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Exhibit 10.1
 
$60,000,000

REVOLVING CREDIT LOAN AND SECURITY AGREEMENT

by and between

HERSHA HOSPITALTY LIMITED PARTNERSHIP,
as Borrower

HERSHA HOSPITALITY TRUST
2844 ASSOCIATES
HHLP VALLEY FORGE ASSOCIATES
44 LAUREL ASSOCIATES, LLC
44 NEW ENGLAND MANAGEMENT COMPANY,
as Guarantors

EACH OF THE FINANCIAL INSTITUTIONS
NOW OR HEREAFTER A PARTY HERETO,
as Lenders

and

COMMERCE BANK, N.A.
as Lender and Agent

Dated: January 17, 2006
 

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TABLE OF CONTENTS
 

 

   
Page
       
ARTICLE I DEFINITIONS
 
1
     
1.1
Definitions
 
1
1.2
Other Definitional Provisions
 
17
       
ARTICLE II THE LINE: USE OF PROCEEDS
 
17
     
2.1
Line of Credit
 
17
2.2
Letters of Credit
 
19
2.3
Commitments
 
24
2.4
Use of Proceeds
 
24
2.5
Advances of the Line
 
24
2.6
Conditions to Advances; Borrowing Base
 
24
       
ARTICLE III INTEREST RATES
 
26
     
3.1
Interest on the Line
 
26
3.2
Default Interest
 
26
3.3
Calculation
 
26
3.4
Limitation of Interest to Maximum Lawful Rate
 
26
       
ARTICLE IV PAYMENTS AND FEES; COLLATERAL
 
27
     
4.1
Interest Payments on the Line
 
27
4.2
Principal Payments on the Line; Prepayments
 
27
4.3
Facility Fee
 
28
4.4
Arrangement Fee
 
28
4.5
Unused Facility Fee
 
28
4.6
Letter of Credit Fees
 
28
4.7
Late Charge
 
29
4.8
Payment Method
 
29
4.9
Application of Payments
 
29
4.10
Loan Account
 
29
4.11
Indemnity; Loss of Margin
 
30
4.12
Extension of Expiration Date
 
31
4.13
Collateral
 
31
4.14
Release and Substitution of Collateral; Additional Collateral
 
31
       
ARTICLE V REPRESENTATIONS AND WARRANTIES
 
33
     
5.1
Valid Organization, Standing and Qualification
 
33
5.2
Licenses
 
33
5.3
Ownership Interests
 
34
5.4
Subsidiaries
 
34
5.5
Financial Statements
 
34
5.6
No Material Adverse Change in Financial Condition
 
34

 

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5.7
Pending Litigation or Proceedings
 
34
5.8
Due Authorization; No Legal Restrictions
 
34
5.9
Enforceability
 
35
5.10
No Default Under Other Obligations Orders or Governmental Obligations
 
35
5.11
Governmental Consents
 
35
5.12
Taxes
 
36
5.13
Addresses
 
36
5.14
Investment Company
 
36
5.15
Current Compliance
 
36
5.16
Deferred Compensation Plans
 
36
5.17
Leases and Contracts
 
36
5.18
Contingent Liabilities
 
36
5.19
Encumbrances
 
37
5.20
Environmental Matters
 
37
5.21
Insurance
 
38
5.22
Anti-Terrorism Laws
 
38
5.23
Compliance with OFAC Rules and Regulations
 
38
5.24
Securities Act
 
38
5.25
Disclosure
 
38
5.26
Margin Stock
 
39
5.27
Bank Accounts
 
39
       
ARTICLE VI GENERAL AFFIRMATIVE COVENANTS
 
39
     
6.1
Existence, Approvals, Qualifications, Business Operations; Compliance with Laws
 
39
6.2
Taxes; Claims for Labor and Materials
 
40
6.3
Maintenance of Properties
 
40
6.4
Insurance
 
40
6.5
Inspections; Examinations
 
40
6.6
Bank Accounts
 
41
6.7
Maintenance of Management
 
41
6.8
Notices
 
41
6.9
Appraisals
 
41
6.10
Further Assurances
 
41
       
ARTICLE VII FINANCIAL COVENANTS
 
42
     
7.1
Debt Service Coverage Ratio
 
42
7.2
Total Funded Debt to Gross Asset Value
 
42
7.3
EBITDA to Debt Service
 
42
7.4
Tangible Net Worth
 
42
7.5
Certain Indebtedness
 
42
7.6
Changes to Financial Covenants
 
42
       
ARTICLE VIII NEGATIVE COVENANTS
 
43
     
8.1
Limitation on Indebtedness
 
43
8.2
Guaranties
 
43
8.3
Disposition of Assets
 
44

 

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8.4
Liens
 
44
8.5
Nature of Business
 
44
8.6
Consolidation, Merger, Sale or Purchase of Assets
 
44
8.7
Advances, Investments and Loans
 
45
8.8
Default Under Other Indebtedness
 
45
8.9
Deferred Compensation Plans
 
46
8.10
Transactions with Affiliates
 
46
8.11
Restriction on Transfer
 
46
8.12
Corporate Changes
 
46
8.13
Limitations on Restricted Actions
 
47
8.14
Restricted Payments
 
47
8.15
Negative Pledges
 
47
8.16
Name or Address Change
 
47
8.17
Material Adverse Contracts
 
48
       
ARTICLE IX ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS
 
48
     
9.1
Annual Statements
 
48
9.2
Quarterly Statements
 
48
9.3
Requested Information
 
49
9.4
Compliance Certificates
 
49
9.5
Other Operating Information
 
49
9.6
Annual Budget and Financial Projections
 
49
       
ARTICLE X CONDITIONS OF CLOSING
 
49
     
10.1
Conditions Precedent
 
50
10.2
Representations and Warranties
 
53
10.3
No Default
 
53
10.4
Environmental Matters
 
53
10.5
Additional Documents
 
53
10.6
No Material Adverse Change
 
53
10.7
Conditions Subsequent
 
53
       
ARTICLE XI CERTAIN CONDITIONS TO SUBSEQUENT ADVANCES
 
54
     
11.1
Representations and Warranties
 
54
11.2
No Default
 
54
11.3
Additional Conditions
 
54
11.4
Other Requirements
 
54
       
ARTICLE XII DEFAULT AND REMEDIES
 
54
     
12.1
Events of Default
 
54
12.2
Acceleration; Remedies
 
56

 

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ARTICLE XIII THE AGENT
 
57
     
13.1
Appointment of Agent
 
57
13.2
Nature of Duties of Agent
 
58
13.3
Lack of Reliance on Agent
 
58
13.4
Certain Rights of the Agent
 
58
13.5
Reliance by Agent
 
59
13.6
Indemnification of Agent
 
59
13.7
The Agent in its Individual Capacity
 
59
13.8
Holders of Notes
 
59
13.9
Successor Agent
 
60
13.10
Collateral Matters
 
60
13.11
Actions with Respect to Defaults
 
62
13.12
Delivery of Information
 
62
13.13
Disbursements to Lenders
 
62
       
ARTICLE XIV COMMUNICATIONS AND NOTICES
 
63
     
14.1
Communications and Notices
 
63
       
ARTICLE XV WAIVERS
 
64
     
15.1
Waivers
 
64
15.2
Forbearance
 
64
15.3
Limitation on Liability
 
65
       
ARTICLE XVI SUBMISSION TO JURISDICTION
 
65
     
16.1
Submission to Jurisdiction
 
65
       
ARTICLE XVII MISCELLANEOUS
 
66
     
17.1
Brokers
 
66
17.2
No Joint Venture
 
66
17.3
Survival
 
66
17.4
No Assignment by Borrower
 
66
17.5
Assignment or Sale by Bank
 
66
17.6
Binding Effect
 
67
17.7
Severability
 
67
17.8
No Third Party Beneficiaries
 
67
17.9
Modifications
 
67
17.10
Holidays
 
67
17.11
Law Governing
 
67
17.12
Integration
 
68
17.13
Exhibits and Schedules
 
68
17.14
Headings
 
68
17.15
Counterparts
 
68
17.16
Waiver of Right to Trial by Jury
 
68

 

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REVOLVING CREDIT LOAN AND SECURITY AGREEMENT

THIS REVOLVING CREDIT LOAN AND SECURITY AGREEMENT (this “Agreement”) is made
effective the 17th day of January, 2006, by and between HERSHA HOSPITALITY
LIMITED PARTNERSHIP, a Virginia limited partnership (“Borrower”), HERSHA
HOSPITALITY TRUST, a Maryland real estate investment trust (the “Trust”), as
Guarantor, each of the other Guarantors party hereto, each of the financial
institutions identified as Lenders on Schedule A hereto (together with each of
their successors and assigns, referred to individually as a “Lender” and
collectively as “Lenders”) and COMMERCE BANK, N.A. (“Bank”), as Lender and as
administrative agent for the Lenders hereunder, acting in the manner and to the
extent described herein (in such capacity, “Agent”).

BACKGROUND

A.    Borrower desires to obtain a revolving credit facility to provide funds
for the purposes described herein.

B.    Lenders are willing to make loans and advances to Borrower upon the terms
and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and intending to be legally bound, the parties hereto hereby
agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1
Definitions.

