" or "Guaranty"), made as of
June 25, 2004, from the parties listed as Guarantors on the signature pages
hereto (collectively, the "Guarantors"), each having an address at c/o Lodgian,
3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 to MERRILL LYNCH
MORTGAGE LENDING, INC., a Delaware corporation, having an office at Four World
Financial Center, 16th Floor, 250 Vesey Street, New York, New York 10080
(together with its successors and assigns, "Lender").

                                   WITNESSETH:

            WHEREAS, Lender has agreed to make three (3) loans (respectively,
the "Pool 1 Loan," "Pool 2 Loan," and "Pool 4 Loan," and collectively, the
"Loans") to the respective borrowers described on Exhibit A (respectively, the
"Pool 1 Borrowers," "Pool 2 Borrowers," and "Pool 4 Borrowers," and
collectively, the "Borrowers"), in the amounts set forth on Exhibit A; and

            WHEREAS, to evidence the respective Loans, the respective Borrowers
have executed and delivered those certain Promissory Notes, each dated as of the
date hereof, in the principal amounts of the respective Loans (respectively,
"Note 1," "Note 2" and "Note 4," and collectively, the "Notes"), pursuant to
those certain Loan and Security Agreements, each dated as of the date hereof,
among the respective Borrowers and Lender as more particularly described on
Exhibit A (respectively, "Loan Agreement 1," "Loan Agreement 2" and "Loan
Agreement 4," and collectively, the "Loan Agreements"); and

            WHEREAS, capitalized terms used but not otherwise defined herein
shall have the respective meanings given thereto in the respective Loan
Agreements or Guarantor Loan Agreement (hereinafter defined), as applicable; and

            WHEREAS, the Notes shall be secured by, among other things, the
Mortgages encumbering the Properties; and

            WHEREAS, simultaneously with the making of the Loans, Guarantors are
obtaining a loan in the amount of $66,818,000 (the "Guarantor Loan") from Lender
pursuant to that certain Loan and Security Agreement, dated as of the date
hereof, by and between the Guarantors and Lender (the "Guarantor Loan
Agreement"; and together with the other documents and agreements evidencing
and/or securing the Guarantor Loan, collectively, the "Guarantor Loan
Documents"); and

            WHEREAS, it is a condition precedent to Lender making the Guarantor
Loan to Guarantors that Guarantors, among other things, guaranty the Loans
pursuant to this Guaranty and grant to Lender Mortgages on the Properties (as
defined in the Guarantor Loan Agreement, and hereinafter referred to as the
"Guarantor Properties") as security for their obligations hereunder; and

            WHEREAS, Guarantors shall derive substantial economic benefits from
the simultaneous making of the Guarantor Loan and Loans by Lender to Guarantors
and Borrowers, respectively; and

            WHEREAS, as a condition precedent to the making of the Loans,
Borrowers have agreed to procure and deliver to Lender this Agreement; and

Cross-Guaranty (Fixed 3)



            WHEREAS, Lender has declined to make the Loans or the Guarantor Loan
unless this Agreement is duly executed by Guarantors and delivered to Lender.

            NOW, THEREFORE, in consideration for, and as an inducement to,
Lender's making the Loans and the Guarantor Loan, and for other good and
valuable consideration the legal sufficiency of which and receipt thereof are
hereby acknowledged, and notwithstanding any provision to the contrary contained
in the Guarantor Loan Agreement, the Guarantor Loan Documents, the Loan
Agreements, the Notes, the Mortgages or any of the other Loan Documents, but
subject to the provisions of Article XII of the Guarantor Loan Agreement, Lender
and Guarantors do hereby agree as follows:

            1.    Guarantors, on behalf of themselves and their successors and
assigns (collectively, "Successors") do hereby absolutely, unconditionally,
irrevocably and personally: (i) guaranty to Lender the full and prompt payment
and performance when due of the Loans and all other Obligations of the Borrowers
under the Loan Agreements and (ii) agree to reimburse Lender for, and hold
Lender harmless from and against, any and all losses, damages, claims, expenses,
deficiencies, liabilities and costs (including, without limitation, reasonable
attorneys' fees and disbursements) incurred, suffered or sustained by Lender
and/or its successors and assigns as a result of or arising out of, in
connection with or resulting from, the enforcement of this Agreement against
Guarantors (the obligations of Guarantors under clauses (i) and (ii) above being
referred to hereinafter, collectively, as "Guarantors' Obligations").

            Notwithstanding the foregoing, or anything else to the contrary
contained herein, in the event that any of the Guarantors shall become an
Excluded Borrower and the Guarantor Loan shall become an Excluded Loan pursuant
to Lender's election under Section 2.12(G) of the Guarantor Loan Agreement to
cause any of the Loans to no longer be secured by the Guarantor Properties, this
Guaranty shall automatically terminate and shall be of no further force or
effect.

            2.    It is agreed that the obligations of Guarantors hereunder
shall be primary and this Agreement shall be enforceable against Guarantors and
their Successors without the necessity for any suit or proceeding of any kind or
nature whatsoever brought by Lender against Borrowers or their respective
successors or assigns or any other party or against any security for the payment
of the Guarantors' Obligations and without the necessity of any notice of
non-payment or non-observance or of any notice of acceptance of this Agreement
or of any notice of demand to which Guarantors might otherwise be entitled
(including, without limitation, diligence, presentment, notice of maturity,
extension of time, protest, notice of dishonor or default, change in nature or
form of the Guarantors' Obligations, acceptance of further security, release of
further security, imposition or agreement arrived at as to the amount of or the
terms of the Guarantors' Obligations, notice of adverse change in Borrowers'
financial condition and any other fact that might materially increase the risk
to Guarantors), all of which Guarantors hereby expressly waive. Guarantors
hereby expressly agree that the validity of this Agreement and the obligations
of Guarantors hereunder shall in no way be terminated, affected, diminished,
modified or impaired by reason of the assertion of or the failure to assert by
Lender against Borrowers, or their successors or assigns, any of the rights or
remedies reserved to Lender pursuant to the provisions of the Guarantor Loan
Agreement, the Loan Agreements, the Notes, the Mortgages or any other Loan
Documents.

            3.    Guarantors waive, and covenant and agree that they will not at
any time insist upon, plead or in any manner whatsoever claim or take the
benefit or advantage of, any and all appraisal, valuation, stay, extension,
marshaling-of-assets or redemption laws, or right of homestead or exemption,
whether now or at any time hereafter in force, that may delay, prevent or
otherwise affect the performance by Guarantors of their obligations under, or
the enforcement by Lender of, this Agreement. Guarantors further covenant and
agree not to set up or claim any defense, counterclaim, cross-claim, offset,
set-off, right of recoupment, or other objection of any kind to any action, suit
or proceeding in law, equity or otherwise, or to any demand or claim that may be
instituted or made by Lender hereunder other than the

                                       2

Cross-Guaranty (Fixed 3)



defense of the actual timely performance of Guarantors' Obligations hereunder.
Guarantors represent, warrant and agree that, as of the date hereof, their
obligations under this Agreement are not subject to any counterclaims,
cross-claims, rights of recoupment, offsets or affirmative or other defenses of
any kind against Lender.

            4.    Guarantors agree that any notice or directive given at any
time by Guarantors to Lender that is inconsistent with any waiver contained in
this Agreement shall be void and may be ignored by Lender, and, in addition, may
not be pleaded or introduced as evidence in any litigation relating to this
Agreement for the reason that such pleading or introduction would be at variance
with the written terms of this Agreement, unless Lender has specifically agreed
otherwise in a writing, signed by a duly authorized officer. Guarantors
specifically acknowledge and agree that the foregoing waivers are of the essence
of the Loan transaction and that, but for this Agreement and such waivers,
Lender would not make the Loans to Borrowers.

            5.    The provisions of this Agreement are for the benefit of Lender
and its successors and assigns, and nothing herein contained shall impair, as
between Borrowers and Lender, the obligations of Borrowers under the Loan
Agreements, the Notes, the Mortgages or any of the other Loan Documents.

            6.    This Agreement shall be a continuing guaranty and the
liability of Guarantors hereunder shall in no way be terminated, affected,
modified, impaired or diminished (to the extent permitted by law) by reason of
the happening, from time to time, of any of the following, although without
notice or the further consent of Guarantors:

            (a)   any assignment, amendment, modification or waiver of or change
      in any of the terms, covenants, conditions or provisions of the Guarantor
      Loan Agreement, the Loan Agreements, the Notes, the Mortgages or any of
      the other Loan Documents or the invalidity or unenforceability of any of
      the foregoing; or

            (b)   any extension of time that may be granted by Lender to
      Borrowers, Guarantors or Guarantors' Successors; or

            (c)   any action that Lender or Borrowers may take or fail to take
      under or in respect of any of the Loan Documents or by reason of any
      waiver of, or failure to enforce any of the rights, remedies, powers or
      privileges available to Lender under this Agreement or available to Lender
      at law, equity or otherwise, or any action on the part of Lender or
      Borrowers granting indulgence or extension in any form whatsoever; or

            (d)   any dealing, transaction, matter or thing occurring between
      Lender, Borrowers, Guarantors or Guarantors' Successors; or

            (e)   any sale, exchange, release, or other disposition of any
      property pledged, Mortgaged or conveyed, or any property in which Lender
      has been granted a lien or security interest to secure any indebtedness of
      Borrowers to Lender; or

            (f)   any release of any person or entity who may be liable in any
      manner for the payment and collection of any amounts owed by Borrowers to
      Lender (including the other Guarantors); or

            (g)   the application of any sums by whomsoever paid or however
      realized to any amounts owing by Borrowers to Lender in such manner as
      Lender shall determine in its sole discretion; or

                                       3

Cross-Guaranty (Fixed 3)



            (h)   any Event of Default (as such term is defined in the Guarantor
      Loan Agreement and the Loan Agreements), whether or not Lender has
      exercised any of its rights and remedies as set forth in the Guarantor
      Loan Agreement or the Mortgages upon the happening of any such Event of
      Default; or

            (i)   Borrowers' and/or Guarantors' voluntary or involuntary
      liquidation, dissolution, sale of all or substantially all of their
      respective assets and liabilities, appointment of a trustee, receiver,
      liquidator, sequestrator or conservator for all or any part of Borrowers'
      or Guarantors' assets, insolvency, bankruptcy, assignment for the benefit
      of creditors, reorganization, arrangement, composition or readjustment, or
      the commencement of other similar proceedings affecting Borrowers or
      Guarantors or any of the assets of either of them, including, without
      limitation, (A) the release or discharge of Borrowers from the payment and
      performance of their obligations under any of the Loan Documents by
      operation of law, or (B) the impairment, limitation or modification of the
      liability of Borrowers, their partners or Guarantors in bankruptcy, or of
      any remedy for the enforcement of the Guarantors' Obligations, under any
      of the Loan Documents, or Guarantors' liability under this Agreement,
      resulting from the operation of any present or future provisions of the
      Federal Bankruptcy Code or other present or future federal, state or
      applicable statute of law or from the decision in any court; or

            (j)   any change in or termination of the ownership interest of
      Guarantors in Borrowers (whether direct or indirect); or

            (k)   any conveyance of the Mortgaged Properties, whether or not
      pursuant to a foreclosure sale, a deed in lieu of foreclosure, a transfer
      through bankruptcy, or otherwise.

            7.    Guarantors acknowledge that this Guaranty and Guarantors'
Obligations are and shall at all times continue to be absolute, unconditional
and irrevocable in all respects, and shall at all times be valid and enforceable
irrespective of any other agreement or circumstances of any nature whatsoever
that might otherwise constitute a defense to this Guaranty or the obligations of
any other person or party (including, without limitation, Borrower or any other
guarantor) relating to this Guaranty or the obligations of Guarantors hereunder.

            8.    Guarantors agree that if at any time all or any part of any
payment at any time received by Lender from Borrowers or Guarantors under or
with respect to this Agreement is or must be rescinded or returned by Lender for
any reason whatsoever (including, without limitation, the insolvency, bankruptcy
or reorganization of Borrowers or Guarantors), then Guarantors' Obligations
hereunder shall, to the extent of the payment rescinded or returned, be deemed
to have continued in existence notwithstanding such previous receipt by Lender,
and Guarantors' Obligations hereunder shall continue to be effective or
reinstated, as the case may be, as to such payment, as though such previous
payment to Lender had never been made.

            9.    Until repayment of the Indebtedness (as such term is defined
in the Guarantor Loan Agreement and the Loan Agreements) and satisfaction of all
of the obligations under the Guarantor Loan Agreement, Guarantors and each of
them (a) shall have no right of subrogation against Borrowers, general partner
of any Borrower that is a limited partnership or any other Guarantor by reason
of any payments or acts of performance by a Guarantor in compliance with the
obligations of a Guarantor hereunder; (b) shall have no right of indemnity,
contribution, or any other right or cause of action whatsoever under law or
equity against any other Guarantor by reason of any payments or acts of
performance by a Guarantor in compliance with the obligations of a Guarantor
hereunder; (c) hereby waive any right to enforce any remedy that any Guarantors
now or hereafter shall have against Borrowers, general partner of any Borrower
that is a limited partnership or any other Guarantor by reason of any one

                                       4

Cross-Guaranty (Fixed 3)



or more payments or acts of performance in compliance with the obligations of a
Guarantor hereunder; (d) shall subordinate any liability or indebtedness of
Borrowers, general partner of any Borrower that is a limited partnership or any
Guarantor now or hereafter held by any Guarantor or any affiliate of a Guarantor
to the obligations of Borrowers, general partner of any Borrower that is a
limited partnership or Guarantor to Lender under the Loan Documents; and (e)
shall not file, assert or receive payment on any claim, whether now existing or
hereafter arising, against Borrowers, general partner of any Borrower that is a
limited partnership or any Guarantor in the event of the commencement of a case
by or against Borrowers, general partner of any Borrower that is a limited
partnership or any Guarantor under federal or state insolvency laws.

            10.   Guarantors represent and warrant to Lender, with the knowledge
that Lender is relying upon the same, as follows:

            (a)   Guarantors are solvent and have the legal right to enter into
      this Agreement and to perform their obligations under the terms hereof;

            (b)   to the best of Guarantors' knowledge, there is no action,
      suit, proceeding or investigation pending or threatened against or
      affecting Guarantors at law, in equity, in admiralty or before any
      arbitrator or any governmental department, commission, board, bureau,
      agency or instrumentality (domestic or foreign) that is likely to result
      in any material adverse change in the property, assets or condition
      (financial or otherwise) of Guarantors or that is likely to impair
      materially the ability of Guarantors to perform their obligations under
      this Agreement; and

            (c)   all financial statements that have heretofore been furnished
      by Guarantors to Lender in connection with this Agreement, are true,
      correct and complete; and fairly present the financial condition of
      Guarantors, all as of the respective dates thereof.

            11.   Guarantors and Lender acknowledge and agree that this
Agreement is a guaranty of payment and performance and not of collection and
enforcement in respect of any of the Guarantors' Obligations.

            12.   Lender may freely assign any or all of its rights under this
Agreement, but any such assignment shall be made only to the subsequent holder
of any of the Notes and no such assignment shall increase Guarantors'
Obligations or diminish its rights hereunder. In the event of any such
assignment, the consent of Guarantors shall not be required for any such
assignment and failure to give notice of such assignment shall not affect the
validity or enforceability of any such assignment or subject Lender to any
liability and Guarantors shall continue to remain bound by and obligated to
perform under and with respect to this Agreement. Guarantors shall not assign
any of their obligations under this Agreement without the prior consent of the
Lender.

            13.   The representations, warranties and obligations of Guarantor
set forth in this Agreement shall survive until this Agreement shall terminate
in accordance with the terms hereof.

            14.   This Agreement contains the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements relating to such subject matter and may not be modified,
amended, supplemented or discharged except by a written agreement signed by
Guarantors and Lender. This Agreement also may be discharged by full performance
of the Guarantors' Obligations in accordance with the terms hereof, or as
otherwise provided herein.

            15.   If all or any portion of any provision contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, such provision or portion

                                        5

Cross-Guaranty (Fixed 3)



thereof shall be deemed stricken and severed from this Agreement and the
remaining provision and portions thereof shall continue in full force and
effect.

            16.   All notices, requests, demands and other communications under
or in connection with this Agreement shall be in writing and shall be deemed to
have been given or made (i) three (3) days after the date such notice is mailed,
(ii) on the next Business Day if sent by a nationally recognized overnight
courier service, (iii) on the date of delivery by personal delivery and (iv) on
the date of transmission if sent by telefax during business hours on a Business
Day (otherwise the next Business Day). Notices shall be addressed as follows:

            If to Guarantors:   The address listed above

            With a copy to:     Morris Manning & Martin, LLP
                                3343 Peachtree Rd., NE
                                1600 Atlanta Financial Center
                                Atlanta, Georgia  30326
                                Attn.: Thomas Gryboski, Esq.
                                Facsimile: (404) 365-9532

            If to Lender:       The address listed above

            With a copy to:     Sidley Austin Brown & Wood LLP
                                787 Seventh Avenue
                                New York, New York  10019
                                Attn.: Robert L. Boyd, Esq.
                                Facsimile: (212) 839-5599

The above addresses may be changed on written notice given as hereinabove
provided. Notices may be sent by a party hereto or on its behalf by its
attorney.

            17.   This Agreement shall be binding upon Guarantors and their
Successors and shall inure to the benefit of Lender and its successors and
assigns.

            18.   The failure of Lender to enforce any right or remedy
hereunder, or promptly to enforce any such right or remedy, shall not constitute
a waiver thereof, nor give rise to any estoppel against Lender, nor excuse
Guarantors from their obligations hereunder. Any waiver of any such right or
remedy to be enforceable against Lender must be expressly set forth in writing
signed by Lender.

            19.   (a) Any suit initiated by Lender against Guarantors or in
      connection with or arising, directly or indirectly, out of or relating to,
      this Agreement (an "Action") may, at Lender's option, be brought in any
      state or federal court in the State of New York, or any state or federal
      court in which the property is located, having jurisdiction over the
      subject matter hereof. Guarantors hereby submit themselves to the
      jurisdiction of any such court and agree that service of process against
      Guarantors in any such action may be effected by any means permissible
      under federal law or under the laws of the state in which such Action is
      brought. Guarantors hereby agree that insofar as is permitted under
      applicable law, this consent to personal jurisdiction shall be
      self-operative and no further instrument or action, other than service of
      process in one of the manners specified in this Guaranty, or as otherwise
      permitted by law, shall be necessary in order to confer jurisdiction upon
      Guarantors.

                                       6

Cross-Guaranty (Fixed 3)



            (b)   Guarantors agree that, provided that service of process is
      effected upon Guarantors in any manner permitted by law, Guarantors
      irrevocably waive, to the fullest extent permitted by law, and agree not
      to assert, by way of motion, as a defense or otherwise, (i) any objection
      that Guarantors may have or may hereafter have to the laying of the venue
      of any Action brought in any court as provided for by this Agreement, (ii)
      any claim that any Action brought in any such court has been brought in an
      inconvenient forum, or (iii) any claim that Guarantors are not personally
      subject to the jurisdiction of such court. Guarantors agree that, provided
      that service of process is effected upon Guarantors in one of the manners
      specified in this Guaranty or as otherwise permitted by law, a final
      judgment from which Guarantors have not appealed or may not appeal in any
      Action brought in any such court shall be conclusive and binding upon
      Guarantors and may, so far as permitted under applicable law, be enforced
      in the courts of any state or any federal court or in any other courts to
      the jurisdiction of which it is subject, by a suit upon such judgment and
      that Guarantors shall not assert any defense, counterclaim or set-off in
      any such suit upon such judgment.

            (c)   To the extent that Guarantors have or hereafter may acquire
      any immunity from jurisdiction of any court or from any legal process
      (whether through service or notice, attachment before judgment, attachment
      in aid of execution, execution or otherwise) with respect to Guarantors or
      Guarantors' property, Guarantors hereby irrevocably waive such immunity in
      respect of its obligations under this Agreement.

            (d)   As a further inducement to Lender's making of the Loans to
      Borrowers, and in consideration thereof, Lender and Guarantors each
      covenant and agree that in any action or proceeding brought on, under or
      by virtue of this Agreement, Lender and Guarantors each shall and do
      hereby unconditionally and irrevocably waive trial by jury.

            (e)   Guarantors hereby further covenant and agree to and with
      Lender that Guarantors may be joined in any action against Borrowers in
      connection with the Guarantor Loan Agreement, the Loan Agreements, the
      Notes, the Mortgages, or any of the other Loan Documents, solely with
      respect to the subject matter of this Agreement.

            (f)   Guarantors covenant and agree to indemnify and save Lender
      harmless of and from, and defend it against, all losses, costs,
      liabilities, expenses, damages or claims suffered by reason of Guarantors'
      failure to perform its obligations hereunder.

            20.   All of Lender's rights and remedies under the Guarantor Loan
Agreement, the Loan Agreements, the Notes, the Mortgages or any of the other
Loan Documents or under this Agreement are intended to be distinct, separate and
cumulative and no such right or remedy therein or herein mentioned is intended
to be in exclusion of or a waiver of any other right or remedy available to
Lender.

            21.   Guarantors hereby consent that from time to time, before or
after any default by Borrower, with or without further notice to or assent from
Guarantors, any security at any time held by or available to Lender for any
obligation of Borrowers, or any security at any time held by or available to
Lender for any obligation of any other person or party secondarily or otherwise
liable for all or any portion of the Loans, may be exchanged, surrendered or
released and any obligation of Borrowers, or of any such other person or party,
may be changed, altered, renewed, extended, continued, surrendered, compromised,
waived or released in whole or in part, or any default with respect thereto
waived, and Lender may fail to set off and may release, in whole or in part, any
balance of any deposit account or credit on its books in favor of Borrowers, or
of any such other person or party, and may extend further credit in any manner
whatsoever to Borrowers, and generally deal with Borrowers or any such security
or other person or party as Lender may see fit; and Guarantors shall remain
bound under this Agreement

                                        7

Cross-Guaranty (Fixed 3)



notwithstanding any such exchange, surrender, release, change, alteration,
renewal, extension, continuance, compromise, waiver, action, inaction, extension
of further credit or other dealing. This Agreement is independent of, and in
addition to, all collateral granted, pledged or assigned under the Loan
Documents.

            22.   The terms of this Agreement have been negotiated, and this
Agreement has been executed and delivered in the State of New York, and it is
the intention of the parties hereto that this Agreement be construed and
enforced in accordance with the laws of such State.

            23.   This Agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.

            24.   This Agreement may be executed in counterparts, which together
shall constitute the same instrument.

            25.   All representations, warranties, covenants (both affirmative
and negative) and all other obligations under this Guaranty shall be the joint
and several obligation of each of the Guarantors and any default under this
Guaranty by any such Guarantor shall be deemed a default by all such Guarantors.

                         [NO FURTHER TEXT ON THIS PAGE]

                                        8

Cross-Guaranty (Fixed 3)



            IN WITNESS WHEREOF, Guarantor has executed and delivered this
Agreement as of the date and year first above written.

                                GUARANTORS:

                                LODGIAN AMI, INC.
                                LODGIAN HOTELS FIXED III, LLC
                                MINNEAPOLIS MOTEL ENTERPRISES, INC.

                                By: /s/ Daniel E. Ellis
                                    -----------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

                                SERVICO CENTRE ASSOCIATES, LTD.

                                By: SERVICO PALM BEACH GENERAL
                                    PARTNER SPE, INC., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    -----------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

Cross-Guaranty (Fixed 3)



                                    EXHIBIT A

1.    Pool 1 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 1"), between Impac Hotels I, L.L.C., Lodgian
      Denver LLC, Macon Hotel Associates, L.L.C., Servico Northwoods, Inc. and
      Lodgian Hotels Fixed I, LLC (collectively, the "Pool 1 Borrowers") and
      Lender, Lender has made a loan in the amount of $63,801,000 ("Pool 1
      Loan"), which Loan is evidenced by a Promissory Note dated as of the date
      hereof ("Note 1"), made by the Pool 1 Borrowers to Lender;

2.    Pool 2 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 2"), between Albany Hotel, Inc., AMI
      Operating Partners, L.P., Apico Inns of GreenTree, Inc., Dedham Lodging
      Associates I, Limited Partnership, Lodgian Hotels Fixed II, Inc., Lodgian
      Augusta LLC, Lodgian Lafayette LLC and Lodgian Tulsa LLC (collectively,
      the "Pool 2 Borrowers") and Lender, Lender has made a loan in the amount
      of $67,864,000 ("Pool 2 Loan"), which Loan is evidenced by a Promissory
      Note dated as of the date hereof ("Note 2"), made by the Pool 2 Borrowers
      to Lender;

3.    Pool 4 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 4"), between Lodgian Hotels Fixed IV, L.P.,
      Little Rock Lodging Associates I, Limited Partnership, Lodgian Fairmont
      LLC, NH Motel Enterprises, Inc., Servico Columbia, Inc. and Servico
      Houston, Inc. (collectively, the "Pool 4 Borrowers") and Lender, Lender
      has made a loan in the amount of $61,516,500 ("Pool 4 Loan") which Loan is
      evidenced by a Promissory Note, dated as of the date hereof ("Note 4"),
      made by the Pool 4 Borrowers to Lender.

Cross-Guaranty (Fixed 3)

EX-10.4.5

                                                                  EXHIBIT 10.4.5

              CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT

                  This CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT,
dated as of June 25, 2004 (this "AGREEMENT"), made by LODGIAN MANAGEMENT CORP.,
a Delaware corporation, having an address at 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30826 ("HOTEL MANAGER"), and the undersigned, each having an
address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30826 (each a "BORROWER and collectively, "BORROWERS"), to and for the
benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080, its
successors, transferees and assigns ("LENDER").

                  A.       Hotel Manager has entered into a certain Management
Agreement (each a "CONTRACT" and collectively, the "CONTRACTS") with each
Borrower, a true, correct and complete copy of which has been delivered to
Lender on or prior to the date hereof and the form of which is attached hereto
as EXHIBIT A, providing for the performance by Hotel Manager of certain
management obligations more particularly described therein with respect to the
management and operation of the property as more particularly described therein
(each, a "PROPERTY" and collectively, the "PROPERTIES").

                  B.       This Agreement is being executed in order to amend
each Contract, to conditionally assign each Borrower's interest therein to
Lender, and to subordinate Hotel Manager's rights to payment under the Contracts
to Lender's lien on the Properties in connection with Lender's making a loan to
Borrowers and certain other borrowers (collectively, the "MORTGAGE BORROWERS")
in the original principal amount of up to Sixty Six Million Eight Hundred and
Eighteen Thousand Five Hundred and no/100 Dollars ($66,818,500.00) (the "LOAN")
pursuant to that certain Loan and Security Agreement, dated as of even date
herewith (as amended, modified or restated, the "LOAN AGREEMENT"), among
Mortgage Borrowers and Lender. The Loan is evidenced by a certain Promissory
Note, dated of even date herewith (as amended, modified or restated, and any
replacements or substitutes therefor (by means of multiple notes or otherwise),
(the "NOTE"), made by Mortgage Borrowers in favor of Lender and is secured by,
among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt,
Assignments of Leases and Rents and Security Agreements, dated as of even date
herewith (as amended, modified, restated, spread or consolidated, collectively,
the "SECURITY INSTRUMENT"), in favor of Lender (the Note, the Security
Instrument, the Loan Agreement, this Agreement and all other documents executed
in connection with the Loan are collectively referred to as the "LOAN
DOCUMENTS"). All capitalized terms used and not defined herein shall have the
respective meanings given to such terms in the Loan Agreement, a copy of which
Hotel Manager hereby acknowledges having received.

                  NOW, THEREFORE, in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Hotel Manager and Borrowers hereby represent,
warrant and covenant to Lender as follows:



                  1.       As additional collateral security for the Loan, each
Borrower hereby conditionally transfers, sets over and assigns to Lender all of
such Borrower's right, title and interest in and to its Contract, said transfer
and assignment to automatically become a present, unconditional assignment, at
Lender's option, upon the occurrence and during the continuance of an Event of
Default by Borrowers under any of the Loan Documents.

                  2.       Hotel Manager hereby agrees that each Contract, all
rights, interests and privileges of Hotel Manager thereunder, and all management
fees and other payment obligations of each Borrower to Hotel Manager for
services rendered by Hotel Manager for the management and operation of its
Property, as such services are more particularly described in such Contract, are
hereby subordinated to the Loan Documents and the liens in favor of Lender
provided for therein, and to all rights of Lender to receive payment from
Borrowers under the Note and all other amounts which may be due Lender under the
Loan Documents. Hotel Manager recognizes and agrees that so long as the Note is
being paid in strict accordance with its terms and no Event of Default has
occurred and is continuing or will by virtue of payments to Hotel Manager occur,
Hotel Manager shall, subject to the requirements of the Loan Documents,
including any such requirements governing management and application of the
Properties and Borrower revenues and cash flow, be entitled to receive payments
provided for under such Contract in accordance with the terms thereof. Hotel
Manager hereby releases, discharges and waives any and all liens, claims,
demands of any kind or nature, against each Property, either now or in the
future, arising from the services provided by Hotel Manager for the management
and operation of such Property.

                  3.       In the event that such Borrower defaults under the
terms of its Contract, Hotel Manager agrees that before exercising any rights or
remedies with respect thereto, it will notify Lender of such default. Upon
Lender's request, Hotel Manager will continue to perform under such Contract
until such time as Lender may elect to terminate such Contract, provided that
Hotel Manager shall continue to receive all fees payable to it under such
Contract. Subject to the foregoing, Hotel Manager agrees that it shall not be
entitled to receive any management fee or other fee, commission or other amount
payable under the Contract or otherwise for and during any period of time that
any Event of Default has occurred and is continuing, provided that Hotel Manager
shall not be obligated to return or refund to Lender any management fee or other
fee, commission or other amount already received by Hotel Manager prior to the
occurrence of the Event of Default, and to which Hotel Manager was entitled
under paragraph 2 above. In all events, Hotel Manager recognizes that the
maximum amount that shall be due and payable under each Contract is the amount
stated therein (such amount being adequate to complete the services called for
in such Contract), and that Hotel Manager will not claim any incidental,
consequential, or exemplary damages of any nature as a condition to completing
its performance under the Contract.

                  4.       In the event that (a) Hotel Manager becomes
insolvent, or (b) an Event of Default occurs and is continuing, or (c) any
default occurs by Hotel Manager under the Management Agreement beyond the
expiration of any notice and cure periods, or (d) any other event occurs which,
under the terms of the Loan Documents, entitles Lender to direct Borrower to
replace Hotel Manager, Lender may exercise its rights under the Loan Documents
and direct any Borrower to terminate its Contract and/or to replace Hotel
Manager with a management company chosen by such Borrower and reasonably
acceptable to Lender. Upon receiving notice

                                       2


of any such election, Hotel Manager shall abide by such direction to terminate
and cooperate with any replacement manager approved or designated by Lender. No
termination fee or other compensation shall be due or owing under such Contract
as a result of any such termination other than accrued unpaid fees.

                  5.       Without limiting the foregoing, subject to the second
sentence of paragraph 3 hereof, in the event Lender forecloses or otherwise
succeeds to the rights of any Borrower with respect to any Property, Lender
shall have the option upon written notice to Hotel Manager delivered within
thirty (30) days following foreclosure by Lender or other acquisition of such
Property by Lender, either to (a) terminate the applicable Contract without any
obligation or liability of Lender to pay the termination fees, if any; or (b)
continue such Contract in effect upon all of the terms and provisions provided
in such Contract, except that Lender shall have no obligation to pay any sums
due and owing under the Contract as of the date of foreclosure or other
acquisition of such Property, and Lender shall have the right after it elects to
continue such Contract under subparagraph (b) hereof to terminate such Contract
without cause upon thirty (30) days written notice to Hotel Manager without any
obligation or liability of Lender to pay the termination fees, if any other than
accrued unpaid fees. Hotel Manager acknowledges and agrees with Lender that
Lender has not assumed any obligations or liabilities of such Borrower to Hotel
Manager under such Contract. If Lender chooses not to continue any Contract
following a foreclosure or other acquisition of any Property, the only
compensation from Lender for which Hotel Manager shall be entitled under such
Contract shall be for the period commencing with the date of such foreclosure or
other acquisition and ending upon the subsequent termination by Lender of such
Contract. Notwithstanding the foregoing to the contrary, in the event Lender
forecloses or otherwise succeeds to the rights of any Borrower with respect to
its Property, upon Lender's request, Hotel Manager agrees to transfer and assign
to Lender, or its designee, to the extent possible, all applicable licenses
(including, without limitation, each liquor license and beer permit), permits
and approvals required for the use, occupancy, operation and maintenance of each
of the Property and held by or in the name of Hotel Manager, and, if requested
by Lender and permitted by applicable law, enter into such reasonable concession
or use agreements with Lender or its designee (subject to appropriate
indemnification) as are reasonably necessary to allow Lender or its designee to
offer, or cause to be offered, liquor and beer for sale at such Property. For
this purpose, Hotel Manager constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution to complete or undertake the
assignment of each of the items referenced in the preceding sentence in the name
of Hotel Manager pursuant to this paragraph 5. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked.

                  6.       Hotel Manager agrees (a) not to resign as Hotel
Manager without ninety (90) days prior written notice to Lender, and (b) not to
amend any Contract in any material respect without Lender's prior written
approval, which approval shall not be unreasonably withheld or delayed.

                  7.       Hotel Manager acknowledges and agrees that any and
all rents, room rents, credit card receipts, other receipts, profits or other
sums, including any management fees in excess of the management fees to which
Hotel Manager is entitled pursuant to paragraph 2 hereof, and receipts derived
from the sale of alcoholic beverages (collectively herein called "PROPERTY
PROCEEDS") collected or received by Hotel Manager from the Properties are
subject to

                                       3


a security interest of Lender pursuant to the Loan Documents, and shall be
collected and held by Hotel Manager in trust for the benefit of the applicable
Borrower and Lender. Any such Property Proceeds shall be deposited by Hotel
Manager within two (2) Business Days of receipt into a deposit account (the
"DEPOSIT ACCOUNT") in the name of the Lender and identified in that certain
Deposit Account Agreement or other similar agreement dated as of the date hereof
(as amended, restated, modified, replaced or supplemented from time to time,
each, a "DEPOSIT ACCOUNT AGREEMENT") among the applicable Borrower, Lender,
Hotel Manager and the bank named therein. Upon transfer of any such Property
Proceeds to Hotel Manager from the Lock Box Account (as defined in that certain
Cash Management Agreement dated as of even date herewith (as amended, restated,
modified, replaced or supplemented from time to time, the "CASH MANAGEMENT
AGREEMENT"), among Mortgage Borrowers, Lender, Hotel Manager and Wachovia Bank,
National Association) as directed by the applicable Borrower pursuant to Section
3.3 of the Cash Management Agreement, such Property Proceeds shall be used by
Hotel Manager for proper expenses and costs of managing and operating the
applicable Property as permitted under the applicable Contract, subject, in all
instances, to compliance with the Operating Budget and FF&E Budget then in
effect and limitations on distributions to Borrowers, each as more fully
described in the Loan Agreement. Hotel Manager hereby disclaims any and all
interests in the Deposit Account, the Lock Box Account (and any Sub-Accounts
thereof), the Property Operating Account and in any of the Property Proceeds.
Upon written notice from Lender that an Event of Default has occurred under the
Loan Agreement and/or other Loan Documents, Hotel Manager agrees to apply
Property Proceeds as instructed by Lender.

                  8.       Hotel Manager represents and warrants that (a) a
true, correct and complete copy of each Contract has been delivered to Lender on
or prior to the date hereof, the form of which is attached hereto as EXHIBIT A,
(b) each Contract is in full force and effect and has not been modified, amended
or assigned, except in favor of Lender or its predecessor-in-interest (c)
neither Hotel Manager nor, to Hotel Manager's knowledge, any Borrower is in
default under any of the terms, covenants or provisions of its Contract, and
Hotel Manager knows of no event which, with the giving of notice or the passage
of time, or both, would constitute a default under any Contract, (d) Hotel
Manager has no knowledge of and has not commenced any action or given or
received any notice for the purpose of terminating any Contract, and (e) all
management fees, commissions and other sums due and payable to the Hotel Manager
under each Contract as of the date hereof have been paid in full.

                  9.       This Agreement shall be deemed to be a contract
entered into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of the State of New York.

                  10.      All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder shall be in
writing and shall be delivered to Lender and Borrowers at the addresses set
forth in Section 14.5 of the Loan Agreement and to Hotel Manager at the address
set forth on the first page hereof, with a copy to Morris Manning & Martin LLP,
Attention: Tom Gryboski, Esq., Fax: (404) 365-9532, each in the manner provided
in Section 14.5 of the Loan Agreement.

                  11.      This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to

                                       4


act on the part of Lender or any other party, but only by an agreement in
writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

                  12.      If any term, covenant or condition of this Agreement
is held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such provision. If any conflict exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                  13. This Agreement may be executed in any number of duplicate
originals and each duplicate original shall be deemed to be an original. This
Agreement may be executed in several counterparts, each of which counterparts
shall be deemed an original and all of which together shall constitute a single
agreement. The failure of any party hereto to execute this Agreement, or any
counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.

                  14. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa.

                  15. This Agreement shall be binding upon Hotel Manager and its
heirs, devisees, representatives, successors and assigns, and shall inure to the
benefit of and may be enforced by and binding upon Lender and its heirs,
successors, legal representatives, substitutes and assigns. Except as permitted
under the Loan Agreement, Hotel Manager shall not assign any of its rights or
obligations under this Agreement. Subject to the terms of the Loan Agreement,
Lender shall have the right to assign this Agreement and the obligations
hereunder in connection with any assignment or transfer of all or any portion of
the Loan or any interest therein. The parties hereto acknowledge that following
the execution and delivery of this Agreement, Lender may sell, transfer and
assign this Agreement and certain other Loan Documents. All references to
"Lender" hereunder shall be deemed to include the successors and assigns of
Lender and the parties hereto acknowledge that actions taken by Lender hereunder
may be taken by Lender's agents and by the agents of the successors and assigns
of Lender.

                  16. This Agreement is intended solely for the benefit of
Lender and its heirs, successors, legal representatives, substitutes and
assigns, and no third party shall have any right or interest in this Agreement,
nor any right to enforce this Agreement against any party hereto.

                  17. Hotel Manager acknowledges and agrees that pursuant to the
Loan Agreement, each Deposit Account Agreement and the Cash Management Agreement
(for purposes of this paragraph 17, collectively, the "AGREEMENTS") (the terms,
conditions and agreements of the Agreements being hereby incorporated herein
with the same force as is fully set forth herein), certain requirements are
specified with respect to the Property Proceeds and other payments due under any
Lease (as defined in the Security Instrument) or otherwise with respect to the
Properties, and Hotel Manager covenants and agrees to observe and, as and to the
extent applicable to Hotel Manager, perform all such requirements, including,
without limitation, ensuring that all Property Proceeds received by Hotel
Manager are properly deposited into the applicable Deposit Account.

                                       5


                  18.      The obligations of Borrowers and Hotel Manager
hereunder are subject to limitations on recourse as provided in Article XII of
the Loan Agreement.

                                       6


                  EXECUTED as of the day and year first above written.

                                    BORROWERS:

                                    LODGIAN HOTELS FIXED III, LLC
                                    MINNEAPOLIS MOTEL ENTERPRISES, INC.

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of the
                                           entities listed above

                                    SERVICO CENTRE ASSOCIATES, LTD.

                                    By:    SERVICO PALM BEACH GENERAL
                                           PARTNER SPE, INC., a Delaware
                                           Corporation, its general partner

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary,
                                           or Authorized Signatory


                                    HOTEL MANAGER:

                                    LODGIAN MANAGEMENT CORP.,
                                    a Delaware corporation

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary



                                    EXHIBIT A

                      COPY OF FORM OF MANAGEMENT AGREEMENT

EX-10.4.6

                                                                  EXHIBIT 10.4.6

              CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT

                  This CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT,
dated as of June 25, 2004 (this "AGREEMENT"), made by LODGIAN MANAGEMENT CORP.,
a Delaware corporation, having an address at 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30826 ("HOTEL MANAGER"), and the undersigned, each having an
address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30826 (each a "BORROWER and collectively, "BORROWERS"), to and for the
benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080, its
successors, transferees and assigns ("LENDER").

                  A.       Hotel Manager has entered into a certain Management
Agreement (each a "CONTRACT" and collectively, the "CONTRACTS") with each
Borrower, a true, correct and complete copy of which has been delivered to
Lender on or prior to the date hereof and the form of which is attached hereto
as EXHIBIT A, providing for the performance by Hotel Manager of certain
management obligations more particularly described therein with respect to the
management and operation of the property as more particularly described therein
(each, a "PROPERTY" and collectively, the "PROPERTIES").

                  B.       This Agreement is being executed in order to amend
each Contract, to conditionally assign each Borrower's interest therein to
Lender, and to subordinate Hotel Manager's rights to payment under the Contracts
to Lender's lien on the Properties in connection with Lender's making a loan to
Borrowers and certain other borrowers (collectively, the "MORTGAGE BORROWERS")
in the original principal amount of up to Sixty Six Million Eight Hundred and
Eighteen Thousand Five Hundred and No/100 Dollars ($66,818,500.00) (the "LOAN")
pursuant to that certain Loan and Security Agreement, dated as of even date
herewith (as amended, modified or restated, the "LOAN AGREEMENT"), among
Mortgage Borrowers and Lender. The Loan is evidenced by a certain Promissory
Note, dated of even date herewith (as amended, modified or restated, and any
replacements or substitutes therefor (by means of multiple notes or otherwise),
the "NOTE"), made by Mortgage Borrowers in favor of Lender and is secured by,
among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt,
Assignments of Leases and Rents and Security Agreements, dated as of even date
herewith (as amended, modified, restated, spread or consolidated, collectively,
the "SECURITY INSTRUMENT"), in favor of Lender (the Note, the Security
Instrument, the Loan Agreement, this Agreement and all other documents executed
in connection with the Loan are collectively referred to as the "LOAN
DOCUMENTS"). All capitalized terms used and not defined herein shall have the
respective meanings given to such terms in the Loan Agreement, a copy of which
Hotel Manager hereby acknowledges having received.

                  NOW, THEREFORE, in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Hotel Manager and Borrowers hereby represent,
warrant and covenant to Lender as follows:



                  1.       As additional collateral security for the Loan, each
Borrower hereby conditionally transfers, sets over and assigns to Lender all of
such Borrower's right, title and interest in and to its Contract, said transfer
and assignment to automatically become a present, unconditional assignment, at
Lender's option, upon the occurrence and during the continuance of an Event of
Default by Borrowers under any of the Loan Documents.

                  2.       Hotel Manager hereby agrees that each Contract, all
rights, interests and privileges of Hotel Manager thereunder, and all management
fees and other payment obligations of each Borrower to Hotel Manager for
services rendered by Hotel Manager for the management and operation of its
Property, as such services are more particularly described in such Contract, are
hereby subordinated to the Loan Documents and the liens in favor of Lender
provided for therein, and to all rights of Lender to receive payment from
Borrowers under the Note and all other amounts which may be due Lender under the
Loan Documents. Hotel Manager recognizes and agrees that so long as the Note is
being paid in strict accordance with its terms and no Event of Default has
occurred and is continuing or will by virtue of payments to Hotel Manager occur,
Hotel Manager shall, subject to the requirements of the Loan Documents,
including any such requirements governing management and application of the
Properties and Borrower revenues and cash flow, be entitled to receive payments
provided for under such Contract in accordance with the terms thereof. Hotel
Manager hereby releases, discharges and waives any and all liens, claims,
demands of any kind or nature, against each Property, either now or in the
future, arising from the services provided by Hotel Manager for the management
and operation of such Property.

                  3.       In the event that such Borrower defaults under the
terms of its Contract, Hotel Manager agrees that before exercising any rights or
remedies with respect thereto, it will notify Lender of such default. Upon
Lender's request, Hotel Manager will continue to perform under such Contract
until such time as Lender may elect to terminate such Contract, provided that
Hotel Manager shall continue to receive all fees payable to it under such
Contract. Subject to the foregoing, Hotel Manager agrees that it shall not be
entitled to receive any management fee or other fee, commission or other amount
payable under the Contract or otherwise for and during any period of time that
any Event of Default has occurred and is continuing, provided that Hotel Manager
shall not be obligated to return or refund to Lender any management fee or other
fee, commission or other amount already received by Hotel Manager prior to the
occurrence of the Event of Default, and to which Hotel Manager was entitled
under paragraph 2 above. In all events, Hotel Manager recognizes that the
maximum amount that shall be due and payable under each Contract is the amount
stated therein (such amount being adequate to complete the services called for
in such Contract), and that Hotel Manager will not claim any incidental,
consequential, or exemplary damages of any nature as a condition to completing
its performance under the Contract.

                  4.       In the event that (a) Hotel Manager becomes
insolvent, or (b) an Event of Default occurs and is continuing, or (c) any
default occurs by Hotel Manager under the Management Agreement beyond the
expiration of any notice and cure periods, or (d) any other event occurs which,
under the terms of the Loan Documents, entitles Lender to direct Borrower to
replace Hotel Manager, Lender may exercise its rights under the Loan Documents
and direct any Borrower to terminate its Contract and/or to replace Hotel
Manager with a management

                                       2


company chosen by such Borrower and reasonably acceptable to Lender. Upon
receiving notice of any such election, Hotel Manager shall abide by such
direction to terminate and cooperate with any replacement manager approved or
designated by Lender. No termination fee or other compensation shall be due or
owing under such Contract as a result of any such termination other than accrued
unpaid fees.

                  5.       Without limiting the foregoing, subject to the second
sentence of paragraph 3 hereof, in the event Lender forecloses or otherwise
succeeds to the rights of any Borrower with respect to any Property, Lender
shall have the option upon written notice to Hotel Manager delivered within
thirty (30) days following foreclosure by Lender or other acquisition of such
Property by Lender, either to (a) terminate the applicable Contract without any
obligation or liability of Lender to pay the termination fees, if any; or (b)
continue such Contract in effect upon all of the terms and provisions provided
in such Contract, except that Lender shall have no obligation to pay any sums
due and owing under the Contract as of the date of foreclosure or other
acquisition of such Property, and Lender shall have the right after it elects to
continue such Contract under subparagraph (b) hereof to terminate such Contract
without cause upon thirty (30) days written notice to Hotel Manager without any
obligation or liability of Lender to pay the termination fees, if any other than
accrued unpaid fees. Hotel Manager acknowledges and agrees with Lender that
Lender has not assumed any obligations or liabilities of such Borrower to Hotel
Manager under such Contract. If Lender chooses not to continue any Contract
following a foreclosure or other acquisition of any Property, the only
compensation from Lender for which Hotel Manager shall be entitled under such
Contract shall be for the period commencing with the date of such foreclosure or
other acquisition and ending upon the subsequent termination by Lender of such
Contract. Notwithstanding the foregoing to the contrary, in the event Lender
forecloses or otherwise succeeds to the rights of any Borrower with respect to
its Property, upon Lender's request, Hotel Manager agrees to transfer and assign
to Lender, or its designee, to the extent possible, all applicable licenses
(including, without limitation, each liquor license and beer permit), permits
and approvals required for the use, occupancy, operation and maintenance of each
of the Property and held by or in the name of Hotel Manager, and, if requested
by Lender and permitted by applicable law, enter into such reasonable concession
or use agreements with Lender or its designee (subject to appropriate
indemnification) as are reasonably necessary to allow Lender or its designee to
offer, or cause to be offered, liquor and beer for sale at such Property. For
this purpose, Hotel Manager constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution to complete or undertake the
assignment of each of the items referenced in the preceding sentence in the name
of Hotel Manager pursuant to this paragraph 5. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked.

                  6.       Hotel Manager agrees (a) not to resign as Hotel
Manager without ninety (90) days prior written notice to Lender, and (b) not to
amend any Contract in any material respect without Lender's prior written
approval, which approval shall not be unreasonably withheld or delayed.

                  7.       Hotel Manager acknowledges and agrees that any and
all rents, room rents, credit card receipts, other receipts, profits or other
sums, including any management fees in excess of the management fees to which
Hotel Manager is entitled pursuant to paragraph 2

                                       3


hereof, and receipts derived from the sale of alcoholic beverages, to the extent
permitted by law (collectively herein called "PROPERTY PROCEEDS"), collected or
received by Hotel Manager from the Properties are subject to a security interest
of Lender pursuant to the Loan Documents, and shall be collected and held by
Hotel Manager in trust for the benefit of the applicable Borrower and Lender.
Any such Property Proceeds shall be deposited by Hotel Manager within two (2)
Business Days of receipt into a deposit account (the "DEPOSIT ACCOUNT") in the
name of the Lender and identified in that certain Deposit Account Agreement or
other similar agreement dated as of the date hereof (as amended, restated,
modified, replaced or supplemented from time to time, each, a "DEPOSIT ACCOUNT
AGREEMENT") among the applicable Borrower, Lender, Hotel Manager and the bank
named therein. Upon transfer of any such Property Proceeds to Hotel Manager from
the Lock Box Account (as defined in that certain Cash Management Agreement dated
as of even date herewith (as amended, restated, modified, replaced or
supplemented from time to time, the "CASH MANAGEMENT AGREEMENT"), among Mortgage
Borrowers, Lender, Hotel Manager and Wachovia Bank, National Association) as
directed by the applicable Borrower pursuant to Section 3.3 of the Cash
Management Agreement, such Property Proceeds shall be used by Hotel Manager for
proper expenses and costs of managing and operating the applicable Property as
permitted under the applicable Contract, subject, in all instances, to
compliance with the Operating Budget and FF&E Budget then in effect and
limitations on distributions to Borrowers, each as more fully described in the
Loan Agreement. Hotel Manager hereby disclaims any and all interests in the
Deposit Account, the Lock Box Account (and any Sub-Accounts thereof), the
Property Operating Account and in any of the Property Proceeds. Upon written
notice from Lender that an Event of Default has occurred under the Loan
Agreement and/or other Loan Documents, Hotel Manager agrees to apply Property
Proceeds as instructed by Lender.

                  8.       Hotel Manager represents and warrants that (a) a
true, correct and complete copy of each Contract has been delivered to Lender on
or prior to the date hereof, the form of which is attached hereto as EXHIBIT A,
(b) each Contract is in full force and effect and has not been modified, amended
or assigned, except in favor of Lender or its predecessor-in-interest (c)
neither Hotel Manager nor, to Hotel Manager's knowledge, any Borrower is in
default under any of the terms, covenants or provisions of its Contract, and
Hotel Manager knows of no event which, with the giving of notice or the passage
of time, or both, would constitute a default under any Contract, (d) Hotel
Manager has no knowledge of and has not commenced any action or given or
received any notice for the purpose of terminating any Contract, and (e) all
management fees, commissions and other sums due and payable to the Hotel Manager
under each Contract as of the date hereof have been paid in full.

                  9.       This Agreement shall be deemed to be a contract
entered into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of the State of New York.

                  10.      All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder shall be in
writing and shall be delivered to Lender and Borrowers at the addresses set
forth in Section 14.5 of the Loan Agreement and to Hotel Manager at the address
set forth on the first page hereof, with a copy to

                                       4


Morris Manning & Martin LLP, Attention: Tom Gryboski, Esq., Fax: (404) 365-9532,
each in the manner provided in Section 14.5 of the Loan Agreement.

                  11.      This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of Lender or any other party, but only
by an agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.

                  12.      If any term, covenant or condition of this Agreement
is held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such provision. If any conflict exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                  13.      This Agreement may be executed in any number of
duplicate originals and each duplicate original shall be deemed to be an
original. This Agreement may be executed in several counterparts, each of which
counterparts shall be deemed an original and all of which together shall
constitute a single agreement. The failure of any party hereto to execute this
Agreement, or any counterpart hereof, shall not relieve the other signatories
from their obligations hereunder.

                  14.      Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns and pronouns shall include the plural and vice versa.

                  15.      This Agreement shall be binding upon Hotel Manager
and its heirs, devisees, representatives, successors and assigns, and shall
inure to the benefit of and may be enforced by and binding upon Lender and its
heirs, successors, legal representatives, substitutes and assigns. Except as
permitted under the Loan Agreement, Hotel Manager shall not assign any of its
rights or obligations under this Agreement. Subject to the terms of the Loan
Agreement, Lender shall have the right to assign this Agreement and the
obligations hereunder in connection with any assignment or transfer of all or
any portion of the Loan or any interest therein. The parties hereto acknowledge
that following the execution and delivery of this Agreement, Lender may sell,
transfer and assign this Agreement and certain other Loan Documents. All
references to "Lender" hereunder shall be deemed to include the successors and
assigns of Lender and the parties hereto acknowledge that actions taken by
Lender hereunder may be taken by Lender's agents and by the agents of the
successors and assigns of Lender.

                  16.      This Agreement is intended solely for the benefit of
Lender and its heirs, successors, legal representatives, substitutes and
assigns, and no third party shall have any right or interest in this Agreement,
nor any right to enforce this Agreement against any party hereto.

                  17.      Hotel Manager acknowledges and agrees that pursuant
to the Loan Agreement, each Deposit Account Agreement and the Cash Management
Agreement (for purposes of this paragraph 17, collectively, the "AGREEMENTS")
(the terms, conditions and agreements of the Agreements being hereby
incorporated herein with the same force as is fully set forth herein), certain
requirements are specified with respect to the Property Proceeds and

                                       5


other payments due under any Lease (as defined in the Security Instrument) or
otherwise with respect to the Properties, and Hotel Manager covenants and agrees
to observe and, as and to the extent applicable to Hotel Manager, perform all
such requirements, including, without limitation, ensuring that all Property
Proceeds received by Hotel Manager are properly deposited into the applicable
Deposit Account.

                  18.      The obligations of Borrowers and Hotel Manager
hereunder are subject to limitations on recourse as provided in Article XII of
the Loan Agreement.

                                       6


                  EXECUTED as of the day and year first above written.

                                    BORROWERS:

                                    LODGIAN AMI, INC.
                                    LODGIAN HOTELS FIXED III, LLC

                                    By:/s/ Daniel E. Ellis
                                       -------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of the
                                           entities listed above



                                    HOTEL MANAGER:

                                    LODGIAN MANAGEMENT CORP.,
                                    a Delaware corporation

                                    By:/s/ Daniel E. Ellis
                                       -------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or



                                    EXHIBIT A

                      COPY OF FORM OF MANAGEMENT AGREEMENT

EX-10.4.7

                                                                  EXHIBIT 10.4.7

                       ASSIGNMENT OF AGREEMENTS, LICENSES,
                              PERMITS AND CONTRACTS

                  This ASSIGNMENT OF AGREEMENTS, LICENSES, PERMITS AND
CONTRACTS, dated as of June 25, 2004 (this "ASSIGNMENT"), made by the
undersigned, each having an address at c/o Lodgian, Inc., 3445 Peachtree Road,
NE, Suite 700, Atlanta, Georgia 30326 (collectively, "BORROWER"), to MERRILL
LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an address at 4
World Financial Center, New York, New York 10080 (together with its successors,
transferees and assigns, "LENDER").

                              W I T N E S S E T H:

                  WHEREAS:

                  A.       Borrower is the owner of a fee simple and leasehold
interest, as the case may be, in those certain parcels of real property
(collectively, the "PREMISES") described in EXHIBIT A attached hereto, and the
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and other improvements now or hereafter
located thereon (the "IMPROVEMENTS"; together with the Premises, collectively,
the "PROPERTY");

                  B.       Borrower and Lender have entered into a certain Loan
and Security Agreement, dated as of the date hereof (as amended, modified or
restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has
agreed to make a loan to Borrower as more particularly described below.
Capitalized terms used herein and not herein defined shall have the meanings
assigned to such terms in the Loan Agreement.

                  C.       Pursuant to the Loan Agreement, Lender is making a
Loan to Borrower in the aggregate original principal amount of up to $66,818,500
(the "LOAN"). The Loan is evidenced by a certain Promissory Note, dated as of
the date hereof (as amended, modified or restated from time to time, the "NOTE")
and secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds to
Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as
of the date hereof (as amended, modified or restated from time to time,
collectively, the "SECURITY INSTRUMENT"), with respect to the Property and
Improvements.

                  D.       To induce Lender to make the Loan and to secure
payment of the Note, together with interest thereon, Borrower has agreed to the
execution and delivery of this Assignment.

                  NOW, THEREFORE, in consideration of the sum of Ten Dollars
($10) and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the Borrower hereby absolutely grants a first
lien on and security interest in, and hereby assigns, transfers and sets over to
Lender as additional security for the payment of the Loan and the observance and
performance by the Borrower of the terms, covenants and conditions of the Loan



Documents on the part of the Borrower to be observed or performed, all of the
Borrower's right, title and interest in and to the following:

                           (a)      to the extent assignable, all of Borrower's
right, title and interest in, to and under the documents, contracts,
instruments, plans, permits, licenses (including, without limitation, all liquor
licenses and other beverage permits), approvals, applications, trade names and
trademarks (including, without limitation, any licenses of, or agreements to
license, trade names or trademarks now or hereafter entered into by or on behalf
of Borrower or Manager in connection with the operation of the Property),
insurance policies, equipment leases, purchase and sale agreements, and other
instruments described or existing with respect to the Property or any portion
thereof, and any amendments or modifications thereto, any replacements thereof
executed during the term of the Note and any other similar documents or
instruments with respect to the Property or any portion thereof, now in
existence or hereafter executed by Borrower or now in the possession of Borrower
or hereafter obtained by Borrower (collectively, the "DOCUMENTS");

                           (b)      to the extent assignable, all rights,
powers, privileges, claims, remedies and causes of action of every kind which
Borrower now has or may in the future have with respect to or by reason of its
interest in the Documents; and

                           (c)      to the extent assignable, any and all
proceeds (including non-cash proceeds) of any of the foregoing (the items
enumerated in the preceding subparagraphs (a) and (b) and in this subparagraph
(c) being hereinafter collectively referred to as the "COLLATERAL").

                  1.       This Assignment is given to secure the obligations of
Borrower under and in respect of (a) the Note and (b) the other Loan Documents.
The parties intend that this Assignment shall be a present, actual, absolute and
unconditional assignment and shall, immediately upon execution, give Lender the
right to assume Borrower's interest in the Collateral; provided, however, that
unless an Event of Default under any of the Loan Documents shall have occurred
and be continuing, Borrower shall have a license to utilize the Collateral in
accordance with the terms thereof. If an Event of Default shall have occurred
and be continuing under any of the Loan Documents, Borrower's license mentioned
in the immediately preceding sentence shall cease and terminate, without the
execution of any further instrument or document or the taking of any other act
on the part of Lender, and in such event, subject to the terms of the Loan
Agreement and the other Loan Documents, Lender shall be entitled to utilize the
Collateral in Borrower's place and stead, in the name of Borrower or otherwise,
and in furtherance thereof, subject to the terms of the Loan Agreement and the
other Loan Documents, Lender may enter upon the Property and take possession of
the Property by its officers, agents or employees, or by a court-appointed
receiver, and for the operation, protection, repair and maintenance of the
Property, and in connection therewith, Lender shall be entitled to take
possession of and use all books of account and financial records of Borrower and
its property managers or representatives relating to the Property.

                  2.       Neither this Assignment nor any action or inaction on
the part of Lender shall constitute an assumption on the part of Lender of any
duty or obligation with respect to the Collateral, nor shall Lender have any
duty or obligation to make any payment to be made by Borrower under the
Collateral, or to present or file any claim, or to take any other action to

                                      -2-


collect or enforce the payment of any amounts or the performance of any
obligations which have been assigned to Lender or to which it may be entitled
hereunder at any time or times. No action or inaction on the part of Lender
shall adversely affect or limit in any way the rights of Lender hereunder or
under the Collateral, and Lender shall not incur any liability on account of any
action taken (or not taken) by it or on its behalf in connection with the
Collateral in good faith, whether or not the same shall prove to be improper,
inadequate or invalid, in whole or in part.

                  3.       Borrower shall indemnify and hold Lender harmless
from and against any and all liabilities, losses and damages which Lender may
incur by reason of this Assignment and any actions of Lender taken (or not
taken) in connection with the Collateral, and from and against any and all
claims and demands whatsoever which may be asserted against Lender by reason of
any alleged obligations to be performed or discharged by Lender by reason of
this Assignment, and the amount thereof, including reasonable costs, expenses
and reasonable attorneys' fees and disbursements, together with interest on such
amount, at the Default Rate under the Note from the date such costs, expenses
and fees were incurred by Lender to the date of payment thereof to Lender by
Borrower, shall be secured hereby and by the other Loan Documents, and Borrower
shall reimburse Lender therefor within twenty (20) days after demand, and upon
the failure of Borrower to do so, the same shall be deemed an Event of Default
under the Loan Agreement for which Lender shall be entitled to exercise any and
all rights and remedies provided therein or at law or in equity; provided,
however, that in no event shall Borrower be required to indemnify or hold
harmless Lender for any liabilities, losses or damages resulting from Lender's
bad faith, gross negligence or willful misconduct. It is further understood that
this Assignment shall not operate to constitute Lender as a lender in possession
of the Property, or to place responsibility for the control, care, management or
repair of the Improvements upon Lender, nor shall it operate to make Lender
responsible or liable (as to Borrower) for any waste committed with respect to
the Property by any party, or for any Hazardous Material placed upon or found at
the Property, or for any dangerous or defective condition of the Improvements or
for any negligence in the management, up-keep, repair or control of the
Improvements resulting in loss, injury, death or damage to any contractor,
sub-contractor, licensee, invitee, employee, or other party, or for any other
thing or matter whatsoever.

                  4.       Borrower shall remain liable to, and shall, perform
all of its obligations under and with respect to the Collateral and shall, at
its sole cost and expense, enforce the Collateral in the ordinary course of
business and comply in all material respects with all of its obligations under
the Collateral and all the terms thereof. Borrower shall give Lender prompt
notice of any material default by any party under the Collateral. So long as (a)
Borrower is acting in the ordinary course of business, and (b) no Event of
Default has occurred and is continuing under any of the Loan Documents, except
as otherwise provided in the Loan Agreement, Borrower may alter, amend, extend,
modify, change, cancel or terminate any of the Collateral, provided that such
alterations, amendments, extensions, modifications, changes, cancellations and
terminations, taken as a whole, are not likely to result in a Material Adverse
Effect, and, except as otherwise provided in the Loan Agreement, Borrower may
enter into new Collateral on commercially reasonable terms without Lender's
prior written consent in each instance; provided, however, that Borrower shall
provide Lender with copies of any such alterations, amendments, extensions,
modifications, changes, cancellations, and terminations of

                                      -3-


the Collateral upon request of Lender unless otherwise required to be provided
pursuant to the Loan Agreement.

                  5.       Upon the occurrence and during the continuance of an
Event of Default under any of the Loan Documents, Lender shall be entitled to
all of the rights, remedies, powers and privileges available to a secured party
under the Uniform Commercial Code in any jurisdiction whose laws may apply and
this Assignment shall constitute a direction to and full authority to any person
or entity which has contracted with or is a party to any of the Documents
(collectively, the "CONTRACTING PARTIES", and individually, a "CONTRACTING
PARTY") to perform its obligations under the Documents for the benefit of Lender
without proof to any Contracting Party of the default of Borrower. In addition,
Borrower agrees that it shall, promptly upon request of Lender following such
Event of Default, execute and deliver notices to the Contracting Parties
directing that future performance of such Contracting Parties' obligations be
made at the direction of Lender. Borrower hereby irrevocably authorizes each of
the Contracting Parties to rely upon and comply with any notice or demand by
Lender for the performance by any such Contracting Party of its obligations
under any Document for the benefit of Lender, and no Contracting Party shall
have any right or duty to inquire whether an Event of Default has actually
occurred, and Borrower shall have no right to countermand its authorization
herein to the Contracting Parties to perform for the benefit of Lender.

                  6.       Borrower represents and warrants that it has full
right, power and authority, pursuant to its certificate of limited partnership
and limited partnership agreement, certificate of formation and limited
liability company agreement, or certification of incorporation and by-laws, as
the case may be, to assign the Collateral assigned hereby and that (a) to
Borrower's knowledge, the Documents in existence on the date hereof, are in full
force and effect in accordance with their respective terms, (b) Borrower has
delivered to Lender true and complete copies of the material Documents in
existence as of the date hereof, (c) neither the Collateral nor any part thereof
has been assigned, pledged or encumbered by Borrower except pursuant to this
Assignment and the other Loan Documents, (d) to Borrower's knowledge, no default
or event of default which remains uncured beyond the expiration of any
applicable grace or notice period which could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing hereunder and no Event of
Default or Default has occurred, (e) to Borrower's knowledge, none of the
Contracting Parties has any defense, set-off or counterclaim against Borrower to
the performance of any obligations of such respective Contracting Party, and (f)
its principal place of business is its address for notices as set forth in the
Loan Agreement

                  7.       Borrower, at its expense, shall execute and deliver
all such instruments and take all such action as Lender, from time to time, may
reasonably request in order to obtain the full benefits of this Assignment and
of the rights and powers herein created and to maintain and perfect the security
interest granted in this Assignment. To the extent permitted by law, Borrower
irrevocably authorizes Lender, at the expense of Borrower, to file financing
statements and continuation statements with respect to the Collateral that
Lender deems appropriate or desirable without the signature of Borrower.

                  8.       Wherever there is any conflict or inconsistency
between any terms or provisions of this Assignment and the Loan Agreement, the
terms and provisions of the Loan Agreement shall control.

                                      -4-


                  9.       All rights and remedies herein conferred may be
exercised whether or not sale proceedings are pending under the Security
Instrument or any other action or proceeding has been commenced under any of the
other Loan Documents. Lender shall not be required to resort first to the
security of this Assignment before resorting to the security of the Security
Instrument or any of the other Loan Documents and Lender may exercise the
security hereof or thereof concurrently or independently and in any order of
preference.

                  10.      This Assignment shall automatically terminate upon
payment in full of all sums due Lender under the Note, the Loan Agreement, and
the other Loan Documents, and any other indebtedness secured by the Security
Instrument.

                  11.      All notices, demands, consents, or requests which are
either required or desired to be given or furnished hereunder shall be sent and
shall be effective in the manner set forth in Section 14.5 of the Loan
Agreement.

                  12.      The provisions of this Assignment shall be binding
upon Borrower, its successors and assigns, and all persons claiming under or
through Borrower or any such successor or assign, and shall inure to the benefit
of and be enforceable by Lender and its successors and assigns. Subject to the
terms of the Loan Agreement, Lender shall have the right to assign this
Assignment and the obligations hereunder in connection with any assignment or
transfer of all or any portion of the Loan or any interest therein. The parties
hereto acknowledge that following the execution and delivery of this Assignment,
Lender may sell, transfer and assign this Assignment and certain other Loan
Documents. All references to "Lender" hereunder shall be deemed to include the
assigns of Lender and the parties hereto acknowledge that actions taken by
Lender hereunder may be taken by Lender's agents and by the agents of the
assigns of Lender.

                  13.      This Assignment shall constitute a security agreement
for all purposes under the Uniform Commercial Code as in effect in the State
where the applicable Property is located.

                  14.      This Assignment and the obligations arising hereunder
shall be governed by and construed in accordance with the laws of the State of
New York and any applicable laws of the United States of America, except that at
all times the provisions for the creation, perfection, attachment and
enforcement of the liens and the security interests created pursuant to this
Assignment shall be governed by the laws of the State where the applicable
Property is located.

                  15.      Neither this Assignment nor any provision hereof may
be changed, waived or terminated orally, but only by an instrument in writing
signed by Lender and Borrower.

                  16.      If any of the provisions of this Assignment, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Assignment, or the application
of such provision or provisions to persons or circumstances other than those to
whom or which it is held invalid or unenforceable, shall not be affected thereby
and every provision of this Assignment shall be valid and enforceable to the
fullest extent permitted by law.

                                      -5-


                  17.      The obligations of Borrower hereunder are subject to
limitations on recourse as provided in Article XII of the Loan Agreement.

                                      -6-


                  IN WITNESS WHEREOF, the Borrower has duly executed this
instrument as of the day and year first above written.

                                    BORROWERS:

                                    LODGIAN AMI, INC.
                                    LODGIAN HOTELS FIXED III, LLC
                                    MINNEAPOLIS MOTEL ENTERPRISES, INC.


                                    By:/s/ Daniel E. Ellis
                                       ------------------------------------
                                       Name:  Daniel E. Ellis
                                       Title: Vice President and Secretary, or
                                              Authorized Signatory for each of
                                              the entities listed above


                                    SERVICO CENTRE ASSOCIATES, LTD.

                                    By: SERVICO PALM BEACH
                                        GENERAL PARTNER SPE, INC.,
                                        a Delaware corporation, its
                                        general partner

                                    By:/s/ Daniel E. Ellis
                                       ------------------------------------
                                       Name:  Daniel E. Ellis
                                       Title: Vice President and Secretary,
                                              or Authorized Signatory


                                   EXHIBITS A

                                   PROPERTIES



     CHAIN/NAME                     CITY                           ST
- ---------------------      -----------------------                 --
                                                             
Courtyard by Marriott      Bentonville                             AR
Crowne Plaza               West Palm Beach                         FL
Courtyard by Marriott      Florence                                KY
Holiday Inn                Baltimore, Inner Harbor                 MD
Holiday Inn                Glen Burnie                             MD
Holiday Inn                Towson (Cromwell Bridge)                MD
Holiday Inn                Arden Hills/St. Paul                    MN
Fairfield Inn              Merrimack                               NH
Holiday Inn Sunspree       Myrtle Beach (Surfside Beach)           SC

EX-10.4.8

                                                                  EXHIBIT 10.4.8

                              COOPERATION AGREEMENT

            THIS COOPERATION AGREEMENT (this "AGREEMENT") is made as of the 25
day of June, 2004, by and between the Mortgage Borrowers listed on the signature
page hereof (collectively, the "MORTGAGE BORROWERS"), Lodgian Mezzanine Fixed,
LLC (the "MEZZANINE BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., in its
capacity as both mortgage lender and mezzanine lender ("LENDER").

                                    RECITALS:

            A.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 1
Borrowers" (collectively, the "POOL 1 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 1"), are indebted to
Lender in the original principal sum of $63,801,000 ("MORTGAGE LOAN 1") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 1 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
1").

            B.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 2
Borrowers" (collectively, the "POOL 2 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 2"), are indebted to
Lender in the original principal sum of $67,864,000 ("MORTGAGE LOAN 2") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 2 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
2").

            C.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 3
Borrowers" (collectively, the "POOL 3 BORROWERS") by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 3"), are indebted to
Lender in the original principal sum of $66,818,500 ("MORTGAGE LOAN 3") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 3 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
3").

            D.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 4
Borrowers" (collectively, the "POOL 4 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 4", and together with
Mortgage Note 1, Mortgage Note 2, and Mortgage Note 3, collectively, the
"MORTGAGE NOTES"), are indebted to Lender in the original principal sum of
$61,516,500 ("MORTGAGE LOAN 4", and together with Mortgage Loan 1, Mortgage Loan
2, and Mortgage Loan 3, collectively, the "MORTGAGE LOANS") as governed by that
certain Loan and Security Agreement of even date herewith between the Pool 4
Borrowers and Lender (together with all extensions, renewals, modifications,
substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT 4", and together
with Mortgage Loan Agreement 1, Mortgage Loan Agreement 2, and Mortgage Loan
Agreement 3, collectively, the "MORTGAGE LOAN AGREEMENTS").

[Fixed Loan]



            E.    Mortgage Loan 1, Mortgage Loan 2, Mortgage Loan 3, and
Mortgage Loan 4 are secured, in part, by Mortgages on the respective pools of
Properties identified on Schedule 2 (each, a "POOL", and collectively, the
"POOLS").

            F.    The Mezzanine Borrower, by that certain Mezzanine Note of even
date herewith given to Lender (the "MEZZANINE NOTE"), is indebted to Lender in
the aggregate principal sum of One Hundred and No/100 ($100.00) (the "MEZZANINE
LOAN") as governed by that certain Mezzanine Loan Agreement of even date
herewith between the Mezzanine Borrower and Lender (together with all
extensions, renewals, modifications, substitutions and amendments thereof, the
"MEZZANINE LOAN AGREEMENT").

            G.    Lender has required as a condition to making the Mortgage
Loans and the Mezzanine Loan that the Mortgage Borrowers and the Mezzanine
Borrower enter into this Agreement with Lender.

                                    AGREEMENT

            For ten ($10) dollars and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:

            Section 1. Adjustment of Mortgage Loans and Mezzanine Loan/Loan
Modification. Lender shall have the right in its sole discretion, at any time
prior to the final Securitization of the last of the Mortgage Loans to be
securitized, to cause any of the following to occur (each, a "LOAN
MODIFICATION"):

            (1)   separately adjust the principal amount and applicable interest
            rates of any of the Mortgage Loans and the Mezzanine Loan, provided
            that (i) the aggregate principal amount of the Mortgage Loans and
            the Mezzanine Loan immediately after such adjustment shall equal the
            aggregate outstanding principal balance of the Mortgage Loans and
            the Mezzanine Loan immediately prior to such adjustment, (ii) the
            weighted average interest rate of the Mortgage Loans and the
            Mezzanine Loan immediately after such adjustment shall equal the
            weighted average interest rate which was applicable to the Mortgage
            Loans and the Mezzanine Loan immediately prior to such adjustment,
            (iii) the aggregate debt service payments on the Mortgage Loans and
            the Mezzanine Loan immediately after such adjustment shall equal the
            aggregate debt service payments which were due under the Mortgage
            Loans and the Mezzanine Loan immediately prior to such adjustment,
            and (iv) the other material terms and provisions of each of the
            Mortgage Loans and the Mezzanine Loan shall remain unchanged and
            none of the foregoing adjustments shall increase the obligations or
            reduce the rights of the Mortgage Borrowers, the Mezzanine Borrower
            or Guarantor in any material respect; and/or

            (2)   cause any of the Properties in any one or more of the Pools to
            become Collateral for any other Pool.

Any Loan Modification shall be subject to the following:

                                        2





            (a)   (i) If Lender elects to increase the principal amount of the
Mezzanine Loan, the Mezzanine Borrower shall contribute to the Mortgage
Borrowers such additional loan proceeds to be applied to repay, dollar for
dollar, the Mortgage Notes (in an amount and as designated by Lender), and the
Lender under the Mortgage Notes will accept such prepayment without penalty,
premium or additional costs (except as provided herein) to the Mortgage
Borrowers; (ii) If Lender elects to increase the principal amount of the
Mortgage Loans, or any of them, and reduce the principal amount of the Mezzanine
Loan, the Mortgage Borrowers shall distribute to the Mezzanine Borrower such
additional loan proceeds to be applied to repay, dollar for dollar, the
Mezzanine Note, and the Lender under the Mezzanine Note will accept such
prepayment without penalty, premium or additional costs to the Mezzanine
Borrower (except as provided herein); and (iii) If Lender elects to increase the
principal amount of any of the Mortgage Loans and decrease the amount of any of
the other Mortgage Loans, the applicable Mortgage Borrowers shall distribute to
the Mezzanine Borrower such additional loan proceeds and the Mezzanine Borrower
shall contribute to the applicable Mortgage Borrowers (whose Mortgage Loans are
to be decreased) such additional loan proceeds to be applied to repay, dollar
for dollar, the applicable Mortgage Notes, and the Lender under the applicable
Mortgage Notes will accept such prepayment without penalty, premium or
additional costs to the Mortgage Borrowers (except as provided herein).

            (b)   The Mortgage Borrowers and the Mezzanine Borrower shall
cooperate, and shall cause Guarantor and any Affiliates thereof (the "LODGIAN
PARTIES") to cooperate, with all reasonable requests of Lender in connection
with any Loan Modification including, without limitation (x) execution and
delivery of such documents as shall reasonably be required by Lender in
connection therewith (including amended and restated notes, amended and restated
loan agreements, replacement Mortgages, replacement Assignments of Leases, and
ratifications by Guarantor of any of its obligations under any guaranties or
indemnities provided under the Mortgage Loan or the Mezzanine Loan), and (y)
transfers of one or more Properties among the Mortgage Borrowers, to the extent
required to comply with the terms of Article IX of the Mortgage Loan Agreements;

            (c)   The Mortgage Borrowers and the Mezzanine Borrower hereby
absolutely and irrevocably appoint Lender their true and lawful attorney coupled
with an interest, in their name and stead to make and execute all documents
necessary to effect any Loan Modification, provided, however, that Lender shall
not make or execute any such documents under such power until ten (10) days
after notice by Lender to Mortgage Borrowers and Mezzanine Borrower of such
intent to exercise its right under such power;

            (d)   At Lender's request, in connection with any Loan Modification
the Mortgage Borrowers and the Mezzanine Borrower shall deliver to Lender, at
the Mortgage Borrowers' and the Mezzanine Borrower' expense, replacement opinion
letters in form and substance similar to the opinion letters delivered on the
Closing Date addressed to any subsequent holders of any of the Mortgage Loans or
the Mezzanine Loan or any interest therein (including, without limitation, each
trustee holding any of the Mortgage Loans or the Mezzanine Loan) with respect to
any opinion letter delivered in connection with the Mortgage Loans and the
Mezzanine Loan;

                                        3






            (e)   Lender shall pay all reasonable out-of-pocket costs and
expenses incurred by the Mortgage Borrowers and the Mezzanine Borrower in
connection with a Loan Modification (other than the Mortgage Borrowers',
Mezzanine Borrower's and Guarantor's internal costs and expenses, and the costs
and expenses of their respective counsel, mortgage recording fees and taxes,
required endorsements, if any, to the Title Policies (as such term is defined in
the Mortgage Loan Agreement and the Mezzanine Loan Agreement), and Property
transfer costs).

            Section 2. Capitalized Terms; Notices. Capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Mortgage Loan Agreements. Any notices, requests, demands or other communications
required or permitted hereunder shall be delivered as specified in the Mortgage
Loan Agreements and the Mezzanine Loan Agreement.

            Section 3. Event of Default. It shall be an Event of Default under
the Mortgage Loans and the Mezzanine Loan if any of the Mortgage Borrowers, the
Mezzanine Borrower, or the Lodgian Parties fail to comply with any of the terms,
covenants or conditions of this Agreement within ten (10) Business Days after
receipt of written request from Lender.

            Section 4. Governing Law. This Agreement shall be governed,
construed, applied and enforced in accordance with the laws of the State of New
York and the applicable laws of the United States of America.

            Section 5. No Oral Change. This Agreement, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of the Mortgage
Borrowers, the Mezzanine Borrower, Guarantor, or Lender, but only by an
agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.

            Section 6. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Mortgage Borrowers, the Mezzanine Borrower,
Guarantor, and Lender and their respective successors and assigns forever.

            Section 7. Inapplicable Provisions. If any term, covenant or
condition of this Agreement is held to be invalid, illegal or unenforceable in
any respect, this Agreement shall be construed without such provision.

            Section 8. Headings, etc. The headings and captions of various
paragraphs of this Agreement are for convenience of reference only and are not
to be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.

            Section 9. Duplicate Originals, Counterparts. This Agreement may be
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. This Agreement may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Agreement. The failure of
any party hereto to execute this Agreement, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.

                         [NO FURTHER TEXT ON THIS PAGE]

                                       4





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

                                LENDER:

                                MERRILL LYNCH MORTGAGE
                                LENDING, INC.

                                By: /s/ Robert Spinna
                                    ---------------------------
                                Name: Robert Spinna
                                Title: Vice President

                                        [signatures continue on next page]

[Fixed Loan]]



                                MEZZANINE BORROWER:

                                LODGIAN MEZZANINE FIXED, LLC

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name: Daniel E. Ellis
                                Title: Vice President and Secretary

                                MORTGAGE BORROWERS:

                                IMPAC HOTELS I, L.L.C.
                                LODGIAN DENVER LLC
                                LODGIAN HOTELS FIXED I, LLC
                                MACON HOTEL ASSOCIATES, L.L.C.
                                SERVICO NORTHWOODS, INC.

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of
                                       the entities listed above

                                ALBANY HOTEL, INC.
                                APICO INNS OF GREEN TREE, INC.
                                LODGIAN AUGUSTA LLC
                                LODGIAN HOTELS FIXED II, INC.
                                LODGIAN LAFAYETTE LLC
                                LODGIAN TULSA LLC

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above



                                AMI OPERATING PARTNERS, L.P.

                                By: AMIOP ACQUISITION GENERAL
                                    PARTNER SPE CORP., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                DEDHAM LODGING ASSOCIATES I, LIMITED
                                PARTNERSHIP

                                By:   DEDHAM LODGING SPE, INC., a Delaware
                                      corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                LODGIAN AMI, INC.
                                LODGIAN HOTELS FIXED III, LLC
                                MINNEAPOLIS MOTEL ENTERPRISES, INC.

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above



                                SERVICO CENTRE ASSOCIATES, LTD.

                                By: SERVICO PALM BEACH GENERAL
                                    PARTNER SPE, INC., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                LODGIAN FAIRMONT LLC
                                NH MOTEL ENTERPRISES, INC.
                                SERVICO COLUMBIA, INC.
                                SERVICO HOUSTON, INC.

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

                                LITTLE ROCK LODGING ASSOCIATES I,
                                LIMITED PARTNERSHIP

                                By: LODGIAN LITTLE ROCK SPE, INC.,
                                    a Delaware corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory



                                LODGIAN HOTELS FIXED IV, L.P.

                                By: LODGIAN HOTELS FIXED IV GP, INC.,
                                    a Delaware corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                GUARANTOR:

                                LODGIAN, INC.

                                By: /s/ Daniel E. Ellis
                                    ---------------------------
                                Name:  Daniel E. Ellis
                                Title: Senior Vice President



                                   SCHEDULE 1

                               MORTGAGE BORROWERS

Pool 1 Borrowers

Lodgian Hotels Fixed I, LLC
Macon Hotel Associates, L.L.C.
Servico Northwoods, Inc.
Impac Hotels I, L.L.C.
Lodgian Denver LLC

Pool 2 Borrowers

AMI Operating Partners, L.P.
Albany Hotel, Inc.
Apico Inns of Green Tree, Inc.
Lodgian Tulsa LLC
Lodgian Augusta LLC
Lodgian Lafayette LLC
Dedham Lodging Associates I, Limited Partnership
Lodgian Hotels Fixed II, Inc.

Pool 3 Borrowers

Minneapolis Motel Enterprises, Inc.
Servico Centre Associates, Ltd.
Lodgian Hotels Fixed III, LLC -
Lodgian AMI, Inc.

Pool 4 Borrowers

NH Motel Enterprises, Inc.
Servico Columbia, Inc.
Lodgian Fairmont LLC
Little Rock Lodging Associates I, Limited Partnership
Lodgian Hotels Fixed IV, L.P.
Servico Houston, Inc.

[Fixed Loan]



                                   SCHEDULE 2

                                   PROPERTIES

Pool 1
Marriott  - Aurora
Courtyard by Marriott - Atlanta
Doubletree Club - Philadelphia
Holiday Inn Select - Strongsville
Crowne Plaza - Macon
Holiday Inn - Marietta
Holiday Inn - Lancaster
Clarion - North Charleston

Pool 2
Crowne Plaza - Albany
Holiday Inn - Linthicum
Residence Inn - Dedham
Courtyard by Marriott  - Tulsa
Courtyard by Marriott  - Lafayette
Holiday Inn - Pittsburgh
Marriott Fairfield Inn  - Augusta
Holiday Inn - York
Holiday Inn - E. Hartford

Pool 3
Holiday Inn - Baltimore
Crowne Plaza - West Palm Beach
Holiday Inn - Glen Burnie
Courtyard by Marriott - Bentonville
Holiday Inn - Towson
Holiday Inn - St. Paul
Courtyard by Marriott - Florence
Holiday Inn SunSpree - Surfside Beach
Marriott Fairfield Inn - Merrimack

Pool 4
Crowne Plaza - Houston
Hilton  - Columbia
Hilton  - Troy
Holiday Inn Select - Irving
Residence Inn - Little Rock
Holiday Inn - Frederick
Courtyard by Marriott - Paducah
Courtyard by Marriott - Abilene
Holiday Inn  - Fairmont

EX-10.4.9

                                                                  EXHIBIT 10.4.9

                            CASH MANAGEMENT AGREEMENT

                           Dated: as of June 25, 2004

                                      among

                                  THE BORROWERS
                      LISTED ON THE SIGNATURE PAGES HERETO,
                                  as Borrowers,

                      MERRILL LYNCH MORTGAGE LENDING, INC.

                                   as Lender,

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                                    as Agent

                                       and

                LODGIAN MANAGEMENT CORP., a Delaware corporation,
                                   as Manager


Cash Management Agreement (FX3)


                            CASH MANAGEMENT AGREEMENT

            CASH MANAGEMENT AGREEMENT (this "AGREEMENT"), dated as of June 25,
2004, among the Borrowers listed on the signature pages hereto, each having an
address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia
30326 (each, a "BORROWER", and collectively, "BORROWERS"), WACHOVIA BANK,
NATIONAL ASSOCIATION, having an address at 8739 Research Drive, URP4, Charlotte,
North Carolina 28288-1075 ("AGENT"), MERRILL LYNCH MORTGAGE LENDING, INC., a
Delaware corporation having an office at Four World Financial Center, New York,
New York 10080 ("LENDER"), and LODGIAN MANAGEMENT CORP., a Delaware corporation,
having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30326 ("MANAGER").

                              W I T N E S S E T H:

            WHEREAS, pursuant to a certain Loan and Security Agreement, dated as
of the date hereof (together with all extensions, renewals, modifications,
substitutions and amendments thereof, the "LOAN AGREEMENT"), between the
Borrowers and Lender, Lender has made a loan to the Borrowers in the principal
amount of Sixty Six Million Eight Hundred and Eighteen Thousand Five Hundred and
No/100 Dollars ($66,818,500.00) (the "LOAN"), which Loan is evidenced by a
Promissory Note, dated as of the date hereof (together with all extensions,
renewals, modifications, restatements, replacements, substitutions, by means of
multiple notes or otherwise, and amendments thereof, collectively, the "NOTE"),
made by the Borrowers, as makers, to Lender, as payee, and secured by, among
other things, (i) those certain Mortgages/Deeds of Trust/Deeds to Secure Debt,
Assignments of Leases and Rents, Security Agreements and Fixture Filings, each
dated as of the date hereof (together with all extensions, renewals,
modifications, restatements, substitutions and amendments thereof, each a
"SECURITY INSTRUMENT" and, collectively, the "SECURITY INSTRUMENTS"), each made
by a Borrower for the benefit of Lender and covering the properties as more
particularly described therein (collectively, the "PROPERTIES"), (ii) those
certain Assignments of Leases and Rents, dated as of the date hereof (together
with all extensions, renewals, modifications, restatements, substitutions and
amendments thereof, collectively, the "ASSIGNMENT OF LEASES"), made by the
applicable Borrower, as assignor, to Lender, as assignee, and (iii) the other
Loan Documents (as defined in the Loan Agreement);

            WHEREAS, pursuant to the Security Instruments and the Assignment of
Leases, the Borrowers have each granted to Lender a security interest in all of
the Borrowers' right, title and interest in, to and under the Rents (as defined
in the Security Instruments) and other revenues derived from and otherwise
attributable or allocable to the Properties, and have assigned and conveyed to
Lender all of the Borrowers' right, title and interest in, to and under the
Operating Revenues due and to become due to each of the Borrowers or to which
any of the Borrowers are now or may hereafter become entitled, arising out of
the Property or any part or parts thereof;

Cash Management Agreement (FX3)



            WHEREAS, the Borrowers and Manager have entered into Management
Agreements with respect to the Properties pursuant to which Manager has agreed
to manage the Properties; and

            WHEREAS, Manager has agreed to subordinate any right, title and
interest that Manager may have in and to the Operating Revenues and any other
income and revenues from the Properties to the interests of Lender under the
Loan Agreement and the Loan Documents; and

            WHEREAS, in order to fulfill all of the Borrowers' obligations under
the Loan Agreement, the Borrowers and Manager have agreed that all Operating
Revenues and other revenues from the Properties will be deposited directly into
the Deposit Account or the Lock Box Account (as such terms are hereinafter
defined), transferred to a Lock Box Account (if not deposited directly therein)
established hereunder with Agent and allocated and/or disbursed in accordance
with the terms and conditions hereof.

            NOW, THEREFORE, in consideration of the covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

            I.    DEFINITIONS

            Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Loan Agreement. As used herein, the following terms
shall have the following definitions:

            "ACCOUNTS" shall mean, collectively, the Deposit Account, the Lock
Box Account, the Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds
Account, and any other accounts pledged to Lender pursuant to this Agreement or
any of the other Loan Documents.

            "AGENT" shall mean Wachovia Bank, National Association, as agent
under this Agreement, together with its successors and assigns.

            "AGREEMENT" shall mean this Cash Management Agreement among the
Borrowers, Manager, Agent and Lender, as amended, supplemented, restated or
otherwise modified from time to time.

            "ALLOCABLE MEZZANINE SERVICING FEE" shall mean the Allocable Portion
of the monthly Servicing Fee (as defined in the Mezzanine Loan Agreement) for
which the Mezzanine Borrower is responsible pursuant to Section 2.11 of the
Mezzanine Loan Agreement.

            "ALLOCABLE PORTION" as defined in the Loan Agreement.

            "APPROVED OPERATING BUDGET" shall mean, for any period, each
Borrower's Operating Budget as approved or deemed approved by Lender from time
to time in accordance with Section 5.1(D) of the Loan Agreement, setting forth
such Borrower's reasonable estimate of Operating Revenues and Operating Expenses
for the applicable Property for such period.

                                        2
Cash Management Agreement (FX3)


            "BORROWERS" as defined in the Preamble, together with their
successors and permitted assigns.

            "BUSINESS INTERRUPTION INSURANCE" as defined in Section 2.1(d).

            "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" as defined in Section
2.1(c).

            "CASH TRAP EVENT" as defined in Section 6.8 of the Loan Agreement.

            "CASH TRAP RESERVE SUB-ACCOUNT" as defined in Section 2.1(c).

            "COLLATERAL" as defined in Section 5.1.

            "CREDIT CARD COMPANIES" as defined in Section 2.2(a).

            "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" as defined in
Section 2.2(a).

            "DEBT SERVICE SUB-ACCOUNT" as defined in Section 2.1(c).

            "DEPOSIT ACCOUNT" as defined in Section 2.1(a).

            "DEPOSIT ACCOUNT AGREEMENT" as defined in Section 2.1(a).

            "DEPOSIT BANK" as defined in Section 2.1(a).

            "ELIGIBLE ACCOUNT" shall mean a separate and identifiable account
from all other funds held by the holding institution, which account is either
(i) an account maintained with an Eligible Bank or (ii) a segregated trust
account maintained by a corporate trust department of a federal depository
institution or a state chartered depository institution subject to regulations
regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulation Section 9.10(b), which, in either case, has corporate trust powers
and is acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.

            "ELIGIBLE BANK" shall mean a bank that satisfies the Rating
Criteria.

            "EXCESS CASH FLOW" means any and all amounts available for
distribution in any calendar month after allocations and/or distribution of all
amounts required to be allocated under Sections 3.3(a)(i) through (ix) hereof.

            "EXTRAORDINARY EXPENSES" shall mean any extraordinary Operating
Expense or Capital Expenditure not set forth in the Approved Operating Budget
then in effect for the Property.

            "EXTRAORDINARY RECEIPTS" shall mean any receipts of the Borrowers
not included within the definition of Operating Revenues under the Loan
Agreement, including, without limitation, receipts from litigation proceedings
and tax certiorari proceedings.

            "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" as defined in Section 2.1(e).

                                       3

Cash Management Agreement (FX3)



            "FF&E RESERVE ACCOUNT" as defined in Section 2.1(f).

            "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

            "IMPOSITIONS AND INSURANCE RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

            "LENDER" shall mean Merrill Lynch Mortgage Lending, Inc., together
with its successors and assigns.

            "LOCK BOX ACCOUNT" as defined in Section 2.1(b).

            "LOSS PROCEEDS ACCOUNT" as defined in Section 2.1(d).

            "MANAGER" shall mean Lodgian Management Corp., together with its
successors and permitted assigns.

            "MEZZANINE BORROWER" as defined in the Loan Agreement.

            "MEZZANINE LENDER" as defined in the Loan Agreement.

            "MEZZANINE LOAN" as defined in the Loan Agreement.

            "MEZZANINE LOAN AGREEMENT" means that certain Mezzanine Loan
Agreement dated as of the date hereof, between Mezzanine Lender and Mezzanine
Borrower.

            "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" as defined in Section
2.1(c).

            "MEZZANINE SERVICER" means the Servicer as such term is defined in
the Mezzanine Loan Agreement.

            "MINIMUM BALANCE" as defined in Section 2.1(g).

            "MINIMUM BALANCE SUB-ACCOUNT" as defined in Section 2.1(c).

            "MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean the monthly payment
of principal and interest on the Loan required to be paid on each Monthly
Payment Date during the term of the Loan.

            "MONTHLY FF&E PAYMENT" shall mean the monthly deposit required to be
made to the FF&E Reserve pursuant to Section 6.4 of the Loan Agreement for any
month provided that if at the time of determination thereof the actual Operating
Revenues utilized in calculating the Monthly FF&E Payment have not been
determined for the prior calendar month (the "Measurement Month"), such
calculation shall be based upon the Operating Revenues set forth for the
Measurement Month in the applicable Operating Budget (the "Estimated Monthly
FF&E Payment"), and, upon determination of the actual Operating Revenues for the
Measurement Month, funds from the Lock Box Account in an amount equal to any
deficit between the Estimated Monthly FF&E Payment and the Monthly FF&E Payment
required to be allocated to

                                        4

Cash Management Agreement (FX3)



the FF&E Reserve based upon the actual Operating Revenues for the Measurement
Month, shall be allocated (or if funds available in the Lock Box Account and not
otherwise required to be deposited in any other Sub-Account for the applicable
month are not sufficient to cover such deficit, paid by the Borrowers) to the
FF&E Reserve within five (5) Business Days of such determination. Any excess of
the Estimated Monthly FF&E Payment allocated to the FF&E Reserve for the
applicable month over the Monthly FF&E Payment based upon the actual Operating
Revenues for the Measurement Month shall be made available for allocation to the
other Sub-Accounts or disbursed in accordance with Section 3.3(a) hereof.

            "MONTHLY IMPOSITIONS AND INSURANCE AMOUNT" shall mean the aggregate
monthly deposit for Impositions and Insurance Premiums required to be paid
pursuant to Section 6.3 of the Loan Agreement.

            "MONTHLY MEZZANINE DEBT SERVICE PAYMENT AMOUNT" shall mean the
Allocable Portion of the monthly payment of principal and interest on the
Mezzanine Loan required to be paid on each Monthly Payment Date to Mezzanine
Lender.

            "MONTHLY OPERATING EXPENSE BUDGET AMOUNT" shall mean, with respect
to each month, an amount equal to the Operating Expenses plus estimated sales,
use, occupancy and similar taxes relating to the Properties (excluding therefrom
Impositions, Insurance Premiums, FF&E expenditures, and management fees payable
to any Manager that is an Affiliate of the Borrowers) set forth in the Approved
Operating Budget for the applicable month of determination.

            "MONTHLY PAYMENT DATE" means the first (1st) day of each calendar
month occurring during the term of the Loan (or if such day is not a Business
Day, the immediately succeeding Business Day).

            "OPERATING EXPENSES" as defined in the Loan Agreement.

            "OPERATING EXPENSE SUB-ACCOUNT" as defined in Section 2.1(c).

            "OPERATING REVENUES" as defined in the Loan Agreement.

            "PERMITTED INVESTMENTS" shall mean any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
including those issued by any Servicer, the trustee under any Securitization or
any of their respective Affiliates, payable on demand or having a maturity date
not later than the Business Day immediately prior to the date on which the
invested sums are required for payment of an obligation for which the related
Sub-Account was created and meeting one of the appropriate standards set forth
below:

                  (i) obligations of, or obligations fully guaranteed as to
      payment of principal and interest by, the United States or any agency or
      instrumentality thereof, provided such obligations are backed by the full
      faith and credit of the United States of America including, without
      limitation, obligations of: the U.S. Treasury (all direct or fully
      guaranteed obligations), the Farmers Home Administration (certificates of
      beneficial ownership), the General Services Administration (participation
      certificates), the U.S. Maritime Administration (guaranteed Title XI
      financing), the Small Business

                                        5

Cash Management Agreement (FX3)



      Administration (guaranteed participation certificates and guaranteed pool
      certificates), the U.S. Department of Housing and Urban Development (local
      authority bonds) and the Washington Metropolitan Area Transit Authority
      (guaranteed transit bonds); provided, however, that the investments
      described in this clause (i) must (A) have a predetermined fixed dollar
      amount of principal due at maturity that cannot vary or change, (B) if
      rated by S&P, not have an "r" highlighter affixed to their rating, (C) if
      such investments have a variable rate of interest, have an interest rate
      tied to a single interest rate index plus a fixed spread (if any) and must
      move proportionately with that index, and (D) not be subject to
      liquidation prior to their maturity;

                  (ii) Federal Housing Administration debentures;

                  (iii) obligations of the following United States government
      sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations),
      the Farm Credit System (consolidated systemwide bonds and notes), the
      Federal Home Loan Banks (consolidated debt obligations), the Federal
      National Mortgage Association (debt obligations), the Student Loan
      Marketing Association (debt obligations), the Financing Corp. (debt
      obligations), and the Resolution Funding Corp. (debt obligations);
      provided, however, that the investments described in this clause (iii)
      must (A) have a predetermined fixed dollar amount of principal due at
      maturity that cannot vary or change, (B) if rated by S&P, not have an "r"
      highlighter affixed to their rating, (C) if such investments have a
      variable rate of interest, have an interest rate tied to a single interest
      rate index plus a fixed spread (if any) and must move proportionately with
      that index, and (D) not be subject to liquidation prior to their maturity;

                  (iv) federal funds, unsecured certificates of deposit, time
      deposits, bankers' acceptances and repurchase agreements with maturities
      of not more than 365 days of any bank, the short term obligations of which
      at all times are rated in the highest short term rating category by each
      Rating Agency (or, if not rated by all Rating Agencies, rated by at least
      one Rating Agency in the highest short term rating category and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investment would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of certificates or other securities issued
      in connection with any Securitization backed in whole or in part by the
      Loan (collectively the "CERTIFICATES"); provided, however, that the
      investments described in this clause (iv) must (A) have a predetermined
      fixed dollar amount of principal due at maturity that cannot vary or
      change, (B) if rated by S&P, not have an "r" highlighter affixed to their
      rating, (C) if such investments have a variable rate of interest, have an
      interest rate tied to a single interest rate index plus a fixed spread (if
      any) and must move proportionately with that index, and (D) not be subject
      to liquidation prior to their maturity;

                  (v) fully Federal Deposit Insurance Corporation-insured demand
      and time deposits in, or certificates of deposit of, or bankers'
      acceptances issued by, any bank or trust company, savings and loan
      association or savings bank, the short term obligations of which at all
      times are rated in the highest short term rating category by each Rating
      Agency (or, if not rated by all Rating Agencies, rated by at least one
      Rating

                                        6

Cash Management Agreement (FX3)



      Agency in the highest short term rating category and otherwise acceptable
      to each other Rating Agency, as confirmed in writing that such investment
      would not, in and of itself, result in a downgrade, qualification or
      withdrawal of the initial or, if higher, then current ratings assigned to
      any class of Certificates); provided, however, that the investments
      described in this clause (v) must (A) have a predetermined fixed dollar of
      principal due at maturity that cannot vary or change, (B) if rated by S&P,
      not have a "r" highlighter affixed to their rating, (C) if such
      investments have a variable rate of interest, have an interest rate tied
      to a single interest rate index plus a fixed spread (if any) and must move
      proportionately with that index, and (D) not be subject to liquidation
      prior to their maturity;

                  (vi) debt obligations with maturities of not more than 365
      days and at all times rated by each Rating Agency (or, if not rated by all
      Rating Agencies, rated by at least one Rating Agency and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investments would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to the Certificates) in its highest long-term unsecured
      debt rating category; provided, however, that the investments described in
      this clause (vi) must (A) have a predetermined fixed dollar amount of
      principal due at maturity that cannot vary or change, (B) if rated by S&P,
      not have an "r" highlighter affixed to their rating, (C) if such
      investments have a variable rate of interest, have an interest rate tied
      to a single interest rate index plus a fixed spread (if any) and must move
      proportionately with that index, (D) not be subject to liquidation prior
      to their maturity, and (E) if such investment has a maturity of (1) less
      than one month, have a long-term rating of at least "A2" by Moody's, (2)
      up to three months, have a long-term rating of at least "Aa" by Moody's,
      (3) up to six months, have a long-term rating of at least "Aa3" by
      Moody's, and (4) over six months, have a long-term rating of at least
      "Aaa" by Moody's;

                  (vii) commercial paper (including both non-interest-bearing
      discount obligations and interest-bearing obligations payable on demand or
      on a specified date not more than one year after the date of issuance
      thereof) with maturities of not more than 365 days and that at all times
      is rated by each Rating Agency (or, if not rated by all Rating Agencies,
      rated by at least one Rating Agency and otherwise acceptable to each other
      Rating Agency, as confirmed in writing that such investment would not, in
      and of itself, result in a downgrade, qualification or withdrawal of the
      initial or, if higher, then current ratings assigned to any class of
      Certificates) in its highest short-term unsecured debt rating; provided,
      however, that the investments described in this clause (vii) must (A) have
      a predetermined fixed dollar amount of principal due at maturity that
      cannot vary or change, (B) if rated by S&P, not have a "r" highlighter
      affixed to their rating, (C) if such investments have a variable rate of
      interest, have an interest rate tied to a single interest rate index plus
      a fixed spread (if any) and must move proportionately with that index, and
      (D) not be subject to liquidation prior to their maturity;

                  (viii) units of taxable money market funds or mutual funds,
      which funds are regulated investment companies, seek to maintain a
      constant net asset value per share and have the highest rating from each
      Rating Agency (or, if not rated by all Rating Agencies, rated by at least
      one Rating Agency and otherwise acceptable to each other

                                        7

Cash Management Agreement (FX3)


      Rating Agency, as confirmed in writing that such investment would not, in
      and of itself, result in a downgrade, qualification or withdrawal of the
      initial or, if higher, then current ratings assigned to any class of
      Certificates) for money market funds or mutual funds; and

                  (ix) any other security, obligation or investment which has
      been approved as a Permitted Investment in writing by (a) Lender and (b)
      each Rating Agency, as evidenced by a written confirmation that the
      designation of such security, obligation or investment as a Permitted
      Investment will not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of Certificates by such Rating Agency;

provided, however, that such instrument continues to qualify as a "CASH FLOW
INVESTMENT" pursuant to Code Section 860G(a)(6) earning a passive return in the
nature of interest and no obligation or security shall be a Permitted Investment
if (A) such obligation or security evidences a right to receive only interest
payments or (B) the right to receive principal and interest payments on such
obligation or security are derived from an underlying investment that provides a
yield to maturity in excess of 120% of the yield to maturity at par of such
underlying investment; and provided, further, no obligation or security, other
than an obligation or security constituting real estate assets, cash, cash items
or Government securities pursuant to Code Section 856(c)(4)(A), shall be a
Permitted Investment if the value of such obligation or security exceeds ten
percent (10%) of the total value of the outstanding securities of any one
issuer.

            "RATING CRITERIA" with respect to any Person, shall mean that (i)
the short-term unsecured debt obligations of such Person are rated at least
"A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such
Person for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa3" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.

            "SERVICING FEE" shall mean the monthly Servicing Fee (as defined in
the Loan Agreement) for which the Borrowers are responsible under Section 2.11
of the Loan Agreement.

            "SUB-ACCOUNTS" shall mean, collectively, the Debt Service
Sub-Account, the Impositions and Insurance Reserve Sub-Account, the Mezzanine
Loan Debt Service Sub-Account, the Capital Improvement Reserve Sub-Account, the
Hazardous Materials Remediation Reserve Sub-Account, the Extraordinary Receipts
Sub-Account, the Cash Trap Reserve Sub-Account, the Operating Expense
Sub-Account, the Minimum Balance Sub-Account and any other sub-accounts of the
Lock Box Account which may hereafter be established by Lender hereunder.

            "UCC" as defined in Section 5.1(a)(iv).

                                        8

Cash Management Agreement (FX3)



            II.   THE ACCOUNTS

            SECTION 2.1 ESTABLISHMENT OF DEPOSIT ACCOUNT, LOCK BOX ACCOUNT AND
SUB-ACCOUNTS.

            (a) DEPOSIT ACCOUNT. On or before the Closing Date, one or more
deposit accounts (collectively, the "DEPOSIT ACCOUNT") shall be established at
the Borrowers' sole cost and expense with financial institutions approved by
Lender (collectively, the "DEPOSIT BANK"), each pursuant to an agreement
(collectively, the "DEPOSIT ACCOUNT AGREEMENT") in form and substance reasonably
acceptable to Lender, executed and delivered by each Borrower and the applicable
Deposit Bank. Among other things, the Deposit Account Agreement shall provide
that the Borrowers shall have no access to or control over the Deposit Account,
and that all available funds on deposit in the Deposit Account shall be
deposited by wire transfer (or transfer via the ACH System) on each Business Day
by the Deposit Bank into the Lock Box Account.

            (b) LOCK BOX ACCOUNT. On or before the Closing Date, an Eligible
Account shall be established with Agent for the purposes specified herein, which
shall be entitled "Lock Box Account for the benefit of Merrill Lynch Mortgage
Lending, Inc., its successors and assigns, as secured party" (said account, and
any account replacing the same in accordance with this Agreement, the "LOCK BOX
ACCOUNT"). The Lock Box Account shall be under the sole dominion and control of
Lender and/or its designee, including any Servicer of the Loan, and the
Borrowers shall have no rights to control or direct the investment or payment of
funds therein except as may be expressly provided herein.

            Any amounts that Lender may hold in reserve pursuant to the Loan
Agreement may be held by Lender in the Lock Box Account (including in a
Sub-Account thereof) or may be held in another account or manner as specified in
Articles VI or VII of the Loan Agreement.

            (c) SUB-ACCOUNTS OF THE LOCK BOX ACCOUNT. The Lock Box Account shall
be deemed to contain, among others, the following Sub-Accounts (which may be
maintained as separate ledger accounts):

                  (i) "DEBT SERVICE SUB-ACCOUNT" shall mean the Sub-Account
      established for the purpose of depositing the amounts required for
      payments of principal and interest under the Loan and all other amounts
      then due under the Note and the Loan Agreement;

                  (ii) "IMPOSITION AND INSURANCE RESERVE SUB-ACCOUNT" shall mean
      the Sub-Account established for the purpose of depositing the sums
      required to be deposited pursuant to Section 6.3 of the Loan Agreement;

                  (iii) "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the sums required to
      be deposited pursuant to Section 6.5 of the Loan Agreement;

                  (iv) "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT"
      shall mean the Sub-Account established for the purpose of depositing sums
      required to be deposited pursuant to Section 6.6 of the Loan Agreement;

                                        9

Cash Management Agreement (FX3)



                  (v) "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the amounts required
      for payments of the Monthly Mezzanine Debt Service Payment Amount;

                  (vi) "CASH TRAP RESERVE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing Excess Cash Flow
      when required to be deposited pursuant to Section 6.8 of the Loan
      Agreement;

                  (vii) "OPERATING EXPENSE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the Monthly
      Operating Expense Budget Amount, Extraordinary Expenses approved by
      Lender, if any, and fees due to the Manager; and

                  (viii) "MINIMUM BALANCE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing and maintaining the
      Minimum Balance as and to the extent required under Section 2.1(g)
      hereof..

            (d) If the proceeds of any business interruption or rent loss
insurance maintained under Section 5.4 of the Loan Agreement (any such
insurance, "BUSINESS INTERRUPTION INSURANCE") paid upon the occurrence of any
fire or casualty to any Property shall be paid in a lump sum (rather than on a
monthly basis), the Borrowers and Lender shall establish a separate Eligible
Account with Agent hereunder entitled "Loss Proceeds Account for the benefit of
Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as secured
party" (said account, the "LOSS PROCEEDS ACCOUNT") for deposit of such Business
Interruption Insurance proceeds and such proceeds shall be held, allocated and
disbursed in accordance with the terms and conditions hereof and of the Loan
Agreement. The Loss Proceeds Account shall be under the sole dominion and
control of Lender and/or its designee, including any Servicer of the Loan, and
the Borrowers shall have no rights to control or direct the investment or
payment of funds therein except as expressly provided herein.

            (e) If any Extraordinary Receipts are received by any Borrower, such
amounts shall be paid to the Lock Box Account to be retained in a subaccount
thereof (the "EXTRAORDINARY RECEIPTS SUB-ACCOUNT"). Amounts held in the
Extraordinary Receipts Sub-Account shall be disbursed to the Lock Box Account
and allocated and distributed in accordance with Section 3.3 upon receipt by
Lender of evidence reasonably satisfactory to Lender that (x) with respect to
Extraordinary Receipts received in connection with any pending litigation,
action, or similar matter, such action has been concluded in favor of the
Borrowers and no appeal has been timely filed within the applicable appeal
period, (y) with respect to Extraordinary Receipts received with respect to work
at, or other conditions with respect to, any of the Properties, the item of work
or other condition has been completed or corrected and paid for to the
reasonable satisfaction of Lender, and (z) with respect to Extraordinary
Receipts received in any other circumstance, the Borrowers are not liable
directly, or indirectly, to refund or repay any such amounts; provided however,
all Extraordinary Receipts with respect to lease termination payments, advance
booking terminations, and similar payments or fees, shall be retained in the
Extraordinary Receipts Sub-Account and disbursed in equal monthly installments
during the period of time for which such payments relate in accordance with
Section 3.3. The

                                       10

Cash Management Agreement (FX3)



Extraordinary Receipts Sub-Account shall be under the sole dominion and control
of Lender and/or its designee, including any Servicer of the Loan, and the
Borrowers shall have no rights to control or direct the investment or payment of
funds therein except as expressly provided herein.

            (f) On or before the Closing Date, the Borrowers shall establish a
separate Eligible Account hereunder entitled "FF&E Reserve Account for the
benefit of Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as
secured party" (said account, the "FF&E RESERVE ACCOUNT") with Agent for the
purpose of depositing Monthly FF&E Reserve Payments pursuant to Section 6.4 of
the Loan Agreement, to be held, allocated and disbursed in accordance with the
terms and conditions hereof and of the Loan Agreement. The FF&E Reserve Account
shall be under the sole dominion and control of Lender and/or its designee,
including any Servicer of the Loan, and the Borrowers shall have no rights to
control or direct the investment or payment of funds therein except as expressly
provided herein and in the Loan Agreement. Notwithstanding the foregoing, the
Borrowers shall, in accordance with the terms of this Agreement and the Loan
Agreement, have access to and the right to withdraw funds held in the FF&E
Reserve Account on or prior to (x) the occurrence and during the continuance of
an Event of Default, or (y) the failure of the Borrowers or Manager to comply
with the reporting requirements set forth in Section 5.1(A)(v) of the Loan
Agreement, at which time Agent, upon receipt of notice from Lender, shall (i)
cease to honor checks drawn by Manager or any Borrower on the FF&E Reserve
Account, (ii) cease to disburse funds from the FF&E Reserve Account to either
the Manager or the Borrowers except in accordance with written instructions
received from Lender, and (iii) deposit the amounts in the FF&E Reserve Account,
together with any funds from time to time held or deposited or received into the
FF&E Reserve Account, in accordance with Lender's instructions from time to time
on the day such instructions are received, if such instructions are received
prior to 12:00 p.m. on such day, or, if received after 12:00 p.m., on the
following Business Day. Neither the Borrowers nor Manager shall withdraw any
funds from the FF&E Reserve Account in violation of this Agreement or the Loan
Agreement.

            (g) Upon the occurrence and during the continuance of a Cash Trap
Event or an Event of Default, the Borrowers shall be required to deposit, from
and at the time of the allocations from the Lock Box Account pursuant to Section
3.3(a)(ix) hereof, and maintain in the Minimum Balance Sub-Account an amount
equal to $50,000 (the "MINIMUM BALANCE"). In the event that, during the
continuance of a Cash Trap Event, funds available in a Deposit Account are
insufficient to pay the amount of any checks deposited into such Deposit Account
which are returned for insufficient or uncollected funds (collectively
"CHARGEBACKS"), and such Chargebacks are required to be paid by the applicable
Borrower to the applicable Deposit Account Bank pursuant to the terms of the
applicable Deposit Account Agreement, provided that no Event of Default exists,
funds shall be made available from the Minimum Balance Sub-Account to the
applicable Borrower to pay the amount of such Chargebacks due to such Deposit
Account Bank (or to reimburse the applicable Borrower for any such amounts as
may have been previously paid by or on behalf of such Borrower from other funds
on account of any Chargebacks at a time when insufficient amounts were available
therefor in the Minimum Balance Sub-Account) promptly after delivery to Lender
of evidence reasonably satisfactory to Lender that such amounts are due (or have
been paid by or on behalf of the applicable Borrower). In the event that during
a Cash Trap Event, as a result of any such disbursement or otherwise, the
Minimum Balance Sub-Account shall contain less than the Minimum Balance, the

                                       11

Cash Management Agreement (FX3)



Borrowers shall be required to deposit such deficiency from and at the time of
allocations from the Lock Box Account pursuant to Section 3.3(a)(ix) hereof.

            SECTION 2.2 DEPOSITS INTO ACCOUNTS. The Borrowers and Manager
represent, warrant and covenant that:

            (a) Each Borrower and Manager shall cause all Operating Revenues and
other income and revenues received by such Borrower or Manager to be deposited
directly into the Deposit Account for each applicable Property. The Borrowers
shall obtain an agreement (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION
LETTER") from each of the Persons paying or disbursing credit card receivables
(each, a "CREDIT CARD COMPANY" and collectively, the "CREDIT CARD COMPANIES"),
in substantially the form of EXHIBIT A attached hereto or as otherwise approved
by Lender in its reasonable discretion, pursuant to which the Credit Card
Companies agree to pay all credit card receivables for the Properties directly
into the Lock Box Account, and acknowledge and agree that Lender shall have a
first priority perfected security interest in such credit card receivables.
Pursuant to the Deposit Account Agreement, all available funds on deposit in the
applicable Deposit Account shall be deposited directly by the Deposit Bank into
the Lock Box Account by wire transfer on each Business Day.

            (b) If any Borrower or Manager receives any Operating Revenues or
other income or revenues from any Property, or any Extraordinary Receipts, then
such receipt shall not constitute a Default provided (i) such amounts shall be
deemed to be Collateral and shall be held in trust for the benefit, and as the
property, of Lender, and (ii) such Borrower or Manager shall deposit such
amounts into the applicable Deposit Account within two (2) Business Days of
receipt.

            (c) Without the prior written consent of Lender, which shall not be
unreasonably withheld, delayed or conditioned, neither the Borrowers nor Manager
shall (i) terminate, amend, revoke or modify any Credit Card Receivables Payment
Direction Letter in any manner whatsoever, or (ii) direct or cause any Credit
Card Company to pay any amount in any manner other than as provided in the
related Credit Card Receivables Payment Direction Letter, unless a replacement
Credit Card Receivables Payment Direction Letter in form reasonably acceptable
to Lender is executed and delivered to Lender by any proposed replacement Credit
Card Company prior to termination of the then effective Credit Card Receivables
Payment Direction Letter.

            (d) Each Borrower and Manager shall also cause the proceeds of any
Business Interruption Insurance to be deposited directly into the Lock Box
Account as same are paid (or, if any such proceeds are received by such Borrower
or Manager, same shall be deposited into the Lock Box Account within two (2)
Business Days after receipt thereof) and such proceeds shall be allocated and
disbursed in accordance with Section 3.3 hereof. If the proceeds of any such
Business Interruption Insurance are paid in a lump sum, such proceeds shall be
deposited into the Loss Proceeds Account. Agent shall cause monthly amounts to
be transferred from the Loss Proceeds Account to the Lock Box Account as
directed by Lender (based upon a ratable allocation of such proceeds over the
casualty restoration period as reasonably determined by Lender) on the first
(1st) Business Day of each calendar month during the period of restoration of

                                       12

Cash Management Agreement (FX3)



the Property, and after transfer of same to the Lock Box Account, such amounts
shall be allocated and disbursed in accordance with Section 3.3 hereof.

            SECTION 2.3 ACCOUNT NAME. The Accounts shall each be in the names
set forth herein; provided, however, that if Lender transfers or assigns the
Loan, Agent, at Lender's request (with respect to the Accounts other than the
Deposit Account), and each Deposit Bank (with respect to its Deposit Account)
shall change the name of each Account to the name of the transferee or assignee.
If Lender retains a Servicer to service the Loan, Agent, at Lender's request,
shall change the name of each Account to the name of Servicer, as agent for
Lender.

            SECTION 2.4 ELIGIBLE ACCOUNTS/CHARACTERIZATION OF ACCOUNTS. The
Borrowers and Agent shall maintain each Account (other than the Deposit Account)
as an Eligible Account. Each Account (other than the Deposit Account) is and
shall be treated as a "SECURITIES ACCOUNT" as such term is defined in Section
8-501(a) of the UCC. Agent hereby agrees that each item of property (whether
investment property, financial asset, securities, securities entitlement,
instrument, cash or other property) credited to each Account shall be treated as
a "FINANCIAL ASSET" within the meaning of Section 8-102(a)(9) of the UCC. Agent
shall, subject to the terms of this Agreement, treat Lender as entitled to
exercise the rights that comprise any financial asset credited to each Account.
All securities or other property underlying any financial assets credited to
each Account (other than cash) shall be registered in the name of Agent,
indorsed to Agent or in blank or credited to another securities account
maintained in the name of Agent and in no case will any financial asset credited
to any Account be registered in the name of any Borrower, payable to the order
of any Borrower or specially indorsed to any Borrower.

            SECTION 2.5 PERMITTED INVESTMENTS. Sums on deposit in the Accounts
may, at the Borrowers' election, be invested in Permitted Investments, provided
that, notwithstanding the foregoing, in no event will funds in the Deposit
Account be subject to any investment. Except during the existence of any Event
of Default, the Borrowers shall have the right to direct Agent to invest sums on
deposit in the Accounts in Permitted Investments. After an Event of Default and
during the continuance thereof, Lender may direct Agent to invest sums on
deposit in the Accounts in Permitted Investments as Lender shall determine in
its sole discretion. The Borrowers hereby irrevocably authorize and direct Agent
to apply any income earned from Permitted Investments to the respective
Accounts. The amount of actual losses sustained on a liquidation of a Permitted
Investment shall be deposited into the Lock Box Account by the Borrowers no
later than three (3) Business Days following such liquidation. The Borrowers
shall be responsible for payment of any federal, state or local income or other
tax applicable to income earned from Permitted Investments. The Accounts shall
be assigned the federal tax identification number of the applicable Borrowers,
which numbers are set forth on the signature page hereof. Any interest,
dividends or other earnings which may accrue on the Accounts shall be added to
the balance in the applicable Account and allocated and/or disbursed in
accordance with the terms hereof.

                                       13

Cash Management Agreement (FX3)


            III.  DEPOSITS

            SECTION 3.1 INITIAL DEPOSITS.

            (a) The Borrowers shall deposit in the Debt Service Sub-Account on
the date hereof the amount of $73,244.21.

            (b) The Borrowers shall deposit in the Impositions and Insurance
Reserve Sub-Account on the date hereof the amount of $1,318,789.30.

            (c) The Borrowers shall deposit in the Hazardous Materials
Remediation Reserve Sub-Account on the date hereof the amount of $1,237.50.

            (d) The Borrowers shall deposit in the FF&E Reserve Account on the
date hereof the amount of $0.00.

            (e) The Borrowers shall deposit in the Capital Improvement Reserve
Sub-Account on the date hereof the amount of $4,797,522.00.

            SECTION 3.2 ADDITIONAL DEPOSITS. The Borrowers shall make such
additional deposits into the Accounts as may be required by the Loan Agreement.

            SECTION 3.3 ALLOCATION OF FUNDS FROM THE LOCK BOX ACCOUNT.

            (a) At any time other than after the occurrence and during the
continuance of an Event of Default, Agent shall allocate and deposit, as
applicable, all available funds on deposit in the Lock Box Account on each
Business Day of each calendar month (or such other period of time as set forth
below) in the following amounts and order of priority:

                  (i) First, to the Impositions and Insurance Reserve
      Sub-Account, the Monthly Impositions and Insurance Amount for the next
      Monthly Payment Date;

                  (ii) Second, (A) to the Agent, as Servicer, the monthly
      Servicing Fee on the Loan, and then (B) to the Debt Service Sub-Account,
      the Monthly Debt Service Payment Amount due under the Loan Agreement for
      the next Monthly Payment Date;

                  (iii) Third, to the FF&E Reserve Account, the Monthly FF&E
      Payment for the next Monthly Payment Date;

                  (iv) Fourth, to the Operating Expense Sub-Account, funds
      sufficient to pay the Monthly Operating Expense Budget Amount for the next
      calendar Month;

                  (v) Fifth, to the Operating Expense Sub-Account, funds in an
      amount necessary to pay Extraordinary Expenses approved by Lender, if any;

                  (vi) Sixth, to the Operating Expense Sub-Account, subject to
      the terms and conditions of the Assignment of Management Agreement, any
      management fees due and owing to Manager which have not previously been
      paid to Manager, together with

                                       14

Cash Management Agreement (FX3)



      any fees payable to Manager for the next calendar month pursuant to the
      Management Agreement not otherwise paid pursuant to (iv) above;

                  (vii) Seventh, to the Debt Service Sub-Account any late
      payment charges, default interest, and any other amounts (other than
      interest and principal paid pursuant to (ii) above) then due and owing
      under the Loan Agreement;

                  (viii) Eighth, for so long as the Mezzanine Loan is
      outstanding, (A) to the Mezzanine Servicer, the monthly Allocable
      Mezzanine Servicing Fee, and then (B) to the Mezzanine Loan Debt Service
      Sub-Account, an amount equal to the Monthly Mezzanine Debt Service Payment
      Amount due for the next Monthly Payment Date under the Mezzanine Loan
      Agreement;

                  (ix) Ninth, if a Cash Trap Event shall have occurred and is
      continuing and the balance then held in the Minimum Balance SubAccount is
      less than the Minimum Balance, to the Minimum Balance Sub-Account until
      such Sub-Account contains the Minimum Balance;

                  (x) Tenth, if a Cash Trap Event shall have occurred and is
      continuing, any amounts remaining in the Lock Box Account after deposits
      for items (i) through (ix) above shall be deposited into the Cash Trap
      Reserve Sub-Account; and

                  (xi) Eleventh, if no Cash Trap Event shall have occurred and
      is continuing, any amounts remaining in the Lock Box Account after
      deposits for items (i) through (viii) above shall be paid to, or as
      directed by, the Borrowers.

            (b) If there are insufficient funds in the Lock Box Account for the
deposits required by Sections 3.3(a)(i) through (iii) and (vii) above, the
Borrowers shall deposit such deficiency into the Lock Box Account on or before
the applicable Monthly Payment Date. Except as expressly provided in Section 6.8
of the Loan Agreement, under no circumstances shall Lender be required to
utilize the Cash Trap Reserve or funds in any other Sub-Account to cure any
deficiencies in any other Sub-Accounts. The deposit by the Borrowers of any such
deficiency pursuant to this Section 3.3(b) shall satisfy the obligation of the
Borrowers to make the related deposit under the Loan Agreement.