Capitalized terms not otherwise defined herein will have the following meanings:

“Accounting Terms” as used in this Agreement, or any certificate, report or
other document made or delivered pursuant to this Agreement, accounting terms
not defined elsewhere in this Agreement shall have the respective meanings given
to them under GAAP as it applies to REIT accounting.

“Adjusted Funds From Operations” means net income (computed in accordance with
GAAP), excluding gains or losses from the sale of property, plus interest
expense, plus depreciation and amortization expenses, minus required capital
expenditures reserves, and after adjustments for unconsolidated partnerships and
joint ventures, minority interest applicable to common units, and preferred
stock distributions.

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“Affiliate” as to any Person, means each other Person that directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, the Person in question.

“Appraisal” means an appraisal performed by an MAI appraiser approved by Agent
and in form and substance satisfactory to Agent. Agent reserves the right to
make reasonable adjustments in the assumptions and other variables used in such
appraisals in order to conform to the policies of Agent, which adjustments may
result in a change in the appraised value.

“Appraised Value” means the fair market value of each property constituting or
proposed to constitute Real Estate, as shown by an Appraisal of such property.

“Assignments of Leases” means each Assignment of Leases, Rents and Profits of
even date herewith from Grantors to Agent, relating to the Mortgaged Properties,
as the same may be amended, modified, supplemented or restated from time to
time.

“Bank Indebtedness” shall mean all obligations and Indebtedness of Borrower to
Bank, whether now or hereafter owing or existing, including, without limitation,
all obligations under the Loan Documents, all obligations to reimburse Bank for
payments made by Bank pursuant to any letter of credit issued for the account or
benefit of Borrower by Bank, all other obligations or undertakings now or
hereafter made by or for the benefit of Borrower to or for the benefit of Bank
under any other agreement, promissory note or undertaking now existing or
hereafter entered into by Borrower with Bank, including, without limitation, all
obligations of Borrower to Bank under any guaranty or surety agreement and all
obligations of Borrower to immediately pay to Bank the amount of any overdraft
on any deposit account maintained with Bank, together with all interest and
other sums payable in connection with any of the foregoing.

“Bankruptcy Code” means the Bankruptcy Code codified in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from time to
time.

“Borrowing Base” has the meaning given to such term in Section 2.6 herein.

“Business Day” means any day except a Saturday, Sunday or other day on which
commercial banks in Pennsylvania are authorized by law to close; provided,
however, that when used in connection with a borrowing or payment in respect of
a LIBOR Rate Loan, the term “Business Day” shall also exclude any day on which
banks in London, England are not open for dealings in Dollar deposits in the
London interbank market.

“Capital Lease” means any lease of property, real or personal, the obligations
with respect to which are required to be capitalized on a balance sheet of the
lessee in accordance with GAAP.

“Capital Stock” means (a) in the case of a corporation, capital stock, (b) in
the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of capital
stock, (c) in the case of a partnership, partnership interests (whether general
or limited), (d) in the case of a limited liability company, membership
interests and (e) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets upon liquidation of, the issuing Person.

2

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“Cash Equivalents” means (a) securities issued or directly and fully guaranteed
or insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of America
is pledged in support thereof) having maturities of not more than twelve (12)
months from the date of acquisition (“Government Obligations”), (b) U.S. dollar
denominated time deposits, certificates of deposit of (i) any domestic
commercial bank of recognized standing having capital and surplus in excess of
$250,000,000 or (ii) any bank whose short-term commercial paper rating from S&P
is at least A-1 or the equivalent thereof or from Moody’s is at least P-1 or the
equivalent thereof (any such bank being an “Approved Bank”), in each case with
maturities of not more than 364 days from the date of acquisition,
(c) commercial paper and variable or fixed rate notes issued by any Approved
Bank (or by the parent company thereof) or any variable rate notes issued by or
guaranteed by any domestic corporation rated A-1 (or the equivalent thereof) or
better by S&P or P-1 (or the equivalent thereof) or better by Moody’s and
maturing within six (6) months of the date of acquisition, (d) repurchase
agreements with a bank or trust company (including a Lender) or a recognized
securities dealer having capital and surplus in excess of $500,000,000 for
direct obligations issued by or fully guaranteed by the United States of
America, (e) obligations of any state of the United States of America or any
political subdivision thereof for the payment of the principal and redemption
price of and interest on which there has been irrevocably deposited Government
Obligations maturing as to principal and interest at times and in amounts
sufficient to provide such payment and (f) auction preferred stock rated in the
highest short-term credit rating category by S&P or Moody’s.

“Closing Date” means the date of this Agreement.

“Code” means the Internal Revenue Code of 1986, as amended, modified, succeeded
or replaced from time to time.

“Collateral” means a collective reference to the collateral that is identified
in, and at any time will be covered by, the Collateral Documents, and any other
property or assets, whether tangible or intangible and whether real or personal,
now owned or hereafter acquired by any of the Credit Parties.

“Collateral Documents” means the Mortgages, the Assignments of Leases, the
Collateral Assignments of Hotel Management Agreements, the Guaranties and all
other agreements, documents and instruments relating to, arising out of, or in
any way connected with any of the foregoing documents or granting to the Agent,
for the benefit of the Secured Parties, Liens or security interests to secure,
inter alia, the Obligations whether now or hereafter executed and/or filed, each
as may be amended from time to time in accordance with the terms hereof,
executed and delivered in connection with the granting, attachment and
perfection of the Administrative Agent’s security interests and Liens arising
thereunder, including, without limitation, UCC financing statements.

3

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“Commitment” of any Lender shall mean the commitment of such Lender to make its
portion of the Loan in a principal amount up to such Lender’s Commitment
Percentage of the Committed Amount.

“Commitment Percentage” means, for any Lender, the percentage identified as its
commitment percentage on Schedule A or in the Assignment and Assumption pursuant
to which such Lender became a Lender hereunder, as such percentage may be
modified.

“Commitment Amount” means the aggregate revolving credit line extended by
Lenders to Borrower for Loans and Letters of Credit pursuant to and in
accordance with the terms of this Agreement, in an amount up to $60,000,000.

“Corporation” means a corporation, partnership, trust, unincorporated
organization, association or joint stock company.

“Credit Party” or “Credit Parties” means the Borrower and/or the Guarantors,
individually or collectively, as appropriate.

“Debt Service” means the sum of the current portion of long-term debt and the
current portion of capitalized lease obligations plus interest expense on all
obligations.

“Debt Service Coverage Ratio” means the ratio of Adjusted Funds From Operations
to the sum of the current portion of long-term debt and the current portion of
capitalized lease obligations plus interest expense on all obligations.

“Default Rate” has the meaning given to such term in Section 3.2 herein.

“Deferred Compensation Plan” means any plan described in Section 3(3) of ERISA
or any other plan or arrangement under which Borrower or any ERISA Affiliate may
become obligated to pay deferred, bonus, incentive, or other compensation or
health, life, medical, dental, or other welfare benefits, excluding only any
fully insured major medical, hospital, or dental program for which Borrower or
such ERISA Affiliate has no obligation other than the payment of premiums.

“Deposit Accounts” has the meaning given to such term in Section 5.27 herein.

“EBITDA” means net income, less income or plus loss from discontinued operations
and extraordinary items, plus income taxes, plus interest expense, plus
depreciation, depletion and amortization.

“Environmental Affiliate” means Borrower and any other Person for whom Borrower
at any time has any liability (contingent or otherwise) with respect to any
claims arising out of the failure of Borrower or such Person to comply with all
applicable Environmental Requirements.

“Environmental Cleanup Site” means any location which is listed or proposed for
listing on the National Priorities List, on CERCLIS or on any similar state list
of sites requiring investigation or cleanup, or which is the subject of any
pending or threatened action, suit, proceeding or investigation related to or
arising from any alleged violation of any Environmental Requirements.

4

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“Environmental Requirements” means any and all applicable federal, state or
local laws, statutes, ordinances, regulations or standards, administrative or
court orders or decrees, common law doctrines or private agreements, relating to
(i) pollution or protection of the environment and natural resources, (ii)
exposure of employees or other persons to Special Materials, (iii) protection of
the public health and welfare from the effects of Special Materials and their
products, by-products, wastes, emissions, discharges or releases, and (iv)
regulation, licensing, approval or authorization of the manufacture, generation,
use, formulation, packaging, labeling, transporting, distributing, handling,
storing or disposing of any Special Materials.

“Equity” means Borrower's consolidated equity, as shown on its financial
statements submitted to Bank in accordance with Article IX herein.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and all rules or regulations issued in connection therewith.

“ERISA Affiliate” means each trade or business (whether or not incorporated)
that, together with Borrower, would be treated as a single employer under
Section 4001(b)(1) of ERISA or Section 414(b) or 414(c) of the Internal Revenue
Code.

“Eurodollar Reserve Percentage” means for any day, the percentage (expressed as
a decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%)
that is in effect for such day as prescribed by the Federal Reserve Board (or
any successor) for determining the maximum reserve requirement (including
without limitation any basic, supplemental or emergency reserves) in respect of
Eurocurrency liabilities, as defined in Regulation D of such Board as in effect
from time to time, or any similar category of liabilities for a member bank of
the Federal Reserve System in New York City.

“Event of Default” means each of the events specified in Section 12.1.

“Expiration Date” means December 31, 2008.

“Extension of Credit” means, as to any Lender, the making of a Loan by such
Lender or the issuance of, or participation in, a Letter of Credit by such
Lender.

“Fee Letter” means the agreement of even date herewith between the Borrower and
Agent setting forth the amounts of certain fees payable by Borrower hereunder.

“Federal Funds Rate” shall mean, for any period, a fluctuating interest rate per
annum equal, for each day during such period, to the weighted average of the
rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by it.

5

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“GAAP” means generally accepted accounting principles in the United States of
America, in effect from time to time, consistently applied and maintained.

“Government Acts” has the meaning set forth in Section 2.2.8.

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.

“Grantors” means the Harrisburg Grantor, the King of Prussia Grantor, the Laurel
Grantor and each fee owner of any other Mortgaged Property, as grantor under the
Mortgage in respect of such Mortgaged Property.

“Gross Asset Value” means: (i) Operating Real Estate Value, plus (ii) cash and
cash equivalents (excluding any restricted cash), plus (iii) accounts receivable
less than ninety (90) days, plus (iv) with respect to any operating hotel
acquired during the preceding quarter, the acquisition cost of such property.

“Guarantor” means the Trust, each of the Grantors, 44 New England Management
Company, a Virginia corporation and each other Subsidiary or Affiliate of
Borrower that hereafter becomes a guarantor of Borrower’s obligations hereunder.

“Guaranty” means the Guaranty of Payment and Performance of each Guarantor.

“Harrisburg Grantor” means 2844 Associates, a Pennsylvania limited partnership,
the fee owner of the Harrisburg Property, as grantor under the Harrisburg
Mortgage.

“Harrisburg Mortgage” means the Open-End Mortgage, Assignment of Leases and
Rents and Security Agreement of even date herewith from the Harrisburg Grantor
to Agent, and relating to the Harrisburg Property, as the same may be amended,
modified, supplemented or restated from time to time.

“Harrisburg Property” means the real property, fixtures and improvements thereon
located at 5680 Allentown Boulevard, Harrisburg, Pennsylvania and operated as a
Holiday Inn Express Hotel and Suites.

“Hazardous Material” means any substance or material meeting any one or more of
the following criteria: (i) it is or contains a substance designated as a
hazardous waste, hazardous substance, pollutant, contaminant or toxic substance
under any Environmental Requirement; (ii) it is toxic, explosive, corrosive,
ignitable, infectious, radioactive, mutagenic or otherwise hazardous, (iii) its
presence requires investigation or remediation under an Environmental
Requirement or common law; (iv) it constitutes a danger, nuisance, trespass or
health or safety hazard to persons or property; and/or (v) it is or contains,
without limiting the foregoing, petroleum hydrocarbons.

6

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“Hedging Agreements” shall mean any Interest Rate Protection Agreement or other
interest rate protection agreement, foreign currency exchange agreement,
commodity purchase or option agreement or other interest or exchange rate or
commodity price hedging agreements.

“Hedging Agreement Provider” means any Person that enters into a Hedging
Agreement with a Credit Party or any of its Subsidiaries that is permitted by
Section 8.1(e) to the extent such Person is a Lender, an Affiliate of a Lender
or any other Person that was a Lender (or an Affiliate of a Lender) at the time
it entered into the Hedging Agreement but has ceased to be a Lender (or whose
Affiliate has ceased to be a Lender) under this Agreement.

“Improvements” means all buildings, structures, fixtures and personal property
now or hereafter located on or affixed to the Land, together with all additions
and accessions thereto and replacements and proceeds thereof.

“Indebtedness,” as applied to a Person, means:

(a) all items (except items of capital stock or of surplus) which in accordance
with GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of such Person as at the date as of which
Indebtedness is to be determined;

(b) to the extent not included in the foregoing, all indebtedness, obligations,
and liabilities secured by any mortgage, pledge, lien, conditional sale or other
title retention agreement or other security interest to which any property or
asset owned or held by such Person is subject, whether or not the indebtedness,
obligations or liabilities secured thereby shall have been assumed by such
Person; and

(c) to the extent not included in the foregoing, all indebtedness, obligations
and liabilities of others which such Person has directly or indirectly
guaranteed, endorsed (other than for collection or deposit in the ordinary
course of business), sold with recourse, or agreed (contingently or otherwise)
to purchase or repurchase or otherwise acquire or in respect of which such
Person has agreed to supply or advance funds (whether by way of loan, stock
purchase, capital contribution or otherwise) or otherwise to become directly or
indirectly liable.

“Interest Payment Date” means (a) as to any Prime Rate Loan, the first Business
Day of each calendar month and on the Expiration Date, (b) as to any LIBOR Rate
Loan having an Interest Period of three (3) months or less, the last day of such
Interest Period, (c)  as to any LIBOR Rate Loan having an Interest Period longer
than three (3) months, each day which is three (3) months after the first day of
such Interest Period and the last day of such Interest Period and (d) as to any
Loan which is the subject of a mandatory prepayment, the date on which such
mandatory prepayment is due.

“Interest Period” means, with respect to any LIBOR Rate Loan,

7

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(a)   initially, the period commencing on the date such Loan is made or
converted, as the case may be, with respect to such LIBOR Rate Loan and ending
one (1), two (2), three (3) or six (6) months thereafter, subject to
availability, as selected by the Borrower in the Line Request given with respect
thereto; and

(b)   thereafter, each period commencing on the last day of the immediately
preceding Interest Period applicable to such LIBOR Rate Loan and ending one (1),
two (2), three (3) or six (6) months thereafter, as selected by the Borrower by
irrevocable notice to the Agent not less than two (2) Business Days prior to the
last day of the then current Interest Period with respect thereto;
 
provided that the foregoing provisions are subject to the following:

(i)     if any Interest Period pertaining to a LIBOR Rate Loan would otherwise
end on a day that is not a Business Day, such Interest Period shall be extended
to the next succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
 
(ii)    any Interest Period pertaining to a LIBOR Rate Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the relevant calendar month;
 
(iii)   if the Borrower shall fail to give notice as provided above, the
Borrower shall be deemed to have selected a Prime Rate Loan to replace the
affected LIBOR Rate Loan;
 
(iv)   no Interest Period in respect of any Loan shall extend beyond the
Expiration Date; and
 
(v)    no more than six (6) LIBOR Rate Loans may be in effect at any time. For
purposes hereof, LIBOR Rate Loans of different Interest Periods or Tranches
shall be considered as separate LIBOR Rate Loans, even if they shall begin on
the same date and have the same duration, although borrowings, extensions and
conversions in the same Tranche may, in accordance with the provisions hereof,
be combined at the end of existing Interest Periods to constitute a new LIBOR
Rate Loan with a single Interest Period.

“Interest Rate Option” means the option of Borrower to select a Prime Rate Loan
or LIBOR Rate Loan as the interest rate applicable to principal advances under
the Line.

“Interest Rate Protection Agreement” means any interest rate protection
agreement, foreign currency exchange agreement, commodity purchase or option
agreement or other interest or exchange rate or commodity price hedging
agreements between Borrower and any Lender, or any affiliate of Bank.

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“Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of capital stock or other securities of another Person, (b) a loan,
advance or capital contribution to, guaranty or assumption of debt of, or
purchase or other acquisition of any other debt or equity participation or
interest in, another Person, including any partnership or joint venture interest
in such other Person, or (c) the purchase or other acquisition (in one
transaction or a series of transactions) of assets of another Person that
constitute a business unit.

“Issuing Bank” or “Issuing Lender” shall mean Bank or any other Lender that is
acceptable to Agent which shall issue a Letter of Credit for the account of
Borrower.

“King of Prussia Grantor” means HHLP Valley Forge Associates, a Pennsylvania
limited partnership, the fee owner of the King of Prussia Property, as grantor
under the King of Prussia Mortgage.

“King of Prussia Mortgage” means the Open-End Mortgage, Assignment of Leases and
Rents and Security Agreement of even date herewith from the King of Prussia
Grantor to Agent, and relating to the King of Prussia Property, as the same may
be amended, modified, supplemented or restated from time to time.

“King of Prussia Property” means the real property, fixtures and improvements
thereon located at 440 American Avenue, King of Prussia, Pennsylvania and
operated as a Mainstay Suites and Sleep Inn.

“Land” means the real property described in Exhibit A to each of the Mortgages.

“Laurel Grantor” means 44 Laurel Associates, LLC, a Maryland limited liability
company, the fee owner of the Laurel Property, as grantor under the Laurel
Mortgage.

“Laurel Mortgage” means the Deed of Trust of even date herewith from the Laurel
Grantor to Agent, and relating to the Laurel Property, as the same may be
amended, modified, supplemented or restated from time to time.

“Laurel Property” means the real property, fixtures and improvements thereon
located at 13700 Baltimore Avenue, Laurel, Maryland and operated as a Fairfield
Inn.

“Lender’s Fees” shall mean the non-refundable fees payable to each of the
Lenders as set forth herein and in the fee letter between Agent and Borrower.

“Letter of Credit Committed Amount” shall have the meaning given to such term in
Section 2.2 herein.