            (c) The Borrowers shall use, or caused to be used, all disbursements
made to it under Sections 3.3(a)(iv) and (v) solely to pay Operating Expenses in
accordance with the Approved Operating Budget and to pay Extraordinary Expenses
for which Lender has approved disbursements under Section 3.3(a)(v) above.

            (d) Notwithstanding anything to the contrary contained herein,
Lender shall not be obligated to make any disbursement from the Lock Box Account
(under Sections 3.3(a)(iv) and (v) or otherwise) to pay for any costs or
expenses (including legal fees) in connection with any dispute or defense of the
Borrowers under any of the Loan Documents.

            (e) Upon the expiration of a Cash Trap Event in accordance with
Section 6.8 of the Loan Agreement, any funds remaining in the Cash Trap Reserve
Sub-Account and in the

                                       15

Cash Management Agreement (FX3)



Minimum Balance Sub-Account will be disbursed pursuant to Section 6.8 of the
Loan Agreement.

            (f) Notwithstanding anything herein to the contrary, upon the
occurrence and during the continuance of an Event of Default, all funds on
deposit in the Lock Box Account, the Sub-Accounts, the FF&E Reserve Account, and
any Loss Proceeds Account shall be disbursed to or as directed by Lender, it
being agreed that application of any such amounts shall be in Lender's sole
discretion and shall not be subject to the terms of Section 3.3(a) hereof.

            (g) Except as otherwise agreed to by Lender in writing, no funds
shall be withdrawn from the FF&E Reserve Account other than in accordance with
the CapEx/FF&E Budget.

            SECTION 3.4 DISBURSEMENTS FOR OPERATING EXPENSE AMOUNTS. The
Borrowers shall provide on a monthly basis (a) a reasonably detailed explanation
of any variances of ten percent (10%) or more between budgeted (as set forth in
the Approved Operating Budget) and actual Operating Expense amounts for any
month in the aggregate, and (b) with respect to any individual item with a cost
of $10,000 or more and not otherwise covered by the Approved Operating Budget,
all invoices or other backup requested by Lender to substantiate the amount
disbursed to the Borrowers pursuant to Section 3.3(a)(iv) and (v).

            IV.   PAYMENT OF FUNDS FROM SUB-ACCOUNTS

            SECTION 4.1 PAYMENTS FROM SUB-ACCOUNTS.

            (a) Impositions and Insurance Reserve Sub-Account. Lender shall have
the right to withdraw amounts on deposit in the Impositions and Insurance
Reserve Sub-Account to pay (or reimburse any Borrower for repayment of)
Impositions and Insurance Premiums in accordance with the Loan Agreement.

            (b) Debt Service Sub-Account. Lender shall have the right to
withdraw amounts from the Debt Service Sub-Account to pay: (i) default interest
and late charges, if any, and any amounts then due and payable under the Note
and the Loan Agreement, and (ii) the Monthly Debt Service Payment Amount on each
Monthly Payment Date on which same are due and payable under the Loan Agreement.

            (c) Operating Expense Sub-Account. Funds deposited into the
Operating Expense Sub-Account pursuant to Sections 3.3(a)(iv) through (vi) shall
be distributed to the Borrowers on each Business Day.

            (d) Mezzanine Loan Debt Service Sub-Account. On each Monthly Payment
Date, all funds held in the Mezzanine Loan Debt Service Sub-Account shall be
distributed to Mezzanine Lender, and such distribution shall be deemed to have
been distributed by the Borrowers to the Mezzanine Borrowers and shall be
applied by Mezzanine Borrowers to the obligations under the Mezzanine Loan
Agreement.

            (e) Distributions to the Borrowers. Following the date in each month
that Borrower has made all required deposits pursuant to Section 3.3(i) through
(viii), to the extent

                                       16

Cash Management Agreement (FX3)



that Excess Cash Flow is to be distributed to the Borrowers pursuant to Section
3.3(a)(xi) above, such funds shall be distributed to the Borrowers on each
Business Day.

            (f) FF&E Reserve Account. Distributions from the FF&E Reserve
Account will be made in accordance with Section 2.1(f).

            (g) Minimum Balance Sub-Account. Distributions from the Minimum
Balance Sub-Account will be made in accordance with Section 2.1(g).

            SECTION 4.2 REQUESTS FOR WITHDRAWALS FROM THE HAZARDOUS MATERIALS
REMEDIATION RESERVE SUB-ACCOUNT AND CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT.
Agent shall disburse funds on deposit in the Hazardous Materials Remediation
Reserve Sub-Account and the Capital Improvement Reserve Sub-Account within five
(5) Business Days after written request made from time to time (but not more
often than twice per calendar month) by the Borrowers in accordance with the
terms and conditions of Section 6.7 of the Loan Agreement.

            SECTION 4.3 SOLE DOMINION AND CONTROL. The Borrowers and Manager
acknowledge and agree that the Accounts are subject to the sole dominion,
control and discretion of Lender, its authorized agents or designees, including
Agent, subject to the terms hereof and the Loan Agreement. Neither the Borrowers
nor Manager shall have any right of withdrawal with respect to any Account
except, subject to the terms and conditions hereof and the Loan Agreement, the
FF&E Reserve Account. Agent shall have the right and agrees to comply with the
instructions of Lender with respect to the Accounts without the further consent
of the Borrowers or Manager. Agent shall comply with all "entitlement orders"
(as defined in Section 8-102(a)(8) of the UCC) and instructions originated by
Lender without further consent by the Borrowers or any other Person.

            V.    PLEDGE OF ACCOUNTS

            SECTION 5.1 SECURITY FOR OBLIGATIONS. (a) To secure the full and
punctual payment and performance of all Obligations of the Borrowers under the
Loan Agreement, the Note, the Security Instruments, this Agreement and all other
Loan Documents, the Borrowers hereby grant to Lender a first priority continuing
security interest in and to the following property of the Borrowers, whether now
owned or existing or hereafter acquired or arising and regardless of where
located (all of the same, collectively, the "COLLATERAL"):

                  (i) the Deposit Account, the Lock Box Account, each of the
      Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds Account and all
      cash, checks, drafts, certificates and instruments, if any, from time to
      time deposited or held in the Lock Box Account, each of the Sub-Accounts,
      any Loss Proceeds Account and the FF&E Reserve Account, including, without
      limitation, all deposits or wire transfers made to the Deposit Account,
      the Lock Box Account, each of the Sub-Accounts, the FF&E Reserve Account,
      and any Loss Proceeds Account;

                  (ii) any and all amounts invested in Permitted Investments;

                                       17

Cash Management Agreement (FX3)



                  (iii) all interest, dividends, cash, instruments and other
      property from time to time received, receivable or otherwise payable in
      respect of, or in exchange for, any or all of the foregoing; and

                  (iv) to the extent not covered by clauses (i), (ii) or (iii)
      above, all "proceeds" (as defined under the Uniform Commercial Code as in
      effect in the State of New York (the "UCC")) of any or all of the
      foregoing.

            (b) Lender and Agent, as agent for Lender, shall have with respect
to the Collateral, in addition to the rights and remedies herein set forth, all
of the rights and remedies available to a secured party under the UCC, as if
such rights and remedies were fully set forth herein.

            SECTION 5.2 RIGHTS ON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, Lender shall promptly notify Agent of such
Event of Default and, without notice from Lender, (a) the Borrowers shall have
no further right in respect of (including, without limitation, the right to
instruct Lender or Agent to transfer from) the Accounts, (b) Lender may direct
Agent to liquidate and transfer any amounts then invested in Permitted
Investments to the Accounts or reinvest such amounts in other Permitted
Investments as Lender may reasonably determine is necessary to perfect or
protect any security interest granted or purported to be granted hereby or to
enable Agent, as agent for Lender, or Lender to exercise and enforce Lender's
rights and remedies hereunder with respect to any Collateral, and (c) Lender may
apply any Collateral to any Obligations in such order of priority as Lender may
determine. The proceeds of any disposition of the Collateral, or any part
thereof, may be applied by Lender to the payment of the Obligations in such
priority and proportions as Lender in its discretion shall deem proper.

            SECTION 5.3 FINANCING STATEMENT; FURTHER ASSURANCES. Simultaneously
herewith, the Borrowers shall deliver to Lender for filing a financing statement
or statements in connection with the Collateral in the form reasonably required
by Lender to properly perfect Lender's security interest therein to the extent a
security interest in the Collateral may also be perfected by filing. The
Borrowers agree that at any time and from time to time, at the expense of the
Borrowers, the Borrowers will promptly execute and deliver all further
instruments and documents, and take all further actions, that may be reasonably
necessary, or that Agent or Lender may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted hereby
(including, without limitation, any security interest in and to any Permitted
Investments) or to enable Agent or Lender to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. In the event of any change in
name, identity or structure of any Borrower, such Borrower shall notify Lender
thereof and promptly after Lender's reasonable request shall file and record, or
deliver to Lender, such UCC financing statements (if any) as are necessary to
maintain the priority of Lender's lien upon and security interest in the
Collateral, and shall pay all expenses and fees in connection with the filing
and recording thereof. If Lender shall require the filing or recording of
additional UCC financing or continuation statements, the Borrowers shall,
promptly after request, execute, if necessary, file and record such UCC
financing or continuation statements as Lender shall deem reasonably necessary,
and shall pay all reasonable expenses and fees in connection with the filing and
recording thereof.

                                       18

Cash Management Agreement (FX3)



            SECTION 5.4 TERMINATION OF AGREEMENT. This Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until payment in full of the Obligations. Upon payment and
performance in full of the Obligations, this Agreement shall terminate and the
Borrowers shall be entitled to the return, at their expense, of such of the
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof, and Agent and/or Lender shall execute such instruments and
documents as may be reasonably requested by the Borrowers to evidence such
termination and the release of the lien hereof including, without limitation,
letters to Credit Card Companies, as applicable, prepared by the Borrowers and
reasonably acceptable to Lender rescinding the instructions set forth in the
Credit Card Receivables Payment Direction Letter and UCC-3 termination
statements.

            VI.   RIGHTS AND DUTIES OF LENDER AND AGENT

            SECTION 6.1 REASONABLE CARE. Beyond the exercise of reasonable care
in the custody thereof or as otherwise expressly provided herein, neither Agent
nor Lender shall have any duty as to any Collateral in its possession or control
as agent therefor or bailee thereof or any income thereon or the preservation of
rights against any Person or otherwise with respect thereto. Agent and Lender
each shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Agent or Lender accords its own
property, it being understood that Agent and/or Lender shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in value thereof, by reason of the act or omission of Agent or
Lender, its Affiliates, agents, employees or bailees, except to the extent that
such loss or damage results from such Person's gross negligence or willful
misconduct, provided that nothing in this Article VI shall be deemed to relieve
Agent from the duties and standard of care which, as a commercial bank, it
generally owes to depositors. Neither Lender nor Agent shall have any liability
for any loss resulting from the investment of funds in Permitted Investments in
accordance with the terms and conditions of this Agreement.

            SECTION 6.2 INDEMNITY. Agent, in its capacity as agent hereunder,
shall be responsible for the performance only of such duties as are specifically
set forth herein, and no duty shall be implied from any provision hereof. Agent
shall not be under any obligation or duty to perform any act which would involve
it in expense or liability or to institute or defend any suit in respect hereof,
or to advance any of its own monies. The Borrowers shall indemnify and hold
Agent and Lender, their respective employees, officers, directors and agents
harmless from and against any loss, liability, cost or damage (including,
without limitation, reasonable attorneys' fees and disbursements) incurred by
Agent or Lender in connection with the transactions contemplated hereby, except
to the extent that such loss or damage results from such Person's gross
negligence or willful misconduct. The foregoing indemnity shall survive the
termination of this Agreement and the resignation and removal of Agent.

            SECTION 6.3 RELIANCE. Agent shall be protected in acting upon any
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other paper, document or signature believed by it to be genuine, and it may
be assumed that any person purporting to act on behalf of any Person giving any
of the foregoing in connection with the provisions hereof has been duly
authorized to do so. Agent may consult with legal counsel, and the advice or
opinion of such counsel shall be full and complete authorization and protection
in respect of any action

                                       19

Cash Management Agreement (FX3)



taken or suffered by it hereunder and in good faith in accordance therewith.
Agent shall not be liable for any act or omission done or omitted to be done by
Agent in reliance upon any instruction, direction or certification received by
Agent and without gross negligence or willful or reckless misconduct. Agent
shall be entitled to execute any of the powers hereunder or perform any duties
hereunder either directly or through agents or attorneys; provided, however,
that the execution of such powers by any such agents or attorneys shall not
diminish, or relieve Agent for, responsibility therefor to the same degree as if
Agent itself had executed such powers.

            SECTION 6.4 RESIGNATION OF AGENT.

            (a) Agent shall have the right to resign as Agent hereunder upon
sixty (60) days' prior written notice to the Borrowers and Lender, and in the
event of such resignation, the Borrowers shall appoint a successor Agent which
must be an Eligible Bank. No such resignation by Agent shall become effective
until a successor Agent shall have accepted such appointment and executed an
instrument by which it shall have assumed all of the rights and obligations of
Agent hereunder. If no such successor Agent is appointed within sixty (60) days
after receipt of the resigning Agent's notice of resignation, the resigning
Agent may petition a court for the appointment of a successor Agent.

            (b) In connection with any resignation by Agent, (i) the resigning
Agent shall, (A) duly assign, transfer and deliver to the successor Agent this
Agreement and all cash and Permitted Investments held by it hereunder, (B)
deliver such financing statements and execute and deliver such other instruments
prepared by the Borrowers and reasonably approved by Lender or prepared by
Lender as may be reasonably necessary to assign to the successor Agent, as agent
for Lender, any security interest in the Collateral existing in favor of the
retiring Agent hereunder and to otherwise give effect to such succession and (C)
take such other actions as may be reasonably required by Lender or the successor
Agent in connection with the foregoing and (ii) the successor Agent shall
establish in Lender's name, as secured party, cash collateral accounts, which
shall become the Accounts for purposes of this Agreement upon the succession of
such Agent, and which Accounts shall also be "securities accounts" within the
meaning of the UCC.

            (c) Lender at its sole discretion shall have the right, upon thirty
(30) days notice to Agent, to substitute Agent with a successor Agent that
satisfies the requirements of an Eligible Bank or to have one or more of the
Accounts held by another Eligible Bank, provided that such successor Agent shall
perform the duties of Agent pursuant to the terms of this Agreement.

            SECTION 6.5 LENDER APPOINTED ATTORNEY-IN-FACT. The Borrowers hereby
irrevocably constitute and appoint Lender as the Borrowers' true and lawful
attorney-in-fact, coupled with an interest and with full power of substitution,
to exercise and enforce every right, power, remedy, option and privilege of the
Borrowers with respect to the Collateral, and do in the name, place and stead of
the Borrowers, all such acts, things and deeds for and on behalf of and in the
name of the Borrowers, which the Borrowers are required to do hereunder or under
the other Loan Documents or which Agent or Lender may reasonably deem necessary
to more fully vest in Lender the rights and remedies provided for herein and to
accomplish the purposes of this Agreement including, without limitation, the
filing of any UCC financing statements or

                                       20

Cash Management Agreement (FX3)



continuation statements in appropriate public filing offices on behalf of the
Borrowers, in any of the foregoing cases, upon the Borrowers' failure to take
any of the foregoing actions within ten (10) days after notice from Lender. The
foregoing powers of attorney are irrevocable and coupled with an interest. If
any Borrower fails to perform any agreement herein contained and such failure
shall continue for ten (10) days after notice of such failure is given to such
Borrower, Lender may perform or cause performance of any such agreement, and any
reasonable expenses of Lender and Agent in connection therewith shall be paid by
the Borrowers.

            SECTION 6.6 ACKNOWLEDGMENT OF LIEN/OFFSET RIGHTS. Agent hereby
acknowledges and agrees with respect to the Accounts that (a) the Accounts shall
be held by Agent in the names set forth herein, (b) all funds held in the
Accounts shall be held for the benefit of Lender, (c) the Borrowers have granted
to Lender a first priority security interest in the Collateral, (d) Agent shall
not disburse any funds from the Accounts except as provided herein, and (e)
Agent shall invest and reinvest any balance of the Accounts in Permitted
Investments in accordance with Section 2.5 hereof. Agent hereby waives any right
of offset, banker's lien or similar rights against, or any assignment, security
interest or other interest in, the Collateral.

            SECTION 6.7 REPORTING PROCEDURES.

            Agent shall provide the Borrowers and Lender with a record of all
checks and any other items deposited to the Lock Box Account or processed for
collection. Agent shall send a daily credit advice to the Borrowers and Manager,
which credit advice shall specify the amount of each receipt deposited into each
Account on such date. Agent shall send a monthly report to the Borrowers,
Manager and Lender, which monthly report shall specify the credits and charges
to the Accounts for the previous calendar month. Agent shall, at the request of
Lender, establish Lender and its designated Servicer, and the Borrowers, as
users of Agent's electronic data transfer system in accordance with Agent's
standard procedures; provided that, the Borrowers' access shall be limited to
information services and shall under no circumstances provide the Borrowers with
transaction rights in any such account. Upon request of Lender or its designated
Servicer, (i) Agent shall send to Lender or its designated Servicer, as
applicable, either (x) copies of the daily credit advices and any other advices
or reports furnished by Agent to the Borrowers and/or Manager hereunder or (y)
information on Account balances, to the extent said balances in the Accounts
have changed from the previous report, the aggregate amount of withdrawals from
the Accounts and other similar information via the electronic data transfer
system or facsimile transmission on a daily basis, and (ii) Agent shall advise
Lender or its designated Servicer, as applicable, of the amount of available
funds in the Accounts and shall deliver to Lender or its designated Servicer
copies of all statements and other information concerning the Accounts, to the
extent that the balances in the Accounts have changed from the previous report,
as Lender or its designated Servicer shall reasonably request. In the event
Agent shall resign as Agent hereunder, Agent shall provide the Borrowers with a
final written accounting, including closing statements, with respect to the
Accounts within thirty (30) days of resignation.

            VII.  REMEDIES

            SECTION 7.1 REMEDIES. Upon the occurrence and during the continuance
of an Event of Default, Lender or Agent at the direction of Lender, as agent for
Lender, may:

                                       21

Cash Management Agreement (FX3)



            (a) without notice to the Borrowers, except as required by law, and
at any time or from time to time, charge, set-off and otherwise apply all or any
part of the Collateral against the Obligations or any part thereof, including,
without limitation, reasonable costs and expenses set forth in Section 8.4
hereof;

            (b) in its sole discretion, at any time and from time to time,
exercise any and all rights and remedies available to it under this Agreement,
and/or as a secured party under the UCC and/or under any other applicable law or
in equity; and

            (c) demand, collect, take possession of, receive, settle,
compromise, adjust, sue for, foreclose or realize upon the Collateral (or any
portion thereof) as Lender may determine in its sole discretion.

            SECTION 7.2 WAIVER. The Borrowers hereby expressly waive, to the
fullest extent permitted by law, presentment, demand, protest or any notice of
any kind in connection with this Agreement or the Collateral. The Borrowers
acknowledge and agree that ten (10) days' prior written notice of the time and
place of any public sale of the Collateral or any other intended disposition
thereof shall be reasonable and sufficient notice to the Borrowers within the
meaning of the UCC.

            VIII. MISCELLANEOUS

            SECTION 8.1 TRANSFERS AND OTHER LIENS. Each Borrower agrees that it
will not (i) sell or otherwise dispose of any of the Collateral or (ii) create
or permit to exist any Lien upon or with respect to all or any of the
Collateral, except for the Lien granted under this Agreement.

            SECTION 8.2 LENDER'S RIGHT TO PERFORM BORROWER'S OBLIGATIONS; NO
LIABILITY OF LENDER. If any Borrower fails to perform any of the covenants or
obligations contained herein, and such failure shall continue for a period ten
(10) Business Days after such Borrower's receipt of written notice thereof from
Lender, Lender may itself perform, or cause performance of, such covenants or
obligations, and the reasonable expenses of Lender incurred in connection
therewith shall be payable by the Borrowers to Lender. Notwithstanding Lender's
right to perform certain obligations of the Borrowers, it is acknowledged and
agreed that the Borrowers retain control of the Property and operation thereof
and notwithstanding anything contained herein or Agent's or Lender's exercise of
any of its rights or remedies hereunder, under the Loan Documents or otherwise
at law or in equity, neither Agent nor Lender shall be deemed to be a
mortgagee-in-possession nor shall Lender be subject to any liability with
respect to the Property or otherwise based upon any claim of lender liability
except as a result of Lender's gross negligence or willful misconduct.

            SECTION 8.3 NO WAIVER. The rights and remedies provided in this
Agreement and the other Loan Documents are cumulative and may be exercised
independently or concurrently, and are not exclusive of any other right or
remedy provided at law or in equity. No failure to exercise or delay by Agent or
Lender in exercising any right or remedy hereunder or under the Loan Documents
shall impair or prohibit the exercise of any such rights or remedies in the
future or be deemed to constitute a waiver or limitation of any such right or
remedy or acquiescence therein. Every right and remedy granted to Agent and/or
Lender hereunder or by

                                       22

Cash Management Agreement (FX3)



law may be exercised by Agent and/or Lender at any time and from time to time,
and as often as Agent and/or Lender may deem it expedient. Any and all of
Agent's and/or Lender's rights with respect to the lien and security interest
granted hereunder shall continue unimpaired, and the Borrowers shall be and
remain obligated in accordance with the terms hereof, notwithstanding (a) any
proceeding of the Borrowers under the Federal Bankruptcy Code or any bankruptcy,
insolvency or reorganization laws or statutes of any state, (b) the release or
substitution of Collateral at any time, or of any rights or interests therein or
(c) any delay, extension of time, renewal, compromise or other indulgence
granted by the Agent and/or Lender in the event of any default, with respect to
the Collateral or otherwise hereunder. No delay or extension of time by Agent
and/or Lender in exercising any power of sale, option or other right or remedy
hereunder, and no notice or demand which may be given to or made upon the
Borrowers by Agent and/or Lender, shall constitute a waiver thereof, or limit,
impair or prejudice Agent's and/or Lender's right, without notice or demand, to
take any action against the Borrowers or to exercise any other power of sale,
option or any other right or remedy.

            SECTION 8.4 EXPENSES. Agent shall be entitled to deduct from the
Lock Box Account for its own account the monthly Servicing Fee for which the
Borrowers are responsible pursuant to Section 2.11 of the Loan Agreement prior
to making any disbursements pursuant to Section 3.3(a)(ii) hereof, and, for so
long as the Mezzanine Loan is outstanding, Agent shall deduct from the Lock Box
Account the monthly Allocable Mezzanine Servicing Fee for which the Mezzanine
Borrower is responsible pursuant to Section 2.11 of the Mezzanine Loan Agreement
to be remitted to the Mezzanine Servicer prior to making any disbursements
pursuant to Section 3.3(a)(viii) hereof. The Collateral shall secure, and the
Borrowers shall pay to Agent and Lender within five (5) Business Days of the
written demand therefor, from time to time, all reasonable costs and expenses
(including, but not limited to, reasonable attorneys' fees and disbursements,
and transfer, recording and filing fees, taxes and other charges) of, or
incidental to, the creation or perfection of any lien or security interest
granted or intended to be granted hereby, the custody, care, sale, transfer,
administration, collection of or realization on the Collateral, or in any way
relating to the enforcement, protection or preservation of the rights or
remedies of Agent and/or Lender under this Agreement, the Loan Agreement, the
Note, the Security Instruments, or the other Loan Documents. Standard and
customary fees and charges associated with the Accounts shall be included on a
monthly consolidated account analysis statement which Agent shall submit to the
Borrowers for the Borrowers' payment. This statement shall set forth the fees
and charges payable for such month, including, but not limited to reasonable
fees and reasonable expenses incurred in connection with this Agreement and be
accompanied by reasonably detailed supporting documentation. Agent shall be
entitled to charge the Accounts for such reasonable fees and expenses as
indicated by the analysis statement.

            SECTION 8.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
and final agreement between the parties with respect to the subject matter
hereof and may not be changed, terminated or otherwise varied, except by a
writing duly executed by the parties.

            SECTION 8.6 NO WAIVER. No waiver of any term or condition of this
Agreement, whether by delay, omission or otherwise, shall be effective unless in
writing and signed by the party sought to be charged, and then such waiver shall
be effective only in the specific instance and for the purpose for which given.

                                       23

Cash Management Agreement (FX3)



            SECTION 8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their respective successors
and permitted assigns.

            SECTION 8.8 NOTICES. All notices, demands, requests, consents,
approvals and other communications (any of the foregoing, a "NOTICE") required,
permitted, or desired to be given hereunder to the Borrowers, Lender or Manager
shall be in writing and delivered to such parties at the addresses and in the
manner provided in Section 14.5 of the Loan Agreement. Notices to the Agent
shall be addressed as follows:

                                 Wachovia Bank, National Association
                                 8739 Research Drive
                                 URP4
                                 Charlotte, North Carolina  28288-1075
                                 Attention: David Tucker
                                 Facsimile No.: (704) 593-7737

            SECTION 8.9 CAPTIONS. All captions in this Agreement are included
herein for convenience of reference only and shall not constitute part of this
Agreement for any other purpose.

            SECTION 8.10 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in all respects in accordance with the laws of the State
of New York without regard to conflicts of law principles of such State.

            SECTION 8.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts.

            SECTION 8.12 EXCULPATION. The provisions of Article XII of the Loan
Agreement are hereby incorporated by reference into this Agreement as to the
liability of the Borrowers hereunder to the same extent and with the same force
as if fully set forth herein, and shall apply equally to Manager to the same
extent and with the same force as if fully set forth herein, provided, however,
that notwithstanding the foregoing, there shall be personal liability to the
Borrowers and Manager for the payment to Lender of all losses, damages, costs
and expenses suffered or incurred by Lender and arising from the failure of the
Borrowers and/or Manager to comply with the provisions of Section 2.2 of this
Agreement.

            SECTION 8.13 LOAN AGREEMENT. If any inconsistency exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                                       24

Cash Management Agreement (FX3)



            IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                       LENDER:

                                       MERRILL LYNCH MORTGAGE LENDING, INC.

                                       By: /s/ Robert Spinna
                                           -------------------------------------
                                       Name:  Robert Spinna
                                       Title:  Vice President

                                       AGENT:

                                       WACHOVIA BANK, NATIONAL ASSOCIATION

                                       By: /s/ David C. Tucker
                                           -------------------------------------
                                           Name:  David C. Tucker
                                           Title:  Vice President

                                       MANAGER:

                                       LODGIAN MANAGEMENT CORP.

                                       By: /s/ Daniel E. Ellis
                                           -------------------------------------
                                       Name: Daniel E. Ellis
                                       Title:  Vice President and Secretary

                   [SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

Cash Management Agreement (FX3)



                                       BORROWERS:

                                       LODGIAN AMI, INC.
                                       LODGIAN HOTELS FIXED III, LLC
                                       MINNEAPOLIS MOTEL ENTERPRISES, INC.

                                       By: /s/ Daniel E. Ellis
                                           -------------------------------------
                                       Name:  Daniel E. Ellis
                                       Title: Vice President and Secretary, or
                                              Authorized Signatory for each of
                                              the entities listed above

                                       SERVICO CENTRE ASSOCIATES, LTD.

                                       By: SERVICO PALM BEACH GENERAL PARTNER
                                           SPE, INC., a Delaware corporation,
                                           its general partner

                                       By: /s/ Daniel E. Ellis
                                           -------------------------------------
                                       Name:  Daniel E. Ellis
                                       Title: Vice President and Secretary, or
                                              Authorized Signatory

Cash Management Agreement (FX3)



                                    EXHIBIT A

            Form of Credit Card Receivables Payment Direction Letter

                                     [Date]

__________________________
__________________________
__________________________

            Re:   _______________________ (the "COMPANY")

Gentlemen:

            ________________ (the "PROCESSOR") has entered into arrangements
pursuant to which Processor acts as credit card processing service provider with
respect to certain credit card and debit card sales by Company and makes
payments to Company in respect of such sales as set forth in the [Merchant
Services Bankcard Agreement], dated _____________ between Processor and Company
(and together with any replacement agreement thereto, referred to herein as the
"CARD PROCESSING AGREEMENT").

            Please be advised that Company has entered or is about to enter into
financing arrangements with Merrill Lynch Mortgage Lending, Inc. (the "LENDER")
pursuant to which Lender may from time to time make loans and advances and
provide other financial accommodations to Company, secured by, among other
things, all of Company's right, title and interest in and to all deposit and
other bank accounts and proceeds of the foregoing, including all amounts at any
time payable by Processor to Company pursuant to the Card Processing Agreement
or otherwise.

            Notwithstanding anything to the contrary contained in the Card
Processing Agreement or any prior instructions to Processor, unless and until
Processor receives written instructions from Lender to the contrary, effective
as of the day after the date of Processor's written acknowledgement below all
amounts payable by Processor to Company pursuant to the Card Processing
Agreement or otherwise shall be sent by federal funds wire transfer or
electronic depository transfer to the following bank account of Lender:

                            ___________ (the "BANK")
                             ABA Number: ___________
 For the Account of: Lock Box Account for the benefit of Merrill Lynch Mortgage
     Lending, Inc., its successors and assigns Account Number: ____________
                      Attn: ____________, Fax: ____________

            In the event Processor at any time receives any other instructions
from Lender with respect to the disposition of amounts payable by or through
Processor to Company pursuant to

                                       A-1

Cash Management Agreement (FX3)



the Card Processing Agreement or otherwise, Processor is hereby irrevocably
authorized and directed to follow such instructions, without inquiry as to
Lender's right or authority to give such instructions. Company and Lender
acknowledge that (a) any instructions from Lender to Processor to change the
account to which funds must be sent by a vice president or other officer of
Lender to ____________; (b) such instructions shall only provide for funds to be
sent to a single deposit account of Lender, in a manner with respect to the
nature of the funds transfer and at times consistent with the payment practices
of Processor as then in effect, unless otherwise agreed by Processor. The
Company agrees to hold harmless Processor for any action taken by Processor in
accordance with the terms of this letter and the Card Processing Agreement; and
Lender shall complete such account change forms as Processor may require. The
Company hereby acknowledges that the account set forth above is owned by Company
but is under the control of Lender.

            Lender and Company hereby confirm and agree as follows: (i) the Card
Processing Agreement is in full force and effect and (ii) this Payment Direction
Letter does not prohibit or limit any rights Processor possesses under the Card
Processing Agreement, including but not limited to Processor's right to debit,
offset or charge back any amount owing to Processor under the Card Processing
Agreement or any replacement or renewal thereof, against funds sent to or to be
sent to the above referenced bank account.

            This Payment Direction Letter cannot be changed, modified, or
terminated, except by written agreement signed by Lender, Company and Processor.
Processor agrees to use reasonable efforts to ensure payment instructions are
followed, but Lender and Company herein acknowledge that Processor shall incur
no liability for changes or modifications wherein Processor has received
instructions from Company or Lender to change deposit instructions. The terms of
this Payment Direction Letter shall be governed by the laws of the State of New
York.

            Please acknowledge your receipt of, and agreement to, the foregoing
by signing in the space provided below.

                                       Very truly yours,
                                       ________________ (the "COMPANY")

                                       By:   ___________________________
                                             Name:
                                             Title:
                                       Date: ____________________________

Agreed to by Proc

_______________________________

By:_____________________________
Name:
Title:

                                       A-2

Cash Management Agreement (FX3)

EX-10.4.10

                                                                 EXHIBIT 10.4.10

                             ENVIRONMENTAL INDEMNITY

                  This ENVIRONMENTAL INDEMNITY, made as of June 25, 2004 (this
"AGREEMENT"), by the Borrowers named on the signature pages hereto, each having
an address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30326 (each, a "BORROWER" and collectively, "BORROWERS"), by LODGIAN,
INC., a Delaware corporation, having an address at 3445 Peachtree Road, NE,
Suite 700, Atlanta, Georgia 30326 ("OBLIGOR"), jointly and severally (Borrowers
and Obligor being referred to herein collectively as "INDEMNITORS" and
individually as an "INDEMNITOR"), in favor of MERRILL LYNCH MORTGAGE LENDING,
INC., a Delaware corporation, having an address at 4 World Financial Center, New
York, New York, 10080 (together with its successors, transferees and assigns,
"LENDER").

                              W I T N E S S E T H:

                  WHEREAS:

                  A.       Borrowers are the owners of fee simple or leasehold
title, as applicable, to those certain parcels of real property (collectively,
the "PREMISES") described in EXHIBIT A attached hereto, and the buildings,
structures, fixtures, additions, enlargements, extensions, modifications,
repairs, replacements and other improvements now or hereafter located thereon
(the "IMPROVEMENTS"; together with the Premises, collectively, the "PROPERTY").

                  B.       Borrowers and Lender have entered into a certain Loan
and Security Agreement, dated as of the date hereof (as amended, modified or
restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has
agreed to make a loan to Borrowers as more particularly described below.
Capitalized terms used herein and not herein defined shall have the meanings
assigned to such terms in the Loan Agreement.

                  C.       Pursuant to the Loan Agreement, Lender is making a
Loan to Borrower in the aggregate original principal amount of up to $66,818,500
(the "LOAN"). The Loan is evidenced by a certain Promissory Note, dated as of
the date hereof (as amended, modified, restated or split from time to time, the
"NOTE") and secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds
to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated
as of the date hereof (as amended, modified or restated from time to time,
collectively, the "SECURITY INSTRUMENT"), with respect to the Property.

                  D.       As a condition to Lender's making the Loan, Lender is
requiring that Indemnitors indemnify the Indemnified Parties (as hereinafter
defined) with respect to environmental conditions or liabilities on, in, under
or affecting the Property as hereinafter set forth.

                  E.       Obligor holds a direct and/or indirect ownership
interest in Borrower and will derive substantial economic benefit from Lender
making the Loan to Borrower.



                  NOW, THEREFORE, to induce Lender to extend the Loan to
Borrower and in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Indemnitors hereby covenant and agree for the benefit of the
Indemnified Parties as follows:

         1.       DEFINITIONS. The following terms shall have the following
meanings when used herein:

                  "COSTS" shall mean, collectively, all liens, damages, losses,
fines, liabilities (including, without limitation, any strict liability),
obligations, settlements, penalties, assessments, citations, directives, claims,
litigations, demands, response costs (including, without limitation,
investigation, removal, remediation, mitigation, containment, post-closure and
monitoring costs), defenses, judgments, suits, proceedings, costs, laboratory
fees, disbursements and expenses of any kind or nature whatsoever (including,
without limitation, reasonable attorneys', consultants' and experts' fees and
disbursements). Costs shall also include any future reduction in sales price of,
or unmarketability and consequent inability of Lender to foreclose on or
otherwise sell, the Property and the lost opportunity costs resulting from the
inability of Lender to sell or dispose of its interest in the Property, all as a
consequence of any event described in paragraph 2 herein to the extent that such
loss in value results in Lender receiving in any foreclosure, or deed in lieu
thereof, of the Properties less than the full amount of the Obligations by
reason of any matter set forth in Section 2.

                  "ENVIRONMENTAL LAWS" shall have the meaning given to such term
in the Loan Agreement.

                  "HAZARDOUS MATERIAL" shall have the meaning given to such term
in the Loan Agreement.

                  "INDEMNIFIED PARTY" shall mean Lender, any subsequent holder
of the Note and each of their officers, directors, shareholders, principals,
partners, representatives, employees, agents, successors and assigns.

                  "TENANTS" shall mean all tenants, lessees, subtenants and
other occupants of the Property.

         2.       INDEMNITY.

                  (a)      Except as provided in Section 2(b) below, Indemnitors
hereby assume liability for, and agree to pay, protect, defend, indemnify and
save all Indemnified Parties harmless from and against any and all Costs which
may be imposed upon, incurred by or asserted or awarded against any of the
Indemnified Parties or the Property, and arising directly or indirectly from:
(i) the violation or alleged violation of any Environmental Laws relating to or
affecting the Property, whether or not caused by or within the control of
Indemnitors; (ii) the actual or alleged presence, release or threat of release
of, or exposure to any Hazardous Material on, in, under or affecting all or any
portion of the Property or any surrounding areas, regardless of whether or not
caused by or within the control of Indemnitors; (iii) any actual or alleged
personal injury or property damage arising out of or related to Hazardous
Material on the Property; (iv) any acts or omissions that exacerbate an existing
condition at the Property and give

                                       2


rise to liability under any Environmental Law; (v) the failure by Indemnitors to
comply fully with the terms and conditions of this Agreement in all material
respects; (vi) a material breach of any representation or warranty contained in
this Agreement; (vii) the enforcement of this Agreement; or (viii) assessment,
investigation, containment, monitoring, remediation and/or removal of any and
all Hazardous Material from the Property or any surrounding areas, and costs
incurred to comply with Environmental Laws in connection with the Property or
any surrounding areas.

                  (b)      Notwithstanding any provision hereof to the contrary,
Indemnitors shall have no liability under this Agreement with respect to Costs
relating to Hazardous Material which is initially placed on, in or under the
Property after the earlier of (i) Lender or any receiver appointed at the
request of Lender taking actual possession and control of the Property following
an Event of Default, and (ii) Lender completing a foreclosure or other sale
pursuant to which Lender takes title to the Property. Indemnitors shall have no
liability under this Agreement to any Indemnified Party with respect to Costs
which result from such Indemnified Party's willful misconduct or gross
negligence. In addition to the foregoing, Obligor shall have no liability
pursuant to this Agreement with respect to costs relating to Hazardous Material
which is initially placed on, in or under the Property after the transfer of the
Mezzanine Borrowers' equity interest in the applicable Borrower to the Mezzanine
Lender or its designee by reason of, or in lieu of, enforcement of the Mezzanine
Lender's rights under the Mezzanine Loan Documents.

                  (c)      Indemnitors' obligation to defend the Indemnified
Parties hereunder shall include defense at both the trial and appellate levels
and shall be with attorneys, consultants and experts selected by Indemnitor and
subject to the reasonable approval of the Indemnified Parties.

         3.       REPRESENTATIONS REGARDING HAZARDOUS MATERIAL. Indemnitors
hereby represent and warrant to agree with the Indemnified Parties as follows:

                  (a)      Indemnitors, the Property and all businesses or
operations conducted thereon are in compliance with all applicable Environmental
Laws in all material respects;

                  (b)      Except as previously disclosed to Lender in the Phase
I Reports, no Hazardous Material has been disposed of on or released (as used
herein, "RELEASE" shall have the meaning provided in 42 U.S.C. Section 9601(22))
at, onto or under the Property by any Indemnitor or, to Indemnitors' knowledge,
by any other Person that has not been remediated in accordance with applicable
Environmental Laws or that is present at or under the Property at a level in
excess of that allowed by applicable Environmental Laws;

                  (c)      Except as previously disclosed to Lender in the Phase
I Reports, no Hazardous Material is located in, on or under, or has been
handled, generated, stored, processed or discharged from the Property in
violation of applicable Environmental Laws by any Indemnitor or, to the
Indemnitors' knowledge, by any other Person, except for those materials used by
Borrowers, Manager or tenants of the Property ("TENANTS") in the ordinary course
of their business in material compliance with all applicable Environmental Laws
and not reasonably expected to give rise to liability under applicable
Environmental Laws;

                                       3


                  (d)      Indemnitors have received no written notice that the
Property is subject to any private or governmental lien or judicial or
administrative notice or action relating to or arising under applicable
Environmental Laws;

                  (e)      Except as previously disclosed to Lender in the Phase
I Reports, there are no underground storage receptacles or surface impoundments,
landfills or dumps for Hazardous Material on the Property;

                  (f)      Indemnitors have received no notice of, and to
Indemnitors' knowledge there exists no investigation, action, proceeding or
claim by any agency, authority or unit of government or by any third party
asserted or threatened which could result in any liability, penalty, sanction or
judgment under any applicable Environmental Laws with respect to any condition,
use or operation of the Property, nor do Indemnitors know of any basis for any
of the foregoing;

                  (g)      Except as previously disclosed to Lender in the Phase
I Reports or the Property Condition Reports, there is no asbestos-containing
material or lead-based paint at the Property nor are there any polychlorinated
biphenyls ("PCB'S"), endangered species' habitats or wetlands at the Property;

                  (h)      Indemnitors have received no notice that, and to
Indemnitors' knowledge, there has been no claim by any party that, any use,
operation or condition of the Property has caused any nuisance or any other
liability or adverse condition on any other property nor do Indemnitors know of
any basis for such a claim relating to Hazardous Material;

                  (i)      Except as previously disclosed in writing to Lender,
Indemnitor has not knowingly waived or released any Person's liability with
regard to Hazardous Material in, on, under or around the Property nor retained
or assumed, contractually or otherwise, any other Person's liability relative to
Hazardous Material or any claim, action or proceeding relating thereto; and

                  (j)      Except as previously disclosed to Lender in the Phase
I Reports, neither the Property nor any other property owned by any Borrower (i)
is included or, to Indemnitor's knowledge, proposed for inclusion on the
National Priorities List issued pursuant to CERCLA (hereinafter defined) by the
United States Environmental Protection Agency (the "EPA") or on any of the
inventories of other potential "Problem" sites issued by the EPA or other
applicable Governmental Authority nor (ii) otherwise identified by the EPA as a
potential CERCLA site or included or, to Indemnitor's knowledge, proposed for
inclusion on any such list or inventory issued pursuant to any other applicable
Environmental Law or issued by any other Governmental Authority.

         4.       COVENANTS OF INDEMNITORS.

                  (a)      So long as any Borrower or Affiliate thereof owns or
is in possession of the Property, Indemnitors shall, and shall use commercially
reasonable efforts to cause all property managers, agents, employees and Tenants
to: (i) comply with all Environmental Laws applicable to the Property, (ii) keep
or cause the Property to be kept free from Hazardous Material (except those
materials used by Borrower, Manager or Tenants in the ordinary course of

                                       4


their business, in compliance with applicable Environmental Laws), (iii) not
install or use, or permit the installation or use of, any underground
receptacles containing Hazardous Material on the Property, (iv) expressly
prohibit the use, generation, handling, storage, production, release, processing
and disposal of Hazardous Material by all future Tenants and Managers (except
those substances used by such Tenants or Managers in the ordinary course of
their business in compliance with all applicable Environmental Laws) and use all
commercially reasonable efforts to prevent existing Tenants, Managers and other
permitted occupants of the Property from taking any such actions, (v) in any
event, not install on the Property or permit to be installed on the Property
PCB's, urea formaldehyde insulation, asbestos or any substance containing
asbestos or any material containing lead-based paint, (vi) prohibit the disposal
and/or release of any Hazardous Material in violation of applicable
Environmental Laws on, at or beneath, the Property, (vii) operate and maintain,
or cause to be operated and maintained, the HVAC systems at the Property in
accordance with standards for operation of similar systems located at properties
that are similar (including, without limitation, the manner, class of operation,
and/or Franchisor standards) to the Property, (viii) cause the Required Capital
Improvements which relate to mold to be completed in accordance with the
standards and time frames set forth in Section 6.5 of the Loan Agreement, and
(ix) not permit any Lien imposed pursuant to any applicable Environmental Law to
be imposed or, subject to Section 4(c) below, to remain on the Property.

                  (b)      Indemnitors shall promptly notify Lender in writing
should any Indemnitor become aware of (i) any release, disposal or discharge of
Hazardous Material in violation of applicable Environmental Laws, or other
material actual environmental problem or liability, with respect to or affecting
the Property, (ii) any lien, action or notice of violation or potential
liability affecting the Property or Borrowers and arising under any applicable
Environmental Law, (iii) the institution of any investigation, inquiry or
proceeding concerning Borrowers or the Property pursuant to any applicable
Environmental Law or otherwise relating to Hazardous Material affecting the
Property, (iv) the discovery of any occurrence, condition or state of facts
which would render any representation or warranty contained in this Agreement
incorrect or incomplete in any material respect if made at the time of such
discovery, (v) any remedial action taken by Indemnitors or, if actually known by
Indemnitor, any other Person in response to any Hazardous Material on, under or
at the Property, (vi) the discovery by Indemnitors of any occurrence or
condition on any real property adjoining or in the vicinity of the Property that
would reasonably be expected to cause the Property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or use
thereof under any applicable Environmental Laws, and (vii) any request for
information from any governmental agency that indicates such agency is
investigating whether Indemnitors may be potentially responsible for a release,
disposal or discharge of Hazardous Material. Borrowers shall promptly notify
Lender of any proposed action to be taken pertaining in any way to the Property
to commence any operations that could reasonably be expected to subject any
Borrower or the Property to additional obligations or liabilities under
applicable Environmental Laws, including laws, rules and regulations requiring
additional or amended environmental permits or licenses which could reasonably
be expected to subject any Borrower to any material obligations or requirements
under any applicable Environmental Laws. Borrowers shall, at their own expense,
provide copies of such documents or information as Lender may reasonably request
in relation to any matters disclosed pursuant to this Section. Indemnitor shall
promptly transmit to Lender

                                       5


copies of any and all material citations, orders, notices and all other
communications sent or received by any Borrower relating to any of the foregoing
provisions of this paragraph.

                  (c)      Regardless of the source of contamination,
Indemnitors shall, at their own expense, promptly take or cause to be taken and
diligently prosecute all actions required by applicable Environmental Laws for
the clean-up of the Property and other property affected by contamination in,
on, under or at the Property, including, without limitation, all investigative,
monitoring, removal, containment and remedial actions in accordance with and
required by all applicable Environmental Laws (and in all events in a manner
satisfactory to the applicable Governmental Authority and reasonably
satisfactory to Lender). Indemnitor shall further pay or cause to be paid, at no
expense to any Indemnified Party, all clean-up, administrative and enforcement
costs of applicable governmental agencies which may be asserted against the
Property. In the event Indemnitors fail to do so, or following an Event of
Default, Lender may, at its sole election, cause the Property or other affected
property to be freed from any Hazardous Material located thereon at a level in
excess of that allowed by applicable Environmental Laws, or otherwise be brought
into compliance with applicable Environmental Laws, and any cost incurred in
connection therewith shall be included in Costs. Borrowers hereby grant to
Lender access to the Property and an irrevocable license to remove any Hazardous
Material and to do all things necessary to bring the Property into compliance in
all material respects with applicable Environmental Laws. However, Lender shall
have no obligation to inspect or clean up any Hazardous Material. Lender shall
not be deemed a generator of any Hazardous Material removed from the Property.

                  (d)      Upon the request of Lender, at any time (i) after the
occurrence of an Event of Default or (ii) Lender has reasonable grounds to
believe that (A) Hazardous Material is or has been released, stored or disposed
of, or existing, on or around the Property at a level in excess of that allowed
by applicable Environmental Laws or (B) the Property may be in material
violation of applicable Environmental Laws, Indemnitors shall cause an
investigation or audit of the Property to be undertaken by a hydrogeologist or
environmental engineer or other appropriate consultant reasonably approved by
Lender to determine whether any Hazardous Material is located on, at, beneath,
or near the Property and/or whether the Property is in compliance in all
material respects with Environmental Laws. The scope of any investigation or
audit shall be approved by Lender in Lender's reasonable discretion. If
Indemnitors fail to provide reports of such investigation or audit within thirty
(30) days after such request, Lender may, but shall have no obligation to, order
the same. Borrowers hereby grant to Lender and Lender's contractors access to
the Property and an irrevocable license to undertake such investigation or audit
provided that such investigation is conducted in a manner so as not to
unreasonably affect Borrowers' operations at the Property. All reasonable costs
of any such investigation or audit shall be included in Costs and shall be paid
by Indemnitors in accordance with the terms of paragraph 5(c) hereof.

                  (e)      In the event that a Lien is filed against the
Property pursuant to any applicable Environmental Law, Indemnitors shall, within
ten (10) Business Days from the date that any Borrower receives notice of such
Lien (but in any event ten (10) days prior to the date of any contemplated sale
pursuant to such Lien), either (i) pay the claim and remove the Lien from the
Property, or (ii) furnish, at Indemnitor's option, (A) a bond satisfactory to
Lender in the amount of the claim out of which the Lien arises, (B) a cash
deposit in the amount of the claim

                                       6


out of which the Lien arises, (C) other security reasonably satisfactory to
Lender in an amount sufficient to discharge the claim out of which the Lien
arises, or (D) security in a form and amount satisfactory to the applicable
Governmental Authority pursuant to a valid consent or other order, and
Indemnitors shall promptly arrange for the removal of the Lien. Notwithstanding
the foregoing, Indemnitors shall prevent a sale pursuant to any Lien.

                  (f)      The amount of Indemnitors' liability hereunder is
unrelated to the amount of the Loan and any failure of the Loan to be repaid in
full. The enforcement of this Agreement by the Indemnified Parties shall not be
construed by Indemnitors as an indirect attempt to recover any Loan deficiency
or loss relating to the failure of the Loan to be repaid in full. Indemnitors
acknowledge that they may have liability hereunder even if the Loan is repaid in
full by reason of a full credit bid at any foreclosure sale under the Security
Instrument, and that the amount of Indemnitor's liability hereunder could exceed
the entire amount paid by Borrower for the Property.

         5.       INDEMNIFICATION PROCEDURES.

                  (a)      If any action, proceeding, litigation or claim shall
be brought or asserted against any Indemnified Party for any matter which the
Indemnified Parties are indemnified hereunder (each, a "CLAIM"), such
Indemnified Party shall notify Indemnitors in writing thereof and Indemnitors
shall promptly assume the defense thereof, including, without limitation, the
employment of counsel selected by the Indemnitor and approved by the Indemnified
Party, such approval not to be unreasonably withheld, conditioned or delayed,
and the negotiation of any settlement. Any failure of such Indemnified Party to
notify Indemnitors of such matter shall not impair or reduce the obligations of
Indemnitors hereunder. The Indemnified Parties shall have the right, at the
reasonable expense of Indemnitors (which expense shall be included in Costs), if
an Indemnified Party has reason to believe that its interests are not being
adequately represented or diverge from other interests being represented by such
counsel, to employ separate counsel in any such action and to participate in the
defense thereof at such Indemnitor's sole cost and expense. In the event
Indemnitors shall fail to discharge or undertake to defend any Indemnified Party
against any Claim, such failure shall constitute an Event of Default and the
Indemnified Party may, at its sole election, defend or settle such Claim. The
liability of Indemnitors to such Indemnified Party hereunder for any settlement
by such Indemnified Party shall be conclusively established by any settlement
entered into by the Indemnified Party in good faith. The amount of Indemnitors'
liability hereunder shall include the settlement consideration and all other
Costs, which shall be paid by the Indemnitors as hereinafter provided. Costs
incurred in connection with a Claim shall be reimbursed by Indemnitors without
the requirement of waiting for the ultimate outcome of such Claim.

                  (b)      Indemnitors shall not, without the prior written
consent of the Indemnified Party, which consent will not be unreasonably
withheld, conditioned or delayed, settle or compromise any Claim in any manner
or consent to the entry of any judgment (i) in which the claimant or plaintiff
does not unconditionally release the Indemnified Party from all liability and
obligations in respect of such Claim and obtain a dismissal of such Claim with
prejudice; or (ii) that may adversely affect the Indemnified Party (as
determined in the reasonable discretion of such Indemnified Party) or obligate
the Indemnified Party to pay any sum or perform any obligation.

                                       7


                  (c)      Indemnitors shall pay to the applicable Indemnified
Party any and all Costs within fifteen (15) days after written notice from such
Indemnified Party. All Costs shall be immediately reimbursable to the
Indemnified Party or, upon request of the Indemnified Party, paid directly to
the party sending a bill or other statement to the Indemnified Party. Any Costs
not paid within the aforementioned fifteen (15) day period shall bear interest
at the Default Rate from the date incurred until the date paid in full.

         6.       REINSTATEMENT OF OBLIGATIONS. If at any time all or any part
of any payment received by an Indemnified Party pursuant to this Agreement shall
be rescinded or returned for any reason whatsoever, including, without
limitation, the insolvency, bankruptcy or reorganization of any Indemnitor, then
the obligations of Indemnitors hereunder shall, to the extent of such rescinded
or returned payment, be reinstated and shall continue as though such previous
payment received by the Indemnified Party had never occurred.

         7.       WAIVERS BY INDEMNITORS. To the extent permitted by law,
Indemnitors hereby waive and agree not to assert or take advantage of:

                  (a)      Any right to require an Indemnified Party (i) to
proceed against Borrower or any other Person, (ii) to proceed against or exhaust
any security held by any Indemnified Party at any time or (iii) to pursue any
other remedy in such Indemnified Party's power or under any other agreement, in
any case, before proceeding against Indemnitors hereunder;

                  (b)      Any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other Person or the
failure of an Indemnified Party to file or enforce a claim against the estate
(in administration, bankruptcy or any other proceeding) of any other Person;

                  (c)      Demand, presentment for payment, protest and notice
of protest, demand, dishonor and nonpayment and all other notices except as
expressly required in the Loan Documents, including, without limitation, notice
of new or additional indebtedness or obligations or of any action or non-action
on the part of Borrower, Lender, any endorser or creditor of Borrower or of
Indemnitor or of any other Person whomsoever under this Agreement or any other
Loan Document;

                  (d)      Any defense based upon an election of remedies,
splitting a cause of action or merger of judgments by any Indemnified Party;

                  (e)      Any right or claim of right to cause a marshaling of
the assets of Indemnitors;

                  (f)      Any principle or provision of law, statutory or
otherwise, which is or might be in conflict with the terms and provisions of
this Agreement;

                  (g)      Any duty on the part of any Indemnified Party to
disclose to Indemnitors any facts such Indemnified Party may now or hereafter
know about Borrower or the Property, regardless of whether such Indemnified
Party (i) has reason to believe that any such facts materially increase the risk
beyond that which Indemnitors intend to assume, (ii) has reason to believe that
such facts are unknown to Indemnitors or (iii) has a reasonable opportunity to

                                       8


communicate such facts to Indemnitors, it being understood and agreed that
Indemnitors are fully responsible for being informed of the financial condition
of Borrower, the condition of the Property and of all other circumstances
bearing on the risk that liability may be incurred by Indemnitors hereunder;

                  (h)      Any invalidity, irregularity or unenforceability, in
whole or in part, of any one or more of the Loan Documents;

                  (i)      Any lack of commercial reasonableness in dealing with
the collateral for the Loan;

                  (j)      Any deficiencies in the collateral for the Loan or
any deficiency in the ability of Lender to collect or to obtain performance from
any Persons now or hereafter liable for the payment and performance of any
obligation hereby guaranteed;

                  (k)      An assertion or claim that the automatic stay
provided by 11 U.S.C. Section 362 (arising upon the voluntary or involuntary
bankruptcy proceeding of Borrower) or any other stay provided under any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, shall operate or be interpreted to stay, interdict, condition,
reduce or inhibit the ability of Lender to enforce any of its rights, whether
now existing or hereafter acquired, which Lender may have against any Indemnitor
or the collateral for the Loan;

                  (l)      Any modifications of the Loan Documents or any
obligation of Borrower relating to the Loan by operation of law or by action of
any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or
any other debtor relief law (whether statutory, common law, case law or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or
otherwise;

                  (m)      Any action, occurrence, event or matter consented to
by Indemnitors under Section 8(j) hereof, under any other provision hereof, or
otherwise; and

                  (n)      the failure of any representation and/or warranties
made by Borrower, Indemnitor or any other party to be true, complete or correct
when given, or at any time thereafter.

Indemnitors covenant and agree that upon the commencement of a voluntary or
involuntary bankruptcy proceeding by or against any Borrower, neither such
Indemnitor shall seek a supplemental stay or otherwise pursuant to 11 U.S.C.
Section 105 or any other provision of the Bankruptcy Reform Act of 1978, as
amended, or any other debtor relief law (whether statutory, common law, case
law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect,
which may be or become applicable, to stay, interdict, condition, reduce or
inhibit the ability of Lender to enforce any rights of Lender against such
Indemnitor by virtue of this Agreement or otherwise.

                                       9


         8.       GENERAL PROVISIONS.

                  (a)      Fully Recourse. Notwithstanding any provision of any
other Loan Document to the contrary, all of the terms and provisions of this
Agreement are recourse obligations of Indemnitors and not restricted by any
limitation on personal liability.

                  (b)      Right to Indemnification Not Affected by Knowledge.
An Indemnified Party's right to defense, indemnification, payment of Costs or
other rights and remedies pursuant to this Agreement shall not be diminished or
affected in any way by any investigation conducted by or on behalf of such
Indemnified Party or other knowledge acquired (or capable of being acquired) by
such Indemnified Party through any means at any time.

                  (c)      Reliance. Indemnitors hereby acknowledge that Lender
would not make the Loan without being able to rely upon the covenants and
obligations of Indemnitors set forth herein. Accordingly, Indemnitors
intentionally and unconditionally enter into this Agreement.

                  (d)      Obligations Unsecured. Indemnitors acknowledge that
even though the representations, warranties and covenants of Indemnitors
contained herein may be identical or substantially similar to those of Borrower
set forth in the Security Instrument, the obligations of Indemnitors hereunder
are independent obligations which are not secured by the Security Instrument or
the other Loan Documents. The Indemnitors further acknowledge that it is the
intent of Lender to create separate obligations of Indemnitors hereunder which
can be enforced against Indemnitors without regard to the existence of the
Security Instrument or the other Loan Documents or the liens or security
interests created therein.

                  (e)      Survival. This Agreement shall be deemed to be
continuing in nature, remain in full force and effect and survive indefinitely,
notwithstanding the exercise of any remedy by Lender under the Security
Instrument or any of the other Loan Documents, including, without limitation,
any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the
Loan is paid or satisfied in full. Notwithstanding the foregoing to the
contrary, the obligations and liabilities of Indemnitors under this Agreement
shall survive following payment in full of the Obligations in accordance with
the terms of the Loan Documents for a period equal to the lesser of (x) five (5)
years, or (y) if Borrowers deliver Phase I environmental reports for each of the
Properties to Lender, acceptable to Lender in all respects, and which Lender
determines in its sole discretion demonstrates that no condition exists which
may cause any of the liabilities of Indemnitors to arise after delivery thereof,
two (2) years following the delivery of such Phase I environmental reports,
provided, however, in the event that (a) any obligations or liabilities of the
Indemnitors under this Agreement shall have arisen from any Hazardous Material
which existed on, in, under or affecting the Property prior to the expiration of
such period or (b) if, prior to payment in full of the Loan, Lender shall have
exercised any rights or remedies after an Event of Default or any of the Loan
Documents shall have been modified or amended or any provision thereof waived
pursuant to any workout or restructuring of the Loan (and if, as a consequence
thereof, at any time after the expiration of the survival period specified
above, Lender shall be unable to avail itself of any exemption from liability
available to lenders under any applicable Environmental Law or shall be required
to defend any claim or action relating to any Hazardous Material), then in any
such event the foregoing survival period shall not apply and the obligations and
liabilities of Indemnitors hereunder shall survive.

                                       10


                  (f)      Subordination; No Recourse Against Lender. Obligor
hereby subordinates any and all indebtedness of Borrower now or hereafter owed
to Obligor to all indebtedness of Borrower to Lender. Obligor shall not demand
or accept any payment of principal or interest from Borrower, shall not claim
any offset or other reduction of Obligor's obligations hereunder because of any
such indebtedness and shall not take any action to obtain any of the collateral
for the Loan. Further, Indemnitors shall not have any right of recourse against
any Indemnified Party by reason of any action such Indemnified Party may take or
omit to take under the provisions of this Agreement or any other Loan Documents.

                  (g)      Reservation of Rights. Nothing contained in this
Agreement shall prevent or in any way diminish or interfere with any rights or
remedies, including, without limitation, the right to cost recovery or
contribution, which any Indemnified Party may have against either Indemnitor or
any other party under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (codified at Title 42 U.S.C. Section 9601 et seq.), as it
may be amended from time to time ("CERCLA"), or any other applicable Federal,
state or local laws, all such rights being hereby expressly reserved.

                  (h)      Financial Statements. Each Indemnitor hereby agrees
to furnish Lender such financial statements and other information as is required
to be delivered pursuant to Section 5.1 of the Loan Agreement.

                  (i)      Nature of Obligations. The obligations of Indemnitors
hereunder are independent of the obligations of Borrower under the other Loan
Documents. In the event of any default hereunder, a separate action or actions
may be brought and prosecuted against Indemnitors whether or not Indemnitors are
the alter ego of Borrower and whether or not Borrower is joined therein or a
separate action or actions are brought against Borrower. Lender's rights
hereunder shall not be exhausted until all of the obligations of Indemnitor
hereunder have been fully paid and performed.

                  (j)      No Limitation on Liability. Indemnitors hereby
consent and agree that any of the following may occur from time to time, without
notice or consideration to, or consent of, Indemnitors, and the liability of
Indemnitors hereunder shall remain unconditional and absolute and shall in no
way be impaired or limited by reason thereof:

                           (i)      any extension of time for performance
required by any of the Loan Documents or otherwise granted by Lender or any
extension or renewal of the Note;

                           (ii)     any sale, assignment or foreclosure of the
Note, the Security Instrument or any of the other Loan Documents or any sale or
transfer of the Property, except as set forth in Section 2(b);

                           (iii)    any change in the composition of Borrower,
including, without limitation, the voluntary or involuntary withdrawal or
removal of Indemnitors from any current or future position of ownership,
management or control of Borrower;

                           (iv)     the release of Borrower or of any other
Person from performance or observance of any of the agreements, covenants, terms
or conditions contained in any of the Loan Documents by operation of law,
Lender's voluntary act or otherwise;

                                       11


                           (v)      the release or substitution in whole or in
part of any security for the Loan;

                           (vi)     Lender's failure to record the Security
Instrument or to file any financing statement (or Lender's improper recording or
filing thereof) or to otherwise perfect, protect, secure or insure any lien or
security interest given as security for the Loan;

                           (vii)    the modification of the terms of any one or
more of the Loan Documents;

                           (viii)   subject to Section 2(b) hereof, the exercise
by Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant
to the terms of the Mezzanine Loan Documents, including, without limitation,
foreclosure or similar remedies under any pledge agreement encumbering Mezzanine
Borrower's interest in General Partner, Member or any Borrower; or

                           (ix)     the taking or failure to take any action of
any type whatsoever. No such action which Lender shall take or fail to take in
connection with the Loan Documents or any collateral for the Loan, nor any
course of dealing with Borrower or any other Person, shall limit, impair or
release Indemnitor's obligations hereunder, affect this Agreement in any way or
afford Indemnitors any recourse against any Indemnified Party. Nothing contained
in this Section shall be construed to require any Indemnified Party to take or
refrain from taking any action referred to herein.

                  (k)      Representations. Each Indemnitor represents and
warrants that there is no bankruptcy, reorganization or insolvency proceeding
pending or, to its knowledge, threatened against it.

                  (l)      Professionals' Fees. In the event it is necessary for
any Indemnified Party to retain the services of an attorney or any other
consultants in order to enforce this Agreement, or any portion hereof,
Indemnitors agree to pay to such Indemnified Party any and all reasonable costs
and expenses, including, without limitation, reasonable attorneys' and
consultants' fees and disbursements, incurred by such Indemnified Party as a
result thereof and all such amounts shall be included in Costs.

                  (m)      Successive Actions. A separate right of action
hereunder shall arise each time an Indemnified Party acquires knowledge of any
matter indemnified or guaranteed by Indemnitors hereunder. Separate and
successive actions may be brought hereunder to enforce any of the provisions
hereof at any time and from time to time and no action hereunder shall preclude
any subsequent action.

                  (n)      No Waiver; Remedies Cumulative. No failure or delay
on the part of Lender in exercising any right, remedy, power or privilege
hereunder or under the other Loan Documents and no course of dealing between
Borrower and Lender shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder or under the
other Loan Documents preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege hereunder or thereunder.
The rights and remedies provided herein and in the other Loan Documents are
cumulative and not exclusive

                                       12


of any rights or remedies provided by law. The giving of notice to or demand on
Borrower which notice or demand is not required hereunder or under the other
Loan Documents shall not entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights,
remedies, powers or privileges of Lender in any circumstances not requiring
notice or demand.

                  (o)      Notices. All notices, requests and other
communications to any party hereunder or under the Note shall be given in the
manner set forth in Section 14.5 of the Loan Agreement, to Lender and Borrower
at such party's address set forth in Section 14.5 of the Loan Agreement and to
each Obligor at its address set forth above, or such other address as
Indemnitors or Lender shall hereafter specify by not less than ten (10) days
prior written notice as provided herein; provided, however, that notwithstanding
any provision of this Section to the contrary, such notice of change of address
shall be deemed given only upon actual receipt thereof. Rejection or other
refusal to accept or the inability to deliver because of changed addresses of
which no notice was given as herein required shall be deemed to be receipt of
the notice, demand, statement, request or consent.

                  (p)      Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
and the applicable laws of the United States of America. Indemnitors hereby
irrevocably submit to the jurisdiction of any court of competent jurisdiction
located in the State of New York and in any state in which the Property is
located in connection with any proceeding out of or relating to this Agreement.

                  (q)      Invalid Provisions. If any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect, this
Agreement shall be construed without such provision.

                  (r)      Amendments. The terms of this Agreement, together
with the terms of the other Loan Documents, constitute the entire understanding
and agreement of the parties hereto and supersede all prior agreements,
understandings and negotiations between Indemnitors and Lender with respect to
the obligations contained herein. This Agreement, and any provisions hereof, may
not be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act on the part of Borrower or Lender, but only by an agreement
in writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

                  (s)      Parties Bound; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives; provided, however, that except as
provided in the Loan Agreement or herein, Indemnitors may not, without the prior
written consent of Lender, assign any of their rights, powers, duties or
obligations hereunder.

                  (t)      Headings; Construction of Documents. The headings and
captions of various sections of this Agreement are for convenience of reference
only and are not to be construed as defining or limiting, in any way, the scope
or intent of the provisions hereof. Indemnitors acknowledge that they were
represented by competent counsel in connection with the negotiation and drafting
of this Agreement and the other Loan Documents and that neither

                                       13


this Agreement nor the other Loan Documents shall be subject to the principle of
construing the meaning against the Person who drafted same.

                  (u)      Recitals. The recital and introductory paragraphs
hereof are a part hereof, form a basis for this Agreement and shall be
considered prima facie evidence of the facts and documents referred to therein.

                  (v)      Counterparts. To facilitate execution, this Agreement
may be executed in as many counterparts as may be convenient or required. It
shall not be necessary that the signature or acknowledgment of, or on behalf of,
each party, or that the signature of all Persons required to bind any party, or
the acknowledgment of such party, appear on each counterpart. All counterparts
shall collectively constitute a single instrument. It shall not be necessary in
making proof of this Agreement to produce or account for more than a single
counterpart containing the respective signatures of, or on behalf of, and the
respective acknowledgments of, each of the parties hereto. Any signature or
acknowledgment page to any counterpart may be detached from such counterpart
without impairing the legal effect of the signatures or acknowledgments thereon
and thereafter attached to another counterpart identical thereto except having
attached to it additional signature or acknowledgment pages.

                  (w)      Cumulative Rights. The rights of Lender under this
Agreement shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled, subject to the terms of this Agreement, to
every right and remedy now or hereafter afforded by law.

                  (x)      Waiver of Counterclaim and Right to Trial by Jury.
Indemnitors hereby waive the right to assert a counterclaim, other than a
compulsory counterclaim, in any action or proceeding brought against it by
Lender or its agents, and Lender and Indemnitors waive trial by jury in any
action or proceeding brought by either party hereto against the other or in any
counterclaim any other party may be permitted to assert hereunder or which may
be asserted by any party or its agents, against Indemnitors, or in any matters
whatsoever arising out of or in any way connected with this Agreement, the debt
or the obligations contained herein.

                  (y)      Singular and Plural; Joint and Several Liability.

                           (i)      If there is more than one entity comprising
Obligor, all references to Obligor herein shall be to Obligor, or any one or
more of them. All references to Indemnitors herein shall be to Indemnitors or
any one or more of them. All obligations and liabilities of Indemnitors
hereunder are in addition to, not in lieu of and are independent of: (A) all
obligations of Borrower under any other Loan Document, including the Note and
the Loan Agreement; and (B) any obligation of Obligor under any other Loan
Document to which Obligor is a party.

                           (ii)     All obligations of Indemnitors hereunder
shall be joint and several.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       14


                  IN WITNESS WHEREOF, Indemnitors have executed this Agreement
as of the day and year first above written.

                                  BORROWERS:

                                  LODGIAN AMI, INC.
                                  LODGIAN HOTELS FIXED III, LLC
                                  MINNEAPOLIS MOTEL ENTERPRISES, INC.

                                  By:/s/ Daniel E. Ellis
                                     --------------------------------------
                                     Name:  Daniel E. Ellis
                                     Title: Vice President and Secretary, or
                                            Authorized Signatory for each of the
                                            entities listed above


                                  SERVICO CENTRE ASSOCIATES, LTD.

                                  By:  SERVICO PALM BEACH GENERAL PARTNER
                                       SPE, INC., a Delaware corporation, its
                                       general partner

                                  By:/s/ Daniel E. Ellis
                                     --------------------------------------
                                     Name:  Daniel E. Ellis
                                     Title: Vice President and Secretary, or
                                            Authorized Signatory


                                  OBLIGOR:

                                  LODGIAN, INC., a Delaware
                                  corporation

                                  By:/s/ Daniel E. Ellis
                                     --------------------------------------
                                     Name: Daniel E. Ellis
                                     Title: Senior Vice President



                                   EXHIBITS A

                                   PROPERTIES



     CHAIN/NAME                          CITY                  ST
- ---------------------           -----------------------        --
                                                         
Courtyard by Marriott           Bentonville                    AR
Crowne Plaza                    West Palm Beach                FL
Courtyard by Marriott           Florence                       KY
Holiday Inn                     Baltimore, Inner Harbor        MD
Holiday Inn                     Glen Burnie                    MD
Holiday Inn                     Towson (Cromwell Bridge)       MD
Holiday Inn                     Arden Hills/St. Paul           MN
Fairfield Inn                   Merrimack                      NH
Holiday Inn Sunspree            Myrtle Beach (Surfside Beach)  SC

EX-10.5.1

                                                                  EXHIBIT 10.5.1

                           LOAN AND SECURITY AGREEMENT
                                 (FIXED RATE #4)

                            DATED AS OF JUNE 25, 2004

                                     BETWEEN

                    THE BORROWERS LISTED ON SCHEDULE 1 HERETO
                                  AS BORROWERS

                                       AND

                      MERRILL LYNCH MORTGAGE LENDING, INC.
                                    AS LENDER



                                TABLE OF CONTENTS



                                                                                                                       Page
                                                                                                                       ----
                                                                                                                    
                                    ARTICLE I
DEFINITIONS......................................................................................................        1

Section 1.1       Certain Defined Terms..........................................................................        1
Section 1.2       Accounting Terms...............................................................................       23
Section 1.3       Other Definitional Provisions..................................................................       23

                                   ARTICLE II

TERMS OF THE LOAN................................................................................................       23

Section 2.1       Loan...........................................................................................       23
Section 2.2       Interest.......................................................................................       24
Section 2.3       Reserved.......................................................................................       25
Section 2.4       Payments.......................................................................................       25
Section 2.5       Maturity.......................................................................................       26
Section 2.6       Prepayment.....................................................................................       26
Section 2.7       Outstanding Balance............................................................................       27
Section 2.8       Taxes..........................................................................................       27
Section 2.9       Reasonableness of Charges......................................................................       27
Section 2.10      Reserved.......................................................................................       27
Section 2.11      Servicing/Special Servicing....................................................................       27
Section 2.12      Cross-Collateralization; Contribution; Release of Cross-Collateralization......................       28

                                   ARTICLE III

CONDITIONS TO LOAN...............................................................................................       33

Section 3.1       Conditions to Funding of the Loan on the Closing Date..........................................       33

                                   ARTICLE IV

REPRESENTATIONS AND WARRANTIES...................................................................................       38

Section 4.1       Organization, Powers, Capitalization, Good Standing, Business..................................       38
Section 4.2       Authorization of Borrowing, etc................................................................       39
Section 4.3       Financial Statements...........................................................................       39
Section 4.4       Indebtedness and Contingent Obligations........................................................       40
Section 4.5       Title to the Properties........................................................................       40
Section 4.6       Zoning; Compliance with Laws...................................................................       40
Section 4.7       Leases; Agreements.............................................................................       41
Section 4.8       Condition of the Properties....................................................................       42
Section 4.9       Litigation; Adverse Facts......................................................................       43
Section 4.10      Payment of Taxes...............................................................................       43
Section 4.11      Adverse Contracts..............................................................................       43
Section 4.12      Performance of Agreements......................................................................       43
Section 4.13      Governmental Regulation........................................................................       43


                                        i


                                                                                                                     
Section 4.14      Employee Benefit Plans.........................................................................       43
Section 4.15      Broker's Fees..................................................................................       43
Section 4.16      Intentionally Deleted..........................................................................       44
Section 4.17      Solvency. .....................................................................................       44
Section 4.18      Disclosure.....................................................................................       44
Section 4.19      Use of Proceeds and Margin Security............................................................       44
Section 4.20      Insurance......................................................................................       44
Section 4.21      Separate Tax Lots..............................................................................       45
Section 4.22      Investments....................................................................................       45
Section 4.23      Bankruptcy.....................................................................................       45
Section 4.24      Defaults.......................................................................................       45
Section 4.25      No Plan Assets.................................................................................       45
Section 4.26      Governmental Plan..............................................................................       45
Section 4.27      Not Foreign Person.............................................................................       45
Section 4.28      No Collective Bargaining Agreements............................................................       45
Section 4.29      Reserved.......................................................................................       45
Section 4.30      Reserved.......................................................................................       45
Section 4.31      No Prohibited Persons..........................................................................       46

                                    ARTICLE V

COVENANTS OF BORROWER PARTIES....................................................................................       46

Section 5.1       Financial Statements and Other Reports.........................................................       46
Section 5.2       Existence; Qualification.......................................................................       51
Section 5.3       Payment of Impositions and Claims..............................................................       51
Section 5.4       Maintenance of Insurance.......................................................................       52
Section 5.5       Operation and Maintenance of the Properties; Casualty..........................................       56
Section 5.6       Inspection.....................................................................................       59
Section 5.7       O&M Plan.......................................................................................       59
Section 5.8       Reserved.......................................................................................       59
Section 5.9       Compliance with Laws and Contractual Obligations...............................................       59
Section 5.10      Further Assurances.............................................................................       60
Section 5.11      Performance of Agreements and Leases...........................................................       60
Section 5.12      Leases.........................................................................................       60
Section 5.13      Management; Franchise Agreements...............................................................       61
Section 5.14      Material Agreements............................................................................       63
Section 5.15      Deposits; Application of Receipts..............................................................       64
Section 5.16      Estoppel Certificates..........................................................................       64
Section 5.17      Indebtedness...................................................................................       64
Section 5.18      No Liens.......................................................................................       65
Section 5.19      Contingent Obligations.........................................................................       65
Section 5.20      Restriction on Fundamental Changes.............................................................       65
Section 5.21      Transactions with Related Persons..............................................................       65
Section 5.22      Bankruptcy, Receivers, Similar Matters.........................................................       65
Section 5.23      ERISA..........................................................................................       66
Section 5.24      Press Release..................................................................................       67
Section 5.25      Reserved.......................................................................................       67



                                       ii


                                                                                                                     
Section 5.26      Reserved.......................................................................................       67
Section 5.27      Lender's Expenses..............................................................................       67
Section 5.28      Distributions..................................................................................       67
Section 5.29      Cancellation of Indebtedness; Settlement of Claims.............................................       67
Section 5.30      Prohibited Persons.............................................................................       67

                                   ARTICLE VI

RESERVES.........................................................................................................       68

Section 6.1       Security Interest in Reserves; Other Matters Pertaining to Reserves............................       68
Section 6.2       Funds Deposited with Lender....................................................................       68
Section 6.3       Impositions and Insurance Reserve..............................................................       69
Section 6.4       FF&E Reserve...................................................................................       69
Section 6.5       Capital Improvement Reserve; Required Capital Improvements.....................................       70
Section 6.6       Hazardous Materials Remediation Reserve........................................................       70
Section 6.7       Conditions to Disbursements from Hazardous Materials Remediation Reserve and
                  Capital Improvement Reserve; Performance of Work...............................................       70
Section 6.8       Cash Trap Reserve..............................................................................       75

                                   ARTICLE VII

DEPOSIT ACCOUNT; LOCK BOX ACCOUNT; CASH MANAGEMENT...............................................................       76

Section 7.1       Establishment of Deposit Account and Lock Box Account..........................................       76
Section 7.2       Application of Funds in Lock Box Account.......................................................       78
Section 7.3       Application of Funds After Event of Default....................................................       78

                                  ARTICLE VIII

DEFAULT, RIGHTS AND REMEDIES.....................................................................................       78

Section 8.1       Event of Default...............................................................................       78
Section 8.2       Acceleration and Remedies......................................................................       80
Section 8.3       Performance by Lender..........................................................................       82
Section 8.4       Evidence of Compliance.........................................................................       82

                                   ARTICLE IX

SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS......................................       83

Section 9.1       Applicable to all Primary Borrower Parties.....................................................       83
Section 9.2       Applicable to Borrowers, General Partner and Member............................................       85

                                    ARTICLE X

RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS................................................................       87

Section 10.1      Secondary Market Transactions Generally........................................................       87
Section 10.2      Cooperation; Limitations.......................................................................       87
Section 10.3      Information....................................................................................       88
Section 10.4      Additional Provisions..........................................................................       89



                                       iii


                                                                                                                    
                                   ARTICLE XI

RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES............................................       89

Section 11.1      Restrictions on Transfer and Encumbrance.......................................................       89
Section 11.2      Transfers of Beneficial Interests in Borrowers. The following voluntary or
                  involuntary sales, encumbrances, conveyances, transfers and pledges (each, a
                  "Transfer") of a direct, indirect or beneficial interest in any Borrower shall be
                  permitted without Lender's consent ("Permitted Ownership Interest Transfers"):.................       90
Section 11.3      Assumability...................................................................................       90
Section 11.4      Release of Properties..........................................................................       92
Section 11.5      Reserved.......................................................................................       94
Section 11.6      Sale of Building Equipment.....................................................................       94
Section 11.7      Immaterial Transfers and Easements, etc........................................................       94

                                   ARTICLE XII

RECOURSE; LIMITATIONS ON RECOURSE................................................................................       94

Section 12.1      Limitations on Recourse........................................................................       94
Section 12.2      Partial Recourse; Full Recourse................................................................       95
Section 12.3      Miscellaneous..................................................................................       96

                                  ARTICLE XIII

WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES...................................................................       96

Section 13.1      Waivers........................................................................................       96

                                   ARTICLE XIV

MISCELLANEOUS....................................................................................................       98

Section 14.1      Expenses and Attorneys' Fees...................................................................       98
Section 14.2      Indemnity......................................................................................       98
Section 14.3      Amendments and Waivers.........................................................................       99
Section 14.4      Retention of the Borrowers' Documents..........................................................       99
Section 14.5      Notices........................................................................................       99
Section 14.6      Survival of Warranties and Certain Agreements.................................................       100
Section 14.7      Failure or Indulgence Not Waiver; Remedies Cumulative.........................................       101
Section 14.8      Marshaling; Payments Set Aside................................................................       101
Section 14.9      Severability..................................................................................       101
Section 14.10     Headings......................................................................................       101
Section 14.11     APPLICABLE LAW................................................................................       101
Section 14.12     Successors and Assigns........................................................................       102
Section 14.13     Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship............................       102
Section 14.14     Reasonableness of Determinations..............................................................       102
Section 14.15     Limitation of Liability.......................................................................       103
Section 14.16     No Duty.......................................................................................       103
Section 14.17     Entire Agreement..............................................................................       103



                                       iv


                                                                                                                    
Section 14.18     Construction; Supremacy of Loan Agreement.....................................................       103
Section 14.19     Consent to Jurisdiction.......................................................................       103
Section 14.20     Waiver of Jury Trial..........................................................................       104
Section 14.21     Counterparts; Effectiveness...................................................................       104
Section 14.22     Servicer......................................................................................       104
Section 14.23     Obligations of Borrower Parties...............................................................       105
Section 14.24     Additional Inspections; Reports...............................................................       105



                                        v


                         LIST OF EXHIBITS AND SCHEDULES

                        
Exhibit A             -    Properties
Exhibit B             -    Environmental Reports
Exhibit C             -    Franchise Agreements
Exhibit D             -    Allocated Loan Amounts/Aggregate Allocated Loan Amounts
Exhibit E             -    Management Agreements
Exhibit F             -    [Reserved]
Exhibit G             -    Property Improvement Plans
Exhibit H             -    [Reserved]
Exhibit I             -    Acceptable Franchisors
Exhibit J             -    Property Condition Reports
Exhibit K             -    Zoning Reports
Exhibit L             -    Certificate re: Work Reserves

Schedule 1            -    Borrowers
Schedule 2.4          -    Scheduled Mortgage Principal Payments
Schedule 2.12(G)      -    Crossed Loans/Crossed Borrowers
Schedule 3.1(A)       -    List of Loan Documents
Schedule 4.1(C)       -    Organizational Chart for Borrower Parties
Schedule 4.2          -    Consents
Schedule 4.5          -    Condemnation Proceedings
Schedule 4.5(A)       -    Rights to Purchase/Rights of First Offer
Schedule 4.7(B)       -    Rent Roll
Schedule 4.7(E)       -    Franchise Defaults
Schedule 4.9          -    Litigation
Schedule 4.14              ERISA Plans
Schedule 4.20         -    Insurance
Schedule 4.28         -    Collective Bargaining Agreements
Schedule 5.14         -    Material Agreements
Schedule 6.5          -    Required Capital Improvements
Schedule 6.6          -    Environmental Work/O&M Plans
Schedule 6.7          -    Reserve Funding Conditions



                                        i


                           LOAN AND SECURITY AGREEMENT

            This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as
of June 25, 2004 and entered into by and between the parties listed as Borrowers
on SCHEDULE 1 hereto (collectively, "BORROWERS", and individually, each a
"BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation
(together with its successors and assigns, "LENDER").

            NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrowers and Lender agree as
follows:

                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan
Agreement as so defined. Terms defined in the preamble and recitals to this Loan
Agreement are used in this Loan Agreement as so defined.

      "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the
franchisors identified on EXHIBIT I.

      "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate
of the Borrowers and, upon receipt of a Rating Confirmation, another reputable
hotel management company with at least five (5) years experience managing hotel
properties similar to the Properties and which at the time of its engagement is
managing at least 5,000 hotel rooms (exclusive of the Properties).

      "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest
in and to the Accounts, the Reserves, all monies and amounts which may from time
to time be on deposit therein, all monies, checks, notes, instruments,
documents, deposits, and credits from time to time in the possession of Lender
representing or evidencing such Accounts and Reserves and all earnings and
investments held therein and proceeds thereof.

      "ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any
Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any
other accounts pledged to Lender pursuant to this Loan Agreement or any other
Loan Document.

      "AFFILIATE" means in relation to any Person, any other Person: (i)
directly or indirectly controlling, controlled by, or under common control with,
the first Person; (ii) directly or indirectly owning or holding fifty percent
(50%) or more of any equity interest in the first Person; or (iii) fifty percent
(50%) or more of whose voting stock or other equity interest is directly or
indirectly owned or held by the first Person. In addition, the Affiliates of
each Borrower Party include, without limitation, all other Borrower Parties,
irrespective of whether they now or hereafter satisfy the foregoing criteria.
For purposes of this definition, "CONTROL" (including with correlative meanings,
the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means
the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Where expressions such
as "[name of party] or



any Affiliate" are used, the same shall refer to the named party and any
Affiliate of the named party. Further, the Affiliates of any Person that is an
entity shall include all natural persons who are officers, directors, managing
members, or general partners of the entity.

      "AGGREGATE ALLOCATED LOAN AMOUNT" means the aggregate portion of the
Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT
D.

      "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of
determination, the aggregate outstanding principal balance of the Mezzanine Loan
and the Loan.

      "ALLOCABLE PORTION" means 23.66%.

      "ALLOCATED LOAN AMOUNT" means the portion of the Loan allocated to each
Property as set forth on EXHIBIT D.

      "APPROVED ACCOUNTING FIRM" means Ernst and Young, PriceWaterhouseCoopers,
Deloitte & Touche or KPMG Peat Marwick or any successor entity.

      "APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in
Section 6.7.

      "APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section
6.7.

      "APPROVED EXPENDITURES" has the meaning set forth in Section 6.7.

      "ARCHITECT" has the meaning set forth in Section 5.5.

      "ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and
Rents of even date herewith from each of the Borrowers to Lender, constituting
assignments of each Borrower's right, title and interest in the Leases and
proceeds therefrom for each of their respective Properties as Collateral for the
Loan, as same may be amended or modified from time to time.

      "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain
Conditional Assignments of Hotel Management Agreements of even date herewith
executed by each of the Borrowers and the applicable Manager, constituting an
assignment of each Management Agreement as Collateral for the Loan, as same may
be amended or modified from time to time.

      "ASSUMPTION" has the meaning set forth in Section 11.3.

      "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended
from time to time, and all rules and regulations promulgated thereunder.

      "BEVERAGE COMPANY" means any Person (other than any of the Borrowers)
holding, or entitled to any proceeds from, any liquor license or other beverage
permit for the sale of alcoholic beverages at any Property.

                                       2


      "BOARD OF MANAGERS" means the board of managers, or similar governing
entity, established for the governance of the condominium association
established pursuant to the terms of the Condominium Property Documents.

      "BORROWER" and "BORROWERS" have the meanings set forth in the preamble;
provided that, following a Release, "BORROWERS" means each of the Borrowers
remaining as a party to the Loan Documents, and whose Properties remain
encumbered by the Mortgages as Collateral for the Loan and "BORROWER" means any
of such remaining parties.

      "BORROWER PARTY" and "BORROWER PARTIES" means, individually or
collectively, the Borrowers, General Partner, Member and Guarantor.

      "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1.

      "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii)
any day which is a legal holiday under the laws of the State of New York, the
state or states where the servicing offices of the Servicer, and, if the Loan
becomes a "specially serviced mortgage loan" pursuant to the terms of any trust
and servicing agreement entered into in connection with any Securitization
backed in whole or in part by the Loan, the special servicer, are located or the
state in which the corporate trust office of the trustee in connection with any
such Securitization is located, and (iv) any day on which banking institutions
located in such state are generally not open for the conduct of regular
business.

      "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event,
the last day of each calendar quarter, and (y) during the continuance of a Cash
Trap Event, the last day of each calendar month.

      "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other
expenditures for FF&E and Capital Expenditures set forth in an annual budget
approved by Lender in writing (such approval not to be unreasonably withheld or
delayed as long as the budget is consistent with the form of the CapEx/FF&E
Budget provided to Lender prior to Closing), covering the planned FF&E
expenditures and Capital Expenditures for the period covered by such budget, as
same may be amended pursuant to Section 5.1(D) hereof.

      "CAPITAL EXPENDITURES" means expenditures for Capital Improvements.

      "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations
(including any improvements, repairs or alterations required pursuant to a
Property Improvement Plan), FF&E and other capital items (whether paid in cash
or property or accrued as liabilities) made by the Borrowers that, in conformity
with GAAP, would not be included in the Borrowers' annual financial statements
as an Operating Expense of the Properties.

      "CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5.

      "CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even
date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank.

      "CASH TRAP EVENT" has the meaning set forth in Section 6.8.

                                       3


      "CASH TRAP RESERVE" has the meaning set forth in Section 6.8.

      "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier
3 Hotel category.

      "CLAIMS" has the meaning set forth in Section 5.3.

      "CLOSING" means the funding of the Loan.

      "CLOSING DATE" means the date on which the Closing occurs.

      "COLLATERAL" means rights, interests, and property of every kind, real and
personal, tangible and intangible, which is granted, pledged, liened, or
encumbered as security for the Loan or any of the other Obligations under this
Loan Agreement, the Mortgages, the Cash Management Agreement or other Loan
Documents, including without limitation the Properties and the Account
Collateral.

      "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1.

      "CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (A) with respect to
any indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto; (B) with respect to any
letter of credit issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings; (C) under any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect against
fluctuations in interest rates; or (D) under any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect that Person against fluctuations in currency values. Contingent
Obligations shall include (i) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
co-making (other than the Loan), discounting with recourse or sale with recourse
by such Person of the obligation of another, (ii) the obligation to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement, and (iii) any liability of such Person
for the obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance sheet item or level of
income of another. The amount of any Contingent Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported or, if not a fixed
and determined amount, the maximum amount so guaranteed.

      "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject, other than the Loan Documents.

                                       4


      "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1.

      "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set
forth in Section 7.1.

      "CROSS GUARANTIES" shall mean (i) those certain Guaranties of the Loan,
each dated as of the date hereof, executed by each of the Crossed Borrowers, and
(ii) those certain Guaranties of each of the Crossed Loans, each dated as of the
date hereof, executed by each of the Borrowers.

      "CROSS RELEASE NOTICE" has the meaning set forth in Section 2.12(G).

      "CROSSED BORROWERS" shall mean the mortgage loan borrowers (other than the
Borrowers) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof,
subject to modification pursuant to Section 2.12(G) hereof.

      "CROSSED INDEBTEDNESS" shall mean the Crossed Loans and all other
"Indebtedness" as defined in each Crossed Loan Agreement.

      "CROSSED LOANS" shall mean each of the mortgage loans (other than the
Loan) listed on SCHEDULE 2.12(G) attached hereto and made a part hereof with
respect to each Crossed Borrower, subject to modification pursuant to Section
2.12(G) hereof.

      "CROSSED LOAN AGREEMENTS" shall mean those certain Loan Agreements, each
dated as of the date hereof, between Lender and the Crossed Borrowers for the
respective Crossed Loans, each as amended, modified, supplemented or restated
from time to time, subject to modification pursuant to Section 2.12(G) hereof.

      "CROSSED LOAN DEFAULT" shall mean any "Event of Default" as defined in any
Crossed Loan Agreement, subject to modification pursuant to Section 2.12(G)
hereof.

      "CROSSED LOAN DOCUMENTS" shall mean the "Loan Documents" as defined in
each Crossed Loan Agreement for each Crossed Loan, including without limitation
the promissory note(s), Crossed Mortgages and Crossed Loan Agreement evidencing
and/or securing each Crossed Loan, and each of the Crossed Guaranties relating
to the respective Crossed Loans, subject to modification pursuant to Section
2.12(G) hereof.

      "CROSSED MORTGAGES" shall mean each of the mortgages, deeds of trust and
deeds to secure debt, each dated as of the date hereof, from each Crossed
Borrower to Lender, constituting a Lien on such Crossed Borrower's Crossed
Property as security for the respective Crossed Loans, each as amended,
modified, supplemented or restated from time to time, subject to modification
pursuant to Section 2.12(G) hereof.

      "CROSSED PROPERTIES" shall mean the properties securing each Crossed Loan,
as described in the respective Crossed Loan Agreement, subject to modification
pursuant to Section 2.12(G) hereof.

      "D&O INSURANCE" has the meaning set forth in Section 5.4.

                                       5


      "DEBT SERVICE COVERAGE RATIO" OR "DSCR" means, at any time of
determination, Net Cash Flow for the trailing twelve (12) month period divided
by the amount of interest that will be required to be paid over the succeeding
twelve (12) months on the Loan and the Allocable Portion of the Mezzanine Loan,
plus principal amortization of the Loan and the Allocable Portion of the
Mezzanine Loan that would be required in respect of the then outstanding
principal amount of the Loan and the Allocable Portion of the Mezzanine Loan
over the succeeding twelve (12) months based on a twenty-five (25) year
amortization schedule, calculated using the Interest Rate for the Loan and the
actual interest rate on the Mezzanine Loan.

      "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1.

      "DEBT YIELD" means, at any time of determination, Net Cash Flow for the
trailing twelve (12) month period divided by the then outstanding principal
balance of the Loan and the Allocable Portion of the Mezzanine Loan; provided,
however, that Debt Yield shall be determined for each Calculation Date during
calendar year 2004 based upon budgeted Net Cash Flow for 2004 for the Hilton,
Columbia, Maryland and Hilton, Troy, Michigan Properties (as opposed to actual
Net Cash Flow for the trailing twelve (12) month period for such Properties).

      "DEFAULT" means any breach or default under any of the Loan Documents,
whether or not the same is an Event of Default, and also any condition or event
that, after notice or lapse of time or both, would constitute an Event of
Default if that condition or event were not cured or removed within any
applicable grace or cure period.

      "DEFAULT RATE" has the meaning set forth in Section 2.2.

      "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1.

      "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1.

      "DEPOSIT BANK" has the meaning set forth in Section 7.1.

      "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3.

      "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by
Moody's or A-1 or better by S&P or similarly rated by any successor to either of
such rating services, (b) obligations of the United States government or any
agency thereof which are backed by the full faith and credit of the United
States, or (c) deposits, including certificates of deposit, in any commercial
bank or trust company (i) which is registered to do business in any state of the
United States, (ii) which has capital and surplus in excess of $100,000,000 and
(iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or
better by Moody's or is similarly rated by any successor thereof, provided that
each such item of commercial paper, each such obligation, and each such time
deposit has a maturity date not later than thirty days after the date of
purchase thereof.

      "DOLLARS" and the sign "$" mean the lawful money of the United States of
America.

                                       6


      "ELIGIBLE ACCOUNT" means a separate and identifiable account from all
other funds held by the holding institution, which account is either (i) an
account maintained with an Eligible Bank or (ii) a segregated trust account
maintained by a corporate trust department of a federal depository institution
or a state chartered depository institution subject to regulations regarding
fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulations ss. 9.10(b), which, in either case, has corporate trust powers and
is acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.

      "ELIGIBLE BANK" means a bank that satisfies the Rating Criteria.

      "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning
of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is
maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii)
which has at any time within the preceding six (6) years been maintained for the
employees of any of the Borrowers or any current or former ERISA Affiliate or
(iii) for which any of the Borrowers or any ERISA Affiliate has any liability,
including contingent liability.

      "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date
herewith from the Borrowers and Guarantor to Lender, as same may be amended or
modified from time to time.

      "ENVIRONMENTAL LAWS" means all present and future local, state, federal or
other governmental authority, statutes, ordinances, codes, orders, decrees,
laws, rules or regulations pertaining to or imposing liability or standards of
conduct concerning environmental regulation (including, without limitation,
regulations concerning health and safety), contamination or clean-up or the
handling, generation, release or storage of Hazardous Material affecting the
Properties including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know
Act of 1986, as amended, the Hazardous Substances Transportation Act, as
amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as
amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as
amended, the Safe Drinking Water Act, as amended, the Occupational Safety and
Health Act, as amended, any state superlien and environmental clean-up statutes
and all regulations adopted in respect of the foregoing laws whether now or
hereafter in effect.

      "ENVIRONMENTAL REPORTS" means those certain environmental reports and
audits for the Properties as described on EXHIBIT B.

      "ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6.

      "EO13224" has the meaning set forth in Section 4.31.

      "ERISA" means the Employee Retirement Income Security Act of 1974, and all
rules and regulations promulgated thereunder.

      "ERISA AFFILIATE" means, in relation to any Person, any other Person under
common control with the first Person, within the meaning of Section 4001(a)(14)
of ERISA.

                                       7


      "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of
London, England are generally open for interbank or foreign exchange
transactions and which is also a Business Day.

      "EVENT OF DEFAULT" has the meaning set forth in Section 8.1.

      "EXCESS CASH FLOW" has the meaning set forth in the Cash Management
Agreement.

      "EXCESS INTEREST" has the meaning set forth in Section 2.2.

      "EXCLUDED BORROWER" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED GUARANTIES" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED LOAN" has the meaning set forth in Section 2.12(G) hereof.

      "EXCLUDED LOAN AGREEMENT" has the meaning set forth in Section 2.12(G)
hereof.

      "EXCLUDED LOAN DOCUMENTS" has the meaning set forth in Section 2.12(G)
hereof.

      "EXCLUDED PROPERTY" has the meaning set forth in Section 2.12(G) hereof.

      "EXCULPATED PARTIES" has the meaning set forth in Section 12.2.

      "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash
Management Agreement.

      "FF&E" means all machinery, furniture, furnishings, equipment, fixtures
(including, without limitation, all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures), inventory and articles of
personal property and accessions, renewals and replacements thereof and
substitutions therefor (including, without limitation, beds, bureaus,
chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs,
carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings,
pictures, divans, couches, luggage carts, luggage racks, stools, sofas,
chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry
cleaning facilities, dining room wagons, tools, keys or other entry systems,
bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock
radios, television sets, intercom and paging equipment, electric and electronic
equipment, dictating equipment, private telephone systems, medical equipment,
potted plants, heating, lighting and plumbing fixtures, fire prevention and
extinguishing apparatus, cooling and air-conditioning systems, elevators,
escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry
machines, tools, machinery, engines, dynamos, motors, boilers, incinerators,
switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning,
waxing and polishing equipment, call systems, brackets, electrical signs, bulbs,
bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment,
dishwashers, garbage disposals, washer and dryers), other customary hotel
equipment and other tangible property of every kind and nature whatsoever owned
by the Borrowers, or in which the Borrowers have or shall have an interest, now
or hereafter located at the Properties, or appurtenant thereto, and useable in
connection with the present or future operation and occupancy of the Properties
and all building equipment, material and supplies of any nature

                                       8


whatsoever owned by the Borrowers, or in which the Borrowers have or shall have
an interest, now or hereafter located at the Properties, or appurtenant thereto,
and useable in connection with the present or future operation, enjoyment and
occupancy of the Properties.

      "FF&E RESERVE" means the reserve established pursuant to Section 6.4.

      "FINANCIAL STATEMENTS" means statements of operations and retained
earnings, statements of cash flow and balance sheets.

      "FINANCING STATEMENTS" means the Uniform Commercial Code Financing
Statements naming the applicable Borrower Parties as debtor, and Lender as
secured party, required under applicable state law to perfect the security
interests created hereunder or under the other Loan Documents.

      "FITCH" means Fitch, Inc.

      "FORCE MAJEURE" means acts of god, governmental restrictions, stays,
judgments, orders, decrees, enemy actions, civil commotion, fire, casualty,
strikes or work stoppages which are industry-wide and not aimed at the Borrowers
or their Affiliates, or other causes beyond the reasonable control of the
Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of
itself shall not be deemed a cause beyond the control of the Borrowers.

      "FRANCHISE AGREEMENTS" means, collectively, those certain agreements
described in EXHIBIT C and any replacement franchise agreement which may
hereafter be entered into in accordance with the terms and conditions hereof by
any of the Borrowers, as franchisee, pursuant to which the Borrowers have the
right to operate the Properties under names and hotel systems controlled by the
Franchisor.

      "FRANCHISOR" means the current hotel franchisor or licensor with respect
to each Property or any other successor franchisor or licensor permitted
pursuant to Section 5.13.

      "FRANCHISOR LETTER" means, with respect to each Property, a comfort
letter(s), and/or similar instrument(s) from the related Franchisor to Lender
acknowledging the Loan and providing certain assurances, reasonably satisfactory
to Lender, with respect thereto.

      "FUNDING LOSSES" has the meaning set forth in Section 2.10.

      "FUNDING PARTY" means any bank or other entity, if any, which is
indirectly or directly funding Lender with respect to the Loan, in whole or in
part, including, without limitation, any direct or indirect assignee of, or
participant in, the Loan.

      "GAAP" means generally accepted accounting principles as set forth in
Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting
Fairly in Conformity with Generally Accepted Accounting Principles in the
Independent Auditor's Report" issued by the Auditing Standards Board of the
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board to the extent such principles are
applicable to the facts and circumstances as of the date of determination.

                                       9


      "GENERAL PARTNER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "General Partners", and any other entity which
is now or hereafter becomes a general partner of any of the Borrowers under such
Borrower's limited partnership agreement.

      "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or
state government or other political subdivision thereof and any entity,
including any regulatory or administrative authority or court, exercising
executive, legislative, judicial, regulatory or administrative or
quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal in each case having jurisdiction over such
applicable Person or such Person's property, and any stock exchange on which
shares of capital stock of such Person are listed or admitted for trading.

      "GUARANTOR" means Lodgian, Inc., a Delaware corporation.

      "GUARANTY" means the Guaranty of Recourse Obligations and the
Environmental Indemnity.

      "GUARANTY OF RECOURSE OBLIGATIONS" means the Guaranty of Recourse
Obligations of even date herewith from Guarantor to Lender, as same may be
amended or modified from time to time.

      "HAZARDOUS MATERIAL" means all or any of the following: (A) substances,
materials, compounds, wastes, products, emissions and vapors that are defined or
listed in, regulated by, or otherwise classified pursuant to, any applicable
Environmental Laws, including any so defined, listed, regulated or classified as
"hazardous substances", "hazardous materials", "hazardous wastes", "toxic
substances", "pollutants", "contaminants", or any other formulation intended to
regulate, define, list or classify substances by reason of deleterious, harmful
or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources; (C)
any flammable substances or explosives or any radioactive materials; (D)
asbestos in any form; (E) electrical or hydraulic equipment which contains any
oil or dielectric fluid containing polychlorinated biphenyls; (F) radon; (G)
mold; or (H) urea formaldehyde, provided, however, such definition shall not
include cleaning materials and other substances commonly used in the ordinary
course of the Borrowers' business, which materials exist only in reasonable
quantities and are stored, contained, transported, used, released, and disposed
of in accordance with all applicable Environmental Laws.

      "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established
pursuant to Section 6.6.

      "IMPOSITIONS" means (i) all real estate and personal property taxes, and
vault charges and all other taxes, levies, assessments and other similar
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, of every kind and nature whatsoever (including any payments in lieu
of taxes), which at any time prior to, at or after the execution hereof may be
assessed, levied or imposed by, in each case, a governmental authority upon any
of the Properties or the rents relating thereto or upon the ownership, use,
occupancy or enjoyment thereof, and any

                                       10


interest, cost or penalties imposed by such governmental authority with respect
to any of the foregoing and (ii) all rent and other amounts payable by the
Borrowers under each of the Ground Leases and under the Condominium Property
Documents. Impositions shall not include (x) any sales or use taxes payable by
the Borrowers, (y) taxes payable by tenants or guests occupying any portions of
the Properties, or (z) taxes or other charges payable by any Manager or
Franchisor unless such taxes are being paid on behalf of the Borrowers.

      "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant
to Section 6.3.

      "IMPROVEMENTS" means all buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
of every kind and nature now or hereafter located on the Properties.

      "INDEBTEDNESS" or "INDEBTEDNESS", means, for any Person, without
duplication: (i) all indebtedness of such Person for borrowed money, for amounts
drawn under a letter of credit, or for the deferred purchase price of property
for which such Person or its assets is liable, (ii) all unfunded amounts under a
loan agreement, letter of credit (unless secured in full by Dollars), or other
credit facility for which such Person would be liable if such amounts were
advanced thereunder, (iii) all amounts required to be paid by such Person as a
guaranteed payment to partners or a preferred or special dividend, including any
mandatory redemption of shares or interests but not any preferred return or
special dividend paid solely from, and to the extent of, excess cash flow after
the payment of all operating expenses, capital improvements and debt service on
all Indebtedness, (iv) all obligations under leases that constitute capital
leases for which such Person is liable, and (v) all obligations of such Person
under interest rate swaps, caps, floors, collars and other interest hedge
agreements, in each case whether such Person is liable contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which
obligations such Person otherwise assures a creditor against loss.

      "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2.

      "INDEMNITEES" has the meaning set forth in Section 14.2.

      "INDEPENDENT DIRECTOR" means an individual who shall not have been at the
time of such individual's appointment or at any time while serving as a director
of General Partner, Member, any of the Borrowers or any of their respective
Affiliates, and may not have been at any time during the preceding five years
(i) a stockholder, director (other than as an independent director/member),
officer, employee, partner, attorney or counsel of General Partner, Member,
Guarantor, any of the Borrowers or any Affiliate of any of them (except that
such individual may be an independent director of any other Affiliate of the
foregoing), (ii) a customer, supplier or other Person who derives any of its
purchases or revenues from its activities with General Partner, Member,
Guarantor, any of the Borrowers or any Affiliate of any of them (other than a
company that provides professional independent directors and which also may
provide other ancillary corporate, partnership, company or trust services to the
Borrowers, Member, General Partner or their Affiliates in the ordinary course of
business (for example, The Corporation Trust Company)), (iii) a Person or other
entity controlling or under common control with any such stockholder, partner,
customer, supplier or other Person, or (iv) a member of the immediate

                                       11


family of any such stockholder, director, officer, employee, partner, customer,
supplier or other Person. As used in this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management, policies or activities of a Person, whether through
ownership of voting securities, by contract or otherwise.

      "INITIAL TERM" means the period from the Closing Date to the Scheduled
Maturity Date.

      "INSURANCE POLICIES" has the meaning set forth in Section 5.4.

      "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance
policies required to be maintained by the Borrowers with respect to the
Properties under Section 5.4.

      "INTERESTED PARTIES" has the meaning set forth in Section 10.3.

      "INTEREST RATE" has the meaning set forth in Section 2.2.

      "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section
5.22.

      "IRC" means the Internal Revenue Code of 1986, and any rule or regulation
promulgated thereunder from time to time, in each case as amended from time to
time.

      "IRS" means the Internal Revenue Service or any successor thereto.

      "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents,
or in any document or certificate executed on behalf of any Borrower Party
pursuant to this Loan Agreement or any of the Loan Documents, reference is made
to the knowledge of the Borrowers or any other Borrower Party (whether by use of
the words "knowledge" or "known", or other words of similar meaning, and whether
or not the same are capitalized), such shall be deemed to refer to the knowledge
(without independent investigation or inquiry unless otherwise specified) of (i)
the individuals who have significant responsibility for any policy making, major
decisions or financial affairs of the applicable entity; (ii) the general
manager for the applicable Property; (iii) the regional vice president of
operations for Guarantor, the president of each Borrower and Member, with
respect to operational issues of any Property or any of the Borrowers; (iv) the
chief operating officer of Guarantor, with respect to representations regarding
Guarantor; and (v) the person signing such document or certificate.

      "LEASE" means any lease, tenancy, license, assignment and/or other rental
or occupancy agreement or other agreement or arrangement (including, without
limitation, any and all guaranties of any of the foregoing) heretofore or
hereafter entered into affecting the use, enjoyment or occupancy of, or the
conduct of any activity upon or in, the Properties or any portion thereof,
including any extensions, renewals, modifications or amendments thereof.

      "LENDER" is defined in the preamble.

      "LENDER'S CONSULTANT" has the meaning set forth in Section 6.7

      "LETTER OF CREDIT" means an irrevocable, unconditional, transferable,
clean sight draft letter of credit (either an evergreen letter of credit or one
which does not expire until at least

                                       12


thirty (30) days after the Maturity Date (the "LC EXPIRATION DATE")), in favor
of Lender, entitling Lender to draw thereon in New York, New York based solely
on a statement executed by an officer or authorized signatory of Lender, in form
and substance reasonably acceptable to Lender and issued by an Eligible Bank. If
at any time (a) the institution issuing any such Letter of Credit shall cease to
be an Eligible Bank, or (b) if the Letter of Credit is due to expire prior to
the LC Expiration Date, Lender shall have the right immediately to draw down the
same in full and hold the proceeds thereof in accordance with the provisions of
this Loan Agreement, unless the Borrowers shall deliver a replacement Letter of
Credit from an Eligible Bank within (i) as to (a) above, twenty (20) days after
Lender delivers written notice to the Borrowers that the institution issuing the
Letter of Credit has ceased to be an Eligible Bank, or (ii) as to (b) above,
within twenty (20) days prior to the expiration date of said Letter of Credit.

      "LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).

      "LOAN" has the meaning set forth in Section 2.1.

      "LOAN AGREEMENT" means this Loan and Security Agreement, as same may be
amended, modified or restated from time to time (including all schedules,
exhibits, annexes and appendices hereto).

      "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgages, the
Assignments of Leases, the Assignments of Management Agreements, the Guaranty,
the Financing Statements, the Cash Management Agreement and any and all other
documents and agreements from any of the Borrowers, General Partner, Member,
Guarantor or Manager and accepted by Lender for the purposes of evidencing
and/or securing the Loan, excluding the Mezzanine Loan Documents.

      "LOAN YEAR" means the twelve (12) month period commencing on July 1st of
any calendar year during the term of the Loan and ending on June 30th of the
following calendar year[; provided that the first Loan Year shall commence on
the Closing Date and end on June 30, 2005].

      "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1.

      "MANAGEMENT AGREEMENTS" means those certain Management Agreements
described in EXHIBIT E, between each Borrower and the applicable Manager
described therein, and any management agreement which may hereafter be entered
into in accordance with the terms and conditions hereof, pursuant to which any
subsequent Manager may hereafter manage one or more of the Properties.

      "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the
terms of the Management Agreements.

      "MANAGERS" means the managers described in EXHIBIT E or an Acceptable
Manager as may hereafter be charged with management of one or more of the
Properties approved by Lender in accordance with the terms and conditions
hereof.

                                       13


      "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable
discretion, (A) a material adverse effect (which may include economic or
political events) upon the business, operations, properties, assets or condition
(financial or otherwise) of any of the Borrowers or Guarantor, or (B) the
impairment of the ability of any of the Borrowers or Guarantor to perform its
obligations under any Loan Documents, or (C) the impairment of the ability of
Lender to enforce or collect any of the Obligations as such Obligations become
due. In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then occurring events and existing
conditions would result in a Material Adverse Effect.

      "MATERIAL AGREEMENT" means any contract or agreement relating to the
ownership, management, development, use, operation, leasing, maintenance, repair
or improvement of the Properties under which there is an obligation of the
Borrowers, in the aggregate, to pay, or under which any of the Borrowers
receives in compensation, more than $500,000 per annum, other than (i) the
Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement
under which (x) there is an obligation of the Borrowers, in the aggregate, to
pay, or under which any of the Borrowers (or all the Borrowers in the aggregate)
receives in compensation, not more than $1,000,000 per annum and (y) which is
terminable by the Borrowers on not more than sixty (60) days prior written
notice without any fee or penalty.

      "MATERIAL ALTERATION" means any improvement or alteration to a Property
(other than decorative work such as painting, wallpapering and carpeting), the
cost of which exceeds the greater of (x) five percent (5%) of the Aggregate
Allocated Loan Amount with respect to the applicable Property or (y) $250,000,
and is not otherwise already approved by Lender as part of the CapEx/FF&E Budget
then in effect, or as approved Work under Section 6.7 hereof.

      "MATERIAL LEASE" means any Lease of space in a Property which (i) is with
an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other
payments in an amount equal to or greater than $100,000, or has a term
(including all extensions and renewals which are unilaterally exercisable by the
tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by
either party thereto on thirty (30) days' notice without payment of a
termination fee, penalty or other cancellation fee, (iii) demises in excess of
2000 square feet of space, or (iv) obligates the Borrowers to make any
improvements to the Properties either directly or through cash allowances
(including, without limitation, free rent, tenant improvement allowances, or
landlord's construction work) to the applicable tenant in excess of $25,000. For
purposes of this definition only, in determining the square footage demised
under any Lease, all space in the applicable Property which may in the future be
demised to the tenant under such Lease by reason of such tenant exercising any
right or option contained in such Lease shall be included in the calculation of
the square footage demised under such Lease.

      "MATURITY DATE" means July 1, 2009, or such other date on which the final
payment of principal of the Note becomes due and payable as herein provided,
whether at such stated maturity date, by acceleration, or otherwise.

      "MAXIMUM RATE" has the meaning set forth in Section 2.2.

                                       14


      "MEMBER" means, individually or collectively, those parties identified on
SCHEDULE 4.1(C) as "Members" (being the managing or sole members of each of the
Borrowers which are limited liability companies) and any other entity which is
now or hereafter becomes the managing or sole member of any of the Borrowers
under such Borrower's limited liability company operating agreement.

      "MERRILL LYNCH" has the meaning set forth in Section 10.3.

      "MEZZANINE BORROWER" means, individually or collectively, those parties
identified on SCHEDULE 4.1(C) as "Mezzanine Borrower".

      "MEZZANINE LENDER" means Merrill Lynch Mortgage Lending, Inc., its
successors and assigns.

      "MEZZANINE LOAN" means that certain loan being made on the date hereof
from Mezzanine Lender to Mezzanine Borrower.

      "MEZZANINE LOAN DOCUMENTS" means the documents evidencing and securing the
Mezzanine Loan, as same may be amended, modified or restated from time to time.

      "MINIMUM DEBT YIELD" means (i) during the first (1st) Loan Year, 9%, (ii)
during the second (2nd) Loan Year, 10%, (iii) during the third (3rd) Loan Year,
11%, (iv) during the fourth (4th) Loan Year, 12%, and (v) during the fifth (5th)
Loan Year, 13%.

      "MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4.

      "MOODY'S" means Moody's Investors Service.

      "MORTGAGES" means, collectively, (i) those certain Mortgages, Assignments
of Leases and Security Agreements, (ii) those certain Deeds of Trust,
Assignments of Leases and Security Agreements, and (iii) those certain Deeds to
Secure Debt, Assignment of Leases and Security Agreements, each of even date
herewith, from each Borrower to Lender (or deed trustee on behalf of Lender, as
applicable), constituting a Lien on such Borrower's respective Property as
Collateral for the Loan as same may be modified or amended from time to time.

      "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any
Affiliate is making, or is accruing an obligation to make, contributions or has
made, or been obligated to make, contributions within the preceding six (6)
years, or for which any of the Borrowers or any Affiliate has any liability,
including contingent liability.

      "NET CASH FLOW" means Net Operating Income for any period less (i) a base
management fee equal to the greater of (A) the actual base management fee for
such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve
for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due
to all Franchisors for such period.

      "NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which
Operating Revenues exceed Operating Expenses (excluding Management Fees,
interest, income

                                       15


taxes, depreciation, amortization, FF&E reserves, and fees due to all
Franchisors for such period).

      "NOTE" has the meaning set forth in Section 2.1.

      "OBLIGATIONS" means the Loan and all obligations, liabilities and
indebtedness of every nature to be paid or performed by the Borrowers under the
Loan Documents, including the principal amount of the Loan, interest accrued
thereon and all fees, costs and expenses, and other sums now or hereafter owing,
due or payable and whether before or after the filing of a proceeding under the
Bankruptcy Code by or against any of the Borrowers, and the performance of all
other terms, conditions and covenants under the Loan Documents.

      "OFAC" has the meaning set forth in Section 4.31.

      "O&M PLANS" has the meaning set forth in Section 5.7.

      "OPERATING BUDGET" means, collectively, for any period, the Borrowers'
budgets setting forth the Borrowers' best estimate, after due consideration, of
all Operating Revenues and Operating Expenses and any other revenues, costs and
expenses for each of the Properties for such period, which budgets have been
approved by Lender in accordance herewith, as same may be amended pursuant to
Section 5.1(D) hereof.

      "OPERATING EXPENSES" means, for any period, without duplication, all costs
and expenses of operating, maintaining and managing the Properties determined in
accordance with GAAP, including, without limitation, Impositions (due and
payable during the applicable period of determination), Insurance Premiums,
repair and maintenance costs, Management Fees and costs, fees payable to all
Franchisors, utilities, accounting, legal and other professional fees, fees
relating to environmental and financial audits, wages, salaries, payroll taxes
and benefits, business franchise taxes, tips and gratuities paid to employees
and staff and other personnel expenses, costs and expenses related to operating
and maintaining all guest rooms, restaurants (including inventory and supplies),
retail stores and shops, bars, meeting rooms, banquet rooms, apartments, parking
and recreational facilities, and all other "costs and expenses" as defined in
the Uniform System; but excluding principal and interest payments on the Loan,
fees and expenses of a non-operating nature and fees and expenses due and
payable to or for the benefit of Lender under this Loan Agreement or any of the
other Loan Documents (including, without limitation, all loan servicing fees and
expenses, and expenses related to a Cap), expenses which, in accordance with
GAAP, should be capitalized, any expense paid by a tenant that would otherwise
be an Operating Expense, capital expenditures, tenant improvement allowances and
leasing commissions, if any, asset management fees, any payment or expense for
which each Borrower was or is to be reimbursed from proceeds of the Loan or
insurance or by any third party, any fees or expenses paid to any partner or
member of the Borrowers for services provided to any of the Borrowers and any
non-cash charges such as depreciation and amortization. Operating Expenses shall
not include federal, state or local income taxes or legal and other professional
fees unrelated to the operation of the Properties.

      "OPERATING REVENUES" means, without duplication, all revenues and receipts
of the Borrowers from operation of the Properties or otherwise arising in
respect of the Properties

                                       16


which are properly allocable to the Properties for the applicable period in
accordance with GAAP, including, without limitation, all hotel receipts,
revenues and credit card receipts collected from guest rooms, restaurants and
bars (including without limitation, service charges for employees and staff),
mini-bars, meeting rooms, banquet rooms, apartments, parking and recreational
facilities, health club membership fees, food and beverage wholesale and retail
sales, service charges, convention services, special events, audio-visual
services, boat cruises, travel agency fees, internet booking fees, telephone
charges, laundry services, vending machines and otherwise, all rents, revenues
and receipts now existing or hereafter arising or created out of the sale,
lease, sublease, license, concession or other grant of the right of the
possession, use or occupancy of all or any portion of the Properties or
personalty located thereon, or rendering of service by any of the Borrowers or
any operator or manager of the hotel or commercial space (including, without
limitation, from the rental of any office space, retail space, guest rooms or
other space, halls, stores and deposits securing reservations of such space
(only to the extent such deposits are not required to be returned or refunded to
the depositor)), proceeds from rental or business interruption insurance
relating to business interruption or loss of income for the period in question
and any other items of revenue which would be included in operating revenues
under the Uniform System; but excluding proceeds from the sale of FF&E,
abatements, reductions or refunds of real estate or personal property taxes
relating to the Properties, dividends on insurance policies relating to the
Properties, condemnation proceeds arising from a temporary taking of all or a
part of any Properties, security and other deposits until they are forfeited by
the depositor, advance rentals until they are earned, proceeds from a sale,
financing or other disposition of the Properties or any part thereof or interest
therein and other non-recurring revenues as determined by Lender, insurance
proceeds (other than proceeds from rental or business interruption insurance),
other condemnation proceeds, capital contributions or loans to any of the
Borrowers, disbursements to any of the Borrowers from the Reserves, sales, use
and occupancy taxes collected from customers or patrons of the Properties to be
remitted to the applicable taxing authorities, and gratuities or service charges
collected on behalf of and remitted to employees or contractors of the
Properties.

      "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1.

      "PAYMENT DATE" means the first day of each calendar month occurring during
the term of the Loan (or if such day is not a Business Day, the immediately
succeeding Business Day).

      "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3.

      "PERMITTED ENCUMBRANCES" means, collectively, (i) the Mortgages and the
other Liens of the Loan Documents in favor of Lender, (ii) the items shown in
Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not
yet due and payable or Liens arising after the date hereof which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted in accordance with Section 5.3(B) hereof; (iv) in the case
of Liens arising after the date hereof, statutory Liens of carriers,
warehousemen, mechanics, materialmen and other similar Liens arising by
operation of law, which are incurred in the ordinary course of business and
discharged by the Borrowers by payment, bonding or otherwise within forty-five
(45) days after the filing thereof or which are being contested in good faith in
accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and
customary purchase money financing of personal property and equipment leasing to
the extent the same are

                                       17


created in the ordinary course of business in accordance with Section 5.17(B)
hereof; (vi) all easements, rights-of-way, restrictions and other similar
charges or non-monetary encumbrances against real property which do not
materially adversely affect (A) the ability of the Borrowers to pay any of their
obligations to any Person as and when due, (B) the marketability of title to the
Properties, (C) the fair market value of the Properties, or (D) the use or
operation of the Properties as of the Closing Date and thereafter; (vii) rights
of existing and future tenants, as tenants only, pursuant to the Leases; (viii)
any other Lien to which Lender may expressly consent in writing; and (ix) Liens
of the Mezzanine Loan Documents in favor of Mezzanine Lender.

      "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17.

      "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management
Agreement.

      "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in
Section 11.2.

      "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies
the requirements of Article IX hereof) controlled by, and more than 51% of which
is owned by, one of the following:

      (i) a pension fund, pension trust or pension account that (a) has total
real estate assets of at least $2.5 Billion and (b) is managed by a Person who
controls real estate equity assets (not including the Properties) having a fair
market value of at least $1.25 Billion; or

      (ii) a pension fund advisor who (a) immediately prior to such transfer,
controls at least $1 Billion of real estate equity assets and (b) is acting on
behalf of one or more pension funds that, in the aggregate, satisfy the
requirements of clause (i) of this definition; or

      (iii) an insurance company which is subject to supervision by the
insurance commissioner, or a similar official or agency, of a state or territory
of the United States (including the District of Columbia) (a) with a net worth,
as of the date immediately prior to the date of the transfer, of at least $1
Billion and (b) who, immediately prior to such transfer, controls real estate
equity assets (not including the Properties) having a fair market value of at
least $2.5 Billion; or

      (iv) a corporation organized under the banking laws of the United States
or any state or territory of the United States (including the District of
Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b)
who, immediately prior to such transfer, controls real estate equity assets (not
including the Properties) having a fair market value of at least $5 Billion; or

      (v) any other Person (a) with a long-term unsecured debt rating from the
Rating Agencies of at least investment grade and (b) that owns or operates at
least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior
to the date of such transfer, of at least $750 Million and (iii) immediately
prior to such transfer, controls real estate equity assets (not including the
Properties) having a fair market value of at least $1.5 Billion.

                                       18


      "PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof
and their respective permitted successors and assigns (or in the case of a
governmental Person, the successor functional equivalent of such Person).

      "PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5.

      "PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6.

      "PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General
Partner and Member.

      "PROHIBITED PERSON" has the meaning set forth in Section 4.31.

      "PROPERTIES" and "PROPERTY" means, collectively or individually, the
properties (including land and Improvements) described in EXHIBIT A, together
with all Improvements now or hereafter located thereon and all related
facilities, amenities and FF&E owned by the Borrowers and which shall be
encumbered by and are more particularly described in the respective Mortgages:
provided that, following a Release, "PROPERTIES" means each of the Properties
that remain encumbered by the Mortgages as Collateral for the Loan.

      "PROPERTY CONDITION REPORT" means those certain property condition reports
for the Properties as described on EXHIBIT J.

      "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property
improvement plans for the Properties described on EXHIBIT G and any future
Property Improvement Plans required to be implemented by the applicable
Franchisor.

      "PROPERTY RELEASE" has the meaning set forth in Section 11.4.

      "RATING AGENCY" means, prior to a securitization, any of S&P, Moody's and
Fitch or any other nationally-recognized statistical rating organization
designated by Lender in its sole discretion, and, after a Securitization, each
Rating Agency which has rated the Securities that are the subject of the
Securitization.

      "RATING CONFIRMATION" with respect to the transaction or matter in
question, means: (i) if all or any portion of the Loan, by itself or together
with other loans, has been the subject of a Securitization, then each applicable
Rating Agency shall have confirmed in writing that such transaction or matter
shall not result in a downgrade, qualification, or withdrawal of any rating then
in effect for any certificate or other securities issued in connection with such
Securitization; and (ii) if all of the Loan has not been the subject of a
Securitization, then Lender shall have determined in its reasonable discretion
(taking into consideration such factors as Lender may in good faith determine,
including the attributes of the loan pool in which the Loan might reasonably be
expected to be securitized) that no rating for any certificate or other
securities that would be issued in connection with a Securitization of such
portion of the Loan will be downgraded, qualified, or withheld by reason of such
transaction or matter.

                                       19


      "RATING CRITERIA" with respect to any Person, means that (i) the
short-term unsecured debt obligations of such Person are rated at least "A-1" by
S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person
for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa2" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.