“Letter of Credit Documents” shall mean, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered in
connection therewith, any application therefor, and any agreements, instruments,
guarantees or other documents (whether general in application or applicable only
to such Letter of Credit) governing or providing for (i) the rights and
obligations of the parties concerned or at risk or (ii) any collateral security
for such obligations.

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“Letter of Credit Fees” shall mean the letter of credit fees referred to in
Section 4.6 herein.

“Letter of Credit Obligations” shall mean, at any time, the sum of (i) the
aggregate undrawn amount of all Letters of Credit outstanding at such time, plus
(ii) the aggregate amount of all drawings under Letters of Credit for which
Agent has not at such time been reimbursed.

“Letter of Credit Sublimit” shall mean $15,000,000.

“Letters of Credit” shall mean all letters of credit (whether documentary or
stand-by) issued by Lenders for the account of Borrower pursuant to this
Agreement, and all amendments, renewals, extensions or replacements thereof.

“LIBOR” means, for any LIBOR Rate Loan for any Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%)
appearing on Moneyline Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two (2) Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term “LIBOR” means, for any LIBOR Rate Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100th of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two (2) Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period; provided, however, if more
than one rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates (rounded upwards, if necessary,
to the nearest 1/100th of 1%). If, for any reason, neither of such rates is
available, then “LIBOR” means the rate per annum at which, as determined by the
Agent, Dollars in an amount comparable to the Loans then requested are being
offered to leading banks at approximately 11:00 A.M. London time, two (2)
Business Days prior to the commencement of the applicable Interest Period for
settlement in immediately available funds by leading banks in the London
interbank market for a period equal to the Interest Period selected.

“LIBOR Lending Office” means, as to any Lender, such office of such Lender as
such Lender may from time to time specify to the Agent and the Borrower as the
office of such Lender at which the LIBOR Rate Loans of such Lender are to be
made.

“LIBOR Market Index Rate” means, for any day, the rate for one (1) month U.S.
dollar deposits as reported on Telerate page 3750 as of 11:00 a.m., London time,
on such day, or if such day is not a Business Day, then the immediately
preceding Business Day (or if not so reported, then as determined by the Agent
from another recognized source or interbank quotation).

“LIBOR Rate” means a rate per annum (rounded upwards, if necessary, to the next
higher 1/100th of 1%) determined by the Agent pursuant to the following formula:

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LIBOR Rate =
LIBOR
     
1.00 - Eurodollar Reserve Percentage
 

“LIBOR Rate Loan” means a Loan the rate of interest applicable to which is based
on the LIBOR Rate as described in Section 3.1.2 herein.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement and any capital lease having substantially the same economic effect as
any of the foregoing).

“Line” has the meaning given to such term in Section 2.1 herein.

“Line Note” has the meaning given to such term in Section 2.1 herein.

“Line Request” has the meaning given to such term in Section 2.5 herein.

“Loan Documents” means this Agreement, the Line Notes, the Mortgages, the
Assignments of Leases, the Collateral Assignments of Hotel Management
Agreements, the Guaranties and all other documents executed or delivered by the
Credit Parties and their respective Subsidiaries and Affiliates pursuant to this
Agreement, as they may be amended from time to time.

“Loans” means the unpaid balance of advances under the Line, which may be Prime
Rate Loans or LIBOR Rate Loans.

“Material Adverse Effect” means a material adverse effect on (a) the businesses,
properties, operations or financial conditions of the Credit Parties taken as a
whole, (b) the ability of the Credit Parties taken as a whole to perform their
obligations, when such obligations are required to be performed, under this
Agreement, any of the Notes or any other Loan Document or (c) the validity or
enforceability of this Agreement, any of the Notes, any of the other Loan
Documents, any Hedging Agreement or the rights or remedies of the Agent or the
Lenders hereunder or thereunder, in any material respect.

“Minimum Debt Service Coverage Ratio” means 1.35:1.00.

“Mortgage” or “Mortgages” means, individually or collectively, as applicable,
any of the Harrisburg Mortgage, the King of Prussia Mortgage, the Laurel
Mortgage and each other Mortgage and Security Agreement from the fee owner, as
grantor, to Agent, and relating to any of the Mortgaged Properties, as the same
may be amended, modified, supplemented or restated from time to time.

“Mortgaged Property” or “Mortgaged Properties” means, individually or
collectively, as applicable, any of the Harrisburg Property, the King of Prussia
Property, the Laurel Property and such additions, replacements or substitutions
thereto and therefore as may approved by Lenders pursuant to Section 13.10
hereof.

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“Multiemployer Plan” means a plan described in Section 3(37) or 4001(a)(3) of
ERISA or Section 414 of the Internal Revenue Code of 1986, as amended from time
to time, which cover employees of Borrower or any ERISA Affiliate.

“Net Operating Income” means Borrower’s consolidated gross revenues less
expenses (excluding depreciation, interest and amortization).

“Net Worth” means, as of any date, net worth of Borrower as determined in
accordance with GAAP.

“Note” or “Notes” means the promissory note or notes of the Borrower in favor of
each of the Lenders evidencing the Loans provided pursuant to Section 2.1,
individually or collectively, as appropriate, as such promissory notes may be
amended, modified, supplemented, extended, renewed or replaced from time to
time.

“Obligations” means, without duplication, (a) all of the obligations,
indebtedness and liabilities of the Credit Parties to the Lenders and the Agent,
whenever arising, under this Agreement, the Notes or any of the other Loan
Documents including principal, interest, fees, Letter of Credit Obligations,
reimbursements and indemnification obligations and other amounts (including, but
not limited to, any interest accruing after the occurrence of a filing of a
petition of bankruptcy under the Bankruptcy Code with respect to any Credit
Party, regardless of whether such interest is an allowed claim under the
Bankruptcy Code), and (b) all Swap Obligations owing to one or more Lenders or
their respective Affiliates, provided that at or prior to the time that any
transaction relating to such Swap Obligations is executed, the Lender or
Affiliate party thereto (other than Bank) shall have delivered written notice to
the Agent that such a transaction has been entered into and that it constitutes
an Obligation entitled to the benefits of the Loan Documents.

“Obligor” means each maker, mortgagor, guarantor, or other obligor under or with
respect to any Collateral Document.

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets
Control.

“Operating Real Estate Value” means the aggregate EBITDA generated by the
Borrower and its Subsidiaries for the preceding fiscal quarter annualized and
capitalized at the higher of (i) 10.0%; or (ii) the national average
capitalization rate as determined by Korpacz Real Estate Investor Survey for
limited service hotels; the capitalization rate shall be adjusted not more than
annually. For the purposes of determining Operating Real Estate Value, EBITDA
from the properties acquired during the prior quarter or disposed of during the
prior quarter shall be excluded.

“Patriot Act” means the USA Patriot Act, Title III of Pub. L. 107-56, signed
into law October 26, 2001, as amended.

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“Permitted Investments” means:

(a)    cash and Cash Equivalents;

(b)    receivables owing to any Credit Party or any of their Subsidiaries and
advances to suppliers, in each case if created, acquired or made in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms;
 
(c)    Investments in and loans to any Credit Parties;
 
(d)    Investments received in connection with the bankruptcy or reorganization
of suppliers and customers and in settlement of delinquent obligations of, and
other disputes with, customers and suppliers arising in the ordinary course of
business;
 
(e)    Investments, acquisitions or transactions permitted under Section 8.7;
and
 
(f)    Hedging Agreements to the extent permitted pursuant to Section 8.1(e).

“Permitted Liens” means:
 
(a)    Liens created by or otherwise existing, under or in connection with this
Agreement or the other Loan Documents in favor of the Lenders;

(b)    Liens in favor of a Hedging Agreement Provider in connection with any
Hedging Agreement, but only (i) to the extent such Liens secure obligations
under Hedging Agreements with any Lender, or any Affiliate of a Lender, (ii) to
the extent such Liens are on the same collateral as to which the Agent on behalf
of the Lenders also has a Lien and (iii) if such Hedging Agreement Provider and
the Agent, on behalf of the Lenders shall share pari passu in the collateral
subject to such Liens;
 
(c)    Liens securing purchase money indebtedness to the extent permitted under
Section 8.1;
 
(d)    Liens for taxes, assessments, charges or other governmental levies not
yet due or as to which the period of grace (not to exceed sixty (60) days), if
any, related thereto has not expired or which are being contested in good faith
by appropriate proceedings; provided that adequate reserves with respect thereto
are maintained on the books of the Credit Parties or their Subsidiaries, as the
case may be, in conformity with GAAP;
 
(e)    carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or
other like Liens arising in the ordinary course of business which are not
overdue for a period of more than sixty (60) days or which are being contested
in good faith by appropriate proceedings; provided that a reserve or other
appropriate provision has been made therefor and the aggregate amount of such
Liens is less than $100,000;
 
(f)    mechanics’, materialmen’s, repairmen’s or other like Liens arising in the
ordinary course of business under any construction contract which are not
overdue for a period of more than sixty (60) days or which are being contested
in good faith by appropriate proceedings; provided that a reserve or other
appropriate provision has been made therefor;
 
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(g)    pledges or deposits in connection with workers’ compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements in an aggregate amount not to exceed $100,000;
 
(h)    deposits to secure the performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
 
(i)     any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Lien referred to in the
foregoing clauses; provided that such extension, renewal or replacement Lien
shall be limited to all or a part of the property which secured the Lien so
extended, renewed or replaced (plus improvements on such property);
 
(j)     easements, rights-of-way, zoning restrictions, minor defects or
irregularities in title and other similar encumbrances not interfering in any
material respect with the value or use of the property to which such lien is
attached;
 
(k)    Liens on equipment arising from precautionary UCC financing statements
relating to the lease of such equipment to the extent permitted by this
Agreement;
 
(l)     Liens existing on the Closing Date and set forth on Schedule 8.4;
provided that (i) no such Lien shall at any time be extended to cover property
or assets other than the property or assets subject thereto on the Closing Date
and (ii) the Indebtedness secured by such Liens shall remain permitted pursuant
to Section 8.1; and
 
(m)    any attachment or judgment Lien not constituting an Event of Default.