      "RECEIPTS" means all revenues, receipts and other payments of every kind
arising from ownership or operation of the Properties, including without
limitation, all warrants, stock options, or equity interests in any tenant,
licensee or other Person occupying space at, or providing services related to or
for the benefit of, the Properties received by the Borrowers or any Related
Person of the Borrowers in lieu of rent or other payment.

      "RELATED PERSON" means any Person in which any of the Borrowers or the
Guarantor holds greater than a ten percent (10%) equity interest.

      "RELEASE" has the meaning set forth in Section 11.4.

      "RELEASE DATE" has the meaning set forth in Section 11.4.

      "RELEASE PRICE" means an amount equal to one hundred twenty-five percent
(125%) of the Allocated Loan Amount of the applicable Property.

      "RENT ROLL" has the meaning set forth in Section 3.1.

      "RENTS" has the meaning set forth in the Mortgages.

      "REPLACEMENTS" has the meaning set forth in Section 6.4.

      "REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5.

      "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1.

      "RESERVES" means the reserves held by or on behalf of Lender pursuant to
this Loan Agreement or the other Loan Document, including without limitation,
the reserves established pursuant to Article VI.

      "RESTORATION" has the meaning set forth in Section 5.5.

      "RESTORATION THRESHOLD" means the greater of (x) $250,000 or (y) five
percent (5%) of the Aggregate Allocated Loan amount of the applicable Property,
not to exceed $500,000, per Property per occurrence.

      "REVPAR" means average room revenues per available room per day.

      "S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.

                                       20


      "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" means the monthly payments of
principal for each Payment Date as set forth on SCHEDULE 2.4 attached hereto;
which payment amounts were calculated based upon a twenty-five (25) year
amortization schedule at the Interest Rate. In the event that the amount of
principal prepayments on the Loan from application of casualty insurance
proceeds or condemnation awards under Section 5.5 shall exceed $10,000,000, in
the aggregate, from the Closing Date or from the date of the last
re-amortization of the Loan under this sentence, Lender shall recalculate the
Scheduled Mortgage Principal Payments based upon the then remaining principal
amount of the Loan and the foregoing assumptions and deliver a revised SCHEDULE
2.4 to the Borrowers, which revised schedule shall replace SCHEDULE 2.4 hereto
in its entirety.

      "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1.

      "SECURITIES" (whether or not capitalized) means any stock, shares, voting
trust certificates, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.

      "SECURITIZATION" means a rated offering of securities representing direct
or indirect interests in the Loan or the right to receive income therefrom.

      "SERVICER" means a servicer selected by Lender from time to time in its
sole discretion to service the Loan.

      "SERVICING FEE" has the meaning set forth in Section 2.11.

      "SPE EFFECTIVE DATE" means the later of (x) November 25, 2002, or (y) the
date of formation of the applicable Person in its respective jurisdiction of
formation.

      "SUB-ACCOUNTS" has the meaning set forth in Section 7.1.

      "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the
budgeted income and expenses and the actual income and expenses for the prior
calendar year or corresponding calendar quarter for such prior year, (ii) a
calculation of the average daily rate, RevPAR and average occupancy statistics
for the Properties for the applicable period, (iii) a calculation of the Debt
Service Coverage Ratio and the Debt Yield for the applicable period (which shall
not be binding on Lender), and (iv) such other financial reports as the subject
entity shall routinely and regularly prepare.

      "SURVEY" has the meaning set forth in Section 3.1.

      "TAX LIABILITIES" has the meaning set forth in Section 2.9.

      "TIER 1 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, as
applicable, identified in the "Tier 1" category on EXHIBIT I.

                                       21


      "TIER 2 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 2" category on EXHIBIT I.

      "TIER 3 HOTEL" means any of the Properties subject to a Franchise
Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified
in the "Tier 3" category on EXHIBIT I.

      "TITLE COMPANIES" means LandAmerica Title Insurance Company and Stewart
Title Insurance Company, as co-insurers, and/or such other national title
insurance company as may be acceptable to Lender.

      "TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title
insurance pertaining to the Mortgages issued by the Title Companies to Lender in
connection with the Closing.

      "TRANSFER" has the meaning set forth in Section 11.2.

      "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3.

      "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary
termination of any Franchise Agreement, (y) the failure to pay to any Franchisor
any amount due under any Franchise Agreement (a, "FRANCHISE PAYMENT DEFAULT")
and the continuance thereof beyond any applicable notice and grace period under
such Franchise Agreement or the occurrence of one or more breaches or defaults
(other than Franchise Payment Defaults) and the continuance thereof beyond all
applicable notice and grace periods, if any, under such Franchise Agreements (or
such other cure periods as may be provided by the applicable Franchisors in
writing) covering Properties with Allocated Loan Amounts of ten percent (10%) or
more of the outstanding principal balance of the Loan; provided, however, no
Uncured Franchise Default shall be deemed to have occurred under clause (x)
above with respect to any Property following the voluntary or involuntary
termination of the applicable Franchise Agreement if (a) within ten (10)
Business Days of the termination of such Franchise Agreement (and at the time of
delivery of each report pursuant to Section 5.1(A)(v)), the applicable Borrower
delivers to Lender evidence reasonably satisfactory to Lender that such Borrower
is diligently pursuing efforts to enter into a new Franchise Agreement with an
Acceptable Franchisor for the applicable Property and such Borrower shall
thereafter diligently and continuously pursue such efforts to enter into a new
Franchise Agreement, (b) at the time of such termination no other Property shall
be in operation without being subject to a Franchise Agreement, (c) the
Allocated Loan Amount of the Property covered by such Franchise Agreement is not
more than five percent (5%) of the outstanding principal balance of the Loan or
such Property shall not be in operation for more than five (5) consecutive days
without being subject to a Franchise Agreement, and (d) no Property shall be
without a Franchise Agreement in place for a period in excess of six (6) months
from the termination of the applicable Franchise Agreement.

      "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging
Industry promulgated by the American Hotel and Motel Association, as in effect
from time to time.

      "WAIVING PARTY" has the meaning set forth in Section 13.1.

                                       22


      "WORK" has the meaning set forth in Section 6.7.

      "WORK RESERVES" has the meaning set forth in Section 6.7.

      "ZONING REPORTS" means those certain zoning and site requirements
summaries for the Properties as described on EXHIBIT K.

SECTION 1.2 ACCOUNTING TERMS.

      For purposes of this Loan Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to such terms in conformity with
GAAP or the Uniform System, as the case may be.

SECTION 1.3 OTHER DEFINITIONAL PROVISIONS.

      References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and
"SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules,
respectively, of this Loan Agreement unless otherwise specifically provided. Any
of the terms defined in Section 1.1 may, unless the context otherwise requires,
be used in the singular or the plural depending on the reference. In this Loan
Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer
to this Loan Agreement as a whole and not merely to the specific article,
section, subsection, paragraph or clause in which the respective word appears;
words importing any gender include the other genders; references to "WRITING"
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be
deemed to be followed by the words "without limitation"; and any reference to
any statute or regulation may include any amendments of same and any successor
statutes and regulations. Further, (i) any reference to any agreement or other
document may include subsequent amendments, assignments, and other modifications
thereto, and (ii) any reference to any Person may include such Person's
respective permitted successors and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons.

                                   ARTICLE II
                                TERMS OF THE LOAN

SECTION 2.1 LOAN.

      (A) LOAN. Subject to the terms and conditions of this Loan Agreement and
in reliance upon the representations and warranties of the Borrowers contained
herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to
borrow from Lender, a loan in the original principal amount of $61,516,500 (the
"LOAN").

      (B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to
Lender a Promissory Note, dated of even date herewith (as amended, modified or
restated, and any replacement or substitute notes therefor, by means of multiple
notes or otherwise, collectively, the "NOTE"), made by the Borrowers to the
order of Lender, in the original principal amount of $61,516,500.

                                       23


      (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be
used to (i) refinance existing indebtedness; (ii) pay all recording fees and
taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses
incurred by Lender, including reasonable legal fees and expenses of counsel to
Lender, and other costs and expenses approved by Lender (which approval will not
be unreasonably withheld) related to the Loan; (iii) establish the Reserves
required hereunder; and (iv) provide for general corporate purposes, including,
without limitation, payment of transaction costs and expenses incurred by the
Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or
as otherwise directed by the Borrowers.

SECTION 2.2 INTEREST.

      (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall
bear interest at a rate per annum equal to six and five hundred seventy-seven
one-thousandths percent (6.577%) (the "INTEREST RATE").

      (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and
during the continuance of an Event of Default and in any event from and after
the Maturity Date of the Loan and until the Loan and all other Obligations are
satisfied in full, the outstanding principal balance of the Loan and all other
Obligations shall bear interest until paid in full at a rate per annum that is
four percent (4%) in excess of the Interest Rate otherwise applicable under this
Loan Agreement and the Note (the "DEFAULT RATE").

      (C) COMPUTATION OF INTEREST. Interest on the Loan and all other
Obligations owing to Lender shall be computed on the basis of a 360-day year,
and shall be charged for the actual number of days elapsed during any month or
other accrual period. Interest shall be payable in arrears.

      (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained
in this Loan Agreement or the other Loan Documents, the Borrowers shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by law ("EXCESS
INTEREST"). If any Excess Interest is provided for or determined by a court of
competent jurisdiction to have been provided for in this Loan Agreement or in
any of the other Loan Documents, then in such event: (1) the provisions of this
subsection shall govern and control; (2) the Borrowers shall not be obligated to
pay any Excess Interest; (3) any Excess Interest that Lender may have received
hereunder shall be, at Lender's option, (a) applied as a credit against either
or both of the outstanding principal balance of the Loan or accrued and unpaid
interest thereunder (not to exceed the maximum amount permitted by law), (b)
refunded to the payor thereof, or (c) any combination of the foregoing; (4) the
interest rate(s) provided for herein shall be automatically reduced to the
maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM
RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to
have been and shall be, reformed and modified to reflect such reduction; and (5)
the Borrowers shall not have any action against Lender for any damages arising
out of the payment or collection of any Excess Interest. Notwithstanding the
foregoing, if for any period of time interest on any Obligation is calculated at
the Maximum Rate rather than the applicable rate under this Loan Agreement, and
thereafter such applicable rate becomes less than the Maximum Rate, the rate of
interest payable on such Obligations shall, to the extent permitted by law,
remain at the Maximum Rate until Lender shall have received or accrued the
amount of interest which Lender would have received or accrued

                                       24


during such period on Obligations had the rate of interest not been limited to
the Maximum Rate during such period. If the Default Rate shall be finally
determined to be unlawful, then the Interest Rate shall be applicable during any
time when the Default Rate would have been applicable hereunder, provided
however that if the Maximum Rate is greater or lesser than the Interest Rate,
then the foregoing provisions of this paragraph shall apply.

      (E) LATE CHARGES. If an Event of Default regarding non-payment of
principal, interest or other sums due hereunder or under any of the other Loan
Documents shall occur, then the Borrowers shall pay to Lender, in addition to
all sums otherwise due and payable, a late fee in an amount equal to five
percent (5.0%) of such principal, interest or other sums due hereunder or under
any other Loan Document, such late charge to be immediately due and payable
without demand by Lender.

SECTION 2.3 RESERVED.

SECTION 2.4 PAYMENTS.

      (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments
of interest and principal on the Note as follows:

            (i) The Borrowers shall make a payment to Lender of interest only on
the Closing Date for the period from and including the Closing Date through and
including the last day of the calendar month in which the Closing occurs; and

            (ii) Commencing on August 1, 2004 and on each Payment Date
thereafter through but not including the Maturity Date, the Borrowers shall make
a payment of interest on the Loan for the prior calendar month, and in addition
shall make a payment of principal on the Loan in an amount equal to the
Scheduled Mortgage Principal Payment for such Payment Date.

      (B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for
payments on the Loan which are transferred to the account of Lender as provided
below (i) on the day that such funds are received by Lender if such receipt
occurs by 2:00 p.m. (New York time) on such day, or (ii) on the next succeeding
Business Day after such funds are received by Lender if such receipt occurs
after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall
be stated to be due on a day that is not a Business Day, the payment may be made
on the next succeeding Business Day.

      (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to
pay all of the Obligations relating to the Loan as such amounts become due or
are declared due pursuant to the terms of this Loan Agreement. All payments by
the Borrowers on the Loan shall be made without deduction, defense, set off or
counterclaim and in immediately available funds delivered to Lender by wire
transfer to such accounts at such banks as Lender may from time to time
designate. Prior to an Event of Default, each payment shall be applied first to
pay late charges and the charges and expenses of Lender, Servicer and any
special servicer as provided hereunder, second to accrued and unpaid interest,
and the balance to principal. Prior to an Event of Default, to the extent
sufficient funds are contained in the Lock Box Account, or an Account or
Sub-Account thereof, to make the required monthly payments to the applicable
Reserves and Sub-Account on such Payment Date, the Borrowers shall be deemed to
have satisfied their

                                       25


obligations to make such payments. Upon the occurrence and during the
continuance of an Event of Default, payments shall be applied to the Obligations
in such order as Lender shall determine in its sole and absolute discretion.

SECTION 2.5 MATURITY. To the extent not sooner due and payable in accordance
with the Loan Documents, the then outstanding principal balance of the Loan, all
accrued and unpaid interest thereon, and all other sums then owing to Lender
hereunder and under the Note, the Mortgages and the other Loan Documents, shall
be due and payable on the Maturity Date.

SECTION 2.6 PREPAYMENT.

      (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON
ACCELERATION. The Borrowers shall have no right to prepay the Loan in whole or
in part at any time, except as expressly set forth in this provision. On and
after May 1, 2009, the Borrowers may prepay the Loan in whole, but not in part,
without payment of Prepayment Consideration, provided that (i) the Borrowers
shall provide to Lender not less than fifteen (15) days prior written notice of
such prepayment, (ii) together with such prepayment the Borrowers also shall pay
all accrued and unpaid interest and all other Obligations then due and owing,
(iii) if such prepayment occurs on any day other than a Payment Date, then
together therewith the Borrowers also shall pay to Lender the amount of interest
that would have accrued on the amount being prepaid from and including the date
of such prepayment to the end of such calendar month.

      (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion
of the Loan shall occur prior to May 1 2009, on account of acceleration of the
Loan (whether or not due to an Event of Default), or otherwise, then except only
as expressly provided in this Loan Agreement or the other Loan Documents to the
contrary, the Borrowers shall pay the Prepayment Consideration on the amount
prepaid to Lender together with such prepayment, as liquidated damages and
compensation for costs incurred, and in addition to all other amounts due and
owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will
be due as to a prepayment of the Loan in connection with (i) application of
insurance or condemnation proceeds required by Lender pursuant to this Loan
Agreement or the Mortgages in the absence of an Event of Default, (ii) Scheduled
Mortgage Principal Payments. The foregoing designation of any amount of
Prepayment Consideration in this Agreement shall not create a right to prepay at
any time or in any circumstances where this Agreement does not expressly state
that such a right exists.

      (C) DEFINITIONS. The following terms shall have the meanings indicated:

            "PREPAYMENT CONSIDERATION" shall mean an amount equal to the greater
of (i) one percent (1%) of the Loan balance at the time of prepayment and (ii)
the Yield Maintenance Amount.

            "YIELD MAINTENANCE AMOUNT" shall mean the positive difference, if
any, between (i) the present value on the date of prepayment (by acceleration or
otherwise) of all future installments of principal and interest which the
Borrowers would otherwise be required to pay under the Note from the date of
such prepayment until the Maturity Date absent such prepayment, including the
unpaid principal amount which might otherwise be due upon the

                                       26


Maturity Date absent such prepayment, with such present value being determined
by the use of a discount rate equal to the yield to maturity (adjusted to a
"Mortgage Equivalent Basis" pursuant to the standards and practices of the
Securities Industry Association), on the date of such prepayment of the United
States Treasury Security having the term to maturity closest to what otherwise
would have been the remaining term hereof absent such prepayment and (ii) the
principal balance of the Loan on the date of such prepayment.

SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall
be presumptive evidence (absent manifest error) of the amounts owing to Lender
by the Borrowers; provided that any failure to record any transaction affecting
such balance or any error in so recording shall not limit or otherwise affect
the Borrowers' obligation to pay the Obligations.

SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or
under the Note shall be made free and clear of and without deduction for any and
all taxes, withholding taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto arising out of or in
connection with the transactions contemplated by the Loan Documents (all such
taxes, levies, imposts, deductions, charges or withholdings and all liabilities
with respect thereto (excluding taxes imposed on net income in accordance with
the following sentence) herein "TAX LIABILITIES"). Notwithstanding the
foregoing, the Borrowers shall not be liable for taxes imposed on the net income
of Lender by the jurisdiction under the laws of which Lender is organized or
doing business or any political subdivision thereof and taxes imposed on its net
income by the jurisdiction of Lender's applicable lending office or any
political subdivision thereof. If the Borrowers shall be required by law to
deduct any such Tax Liabilities (or amounts in estimation or reimbursement for
the same) from or in respect of any sum payable hereunder to Lender, then the
sum payable hereunder shall be increased as may be necessary so that, after
making all required deductions, Lender receives an amount equal to the sum it
would have received had no such deductions been made.

SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the
actual costs and damages that Lender would suffer by reason of an Event of
Default (exclusive of the attorneys' fees and other costs incurred in connection
with enforcement of Lender's rights under the Loan Documents) or a prepayment
would be difficult and needlessly expensive to calculate and establish, and (ii)
the amounts of the Default Rate, the late charges, and the Prepayment
Consideration are reasonable, taking into consideration the circumstances known
to the parties at this time, and (iii) such Default Rate and late charges and
Lender's reasonable attorneys' fees and other costs and expenses incurred in
connection with enforcement of Lender's rights under the Loan Documents shall be
due and payable as provided herein, and (iv) such interest at the Default Rate,
late charges, Prepayment Consideration, and the obligation to pay Lender's
reasonable attorneys' fees and other enforcement costs do not, individually or
collectively, constitute a penalty.

SECTION 2.10 RESERVED.

SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from
time to time without the consent of the Borrowers, on prior written notice to
the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's
fees (the "SERVICING FEE"), which shall in no event exceed five one-hundredths
of one percent (.05%) per annum on the outstanding

                                       27


principal balance of the Loan, payable in monthly installments, and if the Loan
becomes a specially serviced loan, any fees of the special servicer, shall be
payable by the Borrowers and shall constitute a portion of the Obligations;
provided, however, that at no time shall the Borrowers be liable for Servicing
Fees or special servicing fees in excess of those fees charged to Lender by the
Servicer or any special servicer.

SECTION 2.12 CROSS-COLLATERALIZATION; CONTRIBUTION; RELEASE OF
CROSS-COLLATERALIZATION.

      (A)   Until repayment of the Indebtedness and the Crossed Indebtedness and
satisfaction of all obligations under this Agreement and the Crossed Loan
Agreement, each Borrower acknowledges and agrees (subject to Lender's
election(s) at Lender's sole discretion from time to time pursuant to Section
2.12(G) below): (i) that the Properties shall secure not only the Loan but also
the Crossed Loans, and that the Liens of the Loan Documents shall constitute
Liens securing not only the Loan but also the Crossed Loans; (ii) that the
Crossed Properties shall secure the Loan as well as the Crossed Loan(s) secured
by such Crossed Properties; and (iii) that Lender would not make the Loan to the
Borrowers or the loans constituting the Crossed Loans unless the Borrowers and
the Crossed Borrowers granted liens on the Properties and, in addition, the
Crossed Properties of the Crossed Borrowers to secure the payment of the Loan
and the Crossed Loans.

      (B)   Until the date that all of the Loan and the Crossed Loans shall have
been paid and satisfied in full, the Borrowers (i) shall have no right of
subrogation with respect to the Crossed Loans and (ii) waive any right to
enforce any remedy which Lender now has or may hereafter have against the
Crossed Borrowers, any endorser or any guarantor of all or any part of the
Crossed Loans or any other individual or entity, and the Borrowers waive any
benefit of, and any right to participate in, any security or collateral given to
Lender to secure the payment or performance of all or any part of the Crossed
Loans or any other liability of any of the Crossed Borrowers to Lender. Should
any Borrower have the right, notwithstanding the foregoing, to exercise its
subrogation rights, each Borrower hereby expressly and irrevocably (1)
subordinates any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off that such
Borrower may have to the payment in full in cash of the Loan and the Crossed
Loans and (2) waives any and all defenses available to a surety, guarantor or
accommodation co-obligor until the Loan and the Crossed Loans are paid in full
in cash. Each Borrower acknowledges and agrees that this subordination is
intended to benefit Lender and shall not limit or otherwise affect any
Borrower's liability hereunder or the enforceability of this Loan Agreement or
the Crossed Loan Documents.

      (C)   Each Borrower agrees that any and all claims of such Borrower
against any of the Crossed Borrowers or any endorser or any guarantor of all or
any part of the Crossed Loans (collectively, the "CROSSED OBLIGORS") with
respect to any obligations, liabilities or indebtedness now or hereafter owing
by the Crossed Obligors, or any of them, to such Borrower, or otherwise existing
or claimed to be owed or to exist on the part of any of the Crossed Obligors, or
against any of their respective properties (collectively, the "CROSSED PARTY
OBLIGATIONS") shall be subordinate and subject in right of payment to the prior
payment, in full and in cash, of all the Loan and the Crossed Loans.
Notwithstanding any right of any Borrower to ask, demand, sue for, take or
receive any payment from any of the Crossed Obligors, all rights, liens and
security interests of each Borrower, whether now or hereafter arising and
howsoever existing, in and to

                                       28


any assets of any of the Crossed Obligors shall be and are subordinated to the
rights of Lender in those assets under the Loan Documents, the Crossed Loan
Documents or otherwise, and no Borrower shall, until the date that all of the
Loan and the Crossed Loans shall have been paid and satisfied in full, (i)
assert, collect, sue upon, or enforce all or any part of the Crossed Party
Obligations; (ii) commence or join with any other creditors of any of the
Crossed Obligors in commencing any bankruptcy, reorganization, receivership or
insolvency proceeding against any of the Crossed Obligors; (iii) take, accept,
ask for, sue for, receive, set off or demand any payments upon the Crossed Party
Obligations; or (iv) take, accept, ask for, sue for, receive, demand or allow to
be created liens, security interests, mortgages, deeds of trust or pledges of or
with respect to any of the assets of any of the Crossed Obligors in favor of or
for the benefit of such Borrower.

      (D)   If all or any part of the assets of any of the Crossed Obligors, or
the proceeds thereof, are subject to any distribution, division or application
to the creditors of such Crossed Obligor, whether partial or complete, voluntary
or involuntary, and whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding, or if the business of any such Crossed Obligor is dissolved or if
substantially all of the assets of any such Crossed Obligor are sold, then, and
in any such event (such events being herein referred to as an "CROSSED OBLIGOR
INSOLVENCY EVENT"), any payment or distribution of any kind or character, either
in cash, securities or other property, which shall be payable or deliverable to
any Borrower upon or with respect to any Crossed Party Obligations shall be paid
or delivered directly to the Lender for application on the Loan and the Crossed
Loans, due or to become due, until such Loan and Crossed Loans shall have first
been fully paid and satisfied (in cash). Should any payment, distribution,
security or instrument or proceeds thereof be received by any Borrower upon or
with respect to the Crossed Party Obligations after any Crossed Obligor
Insolvency Event and prior to the payment in full and satisfaction of all of the
Loan and Crossed Loans, such Borrower shall receive and hold the same in trust,
as trustee, for the benefit of Lender and shall forthwith deliver the same to
Lender in precisely the form received (except for the endorsement or assignment
of such Borrower where necessary), for application to any of the Loan or Crossed
Loans, due or not due, and, until so delivered, the same shall be held in trust
by such Borrower as the property of Lender. If such Borrower fails to make any
such endorsement or assignment to Lender, Lender or any of its officers or
employees is irrevocably authorized to make the same. Each Borrower agrees that
until the Loan and Crossed Loans have been paid in full (in cash) and satisfied,
no Borrower will assign or transfer to any individual or entity (other than
Lender) any claim such Borrower has or may have against any Crossed Obligor.

      (E)   Subject to the provisions of Section 2.12(G), to the extent that any
collection upon any of the Loan or the Crossed Loans is made by Lender from one
of the Crossed Borrowers or the Crossed Properties or other assets of the
Crossed Borrowers (a "CROSSED LOANS COLLECTION") which, taking into account all
other Crossed Loans Collections then previously or concurrently made by such
Crossed Borrower, exceeds the amount which otherwise would have been collected
from such Crossed Borrower if each Borrower and each Crossed Borrower had paid
the portion of the Loan and Crossed Loans satisfied by such Crossed Loans
Collection in the same proportion as such Crossed Borrower's Allocable Amount
(as defined below) (as determined immediately prior to such Crossed Loans
Collection) bore to the aggregate Allocable Amounts of each Borrower and each
Crossed Borrower as determined immediately prior to the making of

                                       29


such Crossed Loans Collection, then, following payment in full in cash of the
entire Loan and Crossed Loans, such Crossed Borrower shall be entitled to
receive contribution and indemnification payments from, and be reimbursed by,
each Borrower and each of the other Crossed Borrowers for the amount of such
excess, pro rata based upon their respective Allocable Amounts in effect
immediately prior to such Crossed Loans Collection. As of any date of
determination, the "ALLOCABLE AMOUNT" of any Borrower or any Crossed Borrower
shall be equal to the maximum amount of the claim which could then be recovered
from such Borrower or Crossed Borrower under the Loan Documents and Crossed Loan
Documents without rendering such claim voidable or avoidable under Section 548
of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform
Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or
common law. The foregoing provision shall be for the benefit of each of the
Crossed Borrowers and Lender, but shall be subject to modification as provided
in Section 2.12(G) below and to amendment by agreement of the Borrowers and
Lender, in each case without necessity of any agreement, acknowledgment or
approval of any Crossed Borrower or any notice to any Crossed Borrower. Section
2.12(E) of each of the Crossed Loan Agreements contains provisions similar to
this Section 2.12(E) for the benefit of Lender and (subject to the terms
thereof) the Crossed Borrowers. This Section 2.12(E) and Section 2.12(E) of each
of the Crossed Loan Agreements are intended only to define the relative rights
of the Borrowers and Crossed Borrowers, and nothing set forth in this Section
2.12(E) or in Section 2.12(E) of each of the Crossed Loan Agreements is intended
to or shall impair the liens and security interests of the Loan Documents and
the Crossed Loan Documents or the obligations of the Borrowers and the Crossed
Borrowers thereunder. Each Borrower acknowledges that the rights of contribution
and indemnification under this Section 2.12(E) and under Section 2.12(E) of the
Crossed Loan Agreements constitute assets of the Borrowers or Crossed Borrowers
to which such contribution and indemnification is owing, and any such right of
contribution and indemnification owing to any Borrower under Section 2.12(E) of
any of the Crossed Loan Agreements shall constitute additional Crossed Party
Obligations for all purposes under this Section 2.12.

      (F)   Each Borrower hereby consents and agrees to each of the following,
and agrees that such Borrower's obligations under this Loan Agreement and the
other Loan Documents and the Liens created under this Loan Agreement and the
other Loan Documents securing the Loan and the Crossed Loans shall not be
released, diminished, impaired, reduced or adversely affected by any of the
following, and waives any common law, equitable, statutory or other rights
(including without limitation rights to notice) that such Borrower might
otherwise have as a result of or in connection with any of the following:

            (i)   Any renewal, extension, increase, modification, alteration or
rearrangement of all or any part of the Crossed Loans, the Crossed Loan
Documents, or other document, instrument, contract or understanding between the
Crossed Borrowers and Lender, or any other parties, pertaining to the Crossed
Loans or any failure of Lender to notify such Borrower of any such action.

            (ii)  Any adjustment, indulgence, forbearance or compromise that
might be granted or given by Lender to the Crossed Borrowers.

                                       30


            (iii) The insolvency, bankruptcy, arrangement, adjustment,
composition, liquidation, disability, dissolution or lack of power of any of the
Crossed Borrowers or any other party at any time liable for the payment of all
or part of the Crossed Loans; or any dissolution of any of the Crossed
Borrowers, or any sale, lease or transfer of any or all of the assets of any of
the Crossed Borrowers, or any changes in the shareholders, partners or members
of any of the Crossed Borrowers; or any reorganization of any of the Crossed
Borrowers.

            (iv)  The invalidity, illegality or unenforceability of all or any
part of the Crossed Loans, or any document or agreement executed in connection
therewith, for any reason whatsoever, including without limitation the fact that
(A) the Crossed Loans, or any part thereof, exceeds the amount permitted by law,
(B) the act of creating the Crossed Loans or any part thereof is ultra vires,
(C) the officers or representatives executing the Crossed Loan Documents or
otherwise creating the Crossed Loans acted in excess of their authority, (D) the
Crossed Loans violate applicable usury laws, (E) the Crossed Borrowers have
valid defenses, claims or offsets (whether at law, in equity or by agreement)
which render the Crossed Loans wholly or partially uncollectible from the
Crossed Borrowers, (F) the creation, performance or repayment of the Crossed
Loans (or the execution, delivery and performance of any document or instrument
representing part of the Crossed Loans or executed in connection with the
Crossed Loans, or given to secure the repayment of the Crossed Loans) is
illegal, uncollectible or unenforceable, or (G) any of the Crossed Loan
Documents have been forged or otherwise are irregular or not genuine or
authentic, it being agreed that each Borrower shall remain liable hereon
regardless of whether the Crossed Borrowers or any other person be found not
liable on the Crossed Loans or any part thereof for any reason.

            (v)   Any full or partial release of the liability of the Crossed
Borrowers on the Crossed Loans, or any part thereof, or of any co-guarantors, or
any other person or entity now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally, to pay, perform,
guarantee or assure the payment of the Crossed Loans, or any part thereof, it
being recognized, acknowledged and agreed by each Borrower that such Borrower
has not been induced to enter into this Loan Agreement or the other Loan
Documents on the basis of a contemplation, belief, understanding or agreement
that other parties will be liable to pay or perform the Loan or such Borrower's
obligations under the Loan Agreement or the other Loan Documents, or that Lender
will look to other parties to pay or perform the Crossed Loans.

            (vi)  The taking or accepting of any other security, collateral or
guaranty, or other assurance of payment, for all or any part of the Crossed
Loans.

            (vii) Any release, surrender, exchange, subordination,
deterioration, waste, loss or impairment (including without limitation
negligent, willful, unreasonable or unjustifiable impairment) of any collateral,
property or security, at any time existing in connection with, or assuring or
securing payment of, all or any part of the Crossed Loans.

            (viii) The failure of or refusal of Lender or any other party acting
on behalf of Lender to exercise diligence or reasonable care in the
preservation, protection, enforcement, sale or other handling or treatment of
all or any part of such collateral, property or security, including but not
limited to any neglect, delay, omission, failure or refusal of Lender (A) to
take or prosecute any action for the collection of any of the Crossed Loans, (B)
to foreclose, or initiate

                                       31


any action to foreclose, or, once commenced, prosecute to completion any action
to foreclose upon any security therefor, or (C) to take or prosecute any action
in connection with any instrument or agreement evidencing or securing all or any
part of the Crossed Loans.

            (ix)  The fact that any collateral, security, security interest or
lien contemplated or intended to be given, created or granted as security for
the repayment of the Crossed Loans, or any part thereof, shall not be properly
perfected or created, or shall prove to be unenforceable or subordinate to any
other security interest or lien, it being recognized and agreed by each Borrower
that it is not entering into this Loan Agreement in reliance on, or in
contemplation of the benefits of, the validity, enforceability, collectibility
or value of any of the collateral for the Crossed Loans.

            (x)   Any payment by any of the Crossed Borrowers to Lender is held
to constitute a preference under bankruptcy laws, or for any reason Lender is
required to refund such payment or pay such amount to any of the Crossed
Borrowers or someone else.

            (xi)  Any other action taken or omitted to be taken with respect to
the Crossed Loan Documents, the Crossed Loans, or the security and collateral
therefor.

      (G)   Notwithstanding anything to the contrary set forth in this Loan
Agreement, Lender may, at its sole option and in its sole discretion, from time
to time (one or more times) deliver written notice to the Borrowers stating that
this Loan Agreement, the Mortgages and the other Loan Documents shall no longer
secure one or more (at Lender's sole election) of the Crossed Loans (each a
"CROSS RELEASE NOTICe"), whereupon (i) this Loan Agreement and the other Loan
Documents shall no longer secure any of the Crossed Loans for which a Cross
Release Notice is given (any such Crossed Loan, an "EXCLUDED LOAN", and,
collectively, the "EXCLUDED LOAN(S)"; each Crossed Borrower which is the
borrower with respect to an Excluded Loan is herein referred to as an "EXCLUDED
BORROWER", and the Crossed Loan Agreement, Crossed Mortgages, Cross Side
Agreement and other Crossed Loan Documents executed and delivered by the
Excluded Borrowers with respect to any Excluded Loan are herein referred to as
the "EXCLUDED LOAN AGREEMENT", "EXCLUDED MORTGAGES", "EXCLUDED SIDE AGREEMENT"
and "EXCLUDED LOAN DOCUMENTS", respectively, and each Crossed Property
encumbered by the Excluded Loan Documents is herein referred to as an "EXCLUDED
Property"), (ii) each Cross Guaranty of the Loan executed by each Excluded
Borrower, together with each Cross Guaranty of an Excluded Loan executed by the
Borrowers (herein collectively referred to as the "EXCLUDED GUARANTIES") shall
be deemed automatically terminated and of no further force or effect, (iii) each
reference herein and in the other Loan Documents to the "Crossed Loans" shall be
deemed to exclude the Excluded Loans, (iv) each reference herein and in the
other Loan Documents to the "Crossed Loan Agreements", "Crossed Mortgages",
"Crossed Loan Documents", "Crossed Properties", "Cross Side Agreements" and
"Cross Guaranties" shall be deemed to exclude the Excluded Loan Agreement, the
Excluded Mortgages, the Excluded Loan Documents, the Excluded Property, the
Excluded Side Agreements and the Excluded Guaranties, respectively, (v) each
reference herein and in the other Loan Documents to the "Crossed Borrowers" and
the "Crossed Obligors" shall be deemed to exclude each Excluded Borrower, (vi)
the provisions of Section 2.12(E) of this Loan Agreement shall not apply to any
Crossed Loans Collection from any Excluded Borrower or its Excluded Property and
the Borrowers shall have no obligation or liability on account thereof; and
(vii) Borrowers shall no longer be

                                       32


beneficiaries of the covenants and agreements set forth in Section 2.12(E) of
any Excluded Loan Agreement, and the Borrowers shall have no rights or claims on
account of any contribution or indemnification obligations of any Excluded
Borrower under Section 2.12(E) of any Excluded Loan Agreement. In addition to
and without limiting the foregoing, the Borrowers hereby agree to fully
cooperate with Lender, if Lender is considering the termination of the cross
collateralization and cross default of the Loan and Loan Documents with any of
the Crossed Loans, including, but not limited to (x) amending this Loan
Agreement and the other Loan Documents as may be required by Lender to
effectuate such termination of the cross collateralization and cross default
provisions thereof, and (y) updating and/or endorsing the title insurance
policies (at Lender's cost as to additional premium charges, if any) to reflect
the continuation of the first priority lien of this Loan Agreement.

      (H)   In the event the Loan is repaid or defeased in full in accordance
with the provisions of this Loan Agreement and the other Loan Documents, then
provided no Event of Default then exists hereunder, and no "Event of Default"
(as defined in any of the Other Crossed Loan Agreements) exists under any of the
Other Crossed Loan Documents, the cross collateralization and cross default of
the Loan and Loan Documents with the Other Crossed Loans shall terminate and all
the Other Crossed Loans shall be deemed Excluded Loans with respect to the Loan
and the provisions of Section 2.12(G) above shall become automatically
applicable with respect thereto.

                                  ARTICLE III
                               CONDITIONS TO LOAN

SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The
obligation of Lender to fund the Loan are subject to the prior or concurrent
satisfaction or waiver of the conditions set forth below, and to satisfaction of
any other conditions specified herein or elsewhere in the Loan Documents. With
respect to facts and circumstances actually known to Lender at Closing, by
funding the Loan Lender shall be deemed to have acknowledged that each of the
conditions set forth below has been satisfied or waived (except as otherwise set
forth in any other agreement in writing between the Borrowers and Lender). Where
in this Section any documents, instruments or information are to be delivered to
Lender, then the condition shall not be satisfied unless (i) the same shall be
in form and substance satisfactory to Lender, and (ii) if so required by Lender,
the Borrowers shall deliver to Lender a certificate duly executed by the
Borrowers stating that the applicable document, instrument or information is
true and complete and does not omit to state any information without which the
same might reasonably be deemed materially misleading.

      (A)   LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall
execute and deliver and cause to be executed and delivered to Lender all of the
Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan
Documents as may be reasonably required by Lender, each, unless otherwise noted,
of even date herewith, duly executed, in form and substance satisfactory to
Lender and in quantities designated by Lender (except for the Note, of which
only one shall be signed), which Loan Documents shall become effective upon the
Closing.

                                       33


      (B)   DEPOSITS. The deposits required herein, including without
limitation, the initial deposits into the Reserves and Accounts, shall have been
made (and at the Borrowers' option, the same may be made from the proceeds of
the Loan).

      (C)   PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES.
Each Borrower Party and all other Persons executing any agreement on behalf of
any Borrower Party shall have performed in all material respects all agreements
which this Loan Agreement provides shall be performed on or before the Closing
Date. The representations and warranties contained herein and in the other Loan
Documents shall be true, correct and complete in all material respects on and as
of the Closing Date.

      (D)   CLOSING CERTIFICATE. On or before the Closing Date, Lender shall
have received certificates of even date herewith executed on behalf of each
Borrower by the chief financial officer (or similar officer of the Borrowers)
stating that: (i) on such date, to the Borrowers' Knowledge no Default exists;
(ii) no material adverse change in the financial condition or operations of the
business of the Borrowers or the projected cash flow of the Borrowers or the
Properties, in each case taken as a whole, has occurred since the delivery to
Lender of any financial statements, budgets, proformas, or similar materials (or
if there has been any change, specifying such change in detail), and that, to
the Borrowers' Knowledge after due inquiry, such financial materials fairly
present the financial condition and results of operations of the Borrowers and
the Properties, in each case taken as a whole, and all other materials delivered
to Lender are complete and accurate in all material respects; and (iii) the
representations and warranties set forth in this Loan Agreement are true and
correct in all material respects on and as of such date with the same effect as
though made on and as of such date (or if any such representations or warranties
require qualification, specifying such qualification in detail) and (iv) to the
Borrowers' Knowledge, there are no material facts or conditions concerning the
Properties or any Borrower Party that have not been disclosed to Lender which
could have a Material Adverse Effect.

      (E)   OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall
have received from Morris, Manning & Martin, LLP or other legal counsel for the
Borrowers satisfactory to Lender, written legal opinions, each in form and
substance acceptable to Lender, as to such matters as Lender shall request,
including opinions to the effect that (i) each of the Borrower Parties is duly
formed, validly existing, and in good standing in its state of organization and,
in the case of each Borrower, in each state where its Property is located, (ii)
this Loan Agreement and the Loan Documents have been duly authorized, executed
and delivered and are enforceable in accordance with their terms subject to
customary qualifications for bankruptcy, general equitable principles, and other
customary assumptions and qualifications; (iii) the Deposit Account Agreement
and Cash Management Agreement have been duly authorized, executed and delivered
by Borrower and Manager and are enforceable in accordance with their terms and
the security interests in favor of Lender in the Account Collateral have been
validly created and perfected; and (iv) no Borrower, Member or General Partner
would be consolidated in any bankruptcy proceeding affecting Guarantor or
certain other Affiliates of the Borrower Parties specified by Lender. Also on or
before the Closing Date, Lender shall have received the following legal
opinions, each in form and substance acceptable to Lender: (a) an opinion of the
Borrowers' local counsel in each state where the Properties are located as to
the enforceability of, and the creation and perfection of Liens under, the
Mortgages and the Assignments of Leases

                                       34


and such other matters as Lender may reasonably request; (b) [intentionally
omitted]; (c) opinions of Richards, Layton & Finger or other Delaware legal
counsel, acceptable to Lender, for each Borrower that is a single member limited
liability company formed under the laws of the State of Delaware that, among
other matters, (1) under Delaware law (x) the prior unanimous written consent of
Member (and the unanimous written consent of the board of directors of Member
including the Independent Directors, or the unanimous prior written consent of
the board of managers' of each Borrower, including the Independent Directors')
would be required for a voluntary bankruptcy filing by each such Borrower, (y)
the prior unanimous written consent of the board of directors of Member
(including the Independent Directors) would be required for a voluntary
bankruptcy filing by Member, (z) such unanimous consent requirements are
enforceable against Member in accordance with their terms; (2) under Delaware
law the bankruptcy or dissolution of Member would not cause the dissolution of
any of the Borrowers and the bankruptcy or dissolution of the sole shareholder
or member would not cause the dissolution of Member; (3) under Delaware law,
creditors of Member shall have no legal or equitable remedies with respect to
the assets of any of the Borrowers and creditors of Guarantor shall have no
legal or equitable remedies with respect to the assets of Member; and (4) a
federal bankruptcy court would hold that Delaware law governs the determination
of what Persons have authority to file a voluntary bankruptcy petition on behalf
of each Borrower and Member; and (d) such other legal opinions as Lender may
reasonably request.

      (F)   TITLE POLICIES. On or before the Closing Date, Lender shall have
received and approved pro forma Title Policies for the Mortgages, and as of the
Closing, each Title Company shall be irrevocably committed and prepared
immediately to issue the Title Policies or binding commitments. The Title
Policies shall be in form and substance satisfactory to Lender. Without
limitation, each Title Policy shall be issued on an ALTA form acceptable to
Lender by each Title Company or if an ALTA form is not available in the
applicable jurisdiction, another form acceptable to Lender, together with such
reinsurance and direct access agreements as Lender may require, insuring that
the Mortgages are valid first and prior enforceable liens on each Borrower's fee
simple interest or ground leasehold interest, as the case may be, in the
applicable Property (including any easements appurtenant thereto) subject only
to such exceptions to coverage as are acceptable to Lender, including the
Permitted Exceptions. Each Title Policy shall contain such endorsements as
Lender may require (to the extent available in the state where the Properties is
located) in form acceptable to Lender, including deletion of the creditors'
rights exception and affirmative endorsement coverage for creditors' rights
risks.

      (G)   SURVEY. Lender shall have received a survey of each of the
Properties, certified to Lender and its successors, assigns and designees and to
each Title Company by a surveyor reasonably satisfactory to Lender (the
"SURVEY"), or Lender shall have received both (x) a "no change" affidavit from
each Borrower with respect to such Borrower's most recent Survey sufficient to
cause the Title Company to provide current survey coverage to Lender in the
applicable Title Policy without exception for matters that would be revealed by
a current and accurate survey of the applicable Property, except for matters
specifically shown on such most recent Survey, and (y) a reliance letter (to the
extent any such surveys are not currently addressed to Lender) in form and
substance satisfactory to Lender, permitting Lender to rely on the Survey (and
any certification thereof) as if originally addressed and certified to Lender.
Each Survey shall contain the minimum detail for land surveys as most recently
adopted by ALTA/ASCM,

                                       35


shall comply with Lender's survey requirements and shall contain Lender's
standard form certification, and shall show no state of facts or conditions
reasonably objectionable to Lender.

      (H)   ZONING. On or before the Closing Date, Lender shall have received
evidence reasonably satisfactory to Lender as to the zoning and subdivision
compliance of each of the Properties.

      (I)   CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the
Closing Date, Lender shall have received copies of the organizational documents
and filings of each Borrower Party, together with good standing certificates (or
similar documentation) (including verification of tax status) from the state of
its formation and from all states in which the laws thereof require such Person
to be qualified and/or licensed to do business (including without limitation,
each state in which the Properties are located for the applicable Borrower(s)
and, to the extent required by law, Member and General Partner). Each such
certificate shall be dated not more than 30 days prior to the Closing Date, as
applicable, and certified by the applicable Secretary of State or other
authorized governmental entity. In addition, on or before the Closing Date the
secretary or corresponding officer of each Borrower Party, or the secretary or
corresponding officer of the partner, trustee, or other Person as required by
such Borrower Party's organizational documents (as the case may be, the
"BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating
that the copies of the organizational documents as delivered to Lender are true
and complete and are in full force and effect, and that the same have not been
amended except by such amendments as have been so delivered to Lender.

      (J)   CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing
Date, Lender shall have received certificates of incumbency and resolutions of
each Borrower Party and its constituents as requested by Lender, approving and
authorizing the Loan and the execution, delivery and performance of the Loan
Documents, certified as of the Closing Date by the Borrower Party Secretary as
being in full force and effect without modification or amendment.

      (K)   FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall
have received such financial statements and other financial information as shall
be satisfactory to Lender for each Borrower Party (including for Guarantor) and
for the Properties. If any such statements are not available for the Properties,
then the Borrowers shall provide such financial reports as are available. All
such financial statements shall be certified to Lender by the applicable
Borrower Party (through its chief financial officer or other officer charged
with similar duties), which certification shall be in form and substance
reasonably satisfactory to Lender.

      (L)   OPERATING AND CAPEX/FF&E BUDGETS. On or before the Closing Date,
Lender shall have received and approved the Operating Budget and CapEx/FF&E
Budget for the Properties for the remainder of the current calendar year.

      (M)   AGREEMENTS. On or before the Closing Date, Lender shall have
received a list of all Material Agreements and, to the extent requested by
Lender, copies thereof.

                                       36


      (N)   MANAGEMENT AGREEMENT; FRANCHISE AGREEMENTS. On or before the Closing
Date, Lender shall have received copies of the Management Agreements and any
leasing brokerage agreements pertaining to the Properties and the Assignments of
Management Agreements, duly executed by each Manager and the applicable
Borrower. On or before the Closing Date, Lender shall have received copies of
the existing Franchise Agreements (including any Property Improvement Plan) and
Franchisor Letters for each of the Properties duly executed by the applicable
Franchisors.

      (O)   RENT ROLL. Prior to the Closing, Lender shall have received from the
Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL")
in form and substance satisfactory to Lender. The Rent Roll shall constitute a
true, correct, and complete list of each and every Material Lease, together with
all extensions and amendments thereof, and shall accurately and completely
disclose all annual and monthly rents payable by all tenants, including all
percentage rents, if any, and expiration dates of such Material Leases, and the
amount of security deposit being held by the Borrowers under each Material
Lease, if any.

      (P)   MATERIAL LEASES. Prior to the Closing, Lender shall have received
true, correct and complete copies of the Material Leases, as amended.

      (Q)   LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender
shall have received copies of the final, unconditional certificates of occupancy
issued with respect to each of the Properties, together with all other
applicable licenses (including, without limitation, each liquor license and beer
permit), permits and approvals required for each Borrower to own, use, occupy,
operate and maintain each of the Properties as a hotel.

      (R)   INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date,
Lender shall have received copies of certificates of insurance (dated not more
than twenty (20) days prior to the Closing Date) regarding insurance required to
be maintained under this Loan Agreement and the other Loan Documents, together
with endorsements satisfactory to Lender naming Lender as an additional insured
and loss payee, as required by this Loan Agreement, under such policies. In
addition, as to any insurance matters arising under Environmental Laws or
pertaining to any environmental insurance that any of the Borrowers has with
respect to any Property, the same shall be endorsed to Lender as required by
this Loan Agreement and shall name Lender as an insured, additional insured
and/or loss payee, as applicable.

      (S)   ENVIRONMENTAL ASSESSMENT. Lender shall have received the
Environmental Reports relating to each of the Properties, together with a letter
from each preparer thereof entitling Lender and its successors and assigns to
rely upon said Environmental Report.

      (T)   PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender
shall have received a property condition report for each of the Properties,
which shall be prepared by an engineer or other consultant satisfactory to
Lender and otherwise shall be in form and substance satisfactory to Lender in
its sole discretion. Each such report shall set forth any items of deferred
maintenance at the applicable Property.

      (U)   APPRAISAL. On or before the Closing Date, Lender shall have received
an independent appraisal of each of the Properties from a state certified
appraiser engaged by

                                       37


Lender. Each such appraisal shall conform in all respects to the criteria for
appraisals set forth in the Financial Institutions Reform and Recovery Act of
1989 and the regulations promulgated thereunder (as if Lender were an
institution under the jurisdiction thereof) and the Uniform Standards of
Professional Appraisal Practices of the Appraisal Foundation.

      (V)   SEARCHES. Prior to the Closing Date, Lender shall have received
copies of Uniform Commercial Code, judgment, tax lien, bankruptcy and litigation
search reports with respect to the Borrowers, Guarantor, Managers, General
Partner and Member, all dated not more than thirty (30) days prior to the
Closing Date.

      (W)   DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2)
days prior to the Closing Date, Lender shall have received payoff demand letters
and wiring instructions from each lender or other obligee of any existing
indebtedness which is required to be repaid pursuant to this Loan Agreement.

      (X)   LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and
all reasonable legal fees and expenses of counsel to Lender, together with all
recording fees and taxes, title insurance premiums, and other reasonable costs
and expenses related to the Closing.

      (Y)   COMMITMENT CONDITIONS. If a commitment letter or similar agreement
shall have been issued by Lender for the Loan, such additional conditions as
shall be specified in such commitment shall have been satisfied.

      (Z)   OTHER REVIEW. Lender shall have completed all other review of the
Borrower Parties, the Properties, and such other items as it reasonably
determines relevant, and shall have determined based upon such review to fund
the Loan. The Borrower Parties shall have satisfied such other reasonable
criteria as Lender may reasonably specify.

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

      In order to induce Lender to enter into this Loan Agreement and to make
the Loan, each Borrower represents and warrants to Lender that the statements
set forth in this Article IV, after giving effect to the Closing, will be, true,
correct and complete in all material respects as of the Closing Date.

SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS.

      (A)   ORGANIZATION AND POWERS. Each Borrower Party is duly organized,
validly existing and in good standing under the laws of the state of its
formation. Each Borrower Party has all requisite power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
to be conducted, and to enter into each Loan Document to which it is a party and
to perform the terms thereof.

      (B)   QUALIFICATION. Each Borrower Party is duly qualified and in good
standing in the state of its formation. In addition, each Borrower Party is duly
qualified and in good standing in each state where necessary to carry on its
present business and operations, except in jurisdictions

                                       38


in which the failure to be qualified and in good standing could not reasonably
be expected to have a Material Adverse Effect.

      (C)   ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C)
accurately sets forth the direct and indirect ownership structure of the
Borrowers, General Partners and Members.

SECTION 4.2 AUTHORIZATION OF BORROWING, ETC.

      (A)   AUTHORIZATION OF BORROWING. The Borrowers have the power and
authority to incur the Indebtedness evidenced by the Note. The execution,
delivery and performance by each Borrower Party of each of the Loan Documents to
which it is a party and the consummation of the transactions contemplated
thereby have been duly authorized by all necessary limited liability company,
partnership, trustee, corporate or other action, as the case may be.

      (B)   NO CONFLICT. The execution, delivery and performance by each
Borrower Party of the Loan Documents to which it is a party and the consummation
of the transactions contemplated thereby do not and will not: (1) violate (x)
any provision of law applicable to any Borrower Party; (y) the partnership
agreement, certificate of limited partnership, certificate of incorporation,
bylaws, declaration of trust, operating agreement or other organizational
documents, as the case may be, of each Borrower Party; or (z) any order,
judgment or decree of any Governmental Authority binding on any Borrower Party
or any of its Affiliates; (2) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any Contractual
Obligation of any Borrower Party or any of its Affiliates (except where such
breach will not cause a Material Adverse Effect); (3) result in or require the
creation or imposition of any material Lien (other than the Lien of the Loan
Documents) upon the Properties or assets of any Borrower Party; or (4) except as
set forth on SCHEDULE 4.2, require any approval or consent of any Person under
any material Contractual Obligation of any Borrower Party, which approvals or
consents as set forth on SCHEDULE 4.2 have been obtained on or before the dates
required under such material Contractual Obligation, but in no event later than
the Closing Date.

      (C)   GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower
Party of the Loan Documents to which it is a party, and the consummation of the
transactions contemplated thereby do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
Governmental Authority.

      (D)   BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents,
including the Note, when executed and delivered will be, the legally valid and
binding obligations of each Borrower Party that is a party thereto, enforceable
against each of the Borrower Parties, as applicable, in accordance with their
respective terms, subject to bankruptcy, insolvency, moratorium, reorganization
and other similar laws affecting creditor's rights. No Borrower Party has any
defense or offset to any of its obligations under the Loan Documents to which it
is a party. No Borrower Party has any claim against Lender or any Affiliate of
Lender.

SECTION 4.3 FINANCIAL STATEMENTS. All financial statements concerning any of the
Borrowers, their Affiliates and the Properties which have been furnished by or
on behalf of the Borrowers to

                                       39


Lender pursuant to this Loan Agreement present fairly the financial condition of
the Persons covered thereby as of the dates thereof and the results of their
operations for the periods then ended, and, to the Borrowers' Knowledge after
due inquiry, have been prepared in accordance with GAAP consistently applied
(except as disclosed therein). Since the date of the financial statements
delivered to Lender, there has been no material adverse change in the financial
condition, operations or business of the Borrower Parties or the Properties from
that set forth in said financial statements.

SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, the
Borrowers shall have no outstanding Indebtedness or Contingent Obligations other
than the Obligations or any other Permitted Indebtedness.

SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee
simple title to the Properties, free and clear of all Liens except for the
Permitted Encumbrances. The Borrowers own and will own at all times all FF&E
relating to the Properties (other than personal property which is either owned
by tenants of such Property, not used or necessary for the operation of the
applicable Property, or leased by the Borrowers as permitted hereunder), subject
only to the Permitted Encumbrances. The Mortgages, when properly recorded in the
appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (i) a
valid, perfected first lien on each of the Properties, subject only to the
Permitted Encumbrances, and (ii) perfected first priority security interests in
and to, and perfected collateral assignments of, all personalty (including the
Rents, the Leases, and the FF&E), all in accordance with the terms thereof, in
each case subject only to any applicable Permitted Encumbrances. Lender will
have a perfected first priority security interest in and to the FF&E owned by
the Borrowers, if any, not located at the Properties. To the Borrowers'
Knowledge, except as set forth on SCHEDULE 4.5, there are no proceedings in
condemnation or eminent domain affecting any of the Properties, and to the
actual Knowledge of the Borrowers, none is threatened. Except as set forth on
SCHEDULE 4.5(A), no Person has any option or other right to purchase all or any
portion of any of the Properties or any interest therein. To the Borrowers'
Knowledge, there are no mechanic's, materialman's or other similar liens or
claims which have been filed for work, labor or materials affecting the
Properties which are or will be liens prior to, or equal or coordinate with, the
lien of any of the Mortgages. None of the Permitted Encumbrances, individually
or in the aggregate, materially interfere with the benefits of the security
intended to be provided by the Mortgages and this Loan Agreement, materially and
adversely affect the value of any of the Properties, impair the use or
operations of the Properties or impair the Borrowers' ability to pay its
obligations in a timely manner.

SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. To the Borrower's Knowledge, except as
set forth in the Zoning Reports for the Properties delivered to Lender, the
Properties and the use thereof comply in all material respects with all
applicable zoning, subdivision and land use laws, regulations and ordinances,
all applicable health, fire, building codes, parking laws and all other laws,
statutes, codes, ordinances, rules and regulations applicable to the Properties,
or any of them, including without limitation the Americans with Disabilities
Act. To the Borrowers' Knowledge, there are no illegal activities relating to
controlled substances on any of the Properties. To the Borrower's Knowledge,
except as set forth in the Zoning Reports for the Properties delivered to
Lender, all material permits, licenses and certificates for the lawful use,
occupancy and operation of each component of each of the Properties in the
manner in which it

                                       40


is currently being used, occupied and operated, including, but not limited to
liquor licenses and certificates of occupancy, or the equivalent, have been
obtained and are current and in full force and effect. To the Borrower's
Knowledge, except as set forth in the Zoning Reports for the Properties
delivered to Lender, in the event that all or any part of the Improvements
located on any Property is destroyed or damaged, said Improvements can be
legally reconstructed to their condition prior to such damage or destruction,
and thereafter exist for the same use without violating any zoning or other
ordinances applicable thereto and without the necessity of obtaining any
variances or special permits, other than customary demolition, building and
other construction related permits. To the Borrowers' Knowledge, no legal
proceedings are pending or threatened with respect to the zoning of any
Property. To the Borrowers' Knowledge, except as set forth in the Title Policies
and/or the Surveys, neither the zoning nor any other right to construct, use or
operate any Property is in any way dependent upon or related to any real estate
other than such Property. No tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded by the
Borrowers with respect to any Property without Lender's prior written consent,
which consent shall not be unreasonably withheld, delayed or conditioned.

SECTION 4.7 LEASES; AGREEMENTS.

      (A)   LEASES; AGREEMENTS. The Borrowers have delivered to Lender true and
complete copies (in all material respects) of all (i) Leases for more than five
hundred (500) square feet of space at any Property and (ii) Material Agreements
affecting the operation and management of the Properties, and such Leases and
Material Agreements have not been modified or amended except pursuant to
amendments or modifications delivered to Lender. Except for the rights of each
of the current Managers pursuant to the existing Management Agreements, no
Person has any right or obligation to manage any of the Properties or to receive
compensation in connection with such management. Except for the parties to any
leasing brokerage agreement that has been delivered to Lender, no Person has any
right or obligation to lease or solicit tenants for the Properties, or (except
for cooperating outside brokers) to receive compensation in connection with such
leasing.

      (B)   RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is
attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described
in the Rent Roll, none of the Properties are subject to any Material Leases.
Except only as specified in the Rent Roll, or as otherwise disclosed to Lender
in the estoppel certificates delivered to Lender at Closing, to the Borrowers'
Knowledge, (i) the Material Leases are in full force and effect; (ii) the
Borrowers have not given any notice of default to any tenant under any Material
Lease which remains uncured; (iii) no tenant has any set off, claim or defense
to the enforcement of any Material Lease; (iv) no tenant is in arrears in the
payment of rent, additional rent or any other charges whatsoever due under any
Material Lease, or is materially in default in the performance of any other
obligations under such Material Lease; (v) the Borrowers have completed all work
or alterations required of the landlord or lessor under each Material Lease, and
all of the other obligations of landlord or lessor under the Material Leases
have been performed; and (vi) there are no rent concessions (whether in form of
cash contributions, work agreements, assumption of an existing tenant's other
obligations, or otherwise) or extensions of time whatsoever not reflected in
such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge
of the Borrowers, threatened) against the Borrowers by any tenant or former
tenant. No rental in

                                       41


excess of one month's rent has been prepaid under any of the Material Leases. To
the Borrowers' Knowledge, each of the Material Leases is valid and binding on
the parties thereto in accordance with its terms.

      (C)   NO RESIDENTIAL UNITS. There are no residential units in any of the
Properties and, to each Borrower's Knowledge, no person (other than a site
manager employed by Manager) occupies any part of the Properties for dwelling
purposes other than on a transient basis.

      (D)   MANAGEMENT AGREEMENTS. The Borrowers have delivered to Lender a true
and complete copy of each of the Management Agreements to which they are a party
that will be in effect on the Closing Date, and such Management Agreements have
not been modified or amended except pursuant to amendments or modifications
delivered to Lender. The Management Agreements are in full force and effect and
no default by any of the Borrowers or Manager exists thereunder.

      (E)   FRANCHISE AGREEMENTS; PROPERTY IMPROVEMENT PLANS. The Borrowers have
delivered to Lender a true and complete copy of each of the Franchise Agreements
to which they are a party, and such Franchise Agreements have not been modified
or amended except pursuant to amendments or modifications delivered to Lender.
To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full
force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material
default by the Borrowers, Manager or the applicable Franchisor exists
thereunder. The defaults listed on SCHEDULE 4.7(E), individually and in the
aggregate, do not and will not have a Material Adverse Effect. Except for the
Property Improvement Plans set forth on EXHIBIT G attached hereto, there are no
other property improvement plans or similar capital improvement plans or
obligations required by any Franchisor pursuant to any Franchise Agreement, in
effect for any of the Properties.

SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as
set forth in the Property Condition Reports for the Properties delivered to
Lender, all Improvements including, without limitation, the roof and all
structural components, plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior doors, parking facilities,
sidewalks and landscaping are in good condition and repair. Except as disclosed
in the Property Condition Reports, (i) the Borrowers are not aware of any latent
or patent structural or other material defect or deficiency in the Properties
and, (ii) to the Borrowers' Knowledge, city water supply, storm and sanitary
sewers, and electrical, gas (if applicable) and telephone facilities are
available to each of the Properties within the boundary lines of each of the
Properties (except as may be shown on the applicable Survey), are fully
connected to the Improvements and are fully operational, are sufficient to meet
the reasonable needs of each of the Properties as now used or presently
contemplated to be used, and no other utility facilities are necessary to meet
the reasonable needs of each of the Properties as now used or presently
contemplated. Except as may be shown on the applicable Survey, to the Borrowers'
Knowledge no part of any of the Properties is within a flood plain and none of
the Improvements create encroachments over, across or upon the Properties'
boundary lines, rights of way or easements, and no building or other
improvements on adjoining land create such an encroachment which could
reasonably be expected to have a Material Adverse Effect. All public roads and
streets necessary for service of and access to each of the Properties for the
current and contemplated uses thereof have been completed and are serviceable
and are physically and legally open for use

                                       42


by the public. To the Borrowers' Knowledge after due inquiry, and except as
disclosed in the Property Condition Reports, any septic system located at any of
the Properties is in good and safe condition and repair and in compliance with
all applicable law.

SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9,
there are no judgments outstanding against any Borrower Party, or affecting any
of the Properties or any property of any Borrower, nor is there any action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration now pending or, to the Borrowers' Knowledge, threatened against any
Borrower Party that could reasonably be expected to result in a Material Adverse
Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges,
claims, demand, suits, proceedings, petitions, investigations and arbitrations
set forth on SCHEDULE 4.9 are not reasonably expected to result, either
individually or in the aggregate, in any Material Adverse Effect.

SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and
reports of each Primary Borrower Party required to be filed have been timely
filed (or each Borrower has timely filed for an extension and the applicable
extension has not expired), and all taxes, assessments, fees and other
governmental charges (including any payments in lieu of taxes) upon such Person
and upon its properties, assets, income and franchises which are due and payable
have been paid. To the Borrowers' Knowledge, there is not presently pending any
special assessment against any of the Properties or any part thereof.

SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the
Primary Borrower Parties is a party to or bound by, nor is any property of such
Person subject to or bound by, any contract or other agreement which restricts
such Person's ability to conduct its business in the ordinary course as
currently conducted that, either individually or in the aggregate, has a
Material Adverse Effect or could reasonably be expected to have a Material
Adverse Effect.

SECTION 4.12 PERFORMANCE OF AGREEMENTS. No Borrower Party is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation of any such Person which
could reasonably be expected to have a Material Adverse Effect, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default which could reasonably be expected to have a Material
Adverse Effect.

SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940 or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.

SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no
Primary Borrower Party maintains or contributes to, or has any obligation
(including a contingent obligation) under, any Employee Benefit Plans.

SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar
compensation will be payable by or pursuant to any contract or other obligation
of any Primary Borrower Party with respect to the making of the Loan or any of
the other transactions contemplated hereby or

                                       43


by any of the Loan Documents. The Borrowers shall indemnify, defend, protect,
pay and hold Lender harmless from any and all broker's or finder's fees claimed
to be due in connection with the making of the Loan arising from any Borrower
Parties' actions.

SECTION 4.16 INTENTIONALLY DELETED.

SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction
or any Loan Document with the actual intent to hinder, delay, or defraud any
creditor and (b) received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the Loan, the aggregate
fair saleable value of the Borrowers' assets exceed and will, immediately
following the making of the Loan, exceed the Borrowers' total liabilities,
including, without limitation, subordinated, unliquidated, disputed and
Contingent Obligations. The aggregate fair saleable value of the Borrowers'
assets is and will, immediately following the making of the Loan, be greater
than the Borrowers' probable total liabilities, including the maximum amount of
their Contingent Obligations on their debts as such debts become absolute and
matured. Each Borrower's assets do not and, immediately following the making of
the Loan will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. The Borrowers do not
intend to, and do not believe that they will, incur Indebtedness and liabilities
(including Contingent Obligations and other commitments) beyond their ability to
pay such Indebtedness and liabilities as they mature (taking into account the
timing and amounts of cash to be received by the Borrowers and the amounts to be
payable on or in respect of obligations of the Borrowers).

SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on
behalf of any Borrower Party contains any untrue representation, warranty or
statement of a material fact, or omits to state a material fact necessary in
order to make the statements contained therein not misleading. No Loan Document
or any other document, certificate or written statement for use in connection
with the Loan and prepared by any Borrower Party, or any information provided by
any Borrower Party and contained in, or used in preparation of, any document or
certificate for use in connection with the Loan, contains any untrue
representation, warranty or statement of a material fact, or omits to state a
material fact necessary in order to make the statements contained therein not
misleading. There is no material fact actually known to the Borrowers that has
had or could reasonably be expected to have a Material Adverse Effect and that
has not been disclosed in writing to Lender by the Borrowers.

SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the
proceeds of the Loan only for the purposes set forth herein and consistent with
all applicable laws, statutes, rules and regulations. No portion of the proceeds
of the Loan shall be used by the Borrowers or any Person in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation T, Regulation U or Regulation X or any other regulation of the Board
of Governors of the Federal Reserve System.

SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate
description of all policies of insurance for each Borrower that are in effect as
of the Closing Date. No notice of cancellation has been received with respect to
such policies, and, to each Borrower's Knowledge, the Borrowers are in
compliance with all conditions contained in such policies.

                                       44


SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1)
or more parcels which constitute separate tax lots. No part of any of the
Properties is included or assessed under or as part of another tax lot or
parcel, and no part of any other property is included or assessed under or as
part of the tax lots or parcels comprising any of the Properties.

SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest
in, including without limitation stock, partnership interest or other securities
of, any other Person (other than the Beverage Companies), or (ii) direct or
indirect loan, advance or capital contribution to any other Person, including
all indebtedness and accounts receivable from that other Person.

SECTION 4.23 BANKRUPTCY. No Borrower Party is a debtor, and no property of any
of them (including any Property) is property of the estate, in any voluntary or
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or other similar law now or hereafter in effect. No
Borrower Party and no property of any of them is under the possession or control
of a receiver, trustee or other custodian. No Borrower Party has made any
assignment for the benefit of creditors. No such assignment or bankruptcy or
similar case or proceeding is now contemplated.

SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to
Lender in writing herein or in any of the Loan Documents, no Default exists.

SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an
employee benefit plan as defined in Section 3(3) of ERISA which is subject to
ERISA, (ii) a plan as defined in Section 4975(e)(1) of the IRC which is subject
to Section 4975 of the IRC, or (iii) an entity whose underlying assets
constitute "plan assets" of any such employee benefit plan or plan for purposes
of Title I of ERISA of Section 4975 of the IRC; provided that, in making such
representation, the Borrowers have assumed that (i) no portion of the Loan shall
be funded with plan assets of any employee benefit plan that is subject to Title
I of ERISA or any plan that is covered by Section 4975 of the Code unless the
Lender is eligible to apply one or more exemptions such that the Loan will not
constitute a nonexempt prohibited transaction under Section 406 of ERISA or that
could subject a Borrower Party or its Affiliates to an excise tax under Section
4975 of the IRC; and (ii) such assumption in the preceding clause is true and
correct with respect to any party to which Lender transfers or assigns any
portion of the Loan.

SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with the Borrowers are not and will not be subject to state
statutes applicable to the Borrowers' regulating investments of and fiduciary
obligations with obligations with respect to governmental plans.

SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person"
within the meaning of Section 1445(f)(3) of the IRC.

SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on
SCHEDULE 4.28, no Primary Borrower Party is a party to any collective bargaining
agreement.

SECTION 4.29 RESERVED.

SECTION 4.30 RESERVED.

                                       45


SECTION 4.31 NO PROHIBITED PERSONS. Neither any Borrower Party nor any of their
respective officers, directors, partners, members, Affiliates or, to the
knowledge of the Borrowers, shareholders is an entity or person: (i) that is
listed in the Annex to, or is otherwise subject to the provisions of Executive
Order 13224 issued on September 24, 2001 ("EO13224"); (ii) whose name appears on
the United States Treasury Department's Office of Foreign Assets Control
("OFAC") most current list of "Specifically Designated National and Blocked
Persons" (which list may be published from time to time in various mediums
including, but not limited to, the OFAC website,
http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or
supports "terrorism", as that term is defined in EO 13224; or (iv) who is
otherwise affiliated with any entity or person listed above (any and all parties
or persons described in clauses (i) through (iv) above are herein referred to as
a "PROHIBITED PERSON").

                                   ARTICLE V
                         COVENANTS OF BORROWER PARTIES

      The Borrowers covenant and agree that until payment in full of the Loan,
all accrued and unpaid interest and all other Obligations, the Borrowers shall
perform and comply with all covenants in this Article V applicable to such
Person.

SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS.

      (A)   FINANCIAL STATEMENTS.

            (i)   ANNUAL REPORTING. Within one hundred twenty (120) days after
the end of each calendar year, the Borrowers (on a consolidated basis), and
within ninety (90) days after the end of each calendar year, Guarantor shall
provide true and complete copies of their Financial Statements for such year to
Lender. All such Financial Statements shall be audited by an Approved Accounting
Firm or by other independent certified public accountants reasonably acceptable
to Lender, and shall bear the unqualified certification of such accountants that
such Financial Statements present fairly in all material respects the financial
position of the subject company. The annual Financial Statements shall be
accompanied by Supplemental Financial Information for such calendar year. The
annual Financial Statements for the Borrowers (on a consolidated basis) and
Guarantor shall also be accompanied by a certification executed by the entity's
chief executive officer or chief financial officer (or other officer with
similar duties), satisfying the criteria set forth in Section 5.1(A)(viii)
below, and a Compliance Certificate (as defined below).

            (ii)  QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days
after the end of each calendar quarter, the Borrowers on a consolidated basis
(other than with respect to income statements, which shall be on an individual
property basis) shall provide copies of their Financial Statements for such
quarter to Lender, together with a certification executed on behalf of each of
the Borrowers by their respective chief executive officers or chief financial
officers (or other officer with similar duties) in accordance with the criteria
set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements
shall be accompanied by Supplemental Financial Information and a Compliance
Certificate for such quarter.

                                       46


            (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days
after the end of each calendar quarter, Guarantor shall provide copies of its
Financial Statements for such quarter to Lender, together with a certification
executed on behalf of Guarantor by its chief executive officer or chief
financial officer (or other officer with similar duties) in accordance with the
criteria set forth in Section 5.1(A)(viii) below.

            (iv)  LEASING REPORTS. Within forty-five (45) days after the end of
each calendar year, each Borrower shall provide to Lender a certified Rent Roll
and a schedule of security deposits held under Material Leases, each in form and
substance reasonably acceptable to Lender. Within forty-five (45) days after the
end of each calendar year, each Borrower shall also provide to Lender (a) a
schedule of any retail Material Leases that expired during such calendar year
and a schedule of retail Material Leases scheduled to expire within the next
calendar year and (b) to the extent the Borrowers received notice thereof, a
list of any retail tenants under Material Leases that filed bankruptcy,
insolvency or reorganization proceedings during such calendar year. Within
ninety (90) days after the end of each calendar year, each Borrower shall
provide to Lender a statement of income and expenses for all retail space at
each of the Properties owned and operated by the Borrowers and, to the extent
provided to the Borrowers and not subject to confidentiality restrictions, sales
reports for retail tenants for such year.

            (v)   MONTHLY REPORTING. Within thirty (30) days after the end of
each calendar month, each Borrower shall provide, or cause Manager to provide,
to Lender the following items determined on an accrual basis: (a) a calculation
of the average daily rate, RevPAR and occupancy calculations and statistics for
each of the Properties for the subject month; (b) Smith Travel Research "STAR"
reports then available; (c) monthly, and year to date operating statements
prepared for such calendar month and for the trailing twelve (12) month period
then ended, noting Net Operating Income, Net Cash Flow and including budgeted
and last year results for the same year-to-date period and other information
necessary and sufficient under GAAP to fairly represent the results of operation
of each of the Properties during such calendar month, all in form reasonably
satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects
completed during such calendar month (including a detailed explanation for any
material deviations from budget) and setting forth that all disbursements and/or
withdrawals, as applicable, from the Capital Improvement Reserve and the FF&E
Reserve have been made with respect to items of Capital Improvement only (as
opposed to items that, in accordance with GAAP, would be included as an
Operating Expense); (e) monthly and year to date detailed reports of Operating
Expenses for each of the Properties, including supporting documentation
satisfactory to Lender in its sole discretion for each item of Extraordinary
Expense (as such term is defined in the Cash Management Agreement) for which
Lender has approved a disbursement from the Cash Trap Reserve pursuant to the
terms of Section 3.3(a)(v) of the Cash Management Agreement; (f) most recently
available "OSI", or similar quality index, scores (including detailed
information regarding criteria and thresholds); (g) prior to Securitization of
the Loan, market segmentation reports for the trailing twelve (12) month period
for each of the Properties; and (h) a report setting forth (i) the date of
termination by Property for each Franchise Agreement that has been terminated
after the Closing Date and not replaced with an Approved Franchisor, (ii) the
number of Properties for which a default has occurred and has continued beyond
applicable notice and grace periods under the applicable Franchise Agreement
(including the percentage of the original Aggregate Allocated Loan Amount
represented by such Properties), (iii) a summary

                                       47


report establishing that the Borrowers are diligently continuing to pursue
reflagging efforts with respect to each such Property, and (iv) a summary report
including (a) the aggregate number of Properties for which the Borrowers have
entered into new Franchise Agreements as permitted by Sections 5.13(D)(i) and
5.13(D)(iv) together with the resulting Category of each such Property, and (b)
the aggregate number of Properties for which any replacement (and, if more than
one replacement has occurred to a single Property, the number of replacements
with respect to such Property) of the applicable Franchise Agreements has
occurred pursuant to the terms of Sections 5.13(D)(ii) and 5.13(D)(iii) together
with the percentage of the Aggregate Outstanding Principal Balance represented
by such Properties and including the resulting Category of each such Property.
All of the above statements, reports and information shall be provided to Lender
by email in Microsoft Excel format or other spreadsheet format reasonably
acceptable to Lender (in the case of any statements, reports or information
provided by third parties that are not Affiliates of the Borrowers, to the
extent same are available in such format). Along with such operating statements,
each Borrower shall deliver to Lender a Compliance Certificate of such
Borrower's chief executive officer or chief financial officer (or other officer
with similar duties) satisfying the criteria set forth in Section 5.1(A)(viii)
below.

            (vi)  ADDITIONAL REPORTING. In addition to the foregoing, the
Borrowers shall, and shall cause Guarantor and Manager to, promptly provide to
Lender such further documents and information concerning its operations,
properties, ownership, and finances as Lender shall from time to time reasonably
request upon prior written notice to the Borrowers.

            (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause
Guarantor and Manager to, maintain systems of accounting established and
administered in accordance with sound business practices and sufficient in all
respects to permit preparation of Financial Statements in conformity with GAAP
and the Uniform System. All Financial Statements shall be prepared in accordance
with GAAP and the Uniform System, consistently applied; provided, however, in
the event of a conflict between the Uniform System and GAAP, GAAP will be
followed.

            (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS,
COMPLIANCE CERTIFICATE. Together with the Financial Statements and other
documents and information provided to Lender by or on behalf of the Borrowers or
Guarantor under this Section, the Borrowers or Guarantor also shall deliver to
Lender a certification to Lender, executed on behalf of the Borrowers or
Guarantor by their respective chief executive officer or chief financial officer
(or other officer with similar duties), stating that to their Knowledge after
due inquiry such quarterly and annual Financial Statements and information
fairly present the financial condition and results of operations of the
Borrowers, Guarantor and/or the Properties for the period(s) covered thereby,
and do not omit to state any material information without which the same might
reasonably be misleading, and all other non-financial documents submitted to
Lender (whether monthly, quarterly or annually) are true, correct, accurate and
complete in all material respects. In addition, where this Loan Agreement
requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same
shall deliver a certificate duly executed on behalf of such Person by its chief
executive officer or chief financial officer (or other officer with similar
duties) stating (a) that, to their Knowledge after due inquiry, there does not
exist any Default or Event of Default under the Loan Documents (or if any
exists, specifying

                                       48


the same in detail), and (b) the Borrowers and Guarantor have complied with the
applicable reporting requirements of this Section 5.1.

            (ix)  FISCAL YEAR. Each Borrower represents that its fiscal year and
that of the Guarantor ends on December 31, and agrees that no change shall be
made to each such fiscal year, without Lender's prior written consent.

      (B)   ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower
will deliver copies of all material reports submitted by independent public
accountants in connection with each annual, interim or special audit of the
Financial Statements or other business operations of such Borrower made by such
accountants, including the comment letter submitted by such accountants to
management in connection with the annual audit.

      (C)   TAX RETURNS. Within thirty (30) days after filing the same, each
Borrower shall deliver to Lender a copy of its Federal income tax returns (or
the return of the applicable Person into which such Borrower's Federal income
tax return is consolidated) certified on its behalf by its chief financial
officer (or similar position) to be true and correct.

      (D)   ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS. Prior to February 15 of
each calendar year, each Borrower shall deliver to Lender for its review for its
Property a proposed Operating Budget and CapEx/FF&E Budget (in each case
presented on a monthly and annual basis) for such calendar year. Each Operating
Budget and CapEx/FF&E Budget shall be subject to Lender's approval which shall
not be unreasonably withheld, conditioned or delayed. Provided that no Cash Trap
Event or Event of Default exists, the Borrowers may make changes to the
Operating Budget and the CapEx/FF&E Budget from time to time as deemed
reasonably necessary by the Borrower, provided no such modification (together
with all prior modifications taken as a whole) shall alter any single line item
(or the applicable Budget as a whole) by more than ten percent (10%) without
Lender's prior written approval, which approval shall not be unreasonably
withheld; provided, however, notwithstanding the foregoing during a Cash Trap
Event, increases to the Operating Budget for any Property (not to exceed ten
percent (10%) of the Operating Budget for such Property as a whole) will be
permitted without Lender's consent for actual verifiable increases in utilities,
water and sewer assessments and charges and real property taxes for the
applicable Property over the amounts therefor set forth in the Operating Budget
for such Property for the prior period. Notice of any modifications to the
Operating Budget and the CapEx/FF&E Budget shall be delivered to Lender at the
time of delivery of the next financial reporting required pursuant to Section
5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget
and the CapEx/FF&E Budget for the 2004 calendar year. The proposed Operating
Budget shall identify and set forth each Borrower's reasonable estimate, after
due consideration, of all revenue, costs, and expenses, and shall specify
Operating Revenues and Operating Expenses on a line-item basis consistent with
the form of Operating Budget delivered to Lender prior to Closing. If any of
said budgets or plans requiring Lender's approval is not in form and substance
reasonably satisfactory to Lender, Lender may disapprove the same and specify
the reasons therefor in writing, and the Borrowers shall promptly amend and
resubmit for approval revised budgets or plans, as applicable, making such
changes as are necessary to comply with the reasonable requirements of Lender.
Until any such budget or plan for any year requiring Lender's approval has been
approved or deemed approved, the applicable budget or plan for the previous year
shall remain in effect until the new budget or plan is

                                       49


approved or deemed approved. Lender's consent to any budget, plan or amendments
thereto shall be deemed given, if the first correspondence from the Borrowers to
Lender requesting such approval is in an envelope marked "PRIORITY" and contains
a bold-faced, conspicuous legend at the top of the first page thereof stating
that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL
IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is
accompanied by the information and documents required above and any other
information reasonably requested by Lender in writing prior to the expiration of
such fifteen (15) day period in order to adequately review the same has been
delivered and, if Lender fails to respond or to expressly deny such request for
approval in writing within the fifteen (15) day period, a second notice is
delivered to Lender from the Borrowers in an envelope marked "PRIORITY"
requesting approval containing a bold-faced, conspicuous legend at the top of
the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY
THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL
BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request
for approval within the ten (10) day period.

      (E)   MATERIAL NOTICES.

            (i)   The Borrowers shall promptly deliver, or cause to be
delivered, copies of all notices given or received with respect to a default
under any term or condition related to any Permitted Indebtedness of any
Borrower, and shall notify Lender within five (5) Business Days of any potential
or actual event of default with respect to any such Permitted Indebtedness.

            (ii)  The Borrowers shall promptly deliver to Lender copies of any
and all material notices (including without limitation any notice alleging any
default or breach which is reasonably expected to result in a termination)
received with respect to any Material Agreement or any Lease, including, without
limitation, any inspection report and any progress reports related to any
Property Improvement Plan received from a Franchisor related to such Borrower's
Property.

      (F)   EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining
knowledge of any of the following events or conditions, such Borrower shall
deliver a certificate executed on its behalf by its chief financial officer or
similar officer specifying the nature and period of existence of such condition
or event and what action such Borrower or any Affiliate thereof has taken, is
taking and proposes to take with respect thereto: (i) any condition or event
that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii)
any actual or alleged breach or default or assertion of (or written threat to
assert) remedies under any Management Agreement, Franchise Agreement or Ground
Lease.

      (G)   LITIGATION. Promptly upon any of the Borrowers obtaining knowledge
of (1) the institution of any action, suit, proceeding, governmental
investigation or arbitration against the Borrowers or any of the Properties not
previously disclosed in writing by the Borrowers to Lender which would be
reasonably likely to have a Material Adverse Effect or is not covered by
insurance or (2) any material development in any action, suit, proceeding,
governmental investigation or arbitration at any time pending against or
affecting the Borrowers or the Properties which, in each case, if adversely
determined would reasonably be expected to have a

                                       50


Material Adverse Effect, the Borrowers will give notice thereof to Lender and,
upon request from Lender, provide such other information as may be reasonably
available to them to enable Lender and its counsel to evaluate such matter.

      (H)   INSURANCE. At least five (5) Business Days prior to the end of each
insurance policy period of the Borrowers, the Borrowers will deliver
certificates, reports, and/or other information (all in form and substance
reasonably satisfactory to Lender), (i) outlining all material insurance
coverage maintained as of the date thereof by the Borrowers and all material
insurance coverage planned to be maintained by the Borrowers in the subsequent
insurance policy period and (ii) evidencing payment in full of the premiums for
such insurance policies.

      (I)   OTHER INFORMATION. With reasonable promptness, Borrowers will
deliver such other information and data with respect to such Person and its
Affiliates or the Properties as from time to time may be reasonably requested by
Lender.

SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve
and keep in full force and effect their existence as a limited partnership,
limited liability company, or corporation, as the case may be, and all rights
and franchises material to its business, including their qualification to do
business in each state where it is required by law to so qualify. Without
limitation of the foregoing, each Borrower and, to the extent required by
applicable law, General Partner and Member, shall at all times be qualified to
do business in each of the states where the Properties are located.

SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS.

      (A)   Except for those matters being contested pursuant to clause (B)
below, the Borrowers will pay (i) all Impositions; (ii) all claims (including
claims for labor, services, materials and supplies) for sums that have become
due and payable and that by law have or may become a Lien upon any of its
properties or assets (hereinafter referred to as the "CLAIMS"); and (iii) all
federal, state and local income taxes, sales taxes, excise taxes and all other
taxes and assessments of the Borrowers on their business, income or assets; in
each instance before any penalty or fine is incurred with respect thereto.

      (B)   The Borrowers shall not be required to pay, discharge or remove any
Imposition or Claim relating to a Property so long as the Borrowers contest in
good faith such Imposition, Claim or the validity, applicability or amount
thereof by an appropriate legal proceeding which operates to prevent the
collection of such amounts and the sale of the applicable Property or any
portion thereof, and so long as: (i) no Event of Default shall have occurred and
be continuing, (ii) prior to the date on which such Imposition or Claim would
otherwise have become delinquent, the Borrowers shall have given Lender prior
written notice of their intent to contest said Imposition or Claim; (iii) prior
to the date on which such Imposition or Claim would otherwise have become
delinquent, the Borrowers shall have deposited with Lender (or with a court of
competent jurisdiction or other appropriate body reasonably approved by Lender)
such additional amounts as are necessary to keep on deposit at all times, an
amount by way of cash, Dollar Equivalents, or a Letter of Credit, equal to at
least one hundred twenty-five percent (125%) (or such higher amount as may be
required by applicable law) of the total of (x) the balance of such Imposition
or Claim then remaining unpaid, and (y) all interest, penalties, costs

                                       51


and charges accrued or accumulated thereon; (iv) no risk of sale, forfeiture or
loss of any interest in the applicable Property or any part thereof arises, in
Lender's reasonable judgment, during the pendency of such contest; (v) such
contest does not, in Lender's reasonable determination, have a Material Adverse
Effect; and (vi) such contest is based on bona fide, material, and reasonable
claims or defenses. Any such contest shall be prosecuted with due diligence, and
the Borrowers shall promptly pay the amount of such Imposition or Claim as
finally determined, together with all interest and penalties payable in
connection therewith. Lender shall have full power and authority, but no
obligation, to apply any amount deposited with Lender under this subsection to
the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture
of the applicable Property for non-payment thereof, if Lender reasonably
believes that such sale or forfeiture is threatened. Any surplus retained by
Lender after payment of the Imposition or Claim for which a deposit was made
shall be promptly repaid to the Borrowers unless an Event of Default shall have
occurred, in which case said surplus may be retained by Lender to be applied to
the Obligations. Notwithstanding any provision of this Section to the contrary,
the Borrowers shall pay any Imposition or Claim which they might otherwise be
entitled to contest if an Event of Default shall occur and be continuing, or if,
in the reasonable determination of Lender, the applicable Property is in danger
of being forfeited or foreclosed. If the Borrowers refuse to pay any such
Imposition or Claim, Lender may (but shall not be obligated to) make such
payment and the Borrowers shall reimburse Lender on demand for all such
advances.

SECTION 5.4 MAINTENANCE OF INSURANCE.

      The Borrowers will continuously maintain the following described policies
of insurance on each of the respective Properties without cost to Lender (the
"INSURANCE POLICIES"):

            (i)   Property insurance against loss and damage by all risks of
physical loss or damage, including fire, sprinkler leakage, windstorm,
hurricane, terrorism, and other risks covered by the so-called extended coverage
endorsement covering the Improvements and personal property in amounts not less
than the full insurable replacement value of all Improvements (less building
foundations and footings) and personal property from time to time on the
Properties and without sublimits, and bearing a replacement cost agreed-amount
endorsement;

            (ii)  Commercial general liability insurance, including death,
bodily injury, innkeeper legal liability and broad form property damage coverage
with a combined single limit in an amount not less than One Million Dollars
($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the
aggregate for any policy year;

            (iii) If any of the Properties are in an area prone to geological
phenomena, including, but not limited to, sinkholes, mine subsidence or
earthquakes, insurance covering such risks in an amount equal to 100% of the
full replacement cost of all improvements (without any deductions for
depreciation) and with a maximum permissible deductible equal to the lesser of
$25,000 or 10% of the face value of the policy;

            (iv)  For each Property located in whole or in part in a federally
designated "special flood hazard area", flood insurance in the maximum available
amount;

                                      52


            (v)   An umbrella excess liability policy with a limit of not less
than Twenty Million Dollars ($20,000,000) over primary insurance, which policy
shall include coverage for so-called assumed and contractual liability coverage
and automobile liability coverage, and coverage for safeguarding of personalty
and shall also include such additional coverages and insured risks which are
acceptable to Lender;

            (vi)  Business interruption and/or rent loss insurance with an
aggregate limit equal to at least the gross income from the Properties for an
indemnity period commencing on the date of such casualty and ending at least six
(6) months after completion of the Restoration (such amount being adjusted
annually);

            (vii) Crime protection insurance covering all employees with access
to funds and located in Guarantor's corporate offices with a limit of not less
than One Million Dollars ($1,000,000) and with the same coverages and
deductibles as currently in place at the Properties;

            (viii) Steam boiler, machinery and pressurized vessel insurance
insuring against breakdown or explosion of such equipment on a replacement cost
value basis, which shall not contain any exclusions for testing procedures;

            (ix)  Worker's Compensation Insurance in statutory amounts, if any,
at all times;

            (x)   Insurance against loss or damage from (A) leakage of sprinkler
systems and (B) explosion of steam boilers, air conditioning equipment, high
pressure piping, machinery and equipment, pressure vessels or similar apparatus
now or hereafter installed in the Improvements (without exclusion for
explosions), in an amount at least equal to the Aggregate Allocated Loan Amount;

            (xi)  During any period of construction, repair or restoration,
builder's "all risk" insurance in an amount equal to not less than the full
insurable value of the Properties (excluding building foundations and footings)
against such risks (including, without limitation, fire and extended coverage
and collapse of the Improvements to agreed limits) as Lender may reasonably
request;

            (xii) If the Properties are or become a "non-conforming use" under
applicable zoning and building ordinances, or other requirements of the
applicable Governmental Authority, law or ordinance coverage to compensate for
the cost of demolition and the increased cost of construction, if available;

            (xiii) If the Borrowers, Manager or any of their respective
Affiliates holds a liquor license for the Properties, liquor liability insurance
(including "dram shop" liability) in an amount not less than $1,000,000 for each
common cause and $3,000,000 in the aggregate; provided that if such liquor
license is held by any tenant under a Lease, the Borrowers shall cause such
tenant to cause liquor liability insurance in an amount not less than the limits
set forth above to be carried in such tenant's name, and shall include the
Borrowers and Lender as additional insureds thereunder;

                                       53


            (xiv) If reasonably required by Lender as a result of the release,
disposal or existence of any Hazardous Materials on or about any Property after
the date hereof (or as to which Lender obtains knowledge after the date hereof)
or if such insurance is then customarily required by institutional lenders for
securitized loans, environmental insurance, including mold coverage, in form and
with coverages (including business interruption coverage) reasonably
satisfactory to Lender; provided, however, without limiting or affecting
Lender's right to require such environmental insurance with respect to any other
Properties after the date hereof, Lender acknowledges that, as of the date
hereof, environmental insurance shall only be required with respect to the
Property known as the Holiday Inn, located at 363 Roberts Street, East Hartford,
Connecticut;

            (xv)  Fiduciary liability insurance and directors and officers
liability insurance ("D&O INSURANCE") with coverages at levels in effect as of
the Closing Date;

            (xvi) Insurance against acts of terrorism, or insurance policies
without an exclusion for damages resulting from acts of terrorism on terms
consistent with the commercial property insurance policies required under
subsection (i), (ii), (v) and (vi) above;

            (xvii) Such other insurance as may from time to time be reasonably
required by Lender and which is then customarily required by institutional
lenders for securitized loans secured by similar properties similarly situated,
against other insurable hazards, including, but not limited to, malicious
mischief, vandalism, windstorm and or earthquake, due regard to be given to the
size and type of the Properties, Improvements, fixtures and equipment and their
location, construction and use. Additionally, the Borrowers shall carry such
insurance coverage as Lender may from time to time require if the failure to
carry such insurance would result in a downgrade, qualification or withdrawal of
any class of securities issued in connection with a Securitization.

      All Insurance Policies shall be in content (including, without limitation,
endorsements or exclusions, if any), form, and amounts, and issued by companies,
satisfactory to Lender from time to time and shall name Lender and its
successors and assignees as their interests may appear as (x) an "additional
insured" for each of the liability policies under this Section 5.4 hereof, and
(y) a "mortgagee" for each of the property and casualty policies under this
Section hereof, and shall (except for Worker's Compensation Insurance) contain a
waiver of subrogation clause reasonably acceptable to Lender. Other than with
respect to D&O Insurance, an insurance company shall not be satisfactory unless
such insurance company (a) is licensed or authorized to issue insurance in the
State where the applicable Property is located and (b) has a claims paying
ability rating by the Rating Agencies of AA- (or its equivalent).
Notwithstanding the foregoing, a carrier which does not meet the foregoing
ratings requirement shall nevertheless be deemed acceptable hereunder provided
that such carrier is reasonably acceptable to Lender and the Borrowers shall
obtain and deliver to Lender a Rating Confirmation with respect to such carrier
from each of the Rating Agencies, provided, however, that: (a) if any insurance
coverage required under this Section 5.4 is maintained by a syndicate of
insurers, the preceding ratings requirements shall be deemed satisfied (without
any required Rating Confirmation) as long as at least seventy five percent (75%)
of the coverage (if there are four or fewer members of the syndicate) or at
least sixty percent (60%) of the coverage (if there are five or more members of
the syndicate) is maintained with carriers meeting the claims-paying ability
ratings requirements

                                       54


by S&P and Moody's (if applicable) set forth above and all carriers in such
syndicate have a claims-paying ability rating by S&P of not less than "BBB" and
by Moody's of not less than "Baa2" (to the extent rated by Moody's); (b) Lender
hereby approves Zurich Insurance Company as the carrier providing the insurance
described in clause (ii) above, so long as such carrier maintains a claims
paying ability of not less than A- by S&P (and the equivalent from each of the
other Rating Agencies to the extent rated thereby) and (c) until the expiration
of the current term of the applicable policies, Lender hereby approves Landmark
American as the carrier providing the insurance described in clauses (i), (iv)
and (vi) above (covering losses over the first $25,000,000 of coverage), so long
as thereafter such carrier or any other carrier providing the above coverages
maintains a claims paying ability of not less than A by S&P (and the equivalent
from each of the other Rating Agencies to the extent rated thereby). All
Insurance Policies under Sections 5.4 (i), (iv), (vi), (vii), (x), (xi) and
(xii) hereof shall contain a Non-Contributory Standard mortgagee clause and a
mortgagee's Loss Payable Endorsement (Form 438 BFU NS), or their equivalents
(such endorsements shall entitle Lender to collect any and all proceeds payable
under all such insurance, with the insurance company waiving any claim or
defense against Lender for premium payment, deductible, self-insured retention
or claims reporting provisions). All Insurance Policies shall provide that the
coverage shall not be modified without (30) days' advance written notice to
Lender and shall provide that no claims shall be paid thereunder to a Person
other than Lender without ten (10) days' advance written notice to Lender. The
Borrowers may obtain any insurance required by this Section through blanket
policies; provided, however, that such blanket policies shall separately set
forth the amount of insurance in force with respect to the Properties (which
shall not be reduced by reason of events occurring on property other than the
Properties) and shall afford all the protections to Lender as are required under
this Section. Except as may be expressly provided above, all policies of
insurance required hereunder shall contain no annual aggregate limit of
liability, other than with respect to liability insurance. If a blanket policy
is issued, a certified copy of said policy shall be furnished, together with a
certificate indicating that Lender is an additional insured (and, if applicable,
loss payee) under such policy in the designated amount. The Borrowers will
deliver duplicate originals of all Insurance Policies, premium prepaid through
the current expiration dates of such Insurance Policies, to Lender and, in case
of Insurance Policies about to expire, the Borrowers will deliver duplicate
originals of replacement policies satisfying the requirements hereof to Lender
not less than ten (10) days prior to the date of expiration; provided, however,
if such replacement policy is not yet available, the Borrowers shall provide
Lender with an insurance certificate executed by the insurer or its authorized
agent evidencing that the insurance required hereunder is being maintained under
such policy, which certificate shall be acceptable to Lender on an interim basis
until the duplicate original of the policy is available. The Borrowers shall
furnish Lender receipts for the payment of premiums on such insurance policies
or other evidence of such payment reasonably satisfactory to Lender in the event
that such premiums have not been paid by Lender pursuant to the Loan Agreement.
The requirements of this Section 5.4 shall apply to any separate policies of
insurance taken out by the Borrowers concurrent in form or contributing in the
event of loss with the Insurance Policies. Losses shall be payable to Lender
notwithstanding (1) any act, failure to act or negligence of the Borrowers or
their agents or employees, Lender or any other insured party which might, absent
such agreement, result in a forfeiture or all or part of such insurance payment,
other than the willful misconduct of Lender knowingly in violation of the
conditions of such policy, (2) the occupation or use of the Properties or any
part thereof for purposes more hazardous than permitted by the

                                       55


terms of such policy, (3) any foreclosure or other action or proceeding taken
pursuant to this Loan Agreement or (4) any change in title to or ownership of
the Properties or any part thereof. The property insurance and the boiler and
machinery insurance described in Sections 5.4(i) and (x) hereof shall include
"underground hazards" coverage; "time element" coverage by which Lender shall be
assured payment of all amounts due under the Note, this Loan Agreement and the
other Loan Documents; "extra expense" (i.e., soft costs), clean-up, transit and
ordinary payroll coverage; and "expediting expense" coverage to facilitate rapid
repair or restoration of the Properties. The Insurance Policies shall not
contain any deductible in excess of $250,000.

SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY.

      (A)   The Borrowers will operate and maintain the Properties as is
necessary to maintain hotel standards at least as high as those that currently
apply to each Property, subject to ordinary wear and tear, as reasonably
determined by the Borrowers, and otherwise in compliance with the standards
under the applicable Franchise Agreement and shall maintain or cause to be
maintained in good repair, working order and condition all material property
used in the business of each Borrower, including the applicable Property, and
will make or cause to be made all appropriate repairs, renewals and replacements
thereof. Without limitation of the foregoing, each Borrower will operate and
maintain its Property substantially in accordance with the applicable Operating
Budget and the CapEx/FF&E Budget. All work required or permitted under this Loan
Agreement shall be performed in a workmanlike manner and in compliance with all
applicable laws.

      So long as no Event of Default has occurred and is continuing, the
Borrowers may, without Lender's consent, perform alterations to the Properties
which do not constitute a Material Alteration. The Borrowers shall not perform
any Material Alteration without Lender's prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed; provided, however,
that Lender may, in its sole and absolute discretion, withhold consent to any
Material Alteration which is likely to result in a decrease of Net Operating
Income (taking into consideration all Material Alterations being undertaken at
the Properties at such time) by 5% or more below that which was in effect prior
to the commencement of the first such Material Alteration being undertaken at
the time of determination for a period of sixty (60) days or longer; provided,
further, however, the Borrowers may perform a Material Alteration without
Lender's consent if (i) the delay caused by obtaining Lender's prior consent may
result in injury or death at, or further destruction or deterioration of, the
applicable Property, (ii) such Material Alteration is necessary to prevent the
likelihood of injury or death at, or further destruction or deterioration of,
the applicable Property, and (iii) the Borrowers deliver notice to Lender within
two (2) Business Days of commencement of such Material Alteration together with
such supporting documentation as Lender may require with respect to such
Material Alteration. Lender may, as a condition to giving its consent to a
Material Alteration, require that the Borrowers deliver to Lender evidence
reasonably satisfactory to Lender that the Borrowers have cash available for
payment of the cost of such Material Alteration or, if the Borrowers fail to
deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an
amount equal to 125% of the cost of such Material Alteration as reasonably
estimated by Lender. Cash deposited by the Borrowers with Lender in connection
with any Material Alteration pursuant to the foregoing sentence shall be held by
Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers
to pay for the cost of such Material Alteration as such work progresses subject
to satisfaction of the

                                       56


conditions for disbursement of amounts from the Capital Improvement Reserve
under Section 6.5 (including the requirements set forth under Section 6.7). Upon
completion of the Material Alteration, the Borrowers shall provide evidence
reasonably satisfactory to Lender that (i) the Material Alteration was
constructed in accordance with all material applicable laws and substantially in
accordance with plans and specifications approved by Lender (which approval
shall not be unreasonably withheld or delayed), (ii) all contractors,
subcontractors, materialmen and professionals who provided work, materials or
services in connection with the Material Alteration have been paid in full and
have delivered unconditional releases of lien and (iii) all material licenses
necessary for the use, operation and occupancy of the Material Alteration (other
than those which depend on the performance of tenant improvement work) have been
issued. The Borrowers shall reimburse Lender upon demand for all reasonable
out-of-pocket costs and expenses (including the reasonable fees of any
architect, engineer or other professional engaged by Lender) incurred by Lender
in reviewing plans and specifications or in making any determinations necessary
to implement the provisions of this Section 5.5(A).

      (B)   In the event of casualty or loss at any of the Properties, the
Borrowers shall give immediate written notice of the same to the insurance
carrier and to Lender and shall promptly commence and diligently prosecute to
completion, in accordance with the terms hereof, the repair and restoration of
the Property as nearly as possible to the Pre-Existing Condition (a
"RESTORATION"). The Borrowers hereby authorize and empower Lender as
attorney-in-fact for the Borrowers (jointly with the Borrowers unless an Event
of Default has occurred and is continuing), or any of them, to make proof of
loss, to adjust and compromise any claim under insurance policies, to appear in
and prosecute any action arising from such insurance policies, to collect and
receive insurance proceeds, and to deduct therefrom Lender's expenses incurred
in the collection of such proceeds; provided however, that nothing contained in
this Section shall require Lender to incur any expense or take any action
hereunder. The Borrowers further authorize Lender, at Lender's option, (i) to
hold the balance of such proceeds to be used to reimburse the Borrowers for the
cost of Restoration of any of the Properties or (ii) subject to Subsection
5.5(C), to apply such proceeds to payment of the Obligations whether or not then
due, in any order. Notwithstanding the foregoing, in the event of a casualty
where the loss does not exceed the Restoration Threshold, the Borrowers may
settle and adjust such claim; provided that (a) no Event of Default has occurred
and is continuing and (b) such adjustment is carried out in a commercially
reasonable and timely manner.

      (C)   Lender shall not exercise Lender's option to apply insurance
proceeds to payment of the Obligations if all of the following conditions are
met: (i) no Event of Default then exists; (ii) Lender reasonably determines that
there will be sufficient funds to complete the Restoration of the Property to at
least substantially the Pre-Existing Condition and to timely make all payments
due under the Loan Documents during the Restoration of the affected Property;
(iii) Lender reasonably determines that the Net Operating Income of the
Properties (including rental income or business interruption insurance) will be
sufficient to pay principal and interest on the Loan and the Mezzanine Loan and
Operating Revenues of the Properties, after the Restoration thereof to the
Pre-Existing Condition, will be sufficient to meet all Operating Expenses,
payments for Reserves and payments of principal and interest under the Note and
the Mezzanine Loan; (iv) Lender determines that the Restoration of the affected
Property to the Pre-Existing Condition will be completed not later than five (5)
months prior to the expiration of any business interruption insurance, but in no
event later than six (6) months prior to the Maturity

                                       57


Date; (v) less than fifty percent (50%) of the total floor area of the
Improvements has been damaged, destroyed or rendered unusable as a result of
such fire or other casualty; and (vi) such Property can be restored and repaired
substantially to the condition it was in immediately prior to such casualty and
in compliance with all applicable zoning, building and other laws and codes (the
"PRE-EXISTING CONDITION"). If Lender elects to apply insurance proceeds to
payment of the Obligations, such application shall be made on the Payment Date
immediately following such election in accordance with the terms of the Cash
Management Agreement.

      (D)   If Lender elects or is obligated to make the insurance proceeds
available for the Restoration of any Property and Lender is holding such
proceeds, the Borrowers agree that, if at any time during the Restoration, the
cost of completing such Restoration, as reasonably determined by Lender, exceeds
the undisbursed insurance proceeds, the Borrowers shall, within ten (10)
Business Days following the written demand by Lender, deposit the amount of such
excess with Lender, and Lender shall first disburse such deposit to pay for the
costs of such Restoration on the same terms and conditions as the insurance
proceeds are disbursed. If the Borrowers deposit such excess with Lender and if,
after completion of the Restoration, any funds remain from the combination of
insurance proceeds and the funds so deposited with Lender by the Borrowers, and
if no Event of Default shall have occurred and be continuing, then Lender shall
promptly disburse to the Borrowers such remaining funds.

      (E)   Lender may, at Lender's option, condition disbursement of any
insurance proceeds on Lender's approval (which approval shall not be
unreasonably withheld) of plans and specifications of an independent architect
licensed in the state where the Property is located and reasonably satisfactory
to Lender (the "ARCHITECT"), any and all contractors, subcontractors and
materialmen engaged in the Restoration and the contracts under which they have
been engaged, contractor's cost estimates, architect's certificates, waivers of
liens, sworn statements of mechanics and materialmen and such other evidence of
costs, percentage completion of construction, application of payments, and
satisfaction of liens as Lender may reasonably require. Lender shall not be
obligated to disburse insurance proceeds more frequently than once every
calendar month. If insurance proceeds are applied to the payment of the
Obligations and provided no Event of Default exists, any such application of
proceeds to principal shall be without any Prepayment Consideration and shall
not extend or postpone the due dates of the monthly payments due under the Note
or otherwise under the Loan Documents, or change the amounts of such payments.
If Lender elects to apply all of such insurance proceeds toward the repayment of
the Obligations, the Borrowers shall (subject to compliance with clauses (A),
(B), (D) and (F) of Section 11.4) be entitled to obtain from Lender a Property
Release (without representation or warranty) of the applicable Property from the
Lien of the Mortgage relating to such Property (in which event the Borrowers
shall not be obligated to restore the applicable Property pursuant to Section
5.5(B) above) provided that the Borrowers pay to Lender the amount, if any, by
which the Release Price for such Property exceeds the insurance proceeds
received by Lender and applied to repayment of the Obligations. If any proceeds
are applied to reduce the Obligations under this Section 5.5, provided that no
Event of Default has occurred and is continuing, no Prepayment Consideration
shall be due and payable in connection with such application. Any amount of
insurance proceeds remaining in Lender's possession after full and final payment
and discharge of all Obligations shall be refunded to, or as directed by, the
Borrowers or otherwise paid in accordance with applicable law. If the Property
is sold at foreclosure or if Lender acquires title to the Property, Lender shall
have all of the right, title and

                                       58


interest of the applicable Borrower in and to any insurance policies and
unearned premiums thereon and in and to the proceeds resulting from any damage
to such Property prior to such sale or acquisition.

      (F)   In no event shall Lender be obligated to make disbursements of
insurance proceeds in excess of an amount equal to the costs actually incurred
from time to time for work in place as part of the Restoration, as certified by
the Architect, less a retainage equal to the lesser of (x) the actual retainage
required pursuant to the permitted contract, or (y) ten percent (10%) of such
costs incurred until the Restoration has been completed. The retainage shall in
no event be less than the amount actually held back by the Borrowers from
contractors, subcontractors and materialmen engaged in the Restoration. The
retainage shall not be released until the Architect certifies to Lender, or, if
no Architect has been retained by Lender, Lender is reasonably satisfied, that
the Restoration has been completed in accordance with the provisions of this
Section 5.5 and that all approvals necessary for the re-occupancy and use of the
Property have been obtained from all appropriate governmental authorities, and
Lender receives final lien waivers and such other evidence reasonably
satisfactory to Lender that the costs of the Restoration have been paid in full
or will be paid in full out of the retainage.

SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized
representatives designated by Lender to visit and inspect during normal business
hours its Property and its business, including its financial and accounting
records, and to make copies and take extracts therefrom and to discuss its
affairs, finances and business with its officers and independent public
accountants (with such Borrower's representative(s) present), at such reasonable
times during normal business hours and as often as may be reasonably requested.
Unless an Event of Default has occurred and is continuing, Lender shall provide
advance written notice of at least three (3) Business Days prior to visiting or
inspecting any Property or such Borrower's offices.

SECTION 5.7 O&M PLAN. The applicable Borrowers shall cause to be prepared and
delivered to Lender operations and maintenance programs (the "O&M PLANS") with
respect to suspected asbestos, asbestos-containing materials, and/or mold
located in certain Properties as set forth on Schedule 6.6, which conditions
were disclosed in the applicable Environmental Reports for such Properties. Each
applicable Borrower shall at all times implement and carry out the O&M Plan in
accordance with its terms. Lender's requirement that the applicable Borrowers
develop and comply with the O&M Plan shall not be deemed to constitute a waiver
or modification of any covenants or agreements of the Borrowers or Guarantor
with respect to Hazardous Material or Environmental Laws as set forth in the
Environmental Indemnity.

SECTION 5.8 RESERVED.

SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will
(A) comply with the requirements of all present and future applicable laws,
rules, regulations and orders of any governmental authority in all jurisdictions
in which it is now doing business or may hereafter be doing business, other than
those laws, rules, regulations and orders the noncompliance with which would not
reasonably be expected to have, either individually or in the aggregate, a
material adverse effect on the operation or value of any Property, (B) maintain
all licenses and permits now held or hereafter acquired by any Borrower, the
loss, suspension, or revocation of which, or failure to renew, could have a
material adverse effect on the operation or

                                       59


value of any Property and (C) perform, observe, comply and fulfill all of its
material obligations, covenants and conditions contained in any Contractual
Obligation.

SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute
and/or deliver such documents, instruments, agreements, financing statements,
and perform such acts as Lender at any time may reasonably request to evidence,
preserve and/or protect the Collateral at any time securing or intended to
secure the Obligations and/or to better and more effectively carry out the
purposes of this Loan Agreement and the other Loan Documents.

SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party
shall duly and punctually perform, observe and comply in all material respects
with all of the terms, provisions, conditions, covenants and agreements on its
part to be performed, observed and complied with (i) hereunder and under the
other Loan Documents to which it is a party, (ii) under all Material Agreements
and Leases and (iii) all other agreements entered into or assumed by such Person
in connection with the Properties, and will not suffer or permit any material
default or event of default (giving effect to any applicable notice requirements
and cure periods) to exist under any of the foregoing except where the failure
to perform, observe or comply with any agreement referred to in this clause
(iii) would not reasonably be expected to have a material adverse effect on the
operation or value of any Property.

SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which
shall not be unreasonably withheld or delayed, the Borrowers shall not, nor
shall the Borrowers authorize Manager or any other Person to, (i) enter into any
Material Lease; (ii) cancel or terminate any Material Lease (except to enforce
any such Lease after a default thereunder); (iii) amend or modify any Material
Lease (except for minor modifications and amendments entered into in the
ordinary course of business, consistent with prudent property management
practices, not materially and adversely affecting the economic terms of the
Material Lease); (iv) approve any assignment, sublease or underlease of any
Material Lease (except as required pursuant to the express terms of any existing
Lease or Lease hereafter approved by Lender); or (v) cancel or modify any
guaranty, or release any security deposit, letter of credit, or other item
constituting security pertaining to any Material Lease (except as required
pursuant to the express terms of any existing Lease or Lease hereafter approved
by Lender).

      (B)   Any request for approval of any Material Lease or assignment,
termination, amendment or modification of any Material Lease shall be made to
Lender in writing and together with such request the Borrowers shall furnish to
Lender: (i) such biographical and financial information about the proposed
tenant as Lender may reasonably require in conjunction with its review, (ii) a
copy of the proposed form of Lease (or amendment or modification), and (iii) a
summary of the material terms of such proposed Lease (or amendment or
modification) including, without limitation, rental terms and the term of the
proposed Lease and any options. Lender's approval of any Material Lease or
assignment, termination, amendment or modification of any Material Lease, shall
be deemed given, if the first correspondence from the Borrowers to Lender
requesting such approval is in an envelope marked "PRIORITY" and contains a
bold-faced, conspicuous legend at the top of the first page thereof stating that
"IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN
WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is
accompanied by the information and documents required above and any other

                                       60


information reasonably requested by Lender in writing prior to the expiration of
such fifteen (15) day period in order to adequately review the same has been
delivered and, if Lender fails to respond or to expressly deny such request for
approval in writing within the fifteen (15) day period, a second notice is
delivered to Lender from the Borrowers in an envelope marked "PRIORITY"
requesting approval containing a bold-faced, conspicuous legend at the top of
the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY
THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL
BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request
for approval within the ten (10) day period.

      Except for security deposits, no Material Lease executed after the Closing
Date shall provide for payment of rent more than one month in advance, and the
Borrowers shall not under any circumstances collect any such rent more than one
month in advance. The Borrowers, at Lender's request, shall furnish Lender with
executed copies of all Material Leases hereafter made. Each new Material Lease
or a separate agreement with the tenant of such Material Lease shall be in
recordable form and shall specifically provide that such Material Lease (i) is
subordinate to the Mortgages; (ii) that the tenant attorns to Lender, such
attornment to be effective upon Lender's acquisition of title to the Property;
(iii) that the tenant agrees to execute such further evidences of attornment as
Lender may from time to time request; (iv) that the attornment of the tenant
shall not be terminated by foreclosure; (v) that in no event shall Lender, as
holder of the Mortgages or as successor landlord, be liable to the tenant for
any act or omission of any prior landlord or for any liability or obligation of
any prior landlord occurring prior to the date that Lender or any subsequent
owner acquire title to the Property; and (vi) that Lender may, at Lender's
option, accept or reject such attornment.

SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENTS.

      (A)   The Borrowers shall cause each Manager to manage the Properties in
accordance with the Management Agreements including, without limitation,
maintaining inventory in amounts and types customary for hotels comparable to
each Property. The Borrowers shall (i) perform and observe all of the material
terms, covenants and conditions of the Management Agreement on the part of each
Borrower to be performed and observed, and (ii) promptly notify Lender of any
notice to any of the Borrowers of any material default under the Management
Agreement of which it is aware. If any of the Borrowers shall default in the
performance or observance of any material term, covenant or condition of the
applicable Management Agreement on the part of the Borrowers to be performed or
observed, then, without limiting Lender's other rights or remedies under this
Agreement or the other Loan Documents, and without waiving or releasing the
Borrowers from any of their obligations hereunder or under the applicable
Management Agreement, Lender shall have the right, upon prior written notice to
the Borrower, but shall be under no obligation, to pay any sums and to perform
any act as may be reasonably appropriate to cause such material conditions of
the applicable Management Agreement on the part of the Borrowers to be performed
or observed.

      (B)   The Borrowers shall not surrender, terminate, cancel, modify (other
than non-material changes), renew or extend the Management Agreement, or enter
into any other Management Agreement with Manager or any new Manager, or consent
to the assignment by the Manager of its interest under the Management Agreement,
in each case without (i) prior to a

                                       61


Securitization, the express consent of Lender, which consent shall not be
unreasonably withheld, or (ii) after a Securitization, delivery of Rating
Confirmations from each of the Rating Agencies. The Borrowers shall cause any
new Manager with respect to any Property to execute and deliver a subordination
of management agreement in substantially the form delivered in connection with
the closing of the Loan.

      (C)   Lender shall have the right to require any of the Borrowers to
replace any Manager with a Person chosen by the Borrowers and reasonably
acceptable to Lender (unless such proposed Manager is an Acceptable Manager) and
the applicable Franchisor (to the extent the applicable Franchisor has consent
rights), upon the earliest to occur of any one or more of the following events:
(i) upon the occurrence and during the continuance of an Event of Default; (ii)
thirty (30) days after notice from Lender to the Borrowers if Manager has
engaged in fraud, gross negligence or willful misconduct arising from or in
connection with its performance under the applicable Management Agreement; or
(iii) upon a change of control of the current Manager.

      (D)   The Borrowers shall not terminate or enter into any Franchise
Agreement without Lender's prior written consent, which may be granted or
withheld in Lender's sole discretion. Notwithstanding the foregoing, the
following changes to Franchise Agreements shall be permitted without Lender's
prior written consent:

            (i)   Replacement of any Franchise Agreement with a new Franchise
                  Agreement in form substantially similar to a form previously
                  approved by Lender with any Franchisor that would cause a Tier
                  3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or
                  that would cause a Tier 2 Hotel to become a Tier 1 Hotel;

            (ii)  Replacement of any Franchise Agreement with a new Franchise
                  Agreement in form substantially similar to a form previously
                  approved by Lender with another Franchisor within the same
                  Category, provided that the Borrowers shall not replace
                  Franchise Agreements (in the aggregate) pursuant to this
                  Section 5.13(D)(ii) with respect to more than the lesser of
                  (x) two (2) Properties, or (y) Properties with Aggregate
                  Allocated Loan Amounts (in the aggregate) of ten percent (10%)
                  of the Aggregate Outstanding Principal Balance;

            (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with
                  a new Franchise Agreement in form substantially similar to a
                  form previously approved by Lender for Tier 3 Hotels, provided
                  that the Borrowers shall not replace Franchise Agreements for
                  more than one (1) Property, or for any Property with an
                  Allocated Loan Amount of more than five percent (5%) of the
                  outstanding principal balance of the Loan pursuant to this
                  Section 5.13(D)(iii); and

            (iv)  Entering into new Franchise Agreements (or amendments or
                  addenda to existing Franchise Agreements) with the existing
                  Franchisors for the applicable Properties for the same
                  franchise brand, each in form substantially similar to the
                  forms previously approved for the respective

                                       62


                  Properties by Lender, as required by the existing Franchisors
                  under the respective Franchise Agreements in connection with
                  the transfers of the applicable Properties and the direct and
                  indirect ownership interests in the Borrowers made by the
                  Borrower Parties and their Affiliates in connection with the
                  Closing of the Loan.

      In connection with the replacement of any Franchisors permitted hereunder,
the applicable Borrower shall, within ten (10) Business Days of the execution of
such Franchise Agreement, deliver to Lender a Franchisor Letter from any
replacement Franchisor in form and substance reasonably acceptable to Lender. In
all cases, each Borrower shall (a) cause the hotel located on the applicable
Property to be operated pursuant to the applicable Franchise Agreement; (b)
promptly perform and observe in all material respects all of the covenants
required to be performed and observed by it under the applicable Franchise
Agreement (including the requirements of any Property Improvement Plan); (c)
promptly notify Lender of any material default under the applicable Franchise
Agreement of which it is aware; and (d) promptly enforce in a commercially
reasonable manner the performance and observance of all of the material
covenants required to be performed and observed by the Franchisor under the
Franchise Agreement. In addition, the Borrowers shall not, without Lender's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed: (x) increase or consent to the increase of the aggregate
amount of any fees under any Franchise Agreement; or (y) otherwise materially
modify, change, supplement, alter or amend, or waive or release any of its
material rights and remedies under, any Franchise Agreement.

      Lender's consent to any replacement of any Franchise Agreement, or the
termination, renewal, extension or modification of an existing Franchise
Agreement, shall be deemed given, if the first correspondence from the Borrowers
to Lender requesting such consent is in an envelope marked "PRIORITY" and
contains a bold-faced, conspicuous legend at the top of the first page thereof
stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR
APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED
GIVEN", and is accompanied by the information and documents required above and
any other information reasonably requested by Lender in writing prior to the
expiration of such fifteen (15) day period in order to adequately review the
same has been delivered and, if Lender fails to respond or to expressly deny
such request for approval in writing within the fifteen (15) day period, a
second notice is delivered to Lender from the Borrowers in an envelope marked
"PRIORITY" requesting approval containing a bold-faced, conspicuous legend at
the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR
EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR
APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny
each request for approval within the ten (10) day period.

SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become
obligated under any Material Agreement pertaining to any Property without
Lender's prior written approval, which approval shall not be unreasonably
withheld or conditioned; except that the following Material Agreements shall not
require Lender approval: (i) any Lease that does not require Lender's approval
under, and otherwise complies with, the provisions of Section 5.12 hereof, (ii)
any Management Agreement that does not require Lender's approval under, and

                                       63


otherwise complies with, the provisions of Section 5.13 hereof (provided,
however, that the foregoing shall not affect Borrowers' obligation to deliver
Rating Confirmations with respect to any such Management Agreement if required
under Section 5.13), (iii) the existing Material Agreements described on
SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement that does not
require Lender's approval under, and otherwise complies with, the provisions of
Section 5.13(E) or (v) any other agreement that may be terminated without cause
and without payment of a penalty or premium, on not more than thirty (30) days'
prior written notice.

SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all
Receipts from the Properties into, and otherwise comply with, the Accounts
established from time to time hereunder. Subject to Article VII hereof and the
Cash Management Agreement, each Borrower shall promptly apply all Receipts to
the payment of all current and past due Operating Expenses, and to the repayment
of all sums currently due or past due under the Loan Documents, including all
payments into the Reserves.

SECTION 5.16 ESTOPPEL CERTIFICATES.

      (A) Within ten (10) Business Days following a request by Lender, the
Borrowers shall provide to Lender a duly acknowledged written statement
confirming (i) the amount of the outstanding principal balance of the Loan, (ii)
the terms of payment and maturity date of the Note, (iii) the date to which
interest has been paid, (iv) whether any offsets or defenses exist against the
Obligations, and if any such offsets or defenses are alleged to exist, the
nature thereof shall be set forth in detail and (v) that this Loan Agreement,
the Note, the Mortgages and the other Loan Documents are legal, valid and
binding obligations of the Borrowers and have not been modified or amended, or
if modified or amended, describing such modification or amendments.

      (B) Within ten (10) Business Days following a written request by the
Borrowers, Lender shall provide to the Borrowers a duly acknowledged written
statement setting forth the amount of the outstanding principal balance of the
Loan, the date to which interest has been paid, and whether Lender has provided
the Borrowers with written notice of any Event of Default. Compliance by Lender
with the requirements of this Section shall be for informational purposes only
and shall not be deemed to be a waiver of any rights or remedies of Lender
hereunder or under any other Loan Document.

SECTION 5.17 INDEBTEDNESS. No Primary Borrower Party will directly or indirectly
create, incur, assume, guaranty, or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness except for the following
(collectively, "PERMITTED INDEBTEDNESS"):

      (A) the Obligations and Crossed Indebtedness;

      (B) (i) unsecured trade payables not evidenced by a note and arising out
of purchases of goods or services in the ordinary course of business and (ii)
Indebtedness incurred in the financing of equipment or other personal property
used at any Property in the ordinary course of business, provided that (a) each
such trade payable is payable not later than ninety (90) days after the original
invoice date and is not overdue by more than thirty (30) days, and (b) the
aggregate amount of such trade payables and Indebtedness relating to financing
of equipment and personal

                                       64


property or otherwise referred to in clauses (i) and (ii) above (excluding
therefrom utility expenses of the Properties and fees payable to the Franchisors
pursuant to the terms of the Franchise Agreements) outstanding does not, at any
time, exceed five percent (5%) of the outstanding principal balance of the Loan;
and

      (C) the Mezzanine Loan.

In no event shall any Indebtedness other than the Loan be secured, in whole or
in part, by the Properties or any portion thereof or interest therein.

SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are
in addition to and not in limitation of its obligations under Article XI herein.
The Borrower shall not create, incur, assume or permit to exist any Lien on or
with respect to the Properties, any other Collateral or any direct or indirect
ownership interest in the Borrowers, except the Permitted Encumbrances and Liens
on the ownership interests in the Borrowers securing the Mezzanine Loan.

SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no
Primary Borrower Party shall directly or indirectly create or become or be
liable with respect to any Contingent Obligation.

SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly
permitted in this Loan Agreement, no Primary Borrower Party shall, or shall
permit any other Person to, (i) amend, modify or waive any term or provision of
such Borrower Party's partnership agreement, certificate of limited partnership,
articles of incorporation, by-laws, articles of organization, operating
agreement or other organizational documents so as to violate or permit the
violation of the single-purpose entity provisions set forth in Article IX,
unless required by law; or (ii) liquidate, wind-up or dissolve such Primary
Borrower Party.

SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses
payable to the Manager under the Management Agreement, the Borrowers shall not
pay any management, consulting, director or similar fees to any Related Person
of the Borrowers or to any director, officer or employee of the Borrowers. The
Borrowers shall not directly or indirectly enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Related Person of any of the Borrowers or
with any director, officer or employee of any Borrower Party, except
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of the Borrowers and upon fair and reasonable terms
and which are no less favorable to any of the Borrowers than would be obtained
in a comparable arm's length transaction with a Person that is not a Related
Person of any Borrower. The Borrowers shall not make any payment or permit any
payment to be made to any Related Person of any of the Borrowers when or as to
any time when any Event of Default shall exist.

SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS.

      (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary
case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect.

                                       65


      (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not
apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or
collude to cause the appointment of or taking possession by, a receiver, trustee
or other custodian for all or a substantial part of the assets of any Borrower.
As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" means any
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, in which any of the
Borrowers is a debtor or any portion of the Properties is property of the estate
therein. The Borrowers shall not file a petition for, consent to the filing of a
petition for, or aid, solicit, support, or otherwise act, cooperate or collude
to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any
Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior
written consent of Lender, consent to the entry of any order, file any motion,
or support any motion (irrespective of the subject of the motion), and the
Borrowers shall not file or support any plan of reorganization. The Borrowers
having any interest in any Involuntary Borrower Bankruptcy shall do all things
reasonably requested by Lender to assist Lender in obtaining such relief as
Lender shall seek, and shall in all events vote as directed by Lender. Without
limitation of the foregoing, each such Borrower shall do all things reasonably
requested by Lender to support any motion for relief from stay or plan of
reorganization proposed or supported by Lender.

SECTION 5.23 ERISA.

      (A) NO ERISA PLANS. None of the Primary Borrower Parties will establish
any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence
making contributions to (or become obligated to make contributions to) any
Employee Benefit Plan, Pension Plan or Multiemployer Plan.

      (B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any
non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the IRC; or (ii) except as may be necessary to comply with applicable laws,
establish or amend any Employee Benefit Plan which establishment or amendment
could result in liability to the Borrowers or any ERISA Affiliate or increase
the obligation of the Borrowers, provided that the Borrower shall not be in
default of this covenant if, in either case, any portion of the Loan has been,
or will be, funded with plan assets of any employee benefit plan that either (x)
is subject to Title I of ERISA or any plan that is covered by Section 4975 of
the Code (unless the Lender is eligible to apply for one or more exemptions such
that the Loan will not constitute a nonexempt prohibited transaction under
Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to
an excise tax under Section 4975 of the IRC.

      (C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of
this Loan Agreement become (1) an employee benefit plan defined in Section 3(3)
of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1)
of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental
plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose
underlying assets constitute "plan assets" of any such employee benefit plan,
plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the
IRC or any state statutes applicable to the Borrowers regulating investments of
governmental plans.

                                       66


SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any
other Person within its control to, disclose the name of Lender or terms of this
Loan Agreement or the Loan Documents in any press release without the prior
written consent of Lender, which shall not be unreasonably withheld.
Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted
to make such filings and disclosures with respect to the Loan as are required by
law.

SECTION 5.25 RESERVED.

SECTION 5.26 RESERVED.

SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender,
all reasonable out-of-pocket expenses, charges, costs and fees (including
reasonable attorneys' fees and expenses) in connection with the negotiation,
documentation, closing, administration, servicing, enforcement interpretation,
and collection of the Loan and the Loan Documents, and in the preservation and
protection of Lender's rights hereunder and thereunder. Without limitation the
Borrowers shall pay all costs and expenses, including reasonable attorneys'
fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or
any law succeeding or replacing any of the same). At the Closing, Lender is
authorized to pay directly from the proceeds of the Loan any or all of the
foregoing expenses then or theretofore incurred and approved by the Borrowers.

SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and
at any time that a Cash Trap Event is in effect, the Borrowers shall not make
any distributions of cash or other property to any Borrower Party, or make any
payments in lieu thereof, without Lender's prior written approval, which may be
granted or withheld in Lender's sole discretion.

SECTION 5.29 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless
otherwise specifically provided herein to the contrary, the Borrowers shall not
cancel any indebtedness from any Person owing to any Borrower, or settle any
claims without Lender's prior written consent which shall not be unreasonably
withheld.

SECTION 5.30 PROHIBITED PERSONS. The Borrowers covenant and agree that no
Borrower Party, nor any of their respective Affiliates, officers, directors,
partners or members will knowingly: (i) conduct any business, nor engage in any
transaction or dealing, with any Prohibited Person, including, but not limited
to, the making or receiving of any contribution of funds, goods, or services, to
or for the benefit of a Prohibited Person; or (ii) engage in or conspire to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in
EO13224. The Borrowers further covenants and agrees to deliver (from time to
time) to Lender any such certification or other evidence as may be requested by
Lender in its sole and absolute discretion, confirming that: (i) neither any
Borrower Party, nor their respective officers, directors, partners, members or
Affiliates, is a Prohibited Person; and (ii) neither any Borrower Party, nor
their respective officers, directors, partners, members or Affiliates, has to
its Knowledge engaged in any business, transaction or dealings with a Prohibited
Person, including, but not limited to, the making or receiving of any
contribution of funds, goods, or services, to or for the benefit of a Prohibited
Person.

                                       67


                                   ARTICLE VI
                                    RESERVES

SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES.

      (A) The Borrowers hereby pledge, assign and grant to Lender a security
interest in and to all of the Borrowers' right, title and interest in and to the
Account Collateral, including the Reserves, as security for payment and
performance of all of the Obligations hereunder and under the Note and the other
Loan Documents. The Reserves constitute Account Collateral and are subject to
the security interest in favor of Lender created herein and all provisions of
this Loan Agreement and the other Loan Documents pertaining to Account
Collateral.

      (B) In addition to the rights and remedies provided in Article VII and
elsewhere herein, upon the occurrence and during the continuance of any Event of
Default, Lender shall have all rights and remedies pertaining to the Reserves as
are provided for in any of the Loan Documents or under any applicable law.
Without limiting the foregoing, upon and at all times after the occurrence and
during the continuance of an Event of Default, Lender in its sole and absolute
discretion, may use the Reserves (or any portion thereof) for any purpose,
including but not limited to any combination of the following: (i) payment of
any of the Obligations including the Prepayment Consideration (if any)
applicable upon such payment in such order as Lender may determine in its sole
discretion; provided, however, that such application of funds shall not cure or
be deemed to cure any Default; (ii) reimbursement of Lender for any actual
losses or expenses (including, without limitation, reasonable legal fees)
suffered or incurred as a result of such Event of Default; (iii) payment for the
work or obligation for which such Reserves were reserved or were required to be
reserved; and (iv) application of the Reserves in connection with the exercise
of any and all rights and remedies available to Lender at law or in equity or
under this Loan Agreement or pursuant to any of the other Loan Documents.
Nothing contained in this Loan Agreement shall obligate Lender to apply all or
any portion of the funds contained in the Reserves during the continuance of an
Event of Default to payment of the Loan or in any specific order of priority.

SECTION 6.2 FUNDS DEPOSITED WITH LENDER.

      (A) INTEREST, OFFSETS. Except only as expressly provided otherwise herein,
all funds of the Borrowers which are deposited with Lock Box Account Bank as
Reserves hereunder shall be held by Lock Box Account Bank in one or more
Permitted Investments, such Permitted Investments, prior to an Event of Default,
to be as directed by Borrower. All interest which accrues on the Reserves shall
be taxable to the Borrowers and shall be added to and disbursed in the same
manner and under the same conditions as the principal sum on which said interest
accrued. Additional provisions pertaining to investments are set forth in
Article VII. After repayment of all of the Obligations, all funds held as
Reserves will be promptly returned to, or as directed by, the Borrowers.

      (B) FUNDING AT CLOSING. The Borrowers shall deposit with Lender the
amounts necessary to fund each of the Reserves as set forth below. Deposits into
the Reserves at Closing may occur by deduction from the amount of the Loan that
otherwise would be disbursed to the Borrowers, followed by deposit of the same
into the applicable Sub-Account or Account of the

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Lock Box Account in accordance with the Cash Management Agreement on the Closing
Date. Notwithstanding such deductions, the Loan shall be deemed for all purposes
to be fully disbursed at Closing.

SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the
Borrowers shall deposit with Lock Box Account Bank $1,096,800.00 and, pursuant
to the Cash Management Agreement, the Borrowers shall deposit monthly, on each
Payment Date commencing on the Payment date in August 2004, 1/12th of the annual
charges (as reasonably estimated by Lender) for all Impositions and all
Insurance Premiums (other than for D&O Insurance) payable with respect to the
Properties hereunder (said funds, together with any interest thereon and
additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount
of the monthly deposit to be made to the Impositions and Insurance Reserve from
and after the date hereof is $185,600.00. The Borrowers shall also deposit with
Lock Box Account Bank within ten (10) Business Days of the written demand by
Lender, to be added to and included within such reserve, a sum of money which
Lender reasonably estimates, together with such monthly deposits, will be
sufficient to make the payment of each such charge at least ten (10) Business
Days prior to the date initially due. The Borrowers shall provide Lender with
bills and all other documents necessary for the payment of the foregoing charges
at least thirty (30) days prior to the date on which each payment shall first
become subject to penalty or interest if not paid. So long as (i) no Event of
Default has occurred and is continuing, (ii) the Borrowers have provided Lender
with the foregoing bills and other documents in a timely manner, and (iii)
sufficient funds are held by Lender for the payment of the Impositions and
Insurance Premiums relating to each of the Properties, Lender shall pay said
items or disburse to the Borrowers from such Reserve an amount sufficient to pay
said items. Interest shall accrue in favor of the Borrowers on funds in the
Impositions and Insurance Reserve and be added to the balance thereof and
disbursed in accordance with the terms hereof.

SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on
behalf of Lender shall establish and maintain with Lock Box Bank an account for
the purpose of creating a reserve for replacements of FF&E at or in, or used in
connection with, the Properties (the "REPLACEMENTS") in accordance with the
applicable CapEx/FF&E Budget approved by Lender (said funds, together with any
interest thereon and additions thereto, the "FF&E RESERVE"). The FF&E Reserve
shall be held in an Eligible Account entitled "FF&E Reserve Account for the
benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" which account
shall be under the sole dominion and control of Lender, subject to the terms of
the Cash Management Agreement. Pursuant to the Cash Management Agreement, the
Borrowers shall deposit monthly, on each Payment Date commencing with the
Payment Date in August 2004, an amount equal to 4.0% of the Operating Revenues
generated from the Properties for the prior calendar month (such amount, the
"MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the
Borrowers, subject in all instances to the terms of the Cash Management
Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds
held in the FF&E Reserve shall be used in connection with the Required Capital
Improvements. Upon and at all times after the occurrence and during the
continuance of an Event of Default, no draws will be permitted from the FF&E
Reserve other than Replacements subject, in each instance, to Manager's
compliance with the FF&E reporting requirements set forth in Section
5.1(A)(v)(d).

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SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At
Closing, the Borrowers shall deposit with Lock Box Account Bank
$3,338,310.00 (said funds, together with any interest thereon, the "CAPITAL
IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers
solely for payment of certain Capital Improvements required to be made to the
Properties and designated as "Required Capital Improvements" on SCHEDULE 6.5
attached hereto (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by
the Borrowers for purposes for which any other Reserve is established or for any
other purpose other than completion of the Required Capital Improvements. The
Borrowers shall promptly commence and diligently prosecute to completion,
subject to Force Majeure, the Required Capital Improvements within the time
periods for each Required Capital Improvement set forth on SCHEDULE 6.5. Funds
held in the Capital Improvement Reserve shall be disbursed in accordance with
Section 6.7. Subject to the foregoing conditions, but also subject to the last
paragraph of Section 11.4, the Borrowers shall be entitled to draw any remaining
balance in the Capital Improvement Reserve when all Required Capital
Improvements are complete, and paid for, in accordance with the terms hereof.

SECTION 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers
shall deposit with Lock Box Account Bank, an amount equal to $3,993.75
(said funds, together with any interest thereon and additions thereto, the
"HAZARDOUS MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous
Materials on the Properties as indicated in the Environmental Reports for the
Properties prepared and delivered prior to the Closing and as such work is more
particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the
earlier of (x) the date required by any applicable Governmental Authority or (y)
nine (9) months after the Closing, the Borrowers shall, subject to Force
Majeure, complete such Environmental Work and shall provide to Lender such
closure reports, no-further-action letters, or other evidence of compliance with
law as Lender may reasonably require. The funds contained in the Hazardous
Materials Remediation Reserve shall be utilized by the Borrowers solely for
performance of the Environmental Work in accordance with the Environmental
Reports, and shall not be used by the Borrowers for purposes for which any other
Reserve is established. Subject to the Borrowers' satisfaction of the applicable
conditions of Section 6.7, the Borrowers shall be entitled to draw upon the
Hazardous Materials Remediation Reserve to pay for costs that have been incurred
by the Borrowers for such Environmental Work, provided that the Borrowers
deliver to Lender such evidence as may be reasonably satisfactory to Lender
that, after payment of such draw, the funds remaining in the Hazardous Materials
Remediation Reserve shall be sufficient to pay for the remainder of such
Environmental Work. Subject to the foregoing conditions, but also subject to the
last paragraph of Section 11.4, the Borrowers shall be entitled to draw any
remaining balance in the Hazardous Materials Remediation Reserve when all such
Environmental Work is complete, and is paid for, in accordance with the terms
hereof.

SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION
RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK.

      (A) DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND
CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for
disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to
or for the account of the Borrowers (x) from the Hazardous Materials Remediation
Reserve, to pay to, or pay on behalf of, the

                                       70


Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket
expenditures or costs incurred for Environmental Work (the "APPROVED
ENVIRONMENTAL EXPENDITURES", and (y) from the Capital Improvement Reserve, to
pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers'
actual bona fide out-of-pocket expenditures or costs incurred for Required
Capital Improvements ("APPROVED CAPITAL IMPROVEMENT EXPENDITURES"; and together
with the Approved Environmental Expenditures, collectively, "APPROVED
EXPENDITURES"; and the related Environmental Work or Required Capital
Improvements to which any such request for disbursement relates shall be
referred to as the "WORK"), upon satisfaction of each of the conditions listed
on SCHEDULE 6.7 and each of the conditions set forth below in Lender's
reasonable discretion:

            (i) Except as provided in this Section 6.7, each request for
disbursement from the Hazardous Materials Remediation Reserve or the Capital
Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for
completion of the Approved Expenditures for which disbursement is requested.

            (ii) A request for disbursement from the Work Reserves may be made
after completion of a portion of the Work under such contract, or for payment of
deposits required in connection with the Work under such Contract, provided (1)
all other conditions in this Loan Agreement for disbursement have been
satisfied, (2) funds remaining in the Hazardous Materials Remediation Reserve
are, in Lender's reasonable judgment, sufficient to complete the Environmental
Work when required and/or funds remaining in the Capital Improvement Reserve
are, in Lender's reasonable judgment, sufficient to complete such item of
Required Capital Improvements and any other Required Capital Improvements
remaining to be performed, as the case may be, and (3) if reasonably required by
Lender, each contractor or subcontractor receiving payments in excess of
$100,000 under such contract shall provide a waiver of lien with respect to
amounts which have been paid to that contractor or subcontractor.

            (iii) To the extent the contract with the relevant contractor or
supplier provides for a retainage, each disbursement from a Work Reserve, except
for a final disbursement, shall be in the amount of actual costs incurred less
the percentage of such costs that the contract with the relevant contractor or
supplier specifies to be retained and advanced as part of the final
disbursement. No funds will be advanced for materials stored at any Property
unless such materials are properly stored and secured at the applicable Property
in accordance with the Borrowers' customary procedures and sound construction
practices as reasonably determined by Lender. No funds will be advanced for
materials stored at any location other than at the Properties unless Lender
determines in its reasonable discretion that Lender has a perfected first
priority security interest in any such materials.

            (iv) The amount of all invoices in connection with the Work with
respect to which a disbursement is requested and which has been approved by
Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers
(in which event, the Borrowers covenant and agree to promptly pay such invoices)
or, if an Event of Default has occurred and is continuing, at Lender's option
and in Lender's sole and absolute discretion, directly to the contractor,
supplier, materialman, mechanic or subcontractor indicated on said invoices
unless already paid by the Borrowers and Lender has received satisfactory
evidence of such payment in which case Lender shall reimburse the Borrowers. All
invoices in connection with

                                       71


disbursements from the Capital Improvement Reserve shall be classified as
requests for payment for items of Capital Improvement (as opposed to items that,
in conformity with GAAP, would be included as Operating Expenses). If the
Borrowers request that any amounts be disbursed directly to the Borrowers
pursuant to the foregoing sentence, the Borrowers shall be required to deliver
evidence reasonably acceptable to Lender of payment of all invoices for which
disbursements were previously made to the Borrowers as a condition to such
requested disbursement.

            (v) No more than two (2) disbursements will be made by Lender from
the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve
in any calendar month, and, if made in accordance herewith or otherwise approved
by Lender, requested disbursements will be made within five (5) Business Days
after the request therefor. Lender shall not be required to make any
disbursement from a Work Reserve with respect to the Property unless such
requested disbursement is in an amount equal to or greater than $25,000 (other
than the final disbursement).

            (vi) Lender reserves the right, at its option and as a condition to
any disbursement from a Work Reserve, to approve (which shall not be
unreasonably withheld, delayed or conditioned) (i) all drawings and plans and
specifications, if any, for any Work which require aggregate payments in amounts
exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan
Amount with respect to the applicable Property or (y) $250,000, and (ii) all
contracts and work orders with materialmen, mechanics, suppliers,
subcontractors, contractors and other parties providing labor or materials in
connection with any Work which require aggregate payments in amounts exceeding
the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with
respect to the applicable Property or (y) $250,000. Upon Lender's reasonable
request, the Borrowers shall assign (to the extent assignable) any drawings,
plans and specifications, contracts or subcontracts to Lender. Drawings, plans
and specifications, contracts and work orders approved by Lender shall not be
changed in any material respect without Lender's prior written consent, which
shall not be unreasonably withheld, delayed or conditioned.

            (vii) The Borrowers shall have delivered a certificate to Lender
from an Architect certifying that the Work has been completed in a good and
workmanlike manner in accordance with all applicable laws for any item in excess
of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount
with respect to the applicable Property or (y) $250,000. Lender may retain its
own architect or engineer ("LENDER'S CONSULTANT") to review any plans and
specifications for any item in excess of the greater of (x) five percent (5%) of
the Aggregate Allocated Loan Amount with respect to the applicable Property or
(y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost
and expense.

            (viii) The Borrowers shall have delivered to Lender a certificate of
the Borrowers substantially in the form of Exhibit L attached hereto certifying
as to the actual costs which were incurred by the Borrowers to complete such
Work, which costs shall not materially exceed the amount budgeted for such Work
under the CapEx/FF&E Budget then in effect unless approved by Lender, which
shall not be unreasonably withheld, delayed or conditioned (together with
supporting documentation reasonably acceptable to Lender).

                                       72


            (ix) The Borrowers shall have delivered to Lender all necessary
material certificates, authorizations, permits and licenses which are required
to permit the construction and completion of the Work, as issued by the
appropriate Governmental Authority. The Borrowers, to the full extent permitted
by applicable law, hereby assigns to Lender as additional security for the
payment of the Obligations and the observance and performance by the Borrowers
of the terms, covenants and provisions of the Loan Documents all right, title
and interest which the Borrowers may now have or may hereafter acquire in and to
such certificates, authorizations, permits and licenses.

            (x) Lender may require an inspection of the Property prior to making
a monthly disbursement from the applicable Work Reserve in order to verify
completion of the Work for which disbursement is sought in excess of the greater
of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to
the applicable Property or (y) $250,000. Lender may require that such inspection
be conducted by Lender's Consultant and/or may require a copy of a certificate
of completion by an independent qualified architect or engineer acceptable to
Lender prior to the disbursement of any amounts from the applicable Work
Reserve. The Borrowers shall pay the reasonable out-of-pocket expense of such
inspections as reasonably required hereunder, whether such inspections are
conducted by Lender, Servicer, Lender's Consultant or by an independent
qualified professional.

      (B) PERFORMANCE OF WORK.

            (i) The Borrowers shall complete all Work in a good and workmanlike
manner as soon as practicable following the commencement thereof substantially
in accordance with the applicable budget approved by Lender in accordance with
the terms of this Loan Agreement. The insufficiency of the balance in the
applicable Work Reserve shall not relieve the Borrowers from their obligations
to perform and complete the related Work as herein provided or to fulfill all
other preservation and maintenance covenants in the Loan Documents.

            (ii) If Lender determines in its reasonable discretion that any Work
is not being performed in a workmanlike or timely manner or that any Work has
not been completed in a workmanlike manner, Lender shall have the option to
withhold disbursement for such unsatisfactory work and so notify the Borrowers
with reasonable detail regarding the basis for Lender's dissatisfaction and,
after the expiration of forty-five (45) days from the giving of such notice by
Lender to the Borrowers of such unsatisfactory work without the cure thereof
(or, if such unsatisfactory work is susceptible of a cure but cannot reasonably
be cured within said forty-five (45) day period and provided that the Borrowers
shall have commenced to cure such unsatisfactory work within said forty-five
(45) day period and thereafter diligently and expeditiously proceeds to cure the
same, after the expiration of such longer period as is reasonably necessary for
the Borrowers in the exercise of due diligence to cure such unsatisfactory work,
up to a maximum of an additional sixty (60) days, subject to Force Majeure,
without the cure thereof), Lender may proceed under existing contracts or
contract with third parties to complete such Work, as the case may be, and apply
amounts contained in the applicable Work Reserve toward the labor and materials
necessary to complete the same, without providing any additional prior notice to
the Borrowers, and exercise any and all other remedies available to Lender upon
and during the continuance of an Event of Default hereunder.

                                       73


            (iii) In order to facilitate Lender's completion or making of any
Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right
to enter onto each Property during normal business hours after the expiration of
the notice specified above and perform, subject to the rights of tenants, any
and all work and labor necessary to complete the applicable Work and/or employ
watchmen to protect the Property from damage. All sums so expended by Lender
shall be deemed to have been advanced under the Loan to the Borrowers and
secured by the applicable Mortgage. For this purpose, the Borrowers constitute
and appoint Lender their true and lawful attorney-in-fact with full power of
substitution to complete or undertake the applicable Work in the name of the
Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked. Upon the
occurrence and during the continuance of an Event of Default, the Borrowers
empower said attorney-in-fact as follows: (i) to use any funds in the applicable
Work Reserve for the purpose of making or completing any Work; (ii) to make such
additions, changes and corrections to any Work as shall be reasonably necessary
or desirable to complete the same; (iii) to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for such
purposes; (iv) to pay, settle or compromise all existing bills and claims which
are or may become Liens against any Property, or as may be necessary or
desirable for the completion of any Work, or for clearance of title; (v) to
execute all applications and certificates in the name of the Borrowers which may
be required by any of the contract documents; (vi) in its reasonable discretion,
to prosecute and defend all actions or proceedings in connection with any
Property or the rehabilitation and repair of such Property; and (vii) to do any
and every act which the Borrowers might do in their own behalf to fulfill the
terms of this Loan Agreement.

            (iv) Nothing in this Section shall: (i) make Lender responsible for
making or completing any Work; (ii) require Lender to expend funds in addition
to the amounts on deposit in the applicable Work Reserve to make or complete any
Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to
demand from the Borrowers additional sums to make or complete any Work.

            (v) The Borrowers shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer, architect or
inspector) or third parties performing any Work pursuant to this Section 6.7 to
enter onto any Property during normal business hours upon reasonable notice
(subject to the rights of tenants under their Leases) to inspect the progress of
any Work and all materials being used in connection therewith, to examine all
plans and shop drawings relating thereto which are or may be kept at any
Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The
Borrowers shall use commercially reasonable efforts to cause all contractors and
subcontractors to cooperate with Lender or Lender's representatives or such
other persons described above in connection with inspections described in this
Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B).

            (vi) All Work and all materials, equipment, fixtures and any other
item comprising a part thereof shall be constructed, installed or completed, as
applicable, free and clear of all mechanic's, materialman's or other liens
(except for the Permitted Encumbrances).

            (vii) All Work shall comply with all applicable legal requirements
of all Governmental Authorities having jurisdiction over the Properties and
applicable insurance

                                       74


requirements, including, without limitation, applicable building codes, special
use permits, environmental regulations and requirements of insurance
underwriters.

            (C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold
Lender harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations, out-of-pocket costs and expenses
(including, without limitation, litigation costs and reasonable attorneys' fees
and expenses) arising from or in any way connected with the performance of the
Work, except to the extent caused by the bad faith, willful misconduct or gross
negligence of Lender. The Borrowers shall assign to Lender all rights and claims
the Borrowers may have against all Persons supplying labor or materials in
connection with the Work; provided, however, that Lender may not pursue any such
right or claim or pursue any other action with respect to such rights and claims
unless an Event of Default has occurred and remains uncured.

SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the
Obligations in full, a Cash Trap Event shall occur, then for so long as such
Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise
expressly provided below) shall be deposited with Lender (or its Servicer or
agent) and held in the Lock Box Account in accordance with the terms of the Cash
Management Agreement (said funds, together with any interest thereon, the "CASH
TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when
the Debt Yield is less than the Minimum Debt Yield for the trailing twelve (12)
month period ending on such Calculation Date and shall continue to exist until
such time as the Minimum Debt Yield test has been satisfied for three (3)
consecutive Calculation Dates (on a trailing twelve (12) month basis) following
the commencement of the applicable Cash Trap Event. Notwithstanding that the
Debt Yield is less than the Minimum Debt Yield as of any Calculation Date, no
Cash Trap Event shall be deemed to have occurred as a result of such event if
the Borrowers make a principal prepayment of the Aggregate Outstanding Principal
Balance (which prepayment amount shall be disbursed on the next Payment Date in
accordance with the terms of the Cash Management Agreement), within three (3)
Business Days after the date of delivery of the financial statements disclosing
the existence of such Cash Trap Event (or the date on which such financial
statements are required to be delivered pursuant to Section 5.1), in an amount
equal to the greater of (x) one percent (1%) of the Aggregate Outstanding
Principal Balance, or (y) 120% of the amount, as determined by Lender in its
reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the
Minimum Debt Yield if such calculation was recalculated as provided above
assuming that such amount was applied to reduce the Aggregate Outstanding
Principal Balance as of the first day of the relevant measuring period. During
the continuance of a Cash Trap Event, provided that no Event of Default shall
have occurred and be continuing, any funds on deposit in the Cash Trap Reserve
may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be
applied to (i) prepayment of the Aggregate Outstanding Principal Balance as
provided above, (ii) Capital Expenditures reasonably approved by Lender, or
(iii) scheduled payments (not to exceed $525,000 in the aggregate) of principal
and interest under the Loan and the Allocable Portion of the Mezzanine Loan (to
be applied in accordance with the terms of the Cash Management Agreement). Any
funds on deposit in the Cash Trap Reserve shall continue to be held as
additional Collateral in accordance with this Section 6.8 until the earlier of
(a) the date that such funds are applied or disbursed pursuant to the foregoing
sentence or (b) the date that the Minimum Debt Yield test has been satisfied for
three (3) consecutive months (as determined above), at which time, provided no
Event of Default exists,

                                       75


and no Cash Trap Event has commenced, such funds, together with any and all
amounts then held in the Minimum Balance Sub-Account (as defined in the Cash
Management Agreement), shall be automatically released to the Borrowers without
any further certification requirements on the part of the Borrowers. The
existence of a Cash Trap Event shall be determined by Lender in its reasonable
good faith determination. If Lender determines that a Cash Trap Event has
occurred, Lender shall send the Borrowers written notice thereof.
Notwithstanding any provision herein to the contrary, if an Event of Default has
occurred and is continuing, all funds on deposit in the Cash Trap Reserve and
any subsequent Excess Cash Flow, while such Event of Default is continuing, may
be applied by Lender to payment of the Loan (including payment of any Prepayment
Consideration) or other Obligations (or to the obligations of the Mezzanine
Borrowers to Mezzanine Lender) as Lender may elect.

                                   ARTICLE VII
                       DEPOSIT ACCOUNT; LOCK BOX ACCOUNT;
                                 CASH MANAGEMENT

SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT.

      (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more
deposit accounts shall be established at the Borrowers' sole cost and expense in
the name of Lender, as secured party hereunder (said accounts, and any accounts
replacing same in accordance with this Loan Agreement and the Deposit Account
Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial
institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"),
pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT
AGREEMENT") substantially similar to Lender's form or otherwise in form and
substance reasonably acceptable to Lender, executed and delivered by the
Borrowers and the Deposit Bank. The Deposit Account shall be under the sole
dominion and control of Lender (which dominion and control may be exercised by
Servicer). Among other things, the Deposit Account Agreement shall provide that
the Borrowers shall have no access to or control over the Deposit Account, that
all available funds on deposit in the Deposit Account shall be transferred by
wire transfer (or transfer via the ACH System) on each Business Day by the
Deposit Bank into the Lock Box Account, for application in accordance with the
Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall
be directed to deliver to the Borrowers copies of bank statements and other
information made available by the Deposit Bank and the Lock Box Account Bank
concerning the Deposit Account and the Lock Box Account.

            (i) Upon establishing the Deposit Account, (1) the Borrowers shall
cause any and all Operating Revenues, including distributions or other payments
made directly or indirectly to the Borrowers, Manager, or any of their
respective Affiliates, from any Beverage Company, to be deposited promptly into
the Deposit Account and in no event later than two (2) Business Days after the
same are paid to or for the benefit of the Borrowers, and (2) the Borrowers
shall obtain agreements (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION
LETTER") from each of the Persons paying or disbursing credit card receivables
(the "CREDIT CARD COMPANIES"), substantially similar to Lender's form or
otherwise in form and substance reasonably acceptable to Lender, pursuant to
which the Credit Card Companies agree to pay all credit card receivables into
the Lock Box Account, and acknowledge and agree that Lender shall have a first
priority perfected security interest in such credit card receivables. To the
extent that the Borrowers or any

                                       76


Person on the Borrowers' behalf holds any Receipts, whether in accordance with
this Loan Agreement or otherwise, the Borrowers shall be deemed to hold the same
in trust for Lender for the protection of the interests of Lender hereunder and
under the Loan Documents. The Borrowers represent and warrant that, as of the
date hereof, the only Credit Card Companies paying or disbursing credit card
receivables with respect to the Property are Chase Merchant Services, American
Express, Discover Financial Service, Diners Club, JCB (Japanese Credit Bureau),
and, if any of the Borrowers shall hereafter enter into an agreement with any
other Credit Card Company pursuant to which such Credit Card Company shall pay
credit card receivables with respect to the Properties, such Borrower shall
promptly obtain a Credit Card Receivables Payment Direction Letter in form and
substance reasonably acceptable to Lender from such Credit Card Company.

            (ii) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses incurred by Lender in connection with the transactions and other
matters contemplated by this Section 7.1, including but not limited to, Lender's
reasonable attorneys' fees and expenses, and all reasonable fees and expenses of
the Deposit Bank and the Lock Box Account Bank, including without limitation
their reasonable attorneys' fees and expenses.

      (B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms
of the Cash Management Agreement, an Eligible Account shall be established in
the name of Lender, as secured party hereunder, to serve as the "Lock Box
Account" (said account, and any account replacing the same in accordance with
this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT";
and the depositary institution in which the Lock Box Account is maintained, the
"LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion
and control of Lender (which dominion and control may be exercised by Servicer);
and except as expressly provided hereunder and/or in the Cash Management
Agreement, the Borrowers shall not have the right to control or direct the
investment or payment of funds therein during the continuance of an Event of
Default. Lender may elect to change any financial institution in which the Lock
Box Account shall be maintained if such institution is no longer an Eligible
Bank, upon not less than five (5) Business Days' notice to the Borrower. The
Lock Box Account shall be deemed to contain such sub-accounts as Lender may
designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts
and need not be separate Eligible Accounts. The Sub-Accounts shall include the
following as more particularly described in the Cash Management Agreement:

            (i) "DEBT SERVICE SUB-ACCOUNT" means the Sub-Account of the Lock Box
Account established for the purposes of reserving for payments of principal and
interest and other amounts due under the Loan Documents (but without duplication
of amounts covered under item (ii) below); and

            (ii) "RESERVE SUB-ACCOUNTS" means the Sub-Accounts of the Lock Box
Account established for the purpose of holding funds in the Reserves including:
(a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Capital
Improvement Reserve Sub-Account"; (c) the "Hazardous Materials Remediation
Reserve Sub-Account"; (d) the "Extraordinary Receipts Sub-Account" (e) the
"Mezzanine Loan Debt Service Sub-Account"; (f) the "Minimum Balance
Sub-Account"; and (g) "Cash Trap Reserve Sub-Account".

                                       77


SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box
Account shall be allocated to the Sub-Accounts or the other Accounts (or paid,
as the case may be) in accordance with the Cash Management Agreement.

SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default
shall occur and be continuing, then notwithstanding anything to the contrary in
this Section or elsewhere, Lender shall have all rights and remedies available
under applicable law and under the Loan Documents. Without limitation of the
foregoing, for so long as an Event of Default exists, Lender may apply any and
all funds in the Deposit Account, and/or any Sub-Accounts against all or any
portion of any of the Obligations, in any order.

                                  ARTICLE VIII
                          DEFAULT, RIGHTS AND REMEDIES

SECTION 8.1 EVENT OF DEFAULT.

      "EVENT OF DEFAULT" means the occurrence or existence of any one or more of
the following:

      (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled
payment amount when the same is due under this Loan Agreement, the Note, or any
other Loan Documents (whether such amount is interest, principal, Reserves, or
otherwise), or to pay for any Insurance Policies required pursuant to Section
5.4 hereof; or

      (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time
to time owing under this Loan Agreement, the Note, or any other Loan Documents
(other than amounts subject to the preceding paragraph) within ten (10) days
after written notice to the Borrowers; or

      (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to
perform or comply with any term or condition contained in Section 5.1 which
continues for a period of ten (10) days after written notice to the Borrowers
(except that no notice or grace period shall be granted for any breach under
Section 5.1(H)); or

      (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE
PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19,
5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary
Lien under Section 5.18 or 11.1, the same shall not constitute an Event of
Default if (i) within forty-five (45) days after the filing thereof, the
Borrowers shall either cause the same to be removed of record by payment,
bonding or otherwise, or (ii) same is being contested in good faith in
accordance with Section 5.3(B) hereof); or

      (E) BREACH OF WARRANTY. Any representation, warranty, certification or
other statement made by any Borrower, Guarantor or Manager in any Loan Document
or in any statement or certificate at any time given in writing pursuant to or
in connection with any Loan Document is false in any material respect as of the
date made; or

      (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the
performance of or compliance with any term contained in this Loan Agreement or
the other Loan

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Documents and such default is not fully cured within thirty (30) days after
receipt by the Borrowers of written notice from Lender of such default (other
than occurrences described in other provisions of this Section 8.1 for which a
different grace or cure period is specified or which constitute immediate Events
of Default); provided however that if (i) the default is capable of cure but
with diligence cannot be cured within such period of thirty (30) days, (ii) the
Borrowers (or the applicable Borrower Party) has commenced the cure within such
thirty (30) day period and has pursued such cure diligently, and (iii) each
Borrower delivers to Lender promptly following written demand (which demand may
be made from time to time by Lender) evidence reasonably satisfactory to Lender
of the foregoing, then such period shall be extended for so long as is
reasonably necessary for the Borrowers in the exercise of due diligence to cure
such default, but in no event beyond one hundred and twenty (120) days after the
original notice of default; or

      (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court
enters a decree or order for relief with respect to any Borrower Party, in an
Involuntary Borrower Bankruptcy, which decree or order is not stayed or other
similar relief is not granted under any applicable federal or state law unless
dismissed within ninety (90) days; (ii) the occurrence and continuance of any of
the following events for ninety (90) days unless dismissed or discharged within
such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or
order of a court for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over any Borrower
Party or over all or a substantial part of its property, is entered, or (z) an
interim receiver, trustee or other custodian is appointed without the consent of
any Borrower Party, for all or a substantial part of the property of such
Person; or

      (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for
relief is entered with respect to any Borrower Party, or any Borrower Party
commences a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for any Borrower Party or for all or a substantial part of the
property of any Borrower Party; (ii) any Borrower Party makes any assignment for
the benefit of creditors; or (iii) the Board of Directors or other governing
body of any Borrower Party adopts any resolution or otherwise authorizes action
to approve any of the actions referred to in this subsection 8.1(H); or

      (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as
described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the
Collateral becomes property of the estate or subject to the automatic stay in
any case or proceeding under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect (provided that if the
same occurs in the context of an involuntary proceeding, it shall not constitute
an Event of Default if it is dismissed or discharged within ninety (90) days
following its occurrence); or

      (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing
its present or prospective inability to pay its debts as they become due; or

                                       79


      (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of
attachment, or similar process is entered or filed against any Borrower Party or
any of its assets, which claim is not fully covered by insurance (other than
with respect to the amount of commercially reasonable deductibles permitted
hereunder), would have a Material Adverse Effect and remains undischarged,
unvacated, unbonded or unstayed for a period of forty-five (45) days; or

      (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of their business and such order
continues for more than thirty (30) days; or

      (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Mortgage or any
of the Loan Documents for any reason ceases to be in full force and effect or
ceases to be a legally valid, binding and enforceable obligation of the
Borrowers or any Lien securing the Obligations shall, in whole or in part, cease
to be a perfected first priority Lien, subject to the Permitted Encumbrances
(except in any of the foregoing cases in accordance with the terms hereof or
under any other Loan Document) and the Borrowers do not take all actions
requested by Lender to correct such defect within ten (10) days after the
written request by Lender to take such action, or any Person under the control
of the Borrowers or Guarantor who is a party thereto, other than Lender, denies
that it has any further liability (as distinguished from denial of the existence
of a Default or Event of Default) under any Loan Documents to which it is party,
or gives notice to such effect; or

      (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any
applicable grace periods shall occur under any of the other Loan Documents; or

      (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An
Uncured Franchise Default occurs; (ii) or any breach or default shall occur in
the material obligations of the Borrowers under any of the Management
Agreements, and such breach or default either is of such a nature or continues
for such a period of time beyond applicable notice and cure periods, if any,
that Manager shall have the right to exercise material remedies as a consequence
thereof.

            If more than one of the foregoing paragraphs shall describe the same
condition or event, then Lender shall have the right to select which paragraph
or paragraphs shall apply. In any such case, Lender shall have the right (but
not the obligation) to designate the paragraph or paragraphs which provide for
non-written notice (or for no notice) or for a shorter time to cure (or for no
time to cure).

SECTION 8.2 ACCELERATION AND REMEDIES.

      (A) Upon the occurrence and during the continuance of any Event of Default
described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal
amount of and accrued interest and fees on the Loan and all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
requirements of any kind, all of which are hereby expressly waived by the
Borrowers. Upon and at any time after the occurrence of any other

                                       80


Event of Default, at the option of Lender, which may be exercised without notice
or demand to anyone, all or any portion of the Loan and other Obligations shall
immediately become due and payable.

      (B) Upon the occurrence and during the continuance of an Event of Default,
all or any one or more of the rights, powers, privileges and other remedies
available to Lender against the Borrowers under this Loan Agreement or any of
the other Loan Documents, or at law or in equity, may be exercised by Lender at
any time and from time to time, whether or not all or any of the Obligations
shall be declared due and payable, and whether or not Lender shall have
commenced any foreclosure proceeding or other action for the enforcement of its
rights and remedies under any of the Loan Documents with respect to the
Properties. Any such actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singly, successively, together or otherwise,
at such time and in such order as Lender may determine in its sole discretion,
to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or
as set forth herein or in the other Loan Documents. Without limiting the
generality of the foregoing, if an Event of Default is continuing (i) to the
fullest extent permitted by law, Lender shall not be subject to any "one action"
or "election of remedies" law or rule, and (ii) all liens and other rights,
remedies or privileges provided to Lender shall remain in full force and effect
until Lender has exhausted all of its remedies against each Property and the
Mortgages have been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Obligations or the Obligations have been paid in full.

      (C) Lender shall have the right from time to time to partially foreclose
the Mortgages in any manner and for any amounts secured by the Mortgages then
due and payable as determined by Lender in its sole discretion including,
without limitation, the following circumstances: (i) in the event the Borrowers
default beyond any applicable grace period in the payment of one or more
scheduled payments of principal and interest, Lender may foreclose the Mortgage
to recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose the Mortgage or any of them to recover so much of the
principal balance of the Loan as Lender may accelerate and such other sums
secured by the Mortgage as Lender may elect. Notwithstanding one or more partial
foreclosures, the Property shall remain subject to the Mortgage to secure
payment of sums secured by the Mortgage and not previously recovered.

      (D) During the continuance of an Event of Default, Lender shall have the
right from time to time to sever the Note and the other Loan Documents into one
or more separate notes, mortgages and other security documents in such
denominations as Lender shall determine in its sole discretion for purposes of
evidencing and enforcing its rights and remedies provided hereunder. The
Borrowers shall execute and deliver to Lender from time to time, within ten (10)
days after the request of Lender, a severance agreement and such other documents
as Lender shall reasonably request in order to effect the severance described in
the preceding sentence, all in form and substance reasonably satisfactory to
Lender. The Borrowers hereby absolutely and irrevocably appoint Lender as their
true and lawful attorney, coupled with an interest, in their name and stead to
make and execute all documents reasonably necessary to effect the aforesaid
severance if the Borrowers fail to do so within ten (10) days of Lender's
written request, the Borrowers ratifying all that their said attorney shall do
by virtue thereof.

                                       81


      (E) Any amounts recovered from the Properties or any other collateral for
the Loan after an Event of Default may be applied by Lender toward the payment
of any interest and/or principal of the Loan and/or any other amounts due under
the Loan Documents in such order, priority and proportions as Lender in its sole
discretion shall determine.

      (F) The rights, powers and remedies of Lender under this Loan Agreement
shall be cumulative and not exclusive of any other right, power or remedy which
Lender may have against the Borrowers pursuant to this Loan Agreement or the
other Loan Documents, or existing at law or in equity or otherwise. Lender's
rights, powers and remedies may be pursued singly, concurrently or otherwise, at
such time and in such order as Lender may determine in Lender's sole discretion.
No delay or omission to exercise any remedy, right or power accruing upon an
Event of Default shall impair any such remedy, right or power or shall be
construed as a waiver thereof, but any such remedy, right or power may be
exercised from time to time and as often as may be deemed expedient. A waiver of
one Default or Event of Default with respect to the Borrowers shall not be
construed to be a waiver of any subsequent Default or Event of Default by the
Borrowers or to impair any remedy, right or power consequent thereon.

SECTION 8.3 PERFORMANCE BY LENDER.

      (A) Upon the occurrence and during the continuance of an Event of Default,
if any of the Borrowers shall fail to perform, or cause to be performed, any
material covenant, duty or agreement contained in any of the Loan Documents
(subject to applicable notice and cure periods), Lender may perform or attempt
to perform such covenant, duty or agreement on behalf of the Borrowers including
making protective advances on behalf of any Borrower, or, in its sole
discretion, causing the obligations of any of the Borrowers to be satisfied with
the proceeds of any Reserve. In such event, the Borrowers shall, at the request
of Lender, promptly pay to Lender, or reimburse, as applicable, any of the
Reserves, any actual amount reasonably expended or disbursed by Lender in such
performance or attempted performance, together with interest thereon at the
Default Rate (including reimbursement of any applicable Reserves), from the date
of such expenditure or disbursement, until paid. Any amounts advanced or
expended by Lender to perform or attempt to perform any such matter shall be
added to and included within the indebtedness evidenced by the applicable Note
and shall be secured by all of the Collateral securing the applicable Loan.
Notwithstanding the foregoing, it is expressly agreed that Lender shall not have
any liability or responsibility for the performance of any obligation of the
Borrowers under this Loan Agreement or any other Loan Document, and it is
further expressly agreed that no such performance by Lender shall cure any Event
of Default hereunder.

      (B) Lender may cease or suspend any and all performance required of Lender
under the Loan Documents upon and at any time after the occurrence and during
the continuance of any Event of Default.

SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each
Borrower shall provide such documents and instruments as shall be reasonably
satisfactory to Lender to evidence compliance with any material provision of the
Loan Documents applicable to the Borrowers.

                                       82


                                   ARTICLE IX
               SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,
                            WARRANTIES AND COVENANTS

SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. Each Primary Borrower
Party hereby represents, warrants and covenants as of the Closing Date and until
such time as all Obligations are paid in full, that absent express advance
written waiver from Lender, which may be withheld in Lender's sole discretion,
that such Primary Borrower Party:

      (A) does not own and will not own any assets other than the Properties
(including incidental personal property necessary for the operation thereof and
proceeds therefrom) or direct or indirect ownership interests in the Borrowers,
and other wholly owned subsidiaries of the Primary Borrower Parties established
solely for the purpose of holding liquor licenses with respect to one or more of
the Properties, and with respect to Member, direct or indirect ownership
interests in the Crossed Borrowers as of the date of this Agreement (all of the
foregoing ownership interests being referred to herein, collectively, as the
"OWNERSHIP INTERESTS") or, with respect to each of the Primary Borrower Parties,
such incidental assets as are necessary to enable it to discharge its
obligations with respect to the Borrowers;

      (B) is not engaged and will not engage in any business, directly or
indirectly, other than the ownership, management and operation of the
Properties, the Crossed Properties as of the date of this Agreement, or the
Ownership Interests;

      (C) has not at any time since the SPE Effective Date entered into and will
not enter into any contract or agreement with any partner, member, shareholder,
trustee, beneficiary, principal or Affiliate of any Primary Borrower Party
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms-length basis with third
parties other than such Affiliate (including the Management Agreements);

      (D) has not incurred any debt that remains outstanding as of Closing and
will not incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted
Indebtedness, and (iii) the Mezzanine Loan;

      (E) has not made any loans or advances to any Person that remains
outstanding as of Closing and will not make any loan or advances to any Person
(including any of its Affiliates), and has not acquired and will not acquire
obligations or securities (other than the Ownership Interests) of any of its
Affiliates other than the other Borrower Parties;

      (F) is and reasonably expects to remain solvent and pay its own
liabilities, indebtedness, and obligations of any kind from its own separate
assets as the same shall become due;

      (G) has at all times since the SPE Effective Date done or caused to be
done and will do all things necessary to preserve its existence, and will not,
and no partner, member, shareholder, trustee, beneficiary, or principal will,
further amend, modify or otherwise change, its partnership certificate,
partnership agreement, articles of incorporation, by-laws, articles of
organization, operating agreement, or other organizational documents, as
modified, amended,

                                       83


restated or supplemented as of the date hereof, in any manner with respect to
the matters set forth in this Article IX;

      (H) has at all times since the SPE Effective Date continuously maintained
its existence and has at all times since the SPE Effective Date been qualified
to do business, and shall continue to maintain its existence and be qualified to
do, business in all states necessary to carry on its business, specifically
including in the case of each Borrower, the state where its Property is located;

      (I) has at all times since the SPE Effective Date conducted and operated,
and will conduct and operate its business as presently conducted and operated
and otherwise contemplated with respect to the ownership of its Property, or the
ownership of the Ownership Interests, as applicable;

      (J) has at all times since the SPE Effective Date maintained, and will
maintain books and records and bank accounts (other than bank accounts
established hereunder, or established by Manager with respect to the operations
of the Properties pursuant to the Management Agreement) separate from those of
its partners, members, shareholders, trustees, beneficiaries, principals,
Affiliates, and any other Person and has at all times since the SPE Effective
Date maintained and will maintain separate financial statements except that it
may also be included in consolidated financial statements of its Affiliates;

      (K) has at all times since the SPE Effective Date been and held itself out
to the public as, and will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other Person (including
any of its partners, members, shareholders, trustees, beneficiaries, principals
and Affiliates, and any Affiliates of any of the same), and not as a department
or division of any Person and has at all times since the SPE Effective Date
corrected and will correct any known misunderstandings regarding its existence
as a separate legal entity;

      (L) has at all times since the SPE Effective Date paid, and will pay the
salaries of its own employees, if any;

      (M) has at all times since the SPE Effective Date allocated, and will
allocate fairly and reasonably any overhead for shared office space;

      (N) has at all times since the SPE Effective Date used, and will use its
own stationery, invoices and checks;

      (O) has at all times since the SPE Effective Date filed, and will file its
own tax returns with respect to itself (or consolidated tax returns, if
applicable) as may be required under applicable law;

      (P) has at all times since the SPE Effective Date maintained, and
reasonably expects to maintain adequate capital (taken as a whole with all of
the other Borrowers) for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;

                                       84


      (Q) will not seek, acquiesce in, or suffer or permit its liquidation,
dissolution or winding up, in whole or in part;

      (R) will not enter into any transaction of merger or consolidation, and
will not acquire by purchase or otherwise all or substantially all of the
business or assets of, or any stock or beneficial ownership (other than the
Ownership Interests) of, any Person;

      (S) has not at any time since the SPE Effective Date commingled or
permitted to be commingled, and will not commingle or permit to be commingled,
its funds or other assets with those of any other Person (other than, with
respect to the Borrowers, each other Borrower, or as may be held by Manager, as
agent, for each Borrower pursuant to the terms of the Management Agreement, and
except for funds deposited in the Accounts in accordance with the Loan
Documents);

      (T) has at all times since the SPE Effective Date maintained, and will
maintain its assets in such a manner that it is not costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person;

      (U) does not and will not hold itself out to be responsible for the debts
or obligations (other than the Obligations and the Crossed Indebtedness as of
the date of this Agreement) of any other Person;

      (V) has not guaranteed or otherwise become liable in connection with any
obligation of any other Person that remains outstanding, and will not guarantee
or otherwise become liable on or in connection with any obligation (other than
the Obligations and the Crossed Indebtedness as of the date of this Agreement)
of any other Person that remains outstanding;

      (W) except for funds deposited into the Accounts in accordance with the
Loan Documents, shall not hold title to its assets other than in its name; and

      (X) shall comply with all of the assumptions, statements, certifications,
representations, warranties and covenants regarding or made by it contained in
or appended to the nonconsolidation opinion delivered pursuant hereto.

SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to
their respective obligations under Section 9.1, each Borrower, General Partner
and Member hereby represents, warrants and covenants, as of the Closing Date and
until such time as all Obligations are paid and satisfied in full, that absent
express advance written waiver from Lender, which may be withheld in Lender's
sole discretion:

      (A) each General Partner shall at all times act as the sole general
partner of each Borrower that is a limited partnership, with all of the rights,
powers, obligations and liabilities thereof under the limited partnership
agreement of such Borrower and shall take any and all actions and do any and all
things necessary or appropriate to the accomplishment of the same and will not
engage in any other business;

      (B) Member shall at all times act as the sole member of each Borrower and
Crossed Borrower as of the date of this Agreement that is a limited liability
company with all of the

                                       85


rights, powers, obligations and liabilities thereof under the limited liability
company operating agreement of such Borrower or Crossed Borrower and shall take
any and all actions and will do any and all things necessary or appropriate to
the accomplishment of the same and will not engage in any other business;

      (C) each Borrower that is a limited liability company shall not, without
the prior written consent of its Member (including the unanimous written consent
of its Member's board of directors including the Independent Directors or the
unanimous written consent of each of the Borrowers' board of managers including
the Independent Directors), and each Borrower that is a limited partnership
shall not, without the prior written consent of its General Partner (including
the unanimous written consent of General Partner's Independent Directors),
institute proceedings for itself to be adjudicated bankrupt or insolvent;
consent to the institution of bankruptcy or insolvency proceedings against
itself; file a petition seeking, or consent to, reorganization or relief under
any applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) for itself or a substantial part of its property; make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;

      (D) each Borrower that is a corporation shall not, without the prior
unanimous written consent of its board of directors, including its Independent
Directors, institute proceedings for itself to be adjudicated bankrupt or
insolvent; consent to the institution of bankruptcy or insolvency proceedings
against it; file a petition seeking, or consent to, reorganization or relief
under any applicable federal or state law relating to bankruptcy; consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) for itself or a substantial part of its property; make any
assignment for the benefit of creditors; or admit in writing its inability to
pay its debts generally as they become due;

      (E) no Member or any General Partner shall, without the unanimous vote of
its board of directors or board of managers, as the case may be, including, in
each case, its Independent Directors, institute proceedings for itself or any
Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of
a bankruptcy or insolvency proceeding against it or any Borrower; file a
petition seeking, or consent to, reorganization or relief under any applicable
federal or state law relating to bankruptcy; consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) for itself or any Borrower; or a substantial part of its or any
Borrower's property; make any assignment for the benefit of creditors; or admit
in writing its inability to pay its debts generally as they become due;

      (F) except as otherwise permitted hereunder, no Member or any General
Partner shall for itself or for any of the Borrowers (i) liquidate or dissolve,
in whole or in part; (ii) consolidate, merge or enter into any form of
consolidation with or into any other Person, nor convey, transfer or lease its
or any Borrower's assets substantially as an entirety to any Person nor permit
any Person to consolidate, merge or enter into any form of consolidation with or
into itself or any Borrower, nor convey, transfer or lease its or any Borrower's
assets substantially as an entirety to any Person; or (iii) amend any provisions
of its or any Borrower's organizational documents containing provisions similar
to those contained in this Article IX; and

                                       86


      (G) each Member, General Partner and Borrower that is a corporation shall
each promptly elect and at all times maintain at least two (2) Independent
Directors on its board of directors, who shall be selected by such Member,
General Partner or Borrower, as applicable, and be reasonably acceptable to
Lender. Each Borrower that is a single member limited liability company shall
promptly appoint and at all times maintain at least two (2) Independent
Directors on its board of managers, who shall be selected by such Borrower, and
be reasonably acceptable to Lender.

                                    ARTICLE X
                RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS

SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the
right to engage in one or more Secondary Market Transactions with respect to the
Loan, and to structure and restructure all or any part of the Loan, including
without limitation in multiple tranches, as a wraparound loan, or for inclusion
in a REMIC or other Securitization. Without limitation, Lender shall have the
right, at Lender's sole cost (other than each Borrower's internal costs and
expenses and the costs and expenses of the Borrowers' counsel), to cause the
Note and any Mortgage to be split into a first and a second mortgage loan, or
into one or more loans evidenced by multiple notes and secured by multiple
mortgages and/or by ownership interests in any of the Borrowers in whatever
proportion Lender determines, and thereafter to engage in Secondary Market
Transactions with respect to all or any part of the indebtedness and loan
documentation. Each of the Borrower Parties acknowledge that it is the intention
of the parties that all or a portion of the Loan will be securitized and that
all or a portion of the Loan will be rated by one or more Rating Agencies. Each
of the Borrower Parties further acknowledge that additional structural
modifications may be required to satisfy issues raised by any Rating Agencies.
As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale,
assignment, or other transfer of all or any portion of the Obligations or the
Loan Documents or any interest therein to one or more investors, (ii) the sale,
assignment, or other transfer of one or more participation interests in the
Obligations or Loan Documents to one or more investors, (iii) the transfer or
deposit of all or any portion of the Obligations or Loan Documents to or with
one or more trusts or other entities which may sell certificates or other
instruments to investors evidencing an ownership interest in the assets of such
trust or the right to receive income or proceeds therefrom or (iv) any other
Securitization backed in whole or in part by the Loan or any interest therein.

SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all
reasonable efforts and cooperate reasonably and in good faith with Lender in
effecting any such restructuring or Secondary Market Transactions at Lender's
sole cost (other than, with respect to the first successful Securitization and
any related Secondary Market Transaction only (or if the Loan shall be hereafter
split into multiple loans, the first successful Securitization and any related
Secondary Market Transaction with respect to each of such loans), the Borrowers'
internal costs and expenses and the costs and expenses of the Borrower Parties'
counsel). Notwithstanding the foregoing or anything to the contrary contained in
this Article X, it is acknowledged and agreed that in no event shall Lender be
responsible for payment of any Borrower Party's (or its Affiliate's) internal
costs and expenses in connection with any Secondary Market Transaction. Such
cooperation shall include without limitation, executing and delivering such
reasonable amendments to the Loan Documents and the organizational documents of
each Borrower as Lender or any Interested Party (as defined below) may request,
provided however that, no such

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amendment shall modify (i) the weighted average interest rate payable under the
Note (or notes); (ii) the stated maturity date of the Note, (iii) the
amortization of the principal amount of the Note, (iv) any other material
economic terms of the Obligations, (v) the non-recourse provisions of the Loan
or (vi) any provision, the effect of which would increase the Borrowers'
obligations or decrease the Borrowers' rights under the Loan Documents except to
a de minimis extent. The Borrower Parties shall not be required to provide
additional collateral to effect any such restructuring or Secondary Market
Transaction after the Closing Date. The Borrower Parties shall not be required
to pay any third party (other than, which respect to the first successful
Securitization and any related Secondary Market Transaction only (or if the Loan
shall be hereafter split into multiple loans, the first successful
Securitization and any related Secondary Market Transaction with respect to each
of such loans), the costs and expenses of the Borrowers' counsel) costs and
expenses incurred by Lender in connection with any such Secondary Market
Transaction unless otherwise expressly payable by the Borrower Parties under
this Loan Agreement or the other Loan Documents.

SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense
(other than, with respect to the first successful Securitization and any related
Secondary Market Transaction only (or if the Loan shall be hereafter split into
multiple loans, the first successful Securitization and any related Secondary
Market Transaction with respect to each of such loans), the Borrowers' internal
costs and expenses and the costs and expenses of the Borrower Parties' counsel),
shall provide such access to personnel and such information and documents
relating to the Borrower Parties, Manager, the Properties and Collateral and the
business and operations of all of the foregoing and such opinions of counsel
(including nonconsolidation opinions) as any Rating Agency may request or as
Lender or any other Interested Party may reasonably request in connection with
any such Secondary Market Transaction including, without limitation, updated
financial information, appraisals, market studies, environmental reviews (Phase
I's and, if appropriate, Phase II's), mold inspection, property condition
reports and other due diligence investigations together with appropriate
verification of such updated information and reports through letters of auditors
and consultants and, as of the closing date of the Secondary Market Transaction,
updated representations and warranties made in the Loan Documents and such
additional representations and warranties as any Rating Agency may request or
any purchaser, transferee, assignee, trustee, servicer or potential investor
(the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED
PARTIES") may reasonably request, to the extent such updated representations and
warranties are true. On or prior to the date of closing of any Secondary Market
Transaction, the Borrowers, at Lender's cost and expense (other than with
respect to the first successful Securitization and any related Secondary Market
Transaction only (or if the Loan shall be hereafter split into multiple loans,
the first successful Securitization and any related Secondary Market Transaction
with respect to each of such loans), the Borrowers' internal costs and expenses
and the costs and expenses of the Borrowers' counsel), shall, if required by any
Rating Agency or reasonably required by Lender, provide revisions or
"bringdowns" to any opinions delivered at Closing (including nonconsolidation
opinions), or if required by the Rating Agencies, new versions of such opinions,
which opinions shall be consistent in substance with the opinions covered by the
original opinions, addressed to Lender, any trustee under any Securitization
backed in whole or in part by the Loan, any Rating Agency that assigns a rating
to any securities in connection therewith and any investor purchasing securities
therein. Lender shall be permitted to share all such information with the
investment banking firms, Rating Agencies, accounting firms, law firms, other
third party advisory firms,

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potential investors, servicers and other service providers and other parties
directly involved in any proposed Secondary Market Transaction. The Borrowers
understand that any such information may be incorporated into any offering
circular, prospectus, prospectus supplement, private placement memorandum or
other offering documents for any Secondary Market Transaction. Lender and the
Rating Agencies shall be entitled to rely upon such information. Without
limiting the foregoing, the Borrowers and Guarantor shall provide in connection
with each (i) preliminary and final private placement memorandum or (ii) a
preliminary and final prospectus or prospectus supplement, as applicable,
prepared in connection with any Secondary Market Transaction (the documents
referred to in the foregoing clauses (i) and (ii), collectively, the "DISCLOSURE
DOCUMENTS"), an agreement reasonably satisfactory to the Borrowers and Guarantor
certifying that the Borrowers and Guarantor have examined such Disclosure
Documents specified by Lender and, that the sections of such Disclosure Document
describing the Borrowers, Guarantor, the Properties and Manager do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not materially misleading. The
Borrowers and Guarantor shall each indemnify, defend, protect and hold harmless
Lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"),
and their respective Affiliates, directors, employees, agents and each Person,
if any, who controls Lender, Merrill Lynch or any such Affiliate within the
meaning of Section 15 of the Securities Act of 1933 or Section 20 of the
Securities Exchange Act of 1934, and any other placement agent or underwriter
with respect to any Securitization or Secondary Market Transaction from and
against any losses, claims, damages and liabilities that arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Disclosure Document as to the Borrowers, Guarantor, Manager and
the Properties or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated in such
information or necessary in order to make the statements in such information not
materially misleading; provided, however, the Borrowers shall not be required to
indemnify Merrill Lynch for any liabilities arising out of untrue statements or
omissions that were identified to Lender in writing or are set forth in any
third party report not prepared by the Borrowers or their Affiliates unless such
reports are caused to be incorrect or misleading based upon information provided
by the Borrowers or their Affiliates. Lender may publicize the existence of the
Obligations in connection with Lender's Secondary Market Transaction activities
or otherwise.

SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender
may transfer its obligations under this Loan Agreement and under the other Loan
Documents (or may transfer the portion thereof corresponding to the transferred
portion of the Obligations), and thereafter Lender shall be relieved of any
obligations hereunder and under the other Loan Documents arising after the date
of said transfer with respect to the transferred interest. Each transferee
investor shall become a "Lender" hereunder.

                                   ARTICLE XI
      RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES

SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or
a Permitted Assumption expressly permitted under this Article XI, Leases entered
into as permitted hereunder, and pledges in connection with the Mezzanine Loan,
the Borrowers shall

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not cause or suffer to occur or exist, directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, any sale, transfer, mortgage,
pledge, Lien or encumbrance (other than the Permitted Encumbrances) of (i) all
or any part of any Property or any interest therein, or (ii) any direct or
indirect ownership or beneficial interest in any Borrower (other than to
Mezzanine Lender), irrespective of the number of tiers of ownership, without
Lender's consent.

SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following
voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges
(each, a "TRANSFER") of a direct, indirect or beneficial interest in any
Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP
INTEREST TRANSFERS"):

      (A) A Transfer of no more than forty-nine percent (49%) of the direct or
indirect ownership interests in such Borrower (in the aggregate), provided that,
following such Transfer, Guarantor maintains control of such Borrower.

      (B) A Transfer or a series of Transfers that result in the proposed
transferee, together with Affiliates of such transferee, owning in the aggregate
(directly or indirectly) more than forty-nine percent (49%) of the economic and
beneficial interests in such Borrower (where, prior to such Transfer, such
proposed transferee and its Affiliates owned in the aggregate (directly or
indirectly) forty-nine percent (49%) or less of such interests in that
Borrower); and, provided that such Transfer shall not be a Permitted Ownership
Interest Transfer unless Lender receives, prior to such Transfer, both (x)
evidence reasonably satisfactory to Lender (which shall include a legal
non-consolidation opinion reasonably acceptable to Lender and the Rating
Agencies) that the single purpose nature and bankruptcy remoteness of such
Borrower (and its members and general partners, as applicable) following such
Transfer or Transfers will be the same as prior to such Transfer or Transfers
and (y) a Rating Agency Confirmation.

      (C) For so long as Guarantor's (or its successor's) stock is traded
through the "over-the-counter market" or through any recognized stock exchange,
any Transfer of all or any portion of the issued and outstanding capital stock
of Guarantor, or the issuance of additional capital stock of Guarantor
(including common or preferred shares) through the "over-the-counter market" or
through any recognized stock exchange.

      (D) The pledge of ownership interests granted by the Mezzanine Borrowers
pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan
Agreement).

      For purposes of this Section 11.2, "control" shall have the meaning given
thereto in the definition of "Affiliate" in Section 1.1 and a "change of
control" of any Person shall include the Transfer of legal or equitable
ownership interests in such Person which after giving effect to such Transfer
results in any transferee or pledgee of such interests holding more than a 49%
legal or equitable ownership interest or security interest in such Person.

SECTION 11.3 ASSUMABILITY.

      (A) The Borrowers shall have the right to request that Lender consent to
(i) a transfer of all of the Properties to another Person (the "TRANSFEREE
BORROWER") and the assumption by the Transferee Borrower of all of the
Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor
with new guarantors and indemnitors who shall assume all of the

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obligations of the Guarantors arising from and after such date and release of
the Borrowers and Guarantor from obligations arising from and after such date
and (iii) the replacement of the Mezzanine Borrowers with pledgors of the
ownership interests in the Transferee Borrower (collectively, an "ASSUMPTION"),
subject to the conditions set forth in paragraphs (B) and (C) of this Section.
Together with such written application, the Borrowers will pay to Lender a
review fee of $10,000. The Borrowers also shall pay on demand all of the
reasonable out-of-pocket costs and expenses incurred by Lender, including
reasonable attorneys' fees and expenses, and the fees and expenses of the Rating
Agencies, if any, and other outside entities, in connection with considering any
proposed Assumption, whether or not the same is permitted or occurs.

      (B) Lender shall not withhold its consent to an Assumption (any such
Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon
the conditions that:

            (i) No Event of Default shall have occurred and be continuing at the
time of such Assumption;

            (ii) The Borrowers shall have submitted to Lender true, correct and
complete copies of any and all information and documents reasonably requested by
Lender concerning the Transferee Borrower, replacement guarantors and
indemnitors and all of such information and documents shall be reasonably
acceptable to Lender;

            (iii) Evidence reasonably satisfactory to Lender shall have been
provided showing that the Transferee Borrower and such of its Affiliates as
shall reasonably be designated by Lender comply and will comply with Article IX,
as those provisions may be modified by Lender taking into account the ownership
structure of Transferee Borrower and its Affiliates;

            (iv) The Borrowers shall have obtained (and delivered to Lender) a
Rating Confirmation with respect to the Assumption, the Transferee Borrower, the
new guarantors and indemnitors and all related transactions;

            (v) The Borrowers shall have paid all of Lender's reasonable
out-of-pocket costs and expenses in connection with considering the Assumption,
and shall have paid the amount reasonably requested by Lender as a deposit
against Lender's reasonable costs and expenses in connection with effecting the
Assumption;

            (vi) The Borrowers, the Transferee Borrower, and the replacement
guarantors and indemnitors shall have indicated in writing in form and substance
reasonably satisfactory to Lender their readiness and ability to satisfy the
conditions set forth in Subsection (C) below;

            (vii) (a) The Transferee Borrower shall be a Permitted Transferee or
(b) the identity, experience and financial condition of the Transferee Borrower
shall otherwise be satisfactory to Lender in its reasonable discretion; and

            (viii) The identity and financial condition of the replacement
guarantors and indemnitors shall be satisfactory to Lender.

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      (C) If Lender consents to the proposed Assumption, the Transferee Borrower
and/or Borrowers, as the case may be, shall promptly and as a condition to the
Assumption deliver the following to Lender:

            (i) The Borrowers, the Transferee Borrower, the original and
replacement guarantors and indemnitors shall execute and deliver any and all
documents reasonably required by Lender to evidence the Transfer and Assumption
of the Loan, in form and substance reasonably required by Lender and similar to
those received at Closing;

            (ii) Counsel to the Transferee Borrower and replacement guarantors
and indemnitors shall deliver to Lender opinions in form and substance
reasonably satisfactory to Lender as to such matters as Lender shall reasonably
require in connection with such Assumption, which may include opinions as to
substantially the same matters as were required in connection with the
origination of the Loan including, without limitation, a bankruptcy
non-consolidation opinion;

            (iii) The Borrowers shall cause to be delivered to Lender, an
endorsement (relating to the change in the identity of the Borrowers and
execution and delivery of the Assumption documents) to Lender's policy of title
insurance in form and substance acceptable to Lender, in Lender's reasonable
discretion; and

            (iv) The Borrowers shall deliver to Lender a payment in the amount
of all remaining unpaid reasonable costs incurred by Lender in connection with
the Transfer and Assumption, including but not limited to Lender's reasonable
attorneys' fees and expenses, all recording fees, and all fees payable to the
title company in connection with the Transfer and Assumption.

SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may
obtain the release (each, a "RELEASE") of one or more Properties from the Lien
of the applicable Mortgage(s) in connection with a partial or total defeasance
of the Loan subject to the conditions of the Note and subject to the
satisfaction of the following conditions:

      (A) Lender shall have received from the Borrowers at least fifteen (15)
days prior written notice of the date proposed for such release (the "RELEASE
DATE") which notice is revocable;

      (B) No Event of Default shall have occurred and be continuing as of the
date of such notice and the Release Date;

      (C) On the date proposed for such Release, the Borrowers shall defease all
or a portion of the Loan by delivering a Defeasance Deposit (as defined in the
Note) in an amount necessary to pay all Scheduled Defeasance Payments (as
defined in the Note) for the entire principal amount of the Loan in the case of
a total defeasance, or in the case of a partial defeasance, relating to the
Release Price of each Property being released (together with all accrued and
unpaid interest on the principal amount being so defeased), and such defeasance
shall be undertaken in accordance with the terms and conditions of the Note, and
Mezzanine Lender shall have received all amounts required to be paid to it in
connection with such Release under the Mezzanine Loan Documents;

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      (D) If required by any Rating Agency, the Borrowers at their sole cost and
expense, in connection with any partial defeasance, shall have delivered to
Lender, one or more endorsements to the Title Policies delivered to Lender on
the date hereof in connection with the Mortgages insuring that, after giving
effect to such Release, (i) the Liens created hereby and thereby and insured
under the Title Policies are first priority Liens on the respective remaining
Properties subject only to the Permitted Encumbrances applicable to the
remaining Properties and (ii) that the Title Policies remain in full force and
effect and unaffected by such Release;

      (E) Immediately following any Release in connection with any partial
defeasance, both the Debt Service Coverage Ratio and the Debt Yield (based upon
a trailing twelve (12) month period) shall be equal to or greater than the Debt
Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12)
month period) in effect at Closing, or immediately prior to the Release,
whichever is greater;

      (A) Notwithstanding the foregoing, the Borrowers may not obtain the
Release under this Section 11.4 of any Property or Properties which
individually, or in the aggregate (with all Releases since the Closing Date),
have an aggregate Allocated Loan Amount of more than thirty percent (30%) of the
original principal balance of the Loan except pursuant to a total defeasance;

      (F) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses (including, without limitation, title search costs and endorsement
premiums and reasonable attorney's fees and disbursements) incurred by Lender,
Servicer, and any custodian employed by Lender or Servicer, in connection with
the Release; and

      (G) Immediately following such Property Release, each released Property
will be owned by a Person other than the Borrowers, except as otherwise
permitted in connection with any full or partial defeasance of the Loan in
accordance with the terms and conditions of the Note.

Upon satisfaction of the above conditions, Lender shall effectuate the following
(hereinafter referred to as a "PROPERTY RELEASE"): the security interest of
Lender under the Mortgage and other Loan Documents relating to each released
Property shall be released and Lender will execute and deliver any agreements
reasonably requested by the Borrowers to release and terminate or reassign, at
the Borrowers' option, the Mortgage, the applicable Assignment of Leases, and
financing statements as to each released Property; provided, that such release
and termination or reassignment shall be without recourse to Lender and without
any representation or warranty except that Lender shall be deemed to have
represented that such release and termination or reassignment has been duly
authorized and that it has not assigned or encumbered the Mortgage or the other
Loan Documents relating to any released Property (except as contemplated hereby)
and Lender shall return the originals of any Loan Documents that relate solely
to each released Property to the Borrowers; provided, further, that upon the
release and termination or reassignment of Lender's security interest in the
Mortgage relating to a released Property all references herein to the Mortgage
relating to such released Property shall be deemed deleted, except as otherwise
provided herein with respect to indemnities. In addition, promptly after
consummation of any such Property Release and Lender's receipt of the Defeasance
Collateral, any and all Reserves designated as applicable to each released
Property held by or on behalf of Lender shall be returned to the Borrowers.

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SECTION 11.5 RESERVED.

SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the
contrary contained herein, provided no Event of Default exists, the Borrowers
may Transfer or dispose of building equipment which is being replaced or which
is no longer necessary in connection with the operation of the Property free
from the lien of the Mortgage, provided that such transfer or disposal will not
have a Material Adverse Effect on the value of any individual Property or on the
Properties taken as a whole, will not materially impair the utility of any
individual Property or the Properties, taken as a whole, and will not result in
a reduction or abatement of, or right of offset against, the Rents payable under
any Lease, in either case as a result thereof, and provided further that any new
building equipment acquired by the Borrowers (and not so disposed of) shall be
subject to the lien of the Mortgage. Lender shall, from time to time, upon the
reasonable request of any Borrower, execute a written instrument in form
reasonably satisfactory to Lender to confirm that such building equipment which
is to be, or has been, sold or disposed of is free from the lien of the
Mortgage.

SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of
Default exists, the Borrowers may, without the consent of Lender, (i) make
immaterial Transfers of portions of the any Property to Governmental Authorities
for dedication for public use, and (ii) grant easements, restrictions,
covenants, reservations and rights of way with respect to any Property in the
ordinary course of business for access, water and sewer lines, telephone and
telegraph lines, electric lines or other utilities or for other similar
purposes, provided that no such transfer, conveyance or encumbrance set forth in
the foregoing clauses (i) and (ii) shall materially impair the utility and
operation of such Property or have a Material Adverse Effect on the value of
such Property taken as a whole. In connection with any Transfer permitted
pursuant to this Section 11.7, Lender shall execute and deliver any instrument
reasonably necessary or appropriate, in the case of the Transfers referred to in
clause (i) above, to release the portion of such Property affected by such
transfer from the lien of the applicable Mortgage or to subordinate the
applicable Mortgage to any such easement, restriction, covenant, reservation or
right of way within ten (10) days of Lender's receipt of the following:

      (A) ten (10) days prior written notice thereof.

      (B) a copy of the instrument or instruments of transfer.

      (C) an officer's certificate given by the Borrowers stating that such
transfer does not materially impair the utility and operation of the Property,
materially reduce the value of the Property or have a Material Adverse Effect.

      (D) reimbursement of all of Lender's reasonable, out-of-pocket costs and
expenses incurred in connection with such Transfer.

                                   ARTICLE XII
                        RECOURSE; LIMITATIONS ON RECOURSE

SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article,
and notwithstanding any provision of the Loan Documents other than this Article,
the personal liability of the Borrowers to pay any and all Obligations including
but not limited to the principal

                                       94



of and interest on the debt evidenced by the Note and any other agreement
evidencing the Borrowers' obligations under the Note shall be limited to (i) the
Properties, (ii) the rents, profits, issues, products and income of the
Properties, and (iii) any other Collateral.

Notwithstanding anything to the contrary in this Loan Agreement, the Mortgages
or any of the Loan Documents, Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Obligations secured by the Mortgages or to require that all collateral shall
continue to secure all of the Obligations owing to Lender in accordance with the
Loan Documents.

SECTION 12.2 PARTIAL RECOURSE; FULL RECOURSE. Notwithstanding Section 12.1, the
Borrowers (but not their members, partners (other than the General Partners),
employees, shareholders agents, directors or officers (the "EXCULPATED
PARTIES")) and Guarantor shall be personally liable to the extent of any
liability, loss, damage, cost or expense (including, without limitation,
reasonable attorneys' fees and expenses) suffered or incurred by Lender
resulting from any and all of the following: (i) fraud of any of the Borrower
Parties or their agents or employees; (ii) any material misrepresentation made
by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan
Document; (iii) insurance proceeds, condemnation awards, or other sums or
payments attributable to the Properties which are not applied in accordance with
the provisions of the Loan Documents; (iv) all rents, profits, issues, products
and income of the Properties received or collected by or on behalf of the
Borrowers or any Borrower Party or Manager and not deposited into the Deposit
Account in accordance with Article VII and the Cash Management Agreement; (v)
failure to turn over to Lender, after an Event of Default, or misappropriation
of any tenant security deposits or rents collected in advance (other than by
Lender or Servicer); (vi) failure to notify Lender of any change in the
principal place of business address of the Borrowers or of any change in the
name of any of the Borrowers or if any of the Borrowers takes any other action
which could make the information set forth in the Financing Statements relating
to the Loan materially misleading; (vii) failure by the Borrowers, or any
indemnitor or guarantor to comply with the covenants, obligations, liabilities,
warranties and representations contained in the Environmental Indemnity or
otherwise pertaining to environmental matters; (viii) material waste with
respect to any of the Properties; (ix) all liabilities and expenses under the
indemnification provisions of Section 10.3; (x) any uncured default under
Section 11.1; (xi) any material uncured default under Article IX; and (xii) any
distributions made in violation of Section 5.28 (to the extent of any such
distribution) including amounts improperly paid or distributed, directly or
indirectly, by Manager in circumvention of such restrictions. Notwithstanding
the preceding sentence or Section 12.1, the Loan shall be fully recourse to the
Borrowers and Guarantor upon the happening of any of the following: (i) any
Borrower Party's defense of any efforts by Lender to collect or enforce the
Obligations following maturity of the Loan or acceleration of the Loan on
account of an Event of Default under Section 8.1(A), or any other defense of any
efforts by Lender to collect or enforce the Obligations without a good faith
basis following any other Event of Default, and (ii) any condition or event
described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the
Borrowers and Guarantor shall not be liable under this Section 12.2 in
connection with any Involuntary Borrower Bankruptcy unless such involuntary
proceeding is solicited, procured, consented to or acquiesced in by any
Borrower, Guarantor or any Affiliate of either of them or

                                       95



any Involuntary Borrower Bankruptcy caused by Mezzanine Lender following the
exercise by Mezzanine Lender of its rights under the Mezzanine Loan Documents).

SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the
enforcement of the Environmental Indemnity, the Guaranty or any guaranty or
similar agreement executed in connection with the Loan, (ii) release or reduce
the debt evidenced by the Note, (iii) impair the lien of any of the Mortgages or
any other security document, (iv) impair the rights of Lender to enforce any
provisions of the Loan Documents, or (v) limit Lender's ability to obtain a
deficiency judgment or judgment on the Note or otherwise against any Borrower
Party but not any Exculpated Party to the extent necessary to obtain any amount
for which such Borrower Party may be liable in accordance with this Article or
any other Loan Document.

                                  ARTICLE XIII
                 WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES

SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article,
a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or
for any other Borrower Party or Affiliate or to have rights or obligations in
the nature of the rights or obligations of a guarantor or surety (whether by
reason of execution of a guaranty, provision of security for the obligations of
another, or otherwise) then this Article shall apply. This Article shall not
affect the rights of the Waiving Party other than to waive or limit rights and
defenses that Waiving Party would have (i) in its capacity as a guarantor or
surety or (ii) in its capacity as one having rights or obligations in the nature
of a guarantor or surety.

      Waiving Party hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of receivership or bankruptcy of any
of the other Borrower Parties, protest or notice with respect to any of the
obligations of any of the other Borrower Parties, setoffs and counterclaims and
all presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance, the benefits
of all statutes of limitation, and all other demands whatsoever (and shall not
require that the same be made on any of the other Borrower Parties as a
condition precedent to the obligations of Waiving Party), and covenants that the
Loan Documents will not be discharged, except by complete payment and
performance of the obligations evidenced and secured thereby, except only as
limited by the express contractual provisions of the Loan Documents. Waiving
Party further waives all notices that the principal amount, or any portion
thereof, and/or any interest on any instrument or document evidencing all or any
part of the obligations of any of the other Borrower Parties to Lender is due,
notices of any and all proceedings to collect from any of the other Borrower
Parties or any endorser or any other guarantor of all or any part of their
obligations, or from any other person or entity, and, to the extent permitted by
law, notices of exchange, sale, surrender or other handling of any security or
collateral given to Lender to secure payment of all or any part of the
obligations of any of the other Borrower Parties.

      Except only to the extent provided otherwise in the express contractual
provisions of the Loan Documents, Waiving Party hereby agrees that all of its
obligations under the Loan Documents shall remain in full force and effect,
without defense, offset or counterclaim of any kind, notwithstanding that any
right of Waiving Party against any of the other Borrower Parties or defense of
Waiving Party against Lender may be impaired, destroyed, or otherwise affected
by

                                       96



reason of any action or inaction on the part of Lender. Waiving Party waives all
rights and defenses arising out of an election of remedies by the Lender, even
though that election of remedies, may have destroyed the Waiving Party's rights
of subrogation and reimbursement against the other Borrower Parties.

      Lender is hereby authorized, without notice or demand, from time to time,
(a) to renew, extend, accelerate or otherwise change the time for payment of, or
other terms relating to, all or any part of the obligations of any of the other
Borrower Parties; (b) to accept partial payments on all or any part of the
obligations of any of the other Borrower Parties; (c) to take and hold security
or collateral for the payment of all or any part of the obligations of any of
the other Borrower Parties; (d) to exchange, enforce, waive and release any such
security or collateral for such obligations; (e) to apply such security or
collateral and direct the order or manner of sale thereof as in its discretion
it may determine; (f) to settle, release, exchange, enforce, waive, compromise
or collect or otherwise liquidate all or any part of such obligations and any
security or collateral for such obligations. Any of the foregoing may be done in
any manner, and Waiving Party agrees that the same shall not affect or impair
the obligations of Waiving Party under the Loan Documents.

      Waiving Party hereby assumes responsibility for keeping itself informed of
the financial condition of all of the other Borrower Parties and any and all
endorsers and/or other guarantors of all or any part of the obligations of the
other Borrower Parties, and of all other circumstances bearing upon the risk of
nonpayment of such obligations, and Waiving Party hereby agrees that Lender
shall have no duty to advise Waiving Party of information known to it regarding
such condition or any such circumstances.

      Waiving Party agrees that neither Lender nor any person or entity acting
for or on behalf of Lender shall be under any obligation to marshal any assets
in favor of Waiving Party or against or in payment of any or all of the
obligations secured hereby. Waiving Party further agrees that, to the extent
that any of the other Borrower Parties or any other guarantor of all or any part
of the obligations of the other Borrower Parties makes a payment or payments to
Lender, or Lender receives any proceeds of collateral for any of the obligations
of the other Borrower Parties, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid or refunded, then, to the extent of such payment or
repayment, the part of such obligations which has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the time immediately preceding such initial payment, reduction or
satisfaction.

      Waiving Party (i) shall have no right of subrogation with respect to the
obligations of the other Borrower Parties; (ii) waives any right to enforce any
remedy that Lender now has or may hereafter have against any of the other
Borrower Parties any endorser or any guarantor of all or any part of such
obligations or any other person; and (iii) waives any benefit of, and any right
to participate in, any security or collateral given to Lender to secure the
payment or performance of all or any part of such obligations or any other
liability of the other parties to Lender.

      Waiving Party agrees that any and all claims that it may have against any
of the other Borrower Parties, any endorser or any other guarantor of all or any
part of the obligations of the other Borrower Parties, or against any of their
respective properties, shall be subordinate and

                                       97



subject in right of payment to the prior payment in full of all obligations
secured hereby. Notwithstanding any right of any of the Waiving Party to ask,
demand, sue for, take or receive any payment from the other Borrower Parties,
all rights, liens and security interests of Waiving Party, whether now or
hereafter arising and howsoever existing, in any assets of any of the other
Borrower Parties (whether constituting part of the security or collateral given
to Lender to secure payment of all or any part of the obligations of the other
Borrower Parties or otherwise) shall be and hereby are subordinated to the
rights of Lender in those assets.

                                   ARTICLE XIV
                                  MISCELLANEOUS

SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions
contemplated hereby shall be consummated, the Borrowers agree to promptly pay
all reasonable fees, costs and expenses incurred by Lender in connection with
any matters contemplated by or arising out of this Loan Agreement, including the
following, and all such fees, costs and expenses shall be part of the
Obligations, payable on demand: (A) reasonable fees, costs and expenses
(including reasonable attorneys' fees, and other professionals retained by
Lender) incurred in connection with the examination, review, due diligence
investigation, documentation and closing of the financing arrangements evidenced
by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and
expenses (including reasonable attorneys' fees and other professionals retained
by Lender) incurred in connection with the administration of the Loan Documents
and the Loan and any amendments, modifications and waivers relating thereto; (C)
subject to Section 10.2, reasonable fees, costs and expenses (including
reasonable attorneys' fees) incurred in connection with the review,
documentation, negotiation, closing and administration of any subordination or
intercreditor agreements; and (D) reasonable fees, costs and expenses (including
reasonable attorneys' fees and fees of other professionals retained by Lender)
incurred in any action to enforce or interpret this Loan Agreement or the other
Loan Documents or to collect any payments due from the Borrowers under this Loan
Agreement, the Note or any other Loan Document or incurred in connection with
any refinancing or restructuring of the credit arrangements provided under this
Loan Agreement, whether in the nature of a "workout" or in connection with any
insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due
and payable to Lender after the Closing Date may be paid to Lender pursuant to
the Cash Management Agreement.

SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required
elsewhere herein, whether or not the transactions contemplated hereby shall be
consummated, the Borrowers agree to indemnify, defend, protect, pay and hold
Lender, Servicer and their successors and assigns (including, without
limitation, the trustee and/or the trust under any trust agreement executed in
connection with any Securitization backed in whole or in part by the Loan and
any other Person which may hereafter be the holder of the Note or any interest
therein), and the officers, directors, stockholders, partners, members,
employees, agents, Affiliates and attorneys of Lender and such successors and
assigns (collectively called the "INDEMNITEES") harmless from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable
costs, expenses and disbursements of any kind or nature whatsoever (including
the reasonable fees and disbursements of outside counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto)

                                       98



that are imposed on, incurred by, or asserted against that Indemnitee, in any
manner relating to or arising out of (A) the negotiation, execution, delivery,
performance, administration, ownership, or enforcement of any of the Loan
Documents; (B) any of the transactions contemplated by the Loan Documents; (C)
any breach by the Borrowers of any material representation, warranty, covenant,
or other agreement contained in any of the Loan Documents; (D) Lender's
agreement to make the Loan hereunder; (E) any claim brought by any third party
arising out of any condition or occurrence at or pertaining to the Properties;
(F) any design, construction, operation, repair, maintenance, use, non-use or
condition of the Properties or Improvements, including claims or penalties
arising from violation of any applicable laws or insurance requirements, as well
as any claim based on any patent or latent defect, whether or not discoverable
by Lender; (G) any performance of any labor or services or the furnishing of any
materials or other property in respect of the Properties or any part thereof;
(H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or
undertaking relating to the performance or discharge of any of the terms,
covenants and conditions of the landlord contained in the Leases; or (J) the use
or intended use of the proceeds of any of the Loan (the foregoing liabilities
herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that
the Borrowers shall not have an obligation to an Indemnitee hereunder with
respect to Indemnified Liabilities arising from the fraud, gross negligence or
willful misconduct of such Indemnitee as determined by a court of competent
jurisdiction. The obligations and liabilities of the Borrowers under this
Section 14.2 shall survive the term of the Loan and the exercise by Lender of
any of its rights or remedies under the Loan Documents, including the
acquisition of the Properties by foreclosure or a conveyance in lieu of
foreclosure.

SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no
amendment, modification, termination or waiver of any provision of this Loan
Agreement, the Note or any other Loan Document, or consent to any departure
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender and any other party to be charged. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on the Borrowers in any case shall entitle the Borrowers or other Person
to any other or further notice or demand in similar or other circumstances.

SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance
with Lender's customary practices, destroy or otherwise dispose of all
documents, schedules, invoices or other papers, delivered by the Borrowers to
Lender (other than the Note) unless the Borrowers request in writing that same
be returned. Upon such request and at the Borrowers' expense, Lender shall
return such papers when Lender's actual or anticipated need for same has
terminated.

SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice
or other communication required or permitted to be given shall be in writing and
addressed to the respective party as set forth below. Notices shall be effective
(i) three (3) days after the date such notice is mailed, (ii) on the next
Business Day if sent by a nationally recognized overnight courier service, (iii)
on the date of delivery by personal delivery and (iv) on the date of
transmission if sent by telefax during business hours on a Business Day
(otherwise on the next Business Day).

                                       99



Notices shall be addressed as follows:

If to the Borrowers or any Borrower Party:

c/o Lodgian
3445 Peachtree Road NE
Suite 700
Atlanta, Georgia 30326
Attention: General Counsel
Facsimile: (404) 364-0088

With a copy to:

Morris, Manning & Martin, LLP
3343 Peachtree Rd., NE
1600 Atlanta Financial Center
Atlanta, Georgia 30326
Attention: Thomas Gryboski, Esq.
Facsimile: (404) 365-9532

If to Lender:

Merrill Lynch Mortgage Lending, Inc.
Four World Financial Center
New York, New York 10080
Attention: Robert Spinna
Facsimile: (212) 449-7684

With a copy to:

Sidley Austin Brown & Wood LLP
787 Seventh Avenue
New York, New York 10019
Attn: Robert L. Boyd, Esq.
Facsimile: (212) 839-5599

Any party may change the address at which it is to receive notices to another
address in the United States at which business is conducted (and not a
post-office box or other similar receptacle), by giving notice of such change of
address in accordance with the foregoing. This provision shall not invalidate or
impose additional requirements for the delivery or effectiveness of any notice
(i) given in accordance with applicable statutes or rules of court, or (ii) by
service of process in accordance with applicable law. If there is any assignment
or transfer of Lender's interest in the Loan, then the new Lenders may give
notice to the parties in accordance with this Section, specifying the addresses
at which the new Lenders shall receive notice, and they shall be entitled to
notice at such address in accordance with this Section.

SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Loan

                                       100



Agreement, the making of the Loan hereunder and the execution and delivery of
the Note. Notwithstanding anything in this Loan Agreement or implied by law to
the contrary, the agreements of the Borrowers to indemnify or release Lender or
Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall
survive the payment of the Loan and the termination of this Loan Agreement.

SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of Lender in the exercise of any power, right or privilege
hereunder or under the Note or any other Loan Document shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Loan Agreement,
the Note and the other Loan Documents are cumulative to, and not exclusive of,
any rights or remedies otherwise available.

SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any
obligation to marshal any assets in favor of any Person or against or in payment
of any or all of the Obligations. To the extent that any Person makes a payment
or payments to Lender, or Lender enforces its remedies or exercises its rights
of set off, and such payment or payments or the proceeds of such enforcement or
set off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
if any, and rights and remedies therefor, shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or set
off had not occurred.

SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Loan Agreement, the
Note or other Loan Documents shall not affect or impair the validity, legality
or enforceability of the remaining provisions or obligations under this Loan
Agreement, the Note or other Loan Documents or of such provision or obligation
in any other jurisdiction.

SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Loan Agreement for any other purpose or be given any substantive
effect.

SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS
WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE
STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND
THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE

                                       101



WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION
AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO EACH
MORTGAGE AND EACH ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE LAWS OF THE
STATE WHERE THE APPLICABLE PROPERTY IS LOCATED AND EXCEPT THAT THE SECURITY
INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER.

SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns except that the Borrowers may not assign their rights or obligations
hereunder or under any of the other Loan Documents except as expressly provided
in Article XI.

SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY
RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties,
represent, warrant and acknowledge that (i) they are sophisticated real estate
investors, familiar with transactions of this kind, and (ii) they have entered
into this Loan Agreement and the other Loan Documents after conducting their own
assessment of the alternatives available to them in the market, and after
lengthy negotiations in which they have been represented by legal counsel of
their choice. The Borrowers, on behalf of themselves and all Borrower Parties,
also acknowledge and agree that the rights of Lender under this Loan Agreement
and the other Loan Documents are reasonable and appropriate, taking into
consideration all of the facts and circumstances including without limitation
the quantity of the Loan, the nature of the Properties, and the risks incurred
by Lender in this transaction. No provision in this Loan Agreement or in any of
the other Loan Documents and no course of dealing between the parties shall be
deemed to create (i) any partnership or joint venture between Lender and the
Borrowers or any other Person, or (ii) any fiduciary or similar duty by Lender
to the Borrowers or any other Person. The relationship between Lender and the
Borrowers is exclusively the relationship of a creditor and a debtor, and all
relationships between Lender and any other Borrower are ancillary to such
creditor/debtor relationship.

SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any
consent, approval, determination or other action by Lender is, pursuant to the
Loan Documents or applicable law, required to be done reasonably or required not
to be unreasonably withheld, then Lender's action shall be presumed to be
reasonable, and the Borrowers shall bear the burden of proof of showing that the
same was not reasonable. In the event that a claim or adjudication is made that
Lender or its agents have acted unreasonably or unreasonably delayed acting in
any case where, by law or under this Loan Agreement or the other Loan Documents,
Lender or such agent, as the case may be, has an obligation to act reasonably or
promptly, neither Lender nor its agents shall be liable for any monetary
damages, and the Borrowers' sole remedy shall be limited to commencing an action
seeking injunctive relief or declaratory judgment. Any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.

                                       102



SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate,
officer, director, employee, attorney, or agent of Lender, shall have any
liability with respect to, and each of the Borrowers hereby waives, releases,
and agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by the Borrower
Parties in connection with, arising out of, or in any way related to, this Loan
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Loan Agreement or any of the other Loan Documents, other
than the gross negligence or willful misconduct of Lender. Each of the Borrowers
hereby waives, releases, and agrees not to sue Lender or any of Lender's
Affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Loan Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Loan Agreement or any of the
transactions contemplated hereby, except to the extent the same is caused by the
gross negligence or willful misconduct of Lender.

SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to any of the Borrowers or Affiliates thereof, or any other Person.

SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other
Loan Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties to the Loan
Documents.

SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and
Lender acknowledge that each of them has had the benefit of legal counsel of its
own choice and has been afforded an opportunity to review this Loan Agreement
and the other Loan Documents with its legal counsel and that this Loan Agreement
and the other Loan Documents shall be construed as if jointly drafted by the
Borrowers and Lender. If any term, condition or provision of this Loan Agreement
shall be inconsistent with any term, condition or provision of any other Loan
Document, then this Loan Agreement shall control.

SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS
LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN
SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH

                                       103



OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS
AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.

SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR
ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT
MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS
BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND
OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF
ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS
ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND
LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan
Documents and any amendments or supplements thereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which counterparts together shall constitute but one and the same
instrument. This Loan Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto.

SECTION 14.22 SERVICER. Lender shall have the right from time to time to
designate and appoint a Servicer and special servicer, and to change or replace
any Servicer or special servicer. Provided that the Borrowers have been notified
of such Servicer's role, all rights of the Lender hereunder may be exercised by
Servicer on behalf of Lender and provided the Borrowers shall not be

                                       104



required to deal with more than one such servicing entity at any time. Lender
shall notify the Borrowers in writing as to the identity of the Servicer and any
special servicer.

SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than
the Borrowers are parties to this Loan Agreement only with regard to the
representations, warranties, and covenants specifically applicable to them.

SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything
contained in this Loan Agreement to the contrary, if for any reason whatsoever
Lender suspects that any conditions exist or may exist at any Property which
might have a Material Adverse Effect, Lender shall have the right, at the
Borrowers' sole reasonable cost and expense, to cause such inspections and
reports to be prepared and performed with respect to any Property as Lender
shall reasonably determine.

                        [signatures follow on next page]

                                       105



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

                               BORROWERS:

                               NH MOTEL ENTERPRISES, INC.
                               SERVICO COLUMBIA, INC.
                               LODGIAN FAIRMONT LLC
                               SERVICO HOUSTON, INC.

                               By:/s/ Daniel E. Ellis
                                  ----------------------------------------------
                                      Name:  Daniel E. Ellis
                                      Title:  Vice President and Secretary, or
                                      Authorized Signatory for each of the
                                      entities listed above

                               LITTLE ROCK LODGING ASSOCIATES I,
                               LIMITED PARTNERSHIP

                               By: Lodgian Little Rock SPE, Inc., its general
                                   partner

                               By:/s/ Daniel E. Ellis
                                  ----------------------------------------------
                               Name:  Daniel E. Ellis
                               Title:  Vice President and Secretary

                               LODGIAN HOTELS FIXED IV, L.P.

                               By: Lodgian Hotels Fixed IV GP, Inc., its general
                                   partner

                               By:/s/ Daniel E. Ellis
                                  ----------------------------------------------
                                      Name:  Daniel E. Ellis
                                      Title:  Vice President and Secretary

                               LENDER:

                               MERRILL LYNCH MORTGAGE LENDING,
                               INC.

                               By:/s/ Robert Spinna
                                  ----------------------------------------------
                               Name:  Robert Spinna
                               Title: Vice President

Loan Agreement (FX #4)



                         LIST OF EXHIBITS AND SCHEDULE

Exhibit A        - Properties
Exhibit B        - Environmental Reports
Exhibit C        - Franchise Agreements
Exhibit D        - Allocated Loan Amounts/Aggregate Allocated Loan Amounts
Exhibit E        - Management Agreements
Exhibit F        - [Reserved]
Exhibit G        - Property Improvement Plans
Exhibit H        - [Reserved]
Exhibit I        - Acceptable Franchisors
Exhibit J        - Property Condition Reports
Exhibit K        - Zoning Reports
Exhibit L        - Certificate Re: Work Reserves

Schedule 1       - Borrowers
Schedule 2.4     - Scheduled Mortgage Principal Payments
Schedule 2.12(G) - Crossed Loans/Crossed Borrowers
Schedule 3.1(A)  - List of Loan Documents
Schedule 4.1(C)  - Organizational Chart for Borrower Parties
Schedule 4.2     - Consents
Schedule 4.5     - Condemnation Proceedings
Schedule 4.5(A)  - Rights to Purchase/Rights of First Offer
Schedule 4.7(B)  - Rent Roll
Schedule 4.7(E)  - Franchise Defaults
Schedule 4.9     - Litigation
Schedule 4.14      ERISA Plans
Schedule 4.20    - Insurance
Schedule 4.28    - Collective Bargaining Agreements
Schedule 5.14    - Material Agreements
Schedule 6.5     - Required Capital Improvements
Schedule 6.6     - Environmental Work/O&M Plans
Schedule 6.7     - Reserve Funding Condition

                         List of Exhibits and Schedules

Loan Agreement (FX #4)



                                    EXHIBIT A

                                   PROPERTIES

1. Residence Inn, 1401 South Shackleford Rd., Little Rock , AR
2. Courtyard by Marriott, 3835 Technology Drive, Paducah, KY
3. Hilton Inn, 5485 Twin Knolls Rd., Columbia , MD
4. Holiday Inn, 999 West Partick St., Frederick , MD
5. Hilton Inn, 5500 Crooks Rd., Troy (Northfield) , MI
6. Courtyard by Marriott, 4350 Ridgemont Dr., Abilene , TX
7. Holiday Inn Select, 4441 Highway 114 & Ester Blvd., Irving (DFW Airport), TX
8. Crowne Plaza, 12801 NW Freeway US 290, Houston , TX
9. Holiday Inn, 930 East Old Grafton Rd., Fairmont, WV

                                    Exhibit A

Loan Agreement (FX #4)



                                    EXHIBIT B

                              ENVIRONMENTAL REPORTS



         LODGIAN  LOCATION
ML CODE    CODE     CODE        PROPERTY NAME                ADDRESS               CITY      STATE
- -------    ----     ----        -------------                -------               ----      -----
                                                                           
FIXED RATE LOAN #4
  47       hou      4310    Crowne Plaza -          12801 NW Freeway US 290     Houston        TX
                            Houston

  17       col      1710    Hilton  - Columbia      5485 Twin Knolls Rd.        Columbia       MD
  42       nrf      3930    Hilton  - Troy          5500 Crooks Rd.             Troy           MI
  50       dfw      4388    Holiday Inn Select -    4441 Hwy 114 & Ester Blvd.  Irving         TX
                            Irving

   6       lrk       560    Residence Inn - Little  1401 S. Shackleford Rd.     Little Rock    AR
                            Rock

  22       fre      1776    Holiday Inn -           999 W. Patrick St.          Frederick      MD
                            Frederick

  26       pdk      2007    Courtyard by Marriott   3835 Technology Dr.         Paducah        KY
                            - Paducah

  48       abl      4343    Courtyard by Marriott   4350 Ridgemont Dr.          Abilene        TX
                            - Abilene


         LODGIAN  LOCATION                                                ASSESSMENT                PROJECT OR JOB
ML CODE    CODE     CODE                       REPORT                        FIRM     REPORT DATE       NUMBER
- -------    ----     ----                       ------                        ----     -----------       ------
                                                                                  
FIXED RATE LOAN #4
  47       hou      4310    Phase I Environmental Site Assessment Report      EMG     May 24, 2004      116680

  17       col      1710    Phase I Environmental Site Assessment Report      EMG     May 20, 2004      116618

  42       nrf      3930    Phase I Environmental Site Assessment Report      EMG     May 24, 2004      116629

  50       dfw      4388    Phase I Environmental Site Assessment Report      EMG     May 20, 2004      116678

   6       lrk       560    Phase I Environmental Site Assessment Report      EMG     May 22, 2004      116574

  22       fre      1776    Phase I Environmental Site Assessment Report      EMG     May 20, 2004      116620

  26       pdk      2007    Phase I Environmental Site Assessment Report      EMG     May 20, 2004      116610

  48       abl      4343    Phase I Environmental Site Assessment Report      EMG     May 21, 2004      116671



                                    Exhibit B

Loan Agreement (FX #4)



                                    EXHIBIT C

                              FRANCHISE AGREEMENTS



           PROPERTY                                                   AGREEMENT
             NAME                STATE          FRANCHISOR              DATE
             ----                -----          ----------              ----
                                                             
Crowne Plaza - Houston            TX    Intercontinental Hotel Group   3/27/98
Hilton - Columbia                 MD                          Hilton    2/9/98
Hilton - Troy                     MI                          Hilton  10/12/92
Holiday Inn Select - Irving       TX    Intercontinental Hotel Group  12/11/98
Residence Inn - Little Rock       AR                        Marriott   5/20/96
Holiday Inn- Frederick            MD    Intercontinental Hotel Group   5/28/98
Courtyard by Marriott - Paducah   KY                        Marriott  10/10/95
Courtyard by Marriott - Abilene   TX                        Marriott   3/16/96
Holiday Inn - Fairmont            WV    Intercontinental Hotel Group   2/11/98


                                    Exhibit C

Loan Agreement (FX #4)



                                    EXHIBIT D

             ALLOCATED LOAN AMOUNTS/AGGREGATE ALLOCATED LOAN AMOUNTS



         LODGIAN  LOCATION
ML CODE    CODE     CODE                 LEGAL ENTITY                           PROPERTY NAME                    ADDRESS
- -------    ----     ----                 ------------                           -------------                    -------
                                                                                         
FIXED RATE LOAN #4
  47       hou       4310   Servico Houston, Inc.                      Crowne Plaza - Houston           12801 NW Freeway US 290

  17       col       1710   Servico Columbia, Inc.                     Hilton  - Columbia               5485 Twin Knolls Rd.

  42       nrf       3930   NH Motel Enterprises, Inc.                 Hilton  - Troy                   5500 Crooks Rd.

  50       dfw       4388   Lodgian Hotels Fixed IV, L.P.              Holiday Inn Select - Irving      4441 Hwy 114 & Ester Blvd.

   6       lrk       560    Little Rock Lodging Associates I,          Residence Inn - Little Rock      1401 S. Shackleford Rd.
                            Limited Partnership

  22       fre       1776   Lodgian Hotels Fixed IV, L.P.              Holiday Inn - Frederick          999 W. Patrick St.

  26       pdk       2007   Lodgian Hotels Fixed IV, L.P.              Courtyard by Marriott - Paducah  3835 Technology Dr.

  48       abl       4343   Lodgian Hotels Fixed IV, L.P.              Courtyard by Marriott - Abilene  4350 Ridgemont Dr.

  61       fwv       4800   Lodgian Fairmont LLC                       Holiday Inn  - Fairmont          930 East Old Grafton Road
                                                                       SUBTOTAL


                                                               ALLOCATED    AGGREGATE
         LODGIAN  LOCATION                        ALLOCATED    MEZZANINE    ALLOCATED
ML CODE    CODE     CODE       CITY      STATE   LOAN AMOUNT  LOAN AMOUNT  LOAN AMOUNT
- -------    ----     ----       ----      -----   -----------  -----------  -----------
                                                      
FIXED RATE LOAN #4
  47       hou       4310   Houston        TX   $ 15,330,000       $0      $15,330,000

  17       col       1710   Columbia       MD   $ 12,600,000       $0      $12,600,000

  42       nrf       3930   Troy           MI   $  7,350,000       $0      $ 7,350,000

  50       dfw       4388   Irving         TX   $  6,833,500       $0      $ 6,833,500

   6       lrk       560    Little Rock    AR   $  4,760,000       $0      $ 4,760,000


  22       fre       1776   Frederick      MD   $  4,278,000       $0      $ 4,278,000

  26       pdk       2007   Paducah        KY   $  4,340,000       $0      $ 4,340,000

  48       abl       4343   Abilene        TX   $  3,850,000       $0      $ 3,850,000

  61       fwv       4800   Fairmont       WV   $  2,175,000       $0      $ 2,175,000
                                                $ 61,516,500       $0      $61,516,500


                                    Exhibit D

Loan Agreement (FX #4)



                                    EXHIBIT E

                              MANAGEMENT AGREEMENTS

1.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Fixed IV, L.P., as owner,
      re: Holiday Inn, Fredrick, MD.

2.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Fixed IV, L.P., as owner,
      re: Courtyard by Marriott, Abilene TX.

3.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Fixed IV, L.P., as owner,
      re: Holiday Inn Select, DFW Airport, TX.

4.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Hotels Fixed IV, L.P., as owner,
      re: Courtyard by Marriott, Paducah, KY.

5.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Little Rock Lodging Associates I,
      Limited Partnership, as owner, re: Residence Inn, Little Rock, AR.

6.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Lodgian Fairmont LLC, as owner, re:
      Holiday Inn, Fairmont, WV.

7.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and NH Motel Enterprises, Inc., as owner,
      re: Hilton Norfield, Troy, MI.

8.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Columbia, Inc., as owner, re:
      Hilton, Columbia, MD.

9.    Management Agreement, dated on or about June 23, 2004, between Lodgian
      Management Corp., as manager, and Servico Houston, Inc., as owner, re:
      Crowne Plaza, Houston, TX.

                                   Exhibit E

Loan Agreement (FX #4)



                                    EXHIBIT F

                                   [RESERVED]

                                    Exhibit F

Loan Agreement (FX #4)



                                    EXHIBIT G

                           PROPERTY IMPROVEMENT PLANS

                                      None.

                                    Exhibit G

Loan Agreement (FX #4)



                                    EXHIBIT H

                                   [RESERVED]

                                    Exhibit H

Loan Agreement (FX #4)



                                    EXHIBIT I

                             ACCEPTABLE FRANCHISORS



                    TIER 1                                       TIER 2 (WITH FOOD AND BEVERAGE)
- -----------------------------------------------  -------------------------------------------------------------
                                                                          
Six Continents                Crowne Plaza       Six Continents                    Holiday Inn

Hilton Hotels Corp.           Hilton             Six Continents                    Holiday Inn Select

Hilton Hotels Corp.           Doubletree         Six Continents                    Holiday Inn SunSpree Resort

Hilton Hotels Corp.           Homewood Suites    Choice Hotels International       Clarion

Hilton Hotels Corp.           Hilton Garden Inn  Best Western International, Inc.  Best Western

Starwood Hotels & Resorts     Westin             Cendant Corporation               Ramada

Starwood Hotels & Resorts     Sheraton           Starwood Hotels & Resorts         Four Points

Starwood Hotels & Resorts     W                  Choice Hotels International       Quality

US Franchise Systems, Inc.    Hawthorn           Wyndham International             Wyndham Gardens

Marriott International, Inc.  Marriott

Marriott International, Inc.  Renaissance

Marriott International, Inc.  Courtyard

Marriott International, Inc.  Residence Inn

Wyndham International         Wyndham Hotel

Carlson Hotels Worldwide      Radisson


          TIER 3 (WITHOUT FOOD AND
                  BEVERAGE)
- -------------------------------------------------
                           
Six Continents                Holiday Inn Express

Hilton Hotels Corp.           Hampton Inn

Marriott International, Inc.  Fairfield

Choice Hotels International   Comfort Inn

Choice Hotels International   Comfort Suites


                                    Exhibit I

Loan Agreement (FX #4)



                                    EXHIBIT J

                           PROPERTY CONDITION REPORTS



         LODGIAN  LOCATION
ML CODE    CODE     CODE            PROPERTY NAME                      ADDRESS              CITY      STATE
- -------    ----     ----            -------------                      -------              ----      -----
                                                                                    
FIXED RATE LOAN #4
  47       hou      4310    Crowne Plaza - Houston           12801 NW Freeway US 290     Houston        TX

  17       col      1710    Hilton  - Columbia               5485 Twin Knolls Rd.        Columbia       MD

  42       nrf      3930    Hilton  - Troy                   5500 Crooks Rd.             Troy           MI

  50       dfw      4388    Holiday Inn Select - Irving      4441 Hwy 114 & Ester Blvd.  Irving         TX

  6        lrk      560     Residence Inn - Little Rock      1401 S. Shackleford Rd.     Little Rock    AR

  22       fre      1776    Holiday Inn - Frederick          999 W. Patrick St.          Frederick      MD

  26       pdk      2007    Courtyard by Marriott - Paducah  3835 Technology Dr.         Paducah        KY

  48       abl      4343    Courtyard by Marriott - Abilene  4350 Ridgemont Dr.          Abilene        TX

  61       fwv      4800    Holiday Inn  - Fairmont          930 East Old Grafton Road   Fairmont       WV

         LODGIAN  LOCATION                                                                             PROJECT OR JOB
ML CODE    CODE     CODE                   REPORT                    ASSESSMENT FIRM     REPORT DATE        NUMBER
- -------    ----     ----                   ------                    ---------------     -----------        ------
                                                                                     
FIXED RATE LOAN #4
  47       hou      4310    Property Condition Assessment Report  EMG                    May 24, 2004      116681

  17       col      1710    Property Condition Assessment Report  EMG                    May 24, 2004      116619

  42       nrf      3930    Property Condition Assessment Report  EMG                    May 21, 2004      116630

  50       dfw      4388    Property Condition Assessment Report  EMG                    May 21, 2004      116679

  6        lrk      560     Property Condition Assessment Report  EMG                    May 22, 2004      116575

  22       fre      1776    Property Condition Assessment Report  EMG                    May 20, 2004      116621

  26       pdk      2007    Property Condition Assessment Report  EMG                    May 21, 2004      116611

  48       abl      4343    Property Condition Assessment Report  EMG                    May 22, 2004      116672

  61       fwv      4800    Property Condition Assessment Report  Building Evaluation     May 6, 2004    04-111/Ec
                                                                  Services & Technology


                                    Exhibit J

Loan Agreement (FX #4)



                                    EXHIBIT K

                                 ZONING REPORTS*



                                                     DATE OF              PZR SITE
    CHAIN NAME              CITY           ST        REPORT                NUMBER
    ----------              ----           --        ------                ------
                                                        
      Crowne Plaza     Houston             TX   4/23/2004           26462
Hilton                 Columbia            MD   5/4/2004            26432

Hilton                 Troy (Northfield)   MI   5/5/2004            26457
                                                Revised 5/26/2004

Holiday Inn Select     Irving              TX   4/28/2004           26465

Residence Inn          Little Rock         AR   4/30/2004           26421

Holiday Inn            Frederick           MD   4/27/2004           26437

Courtyard by Marriott  Paducah             KY   5/5/2004            26441

Courtyard by Marriott  Abilene             TX   5/4/2004            26463

Holiday Inn            Fairmont            WV   4/29/2004           PZR issued a letter in
                                                                    lieu of their standard
                                                                    report


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

* All reports were prepared for Merrill Lynch Mortgage Lending, Inc. by the
Planning & Zoning Resource Corporation.

                                 Exhibit K

Loan Agreement (FX #4)



                                    EXHIBIT L

                          CERTIFICATE RE: WORK RESERVES

                            BORROWER'S CERTIFICATION

      THIS CERTIFICATION is made as of __________ by the undersigned (the
"Borrowers") to and for the benefit of: (i) the current holder (the "Holder") of
Loan No. ________ and ________ (the "Loans"), and (ii)
_________________________, as mortgage servicer on behalf of the Holder (the
"Servicer"), in order to induce the Servicer to advance to the Borrower the
aggregate sum of $__________ from the _______________ [describe name of reserve
account] Reserve, as provided under Section 6.7 the Loan and Security Agreement
evidencing the Loan (the "Loan Agreement").

      Capitalized terms used in this Certification that are not otherwise
defined herein shall have the meanings ascribed to such terms in the Loan
Agreement.

      The undersigned hereby certifies to the Holder and Servicer as follows:

1.    No event, fact or circumstance has occurred or failed to occur which
constitutes, or upon the lapse of time, or the giving of notice, or both, could
constitute a Default or an Event of Default under the Loan Documents. The Loan
Documents remain the valid and legally binding obligations of the undersigned
and are fully enforceable in accordance with their terms.

2.    The portion of the Work that relates to the subject disbursement request
has been delivered or provided to Borrower in a good and workmanlike manner and
in accordance with the plans and specifications therefor, if applicable,
approved by Lender and in accordance with all legal requirements of governmental
authorities having jurisdiction over the Property, or deposits for work or
materials that relate to the subject disbursement request have been paid by
Borrower, as applicable.

3.    All of the statements, invoices, receipts and information delivered in
connection with the subject disbursement request are true and correct as of the
date hereof, and each person that supplied materials or labor in connection with
the Work to be funded by the subject disbursement request has been paid in full
to date, or will be paid in full to date upon such disbursement, subject to any
applicable retainage. The actual costs incurred in connection with the subject
disbursement request do not materially exceed the amount budgeted for such Work
under the CapEx/FF&E Budget in effect and constitute expenditures for Capital
Improvements.

4.    None of the labor, materials, overhead or other items of expense specified
in the disbursement request submitted herewith, other than payments on account
of retainage, has previously been the basis of any disbursement request by the
Borrower or any payment by the Servicer, other than for partially completed work
or deposits and, when added to all sums previously disbursed by the Servicer on
account of the related work, do not exceed the costs of all services completed,
installed and/or delivered, or deposits made, as applicable, as of the date of
this certificate. In addition, the amount remaining in the subject reserve will
be sufficient to

                                  Exhibit L-1

Loan Agreement (FX #4)



pay in full the entire remaining cost of related work required to be completed
in accordance with the Loan Agreement.

5.    None of the materials or other items of expense specified in the
disbursement request submitted herewith are stored at any Property unless such
materials are properly stored and secured at the applicable Property in
accordance with the Borrowers' customary procedures and sound construction
practices as reasonably determined by Lender. None of the materials or other
items of expense specified in the disbursement request submitted herewith are
stored at any location other than at the Properties unless Lender determines in
its reasonable discretion that Lender has a perfected first priority security
interest in any such materials.

6.    All permits and approvals required to complete the work in process have
been obtained. All conditions to the disbursement have been met in accordance
with the terms of the Loan Agreement.

7.    The individual that is signing below on behalf of the Borrower has made
due investigation of the matters herein set forth, and acknowledges that the
Servicer is relying upon the certification made herein as a condition to
advancing the requested reserve disbursement.

8.    This Certification shall be deemed to be a "Loan Document" as that term is
defined in the Loan Agreement. Accordingly, an uncured breach of any
representation or warranty set forth herein shall constitute an Event of Default
under the Mortgages and the Loan Documents.

      IN WITNESS WHEREOF, the Borrower has executed this Certification under
seal as of the date written above.

                                     BORROWERS:
                                     Legal Entities listed on "Attachment A"

                                     By: ____________________________
                                         Name:  _____________________
                                         Title: _____________________

                                   Exhibit L-2

Loan Agreement (FX #4)



                                  ATTACHMENT A

BORROWERS:

                                  Exhibit L-3

Loan Agreement (FX #4)



                                   SCHEDULE 1

                                    BORROWERS

LODGIAN HOTELS FIXED IV, L.P.
LITTLE ROCK LODGING ASSOCIATES I, LIMITED
PARTNERSHIP LODGIAN FAIRMONT LLC NH MOTEL
ENTERPRISES, INC.
SERVICO COLUMBIA, INC.
SERVICO HOUSTON, INC.

                                   Schedule 1

Loan Agreement (FX #4)



                                  SCHEDULE 2.4

                      SCHEDULED MORTGAGE PRINCIPAL PAYMENTS



                    SCHEDULED     SCHEDULED        TOTAL
PERIOD     DATE      INTEREST     PRINCIPAL       PAYMENT
- ------     ----      --------     ---------       -------
                                   
   1      8/1/2004  348,400.41      69,928.09     418,328.50
   2      9/1/2004  348,004.37      70,324.13     418,328.50
   3     10/1/2004  336,392.98      81,935.52     418,328.50
   4     11/1/2004  347,142.04      71,186.46     418,328.50
   5     12/1/2004  335,553.75      82,774.75     418,328.50
   6      1/1/2005  346,270.08      72,058.42     418,328.50
   7      2/1/2005  345,861.97      72,466.53     418,328.50
   8      3/1/2005  312,020.76     106,307.74     418,328.50
   9      4/1/2005  344,849.48      73,479.02     418,328.50
  10      5/1/2005  333,322.58      85,005.92     418,328.50
  11      6/1/2005  343,951.89      74,376.61     418,328.50
  12      7/1/2005  332,449.03      85,879.47     418,328.50
  13      8/1/2005  343,044.28      75,284.22     418,328.50
  14      9/1/2005  342,617.91      75,710.59     418,328.50
  15     10/1/2005  331,150.76      87,177.74     418,328.50
  16     11/1/2005  341,695.38      76,633.12     418,328.50
  17     12/1/2005  330,252.94      88,075.56     418,328.50
  18      1/1/2006  340,762.55      77,565.95     418,328.50
  19      2/1/2006  340,323.25      78,005.25     418,328.50
  20      3/1/2006  306,989.71     111,338.79     418,328.50
  21      4/1/2006  339,250.90      79,077.60     418,328.50
  22      5/1/2006  327,873.91      90,454.59     418,328.50
  23      6/1/2006  338,290.75      80,037.75     418,328.50
  24      7/1/2006  326,939.47      91,389.03     418,328.50
  25      8/1/2006  337,319.87      81,008.63     418,328.50
  26      9/1/2006  336,861.07      81,467.43     418,328.50
  27     10/1/2006  325,548.08      92,780.42     418,328.50
  28     11/1/2006  335,874.22      82,454.28     418,328.50
  29     12/1/2006  324,587.65      93,740.85     418,328.50
  30      1/1/2007  334,876.33      83,452.17     418,328.50
  31      2/1/2007  334,403.70      83,924.80     418,328.50
  32      3/1/2007  301,612.74     116,715.76     418,328.50
  33      4/1/2007  333,267.36      85,061.14     418,328.50
  34      5/1/2007  322,050.60      96,277.90     418,328.50
  35      6/1/2007  332,240.34      86,088.16     418,328.50
  36      7/1/2007  321,051.08      97,277.42     418,328.50
  37      8/1/2007  331,201.85      87,126.65     418,328.50
  38      9/1/2007  330,708.40      87,620.10     418,328.50
  39     10/1/2007  319,560.16      98,768.34     418,328.50
  40     11/1/2007  329,652.79      88,675.71     418,328.50
  41     12/1/2007  318,532.81      99,795.69     418,328.50
  42      1/1/2008  328,585.37      89,743.13     418,328.50
  43      2/1/2008  328,077.11      90,251.39     418,328.50
  44      3/1/2008  306,432.68     111,895.82     418,328.50
  45      4/1/2008  326,932.25      91,396.25     418,328.50
  46      5/1/2008  315,885.12     102,443.38     418,328.50
  47      6/1/2008  325,834.43      92,494.07     418,328.50
  48      7/1/2008  314,816.70     103,511.80     418,328.50
  49      8/1/2008  324,724.34      93,604.16     418,328.50
  50      9/1/2008  324,194.22      94,134.28     418,328.50


                                  Schedule 2.4

Loan Agreement (FX #4)



                                   
  51     10/1/2008  313,220.40     105,108.10     418,328.50
  52     11/1/2008  323,065.80      95,262.70     418,328.50
  53     12/1/2008  312,122.20     106,206.30     418,328.50
  54      1/1/2009  321,924.78      96,403.72     418,328.50
  55      2/1/2009  321,378.79      96,949.71     418,328.50
  56      3/1/2009  289,781.68     128,546.82     418,328.50
  57      4/1/2009  320,101.68      98,226.82     418,328.50
  58      5/1/2009  309,237.46     109,091.04     418,328.50
  59      6/1/2009  318,927.53      99,400.97     418,328.50
  60      7/1/2009  308,094.75  56,213,121.22  56,521,215.97



                                  Schedule 2.4

Loan Agreement (FX #4)



                                SCHEDULE 2.12(G)

                         CROSSED LOANS/CROSSED BORROWERS

            1.    Pool 1 Loan: A Loan in the amount of $63,801,000 ("Pool 1
Loan"), which Pool 1 Loan is evidenced by a Promissory Note, dated as of the
date hereof ("Note 1"), made by the Pool 1 Borrowers to Lender and is further
evidenced and secured by a Loan and Security Agreement, dated as of the date
hereof ("Loan Agreement 1"), between Impac Hotels I, L.L.C., Lodgian Denver LLC,
Macon Hotel Associates, L.L.C., Servico Northwoods, Inc. and Lodgian Hotels
Fixed I, LLC (collectively, the "Pool 1 Borrowers") and Lender;

            2.    Pool 2 Loan: A Loan in the amount of $67,864,000 ("Pool 2
Loan"), which Pool 2 Loan is evidenced by a Promissory Note, dated as of the
date hereof ("Note 2"), made by the Pool 2 Borrowers to Lender and is further
evidenced and secured by a Loan and Security Agreement, dated as of the date
hereof ("Loan Agreement 2"), between Albany Hotels, Inc., AMI Operating
Partners, L.P., Apico Inns of GreenTree, Inc., Dedham Lodging Associates I,
Limited Partnership, Lodgian Hotels Fixed II, Inc., Lodgian Augusta LLC, Lodgian
Lafayette LLC and Lodgian Tulsa LLC (collectively, the "Pool 2 Borrowers") and
Lender; and

            3.    Pool 3 Loan: A Loan in the amount of $66,818,500 ("Pool 3
Loan"), which Pool 3 Loan is evidenced by a Promissory Note, dated as of the
date hereof ("Note 3"), made by the Pool 3 Borrowers to Lender and is further
evidenced and secured by a Loan and Security Agreement, dated as of the date
hereof ("Loan Agreement 3"), between Lodgian Hotels Fixed III, LLC, Lodgian AMI,
Inc., Minneapolis Motel Enterprises, Inc. and Servico Centre Associates, Ltd.
(collectively, the "Pool 3 Borrowers") and Lender.

                  "Crossed Loans" shall mean, collectively, the Pool 1 Loan, the
Pool 2 Loan and Pool 3 Loan.

                  "Crossed Borrowers" shall mean, collectively, the Pool 1
Borrowers, the Pool 2 Borrowers and the Pool 3 Borrowers.

                                Schedule 2.12(G)

Loan Agreement (FX #4)



                                 SCHEDULE 3.1(A)

                             LIST OF LOAN DOCUMENTS

1.    Loan and Security Agreement

2.    Note

3.    Mortgages

4.    Assignments of Leases

5.    Assignments of Agreements, Licenses, Permits and Contracts

6.    Assignments of Hotel Management Agreements

7.    Guaranty of Recourse Obligations

8.    Environmental Indemnity

9.    Deposit Account Agreements

10.   Financing Statements

11.   Cash Management Agreement

12.   Borrower's Closing Certificate under Section 3.1(D)

13.   Closing Certificate of Lodgian, Inc.

14.   Cooperation Agreement

15.   Agreement Regarding Right of First Offer

16.   Contribution Agreement

17.   Cross-Guaranty

18.   Post Closing Agreement

                                 Schedule 3.1(A)

Loan Agreement (FX #4)



                                 SCHEDULE 4.1(C)

                    ORGANIZATIONAL CHART FOR BORROWER PARTIES

                                 Schedule 4.1(C)

Loan Agreement (FX #4)



                                  SCHEDULE 4.2

                                    CONSENTS

                                      None.