“Person” means an individual, a Corporation or a government or any agency or
subdivision thereof, or any other entity.

“Philadelphia Grantor” means the fee owner of the Philadelphia Property, as
grantor under the Philadelphia Mortgage.

“Philadelphia Mortgage” means the Open-End Mortgage, Assignment of Leases and
Rents and Security Agreement from the Philadelphia Grantor to Agent, and
relating to the Philadelphia Property, as the same may be amended, modified,
supplemented or restated from time to time.

“Philadelphia Property” means the real property, fixtures and improvements
thereon located at 1301 Race Street, Philadelphia, Pennsylvania and operated as
a Hampton Inn.

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

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“Prime Rate” means the variable rate of interest published from time to time in
the Wall Street Journal as the Prime Rate.

“Prime Rate Loan” means a Loan the rate of interest applicable to which is based
on the Prime Rate, as described in Section 3.1.1 herein.

“Recovery Event” means theft, loss, physical destruction or damage, taking or
similar event with respect to any property or assets owned by any of the Credit
Parties or any of their Subsidiaries which results in the receipt by any of the
Credit Parties or any of their Subsidiaries of any cash insurance proceeds or
condemnation award payable by reason thereof.

“Replacement Guarantor” means any Person, reasonably acceptable to Agent, who
becomes a Guarantor hereunder pursuant to Section 4.14 hereof or otherwise.

“Required Lenders” means at any time, Lenders which are then in compliance with
their obligations hereunder (as determined by the Agent) and holding in the
aggregate at least sixty-six and two-thirds percent (66 2/3%) of (i) the
Commitment (and participation interests therein) and the outstanding Loans (and
participation interests therein) or (ii) if the Commitment have been terminated,
the outstanding Loans and participation interests (including the participation
interests of the Issuing Bank in any Letters of Credit).

“Restricted Payment” means, as to any Person (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of such Person, now or hereafter outstanding, (b) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of Capital Stock of such
Person, now or hereafter outstanding, (c) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of Capital Stock of such Person, now or hereafter
outstanding, (d) any payment with respect to any earnout obligation, (e) any
payment or prepayment of principal of, premium, if any, or interest on,
redemption, purchase, retirement, defeasance, sinking fund or similar payment
with respect to, any Subordinated Debt; (f) any payment of any management or
consulting fee to any Person; or (g) any payment of any bonus or other form of
compensation (other than salary) to any Person who is directly or indirectly a
significant partner, shareholder, owner, managing member or Affiliate of such
Person.

“RevPAR” means revenue per available room.

“Sanctioned Country” means a country subject to a sanctions program identified
on the list maintained by OFAC and available at
http://www.treas.gov/offices/enforcement /ofac/sanctions/index.html, or as
otherwise published from time to time.

“Sanctioned Person” means (a) a Person named on the list of “Specially
Designated Nationals and Blocked Persons” maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise
published from time to time, or (b) (i) an agency of the government of a
Sanctioned Country, (ii) an organization controlled by a Sanctioned Country, or
(iii) a person resident in a Sanctioned Country, to the extent subject to a
sanctions program administered by OFAC.

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“Secured Parties” means collectively, (i) the Agent, (ii) the Lenders (including
the Bank), (iii) the Issuing Lender, (iv) any Hedging Agreement Provider which
is a counterparty to any Hedging Agreement, provided that with respect to clause
(iv) the Lender or Affiliate of a Lender party thereto (other than Bank or its
Affiliates) shall have delivered written notice to the Agent that such a
transaction has been entered into and that it constitutes an Obligation entitled
to the benefits of the Collateral Documents.
 
“Special Materials” means any and all materials which, under Environmental
Requirements, require special handling in use, generation, collection, storage,
treatment or disposal, or payment of costs associated with responding to the
lawful directives of any court or agency of competent jurisdiction. Special
Materials shall include, without limitation: (i) any flammable substance,
explosive, radioactive material, hazardous material, hazardous waste, toxic
substance, solid waste, pollutant, contaminant or any related material, raw
material, substance, product or by-product of any substance specified in or
regulated or otherwise affected by any Environmental Requirements (including but
not limited to any "hazardous substance" as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
any similar state or local law), (ii) any toxic chemical or other substance from
or related to industrial, commercial or institutional activities, and (iii)
asbestos, gasoline, diesel fuel, motor oil, waste and used oil, heating oil and
other petroleum products or compounds, polychlorinated biphenyls, radon, urea
formaldehyde and lead-containing materials.

“Subordinated Liabilities” means liabilities subordinated to the Borrower’s
obligation to Lenders in a manner acceptable to Agent in its sole discretion.

“Subsidiary” means a Corporation (a) which is organized under the laws of the
United States or any state thereof, or any other country or jurisdiction, (b)
which conducts substantially all of its business and has substantially all of
its assets within the United States, and (c) of which more than fifty percent
(50%) of its outstanding voting stock of every class (or other voting equity
interest) is owned by Borrower or one or more of its Subsidiaries.

“Substitute Collateral” means any real property, together with the improvements
thereon, owned by an Affiliate or Subsidiary of Borrower or the Trust, in
respect of which Agent shall have received an Appraisal and such other reports,
documents and instruments as may be required by Agent pursuant to Section 4.14
hereof. Upon the delivery of Substitute Collateral to Agent and the acceptance
thereof by Agent and Lenders, the Substitute Mortgage and the Substitute
Assignment of Leases delivered to Agent shall constitute Collateral Documents
and the Land and Improvements to which they relate shall constitute Mortgaged
Property.

“Swap Obligations” of a Person means any and all obligations of such Person,
whether absolute or contingent and however and whenever created, arising,
evidenced or acquired (including all renewals, extensions and modifications
thereof and substitutions therefor), under a Hedging Agreement.

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“Tangible Net Worth” means the value of the Borrower’s total assets (including
leaseholds and leasehold improvements and reserves against assets, but excluding
goodwill, patents, trademarks, trade names, organization expense, unamortized
debt discount and expense, capitalized or deferred research and development
costs, deferred marketing expenses, and other like intangibles, and monies due
from affiliates, officers, employees, shareholders or managers of the Borrower)
less total liabilities, including, but not limited to accrued and deferred
income taxes, but excluding the non-current portion of subordinated liabilities.

“Total Funded Debt” means all outstanding liabilities for borrowed money and
other interest interest-bearing liabilities, including current and long-term
debt, less the non-current portion of subordinated liabilities.

“Tranche” means the collective reference to LIBOR Rate Loans with Interest
Periods which begin and end on the same day.

“UCC” means the Uniform Commercial Code, as presently and hereafter enacted in
the Commonwealth of Pennsylvania. Any term used in this Agreement which is
defined in the UCC and not otherwise defined in this Agreement or in any other
Loan Document has the meaning given to the term in the UCC.
 
Section 1.2
Other Definitional Provisions.

 
(a)    Unless otherwise specified therein, all terms defined in this Agreement
have the defined meanings when used in the Notes or other Loan Documents or any
certificate or other document made or delivered pursuant hereto.
 
(b)    The words “hereof”, “herein” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Section, subsection, Schedule
and Exhibit references are to this Agreement unless otherwise specified.
 
(c)    The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.
 
 
ARTICLE II
THE LINE: USE OF PROCEEDS

Section 2.1
Line of Credit.

(a)    Lenders will establish for Borrower for and during the period from the
date hereof and until the Expiration Date, subject to the terms and conditions
hereof, a revolving line of credit (the “Line”) pursuant to which Lenders will
from time to time make Loans to Borrower in an aggregate outstanding principal
amount not to exceed at any time Sixty Million Dollars ($60,000,000) (the
“Committed Amount”). Each Lender severally agrees to make Loans to Borrower from
time to time in an amount equal to such Lender’s Commitment Percentage of the
advance under the Line requested by Borrower and in an aggregate principal
amount up to its Commitment Percentage of the Committed Amount; provided,
however, that (i) with regard to each Lender individually, the aggregate
principal amount of such Lender’s Commitment Percentage of Loans plus Letter of
Credit Obligations shall not exceed such Lender’s Commitment Percentage of the
Committed Amount and (ii) with regard to the Lenders collectively, the aggregate
principal amount of Loans plus Letter of Credit Obligations shall not exceed the
Committed Amount. Neither Agent nor any other Lender shall be obligated to
advance the share of any other Lender. Agent shall not be required to make the
full amount of any requested advance unless and until it receives funds
representing each other Lender’s Commitment Percentage of such requested
advance, but Agent shall advance to Borrower that portion of the requested
advance equal to the Commitment Percentages of such requested advance which it
has received from Lenders. Within the limits of the Line, Borrower may borrow,
repay and re-borrow under the Line. The Line shall be subject to all terms and
conditions set forth in all of the Loan Documents, which terms and conditions
are incorporated herein.