                                  Schedule 4.2

Loan Agreement (FX #4)



                                  SCHEDULE 4.5

                            CONDEMNATION PROCEEDINGS

                                      None.

                                  Schedule 4.5

Loan Agreement (FX #4)



                                 SCHEDULE 4.5(A)

                    RIGHTS TO PURCHASE/RIGHTS OF FIRST OFFER



                                                  DATE OF AGREEMENT OR     RIGHT OF FIRST REFUSAL
                                                  AMENDMENT GRANTING       SECTION OF AGREEMENT
     FRANCHISOR                LOCATION           RIGHT OF FIRST REFUSAL   OR AMENDMENT
     ----------                --------           ----------------------   ------------
                                                                  
Holiday Inn             999 West Patrick Street   5/28/1998                Section 14.G.; page 24
Frederick, MD           Frederick, MD 21701

Hilton Inn              5485 Twin Knolls Road     2/9/1998                 Section 9.b.1.; page 8
Columbia, MD            Columbia, MD 21945-3247

Hilton Hotel            5500 Crooks Road          10/11/1983               Section 9.b.1

Northfield, MI          Troy, MI 49098

Courtyard by Marriott   4350 Ridgemont Drive      12/23/98 (Amendment)     Section A.; page 2
Abilene, TX             Abilene, TX


                                Schedule 4.5(A)

Loan Agreement (FX #4)



                                 SCHEDULE 4.7(B)

                                    RENT ROLL



                                                                                                    BASE RENT AND
                  TYPE OF                                AREA                            SECURITY  PERCENTAGE RENT,
STATE  PROPERTY  AGREEMENT     LANDLORD      TENANT      (SF)            TERM             DEPOSIT       IF ANY
- -----  --------  ---------     --------      ------      ----            ----             -------       ------
                                                                           
 MI    Hilton    Restaurant  NH Motel      C.A. Muer    10,000  20 years, commencing      N/A      $   8,368.33 per
       Hotel -   Lease       Enterprises,  Corporation  sf      September 15, 1976;                month
       Troy, MI              Inc.                               Option to renew for 3
                                                                additional 5-year
                                                                terms. 2 renewal
                                                                options exercised,
                                                                Lease expires September
                                                                15, 2006


                                 Schedule 4.7(B)

Loan Agreement (FX #4)



                                 SCHEDULE 4.7(E)

                               FRANCHISE DEFAULTS

                                      None.

                                 Schedule 4.7(E)

Loan Agreement (FX #4)



                                  SCHEDULE 4.9

                                   LITIGATION

                                      None.

                                  Schedule 4.9

Loan Agreement (FX #4)



                                  SCHEDULE 4.14

                                   ERISA PLANS

1.    Lodgian, Inc. 401(k) Plan.

2.    Lodgian, Inc. Employee Health & Welfare Plan.

3.    Multiemployer Plans covering employees of the following unions:

      Hotel Employees & Restaurant Employees Local 24 (Northfield, MI) (pension,
      welfare)

      International Union of Operating Engineers - Local 547 - A, B, C, E, H,
      (Northfield, MI) (pension, welfare)

                                  Schedule 4.14

Loan Agreement (FX #4)



                                  SCHEDULE 4.20

                                    INSURANCE

                                  Schedule 4.20

Loan Agreement (FX #4)



                                  SCHEDULE 4.28

                        COLLECTIVE BARGAINING AGREEMENTS



                                                                                                                    DATE OF
         HOTEL                     BORROWER                                      UNION                             AGREEMENT
         -----                     --------                                      -----                             ---------
                                                                                                          
Hilton - Northfield, MI   NH Motel Enterprises, Inc.   Hotel Employees and Restaurant Employees Union Local 24      11/1/03

Hilton - Northfield, MI   NH Motel Enterprises, Inc.   The International Union of Operating Engineers, Local 547    10/1/03


                                  Schedule 4.28

Loan Agreement (FX #4)



                                  SCHEDULE 5.14

                               MATERIAL AGREEMENTS

Agreement between PFG Broadline and Lodgian, Inc. dated July 2, 2003.

                                  Schedule 5.14

Loan Agreement (FX #4)



                                  SCHEDULE 6.5

                          REQUIRED CAPITAL IMPROVEMENTS

                                  Schedule 6.5

Loan Agreement (FX #4)



                                  SCHEDULE 6.6

                          ENVIRONMENTAL WORK/ O&M WORK



         LODGIAN  LOCATION
ML CODE    CODE     CODE         PROPERTY NAME              ADDRESS              CITY      STATE
- -------    ----     ----         -------------              -------              ----      -----
                                                                         
FIXED RATE LOAN #4
  47       hou      4310    Crowne Plaza - Houston   12801 NW Freeway US 290  Houston       TX

  17       col      1710    Hilton  - Columbia       5485 Twin Knolls Rd.     Columbia      MD

  42       nrf      3930    Hilton  - Troy           5500 Crooks Rd.          Troy          MI

  50       dfw      4388    Holiday Inn Select -     4441 Hwy 114 & Ester     Irving        TX
                            Irving                   Blvd.

   6       lrk       560    Residence Inn - Little   1401 S. Shackleford Rd.  Little Rock   AR
                            Rock

  22       fre      1776    Holiday Inn - Frederick  999 W. Patrick St.       Frederick     MD

  26       pdk      2007    Courtyard by Marriott -  3835 Technology Dr.      Paducah       KY
                            Paducah

  48       abl      4343    Courtyard by Marriott -  4350 Ridgemont Dr.       Abilene       TX
                            Abilene

  61       fwv      4800    Holiday Inn  - Fairmont  930 East Old Grafton     Fairmont      WV
                                                     Road


         LODGIAN  LOCATION                                                           REMEDIATION
ML CODE    CODE     CODE                  REQUIRED ENVIRONMENTAL WORK                   COSTS      REQUIRED COMPLETION DATE
- -------    ----     ----                  ---------------------------                   -----      ------------------------
                                                                                   
FIXED RATE LOAN #4
  47       hou      4310    None                                                       $    0           Not Applicable

  17       col      1710    None                                                       $    0           Not Applicable

  42       nrf      3930    (1) Develop and implement an asbestos Operations           $1,995     September 30, 2004 (Except
                            and Maintenance Program ($495) (2) Remove
                            stained O&M Program should be in soil around
                            generator AST and install secondary place by
                            July 31, 2004) containment beneath tank
                            ($1,000-1,500).

  50       dfw      4388    None                                                       $    0           Not Applicable

   6       lrk       560    None                                                       $    0

  22       fre      1776    (1) Abate a limited quantity of damaged asbestos-          $1,200         September 30, 2004
                            containing HVAC coating ($900-1,200).

  26       pdk      2007    None                                                       $    0           Not Applicable

  48       abl      4343    None                                                       $    0           Not Applicable

  61       fwv      4800    Asbestos was found in the sprayed-on acoustic ceiling      $    0            July 31, 2004
                            texturing, and the floor tiles and floor tile mastic
                            in the kitchen storage area, based on laboratory
                            results from samples taken by Building Evaluation
                            Services and Technology and review of a previous
                            report. Therefore, Building Evaluation Services and
                            Technology recommends that the property follow the
                            Asbestos Operations and Maintenance Program prepared
                            by Building Evaluation Services and Technology, dated
                            March 11, 2003, for the sprayed-on acoustic ceiling
                            texturing, and the floor tiles and floor tile mastic
                            in the kitchen storage area, that is currently in place
                            at the subject property.


                                  Schedule 6.6

Loan Agreement (FX #4)



                                  SCHEDULE 6.7

                           RESERVE FUNDING CONDITIONS

            1.    The Borrowers shall have submitted to Lender a written request
for disbursement at least five (5) days prior to the date on which the Borrowers
request such disbursement be made, specifying the specific Work or for which the
disbursement is requested and such other information (such as the price of
materials and the cost of contracted labor or other services) as Lender may
reasonably require, which request must be on a form specified or approved by
Lender;

            2.    On the date such request is received by Lender and on the date
such payment is to be made, no Event of Default shall exist and remain uncured;

            3.    Lender shall have received a certificate from the Borrowers
stating that all Work at the Property to be funded by the requested disbursement
have been completed in a good and workmanlike manner and in accordance with any
plans and specifications approved by Lender and all legal requirements of any
Governmental Authority having jurisdiction over the Property, such certificate
to be accompanied, in either case, by a copy of any license, permit or other
approval by any Governmental Authority required to commence (only for the first
advance with respect to each distinct item of work) and/or complete (only for
the final advance with respect to each distinct item of work) such Work;

            4.    Lender shall have received a certificate from the Borrowers
stating that each Person that supplied materials or labor in connection with the
Work to be funded by the requested disbursement has been paid in full or will be
paid in full upon such disbursement, such certificate to be accompanied by
copies of invoices for all items or materials purchased and all contracted labor
or services provided, and, with respect to Work relating to mold, a certificate
of a Certified Industrial Hygienist that the such Work has been completed in
conformity with applicable mold clean-up procedures promulgated by the
applicable Governmental Authority within the state in which the applicable
Property is located, or, if no such procedures exist, in conformity with the New
York City Department of Health or the United States Environmental Protection
guidelines for mold related clean-up work;

            5.    Lender shall have received appropriate lien waivers (including
final lien waivers) from each contractor, supplier, materialman, mechanic or
subcontractor who receives payment in an amount equal to or greater than $10,000
for completion of its work or delivery of its materials, which lien waivers
shall conform to the requirements of applicable law and shall cover all work
performed and materials supplied (including equipment and fixtures) for a
Property by that contractor, supplier, subcontractor, mechanic or materialman
through the date covered by the current disbursement request; and

            6.    At Lender's option, Lender shall have received a title search
for the Property effective to the date of the disbursement, which search shows
that no mechanic's or materialmen's liens or other Liens of any nature have been
placed against the Property since the date of recordation of the applicable
Mortgage and that title to the Property is free and clear of all Liens (other
than the Permitted Encumbrances).

                                  Schedule 6.7

Loan Agreement (FX #4)

EX-10.5.2

                                                                  EXHIBIT 10.5.2

                                 PROMISSORY NOTE

$61,516,500                                                        JUNE 25, 2004

      FOR VALUE RECEIVED, the undersigned, each having an address at c/o
Lodgian, 3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 (each, a
"Borrower" and, collectively, the "Borrowers"), jointly and severally, promise
to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware
corporation (together with its successors and assigns, "Lender"), having an
address at Four World Financial Center, New York, New York 10080, or such other
place as Lender may designate in writing, the principal sum of SIXTY-ONE MILLION
FIVE HUNDRED SIXTEEN THOUSAND FIVE HUNDRED AND NO/100 Dollars ($61,516,500),
with interest on the unpaid principal balance from the date of this Note, until
paid, at the Interest Rate (as hereinafter defined) in effect from time to time
hereunder. This Promissory Note may be referred to herein as the "Note," and the
loan evidenced hereby may be referred to herein as the "Loan."

      PAYMENTS OF PRINCIPAL AND INTEREST. The Borrowers shall make a payment on
the date hereof to Lender of interest only on the outstanding principal balance
of this Note at the Interest Rate (hereinafter defined), from the date hereof
through and including the last day of the calendar month in which this Note is
executed. Commencing on August 1, 2004 (the "First Payment Date") and on the
first day of each calendar month (each, a "Payment Date") thereafter to and
including the Maturity Date (hereinafter defined), the Borrowers shall make
payments to Lender of interest and principal in monthly installments in the
amounts set forth on Schedule 1 attached hereto and made a part hereof (the
"Monthly Debt Service Payment Amounts"). The entire outstanding principal
balance of the Loan, all accrued and unpaid interest thereon and all other
amounts due hereunder and under the other Loan Documents (collectively the
"Debt") if not sooner paid, shall be due and payable on July 1, 2009 (the
"Maturity Date").

      Interest on the principal sum of this Note shall be calculated on the
basis of a 360 day year, and shall be charged for the actual number of days
elapsed during any month or other accrual period. Interest on this Note shall be
payable in arrears.

      DEFINITIONS. The term "Interest Rate" as used in this Note shall have the
meaning set forth in Section 2.2 of the Loan Agreement (hereinafter defined).

      SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered
pursuant to that certain Loan and Security Agreement, dated as of the date
hereof (the "Loan Agreement"), among the Borrowers and Lender and is secured by,
among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt,
Assignments of Leases and Rents and Security Agreements, each dated as of the
date hereof (collectively, the "Mortgages"), each executed by the applicable
Borrower, encumbering the fee interests or ground lessee's interests of such
Borrower, as applicable, in and to certain properties more particularly
described therein (collectively, the "Properties"). This Note, the Loan
Agreement, the Mortgages, and all other documents or instruments given by the
Borrowers or any of them or any guarantor and accepted by Lender for purposes of
evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by
this Note may be referred to as the "Loan Documents." Capitalized terms used but

Promissory Note (FX-4)



not otherwise defined herein shall have the respective meanings given thereto in
the Loan Agreement.

      DEFEASANCE.

      A.    Notwithstanding anything to the contrary contained in this Note, the
Mortgages or the other Loan Documents, at any time after the earlier to occur of
(x) the second (2nd) anniversary of the date that is the "startup day," within
the meaning of Section 860G of the Internal Revenue Code of 1986, as amended
from time to time or any successor statute (the "Code"), of a "real estate
mortgage investment conduit," within the meaning of Section 860D of the Code,
that holds this Note and (y) forty-eight (48) months after the date of this
Note, the Borrowers shall have the right to defease all or any portion of the
Loan evidenced by this Note with U.S. Government Securities (a "Defeasance");
provided that a partial Defeasance of this Note shall be permitted only in
connection with the release of one or more of the Properties from the lien of
the Mortgages and the other Loan Documents in accordance with Section 11.4 of
the Loan Agreement and upon the satisfaction of the following conditions
precedent (all of which conditions shall become covenants upon occurrence of the
Defeasance):

            (i)   The Borrowers shall provide to Lender not less than thirty
(30) days' prior written notice specifying the date on which the Defeasance
Deposit (hereinafter defined) is to be made (the date so specified may be
referred to as the "Defeasance Election Date").

            (ii)  The Borrowers shall pay to Lender on the Defeasance Election
Date all interest accrued and unpaid on the outstanding principal amount of this
Note due through the Defeasance Election Date, or through the end of the
Interest Accrual Period during which the Defeasance Election Date occurs if the
Defeasance Election Date is other than a Payment Date, and the scheduled
principal amortization payment due on such Defeasance Election Date, or due upon
the next succeeding Payment Date if the Defeasance Election Date is other than a
Payment Date, together with all other amounts, if any, then due and payable
under this Note, the Mortgages and the other Loan Documents.

            (iii) The Borrowers shall irrevocably deposit with Lender an amount
of U.S. Government Securities (hereinafter defined) which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms will provide, not later than the due dates of the payments owing
hereunder, cash in an amount sufficient, without reinvestment, in the opinion of
a firm of independent certified public accountants reasonably acceptable to
Lender expressed in a written certification thereof delivered to Lender (the
"CPA Certificate"), (1) with respect to a total Defeasance, to pay and discharge
the Scheduled Defeasance Payments (hereinafter defined) for the principal
balance of this Note or (2) with respect to a partial Defeasance in connection
with the release of one or more Properties, to pay and discharge the Scheduled
Defeasance Payments relating to the Release Price for such Property or
Properties (the U.S. Government Securities so deposited together with any
interest or other increase from the issuer of the securities earned thereon, and
any replacements thereof, shall be referred to herein as the "Defeasance
Deposit"). All such U.S. Government Securities, if in registered form, shall be
registered in the name of Lender or its nominee (and, if registered in nominee's
name, endorsed to Lender or in blank) and, if issued in book-entry form, the
name of Lender or its

                                       2

Promissory Note (FX-4)



nominee shall appear as the owner of such securities on the books of the Federal
Reserve Bank or other party maintaining such book-entry system.

            (iv)  The Borrowers shall cause the following to be delivered to
Lender on or prior to the Defeasance Election Date, all in form and substance
reasonably satisfactory to Lender:

                  (a)   a security agreement, in form and substance reasonably
satisfactory to Lender, creating a first priority lien on the Defeasance Deposit
(the "Defeasance Security Agreement");

                  (b)   the CPA Certificate;

                  (c)   a certificate of the Borrowers certifying that all
requirements for the Defeasance set forth herein have been satisfied;

                  (d)   an opinion of counsel for the Borrowers in form and
substance reasonably satisfactory to Lender to the effect that (i) Lender has a
perfected first priority security interest in the Defeasance Deposit, (ii) the
holder of this Note will not recognize additional income, gain or loss for
United States federal income tax purposes as a result of the Defeasance and will
be subject to United States federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if the Defeasance had
not occurred, (iii) any holder, trustee or custodian of this Note which is a
"real estate mortgage investment conduit" within the meaning of Section 860D of
the Code will not fail to maintain its status as such as a result of the
Defeasance and (iv) the Defeasance Security Agreement is enforceable against the
Borrowers in accordance with its terms;

                  (e)   evidence in writing from the applicable Rating Agencies
for any Securities backed in whole or in part by this Note, to the effect that
the Defeasance will not result in a downgrading, withdrawal, or qualification of
the ratings in effect immediately prior to such Defeasance for any class of such
then outstanding Securities;

                  (f)   evidence reasonably satisfactory to Lender that each of
the Borrowers remains validly existing and in good standing under the laws of
the state where it is organized and, to the extent required by applicable law,
qualified to do business in the state where its respective Property is located;
and the Borrowers shall maintain such existence during the time thereafter when
this Note shall be outstanding (unless a Successor Borrower (hereinafter
defined) assumes the obligations of each of the Borrowers or the Defeasing
Borrower(s) (as hereinafter defined), as the case may be, under this Note); and

                  (g)   a certificate of the Borrowers certifying that all of
the representations, and warranties contained in the Loan Agreement and the
other Loan Documents are true and correct in all material respects as of the
Defeasance Election Date and ratifying all of the covenants and obligations of
the Borrowers under the Loan Documents as of such date and such other
certificates, documents or instruments as Lender may reasonably request or as
may be required by the Rating Agencies referred to above, provided that such
certificates, documents or instruments shall not increase the Borrowers'
obligations or decrease the Borrowers' rights under the Loan Documents.

                                       3

Promissory Note (FX-4)



            (v)   Either (1) each of the Borrowers in the case of a total
Defeasance, or the Defeasing Borrower(s) in the case of a partial Defeasance
shall deliver to Lender a certificate stating that at all times following the
Defeasance, the Borrowers or the Defeasing Borrower(s), as the case may be,
shall have no interest in any assets other than the Defeasance Deposit, or (2)
such Borrower(s) shall satisfy all of the requirements of Section C below.

            (vi)  The Borrowers shall pay to Lender all reasonable out-of-pocket
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements) incurred by Lender in connection with the Defeasance.

            (vii) In the event only a portion of the Loan evidenced by this Note
is the subject of the Defeasance in connection with the release of any Lien of
any applicable Mortgage on one or more individual Properties under Section 11.4
of the Loan Agreement, the Borrowers shall execute and deliver all necessary
documents to amend and restate this Note and issue two substitute promissory
notes therefor: one note having a principal balance equal to the defeased
portion of the original Note (the "Defeased Note") and one note having a
principal balance equal to the undefeased portion of the original Note (the
"Undefeased Note"). The Defeased Note and the Undefeased Note shall have
identical terms as the original Note (and the Defeased Note and the Undefeased
Note or Notes shall be cross-defaulted with each other), except for the
principal balance. A Defeased Note cannot be the subject of any further
Defeasance. An Undefeased Note may be the subject of a further Defeasance in
accordance with the terms of this Note and the Loan Agreement (the term "Note",
as used above in this clause (vii) for these purposes, being deemed to refer to
the Undefeased Note that is the subject of further defeasance); provided,
however, that no such partial Defeasance shall take place unless the conditions
hereof and the conditions of Section 11.4 of the Loan Agreement are satisfied.

      B.    Upon compliance with the requirements of Section A above and
compliance with the requirements of Section 11.4 of the Loan Agreement, Lender
shall cause each of the Properties, in the case of a total Defeasance, or each
Defeased Property (as hereinafter defined), in the case of a partial Defeasance,
to be released from the lien of the applicable Mortgages and the other
applicable Loan Documents. The obligations under the Loan Documents with respect
to the Properties or each Defeased Property, as the case may be, shall no longer
be applicable, and the Defeasance Deposit shall be the sole source of collateral
securing this Note or the Defeased Note, as the case may be. Lender shall apply
the Defeasance Deposit and the payments received therefrom to the payment of all
scheduled principal and interest payments due on all successive Payment Dates
under this Note or the Defeased Note, as the case may be, after the Defeasance
Election Date to and including the Maturity Date and to payment of the entire
remaining Debt or the entire remaining principal balance, accrued and unpaid
interest and other sums due under the Defeased Note, as the case may be, on the
Maturity Date (collectively, the "Scheduled Defeasance Payments"). The
Borrowers, pursuant to the Defeasance Security Agreement or other appropriate
document, shall direct that the payments received from the Defeasance Deposit
shall be made directly to Lender and applied to satisfy the obligations of the
Borrowers under this Note or the Defeased Note, as the case may be.

      C.    If, after the Defeasance, the Borrowers, in the case of a total
Defeasance, or the Defeasing Borrower(s), in the case of a partial Defeasance,
will own any assets other than the Defeasance Deposit, the Borrowers or the
Defeasing Borrower(s), as the case may be, shall

                                       4

Promissory Note (FX-4)



establish or designate a single-purpose, bankruptcy-remote successor entity
acceptable to Lender (the "Successor Borrower"), with respect to which a
nonconsolidation opinion reasonably satisfactory in form and substance to Lender
and any applicable Rating Agencies shall be delivered to Lender and such Rating
Agencies, in which case the Borrowers or the Defeasing Borrower(s), as the case
may be, shall transfer and assign to the Successor Borrower all of their
respective obligations, rights and duties under this Note or the Defeased Note,
as the case may be, and the Defeasance Security Agreement, together with the
pledged Defeasance Deposit. The Successor Borrower shall assume the obligations
of the Borrowers or the Defeasing Borrower(s), as the case may be, under this
Note or the Defeased Note, as the case may be, and the Defeasance Security
Agreement, and such Borrower(s) shall be relieved and released of their
respective obligations hereunder and thereunder. Each of the Borrowers or the
applicable Defeasing Borrower(s), as the case may be, shall pay not less than
$1,000 to the Successor Borrower as consideration for assuming such Borrower's
obligations.

      D.    As used herein, the following terms shall have the following
meanings:

            (i)   "Defeased Property" shall mean any Property being released
from the lien of the Mortgage relating to such Property pursuant to a partial
Defeasance in accordance with the provisions of this Note and Section 11.4 of
the Loan Agreement.

            (ii)  "U.S. Government Securities" shall mean securities that are
(i) direct obligations of the United States of America for the full and timely
payment of which its full faith and credit is pledged or (ii) obligations of an
entity controlled or supervised by and acting as an agency or instrumentality
and guaranteed as a full faith and credit obligation which shall be fully and
timely paid by the United States of America, which in either case are not
callable or redeemable at the option of the issuer thereof (including a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the United
States Securities Act)) as custodian with respect to any such U.S. Government
Securities or a specific payment of principal of or interest on any such U.S.
Government Securities held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the securities or the specific payment of principal of or interest on
the securities evidenced by such depository receipt.

            (iii) "Defeasing Borrower" shall mean the Borrower owning or
leasing, as the case may be, a Defeased Property.

            (iv)  "Release Price" shall have the meaning set forth in the Loan
Agreement.

      E.    If, after payment in full of all obligations evidenced by this Note
or any other of the Loan Documents, any of the Defeasance Deposit remains, such
remaining balance of the Defeasance Deposit shall be returned to the Borrowers
(or to the Successor Borrower, as the case may be) or Lender shall assign to the
Borrowers (or the Successor Borrower, as the case may be) all of Lender's right,
title, and interest in the Government Securities constituting the Defeasance
Deposit.

                                       5

Promissory Note (FX-4)



      PREPAYMENT; PREPAYMENT CONSIDERATION. The Borrowers may not prepay this
Note in whole or in part at any time except as expressly provided in Section 2.6
of the Loan Agreement.

      EVENTS OF DEFAULT; ACCELERATION. Upon and at any time following the
occurrence of any Event of Default, then at the option of Lender and without
notice, the entire principal amount and all interest accrued and outstanding
hereunder and all other amounts outstanding under any of the Loan Documents
shall at once become due and payable, and Lender may exercise any and all of its
rights and remedies under any of the Loan Documents or pursuant to applicable
law. Lender may so accelerate such obligations and exercise such remedies at any
time after the occurrence of any Event of Default, regardless of any prior
forbearance.

      LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to
non-payment of any principal, interest or other sums due under this Note or
under any of the other Loan Documents shall occur, then the Borrowers shall pay
to Lender, in addition to all sums otherwise due and payable, a late fee in an
amount equal to five percent (5.0%) of such principal, interest or other sums
due hereunder or under any other Loan Document (or, in the case of a partial
payment, the unpaid portion thereof), such late charge to be immediately due and
payable without demand by Lender.

      Upon the occurrence and during the continuance of an Event of Default and
in any event from and after the Maturity Date of the Loan, the outstanding
principal balance of this Note shall bear interest until paid in full at a rate
per annum (the "Default Rate") equal to the sum of (i) four percent (4.0%) and
(ii) the Interest Rate otherwise applicable under this Note.

      The Borrowers agree that such late charges and Default Rate of interest
are reasonable and do not constitute a penalty.

      LAWFUL INTEREST. Notwithstanding any provision to the contrary contained
in this Note, the Loan Agreement or the other Loan Documents, the Borrowers
shall not be required to pay, and Lender shall not be permitted to collect, any
amount of interest in excess of the maximum amount of interest permitted by law
("Excess Interest"). If any Excess Interest is provided for or determined by a
court of competent jurisdiction to have been provided for in this Note, the Loan
Agreement or in any of the other Loan Documents, then in such event: (1) the
provisions of this subsection shall govern and control; (2) the Borrowers shall
not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender
may have received hereunder shall be, at Lender's option, (a) applied as a
credit against either or both of the outstanding principal balance of the Loan
or accrued and unpaid interest thereunder (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any combination of
the foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to time under
applicable law (the "Maximum Rate"), and this Note, the Loan Agreement and the
other Loan Documents shall be deemed to have been and shall be, reformed and
modified to reflect such reduction; and (5) the Borrowers shall not have any
action against Lender for any damages arising out of the payment or collection
of any Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligation is calculated at the Maximum Rate rather than the
applicable rate under this Note or the Loan Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate,

                                       6

Promissory Note (FX-4)



the rate of interest payable on such Obligations shall, to the extent permitted
by law, remain at the Maximum Rate until Lender shall have received or accrued
the amount of interest which Lender would have received or accrued during such
period on Obligations had the rate of interest not been limited to the Maximum
Rate during such period. If the Default Rate shall be finally determined to be
unlawful, then the applicable Interest Rate shall be applicable during any time
when the Default Rate would have been applicable hereunder, provided however
that if the Maximum Rate is greater or lesser than the applicable Interest Rate,
then the foregoing provisions of this paragraph shall apply.

      CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the
obligation of the Borrowers or their successors or assigns to pay the
outstanding principal balance of this Note, interest thereon and other amounts
due hereunder and to observe the covenants contained herein, in the Loan
Agreement, the Mortgages or in any other Loan Document, without affecting the
guaranty of any person or entity for payment of the outstanding principal
balance of this Note, without giving notice to or obtaining the consent of any
Borrower or its successors or assigns or any guarantors or indemnitor, and
without liability on the part of Lender, Lender may, at its option, extend the
time for payment of the outstanding principal balance of this Note or any part
thereof, reduce the payments thereon, release anyone liable for payment of all
or a portion of said indebtedness, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.

      Presentment, notice of dishonor, and protest are hereby waived by the
Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note
shall be binding upon the Borrowers and their successors and assigns.

      EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE
INSTRUMENTS, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.

      ASSIGNMENT AND TRANSFER OF NOTE. Subject to the provisions of the Loan
Agreement, Lender shall have the right to assign or transfer, in whole or in
part (including the right to grant participation interests in) any or all of its
obligations under this Note, the Loan Agreement, the Mortgages and any or all of
the other Loan Documents. Lender shall be released of any obligations to the
extent that the same are so assigned or transferred, and the rights and
obligations of "Lender" hereunder shall become the rights and obligations of the
transferee holder.

      LIMITATION ON RECOURSE. Lender's rights of recourse for the obligations of
the Borrowers hereunder are limited in accordance with Article XII of the Loan
Agreement. This

                                       7

Promissory Note (FX-4)



provision shall not limit any rights of Lender under the Guaranty of Recourse
Obligations or the Environmental Indemnity, each dated as of the date hereof.

      ATTORNEYS' FEES, COSTS OF COLLECTION. The Borrowers shall pay to Lender on
demand all out-of-pocket costs and expenses, including reasonable attorneys'
fees and expenses, incurred by Lender in collecting the indebtedness arising
hereunder or under any other Loan Documents or secured thereby or otherwise
exercising any rights or remedies of Lender hereunder or thereunder or at law or
in equity or enforcing the obligations of any parties hereto or thereto, or as a
consequence of any breach or default by any Borrower or any guarantor hereunder
or thereunder, or otherwise as a consequence of any right evidenced or secured
by this Note or the Loan Documents. Without limitation, such costs and expenses
to be reimbursed by the Borrowers shall include reasonable attorneys' fees and
expenses incurred in any bankruptcy case or proceeding and in any appeal.

      APPLICABLE LAW. This Note shall be governed by and construed in accordance
with the laws of the State of New York and applicable federal law.

      TIME OF ESSENCE. Time shall be of the essence as to all of the terms,
covenants and conditions of this Note. If the due date of any payment due
hereunder or under any of the other Loan Documents shall fall on a day other
than a Business Day, the Borrowers shall be required to make such payment on the
next succeeding Business Day.

      JOINT AND SEVERAL OBLIGATIONS. The obligations and liabilities of the
Borrowers hereunder shall be joint and several.

                        [NO ADDITIONAL TEXT ON THIS PAGE]

                                       8

Promissory Note (FX-4)



      IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as
of the date first written above.

                            BORROWERS:

                            LODGIAN FAIRMONT LLC
                            NH MOTEL ENTERPRISES, INC.
                            SERVICO COLUMBIA, INC.
                            SERVICO HOUSTON, INC.

                            By: /s/ Daniel E. Ellis
                                ------------------------------------------------
                            Name:  Daniel E. Ellis
                            Title: Vice President and Secretary, or
                                   Authorized Signatory for each of the
                                   entities listed above

                            LITTLE ROCK LODGING ASSOCIATES I,
                            LIMITED PARTNERSHIP

                            By: LODGIAN LITTLE ROCK SPE, INC., a
                                Delaware corporation, its general partner

                            By: /s/ Daniel E. Ellis
                                ------------------------------------------------
                            Name:  Daniel E. Ellis
                            Title: Vice President and Secretary, or
                                   Authorized Signatory

                            LODGIAN HOTELS FIXED IV, L.P.

                            By: LODGIAN HOTELS FIXED IV GP, INC., a
                                Delaware corporation, its general partner

                            By: /s/ Daniel E. Ellis
                                ------------------------------------------------
                            Name:  Daniel E. Ellis
                            Title: Vice President and Secretary, or
                                   Authorized Signatory

Promissory Note (FX-4)



                                   SCHEDULE 1

                      MONTHLY DEBT SERVICE PAYMENT AMOUNTS



                        SCHEDULED        SCHEDULED        TOTAL
PERIOD         DATE      INTEREST        PRINCIPAL       PAYMENT
- ------         ----      --------        ---------       -------
                                            
  1          8/1/2004   348,400.41       69,928.09      418,328.50
  2          9/1/2004   348,004.37       70,324.13      418,328.50
  3         10/1/2004   336,392.98       81,935.52      418,328.50
  4         11/1/2004   347,142.04       71,186.46      418,328.50
  5         12/1/2004   335,553.75       82,774.75      418,328.50
  6          1/1/2005   346,270.08       72,058.42      418,328.50
  7          2/1/2005   345,861.97       72,466.53      418,328.50
  8          3/1/2005   312,020.76      106,307.74      418,328.50
  9          4/1/2005   344,849.48       73,479.02      418,328.50
 10          5/1/2005   333,322.58       85,005.92      418,328.50
 11          6/1/2005   343,951.89       74,376.61      418,328.50
 12          7/1/2005   332,449.03       85,879.47      418,328.50
 13          8/1/2005   343,044.28       75,284.22      418,328.50
 14          9/1/2005   342,617.91       75,710.59      418,328.50
 15         10/1/2005   331,150.76       87,177.74      418,328.50
 16         11/1/2005   341,695.38       76,633.12      418,328.50
 17         12/1/2005   330,252.94       88,075.56      418,328.50
 18          1/1/2006   340,762.55       77,565.95      418,328.50
 19          2/1/2006   340,323.25       78,005.25      418,328.50
 20          3/1/2006   306,989.71      111,338.79      418,328.50
 21          4/1/2006   339,250.90       79,077.60      418,328.50
 22          5/1/2006   327,873.91       90,454.59      418,328.50
 23          6/1/2006   338,290.75       80,037.75      418,328.50
 24          7/1/2006   326,939.47       91,389.03      418,328.50
 25          8/1/2006   337,319.87       81,008.63      418,328.50
 26          9/1/2006   336,861.07       81,467.43      418,328.50
 27         10/1/2006   325,548.08       92,780.42      418,328.50
 28         11/1/2006   335,874.22       82,454.28      418,328.50
 29         12/1/2006   324,587.65       93,740.85      418,328.50
 30          1/1/2007   334,876.33       83,452.17      418,328.50
 31          2/1/2007   334,403.70       83,924.80      418,328.50
 32          3/1/2007   301,612.74      116,715.76      418,328.50
 33          4/1/2007   333,267.36       85,061.14      418,328.50
 34          5/1/2007   322,050.60       96,277.90      418,328.50
 35          6/1/2007   332,240.34       86,088.16      418,328.50
 36          7/1/2007   321,051.08       97,277.42      418,328.50
 37          8/1/2007   331,201.85       87,126.65      418,328.50
 38          9/1/2007   330,708.40       87,620.10      418,328.50
 39         10/1/2007   319,560.16       98,768.34      418,328.50
 40         11/1/2007   329,652.79       88,675.71      418,328.50
 41         12/1/2007   318,532.81       99,795.69      418,328.50
 42          1/1/2008   328,585.37       89,743.13      418,328.50
 43          2/1/2008   328,077.11       90,251.39      418,328.50
 44          3/1/2008   306,432.68      111,895.82      418,328.50
 45          4/1/2008   326,932.25       91,396.25      418,328.50
 46          5/1/2008   315,885.12      102,443.38      418,328.50
 47          6/1/2008   325,834.43       92,494.07      418,328.50
 48          7/1/2008   314,816.70      103,511.80      418,328.50
 49          8/1/2008   324,724.34       93,604.16      418,328.50
 50          9/1/2008   324,194.22       94,134.28      418,328.50




                                        
51         10/1/2008   313,220.40      105,108.10      418,328.50
52         11/1/2008   323,065.80       95,262.70      418,328.50
53         12/1/2008   312,122.20      106,206.30      418,328.50
54          1/1/2009   321,924.78       96,403.72      418,328.50
55          2/1/2009   321,378.79       96,949.71      418,328.50
56          3/1/2009   289,781.68      128,546.82      418,328.50
57          4/1/2009   320,101.68       98,226.82      418,328.50
58          5/1/2009   309,237.46      109,091.04      418,328.50
59          6/1/2009   318,927.53       99,400.97      418,328.50
60          7/1/2009   308,094.75   56,213,121.22   56,521,215.97



                                       11

EX-10.5.3

                                                                  EXHIBIT 10.5.3

                        GUARANTY OF RECOURSE OBLIGATIONS

            This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of
June 25, 2004, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"),
having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326,
in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080 (together
with its successors, transferees and assigns, "LENDER").

                                R E C I T A L S:

            A. Pursuant to that certain Loan and Security Agreement, dated as of
the date hereof (as the same may be amended, modified, supplemented or restated
from time to time, the "LOAN AGREEMENT"), among the Borrowers named therein
(each, a "BORROWER", and collectively, "BORROWERS"), and Lender, Lender has
agreed to make a loan to Borrowers in the aggregate original principal amount of
up to SIXTY-ONE MILLION FIVE HUNDRED SIXTEEN THOUSAND FIVE HUNDRED AND NO/100
Dollars ($61,516,500) (the "LOAN"), subject to the terms and conditions of the
Loan Agreement;

            B. As a condition to Lender's making the Loan, Lender is requiring
that Guarantor execute and deliver to Lender this Guaranty; and

            C. Guarantor hereby acknowledges that Guarantor holds a direct
and/or indirect ownership interest in each Borrower and that Guarantor will
materially benefit from Lender's agreeing to make the Loan.

            NOW, THEREFORE, in consideration of the premises set forth herein
and as an inducement for and in consideration of the agreement of Lender to make
the Loan pursuant to the Loan Agreement and the other Loan Documents, Guarantor
hereby agrees, covenants, represents and warrants to Lender as follows:

            SECTION 1. DEFINITIONS. All capitalized terms used and not defined
herein shall have the respective meanings given such terms in the Loan
Agreement.

            SECTION 2. GUARANTY.

            (a) Guarantor (but not its members, partners, employees,
shareholders, agents, directors or officers) hereby irrevocably, absolutely and
unconditionally assumes liability for, guarantees payment to Lender of, and
agrees to pay, protect, defend, indemnify and save harmless Lender from and
against any and all Guaranteed Recourse Obligations of Borrowers (as hereinafter
defined).

            The obligations which are the subject of the guaranty referred to in
this Section 2 are hereinafter collectively referred to as the "GUARANTEED
OBLIGATIONS".

Guaranty of Recourse Obligations [FX-4]



            (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF BORROWERS" as used
in this Guaranty shall mean all obligations and liabilities of Borrowers for
which Borrowers shall be personally liable under the provisions of Section 12.2
of the Loan Agreement.

            (c) All sums payable to Lender under this Guaranty shall be payable
on demand and without reduction for any offset, claim, counterclaim or defense.

            SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby
represents and warrants to Lender as follows (which representations and
warranties shall be given as of the date hereof and shall survive the execution
and delivery of this Guaranty):

            (a) DUE EXECUTION. This Guaranty has been duly executed and
delivered by Guarantor.

            (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and
binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally, or application of general principles
of equity in any legal proceeding.

            (c) NO VIOLATION. The execution, delivery and performance by
Guarantor of its obligations under this Guaranty do not violate any law,
regulation, order, writ, injunction or decree of any court or governmental body,
agency or other instrumentality applicable to Guarantor, or result in a breach
of any of the terms, conditions or provisions of, or constitute a default under,
or result in the creation or imposition of any mortgage, lien, charge or
encumbrance of any nature whatsoever upon any of the assets of Guarantor
pursuant to the terms of any mortgage, indenture, agreement or instrument to
which Guarantor is a party or by which it or any of its properties is bound.
Guarantor is not in default under any other guaranty which it has provided to
Lender.

            (d) NO LITIGATION. Except as disclosed on Schedule 4.9 to the Loan
Agreement, there are no actions, suits or proceedings at law or at equity,
pending or, to Guarantor's knowledge, threatened against or affecting Guarantor
or which involve or could reasonably be expected to involve the validity or
enforceability of this Guaranty or which might materially adversely affect the
financial condition of Guarantor or the ability of Guarantor to perform any of
its obligations under this Guaranty. Guarantor is not in default beyond any
applicable grace or cure period with respect to any order, writ, injunction,
decree or demand of any Governmental Authority which might materially adversely
affect the financial condition of Guarantor or the ability of Guarantor to
perform any of its obligations under this Guaranty.

            (e) CONSENTS. All consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, all Governmental Authorities
(collectively, the "CONSENTS") that are required in connection with the valid
execution, delivery and performance by Guarantor of this Guaranty have been
obtained and Guarantor agrees that all Consents required in connection with the
carrying out or performance of any of Guarantor's obligations under this
Guaranty will be obtained when required.

            (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial
statements of Guarantor heretofore delivered to Lender fairly present the
financial condition of Guarantor as of

                                        2

Guaranty of Recourse Obligations [FX-4]



the respective dates thereof, and no materially adverse change has occurred in
the financial conditions reflected therein since the respective dates thereof.
None of the aforesaid financial statements or any certificate or statement
furnished to Lender by or on behalf of Guarantor in connection with the
transactions contemplated hereby, and none of the representations and warranties
in this Guaranty contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein not materially misleading. Guarantor is not insolvent within
the meaning of the Bankruptcy Code or any other applicable law, code or
regulation and the execution, delivery and performance of this Guaranty will not
render Guarantor insolvent.

            SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the
benefit of Lender that Guarantor will deliver to Lender each of the financial
statements required to be delivered pursuant to Section 5.1 of the Loan
Agreement.

            SECTION 5. INTENTIONALLY DELETED.

            SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR.

            (a) The obligations of Guarantor hereunder shall be irrevocable,
absolute and unconditional, irrespective of the validity, regularity or
enforceability, in whole or in part, of the Note, the Loan Agreement, the
Mortgages or the other Loan Documents or any provision thereof, or the absence
of any action to enforce the same, any waiver or consent with respect to any
provision thereof, the recovery of any judgment against any Borrower, Guarantor
or any other Person or any action to enforce the same, any failure or delay in
the enforcement of the obligations of Borrowers under the Note, the Loan
Agreement, the Mortgages or any other Loan Documents or Guarantor under this
Guaranty, or any setoff, counterclaim, and irrespective of any other
circumstances which might otherwise limit recourse against Guarantor by Lender
or constitute a legal or equitable discharge or defense of a guarantor or
surety. Lender may enforce the obligations of Guarantor under this Guaranty by a
proceeding at law, in equity or otherwise, independent of any loan foreclosure
or similar proceeding or any deficiency action against Borrowers or any other
Person at any time, either before or after an action against the Properties or
any of them or any part thereof, Borrowers or any other Person. THIS GUARANTY IS
A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A GUARANTY OF COLLECTION.
Guarantor waives diligence, notice of acceptance of this Guaranty, filing of
claims with any court, any proceeding to enforce any provision of the Note, the
Loan Agreement, the Mortgages or any other Loan Documents, against Guarantor,
Borrowers or any other Person, any right to require a proceeding first against
Borrowers or any other Person, or to exhaust any security (including, without
limitation, the Properties or any of them or any part thereof) for the
performance of the Guaranteed Obligations or any other obligations of Borrowers
or any other Person, or any protest, presentment, notice of default (except as
may be expressly required under the Loan Documents) or other notice or demand
whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not
be discharged of its obligations hereunder.

            (b) The obligations of Guarantor under this Guaranty, and the rights
of Lender to enforce the same by proceedings, whether by action at law, suit in
equity or otherwise, shall not be in any way affected by any of the following:

                                       3

Guaranty of Recourse Obligations [FX-4]



                  (i) any insolvency, bankruptcy, liquidation, reorganization,
      readjustment, composition, dissolution, receivership, conservatorship,
      winding up or other similar proceeding involving or affecting any
      Borrower, any Property or any part thereof, Guarantor or any other Person;

                  (ii) any failure by Lender or any other Person, whether or not
      without fault on its part, to perform or comply with any of the terms of
      the Loan Agreement, or any other Loan Documents, or any document or
      instrument relating thereto;

                  (iii) except (A) with respect to activities occurring after
      the date of a Permitted Assumption or, (B) activities relating to a
      Released Property after the date of a Release with respect thereto, the
      sale, transfer or conveyance of any Property or any interest therein to
      any Person, whether now or hereafter having or acquiring an interest in
      any Property or any interest therein and whether or not pursuant to any
      foreclosure, trustee sale or similar proceeding against any Borrower or
      any Property or any interest therein;

                  (iv) the conveyance to Lender, any Affiliate of Lender or
      Lender's nominee of any Property or any interest therein by a deed-in-lieu
      of foreclosure;

                  (v) the release of any Borrower or any other Person from the
      performance or observance of any of the agreements, covenants, terms or
      conditions contained in any of the Loan Documents by operation of law or
      otherwise;

                  (vi) the release in whole or in part of any collateral for any
      or all Guaranteed Obligations or for the Loan or any portion thereof; or

                  (vii) the exercise by Mezzanine Lender of any remedies made
      available to Mezzanine Lender pursuant to the terms of the Mezzanine Loan
      Documents, including, without limitation, foreclosure or similar remedies
      under any pledge agreement encumbering Mezzanine Borrower's interest in
      any General Partner, any Member, and/or any Borrower except with respect
      to actions taken by the Mezzanine Lender following the Mezzanine Lender
      succeeding to the interests of the Mezzanine Borrowers in and to the
      Borrowers.

            (c) Except as otherwise specifically provided in this Guaranty,
Guarantor hereby expressly and irrevocably waives all defenses in an action
brought by Lender to enforce this Guaranty based on claims of waiver, release,
surrender, alteration or compromise and all setoffs, reductions, or impairments,
whether arising hereunder or otherwise.

            (d) Lender may deal with Borrowers and Affiliates of Borrowers in
the same manner and as freely as if this Guaranty did not exist and shall be
entitled, among other things, to grant Borrowers or any other Person such
extension or extensions of time to perform any act or acts as may be deemed
advisable by Lender, at any time and from time to time, without terminating,
affecting or impairing the validity of this Guaranty or the obligations of
Guarantor hereunder.

            (e) No compromise, alteration, amendment, modification, extension,
renewal, release or other change of, or waiver, consent, delay, omission,
failure to act or other action with

                                        4

Guaranty of Recourse Obligations [FX-4]



respect to, any liability or obligation under or with respect to, or of any of
the terms, covenants or conditions of, the Note, the Loan Agreement, the
Mortgages or the other Loan Documents or any amendment, modification or other
change of any legal requirement shall in any way alter, impair or affect any of
the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan
Documents are modified with Lender's consent, the Guaranteed Obligations shall
automatically be deemed modified to include such modifications.

            (f) Lender may proceed to protect and enforce any or all of its
rights under this Guaranty by suit in equity or action at law, whether for the
specific performance of any covenants or agreements contained in this Guaranty
or otherwise, or to take any action authorized or permitted under applicable
law, and shall be entitled to require and enforce the performance of all acts
and things required to be performed hereunder by Guarantor. Each and every
remedy of Lender shall, to the extent permitted by law, be cumulative and shall
be in addition to any other remedy given hereunder or now or hereafter existing
at law or in equity.

            (g) No waiver shall be deemed to have been made by Lender of any
rights hereunder unless the same shall be in writing and signed by Lender, and
any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of Lender or the obligations of
Guarantor to Lender in any other respect or at any other time.

            (h) At the option of Lender, Guarantor may be joined in any action
or proceeding commenced by Lender against Borrowers in connection with or based
upon the Note, the Loan Agreement, the Mortgages or any other Loan Documents and
recovery may be had against Guarantor in such action or proceeding or in any
independent action or proceeding against Guarantor to the extent of Guarantor's
liability hereunder, without any requirement that Lender first assert, prosecute
or exhaust any remedy or claim against Borrowers or any other Person, or any
security for the obligations of Borrowers or any other Person.

            (i) Guarantor agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
is made by Borrowers or Guarantor to Lender and such payment is rescinded or
must otherwise be returned by Lender (as determined by Lender in its sole and
absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, receivership, conservatorship, winding
up or other similar proceeding involving or affecting any Borrower or Guarantor,
all as though such payment had not been made.

            (j) In the event that Guarantor shall advance or become obligated to
pay any sums under this Guaranty or in connection with the Guaranteed
Obligations or in the event that for any reason whatsoever any Borrower or any
subsequent owner of any Property or any part thereof is now, or shall hereafter
become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums
and of such indebtedness and all interest thereon shall at all times be
subordinate as to the lien, the time of payment and in all other respects to all
sums, including principal and interest and other amounts, at any time owed to
Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to
enforce or receive payment thereof until all principal, interest and other sums
due pursuant to the Loan Documents have been paid in full. Nothing herein
contained is intended or shall be construed to give Guarantor any right of
subrogation in or under the Loan Documents or any right to participate in any
way therein, or in the right, title or interest of Lender

                                        5

Guaranty of Recourse Obligations [FX-4]


in or to any collateral for the Loan, notwithstanding any payments made by
Guarantor under this Guaranty, until the actual and irrevocable receipt by
Lender of payment in full of all principal, interest and other sums due with
respect to the Loan or otherwise payable under the Loan Documents. If any amount
shall be paid to Guarantor on account of such subrogation rights at any time
when any such sums due and owing to Lender shall not have been fully paid, such
amount shall be paid by Guarantor to Lender for credit and application against
such sums due and owing to Lender. The foregoing shall not prohibit Borrowers
from using the proceeds of the Loan for any permitted use under the Loan
Agreement, including, without limitation, the making of distributions to
Guarantor.

            (k) Guarantor's obligations hereunder shall survive a foreclosure,
delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or
similar proceeding involving any Property or any part thereof and the exercise
by Lender of any of all of its remedies pursuant to the Loan Documents.
Notwithstanding the foregoing to the contrary, the obligations and liabilities
of Guarantor under this Guaranty shall survive for a period of two (2) years
following payment in full of the Obligations in accordance with the terms of the
Loan Documents, provided, however, in the event that any Guaranteed Obligations
or liabilities of the Guarantor under this Guaranty shall have arisen prior to
the expiration of such period, then in any such event the foregoing survival
period shall not apply and the obligations and liabilities of Guarantor
hereunder shall survive.

            SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. THIS INSTRUMENT REPRESENTS
THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER
HEREOF. THE TERMS OF THIS GUARANTY SHALL NOT BE WAIVED, ALTERED, MODIFIED,
AMENDED, SUPPLEMENTED OR TERMINATED IN ANY MANNER WHATSOEVER EXCEPT BY WRITTEN
INSTRUMENT SIGNED BY LENDER AND GUARANTOR.

            SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding
upon Guarantor, and its successors and assigns, may not be assigned or delegated
by Guarantor and shall inure to the benefit of Lender and its successors and
assigns. Lender shall have the right to assign this Guaranty and the obligations
hereunder in connection with any assignment or transfer of all or any portion of
the Loan or any interest therein. All references to "Lender" hereunder shall be
deemed to include the successors and assigns of Lender and the parties hereto
acknowledge that actions taken by Lender hereunder may be taken by Lender's
agents and by the agents of the successors and assigns of Lender.

            SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty
shall be governed by, and construed in accordance with, the substantive laws of
the State of New York. Guarantor irrevocably (a) agrees that any suit, action or
other legal proceeding arising out of or relating to this Guaranty may be
brought in a court of record in the City and County of New York or in the Courts
of the United States of America located in the Southern District of New York,
(b) consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which it may have to the laying of venue
of any such suit, action or proceeding in any of such courts and any claim that
any such suit, action or proceeding has been brought in an inconvenient forum.
Guarantor irrevocably consents to the service of any and all process in any such
suit, action or proceeding by service of copies of such process to Guarantor at
its address set forth on the first page hereof. Nothing in this Section 9,
however, shall affect the right of

                                        6

Guaranty of Recourse Obligations [FX-4]


Lender to serve legal process in any other manner permitted by law or affect the
right of Lender to bring any suit, action or proceeding against Guarantor or its
property in the courts of any other jurisdictions.

            SECTION 10. SECTION HEADINGS. The headings of the sections and
paragraphs of this Guaranty have been inserted for convenience of reference only
and shall in no way define, modify, limit or amplify any of the terms or
provisions hereof.

            SECTION 11. SEVERABILITY. Any provision of this Guaranty which may
be determined by any competent authority to be prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Guarantor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.

            SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND LENDER
HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING
ARISING HEREUNDER OR IN CONNECTION THEREWITH.

            SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL
LIABILITY.

            (a) The obligations of Guarantor hereunder are separate and distinct
from, and in addition to, the obligations of Guarantor now or hereafter arising
under the other guaranties pursuant to which Guarantor has guaranteed the
payment and performance of certain other obligations of Borrowers described
therein.

            (b) If there is more than one entity comprising Guarantor, all
references to Guarantor herein shall be to Guarantor (but not its members,
partners, employees, shareholders, agents, directors or officers) or any one or
more of them. All obligations and liabilities of Guarantor hereunder are in
addition to, not in lieu of and are independent of: (i) all obligations of
Borrowers under any other Loan Document, including the Note and the Loan
Agreement; and (ii) any obligation of Guarantor under any other Loan Document to
which Guarantor is a party.

            (c) If there is more than one entity comprising Guarantor, all
obligations of Guarantor hereunder shall be joint and several.

            SECTION 14. NOTICES. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder to
Lender or Guarantor or which are given to Lender or Guarantor with respect to
this Guaranty shall be in writing and shall be delivered to Lender at the
address set forth in Section 14.5 of the Loan Agreement and to Guarantor at the
address set forth on the first page hereof, each in the manner provided in
Section 14.5 of the Loan Agreement. Guarantor agrees to give Lender not less
than ten (10) days' prior written notice of any change in the location of
Guarantor's principal place of business.

            SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its
execution hereof acknowledges receipt of true copies of all of the Loan
Documents, the terms and conditions of which are hereby incorporated herein by
reference.

                                        7

Guaranty of Recourse Obligations [FX-4]


            SECTION 16. INTEREST; EXPENSES.

            (a) If Guarantor fails to pay all or any sums due hereunder within
ten (10) days of demand by Lender, the amount of such sums payable by Guarantor
to Lender shall bear interest from the date of demand until paid at the Default
Rate in effect from time to time.

            (b) Guarantor hereby agrees to pay all reasonable out of pocket
costs, charges and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, that may be incurred by Lender in enforcing
the covenants, agreements, obligations and liabilities of Guarantor under this
Guaranty.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                        8

Guaranty of Recourse Obligations [FX-4]



            IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the
date first above written.

                                       GUARANTOR:

                                       LODGIAN, INC., a Delaware
                                       corporation

                                       By: /s/ Daniel E. Ellis
                                           -------------------------------
                                           Name:  Daniel E. Ellis
                                           Title: Senior Vice President

Guaranty of Recourse Obligations [FX-4]

EX-10.5.4

                                                                  EXHIBIT 10.5.4

                                 CROSS-GUARANTY

            THIS CROSS-GUARANTY (this "Agreement" or "Guaranty"), made as of
June 25, 2004, from the parties listed as Guarantors on the signature pages
hereto (collectively, the "Guarantors"), each having an address at c/o Lodgian,
3445 Peachtree Road NE, Suite 700, Atlanta, Georgia 30326 to MERRILL LYNCH
MORTGAGE LENDING, INC., a Delaware corporation, having an office at Four World
Financial Center, 16th Floor, 250 Vesey Street, New York, New York 10080
(together with its successors and assigns, "Lender").

                                   WITNESSETH:

            WHEREAS, Lender has agreed to make three (3) loans (respectively,
the "Pool 1 Loan," "Pool 2 Loan," and "Pool 3 Loan," and collectively, the
"Loans") to the respective borrowers described on Exhibit A (respectively, the
"Pool 1 Borrowers," "Pool 2 Borrowers," and "Pool 3 Borrowers," and
collectively, the "Borrowers"), in the amounts set forth on Exhibit A; and

            WHEREAS, to evidence the respective Loans, the respective Borrowers
have executed and delivered those certain Promissory Notes, each dated as of the
date hereof, in the principal amounts of the respective Loans (respectively,
"Note 1," "Note 2" and "Note 3," and collectively, the "Notes"), pursuant to
those certain Loan and Security Agreements, each dated as of the date hereof,
among the respective Borrowers and Lender as more particularly described on
Exhibit A (respectively, "Loan Agreement 1," "Loan Agreement 2" and "Loan
Agreement 3," and collectively, the "Loan Agreements"); and

            WHEREAS, capitalized terms used but not otherwise defined herein
shall have the respective meanings given thereto in the respective Loan
Agreements or Guarantor Loan Agreement (hereinafter defined), as applicable; and

            WHEREAS, the Notes shall be secured by, among other things, the
Mortgages encumbering the Properties; and

            WHEREAS, simultaneously with the making of the Loans, Guarantors are
obtaining a loan in the amount of $61,516,500 (the "Guarantor Loan") from Lender
pursuant to that certain Loan and Security Agreement, dated as of the date
hereof, by and between the Guarantors and Lender (the "Guarantor Loan
Agreement"; and together with the other documents and agreements evidencing
and/or securing the Guarantor Loan, collectively, the "Guarantor Loan
Documents"); and

            WHEREAS, it is a condition precedent to Lender making the Guarantor
Loan to Guarantors that Guarantors, among other things, guaranty the Loans
pursuant to this Guaranty and grant to Lender Mortgages on the Properties (as
defined in the Guarantor Loan Agreement, and hereinafter referred to as the
"Guarantor Properties") as security for their obligations hereunder; and

            WHEREAS, Guarantors shall derive substantial economic benefits from
the simultaneous making of the Guarantor Loan and Loans by Lender to Guarantors
and Borrowers, respectively; and

            WHEREAS, as a condition precedent to the making of the Loans,
Borrowers have agreed to procure and deliver to Lender this Agreement; and

            WHEREAS, Lender has declined to make the Loans or the Guarantor Loan
unless this Agreement is duly executed by Guarantors and delivered to Lender.



            NOW, THEREFORE, in consideration for, and as an inducement to,
Lender's making the Loans and the Guarantor Loan, and for other good and
valuable consideration the legal sufficiency of which and receipt thereof are
hereby acknowledged, and notwithstanding any provision to the contrary contained
in the Guarantor Loan Agreement, the Guarantor Loan Documents, the Loan
Agreements, the Notes, the Mortgages or any of the other Loan Documents, but
subject to the provisions of Article XII of the Guarantor Loan Agreement, Lender
and Guarantors do hereby agree as follows:

            1.    Guarantors, on behalf of themselves and their successors and
assigns (collectively, "Successors") do hereby absolutely, unconditionally,
irrevocably and personally: (i) guaranty to Lender the full and prompt payment
and performance when due of the Loans and all other Obligations of the Borrowers
under the Loan Agreements and (ii) agree to reimburse Lender for, and hold
Lender harmless from and against, any and all losses, damages, claims, expenses,
deficiencies, liabilities and costs (including, without limitation, reasonable
attorneys' fees and disbursements) incurred, suffered or sustained by Lender
and/or its successors and assigns as a result of or arising out of, in
connection with or resulting from, the enforcement of this Agreement against
Guarantors (the obligations of Guarantors under clauses (i) and (ii) above being
referred to hereinafter, collectively, as "Guarantors' Obligations").

            Notwithstanding the foregoing, or anything else to the contrary
contained herein, in the event that any of the Guarantors shall become an
Excluded Borrower and the Guarantor Loan shall become an Excluded Loan pursuant
to Lender's election under Section 2.12(G) of the Guarantor Loan Agreement to
cause any of the Loans to no longer be secured by the Guarantor Properties, this
Guaranty shall automatically terminate and shall be of no further force or
effect.

            2.    It is agreed that the obligations of Guarantors hereunder
shall be primary and this Agreement shall be enforceable against Guarantors and
their Successors without the necessity for any suit or proceeding of any kind or
nature whatsoever brought by Lender against Borrowers or their respective
successors or assigns or any other party or against any security for the payment
of the Guarantors' Obligations and without the necessity of any notice of
non-payment or non-observance or of any notice of acceptance of this Agreement
or of any notice of demand to which Guarantors might otherwise be entitled
(including, without limitation, diligence, presentment, notice of maturity,
extension of time, protest, notice of dishonor or default, change in nature or
form of the Guarantors' Obligations, acceptance of further security, release of
further security, imposition or agreement arrived at as to the amount of or the
terms of the Guarantors' Obligations, notice of adverse change in Borrowers'
financial condition and any other fact that might materially increase the risk
to Guarantors), all of which Guarantors hereby expressly waive. Guarantors
hereby expressly agree that the validity of this Agreement and the obligations
of Guarantors hereunder shall in no way be terminated, affected, diminished,
modified or impaired by reason of the assertion of or the failure to assert by
Lender against Borrowers, or their successors or assigns, any of the rights or
remedies reserved to Lender pursuant to the provisions of the Guarantor Loan
Agreement, the Loan Agreements, the Notes, the Mortgages or any other Loan
Documents.

            3.    Guarantors waive, and covenant and agree that they will not at
any time insist upon, plead or in any manner whatsoever claim or take the
benefit or advantage of, any and all appraisal, valuation, stay, extension,
marshaling-of-assets or redemption laws, or right of homestead or exemption,
whether now or at any time hereafter in force, that may delay, prevent or
otherwise affect the performance by Guarantors of their obligations under, or
the enforcement by Lender of, this Agreement. Guarantors further covenant and
agree not to set up or claim any defense, counterclaim, cross-claim, offset,
set-off, right of recoupment, or other objection of any kind to any action, suit
or proceeding in law, equity or otherwise, or to any demand or claim that may be
instituted or made by Lender hereunder other than the defense of the actual
timely performance of Guarantors' Obligations hereunder. Guarantors represent,
warrant and agree that, as of the date hereof, their obligations under this
Agreement are not subject to any

                                       2


counterclaims, cross-claims, rights of recoupment, offsets or affirmative or
other defenses of any kind against Lender.

            4.    Guarantors agree that any notice or directive given at any
time by Guarantors to Lender that is inconsistent with any waiver contained in
this Agreement shall be void and may be ignored by Lender, and, in addition, may
not be pleaded or introduced as evidence in any litigation relating to this
Agreement for the reason that such pleading or introduction would be at variance
with the written terms of this Agreement, unless Lender has specifically agreed
otherwise in a writing, signed by a duly authorized officer. Guarantors
specifically acknowledge and agree that the foregoing waivers are of the essence
of the Loan transaction and that, but for this Agreement and such waivers,
Lender would not make the Loans to Borrowers.

            5.    The provisions of this Agreement are for the benefit of Lender
and its successors and assigns, and nothing herein contained shall impair, as
between Borrowers and Lender, the obligations of Borrowers under the Loan
Agreements, the Notes, the Mortgages or any of the other Loan Documents.

            6.    This Agreement shall be a continuing guaranty and the
liability of Guarantors hereunder shall in no way be terminated, affected,
modified, impaired or diminished (to the extent permitted by law) by reason of
the happening, from time to time, of any of the following, although without
notice or the further consent of Guarantors:

            (a)   any assignment, amendment, modification or waiver of or change
      in any of the terms, covenants, conditions or provisions of the Guarantor
      Loan Agreement, the Loan Agreements, the Notes, the Mortgages or any of
      the other Loan Documents or the invalidity or unenforceability of any of
      the foregoing; or

            (b)   any extension of time that may be granted by Lender to
      Borrowers, Guarantors or Guarantors' Successors; or

            (c)   any action that Lender or Borrowers may take or fail to take
      under or in respect of any of the Loan Documents or by reason of any
      waiver of, or failure to enforce any of the rights, remedies, powers or
      privileges available to Lender under this Agreement or available to Lender
      at law, equity or otherwise, or any action on the part of Lender or
      Borrowers granting indulgence or extension in any form whatsoever; or

            (d)   any dealing, transaction, matter or thing occurring between
      Lender, Borrowers, Guarantors or Guarantors' Successors; or

            (e)   any sale, exchange, release, or other disposition of any
      property pledged, Mortgaged or conveyed, or any property in which Lender
      has been granted a lien or security interest to secure any indebtedness of
      Borrowers to Lender; or

            (f)   any release of any person or entity who may be liable in any
      manner for the payment and collection of any amounts owed by Borrowers to
      Lender (including the other Guarantors); or

            (g)   the application of any sums by whomsoever paid or however
      realized to any amounts owing by Borrowers to Lender in such manner as
      Lender shall determine in its sole discretion; or

                                       3


            (h)   any Event of Default (as such term is defined in the Guarantor
      Loan Agreement and the Loan Agreements), whether or not Lender has
      exercised any of its rights and remedies as set forth in the Guarantor
      Loan Agreement or the Mortgages upon the happening of any such Event of
      Default; or

            (i)   Borrowers' and/or Guarantors' voluntary or involuntary
      liquidation, dissolution, sale of all or substantially all of their
      respective assets and liabilities, appointment of a trustee, receiver,
      liquidator, sequestrator or conservator for all or any part of Borrowers'
      or Guarantors' assets, insolvency, bankruptcy, assignment for the benefit
      of creditors, reorganization, arrangement, composition or readjustment, or
      the commencement of other similar proceedings affecting Borrowers or
      Guarantors or any of the assets of either of them, including, without
      limitation, (A) the release or discharge of Borrowers from the payment and
      performance of their obligations under any of the Loan Documents by
      operation of law, or (B) the impairment, limitation or modification of the
      liability of Borrowers, their partners or Guarantors in bankruptcy, or of
      any remedy for the enforcement of the Guarantors' Obligations, under any
      of the Loan Documents, or Guarantors' liability under this Agreement
      resulting from the operation of any present or future provisions of the
      Federal Bankruptcy Code or other present or future federal, state or
      applicable statute of law or from the decision in any court; or

            (j)   any change in or termination of the ownership interest of
      Guarantors in Borrowers (whether direct or indirect); or

            (k)   any conveyance of the Mortgaged Properties, whether or not
      pursuant to a foreclosure sale, a deed in lieu of foreclosure, a transfer
      through bankruptcy, or otherwise.

            7.    Guarantors acknowledge that this Guaranty and Guarantors'
Obligations are and shall at all times continue to be absolute, unconditional
and irrevocable in all respects, and shall at all times be valid and enforceable
irrespective of any other agreement or circumstances of any nature whatsoever
that might otherwise constitute a defense to this Guaranty or the obligations of
any other person or party (including, without limitation, Borrower or any other
guarantor) relating to this Guaranty or the obligations of Guarantors hereunder.

            8.    Guarantors agree that if at any time all or any part of any
payment at any time received by Lender from Borrowers or Guarantors under or
with respect to this Agreement is or must be rescinded or returned by Lender for
any reason whatsoever (including, without limitation, the insolvency, bankruptcy
or reorganization of Borrowers or Guarantors), then Guarantors' Obligations
hereunder shall, to the extent of the payment rescinded or returned, be deemed
to have continued in existence notwithstanding such previous receipt by Lender,
and Guarantors' Obligations hereunder shall continue to be effective or
reinstated, as the case may be, as to such payment, as though such previous
payment to Lender had never been made.

            9.    Until repayment of the Indebtedness (as such term is defined
in the Guarantor Loan Agreement and the Loan Agreements) and satisfaction of all
of the obligations under the Guarantor Loan Agreement, Guarantors and each of
them (a) shall have no right of subrogation against Borrowers, general partner
of any Borrower that is a limited partnership or any other Guarantor by reason
of any payments or acts of performance by a Guarantor in compliance with the
obligations of a Guarantor hereunder; (b) shall have no right of indemnity,
contribution, or any other right or cause of action whatsoever under law or
equity against any other Guarantor by reason of any payments or acts of
performance by a Guarantor in compliance with the obligations of a Guarantor
hereunder; (c) hereby waive any right to enforce any remedy that any Guarantors
now or hereafter shall have against Borrowers, general partner of any Borrower
that is a limited partnership or any other Guarantor by reason of any one

                                       4


or more payments or acts of performance in compliance with the obligations of a
Guarantor hereunder; (d) shall subordinate any liability or indebtedness of
Borrowers, general partner of any Borrower that is a limited partnership or any
Guarantor now or hereafter held by any Guarantor or any affiliate of a Guarantor
to the obligations of Borrowers, general partner of any Borrower that is a
limited partnership or Guarantor to Lender under the Loan Documents; and (e)
shall not file, assert or receive payment on any claim, whether now existing or
hereafter arising, against Borrowers, general partner of any Borrower that is a
limited partnership or any Guarantor in the event of the commencement of a case
by or against Borrowers, general partner of any Borrower that is a limited
partnership or any Guarantor under federal or state insolvency laws.

            10.   Guarantors represent and warrant to Lender, with the knowledge
that Lender is relying upon the same, as follows:

            (a)   Guarantors are solvent and have the legal right to enter into
      this Agreement and to perform their obligations under the terms hereof;

            (b)   to the best of Guarantors' knowledge, there is no action,
      suit, proceeding or investigation pending or threatened against or
      affecting Guarantors at law, in equity, in admiralty or before any
      arbitrator or any governmental department, commission, board, bureau,
      agency or instrumentality (domestic or foreign) that is likely to result
      in any material adverse change in the property, assets or condition
      (financial or otherwise) of Guarantors or that is likely to impair
      materially the ability of Guarantors to perform their obligations under
      this Agreement; and

            (c)   all financial statements that have heretofore been furnished
      by Guarantors to Lender in connection with this Agreement, are true,
      correct and complete; and fairly present the financial condition of
      Guarantors, all as of the respective dates thereof.

            11.   Guarantors and Lender acknowledge and agree that this
Agreement is a guaranty of payment and performance and not of collection and
enforcement in respect of any of the Guarantors' Obligations.

            12.   Lender may freely assign any or all of its rights under this
Agreement, but any such assignment shall be made only to the subsequent holder
of any of the Notes and no such assignment shall increase Guarantors'
Obligations or diminish its rights hereunder. In the event of any such
assignment, the consent of Guarantors shall not be required for any such
assignment and failure to give notice of such assignment shall not affect the
validity or enforceability of any such assignment or subject Lender to any
liability and Guarantors shall continue to remain bound by and obligated to
perform under and with respect to this Agreement. Guarantors shall not assign
any of their obligations under this Agreement without the prior consent of the
Lender.

            13.   The representations, warranties and obligations of Guarantor
set forth in this Agreement shall survive until this Agreement shall terminate
in accordance with the terms hereof.

            14.   This Agreement contains the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements relating to such subject matter and may not be modified,
amended, supplemented or discharged except by a written agreement signed by
Guarantors and Lender. This Agreement also may be discharged by full performance
of the Guarantors' Obligations in accordance with the terms hereof, or as
otherwise provided herein.

            15.   If all or any portion of any provision contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, such provision or portion

                                       5


thereof shall be deemed stricken and severed from this Agreement and the
remaining provision and portions thereof shall continue in full force and
effect.

            16.   All notices, requests, demands and other communications under
or in connection with this Agreement shall be in writing and shall be deemed to
have been given or made (i) three (3) days after the date such notice is mailed,
(ii) on the next Business Day if sent by a nationally recognized overnight
courier service, (iii) on the date of delivery by personal delivery and (iv) on
the date of transmission if sent by telefax during business hours on a Business
Day (otherwise the next Business Day). Notices shall be addressed as follows:

            If to Guarantors:   The address listed above

            With a copy to:     Morris Manning & Martin, LLP
                                3343 Peachtree Rd., NE
                                1600 Atlanta Financial Center
                                Atlanta, Georgia 30326
                                Attn.: Thomas Gryboski, Esq.
                                Facsimile: (404) 365-9532

            If to Lender:       The address listed above

            With a copy to:     Sidley Austin Brown & Wood LLP
                                787 Seventh Avenue
                                New York, New York 10019
                                Attn.: Robert L. Boyd, Esq.
                                Facsimile: (212) 839-5599

The above addresses may be changed on written notice given as hereinabove
provided. Notices may be sent by a party hereto or on its behalf by its
attorney.

            17.   This Agreement shall be binding upon Guarantors and their
Successors and shall inure to the benefit of Lender and its successors and
assigns.

            18.   The failure of Lender to enforce any right or remedy
hereunder, or promptly to enforce any such right or remedy, shall not constitute
a waiver thereof, nor give rise to any estoppel against Lender, nor excuse
Guarantors from their obligations hereunder. Any waiver of any such right or
remedy to be enforceable against Lender must be expressly set forth in writing
signed by Lender.

            19.   (a) Any suit initiated by Lender against Guarantors or in
      connection with or arising, directly or indirectly, out of or relating to,
      this Agreement (an "Action") may, at Lender's option, be brought in any
      state or federal court in the State of New York, or any state or federal
      court in which the property is located, having jurisdiction over the
      subject matter hereof. Guarantors hereby submit themselves to the
      jurisdiction of any such court and agree that service of process against
      Guarantors in any such action may be effected by any means permissible
      under federal law or under the laws of the state in which such Action is
      brought. Guarantors hereby agree that insofar as is permitted under
      applicable law, this consent to personal jurisdiction shall be
      self-operative and no further instrument or action, other than service of
      process in one of the manners specified in this Guaranty, or as otherwise
      permitted by law, shall be necessary in order to confer jurisdiction upon
      Guarantors.

                                       6


            (b)   Guarantors agree that, provided that service of process is
      effected upon Guarantors in any manner permitted by law, Guarantors
      irrevocably waive, to the fullest extent permitted by law, and agree not
      to assert, by way of motion, as a defense or otherwise, (i) any objection
      that Guarantors may have or may hereafter have to the laying of the venue
      of any Action brought in any court as provided for by this Agreement, (ii)
      any claim that any Action brought in any such court has been brought in an
      inconvenient forum, or (iii) any claim that Guarantors are not personally
      subject to the jurisdiction of such court. Guarantors agree that, provided
      that service of process is effected upon Guarantors in one of the manners
      specified in this Guaranty or as otherwise permitted by law, a final
      judgment from which Guarantors have not appealed or may not appeal in any
      Action brought in any such court shall be conclusive and binding upon
      Guarantors and may, so far as permitted under applicable law, be enforced
      in the courts of any state or any federal court or in any other courts to
      the jurisdiction of which it is subject, by a suit upon such judgment and
      that Guarantors shall not assert any defense, counterclaim or set-off in
      any such suit upon such judgment.

            (c)   To the extent that Guarantors have or hereafter may acquire
      any immunity from jurisdiction of any court or from any legal process
      (whether through service or notice, attachment before judgment, attachment
      in aid of execution, execution or otherwise) with respect to Guarantors or
      Guarantors' property, Guarantors hereby irrevocably waive such immunity in
      respect of its obligations under this Agreement.

            (d)   As a further inducement to Lender's making of the Loans to
      Borrowers, and in consideration thereof, Lender and Guarantors each
      covenant and agree that in any action or proceeding brought on, under or
      by virtue of this Agreement, Lender and Guarantors each shall and do
      hereby unconditionally and irrevocably waive trial by jury.

            (e)   Guarantors hereby further covenant and agree to and with
      Lender that Guarantors may be joined in any action against Borrowers in
      connection with the Guarantor Loan Agreement, the Loan Agreements, the
      Notes, the Mortgages, or any of the other Loan Documents, solely with
      respect to the subject matter of this Agreement.

            (f)   Guarantors covenant and agree to indemnify and save Lender
      harmless of and from, and defend it against, all losses, costs,
      liabilities, expenses, damages or claims suffered by reason of Guarantors'
      failure to perform its obligations hereunder.

            20.   All of Lender's rights and remedies under the Guarantor Loan
Agreement, the Loan Agreements, the Notes, the Mortgages or any of the other
Loan Documents or under this Agreement are intended to be distinct, separate and
cumulative and no such right or remedy therein or herein mentioned is intended
to be in exclusion of or a waiver of any other right or remedy available to
Lender.

            21.   Guarantors hereby consent that from time to time, before or
after any default by Borrower, with or without further notice to or assent from
Guarantors, any security at any time held by or available to Lender for any
obligation of Borrowers, or any security at any time held by or available to
Lender for any obligation of any other person or party secondarily or otherwise
liable for all or any portion of the Loans, may be exchanged, surrendered or
released and any obligation of Borrowers, or of any such other person or party,
may be changed, altered, renewed, extended, continued, surrendered, compromised,
waived or released in whole or in part, or any default with respect thereto
waived, and Lender may fail to set off and may release, in whole or in part, any
balance of any deposit account or credit on its books in favor of Borrowers, or
of any such other person or party, and may extend further credit in any manner
whatsoever to Borrowers, and generally deal with Borrowers or any such security
or other person or party as Lender may see fit; and Guarantors shall remain
bound under this Agreement

                                       7


notwithstanding any such exchange, surrender, release, change, alteration,
renewal, extension, continuance, compromise, waiver, action, inaction, extension
of further credit or other dealing. This Agreement is independent of, and in
addition to, all collateral granted, pledged or assigned under the Loan
Documents.

            22.   The terms of this Agreement have been negotiated, and this
Agreement has been executed and delivered in the State of New York, and it is
the intention of the parties hereto that this Agreement be construed and
enforced in accordance with the laws of such State.

            23.   This Agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.

            24.   This Agreement may be executed in counterparts, which together
shall constitute the same instrument.

            25.   All representations, warranties, covenants (both affirmative
and negative) and all other obligations under this Guaranty shall be the joint
and several obligation of each of the Guarantors and any default under this
Guaranty by any such Guarantor shall be deemed a default by all such Guarantors.

                         [NO FURTHER TEXT ON THIS PAGE]

                                       8


            IN WITNESS WHEREOF, Guarantor has executed and delivered this
Agreement as of the date and year first above written.

                            GUARANTORS:

                            LODGIAN FAIRMONT LLC
                            NH MOTEL ENTERPRISES, INC.
                            SERVICO COLUMBIA, INC.
                            SERVICO HOUSTON, INC.

                            By: /s/ Daniel E. Ellis
                                ------------------------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

                            LITTLE ROCK LODGING ASSOCIATES I,
                            LIMITED PARTNERSHIP

                            By: LODGIAN LITTLE ROCK SPE, INC.,
                                a Delaware corporation, its general partner

                            By: /s/ Daniel E. Ellis
                                ------------------------------------------------
                            Name:Daniel E. Ellis
                            Title: Vice President and Secretary, or
                                   Authorized Signatory

                            LODGIAN HOTELS FIXED IV, L.P.

                            By: LODGIAN HOTELS FIXED IV GP, INC.,
                                a Delaware corporation, its general partner

                            By: /s/ Daniel E. Ellis
                                ------------------------------------------------
                            Name:  Daniel E. Ellis
                            Title: Vice President and Secretary, or
                                   Authorized Signatory



                                    EXHIBIT A

1.    Pool 1 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 1"), between Impac Hotels I, L.L.C., Lodgian
      Denver LLC, Macon Hotel Associates, L.L.C., Servico Northwoods, Inc. and
      Lodgian Hotels Fixed I, LLC (collectively, the "Pool 1 Borrowers") and
      Lender, Lender has made a loan in the amount of $63,801,000 ("Pool 1
      Loan"), which Loan is evidenced by a Promissory Note dated as of the date
      hereof ("Note 1"), made by the Pool 1 Borrowers to Lender;

2.    Pool 2 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 2"), between Albany Hotel, Inc., AMI
      Operating Partners, L.P., Apico Inns of GreenTree, Inc., Dedham Lodging
      Associates I, Limited Partnership, Lodgian Hotels Fixed II, Inc., Lodgian
      Augusta LLC, Lodgian Lafayette LLC and Lodgian Tulsa LLC (collectively,
      the "Pool 2 Borrowers") and Lender, Lender has made a loan in the amount
      of $67,864,000 ("Pool 2 Loan"), which Loan is evidenced by a Promissory
      Note dated as of the date hereof ("Note 2"), made by the Pool 2 Borrowers
      to Lender; and

3.    Pool 3 Loan: Pursuant to a Loan and Security Agreement, dated as of the
      date hereof ("Loan Agreement 3"), between Lodgian Hotels Fixed III, LLC,
      Lodgian AMI, Inc., Minneapolis Motel Enterprises, Inc. and Servico Centre
      Associates, Ltd. (collectively, the "Pool 3 Borrowers") and Lender, Lender
      has made a loan in the amount of $66,818,500 ("Pool 3 Loan"), which Loan
      is evidenced by a Promissory Note, dated as of the date hereof ("Note 3"),
      made by the Pool 3 Borrowers to Lender.

EX-10.5.5

                                                                  EXHIBIT 10.5.5

              CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT

                  This CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT,
dated as of June 25, 2004 (this "AGREEMENT"), made by LODGIAN MANAGEMENT CORP.,
a Delaware corporation, having an address at 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30826 ("HOTEL MANAGER"), and the undersigned, each having an
address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30826 (each a "BORROWER and collectively, "BORROWERS"), to and for the
benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080, its
successors, transferees and assigns ("LENDER").

                  A.       Hotel Manager has entered into a certain Management
Agreement (each a "CONTRACT" and collectively, the "CONTRACTS") with each
Borrower, a true, correct and complete copy of which has been delivered to
Lender on or prior to the date hereof and the form of which is attached hereto
as EXHIBIT A, providing for the performance by Hotel Manager of certain
management obligations more particularly described therein with respect to the
management and operation of the property as more particularly described therein
(each, a "PROPERTY" and collectively, the "PROPERTIES").

                  B.       This Agreement is being executed in order to amend
each Contract, to conditionally assign each Borrower's interest therein to
Lender, and to subordinate Hotel Manager's rights to payment under the Contracts
to Lender's lien on the Properties in connection with Lender's making a loan to
Borrowers and certain other borrowers (collectively, the "MORTGAGE BORROWERS")
in the original principal amount of up to Sixty-One Million Five Hundred Sixteen
Thousand Five Hundred and No/100 Dollars ($61,516,500) (the "LOAN") pursuant to
that certain Loan and Security Agreement, dated as of even date herewith (as
amended, modified or restated, the "LOAN AGREEMENT"), among Mortgage Borrowers
and Lender. The Loan is evidenced by a certain Promissory Note, dated of even
date herewith (as amended, modified or restated, and any replacements or
substitutes therefor (by means of multiple notes or otherwise), (the "NOTE"),
made by Mortgage Borrowers in favor of Lender and is secured by, among other
things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments
of Leases and Rents and Security Agreements, dated as of even date herewith (as
amended, modified, restated, spread or consolidated, collectively, the "SECURITY
INSTRUMENT"), in favor of Lender (the Note, the Security Instrument, the Loan
Agreement, this Agreement and all other documents executed in connection with
the Loan are collectively referred to as the "LOAN DOCUMENTS"). All capitalized
terms used and not defined herein shall have the respective meanings given to
such terms in the Loan Agreement, a copy of which Hotel Manager hereby
acknowledges having received.

                  NOW, THEREFORE, in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Hotel Manager and Borrowers hereby represent,
warrant and covenant to Lender as follows:



                  1.       As additional collateral security for the Loan, each
Borrower hereby conditionally transfers, sets over and assigns to Lender all of
such Borrower's right, title and interest in and to its Contract, said transfer
and assignment to automatically become a present, unconditional assignment, at
Lender's option, upon the occurrence and during the continuance of an Event of
Default by Borrowers under any of the Loan Documents.

                  2.       Hotel Manager hereby agrees that each Contract, all
rights, interests and privileges of Hotel Manager thereunder, and all management
fees and other payment obligations of each Borrower to Hotel Manager for
services rendered by Hotel Manager for the management and operation of its
Property, as such services are more particularly described in such Contract, are
hereby subordinated to the Loan Documents and the liens in favor of Lender
provided for therein, and to all rights of Lender to receive payment from
Borrowers under the Note and all other amounts which may be due Lender under the
Loan Documents. Hotel Manager recognizes and agrees that so long as the Note is
being paid in strict accordance with its terms and no Event of Default has
occurred and is continuing or will by virtue of payments to Hotel Manager occur,
Hotel Manager shall, subject to the requirements of the Loan Documents,
including any such requirements governing management and application of the
Properties and Borrower revenues and cash flow, be entitled to receive payments
provided for under such Contract in accordance with the terms thereof. Hotel
Manager hereby releases, discharges and waives any and all liens, claims,
demands of any kind or nature, against each Property, either now or in the
future, arising from the services provided by Hotel Manager for the management
and operation of such Property.

                  3.       In the event that such Borrower defaults under the
terms of its Contract, Hotel Manager agrees that before exercising any rights or
remedies with respect thereto, it will notify Lender of such default. Upon
Lender's request, Hotel Manager will continue to perform under such Contract
until such time as Lender may elect to terminate such Contract, provided that
Hotel Manager shall continue to receive all fees payable to it under such
Contract. Subject to the foregoing, Hotel Manager agrees that it shall not be
entitled to receive any management fee or other fee, commission or other amount
payable under the Contract or otherwise for and during any period of time that
any Event of Default has occurred and is continuing, provided that Hotel Manager
shall not be obligated to return or refund to Lender any management fee or other
fee, commission or other amount already received by Hotel Manager prior to the
occurrence of the Event of Default, and to which Hotel Manager was entitled
under paragraph 2 above. In all events, Hotel Manager recognizes that the
maximum amount that shall be due and payable under each Contract is the amount
stated therein (such amount being adequate to complete the services called for
in such Contract), and that Hotel Manager will not claim any incidental,
consequential, or exemplary damages of any nature as a condition to completing
its performance under the Contract.

                  4.       In the event that (a) Hotel Manager becomes
insolvent, or (b) an Event of Default occurs and is continuing, or (c) any
default occurs by Hotel Manager under the Management Agreement beyond the
expiration of any notice and cure periods, or (d) any other event occurs which,
under the terms of the Loan Documents, entitles Lender to direct Borrower to
replace Hotel Manager, Lender may exercise its rights under the Loan Documents
and direct any Borrower to terminate its Contract and/or to replace Hotel
Manager with a management company chosen by such Borrower and reasonably
acceptable to Lender. Upon receiving notice

                                       2


of any such election, Hotel Manager shall abide by such direction to terminate
and cooperate with any replacement manager approved or designated by Lender. No
termination fee or other compensation shall be due or owing under such Contract
as a result of any such termination other than accrued unpaid fees.

                  5.       Without limiting the foregoing, subject to the second
sentence of paragraph 3 hereof, in the event Lender forecloses or otherwise
succeeds to the rights of any Borrower with respect to any Property, Lender
shall have the option upon written notice to Hotel Manager delivered within
thirty (30) days following foreclosure by Lender or other acquisition of such
Property by Lender, either to (a) terminate the applicable Contract without any
obligation or liability of Lender to pay the termination fees, if any; or (b)
continue such Contract in effect upon all of the terms and provisions provided
in such Contract, except that Lender shall have no obligation to pay any sums
due and owing under the Contract as of the date of foreclosure or other
acquisition of such Property, and Lender shall have the right after it elects to
continue such Contract under subparagraph (b) hereof to terminate such Contract
without cause upon thirty (30) days written notice to Hotel Manager without any
obligation or liability of Lender to pay the termination fees, if any other than
accrued unpaid fees. Hotel Manager acknowledges and agrees with Lender that
Lender has not assumed any obligations or liabilities of such Borrower to Hotel
Manager under such Contract. If Lender chooses not to continue any Contract
following a foreclosure or other acquisition of any Property, the only
compensation from Lender for which Hotel Manager shall be entitled under such
Contract shall be for the period commencing with the date of such foreclosure or
other acquisition and ending upon the subsequent termination by Lender of such
Contract. Notwithstanding the foregoing to the contrary, in the event Lender
forecloses or otherwise succeeds to the rights of any Borrower with respect to
its Property, upon Lender's request, Hotel Manager agrees to transfer and assign
to Lender, or its designee, to the extent possible, all applicable licenses
(including, without limitation, each liquor license and beer permit), permits
and approvals required for the use, occupancy, operation and maintenance of each
of the Property and held by or in the name of Hotel Manager, and, if requested
by Lender and permitted by applicable law, enter into such reasonable concession
or use agreements with Lender or its designee (subject to appropriate
indemnification) as are reasonably necessary to allow Lender or its designee to
offer, or cause to be offered, liquor and beer for sale at such Property. For
this purpose, Hotel Manager constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution to complete or undertake the
assignment of each of the items referenced in the preceding sentence in the name
of Hotel Manager pursuant to this paragraph 5. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked.

                  6.       Hotel Manager agrees (a) not to resign as Hotel
Manager without ninety (90) days prior written notice to Lender, and (b) not to
amend any Contract in any material respect without Lender's prior written
approval, which approval shall not be unreasonably withheld or delayed.

                  7.       Hotel Manager acknowledges and agrees that any and
all rents, room rents, credit card receipts, other receipts, profits or other
sums, including any management fees in excess of the management fees to which
Hotel Manager is entitled pursuant to paragraph 2 hereof, and receipts derived
from the sale of alcoholic beverages (collectively herein called "PROPERTY
PROCEEDS") collected or received by Hotel Manager from the Properties are
subject to

                                       3


a security interest of Lender pursuant to the Loan Documents, and shall be
collected and held by Hotel Manager in trust for the benefit of the applicable
Borrower and Lender. Any such Property Proceeds shall be deposited by Hotel
Manager within two (2) Business Days of receipt into a deposit account (the
"DEPOSIT ACCOUNT") in the name of the Lender and identified in that certain
Deposit Account Agreement or other similar agreement dated as of the date hereof
(as amended, restated, modified, replaced or supplemented from time to time,
each, a "DEPOSIT ACCOUNT AGREEMENT") among the applicable Borrower, Lender,
Hotel Manager and the bank named therein. Upon transfer of any such Property
Proceeds to Hotel Manager from the Lock Box Account (as defined in that certain
Cash Management Agreement dated as of even date herewith (as amended, restated,
modified, replaced or supplemented from time to time, the "CASH MANAGEMENT
AGREEMENT"), among Mortgage Borrowers, Lender, Hotel Manager and Wachovia Bank,
National Association) as directed by the applicable Borrower pursuant to Section
3.3 of the Cash Management Agreement, such Property Proceeds shall be used by
Hotel Manager for proper expenses and costs of managing and operating the
applicable Property as permitted under the applicable Contract, subject, in all
instances, to compliance with the Operating Budget and FF&E Budget then in
effect and limitations on distributions to Borrowers, each as more fully
described in the Loan Agreement. Hotel Manager hereby disclaims any and all
interests in the Deposit Account, the Lock Box Account (and any Sub-Accounts
thereof), the Property Operating Account and in any of the Property Proceeds.
Upon written notice from Lender that an Event of Default has occurred under the
Loan Agreement and/or other Loan Documents, Hotel Manager agrees to apply
Property Proceeds as instructed by Lender.

                  8.       Hotel Manager represents and warrants that (a) a
true, correct and complete copy of each Contract has been delivered to Lender on
or prior to the date hereof, the form of which is attached hereto as EXHIBIT A,
(b) each Contract is in full force and effect and has not been modified, amended
or assigned, except in favor of Lender or its predecessor-in-interest (c)
neither Hotel Manager nor, to Hotel Manager's knowledge, any Borrower is in
default under any of the terms, covenants or provisions of its Contract, and
Hotel Manager knows of no event which, with the giving of notice or the passage
of time, or both, would constitute a default under any Contract, (d) Hotel
Manager has no knowledge of and has not commenced any action or given or
received any notice for the purpose of terminating any Contract, and (e) all
management fees, commissions and other sums due and payable to the Hotel Manager
under each Contract as of the date hereof have been paid in full.

                  9.       This Agreement shall be deemed to be a contract
entered into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of the State of New York.

                  10.      All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder shall be in
writing and shall be delivered to Lender and Borrowers at the addresses set
forth in Section 14.5 of the Loan Agreement and to Hotel Manager at the address
set forth on the first page hereof, with a copy to Morris Manning & Martin LLP,
Attention: Tom Gryboski, Esq., Fax: (404) 365-9532, each in the manner provided
in Section 14.5 of the Loan Agreement.

                  11.      This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to

                                       4


act on the part of Lender or any other party, but only by an agreement in
writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

                  12.      If any term, covenant or condition of this Agreement
is held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such provision. If any conflict exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                  13. This Agreement may be executed in any number of duplicate
originals and each duplicate original shall be deemed to be an original. This
Agreement may be executed in several counterparts, each of which counterparts
shall be deemed an original and all of which together shall constitute a single
agreement. The failure of any party hereto to execute this Agreement, or any
counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.

                  14. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa.

                  15. This Agreement shall be binding upon Hotel Manager and its
heirs, devisees, representatives, successors and assigns, and shall inure to the
benefit of and may be enforced by and binding upon Lender and its heirs,
successors, legal representatives, substitutes and assigns. Except as permitted
under the Loan Agreement, Hotel Manager shall not assign any of its rights or
obligations under this Agreement. Subject to the terms of the Loan Agreement,
Lender shall have the right to assign this Agreement and the obligations
hereunder in connection with any assignment or transfer of all or any portion of
the Loan or any interest therein. The parties hereto acknowledge that following
the execution and delivery of this Agreement, Lender may sell, transfer and
assign this Agreement and certain other Loan Documents. All references to
"Lender" hereunder shall be deemed to include the successors and assigns of
Lender and the parties hereto acknowledge that actions taken by Lender hereunder
may be taken by Lender's agents and by the agents of the successors and assigns
of Lender.

                  16. This Agreement is intended solely for the benefit of
Lender and its heirs, successors, legal representatives, substitutes and
assigns, and no third party shall have any right or interest in this Agreement,
nor any right to enforce this Agreement against any party hereto.

                  17. Hotel Manager acknowledges and agrees that pursuant to the
Loan Agreement, each Deposit Account Agreement and the Cash Management Agreement
(for purposes of this paragraph 17, collectively, the "AGREEMENTS") (the terms,
conditions and agreements of the Agreements being hereby incorporated herein
with the same force as is fully set forth herein), certain requirements are
specified with respect to the Property Proceeds and other payments due under any
Lease (as defined in the Security Instrument) or otherwise with respect to the
Properties, and Hotel Manager covenants and agrees to observe and, as and to the
extent applicable to Hotel Manager, perform all such requirements, including,
without limitation, ensuring that all Property Proceeds received by Hotel
Manager are properly deposited into the applicable Deposit Account.

                                       5


                  18.      The obligations of Borrowers and Hotel Manager
hereunder are subject to limitations on recourse as provided in Article XII of
the Loan Agreement.

                                       6


                  EXECUTED as of the day and year first above written.

                                    BORROWERS:

                                    LODGIAN FAIRMONT LLC
                                    NH MOTEL ENTERPRISES, INC.

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of the
                                           entities listed above


                                    LODGIAN HOTELS FIXED IV, L.P.

                                    By: LODGIAN HOTELS FIXED IV GP, INC.,
                                        a Delaware Corporation, its general
                                        partner

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory


                                    HOTEL MANAGER:

                                    LODGIAN MANAGEMENT CORP.,
                                    a Delaware corporation

                                    By:/s/ Daniel E. Ellis
                                       ---------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary



                                    EXHIBIT A

                      COPY OF FORM OF MANAGEMENT AGREEMENT

EX-10.5.6

                                                                  EXHIBIT 10.5.6

              CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT

                  This CONDITIONAL ASSIGNMENT OF HOTEL MANAGEMENT AGREEMENT,
dated as of June 25, 2004 (this "AGREEMENT"), made by LODGIAN MANAGEMENT CORP.,
a Delaware corporation, having an address at 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30826 ("HOTEL MANAGER"), and the undersigned, each having an
address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30826 (each a "BORROWER and collectively, "BORROWERS"), to and for the
benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having
an office at Four World Financial Center, New York, New York 10080, its
successors, transferees and assigns ("LENDER").

                  A.       Hotel Manager has entered into a certain Management
Agreement (each a "CONTRACT" and collectively, the "CONTRACTS") with each
Borrower, a true, correct and complete copy of which has been delivered to
Lender on or prior to the date hereof and the form of which is attached hereto
as EXHIBIT A, providing for the performance by Hotel Manager of certain
management obligations more particularly described therein with respect to the
management and operation of the property as more particularly described therein
(each, a "PROPERTY" and collectively, the "PROPERTIES").

                  B.       This Agreement is being executed in order to amend
each Contract, to conditionally assign each Borrower's interest therein to
Lender, and to subordinate Hotel Manager's rights to payment under the Contracts
to Lender's lien on the Properties in connection with Lender's making a loan to
Borrowers and certain other borrowers (collectively, the "MORTGAGE BORROWERS")
in the original principal amount of up to Sixty-One Million Five Hundred Sixteen
Thousand Five Hundred And No/100 Dollars ($61,516,500)(the "LOAN") pursuant to
that certain Loan and Security Agreement, dated as of even date herewith (as
amended, modified or restated, the "LOAN AGREEMENT"), among Mortgage Borrowers
and Lender. The Loan is evidenced by a certain Promissory Note, dated of even
date herewith (as amended, modified or restated, and any replacements or
substitutes therefor (by means of multiple notes or otherwise), the "NOTE"),
made by Mortgage Borrowers in favor of Lender and is secured by, among other
things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments
of Leases and Rents and Security Agreements, dated as of even date herewith (as
amended, modified, restated, spread or consolidated, collectively, the "SECURITY
INSTRUMENT"), in favor of Lender (the Note, the Security Instrument, the Loan
Agreement, this Agreement and all other documents executed in connection with
the Loan are collectively referred to as the "LOAN DOCUMENTS"). All capitalized
terms used and not defined herein shall have the respective meanings given to
such terms in the Loan Agreement, a copy of which Hotel Manager hereby
acknowledges having received.

                  NOW, THEREFORE, in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Hotel Manager and Borrowers hereby represent,
warrant and covenant to Lender as follows:



                  1.       As additional collateral security for the Loan, each
Borrower hereby conditionally transfers, sets over and assigns to Lender all of
such Borrower's right, title and interest in and to its Contract, said transfer
and assignment to automatically become a present, unconditional assignment, at
Lender's option, upon the occurrence and during the continuance of an Event of
Default by Borrowers under any of the Loan Documents.

                  2.       Hotel Manager hereby agrees that each Contract, all
rights, interests and privileges of Hotel Manager thereunder, and all management
fees and other payment obligations of each Borrower to Hotel Manager for
services rendered by Hotel Manager for the management and operation of its
Property, as such services are more particularly described in such Contract, are
hereby subordinated to the Loan Documents and the liens in favor of Lender
provided for therein, and to all rights of Lender to receive payment from
Borrowers under the Note and all other amounts which may be due Lender under the
Loan Documents. Hotel Manager recognizes and agrees that so long as the Note is
being paid in strict accordance with its terms and no Event of Default has
occurred and is continuing or will by virtue of payments to Hotel Manager occur,
Hotel Manager shall, subject to the requirements of the Loan Documents,
including any such requirements governing management and application of the
Properties and Borrower revenues and cash flow, be entitled to receive payments
provided for under such Contract in accordance with the terms thereof. Hotel
Manager hereby releases, discharges and waives any and all liens, claims,
demands of any kind or nature, against each Property, either now or in the
future, arising from the services provided by Hotel Manager for the management
and operation of such Property.

                  3.       In the event that such Borrower defaults under the
terms of its Contract, Hotel Manager agrees that before exercising any rights or
remedies with respect thereto, it will notify Lender of such default. Upon
Lender's request, Hotel Manager will continue to perform under such Contract
until such time as Lender may elect to terminate such Contract, provided that
Hotel Manager shall continue to receive all fees payable to it under such
Contract. Subject to the foregoing, Hotel Manager agrees that it shall not be
entitled to receive any management fee or other fee, commission or other amount
payable under the Contract or otherwise for and during any period of time that
any Event of Default has occurred and is continuing, provided that Hotel Manager
shall not be obligated to return or refund to Lender any management fee or other
fee, commission or other amount already received by Hotel Manager prior to the
occurrence of the Event of Default, and to which Hotel Manager was entitled
under paragraph 2 above. In all events, Hotel Manager recognizes that the
maximum amount that shall be due and payable under each Contract is the amount
stated therein (such amount being adequate to complete the services called for
in such Contract), and that Hotel Manager will not claim any incidental,
consequential, or exemplary damages of any nature as a condition to completing
its performance under the Contract.

                  4.       In the event that (a) Hotel Manager becomes
insolvent, or (b) an Event of Default occurs and is continuing, or (c) any
default occurs by Hotel Manager under the Management Agreement beyond the
expiration of any notice and cure periods, or (d) any other event occurs which,
under the terms of the Loan Documents, entitles Lender to direct Borrower to
replace Hotel Manager, Lender may exercise its rights under the Loan Documents
and direct any Borrower to terminate its Contract and/or to replace Hotel
Manager with a management

                                       2


company chosen by such Borrower and reasonably acceptable to Lender. Upon
receiving notice of any such election, Hotel Manager shall abide by such
direction to terminate and cooperate with any replacement manager approved or
designated by Lender. No termination fee or other compensation shall be due or
owing under such Contract as a result of any such termination other than accrued
unpaid fees.

                  5.       Without limiting the foregoing, subject to the second
sentence of paragraph 3 hereof, in the event Lender forecloses or otherwise
succeeds to the rights of any Borrower with respect to any Property, Lender
shall have the option upon written notice to Hotel Manager delivered within
thirty (30) days following foreclosure by Lender or other acquisition of such
Property by Lender, either to (a) terminate the applicable Contract without any
obligation or liability of Lender to pay the termination fees, if any; or (b)
continue such Contract in effect upon all of the terms and provisions provided
in such Contract, except that Lender shall have no obligation to pay any sums
due and owing under the Contract as of the date of foreclosure or other
acquisition of such Property, and Lender shall have the right after it elects to
continue such Contract under subparagraph (b) hereof to terminate such Contract
without cause upon thirty (30) days written notice to Hotel Manager without any
obligation or liability of Lender to pay the termination fees, if any other than
accrued unpaid fees. Hotel Manager acknowledges and agrees with Lender that
Lender has not assumed any obligations or liabilities of such Borrower to Hotel
Manager under such Contract. If Lender chooses not to continue any Contract
following a foreclosure or other acquisition of any Property, the only
compensation from Lender for which Hotel Manager shall be entitled under such
Contract shall be for the period commencing with the date of such foreclosure or
other acquisition and ending upon the subsequent termination by Lender of such
Contract. Notwithstanding the foregoing to the contrary, in the event Lender
forecloses or otherwise succeeds to the rights of any Borrower with respect to
its Property, upon Lender's request, Hotel Manager agrees to transfer and assign
to Lender, or its designee, to the extent possible, all applicable licenses
(including, without limitation, each liquor license and beer permit), permits
and approvals required for the use, occupancy, operation and maintenance of each
of the Property and held by or in the name of Hotel Manager, and, if requested
by Lender and permitted by applicable law, enter into such reasonable concession
or use agreements with Lender or its designee (subject to appropriate
indemnification) as are reasonably necessary to allow Lender or its designee to
offer, or cause to be offered, liquor and beer for sale at such Property. For
this purpose, Hotel Manager constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution to complete or undertake the
assignment of each of the items referenced in the preceding sentence in the name
of Hotel Manager pursuant to this paragraph 5. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked.

                  6.       Hotel Manager agrees (a) not to resign as Hotel
Manager without ninety (90) days prior written notice to Lender, and (b) not to
amend any Contract in any material respect without Lender's prior written
approval, which approval shall not be unreasonably withheld or delayed.

                  7.       Hotel Manager acknowledges and agrees that any and
all rents, room rents, credit card receipts, other receipts, profits or other
sums, including any management fees in excess of the management fees to which
Hotel Manager is entitled pursuant to paragraph 2

                                       3


hereof, and receipts derived from the sale of alcoholic beverages, to the extent
permitted by law (collectively herein called "PROPERTY PROCEEDS"), collected or
received by Hotel Manager from the Properties are subject to a security interest
of Lender pursuant to the Loan Documents, and shall be collected and held by
Hotel Manager in trust for the benefit of the applicable Borrower and Lender.
Any such Property Proceeds shall be deposited by Hotel Manager within two (2)
Business Days of receipt into a deposit account (the "DEPOSIT ACCOUNT") in the
name of the Lender and identified in that certain Deposit Account Agreement or
other similar agreement dated as of the date hereof (as amended, restated,
modified, replaced or supplemented from time to time, each, a "DEPOSIT ACCOUNT
AGREEMENT") among the applicable Borrower, Lender, Hotel Manager and the bank
named therein. Upon transfer of any such Property Proceeds to Hotel Manager from
the Lock Box Account (as defined in that certain Cash Management Agreement dated
as of even date herewith (as amended, restated, modified, replaced or
supplemented from time to time, the "CASH MANAGEMENT AGREEMENT"), among Mortgage
Borrowers, Lender, Hotel Manager and Wachovia Bank, National Association) as
directed by the applicable Borrower pursuant to Section 3.3 of the Cash
Management Agreement, such Property Proceeds shall be used by Hotel Manager for
proper expenses and costs of managing and operating the applicable Property as
permitted under the applicable Contract, subject, in all instances, to
compliance with the Operating Budget and FF&E Budget then in effect and
limitations on distributions to Borrowers, each as more fully described in the
Loan Agreement. Hotel Manager hereby disclaims any and all interests in the
Deposit Account, the Lock Box Account (and any Sub-Accounts thereof), the
Property Operating Account and in any of the Property Proceeds. Upon written
notice from Lender that an Event of Default has occurred under the Loan
Agreement and/or other Loan Documents, Hotel Manager agrees to apply Property
Proceeds as instructed by Lender.

                  8.       Hotel Manager represents and warrants that (a) a
true, correct and complete copy of each Contract has been delivered to Lender on
or prior to the date hereof, the form of which is attached hereto as EXHIBIT A,
(b) each Contract is in full force and effect and has not been modified, amended
or assigned, except in favor of Lender or its predecessor-in-interest (c)
neither Hotel Manager nor, to Hotel Manager's knowledge, any Borrower is in
default under any of the terms, covenants or provisions of its Contract, and
Hotel Manager knows of no event which, with the giving of notice or the passage
of time, or both, would constitute a default under any Contract, (d) Hotel
Manager has no knowledge of and has not commenced any action or given or
received any notice for the purpose of terminating any Contract, and (e) all
management fees, commissions and other sums due and payable to the Hotel Manager
under each Contract as of the date hereof have been paid in full.

                  9.       This Agreement shall be deemed to be a contract
entered into pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of the State of New York.

                  10.      All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder shall be in
writing and shall be delivered to Lender and Borrowers at the addresses set
forth in Section 14.5 of the Loan Agreement and to Hotel Manager at the address
set forth on the first page hereof, with a copy to

                                       4


Morris Manning & Martin LLP, Attention: Tom Gryboski, Esq., Fax: (404) 365-9532,
each in the manner provided in Section 14.5 of the Loan Agreement.

                  11.      This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of Lender or any other party, but only
by an agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.

                  12.      If any term, covenant or condition of this Agreement
is held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such provision. If any conflict exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                  13.      This Agreement may be executed in any number of
duplicate originals and each duplicate original shall be deemed to be an
original. This Agreement may be executed in several counterparts, each of which
counterparts shall be deemed an original and all of which together shall
constitute a single agreement. The failure of any party hereto to execute this
Agreement, or any counterpart hereof, shall not relieve the other signatories
from their obligations hereunder.

                  14.      Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns and pronouns shall include the plural and vice versa.

                  15.      This Agreement shall be binding upon Hotel Manager
and its heirs, devisees, representatives, successors and assigns, and shall
inure to the benefit of and may be enforced by and binding upon Lender and its
heirs, successors, legal representatives, substitutes and assigns. Except as
permitted under the Loan Agreement, Hotel Manager shall not assign any of its
rights or obligations under this Agreement. Subject to the terms of the Loan
Agreement, Lender shall have the right to assign this Agreement and the
obligations hereunder in connection with any assignment or transfer of all or
any portion of the Loan or any interest therein. The parties hereto acknowledge
that following the execution and delivery of this Agreement, Lender may sell,
transfer and assign this Agreement and certain other Loan Documents. All
references to "Lender" hereunder shall be deemed to include the successors and
assigns of Lender and the parties hereto acknowledge that actions taken by
Lender hereunder may be taken by Lender's agents and by the agents of the
successors and assigns of Lender.

                  16.      This Agreement is intended solely for the benefit of
Lender and its heirs, successors, legal representatives, substitutes and
assigns, and no third party shall have any right or interest in this Agreement,
nor any right to enforce this Agreement against any party hereto.

                  17.      Hotel Manager acknowledges and agrees that pursuant
to the Loan Agreement, each Deposit Account Agreement and the Cash Management
Agreement (for purposes of this paragraph 17, collectively, the "AGREEMENTS")
(the terms, conditions and agreements of the Agreements being hereby
incorporated herein with the same force as is fully set forth herein), certain
requirements are specified with respect to the Property Proceeds and

                                       5


other payments due under any Lease (as defined in the Security Instrument) or
otherwise with respect to the Properties, and Hotel Manager covenants and agrees
to observe and, as and to the extent applicable to Hotel Manager, perform all
such requirements, including, without limitation, ensuring that all Property
Proceeds received by Hotel Manager are properly deposited into the applicable
Deposit Account.

                  18.      The obligations of Borrowers and Hotel Manager
hereunder are subject to limitations on recourse as provided in Article XII of
the Loan Agreement.

                                       6


                  EXECUTED as of the day and year first above written.

                                    BORROWERS:

                                    SERVICO COLUMBIA, INC.
                                    SERVICO HOUSTON, INC.

                                    By:/s/ Daniel E. Ellis
                                       -------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory for each of the
                                           entities listed above

                                    LITTLE ROCK LODGING ASSOCIATES I,
                                      LIMITED PARTNERSHIP

                                    By: LODGIAN LITTLE ROCK SPE, INC.,
                                           a Delaware corporation, its general
                                           partner

                                    By:/s/ Daniel E. Ellis
                                       -------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory

                                    LODGIAN HOTELS FIXED IV, L.P.

                                    By: LODGIAN HOTELS FIXED IV GP, INC.,
                                           a Delaware corporation, its general
                                           partner

                                    By:/s/ Daniel E. Ellis
                                       -------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or
                                           Authorized Signatory


                                    HOTEL MANAGER:

                                    LODGIAN MANAGEMENT CORP.,
                                    a Delaware corporation

                                    By:/s/ Daniel E. Ellis
                                       -------------------------------------
                                    Name:  Daniel E. Ellis
                                    Title: Vice President and Secretary, or



                                    EXHIBIT A

                      COPY OF FORM OF MANAGEMENT AGREEMENT

EX-10.5.7

                                                                  EXHIBIT 10.5.7

                       ASSIGNMENT OF AGREEMENTS, LICENSES,
                              PERMITS AND CONTRACTS

                  This ASSIGNMENT OF AGREEMENTS, LICENSES, PERMITS AND
CONTRACTS, dated as of June 25, 2004 (this "ASSIGNMENT"), made by the
undersigned, each having an address at c/o Lodgian, Inc., 3445 Peachtree Road,
NE, Suite 700, Atlanta, Georgia 30326 (collectively, "BORROWER"), to MERRILL
LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an address at 4
World Financial Center, New York, New York 10080 (together with its successors,
transferees and assigns, "LENDER").

                              W I T N E S S E T H:

                  WHEREAS:

                  A.       Borrower is the owner of a fee simple and leasehold
interest, as the case may be, in those certain parcels of real property
(collectively, the "PREMISES") described in EXHIBIT A attached hereto, and the
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and other improvements now or hereafter
located thereon (the "IMPROVEMENTS"; together with the Premises, collectively,
the "PROPERTY");

                  B.       Borrower and Lender have entered into a certain Loan
and Security Agreement, dated as of the date hereof (as amended, modified or
restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has
agreed to make a loan to Borrower as more particularly described below.
Capitalized terms used herein and not herein defined shall have the meanings
assigned to such terms in the Loan Agreement.

                  C.       Pursuant to the Loan Agreement, Lender is making a
Loan to Borrower in the aggregate original principal amount of up to $61,516,500
(the "LOAN"). The Loan is evidenced by a certain Promissory Note, dated as of
the date hereof (as amended, modified or restated from time to time, the "NOTE")
and secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds to
Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as
of the date hereof (as amended, modified or restated from time to time,
collectively, the "SECURITY INSTRUMENT"), with respect to the Property and
Improvements.

                  D.       To induce Lender to make the Loan and to secure
payment of the Note, together with interest thereon, Borrower has agreed to the
execution and delivery of this Assignment.

                  NOW, THEREFORE, in consideration of the sum of Ten Dollars
($10) and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the Borrower hereby absolutely grants a first
lien on and security interest in, and hereby assigns, transfers and sets over to
Lender as additional security for the payment of the Loan and the observance and
performance by the Borrower of the terms, covenants and conditions of the Loan



Documents on the part of the Borrower to be observed or performed, all of the
Borrower's right, title and interest in and to the following:

                           (a)      to the extent assignable, all of Borrower's
right, title and interest in, to and under the documents, contracts,
instruments, plans, permits, licenses (including, without limitation, all liquor
licenses and other beverage permits), approvals, applications, trade names and
trademarks (including, without limitation, any licenses of, or agreements to
license, trade names or trademarks now or hereafter entered into by or on behalf
of Borrower or Manager in connection with the operation of the Property),
insurance policies, equipment leases, purchase and sale agreements, and other
instruments described or existing with respect to the Property or any portion
thereof, and any amendments or modifications thereto, any replacements thereof
executed during the term of the Note and any other similar documents or
instruments with respect to the Property or any portion thereof, now in
existence or hereafter executed by Borrower or now in the possession of Borrower
or hereafter obtained by Borrower (collectively, the "DOCUMENTS");

                           (b)      to the extent assignable, all rights,
powers, privileges, claims, remedies and causes of action of every kind which
Borrower now has or may in the future have with respect to or by reason of its
interest in the Documents; and

                           (c)      to the extent assignable, any and all
proceeds (including non-cash proceeds) of any of the foregoing (the items
enumerated in the preceding subparagraphs (a) and (b) and in this subparagraph
(c) being hereinafter collectively referred to as the "COLLATERAL").

                  1.       This Assignment is given to secure the obligations of
Borrower under and in respect of (a) the Note and (b) the other Loan Documents.
The parties intend that this Assignment shall be a present, actual, absolute and
unconditional assignment and shall, immediately upon execution, give Lender the
right to assume Borrower's interest in the Collateral; provided, however, that
unless an Event of Default under any of the Loan Documents shall have occurred
and be continuing, Borrower shall have a license to utilize the Collateral in
accordance with the terms thereof. If an Event of Default shall have occurred
and be continuing under any of the Loan Documents, Borrower's license mentioned
in the immediately preceding sentence shall cease and terminate, without the
execution of any further instrument or document or the taking of any other act
on the part of Lender, and in such event, subject to the terms of the Loan
Agreement and the other Loan Documents, Lender shall be entitled to utilize the
Collateral in Borrower's place and stead, in the name of Borrower or otherwise,
and in furtherance thereof, subject to the terms of the Loan Agreement and the
other Loan Documents, Lender may enter upon the Property and take possession of
the Property by its officers, agents or employees, or by a court-appointed
receiver, and for the operation, protection, repair and maintenance of the
Property, and in connection therewith, Lender shall be entitled to take
possession of and use all books of account and financial records of Borrower and
its property managers or representatives relating to the Property.

                  2.       Neither this Assignment nor any action or inaction on
the part of Lender shall constitute an assumption on the part of Lender of any
duty or obligation with respect to the Collateral, nor shall Lender have any
duty or obligation to make any payment to be made by Borrower under the
Collateral, or to present or file any claim, or to take any other action to

                                      -2-


collect or enforce the payment of any amounts or the performance of any
obligations which have been assigned to Lender or to which it may be entitled
hereunder at any time or times. No action or inaction on the part of Lender
shall adversely affect or limit in any way the rights of Lender hereunder or
under the Collateral, and Lender shall not incur any liability on account of any
action taken (or not taken) by it or on its behalf in connection with the
Collateral in good faith, whether or not the same shall prove to be improper,
inadequate or invalid, in whole or in part.

                  3.       Borrower shall indemnify and hold Lender harmless
from and against any and all liabilities, losses and damages which Lender may
incur by reason of this Assignment and any actions of Lender taken (or not
taken) in connection with the Collateral, and from and against any and all
claims and demands whatsoever which may be asserted against Lender by reason of
any alleged obligations to be performed or discharged by Lender by reason of
this Assignment, and the amount thereof, including reasonable costs, expenses
and reasonable attorneys' fees and disbursements, together with interest on such
amount, at the Default Rate under the Note from the date such costs, expenses
and fees were incurred by Lender to the date of payment thereof to Lender by
Borrower, shall be secured hereby and by the other Loan Documents, and Borrower
shall reimburse Lender therefor within twenty (20) days after demand, and upon
the failure of Borrower to do so, the same shall be deemed an Event of Default
under the Loan Agreement for which Lender shall be entitled to exercise any and
all rights and remedies provided therein or at law or in equity; provided,
however, that in no event shall Borrower be required to indemnify or hold
harmless Lender for any liabilities, losses or damages resulting from Lender's
bad faith, gross negligence or willful misconduct. It is further understood that
this Assignment shall not operate to constitute Lender as a lender in possession
of the Property, or to place responsibility for the control, care, management or
repair of the Improvements upon Lender, nor shall it operate to make Lender
responsible or liable (as to Borrower) for any waste committed with respect to
the Property by any party, or for any Hazardous Material placed upon or found at
the Property, or for any dangerous or defective condition of the Improvements or
for any negligence in the management, up-keep, repair or control of the
Improvements resulting in loss, injury, death or damage to any contractor,
sub-contractor, licensee, invitee, employee, or other party, or for any other
thing or matter whatsoever.

                  4.       Borrower shall remain liable to, and shall, perform
all of its obligations under and with respect to the Collateral and shall, at
its sole cost and expense, enforce the Collateral in the ordinary course of
business and comply in all material respects with all of its obligations under
the Collateral and all the terms thereof. Borrower shall give Lender prompt
notice of any material default by any party under the Collateral. So long as (a)
Borrower is acting in the ordinary course of business, and (b) no Event of
Default has occurred and is continuing under any of the Loan Documents, except
as otherwise provided in the Loan Agreement, Borrower may alter, amend, extend,
modify, change, cancel or terminate any of the Collateral, provided that such
alterations, amendments, extensions, modifications, changes, cancellations and
terminations, taken as a whole, are not likely to result in a Material Adverse
Effect, and, except as otherwise provided in the Loan Agreement, Borrower may
enter into new Collateral on commercially reasonable terms without Lender's
prior written consent in each instance; provided, however, that Borrower shall
provide Lender with copies of any such alterations, amendments, extensions,
modifications, changes, cancellations, and terminations of

                                      -3-


the Collateral upon request of Lender unless otherwise required to be provided
pursuant to the Loan Agreement.

                  5.       Upon the occurrence and during the continuance of an
Event of Default under any of the Loan Documents, Lender shall be entitled to
all of the rights, remedies, powers and privileges available to a secured party
under the Uniform Commercial Code in any jurisdiction whose laws may apply and
this Assignment shall constitute a direction to and full authority to any person
or entity which has contracted with or is a party to any of the Documents
(collectively, the "CONTRACTING PARTIES", and individually, a "CONTRACTING
PARTY") to perform its obligations under the Documents for the benefit of Lender
without proof to any Contracting Party of the default of Borrower. In addition,
Borrower agrees that it shall, promptly upon request of Lender following such
Event of Default, execute and deliver notices to the Contracting Parties
directing that future performance of such Contracting Parties' obligations be
made at the direction of Lender. Borrower hereby irrevocably authorizes each of
the Contracting Parties to rely upon and comply with any notice or demand by
Lender for the performance by any such Contracting Party of its obligations
under any Document for the benefit of Lender, and no Contracting Party shall
have any right or duty to inquire whether an Event of Default has actually
occurred, and Borrower shall have no right to countermand its authorization
herein to the Contracting Parties to perform for the benefit of Lender.

                  6.       Borrower represents and warrants that it has full
right, power and authority, pursuant to its certificate of limited partnership
and limited partnership agreement, certificate of formation and limited
liability company agreement, or certification of incorporation and by-laws, as
the case may be, to assign the Collateral assigned hereby and that (a) to
Borrower's knowledge, the Documents in existence on the date hereof, are in full
force and effect in accordance with their respective terms, (b) Borrower has
delivered to Lender true and complete copies of the material Documents in
existence as of the date hereof, (c) neither the Collateral nor any part thereof
has been assigned, pledged or encumbered by Borrower except pursuant to this
Assignment and the other Loan Documents, (d) to Borrower's knowledge, no default
or event of default which remains uncured beyond the expiration of any
applicable grace or notice period which could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing hereunder and no Event of
Default or Default has occurred, (e) to Borrower's knowledge, none of the
Contracting Parties has any defense, set-off or counterclaim against Borrower to
the performance of any obligations of such respective Contracting Party, and (f)
its principal place of business is its address for notices as set forth in the
Loan Agreement

                  7.       Borrower, at its expense, shall execute and deliver
all such instruments and take all such action as Lender, from time to time, may
reasonably request in order to obtain the full benefits of this Assignment and
of the rights and powers herein created and to maintain and perfect the security
interest granted in this Assignment. To the extent permitted by law, Borrower
irrevocably authorizes Lender, at the expense of Borrower, to file financing
statements and continuation statements with respect to the Collateral that
Lender deems appropriate or desirable without the signature of Borrower.

                  8.       Wherever there is any conflict or inconsistency
between any terms or provisions of this Assignment and the Loan Agreement, the
terms and provisions of the Loan Agreement shall control.

                                      -4-


                  9.       All rights and remedies herein conferred may be
exercised whether or not sale proceedings are pending under the Security
Instrument or any other action or proceeding has been commenced under any of the
other Loan Documents. Lender shall not be required to resort first to the
security of this Assignment before resorting to the security of the Security
Instrument or any of the other Loan Documents and Lender may exercise the
security hereof or thereof concurrently or independently and in any order of
preference.

                  10.      This Assignment shall automatically terminate upon
payment in full of all sums due Lender under the Note, the Loan Agreement, and
the other Loan Documents, and any other indebtedness secured by the Security
Instrument.

                  11.      All notices, demands, consents, or requests which are
either required or desired to be given or furnished hereunder shall be sent and
shall be effective in the manner set forth in Section 14.5 of the Loan
Agreement.

                  12.      The provisions of this Assignment shall be binding
upon Borrower, its successors and assigns, and all persons claiming under or
through Borrower or any such successor or assign, and shall inure to the benefit
of and be enforceable by Lender and its successors and assigns. Subject to the
terms of the Loan Agreement, Lender shall have the right to assign this
Assignment and the obligations hereunder in connection with any assignment or
transfer of all or any portion of the Loan or any interest therein. The parties
hereto acknowledge that following the execution and delivery of this Assignment,
Lender may sell, transfer and assign this Assignment and certain other Loan
Documents. All references to "Lender" hereunder shall be deemed to include the
assigns of Lender and the parties hereto acknowledge that actions taken by
Lender hereunder may be taken by Lender's agents and by the agents of the
assigns of Lender.

                  13.      This Assignment shall constitute a security agreement
for all purposes under the Uniform Commercial Code as in effect in the State
where the applicable Property is located.

                  14.      This Assignment and the obligations arising hereunder
shall be governed by and construed in accordance with the laws of the State of
New York and any applicable laws of the United States of America, except that at
all times the provisions for the creation, perfection, attachment and
enforcement of the liens and the security interests created pursuant to this
Assignment shall be governed by the laws of the State where the applicable
Property is located.

                  15.      Neither this Assignment nor any provision hereof may
be changed, waived or terminated orally, but only by an instrument in writing
signed by Lender and Borrower.

                  16.      If any of the provisions of this Assignment, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Assignment, or the application
of such provision or provisions to persons or circumstances other than those to
whom or which it is held invalid or unenforceable, shall not be affected thereby
and every provision of this Assignment shall be valid and enforceable to the
fullest extent permitted by law.

                                      -5-


                  17.      The obligations of Borrower hereunder are subject to
limitations on recourse as provided in Article XII of the Loan Agreement.

                                      -6-

                  IN WITNESS WHEREOF, the Borrower has duly executed this
instrument as of the day and year first above written.

                                  BORROWERS:

                                  LODGIAN FAIRMONT LLC
                                  NH MOTEL ENTERPRISES, INC.
                                  SERVICO COLUMBIA, INC.
                                  SERVICO HOUSTON, INC.

                                  By: /s/ Daniel E. Ellis
                                      --------------------------------------
                                      Name:  Daniel E. Ellis
                                      Title: Vice President and Secretary, or
                                             Authorized Signatory for each of
                                             the entities listed above


                                  LITTLE ROCK LODGING ASSOCIATES I,
                                    LIMITED PARTNERSHIP

                                  By:  LODGIAN LITTLE ROCK SPE, INC.,
                                       a Delaware corporation, its
                                       general partner

                                  By: /s/ Daniel E. Ellis
                                      --------------------------------------
                                      Name:  Daniel E. Ellis
                                      Title: Vice President and Secretary, or
                                             Authorized Signatory


                                  LODGIAN HOTELS FIXED IV, L.P.

                                  By:  LODGIAN HOTELS FIXED IV GP, INC.,
                                       a Delaware corporation, its
                                       general partner

                                  By: /s/ Daniel E. Ellis
                                      --------------------------------------
                                      Name:  Daniel E. Ellis
                                      Title: Vice President and Secretary, or
                                             Authorized Signatory


                                   EXHIBITS A

                                   PROPERTIES



     CHAIN/NAME                     CITY                           ST
- ---------------------      -----------------------                 --
                                                             
Residence Inn              Little Rock                             AR
Courtyard by Marriott      Paducah                                 KY
Hilton Inn                 Columbia                                MD
Holiday Inn                Frederick                               MD
Hilton Inn                 Troy (Northfield)                       MI
Courtyard by Marriott      Abilene                                 TX
Holiday Inn Select         Dallas (DFW Airport)(Irving)            TX
Crowne Plaza               Houston                                 TX
Holiday Inn                Fairmont                                WV

EX-10.5.8

                                                                  EXHIBIT 10.5.8

                              COOPERATION AGREEMENT

            THIS COOPERATION AGREEMENT (this "AGREEMENT") is made as of the 25th
day of June, 2004, by and between the Mortgage Borrowers listed on the signature
page hereof (collectively, the "MORTGAGE BORROWERS"), Lodgian Mezzanine Fixed,
LLC (the "MEZZANINE BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., in its
capacity as both mortgage lender and mezzanine lender ("LENDER").

                                    RECITALS:

            A.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 1
Borrowers" (collectively, the "POOL 1 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 1"), are indebted to
Lender in the original principal sum of $63,801,000 ("MORTGAGE LOAN 1") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 1 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
1").

            B.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 2
Borrowers" (collectively, the "POOL 2 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 2"), are indebted to
Lender in the original principal sum of $67,864,000 ("MORTGAGE LOAN 2") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 2 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
2").

            C.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 3
Borrowers" (collectively, the "POOL 3 BORROWERS") by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 3"), are indebted to
Lender in the original principal sum of $66,818,500 ("MORTGAGE LOAN 3") as
governed by that certain Loan and Security Agreement of even date herewith
between the Pool 3 Borrowers and Lender (together with all extensions, renewals,
modifications, substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT
3").

            D.    The Mortgage Borrowers identified on Schedule 1 as the "Pool 4
Borrowers" (collectively, the "POOL 4 BORROWERS"), by that certain Promissory
Note of even date herewith given to Lender ("MORTGAGE NOTE 4", and together with
Mortgage Note 1, Mortgage Note 2, and Mortgage Note 3, collectively, the
"MORTGAGE NOTES"), are indebted to Lender in the original principal sum of
$61,516,500 ("MORTGAGE LOAN 4", and together with Mortgage Loan 1, Mortgage Loan
2, and Mortgage Loan 3, collectively, the "MORTGAGE LOANS") as governed by that
certain Loan and Security Agreement of even date herewith between the Pool 4
Borrowers and Lender (together with all extensions, renewals, modifications,
substitutions and amendments thereof, "MORTGAGE LOAN AGREEMENT 4", and together
with Mortgage Loan Agreement 1, Mortgage Loan Agreement 2, and Mortgage Loan
Agreement 3, collectively, the "MORTGAGE LOAN AGREEMENTS").

[Fixed Loan]



            E.    Mortgage Loan 1, Mortgage Loan 2, Mortgage Loan 3, and
Mortgage Loan 4 are secured, in part, by Mortgages on the respective pools of
Properties identified on Schedule 2 (each, a "POOL", and collectively, the
"POOLS").

            F.    The Mezzanine Borrower, by that certain Mezzanine Note of even
date herewith given to Lender (the "MEZZANINE NOTE"), is indebted to Lender in
the aggregate principal sum of One Hundred and No/100 ($100.00) (the "MEZZANINE
LOAN") as governed by that certain Mezzanine Loan Agreement of even date
herewith between the Mezzanine Borrower and Lender (together with all
extensions, renewals, modifications, substitutions and amendments thereof, the
"MEZZANINE LOAN AGREEMENT").

            G.    Lender has required as a condition to making the Mortgage
Loans and the Mezzanine Loan that the Mortgage Borrowers and the Mezzanine
Borrower enter into this Agreement with Lender.

                                    AGREEMENT

            For ten ($10) dollars and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:

            Section 1. Adjustment of Mortgage Loans and Mezzanine Loan/Loan
Modification. Lender shall have the right in its sole discretion, at any time
prior to the final Securitization of the last of the Mortgage Loans to be
securitized, to cause any of the following to occur (each, a "LOAN
MODIFICATION"):

            (1)   separately adjust the principal amount and applicable interest
            rates of any of the Mortgage Loans and the Mezzanine Loan, provided
            that (i) the aggregate principal amount of the Mortgage Loans and
            the Mezzanine Loan immediately after such adjustment shall equal the
            aggregate outstanding principal balance of the Mortgage Loans and
            the Mezzanine Loan immediately prior to such adjustment, (ii) the
            weighted average interest rate of the Mortgage Loans and the
            Mezzanine Loan immediately after such adjustment shall equal the
            weighted average interest rate which was applicable to the Mortgage
            Loans and the Mezzanine Loan immediately prior to such adjustment,
            (iii) the aggregate debt service payments on the Mortgage Loans and
            the Mezzanine Loan immediately after such adjustment shall equal the
            aggregate debt service payments which were due under the Mortgage
            Loans and the Mezzanine Loan immediately prior to such adjustment,
            and (iv) the other material terms and provisions of each of the
            Mortgage Loans and the Mezzanine Loan shall remain unchanged and
            none of the foregoing adjustments shall increase the obligations or
            reduce the rights of the Mortgage Borrowers, the Mezzanine Borrower
            or Guarantor in any material respect; and/or

            (2)   cause any of the Properties in any one or more of the Pools to
            become Collateral for any other Pool.

                                       2

Any Loan Modification shall be subject to the following:





            (a)   (i) If Lender elects to increase the principal amount of the
Mezzanine Loan, the Mezzanine Borrower shall contribute to the Mortgage
Borrowers such additional loan proceeds to be applied to repay, dollar for
dollar, the Mortgage Notes (in an amount and as designated by Lender), and the
Lender under the Mortgage Notes will accept such prepayment without penalty,
premium or additional costs (except as provided herein) to the Mortgage
Borrowers; (ii) If Lender elects to increase the principal amount of the
Mortgage Loans, or any of them, and reduce the principal amount of the Mezzanine
Loan, the Mortgage Borrowers shall distribute to the Mezzanine Borrower such
additional loan proceeds to be applied to repay, dollar for dollar, the
Mezzanine Note, and the Lender under the Mezzanine Note will accept such
prepayment without penalty, premium or additional costs to the Mezzanine
Borrower (except as provided herein); and (iii) If Lender elects to increase the
principal amount of any of the Mortgage Loans and decrease the amount of any of
the other Mortgage Loans, the applicable Mortgage Borrowers shall distribute to
the Mezzanine Borrower such additional loan proceeds and the Mezzanine Borrower
shall contribute to the applicable Mortgage Borrowers (whose Mortgage Loans are
to be decreased) such additional loan proceeds to be applied to repay, dollar
for dollar, the applicable Mortgage Notes, and the Lender under the applicable
Mortgage Notes will accept such prepayment without penalty, premium or
additional costs to the Mortgage Borrowers (except as provided herein).

            (b)   The Mortgage Borrowers and the Mezzanine Borrower shall
cooperate, and shall cause Guarantor and any Affiliates thereof (the "LODGIAN
PARTIES") to cooperate, with all reasonable requests of Lender in connection
with any Loan Modification including, without limitation (x) execution and
delivery of such documents as shall reasonably be required by Lender in
connection therewith (including amended and restated notes, amended and restated
loan agreements, replacement Mortgages, replacement Assignments of Leases, and
ratifications by Guarantor of any of its obligations under any guaranties or
indemnities provided under the Mortgage Loan or the Mezzanine Loan), and (y)
transfers of one or more Properties among the Mortgage Borrowers, to the extent
required to comply with the terms of Article IX of the Mortgage Loan Agreements;

            (c)   The Mortgage Borrowers and the Mezzanine Borrower hereby
absolutely and irrevocably appoint Lender their true and lawful attorney coupled
with an interest, in their name and stead to make and execute all documents
necessary to effect any Loan Modification, provided, however, that Lender shall
not make or execute any such documents under such power until ten (10) days
after notice by Lender to Mortgage Borrowers and Mezzanine Borrower of such
intent to exercise its right under such power;

            (d)   At Lender's request, in connection with any Loan Modification
the Mortgage Borrowers and the Mezzanine Borrower shall deliver to Lender, at
the Mortgage Borrowers' and the Mezzanine Borrower' expense, replacement opinion
letters in form and substance similar to the opinion letters delivered on the
Closing Date addressed to any subsequent holders of any of the Mortgage Loans or
the Mezzanine Loan or any interest therein (including, without limitation, each
trustee holding any of the Mortgage Loans or the Mezzanine Loan) with respect to
any opinion letter delivered in connection with the Mortgage Loans and the
Mezzanine Loan;

                                       3



            (e)   Lender shall pay all reasonable out-of-pocket costs and
expenses incurred by the Mortgage Borrowers and the Mezzanine Borrower in
connection with a Loan Modification (other than the Mortgage Borrowers',
Mezzanine Borrower's and Guarantor's internal costs and expenses, and the costs
and expenses of their respective counsel, mortgage recording fees and taxes,
required endorsements, if any, to the Title Policies (as such term is defined in
the Mortgage Loan Agreement and the Mezzanine Loan Agreement), and Property
transfer costs).

            Section 2. Capitalized Terms; Notices. Capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Mortgage Loan Agreements. Any notices, requests, demands or other communications
required or permitted hereunder shall be delivered as specified in the Mortgage
Loan Agreements and the Mezzanine Loan Agreement.

            Section 3. Event of Default. It shall be an Event of Default under
the Mortgage Loans and the Mezzanine Loan if any of the Mortgage Borrowers, the
Mezzanine Borrower, or the Lodgian Parties fail to comply with any of the terms,
covenants or conditions of this Agreement within ten (10) Business Days after
receipt of written request from Lender.

            Section 4. Governing Law. This Agreement shall be governed,
construed, applied and enforced in accordance with the laws of the State of New
York and the applicable laws of the United States of America.

            Section 5. No Oral Change. This Agreement, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of the Mortgage
Borrowers, the Mezzanine Borrower, Guarantor, or Lender, but only by an
agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.

            Section 6. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Mortgage Borrowers, the Mezzanine Borrower,
Guarantor, and Lender and their respective successors and assigns forever.

            Section 7. Inapplicable Provisions. If any term, covenant or
condition of this Agreement is held to be invalid, illegal or unenforceable in
any respect, this Agreement shall be construed without such provision.

            Section 8. Headings, etc. The headings and captions of various
paragraphs of this Agreement are for convenience of reference only and are not
to be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.

            Section 9. Duplicate Originals, Counterparts. This Agreement may be
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. This Agreement may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Agreement. The failure of
any party hereto to execute this Agreement, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.

                         [NO FURTHER TEXT ON THIS PAGE]

                                        4


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

                                LENDER:

                                MERRILL LYNCH MORTGAGE
                                LENDING, INC.

                                By: /s/ Robert Spinna
                                    ----------------------------
                                Name: Robert Spinna
                                Title: Vice President

                       [signatures continue on next page]

[Fixed Loan]



                                MEZZANINE BORROWER:

                                LODGIAN MEZZANINE FIXED, LLC

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name: Daniel E. Ellis
                                Title: Vice President and Secretary

                                MORTGAGE BORROWERS:

                                IMPAC HOTELS I, L.L.C.
                                LODGIAN DENVER LLC
                                LODGIAN HOTELS FIXED I, LLC
                                MACON HOTEL ASSOCIATES, L.L.C.
                                SERVICO NORTHWOODS, INC.

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of
                                       the entities listed above

                                ALBANY HOTEL, INC.
                                APICO INNS OF GREEN TREE, INC.
                                LODGIAN AUGUSTA LLC
                                LODGIAN HOTELS FIXED II, INC.
                                LODGIAN LAFAYETTE LLC
                                LODGIAN TULSA LLC

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above



                                AMI OPERATING PARTNERS, L.P.

                                By: AMIOP ACQUISITION GENERAL
                                    PARTNER SPE CORP., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                DEDHAM LODGING ASSOCIATES I, LIMITED
                                PARTNERSHIP

                                By: DEDHAM LODGING SPE, INC., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                LODGIAN AMI, INC.
                                LODGIAN HOTELS FIXED III, LLC
                                MINNEAPOLIS MOTEL ENTERPRISES, INC.

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above



                                SERVICO CENTRE ASSOCIATES, LTD.

                                By: SERVICO PALM BEACH GENERAL
                                    PARTNER SPE, INC., a Delaware
                                    corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                LODGIAN FAIRMONT LLC
                                NH MOTEL ENTERPRISES, INC.
                                SERVICO COLUMBIA, INC.
                                SERVICO HOUSTON, INC.

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

                                LITTLE ROCK LODGING ASSOCIATES I,
                                LIMITED PARTNERSHIP

                                By: LODGIAN LITTLE ROCK SPE, INC.,
                                    a Delaware corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory



                                LODGIAN HOTELS FIXED IV, L.P.

                                By: LODGIAN HOTELS FIXED IV GP, INC.,
                                    a Delaware corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                GUARANTOR:

                                LODGIAN, INC.

                                By: /s/ Daniel E. Ellis
                                    ----------------------------
                                Name:  Daniel E. Ellis
                                Title:  Senior Vice President



                                   SCHEDULE 1

                               MORTGAGE BORROWERS

Pool 1 Borrowers

Lodgian Hotels Fixed I, LLC
Macon Hotel Associates, L.L.C.
Servico Northwoods, Inc.
Impac Hotels I, L.L.C.
Lodgian Denver LLC

Pool 2 Borrowers

AMI Operating Partners, L.P.
Albany Hotel, Inc.
Apico Inns of Green Tree, Inc.
Lodgian Tulsa LLC
Lodgian Augusta LLC
Lodgian Lafayette LLC
Dedham Lodging Associates I, Limited Partnership
Lodgian Hotels Fixed II, Inc.

Pool 3 Borrowers

Minneapolis Motel Enterprises, Inc.
Servico Centre Associates, Ltd.
Lodgian Hotels Fixed III, LLC -
Lodgian AMI, Inc.

Pool 4 Borrowers

NH Motel Enterprises, Inc.
Servico Columbia, Inc.
Lodgian Fairmont LLC
Little Rock Lodging Associates I, Limited Partnership
Lodgian Hotels Fixed IV, L.P.
Servico Houston, Inc.

[Fixed Loan]



                                   SCHEDULE 2

                                   PROPERTIES

Pool 1
Marriott  - Aurora
Courtyard by Marriott - Atlanta
Doubletree Club - Philadelphia
Holiday Inn Select - Strongsville
Crowne Plaza - Macon
Holiday Inn - Marietta
Holiday Inn - Lancaster
Clarion - North Charleston

Pool 2
Crowne Plaza - Albany
Holiday Inn - Linthicum
Residence Inn - Dedham
Courtyard by Marriott  - Tulsa
Courtyard by Marriott  - Lafayette
Holiday Inn - Pittsburgh
Marriott Fairfield Inn  - Augusta
Holiday Inn - York
Holiday Inn - E. Hartford

Pool 3
Holiday Inn - Baltimore
Crowne Plaza - West Palm Beach
Holiday Inn - Glen Burnie
Courtyard by Marriott - Bentonville
Holiday Inn - Towson
Holiday Inn - St. Paul
Courtyard by Marriott - Florence
Holiday Inn SunSpree - Surfside Beach
Marriott Fairfield Inn - Merrimack

Pool 4
Crowne Plaza - Houston
Hilton  - Columbia
Hilton  - Troy
Holiday Inn Select - Irving
Residence Inn - Little Rock
Holiday Inn - Frederick
Courtyard by Marriott - Paducah
Courtyard by Marriott - Abilene
Holiday Inn  - Fairmont

EX-10.5.9

                                                                  EXHIBIT 10.5.9

                            CASH MANAGEMENT AGREEMENT

                           Dated: as of June 25, 2004

                                      among

                                  THE BORROWERS
                      LISTED ON THE SIGNATURE PAGES HERETO,
                                  as Borrowers,

                      MERRILL LYNCH MORTGAGE LENDING, INC.

                                   as Lender,

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                                    as Agent

                                       and

                LODGIAN MANAGEMENT CORP., a Delaware corporation,
                                   as Manager

Cash Management Agreement (FX4)



                            CASH MANAGEMENT AGREEMENT

            CASH MANAGEMENT AGREEMENT (this "AGREEMENT"), dated as of June 25,
2004, among the Borrowers listed on the signature pages hereto, each having an
address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia
30326 (each, a "BORROWER", and collectively, "BORROWERS"), WACHOVIA BANK,
NATIONAL ASSOCIATION, having an address at 8739 Research Drive, URP4, Charlotte,
North Carolina 28288-1075 ("AGENT"), MERRILL LYNCH MORTGAGE LENDING, INC., a
Delaware corporation having an office at Four World Financial Center, New York,
New York 10080 ("LENDER"), and LODGIAN MANAGEMENT CORP., a Delaware corporation,
having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700,
Atlanta, Georgia 30326 ("MANAGER").

                              W I T N E S S E T H:

            WHEREAS, pursuant to a certain Loan and Security Agreement, dated as
of the date hereof (together with all extensions, renewals, modifications,
substitutions and amendments thereof, the "LOAN AGREEMENT"), between the
Borrowers and Lender, Lender has made a loan to the Borrowers in the principal
amount of $61,516,500 (the "LOAN"), which Loan is evidenced by a Promissory
Note, dated as of the date hereof (together with all extensions, renewals,
modifications, restatements, replacements, substitutions, by means of multiple
notes or otherwise, and amendments thereof, collectively, the "NOTE"), made by
the Borrowers, as makers, to Lender, as payee, and secured by, among other
things, (i) those certain Mortgages/Deeds of Trust/Deeds to Secure Debt,
Assignments of Leases and Rents, Security Agreements and Fixture Filings, each
dated as of the date hereof (together with all extensions, renewals,
modifications, restatements, substitutions and amendments thereof, each a
"SECURITY INSTRUMENT" and, collectively, the "SECURITY INSTRUMENTS"), each made
by a Borrower for the benefit of Lender and covering the properties as more
particularly described therein (collectively, the "PROPERTIES"), (ii) those
certain Assignments of Leases and Rents, dated as of the date hereof (together
with all extensions, renewals, modifications, restatements, substitutions and
amendments thereof, collectively, the "ASSIGNMENT OF LEASES"), made by the
applicable Borrower, as assignor, to Lender, as assignee, and (iii) the other
Loan Documents (as defined in the Loan Agreement);

            WHEREAS, pursuant to the Security Instruments and the Assignment of
Leases, the Borrowers have each granted to Lender a security interest in all of
the Borrowers' right, title and interest in, to and under the Rents (as defined
in the Security Instruments) and other revenues derived from and otherwise
attributable or allocable to the Properties, and have assigned and conveyed to
Lender all of the Borrowers' right, title and interest in, to and under the
Operating Revenues due and to become due to each of the Borrowers or to which
any of the Borrowers are now or may hereafter become entitled, arising out of
the Property or any part or parts thereof;

            WHEREAS, the Borrowers and Manager have entered into Management
Agreements with respect to the Properties pursuant to which Manager has agreed
to manage the Properties; and

Cash Management Agreement (FX4)



            WHEREAS, Manager has agreed to subordinate any right, title and
interest that Manager may have in and to the Operating Revenues and any other
income and revenues from the Properties to the interests of Lender under the
Loan Agreement and the Loan Documents; and

            WHEREAS, in order to fulfill all of the Borrowers' obligations under
the Loan Agreement, the Borrowers and Manager have agreed that all Operating
Revenues and other revenues from the Properties will be deposited directly into
the Deposit Account or the Lock Box Account (as such terms are hereinafter
defined), transferred to a Lock Box Account (if not deposited directly therein)
established hereunder with Agent and allocated and/or disbursed in accordance
with the terms and conditions hereof.

            NOW, THEREFORE, in consideration of the covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

            I.    DEFINITIONS

            Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Loan Agreement. As used herein, the following terms
shall have the following definitions:

            "ACCOUNTS" shall mean, collectively, the Deposit Account, the Lock
Box Account, the Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds
Account, and any other accounts pledged to Lender pursuant to this Agreement or
any of the other Loan Documents.

            "AGENT" shall mean Wachovia Bank, National Association, as agent
under this Agreement, together with its successors and assigns.

            "AGREEMENT" shall mean this Cash Management Agreement among the
Borrowers, Manager, Agent and Lender, as amended, supplemented, restated or
otherwise modified from time to time.

            "ALLOCABLE MEZZANINE SERVICING FEE" shall mean the Allocable Portion
of the monthly Servicing Fee (as defined in the Mezzanine Loan Agreement) for
which the Mezzanine Borrower is responsible pursuant to Section 2.11 of the
Mezzanine Loan Agreement.

            "ALLOCABLE PORTION" as defined in the Loan Agreement.

            "APPROVED OPERATING BUDGET" shall mean, for any period, each
Borrower's Operating Budget as approved or deemed approved by Lender from time
to time in accordance with Section 5.1(D) of the Loan Agreement, setting forth
such Borrower's reasonable estimate of Operating Revenues and Operating Expenses
for the applicable Property for such period.

            "BORROWERS" as defined in the Preamble, together with their
successors and permitted assigns.

            "BUSINESS INTERRUPTION INSURANCE" as defined in Section 2.1(d).

                                        2

Cash Management Agreement (FX4)



            "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" as defined in Section
2.1(c).

            "CASH TRAP EVENT" as defined in Section 6.8 of the Loan Agreement.

            "CASH TRAP RESERVE SUB-ACCOUNT" as defined in Section 2.1(c).

            "COLLATERAL" as defined in Section 5.1.

            "CREDIT CARD COMPANIES" as defined in Section 2.2(a).

            "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" as defined in
Section 2.2(a).

            "DEBT SERVICE SUB-ACCOUNT" as defined in Section 2.1(c).

            "DEPOSIT ACCOUNT" as defined in Section 2.1(a).

            "DEPOSIT ACCOUNT AGREEMENT" as defined in Section 2.1(a).

            "DEPOSIT BANK" as defined in Section 2.1(a).

            "ELIGIBLE ACCOUNT" shall mean a separate and identifiable account
from all other funds held by the holding institution, which account is either
(i) an account maintained with an Eligible Bank or (ii) a segregated trust
account maintained by a corporate trust department of a federal depository
institution or a state chartered depository institution subject to regulations
regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulation Section 9.10(b), which, in either case, has corporate trust powers
and is acting in its fiduciary capacity or is otherwise acceptable to the Rating
Agencies.

            "ELIGIBLE BANK" shall mean a bank that satisfies the Rating
Criteria.

            "EXCESS CASH FLOW" means any and all amounts available for
distribution in any calendar month after allocations and/or distribution of all
amounts required to be allocated under Sections 3.3(a)(i) through (ix) hereof.

            "EXTRAORDINARY EXPENSES" shall mean any extraordinary Operating
Expense or Capital Expenditure not set forth in the Approved Operating Budget
then in effect for the Property.

            "EXTRAORDINARY RECEIPTS" shall mean any receipts of the Borrowers
not included within the definition of Operating Revenues under the Loan
Agreement, including, without limitation, receipts from litigation proceedings
and tax certiorari proceedings.

            "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" as defined in Section 2.1(e).

            "FF&E RESERVE ACCOUNT" as defined in Section 2.1(f).

            "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

                                       3

Cash Management Agreement (FX4)



            "IMPOSITIONS AND INSURANCE RESERVE SUB-ACCOUNT" as defined in
Section 2.1(c).

            "LENDER" shall mean Merrill Lynch Mortgage Lending, Inc., together
with its successors and assigns.

            "LOCK BOX ACCOUNT" as defined in Section 2.1(b).

            "LOSS PROCEEDS ACCOUNT" as defined in Section 2.1(d).

            "MANAGER" shall mean Lodgian Management Corp., together with its
successors and permitted assigns.

            "MEZZANINE BORROWER" as defined in the Loan Agreement.

            "MEZZANINE LENDER" as defined in the Loan Agreement.

            "MEZZANINE LOAN" as defined in the Loan Agreement.

            "MEZZANINE LOAN AGREEMENT" means that certain Mezzanine Loan
Agreement dated as of the date hereof, between Mezzanine Lender and Mezzanine
Borrower.

            "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" as defined in Section
2.1(c).

            "MEZZANINE SERVICER" means the Servicer as such term is defined in
the Mezzanine Loan Agreement.

            "MINIMUM BALANCE" as defined in Section 2.1(g).

            "MINIMUM BALANCE SUB-ACCOUNT" as defined in Section 2.1(c).

            "MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean the monthly payment
of principal and interest on the Loan required to be paid on each Monthly
Payment Date during the term of the Loan.

            "MONTHLY FF&E PAYMENT" shall mean the monthly deposit required to be
made to the FF&E Reserve pursuant to Section 6.4 of the Loan Agreement for any
month provided that if at the time of determination thereof the actual Operating
Revenues utilized in calculating the Monthly FF&E Payment have not been
determined for the prior calendar month (the "Measurement Month"), such
calculation shall be based upon the Operating Revenues set forth for the
Measurement Month in the applicable Operating Budget (the "Estimated Monthly
FF&E Payment"), and, upon determination of the actual Operating Revenues for the
Measurement Month, funds from the Lock Box Account in an amount equal to any
deficit between the Estimated Monthly FF&E Payment and the Monthly FF&E Payment
required to be allocated to the FF&E Reserve based upon the actual Operating
Revenues for the Measurement Month, shall be allocated (or if funds available in
the Lock Box Account and not otherwise required to be deposited in any other
Sub-Account for the applicable month are not sufficient to cover such deficit,
paid by the Borrowers) to the FF&E Reserve within five (5) Business Days of such

                                        4

Cash Management Agreement (FX4)



determination. Any excess of the Estimated Monthly FF&E Payment allocated to the
FF&E Reserve for the applicable month over the Monthly FF&E Payment based upon
the actual Operating Revenues for the Measurement Month shall be made available
for allocation to the other Sub-Accounts or disbursed in accordance with Section
3.3(a) hereof.

            "MONTHLY IMPOSITIONS AND INSURANCE AMOUNT" shall mean the aggregate
monthly deposit for Impositions and Insurance Premiums required to be paid
pursuant to Section 6.3 of the Loan Agreement.

            "MONTHLY MEZZANINE DEBT SERVICE PAYMENT AMOUNT" shall mean the
Allocable Portion of the monthly payment of principal and interest on the
Mezzanine Loan required to be paid on each Monthly Payment Date to Mezzanine
Lender.

            "MONTHLY OPERATING EXPENSE BUDGET AMOUNT" shall mean, with respect
to each month, an amount equal to the Operating Expenses plus estimated sales,
use, occupancy and similar taxes relating to the Properties (excluding therefrom
Impositions, Insurance Premiums, FF&E expenditures, and management fees payable
to any Manager that is an Affiliate of the Borrowers) set forth in the Approved
Operating Budget for the applicable month of determination.

            "MONTHLY PAYMENT DATE" means the first (1st) day of each calendar
month occurring during the term of the Loan (or if such day is not a Business
Day, the immediately succeeding Business Day).

            "OPERATING EXPENSES" as defined in the Loan Agreement.

            "OPERATING EXPENSE SUB-ACCOUNT" as defined in Section 2.1(c).

            "OPERATING REVENUES" as defined in the Loan Agreement.

            "PERMITTED INVESTMENTS" shall mean any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
including those issued by any Servicer, the trustee under any Securitization or
any of their respective Affiliates, payable on demand or having a maturity date
not later than the Business Day immediately prior to the date on which the
invested sums are required for payment of an obligation for which the related
Sub-Account was created and meeting one of the appropriate standards set forth
below:

                  (i) obligations of, or obligations fully guaranteed as to
      payment of principal and interest by, the United States or any agency or
      instrumentality thereof, provided such obligations are backed by the full
      faith and credit of the United States of America including, without
      limitation, obligations of: the U.S. Treasury (all direct or fully
      guaranteed obligations), the Farmers Home Administration (certificates of
      beneficial ownership), the General Services Administration (participation
      certificates), the U.S. Maritime Administration (guaranteed Title XI
      financing), the Small Business Administration (guaranteed participation
      certificates and guaranteed pool certificates), the U.S. Department of
      Housing and Urban Development (local authority bonds) and the Washington
      Metropolitan Area Transit Authority (guaranteed transit bonds); provided,
      however, that the investments described in this clause (i) must (A) have a
      predetermined

                                        5

Cash Management Agreement (FX4)



      fixed dollar amount of principal due at maturity that cannot vary or
      change, (B) if rated by S&P, not have an "r" highlighter affixed to their
      rating, (C) if such investments have a variable rate of interest, have an
      interest rate tied to a single interest rate index plus a fixed spread (if
      any) and must move proportionately with that index, and (D) not be subject
      to liquidation prior to their maturity;

                  (ii) Federal Housing Administration debentures;

                  (iii) obligations of the following United States government
      sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations),
      the Farm Credit System (consolidated systemwide bonds and notes), the
      Federal Home Loan Banks (consolidated debt obligations), the Federal
      National Mortgage Association (debt obligations), the Student Loan
      Marketing Association (debt obligations), the Financing Corp. (debt
      obligations), and the Resolution Funding Corp. (debt obligations);
      provided, however, that the investments described in this clause (iii)
      must (A) have a predetermined fixed dollar amount of principal due at
      maturity that cannot vary or change, (B) if rated by S&P, not have an "r"
      highlighter affixed to their rating, (C) if such investments have a
      variable rate of interest, have an interest rate tied to a single interest
      rate index plus a fixed spread (if any) and must move proportionately with
      that index, and (D) not be subject to liquidation prior to their maturity;

                  (iv) federal funds, unsecured certificates of deposit, time
      deposits, bankers' acceptances and repurchase agreements with maturities
      of not more than 365 days of any bank, the short term obligations of which
      at all times are rated in the highest short term rating category by each
      Rating Agency (or, if not rated by all Rating Agencies, rated by at least
      one Rating Agency in the highest short term rating category and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investment would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of certificates or other securities issued
      in connection with any Securitization backed in whole or in part by the
      Loan (collectively the "CERTIFICATES"); provided, however, that the
      investments described in this clause (iv) must (A) have a predetermined
      fixed dollar amount of principal due at maturity that cannot vary or
      change, (B) if rated by S&P, not have an "r" highlighter affixed to their
      rating, (C) if such investments have a variable rate of interest, have an
      interest rate tied to a single interest rate index plus a fixed spread (if
      any) and must move proportionately with that index, and (D) not be subject
      to liquidation prior to their maturity;

                  (v) fully Federal Deposit Insurance Corporation-insured demand
      and time deposits in, or certificates of deposit of, or bankers'
      acceptances issued by, any bank or trust company, savings and loan
      association or savings bank, the short term obligations of which at all
      times are rated in the highest short term rating category by each Rating
      Agency (or, if not rated by all Rating Agencies, rated by at least one
      Rating Agency in the highest short term rating category and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investment would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of Certificates); provided, however, that
      the investments

                                        6

Cash Management Agreement (FX4)



      described in this clause (v) must (A) have a predetermined fixed dollar of
      principal due at maturity that cannot vary or change, (B) if rated by S&P,
      not have a "r" highlighter affixed to their rating, (C) if such
      investments have a variable rate of interest, have an interest rate tied
      to a single interest rate index plus a fixed spread (if any) and must move
      proportionately with that index, and (D) not be subject to liquidation
      prior to their maturity;

                  (vi) debt obligations with maturities of not more than 365
      days and at all times rated by each Rating Agency (or, if not rated by all
      Rating Agencies, rated by at least one Rating Agency and otherwise
      acceptable to each other Rating Agency, as confirmed in writing that such
      investments would not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to the Certificates) in its highest long-term unsecured
      debt rating category; provided, however, that the investments described in
      this clause (vi) must (A) have a predetermined fixed dollar amount of
      principal due at maturity that cannot vary or change, (B) if rated by S&P,
      not have an "r" highlighter affixed to their rating, (C) if such
      investments have a variable rate of interest, have an interest rate tied
      to a single interest rate index plus a fixed spread (if any) and must move
      proportionately with that index, (D) not be subject to liquidation prior
      to their maturity, and (E) if such investment has a maturity of (1) less
      than one month, have a long-term rating of at least "A2" by Moody's, (2)
      up to three months, have a long-term rating of at least "Aa" by Moody's,
      (3) up to six months, have a long-term rating of at least "Aa3" by
      Moody's, and (4) over six months, have a long-term rating of at least
      "Aaa" by Moody's;

                  (vii) commercial paper (including both non-interest-bearing
      discount obligations and interest-bearing obligations payable on demand or
      on a specified date not more than one year after the date of issuance
      thereof) with maturities of not more than 365 days and that at all times
      is rated by each Rating Agency (or, if not rated by all Rating Agencies,
      rated by at least one Rating Agency and otherwise acceptable to each other
      Rating Agency, as confirmed in writing that such investment would not, in
      and of itself, result in a downgrade, qualification or withdrawal of the
      initial or, if higher, then current ratings assigned to any class of
      Certificates) in its highest short-term unsecured debt rating; provided,
      however, that the investments described in this clause (vii) must (A) have
      a predetermined fixed dollar amount of principal due at maturity that
      cannot vary or change, (B) if rated by S&P, not have a "r" highlighter
      affixed to their rating, (C) if such investments have a variable rate of
      interest, have an interest rate tied to a single interest rate index plus
      a fixed spread (if any) and must move proportionately with that index, and
      (D) not be subject to liquidation prior to their maturity;

                  (viii) units of taxable money market funds or mutual funds,
      which funds are regulated investment companies, seek to maintain a
      constant net asset value per share and have the highest rating from each
      Rating Agency (or, if not rated by all Rating Agencies, rated by at least
      one Rating Agency and otherwise acceptable to each other Rating Agency, as
      confirmed in writing that such investment would not, in and of itself,
      result in a downgrade, qualification or withdrawal of the initial or, if
      higher, then current ratings assigned to any class of Certificates) for
      money market funds or mutual funds; and

                                       7

Cash Management Agreement (FX4)



                  (ix) any other security, obligation or investment which has
      been approved as a Permitted Investment in writing by (a) Lender and (b)
      each Rating Agency, as evidenced by a written confirmation that the
      designation of such security, obligation or investment as a Permitted
      Investment will not, in and of itself, result in a downgrade,
      qualification or withdrawal of the initial or, if higher, then current
      ratings assigned to any class of Certificates by such Rating Agency;

provided, however, that such instrument continues to qualify as a "CASH FLOW
INVESTMENT" pursuant to Code Section 860G(a)(6) earning a passive return in the
nature of interest and no obligation or security shall be a Permitted Investment
if (A) such obligation or security evidences a right to receive only interest
payments or (B) the right to receive principal and interest payments on such
obligation or security are derived from an underlying investment that provides a
yield to maturity in excess of 120% of the yield to maturity at par of such
underlying investment; and provided, further, no obligation or security, other
than an obligation or security constituting real estate assets, cash, cash items
or Government securities pursuant to Code Section 856(c)(4)(A), shall be a
Permitted Investment if the value of such obligation or security exceeds ten
percent (10%) of the total value of the outstanding securities of any one
issuer.

            "RATING CRITERIA" with respect to any Person, shall mean that (i)
the short-term unsecured debt obligations of such Person are rated at least
"A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such
Person for a period of less than one month, or (ii) the long-term unsecured debt
obligations of such Person are rated at least "AA-" by S&P (or "A" if the
short-term unsecured debt obligations of such Person are rated at least "A-1"),
"Aa3" by Moody's and "AA-" by Fitch, if deposits are held by such Person for a
period of one month or more.

            "SERVICING FEE" shall mean the monthly Servicing Fee (as defined in
the Loan Agreement) for which the Borrowers are responsible under Section 2.11
of the Loan Agreement.

            "SUB-ACCOUNTS" shall mean, collectively, the Debt Service
Sub-Account, the Impositions and Insurance Reserve Sub-Account, the Mezzanine
Loan Debt Service Sub-Account, the Capital Improvement Reserve Sub-Account, the
Hazardous Materials Remediation Reserve Sub-Account, the Extraordinary Receipts
Sub-Account, the Cash Trap Reserve Sub-Account, the Operating Expense
Sub-Account, the Minimum Balance Sub-Account and any other sub-accounts of the
Lock Box Account which may hereafter be established by Lender hereunder.

            "UCC" as defined in Section 5.1(a)(iv).

            II.   THE ACCOUNTS

            SECTION 2.1 ESTABLISHMENT OF DEPOSIT ACCOUNT, LOCK BOX ACCOUNT AND
SUB-ACCOUNTS.

            (a) DEPOSIT ACCOUNT. On or before the Closing Date, one or more
deposit accounts (collectively, the "DEPOSIT ACCOUNT") shall be established at
the Borrowers' sole cost and expense with financial institutions approved by
Lender (collectively, the "DEPOSIT BANK"), each pursuant to an agreement
(collectively, the "DEPOSIT ACCOUNT AGREEMENT") in form and

                                       8

Cash Management Agreement (FX4)



substance reasonably acceptable to Lender, executed and delivered by each
Borrower and the applicable Deposit Bank. Among other things, the Deposit
Account Agreement shall provide that the Borrowers shall have no access to or
control over the Deposit Account, and that all available funds on deposit in the
Deposit Account shall be deposited by wire transfer (or transfer via the ACH
System) on each Business Day by the Deposit Bank into the Lock Box Account.

            (b) LOCK BOX ACCOUNT. On or before the Closing Date, an Eligible
Account shall be established with Agent for the purposes specified herein, which
shall be entitled "Lock Box Account for the benefit of Merrill Lynch Mortgage
Lending, Inc., its successors and assigns, as secured party" (said account, and
any account replacing the same in accordance with this Agreement, the "LOCK BOX
ACCOUNT"). The Lock Box Account shall be under the sole dominion and control of
Lender and/or its designee, including any Servicer of the Loan, and the
Borrowers shall have no rights to control or direct the investment or payment of
funds therein except as may be expressly provided herein.

            Any amounts that Lender may hold in reserve pursuant to the Loan
Agreement may be held by Lender in the Lock Box Account (including in a
Sub-Account thereof) or may be held in another account or manner as specified in
Articles VI or VII of the Loan Agreement.

            (c) SUB-ACCOUNTS OF THE LOCK BOX ACCOUNT. The Lock Box Account shall
be deemed to contain, among others, the following Sub-Accounts (which may be
maintained as separate ledger accounts):

                  (i) "DEBT SERVICE SUB-ACCOUNT" shall mean the Sub-Account
      established for the purpose of depositing the amounts required for
      payments of principal and interest under the Loan and all other amounts
      then due under the Note and the Loan Agreement;

                  (ii) "IMPOSITION AND INSURANCE RESERVE SUB-ACCOUNT" shall mean
      the Sub-Account established for the purpose of depositing the sums
      required to be deposited pursuant to Section 6.3 of the Loan Agreement;

                  (iii) "CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the sums required to
      be deposited pursuant to Section 6.5 of the Loan Agreement;

                  (iv) "HAZARDOUS MATERIALS REMEDIATION RESERVE SUB-ACCOUNT"
      shall mean the Sub-Account established for the purpose of depositing sums
      required to be deposited pursuant to Section 6.6 of the Loan Agreement;

                  (v) "MEZZANINE LOAN DEBT SERVICE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the amounts required
      for payments of the Monthly Mezzanine Debt Service Payment Amount;

                  (vi) "CASH TRAP RESERVE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing Excess Cash Flow
      when required to be deposited pursuant to Section 6.8 of the Loan
      Agreement;

                                       9

Cash Management Agreement (FX4)



                  (vii) "OPERATING EXPENSE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing the Monthly
      Operating Expense Budget Amount, Extraordinary Expenses approved by
      Lender, if any, and fees due to the Manager; and

                  (viii) "MINIMUM BALANCE SUB-ACCOUNT" shall mean the
      Sub-Account established for the purpose of depositing and maintaining the
      Minimum Balance as and to the extent required under Section 2.1(g)
      hereof..

            (d) If the proceeds of any business interruption or rent loss
insurance maintained under Section 5.4 of the Loan Agreement (any such
insurance, "BUSINESS INTERRUPTION INSURANCE") paid upon the occurrence of any
fire or casualty to any Property shall be paid in a lump sum (rather than on a
monthly basis), the Borrowers and Lender shall establish a separate Eligible
Account with Agent hereunder entitled "Loss Proceeds Account for the benefit of
Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as secured
party" (said account, the "LOSS PROCEEDS ACCOUNT") for deposit of such Business
Interruption Insurance proceeds and such proceeds shall be held, allocated and
disbursed in accordance with the terms and conditions hereof and of the Loan
Agreement. The Loss Proceeds Account shall be under the sole dominion and
control of Lender and/or its designee, including any Servicer of the Loan, and
the Borrowers shall have no rights to control or direct the investment or
payment of funds therein except as expressly provided herein.

            (e) If any Extraordinary Receipts are received by any Borrower, such
amounts shall be paid to the Lock Box Account to be retained in a subaccount
thereof (the "EXTRAORDINARY RECEIPTS SUB-ACCOUNT"). Amounts held in the
Extraordinary Receipts Sub-Account shall be disbursed to the Lock Box Account
and allocated and distributed in accordance with Section 3.3 upon receipt by
Lender of evidence reasonably satisfactory to Lender that (x) with respect to
Extraordinary Receipts received in connection with any pending litigation,
action, or similar matter, such action has been concluded in favor of the
Borrowers and no appeal has been timely filed within the applicable appeal
period, (y) with respect to Extraordinary Receipts received with respect to work
at, or other conditions with respect to, any of the Properties, the item of work
or other condition has been completed or corrected and paid for to the
reasonable satisfaction of Lender, and (z) with respect to Extraordinary
Receipts received in any other circumstance, the Borrowers are not liable
directly, or indirectly, to refund or repay any such amounts; provided however,
all Extraordinary Receipts with respect to lease termination payments, advance
booking terminations, and similar payments or fees, shall be retained in the
Extraordinary Receipts Sub-Account and disbursed in equal monthly installments
during the period of time for which such payments relate in accordance with
Section 3.3. The Extraordinary Receipts Sub-Account shall be under the sole
dominion and control of Lender and/or its designee, including any Servicer of
the Loan, and the Borrowers shall have no rights to control or direct the
investment or payment of funds therein except as expressly provided herein.

            (f) On or before the Closing Date, the Borrowers shall establish a
separate Eligible Account hereunder entitled "FF&E Reserve Account for the
benefit of Merrill Lynch Mortgage Lending, Inc., its successors and assigns, as
secured party" (said account, the "FF&E RESERVE ACCOUNT") with Agent for the
purpose of depositing Monthly FF&E Reserve Payments

                                       10

Cash Management Agreement (FX4)



pursuant to Section 6.4 of the Loan Agreement, to be held, allocated and
disbursed in accordance with the terms and conditions hereof and of the Loan
Agreement. The FF&E Reserve Account shall be under the sole dominion and control
of Lender and/or its designee, including any Servicer of the Loan, and the
Borrowers shall have no rights to control or direct the investment or payment of
funds therein except as expressly provided herein and in the Loan Agreement.
Notwithstanding the foregoing, the Borrowers shall, in accordance with the terms
of this Agreement and the Loan Agreement, have access to and the right to
withdraw funds held in the FF&E Reserve Account on or prior to (x) the
occurrence and during the continuance of an Event of Default, or (y) the failure
of the Borrowers or Manager to comply with the reporting requirements set forth
in Section 5.1(A)(v) of the Loan Agreement, at which time Agent, upon receipt of
notice from Lender, shall (i) cease to honor checks drawn by Manager or any
Borrower on the FF&E Reserve Account, (ii) cease to disburse funds from the FF&E
Reserve Account to either the Manager or the Borrowers except in accordance with
written instructions received from Lender, and (iii) deposit the amounts in the
FF&E Reserve Account, together with any funds from time to time held or
deposited or received into the FF&E Reserve Account, in accordance with Lender's
instructions from time to time on the day such instructions are received, if
such instructions are received prior to 12:00 p.m. on such day, or, if received
after 12:00 p.m., on the following Business Day. Neither the Borrowers nor
Manager shall withdraw any funds from the FF&E Reserve Account in violation of
this Agreement or the Loan Agreement.

            (g) Upon the occurrence and during the continuance of a Cash Trap
Event or an Event of Default, the Borrowers shall be required to deposit, from
and at the time of the allocations from the Lock Box Account pursuant to Section
3.3(a)(ix) hereof, and maintain in the Minimum Balance Sub-Account an amount
equal to $50,000 (the "MINIMUM BALANCE"). In the event that, during the
continuance of a Cash Trap Event, funds available in a Deposit Account are
insufficient to pay the amount of any checks deposited into such Deposit Account
which are returned for insufficient or uncollected funds (collectively
"CHARGEBACKS"), and such Chargebacks are required to be paid by the applicable
Borrower to the applicable Deposit Account Bank pursuant to the terms of the
applicable Deposit Account Agreement, provided that no Event of Default exists,
funds shall be made available from the Minimum Balance Sub-Account to the
applicable Borrower to pay the amount of such Chargebacks due to such Deposit
Account Bank (or to reimburse the applicable Borrower for any such amounts as
may have been previously paid by or on behalf of such Borrower from other funds
on account of any Chargebacks at a time when insufficient amounts were available
therefor in the Minimum Balance Sub-Account) promptly after delivery to Lender
of evidence reasonably satisfactory to Lender that such amounts are due (or have
been paid by or on behalf of the applicable Borrower). In the event that during
a Cash Trap Event, as a result of any such disbursement or otherwise, the
Minimum Balance Sub-Account shall contain less than the Minimum Balance, the
Borrowers shall be required to deposit such deficiency from and at the time of
allocations from the Lock Box Account pursuant to Section 3.3(a)(ix) hereof.

            SECTION 2.2 DEPOSITS INTO ACCOUNTS. The Borrowers and Manager
represent, warrant and covenant that:

            (a) Each Borrower and Manager shall cause all Operating Revenues and
other income and revenues received by such Borrower or Manager to be deposited
directly into the

                                       11

Cash Management Agreement (FX4)



Deposit Account for each applicable Property. The Borrowers shall obtain an
agreement (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from each
of the Persons paying or disbursing credit card receivables (each, a "CREDIT
CARD COMPANY" and collectively, the "CREDIT CARD COMPANIES"), in substantially
the form of EXHIBIT A attached hereto or as otherwise approved by Lender in its
reasonable discretion, pursuant to which the Credit Card Companies agree to pay
all credit card receivables for the Properties directly into the Lock Box
Account, and acknowledge and agree that Lender shall have a first priority
perfected security interest in such credit card receivables. Pursuant to the
Deposit Account Agreement, all available funds on deposit in the applicable
Deposit Account shall be deposited directly by the Deposit Bank into the Lock
Box Account by wire transfer on each Business Day.

            (b) If any Borrower or Manager receives any Operating Revenues or
other income or revenues from any Property, or any Extraordinary Receipts, then
such receipt shall not constitute a Default provided (i) such amounts shall be
deemed to be Collateral and shall be held in trust for the benefit, and as the
property, of Lender, and (ii) such Borrower or Manager shall deposit such
amounts into the applicable Deposit Account within two (2) Business Days of
receipt.

            (c) Without the prior written consent of Lender, which shall not be
unreasonably withheld, delayed or conditioned, neither the Borrowers nor Manager
shall (i) terminate, amend, revoke or modify any Credit Card Receivables Payment
Direction Letter in any manner whatsoever, or (ii) direct or cause any Credit
Card Company to pay any amount in any manner other than as provided in the
related Credit Card Receivables Payment Direction Letter, unless a replacement
Credit Card Receivables Payment Direction Letter in form reasonably acceptable
to Lender is executed and delivered to Lender by any proposed replacement Credit
Card Company prior to termination of the then effective Credit Card Receivables
Payment Direction Letter.

            (d) Each Borrower and Manager shall also cause the proceeds of any
Business Interruption Insurance to be deposited directly into the Lock Box
Account as same are paid (or, if any such proceeds are received by such Borrower
or Manager, same shall be deposited into the Lock Box Account within two (2)
Business Days after receipt thereof) and such proceeds shall be allocated and
disbursed in accordance with Section 3.3 hereof. If the proceeds of any such
Business Interruption Insurance are paid in a lump sum, such proceeds shall be
deposited into the Loss Proceeds Account. Agent shall cause monthly amounts to
be transferred from the Loss Proceeds Account to the Lock Box Account as
directed by Lender (based upon a ratable allocation of such proceeds over the
casualty restoration period as reasonably determined by Lender) on the first
(1st) Business Day of each calendar month during the period of restoration of
the Property, and after transfer of same to the Lock Box Account, such amounts
shall be allocated and disbursed in accordance with Section 3.3 hereof.

            SECTION 2.3 ACCOUNT NAME. The Accounts shall each be in the names
set forth herein; provided, however, that if Lender transfers or assigns the
Loan, Agent, at Lender's request (with respect to the Accounts other than the
Deposit Account), and each Deposit Bank (with respect to its Deposit Account)
shall change the name of each Account to the name of the transferee or assignee.
If Lender retains a Servicer to service the Loan, Agent, at Lender's request,
shall change the name of each Account to the name of Servicer, as agent for
Lender.

                                       12

Cash Management Agreement (FX4)



            SECTION 2.4 ELIGIBLE ACCOUNTS/CHARACTERIZATION OF ACCOUNTS. The
Borrowers and Agent shall maintain each Account (other than the Deposit Account)
as an Eligible Account. Each Account (other than the Deposit Account) is and
shall be treated as a "SECURITIES ACCOUNT" as such term is defined in Section
8-501(a) of the UCC. Agent hereby agrees that each item of property (whether
investment property, financial asset, securities, securities entitlement,
instrument, cash or other property) credited to each Account shall be treated as
a "FINANCIAL ASSET" within the meaning of Section 8-102(a)(9) of the UCC. Agent
shall, subject to the terms of this Agreement, treat Lender as entitled to
exercise the rights that comprise any financial asset credited to each Account.
All securities or other property underlying any financial assets credited to
each Account (other than cash) shall be registered in the name of Agent,
indorsed to Agent or in blank or credited to another securities account
maintained in the name of Agent and in no case will any financial asset credited
to any Account be registered in the name of any Borrower, payable to the order
of any Borrower or specially indorsed to any Borrower.

            SECTION 2.5 PERMITTED INVESTMENTS. Sums on deposit in the Accounts
may, at the Borrowers' election, be invested in Permitted Investments, provided
that, notwithstanding the foregoing, in no event will funds in the Deposit
Account be subject to any investment. Except during the existence of any Event
of Default, the Borrowers shall have the right to direct Agent to invest sums on
deposit in the Accounts in Permitted Investments. After an Event of Default and
during the continuance thereof, Lender may direct Agent to invest sums on
deposit in the Accounts in Permitted Investments as Lender shall determine in
its sole discretion. The Borrowers hereby irrevocably authorize and direct Agent
to apply any income earned from Permitted Investments to the respective
Accounts. The amount of actual losses sustained on a liquidation of a Permitted
Investment shall be deposited into the Lock Box Account by the Borrowers no
later than three (3) Business Days following such liquidation. The Borrowers
shall be responsible for payment of any federal, state or local income or other
tax applicable to income earned from Permitted Investments. The Accounts shall
be assigned the federal tax identification number of the applicable Borrowers,
which numbers are set forth on the signature page hereof. Any interest,
dividends or other earnings which may accrue on the Accounts shall be added to
the balance in the applicable Account and allocated and/or disbursed in
accordance with the terms hereof.

            III.  DEPOSITS

            SECTION 3.1 INITIAL DEPOSITS.

            (a) The Borrowers shall deposit in the Debt Service Sub-Account on
the date hereof the amount of $67,432.34.

            (b) The Borrowers shall deposit in the Impositions and Insurance
Reserve Sub-Account on the date hereof the amount of $1,096,800.00.

            (c) The Borrowers shall deposit in the Hazardous Materials
Remediation Reserve Sub-Account on the date hereof the amount of $3,993,75.

                                       13

Cash Management Agreement (FX4)


            (d) The Borrowers shall deposit in the FF&E Reserve Account on the
date hereof the amount of $0.00.

            (e) The Borrowers shall deposit in the Capital Improvement Reserve
Sub-Account on the date hereof the amount of $3,338,310.00.

            SECTION 3.2 ADDITIONAL DEPOSITS. The Borrowers shall make such
additional deposits into the Accounts as may be required by the Loan Agreement.

            SECTION 3.3 ALLOCATION OF FUNDS FROM THE LOCK BOX ACCOUNT.

            (a) At any time other than after the occurrence and during the
continuance of an Event of Default, Agent shall allocate and deposit, as
applicable, all available funds on deposit in the Lock Box Account on each
Business Day of each calendar month (or such other period of time as set forth
below) in the following amounts and order of priority:

                  (i) First, to the Impositions and Insurance Reserve
      Sub-Account, the Monthly Impositions and Insurance Amount for the next
      Monthly Payment Date;

                  (ii) Second, (A) to the Agent, as Servicer, the monthly
      Servicing Fee on the Loan, and then (B) to the Debt Service Sub-Account,
      the Monthly Debt Service Payment Amount due under the Loan Agreement for
      the next Monthly Payment Date;

                  (iii) Third, to the FF&E Reserve Account, the Monthly FF&E
      Payment for the next Monthly Payment Date;

                  (iv) Fourth, to the Operating Expense Sub-Account, funds
      sufficient to pay the Monthly Operating Expense Budget Amount for the next
      calendar Month;

                  (v) Fifth, to the Operating Expense Sub-Account, funds in an
      amount necessary to pay Extraordinary Expenses approved by Lender, if any;

                  (vi) Sixth, to the Operating Expense Sub-Account, subject to
      the terms and conditions of the Assignment of Management Agreement, any
      management fees due and owing to Manager which have not previously been
      paid to Manager, together with any fees payable to Manager for the next
      calendar month pursuant to the Management Agreement not otherwise paid
      pursuant to (iv) above;

                  (vii) Seventh, to the Debt Service Sub-Account any late
      payment charges, default interest, and any other amounts (other than
      interest and principal paid pursuant to (ii) above) then due and owing
      under the Loan Agreement;

                  (viii) Eighth, for so long as the Mezzanine Loan is
      outstanding, (A) to the Mezzanine Servicer, the monthly Allocable
      Mezzanine Servicing Fee, and then (B) to the Mezzanine Loan Debt Service
      Sub-Account, an amount equal to the Monthly Mezzanine Debt Service Payment
      Amount due for the next Monthly Payment Date under the Mezzanine Loan
      Agreement;

                                       14

Cash Management Agreement (FX4)



                  (ix) Ninth, if a Cash Trap Event shall have occurred and is
      continuing and the balance then held in the Minimum Balance SubAccount is
      less than the Minimum Balance, to the Minimum Balance Sub-Account until
      such Sub-Account contains the Minimum Balance;

                  (x) Tenth, if a Cash Trap Event shall have occurred and is
      continuing, any amounts remaining in the Lock Box Account after deposits
      for items (i) through (ix) above shall be deposited into the Cash Trap
      Reserve Sub-Account; and

                  (xi) Eleventh, if no Cash Trap Event shall have occurred and
      is continuing, any amounts remaining in the Lock Box Account after
      deposits for items (i) through (viii) above shall be paid to, or as
      directed by, the Borrowers.

            (b) If there are insufficient funds in the Lock Box Account for the
deposits required by Sections 3.3(a)(i) through (iii) and (vii) above, the
Borrowers shall deposit such deficiency into the Lock Box Account on or before
the applicable Monthly Payment Date. Except as expressly provided in Section 6.8
of the Loan Agreement, under no circumstances shall Lender be required to
utilize the Cash Trap Reserve or funds in any other Sub-Account to cure any
deficiencies in any other Sub-Accounts. The deposit by the Borrowers of any such
deficiency pursuant to this Section 3.3(b) shall satisfy the obligation of the
Borrowers to make the related deposit under the Loan Agreement.

            (c) The Borrowers shall use, or caused to be used, all disbursements
made to it under Sections 3.3(a)(iv) and (v) solely to pay Operating Expenses in
accordance with the Approved Operating Budget and to pay Extraordinary Expenses
for which Lender has approved disbursements under Section 3.3(a)(v) above.

            (d) Notwithstanding anything to the contrary contained herein,
Lender shall not be obligated to make any disbursement from the Lock Box Account
(under Sections 3.3(a)(iv) and (v) or otherwise) to pay for any costs or
expenses (including legal fees) in connection with any dispute or defense of the
Borrowers under any of the Loan Documents.

            (e) Upon the expiration of a Cash Trap Event in accordance with
Section 6.8 of the Loan Agreement, any funds remaining in the Cash Trap Reserve
Sub-Account and in the Minimum Balance Sub-Account will be disbursed pursuant to
Section 6.8 of the Loan Agreement.

            (f) Notwithstanding anything herein to the contrary, upon the
occurrence and during the continuance of an Event of Default, all funds on
deposit in the Lock Box Account, the Sub-Accounts, the FF&E Reserve Account, and
any Loss Proceeds Account shall be disbursed to or as directed by Lender, it
being agreed that application of any such amounts shall be in Lender's sole
discretion and shall not be subject to the terms of Section 3.3(a) hereof.

            (g) Except as otherwise agreed to by Lender in writing, no funds
shall be withdrawn from the FF&E Reserve Account other than in accordance with
the CapEx/FF&E Budget.

                                       15

Cash Management Agreement (FX4)



            SECTION 3.4 DISBURSEMENTS FOR OPERATING EXPENSE AMOUNTS. The
Borrowers shall provide on a monthly basis (a) a reasonably detailed explanation
of any variances of ten percent (10%) or more between budgeted (as set forth in
the Approved Operating Budget) and actual Operating Expense amounts for any
month in the aggregate, and (b) with respect to any individual item with a cost
of $10,000 or more and not otherwise covered by the Approved Operating Budget,
all invoices or other backup requested by Lender to substantiate the amount
disbursed to the Borrowers pursuant to Section 3.3(a)(iv) and (v).

            IV.   PAYMENT OF FUNDS FROM SUB-ACCOUNTS

            SECTION 4.1 PAYMENTS FROM SUB-ACCOUNTS.

            (a) Impositions and Insurance Reserve Sub-Account. Lender shall have
the right to withdraw amounts on deposit in the Impositions and Insurance
Reserve Sub-Account to pay (or reimburse any Borrower for repayment of)
Impositions and Insurance Premiums in accordance with the Loan Agreement.

            (b) Debt Service Sub-Account. Lender shall have the right to
withdraw amounts from the Debt Service Sub-Account to pay: (i) default interest
and late charges, if any, and any amounts then due and payable under the Note
and the Loan Agreement, and (ii) the Monthly Debt Service Payment Amount on each
Monthly Payment Date on which same are due and payable under the Loan Agreement.

            (c) Operating Expense Sub-Account. Funds deposited into the
Operating Expense Sub-Account pursuant to Sections 3.3(a)(iv) through (vi) shall
be distributed to the Borrowers on each Business Day.

            (d) Mezzanine Loan Debt Service Sub-Account. On each Monthly Payment
Date, all funds held in the Mezzanine Loan Debt Service Sub-Account shall be
distributed to Mezzanine Lender, and such distribution shall be deemed to have
been distributed by the Borrowers to the Mezzanine Borrowers and shall be
applied by Mezzanine Borrowers to the obligations under the Mezzanine Loan
Agreement.

            (e) Distributions to the Borrowers. Following the date in each month
that Borrower has made all required deposits pursuant to Section 3.3(i) through
(viii), to the extent that Excess Cash Flow is to be distributed to the
Borrowers pursuant to Section 3.3(a)(xi) above, such funds shall be distributed
to the Borrowers on each Business Day.

            (f) FF&E Reserve Account. Distributions from the FF&E Reserve
Account will be made in accordance with Section 2.1(f).

            (g) Minimum Balance Sub-Account. Distributions from the Minimum
Balance Sub-Account will be made in accordance with Section 2.1(g).

            SECTION 4.2 REQUESTS FOR WITHDRAWALS FROM THE HAZARDOUS MATERIALS
REMEDIATION RESERVE SUB-ACCOUNT AND CAPITAL IMPROVEMENT RESERVE SUB-ACCOUNT.
Agent shall disburse funds on deposit in the Hazardous Materials Remediation
Reserve Sub-Account and the Capital Improvement Reserve Sub-Account within five
(5) Business Days after written

                                       16

Cash Management Agreement (FX4)



request made from time to time (but not more often than twice per calendar
month) by the Borrowers in accordance with the terms and conditions of Section
6.7 of the Loan Agreement.

            SECTION 4.3 SOLE DOMINION AND CONTROL. The Borrowers and Manager
acknowledge and agree that the Accounts are subject to the sole dominion,
control and discretion of Lender, its authorized agents or designees, including
Agent, subject to the terms hereof and the Loan Agreement. Neither the Borrowers
nor Manager shall have any right of withdrawal with respect to any Account
except, subject to the terms and conditions hereof and the Loan Agreement, the
FF&E Reserve Account. Agent shall have the right and agrees to comply with the
instructions of Lender with respect to the Accounts without the further consent
of the Borrowers or Manager. Agent shall comply with all "entitlement orders"
(as defined in Section 8-102(a)(8) of the UCC) and instructions originated by
Lender without further consent by the Borrowers or any other Person.

            V.    PLEDGE OF ACCOUNTS

            SECTION 5.1 SECURITY FOR OBLIGATIONS. (a) To secure the full and
punctual payment and performance of all Obligations of the Borrowers under the
Loan Agreement, the Note, the Security Instruments, this Agreement and all other
Loan Documents, the Borrowers hereby grant to Lender a first priority continuing
security interest in and to the following property of the Borrowers, whether now
owned or existing or hereafter acquired or arising and regardless of where
located (all of the same, collectively, the "COLLATERAL"):

                  (i) the Deposit Account, the Lock Box Account, each of the
      Sub-Accounts, the FF&E Reserve Account, any Loss Proceeds Account and all
      cash, checks, drafts, certificates and instruments, if any, from time to
      time deposited or held in the Lock Box Account, each of the Sub-Accounts,
      any Loss Proceeds Account and the FF&E Reserve Account, including, without
      limitation, all deposits or wire transfers made to the Deposit Account,
      the Lock Box Account, each of the Sub-Accounts, the FF&E Reserve Account,
      and any Loss Proceeds Account;

                  (ii) any and all amounts invested in Permitted Investments;

                  (iii) all interest, dividends, cash, instruments and other
      property from time to time received, receivable or otherwise payable in
      respect of, or in exchange for, any or all of the foregoing; and

                  (iv) to the extent not covered by clauses (i), (ii) or (iii)
      above, all "proceeds" (as defined under the Uniform Commercial Code as in
      effect in the State of New York (the "UCC")) of any or all of the
      foregoing.

            (b) Lender and Agent, as agent for Lender, shall have with respect
to the Collateral, in addition to the rights and remedies herein set forth, all
of the rights and remedies available to a secured party under the UCC, as if
such rights and remedies were fully set forth herein.

            SECTION 5.2 RIGHTS ON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, Lender shall promptly notify Agent of such
Event of Default

                                       17

Cash Management Agreement (FX4)



and, without notice from Lender, (a) the Borrowers shall have no further right
in respect of (including, without limitation, the right to instruct Lender or
Agent to transfer from) the Accounts, (b) Lender may direct Agent to liquidate
and transfer any amounts then invested in Permitted Investments to the Accounts
or reinvest such amounts in other Permitted Investments as Lender may reasonably
determine is necessary to perfect or protect any security interest granted or
purported to be granted hereby or to enable Agent, as agent for Lender, or
Lender to exercise and enforce Lender's rights and remedies hereunder with
respect to any Collateral, and (c) Lender may apply any Collateral to any
Obligations in such order of priority as Lender may determine. The proceeds of
any disposition of the Collateral, or any part thereof, may be applied by Lender
to the payment of the Obligations in such priority and proportions as Lender in
its discretion shall deem proper.

            SECTION 5.3 FINANCING STATEMENT; FURTHER ASSURANCES. Simultaneously
herewith, the Borrowers shall deliver to Lender for filing a financing statement
or statements in connection with the Collateral in the form reasonably required
by Lender to properly perfect Lender's security interest therein to the extent a
security interest in the Collateral may also be perfected by filing. The
Borrowers agree that at any time and from time to time, at the expense of the
Borrowers, the Borrowers will promptly execute and deliver all further
instruments and documents, and take all further actions, that may be reasonably
necessary, or that Agent or Lender may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted hereby
(including, without limitation, any security interest in and to any Permitted
Investments) or to enable Agent or Lender to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. In the event of any change in
name, identity or structure of any Borrower, such Borrower shall notify Lender
thereof and promptly after Lender's reasonable request shall file and record, or
deliver to Lender, such UCC financing statements (if any) as are necessary to
maintain the priority of Lender's lien upon and security interest in the
Collateral, and shall pay all expenses and fees in connection with the filing
and recording thereof. If Lender shall require the filing or recording of
additional UCC financing or continuation statements, the Borrowers shall,
promptly after request, execute, if necessary, file and record such UCC
financing or continuation statements as Lender shall deem reasonably necessary,
and shall pay all reasonable expenses and fees in connection with the filing and
recording thereof.

            SECTION 5.4 TERMINATION OF AGREEMENT. This Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until payment in full of the Obligations. Upon payment and
performance in full of the Obligations, this Agreement shall terminate and the
Borrowers shall be entitled to the return, at their expense, of such of the
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof, and Agent and/or Lender shall execute such instruments and
documents as may be reasonably requested by the Borrowers to evidence such
termination and the release of the lien hereof including, without limitation,
letters to Credit Card Companies, as applicable, prepared by the Borrowers and
reasonably acceptable to Lender rescinding the instructions set forth in the
Credit Card Receivables Payment Direction Letter and UCC-3 termination
statements.

                                       18

Cash Management Agreement (FX4)



            VI.   RIGHTS AND DUTIES OF LENDER AND AGENT

            SECTION 6.1 REASONABLE CARE. Beyond the exercise of reasonable care
in the custody thereof or as otherwise expressly provided herein, neither Agent
nor Lender shall have any duty as to any Collateral in its possession or control
as agent therefor or bailee thereof or any income thereon or the preservation of
rights against any Person or otherwise with respect thereto. Agent and Lender
each shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Agent or Lender accords its own
property, it being understood that Agent and/or Lender shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in value thereof, by reason of the act or omission of Agent or
Lender, its Affiliates, agents, employees or bailees, except to the extent that
such loss or damage results from such Person's gross negligence or willful
misconduct, provided that nothing in this Article VI shall be deemed to relieve
Agent from the duties and standard of care which, as a commercial bank, it
generally owes to depositors. Neither Lender nor Agent shall have any liability
for any loss resulting from the investment of funds in Permitted Investments in
accordance with the terms and conditions of this Agreement.

            SECTION 6.2 INDEMNITY. Agent, in its capacity as agent hereunder,
shall be responsible for the performance only of such duties as are specifically
set forth herein, and no duty shall be implied from any provision hereof. Agent
shall not be under any obligation or duty to perform any act which would involve
it in expense or liability or to institute or defend any suit in respect hereof,
or to advance any of its own monies. The Borrowers shall indemnify and hold
Agent and Lender, their respective employees, officers, directors and agents
harmless from and against any loss, liability, cost or damage (including,
without limitation, reasonable attorneys' fees and disbursements) incurred by
Agent or Lender in connection with the transactions contemplated hereby, except
to the extent that such loss or damage results from such Person's gross
negligence or willful misconduct. The foregoing indemnity shall survive the
termination of this Agreement and the resignation and removal of Agent.

            SECTION 6.3 RELIANCE. Agent shall be protected in acting upon any
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other paper, document or signature believed by it to be genuine, and it may
be assumed that any person purporting to act on behalf of any Person giving any
of the foregoing in connection with the provisions hereof has been duly
authorized to do so. Agent may consult with legal counsel, and the advice or
opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken or suffered by it hereunder and in good faith in
accordance therewith. Agent shall not be liable for any act or omission done or
omitted to be done by Agent in reliance upon any instruction, direction or
certification received by Agent and without gross negligence or willful or
reckless misconduct. Agent shall be entitled to execute any of the powers
hereunder or perform any duties hereunder either directly or through agents or
attorneys; provided, however, that the execution of such powers by any such
agents or attorneys shall not diminish, or relieve Agent for, responsibility
therefor to the same degree as if Agent itself had executed such powers.

                                       19

Cash Management Agreement (FX4)



            SECTION 6.4 RESIGNATION OF AGENT.

            (a) Agent shall have the right to resign as Agent hereunder upon
sixty (60) days' prior written notice to the Borrowers and Lender, and in the
event of such resignation, the Borrowers shall appoint a successor Agent which
must be an Eligible Bank. No such resignation by Agent shall become effective
until a successor Agent shall have accepted such appointment and executed an
instrument by which it shall have assumed all of the rights and obligations of
Agent hereunder. If no such successor Agent is appointed within sixty (60) days
after receipt of the resigning Agent's notice of resignation, the resigning
Agent may petition a court for the appointment of a successor Agent.

            (b) In connection with any resignation by Agent, (i) the resigning
Agent shall, (A) duly assign, transfer and deliver to the successor Agent this
Agreement and all cash and Permitted Investments held by it hereunder, (B)
deliver such financing statements and execute and deliver such other instruments
prepared by the Borrowers and reasonably approved by Lender or prepared by
Lender as may be reasonably necessary to assign to the successor Agent, as agent
for Lender, any security interest in the Collateral existing in favor of the
retiring Agent hereunder and to otherwise give effect to such succession and (C)
take such other actions as may be reasonably required by Lender or the successor
Agent in connection with the foregoing and (ii) the successor Agent shall
establish in Lender's name, as secured party, cash collateral accounts, which
shall become the Accounts for purposes of this Agreement upon the succession of
such Agent, and which Accounts shall also be "securities accounts" within the
meaning of the UCC.

            (c) Lender at its sole discretion shall have the right, upon thirty
(30) days notice to Agent, to substitute Agent with a successor Agent that
satisfies the requirements of an Eligible Bank or to have one or more of the
Accounts held by another Eligible Bank, provided that such successor Agent shall
perform the duties of Agent pursuant to the terms of this Agreement.

            SECTION 6.5 LENDER APPOINTED ATTORNEY-IN-FACT. The Borrowers hereby
irrevocably constitute and appoint Lender as the Borrowers' true and lawful
attorney-in-fact, coupled with an interest and with full power of substitution,
to exercise and enforce every right, power, remedy, option and privilege of the
Borrowers with respect to the Collateral, and do in the name, place and stead of
the Borrowers, all such acts, things and deeds for and on behalf of and in the
name of the Borrowers, which the Borrowers are required to do hereunder or under
the other Loan Documents or which Agent or Lender may reasonably deem necessary
to more fully vest in Lender the rights and remedies provided for herein and to
accomplish the purposes of this Agreement including, without limitation, the
filing of any UCC financing statements or continuation statements in appropriate
public filing offices on behalf of the Borrowers, in any of the foregoing cases,
upon the Borrowers' failure to take any of the foregoing actions within ten (10)
days after notice from Lender. The foregoing powers of attorney are irrevocable
and coupled with an interest. If any Borrower fails to perform any agreement
herein contained and such failure shall continue for ten (10) days after notice
of such failure is given to such Borrower, Lender may perform or cause
performance of any such agreement, and any reasonable expenses of Lender and
Agent in connection therewith shall be paid by the Borrowers.

                                       20

Cash Management Agreement (FX4)



            SECTION 6.6 ACKNOWLEDGMENT OF LIEN/OFFSET RIGHTS. Agent hereby
acknowledges and agrees with respect to the Accounts that (a) the Accounts shall
be held by Agent in the names set forth herein, (b) all funds held in the
Accounts shall be held for the benefit of Lender, (c) the Borrowers have granted
to Lender a first priority security interest in the Collateral, (d) Agent shall
not disburse any funds from the Accounts except as provided herein, and (e)
Agent shall invest and reinvest any balance of the Accounts in Permitted
Investments in accordance with Section 2.5 hereof. Agent hereby waives any right
of offset, banker's lien or similar rights against, or any assignment, security
interest or other interest in, the Collateral.

            SECTION 6.7 REPORTING PROCEDURES.

            Agent shall provide the Borrowers and Lender with a record of all
checks and any other items deposited to the Lock Box Account or processed for
collection. Agent shall send a daily credit advice to the Borrowers and Manager,
which credit advice shall specify the amount of each receipt deposited into each
Account on such date. Agent shall send a monthly report to the Borrowers,
Manager and Lender, which monthly report shall specify the credits and charges
to the Accounts for the previous calendar month. Agent shall, at the request of
Lender, establish Lender and its designated Servicer, and the Borrowers, as
users of Agent's electronic data transfer system in accordance with Agent's
standard procedures; provided that, the Borrowers' access shall be limited to
information services and shall under no circumstances provide the Borrowers with
transaction rights in any such account. Upon request of Lender or its designated
Servicer, (i) Agent shall send to Lender or its designated Servicer, as
applicable, either (x) copies of the daily credit advices and any other advices
or reports furnished by Agent to the Borrowers and/or Manager hereunder or (y)
information on Account balances, to the extent said balances in the Accounts
have changed from the previous report, the aggregate amount of withdrawals from
the Accounts and other similar information via the electronic data transfer
system or facsimile transmission on a daily basis, and (ii) Agent shall advise
Lender or its designated Servicer, as applicable, of the amount of available
funds in the Accounts and shall deliver to Lender or its designated Servicer
copies of all statements and other information concerning the Accounts, to the
extent that the balances in the Accounts have changed from the previous report,
as Lender or its designated Servicer shall reasonably request. In the event
Agent shall resign as Agent hereunder, Agent shall provide the Borrowers with a
final written accounting, including closing statements, with respect to the
Accounts within thirty (30) days of resignation.

            VII.  REMEDIES

            SECTION 7.1 REMEDIES. Upon the occurrence and during the continuance
of an Event of Default, Lender or Agent at the direction of Lender, as agent for
Lender, may:

            (a) without notice to the Borrowers, except as required by law, and
at any time or from time to time, charge, set-off and otherwise apply all or any
part of the Collateral against the Obligations or any part thereof, including,
without limitation, reasonable costs and expenses set forth in Section 8.4
hereof;

            (b) in its sole discretion, at any time and from time to time,
exercise any and all rights and remedies available to it under this Agreement,
and/or as a secured party under the UCC and/or under any other applicable law or
in equity; and

                                       21

Cash Management Agreement (FX4)



            (c) demand, collect, take possession of, receive, settle,
compromise, adjust, sue for, foreclose or realize upon the Collateral (or any
portion thereof) as Lender may determine in its sole discretion.

            SECTION 7.2 WAIVER. The Borrowers hereby expressly waive, to the
fullest extent permitted by law, presentment, demand, protest or any notice of
any kind in connection with this Agreement or the Collateral. The Borrowers
acknowledge and agree that ten (10) days' prior written notice of the time and
place of any public sale of the Collateral or any other intended disposition
thereof shall be reasonable and sufficient notice to the Borrowers within the
meaning of the UCC.

            VIII. MISCELLANEOUS

            SECTION 8.1 TRANSFERS AND OTHER LIENS. Each Borrower agrees that it
will not (i) sell or otherwise dispose of any of the Collateral or (ii) create
or permit to exist any Lien upon or with respect to all or any of the
Collateral, except for the Lien granted under this Agreement.

            SECTION 8.2 LENDER'S RIGHT TO PERFORM BORROWER'S OBLIGATIONS; NO
LIABILITY OF LENDER. If any Borrower fails to perform any of the covenants or
obligations contained herein, and such failure shall continue for a period ten
(10) Business Days after such Borrower's receipt of written notice thereof from
Lender, Lender may itself perform, or cause performance of, such covenants or
obligations, and the reasonable expenses of Lender incurred in connection
therewith shall be payable by the Borrowers to Lender. Notwithstanding Lender's
right to perform certain obligations of the Borrowers, it is acknowledged and
agreed that the Borrowers retain control of the Property and operation thereof
and notwithstanding anything contained herein or Agent's or Lender's exercise of
any of its rights or remedies hereunder, under the Loan Documents or otherwise
at law or in equity, neither Agent nor Lender shall be deemed to be a
mortgagee-in-possession nor shall Lender be subject to any liability with
respect to the Property or otherwise based upon any claim of lender liability
except as a result of Lender's gross negligence or willful misconduct.

            SECTION 8.3 NO WAIVER. The rights and remedies provided in this
Agreement and the other Loan Documents are cumulative and may be exercised
independently or concurrently, and are not exclusive of any other right or
remedy provided at law or in equity. No failure to exercise or delay by Agent or
Lender in exercising any right or remedy hereunder or under the Loan Documents
shall impair or prohibit the exercise of any such rights or remedies in the
future or be deemed to constitute a waiver or limitation of any such right or
remedy or acquiescence therein. Every right and remedy granted to Agent and/or
Lender hereunder or by law may be exercised by Agent and/or Lender at any time
and from time to time, and as often as Agent and/or Lender may deem it
expedient. Any and all of Agent's and/or Lender's rights with respect to the
lien and security interest granted hereunder shall continue unimpaired, and the
Borrowers shall be and remain obligated in accordance with the terms hereof,
notwithstanding (a) any proceeding of the Borrowers under the Federal Bankruptcy
Code or any bankruptcy, insolvency or reorganization laws or statutes of any
state, (b) the release or substitution of Collateral at any time, or of any
rights or interests therein or (c) any delay, extension of time, renewal,
compromise or other indulgence granted by the Agent and/or Lender in the event
of any default, with respect to the Collateral or otherwise hereunder. No delay
or extension of time by

                                       22

Cash Management Agreement (FX4)



Agent and/or Lender in exercising any power of sale, option or other right or
remedy hereunder, and no notice or demand which may be given to or made upon the
Borrowers by Agent and/or Lender, shall constitute a waiver thereof, or limit,
impair or prejudice Agent's and/or Lender's right, without notice or demand, to
take any action against the Borrowers or to exercise any other power of sale,
option or any other right or remedy.

            SECTION 8.4 EXPENSES. Agent shall be entitled to deduct from the
Lock Box Account for its own account the monthly Servicing Fee for which the
Borrowers are responsible pursuant to Section 2.11 of the Loan Agreement prior
to making any disbursements pursuant to Section 3.3(a)(ii) hereof, and, for so
long as the Mezzanine Loan is outstanding, Agent shall deduct from the Lock Box
Account the monthly Allocable Mezzanine Servicing Fee for which the Mezzanine
Borrower is responsible pursuant to Section 2.11 of the Mezzanine Loan Agreement
to be remitted to the Mezzanine Servicer prior to making any disbursements
pursuant to Section 3.3(a)(viii) hereof. The Collateral shall secure, and the
Borrowers shall pay to Agent and Lender within five (5) Business Days of the
written demand therefor, from time to time, all reasonable costs and expenses
(including, but not limited to, reasonable attorneys' fees and disbursements,
and transfer, recording and filing fees, taxes and other charges) of, or
incidental to, the creation or perfection of any lien or security interest
granted or intended to be granted hereby, the custody, care, sale, transfer,
administration, collection of or realization on the Collateral, or in any way
relating to the enforcement, protection or preservation of the rights or
remedies of Agent and/or Lender under this Agreement, the Loan Agreement, the
Note, the Security Instruments, or the other Loan Documents. Standard and
customary fees and charges associated with the Accounts shall be included on a
monthly consolidated account analysis statement which Agent shall submit to the
Borrowers for the Borrowers' payment. This statement shall set forth the fees
and charges payable for such month, including, but not limited to reasonable
fees and reasonable expenses incurred in connection with this Agreement and be
accompanied by reasonably detailed supporting documentation. Agent shall be
entitled to charge the Accounts for such reasonable fees and expenses as
indicated by the analysis statement.

            SECTION 8.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
and final agreement between the parties with respect to the subject matter
hereof and may not be changed, terminated or otherwise varied, except by a
writing duly executed by the parties.

            SECTION 8.6 NO WAIVER. No waiver of any term or condition of this
Agreement, whether by delay, omission or otherwise, shall be effective unless in
writing and signed by the party sought to be charged, and then such waiver shall
be effective only in the specific instance and for the purpose for which given.

            SECTION 8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their respective successors
and permitted assigns.

            SECTION 8.8 NOTICES. All notices, demands, requests, consents,
approvals and other communications (any of the foregoing, a "NOTICE") required,
permitted, or desired to be given hereunder to the Borrowers, Lender or Manager
shall be in writing and delivered to such parties at the addresses and in the
manner provided in Section 14.5 of the Loan Agreement. Notices to the Agent
shall be addressed as follows:

                                       23

Cash Management Agreement (FX4)


                                 Wachovia Bank, National Association
                                 8739 Research Drive
                                 URP4
                                 Charlotte, North Carolina  28288-1075
                                 Attention: David Tucker
                                 Facsimile No.: (704) 593-7737

            SECTION 8.9 CAPTIONS. All captions in this Agreement are included
herein for convenience of reference only and shall not constitute part of this
Agreement for any other purpose.

            SECTION 8.10 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in all respects in accordance with the laws of the State
of New York without regard to conflicts of law principles of such State.

            SECTION 8.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts.

            SECTION 8.12 EXCULPATION. The provisions of Article XII of the Loan
Agreement are hereby incorporated by reference into this Agreement as to the
liability of the Borrowers hereunder to the same extent and with the same force
as if fully set forth herein, and shall apply equally to Manager to the same
extent and with the same force as if fully set forth herein, provided, however,
that notwithstanding the foregoing, there shall be personal liability to the
Borrowers and Manager for the payment to Lender of all losses, damages, costs
and expenses suffered or incurred by Lender and arising from the failure of the
Borrowers and/or Manager to comply with the provisions of Section 2.2 of this
Agreement.

            SECTION 8.13 LOAN AGREEMENT. If any inconsistency exists between the
terms of this Agreement and the terms of the Loan Agreement, the terms of the
Loan Agreement shall prevail.

                                       24

Cash Management Agreement (FX4)



            IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                       LENDER:

                                       MERRILL LYNCH MORTGAGE LENDING, INC.

                                       By: /s/ Robert Spinna
                                           -------------------------------------
                                       Name:  Robert Spinna
                                       Title:  Vice President

                                       AGENT:

                                       WACHOVIA BANK, NATIONAL ASSOCIATION

                                       By: /s/ David C. Tucker
                                           -------------------------------------
                                           Name:  David C. Tucker
                                           Title:  Vice President

                                       MANAGER:

                                       LODGIAN MANAGEMENT CORP.

                                       By: /s/ Daniel E. Ellis
                                           -------------------------------------
                                       Name: Daniel E. Ellis
                                       Title: Vice President and Secretary

                   [SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

Cash Management Agreement (FX4)



                                BORROWERS:

                                LODGIAN FAIRMONT LLC
                                NH MOTEL ENTERPRISES, INC.
                                SERVICO COLUMBIA, INC.
                                SERVICO HOUSTON, INC.

                                By: /s/ Daniel E. Ellis
                                    ---------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory for each of the
                                       entities listed above

                                LITTLE ROCK LODGING ASSOCIATES I, LIMITED
                                PARTNERSHIP

                                By: LODGIAN LITTLE ROCK SPE, INC., a Delaware
                                    corporation, its general partner

                                By:  /s/ Daniel E. Ellis
                                     -------------------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

                                LODGIAN HOTELS FIXED IV, L.P.

                                By:    LODGIAN HOTELS FIXED IV GP, INC.,
                                       Delaware corporation, its general partner

                                By: /s/ Daniel E. Ellis
                                    --------------------------------------------
                                Name:  Daniel E. Ellis
                                Title: Vice President and Secretary, or
                                       Authorized Signatory

Cash Management Agreement (FX4)



                                    EXHIBIT A

            Form of Credit Card Receivables Payment Direction Letter

                                     [Date]

__________________________
__________________________
__________________________

            Re:   _______________________ (the "COMPANY")

Gentlemen:

            ________________ (the "PROCESSOR") has entered into arrangements
pursuant to which Processor acts as credit card processing service provider with
respect to certain credit card and debit card sales by Company and makes
payments to Company in respect of such sales as set forth in the [Merchant
Services Bankcard Agreement], dated _____________ between Processor and Company
(and together with any replacement agreement thereto, referred to herein as the
"CARD PROCESSING AGREEMENT").

            Please be advised that Company has entered or is about to enter into
financing arrangements with Merrill Lynch Mortgage Lending, Inc. (the "LENDER")
pursuant to which Lender may from time to time make loans and advances and
provide other financial accommodations to Company, secured by, among other
things, all of Company's right, title and interest in and to all deposit and
other bank accounts and proceeds of the foregoing, including all amounts at any
time payable by Processor to Company pursuant to the Card Processing Agreement
or otherwise.

            Notwithstanding anything to the contrary contained in the Card
Processing Agreement or any prior instructions to Processor, unless and until
Processor receives written instructions from Lender to the contrary, effective
as of the day after the date of Processor's written acknowledgement below all
amounts payable by Processor to Company pursuant to the Card Processing
Agreement or otherwise shall be sent by federal funds wire transfer or
electronic depository transfer to the following bank account of Lender:

                            ___________ (the "BANK")
                             ABA Number: ___________

 For the Account of: Lock Box Account for the benefit of Merrill Lynch Mortgage
     Lending, Inc., its successors and assigns Account Number: ____________
                      Attn: ____________, Fax: ____________

            In the event Processor at any time receives any other instructions
from Lender with respect to the disposition of amounts payable by or through
Processor to Company pursuant to

                                      A-1

Cash Management Agreement (FX4)



the Card Processing Agreement or otherwise, Processor is hereby irrevocably
authorized and directed to follow such instructions, without inquiry as to
Lender's right or authority to give such instructions. Company and Lender
acknowledge that (a) any instructions from Lender to Processor to change the
account to which funds must be sent by a vice president or other officer of
Lender to ____________; (b) such instructions shall only provide for funds to be
sent to a single deposit account of Lender, in a manner with respect to the
nature of the funds transfer and at times consistent with the payment practices
of Processor as then in effect, unless otherwise agreed by Processor. The
Company agrees to hold harmless Processor for any action taken by Processor in
accordance with the terms of this letter and the Card Processing Agreement; and
Lender shall complete such account change forms as Processor may require. The
Company hereby acknowledges that the account set forth above is owned by Company
but is under the control of Lender.

            Lender and Company hereby confirm and agree as follows: (i) the Card
Processing Agreement is in full force and effect and (ii) this Payment Direction
Letter does not prohibit or limit any rights Processor possesses under the Card
Processing Agreement, including but not limited to Processor's right to debit,
offset or charge back any amount owing to Processor under the Card Processing
Agreement or any replacement or renewal thereof, against funds sent to or to be
sent to the above referenced bank account.

            This Payment Direction Letter cannot be changed, modified, or
terminated, except by written agreement signed by Lender, Company and Processor.
Processor agrees to use reasonable efforts to ensure payment instructions are
followed, but Lender and Company herein acknowledge that Processor shall incur
no liability for changes or modifications wherein Processor has received
instructions from Company or Lender to change deposit instructions. The terms of
this Payment Direction Letter shall be governed by the laws of the State of New
York.

         Please acknowledge your receipt of, and agreement to, the foregoing by
signing in the space provided below.

                                       Very truly yours,
                                       ________________ (the "COMPANY")

                                       By:   ___________________________
                                             Name:
                                             Title:
                                       Date: ____________________________

Agreed to by Processor:

________________________________

By:_____________________________
Name:
Title:

                                      A-2

Cash Management Agreement (FX4)

EX-10.5.10

                                                                 EXHIBIT 10.5.10

                             ENVIRONMENTAL INDEMNITY

                  This ENVIRONMENTAL INDEMNITY, made as of June 25, 2004 (this
"AGREEMENT"), by the Borrowers named on the signature pages hereto, each having
an address at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta,
Georgia 30326 (each, a "BORROWER" and collectively, "BORROWERS"), by LODGIAN,
INC., a Delaware corporation, having an address at 3445 Peachtree Road, NE,
Suite 700, Atlanta, Georgia 30326 ("OBLIGOR"), jointly and severally (Borrowers
and Obligor being referred to herein collectively as "INDEMNITORS" and
individually as an "INDEMNITOR"), in favor of MERRILL LYNCH MORTGAGE LENDING,
INC., a Delaware corporation, having an address at 4 World Financial Center, New
York, New York, 10080 (together with its successors, transferees and assigns,
"LENDER").

                              W I T N E S S E T H:

                  WHEREAS:

                  A.       Borrowers are the owners of fee simple or leasehold
title, as applicable, to those certain parcels of real property (collectively,
the "PREMISES") described in EXHIBIT A attached hereto, and the buildings,
structures, fixtures, additions, enlargements, extensions, modifications,
repairs, replacements and other improvements now or hereafter located thereon
(the "IMPROVEMENTS"; together with the Premises, collectively, the "PROPERTY").

                  B.       Borrowers and Lender have entered into a certain Loan
and Security Agreement, dated as of the date hereof (as amended, modified or
restated from time to time, the "LOAN AGREEMENT"), pursuant to which Lender has
agreed to make a loan to Borrowers as more particularly described below.
Capitalized terms used herein and not herein defined shall have the meanings
assigned to such terms in the Loan Agreement.

                  C.       Pursuant to the Loan Agreement, Lender is making a
Loan to Borrower in the aggregate original principal amount of up to $61,516,500
(the "LOAN"). The Loan is evidenced by a certain Promissory Note, dated as of
the date hereof (as amended, modified, restated or split from time to time, the
"NOTE") and secured by, inter alia, those certain Mortgages/Deeds of Trust/Deeds
to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated
as of the date hereof (as amended, modified or restated from time to time,
collectively, the "SECURITY INSTRUMENT"), with respect to the Property.

                  D.       As a condition to Lender's making the Loan, Lender is
requiring that Indemnitors indemnify the Indemnified Parties (as hereinafter
defined) with respect to environmental conditions or liabilities on, in, under
or affecting the Property as hereinafter set forth.

                  E.       Obligor holds a direct and/or indirect ownership
interest in Borrower and will derive substantial economic benefit from Lender
making the Loan to Borrower.



                  NOW, THEREFORE, to induce Lender to extend the Loan to
Borrower and in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Indemnitors hereby covenant and agree for the benefit of the
Indemnified Parties as follows:

         1.       DEFINITIONS. The following terms shall have the following
meanings when used herein:

                  "COSTS" shall mean, collectively, all liens, damages, losses,
fines, liabilities (including, without limitation, any strict liability),
obligations, settlements, penalties, assessments, citations, directives, claims,
litigations, demands, response costs (including, without limitation,
investigation, removal, remediation, mitigation, containment, post-closure and
monitoring costs), defenses, judgments, suits, proceedings, costs, laboratory
fees, disbursements and expenses of any kind or nature whatsoever (including,
without limitation, reasonable attorneys', consultants' and experts' fees and
disbursements). Costs shall also include any future reduction in sales price of,
or unmarketability and consequent inability of Lender to foreclose on or
otherwise sell, the Property and the lost opportunity costs resulting from the
inability of Lender to sell or dispose of its interest in the Property, all as a
consequence of any event described in paragraph 2 herein to the extent that such
loss in value results in Lender receiving in any foreclosure, or deed in lieu
thereof, of the Properties less than the full amount of the Obligations by
reason of any matter set forth in Section 2.

                  "ENVIRONMENTAL LAWS" shall have the meaning given to such term
in the Loan Agreement.

                  "HAZARDOUS MATERIAL" shall have the meaning given to such term
in the Loan Agreement.

                  "INDEMNIFIED PARTY" shall mean Lender, any subsequent holder
of the Note and each of their officers, directors, shareholders, principals,
partners, representatives, employees, agents, successors and assigns.

                  "TENANTS" shall mean all tenants, lessees, subtenants and
other occupants of the Property.

         2.       INDEMNITY.

                  (a)      Except as provided in Section 2(b) below, Indemnitors
hereby assume liability for, and agree to pay, protect, defend, indemnify and
save all Indemnified Parties harmless from and against any and all Costs which
may be imposed upon, incurred by or asserted or awarded against any of the
Indemnified Parties or the Property, and arising directly or indirectly from:
(i) the violation or alleged violation of any Environmental Laws relating to or
affecting the Property, whether or not caused by or within the control of
Indemnitors; (ii) the actual or alleged presence, release or threat of release
of, or exposure to any Hazardous Material on, in, under or affecting all or any
portion of the Property or any surrounding areas, regardless of whether or not
caused by or within the control of Indemnitors; (iii) any actual or alleged
personal injury or property damage arising out of or related to Hazardous
Material on the Property; (iv) any acts or omissions that exacerbate an existing
condition at the Property and give

                                       2


rise to liability under any Environmental Law; (v) the failure by Indemnitors to
comply fully with the terms and conditions of this Agreement in all material
respects; (vi) a material breach of any representation or warranty contained in
this Agreement; (vii) the enforcement of this Agreement; or (viii) assessment,
investigation, containment, monitoring, remediation and/or removal of any and
all Hazardous Material from the Property or any surrounding areas, and costs
incurred to comply with Environmental Laws in connection with the Property or
any surrounding areas.

                  (b)      Notwithstanding any provision hereof to the contrary,
Indemnitors shall have no liability under this Agreement with respect to Costs
relating to Hazardous Material which is initially placed on, in or under the
Property after the earlier of (i) Lender or any receiver appointed at the
request of Lender taking actual possession and control of the Property following
an Event of Default, and (ii) Lender completing a foreclosure or other sale
pursuant to which Lender takes title to the Property. Indemnitors shall have no
liability under this Agreement to any Indemnified Party with respect to Costs
which result from such Indemnified Party's willful misconduct or gross
negligence. In addition to the foregoing, Obligor shall have no liability
pursuant to this Agreement with respect to costs relating to Hazardous Material
which is initially placed on, in or under the Property after the transfer of the
Mezzanine Borrowers' equity interest in the applicable Borrower to the Mezzanine
Lender or its designee by reason of, or in lieu of, enforcement of the Mezzanine
Lender's rights under the Mezzanine Loan Documents.

                  (c)      Indemnitors' obligation to defend the Indemnified
Parties hereunder shall include defense at both the trial and appellate levels
and shall be with attorneys, consultants and experts selected by Indemnitor and
subject to the reasonable approval of the Indemnified Parties.

         3.       REPRESENTATIONS REGARDING HAZARDOUS MATERIAL. Indemnitors
hereby represent and warrant to agree with the Indemnified Parties as follows:

                  (a)      Indemnitors, the Property and all businesses or
operations conducted thereon are in compliance with all applicable Environmental
Laws in all material respects;

                  (b)      Except as previously disclosed to Lender in the Phase
I Reports, no Hazardous Material has been disposed of on or released (as used
herein, "RELEASE" shall have the meaning provided in 42 U.S.C. Section 9601(22))
at, onto or under the Property by any Indemnitor or, to Indemnitors' knowledge,
by any other Person that has not been remediated in accordance with applicable
Environmental Laws or that is present at or under the Property at a level in
excess of that allowed by applicable Environmental Laws;

                  (c)      Except as previously disclosed to Lender in the Phase
I Reports, no Hazardous Material is located in, on or under, or has been
handled, generated, stored, processed or discharged from the Property in
violation of applicable Environmental Laws by any Indemnitor or, to the
Indemnitors' knowledge, by any other Person, except for those materials used by
Borrowers, Manager or tenants of the Property ("TENANTS") in the ordinary course
of their business in material compliance with all applicable Environmental Laws
and not reasonably expected to give rise to liability under applicable
Environmental Laws;

                                       3


                  (d)      Indemnitors have received no written notice that the
Property is subject to any private or governmental lien or judicial or
administrative notice or action relating to or arising under applicable
Environmental Laws;

                  (e)      Except as previously disclosed to Lender in the Phase
I Reports, there are no underground storage receptacles or surface impoundments,
landfills or dumps for Hazardous Material on the Property;

                  (f)      Indemnitors have received no notice of, and to
Indemnitors' knowledge there exists no investigation, action, proceeding or
claim by any agency, authority or unit of government or by any third party
asserted or threatened which could result in any liability, penalty, sanction or
judgment under any applicable Environmental Laws with respect to any condition,
use or operation of the Property, nor do Indemnitors know of any basis for any
of the foregoing;

                  (g)      Except as previously disclosed to Lender in the Phase
I Reports or the Property Condition Reports, there is no asbestos-containing
material or lead-based paint at the Property nor are there any polychlorinated
biphenyls ("PCB'S"), endangered species' habitats or wetlands at the Property;

                  (h)      Indemnitors have received no notice that, and to
Indemnitors' knowledge, there has been no claim by any party that, any use,
operation or condition of the Property has caused any nuisance or any other
liability or adverse condition on any other property nor do Indemnitors know of
any basis for such a claim relating to Hazardous Material;

                  (i)      Except as previously disclosed in writing to Lender,
Indemnitor has not knowingly waived or released any Person's liability with
regard to Hazardous Material in, on, under or around the Property nor retained
or assumed, contractually or otherwise, any other Person's liability relative to
Hazardous Material or any claim, action or proceeding relating thereto; and

                  (j)      Except as previously disclosed to Lender in the Phase
I Reports, neither the Property nor any other property owned by any Borrower (i)
is included or, to Indemnitor's knowledge, proposed for inclusion on the
National Priorities List issued pursuant to CERCLA (hereinafter defined) by the
United States Environmental Protection Agency (the "EPA") or on any of the
inventories of other potential "Problem" sites issued by the EPA or other
applicable Governmental Authority nor (ii) otherwise identified by the EPA as a
potential CERCLA site or included or, to Indemnitor's knowledge, proposed for
inclusion on any such list or inventory issued pursuant to any other applicable
Environmental Law or issued by any other Governmental Authority.

         4.       COVENANTS OF INDEMNITORS.

                  (a)      So long as any Borrower or Affiliate thereof owns or
is in possession of the Property, Indemnitors shall, and shall use commercially
reasonable efforts to cause all property managers, agents, employees and Tenants
to: (i) comply with all Environmental Laws applicable to the Property, (ii) keep
or cause the Property to be kept free from Hazardous Material (except those
materials used by Borrower, Manager or Tenants in the ordinary course of

                                       4


their business, in compliance with applicable Environmental Laws), (iii) not
install or use, or permit the installation or use of, any underground
receptacles containing Hazardous Material on the Property, (iv) expressly
prohibit the use, generation, handling, storage, production, release, processing
and disposal of Hazardous Material by all future Tenants and Managers (except
those substances used by such Tenants or Managers in the ordinary course of
their business in compliance with all applicable Environmental Laws) and use all
commercially reasonable efforts to prevent existing Tenants, Managers and other
permitted occupants of the Property from taking any such actions, (v) in any
event, not install on the Property or permit to be installed on the Property
PCB's, urea formaldehyde insulation, asbestos or any substance containing
asbestos or any material containing lead-based paint, (vi) prohibit the disposal
and/or release of any Hazardous Material in violation of applicable
Environmental Laws on, at or beneath, the Property, (vii) operate and maintain,
or cause to be operated and maintained, the HVAC systems at the Property in
accordance with standards for operation of similar systems located at properties
that are similar (including, without limitation, the manner, class of operation,
and/or Franchisor standards) to the Property, (viii) cause the Required Capital
Improvements which relate to mold to be completed in accordance with the
standards and time frames set forth in Section 6.5 of the Loan Agreement, and
(ix) not permit any Lien imposed pursuant to any applicable Environmental Law to
be imposed or, subject to Section 4(c) below, to remain on the Property.

                  (b)      Indemnitors shall promptly notify Lender in writing
should any Indemnitor become aware of (i) any release, disposal or discharge of
Hazardous Material in violation of applicable Environmental Laws, or other
material actual environmental problem or liability, with respect to or affecting
the Property, (ii) any lien, action or notice of violation or potential
liability affecting the Property or Borrowers and arising under any applicable
Environmental Law, (iii) the institution of any investigation, inquiry or
proceeding concerning Borrowers or the Property pursuant to any applicable
Environmental Law or otherwise relating to Hazardous Material affecting the
Property, (iv) the discovery of any occurrence, condition or state of facts
which would render any representation or warranty contained in this Agreement
incorrect or incomplete in any material respect if made at the time of such
discovery, (v) any remedial action taken by Indemnitors or, if actually known by
Indemnitor, any other Person in response to any Hazardous Material on, under or
at the Property, (vi) the discovery by Indemnitors of any occurrence or
condition on any real property adjoining or in the vicinity of the Property that
would reasonably be expected to cause the Property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or use
thereof under any applicable Environmental Laws, and (vii) any request for
information from any governmental agency that indicates such agency is
investigating whether Indemnitors may be potentially responsible for a release,
disposal or discharge of Hazardous Material. Borrowers shall promptly notify
Lender of any proposed action to be taken pertaining in any way to the Property
to commence any operations that could reasonably be expected to subject any
Borrower or the Property to additional obligations or liabilities under
applicable Environmental Laws, including laws, rules and regulations requiring
additional or amended environmental permits or licenses which could reasonably
be expected to subject any Borrower to any material obligations or requirements
under any applicable Environmental Laws. Borrowers shall, at their own expense,
provide copies of such documents or information as Lender may reasonably request
in relation to any matters disclosed pursuant to this Section. Indemnitor shall
promptly transmit to Lender

                                       5


copies of any and all material citations, orders, notices and all other
communications sent or received by any Borrower relating to any of the foregoing
provisions of this paragraph.

                  (c)      Regardless of the source of contamination,
Indemnitors shall, at their own expense, promptly take or cause to be taken and
diligently prosecute all actions required by applicable Environmental Laws for
the clean-up of the Property and other property affected by contamination in,
on, under or at the Property, including, without limitation, all investigative,
monitoring, removal, containment and remedial actions in accordance with and
required by all applicable Environmental Laws (and in all events in a manner
satisfactory to the applicable Governmental Authority and reasonably
satisfactory to Lender). Indemnitor shall further pay or cause to be paid, at no
expense to any Indemnified Party, all clean-up, administrative and enforcement
costs of applicable governmental agencies which may be asserted against the
Property. In the event Indemnitors fail to do so, or following an Event of
Default, Lender may, at its sole election, cause the Property or other affected
property to be freed from any Hazardous Material located thereon at a level in
excess of that allowed by applicable Environmental Laws, or otherwise be brought
into compliance with applicable Environmental Laws, and any cost incurred in
connection therewith shall be included in Costs. Borrowers hereby grant to
Lender access to the Property and an irrevocable license to remove any Hazardous
Material and to do all things necessary to bring the Property into compliance in
all material respects with applicable Environmental Laws. However, Lender shall
have no obligation to inspect or clean up any Hazardous Material. Lender shall
not be deemed a generator of any Hazardous Material removed from the Property.

                  (d)      Upon the request of Lender, at any time (i) after the
occurrence of an Event of Default or (ii) Lender has reasonable grounds to
believe that (A) Hazardous Material is or has been released, stored or disposed
of, or existing, on or around the Property at a level in excess of that allowed
by applicable Environmental Laws or (B) the Property may be in material
violation of applicable Environmental Laws, Indemnitors shall cause an
investigation or audit of the Property to be undertaken by a hydrogeologist or
environmental engineer or other appropriate consultant reasonably approved by
Lender to determine whether any Hazardous Material is located on, at, beneath,
or near the Property and/or whether the Property is in compliance in all
material respects with Environmental Laws. The scope of any investigation or
audit shall be approved by Lender in Lender's reasonable discretion. If
Indemnitors fail to provide reports of such investigation or audit within thirty
(30) days after such request, Lender may, but shall have no obligation to, order
the same. Borrowers hereby grant to Lender and Lender's contractors access to
the Property and an irrevocable license to undertake such investigation or audit
provided that such investigation is conducted in a manner so as not to
unreasonably affect Borrowers' operations at the Property. All reasonable costs
of any such investigation or audit shall be included in Costs and shall be paid
by Indemnitors in accordance with the terms of paragraph 5(c) hereof.

                  (e)      In the event that a Lien is filed against the
Property pursuant to any applicable Environmental Law, Indemnitors shall, within
ten (10) Business Days from the date that any Borrower receives notice of such
Lien (but in any event ten (10) days prior to the date of any contemplated sale
pursuant to such Lien), either (i) pay the claim and remove the Lien from the
Property, or (ii) furnish, at Indemnitor's option, (A) a bond satisfactory to
Lender in the amount of the claim out of which the Lien arises, (B) a cash
deposit in the amount of the claim

                                       6


out of which the Lien arises, (C) other security reasonably satisfactory to
Lender in an amount sufficient to discharge the claim out of which the Lien
arises, or (D) security in a form and amount satisfactory to the applicable
Governmental Authority pursuant to a valid consent or other order, and
Indemnitors shall promptly arrange for the removal of the Lien. Notwithstanding
the foregoing, Indemnitors shall prevent a sale pursuant to any Lien.

                  (f)      The amount of Indemnitors' liability hereunder is
unrelated to the amount of the Loan and any failure of the Loan to be repaid in
full. The enforcement of this Agreement by the Indemnified Parties shall not be
construed by Indemnitors as an indirect attempt to recover any Loan deficiency
or loss relating to the failure of the Loan to be repaid in full. Indemnitors
acknowledge that they may have liability hereunder even if the Loan is repaid in
full by reason of a full credit bid at any foreclosure sale under the Security
Instrument, and that the amount of Indemnitor's liability hereunder could exceed
the entire amount paid by Borrower for the Property.

         5.       INDEMNIFICATION PROCEDURES.

                  (a)      If any action, proceeding, litigation or claim shall
be brought or asserted against any Indemnified Party for any matter which the
Indemnified Parties are indemnified hereunder (each, a "CLAIM"), such
Indemnified Party shall notify Indemnitors in writing thereof and Indemnitors
shall promptly assume the defense thereof, including, without limitation, the
employment of counsel selected by the Indemnitor and approved by the Indemnified
Party, such approval not to be unreasonably withheld, conditioned or delayed,
and the negotiation of any settlement. Any failure of such Indemnified Party to
notify Indemnitors of such matter shall not impair or reduce the obligations of
Indemnitors hereunder. The Indemnified Parties shall have the right, at the
reasonable expense of Indemnitors (which expense shall be included in Costs), if
an Indemnified Party has reason to believe that its interests are not being
adequately represented or diverge from other interests being represented by such
counsel, to employ separate counsel in any such action and to participate in the
defense thereof at such Indemnitor's sole cost and expense. In the event
Indemnitors shall fail to discharge or undertake to defend any Indemnified Party
against any Claim, such failure shall constitute an Event of Default and the
Indemnified Party may, at its sole election, defend or settle such Claim. The
liability of Indemnitors to such Indemnified Party hereunder for any settlement
by such Indemnified Party shall be conclusively established by any settlement
entered into by the Indemnified Party in good faith. The amount of Indemnitors'
liability hereunder shall include the settlement consideration and all other
Costs, which shall be paid by the Indemnitors as hereinafter provided. Costs
incurred in connection with a Claim shall be reimbursed by Indemnitors without
the requirement of waiting for the ultimate outcome of such Claim.

                  (b)      Indemnitors shall not, without the prior written
consent of the Indemnified Party, which consent will not be unreasonably
withheld, conditioned or delayed, settle or compromise any Claim in any manner
or consent to the entry of any judgment (i) in which the claimant or plaintiff
does not unconditionally release the Indemnified Party from all liability and
obligations in respect of such Claim and obtain a dismissal of such Claim with
prejudice; or (ii) that may adversely affect the Indemnified Party (as
determined in the reasonable discretion of such Indemnified Party) or obligate
the Indemnified Party to pay any sum or perform any obligation.

                                       7


                  (c)      Indemnitors shall pay to the applicable Indemnified
Party any and all Costs within fifteen (15) days after written notice from such
Indemnified Party. All Costs shall be immediately reimbursable to the
Indemnified Party or, upon request of the Indemnified Party, paid directly to
the party sending a bill or other statement to the Indemnified Party. Any Costs
not paid within the aforementioned fifteen (15) day period shall bear interest
at the Default Rate from the date incurred until the date paid in full.

         6.       REINSTATEMENT OF OBLIGATIONS. If at any time all or any part
of any payment received by an Indemnified Party pursuant to this Agreement shall
be rescinded or returned for any reason whatsoever, including, without
limitation, the insolvency, bankruptcy or reorganization of any Indemnitor, then
the obligations of Indemnitors hereunder shall, to the extent of such rescinded
or returned payment, be reinstated and shall continue as though such previous
payment received by the Indemnified Party had never occurred.

         7.       WAIVERS BY INDEMNITORS. To the extent permitted by law,
Indemnitors hereby waive and agree not to assert or take advantage of:

                  (a)      Any right to require an Indemnified Party (i) to
proceed against Borrower or any other Person, (ii) to proceed against or exhaust
any security held by any Indemnified Party at any time or (iii) to pursue any
other remedy in such Indemnified Party's power or under any other agreement, in
any case, before proceeding against Indemnitors hereunder;

                  (b)      Any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other Person or the
failure of an Indemnified Party to file or enforce a claim against the estate
(in administration, bankruptcy or any other proceeding) of any other Person;

                  (c)      Demand, presentment for payment, protest and notice
of protest, demand, dishonor and nonpayment and all other notices except as
expressly required in the Loan Documents, including, without limitation, notice
of new or additional indebtedness or obligations or of any action or non-action
on the part of Borrower, Lender, any endorser or creditor of Borrower or of
Indemnitor or of any other Person whomsoever under this Agreement or any other
Loan Document;

                  (d)      Any defense based upon an election of remedies,
splitting a cause of action or merger of judgments by any Indemnified Party;

                  (e)      Any right or claim of right to cause a marshaling of
the assets of Indemnitors;

                  (f)      Any principle or provision of law, statutory or
otherwise, which is or might be in conflict with the terms and provisions of
this Agreement;

                  (g)      Any duty on the part of any Indemnified Party to
disclose to Indemnitors any facts such Indemnified Party may now or hereafter
know about Borrower or the Property, regardless of whether such Indemnified
Party (i) has reason to believe that any such facts materially increase the risk
beyond that which Indemnitors intend to assume, (ii) has reason to believe that
such facts are unknown to Indemnitors or (iii) has a reasonable opportunity to

                                       8


communicate such facts to Indemnitors, it being understood and agreed that
Indemnitors are fully responsible for being informed of the financial condition
of Borrower, the condition of the Property and of all other circumstances
bearing on the risk that liability may be incurred by Indemnitors hereunder;

                  (h)      Any invalidity, irregularity or unenforceability, in
whole or in part, of any one or more of the Loan Documents;

                  (i)      Any lack of commercial reasonableness in dealing with
the collateral for the Loan;

                  (j)      Any deficiencies in the collateral for the Loan or
any deficiency in the ability of Lender to collect or to obtain performance from
any Persons now or hereafter liable for the payment and performance of any
obligation hereby guaranteed;

                  (k)      An assertion or claim that the automatic stay
provided by 11 U.S.C. Section 362 (arising upon the voluntary or involuntary
bankruptcy proceeding of Borrower) or any other stay provided under any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, shall operate or be interpreted to stay, interdict, condition,
reduce or inhibit the ability of Lender to enforce any of its rights, whether
now existing or hereafter acquired, which Lender may have against any Indemnitor
or the collateral for the Loan;

                  (l)      Any modifications of the Loan Documents or any
obligation of Borrower relating to the Loan by operation of law or by action of
any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or
any other debtor relief law (whether statutory, common law, case law or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or
otherwise;

                  (m)      Any action, occurrence, event or matter consented to
by Indemnitors under Section 8(j) hereof, under any other provision hereof, or
otherwise; and

                  (n)      the failure of any representation and/or warranties
made by Borrower, Indemnitor or any other party to be true, complete or correct
when given, or at any time thereafter.

Indemnitors covenant and agree that upon the commencement of a voluntary or
involuntary bankruptcy proceeding by or against any Borrower, neither such
Indemnitor shall seek a supplemental stay or otherwise pursuant to 11 U.S.C.
Section 105 or any other provision of the Bankruptcy Reform Act of 1978, as
amended, or any other debtor relief law (whether statutory, common law, case
law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect,
which may be or become applicable, to stay, interdict, condition, reduce or
inhibit the ability of Lender to enforce any rights of Lender against such
Indemnitor by virtue of this Agreement or otherwise.

                                       9


         8.       GENERAL PROVISIONS.

                  (a)      Fully Recourse. Notwithstanding any provision of any
other Loan Document to the contrary, all of the terms and provisions of this
Agreement are recourse obligations of Indemnitors and not restricted by any
limitation on personal liability.

                  (b)      Right to Indemnification Not Affected by Knowledge.
An Indemnified Party's right to defense, indemnification, payment of Costs or
other rights and remedies pursuant to this Agreement shall not be diminished or
affected in any way by any investigation conducted by or on behalf of such
Indemnified Party or other knowledge acquired (or capable of being acquired) by
such Indemnified Party through any means at any time.

                  (c)      Reliance. Indemnitors hereby acknowledge that Lender
would not make the Loan without being able to rely upon the covenants and
obligations of Indemnitors set forth herein. Accordingly, Indemnitors
intentionally and unconditionally enter into this Agreement.

                  (d)      Obligations Unsecured. Indemnitors acknowledge that
even though the representations, warranties and covenants of Indemnitors
contained herein may be identical or substantially similar to those of Borrower
set forth in the Security Instrument, the obligations of Indemnitors hereunder
are independent obligations which are not secured by the Security Instrument or
the other Loan Documents. The Indemnitors further acknowledge that it is the
intent of Lender to create separate obligations of Indemnitors hereunder which
can be enforced against Indemnitors without regard to the existence of the
Security Instrument or the other Loan Documents or the liens or security
interests created therein.

                  (e)      Survival. This Agreement shall be deemed to be
continuing in nature, remain in full force and effect and survive indefinitely,
notwithstanding the exercise of any remedy by Lender under the Security
Instrument or any of the other Loan Documents, including, without limitation,
any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the
Loan is paid or satisfied in full. Notwithstanding the foregoing to the
contrary, the obligations and liabilities of Indemnitors under this Agreement
shall survive following payment in full of the Obligations in accordance with
the terms of the Loan Documents for a period equal to the lesser of (x) five (5)
years, or (y) if Borrowers deliver Phase I environmental reports for each of the
Properties to Lender, acceptable to Lender in all respects, and which Lender
determines in its sole discretion demonstrates that no condition exists which
may cause any of the liabilities of Indemnitors to arise after delivery thereof,
two (2) years following the delivery of such Phase I environmental reports,
provided, however, in the event that (a) any obligations or liabilities of the
Indemnitors under this Agreement shall have arisen from any Hazardous Material
which existed on, in, under or affecting the Property prior to the expiration of
such period or (b) if, prior to payment in full of the Loan, Lender shall have
exercised any rights or remedies after an Event of Default or any of the Loan
Documents shall have been modified or amended or any provision thereof waived
pursuant to any workout or restructuring of the Loan (and if, as a consequence
thereof, at any time after the expiration of the survival period specified
above, Lender shall be unable to avail itself of any exemption from liability
available to lenders under any applicable Environmental Law or shall be required
to defend any claim or action relating to any Hazardous Material), then in any
such event the foregoing survival period shall not apply and the obligations and
liabilities of Indemnitors hereunder shall survive.

                                       10


                  (f)      Subordination; No Recourse Against Lender. Obligor
hereby subordinates any and all indebtedness of Borrower now or hereafter owed
to Obligor to all indebtedness of Borrower to Lender. Obligor shall not demand
or accept any payment of principal or interest from Borrower, shall not claim
any offset or other reduction of Obligor's obligations hereunder because of any
such indebtedness and shall not take any action to obtain any of the collateral
for the Loan. Further, Indemnitors shall not have any right of recourse against
any Indemnified Party by reason of any action such Indemnified Party may take or
omit to take under the provisions of this Agreement or any other Loan Documents.

                  (g)      Reservation of Rights. Nothing contained in this
Agreement shall prevent or in any way diminish or interfere with any rights or
remedies, including, without limitation, the right to cost recovery or
contribution, which any Indemnified Party may have against either Indemnitor or
any other party under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (codified at Title 42 U.S.C. Section 9601 et seq.), as it
may be amended from time to time ("CERCLA"), or any other applicable Federal,
state or local laws, all such rights being hereby expressly reserved.

                  (h)      Financial Statements. Each Indemnitor hereby agrees
to furnish Lender such financial statements and other information as is required
to be delivered pursuant to Section 5.1 of the Loan Agreement.

                  (i)      Nature of Obligations. The obligations of Indemnitors
hereunder are independent of the obligations of Borrower under the other Loan
Documents. In the event of any default hereunder, a separate action or actions
may be brought and prosecuted against Indemnitors whether or not Indemnitors are
the alter ego of Borrower and whether or not Borrower is joined therein or a
separate action or actions are brought against Borrower. Lender's rights
hereunder shall not be exhausted until all of the obligations of Indemnitor
hereunder have been fully paid and performed.

                  (j)      No Limitation on Liability. Indemnitors hereby
consent and agree that any of the following may occur from time to time, without
notice or consideration to, or consent of, Indemnitors, and the liability of
Indemnitors hereunder shall remain unconditional and absolute and shall in no
way be impaired or limited by reason thereof:

                           (i)      any extension of time for performance
required by any of the Loan Documents or otherwise granted by Lender or any
extension or renewal of the Note;

                           (ii)     any sale, assignment or foreclosure of the
Note, the Security Instrument or any of the other Loan Documents or any sale or
transfer of the Property, except as set forth in Section 2(b);

                           (iii)    any change in the composition of Borrower,
including, without limitation, the voluntary or involuntary withdrawal or
removal of Indemnitors from any current or future position of ownership,
management or control of Borrower;

                           (iv)     the release of Borrower or of any other
Person from performance or observance of any of the agreements, covenants, terms
or conditions contained in any of the Loan Documents by operation of law,
Lender's voluntary act or otherwise;

                                       11


                           (v)      the release or substitution in whole or in
part of any security for the Loan;

                           (vi)     Lender's failure to record the Security
Instrument or to file any financing statement (or Lender's improper recording or
filing thereof) or to otherwise perfect, protect, secure or insure any lien or
security interest given as security for the Loan;

                           (vii)    the modification of the terms of any one or
more of the Loan Documents;

                           (viii)   subject to Section 2(b) hereof, the exercise
by Mezzanine Lender of any remedies made available to Mezzanine Lender pursuant
to the terms of the Mezzanine Loan Documents, including, without limitation,
foreclosure or similar remedies under any pledge agreement encumbering Mezzanine
Borrower's interest in General Partner, Member or any Borrower; or

                           (ix)     the taking or failure to take any action of
any type whatsoever. No such action which Lender shall take or fail to take in
connection with the Loan Documents or any collateral for the Loan, nor any
course of dealing with Borrower or any other Person, shall limit, impair or
release Indemnitor's obligations hereunder, affect this Agreement in any way or
afford Indemnitors any recourse against any Indemnified Party. Nothing contained
in this Section shall be construed to require any Indemnified Party to take or
refrain from taking any action referred to herein.

                  (k)      Representations. Each Indemnitor represents and
warrants that there is no bankruptcy, reorganization or insolvency proceeding
pending or, to its knowledge, threatened against it.

                  (l)      Professionals' Fees. In the event it is necessary for
any Indemnified Party to retain the services of an attorney or any other
consultants in order to enforce this Agreement, or any portion hereof,
Indemnitors agree to pay to such Indemnified Party any and all reasonable costs
and expenses, including, without limitation, reasonable attorneys' and
consultants' fees and disbursements, incurred by such Indemnified Party as a
result thereof and all such amounts shall be included in Costs.

                  (m)      Successive Actions. A separate right of action
hereunder shall arise each time an Indemnified Party acquires knowledge of any
matter indemnified or guaranteed by Indemnitors hereunder. Separate and
successive actions may be brought hereunder to enforce any of the provisions
hereof at any time and from time to time and no action hereunder shall preclude
any subsequent action.

                  (n)      No Waiver; Remedies Cumulative. No failure or delay
on the part of Lender in exercising any right, remedy, power or privilege
hereunder or under the other Loan Documents and no course of dealing between
Borrower and Lender shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder or under the
other Loan Documents preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege hereunder or thereunder.
The rights and remedies provided herein and in the other Loan Documents are
cumulative and not exclusive

                                       12


of any rights or remedies provided by law. The giving of notice to or demand on
Borrower which notice or demand is not required hereunder or under the other
Loan Documents shall not entitle Borrower to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights,
remedies, powers or privileges of Lender in any circumstances not requiring
notice or demand.

                  (o)      Notices. All notices, requests and other
communications to any party hereunder or under the Note shall be given in the
manner set forth in Section 14.5 of the Loan Agreement, to Lender and Borrower
at such party's address set forth in Section 14.5 of the Loan Agreement and to
each Obligor at its address set forth above, or such other address as
Indemnitors or Lender shall hereafter specify by not less than ten (10) days
prior written notice as provided herein; provided, however, that notwithstanding
any provision of this Section to the contrary, such notice of change of address
shall be deemed given only upon actual receipt thereof. Rejection or other
refusal to accept or the inability to deliver because of changed addresses of
which no notice was given as herein required shall be deemed to be receipt of
the notice, demand, statement, request or consent.

                  (p)      Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
and the applicable laws of the United States of America. Indemnitors hereby
irrevocably submit to the jurisdiction of any court of competent jurisdiction
located in the State of New York and in any state in which the Property is
located in connection with any proceeding out of or relating to this Agreement.

                  (q)      Invalid Provisions. If any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect, this
Agreement shall be construed without such provision.

                  (r)      Amendments. The terms of this Agreement, together
with the terms of the other Loan Documents, constitute the entire understanding
and agreement of the parties hereto and supersede all prior agreements,
understandings and negotiations between Indemnitors and Lender with respect to
the obligations contained herein. This Agreement, and any provisions hereof, may
not be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act on the part of Borrower or Lender, but only by an agreement
in writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.

                  (s)      Parties Bound; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives; provided, however, that except as
provided in the Loan Agreement or herein, Indemnitors may not, without the prior
written consent of Lender, assign any of their rights, powers, duties or
obligations hereunder.

                  (t)      Headings; Construction of Documents. The headings and
captions of various sections of this Agreement are for convenience of reference
only and are not to be construed as defining or limiting, in any way, the scope
or intent of the provisions hereof. Indemnitors acknowledge that they were
represented by competent counsel in connection with the negotiation and drafting
of this Agreement and the other Loan Documents and that neither

                                       13


this Agreement nor the other Loan Documents shall be subject to the principle of
construing the meaning against the Person who drafted same.

                  (u)      Recitals. The recital and introductory paragraphs
hereof are a part hereof, form a basis for this Agreement and shall be
considered prima facie evidence of the facts and documents referred to therein.

                  (v)      Counterparts. To facilitate execution, this Agreement
may be executed in as many counterparts as may be convenient or required. It
shall not be necessary that the signature or acknowledgment of, or on behalf of,
each party, or that the signature of all Persons required to bind any party, or
the acknowledgment of such party, appear on each counterpart. All counterparts
shall collectively constitute a single instrument. It shall not be necessary in
making proof of this Agreement to produce or account for more than a single
counterpart containing the respective signatures of, or on behalf of, and the
respective acknowledgments of, each of the parties hereto. Any signature or
acknowledgment page to any counterpart may be detached from such counterpart
without impairing the legal effect of the signatures or acknowledgments thereon
and thereafter attached to another counterpart identical thereto except having
attached to it additional signature or acknowledgment pages.