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(b)    The obligations to repay the Loans and to pay interest thereon shall be
evidenced by a promissory note of Borrower to Agent in substantially the form of
Exhibit A attached hereto (“Line Note”). In the event a Lender requests a
separate promissory note of Borrower representing such Lender’s Commitment,
Borrower hereby agrees to execute and deliver to such Lender a separate Line
Note substantially in the form of Exhibit A attached hereto, payable to the
order of such Lender in a principal amount equal to such Lender’s Commitment and
representing the obligations of Borrower to pay such Lender the amount of such
Lender’s Commitment or, if less, the aggregate unpaid principal amount of all
Loans made by such Lender hereunder, plus interest accrued thereon, as set forth
herein. All payments under the Line Notes shall be remitted by Borrower to
Agent. In the event any Lender receives a Loan payment directly from Borrower,
such Lender shall immediately remit the entire amount of such payment to Agent,
to be disbursed by Agent in accordance with Section 13.13 hereof. Borrower
irrevocably authorizes each Lender to make or cause to be made appropriate
notations on its Line Note, or on a record pertaining thereto, reflecting Loans
and repayments thereof. The outstanding amount of the Loans set forth on such
Lender’s Line Note or record shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Lender, but the failure to make such
notation or record, or any error in such notation or record shall not limit or
otherwise affect the obligations of Borrower hereunder or under any Line Note to
make payments of principal of or interest on any Line Note when due. Any
references herein to a “Note” or “Notes” shall be deemed to mean and refer to
each Line Note individually and all Line Notes collectively.

(c)    Each Lender shall make its Commitment Percentage of each advance
available to Agent, for the account of the Borrower, in funds immediately
available to Agent at Agent’s designated office by 1:00 p.m. on the date
specified in the applicable Line Request. If Agent does not receive each other
Lender’s Commitment Percentage of an advance, and Agent elects, in its sole
discretion, to make the advance on behalf of Lenders or any of them, Agent shall
be entitled to recover each Lender’s Commitment Percentage of each such advance
together with interest at a per annum rate equal to the Federal Funds Rate
during the period commencing on the date such advance is made and ending on (but
excluding) the date Agent recovers such amount. Each Lender is absolutely and
unconditionally obligated, without deduction or setoff of any kind, to forward
to Agent its Commitment Percentage of each advance made pursuant to the terms of
this Agreement. To the extent Agent is not reimbursed by such Lender, Borrower
shall repay Agent immediately upon demand such amount. Agent also shall be
entitled to recover any and all actual losses and damages (including, without
limitation, reasonable attorneys’ fees) from any Lender failing to so advance
upon demand of Agent. Agent may set off the obligations of a Lender under this
paragraph against any distributions of payments of the Obligations, which Agent
would otherwise make available to such Lender, at any time.

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(d)   To the extent and during the time period in which any Lender fails to
provide or delays providing its respective payment to Agent pursuant to
subparagraph (a) above, such Lender’s percentage of all payments of the
Obligations (but not its Commitment Percentage of future advances required to be
funded by such Lender) shall decrease to reflect the actual percentage which its
actual outstanding Loans bears to the total outstanding Loans of all Lenders.
During the time period in which any Lender fails to provide or delays providing
its respective payment to Agent pursuant to subparagraph (a) above, such Lender
shall not be entitled to give instructions to Agent or to approve, disapprove,
consent or to vote on any matters relating to this Agreement and the other Loan
Documents. All amendments, waivers and other modifications of this Agreement and
the other Loan Documents may be made without regard to such Lender and, for
purposes of the definition of Required Lenders, such Lender shall be deemed not
to be a Lender.

Section 2.2
Letters of Credit.

2.2.1        Issuance of Letters of Credit. Subject to the terms and conditions
hereof and of the Letter of Credit Documents, if any, and any other terms and
conditions which the Issuing Bank may reasonably require, the Lenders will
participate in the issuance by the Issuing Bank from time to time of such
Letters of Credit in Dollars from the Closing Date until the Expiration Date as
Borrower may request, in a form acceptable to the Issuing Bank; provided,
however, that (a) the Letter of Credit Obligations outstanding shall not at any
time exceed Fifteen Million Dollars ($15,000,000) (the “Letter of Credit
Committed Amount”) and (b) the sum of the aggregate principal amount of
outstanding Loans plus Letter of Credit Obligations outstanding shall not at any
time exceed the lesser of the Committed Amount and the Borrowing Base. No Letter
of Credit shall (x) have an original expiry date more than one year from the
date of issuance or (y) as originally issued or as extended, have an expiry date
extending beyond the Expiration Date. Each Letter of Credit shall comply with
the related Letter of Credit Documents. The issuance and expiry date of each
Letter of Credit shall comply with the related Letter of Credit Documents. The
issuance and expiry date of each Letter of Credit shall be a Business Day.

2.2.2        Notice and Reports. The request for the issuance of a Letter of
Credit shall be submitted by Borrower to the Issuing Bank at least five (5)
Business Days prior to the requested date of issuance. The Issuing Bank will,
upon request, disseminate to each of the Lenders a detailed report specifying
the Letters of Credit which are then issued and outstanding and any activity
with respect thereto which may have occurred since the date of the prior report,
and including therein, among other things, the beneficiary, the face amount and
the expiry date as well as any payment or expirations which may have occurred.

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2.2.3        Participation. Each Lender, upon issuance of a Letter of Credit,
shall be deemed to have purchased without recourse a risk participation from the
Issuing Bank in such Letter of Credit and the obligations arising thereunder, in
each case in an amount equal to its Commitment Percentage of such Letter of
Credit, and shall absolutely, unconditionally and irrevocably assume, as primary
obligor and not as surety, and be obligated to pay to the Issuing Bank therefor
and discharge when due, its Commitment Percentage of the obligations arising
under such Letter of Credit. Without limiting the scope and nature of each
Lender’s participation in any Letter of Credit, to the extent that the Issuing
Bank has not been reimbursed as required hereunder or under any such Letter of
Credit, each such Lender shall pay to the Issuing Bank its Commitment Percentage
of such unreimbursed drawing pursuant to the provisions of Section  2.2.4(c).
The obligation of each Lender to so reimburse the Issuing Bank shall be absolute
and unconditional and shall not be affected by the occurrence of a Default, an
Event of Default or any other occurrence or event. Any such reimbursement shall
not relieve or otherwise impair the obligation of Borrower to reimburse the
Issuing Bank under any Letter of Credit, together with interest as hereinafter
provided.

2.2.4        Reimbursement.

(a)    In the event of any drawing under any Letter of Credit, the Issuing Bank
will promptly notify Borrower. Unless Borrower shall immediately notify the
Issuing Bank that Borrower intends to otherwise reimburse the Issuing Bank for
such drawing, Borrower shall be deemed to have requested that the Lenders make a
Loan in the amount of the drawing as provided in Section 2.2.5 on the related
Letter of Credit, the proceeds of which will be used to satisfy the related
reimbursement obligations.

(b)    Borrower promises to reimburse the Issuing Bank on the day of drawing
under any Letter of Credit (either with the proceeds of a Loan obtained
hereunder or otherwise) in same day funds. If Borrower shall fail to reimburse
the Issuing Bank as provided hereinabove, the unreimbursed amount of such
drawing shall bear interest at a per annum rate equal to the Prime Rate plus
three percent (3%). Borrower’s reimbursement obligations hereunder shall be
absolute and unconditional under all circumstances irrespective of any rights of
setoff, counterclaim or defense to payment Borrower may claim or have against
the Issuing Bank, the Agent, the Lenders, the beneficiary of the Letter of
Credit drawn upon or any other Person, including without limitation any defense
based on any failure of Borrower to receive consideration or the legality,
validity, regularity or unenforceability of the Letter of Credit.

(c)    The Issuing Bank will promptly notify the other Lenders of the amount of
any unreimbursed drawing and each Lender shall promptly pay to the Agent for the
account of the Issuing Bank in Dollars and in immediately available funds, the
amount of such Lender’s Commitment Percentage of such unreimbursed drawing. Such
payment shall be made on the Business Day such notice is received by such Lender
from the Issuing Bank if such notice is received at or before 2:00 P.M.
otherwise such payment shall be made at or before 12:00 Noon on the Business Day
next succeeding the day such notice is received. If such Lender does not pay
such amount to the Issuing Bank in full upon such request, such Lender shall, on
demand, pay to the Agent for the account of the Issuing Bank interest on the
unpaid amount during the period from the date of such drawing until such Lender
pays such amount to the Issuing Bank in full at a rate per annum equal to, if
paid within two (2) Business Days of the date that such Lender is required to
make payments of such amount pursuant to the preceding sentence, the Federal
Funds Rate and thereafter at a rate equal to the Prime Rate. Each Lender’s
obligation to make such payment to the Issuing Bank, and the right of the
Issuing Bank to receive the same, shall be absolute and unconditional, shall not
be affected by any circumstance whatsoever and without regard to the termination
of this Agreement or the Commitments hereunder, the existence of a Default or
Event of Default or the acceleration of the obligations of Borrower hereunder
and shall be made without any offset, abatement, withholding or reduction
whatsoever.