                  (w)      Cumulative Rights. The rights of Lender under this
Agreement shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled, subject to the terms of this Agreement, to
every right and remedy now or hereafter afforded by law.

                  (x)      Waiver of Counterclaim and Right to Trial by Jury.
Indemnitors hereby waive the right to assert a counterclaim, other than a
compulsory counterclaim, in any action or proceeding brought against it by
Lender or its agents, and Lender and Indemnitors waive trial by jury in any
action or proceeding brought by either party hereto against the other or in any
counterclaim any other party may be permitted to assert hereunder or which may
be asserted by any party or its agents, against Indemnitors, or in any matters
whatsoever arising out of or in any way connected with this Agreement, the debt
or the obligations contained herein.

                  (y)      Singular and Plural; Joint and Several Liability.

                           (i)      If there is more than one entity comprising
Obligor, all references to Obligor herein shall be to Obligor, or any one or
more of them. All references to Indemnitors herein shall be to Indemnitors or
any one or more of them. All obligations and liabilities of Indemnitors
hereunder are in addition to, not in lieu of and are independent of: (A) all
obligations of Borrower under any other Loan Document, including the Note and
the Loan Agreement; and (B) any obligation of Obligor under any other Loan
Document to which Obligor is a party.

                           (ii)     All obligations of Indemnitors hereunder
shall be joint and several.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       14


                  IN WITNESS WHEREOF, Indemnitors have executed this Agreement
as of the day and year first above written.

                                  BORROWERS:

                                  LODGIAN FAIRMONT LLC
                                  NH MOTEL ENTERPRISES, INC.
                                  SERVICO COLUMBIA, INC.
                                  SERVICO HOUSTON, INC.

                                  By:/s/ Daniel E. Ellis
                                     --------------------------------------
                                     Name:  Daniel E. Ellis
                                     Title: Vice President and Secretary, or
                                            Authorized Signatory for each of the
                                            entities listed above



                                  LITTLE ROCK LODGING ASSOCIATES I,
                                    LIMITED PARTNERSHIP

                                  By: LODGIAN LITTLE ROCK SPE, INC., a
                                      Delaware corporation, its general partner

                                  By: /s/ Daniel E. Ellis
                                      -------------------------------------
                                      Name:  Daniel E. Ellis
                                      Title: Vice President and Secretary, or
                                             Authorized Signatory



                                  LODGIAN HOTELS FIXED IV, L.P.

                                  By: LODGIAN HOTELS FIXED IV GP, INC., a
                                      Delaware corporation, its general partner

                                  By: /s/ Daniel E. Ellis
                                      -------------------------------------
                                      Name:  Daniel E. Ellis
                                      Title: Vice President and Secretary, or
                                             Authorized Signatory


                                  OBLIGOR:

                                  LODGIAN, INC., a Delaware
                                  corporation

                                  By:/s/ Daniel E. Ellis
                                     --------------------------------------
                                     Name: Daniel E. Ellis
                                     Title: Senior Vice President



                                   EXHIBITS A

                                   PROPERTIES



     CHAIN/NAME                          CITY                  ST
- ---------------------           -----------------------        --
                                                         
Residence Inn                   Little Rock                    AR
Courtyard by Marriott           Paducah                        KY
Hilton Inn                      Columbia                       MD
Holiday Inn                     Frederick                      MD
Hilton Inn                      Troy (Northfield)              MI
Courtyard by Marriott           Abilene                        TX
Holiday Inn Select              Dallas (DFW Airport)(Irving)   TX
Crowne Plaza                    Houston                        TX
Holiday Inn                     Fairmont                       WV

EX-10.6

                                                                    EXHIBIT 10.6

================================================================================

                                  GENERAL FORM
                                       OF
                         MORTGAGE, ASSIGNMENT OF LEASES
                        AND RENTS AND SECURITY AGREEMENT
                                       BY

                              [PROPERTY OWNER NAME]
                                   (MORTGAGOR)

                            TO AND FOR THE BENEFIT OF

                      MERRILL LYNCH MORTGAGE LENDING, INC.
                                   (Mortgagee)

                           Dated: As of June __, 2004

                       Property Location: [PROPERTY NAME]
                                          [STREET ADDRESS]
                                          [COUNTY]
                                          [CITY, STATE]

================================================================================

               DOCUMENT PREPARED BY AND WHEN RECORDED, RETURN TO:

                         Sidley Austin Brown & Wood LLP
                               787 Seventh Avenue
                            New York, New York 10019
                         Attention: Mark A. Poole, Esq.



THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT (this
"MORTGAGE"), made as of June __, 2004, by [PROPERTY OWNER NAME], having its
principal place of business at c/o Lodgian, Inc. 3445 Peachtree Road, NE, Suite
700, Atlanta, Georgia 30326 ("MORTGAGOR"), to and for the benefit of MERRILL
LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having its principal place
of business at 4 World Financial Center, New York, New York 10080 (together with
its successors, transferees and assigns, "MORTGAGEE"). Capitalized terms used
herein but not otherwise defined shall have the respective meanings assigned to
such terms in the Loan Agreement (hereinafter defined).

                              W I T N E S S E T H:

         To secure the payment of a loan (the "LOAN") in the original principal
sum of [INSERT POOL LOAN AMOUNT] ($__________), lawful money of the United
States of America, being made from Mortgagee to Mortgagor and the other
Borrowers (together with Mortgagor, "BORROWERS"), pursuant to the terms and
conditions of a certain Loan and Security Agreement, dated as of the date hereof
(as amended or modified, the "LOAN AGREEMENT"), among Borrowers and Mortgagee,
which is evidenced by and is to be paid with interest according to a certain
Promissory Note, dated as of the date hereof (as amended, modified, renewed or
restated, and together with any substitutes or replacements (by means of
multiple notes or otherwise) therefor, collectively, the "NOTE"), made by
Borrowers to Mortgagee and all other sums due hereunder, under the other Loan
Documents and under the Note (said indebtedness and interest due under the Note
and all other sums due hereunder, under the Note and the other Loan Documents
being hereinafter collectively referred to as the "DEBT"), Mortgagor has deeded,
mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed,
confirmed, warranted, pledged, assigned, and hypothecated and by these presents
does hereby deed, mortgage, give, grant, bargain, sell, alien, enfeoff, convey,
confirm, warrant, pledge, assign and hypothecate unto Mortgagee, the real
property described in EXHIBIT A attached hereto (the "PREMISES") and the
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and improvements now or hereafter located
thereon (the "IMPROVEMENTS");

         TOGETHER WITH: all right, title, interest and estate of Mortgagor now
owned, or hereafter acquired, in and to the following property, rights,
interests and estates (the Premises, the Improvements, and the property, rights,
interests and estates hereinafter described are collectively referred to herein
as the "MORTGAGED Property"):

                  (a)      all easements, rights-of-way, strips and gores of
land, streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and development rights, all rights to oil, gas,
minerals, coal and other substances of any kind or character, and all estates,
rights, titles, interests, privileges, liberties, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way belonging, relating or
pertaining to the Premises and the Improvements and the reversion and
reversions, remainder and remainders, and all land lying in the bed of any
street, road, highway, alley or avenue, opened, vacated or proposed, in front of
or adjoining the Premises, to the center line thereof and all the estates,
rights, titles, interests, dower and rights of dower, curtsey and rights of
curtsey, property, possession, claim and demand whatsoever, both at law and in
equity, of Mortgagor of, in and to the Premises and the Improvements and every
part and parcel thereof, with the appurtenances thereto;



                  (b)      all machinery, furniture, furnishings, equipment,
computer software and hardware, fixtures (including, without limitation, all
heating, air conditioning, plumbing, lighting, communications and elevator
fixtures, inventory and articles of personal property and accessions thereof and
renewals, replacements thereof and substitutions therefor, if any (including,
but not limited to, beds, bureaus, chiffoniers, chests, chairs, desks, lamps,
mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains,
shades, venetian blinds, screens, paintings, hangings, pictures, divans,
couches, luggage carts, luggage racks, stools, sofas, chinaware, linens,
pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities,
dining room wagons, tools, keys or other entry systems, bars, bar fixtures,
liquor and other drink dispensers, icemakers, radios, television sets, intercom
and paging equipment, electric and electronic equipment, dictating equipment,
private telephone systems, medical equipment, potted plants, heating, lighting
and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and
air-conditioning systems, elevators, escalators, fittings, plants, apparatus,
stoves, ranges, refrigerators, laundry machines, tools, machinery, engines,
dynamos, motors, boilers, incinerators, switchboards, conduits, compressors,
vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call
systems, brackets, electrical signs, bulbs, bells, ash and fuel, conveyors,
cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage
disposals, washers and dryers), other customary hotel equipment) and other
property of every kind and nature, whether tangible or intangible, whatsoever
owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or
hereafter located upon the Premises and the Improvements, or appurtenant
thereto, and usable in connection with the present or future operation and
occupancy of the Premises and the Improvements and all building equipment,
materials and supplies of any nature whatsoever owned by Mortgagor, or in which
Mortgagor has or shall have an interest, now or hereafter located upon the
Premises and the Improvements, or appurtenant thereto, and usable in connection
with the present or future operation, enjoyment and occupancy of the Premises
and the Improvements (hereinafter collectively referred to as the "EQUIPMENT"),
including any leases of any of the foregoing, any deposits existing at any time
in connection with any of the foregoing, and the proceeds of any sale or
transfer of the foregoing, and the right, title and interest of Mortgagor in and
to any of the Equipment that may be subject to any "security interests" as
defined in the Uniform Commercial Code, as adopted and enacted by the State or
States where any of the Mortgaged Property is located (the "UNIFORM COMMERCIAL
CODE"), superior in lien to the lien of this Mortgage;

                  (c)      all awards or payments, including interest thereon,
that may heretofore and hereafter be made with respect to the Premises and the
Improvements, whether from the exercise of the right of eminent domain or
condemnation (including, without limitation, any transfer made in lieu of or in
anticipation of the exercise of said rights), or for a change of grade, or for
any other injury to or decrease in the value of the Premises and Improvements;

                  (d)      all leases, tenancies, licenses, subleases,
assignments and/or rental or occupancy agreements and other agreements or
arrangements (including, without limitation, any and all guarantees of any of
the foregoing) heretofore or hereafter entered into affecting the use, enjoyment
or occupancy of, or the conduct of any activity upon or in, the Premises and the
Improvements, including any extensions, renewals, modifications or amendments
thereof (collectively, the "LEASES") and all rents, rent equivalents, moneys
payable as damages or in lieu of rent or rent equivalents, royalties (including,

                                       2


without limitation, all oil and gas or other mineral royalties and bonuses),
income, fees, receivables, receipts, revenues, deposits (including, without
limitation, security, utility and other deposits), accounts, cash, issues,
profits, charges for services rendered, and other payment and consideration of
whatever form or nature received by or paid to or for the account of or benefit
of Mortgagor or its agents or employees from any and all sources arising from or
attributable to the Premises and the Improvements, including, without
limitation, all hotel receipts, revenues and credit card receipts collected from
guest rooms, restaurants, bars (including, without limitation, service charges
for employees and staff), mini-bars, meeting rooms, banquet rooms, apartments,
parking, and recreational facilities, health club membership fees, food and
beverage wholesale and retail sales, service charges, convention services,
special events, audio-visual services, boat cruises, travel agency fees,
telephone charges, laundry services, vending machines and otherwise, all
receivables, customer obligations, installment payment obligations and other
obligations now existing or hereafter arising or created out of the sale, lease,
sublease, license, concession or other grant of the right of the possession, use
and occupancy of all or any portion of the Premises and the Improvements or
personalty located thereon, or rendering of services by Mortgagor or any
operator or manager of the hotel or the commercial space located in the
Improvements or acquired from others (including, without limitation, from the
rental of any office space, retail space, guest rooms or other space, halls,
stores, and offices, and deposits securing reservations of such space, and
charges for services such as room service, telecommunication and video,
electronic mail, internet connection and other communications and entertainment
services), license, lease, sublease and concession fees and rentals, and
proceeds, if any, from business interruption or other loss of income insurance
and any other items of revenue which would be included in operating revenues
under the Uniform System (as defined in the Loan Agreement) (the "RENTS"),
together with all proceeds from the sale or other disposition of the Leases and
the right to receive and apply the Rents to the payment of the Debt;

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

                  (f)      all accounts, escrows, documents, instruments,
chattel paper, claims, deposits and general intangibles, as the foregoing terms
are defined in the Uniform Commercial Code, and all franchises, trade names
(including, without limitation, the right to operate the Mortgaged Property
under the name and/or hotel system known as [HOTEL BRAND]), trademarks, symbols,
service marks, books, records, plans, specifications, designs, drawings,
permits, consents, licenses, management agreements (including, without
limitation, the Management Agreement), franchise agreements, contract rights
(including, without limitation, any contract with any architect or engineer or
with any other provider of goods or services for or in connection with any
construction, repair, or other work upon the Mortgaged Property), approvals,
actions, refunds of real estate taxes and assessments (and any other
governmental impositions related to the Mortgaged Property), and causes of
action that now or hereafter relate to, are derived from or are used in
connection with the Mortgaged Property, or the use, operation, maintenance,
occupancy or enjoyment thereof or the conduct of any business or activities
thereon (hereinafter collectively referred to as the "INTANGIBLES"); and

any and all proceeds, products, offspring, rents and profits from any of the
foregoing, including, without limitation, those from sale, exchange, transfer,
collection, loss, damage, disposition,

                                       3


substitution or replacement of any of the foregoing and any and all other
security and collateral of any nature whatsoever, now or hereafter given for the
repayment of the Debt and the performance of Mortgagor's obligations under the
Loan Documents including, without limitation, the Impositions and Insurance
Reserve, the FF&E Reserve, the Loss Proceeds Account, the Deposit Account, the
Lock Box Account and the Sub-Accounts thereof (each as defined in that certain
Cash Management Agreement, dated as of the date hereof (as amended or modified
the "CASH MANAGEMENT AGREEMENT"), by and among Borrowers, Mortgagee, Lodgian
Management Corp. and Wachovia Bank, National Association), and any other escrows
or reserves set forth in the Loan Documents.

         Notwithstanding anything to the contrary contained herein: (i) the
maximum amount of the principal obligations secured by this Mortgage (the
"Principal Obligations") shall not exceed [INSERT POOL LOAN AMOUNT] (the
"Maximum Principal Amount"); (ii) the Maximum Principal Amount of the Principal
Obligations secured by this Mortgage shall be deemed to be the first Principal
Obligations to be advanced and the last Principal Obligations to be repaid;
(iii) the security afforded by this Mortgage for the Debt shall not be reduced
by any payments or other sums applied to the reduction of the Debt so long as
the total amount of the outstanding Principal Obligations exceeds the Maximum
Principal Amount and thereafter shall be reduced only to the extent that any
such payments and other sums are actually applied by Mortgagee, in accordance
with the Loan Agreement, to reduce the outstanding Principal Obligations to an
amount less than the Maximum Principal Amount; and (iv) this limitation on the
Maximum Principal Amount shall only pertain to Principal Obligations and shall
not be construed as limiting the amount of interest, fees, expenses, indemnified
amounts and other Debt secured hereby that are not Principal Obligations, it
being the intention of the parties to this Mortgage that this Mortgage shall
secure any Principal Obligations remaining unpaid at the time of foreclosure up
to the Maximum Principal Amount, plus interest thereon, all costs of collateral
and all other amounts (except Principal Obligations in excess of the Maximum
Principal Amount) included in the Debt.

         TO HAVE AND TO HOLD the above granted and described Mortgaged Property
unto and to the use and benefit of Mortgagee, forever;

         WITH POWER OF SALE, to secure the payment to Mortgagee of the Debt at
the time and in the manner provided for its payment in the Note and in this
Mortgage;

         PROVIDED, HOWEVER, these presents are upon the express condition that,
if Mortgagor shall well and truly pay to Mortgagee the Debt at the time and in
the manner provided in the Note and this Mortgage and shall well and truly abide
by and comply with each and every covenant and condition set forth herein, in
the Note and in the other Loan Documents in a timely manner, these presents and
the estate hereby granted shall cease, terminate and be void;

         AND Mortgagor represents and warrants to and covenants and agrees with
Mortgagee as follows:

                                       4


                                     PART I

                               GENERAL PROVISIONS

         1.       PAYMENT OF DEBT AND INCORPORATION OF COVENANTS, CONDITIONS AND
AGREEMENTS. Mortgagor shall pay the Debt at the time and in the manner provided
in the Note, in the Loan Agreement and in this Mortgage. All the covenants,
conditions and agreements contained in (a) the Note, (b) the Loan Agreement and
(c) the other Loan Documents are hereby made a part of this Mortgage to the same
extent and with the same force as if fully set forth herein.

         2.       WARRANTY OF TITLE. Mortgagor warrants that Mortgagor has good
and marketable title to the Mortgaged Property and has the full power, authority
and right to execute, deliver and perform its obligations under this Mortgage
and to deed, encumber, mortgage, give, grant, bargain, sell, alienate, enfeoff,
convey, confirm, pledge, assign and hypothecate the same and that Mortgagor
possesses a fee estate in the Premises and the Improvements and that it owns the
Mortgaged Property free and clear of all liens, encumbrances and charges
whatsoever except for the Permitted Encumbrances and that this Mortgage is and
will remain a valid and enforceable first lien on and security interest in the
Mortgaged Property, subject only to said exceptions. Mortgagor represents and
warrants that none of the Permitted Encumbrances will, individually or in the
aggregate, materially and adversely affect (i) Mortgagor's ability to pay in
full in a timely manner its obligations, including, without limitation, the
Debt, (ii) the use of the Mortgaged Property for the use currently being made
thereof, (iii) the operation of the Mortgaged Property for the operation
currently being made thereof, or (iv) the value of the Mortgaged Property.
Mortgagor shall forever warrant, defend and preserve such title and the validity
and priority of the lien of this Mortgage and shall forever warrant and defend
the same to Mortgagee against the claims of all persons whomsoever.

         3.       INSURANCE. Mortgagor, at its sole cost and expense, shall
obtain and maintain during the entire term of this Mortgage (the "TERM")
policies of insurance as required pursuant to Section 5.4 of the Loan Agreement,
and pay all premiums thereon (the "INSURANCE PREMIUMS").

         4.       PAYMENT OF IMPOSITIONS AND OTHER CHARGES. Subject to
Mortgagor's right to contest set forth in Section 5.3(B) of the Loan Agreement
and the provisions of Section 5 below, and pursuant to the provisions of the
Cash Management Agreement, Mortgagor shall cause to be paid all Impositions now
or hereafter levied or assessed or imposed against the Mortgaged Property or any
part thereof prior to the date the same shall become delinquent. Mortgagor shall
promptly pay for all utility services provided to the Mortgaged Property.
Mortgagor shall furnish to Mortgagee or its designee receipts for the payment of
the Impositions prior to the date the same shall become delinquent (provided,
however, that Mortgagor shall not be required to furnish such receipts for
payment of Impositions in the event that such Impositions have been paid by
Mortgagee pursuant to Section 5 hereof).

         5.       IMPOSITIONS AND INSURANCE RESERVE. Mortgagor shall make
monthly deposits into the Impositions and Insurance Reserve in accordance with,
and to the extent required under, Section 6.3 of the Loan Agreement and under
the Cash Management Agreement.

                                       5


         6.       CONDEMNATION. To the extent the terms of this Section 6 are
inconsistent with the terms of the Loan Agreement, the terms of the Loan
Agreement shall control.

                  (a)      Mortgagor shall promptly give Mortgagee written
notice of any known actual or threatened commencement of any condemnation or
eminent domain proceeding affecting the Mortgaged Property or any portion
thereof and shall deliver to Mortgagee copies of any and all papers served in
connection with such proceedings. Subject to the terms of Section 6(b) below,
Mortgagee is hereby irrevocably appointed as Mortgagor's attorney-in-fact,
coupled with an interest, with exclusive power to collect, receive and retain
any award or payment for said condemnation or eminent domain and to make any
compromise or settlement in connection with such proceeding, subject to the
provisions of this Mortgage and the Loan Agreement. Notwithstanding any taking
by any public or quasi public authority through eminent domain or otherwise
(including but not limited to any transfer made in lieu of or in anticipation of
the exercise of such taking), Mortgagor shall continue to pay the Debt at the
time and in the manner provided for its payment in the Note, in this Mortgage
and the other Loan Documents and the Debt shall not be reduced until any award
or payment therefor shall have been actually received after expenses of
collection and applied by Mortgagee to the discharge of the Debt in accordance
with the terms hereof. In accordance with the terms hereof, Mortgagor shall
cause the award or payment made in any condemnation or eminent domain proceeding
completed after the date hereof, which is payable to Mortgagor, to be paid
directly to Mortgagee. Mortgagee may apply any such award or payment to the
reduction or discharge of the Debt whether or not then due and payable; such
application to be made without any Prepayment Consideration (as defined in the
Loan Agreement), provided that if Mortgagor receives any such award or payment,
Mortgagor pays such award or payment to Mortgagee within one hundred twenty
(120) days following the date of Mortgagor's receipt thereof, except that if an
Event of Default has occurred and is continuing, then such application shall be
subject to the Prepayment Consideration computed in accordance with the Note. If
the Mortgaged Property is sold following an Event of Default, through
foreclosure or otherwise, prior to the receipt by Mortgagee of such award or
payment, Mortgagee shall have the right, whether or not a deficiency judgment on
the Note shall have been sought, recovered or denied, to receive said award or
payment, or a portion thereof sufficient to pay the Debt.

                  (b)      Notwithstanding the foregoing, Mortgagee shall not
exercise the foregoing rights and Mortgagor may prosecute any condemnation
proceeding and settle or compromise and collect any claim involving an award
and/or claim for damages of not more than the Restoration Threshold provided
that: (i) no Event of Default shall have occurred and be continuing, (ii) in
Mortgagee's reasonable good faith judgment, such condemnation or taking does not
and will not materially restrict access to the Mortgaged Property or otherwise
have a Material Adverse Effect, and the Mortgaged Property remaining after such
condemnation or taking is capable of being restored to an economically viable
whole of substantially the same type which existed prior to the condemnation or
taking or in substantial compliance with all applicable laws, (iii) Mortgagor
applies the proceeds of such award to any reconstruction or repair of the
Mortgaged Property necessary as a result of such condemnation or taking, (iv)
Mortgagor promptly commences and diligently prosecutes such reconstruction or
repair to completion in accordance with all applicable laws and (v) the plans
and specifications for such work shall be subject to Mortgagee's reasonable
approval. Subject to the terms hereof, Mortgagor authorizes Mortgagee to apply
such awards, payments, proceeds or damages, after the deduction of Mortgagee's

                                       6


reasonable expenses incurred in the collection of such amounts, at Mortgagee's
option, to restoration or repair of the Mortgaged Property or to payment of the
sums secured by this Mortgage, whether or not then due, in the order determined
by Mortgagee, with the balance, if any, to Mortgagor. Application of any such
award or payment to payment of the sums secured by this Mortgage pursuant to the
foregoing sentence shall be made without any Prepayment Consideration, provided
that if Mortgagor receives any such award or payment, Mortgagor pays such award
or payment to Mortgagee within one hundred twenty (120) days following
Mortgagor's receipt thereof, except that if an Event of Default has occurred and
is continuing, then such application shall be subject to the Prepayment
Consideration computed in accordance with the Note. Subject to the provisions of
clauses (i) through (v) of this Section 6(b), Mortgagee shall not exercise
Mortgagee's option to apply such awards or damages to payment of the sums
secured by this Mortgage provided that each of the conditions (as applicable) to
the release of insurance proceeds for restoration or repair of the Mortgaged
Property under Section 5.5 of the Loan Agreement have been satisfied with
respect to such condemnation awards or damages. Any application of proceeds to
principal shall not extend or postpone the due date of the monthly installments
due hereunder, under the Note or under any of the Loan Documents or change the
amount of such installments. Mortgagor agrees to execute such further evidence
of assignment of any awards, proceeds, damages or claims arising in connection
with such condemnation or taking as Mortgagee may reasonably require.

         7.       LEASES AND RENTS. To the extent the terms of this Section 7
are inconsistent with the terms of the Loan Agreement or the Assignment of
Leases and Rents, the terms of the Loan Agreement and the Assignment of Leases
and Rents shall control. Mortgagor does hereby absolutely and unconditionally
assign to Mortgagee, all Mortgagor's right, title and interest in all current
and future Leases and Rents, it being intended by Mortgagor that this assignment
constitutes a present, absolute assignment and not an assignment for additional
security only. Such assignment to Mortgagee shall not be construed to bind
Mortgagee to the performance of any of the covenants, conditions or provisions
contained in any such Lease or otherwise impose any obligation upon Mortgagee.
Mortgagor agrees to execute and deliver to Mortgagee such additional
instruments, in form and substance reasonably satisfactory to Mortgagee, as may
hereafter be reasonably requested by Mortgagee to further evidence and confirm
such assignment. Notwithstanding the provisions of this Section 7, so long as no
Event of Default shall have occurred and be continuing under the Loan Documents,
Mortgagor shall have the sole but revocable right and license to act as landlord
under the Leases and to enforce the covenants of the Leases, provided, however,
Mortgagor acknowledges it has no right to collect or use Rents except in
accordance with the terms and conditions of Article VII of the Loan Agreement
and the Cash Management Agreement. Upon the occurrence and during the
continuance of an Event of Default, without the need for notice or demand, the
license granted to Mortgagor herein shall automatically be revoked. Mortgagee is
hereby granted and assigned by Mortgagor the right, at its option, upon
revocation of the license granted herein, to enter upon the Mortgaged Property
in person, by agent or by court-appointed receiver to collect the Rents. Subject
to the terms of the Loan Agreement, any Rents collected after the revocation of
the license shall be applied by Mortgagee in accordance with the Loan Agreement.
Mortgagor expressly understands that any and all proposed leases are included in
the definition of "LEASE" or "LEASES" as such terms may be used throughout this
Mortgage, the Note and the other Loan Documents.

                                       7


         8.       OPERATION AND MAINTENANCE OF MORTGAGED PROPERTY. Mortgagor
shall cause the Mortgaged Property to be operated and maintained in accordance
with Section 5.5 of the Loan Agreement.

         9.       TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY.

                  (a)      Mortgagor acknowledges that Mortgagee has examined
and relied on the creditworthiness and experience of Mortgagor in owning and
operating properties such as the Mortgaged Property in agreeing to make the
Loan, and that Mortgagee will continue to rely on Mortgagor's ownership of the
Mortgaged Property as a means of maintaining the value of the Mortgaged Property
as security for repayment of the Debt. Mortgagor acknowledges that Mortgagee has
a valid interest in maintaining the value of the Mortgaged Property so as to
ensure that, should Mortgagor default in the repayment of the Debt, Mortgagee
can recover the Debt by a sale of the Mortgaged Property. Except as expressly
permitted under this Mortgage, the Loan Agreement or under the other Loan
Documents, Mortgagor shall not cause or suffer to occur or exist, directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, any
sale, transfer, mortgage, pledge, lien or encumbrance (other than Permitted
Encumbrances) (collectively, "TRANSFERS") of (i) all or any part of the
Mortgaged Property or (ii) any direct or indirect beneficial ownership interest
(in whole or part) in Mortgagor, irrespective of the number of tiers of
ownership, without the prior written consent of Mortgagee.

                  (b)      The occurrence of any Transfer in violation of this
Section 9 shall constitute an Event of Default hereunder, whereupon Mortgagee at
its option, without being required to demonstrate any actual impairment of its
security or any increased risk of default hereunder, may declare the Debt
immediately due and payable.

                  (c)      Mortgagee's consent to one Transfer shall not be
deemed to be a waiver of Mortgagee's right to require such consent to any future
occurrence of same. Any Transfer made in contravention of this paragraph shall
be null and void and of no force and effect.

                  (d)      Mortgagor agrees to bear and shall pay or reimburse
Mortgagee on demand for all reasonable expenses (including, without limitation,
reasonable attorneys' fees and disbursements. title search costs and title
insurance endorsement premiums) incurred by Mortgagee in connection with the
review, approval and documentation of any Transfer which requires the consent of
Mortgagee.

         10.      CHANGES IN LAWS REGARDING TAXATION. If any law is enacted or
adopted or amended after the date of this Mortgage which deducts the Debt from
the value of the Mortgaged Property for the purpose of taxation or which imposes
a tax, either directly or indirectly, on the Debt or Mortgagee's interest in the
Mortgaged Property, Mortgagor will pay such tax, with interest and penalties
thereon, if any. In the event Mortgagee is advised by counsel chosen by it that
the payment of such tax or interest and penalties by Mortgagor would be unlawful
or taxable to Mortgagee or unenforceable or provide the basis for a defense of
usury, then in any such event, Mortgagee shall have the option, by written
notice of not less than ninety (90) days, to declare the Debt immediately due
and payable and, provided no Event of Default exists, no Prepayment
Consideration shall be due in connection therewith.

                                       8


         11.      NO CREDITS ON ACCOUNT OF THE DEBT. Mortgagor will not claim or
demand or be entitled to any credit or credits on account of the Debt for any
part of the Taxes or Other Charges assessed against the Mortgaged Property, or
any part thereof, and no deduction shall otherwise be made or claimed from the
assessed value of the Mortgaged Property, or any part thereof, for real estate
tax purposes by reason of this Mortgage or the Debt. In the event such claim,
credit or deduction shall be required by law, Mortgagee shall have the option,
by written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable and, provided no Event of Default exists, no
Prepayment Consideration shall be due in connection therewith.

         12.      DOCUMENTARY STAMPS. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Note or this Mortgage, or impose
any other tax or charge on the same, Mortgagor will pay for the same, with
interest and penalties thereon, if any.

         13.      PERFORMANCE OF OTHER AGREEMENTS. Mortgagor shall observe and
perform each and every material term to be observed or performed by Mortgagor
pursuant to the terms of any agreement or recorded instrument (including all
instruments comprising the Permitted Encumbrances) affecting or pertaining to
the Mortgaged Property, and will not suffer or permit any default or event of
default (after giving effect to any applicable notice requirements and cure
periods) to exist under any of the foregoing.

         14.      FURTHER ACTS; SECONDARY MARKET TRANSACTIONS.

                  (a)      Mortgagor will, at the sole cost and expense of
Mortgagor, and without expense to Mortgagee, do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignment, Uniform Commercial Code financing statements
or continuation statements, transfers and assurances as Mortgagee shall, from
time to time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Mortgagee the property and rights hereby
deeded, mortgaged, given, granted, bargained, sold, alienated, enfeoffed,
conveyed, confirmed, pledged, assigned and hypothecated or intended now or
hereafter so to be, or which Mortgagor may be or may hereafter become bound to
convey or assign to Mortgagee, or for carrying out the intention or facilitating
the performance of the terms of this Mortgage or for filing, registering or
recording this Mortgage or for facilitating the sale of the Loan and the Loan
Documents as described in subparagraph (b) below. Mortgagor, on demand, will
deliver and hereby authorizes Mortgagee to file in the name of Mortgagor, one or
more financing statements, chattel mortgages or other instruments, to evidence
more effectively the security interest of Mortgagee in the Mortgaged Property.
Upon foreclosure or the appointment of a receiver, Mortgagor will, at its sole
cost and expense, and without expense to Mortgagee, cooperate fully and
completely to effect the assignment or transfer of any license, permit,
agreement or any other right necessary or useful to the operation of the
Mortgaged Property. Mortgagor grants to Mortgagee an irrevocable power of
attorney coupled with an interest for the purpose of exercising and perfecting
any and all rights and remedies available to Mortgagee at law and in equity,
including, without limitation, such rights and remedies available to Mortgagee
pursuant to this paragraph.

                  (b)      Subject to the terms and conditions set forth in the
Loan Agreement, Mortgagee shall have the right to engage in one or more
Secondary Market Transactions (as

                                       9


defined in the Loan Agreement) and, in connection therewith, Mortgagee may
transfer its obligations under this Mortgage, the Loan Agreement and under the
other Loan Documents (or may transfer the portion thereof corresponding to the
transferred portion of the Debt), and thereafter Mortgagee shall be relieved of
any obligations hereunder and under the other Loan Documents arising after the
date of said transfer with respect to the transferred interest.

         15.      RECORDING OF MORTGAGE, ETC. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time, will
cause this Mortgage, and any security instrument creating a lien or security
interest or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Mortgagee in, the Mortgaged Property. Mortgagor
will pay all filing, registration or recording fees, and all expenses incident
to the preparation, execution and acknowledgment of this Mortgage, any deed of
trust supplemental hereto, any security instrument with respect to the Mortgaged
Property and any instrument of further assurance, and all federal, state, county
and municipal, taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of this Mortgage, any deed of
trust supplemental hereto, any security instrument with respect to the Mortgaged
Property or any instrument of further assurance, except where prohibited by law
so to do. Mortgagor shall hold harmless and indemnify Mortgagee, its successors
and assigns, against any liability incurred by reason of the imposition of any
tax on the making and recording of this Mortgage.

         16.      REPORTING REQUIREMENTS. Mortgagor agrees to give prompt notice
to Mortgagee of the insolvency or bankruptcy filing of Mortgagor or the death,
insolvency or bankruptcy filing of any Guarantor.

         17.      EVENTS OF DEFAULT. The Debt shall become immediately due and
payable at the option of Mortgagee upon the happening of any Event of Default.
The term "EVENT OF DEFAULT" as used in this Mortgage shall have the meaning
given such term in the Loan Agreement.

         18.      RIGHT TO CURE DEFAULTS. Upon the occurrence and during the
continuance of any Event of Default, Mortgagee may, but without any obligation
to do so and without notice to or demand on Mortgagor and without releasing
Mortgagor from any obligation hereunder, make or do the same in such manner and
to such extent as Mortgagee may deem necessary to protect the security hereof.
Mortgagee is authorized to enter upon the Mortgaged Property for such purposes
or appear in, defend, or bring any action or proceeding to protect its interest
in the Mortgaged Property or to foreclose this Mortgage or collect the Debt, and
the cost and expense thereof (including reasonable attorneys' fees and
disbursements to the extent permitted by law), with interest at the Default Rate
(as defined in the Loan Agreement) for the period after notice from Mortgagee
that such cost or expense was incurred to the date of payment to Mortgagee,
shall constitute a portion of the Debt, shall be secured by this Mortgage and
the other Loan Documents and shall be due and payable to Mortgagee upon demand.

                                       10


         19.      REMEDIES.

                  (a)      Upon the occurrence and during the continuance of any
Event of Default, Mortgagee may take such action, without notice or demand
(except to the extent required by applicable law), as it deems advisable to
protect and enforce its rights against Mortgagor and in and to the Mortgaged
Property by Mortgagee itself or otherwise, including, without limitation, the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as Mortgagee may determine, in its sole discretion,
without impairing or otherwise affecting the other rights and remedies of
Mortgagee:

                           (i)      declare the entire Debt to be immediately
due and payable;

                           (ii)     institute a proceeding or proceedings,
judicial or nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Mortgage in which case the Mortgaged Property or any
interest therein may be sold for cash or upon credit in one or more parcels or
in several interests or portions and in any order or manner;

                           (iii)    with or without entry, to the extent
permitted and pursuant to the procedures provided by applicable law, institute
proceedings for the partial foreclosure of this Mortgage for the portion of the
Debt then due and payable, subject to the continuing lien of this Mortgage for
the balance of the Debt not then due;

                           (iv)     sell for cash or upon credit the Mortgaged
Property or any part thereof and all estate, claim, demand, right, title and
interest of Mortgagor therein and rights of redemption thereof, pursuant to the
power of sale contained herein or otherwise, at one or more sales, as an
entirety or in parcels, at such time and place, upon such terms and after such
notice thereof as may be required or permitted by law;

                           (v)      institute an action, suit or proceeding in
equity for the specific performance of any covenant, condition or agreement
contained herein, or in any of the other Loan Documents;

                           (vi)     recover judgment on the Note either before,
during or after any proceedings for the enforcement of this Mortgage;

                           (vii)    apply for the appointment of a trustee,
receiver, liquidator or conservator of the Mortgaged Property, to the extent
permitted by applicable law, without notice and without regard for the adequacy
of the security for the Debt and without regard for the solvency of the
Mortgagor, any Guarantor or of any person, firm or other entity liable for the
payment of the Debt;

                           (viii)   enforce Mortgagee's interest in the Leases
and Rents and enter into or upon the Mortgaged Property, either personally or by
its agents, nominees or attorneys and dispossess Mortgagor and its agents and
servants therefrom, and thereupon Mortgagee may (A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal with all and every
part of the Mortgaged Property and conduct the business thereat; (B) complete
any construction on the Mortgaged Property in such manner and form as Mortgagee
deems advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the

                                       11


Mortgaged Property; (D) exercise all rights and powers of Mortgagor with respect
to the Mortgaged Property, whether in the name of Mortgagor or otherwise,
including, without limitation, the right to make, cancel, enforce or modify
Leases, obtain and evict tenants, and demand, sue for, collect and receive all
Rents; and (E) apply the receipts from the Mortgaged Property to the payment of
Debt, after deducting therefrom all expenses (including reasonable attorneys'
fees and disbursements) incurred in connection with the aforesaid operations and
all amounts necessary to pay the taxes, assessments insurance and other charges
in connection with the Mortgaged Property, as well as just and reasonable
compensation for the services of Mortgagee, its counsel, agents and employees;
or

                           (ix)     pursue such other rights and remedies as may
be available at law or in equity or under the Uniform Commercial Code.

In the event of a sale, by foreclosure or otherwise, of less than all of the
Mortgaged Property, this Mortgage shall continue as a lien on the remaining
portion of the Mortgaged Property.

                  (b)      The proceeds of any sale made under or by virtue of
this paragraph, together with any other sums which then may be held by Mortgagee
under this Mortgage, whether under the provisions of this paragraph or
otherwise, shall be applied by Mortgagee to the payment of the Debt in such
priority and proportion as Mortgagee in its sole discretion shall deem proper.

                  (c)      Mortgagee may adjourn from time to time any sale by
it to be made under or by virtue of this Mortgage by announcement at the time
and place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law, Mortgagee,
without further notice or publication, may make such sale at the time and place
to which the same shall be so adjourned.

                  (d)      Upon the completion of any sale or sales pursuant
hereto, Mortgagee, or an officer of any court empowered to do so, shall execute
and deliver to the accepted purchaser or purchasers a good and sufficient
instrument, or good and sufficient instruments, conveying, assigning and
transferring all estate, right, title and interest in and to the property and
rights sold. Any sale or sales made under or by virtue of this paragraph,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, shall,
to the maximum extent permitted by applicable law, operate to divest all the
estate, right, title, interest, claim and demand whatsoever, whether at law or
in equity, of Mortgagor in and to the properties and rights so sold, and shall
be a perpetual bar both at law and in equity against Mortgagor and against any
and all persons claiming or who may claim the same, or any part thereof from,
through or under Mortgagor.

                  (e)      Upon any sale made under or by virtue of this
paragraph, whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale, Mortgagee may bid for and acquire the Mortgaged Property or any part
thereof and in lieu of paying cash therefor may make settlement for the purchase
price by crediting upon the Debt the net sales price after deducting therefrom
the expenses of the sale and costs of the action and any other sums which
Mortgagee is authorized to deduct under this Mortgage.

                                       12


                  (f)      No recovery of any judgment by Mortgagee and no levy
of an execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.

                  (g)      Mortgagee may terminate or rescind any proceeding or
other action brought in connection with its exercise of the remedies provided in
this paragraph at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.

                  (h)      Mortgagee may resort to any remedies and the security
given by the Note, this Mortgage or the other Loan Documents in whole or in
part, and in such portions and in such order as determined in Mortgagee's sole
discretion. No such action shall in any way be considered a waiver of any
rights, benefits or remedies evidenced or provided by the Note, this Mortgage or
any of the other Loan Documents. The failure of Mortgagee to exercise any right,
remedy or option provided in the Note, this Mortgage or any of the other Loan
Documents shall not be deemed a waiver of such right, remedy or option or of any
covenant or obligation secured by the Note, this Mortgage or the other Loan
Documents. No acceptance by Mortgagee of any payment after the occurrence of any
Event of Default and no payment by Mortgagee of any obligation for which
Mortgagor is liable hereunder shall be deemed to waive or cure any Event of
Default with respect to Mortgagor, or Mortgagor's liability to pay such
obligation. No sale of all or any portion of the Mortgaged Property, no
forbearance on the part of Mortgagee, and no extension of time for the payment
of the whole or any portion of the Debt or any other indulgence given by
Mortgagee to Mortgagor, shall operate to release or in any manner affect the
interest of Mortgagee in the remaining Mortgaged Property or the liability of
Mortgagor to pay the Debt. No waiver by Mortgagee shall be effective unless it
is in writing and then only to the extent specifically stated. All reasonable
costs and expenses of Mortgagee in exercising its rights and remedies under this
paragraph (including reasonable attorneys' fees and disbursements to the extent
permitted by law), shall be paid by Mortgagor immediately upon notice from
Mortgagee, with interest at the Default Rate for the period after notice from
Mortgagee and such costs and expenses shall constitute a portion of the Debt and
shall be secured by this Mortgage.

                  (i)      The interests and rights of Mortgagee under the Note,
this Mortgage or in any of the other Loan Documents shall not be impaired by any
indulgence, including (i) any renewal, extension or modification which Mortgagee
may grant with respect to any of the Debt, (ii) any surrender, compromise,
release, renewal, extension, exchange or substitution which Mortgagee may grant
with respect to the Mortgaged Property or any portion thereof; or (iii) any
release or indulgence granted to any maker, endorser, Guarantor or surety of any
of the Debt.

         20.      RIGHT OF ENTRY. In addition to any other rights or remedies
granted under this Mortgage, Mortgagee and its agents shall have the right to
enter and inspect the Mortgaged Property at any reasonable time during the Term.
The reasonable cost of such inspections or audits shall be borne by Mortgagor
should Mortgagee determine that an Event of Default exists, including the cost
of all follow up or additional investigations or inquiries deemed reasonably
necessary by Mortgagee. The reasonable cost of such inspections, if not paid for
by Mortgagor within ten (10) Business Days of demand therefor, may be added to
the principal balance of the

                                       13


sums due under the Note and this Mortgage and shall bear interest thereafter
until paid at the Default Rate.

         21.      SECURITY AGREEMENT. This Mortgage is both a real property
mortgage and a "security agreement" within the meaning of the Uniform Commercial
Code. The Mortgaged Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Mortgagor in the Mortgaged Property. Mortgagor by executing and delivering this
Mortgage has granted and hereby grants to Mortgagee, as security for the Debt, a
security interest in the Mortgaged Property to the full extent that the
Mortgaged Property may be subject to the Uniform Commercial Code (said portion
of the Mortgaged Property so subject to the Uniform Commercial Code being called
in this paragraph the "COLLATERAL"). Mortgagor hereby agrees with Mortgagee to
execute and deliver to Mortgagee, in form and substance reasonably satisfactory
to Mortgagee, such financing statements and such further assurances as Mortgagee
may from time to time, reasonably consider necessary to create, perfect, and
preserve Mortgagee's security interest herein granted. This Mortgage shall also
constitute a "fixture filing" for the purposes of the Uniform Commercial Code as
to all or any items of the Collateral that are or are to become fixtures under
the Uniform Commercial Code. Information concerning the security interest herein
granted may be obtained from the parties at the addresses of the parties set
forth in the first paragraph of this Mortgage. If an Event of Default shall
occur, Mortgagee, in addition to any other rights and remedies which it may
have, shall have and may exercise immediately and without demand, any and all
rights and remedies granted to a secured party upon default under the Uniform
Commercial Code, including, without limiting the generality of the foregoing,
the right to take possession of the Collateral or any part thereof, and to take
such other measures as Mortgagee may deem necessary for the care, protection and
preservation of the Collateral. Upon request or demand of Mortgagee after the
occurrence and during the continuance of an Event of Default, Mortgagor shall at
its expense assemble the Collateral and make it available to Mortgagee at a
convenient place reasonably acceptable to Mortgagee. Mortgagor shall pay to
Mortgagee within ten (10) Business Days of demand therefor any and all expenses,
including reasonable attorneys' fees and disbursements, incurred or paid by
Mortgagee in protecting the interest in the Collateral and in enforcing the
rights hereunder with respect to the Collateral. Any notice of sale, disposition
or other intended action by Mortgagee with respect to the Collateral sent to
Mortgagor in accordance with the provisions hereof at least ten (10) Business
Days prior to such action, shall constitute commercially reasonable notice to
Mortgagor. The proceeds of any disposition of the Collateral, or any part
thereof, may be applied by Mortgagee to the payment of the Debt in such priority
and proportions as Mortgagee in its sole discretion shall deem proper. In the
event of any change in name, identity or structure of any Mortgagor, such
Mortgagor shall notify Mortgagee thereof and promptly after Mortgagee's request
shall execute, file and record such Uniform Commercial Code forms as are
necessary to maintain the priority of Mortgagee's lien upon and security
interest in the Collateral, and shall pay all reasonable expenses and fees in
connection with the filing and recording thereof. If Mortgagee shall require the
filing or recording of additional Uniform Commercial Code forms or continuation
statements, Mortgagor shall, promptly after request, execute, file and record
such Uniform Commercial Code forms or continuation statements as Mortgagee shall
deem reasonably necessary, and shall pay all reasonable expenses and fees in
connection with the filing and recording thereof, it being understood and
agreed, however, that no such additional documents shall increase Mortgagor's
obligations or decrease Mortgagor's rights under the Note, this Mortgage and any
of the other Loan Documents.

                                       14


Mortgagor hereby irrevocably appoints Mortgagee as its attorney-in-fact, coupled
with an interest, to file with the appropriate public office on its behalf any
financing or other statements signed only by Mortgagee, as secured party, in
connection with the Collateral covered by this Mortgage.

         22.      ACTIONS AND PROCEEDINGS. Mortgagee has the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its reasonable discretion, decides should be
brought to protect their interest in the Mortgaged Property. Mortgagee shall, at
its option, be subrogated to the lien of any deed of trust or other security
instrument discharged in whole or in part by the Debt, and any such subrogation
rights shall constitute additional security for the payment of the Debt.

         23.      RECOVERY OF SUMS REQUIRED TO BE PAID. Mortgagee shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Mortgagee thereafter to bring an action of foreclosure, or any other action,
for a default or defaults by Mortgagor existing at the time such earlier action
was commenced.

         24.      MARSHALLING AND OTHER MATTERS. Mortgagor hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Mortgaged
Property or any part thereof or any interest therein. Further, Mortgagor hereby
expressly waives any and all rights of redemption from sale under any order or
decree of foreclosure of this Mortgage on behalf of Mortgagor, and on behalf of
each and every person acquiring any interest in or title to the Mortgaged
Property subsequent to the date of this Mortgage and on behalf of all persons to
the extent permitted by applicable law. Mortgagee shall not be under any
obligation to marshal any assets in favor of any Person or in payment of any of
the Debt.

         25.      HANDICAPPED ACCESS.

                  (a)      Mortgagor agrees that the Mortgaged Property shall at
all times comply, with the requirements of the Americans with Disabilities Act
of 1990, the Fair Housing Amendments Act of 1988, if applicable, all state and
local laws and ordinances related to handicapped access and all rules,
regulations, and orders issued pursuant thereto including, without limitation,
the Americans with Disabilities Act Accessibility Guidelines for Buildings and
Facilities (collectively "ACCESS LAWS").

                  (b)      Without limiting the foregoing, Mortgagor shall cause
any alterations to the Mortgaged Property to comply with all applicable Access
Laws. The foregoing shall apply to tenant improvements constructed by Mortgagor
or by any of its tenants. Mortgagee may condition any such approval upon receipt
of a certificate of Access Law compliance from an architect, engineer, or other
person acceptable to Mortgagee.

                                       15


                  (c)      Mortgagor agrees to give prompt notice to Mortgagee
of the receipt by Mortgagor of any material complaints related to violation of
any Access Laws and of the commencement of any proceedings or investigations
which relate to compliance with applicable Access Laws.

         26.      INDEMNIFICATION. In addition to any other indemnifications
provided herein or in the other Loan Documents, Mortgagor shall protect, defend,
indemnify and save harmless Mortgagee and its successors and assigns (including,
without limitation, the trustee and/or the trust under any trust agreement
executed in connection with any Secondary Market Transaction backed in whole or
in part by the Loan and any other person which may hereafter be the holder of
the Note or any interest therein), and the officers, directors, stockholders,
partners, members, employees, agents, and Affiliates of Mortgagee and such
successors and assigns (each an "INDEMNIFIED PARTY") from and against all
liabilities, obligations, claims, demands, damages, penalties, causes of action,
losses, fines, costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements), imposed upon or incurred by or asserted
against any Indemnified Party by reason of: (a) ownership of this Mortgage, the
Mortgaged Property or any interest therein or receipt of any Rents; (b) any
accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Mortgaged Property or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (c) any use, nonuse or condition in, on or about the Mortgaged Property
or any part thereof or on adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (d) any failure on the part of
Mortgagor to perform or comply with any of the terms of this Mortgage; (e)
performance of any labor or services or the furnishing of any materials or other
property in respect of the Mortgaged Property or any part thereof; (f) any
failure of the Premises or the Improvements to comply with any applicable law,
statute, code, ordinance, rule or regulation including, without limitation, any
Access Laws; (g) any default by Mortgagor under this Mortgage, the Loan
Agreement or any of the other Loan Documents; (h) any actions taken by any
Indemnified Party in the enforcement of this Mortgage and other Loan Documents
in accordance with their respective terms; (i) any representation or warranty
made in the Note, this Mortgage or any of the other Loan Documents being false
or misleading in any material respect as of the date such representation or
warranty was made; (j) any claim by brokers, finders or similar persons claiming
to be entitled to a commission in connection with any Lease or other transaction
involving the Mortgaged Property or any part thereof under any legal requirement
or any liability asserted against Mortgagee with respect thereto; and (k) the
claims of any lessee of any or any portion of the Mortgaged Property or any
person acting through or under any lessee or otherwise arising under or as a
consequence of any Lease (collectively, the "INDEMNIFIED LIABILITIES"), provided
that Mortgagor shall not have an obligation to an Indemnified Party hereunder
with respect to the Indemnified Liabilities arising from the fraud, gross
negligence or willful misconduct of such Indemnified Party as determined by a
court of competent jurisdiction. Any amounts payable to Mortgagee by reason of
the application of this paragraph shall be secured by this Mortgage and shall
become immediately due and payable and shall bear interest at the Default Rate
from the date loss or damage is sustained by Mortgagee until paid. The
obligations and liabilities of Mortgagor under this paragraph shall survive the
termination, satisfaction, or assignment of this Mortgage and the exercise by
Mortgagee of any of its rights or remedies hereunder, including, but not limited
to, the acquisition of the Mortgaged Property by foreclosure or a conveyance in
lieu of foreclosure.

                                       16


         27.      NOTICES. Any notice, demand, statement, request or consent
made hereunder shall be in writing, addressed to the intended recipient at its
address set forth in the Loan Agreement, and shall be made and deemed given in
accordance with the terms of the Loan Agreement.

         28.      AUTHORITY. (a) Mortgagor (and the undersigned representative
of Mortgagor, if any) represent and warrant that it (or they, as the case may
be) has full power, authority and right to execute, deliver and perform its
obligations pursuant to this Mortgage, and to deed, mortgage, give, grant,
bargain, sell, alien, enfeoff, convey, confirm, warrant, pledge, hypothecate and
assign the Mortgaged Property pursuant to the terms hereof and to keep and
observe all of the terms of this Mortgage on Mortgagor's part to be performed;
and (b) Mortgagor represents and warrants that Mortgagor is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of
1986, as amended and the related Treasury Department regulations, including
temporary regulations.

         29.      NON-WAIVER. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Mortgage. Any consent or approval by Mortgagee in any single instance shall
not be deemed or construed to be Mortgagee's consent or approval in any like
matter arising at a subsequent date. Mortgagor shall not be relieved of
Mortgagor's obligations hereunder by reason of (a) the failure of Mortgagee to
comply with any request of Mortgagor or any Guarantor to take any action to
foreclose this Mortgage or otherwise enforce any of the provisions hereof or of
the Note, or the other Loan Documents, (b) the release, regardless of
consideration, of the whole or any part of the Mortgaged Property, or of any
person liable for the Debt or any portion thereof, or (c) any agreement or
stipulation by Mortgagee extending the time of payment or otherwise modifying or
supplementing the terms of the Note, this Mortgage or any of the other Loan
Documents. Mortgagee may resort for the payment of the Debt to any other
security held by Mortgagee in such order and manner as Mortgagee, in its sole
discretion, may elect. Mortgagee may take action to recover the Debt, or any
portion thereof, or to enforce any covenant hereof without prejudice to the
right of Mortgagee thereafter to foreclosure this Mortgage. The rights and
remedies of Mortgagee under this Mortgage shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the others. No act
of Mortgagee shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. Mortgagee shall not be
limited exclusively to the rights and remedies herein stated but shall be
entitled to every right and remedy now or hereafter afforded at law or in
equity.

         30.      NO ORAL CHANGE. This Mortgage, and any provisions hereof, may
not be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act or failure to act on the part of Mortgagor or Mortgagee,
but only by an agreement in writing signed by the party against whom enforcement
of any modification, amendment, waiver, extension, change, discharge or
termination is sought.

         31.      LIABILITY. Subject to the provisions hereof requiring
Mortgagee's consent to any transfer of the Mortgaged Property, this Mortgage
shall be binding upon and inure to the benefit of Mortgagor and Mortgagee and
their respective successors and assigns forever.

                                       17


         32.      INAPPLICABLE PROVISIONS. If any term, covenant or condition of
the Note or this Mortgage is held to be invalid, illegal or unenforceable in any
respect, the Note and this Mortgage shall be construed without such provision.

         33.      HEADINGS, ETC. The headings and captions of various paragraphs
of this Mortgage are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.

         34.      DUPLICATE ORIGINALS. This Mortgage may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.

         35.      DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage may be used interchangeably in singular or plural form and the word
"MORTGAGOR" shall mean "each Mortgagor and any subsequent owner or owners of the
Mortgaged Property or any part thereof or any interest therein," the word
"MORTGAGEE" shall mean "Mortgagee and any subsequent holder of the Note," the
word "NOTE" shall mean "the Note and any other evidence of indebtedness secured
by this Mortgage," the word "PERSON" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, and the words "MORTGAGED PROPERTY" shall
include any portion of the Mortgaged Property and any interest therein and the
words "ATTORNEYS' FEES" shall include any and all reasonable attorneys' fees,
paralegal and law clerk fees, including, without limitation, fees at the
pre-trial, trial and appellate levels incurred or paid by Mortgagee in
protecting its interest in the Mortgaged Property and Collateral and enforcing
its rights hereunder. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa.

         36.      HOMESTEAD. Mortgagor hereby waives and renounces all homestead
and exemption rights provided by the Constitution and the laws of the United
States and of any state, in and to the Mortgaged Property as against the
collection of the Debt, or any part hereof.

         37.      ASSIGNMENTS. Mortgagee shall have the right to assign or
transfer its rights under this Mortgage without limitation. Any assignee or
transferee shall be entitled to all the benefits afforded Mortgagee under this
Mortgage.

         38.      WAIVER OF JURY TRIAL. EACH OF MORTGAGOR AND MORTGAGEE HEREBY
AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND
WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST WITH REGARD TO THE NOTE, THIS MORTGAGE, OR THE OTHER LOAN
DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY MORTGAGOR AND MORTGAGEE, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. EACH OF MORTGAGOR AND MORTGAGEE IS HEREBY

                                       18


AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY THE OTHER PARTY.

         39.      INTENTIONALLY OMITTED.

         40.      INTENTIONALLY OMITTED.

         41.      LIMITATIONS ON RECOURSE PROVISIONS. The obligations of
Mortgagor hereunder are subject to limitations on recourse as provided in
Article XII of the Loan Agreement.

         42.      MISCELLANEOUS.

                  (a)      Intentionally Omitted.

                  (b)      The Loan Documents contain the entire agreement
between Mortgagor and Mortgagee relating to or connected with the Loan. Any
other agreements relating to or connected with the Loan not expressly set forth
in the Loan Documents are null and void and superseded in their entirety by the
provisions of the Loan Documents.

                  (c)      Mortgagor represents and warrants to Mortgagee that,
to Mortgagor's knowledge, there has not been committed by Mortgagor or any other
person in occupancy of or involved with the operation or use of the Mortgaged
Property any act or omission affording the federal government or any state or
local government the right of forfeiture as against the Mortgaged Property or
any part thereof or any monies paid in performance of Mortgagor's obligations
under the Note or under any of the other Loan Documents. Mortgagor hereby
covenants and agrees not to commit, intentionally permit or suffer to exist any
act, omission or circumstance affording such right of forfeiture. In furtherance
thereof, Mortgagor hereby indemnifies Mortgagee and agrees to defend and hold
Mortgagee harmless from and against any loss, damage or injury by reason of the
breach of the covenants and agreements or the representations and warranties set
forth in this paragraph. Without limiting the generality of the foregoing, the
filing of formal charges or the commencement of proceedings against Mortgagor or
all or any part of the Mortgaged Property under any federal or state law for
which forfeiture of the Mortgaged Property or any part thereof or of any monies
paid in performance of Mortgagor's obligations under the Loan Documents is a
potential result, shall, at the election of Mortgagee, constitute an Event of
Default hereunder without notice or opportunity to cure.

                  (d)      Mortgagor acknowledges that, with respect to the
Loan, Mortgagor is relying solely on its own judgement and advisors in entering
into the Loan without relying in any manner on any statements, representations
or recommendations of Mortgagee or any parent, subsidiary or affiliate of
Mortgagee. Mortgagor acknowledges that Mortgagee engages in the business of real
estate financings and other real estate transactions and investments which may
be viewed as adverse to or competitive with the business of the Mortgagor or its
affiliates. Mortgagor acknowledges that it is represented by competent counsel
and has consulted counsel before executing the Loan Documents.

                  (e)      Intentionally Omitted.

                                       19


                  (f)      This Mortgage and the obligations arising hereunder
shall be governed by and construed in accordance with the laws of the State of
New York and any applicable laws of the United States of America, except that at
all times the provisions for the creation, perfection and enforcement of the
liens and the security interests created pursuant to this Mortgage shall be
governed by the laws of the State where the Premises are located.

         43.      PROTECTIVE ADVANCES. This Mortgage secures "PROTECTIVE
ADVANCES," as hereinafter defined. All amounts advanced by Mortgagee for
property taxes, insurance costs, or any other costs incurred by Mortgagee to
protect and preserve the lien of this Mortgage and incurred after the execution
of this Mortgage pursuant to any instrument referring to this Mortgage shall be
defined as a "PROTECTIVE ADVANCE". This Paragraph shall serve as notice to any
subsequent holder of a lien, encumbrance, security title or other claim in and
to the Mortgaged Property that Mortgagee claims the priority of the lien of this
Mortgage for all such Protective Advances, as well as for all other obligations
secured hereby. This Paragraph shall also be notice that Mortgagee reserves the
right, upon agreement thereto with Mortgagor, to modify, extend, consolidate,
and renew the Debt, or any portions thereof, and the rate of interest charged
thereon, without affecting the priority of the lien created by this Mortgage.

         44.      CROSS-COLLATERALIZATION. The mortgages and deeds of trust
(other than this Mortgage) listed on EXHIBIT B attached hereto and made a part
hereof, as any of same may be amended, modified or supplemented from time to
time, are collectively referred to for purposes of this Section 44 as the "OTHER
MORTGAGES." This Mortgage, as it may be amended, modified or supplemented from
time to time, together with the Other Mortgages, are collectively referred to
for purposes of this Section 44 as the "MORTGAGES." The Debt is secured by,
among other things, the Mortgages, which encumber real and personal property in
the States set forth on EXHIBIT B, as more particularly described in each of the
Mortgages. The Debt may be accelerated as provided in the Loan Documents. Upon
the occurrence and during the continuance of an Event of Default, Mortgagee may,
at its option, accelerate the Debt and foreclose upon any one or more of the
Mortgages or resort to any one or more of its other rights and remedies under
any or all of the Mortgages and the other Loan Documents. Except as otherwise
provided herein, all of the real and personal property conveyed and/or mortgaged
by the Mortgages are security for the Debt without allocation of any one or more
of the parcels or portions thereof to any portion of the Debt. Mortgagee may
allocate the proceeds that it receives upon the exercise of its rights and
remedies, including foreclosure, to payment of the Debt as Mortgagee in its sole
discretion may determine to be advisable pursuant to the terms of the Loan
Documents. Mortgagee may proceed, at the same or different times, to foreclose
the Mortgages or any one or more of them, by any proceedings appropriate in the
state where any of the real property encumbered by one or more of the Mortgages
lies, including private sale if permitted, and no event of enforcement taking
place in any state, including without limiting the generality of the foregoing,
any pending foreclosure, judgment or decree of foreclosure, foreclosure sale,
rents received, possession taken, deficiency judgment or decrees, or judgment
taken on the Debt, shall in any way stay, preclude or bar enforcement of the
Mortgages or any of them in any other state, and Mortgagee may pursue any or all
of its remedies to the maximum extent permitted by applicable law pursuant to
the terms of the Loan Documents until all of the Debt and all other obligations
now or hereafter secured by any or all of the Mortgages have been paid or
discharged in full. Additionally, and without limitation of any other provision
of this Mortgage, if this Mortgage is foreclosed and the Mortgaged Property is
sold (or any part thereof) pursuant to

                                       20


foreclosure or other proceedings, and if the proceeds of such sale (after
application of such proceeds as provided in this Mortgage and the other Loan
Documents) are not sufficient to pay the total sum of the Debt then outstanding
and any other amounts provided for by applicable law (the "BALANCE OWED"), then,
to the extent permitted by law, the Debt shall not be satisfied to the extent of
the Balance Owed, but such Debt shall continue in existence and continue to be
evidenced and secured by the Loan Documents and the Mortgages. Subject to the
requirements of applicable law, if Mortgagee shall acquire the Mortgaged
Property as a result of any foreclosure or other sale (whether by bidding all or
any portion of the Debt or otherwise), the proceeds of such sale, to the extent
permitted by law, shall not be deemed to include (and Mortgagor shall not be
entitled to any benefit or credit on account of) proceeds of any subsequent sale
of the Mortgaged Property by Mortgagee. Without limitation of any other
provision hereof, Mortgagor further agrees that if any of the Other Mortgages
are foreclosed and sale is made of any of the property subject to any Other
Mortgages, and if the proceeds of such sale (after application of such proceeds
as provided for herein and after deducting all accrued and general and special
taxes and assessments) are not sufficient to pay the Debt and any other amounts
provided for by applicable law, then, to the extent permitted by law, the Debt
then outstanding shall not be satisfied to the extent of the Balance Owed, but
such Debt shall continue in existence and continue to be evidenced and secured
by the Loan Documents and the Mortgages existing immediately prior to any such
foreclosure, except such Mortgages foreclosed upon. No release of personal
liability, if any, of any Person whatsoever and no release of any portion of the
property now or hereafter subject to the lien of any of the Mortgages shall have
any effect whatsoever by way of impairment or disturbance of the lien or
priority of any other of the Mortgages or the unreleased properties encumbered
by any of the Mortgages, to the extent permitted by law. Any foreclosure or
other appropriate remedy brought in any of the states aforesaid may be brought
and prosecuted as to any part of the security, wherever located, without regard
to the fact that foreclosure proceedings or other remedies have or have not been
instituted elsewhere on any other property subject to the lien of the Mortgages.
Neither Mortgagor nor any Person claiming by, through or under Mortgagor shall
have any right to marshal the assets, all such rights being hereby expressly
waived as to Mortgagor and all Persons claiming by, through or under Mortgagor,
Debt, without limitation, junior lienors. Each of Mortgagor and all endorsers,
guarantors and sureties of the Debt, hereby waives any and all rights arising
because of payment or performance by Mortgagor of any Debt (a) against any
Person by way of subrogation of the rights of Mortgagee or (b) against any
Person obligated to pay or perform the Debt or other obligations secured by the
Other Mortgages by way of contribution, reimbursement or otherwise.

                  Section 45. CERTAIN MATTERS RELATING TO MORTGAGED PROPERTY
LOCATED IN [STATE PROPERTY IS LOCATED].

                  With respect to the Mortgaged Property which is located in the
State of [STATE PROPERTY IS LOCATED], notwithstanding anything contained herein
to the contrary:

                   [STATE SPECIFIC PROVISIONS TO BE INSERTED]

                                       21


         IN WITNESS WHEREOF, Mortgagor has executed this instrument the day and
year first above written.

                                       MORTGAGOR:

                                       [PROPERTY OWNER NAME]

                                       By:_____________________________________
                                          Name:
                                          Title:

                                 ACKNOWLEDGMENT

                     [INSERT STATE SPECIFIC ACKNOWLEDGMENT]



                                    EXHIBIT A

                                LEGAL DESCRIPTION

                                      A-1


                                    EXHIBIT B

         [SCHEDULE OF ALL OTHER DEEDS OF TRUST, DEEDS TO SECURE DEBT AND
                             MORTGAGES IN LOAN POOL]

                                       B-1

EX-10.7

                                                                    EXHIBIT 10.7

================================================================================

                            CREDIT LINE DEED OF TRUST

                                 GENERAL FORM OF
                       DEED OF TRUST, ASSIGNMENT OF LEASES
                        AND RENTS AND SECURITY AGREEMENT

                                       BY

                              [PROPERTY OWNER NAME]
                                    (Trustor)

                                       TO

                                 [TRUSTEE NAME]
                                    (Trustee)

                               FOR THE BENEFIT OF

                      MERRILL LYNCH MORTGAGE LENDING, INC.
                                  (Beneficiary)

                           Dated: As of June __, 2004

                       Property Location: [PROPERTY NAME]
                                          [STREET ADDRESS]
                                          [COUNTY]
                                          [CITY, STATE]

================================================================================

               DOCUMENT PREPARED BY AND WHEN RECORDED, RETURN TO:

                         Sidley Austin Brown & Wood LLP
                               787 Seventh Avenue
                            New York, New York 10019
                         Attention: Mark A. Poole, Esq.



                           A CREDIT LINE DEED OF TRUST

THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT (this
"DEED OF TRUST"), made as of June __, 2004, by [PROPERTY OWNER NAME] having its
principal place of business at c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite
700, Atlanta, Georgia 30326 ("TRUSTOR"), to [TRUSTEE NAME], the trustee
hereunder, a resident of __________ County, __________ having an address at
____________________ ____________________ ("TRUSTEE"), for the benefit of
MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having its
principal place of business at 4 World Financial Center, New York, New York
10080 (together with its successors, transferees and assigns, "BENEFICIARY").
Capitalized terms used herein but not otherwise defined shall have the
respective meanings assigned to such terms in the Loan Agreement (hereinafter
defined).

                              W I T N E S S E T H:

         To secure the payment of a loan (the "LOAN") in the original principal
sum of [INSERT POOL LOAN AMOUNT] ($__________), lawful money of the United
States of America, being made from Beneficiary to Trustor and the other
Borrowers (together with Trustor, "BORROWERS"), pursuant to the terms and
conditions of a certain Loan and Security Agreement, dated as of the date hereof
(as amended or modified, the "LOAN AGREEMENT"), among Borrowers and Beneficiary,
which is evidenced by and is to be paid with interest according to a certain
Promissory Note, dated as of the date hereof (as amended, modified, renewed or
restated, and together with any substitutes or replacements (by means of
multiple notes or otherwise) therefor, collectively, the "NOTE"), made by
Borrowers to Beneficiary and all other sums due hereunder, under the other Loan
Documents and under the Note (said indebtedness and interest due under the Note
and all other sums due hereunder, under the Note and the other Loan Documents
being hereinafter collectively referred to as the "DEBT"), Trustor has deeded,
given, granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed,
warranted, pledged, assigned, and hypothecated and by these presents does hereby
deed, give, grant, bargain, sell, alien, enfeoff, convey, confirm, warrant,
pledge, assign and hypothecate unto Trustee (in trust), and, with respect to
personal property and personalty, unto Beneficiary, the real property described
in EXHIBIT A attached hereto (the "PREMISES") and the buildings, structures,
fixtures, additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter located thereon (the
"IMPROVEMENTS");

         TOGETHER WITH: all right, title, interest and estate of Trustor now
owned, or hereafter acquired, in and to the following property, rights,
interests and estates (the Premises, the Improvements, and the property, rights,
interests and estates hereinafter described are collectively referred to herein
as the "TRUST PROPERTY"):

                  (a)      all easements, rights-of-way, strips and gores of
land, streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and development rights, all rights to oil, gas,
minerals, coal and other substances of any kind or character, and all estates,
rights, titles, interests, privileges, liberties, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way belonging, relating or
pertaining to the Premises and the Improvements and the reversion and
reversions, remainder and remainders, and all land lying in the bed of any
street, road, highway, alley or avenue, opened, vacated or proposed, in front of
or



adjoining the Premises, to the center line thereof and all the estates, rights,
titles, interests, dower and rights of dower, curtsey and rights of curtsey,
property, possession, claim and demand whatsoever, both at law and in equity, of
Trustor of, in and to the Premises and the Improvements and every part and
parcel thereof, with the appurtenances thereto;

                  (b)      all machinery, furniture, furnishings, equipment,
computer software and hardware, fixtures (including, without limitation, all
heating, air conditioning, plumbing, lighting, communications and elevator
fixtures, inventory and articles of personal property and accessions thereof and
renewals, replacements thereof and substitutions therefor, if any (including,
but not limited to, beds, bureaus, chiffoniers, chests, chairs, desks, lamps,
mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains,
shades, venetian blinds, screens, paintings, hangings, pictures, divans,
couches, luggage carts, luggage racks, stools, sofas, chinaware, linens,
pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities,
dining room wagons, tools, keys or other entry systems, bars, bar fixtures,
liquor and other drink dispensers, icemakers, radios, television sets, intercom
and paging equipment, electric and electronic equipment, dictating equipment,
private telephone systems, medical equipment, potted plants, heating, lighting
and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and
air-conditioning systems, elevators, escalators, fittings, plants, apparatus,
stoves, ranges, refrigerators, laundry machines, tools, machinery, engines,
dynamos, motors, boilers, incinerators, switchboards, conduits, compressors,
vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call
systems, brackets, electrical signs, bulbs, bells, ash and fuel, conveyors,
cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage
disposals, washers and dryers), other customary hotel equipment) and other
property of every kind and nature, whether tangible or intangible, whatsoever
owned by Trustor, or in which Trustor has or shall have an interest, now or
hereafter located upon the Premises and the Improvements, or appurtenant
thereto, and usable in connection with the present or future operation and
occupancy of the Premises and the Improvements and all building equipment,
materials and supplies of any nature whatsoever owned by Trustor, or in which
Trustor has or shall have an interest, now or hereafter located upon the
Premises and the Improvements, or appurtenant thereto, and usable in connection
with the present or future operation, enjoyment and occupancy of the Premises
and the Improvements (hereinafter collectively referred to as the "EQUIPMENT"),
including any leases of any of the foregoing, any deposits existing at any time
in connection with any of the foregoing, and the proceeds of any sale or
transfer of the foregoing, and the right, title and interest of Trustor in and
to any of the Equipment that may be subject to any "SECURITY INTERESTS" as
defined in the Uniform Commercial Code, as adopted and enacted by the State or
States where any of the Trust Property is located (the "UNIFORM COMMERCIAL
CODE"), superior in lien to the lien of this Deed of Trust;

                  (c)      all awards or payments, including interest thereon,
that may heretofore and hereafter be made with respect to the Premises and the
Improvements, whether from the exercise of the right of eminent domain or
condemnation (including, without limitation, any transfer made in lieu of or in
anticipation of the exercise of said rights), or for a change of grade, or for
any other injury to or decrease in the value of the Premises and Improvements;

                  (d)      all leases, tenancies, licenses, subleases,
assignments and/or rental or occupancy agreements and other agreements or
arrangements (including, without limitation, any and all guarantees of any of
the foregoing) heretofore or hereafter entered into affecting the use,

                                       2


enjoyment or occupancy of, or the conduct of any activity upon or in, the
Premises and the Improvements, including any extensions, renewals, modifications
or amendments thereof (collectively, the "LEASES") and all rents, rent
equivalents, moneys payable as damages or in lieu of rent or rent equivalents,
royalties (including, without limitation, all oil and gas or other mineral
royalties and bonuses), income, fees, receivables, receipts, revenues, deposits
(including, without limitation, security, utility and other deposits), accounts,
cash, issues, profits, charges for services rendered, and other payment and
consideration of whatever form or nature received by or paid to or for the
account of or benefit of Trustor or its agents or employees from any and all
sources arising from or attributable to the Premises and the Improvements,
including, without limitation, all hotel receipts, revenues and credit card
receipts collected from guest rooms, restaurants, bars (including, without
limitation, service charges for employees and staff), mini-bars, meeting rooms,
banquet rooms, apartments, parking, and recreational facilities, health club
membership fees, food and beverage wholesale and retail sales, service charges,
convention services, special events, audio-visual services, boat cruises, travel
agency fees, telephone charges, laundry services, vending machines and
otherwise, all receivables, customer obligations, installment payment
obligations and other obligations now existing or hereafter arising or created
out of the sale, lease, sublease, license, concession or other grant of the
right of the possession, use and occupancy of all or any portion of the Premises
and the Improvements or personalty located thereon, or rendering of services by
Trustor or any operator or manager of the hotel or the commercial space located
in the Improvements or acquired from others (including, without limitation, from
the rental of any office space, retail space, guest rooms or other space, halls,
stores, and offices, and deposits securing reservations of such space, and
charges for services such as room service, telecommunication and video,
electronic mail, internet connection and other communications and entertainment
services), license, lease, sublease and concession fees and rentals, and
proceeds, if any, from business interruption or other loss of income insurance
and any other items of revenue which would be included in operating revenues
under the Uniform System (as defined in the Loan Agreement) (the "RENTS"),
together with all proceeds from the sale or other disposition of the Leases and
the right to receive and apply the Rents to the payment of the Debt;

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

                  (f)      all accounts, escrows, documents, instruments,
chattel paper, claims, deposits and general intangibles, as the foregoing terms
are defined in the Uniform Commercial Code, and all franchises, trade names
(including, without limitation, the right to operate the Trust Property under
the name and/or hotel system known as [HOTEL BRAND]), trademarks, symbols,
service marks, books, records, plans, specifications, designs, drawings,
permits, consents, licenses, management agreements (including, without
limitation, the Management Agreement), franchise agreements, contract rights
(including, without limitation, any contract with any architect or engineer or
with any other provider of goods or services for or in connection with any
construction, repair, or other work upon the Trust Property), approvals,
actions, refunds of real estate taxes and assessments (and any other
governmental impositions related to the Trust Property), and causes of action
that now or hereafter relate to, are derived from or are used in connection with
the Trust Property, or the use, operation, maintenance,

                                       3


occupancy or enjoyment thereof or the conduct of any business or activities
thereon (hereinafter collectively referred to as the "INTANGIBLES"); and

                  (g)      any and all proceeds, products, offspring, rents and
profits from any of the foregoing, including, without limitation, those from
sale, exchange, transfer, collection, loss, damage, disposition, substitution or
replacement of any of the foregoing and any and all other security and
collateral of any nature whatsoever, now or hereafter given for the repayment of
the Debt and the performance of Trustor's obligations under the Loan Documents
including, without limitation, the Impositions and Insurance Reserve, the FF&E
Reserve, the Loss Proceeds, the Deposit Account, the Lock Box Account and the
Sub-Accounts thereof (each as defined in that certain Cash Management Agreement,
dated as of the date hereof (as amended or modified the "CASH MANAGEMENT
AGREEMENT"), by and among Borrowers, Beneficiary, Lodgian Management Corp. and
Wachovia Bank, National Association), and any other escrows or reserves set
forth in the Loan Documents.

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

         IN TRUST, WITH POWER OF SALE, to secure the payment to Beneficiary of
the Debt at the time and in the manner provided for its payment in the Note and
in this Deed of Trust;

         PROVIDED, HOWEVER, these presents are upon the express condition that,
if Trustor shall well and truly pay to Beneficiary the Debt at the time and in
the manner provided in the Note and this Deed of Trust and shall well and truly
abide by and comply with each and every covenant and condition set forth herein,
in the Note and in the other Loan Documents in a timely manner, these presents
and the estate hereby granted shall cease, terminate and be void;

         AND Trustor represents and warrants to and covenants and agrees with
Beneficiary and Trustee as follows:

                                     PART I

                               GENERAL PROVISIONS

         1.       PAYMENT OF DEBT AND INCORPORATION OF COVENANTS, CONDITIONS AND
AGREEMENTS. Trustor shall pay the Debt at the time and in the manner provided in
the Note, in the Loan Agreement and in this Deed of Trust. All the covenants,
conditions and agreements contained in (a) the Note, (b) the Loan Agreement and
(c) the other Loan Documents are hereby made a part of this Deed of Trust to the
same extent and with the same force as if fully set forth herein.

         2.       WARRANTY OF TITLE. Trustor warrants that Trustor has good and
marketable title to the Trust Property and has the full power, authority and
right to execute, deliver and perform its obligations under this Deed of Trust
and to deed, encumber, mortgage, give, grant, bargain, sell, alienate, enfeoff,
convey, confirm, pledge, assign and hypothecate the same and that Trustor
possesses a fee estate in the Premises and the Improvements and that it owns the
Trust Property

                                       4


free and clear of all liens, encumbrances and charges whatsoever except for the
Permitted Encumbrances and that this Deed of Trust is and will remain a valid
and enforceable first lien on and security interest in the Trust Property,
subject only to said exceptions. Trustor represents and warrants that none of
the Permitted Encumbrances will, individually or in the aggregate, materially
and adversely affect (i) Trustor's ability to pay in full in a timely manner its
obligations, including, without limitation, the Debt, (ii) the use of the Trust
Property for the use currently being made thereof, (iii) the operation of the
Trust Property for the operation currently being made thereof, or (iv) the value
of the Trust Property. Trustor shall forever warrant, defend and preserve such
title and the validity and priority of the lien of this Deed of Trust and shall
forever warrant and defend the same to Beneficiary against the claims of all
persons whomsoever.

         3.       INSURANCE. Trustor, at its sole cost and expense, shall obtain
and maintain during the entire term of this Deed of Trust (the "TERM") policies
of insurance as required pursuant to Section 5.4 of the Loan Agreement, and pay
all premiums thereon (the "INSURANCE PREMIUMS").

         4.       PAYMENT OF IMPOSITIONS AND OTHER CHARGES. Subject to Trustor's
right to contest set forth in Section 5.3(B) of the Loan Agreement and the
provisions of Section 5 below, and pursuant to the provisions of the Cash
Management Agreement, Trustor shall cause to be paid all Impositions now or
hereafter levied or assessed or imposed against the Trust Property or any part
thereof prior to the date the same shall become delinquent. Trustor shall
promptly pay for all utility services provided to the Trust Property. Trustor
shall furnish to Beneficiary or its designee receipts for the payment of the
Impositions prior to the date the same shall become delinquent (provided,
however, that Trustor shall not be required to furnish such receipts for payment
of Impositions in the event that such Impositions have been paid by Beneficiary
pursuant to Section 5 hereof).

         5.       IMPOSITIONS AND INSURANCE RESERVE. Trustor shall make monthly
deposits into the Impositions and Insurance Reserve in accordance with, and to
the extent required under Section 6.3 of the Loan Agreement and under the Cash
Management Agreement.

         6.       CONDEMNATION. To the extent the terms of this Section 6 are
inconsistent with the terms of the Loan Agreement, the terms of the Loan
Agreement shall control.

                  (a)      Trustor shall promptly give Beneficiary written
notice of any known actual or threatened commencement of any condemnation or
eminent domain proceeding affecting the Trust Property or any portion thereof
and shall deliver to Beneficiary copies of any and all papers served in
connection with such proceedings. Subject to the terms of Section 6(b) below,
Beneficiary is hereby irrevocably appointed as Trustor's attorney-in-fact,
coupled with an interest, with exclusive power to collect, receive and retain
any award or payment for said condemnation or eminent domain and to make any
compromise or settlement in connection with such proceeding, subject to the
provisions of this Deed of Trust and the Loan Agreement. Notwithstanding any
taking by any public or quasi public authority through eminent domain or
otherwise (including but not limited to any transfer made in lieu of or in
anticipation of the exercise of such taking), Trustor shall continue to pay the
Debt at the time and in the manner provided for its payment in the Note, in this
Deed of Trust and the other Loan Documents and the Debt shall not be reduced
until any award or payment therefor shall have been actually

                                       5


received after expenses of collection and applied by Beneficiary to the
discharge of the Debt in accordance with the terms hereof. In accordance with
the terms hereof, Trustor shall cause the award or payment made in any
condemnation or eminent domain proceeding completed after the date hereof, which
is payable to Trustor, to be paid directly to Beneficiary. Beneficiary may apply
any such award or payment to the reduction or discharge of the Debt whether or
not then due and payable; such application to be made without any Prepayment
Consideration (as defined in the Loan Agreement), provided that if Trustor
receives any such award or payment, Trustor pays such award or payment to
Trustee within one hundred twenty (120) days following the date of Trustor's
receipt thereof, except that if an Event of Default has occurred and is
continuing, then such application shall be subject to the Prepayment
Consideration computed in accordance with the Note. If the Trust Property is
sold following an Event of Default, through foreclosure or otherwise, prior to
the receipt by Beneficiary of such award or payment, Beneficiary shall have the
right, whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to receive said award or payment, or a portion thereof
sufficient to pay the Debt.

                  (b)      Notwithstanding the foregoing, Beneficiary shall not
exercise the foregoing rights and Trustor may prosecute any condemnation
proceeding and settle or compromise and collect any claim involving an award
and/or claim for damages of not more than the Restoration Threshold provided
that: (i) no Event of Default shall have occurred and be continuing, (ii) in
Beneficiary's reasonable good faith judgment, such condemnation or taking does
not and will not materially restrict access to the Trust Property or otherwise
have a Material Adverse Effect, and the Trust Property remaining after such
condemnation or taking is capable of being restored to an economically viable
whole substantially of the same type which existed prior to the condemnation or
taking or in substantial compliance with all applicable laws, (iii) Trustor
applies the proceeds of such award to any reconstruction or repair of the Trust
Property necessary as a result of such condemnation or taking, (iv) Trustor
promptly commences and diligently prosecutes such reconstruction or repair to
completion in accordance with all applicable laws and (v) the plans and
specifications for such work shall be subject to Beneficiary's reasonable
approval. Subject to the terms hereof, Trustor authorizes Beneficiary to apply
such awards, payments, proceeds or damages, after the deduction of Beneficiary's
reasonable expenses incurred in the collection of such amounts, at Beneficiary's
option, to restoration or repair of the Trust Property or to payment of the sums
secured by this Deed of Trust, whether or not then due in the order determined
by Beneficiary, with the balance, if any, to Trustor. Application of any such
award or payment to payment of the sums secured by this Deed of Trust pursuant
to the foregoing sentence shall be made without any Prepayment Consideration,
provided that if Trustor receives any such award or payment, Trustor pays such
award or payment to Trustee within one hundred twenty (120) days following
Trustor's receipt thereof, except that if an Event of Default has occurred and
is continuing, then such application shall be subject to the Prepayment
Consideration computed in accordance with the Note. Subject to the provisions of
clauses (i) through (v) of this Section 6(b), Beneficiary shall not exercise
Beneficiary's option to apply such awards or damages to payment of the sums
secured by this Deed of Trust provided that each of the conditions (as
applicable) to the release of insurance proceeds for restoration or repair of
the Trust Property under Section 5.5 of the Loan Agreement have been satisfied
with respect to such condemnation awards or damages. Any application of proceeds
to principal shall not extend or postpone the due date of the monthly
installments due hereunder, under the Note or under any of the Loan Documents or
change the amount of such installments. Trustor agrees to execute such further
evidence of assignment of any awards,

                                       6


proceeds, damages or claims arising in connection with such condemnation or
taking as Beneficiary may reasonably require.

         7.       LEASES AND RENTS. To the extent the terms of this Section 7
are inconsistent with the terms of the Loan Agreement or the Assignment of
Leases and Rents, the terms of the Loan Agreement and the Assignment of Leases
and Rents shall control. Trustor does hereby absolutely and unconditionally
assign to Beneficiary, all Trustor's right, title and interest in all current
and future Leases and Rents, it being intended by Trustor that this assignment
constitutes a present, absolute assignment and not an assignment for additional
security only. Such assignment to Beneficiary shall not be construed to bind
Beneficiary to the performance of any of the covenants, conditions or provisions
contained in any such Lease or otherwise impose any obligation upon Beneficiary.
Trustor agrees to execute and deliver to Beneficiary such additional
instruments, in form and substance reasonably satisfactory to Beneficiary, as
may hereafter be reasonably requested by Beneficiary to further evidence and
confirm such assignment. Notwithstanding the provisions of this Section 7, so
long as no Event of Default shall have occurred and be continuing under the Loan
Documents, Trustor shall have the sole but revocable right and license to act as
landlord under the Leases and to enforce the covenants of the Leases, provided,
however, Trustor acknowledges it has no right to collect or use Rents except in
accordance with the terms and conditions of Article VII of the Loan Agreement
and the Cash Management Agreement. Upon the occurrence and during the
continuance of an Event of Default, without the need for notice or demand, the
license granted to Trustor herein shall automatically be revoked. Beneficiary
and Trustee are hereby granted and assigned by Trustor the right, at its option,
upon revocation of the license granted herein, to enter upon the Trust Property
in person, by agent or by court-appointed receiver to collect the Rents. Subject
to the terms of the Loan Agreement, any Rents collected after the revocation of
the license shall be applied by Beneficiary in accordance with the Loan
Agreement. Trustor expressly understands that any and all proposed leases are
included in the definition of "LEASE" or "LEASES" as such terms may be used
throughout this Deed of Trust, the Note and the other Loan Documents.

         8.       OPERATION AND MAINTENANCE OF TRUST PROPERTY. Trustor shall
cause the Trust Property to be operated and maintained in accordance with
Section 5.5 of the Loan Agreement.

         9.       TRANSFER OR ENCUMBRANCE OF THE TRUST PROPERTY.

                  (a)      Trustor acknowledges that Beneficiary has examined
and relied on the creditworthiness and experience of Trustor in owning and
operating properties such as the Trust Property in agreeing to make the Loan,
and that Beneficiary will continue to rely on Trustor's ownership of the Trust
Property as a means of maintaining the value of the Trust Property as security
for repayment of the Debt. Trustor acknowledges that Beneficiary has a valid
interest in maintaining the value of the Trust Property so as to ensure that,
should Trustor default in the repayment of the Debt, Beneficiary can recover the
Debt by a sale of the Trust Property. Except as expressly permitted under this
Deed of Trust, the Loan Agreement or under the other Loan Documents, Trustor
shall not cause or suffer to occur or exist, directly or indirectly, voluntarily
or involuntarily, by operation of law or otherwise, any sale, transfer,
mortgage, pledge, lien or encumbrance (other than Permitted Encumbrances)
(collectively, "TRANSFERS") of (i) all or any part of the Trust Property or (ii)
any direct or indirect beneficial ownership interest (in whole or

                                       7


part) in Trustor, irrespective of the number of tiers of ownership, without the
prior written consent of Beneficiary.

                  (b)      The occurrence of any Transfer in violation of this
Section 9 shall constitute an Event of Default hereunder, whereupon Beneficiary
at its option, without being required to demonstrate any actual impairment of
its security or any increased risk of default hereunder, may declare the Debt
immediately due and payable.

                  (c)      Beneficiary's consent to one Transfer shall not be
deemed to be a waiver of Beneficiary's right to require such consent to any
future occurrence of same. Any Transfer made in contravention of this paragraph
shall be null and void and of no force and effect.

                  (d)      Trustor agrees to bear and shall pay or reimburse
Beneficiary on demand for all reasonable expenses (including, without
limitation, reasonable attorneys' fees and disbursements. title search costs and
title insurance endorsement premiums) incurred by Beneficiary in connection with
the review, approval and documentation of any such Transfer which requires the
consent of Lender.

         10.      CHANGES IN LAWS REGARDING TAXATION. If any law is enacted or
adopted or amended after the date of this Deed of Trust which deducts the Debt
from the value of the Trust Property for the purpose of taxation or which
imposes a tax, either directly or indirectly, on the Debt or Beneficiary's
interest in the Trust Property, Trustor will pay such tax, with interest and
penalties thereon, if any. In the event Beneficiary is advised by counsel chosen
by it that the payment of such tax or interest and penalties by Trustor would be
unlawful or taxable to Beneficiary or unenforceable or provide the basis for a
defense of usury, then in any such event, Beneficiary shall have the option, by
written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable and, provided no Event of Default exists, no
Prepayment Consideration shall be due in connection therewith.

         11.      NO CREDITS ON ACCOUNT OF THE DEBT. Trustor will not claim or
demand or be entitled to any credit or credits on account of the Debt for any
part of the Taxes or Other Charges assessed against the Trust Property, or any
part thereof, and no deduction shall otherwise be made or claimed from the
assessed value of the Trust Property, or any part thereof, for real estate tax
purposes by reason of this Deed of Trust or the Debt. In the event such claim,
credit or deduction shall be required by law, Beneficiary shall have the option,
by written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable and, provided no Event of Default exists, no
Prepayment Consideration shall be due in connection therewith.

         12.      DOCUMENTARY STAMPS. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Note or this Deed of Trust, or
impose any other tax or charge on the same, Trustor will pay for the same, with
interest and penalties thereon, if any.

         13.      PERFORMANCE OF OTHER AGREEMENTS. Trustor shall observe and
perform each and every material term to be observed or performed by Trustor
pursuant to the terms of any agreement or recorded instrument (including all
instruments comprising the Permitted Encumbrances) affecting or pertaining to
the Trust Property, and will not suffer or permit any

                                       8


default or event of default (after giving effect to any applicable notice
requirements and cure periods) to exist under any of the foregoing.

         14.      FURTHER ACTS; SECONDARY MARKET TRANSACTIONS.

                  (a)      Trustor will, at the sole cost and expense of
Trustor, and without expense to Beneficiary, do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignment, Uniform Commercial Code financing statements
reasonably or continuation statements, transfers and assurances as Beneficiary
shall, from time to time, reasonably require, for the better assuring,
conveying, assigning, transferring, and confirming unto Beneficiary the property
and rights hereby deeded, mortgaged, given, granted, bargained, sold, alienated,
enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated or intended
now or hereafter so to be, or which Trustor may be or may hereafter become bound
to convey or assign to Beneficiary, or for carrying out the intention or
facilitating the performance of the terms of this Deed of Trust or for filing,
registering or recording this Deed of Trust or for facilitating the sale of the
Loan and the Loan Documents as described in subparagraph (b) below. Trustor, on
demand, will deliver and hereby authorizes Beneficiary to file in the name of
Trustor, one or more financing statements, chattel mortgages or other
instruments, to evidence more effectively the security interest of Beneficiary
in the Trust Property. Upon foreclosure or the appointment of a receiver,
Trustor will, at its sole cost and expense, and without expense to Beneficiary,
cooperate fully and completely to effect the assignment or transfer of any
license, permit, agreement or any other right necessary or useful to the
operation of the Trust Property. Trustor grants to Beneficiary and Trustee an
irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to
Beneficiary and Trustee at law and in equity, including, without limitation,
such rights and remedies available to Beneficiary and Trustee pursuant to this
paragraph.

                  (b)      Subject to the terms and conditions set forth in the
Loan Agreement, Beneficiary shall have the right to engage in one or more
Secondary Market Transactions (as defined in the Loan Agreement) and, in
connection therewith, Beneficiary may transfer its obligations under this Deed
of Trust, the Loan Agreement and under the other Loan Documents (or may transfer
the portion thereof corresponding to the transferred portion of the Debt), and
thereafter Beneficiary shall be relieved of any obligations hereunder and under
the other Loan Documents arising after the date of said transfer with respect to
the transferred interest.

         15.      RECORDING OF DEED OF TRUST, ETC. Trustor forthwith upon the
execution and delivery of this Deed of Trust and thereafter, from time to time,
will cause this Deed of Trust, and any security instrument creating a lien or
security interest or evidencing the lien hereof upon the Trust Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Beneficiary in, the Trust Property. Trustor
will pay all filing, registration or recording fees, and all expenses incident
to the preparation, execution and acknowledgment of this Deed of Trust, any deed
of trust supplemental hereto, any security instrument with respect to the Trust
Property and any instrument of further assurance, and all federal, state, county
and municipal, taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and

                                       9


delivery of this Deed of Trust, any deed of trust supplemental hereto, any
security instrument with respect to the Trust Property or any instrument of
further assurance, except where prohibited by law so to do. Trustor shall hold
harmless and indemnify Beneficiary, its successors and assigns, against any
liability incurred by reason of the imposition of any tax on the making and
recording of this Deed of Trust.

         16.      REPORTING REQUIREMENTS. Trustor agrees to give prompt notice
to Beneficiary of the insolvency or bankruptcy filing of Trustor or the death,
insolvency or bankruptcy filing of any Guarantor.

         17.      EVENTS OF DEFAULT. The Debt shall become immediately due and
payable at the option of Beneficiary upon the happening of any Event of Default.
The term "EVENT OF DEFAULT" as used in this Deed of Trust shall have the meaning
given such term in the Loan Agreement.

         18.      RIGHT TO CURE DEFAULTS. Upon the occurrence and during the
continuance of any Event of Default, Beneficiary may, but without any obligation
to do so and without notice to or demand on Trustor and without releasing
Trustor from any obligation hereunder, make or do the same in such manner and to
such extent as Beneficiary may deem necessary to protect the security hereof.
Beneficiary is authorized to enter upon the Trust Property for such purposes or
appear in, defend, or bring any action or proceeding to protect its interest in
the Trust Property or to foreclose this Deed of Trust or collect the Debt, and
the cost and expense thereof (including reasonable attorneys' fees and
disbursements to the extent permitted by law), with interest at the Default Rate
(as defined in the Loan Agreement) for the period after notice from Beneficiary
that such cost or expense was incurred to the date of payment to Beneficiary,
shall constitute a portion of the Debt, shall be secured by this Deed of Trust
and the other Loan Documents and shall be due and payable to Beneficiary upon
demand.

         19.      REMEDIES.

                  (a)      Upon the occurrence and during the continuance of any
Event of Default, Beneficiary or Trustee may take such action, without notice or
demand, as it deems advisable to protect and enforce its rights against Trustor
and in and to the Trust Property by Beneficiary itself or through Trustee or
otherwise, including, without limitation, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such order as
Beneficiary may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Beneficiary:

                           (i)      declare the entire Debt to be immediately
due and payable;

                           (ii)     institute a proceeding or proceedings,
judicial or nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Deed of Trust in which case the Trust Property or any
interest therein may be sold for cash or upon credit in one or more parcels or
in several interests or portions and in any order or manner;

                           (iii)    with or without entry, to the extent
permitted and pursuant to the procedures provided by applicable law, institute
proceedings for the partial foreclosure of this Deed of Trust for the portion of
the Debt then due and payable, subject to the continuing lien of this Deed of
Trust for the balance of the Debt not then due;

                                       10


                           (iv)     sell for cash or upon credit the Trust
Property or any part thereof and all estate, claim, demand, right, title and
interest of Trustor therein and rights of redemption thereof, pursuant to the
power of sale contained herein or otherwise, at one or more sales, as an
entirety or in parcels, at such time and place, upon such terms and after such
notice thereof as may be required or permitted by law;

                           (v)      institute an action, suit or proceeding in
equity for the specific performance of any covenant, condition or agreement
contained herein, or in any of the other Loan Documents;

                           (vi)     recover judgment on the Note either before,
during or after any proceedings for the enforcement of this Deed of Trust;

                           (vii)    apply for the appointment of a trustee,
receiver, liquidator or conservator of the Trust Property, to the extent
permitted by applicable law, without notice and without regard for the adequacy
of the security for the Debt and without regard for the solvency of the Trustor,
any Guarantor or of any person, firm or other entity liable for the payment of
the Debt;

                           (viii)   enforce Beneficiary's interest in the Leases
and Rents and enter into or upon the Trust Property, either personally or by its
agents, nominees or attorneys and dispossess Trustor and its agents and servants
therefrom, and thereupon Beneficiary may (A) use, operate, manage, control,
insure, maintain, repair, restore and otherwise deal with all and every part of
the Trust Property and conduct the business thereat; (B) complete any
construction on the Trust Property in such manner and form as Beneficiary deems
advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Trust Property; (D) exercise all rights and powers of
Trustor with respect to the Trust Property, whether in the name of Trustor or
otherwise, including, without limitation, the right to make, cancel, enforce or
modify Leases, obtain and evict tenants, and demand, sue for, collect and
receive all Rents; and (E) apply the receipts from the Trust Property to the
payment of Debt, after deducting therefrom all expenses (including reasonable
attorneys' fees and disbursements) incurred in connection with the aforesaid
operations and all amounts necessary to pay the taxes, assessments insurance and
other charges in connection with the Trust Property, as well as just and
reasonable compensation for the services of Beneficiary, its counsel, agents and
employees; or

                           (ix)     pursue such other rights and remedies as may
be available at law or in equity or under the Uniform Commercial Code.

In the event of a sale, by foreclosure or otherwise, of less than all of the
Trust Property, this Deed of Trust shall continue as a lien on the remaining
portion of the Trust Property.

                  (b)      The proceeds of any sale made under or by virtue of
this paragraph, together with any other sums which then may be held by
Beneficiary under this Deed of Trust, whether under the provisions of this
paragraph or otherwise, shall be applied by Beneficiary to the payment of the
Debt in such priority and proportion as Beneficiary in its sole discretion shall
deem proper.

                                       11


                  (c)      Beneficiary or Trustee may adjourn from time to time
any sale by it to be made under or by virtue of this Deed of Trust by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales; and, except as otherwise provided by any applicable provision of
law, Beneficiary or Trustee, without further notice or publication, may make
such sale at the time and place to which the same shall be so adjourned.

                  (d)      Upon the completion of any sale or sales pursuant
hereto, Trustee, Beneficiary, or an officer of any court empowered to do so,
shall execute and deliver to the accepted purchaser or purchasers a good and
sufficient instrument, or good and sufficient instruments, conveying, assigning
and transferring all estate, right, title and interest in and to the property
and rights sold. Any sale or sales made under or by virtue of this paragraph,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, shall
operate to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of Trustor in and to the properties and
rights so sold, and shall be a perpetual bar both at law and in equity against
Trustor and against any and all persons claiming or who may claim the same, or
any part thereof from, through or under Trustor.

                  (e)      Upon any sale made under or by virtue of this
paragraph, whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale, Beneficiary may bid for and acquire the Trust Property or any part thereof
and in lieu of paying cash therefor may make settlement for the purchase price
by crediting upon the Debt the net sales price after deducting therefrom the
expenses of the sale and costs of the action and any other sums which
Beneficiary is authorized to deduct under this Deed of Trust.

                  (f)      No recovery of any judgment by Beneficiary and no
levy of an execution under any judgment upon the Trust Property or upon any
other property of Trustor shall affect in any manner or to any extent the lien
of this Deed of Trust upon the Trust Property or any part thereof, or any liens,
rights, powers or remedies of Beneficiary hereunder, but such liens, rights,
powers and remedies of Beneficiary shall continue unimpaired as before.

                  (g)      Beneficiary may terminate or rescind any proceeding
or other action brought in connection with its exercise of the remedies provided
in this paragraph at any time before the conclusion thereof, as determined in
Beneficiary's sole discretion and without prejudice to Beneficiary.

                  (h)      Beneficiary or Trustee may resort to any remedies and
the security given by the Note, this Deed of Trust or the other Loan Documents
in whole or in part, and in such portions and in such order as determined in
Beneficiary's sole discretion. No such action shall in any way be considered a
waiver of any rights, benefits or remedies evidenced or provided by the Note,
this Deed of Trust or any of the other Loan Documents. The failure of
Beneficiary or Trustee to exercise any right, remedy or option provided in the
Note, this Deed of Trust or any of the other Loan Documents shall not be deemed
a waiver of such right, remedy or option or of any covenant or obligation
secured by the Note, this Deed of Trust or the other Loan Documents. No
acceptance by Beneficiary of any payment after the occurrence of any Event of
Default and no payment by Beneficiary of any obligation for which Trustor is
liable hereunder shall be

                                       12


deemed to waive or cure any Event of Default with respect to Trustor, or
Trustor's liability to pay such obligation. No sale of all or any portion of the
Trust Property, no forbearance on the part of Beneficiary or Trustee, and no
extension of time for the payment of the whole or any portion of the Debt or any
other indulgence given by Beneficiary or Trustee to Trustor, shall operate to
release or in any manner affect the interest of Beneficiary in the remaining
Trust Property or the liability of Trustor to pay the Debt. No waiver by
Beneficiary or Trustee shall be effective unless it is in writing and then only
to the extent specifically stated. All reasonable costs and expenses of
Beneficiary in exercising its rights and remedies under this paragraph
(including reasonable attorneys' fees and disbursements to the extent permitted
by law), shall be paid by Trustor immediately upon notice from Beneficiary or
Trustee, with interest at the Default Rate for the period after notice from
Beneficiary or Trustee and such costs and expenses shall constitute a portion of
the Debt and shall be secured by this Deed of Trust.

                  (i)      The interests and rights of Beneficiary under the
Note, this Deed of Trust or in any of the other Loan Documents shall not be
impaired by any indulgence, including (i) any renewal, extension or modification
which Beneficiary may grant with respect to any of the Debt, (ii) any surrender,
compromise, release, renewal, extension, exchange or substitution which
Beneficiary may grant with respect to the Trust Property or any portion thereof;
or (iii) any release or indulgence granted to any maker, endorser, Guarantor or
surety of any of the Debt.

         20.      RIGHT OF ENTRY. In addition to any other rights or remedies
granted under this Deed of Trust, Beneficiary, Trustee and their agents shall
have the right to enter and inspect the Trust Property at any reasonable time
during the Term. The reasonable cost of such inspections or audits shall be
borne by Trustor should Beneficiary determine that an Event of Default exists,
including the cost of all follow up or additional investigations or inquiries
deemed reasonably necessary by Beneficiary. The reasonable cost of such
inspections, if not paid for by Trustor within ten (10) Business Days of demand
therefor, may be added to the principal balance of the sums due under the Note
and this Deed of Trust and shall bear interest thereafter until paid at the
Default Rate.

         21.      SECURITY AGREEMENT. This Deed of Trust is both a real property
deed of trust and a "SECURITY AGREEMENT" within the meaning of the Uniform
Commercial Code. The Trust Property includes both real and personal property and
all other rights and interests, whether tangible or intangible in nature, of
Trustor in the Trust Property. Trustor by executing and delivering this Deed of
Trust has granted and hereby grants to Beneficiary and Trustee, as security for
the Debt, a security interest in the Trust Property to the full extent that the
Trust Property may be subject to the Uniform Commercial Code (said portion of
the Trust Property so subject to the Uniform Commercial Code being called in
this paragraph the "COLLATERAL"). Trustor hereby agrees with Beneficiary to
execute and deliver to Beneficiary, in form and substance reasonably
satisfactory to Beneficiary, such financing statements and such further
assurances as Beneficiary may from time to time, reasonably consider necessary
to create, perfect, and preserve Beneficiary's security interest herein granted.
This Deed of Trust shall also constitute a "fixture filing" for the purposes of
the Uniform Commercial Code as to all or any items of the Collateral that are or
are to become fixtures under the Uniform Commercial Code. Information concerning
the security interest herein granted may be obtained from the parties at the
addresses of the parties set forth in the first paragraph of this Deed of Trust.
If an Event of Default shall occur, Beneficiary and Trustee, in addition to any
other rights and remedies which

                                       13


either may have, shall have and may exercise immediately and without demand, any
and all rights and remedies granted to a secured party upon default under the
Uniform Commercial Code, including, without limiting the generality of the
foregoing, the right to take possession of the Collateral or any part thereof,
and to take such other measures as Beneficiary or Trustee may deem necessary for
the care, protection and preservation of the Collateral. Upon request or demand
of Beneficiary or Trustee after the occurrence and during the continuance of an
Event of Default, Trustor shall at its expense assemble the Collateral and make
it available to Beneficiary and Trustee at a convenient place reasonably
acceptable to Beneficiary. Trustor shall pay to Beneficiary and Trustee within
ten (10) Business Days of demand therefor any and all expenses, including
reasonable attorneys' fees and disbursements, incurred or paid by Beneficiary
and Trustee in protecting the interest in the Collateral and in enforcing the
rights hereunder with respect to the Collateral. Any notice of sale, disposition
or other intended action by Beneficiary and Trustee with respect to the
Collateral sent to Trustor in accordance with the provisions hereof at least ten
(10) Business Days prior to such action, shall constitute commercially
reasonable notice to Trustor. The proceeds of any disposition of the Collateral,
or any part thereof, may be applied by Beneficiary to the payment of the Debt in
such priority and proportions as Beneficiary in its sole discretion shall deem
proper. In the event of any change in name, identity or structure of any
Trustor, such Trustor shall notify Beneficiary and Trustee thereof and promptly
after Beneficiary's request shall execute, file and record such Uniform
Commercial Code forms as are necessary to maintain the priority of Beneficiary's
lien upon and security interest in the Collateral, and shall pay all reasonable
expenses and fees in connection with the filing and recording thereof. If
Beneficiary shall require the filing or recording of additional Uniform
Commercial Code forms or continuation statements, Trustor shall, promptly after
request, execute, file and record such Uniform Commercial Code forms or
continuation statements as Beneficiary shall deem reasonably necessary, and
shall pay all reasonable expenses and fees in connection with the filing and
recording thereof, it being understood and agreed, however, that no such
additional documents shall increase Trustor's obligations or decrease Trustor's
rights under the Note, this Deed of Trust and any of the other Loan Documents.
Trustor hereby irrevocably appoints Beneficiary as its attorney-in-fact, coupled
with an interest, to file with the appropriate public office on its behalf any
financing or other statements signed only by Beneficiary, as secured party, in
connection with the Collateral covered by this Deed of Trust.

         22.      ACTIONS AND PROCEEDINGS. Beneficiary or Trustee has the right
to appear in and defend any action or proceeding brought with respect to the
Trust Property and to bring any action or proceeding, in the name and on behalf
of Trustor, which Beneficiary, in its reasonable discretion, decides should be
brought to protect their interest in the Trust Property. Beneficiary shall, at
its option, be subrogated to the lien of any deed of trust or other security
instrument discharged in whole or in part by the Debt, and any such subrogation
rights shall constitute additional security for the payment of the Debt.

         23.      RECOVERY OF SUMS REQUIRED TO BE PAID. Beneficiary shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Beneficiary or Trustee thereafter to bring an action of foreclosure, or any
other action, for a default or defaults by Trustor existing at the time such
earlier action was commenced.

                                       14


         24.      MARSHALLING AND OTHER MATTERS. Trustor hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Trust Property
or any part thereof or any interest therein. Further, Trustor hereby expressly
waives any and all rights of redemption from sale under any order or decree of
foreclosure of this Deed of Trust on behalf of Trustor, and on behalf of each
and every person acquiring any interest in or title to the Trust Property
subsequent to the date of this Deed of Trust and on behalf of all persons to the
extent permitted by applicable law. Beneficiary shall not be under any
obligation to marshal any assets in favor of any Person or in payment of any of
the Debt.

         25.      HANDICAPPED ACCESS.

                  (a)      Trustor agrees that the Trust Property shall at all
times comply, with the requirements of the Americans with Disabilities Act of
1990, the Fair Housing Amendments Act of 1988, if applicable, all state and
local laws and ordinances related to handicapped access and all rules,
regulations, and orders issued pursuant thereto including, without limitation,
the Americans with Disabilities Act Accessibility Guidelines for Buildings and
Facilities (collectively "ACCESS LAWS").

                  (b)      Without limiting the foregoing, Trustor shall cause
any alterations to the Trust Property to comply with all applicable Access Laws.
The foregoing shall apply to tenant improvements constructed by Trustor or by
any of its tenants. Beneficiary may condition any such approval upon receipt of
a certificate of Access Law compliance from an architect, engineer, or other
person acceptable to Beneficiary.

                  (c)      Trustor agrees to give prompt notice to Beneficiary
of the receipt by Trustor of any material complaints related to violation of any
Access Laws and of the commencement of any proceedings or investigations which
relate to compliance with applicable Access Laws.

         26.      INDEMNIFICATION. In addition to any other indemnifications
provided herein or in the other Loan Documents, Trustor shall protect, defend,
indemnify and save harmless Beneficiary and Trustee and their respective
successors and assigns (including, without limitation, the trustee and/or the
trust under any trust agreement executed in connection with any Secondary Market
Transaction backed in whole or in part by the Loan and any other person which
may hereafter be the holder of the Note or any interest therein), and the
officers, directors, stockholders, partners, members, employees, agents, and
Affiliates of Beneficiary and such successors and assigns (each an "INDEMNIFIED
PARTY") from and against all liabilities, obligations, claims, demands, damages,
penalties, causes of action, losses, fines, costs and expenses (including,
without limitation, reasonable attorneys' fees and disbursements), imposed upon
or incurred by or asserted against any Indemnified Party by reason of: (a)
ownership of this Deed of Trust, the Trust Property or any interest therein or
receipt of any Rents; (b) any accident, injury to or death of persons or loss of
or damage to property occurring in, on or about the Trust Property or any part
thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (c) any use, nonuse or condition in, on or about
the Trust Property or any part thereof or on adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (d) any failure on
the part of Trustor or Trustee to perform or comply with any of

                                       15


the terms of this Deed of Trust; (e) performance of any labor or services or the
furnishing of any materials or other property in respect of the Trust Property
or any part thereof; (f) any failure of the Premises or the Improvements to
comply with any applicable law, statute, code, ordinance, rule or regulation
including, without limitation, any Access Laws; (g) any default by Trustor under
this Deed of Trust, the Loan Agreement or any of the other Loan Documents; (h)
any actions taken by any Indemnified Party in the enforcement of this Deed of
Trust and other Loan Documents in accordance with their respective terms; (i)
any representation or warranty made in the Note, this Deed of Trust or any of
the other Loan Documents being false or misleading in any material respect as of
the date such representation or warranty was made; (j) any claim by brokers,
finders or similar persons claiming to be entitled to a commission in connection
with any Lease or other transaction involving the Trust Property or any part
thereof under any legal requirement or any liability asserted against
Beneficiary with respect thereto; and (k) the claims of any lessee of any or any
portion of the Trust Property or any person acting through or under any lessee
or otherwise arising under or as a consequence of any Lease (collectively, the
"INDEMNIFIED LIABILITIES"), provided that Trustor shall not have an obligation
to an Indemnified Party hereunder with respect to the Indemnified Liabilities
arising from the fraud, gross negligence or willful misconduct of such
Indemnified Party as determined by a court of competent jurisdiction. Any
amounts payable to Beneficiary or Trustee by reason of the application of this
paragraph shall be secured by this Deed of Trust and shall become immediately
due and payable and shall bear interest at the Default Rate from the date loss
or damage is sustained by Beneficiary or Trustee until paid. The obligations and
liabilities of Trustor under this paragraph shall survive the termination,
satisfaction, or assignment of this Deed of Trust and the exercise by
Beneficiary of any of its rights or remedies hereunder, including, but not
limited to, the acquisition of the Trust Property by foreclosure or a conveyance
in lieu of foreclosure.

         27.      NOTICES. Any notice, demand, statement, request or consent
made hereunder shall be in writing, addressed to the intended recipient at its
address set forth in the Loan Agreement, and shall be made and deemed given in
accordance with the terms of the Loan Agreement.

         28.      AUTHORITY. (a) Trustor (and the undersigned representative of
Trustor, if any) represent and warrant that it (or they, as the case may be) has
full power, authority and right to execute, deliver and perform its obligations
pursuant to this Deed of Trust, and to deed, mortgage, give, grant, bargain,
sell, alien, enfeoff, convey, confirm, warrant, pledge, hypothecate and assign
the Trust Property pursuant to the terms hereof and to keep and observe all of
the terms of this Deed of Trust on Trustor's part to be performed; and (b)
Trustor represents and warrants that Trustor is not a "FOREIGN PERSON" within
the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as
amended and the related Treasury Department regulations, including temporary
regulations.

         29.      NON-WAIVER. The failure of Beneficiary or Trustee to insist
upon strict performance of any term hereof shall not be deemed to be a waiver of
any term of this Deed of Trust. Any consent or approval by Beneficiary in any
single instance shall not be deemed or construed to be Beneficiary's consent or
approval in any like matter arising at a subsequent date. Trustor shall not be
relieved of Trustor's obligations hereunder by reason of (a) the failure of
Beneficiary or Trustee to comply with any request of Trustor or any Guarantor to
take any action to foreclose this Deed of Trust or otherwise enforce any of the
provisions hereof or of the Note,

                                       16


or the other Loan Documents, (b) the release, regardless of consideration, of
the whole or any part of the Trust Property, or of any person liable for the
Debt or any portion thereof, or (c) any agreement or stipulation by Beneficiary
extending the time of payment or otherwise modifying or supplementing the terms
of the Note, this Deed of Trust or any of the other Loan Documents. Beneficiary
may resort for the payment of the Debt to any other security held by Beneficiary
in such order and manner as Beneficiary, in its sole discretion, may elect.
Beneficiary or Trustee may take action to recover the Debt, or any portion
thereof, or to enforce any covenant hereof without prejudice to the right of
Beneficiary or Trustee thereafter to foreclosure this Deed of Trust. The rights
and remedies of Beneficiary or Trustee under this Deed of Trust shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Beneficiary or Trustee shall be construed as
an election to proceed under any one provision herein to the exclusion of any
other provision. Beneficiary and Trustee shall not be limited exclusively to the
rights and remedies herein stated but shall be entitled to every right and
remedy now or hereafter afforded at law or in equity.

         30.      NO ORAL CHANGE. This Deed of Trust, and any provisions hereof,
may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Trustor or
Beneficiary, but only by an agreement in writing signed by the party against
whom enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought.

         31.      LIABILITY. Subject to the provisions hereof requiring
Beneficiary's consent to any transfer of the Trust Property, this Deed of Trust
shall be binding upon and inure to the benefit of Trustor and Beneficiary and
their respective successors and assigns forever.

         32.      INAPPLICABLE PROVISIONS. If any term, covenant or condition of
the Note or this Deed of Trust is held to be invalid, illegal or unenforceable
in any respect, the Note and this Deed of Trust shall be construed without such
provision.

         33.      HEADINGS, ETC. The headings and captions of various paragraphs
of this Deed of Trust are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.

         34.      DUPLICATE ORIGINALS. This Deed of Trust may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.

         35.      DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this Deed
of Trust may be used interchangeably in singular or plural form and the word
"TRUSTOR" shall mean "each Trustor and any subsequent owner or owners of the
Trust Property or any part thereof or any interest therein," the word
"BENEFICIARY" shall mean "BENEFICIARY and any subsequent holder of the Note,"
the word "TRUSTEE" shall mean "Trustee and any subsequent holder of this Deed of
Trust," the word "NOTE" shall mean "the Note and any other evidence of
indebtedness secured by this Deed of Trust," the word "PERSON" shall include an
individual, corporation, partnership, trust, unincorporated association,
government, governmental authority, and any other entity, and the words "TRUST
PROPERTY" shall include any portion of the Trust Property and any interest
therein and the words "ATTORNEYS' FEES" shall include any and all reasonable
attorneys' fees,

                                       17


paralegal and law clerk fees, including, without limitation, fees at the
pre-trial, trial and appellate levels incurred or paid by Beneficiary in
protecting its interest in the Trust Property and Collateral and enforcing its
rights hereunder. Whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice versa.

         36.      HOMESTEAD. Trustor hereby waives and renounces all homestead
and exemption rights provided by the Constitution and the laws of the United
States and of any state, in and to the Trust Property as against the collection
of the Debt, or any part hereof.

         37.      ASSIGNMENTS. Beneficiary shall have the right to assign or
transfer its rights under this Deed of Trust without limitation. Any assignee or
transferee shall be entitled to all the benefits afforded Beneficiary under this
Deed of Trust.

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

         39.      TRUSTEE'S FEES; SUBSTITUTE TRUSTEE.

                  (a)      Trustor shall pay all reasonable costs, fees and
expenses incurred by Trustee and Trustee's agents and counsel in connection with
the performance by Trustee of Trustee's duties hereunder and all such costs,
fees and expenses shall be secured by this Deed of Trust.

                  (b)      Trustee shall be under no duty to take any action
hereunder except as expressly required hereunder or by law, or to perform any
act which would involve Trustee in any expense or liability or to institute or
defend any suit in respect hereof, unless properly indemnified to Trustee's
reasonable satisfaction. Trustee, by acceptance of this Deed of Trust, covenants
to perform and fulfill the trusts herein created, being liable, however, only
for gross negligence or willful misconduct, and hereby waives any statutory fee
and agrees to accept reasonable compensation, in lieu thereof, for any services
rendered by Trustee in accordance with the terms hereof. Trustee may resign at
any time upon giving thirty (30) days' notice to Trustor and to Beneficiary.
Beneficiary may remove Trustee at any time or from time to time and select a
successor trustee. In the event of the death, removal, resignation, refusal to
act, or inability to act of Trustee, or in its sole discretion for any reason
whatsoever, Beneficiary may, without notice and without specifying any reason
therefor and without applying to any court,

                                       18


select and appoint a successor trustee, by an instrument recorded wherever this
Deed of Trust is recorded and all powers, rights, duties and authority of
Trustee, as aforesaid, shall thereupon become vested in such successor. Such
substitute trustee shall not be required to give bond for the faithful
performance of the duties of Trustee hereunder unless required by Beneficiary.
The procedure provided for in this paragraph for substitution of Trustee shall
be in addition to and not in exclusion of any other provisions for substitution,
by law or otherwise.

         40.      POWER OF SALE. Except as otherwise provided in Section 45 of
this Deed of Trust, the following provisions shall apply:

                  (a)      Upon the occurrence and during the continuance of an
Event of Default, Trustee, or the agent or successor of Trustee, at the request
of Beneficiary, shall sell or offer for sale the Trust Property in such
portions, order and parcels as Beneficiary may determine with or without having
first taken possession of same, to the highest bidder for cash, free from the
equity of redemption, statutory right of redemption, homestead, dower and all
other rights and exemptions of every kind, each of which are hereby expressly
waived, at one or more public auctions in accordance with the terms and
provisions of the law of the State in which the Trust Property is located. Such
sale shall be made at the area within the courthouse of the county in which the
Trust Property (or any portion thereof to be sold) is situated (whether the
parts or parcels thereof, if any, in different counties are contiguous or not,
and without the necessity of having any personal property hereby secured present
at such sale) which is designated by the applicable court of such County as the
area in which public sales are to take place, or, if no such area is designated,
at the area at the courthouse designated in the notice of sale as the area in
which the sale will take place, on such day and at such times as permitted under
applicable law of the State where the Trust Property is located, after
advertising the time, place and terms of the sale of the Trust Property for
twenty-one (21) days by three (3) weekly notices in a newspaper published in the
County wherein the Trust Property is wholly or partially located. Trustor agrees
that the Trustee shall have the right to adjourn any such sale to another date
and time to be announced at the time and place of the sale as set forth in the
published notice, and in such event, no further publication of the sale is
required. The sale or sales of less than the whole of the Trust Property shall
not exhaust the power of sale granted herein, and the Trustee is specifically
empowered to make successive sales under such power until the whole of the Trust
Property shall be sold.

         At any such public sale, Trustee may execute and deliver in the name of
Trustor to the purchaser a conveyance of the Trust Property or any part of the
Trust Property in fee simple. In the event of any sale under this Deed of Trust
by virtue of the exercise of the powers herein granted, or pursuant to any order
in any judicial proceeding or otherwise, the Trust Property may be sold in its
entirety or in separate parcels and in such manner or order as Beneficiary in
its sole discretion may elect, and if Beneficiary so elects, Trustee may sell
the personal property covered by this Deed of Trust at one or more separate
sales in any manner permitted by the Uniform Commercial Code of the State in
which the Trust Property is located, and one or more exercises of the powers
herein granted shall not extinguish or exhaust such powers, until all the Trust
Property is sold or the Note and other secured indebtedness is paid in full. If
the Note and other secured indebtedness is now or hereafter further secured by
any chattel Deed of Trusts, pledges, contracts or guaranty, assignments of
lease, or other security instruments, Beneficiary at its

                                       19


option may exhaust the remedies granted under any of said security instruments
either concurrently or independently, and in such order as Beneficiary may
determine.

                  (b)      Upon any foreclosure sale or sales of all or any
portion of the Trust Property under the power herein granted, Beneficiary may
bid for and purchase the Trust Property and shall be entitled to apply all or
any part of the Debt as a credit to the purchase price.

                  (c)      In the event of a foreclosure or a sale of all or any
portion of the Trust Property under the power herein granted, the proceeds of
said sale shall be applied, in whatever order Beneficiary in its sole discretion
may decide, to the reasonable expenses of such sale and of all proceedings in
connection therewith (including, without limitation, reasonable attorneys' fees
and expenses), to fees and expenses of Trustee (including, without limitation,
Trustee's reasonable attorneys' fees and expenses), to insurance premiums,
liens, assessments, taxes and charges (including, without limitation, utility
charges advanced by Beneficiary), to payment of the outstanding principal
balance of the Debt, and to the accrued interest on all of the foregoing; and
the remainder, if any, shall be paid to Trustor, or to the person or entity
lawfully entitled thereto.

         41.      LIMITATIONS ON RECOURSE PROVISIONS. The obligations of Trustor
hereunder are subject to limitations on recourse as provided in Article XII of
the Loan Agreement.

         42.      MISCELLANEOUS.

                  (a)      Intentionally Omitted.

                  (b)      The Loan Documents contain the entire agreement
between Trustor and Beneficiary relating to or connected with the Loan. Any
other agreements relating to or connected with the Loan not expressly set forth
in the Loan Documents are null and void and superseded in their entirety by the
provisions of the Loan Documents.

                  (c)      Trustor represents and warrants to Beneficiary that,
to Trustor's knowledge, there has not been committed by Trustor or any other
person in occupancy of or involved with the operation or use of the Trust
Property any act or omission affording the federal government or any state or
local government the right of forfeiture as against the Trust Property or any
part thereof or any monies paid in performance of Trustor's obligations under
the Note or under any of the other Loan Documents. Trustor hereby covenants and
agrees not to commit, intentionally permit or suffer to exist any act, omission
or circumstance affording such right of forfeiture. In furtherance thereof,
Trustor hereby indemnifies Beneficiary and agrees to defend and hold Beneficiary
harmless from and against any loss, damage or injury by reason of the breach of
the covenants and agreements or the representations and warranties set forth in
this paragraph. Without limiting the generality of the foregoing, the filing of
formal charges or the commencement of proceedings against Trustor or all or any
part of the Trust Property under any federal or state law for which forfeiture
of the Trust Property or any part thereof or of any monies paid in performance
of Trustor's obligations under the Loan Documents is a potential result, shall,
at the election of Beneficiary, constitute an Event of Default hereunder without
notice or opportunity to cure.

                                       20


                  (d)      Trustor acknowledges that, with respect to the Loan,
Trustor is relying solely on its own judgement and advisors in entering into the
Loan without relying in any manner on any statements, representations or
recommendations of Beneficiary or any parent, subsidiary or affiliate of
Beneficiary. Trustor acknowledges that Beneficiary engages in the business of
real estate financings and other real estate transactions and investments which
may be viewed as adverse to or competitive with the business of the Trustor or
its affiliates. Trustor acknowledges that it is represented by competent counsel
and has consulted counsel before executing the Loan Documents.