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(d)    Simultaneously with the making of each payment by a Lender to the Issuing
Bank, such Lender shall, automatically and without any further action on the
part of the Issuing Bank or such Lender, acquire a participation in an amount
equal to such payment (excluding the portion of such payment constituting
interest owing to the Issuing Bank) in the related unreimbursed drawing portion
of the Letter of Credit Obligation and in the interest thereon and in the
related Letter of Credit Documents, and shall have a claim against Borrower with
respect thereto.

2.2.5        Repayment with Loans.

(a)    On any day on which Borrower shall have requested, or been deemed to have
requested, a Loan advance to reimburse a drawing under a standby Letter of
Credit, the Agent shall give notice to the Lenders that a Loan has been
requested or deemed requested by Borrower to be made in connection with a
drawing under a Letter of Credit, in which case a Loan advance shall be
immediately made to Borrower by all Lenders (without giving effect to any
termination of the Commitments pursuant to Section 12.2) pro rata based on the
respective Commitment Percentages of the Lenders (determined before giving
effect to any termination of the Commitments pursuant to Section 12.2) and the
proceeds thereof shall be paid directly by the Agent to the Issuing Bank for
application to the respective Letter of Credit Obligations.

(b)    Each such Lender hereby irrevocably agrees to make its Commitment
Percentage of each such Loan immediately upon any such request or deemed request
in the amount, in the manner and on the date specified in the preceding sentence
notwithstanding: (i) the amount of such borrowing may not comply with the
minimum amount for advances of Loans otherwise required hereunder, (ii) whether
any conditions specified in Article XI are then satisfied, (iii) whether a
Default or an Event of Default then exists, (iv) failure for any such request or
deemed request for Revolving Loan to be made by the time otherwise required
hereunder, (v) whether the date of such borrowing is a date on which Loans are
otherwise permitted to be made hereunder or (vi) any termination of the
Commitments relating thereto immediately prior to or contemporaneously with such
borrowing.

(c)    In the event that any Loan cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of the
commencement of a bankruptcy or insolvency proceeding with respect to Borrower),
then each such Lender hereby agrees that it shall forthwith purchase (as of the
date such borrowing would otherwise have occurred, but adjusted for any payments
received from Borrower on or after such date and prior to such purchase) from
the Issuing Bank such participation in the outstanding Letter of Credit
Obligations as shall be necessary to cause each such Lender to share in such
Letter of Credit Obligations ratably (based upon the respective Commitment
Percentages of the Lenders (determined before giving effect to any termination
of the Commitments pursuant to Section 12.2)), provided that at the time any
purchase of participation pursuant to this sentence is actually made, the
purchasing Lender shall be required to pay to the Issuing Bank, to the extent
not paid to the Issuing Bank by Borrower in accordance with the terms of Section
2.2.3, interest on the principal amount of participation purchased for each day
from and including the day upon which such borrowing would otherwise have
occurred to but excluding the date of payment for such participation, at the
rate equal to, if paid within two (2) Business Days of the date of the Loan
advance, the Federal Funds Rate, and thereafter at a rate equal to the Prime
Rate.

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2.2.6        Renewal, Extension. The renewal or extension of any Letter of
Credit shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.

2.2.7        Uniform Customs and Practices. The Issuing Bank may provide that
the Letters of Credit shall be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the International
Chamber of Commerce (the “UCP”), in which case the UCP may be incorporated by
reference therein and deemed in all respects to be a part thereof.

2.2.8        Indemnification; Nature of Issuing Bank’s Duties.

(a)    In addition to their other obligations under this Section 2.2, Borrower
agrees to protect, indemnify, pay and save the Issuing Bank harmless from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys’ fees) that the Issuing
Bank may incur or be subject to as a consequence, direct or indirect, of (i) the
issuance of any Letter of Credit or (ii) the failure of the Issuing Bank to
honor a drawing under a Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or Governmental Authority (all such acts or omissions, herein called
“Government Acts”).

(b)    As between Borrower and the Issuing Bank, Borrower shall assume all risks
of the acts, omissions or misuse of any Letter of Credit by the beneficiary
thereof. The Issuing Bank shall not be responsible: (i) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for and issuance of any Letter of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (ii) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (iii) for errors, omissions, interruptions or delays
in transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (iv) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under a Letter of Credit or of the proceeds thereof; and (v) for any
consequences arising from causes beyond the control of the Issuing Bank,
including, without limitation, any Government Acts. None of the above shall
affect, impair, or prevent the vesting of the Issuing Bank’s rights or powers
hereunder.

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(c)    In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Issuing
Bank, under or in connection with any Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not put such Issuing Bank
under any resulting liability to Borrower. It is the intention of the parties
that this Credit Agreement shall be construed and applied to protect and
indemnify the Issuing Bank against any and all risks involved in the issuance of
the Letters of Credit, all of which risks are hereby assumed by Borrower,
including, without limitation, any and all Government Acts. The Issuing Bank
shall not, in any way, be liable for any failure by the Issuing Bank or anyone
else to pay any drawing under any Letter of Credit as a result of any Government
Acts or any other cause beyond the control of the Issuing Bank.

(d)    Nothing in this Section 2.2.8 is intended to limit the reimbursement
obligations of Borrower contained in Section 2.2.4 above. The obligations of
Borrower under this Section 2.2 shall survive the termination of this Agreement.
No act or omission of any current or prior beneficiary of a Letter of Credit
shall in any way affect or impair the rights of the Issuing Bank to enforce any
right, power or benefit under this Agreement.

(e)    Notwithstanding anything to the contrary contained in this Section 2.2.8,
Borrower shall have no obligation to indemnify the Issuing Bank in respect of
any liability incurred by the Issuing Bank (i) arising solely out of the gross
negligence or willful misconduct of the Issuing Bank, as determined by a court
of competent jurisdiction, or (ii) caused by the Issuing Bank’s failure to pay
under any Letter of Credit after presentation to it of a request strictly
complying with the terms and conditions of such Letter of Credit, as determined
by a court of competent jurisdiction, unless such payment is prohibited by any
law, regulation, court order or decree.

2.2.9        Responsibility of Issuing Bank. It is expressly understood and
agreed that the obligations of the Issuing Bank hereunder to the Lenders are
only those expressly set forth in this Agreement and that the Issuing Bank shall
be entitled to assume that the conditions precedent set forth herein have been
satisfied unless it shall have acquired actual knowledge that any such condition
precedent has not been satisfied; provided, however, that nothing set forth in
this Section 2.2 shall be deemed to prejudice the right of any Lender to recover
from the Issuing Bank any amounts made available by such Lender to the Issuing
Bank pursuant to this Section 2.2 in the event that it is determined by a court
of competent jurisdiction that the payment with respect to a Letter of Credit
constituted gross negligence or willful misconduct on the part of the Issuing
Bank.

2.2.10      Conflict with Letter of Credit Documents. In the event of any
conflict between this Agreement and any Letter of Credit Document (including any
letter of credit application), this Agreement shall control.

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Section 2.3
Commitments.

Subject to the terms and conditions hereof and in reliance upon the
representations and warranties set forth herein, each of the Lenders severally
agrees to lend to Borrower at any time or from time to time on or after the
Closing Date and before the Expiration Date, such Lender’s Commitment Percentage
of the Loans and Letter of Credit obligations as may be requested or deemed
requested by Borrower.

Section 2.4
Use of Proceeds.

Borrower agrees to use advances under the Line (a) for working capital and
general corporate purposes (including without limitation, the payment of
distributions or dividends to partners or shareholders of the Credit Parties, as
the case may be), (b) to acquire additional hotels or an interest therein, and
for no other purpose.

Section 2.5
Advances of the Line.

Borrower shall give Agent not less than two (2) Business Days prior written
notice of a proposed advance of the Line (each a “Line Request”) in the form
attached hereto as Exhibit B. Each Line Request shall (a) state the principal
amount to be advanced and the use of the proceeds of the Line being requested
(including any acquisition to which such use relates), (b) include a description
of the economics of any acquisition, (c) designate the Interest Rate Option
(including the designation of the applicable Interest Period for any LIBOR Rate
Loan as 30, 60, 90 or 180 days) and (d) contain such other information as Agent
may request in the exercise of its reasonable discretion. All advances requested
by Borrower must be in the minimum amount of $1,000,000 and integral multiples
of $100,000 in excess thereof. Provided that all of the conditions precedent to
Agent making such advance have occurred, and provided further that the making of
such advance will not cause Borrower to be in default of the covenants and
conditions set forth in this Agreement (including without limitation Article VII
herein), Agent shall make the proceeds of such advance available to Borrower by
crediting the amount thereof to Borrower’s deposit account with Bank.

Section 2.6
Conditions to Advances; Borrowing Base.  