                  (e)      Intentionally Omitted.

                  (f)      This Deed of Trust and the obligations arising
hereunder shall be governed by and construed in accordance with the laws of the
State of New York and any applicable laws of the United States of America,
except that at all times the provisions for the creation, perfection and
enforcement of the liens and the security interests created pursuant to this
Deed of Trust shall be governed by the laws of the State where the Premises are
located.

         43.      FUTURE ADVANCES. This Deed of Trust secures "FUTURE ADVANCES,"
as hereinafter defined. Any portion of the Debt which is incurred after the
execution of this Deed of Trust pursuant to any instrument referring to this
Deed of Trust, or which is evidenced by any instrument stating that said
indebtedness is secured by this Deed of Trust, shall be defined as a "FUTURE
ADVANCE," including, without limitation, indebtedness incurred or advanced by
Beneficiary to Trustor or pursuant to the Loan Documents. It is agreed that the
Loan Documents are intended to secure all of the debts and obligations referred
to in the Loan Documents, some of which will be obligatory future advances, and
all advances under the Loan Documents will be for commercial purposes. This
Paragraph shall serve as notice to any subsequent holder of a lien, encumbrance,
security title or other claim in and to the Trust Property that Beneficiary
claims the priority of the lien of this Deed of Trust for all such Future
Advances, as well as for all other obligations secured hereby. This Paragraph
shall also be notice that Beneficiary reserves the right, upon agreement thereto
with Trustor, to modify, extend, consolidate, and renew the Debt, or any
portions thereof, and the rate of interest charged thereon, without affecting
the priority of the lien created by this Deed of Trust.

         44.      CROSS-COLLATERALIZATION. The mortgages and deeds of trust
(other than this Deed of Trust) listed on EXHIBIT B attached hereto and made a
part hereof, as any of same may be amended, modified or supplemented from time
to time, are collectively referred to for purposes of this Section 44 as the
"OTHER MORTGAGES." This Deed of Trust, as it may be amended, modified or
supplemented from time to time, together with the Other Mortgages, are
collectively referred to for purposes of this Section 44 as the "MORTGAGES." The
Debt is secured by, among other things, the Mortgages, which encumber real and
personal property in the States set forth on EXHIBIT B, as more particularly
described in each of the Mortgages. The Debt may be accelerated as provided in
the Loan Documents. Upon the occurrence and during the continuance of an Event
of Default, Beneficiary may, at its option, accelerate the Debt and foreclose
upon any one or more of the Mortgages or resort to any one or more of its other
rights and remedies under any or all of the Mortgages and the other Loan
Documents. Except as otherwise provided herein, all of the real and personal
property conveyed and/or mortgaged by the Mortgages are security for the Debt
without allocation of any one or more of the parcels or

                                       21


portions thereof to any portion of the Debt. Beneficiary may allocate the
proceeds that it receives upon the exercise of its rights and remedies,
including foreclosure, to payment of the Debt as Beneficiary in its sole
discretion may determine to be advisable pursuant to the terms of the Loan
Documents. Beneficiary may proceed, at the same or different times, to foreclose
the Mortgages or any one or more of them, by any proceedings appropriate in the
state where any of the real property encumbered by one or more of the Mortgages
lies, including private sale if permitted, and no event of enforcement taking
place in any state, including without limiting the generality of the foregoing,
any pending foreclosure, judgment or decree of foreclosure, foreclosure sale,
rents received, possession taken, deficiency judgment or decrees, or judgment
taken on the Debt, shall in any way stay, preclude or bar enforcement of the
Mortgages or any of them in any other state, and Beneficiary may pursue any or
all of its remedies to the maximum extent permitted by applicable law pursuant
to the terms of the Loan Documents until all of the Debt and all other
obligations now or hereafter secured by any or all of the Mortgages have been
paid or discharged in full. Additionally, and without limitation of any other
provision of this Deed of Trust, if this Deed of Trust is foreclosed and the
Trust Property is sold (or any part thereof) pursuant to foreclosure or other
proceedings, and if the proceeds of such sale (after application of such
proceeds as provided in this Deed of Trust and the other Loan Documents) are not
sufficient to pay the total sum of the Debt then outstanding and any other
amounts provided for by applicable law (the "BALANCE OWED"), then, to the extent
permitted by law, the Debt shall not be satisfied to the extent of the Balance
Owed, but such Debt shall continue in existence and continue to be evidenced and
secured by the Loan Documents and the Mortgages. Subject to the requirements of
applicable law, if Beneficiary shall acquire the Trust Property as a result of
any foreclosure or other sale (whether by bidding all or any portion of the Debt
or otherwise), the proceeds of such sale, to the extent permitted by law, shall
not be deemed to include (and Trustor shall not be entitled to any benefit or
credit on account of) proceeds of any subsequent sale of the Trust Property by
Beneficiary. Without limitation of any other provision hereof, Trustor further
agrees that if any of the Other Mortgages are foreclosed and sale is made of any
of the property subject to any Other Mortgages, and if the proceeds of such sale
(after application of such proceeds as provided for herein and after deducting
all accrued and general and special taxes and assessments) are not sufficient to
pay the Debt and any other amounts provided for by applicable law, then, to the
extent permitted by law, the Debt then outstanding shall not be satisfied to the
extent of the Balance Owed, but such Debt shall continue in existence and
continue to be evidenced and secured by the Loan Documents and the Mortgages
existing immediately prior to any such foreclosure, except such Mortgages
foreclosed upon. No release of personal liability, if any, of any Person
whatsoever and no release of any portion of the property now or hereafter
subject to the lien of any of the Mortgages shall have any effect whatsoever by
way of impairment or disturbance of the lien or priority of any other of the
Mortgages or the unreleased properties encumbered by any of the Mortgages, to
the extent permitted by law. Any foreclosure or other appropriate remedy brought
in any of the states aforesaid may be brought and prosecuted as to any part of
the security, wherever located, without regard to the fact that foreclosure
proceedings or other remedies have or have not been instituted elsewhere on any
other property subject to the lien of the Mortgages. Neither Trustor nor any
Person claiming by, through or under Trustor shall have any right to marshal the
assets, all such rights being hereby expressly waived as to Trustor and all
Persons claiming by, through or under Trustor, Debt, without limitation, junior
lienors. Each of Trustor and all endorsers, guarantors and sureties of the Debt,
hereby waives any and all rights arising because of payment or

                                       22


performance by Trustor of any Debt (a) against any Person by way of subrogation
of the rights of Beneficiary or (b) against any Person obligated to pay or
perform the Debt or other obligations secured by the Other Mortgages by way of
contribution, reimbursement or otherwise.

         45.      CERTAIN MATTERS RELATING TO TRUST PROPERTY LOCATED IN [STATE
PROPERTY IS LOCATED].

                  With respect to the Trust Property which is located in the
State of [STATE PROPERTY IS LOCATED], notwithstanding anything contained herein
to the contrary:

                   [STATE SPECIFIC PROVISIONS TO BE INSERTED]

                                       23


         IN WITNESS WHEREOF, Trustor has executed this instrument the day and
year first above written.

                                    TRUSTOR:

                                    [PROPERTY OWNER NAME]

                                    By:_____________________________________
                                       Name:
                                       Title:

                                 ACKNOWLEDGEMENT

                     [INSERT STATE SPECIFIC ACKNOWLEDGMENT]

                                       24


                                    EXHIBIT A

                       LEGAL DESCRIPTION OF REAL PROPERTY

                                      A-1


                                    EXHIBIT B

                                    MORTGAGES

         [SCHEDULE OF ALL OTHER DEEDS OF TRUST, DEEDS TO SECURE DEBT AND
                             MORTGAGES IN LOAN POOL]

                                      B-1

EX-10.8

                                                                    EXHIBIT 10.8

================================================================================
UPON RECORDATION                       SPACE ABOVE THIS LINE FOR RECORDER'S USE
RETURN TO:

Sidley Austin Brown & Wood LLP
787 Seventh Avenue
New York, New York 10019
Attn.: Mark A. Poole, Esq.

                                  GENERAL FORM
                                       OF
        DEED TO SECURE DEBT, ASSIGNMENT OF LEASES AND RENTS AND SECURITY
                                    AGREEMENT

                                       BY

                              [PROPERTY OWNER NAME]
                                   (Borrower)

                            TO AND FOR THE BENEFIT OF
                      MERRILL LYNCH MORTGAGE LENDING, INC.
                                    (Lender)

                           Dated: As of June __, 2004

                       Property Location: [PROPERTY NAME]
                                          [STREET ADDRESS]
                                          [COUNTY]
                                          [CITY,STATE]

================================================================================



         THIS DEED TO SECURE DEBT, ASSIGNMENT OF LEASES AND RENTS AND SECURITY
AGREEMENT (this "SECURITY DEED"), made as of June __, 2004, by [PROPERTY OWNER
NAME], having its principal place of business at c/o LODGIAN, INC., 3445
Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 ("BORROWER"), to and for
the benefit of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation,
having its principal place of business at 4 World Financial Center, New York,
New York 10080 (together with its successors, transferees and assigns,
"Lender"). Capitalized terms used herein but not otherwise defined shall have
the respective meanings assigned to such terms in the Loan Agreement
(hereinafter defined).

                              W I T N E S S E T H:

         To secure the payment of a loan (the "LOAN") in the original principal
sum of [INSERT POOL LOAN AMOUNT] ($__________), lawful money of the United
States of America, being made from Lender to Borrower, and the other Borrowers
(together with Borrower, "BORROWERS") pursuant to the terms and conditions of a
certain Loan and Security Agreement, dated as of the date hereof (as amended or
modified, the "LOAN AGREEMENT"), among Borrowers and Lender, which is evidenced
by and is to be paid with interest according to a certain Promissory Note, dated
as of the date hereof and having a maturity date of June 31, 2006, as the same
may be extended pursuant to the Loan Agreement (as amended, modified, renewed or
restated, and together with any substitutes or replacements (by means of
multiple notes or otherwise) therefor, collectively, the "NOTE"), made by
Borrowers to Lender and all other sums due hereunder, under the other Loan
Documents and under the Note (said indebtedness and interest due under the Note
and all other sums due hereunder, under the Note and the other Loan Documents
being hereinafter collectively referred to as the "DEBT"), Borrower has deeded,
given, granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed,
warranted, pledged and assigned and by these presents does hereby deed, give,
grant, bargain, sell, alien, enfeoff, convey, confirm, warrant, pledge and
assign unto Lender, the real property described in EXHIBIT A attached hereto
(the "PREMISES") and the buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
now or hereafter located thereon (the "IMPROVEMENTS");

         TOGETHER WITH: all right, title, interest and estate of Borrower now
owned, or hereafter acquired, in and to the following property, rights,
interests and estates (the Premises, the Improvements, and the property, rights,
interests and estates hereinafter described are collectively referred to herein
as the "PROPERTY"):

                  (a)      all easements, rights-of-way, strips and gores of
land, streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, air rights and development rights, all rights to oil, gas,
minerals, coal and other substances of any kind or character, and all estates,
rights, titles, interests, privileges, liberties, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way belonging, relating or
pertaining to the Premises and the Improvements and the reversion and
reversions, remainder and remainders, and all land lying in the bed of any
street, road, highway, alley or avenue, opened, vacated or proposed, in front of
or adjoining the Premises, to the center line thereof and all the estates,
rights, titles, interests, dower and rights of dower, curtsey and rights of
curtsey, property, possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Premises and the Improvements and every
part and parcel thereof, with the appurtenances thereto;



                  (b)      all machinery, furniture, furnishings, equipment,
computer software and hardware, fixtures (including, without limitation, all
heating, air conditioning, plumbing, lighting, communications and elevator
fixtures, inventory and articles of personal property and accessions thereof and
renewals, replacements thereof and substitutions therefor, if any (including,
but not limited to, beds, bureaus, chiffoniers, chests, chairs, desks, lamps,
mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains,
shades, venetian blinds, screens, paintings, hangings, pictures, divans,
couches, luggage carts, luggage racks, stools, sofas, chinaware, linens,
pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities,
dining room wagons, tools, keys or other entry systems, bars, bar fixtures,
liquor and other drink dispensers, icemakers, radios, television sets, intercom
and paging equipment, electric and electronic equipment, dictating equipment,
private telephone systems, medical equipment, potted plants, heating, lighting
and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and
air-conditioning systems, elevators, escalators, fittings, plants, apparatus,
stoves, ranges, refrigerators, laundry machines, tools, machinery, engines,
dynamos, motors, boilers, incinerators, switchboards, conduits, compressors,
vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call
systems, brackets, electrical signs, bulbs, bells, ash and fuel, conveyors,
cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage
disposals, washers and dryers), other customary hotel equipment) and other
property of every kind and nature, whether tangible or intangible, whatsoever
owned by Borrower, or in which Borrower has or shall have an interest, now or
hereafter located upon the Premises and the Improvements, or appurtenant
thereto, and usable in connection with the present or future operation and
occupancy of the Premises and the Improvements and all building equipment,
materials and supplies of any nature whatsoever owned by Borrower, or in which
Borrower has or shall have an interest, now or hereafter located upon the
Premises and the Improvements, or appurtenant thereto, and usable in connection
with the present or future operation, enjoyment and occupancy of the Premises
and the Improvements (hereinafter collectively referred to as the "EQUIPMENT"),
including any leases of any of the foregoing, any deposits existing at any time
in connection with any of the foregoing, and the proceeds of any sale or
transfer of the foregoing, and the right, title and interest of Borrower in and
to any of the Equipment that may be subject to any "security interests" as
defined in the Uniform Commercial Code, as adopted and enacted by the State or
States where any of the Property is located (the "UNIFORM COMMERCIAL CODE"),
superior in lien to the lien of this Security Deed;

                  (c)      all awards or payments, including interest thereon,
that may heretofore and hereafter be made with respect to the Premises and the
Improvements, whether from the exercise of the right of eminent domain or
condemnation (including, without limitation, any transfer made in lieu of or in
anticipation of the exercise of said rights), or for a change of grade, or for
any other injury to or decrease in the value of the Premises and Improvements;

                  (d)      all leases, tenancies, licenses, subleases,
assignments and/or rental or occupancy agreements and other agreements or
arrangements (including, without limitation, any and all guarantees of any of
the foregoing) heretofore or hereafter entered into affecting the use, enjoyment
or occupancy of, or the conduct of any activity upon or in, the Premises and the
Improvements, including any extensions, renewals, modifications or amendments
thereof (collectively, the "LEASES") and all rents, rent equivalents, moneys
payable as damages or in lieu of rent or rent equivalents, royalties (including,
without limitation, all oil and gas or other mineral royalties and bonuses),
income, fees, receivables, receipts, revenues, deposits (including,

                                       2

without limitation, security, utility and other deposits), accounts, cash,
issues, profits, charges for services rendered, and other payment and
consideration of whatever form or nature received by or paid to or for the
account of or benefit of Borrower or its agents or employees from any and all
sources arising from or attributable to the Premises and the Improvements,
including, without limitation, all hotel receipts, revenues and credit card
receipts collected from guest rooms, restaurants, bars (including, without
limitation, service charges for employees and staff), mini-bars, meeting rooms,
banquet rooms, apartments, parking, and recreational facilities, health club
membership fees, food and beverage wholesale and retail sales, service charges,
convention services, special events, audio-visual services, boat cruises, travel
agency fees, telephone charges, laundry services, vending machines and
otherwise, all receivables, customer obligations, installment payment
obligations and other obligations now existing or hereafter arising or created
out of the sale, lease, sublease, license, concession or other grant of the
right of the possession, use and occupancy of all or any portion of the Premises
and the Improvements or personalty located thereon, or rendering of services by
Borrower or any operator or manager of the hotel or the commercial space located
in the Improvements or acquired from others (including, without limitation, from
the rental of any office space, retail space, guest rooms or other space, halls,
stores, and offices, and deposits securing reservations of such space, and
charges for services such as room service, telecommunication and video,
electronic mail, internet connection and other communications and entertainment
services), license, lease, sublease and concession fees and rentals, and
proceeds, if any, from business interruption or other loss of income insurance
and any other items of revenue which would be included in operating revenues
under the Uniform System (as defined in the Loan Agreement) (the "RENTS"),
together with all proceeds from the sale or other disposition of the Leases and
the right to receive and apply the Rents to the payment of the Debt;

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

                  (f)      all accounts, escrows, documents, instruments,
chattel paper, claims, deposits and general intangibles, as the foregoing terms
are defined in the Uniform Commercial Code, and all franchises, trade names
(including, without limitation, the right to operate the Property under the name
and/or hotel system known as [HOTEL BRAND]), trademarks, symbols, service marks,
books, records, plans, specifications, designs, drawings, permits, consents,
licenses, management agreements (including, without limitation, the Management
Agreement), franchise agreements, contract rights (including, without
limitation, any contract with any architect or engineer or with any other
provider of goods or services for or in connection with any construction,
repair, or other work upon the Property), approvals, actions, refunds of real
estate taxes and assessments (and any other governmental impositions related to
the Property), and causes of action that now or hereafter relate to, are derived
from or are used in connection with the Property, or the use, operation,
maintenance, occupancy or enjoyment thereof or the conduct of any business or
activities thereon (hereinafter collectively referred to as the "INTANGIBLES");
and

                  (g)      any and all proceeds, products, offspring, rents and
profits from any of the foregoing, including, without limitation, those from
sale, exchange, transfer, collection, loss, damage, disposition, substitution or
replacement of any of the foregoing and any and all other

                                       3


security and collateral of any nature whatsoever, now or hereafter given for the
repayment of the Debt and the performance of Borrower's obligations under the
Loan Documents including, without limitation, the Impositions and Insurance
Reserve, the FF&E Reserve, the Loss Proceeds Account, the Deposit Account, the
Lock Box Account and the Sub-Accounts thereof (each as defined in that certain
Cash Management Agreement, dated as of the date hereof (as amended or modified
the "CASH MANAGEMENT AGREEMENT"), by and among Borrowers, Lender, Lodgian
Management Corp. and Wachovia Bank, National Association), and any other escrows
or reserves set forth in the Loan Documents.

         This Security Deed is a deed conveying legal title pursuant to the laws
of the State of Georgia governing deeds to secure debt and is also a security
agreement granting a present and continuing security interest and security title
in the portions of the Property constituting personal property or fixtures
pursuant to the Uniform Commercial Code, and it is not a mortgage.

         TO HAVE AND TO HOLD the Property and all parts, rights, members and
appurtenances thereof, to the use, benefit and behoof of Lender, its successors
and assigns, in fee simple forever, and Borrower covenants that it is lawfully
seized and possessed of the Property in fee simple and has good right to convey
the same.

         WITH POWER OF SALE, to secure the payment to Lender of the Debt at the
time and in the manner provided for its payment in the Note and in this Security
Deed;

         PROVIDED, HOWEVER, these presents are upon the express condition that,
if Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Deed and shall well and truly
abide by and comply with each and every covenant and condition set forth herein,
in the Note and in the other Loan Documents in a timely manner, then this
Security Deed shall be cancelled and surrendered, and Lender will reconvey the
Property in the manner provided by law;

         AND Borrower represents and warrants to and covenants and agrees with
Lender as follows:

                                     PART I

                               GENERAL PROVISIONS

         1.       PAYMENT OF DEBT AND INCORPORATION OF COVENANTS, CONDITIONS AND
AGREEMENTS. Borrower shall pay the Debt at the time and in the manner provided
in the Note, in the Loan Agreement and in this Security Deed. All the covenants,
conditions and agreements contained in (a) the Note, (b) the Loan Agreement and
(c) the other Loan Documents are hereby made a part of this Security Deed to the
same extent and with the same force as if fully set forth herein.

         2.       WARRANTY OF TITLE. Borrower warrants that Borrower has good
and marketable title to the Property and has the full power, authority and right
to execute, deliver and perform its obligations under this Security Deed and to
deed, encumber, give, grant, bargain, sell, alienate, enfeoff, convey, confirm,
pledge and assign the same and that Borrower possesses a fee estate in

                                       4


the Premises and the Improvements and that it owns the Property free and clear
of all liens, encumbrances and charges whatsoever except for the Permitted
Encumbrances and that this Security Deed is and will remain a valid and
enforceable first lien on and security interest in the Property, subject only to
said exceptions. Borrower represents and warrants that none of the Permitted
Encumbrances will, individually or in the aggregate, materially and adversely
affect (i) Borrower's ability to pay in full in a timely manner its obligations,
including, without limitation, the Debt, (ii) the use of the Property for the
use currently being made thereof, (iii) the operation of the Property for the
operation currently being made thereof, or (iv) the value of the Property.
Borrower shall forever warrant, defend and preserve such title and the validity
and priority of the lien of this Security Deed and shall forever warrant and
defend the same to Lender against the claims of all persons whomsoever.

         3.       INSURANCE. Borrower, at its sole cost and expense, shall
obtain and maintain during the entire term of this Security Deed (the "Term")
policies of insurance as required pursuant to Section 5.4 of the Loan Agreement,
and pay all premiums thereon (the "INSURANCE PREMIUMS").

         4.       PAYMENT OF IMPOSITIONS AND OTHER CHARGES. Subject to
Borrower's right to contest set forth in Section 5.3(B) of the Loan Agreement
and the provisions of Section 5 below, and pursuant to the provisions of the
Cash Management Agreement, Borrower shall cause to be paid all Impositions now
or hereafter levied or assessed or imposed against the Property or any part
thereof prior to the date the same shall become delinquent. Borrower shall
promptly pay for all utility services provided to the Property. Borrower shall
furnish to Lender or its designee receipts for the payment of the Impositions
prior to the date the same shall become delinquent (provided, however, that
Borrower shall not be required to furnish such receipts for payment of
Impositions in the event that such Impositions have been paid by Lender pursuant
to Section 5 hereof).

         5.       IMPOSITIONS AND INSURANCE RESERVE. Borrower shall make monthly
deposits into the Impositions and Insurance Reserve in accordance with, and to
the extent required under Section 6.3 of the Loan Agreement and under the Cash
Management Agreement.

         6.       CONDEMNATION. To the extent the terms of this Section 6 are
inconsistent with the terms of the Loan Agreement, the terms of the Loan
Agreement shall control.

                  (a)      Borrower shall promptly give Lender written notice of
any known actual or threatened commencement of any condemnation or eminent
domain proceeding affecting the Property or any portion thereof and shall
deliver to Lender copies of any and all papers served in connection with such
proceedings. Subject to the terms of Section 6(b) below, Lender is hereby
irrevocably appointed as Borrower's attorney-in-fact, coupled with an interest,
with exclusive power to collect, receive and retain any award or payment for
said condemnation or eminent domain and to make any compromise or settlement in
connection with such proceeding, subject to the provisions of this Security Deed
and the Loan Agreement. Notwithstanding any taking by any public or quasi public
authority through eminent domain or otherwise (including but not limited to any
transfer made in lieu of or in anticipation of the exercise of such taking),
Borrower shall continue to pay the Debt at the time and in the manner provided
for its payment in the Note, in this Security Deed and the other Loan Documents
and the Debt shall not be reduced until any

                                       5


award or payment therefor shall have been actually received after expenses of
collection and applied by Lender to the discharge of the Debt in accordance with
the terms hereof. In accordance with the terms hereof, Borrower shall cause the
award or payment made in any condemnation or eminent domain proceeding completed
after the date hereof, which is payable to Borrower, to be paid directly to
Lender. Lender may apply any such award or payment to the reduction or discharge
of the Debt whether or not then due and payable; such application to be made
without any Prepayment Consideration (as defined in the Loan Agreement),
provided that if Borrower receives any such award or payment, Borrower pays such
award or payment to Lender within one hundred twenty (120) days following the
date of Borrower's receipt thereof, except that if an Event of Default has
occurred and is continuing, then such application shall be subject to the
Prepayment Consideration computed in accordance with the Note. If the Property
is sold following an Event of Default, through foreclosure or otherwise, prior
to the receipt by Lender of such award or payment, Lender shall have the right,
whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to receive said award or payment, or a portion thereof
sufficient to pay the Debt.

                  (b)      Notwithstanding the foregoing, Lender shall not
exercise the foregoing rights and Borrower may prosecute any condemnation
proceeding and settle or compromise and collect any claim involving an award
and/or claim for damages of not more than the Restoration Threshold provided
that: (i) no Event of Default shall have occurred and be continuing, (ii) in
Lender's reasonable good faith judgment, such condemnation or taking does not
and will not materially restrict access to the Property or otherwise have a
Material Adverse Effect, and the Property remaining after such condemnation or
taking is capable of being restored to an economically viable whole of
substantially the same type which existed prior to the condemnation or taking or
in substantial compliance with all applicable laws, (iii) Borrower applies the
proceeds of such award to any reconstruction or repair of the Property necessary
as a result of such condemnation or taking, (iv) Borrower promptly commences and
diligently prosecutes such reconstruction or repair to completion in accordance
with all applicable laws and (v) the plans and specifications for such work
shall be subject to Lender's reasonable approval. Subject to the terms hereof,
Borrower authorizes Lender to apply such awards, payments, proceeds or damages,
after the deduction of Lender's reasonable expenses incurred in the collection
of such amounts, at Lender's option, to restoration or repair of the Property or
to payment of the sums secured by this Security Deed, whether or not then due,
in the order determined by Lender, with the balance, if any, to Borrower.
Application of any such award or payment to payment of the sums secured by this
Security Deed pursuant to the foregoing sentence shall be made without any
Prepayment Consideration, provided that if Borrower receives any such award or
payment, Borrower pays such award or payment to Lender within one hundred twenty
(120) days following Borrower's receipt thereof, except that if an Event of
Default has occurred and is continuing, then such application shall be subject
to the Prepayment Consideration computed in accordance with the Note. Subject to
the provisions of clauses (i) through (v) of this Section 6(b), Lender shall not
exercise Lender's option to apply such awards or damages to payment of the sums
secured by this Security Deed provided that each of the conditions (as
applicable) to the release of insurance proceeds for restoration or repair of
the Property under Section 5.5 of the Loan Agreement have been satisfied with
respect to such condemnation awards or damages. Any application of proceeds to
principal shall not extend or postpone the due date of the monthly installments
due hereunder, under the Note or under any of the Loan Documents or change the
amount of such installments. Borrower agrees to execute

                                       6


such further evidence of assignment of any awards, proceeds, damages or claims
arising in connection with such condemnation or taking as Lender may reasonably
require.

         7.       LEASES AND RENTS. To the extent the terms of this Section 7
are inconsistent with the terms of the Loan Agreement or the Assignment of
Leases and Rents, the terms of the Loan Agreement and the Assignment of Leases
and Rents shall control. Borrower does hereby absolutely and unconditionally
assign to Lender, all Borrower's right, title and interest in all current and
future Leases and Rents, it being intended by Borrower that this assignment
constitutes a present, absolute assignment and not an assignment for additional
security only. Such assignment to Lender shall not be construed to bind Lender
to the performance of any of the covenants, conditions or provisions contained
in any such Lease or otherwise impose any obligation upon Lender. Borrower
agrees to execute and deliver to Lender such additional instruments, in form and
substance reasonably satisfactory to Lender, as may hereafter be reasonably
requested by Lender to further evidence and confirm such assignment.
Notwithstanding the provisions of this Section 7, so long as no Event of Default
shall have occurred and be continuing under the Loan Documents, Borrower shall
have the sole but revocable right and license to act as landlord under the
Leases and to enforce the covenants of the Leases, provided, however, Borrower
acknowledges it has no right to collect or use Rents except in accordance with
the terms and conditions of Article VII of the Loan Agreement and the Cash
Management Agreement. Upon the occurrence and during the continuance of an Event
of Default, without the need for notice or demand, the license granted to
Borrower herein shall automatically be revoked. Lender is hereby granted and
assigned by Borrower the right, at its option, upon revocation of the license
granted herein, to enter upon the Property in person, by agent or by
court-appointed receiver to collect the Rents. Subject to the terms of the Loan
Agreement, any Rents collected after the revocation of the license shall be
applied by Lender in accordance with the Loan Agreement. Borrower expressly
understands that any and all proposed leases are included in the definition of
"LEASE" or "LEASES" as such terms may be used throughout this Security Deed, the
Note and the other Loan Documents.

         8.       OPERATION AND MAINTENANCE OF PROPERTY. Borrower shall cause
the Property to be operated and maintained in accordance with Section 5.5 of the
Loan Agreement.

         9.       TRANSFER OR ENCUMBRANCE OF THE PROPERTY.

                  (a)      Borrower acknowledges that Lender has examined and
relied on the creditworthiness and experience of Borrower in owning and
operating properties such as the Property in agreeing to make the Loan, and that
Lender will continue to rely on Borrower's ownership of the Property as a means
of maintaining the value of the Property as security for repayment of the Debt.
Borrower acknowledges that Lender has a valid interest in maintaining the value
of the Property so as to ensure that, should Borrower default in the repayment
of the Debt, Lender can recover the Debt by a sale of the Property. Except as
expressly permitted under this Security Deed, the Loan Agreement or under the
other Loan Documents, Borrower shall not cause or suffer to occur or exist,
directly or indirectly, voluntarily or involuntarily, by operation of law or
otherwise, any sale, transfer, mortgage, pledge, lien or encumbrance (other than
Permitted Encumbrances) (collectively, "TRANSFERS") of (i) all or any part of
the Property or (ii) any direct or indirect beneficial ownership interest (in
whole or part) in Borrower, irrespective of the number of tiers of ownership,
without the prior written consent of Lender.

                                       7


                  (b)      The occurrence of any Transfer in violation of this
Section 9 shall constitute an Event of Default hereunder, whereupon Lender at
its option, without being required to demonstrate any actual impairment of its
security or any increased risk of default hereunder, may declare the Debt
immediately due and payable.

                  (c)      Lender's consent to one Transfer shall not be deemed
to be a waiver of Lender's right to require such consent to any future
occurrence of same. Any Transfer made in contravention of this paragraph shall
be null and void and of no force and effect.

                  (d)      Borrower agrees to bear and shall pay or reimburse
Lender on demand for all reasonable expenses (including, without limitation,
reasonable attorneys' fees and disbursements. title search costs and title
insurance endorsement premiums) incurred by Lender in connection with the
review, approval and documentation of any such Transfer which requires the
consent of Lender.

         10.      CHANGES IN LAWS REGARDING TAXATION. If any law is enacted or
adopted or amended after the date of this Security Deed which deducts the Debt
from the value of the Property for the purpose of taxation or which imposes a
tax, either directly or indirectly, on the Debt or Lender's interest in the
Property, Borrower will pay such tax, with interest and penalties thereon, if
any. In the event Lender is advised by counsel chosen by it that the payment of
such tax or interest and penalties by Borrower would be unlawful or taxable to
Lender or unenforceable or provide the basis for a defense of usury, then in any
such event, Lender shall have the option, by written notice of not less than
ninety (90) days, to declare the Debt immediately due and payable and, provided
no Event of Default exists, no Prepayment Consideration shall be due in
connection therewith.

         11.      NO CREDITS ON ACCOUNT OF THE DEBT. Borrower will not claim or
demand or be entitled to any credit or credits on account of the Debt for any
part of the Taxes or Other Charges assessed against the Property, or any part
thereof, and no deduction shall otherwise be made or claimed from the assessed
value of the Property, or any part thereof, for real estate tax purposes by
reason of this Security Deed or the Debt. In the event such claim, credit or
deduction shall be required by law, Lender shall have the option, by written
notice of not less than ninety (90) days, to declare the Debt immediately due
and payable and, provided no Event of Default exists, no Prepayment
Consideration shall be due in connection therewith.

         12.      DOCUMENTARY STAMPS. If at any time the United States of
America, any State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Note or this Security Deed, or
impose any other tax or charge on the same, Borrower will pay for the same, with
interest and penalties thereon, if any.

         13.      PERFORMANCE OF OTHER AGREEMENTS. Borrower shall observe and
perform each and every material term to be observed or performed by Borrower
pursuant to the terms of any agreement or recorded instrument (including all
instruments comprising the Permitted Encumbrances) affecting or pertaining to
the Property, and will not suffer or permit any default or event of default
(after giving effect to any applicable notice requirements and cure periods) to
exist under any of the foregoing.

                                       8


         14.      FURTHER ACTS; SECONDARY MARKET TRANSACTIONS.

                  (a)      Borrower will, at the sole cost and expense of
Borrower, and without expense to Lender, do, execute, acknowledge and deliver
all and every such further acts, deeds, conveyances, mortgages, assignments,
notices of assignment, Uniform Commercial Code financing statements or
continuation statements, transfers and assurances as Lender shall, from time to
time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Lender the property and rights hereby deeded,
given, granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed,
pledged and assigned or intended now or hereafter so to be, or which Borrower
may be or may hereafter become bound to convey or assign to Lender, or for
carrying out the intention or facilitating the performance of the terms of this
Security Deed or for filing, registering or recording this Security Deed or for
facilitating the sale of the Loan and the Loan Documents as described in
subparagraph (b) below. Borrower, on demand, will deliver and hereby authorizes
Lender to file in the name of Borrower, one or more financing statements,
chattel mortgages or other instruments, to evidence more effectively the
security interest of Lender in the Property. Upon foreclosure or the appointment
of a receiver, Borrower will, at its sole cost and expense, and without expense
to Lender, cooperate fully and completely to effect the assignment or transfer
of any license, permit, agreement or any other right necessary or useful to the
operation of the Property. Borrower grants to Lender an irrevocable power of
attorney coupled with an interest for the purpose of exercising and perfecting
any and all rights and remedies available to Lender at law and in equity,
including, without limitation, such rights and remedies available to Lender
pursuant to this paragraph.

                  (b)      Subject to the terms and conditions set forth in the
Loan Agreement, Lender shall have the right to engage in one or more Secondary
Market Transactions (as defined in the Loan Agreement) and, in connection
therewith, Lender may transfer its obligations under this Security Deed, the
Loan Agreement and under the other Loan Documents (or may transfer the portion
thereof corresponding to the transferred portion of the Debt), and thereafter
Lender shall be relieved of any obligations hereunder and under the other Loan
Documents arising after the date of said transfer with respect to the
transferred interest.

         15.      RECORDING OF SECURITY DEED, ETC. Borrower forthwith upon the
execution and delivery of this Security Deed and thereafter, from time to time,
will cause this Security Deed, and any security instrument creating a lien or
security interest or evidencing the lien hereof upon the Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Lender in, the Property. Borrower will pay all
filing, registration or recording fees, and all expenses incident to the
preparation, execution and acknowledgment of this Security Deed, any deed of
trust supplemental hereto, any security instrument with respect to the Property
and any instrument of further assurance, and all federal, state, county and
municipal, taxes, duties, imposts, assessments and charges arising out of or in
connection with the execution and delivery of this Security Deed, any deed of
trust supplemental hereto, any security instrument with respect to the Property
or any instrument of further assurance, except where prohibited by law so to do.
Borrower shall hold harmless and indemnify Lender, its successors and assigns,
against any liability incurred by reason of the imposition of any tax on the
making and recording of this Security Deed.

                                       9


         16.      REPORTING REQUIREMENTS. Borrower agrees to give prompt notice
to Lender of the insolvency or bankruptcy filing of Borrower or the death,
insolvency or bankruptcy filing of any Guarantor.

         17.      EVENTS OF DEFAULT. The Debt shall become immediately due and
payable at the option of Lender upon the happening of any Event of Default. The
term "EVENT OF DEFAULT" as used in this Security Deed shall have the meaning
given such term in the Loan Agreement.

         18. RIGHT TO CURE DEFAULTS. Upon the occurrence and during the
continuance of any Event of Default Lender may, but without any obligation to do
so and without notice to or demand on Borrower and without releasing Borrower
from any obligation hereunder, make or do the same in such manner and to such
extent as Lender may deem necessary to protect the security hereof. Lender is
authorized to enter upon the Property for such purposes or appear in, defend, or
bring any action or proceeding to protect its interest in the Property or to
foreclose this Security Deed or collect the Debt, and the cost and expense
thereof (including reasonable attorneys' fees and disbursements to the extent
permitted by law), with interest at the Default Rate (as defined in the Loan
Agreement) for the period after notice from Lender that such cost or expense was
incurred to the date of payment to Lender, shall constitute a portion of the
Debt, shall be secured by this Security Deed and the other Loan Documents and
shall be due and payable to Lender upon demand.

         19.      REMEDIES.

                  (a)      Upon the occurrence and during the continuance of any
Event of Default, Lender may take such action, without notice or demand, as it
deems advisable to protect and enforce its rights against Borrower and in and to
the Property by Lender itself or otherwise, including, without limitation, the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as Lender may determine, in its sole discretion,
without impairing or otherwise affecting the other rights and remedies of
Lender:

                           (i)      declare the entire Debt to be immediately
due and payable;

                           (ii)     institute a proceeding or proceedings,
judicial or nonjudicial, by advertisement or otherwise, for the complete
foreclosure of this Security Deed in which case the Property or any interest
therein may be sold for cash or upon credit in one or more parcels or in several
interests or portions and in any order or manner;

                           (iii)    with or without entry, to the extent
permitted and pursuant to the procedures provided by applicable law, institute
proceedings for the partial foreclosure of this Security Deed for the portion of
the Debt then due and payable, subject to the continuing lien of this Security
Deed for the balance of the Debt not then due;

                           (iv)     sell for cash or upon credit the Property or
any part thereof and all estate, claim, demand, right, title and interest of
Borrower therein and rights of redemption thereof, pursuant to the power of sale
contained herein or otherwise, at one or more sales, as an entirety or in
parcels, at such time and place, upon such terms and after such notice thereof
as may be required or permitted by law;

                                       10


                           (v)      institute an action, suit or proceeding in
equity for the specific performance of any covenant, condition or agreement
contained herein, or in any of the other Loan Documents;

                           (vi)     recover judgment on the Note either before,
during or after any proceedings for the enforcement of this Security Deed,
subject to compliance with statutory sale confirmation procedures;

                           (vii)    apply for the appointment of a trustee,
receiver, liquidator or conservator of the Property, to the extent permitted by
applicable law, without notice and without regard for the adequacy of the
security for the Debt and without regard for the solvency of the Borrower, any
Guarantor or of any person, firm or other entity liable for the payment of the
Debt;

                           (viii)   enforce Lender's interest in the Leases and
Rents and enter into or upon the Property, either personally or by its agents,
nominees or attorneys and dispossess Borrower and its agents and servants
therefrom, and thereupon Lender may (A) use, operate, manage, control, insure,
maintain, repair, restore and otherwise deal with all and every part of the
Property and conduct the business thereat; (B) complete any construction on the
Property in such manner and form as Lender deems advisable; (C) make
alterations, additions, renewals, replacements and improvements to or on the
Property; (D) exercise all rights and powers of Borrower with respect to the
Property, whether in the name of Borrower or otherwise, including, without
limitation, the right to make, cancel, enforce or modify Leases, obtain and
evict tenants, and demand, sue for, collect and receive all Rents; and (E) apply
the receipts from the Property to the payment of Debt, after deducting therefrom
all expenses (including reasonable attorneys' fees and disbursements) incurred
in connection with the aforesaid operations and all amounts necessary to pay the
taxes, assessments insurance and other charges in connection with the Property,
as well as just and reasonable compensation for the services of Lender, its
counsel, agents and employees; or

                           (ix)     pursue such other rights and remedies as may
be available at law or in equity or under the Uniform Commercial Code.

In the event of a sale, by foreclosure or otherwise, of less than all of the
Property, this Security Deed shall continue as a lien on the remaining portion
of the Property.

                  (b)      The proceeds of any sale made under or by virtue of
this paragraph, together with any other sums which then may be held by Lender
under this Security Deed, whether under the provisions of this paragraph or
otherwise, shall be applied by Lender to the payment of the Debt in such
priority and proportion as Lender in its sole discretion shall deem proper.

                  (c)      Lender may adjourn from time to time any sale by it
to be made under or by virtue of this Security Deed by announcement at the time
and place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law, Lender, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.

                                       11


                  (d)      Upon the completion of any sale or sales pursuant
hereto, Lender, or an officer of any court empowered to do so, shall execute and
deliver to the accepted purchaser or purchasers a good and sufficient
instrument, or good and sufficient instruments, conveying, assigning and
transferring all estate, right, title and interest in and to the property and
rights sold. Any sale or sales made under or by virtue of this paragraph,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, shall
operate to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of Borrower in and to the properties
and rights so sold, and shall be a perpetual bar both at law and in equity
against Borrower and against any and all persons claiming or who may claim the
same, or any part thereof from, through or under Borrower.

                  (e)      Upon any sale made under or by virtue of this
paragraph, whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale, Lender may bid for and acquire the Property or any part thereof and in
lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Debt the net sales price after deducting therefrom the
expenses of the sale and costs of the action and any other sums which Lender is
authorized to deduct under this Security Deed.

                  (f)      No recovery of any judgment by Lender and no levy of
an execution under any judgment upon the Property or upon any other property of
Borrower shall affect in any manner or to any extent the lien of this Security
Deed upon the Property or any part thereof, or any liens, rights, powers or
remedies of Lender hereunder, but such liens, rights, powers and remedies of
Lender shall continue unimpaired as before.

                  (g)      Lender may terminate or rescind any proceeding or
other action brought in connection with its exercise of the remedies provided in
this paragraph at any time before the conclusion thereof, as determined in
Lender's sole discretion and without prejudice to Lender.

                  (h)      Lender may resort to any remedies and the security
given by the Note, this Security Deed or the other Loan Documents in whole or in
part, and in such portions and in such order as determined in Lender's sole
discretion. No such action shall in any way be considered a waiver of any
rights, benefits or remedies evidenced or provided by the Note, this Security
Deed or any of the other Loan Documents. The failure of Lender to exercise any
right, remedy or option provided in the Note, this Security Deed or any of the
other Loan Documents shall not be deemed a waiver of such right, remedy or
option or of any covenant or obligation secured by the Note, this Security Deed
or the other Loan Documents. No acceptance by Lender of any payment after the
occurrence of any Event of Default and no payment by Lender of any obligation
for which Borrower is liable hereunder shall be deemed to waive or cure any
Event of Default with respect to Borrower, or Borrower's liability to pay such
obligation. No sale of all or any portion of the Property, no forbearance on the
part of Lender, and no extension of time for the payment of the whole or any
portion of the Debt or any other indulgence given by Lender to Borrower, shall
operate to release or in any manner affect the interest of Lender in the
remaining Property or the liability of Borrower to pay the Debt. No waiver by
Lender shall be effective unless it is in writing and then only to the extent
specifically stated. All reasonable costs and expenses of Lender in exercising
its rights and remedies under this paragraph (including

                                       12


reasonable attorneys' fees actually incurred and disbursements to the extent
permitted by law), shall be paid by Borrower immediately upon notice from
Lender, with interest at the Default Rate for the period after notice from
Lender and such costs and expenses shall constitute a portion of the Debt and
shall be secured by this Security Deed.

                  (i) The interests and rights of Lender under the Note, this
Security Deed or in any of the other Loan Documents shall not be impaired by any
indulgence, including (i) any renewal, extension or modification which Lender
may grant with respect to any of the Debt, (ii) any surrender, compromise,
release, renewal, extension, exchange or substitution which Lender may grant
with respect to the Property or any portion thereof; or (iii) any release or
indulgence granted to any maker, endorser, Guarantor or surety of any of the
Debt.

         20.      RIGHT OF ENTRY. In addition to any other rights or remedies
granted under this Security Deed, Lender and its agents shall have the right to
enter and inspect the Property at any reasonable time during the Term. The
reasonable cost of such inspections or audits shall be borne by Borrower should
Lender determine that an Event of Default exists, including the cost of all
follow up or additional investigations or inquiries deemed reasonably necessary
by Lender. The reasonable cost of such inspections, if not paid for by Borrower
within ten (10) Business Days of demand thereof, may be added to the principal
balance of the sums due under the Note and this Security Deed and shall bear
interest thereafter until paid at the Default Rate.

         21.      SECURITY AGREEMENT. This conveyance is intended to operate and
is to be construed as a deed passing the title to the Property to Lender and is
made under those provisions of the existing laws of the State of Georgia
relating to deeds to secure debt (including, e.g., O.C.G.A. Section 44-14-60),
and not as a mortgage, and this Security Deed also constitutes a "security
agreement" within the meaning of the Uniform Commercial Code, and the Property
includes both real and personal property and all other rights and interest,
whether tangible or intangible in nature, of the Borrower in the Property. The
Borrower by executing and delivering this Security Deed has granted to the
Lender, to secure the payment to Lender of the Debt at the time and in the
manner provided for its payment in the Note and in this Security Deed, a
security interest in the Property to the full extent the Property may be subject
to the Uniform Commercial Code (said portion of the Property so subject to the
Uniform Commercial Code being called in this paragraph the "COLLATERAL").
Borrower hereby agrees with Lender to execute and deliver to Lender, in form and
substance reasonably satisfactory to Lender, such financing statements and such
further assurances as Lender may from time to time, reasonably consider
necessary to create, perfect, and preserve Lender's security interest herein
granted. To the extent permitted by law, this Security Deed shall also
constitute a "fixture filing" for the purposes of the Uniform Commercial Code as
to all or any items of the Collateral that are or are to become fixtures under
the Uniform Commercial Code. Information concerning the security interest herein
granted may be obtained from the parties at the addresses of the parties set
forth in the first paragraph of this Security Deed. If an Event of Default shall
occur, Lender, in addition to any other rights and remedies which it may have,
shall have and may exercise immediately and without demand, any and all rights
and remedies granted to a secured party upon default under the Uniform
Commercial Code, including, without limiting the generality of the foregoing,
the right to take possession of the Collateral or any part thereof, and to take
such other measures as Lender may deem necessary for the care, protection and
preservation of the Collateral. Upon request or demand of Lender after the
occurrence and during the continuance of an Event of Default,

                                       13


Borrower shall at its expense assemble the Collateral and make it available to
Lender at a convenient place reasonably acceptable to Lender. Borrower shall pay
to Lender within ten (10) Business Days of demand therefor any and all expenses,
including reasonable attorneys' fees and disbursements, incurred or paid by
Lender in protecting the interest in the Collateral and in enforcing the rights
hereunder with respect to the Collateral. Any notice of sale, disposition or
other intended action by Lender with respect to the Collateral sent to Borrower
in accordance with the provisions hereof at least ten (10) Business Days prior
to such action, shall constitute commercially reasonable notice to Borrower. The
proceeds of any disposition of the Collateral, or any part thereof, may be
applied by Lender to the payment of the Debt in such priority and proportions as
Lender in its sole discretion shall deem proper. In the event of any change in
name, identity or structure of any Borrower, such Borrower shall notify Lender
thereof and promptly after Lender's request shall execute, file and record such
Uniform Commercial Code forms as are necessary to maintain the priority of
Lender's lien upon and security interest in the Collateral, and shall pay all
reasonable expenses and fees in connection with the filing and recording
thereof. If Lender shall require the filing or recording of additional Uniform
Commercial Code forms or continuation statements, Borrower shall, promptly after
request, execute, file and record such Uniform Commercial Code forms or
continuation statements as Lender shall deem reasonably necessary, and shall pay
all reasonable expenses and fees in connection with the filing and recording
thereof, it being understood and agreed, however, that no such additional
documents shall increase Borrower's obligations or decrease Borrower's rights
under the Note, this Security Deed and any of the other Loan Documents. Borrower
hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an
interest, to file with the appropriate public office on its behalf any financing
or other statements signed only by Lender, as secured party, in connection with
the Collateral covered by this Security Deed.

         22.      ACTIONS AND PROCEEDINGS. Lender has the right to appear in and
defend any action or proceeding brought with respect to the Property and to
bring any action or proceeding, in the name and on behalf of Borrower, which
Lender, in its reasonable discretion, decides should be brought to protect their
interest in the Property. Lender shall, at its option, be subrogated to the lien
of any deed of trust or other security instrument discharged in whole or in part
by the Debt, and any such subrogation rights shall constitute additional
security for the payment of the Debt.

         23.      RECOVERY OF SUMS REQUIRED TO BE PAID. Lender shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.

         24.      MARSHALLING AND OTHER MATTERS. Borrower hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein. Further, Borrower hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Deed on behalf of Borrower, and on behalf of each
and every person acquiring any interest in or title to the Property subsequent
to the date of this Security Deed and

                                       14


on behalf of all persons to the extent permitted by applicable law. Lender shall
not be under any obligation to marshal any assets in favor of any Person or in
payment of any of the Debt.

         25.      HANDICAPPED ACCESS.

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

                  (b)      Without limiting the foregoing, Borrower shall cause
any alterations to the Property to comply with all applicable Access Laws. The
foregoing shall apply to tenant improvements constructed by Borrower or by any
of its tenants. Lender may condition any such approval upon receipt of a
certificate of Access Law compliance from an architect, engineer, or other
person acceptable to Lender.

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

         26.      INDEMNIFICATION. In addition to any other indemnifications
provided herein or in the other Loan Documents, Borrower shall protect, defend,
indemnify and save harmless Lender and its successors and assigns (including,
without limitation, the trustee and/or the trust under any trust agreement
executed in connection with any Secondary Market Transaction backed in whole or
in part by the Loan and any other person which may hereafter be the holder of
the Note or any interest therein), and the officers, directors, stockholders,
partners, members, employees, agents, and Affiliates of Lender and such
successors and assigns (each an "INDEMNIFIED PARTY") from and against all
liabilities, obligations, claims, demands, damages, penalties, causes of action,
losses, fines, costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements), imposed upon or incurred by or asserted
against any Indemnified Party by reason of: (a) ownership of this Security Deed,
the Property or any interest therein or receipt of any Rents; (b) any accident,
injury to or death of persons or loss of or damage to property occurring in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (c) any use,
nonuse or condition in, on or about the Property or any part thereof or on
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (d) any failure on the part of Borrower to perform or comply with any
of the terms of this Security Deed; (e) performance of any labor or services or
the furnishing of any materials or other property in respect of the Property or
any part thereof; (f) any failure of the Premises or the Improvements to comply
with any applicable law, statute, code, ordinance, rule or regulation including,
without limitation, any Access Laws; (g) any default by Borrower under this
Security Deed, the Loan Agreement or any of the other Loan Documents; (h) any
actions taken by any Indemnified Party in the enforcement of this Security Deed
and other Loan Documents in accordance with their respective terms; (i) any
representation or warranty made in the Note, this Security Deed or any of the
other Loan Documents being false

                                       15


or misleading in any material respect as of the date such representation or
warranty was made; (j) any claim by brokers, finders or similar persons claiming
to be entitled to a commission in connection with any Lease or other transaction
involving the Property or any part thereof under any legal requirement or any
liability asserted against Lender with respect thereto; and (k) the claims of
any lessee of any or any portion of the Property or any person acting through or
under any lessee or otherwise arising under or as a consequence of any Lease
(collectively, the "INDEMNIFIED LIABILITIES"), provided that Borrower shall not
have an obligation to an Indemnified Party hereunder with respect to the
Indemnified Liabilities arising from the fraud, gross negligence or willful
misconduct of such Indemnified Party as determined by a court of competent
jurisdiction. Any amounts payable to Lender by reason of the application of this
paragraph shall be secured by this Security Deed and shall become immediately
due and payable and shall bear interest at the Default Rate from the date loss
or damage is sustained by Lender until paid. The obligations and liabilities of
Borrower under this paragraph shall survive the termination, satisfaction, or
assignment of this Security Deed and the exercise by Lender of any of its rights
or remedies hereunder, including, but not limited to, the acquisition of the
Property by foreclosure or a conveyance in lieu of foreclosure.

         27.      NOTICES. Any notice, demand, statement, request or consent
made hereunder shall be in writing, addressed to the intended recipient at its
address set forth in the Loan Agreement, and shall be made and deemed given in
accordance with the terms of the Loan Agreement.

         28.      AUTHORITY. (a) Borrower (and the undersigned representative of
Borrower, if any) represent and warrant that it (or they, as the case may be)
has full power, authority and right to execute, deliver and perform its
obligations pursuant to this Security Deed, and to deed, give, grant, bargain,
sell, alien, enfeoff, convey, confirm, warrant, pledge and assign the Property
pursuant to the terms hereof and to keep and observe all of the terms of this
Security Deed on Borrower's part to be performed; and (b) Borrower represents
and warrants that Borrower is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended and the
related Treasury Department regulations, including temporary regulations.

         29.      NON-WAIVER. The failure of Lender to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Security Deed. Any consent or approval by Lender in any single instance
shall not be deemed or construed to be Lender's consent or approval in any like
matter arising at a subsequent date. Borrower shall not be relieved of
Borrower's obligations hereunder by reason of (a) the failure of Lender to
comply with any request of Borrower or any Guarantor to take any action to
foreclose this Security Deed or otherwise enforce any of the provisions hereof
or of the Note, or the other Loan Documents, (b) the release, regardless of
consideration, of the whole or any part of the Property, or of any person liable
for the Debt or any portion thereof, or (c) any agreement or stipulation by
Lender extending the time of payment or otherwise modifying or supplementing the
terms of the Note, this Security Deed or any of the other Loan Documents. Lender
may resort for the payment of the Debt to any other security held by Lender in
such order and manner as Lender, in its sole discretion, may elect. Lender may
take action to recover the Debt, or any portion thereof, or to enforce any
covenant hereof without prejudice to the right of Lender thereafter to
foreclosure this Security Deed. The rights and remedies of Lender under this
Security Deed shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of

                                       16


Lender shall be construed as an election to proceed under any one provision
herein to the exclusion of any other provision. Lender shall not be limited
exclusively to the rights and remedies herein stated but shall be entitled to
every right and remedy now or hereafter afforded at law or in equity.

         30.      NO ORAL CHANGE. This Security Deed, and any provisions hereof,
may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.

         31.      LIABILITY. Subject to the provisions hereof requiring Lender's
consent to any transfer of the Property, this Security Deed shall be binding
upon and inure to the benefit of Borrower and Lender and their respective
successors and assigns forever.

         32.      INAPPLICABLE PROVISIONS. If any term, covenant or condition of
the Note or this Security Deed is held to be invalid, illegal or unenforceable
in any respect, the Note and this Security Deed shall be construed without such
provision.

         33.      HEADINGS, ETC. The headings and captions of various paragraphs
of this Security Deed are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.

         34.      DUPLICATE ORIGINALS. This Security Deed may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.

         35.      DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Security Deed may be used interchangeably in singular or plural form and the
word "BORROWER" shall mean "each Borrower and any subsequent owner or owners of
the Property or any part thereof or any interest therein," the word "LENDER"
shall mean "Lender and any subsequent holder of the Note," the word "NOTE" shall
mean "the Note and any other evidence of indebtedness secured by this Security
Deed," the word "PERSON" shall include an individual, corporation, partnership,
trust, unincorporated association, government, governmental authority, and any
other entity, and the words "PROPERTY" shall include any portion of the Property
and any interest therein and the words "ATTORNEYS' FEES" shall include any and
all reasonable attorneys' fees, paralegal and law clerk fees, including, without
limitation, fees at the pre-trial, trial and appellate levels actually incurred
or paid by Lender in protecting its interest in the Property and Collateral and
enforcing its rights hereunder, but shall not mean statutory attorneys' fees
pursuant to O.C.G.A. Section 13-1-11. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.

         36.      HOMESTEAD. Borrower hereby waives and renounces all homestead
and exemption rights provided by the Constitution and the laws of the United
States and of any state, in and to the Property as against the collection of the
Debt, or any part hereof.

                                       17


         37.      ASSIGNMENTS. Lender shall have the right to assign or transfer
its rights under this Security Deed without limitation. Any assignee or
transferee shall be entitled to all the benefits afforded Lender under this
Security Deed.

         38.      WAIVER OF JURY TRIAL. EACH OF BORROWER AND LENDER HEREBY
AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND
WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST WITH REGARD TO THE NOTE, THIS SECURITY DEED, OR THE OTHER
LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. EACH OF BORROWER AND LENDER IS HEREBY AUTHORIZED TO FILE A
COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER
BY THE OTHER PARTY.

         39.      INTENTIONALLY OMITTED.

         40.      INTENTIONALLY OMITTED.

         41.      LIMITATIONS ON RECOURSE PROVISIONS. The obligations of
Borrower hereunder are subject to limitations on recourse as provided in Article
XII of the Loan Agreement.

         42.      MISCELLANEOUS.

                  (a)      Intentionally Omitted.

                  (b)      The Loan Documents contain the entire agreement
between Borrower and Lender relating to or connected with the Loan. Any other
agreements relating to or connected with the Loan not expressly set forth in the
Loan Documents are null and void and superseded in their entirety by the
provisions of the Loan Documents.

                  (c)      Borrower represents and warrants to Lender that, to
Borrower's knowledge, there has not been committed by Borrower or any other
person in occupancy of or involved with the operation or use of the Property any
act or omission affording the federal government or any state or local
government the right of forfeiture as against the Property or any part thereof
or any monies paid in performance of Borrower's obligations under the Note or
under any of the other Loan Documents. Borrower hereby covenants and agrees not
to commit, intentionally permit or suffer to exist any act, omission or
circumstance affording such right of forfeiture. In furtherance thereof,
Borrower hereby indemnifies Lender and agrees to defend and hold Lender harmless
from and against any loss, damage or injury by reason of the breach of the
covenants and agreements or the representations and warranties set forth in this
paragraph. Without limiting the generality of the foregoing, the filing of
formal charges or the commencement of proceedings against Borrower or all or any
part of the Property under any federal or state law for which forfeiture of the
Property or any part thereof or of any monies paid in performance of Borrower's
obligations under the Loan Documents is a potential result, shall,

                                       18


at the election of Lender, constitute an Event of Default hereunder without
notice or opportunity to cure.

                  (d)      Borrower acknowledges that, with respect to the Loan,
Borrower is relying solely on its own judgement and advisors in entering into
the Loan without relying in any manner on any statements, representations or
recommendations of Lender or any parent, subsidiary or affiliate of Lender.
Borrower acknowledges that Lender engages in the business of real estate
financings and other real estate transactions and investments which may be
viewed as adverse to or competitive with the business of the Borrower or its
affiliates. Borrower acknowledges that it is represented by competent counsel
and has consulted counsel before executing the Loan Documents.

                  (e)      Intentionally Omitted.

                  (f)      This Security Deed and the obligations arising
hereunder shall be governed by and construed in accordance with the laws of the
State of New York and any applicable laws of the United States of America,
except that at all times the provisions for the creation, perfection and
enforcement of the liens and the security interests created pursuant to this
Security Deed shall be governed by the laws of the State where the Premises are
located.

         43.      FUTURE ADVANCES. This Security Deed secures "FUTURE ADVANCES,"
as hereinafter defined. Any portion of the Debt which is incurred after the
execution of this Security Deed pursuant to any instrument referring to this
Security Deed, or which is evidenced by any instrument stating that said
indebtedness is secured by this Security Deed, shall be defined as a "FUTURE
ADVANCE," including, without limitation, indebtedness incurred or advanced by
Lender to Borrower or pursuant to the Loan Documents. It is agreed that the Loan
Documents are intended to secure all of the debts and obligations referred to in
the Loan Documents, some of which will be obligatory future advances, and all
advances under the Loan Documents will be for commercial purposes. This
Paragraph shall serve as notice to any subsequent holder of a lien, encumbrance,
security title or other claim in and to the Property that Lender claims the
priority of the lien of this Security Deed for all such Future Advances, as well
as for all other obligations secured hereby. This Paragraph shall also be notice
that Lender reserves the right, upon agreement thereto with Borrower, to modify,
extend, consolidate, and renew the Debt, or any portions thereof, and the rate
of interest charged thereon, without affecting the priority of the lien created
by this Security Deed.

         44.      CROSS-COLLATERALIZATION. The mortgages, deeds to secure debt
and deeds of trust (other than this Security Deed) listed on EXHIBIT B attached
hereto and made a part hereof, as any of same may be amended, modified or
supplemented from time to time, are collectively referred to for purposes of
this Section 44 as the "OTHER SECURITY INSTRUMENTS." This Security Deed, as it
may be amended, modified or supplemented from time to time, together with the
Security Instruments, are collectively referred to for purposes of this Section
44 as the "SECURITY INSTRUMENTS." The Debt is secured by, among other things,
the Security Instruments, which encumber real and personal property in the
States set forth on EXHIBIT B, as more particularly described in each of the
Security Instruments. The Debt may be accelerated as provided in the Loan
Documents. Upon the occurrence and during the continuance of an Event of
Default, Lender may, at its option, accelerate the Debt and foreclose upon any
one or more of the Security

                                       19


Instruments or resort to any one or more of its other rights and remedies under
any or all of the Security Instruments and the other Loan Documents. Except as
otherwise provided herein, all of the real and personal property conveyed and/or
encumbered by the Security Instruments are security for the Debt without
allocation of any one or more of the parcels or portions thereof to any portion
of the Debt. Lender may allocate the proceeds that it receives upon the exercise
of its rights and remedies, including foreclosure, to payment of the Debt as
Lender in its sole discretion may determine to be advisable pursuant to the
terms of the Loan Documents. Lender may proceed, at the same or different times,
to foreclose the Security Instruments or any one or more of them, by any
proceedings appropriate in the state where any of the real property encumbered
by one or more of the Security Instruments lies, including private sale if
permitted, and no event of enforcement taking place in any state, including
without limiting the generality of the foregoing, any pending foreclosure,
judgment or decree of foreclosure, foreclosure sale, rents received, possession
taken, deficiency judgment or decrees, or judgment taken on the Debt, shall in
any way stay, preclude or bar enforcement of the Security Instruments or any of
them in any other state, and Lender may pursue any or all of its remedies to the
maximum extent permitted by applicable law pursuant to the terms of the Loan
Documents until all of the Debt and all other obligations now or hereafter
secured by any or all of the Security Instruments have been paid or discharged
in full. Additionally, and without limitation of any other provision of this
Security Deed, if this Security Deed is foreclosed and the Property is sold (or
any part thereof) pursuant to foreclosure or other proceedings, and if the
proceeds of such sale (after application of such proceeds as provided in this
Security Deed and the other Loan Documents) are not sufficient to pay the total
sum of the Debt then outstanding and any other amounts provided for by
applicable law (the "BALANCE OWED"), then, to the extent permitted by law, the
Debt shall not be satisfied to the extent of the Balance Owed, but such Debt
shall continue in existence and continue to be evidenced and secured by the Loan
Documents and the Security Instruments. Subject to the requirements of
applicable law, if Lender shall acquire the Property as a result of any
foreclosure or other sale (whether by bidding all or any portion of the Debt or
otherwise), the proceeds of such sale, to the extent permitted by law, shall not
be deemed to include (and Borrower shall not be entitled to any benefit or
credit on account of) proceeds of any subsequent sale of the Property by Lender.
Without limitation of any other provision hereof, Borrower further agrees that
if any of the Other Security Instruments are foreclosed and sale is made of any
of the property subject to any Other Security Instruments, and if the proceeds
of such sale (after application of such proceeds as provided for herein and
after deducting all accrued and general and special taxes and assessments) are
not sufficient to pay the Debt and any other amounts provided for by applicable
law, then, to the extent permitted by law, the Debt then outstanding shall not
be satisfied to the extent of the Balance Owed, but such Debt shall continue in
existence and continue to be evidenced and secured by the Loan Documents and the
Security Instruments existing immediately prior to any such foreclosure, except
such Security Instruments foreclosed upon. No release of personal liability, if
any, of any Person whatsoever and no release of any portion of the property now
or hereafter subject to the lien of any of the Security Instruments shall have
any effect whatsoever by way of impairment or disturbance of the lien or
priority of any other of the Security Instruments or the unreleased properties
encumbered by any of the Security Instruments, to the extent permitted by law.
Any foreclosure or other appropriate remedy brought in any of the states
aforesaid may be brought and prosecuted as to any part of the security, wherever
located, without regard to the fact that foreclosure proceedings or other
remedies have or have not been instituted elsewhere on any other property
subject to the lien of

                                       20


the Security Instruments. Neither Borrower nor any Person claiming by, through
or under Borrower shall have any right to marshal the assets, all such rights
being hereby expressly waived as to Borrower and all Persons claiming by,
through or under Borrower, Debt, without limitation, junior lienors. Each of
Borrower and all endorsers, guarantors and sureties of the Debt, hereby waives
any and all rights arising because of payment or performance by Borrower of any
Debt (a) against any Person by way of subrogation of the rights of Lender or (b)
against any Person obligated to pay or perform the Debt or other obligations
secured by the Other Security Instruments by way of contribution, reimbursement
or otherwise.

         45.      SPECIAL STATE PROVISIONS.

                  (a)      Borrower represents and warrants to Lender that
neither all of the Property nor any part thereof is to be used as a dwelling
place by Borrower at the time this Security Deed is entered into and,
accordingly, the notice requirements of O.C.G.A. Section 44-14-162.2 shall not
be applicable to any exercise of the power of sale contained in this Security
Deed.

                  (b)      The interest of Lender under this Security Deed and
the liability and obligation of Borrower for the payment of the Debt arise from
a "commercial transaction" within the meaning of O.C.G.A. Section 44-14-260(1).
Accordingly, pursuant to O.C.G.A. Section 44-14-263, Borrower waives any and all
rights which Borrower may have to notice prior to seizure by Lender following an
Event of Default of any interest in personal property of Borrower which
constitutes part of the Property, whether such seizure is by writ of possession
or otherwise.

                  (c)      BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT BORROWER
MAY HAVE UNDER THE CONSTITUTION OF THE STATE OF GEORGIA OR THE CONSTITUTION OF
THE UNITED STATES OF AMERICA TO NOTICE OR TO A JUDICIAL HEARING PRIOR TO THE
EXERCISE OF ANY RIGHT OR REMEDY PROVIDED TO LENDER BY THIS SECURITY DEED, AND
WAIVES BORROWER'S RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE UNDER
POWER DULY CONSUMMATED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECURITY DEED
ON THE GROUND (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT PRIOR
NOTICE OR JUDICIAL HEARING OR BOTH. BORROWER FURTHER HEREBY EXPRESSLY WAIVES ALL
HOMESTEAD EXEMPTION RIGHTS, IF ANY, WHICH BORROWER MAY HAVE PURSUANT TO THE
CONSTITUTION OF THE UNITED STATES, THE STATE OF GEORGIA OR ANY OTHER STATE OF
THE UNITED STATES, IN AND TO THE PROPERTY AS AGAINST THE COLLECTION OF THE
OBLIGATION, OR ANY PART THEREOF. ALL WAIVERS BY BORROWER IN THIS SUBSECTION HAVE
BEEN MADE VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY BY BORROWER, AFTER BORROWER
HAS BEEN AFFORDED AN OPPORTUNITY TO BE INFORMED BY COUNSEL OR BORROWER'S CHOICE
AS TO POSSIBLE ALTERNATIVE RIGHTS. BORROWER'S EXECUTION OF THIS SECURITY DEED
SHALL BE CONCLUSIVE EVIDENCE OF THE WAIVER AND THAT SUCH WAIVER HAS BEEN
VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY MADE.

                  (d)      Rights of Lender Upon Event of Default. If an Event
of Default shall have occurred, then the entire Debt and any other indebtedness
of the Borrower to the Lender shall, at

                                       21


the option of Lender, immediately become due and payable without notice or
demand, time being of the essence, and Lender, at its option, may do any one or
more of the following (and, if more than one, either concurrently or
independently, and in such order as Lender may determine in its discretion), all
without regard to the adequacy or value of the security for the Debt and any
other indebtedness of the Borrower to the Lender:

                           (i)      Enter upon and take possession of the
         Premises without the appointment of a receiver, or an application
         therefor; at its option, operate the Premises; at its option, exclude
         Borrower and its agents and employees wholly therefrom; at its option,
         employ a managing agent of the Premises; and at its option, exercise
         any one or more of the rights and powers of Borrower to the same extent
         as Borrower could, either in its own name, or in the name of Borrower;
         and, with or without taking possession of the Premises, receive the
         rents, incomes, issues, profits and revenues of the Premises.

                           (ii)     Apply, as a matter of strict right, without
         notice and without regard to the solvency of any party bound for its
         payment, for the appointment of a receiver to take possession of and to
         operate the Premises and to collect and apply the incomes, rents,
         issues, profits and revenues thereof.

                           (iii)    Pay, perform or observe any term, covenant
         or condition of this Security Deed and any of the other Loan Documents
         and all reasonable payments made or reasonable costs or expenses
         incurred by Lender in connection therewith shall be secured hereby and
         shall be, without demand, immediately repaid by Borrower to Lender with
         interest thereon at the Default Rate. The necessity for any such
         actions and of the amounts to be paid shall be determined by Lender in
         its discretion. Lender is hereby empowered to enter and to authorize
         others to enter upon the Premises or any part thereof for the purpose
         of performing or observing any such defaulted term, covenant or
         condition without thereby becoming liable to Borrower or any person in
         possession holding under Borrower. Borrower hereby acknowledges and
         agrees that the remedies set forth in this clause (iii) shall be
         exercisable by Lender, and any and all reasonable payments made or
         reasonable costs or expenses incurred by Lender in connection therewith
         shall be secured hereby and shall be, without demand, immediately
         repaid by Borrower with interest thereon at the Default Rate,
         notwithstanding the fact that such remedies were exercised and such
         payments made and costs incurred by Lender after the filing by Borrower
         of a voluntary case or the filing against Borrower of an involuntary
         case pursuant to or within the meaning of the Bankruptcy Code, Title 11
         U.S.C., or after any similar action pursuant to any other debtor relief
         law (whether statutory, common law, case law or otherwise) of any
         jurisdiction whatsoever, now or hereafter in effect, which may be or
         become applicable to Borrower, Lender, the Debt and any other
         indebtedness of the Borrower to the Lender or any of the Loan
         Documents.

                           (iv)     Sell the Premises or any part of the
         Premises at one or more public sale or sales at the usual place for
         conducting sales in the county in which the Premises or any part of the
         Premises is situated, to the highest bidder for cash, in order to
         satisfy the Debt and/or pay any other indebtedness of the Borrower to
         the Lender, and all expenses of sale and of all proceedings in
         connection therewith, including reasonable attorneys' fees, after
         advertising the time, place and terms of sale once a week for four (4)
         weeks

                                       22


         immediately preceding such sale (but without regard to the number of
         days) in a newspaper in which sheriff's sales are advertised in said
         county, all other notice being hereby waived by Borrower. At any such
         public sale, Lender may execute and deliver to the purchaser a
         conveyance of the Premises or any part of the Premises in fee simple,
         with full warranties of title, and to this end Borrower hereby
         constitutes and appoints Lender the agent and attorney-in-fact of
         Borrower to make such sale and conveyance, and thereby to divest
         Borrower of all right, title and equity that Borrower may have in and
         to the Premises and to vest the same in the purchaser or purchasers at
         such sale or sales, and all the acts and doings of said agent and
         attorney-in-fact are hereby ratified and confirmed, and any recitals in
         said conveyance or conveyances as to facts essential to a valid sale
         shall be binding upon Borrower. The aforesaid power of sale and agency
         hereby granted are coupled with an interest and are irrevocable by
         death or otherwise, and shall not be exhausted by one exercise thereof
         but may be exercised until full satisfaction of the Debt and full
         payment of any other indebtedness of the Borrower to the Lender. In the
         event of any sale under this Security Deed by virtue of the exercise of
         the powers herein granted, or pursuant to any order in any judicial
         proceeding or otherwise, the Premises may be sold as an entirety or in
         separate parcels and in such manner or order as Lender in its
         discretion may elect, and if Lender so elects, Lender may sell the
         personal property covered by this Security Deed concurrently with the
         real property covered hereby or at one or more separate sales in any
         manner permitted by the Uniform Commercial Code, and one or more
         exercises of the powers herein granted shall not extinguish nor exhaust
         such powers, until the entire Premises are sold or the Debt are fully
         satisfied and any other indebtedness of the Borrower to the Lender is
         paid in full. Lender may, at its option, sell the Premises subject to
         the rights of any tenants of the Premises, and the failure to make any
         such tenants parties to any foreclosure proceedings and to foreclose
         their rights will not be asserted by Borrower to be a defense to any
         proceedings instituted by Lender to satisfy the Debt and/or collect any
         other indebtedness of the Borrower to the Lender. If the Debt and any
         other indebtedness of the Borrower to the Lender is now or hereafter
         further secured by any chattel mortgages, pledges, contracts of
         guaranty, assignments of lease or other security instruments, Lender
         may at its option exhaust the remedies granted under any of said
         security either concurrently or independently, and in such order as
         Lender may determine in its discretion. Upon any foreclosure sale,
         Lender may bid for and purchase the Premises and shall be entitled to
         apply all or any part of the Debt and any other indebtedness of the
         Borrower to the Lender as a credit to the purchase price. In the event
         of any such foreclosure sale by Lender, Borrower shall be deemed a
         tenant holding over and shall forthwith deliver possession to the
         purchaser or purchasers at such sale or be summarily dispossessed
         according to provisions of law applicable to tenants holding over. In
         case Lender shall have proceeded to enforce any right, power or remedy
         under this Security Deed by foreclosure, entry or otherwise or in the
         event Lender commences advertising of the intended exercise of the sale
         under power provided hereunder, and such proceeding or advertisement
         shall have been withdrawn, discontinued or abandoned for any reason,
         then in every such case (i) Borrower and Lender shall be restored to
         their former positions and rights, (ii) all rights, powers and remedies
         of Lender shall continue as if no such proceeding had been taken, (iii)
         each and every Event of Default declared or occurring prior or
         subsequent to such withdrawal, discontinuance or abandonment shall

                                       23


         be deemed to be a continuing Event of Default, and (iv) neither this
         Security Deed, nor the Guaranty, nor the Debt or any other indebtedness
         of the Borrower to the Lender, nor any other Loan Document shall be or
         shall be deemed to have been reinstated or otherwise affected by such
         withdrawal, discontinuance or abandonment; and Borrower hereby
         expressly waives the benefit of any statute or rule of law now
         provided, or which may hereafter be provided, which would produce a
         result contrary to or in conflict with this sentence.

                           (v)      Proceed by a suit or suits in law or in
         equity or by any other appropriate proceeding or remedy (i) to enforce
         the Debt, payment of any other indebtedness of the Borrower to the
         Lender, the performance of any term, covenant, condition or agreement
         of this Security Deed or any of the other Loan Documents or any other
         right or (ii) to pursue any other remedy available to Lender.

                           (vi)     Lender may apply any moneys and proceeds
         received by Lender as a result of the exercise by Lender of any right
         conferred under this Section 45 in such order as Lender in its
         discretion may elect against (i) all reasonable costs and expenses,
         including reasonable attorneys' fees, incurred in connection with the
         operation of the Premises, the performance of Borrower's obligations
         under the Leases and the collection of the rents thereunder; (ii) all
         reasonable costs and expenses, including reasonable attorneys' fees,
         incurred in the satisfaction of the Debt or in the collection of any or
         all other indebtedness of the Borrower to the Lender, including those
         incurred in seeking to realize on or to protect or preserve Lender's
         interest in any other collateral securing any or all of the Debt and/or
         any other indebtedness of the Borrower to the Lender; (iii) any or all
         unpaid principal on the Debt and any other indebtedness of the Borrower
         to the Lender; (iv) any other amounts owing under the Loan Documents;
         and (v) accrued interest and charges on any or all of the foregoing.
         The remainder, if any, shall be paid to Borrower or any person or
         entity lawfully entitled thereto.

                                       24


                  IN WITNESS WHEREOF, Borrower has executed this instrument the
day and year first above written.

                                        BORROWER:

Signed, sealed and delivered            [PROPERTY OWNER NAME]
in the presence of:

____________________________            By: __________________________________
Unofficial Witness                          Name:
                                            Title:

____________________________
Notary Public
My Commission Expires:______

                                        LENDER:

Signed, sealed and delivered            MERRILL LYNCH MORTGAGE
in the presence of:                     LENDING, INC., a Delaware corporation

____________________________            By: __________________________________
Witness                                     Name:  ___________________________
                                            Title: ___________________________

_________________________________
Notary Public (Affix seal and
commission expiration date)



                                    EXHIBIT A

                                LEGAL DESCRIPTION

                                      A-1


                                    EXHIBIT B

  [SCHEDULE OF ALL OTHER DEEDS OF TRUST, DEEDS TO SECURE DEBT AND MORTGAGES IN
                                   LOAN POOL]

                                      B-1

EX-10.9

                                                                   EXHIBIT 10.9


                       PREFERRED SHARE EXCHANGE AGREEMENT

         THIS PREFERRED SHARE EXCHANGE AGREEMENT (this "Agreement") is entered
into as of June 22, 2004, by and among Lodgian, Inc., a Delaware corporation
(the "Company"), and the record and/or beneficial stockholders of the Company
identified on Annex I (each a "Stockholder" and collectively the
"Stockholders").

                                    RECITALS

         WHEREAS, the Company has entered into a Purchase Agreement (the
"Purchase Agreement") with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), Citigroup Global Markets Inc.
("Citigroup"), Banc of America Securities LLC, Legg Mason Wood Walker,
Incorporated and Raymond James & Associates, Inc., as representatives of the
underwriters (the "Underwriters"), providing for the public offering (the
"Offering") of shares (the "Securities") of the Company's common stock, par
value $0.01 per share (the "Common Stock");

         WHEREAS, the Company has filed a registration statement on Form S-1
with the United States Securities and Exchange Commission for the purpose of
effectuating the Offering (the "Registration Statement") and from a portion of
the proceeds of the Offering, shares of the Company's Series A Preferred Stock,
par value of $0.01 per share ("Preferred Stock") will be redeemed for cash; and

         WHEREAS, the Stockholders deem it necessary and desirable to forego
receiving cash for a portion of their shares of Preferred Stock and to maintain
a portion of their investment in the Company, presently represented by shares
of Preferred Stock, in the form of shares of Common Stock.

                                   AGREEMENT

         NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:

         1.       DEFINITIONS. Each capitalized term used herein and not
otherwise defined shall have the meaning given to it in the Registration
Statement.

         2.       EXCHANGE OF STOCK. Immediately following the closing of the
Offering, each of the Stockholders agrees to transfer and exchange, or use
reasonable efforts to cause its custodian, if applicable, to transfer and
exchange, with the Company the number of shares of Preferred Stock owned of
record or beneficially by such Stockholders, as specifically set forth opposite
each such Stockholder's name on Annex I (as to each Stockholder, the "Exchange
Shares") and Company agrees to issue to the Stockholders, or to their
custodian, as directed by the applicable Stockholder, that number of shares of
Common Stock specified opposite each such Stockholder's name on Annex I (as to
each Stockholder, the "Shares") in amounts determined as provided on Annex I.

         3.       CLOSING; DELIVERABLES.

         3.1      Closing. The exchange of the Shares shall take place at the
offices of Sidley Austin Brown & Wood LLP, 787 Seventh Avenue, New York, New
York 10019, at a closing (the "Closing") on the day of and immediately
following the closing of the Offering on the Closing Date, as defined in the
Purchase Agreement.

         3.2      Transactions and Documents at Closing. Upon signing this
Agreement, each Stockholder has



surrendered, or shall deliver an irrevocable instruction to its custodian, as
applicable, directing it to deliver, its Exchange Shares, together with an
executed stock power, to be held in escrow by Wachovia Bank, N.A. ("Wachovia"),
transfer agent for the Company, until completion of the Offering. Immediately
following the closing of the Offering, Wachovia shall release the Exchange
Shares from escrow to the Company and the Company shall issue and deliver to
each Stockholder, or to their custodian, as directed by the applicable
Stockholder, a certificate for the Shares specified on Annex I. If the Purchase
Agreement is terminated or the closing of the Offering does not occur prior to
July 31, 2004, Wachovia shall release the Exchange Shares to the applicable
Stockholders or their custodian, if applicable.

         4.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Stockholder as follows:

         4.1      Validity. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject,
as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
affecting the enforcement of creditors' rights generally and to general equity
principles.

         4.2      Common Stock. At the time of the Closing and after giving
effect to the transactions contemplated by this Agreement, the authorized
Common Stock of the Company will be as described in the Registration Statement.
All of the outstanding shares of Common Stock are, and at the Closing will be,
validly issued and outstanding, fully paid and non-assessable.

         5.       REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS OF STOCKHOLDER.

         5.1      Validity. Each Stockholder represents and warrants to the
Company on its own behalf, and not on behalf of the other Stockholders, that
this Agreement has been duly executed and delivered by the Stockholder and
constitutes the legal, valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms, subject, as
to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally and to general equity
principles.

         5.2      Stock Legends. Each Stockholder agrees, on its own behalf and
not on behalf of the other Stockholders, that if such Stockholder is presently
an affiliate (as that term is defined in SEC Rule 144 under the Securities Act
of 1933) or if the Exchange Shares are "restricted securities" (as defined in
Rule 144), the Exchange Shares shall bear legends in substantially the
following terms:

         (i)      THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING EXCHANGED IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION

         REQUIREMENTS OF THE SECURITIES ACT PURSUANT TO SECTION 3(A)(9)
THEREOF.

         (ii)     THE SHARES ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT PURSUANT TO REGISTRATION OR EXEMPTION FROM SUCH REGISTRATION.
THE SHARES WILL BEAR A LEGEND TO SUCH EFFECT. STOCKHOLDER FURTHER UNDERSTANDS
THAT THE EXEMPTION FROM REGISTRATION AFFORDED BY RULE 144 UNDER THE SECURITIES
ACT DEPENDS ON THE SATISFACTION OF VARIOUS CONDITIONS AND THAT, IF APPLICABLE,
RULE 144 AFFORDS THE BASIS OF SALES OF THE SHARES IN LIMITED AMOUNTS UNDER
CERTAIN CONDITIONS.


                                       2

         (iii)    THE SHARES BEING EXCHANGED HEREUNDER HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY
OR ADEQUACY OF THIS OFFERING.

         6.       MISCELLANEOUS.

         6.1      Further Assurances. From time to time after Closing, the
Stockholders and the Company, without charge, shall perform such other acts,
and shall execute and acknowledge and shall furnish such other instruments,
documents, materials and information, as the other party may reasonably request
in order to confirm the consummation of the transaction provided for in this
Agreement.

         6.2      Notices. Any notice or other communications required or
permitted hereunder shall be deemed to be sufficient if contained in a written
instrument delivered in person or duly sent (i) by first class certified mail,
postage prepaid, (ii) by a nationally recognized overnight courier service or
(iii) by telecopy, in each case addressed to such party at the address or
telecopy number set forth below or such other address or telecopy number as may
hereafter be designed in writing by the addressee to the addressor listing all
parties:

                  If to the Company:   Lodgian, Inc.
                                       3445 Peachtree Road, N.E.
                                       Suite 700
                                       Atlanta, Georgia 30326
                                       Attn: General Counsel
                                       Fax: (404) 364-0088

                  If to a Stockholder: At the address set forth on Annex I

or, in any case, at such other address or addresses as shall have been
furnished in writing by such party to the other parties hereto. All such
notices, requests, consents and other communications shall be deemed to have
been received (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of mailing, on the fifth business day following the
date of such mailing, (iii) in the case of courier service, on the next
business day following the date of such transmission and (iv) in the case of
telecopy, upon confirmed receipt.

         6.3      Entire Agreement; Modifications. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof
and may not be amended or modified nor any provisions waived except in a
writing signed by the Company and Stockholder.

         6.4      Construction. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any party hereto.

         6.5      Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile signatures of
the undersigned parties will have the same force and effect as original
signatures.

         6.6      Severability. Every provision of this Agreement is intended
to be severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
or legality of the remainder of this Agreement.


                                       3

         6.7      Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the law
of the state of New York excluding choice-of-law principles of the law of such
state that would require the application of the laws of a jurisdiction other
than the state of New York.


                                       4

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


                                COMPANY:

                                LODGIAN, INC.

                                By: /s/ Daniel E. Ellis
                                    -------------------------------------------
                                    Name: Daniel E. Ellis
                                    Title: Senior Vice President and General
                                           Counsel


                                STOCKHOLDERS:

                                OCM REAL ESTATE OPPORTUNITIES FUND II, L.P.

                                By: Oaktree Capital Management, LLC, its
                                    General Partner

                                By: /s/ Philip Hofmann
                                    -------------------------------------------
                                    Name: Philip Hofmann
                                    Title: Managing Director

                                By: /s/ Marc Porosoff
                                    -------------------------------------------
                                    Name: Marc Porosoff
                                    Title: Senior Vice President, Legal


                                OCM REAL ESTATE OPPORTUNITIES FUND III, L.P.

                                By: OCM Real Estate Opportunities Fund III GP,
                                    LLC, its general partner

                                    By: Oaktree Capital Management, LLC, its
                                        managing member

                                    By: /s/ Philip Hofmann
                                        ---------------------------------------
                                        Name: Philip Hofmann
                                        Title: Managing Director

                                     By: /s/ Marc Porosoff
                                         --------------------------------------
                                         Name: Marc Porosoff
                                         Title: Senior Vice President, Legal


                                       5

                                OCM REAL ESTATE OPPORTUNITIES FUND IIIA, L.P.

                                By: OCM Real Estate Opportunities Fund III GP,
                                    LLC, its general partner

                                    By: Oaktree Capital Management, LLC, its
                                        managing member

                                    By: /s/ Philip Hofmann
                                        ---------------------------------------
                                        Name: Philip Hofmann
                                        Title: Managing Director

                                     By: /s/ Marc Porosoff
                                         --------------------------------------
                                         Name: Marc Porosoff
                                         Title: Senior Vice President, Legal


                                BRE/HY FUNDING L.L.C.

                                By: /s/ Dennis J. McDonagh
                                    -------------------------------------------
                                    Name: Dennis J. McDonagh
                                    Title: Vice President


                                MERRILL LYNCH, PIERCE, FENNER & SMITH
                                INCORPORATED

                                By: /s/ Michael Nash
                                    -------------------------------------------
                                    Name: Michael Nash
                                    Title:


                                       6

                                    ANNEX I

                                  STOCKHOLDERS




                                                       PRE-EXCHANGE       PRE-EXCHANGE        POST-EXCHANGE       POST-EXCHANGE
                                                     NUMBER OF SHARES   VALUE OF SHARES         NUMBER OF        VALUE OF SHARES
                                                      OF PREFERRED       OF PREFERRED           SHARES OF           OF COMMON
STOCKHOLDER NAME AND ADDRESS                              STOCK            STOCK (1)           COMMON STOCK         STOCK (2)
- ----------------------------                         ----------------   ---------------       -------------      ---------------
                                                                                                     

Merrill Lynch, Pierce, Fenner & Smith
Incorporated                                             236,933          $ 6,608,902              629,420          $ 6,608,902
4 World Financial Center
North Tower, 12th Floor
New York, New York 10080

OCM Real Estate Opportunities Fund II, L.P.              747,789          $20,858,488            1,986,523          $20,858,488
333 South Grand Avenue
28th Floor
Los Angeles, California 90071

OCM Real Estate Opportunities Fund III, L.P.             100,829          $ 2,812,479              267,855          $ 2,812,479
333 South Grand Avenue
28th Floor
Los Angeles, California 90071

OCM Real Estate Opportunities Fund IIIA, L.P.              3,118          $    86,972                8,283          $    86,972
333 South Grand Avenue
28th Floor
Los Angeles, California 90071

BRE/HY Funding L.L.C                                     394,889          $11,014,855            1,049,034          $11,014,855
345 Park Avenue
31st Floor
New York, New York 10154



(1)      Each share of Preferred Stock is valued at 104% of the sum of its
         liquidation value plus accrued and unpaid dividends as of the date of
         the Preferred Share Exchange.

(2)      Each share of Common Stock is valued at the public offering price of
         the Securities set forth in Schedule B to the Purchase Agreement.

EX-10.10

                                                                   EXHIBIT 10.10


                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT, dated as of June 22, 2004 (this
"Agreement"), by and among LODGIAN, INC., a Delaware corporation (the
"Company"), and the other signatories hereto (the "Shareholders").

         WHEREAS, pursuant to that certain Exchange Agreement of even date
herewith (the "Exchange Agreement") the Shareholders shall receive shares of the
Company's Common Stock, which shall be non-transferable for the period of time
and as described in the Lock-up Agreement of the Shareholders of even date
herewith (the "Lock-up Agreement").

         WHEREAS, in connection with the foregoing, the Company has agreed,
subject to the terms, conditions and limitations set forth in this Agreement, to
provide the Shareholders and their respective successors, assigns and
transferees as permitted herein with certain registration rights in respect of
the Registrable Securities.

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

                                    ARTICLE I
                                   DEFINITIONS

         1.1. Definitions. Capitalized words and phrases used and not otherwise
defined in this Agreement shall have the following meanings:

         Commission: means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.

         Common Stock: means the common stock, par value $0.01 per share, of the
Company and all shares hereafter authorized of any class of common stock of the
Company, and, in the case of a reclassification, recapitalization or other
similar change in such Common Stock or in the case of a consolidation or merger
of the Company with or into another Person, such consideration to which a holder
of a share of Common Stock would have been entitled upon the occurrence of such
event.

         Company: includes, in addition to the Company, any successor or
assignee corporation or corporations into which or with which Lodgian, Inc. may
be merged or consolidated; any corporation for whose shares the Common Stock may
be exchanged; and any assignee of or successor to all or substantially all of
the assets of the Company.

         Exchange Act: means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.

         Holder: means each of those Persons listed on Schedule A hereto, and
each Person who is a Permitted Transferee of any Shareholder.

         Permitted Transferee: means:

         (i) In the case of a Shareholder which is a corporation, partnership,
limited liability company or other entity, (a) any corporation, partnership,
limited liability company or other Person controlled by, controlling, or under
common control with any Shareholder to whom any Shareholder has Transferred
shares of Common Stock or (b) any corporation, partnership, limited liability
company or other Person to




whom any Shareholder has Transferred, in the aggregate, 15% or more of such
Shareholder's shares of Common Stock; and

         (ii) In the case of any Shareholder, any other Shareholder.

         Notwithstanding any Person's status as a Permitted Transferee, any
Transfer of Registrable Securities shall be subject to the provisions of Section
10.1. Person: means any individual, corporation, partnership, trust or other
entity of any nature whatsoever.

         Piggyback Registration: shall have the meaning set forth in Section 3.1

         Registrable Securities: means, with respect to any Holder, (a) all
shares of Common Stock received pursuant to the Exchange Agreement and
beneficially owned by such Holder; and (b) all other securities issued or
distributed by the Company with respect to, or in exchange for, the Common Stock
pursuant to a stock dividend or distribution, stock split, merger,
consolidation, reorganization, recapitalization, reclassification, conversion
right or otherwise. Shares of Common Stock held by any Holder shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act
pursuant to Section 2.1 of this Agreement and such securities shall have been
disposed of pursuant to such registration statement, (ii) such securities shall
have been sold or otherwise distributed pursuant to Rule 144 (or any successor
provision) under the Securities Act, (iii) they may be freely transferred by
such Holder pursuant to Rule 144 under the Securities Act without compliance
with paragraph (e) thereto, (iv) all such securities then held by such Holder
can be transferred within a single 90-day period pursuant to Rule 144 under the
Securities Act within the limits specified in paragraph (e)(l)(i) thereof,
provided that, in the case of clauses (iii) and (iv), the Company shall have
complied with paragraph (c) thereof, or (v) such securities shall have ceased to
be outstanding.

         Registration Statement: shall have the meaning set forth in Section
2.1.

         Securities Act: means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.

         Shareholders: shall have the meaning set forth in the recitals.

         Shelf Registration: shall have the meaning set forth in Section 2.1.

         Transfer: means any transfer, sale, gift, assignment, distribution,
conveyance, pledge, hypothecation, encumbrance or other voluntary or involuntary
transfer of title or beneficial interest, whether or not for value, including,
without limitation, any disposition by operation of law or any grant of a
derivative or economic interest therein.


                                   ARTICLE II
                               SHELF REGISTRATION


         2.1. Shelf Registration. The Company shall use its reasonable best
efforts promptly to amend the existing resale registration statement on Form
S-3, Number 333-104248 (the "Registration Statement"), filed with the
Commission, relating to the offer and sale of the Registrable Securities by the
Holders thereof from time to time in accordance with the methods of distribution
set forth in the Registration Statement and Rule 415 under the Securities Act
(the "Shelf Registration"). The Company shall use its reasonable best efforts to
have such Shelf Registration declared effective by the Commission as promptly as
practicable thereafter. The Company shall use its reasonable best efforts to
keep the Registration


                                       3




Statement effective in order to permit the prospectus included therein to be
lawfully delivered by the Holders of the relevant Registrable Securities for the
period beginning on the date on which such Registration Statement is declared
effective and ending on the date that there are no Registrable Securities (the
"Shelf Registration Period"). (As used herein, except as otherwise provided or
unless the context otherwise requires, the term "prospectus" refers to the
prospectus included in the Registration Statement at the time such Registration
Statement is declared effective, as amended or supplemented by any prospectus
supplement and by all other amendments thereto, including post-effective
amendments, and all material incorporated by reference into such prospectus.)
The Company's obligations under this Section 2.1 are subject to the provisions
of Section 4.1.

         2.2. Notice of Offering. Notwithstanding anything in Section 2.1 to the
contrary, in the event that the Registration Statement is prepared on a Form
S-1, any Holder intending to distribute a prospectus in connection with the sale
of Registrable Securities, shall, prior to such distribution, provide the
Company with 5 business days prior written notice of such intention, in order to
provide the Company with sufficient time to amend, supplement, and/or otherwise
update the Registration Statement to permit the prospectus included therein to
be lawfully delivered.


                                   ARTICLE III
                             PIGGYBACK REGISTRATION


         3.1. Notice of Registration. In the event that at any time the Company
proposes to register any of its Common Stock, either for its own account or for
the account of any Person other than the Holders, but not including a
registration (i) relating to employee stock option or purchase plans or (ii)
relating to a transaction pursuant to Rule 145 under the Securities Act (a
"Piggyback Registration"), the Company will:

         (X) promptly give written notice thereof to the Holders; and

         (Y) use its best efforts to include in such Piggyback Registration and
in any underwriting involved therein up to all of the Registrable Securities
which the Holders request in writing to be so included within 20 days after
receipt of such written notice from the Company. Any Holder of Registrable
Securities shall have the right to withdraw its request for inclusion of its
Registrable Securities in any registration statement pursuant to this Section 3
by giving written notice to the Company, within a reasonable time, of its
request to withdraw. The Company's obligations under this Section 3.1 are
subject to the provisions of Section 4.1.

         3.2. Underwriting. If the registration of which the Company gives
notice is for a registered underwritten public offering, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
3.1, and the right of the Holders to include Registrable Securities in such
registration shall be conditioned upon the Holders' participation in such
underwriting and the entry of the participating Holders (together with the
Company and other holders distributing their securities through such
underwriting) into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.

         3.3. Priority. If the underwriter of the registered public offering
referred to in Section 3.2 shall advise the Company in writing that marketing
factors require a limitation of the amount of securities to be underwritten,
securities shall be included in such offering in the following priority: first,
the Common Stock proposed to be registered by the Company; second, Registrable
Securities requested to be included in such registration by persons having
rights under that certain Registration Rights Agreement of the


                                       4




Company dated as of November 25, 2002; and third, Registrable Securities
requested to be included in such registration by requesting Holders pursuant to
Section 3.1, pro rata on the basis of the number of Registrable Securities
requested to be included by such Holders. Any securities excluded pursuant to
the provisions of this Section 3.3 shall be withdrawn from and shall not be
included in such Piggyback Registration.


                                   ARTICLE IV
              PERMITTED DELAYS IN REGISTRATION; HOLDBACK AGREEMENTS

         4.1. Suspension of Company Obligations. Notwithstanding anything to the
contrary set forth in this Agreement, the Company's obligation under Article II
of this Agreement to file the Registration Statement and to use its best efforts
to cause Registrable Securities to be registered as provided therein shall be
suspended in the event either (i) the Company is engaged in an underwritten
primary offering and the Company is advised in writing by the underwriters that
the sale of Registrable Securities would have a material adverse effect on such
primary offering, or (ii) in the good faith opinion of counsel to the Company's
Board of Directors, effecting the registration of Registrable Securities would
adversely affect a material financing, acquisition, disposition of assets or
stock, merger or other comparable transaction or would require the Company to
make public disclosure of information the public disclosure of which would have
a material adverse effect upon the Company (any of the events set forth in
clauses (i) and (ii) being hereinafter referred to as a "Suspension Event"), but
such suspension shall occur on not more than one occasion in a 365-day period
and shall continue only for so long as such event or its effect is continuing,
but in no event will any such suspension exceed 100 days. The Company shall
promptly notify the Holders in writing of the existence of any Suspension Event,
and with such notice shall provide the Holders with a copy of such underwriters'
determination (in the case of clause (i) above), or such opinion of counsel to
the Board of Directors (in the case of clause (ii) above).

         4.2. Restrictions on Public Sale by Holders. Each Holder agrees, if
requested in writing by:

         (i) the managing underwriter or underwriters in an underwritten primary
offering of equity securities of the Company made pursuant to the Securities
Act; or

         (ii) the principal placement agent or agents in any offering of equity
securities to be effected by the Company pursuant to an exemption from
registration under the Securities Act;

not to effect any public sale or distribution of any Registrable Securities,
including a sale pursuant to Rule 144 (or any successor provision) under the
Securities Act (except to the extent included in any such offering or
distribution pursuant to Sections 2.1 or 3,1), during the period starting with
the date 15 days prior to and ending on the date 90 days after the closing date
of any such offering, sale or distribution; provided that, with respect to a
given offering of securities, (x) each other Holder is similarly restricted and
(y) each director and executive officer (including any "key" employees) of the
Company agrees in writing to identical restrictions.

         4.3. Release from Restrictions. The Company may, in its sole and
absolute discretion, elect to waive the applicability in any particular instance
of the provisions of Section 4.2.


                                    ARTICLE V
                             REGISTRATION PROCEDURES

         5.1. Registration Procedures. In connection with each registration to
be effected by the Company pursuant to this Agreement in which any Holder is
participating, the Company shall keep the Holder

                                       5



advised in writing as to the initiation of each registration and as to the
completion thereof. In connection with each such offering, the Company shall as
expeditiously as possible, at its sole expense:

         (a) prepare and file with the Commission a registration statement with
respect to such Holder's Registrable Securities and use its reasonable best
efforts to cause such registration statement to become effective, and thereafter
use its best efforts to keep such registration statement, in the case of the
Shelf Registration, continuously effective for the Shelf Registration Period,
and in the case of the Piggyback Registration, until the distribution described
in the registration statement relating thereto has been completed;

         (b) in connection with the preparation and filing of a registration
statement, give the Holders, the underwriters, if any, and their respective
counsel, the opportunity to participate (including the inclusion of any
reasonable comments proposed by the Holders) in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto (provided that the
Company shall not file any such registration statement including Registrable
Securities or amendment thereto or any related prospectus or any supplement
thereto to which such Holders or the managing underwriter or underwriters, if
any, shall reasonably object in writing), and give each of them such access to
its books and records and such opportunities to discuss the business of the
Company with its officers, its counsel and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of the Holder's and such underwriters' respective counsel, to conduct a
reasonable due diligence investigation within the meaning of the Securities Act;

         (c) furnish to the Holders and to the underwriters of the Registrable
Securities such number of copies of the registration statement, preliminary
prospectus, final prospectus and other documents incident thereto as such
underwriters and Holders from time to time may reasonably request;

         (d) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;

         (e) register or qualify the Registrable Securities under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by any of the Holders for the distribution of the Registrable
Securities covered by the registration statement to be sold by such Holders; and
to take any other action which may be reasonably necessary to enable such
Holders to consummate the disposition in such jurisdictions in the United States
of such Registrable Securities owned by such Holders, provided that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions, or to subject itself to taxation in any such
jurisdiction;

         (f) enter into an underwriting agreement in customary form and
substance reasonably satisfactory to the Company, the Holders and the managing
underwriter or underwriters of the public offering of Registrable Securities, if
the offering is to be underwritten, in whole or in part, provided that the
Holders shall be a party to such underwriting agreement and the Holders may, at
their option, require that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of the Holders. The Holders shall not be required
to make any representations or warranties to or agreement with the Company or
the underwriters other than representations, warranties or agreements regarding
the Holders and their intended method of distribution and any other
representation or warranty required by law;


                                       6




         (g) promptly notify the Holders at any time when a prospectus relating
thereto covered by such registration statement is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the request
of any such Holder prepare and furnish to such Holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
provided that each Holder agrees that upon receipt of any notice from the
Company of the happening of any event of the kind described in this Section
5.l(g), such Holder shall forthwith discontinue its disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by this Section 5.l(g) and, if so directed by
the Company, such Holder shall use its reasonable best efforts to deliver to the
Company all copies, other than permanent file copies then in such Holder's
possession, of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice;

         (h) use its reasonable best efforts promptly to obtain the withdrawal
of any stop order suspending the effectiveness of a registration statement, or
any order suspending or preventing the use of any related prospectus or
suspending the qualification of any securities included in such registration
statement for sale in any jurisdiction;

         (i) furnish, at the request of a Holder on the date that any
Registrable Securities are to be delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to such Holder and (ii) a
letter dated such date, from the independent certified public accountants of the
Company who have certified the Company's financial statements included in such
registration statement, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to such Holder;

         (j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission to effect the prompt
registration of the securities covered by the registration statement, and make
generally available to the Holders, as soon as reasonably practicable, an
earnings statement covering a period of at least twelve months beginning after
the effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 1l(a) of the Securities Act; and

         (k) list all Registrable Securities covered by such registration
statement on the American Stock Exchange or such other national securities
exchange or inter-dealer quotation system as may be mutually agreed upon by the
parties and such securities exchange.


                                   ARTICLE VI
                                 INDEMNIFICATION

         6.1. Indemnification by the Company. In the event of any registration
of any Registrable Securities pursuant to this Agreement under the Securities
Act, the Company will, and hereby does, indemnify and hold harmless each
participating Holder, each of its trustees, beneficiaries, directors,


                                       7



officers, employees, agents, advisors and controlling persons, if any, each
other Person who participates as an underwriter in the offering or sale of such
securities and each other Person who controls any such underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such participating Holder or any such
Person, underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Registrable Securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the Company will reimburse each
participating Holder and each such Person, underwriter and controlling person
for any reasonable legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
participating Holder or any other Person who participates as an underwriter in
the offering or sale of such securities, in either case, specifically stating
that it is for use in the preparation thereof; and provided, further, that the
Company shall not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the Securities Act in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus or supplement to the Persons
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus or supplement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of any participating
Holder or any such underwriter or controlling person and shall survive the
transfer of such securities by the Holder.

         6.2. Indemnification by Participating Holders. Each of the
participating Holders whose Registrable Securities are included or to be
included in any registration statement, as a condition to including Registrable
Securities in such registration statement, agrees to indemnify and hold harmless
(in the same manner and to the same extent as set forth in Section 6.1) the
Company, each director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning of the
Securities Act, and each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person who controls any such
underwriter within the meaning of the Securities Act with respect to any untrue
statement or alleged untrue statement of a material fact in or omission or
alleged omission to state a material fact from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company
pertaining to such participating Holder by such participating Holder
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. The obligation to provide indemnification pursuant to
this Section 6.2 shall be several, and not joint and several, among the
participating Holders. The indemnity provided by each Holder under this Section
6.2 shall be limited to an amount equal to the net proceeds received by such
Holder from the sale of Registrable Securities pursuant to such registration
statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer, or any such underwriter or controlling person and


                                       8


shall survive the transfer of such securities by any participating Holder.

         6.3. Notices of Claims. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in Section 6.1 or 6.2, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action; provided, however, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under Section 6.1 or 6.2,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to the
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation, provided that the indemnified party may participate in such
defense at the indemnified party's expense and provided, further, that all
indemnified parties shall have the right to employ one counsel to represent them
if, in the reasonable judgment of such indemnified parties, it is advisable for
them to be represented by separate counsel by reason of having legal defenses
which are different from or in addition to those available to the indemnifying
party, and in that event the reasonable fees and expenses of such one counsel
shall be paid by the indemnifying party. If the indemnifying party is not
entitled to, or elects not to, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one counsel for the
indemnified parties with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other indemnified parties with respect to such claim,
in which event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel for the indemnified parties. No indemnifying
party shall consent to entry of any judgment or enter into any settlement
without the consent of the indemnified party which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. No indemnifying party shall be subject to any liability for any
settlement made without its consent, which consent shall not be unreasonably
withheld.

         6.4. Other Indemnification. Indemnification similar to that specified
in the preceding Sections of this Article VI (with appropriate modifications)
shall be given by the Company and any participating Holder with respect to any
required registration or other qualification of securities under any federal or
state law or regulation of any governmental authority other than the Securities
Act.

         6.5. Indemnification Payments. The indemnification required by this
Article VI shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.

         6.6. Contribution. If, for any reason, the foregoing indemnity is
unavailable, or is insufficient to hold harmless an indemnified party, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of the expense, loss, claim, damage or liability
(a) in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified party on the other
(determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission), or (b) if the allocation
provided by clause (a) above is not permitted by applicable law or provides a
lesser sum to the indemnified party than the amount otherwise payable hereunder,
in the proportion as is appropriate to


                                       9


reflect not only the relative fault of the indemnifying party and the
indemnified party, but also the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other, as well as any
other relevant equitable considerations. No indemnified party guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any indemnifying party
who was not guilty of such fraudulent misrepresentation. The contribution
provided by each participating Holder under this Section 6.6 shall be limited to
an amount equal to the net proceeds received by such participating Holder from
the sale of Registrable Securities pursuant to such registration statement.

                                   ARTICLE VII
                              REGISTRATION EXPENSES

         7.1. Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement will be borne by the Company,
including, without limitation: (i) all registration, filing and National
Association of Securities Dealers fees and expenses; (ii) all fees and expenses
associated with compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing, messenger and delivery services
and telephone; (iv) all fees and disbursements of counsel for the Company and
the Holders, except to the extent otherwise provided in this Section 7.1; (v)
all application and filing fees in connection with listing the Registrable
Securities on a securities exchange pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Company (including the expenses associated with preparing any special audit
and comfort letters required by or incident to such performance or compliance).

         The Company will reimburse the Holders of Registrable Securities
registered pursuant to the Registration Statement, or any Piggyback
Registration, for the reasonable fees and disbursements of not more than one
counsel, which shall be chosen by Holders of a majority of Registrable
Securities being registered pursuant to such registration. Notwithstanding the
provisions of this Section 7.1, each Holder shall bear the expense of any
broker's commission, agency fee or underwriter's discount or commission.

                                  ARTICLE VIII
                             INFORMATION BY HOLDERS

         8.1. Information Regarding Holders. Each Holder shall furnish to the
Company and any applicable underwriter such information regarding such Holder
and the distribution proposed by such Holder as the Company or such underwriter
may request in writing and as shall be required in connection the registration
referred to in this Agreement.

                                   ARTICLE IX
                                 RULE 144 SALES

         9.1. Reporting. With a view to making available to the Holders the
benefits of certain rules and regulations of the Commission which may permit the
sale of Registrable Securities to the public without registration or through
short form registration forms the Company agrees to:

         (a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after 90 days after the
Effective Date;


                                       10




         (b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and

         (c) furnish to each Holder, so long as such Holder owns any Registrable
Securities, forthwith upon request a written statement by the Company that it
has complied with the reporting requirements of Rule 144 (at any time after 90
days after the Effective Date), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents so filed by the Company as such Holder may reasonably request in
availing itself of any rule or regulation of the Commission permitting such
Holder to sell any such securities without registration.

                                    ARTICLE X
                               TRANSFER OF RIGHTS

         10.1. Transfer or Assignment. The rights granted hereunder by the
Company may be assigned or otherwise conveyed to the respective Permitted
Transferees of the Shareholders. It shall be a condition to any Transfer that
(a) such Transfer is effected in accordance with applicable federal and state
securities laws, (b) such transferee or assignee becomes a party to this
Agreement or agrees in writing to be subject to the terms hereof to the same
extent as if it were the Holder hereunder, and (c) the Company is given written
notice by the Holder of said Transfer, stating the name and address of said
transferee and identifying the securities with respect to which such
registration rights are being assigned.

                                   ARTICLE XI
                                   TERMINATION

         11.1. Termination. This Agreement and the rights provided hereunder
shall terminate and be of no further force and effect with respect to each
Holder on such date as such Holder shall no longer hold any Registrable
Securities.

                                   ARTICLE XII
                                  MISCELLANEOUS

         12.1. Remedies for Breach. It is expressly understood that the
equitable remedies of specific performance and injunction shall be available for
the enforcement of the covenants and agreements herein, and that the
availability of these equitable remedies shall not be deemed to limit any other
right or remedy to which any party to this Agreement would otherwise be
entitled.

         12.2. Successors and Assigns. Subject to the provisions of Section
10.1, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors, assigns and transferees of the
parties. If any successor, assignee or transferee of any Holder shall acquire
Registrable Securities, in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such Person
shall be conclusively deemed to have agreed to be bound by all of the terms and
provisions hereof.

                                       11




         12.3. Notices. All notices and other communications provided for
hereunder shall be in writing and sent by registered or certified mail, return
receipt requested, postage prepaid or delivered. in person or by courier,
telecopier or electronic mail, and shall be deemed to have been duly given when
received, by the party to whom such notice is to be given at its address set
forth below, or at such other address for the party as shall be specified by
notice given pursuant hereto:

         (a)      if to the Company, to:

                  LODGIAN, INC.
                  3445 Peachtree Road - Suite 700
                  Atlanta, Georgia 30326
                  Attention: General Counsel

         (b) If to a Holder, to such Holder at the address set forth for such
Holder in the stock records of the Company.

         12.4. Governing Law. This Agreement and any controversy or claim
arising out of or relating to this Agreement shall be governed by the laws of
the State of Delaware, without giving effect to the principles of conflicts of
laws.

         12.5. Consent to Jurisdiction and Service of Process. Each of the
Company and each Holder hereby irrevocably appoints the Corporation Trust
Company, at its office at 1209 Orange Street, Wilmington, DE 19801, its lawful
agent and attorney to accept and acknowledge service of any and all process
against it in any action, suit or proceeding arising in connection with this
Agreement and upon whom such process may be served, with the same effect as if
such party were a resident of the State of Delaware and had been lawfully served
with such process in such jurisdiction, and waives all claims of error by reason
of such service, provided that in the case of any service upon such agent and
attorney, the party effecting such service shall also deliver a copy thereof to
each other party at the address and in the manner specified in Section 12.3.
Each of the Company and each Holder will enter into such agreements with such
agent as may be necessary to constitute and continue the appointment of such
agent hereunder. In the event that such agent and attorney resigns or otherwise
becomes incapable of acting as such, each party will appoint a successor agent
and attorney in Wilmington, Delaware, reasonably satisfactory to the Company,
with like powers. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the United States District Court for the District of Delaware or
any court of the State of Delaware located in the City of Wilmington in any such
action, suit or proceeding, and agrees that any such action, suit or proceeding
shall be brought only in such court (and waives any objection based on forum non
conveniens or any other objection to venue therein); provided, however, that
such consent to jurisdiction is solely for the purpose referred to in this
Section 12.5 and shall not be deemed to be a general submission to the
jurisdiction of said courts or in the State of Delaware other than for such
purpose. Nothing herein shall affect the right of any party to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against any other party in any other jurisdiction.

         12.6. Entire Agreement; Amendments and Waivers. This Agreement
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions whether oral or written, of the parties. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by all parties. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.

         12.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


                                       12



Copies of executed counterparts transmitted by telecopy or other electronic
transmission service shall be considered original executed counterparts for
purposes of this Section 12.7.

         12.8. Severability. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement.

         12.9. Attorneys' Fees. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which such party may be entitled.

         12.10. Headings. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.

         12.11. Gender and Other References. Unless the context clearly
indicates otherwise, the use of any gender pronoun in this Agreement shall be
deemed to include all other genders, and singular references shall include the
plural and vice versa.

                            [SIGNATURE PAGE FOLLOWS]


                                       13



         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

                             LODGIAN, INC.

                             By:/s/ Daniel E. Ellis
                                -----------------------------------------------
                                  Name:  Daniel E. Ellis
                                  Title: Senior Vice President and Secretary

                             OCM REAL ESTATE OPPORTUNITIES FUND II, L.P.
                             By:   Oaktree Capital Management, LLC,
                                      its General Partner

                             By:/s/ Philip Hofmann
                                -----------------------------------------------
                                  Name:  Philip Hofmann
                                  Title:  Managing Director

                             By:/s/ Marc Porosoff
                                -----------------------------------------------
                                  Name:  Marc Porosoff
                                  Title:  Senior Vice President, Legal

                             OCM REAL ESTATE OPPORTUNITIES FUND III, L.P.

                             By:   OCM Real Estate Opportunities Fund III GP,
                                    LLC, its general partner
                                   By:  Oaktree Capital Management, LLC, its
                                         managing member

                                   By:/s/ Philip Hofmann
                                      -----------------------------------------
                                       Name:  Philip Hofmann
                                       Title:  Managing Director

                                   By:/s/ Marc Porosoff
                                      -----------------------------------------
                                       Name:  Marc Porosoff
                                       Title:  Senior Vice President, Legal

                             OCM REAL ESTATE OPPORTUNITIES FUND IIIA, L.P.
                             By:   OCM Real Estate Opportunities Fund III GP,
                                    LLC, its general partner
                                   By:  Oaktree Capital Management, LLC, its
                                         managing member

                                   By:/s/ Philip Hofmann
                                      -----------------------------------------
                                      Name:  Philip Hofmann
                                      Title:  Managing Director

                                   By:/s/ Marc Porosoff
                                      -----------------------------------------
                                      Name:  Marc Porosoff
                                      Title:  Senior Vice President, Legal

                                       14




                            BRE/HY FUNDING L.L.C.

                            By:/s/ Dennis J. McDonagh
                               -----------------------------------------------
                                 Name:  Dennis J. McDonagh
                                 Title:  Vice President

                            MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

                            By:/s/ Michael Nash
                               ------------------------------------------------
                                 Name:  Michael Nash
                                 Title:






                                   SCHEDULE A




NAME OF SHAREHOLDER                                                                  NUMBER OF SHARES
- -------------------                                                                  ----------------
                                                                                  
OCM Real Estate Opportunities Fund II, L.P.                                              1,986,523

OCM Real Estate Opportunities Fund III, L.P.                                               267,885

OCM Real Estate Opportunities Fund IIIA, L.P.                                                8,283

BRE/HY Funding L.L.C.                                                                    1,049,034

Merrill Lynch, Pierce, Fenner & Smith Incorporated                                         629,422

EX-21.1

                                                                    EXHIBIT 21.1

                          SUBSIDIARIES OF LODGIAN, INC.
                           (*Significant Subsidiaries)

LODGIAN FINANCING CORP. *
LODGIAN FINANCING MEZZANINE, LLC *
LODGIAN MEZZANINE FIXED, LLC *
LODGIAN MEZZANINE FLOATING, LLC *
SERVICO, INC. *
SERVICO OPERATIONS CORPORATION *
1075 Hospitality, LP
12801 NWF Beverage Management, Inc.
Albany Hotel, Inc.
AMI Operating Partners, L.P.
AMIOP Acquisition Corp.
AMIOP Acquisition General Partner SPE Corp.
Apico Hills. Inc.
Apico Inns of Greentree, Inc.
Apico Inns of Pennsylvania, Inc.
Apico Inns of Pittsburgh, Inc.
Apico Management Corp.
Atlanta-Boston Holdings, LLC
Atlanta-Boston Lodging,
LLC Atlanta-Boston SPE, Inc.
Atlanta-Rio Rancho Beverage Management, Inc.
Brunswick Motel Enterprises, Inc.
Columbus Hospitality Assocates, LP
Council of Unit Owners of Silver Spring Plaza Condominium
Courtyard Club
Dedham Lodging Assocates I, LP
Dedham Lodging SPE, Inc.
Dothan Hospitality 3053, Inc.
Dothan Hospitality 3071, Inc.
East Washington Hospitality, LP
Fayetteville Motel Enterprises, Inc.
Fort Wayne Hospitality Associates II, LP
Fourth Street Hospitality, Inc.
Gadsden Hospitality, Inc.
Harrisburg Motel Enterprises, Inc.
Hilton Head Motel Enterprises, Inc.
Impac Holdings III, LLC
Impac Hotel Group Mezzanine, LLC
Impac Hotel Group, LLC
Impac Hotel Management, LLC
Impac Hotels I, LLC
Impac Hotels II, LLC
Impac Hotels III, LLC
Impac Hotels Member SPE, Inc.
Impac Spe #2, Inc.
Impac SPE #4, Inc.
Impac SPE #6, Inc.
Island Motel Enterprises, Inc.
KDS Corporation
Kinser Motel Enterprises, Inc.



Lafayette Beverage Management, Inc.
Lawrence Hospitality Associates, LP
Little Rock Beverage Management, Inc.
Little Rock Lodging Associates I, LP
Lodgian Abeline Beverage Corp.
Lodgian Acquisition, LLC
Lodgian AMI, Inc.
Lodgian Augusta LLC
Lodgian Austin Beverage Corp.
Lodgian Bridgeport LLC
Lodgian Cincinnati LLC
Lodgian Coconut Grove LLC
Lodgian Colchester LLC
Lodgian Dallas Beverage Corp.
Lodgian Denver LLC
Lodgian Fairmont LLC
Lodgian Florence LLC
Lodgian Fort Mitchell LLC
Lodgian Hamburg LLC
Lodgian Hotels Fixed I, LLC
Lodgian Hotels Fixed II, LLC
Lodgian Hotels Fixed III, LLC
Lodgian Hotels Fixed IV GP, Inc.
Lodgian Hotels Fixed IV, LP
Lodgian Hotels Floating, LLC
Lodgian Hotels, Inc.
Lodgian Jackson LLC
Lodgian Lafayette LLC
Lodgian Lancaster North, Inc.
Lodgian Little Rock SPE, Inc.
Lodgian Management Corp.
Lodgian Market Center Beverage Corp.
Lodgian Memphis LLC
Lodgian Memphis Property Owner, LLC
Lodgian Merrimack LLC
Lodgian Mezzanine Springing Member, Inc.
Lodgian Morgantown LLC
Lodgian Mortgage Springing Member, Inc.
Lodgian Mount Laurel, Inc.
Lodgian North Miami LLC
Lodgian Ontario, Inc.
Lodgian Syracuse LLC
Lodgian Tulsa LLC
Lodgian York Market Street, Inc.
Lodgian, Inc.
Macon Hotel Associates LLC
Macon Hotel Associates Manager, Inc.
Manhattan Hospitality Associates, LP
McKnight Motel, Inc.
Melbourne Hospitality Associates, LP
Minneapolis Motel Enterprises, Inc.
Moon Airport Motel, Inc.

                                      -2-


New Orleans Airport Motel Associates, LP
New Orleans Airport Motel Enterprises, Inc.
NH Motel Enterprises, Inc.
Penmoco, Inc.
Prime-American Realty Corp.
Raleigh Downtown Enterprises, Inc.
Royce Management Corp of Morristown
Saginaw Hospitality, LP
Second Fayetteville Motel Enterprises, Inc.
Servico Austin, Inc.
Servico Cedar Rapids, Inc.
Servico Centre Associates, Ltd.
Servico Centre Condominium Association, Inc.
Servico Colesville, Inc.
Servico Columbia II, Inc.
Servico Columbia, Inc.
Servico Columbus, Inc.
Servico Concord, Inc.
Servico Council Bluffs, Inc.
Servico East Washington, Inc.
Servico Flagstaff, Inc.
Servico Fort Wayne II, Inc.
Servico Fort Wayne, Inc.
Servico Frisco, Inc.
Servico Grand Island, Inc.
Servico Hilton Head, Inc.
Servico Hotels I, Inc.
Servico Hotels II, Inc.
Servico Hotels III, Inc.
Servico Hotels IV, Inc.
Servico Houston, Inc.
Servico Jamestown, Inc.
Servico Lansing, Inc.
Servico Lawrence II, Inc.
Servico Lawrence, Inc.
Servico Management Corporation
Servico Management Corporation
Servico Manhattan II, Inc.
Servico Manhattan, Inc.
Servico Market Center, Inc.
Servico Maryland, Inc.
Servico Melbourne, Inc.
Servico Metairie, Inc.
Servico New York, Inc.
Servico Niagara Falls, Inc.
Servico Northwoods, Inc.
Servico Operations Mezzanine, LLC
Servico Palm Beach General Partner SPE, Inc.
Servico Pensacola 7200, Inc.
Servico Pensacola 7330, Inc.
Servico Pensacola, Inc.
Servico Rolling Meadows, Inc.
Servico Roseville, Inc.
Servico Tucson, Inc.
Servico Wichita, Inc.

                                      -3-


Servico Windsor, Inc.
Servico Winter Haven, Inc.
Servico Worcester, Inc.
Sharon Motel Enterprises, Inc.
Sheffield Motel Enterprises, Inc.
Sixteen Hotels, Inc.
South Carolina Interstate Motel Enterprises
Southfield Hotel Group II, LP
W.V.B.M., Inc.
Washington Motel Enterprises, Inc.
Wilpen, Inc.
Worcester Hospitality Associates, LP

                                      -4-

EX-31.1

                                                                    EXHIBIT 31.1


                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
          PURSUANT TO RULE 13A-14(a)/15D-14(a), AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

         I, W. Thomas Parrington, Chief Executive Officer of Lodgian, Inc. (the
"Registrant"), certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of the
Registrant;

         2.       Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

         3.       Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this report;

         4.       The Registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant
and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the Registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the Registrant's
                  internal control over financial reporting that occurred during
                  the Registrant's most recent fiscal quarter (the Registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the Registrant's internal control over financial
                  reporting; and

         5.       The Registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrant's auditors and the audit committee of the
Registrant's board of directors (or persons performing the equivalent
functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal control over financial reporting.

         Dated this 16th day of August, 2004.

                                /s/ W. Thomas Parrington
                                ---------------------------------------------
                                W. Thomas Parrington, Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2


                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
          PURSUANT TO RULE 13A-14(a)/15D-14(d), AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


         I, Manuel Artime, Chief Financial Officer of Lodgian, Inc. (the
"Registrant"), certify that:

         1.       I have reviewed this quarterly report on Form 10-Q of the
Registrant;

         2.       Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

         3.       Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this report;

         4.       The Registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant
and have:

         (a)      Designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision to ensure that material information relating
                  to the Registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

         (b)      Evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures, as of the end of the period covered by this
                  report based on such evaluation; and

         (c)      Disclosed in this report any change in the Registrant's
                  internal control over financial reporting that occurred during
                  the Registrant's most recent fiscal quarter (the Registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the Registrant's internal control over financial
                  reporting; and

         5.       The Registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrant's auditors and the audit committee of the
Registrant's board of directors (or persons performing the equivalent
functions):

         (a)      All significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial information; and

         (b)      Any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal control over financial reporting.

         Dated this 16th day of August, 2004.


                                       /s/ Manuel Artime
                                       ----------------------------------------
                                       Manuel Artime, Chief Financial Officer

EX-32

                                                                      EXHIBIT 32


      CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
           PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


         This Certificate is being delivered pursuant to the requirements of
Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal
Procedures) of the United States Code and shall not be relied on by any person
for any other purpose.


         The undersigned, who are the Chief Executive Officer and Chief
Financial Officer, respectively, of Lodgian, Inc. (the "Company"), hereby each
certify that, to the undersigned's knowledge:


         The Quarterly Report on Form 10-Q of the Company for the quarterly
period ended June 30, 2004 (the "Report"), which accompanies this Certification,
fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, and all information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Company.


         Dated this 16th day of August, 2004.

                                 /s/ W. Thomas Parrington
                                 --------------------------------------------
                                 W. Thomas Parrington, Chief Executive Officer


                                 /s/ Manuel Artime
                                 --------------------------------------------
                                 Manuel Artime, Chief Financial Officer