Lenders agree, subject to the terms and conditions of this Agreement, from time
to time, to make loans and advances to Borrower hereunder on a revolving basis.
Such Loans shall be subject to the following conditions:

 
2.6.1
Type A Loans.

(a)    Lenders will advance such amounts as Borrower may request, up to Fifty
Million Dollars ($50,000,000), for secured Loans (“Type A Loans”);
provided however, that the sum of the aggregate amount of outstanding (i) Type A
Loans, (ii) Type B Loans and (iii) Letter of Credit obligations shall not at any
time exceed the Committed Amount.

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(b)
Type A Loans shall be subject to the following additional conditions:

 
(i)
The aggregate amount of all Type A Loans outstanding shall not exceed at any
time the lesser of:

 
(A)
67% of the Appraised Value of the Mortgaged Properties; or

 
(B)
An amount that would cause the Borrower to exceed the Minimum Debt Service
Coverage Ratio (the “Borrowing Base”).

 
(ii)
Each Type A Loan shall be repaid in full on or prior to the earlier to occur of:
(A) the date that is eighteen (18) months following the date of the advance of
such Type A Loan by Lenders (the “Due Date”) and (B) the Expiration Date;
provided, however, that Borrower’s failure to repay a Type A Loan when due shall
constitute an Event of Default under Section 12.1(a)(i) hereof only if Borrower
fails to repay such Type A Loan in full on or prior to the earlier to occur of:
(x) the date that is six (6) months after the Due Date and (y) the Expiration
Date.

 
(iii)
Notwithstanding the above conditions, Borrower may borrow, as determined by the
Required Lenders in their discretion, Type A Loans in an aggregate principal
amount up to the lesser of (A) one hundred percent (100%) of the Appraised Value
of the Mortgaged Property or (B) the Committed Amount for a period expiring upon
the earlier to occur of (x) the date that is ninety (90) days after the date
such Type A Loan is advanced and (y) the Expiration Date.

 
2.6.2
Type B Loans.

(a)    Lenders will advance such amounts as Borrower may request, up to Ten
Million Dollars ($10,000,000), for unsecured Loans (“Type B Loans”); provided,
however, that the sum of the aggregate amount of outstanding (i) Type A Loans,
(ii) Type B Loans and (iii) Letter of Credit obligations shall not at any time
exceed the Committed Amount.
 
(b)    Each Type B Loan shall be repaid in full on or prior to the earlier to
occur of (i) the date that is ninety (90) days following the date of the advance
of such Type B Loan by Lenders and (ii) the Expiration Date.

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ARTICLE III
INTEREST RATES

Section 3.1
Interest on the Line.

Subject to the provisions of Section 3.2, each Loan shall bear interest as
follows:

3.1.1       Prime Rate Loans. During such periods as a Loan is a Prime Rate
Loan, each such Prime Rate Loan shall bear interest at a per annum rate equal to
the sum of the Prime Rate minus one-half of one percent (0.50%); and
 
3.1.2       LIBOR Rate Loans. During such periods as a Loan is a LIBOR Rate
Loan, each such LIBOR Rate Loan shall bear interest at a per annum rate equal to
the sum of the LIBOR Rate plus two and one-quarter percent (2.25%).
 
Interest on each Loan shall be payable in arrears on each related Interest
Payment Date.

Section 3.2
Default Interest.

From the maturity of the obligations evidenced by the Line Note, as well as upon
the occurrence of an Event of Default, the outstanding principal balance and all
other sums due hereunder and under the Line Note shall bear interest at a rate
which is three percent (3%) in excess of the non-default rate otherwise set
forth herein (“Default Rate”). The Default Rate shall apply to all sums
evidenced by the Line Note as set forth above, including after entry of a
judgment or judgments against Borrower, and said judgment or judgments shall
bear interest at the Default Rate until satisfied in full.

Section 3.3
Calculation.

Interest will be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed.

Section 3.4
Limitation of Interest to Maximum Lawful Rate. 

In no event will the rate of interest payable hereunder exceed the maximum rate
of interest permitted to be charged by applicable law (including the choice of
law rules) and any interest paid in excess of the permitted rate will be
refunded to Borrower. Such refund will be made by application of the excessive
amount of interest paid against any sums outstanding hereunder and will be
applied in such order as Agent may determine. If the excessive amount of
interest paid exceeds the sums outstanding, the portion exceeding the sums
outstanding will be refunded in cash by Agent. Any such crediting or refunding
will not cure or waive any default by Borrower. Borrower agrees, however, that
in determining whether or not any interest payable hereunder exceeds the highest
rate permitted by law, any non-principal payment, including without limitation
prepayment fees and late charges, will be deemed to the extent permitted by law
to be an expense, fee, premium or penalty rather than interest.

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ARTICLE IV
PAYMENTS AND FEES; COLLATERAL

Section 4.1
Interest Payments on the Line.

Borrower will pay interest on the outstanding principal balance of each Loan on
the Interest Payment Date for such Loan.

Section 4.2
Principal Payments on the Line; Prepayments. 

(a)   Borrower will pay the outstanding principal balance of the Line, together
with any accrued and unpaid interest thereon, and any other sums due pursuant to
the terms hereof, on the Expiration Date.

(b)   Borrower may prepay any Loan in full or in part at any time upon not less
than two (2) Business Days prior via written notice to the Agent, without
premium or penalty; provided, however, that upon the prepayment of the principal
amount of any LIBOR Rate Loan, Borrower shall be subject to a breakage fee as
set forth in subparagraph (c) below. In addition, upon the prepayment of any
Loan subject to a Hedging Agreement, Borrower may be obligated to pay an unwind
fee related to such Hedging Agreement and such unwind fee shall be governed by
the Hedging Agreement. Any prepayment shall include accrued and unpaid interest
to the date of the prepayment on the principal amount prepaid and all other sums
due and payable hereunder including, without limitation, payment of expenses
including those costs associated with the termination of derivative
transactions. Nothing herein shall be deemed to alter or affect any obligations
that Borrower may have to a Lender or Hedging Agreement Provider under any
Hedging Agreement. All costs, expenses, and indemnity obligations that may be
incurred by a Lender as a result of any default under, or termination of, a
Hedging Agreement shall be: (i) subject to immediate reimbursement by Borrower;
and (ii) secured by the Collateral Documents.

(c)   The Borrower agrees to hold Lenders harmless from any loss or expense
which the Lenders may sustain or incur as a consequence of the following:

(i)     the failure of the Borrower to make any required payment of the
principal amount of any LIBOR Rate Loan (including payments made after any
acceleration thereof);

(ii)    the failure of the Borrower to borrow, continue or convert a Loan after
the Borrower has given (or is deemed to have given) a Line Request or a Notice
of Conversion/Continuation;

(iii)   the failure of the Borrower to make any prepayment after the Borrower
has given a notice in accordance with Section 4.2(b);

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(iv)   the prepayment (other than pursuant to Section 4.2(b)) of a LIBOR Rate
Loan on a day which is not the last day of the Interest Period with respect
thereto; or

(v)    the conversion of any LIBOR Rate Loan to a Prime Rate Loan on a day that
is not the last day of the applicable Interest Period.

Such breakage fee shall include any loss or expense arising from the liquidation
or re-employment of funds obtained by the Agent to maintain the LIBOR Rate Loan
provided hereunder or from fees payable to terminate the deposits from which
such funds were obtained. Solely for purposes of calculating amounts payable by
the Borrower to the Agent, each LIBOR Rate Loan made by the Agent (and each
related reserve, special deposit or similar requirement) shall be conclusively
deemed to have been funded at the LIBOR used in determining the interest rate
for such LIBOR Rate Loan by a matching deposit or other borrowing in the
interbank Eurodollar market for a comparable amount and for a comparable period,
whether or not such LIBOR Rate Loan is in fact so funded.

Section 4.3
Facility Fee.

Borrower shall pay to Lenders a facility fee in the amount set forth in the Fee
Letter, to be paid to Agent upon execution of this Agreement and disbursed to
Lenders in such amounts as Agent and Lenders have agreed.

Section 4.4
Arrangement Fee.

Borrower shall pay to Bank, as Agent, an arrangement fee in the amount set forth
in the Fee Letter. The arrangement fee shall be paid to Bank not later than June
30, 2006.

Section 4.5
Unused Facility Fee.

Borrower shall pay to Agent for the account of the Lenders at the end of each
calendar quarter, as partial compensation for extending the Committed Amount to
Borrower, an unused facility fee which shall be determined by multiplying (a)
the positive difference, if any, between (i) the Committed Amount in effect at
such time and (ii) the average daily Loans of Borrower and the Letter of Credit
Obligations outstanding during such quarter by (b) one-eighth of one percent
(0.125%) for the number of days in such quarter.

Section 4.6
Letter of Credit Fees.

(a) In consideration of the issuance of Letters of Credit hereunder, Borrower
promises to pay to the Agent for the account of each Lender a fee (the “Letter
of Credit Fee”) on such Lender’s Commitment Percentage of the average daily
maximum amount available to be drawn under each such Letter of Credit, which fee
shall be equal to 0.75% of such available amount, computed at a per annum rate
for each day from the date of issuance to the date of expiration. The Letter of
Credit Fee will be payable quarterly in arrears on the last day of each calendar
quarter.

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(b) In addition to the Letter of Credit Fee payable pursuant to subparagraph (a)
above, Borrower promises to pay to the Issuing Bank, for its own account without
sharing by the other Lenders, the letter of credit fronting and negotiation fees
agreed to by Borrower and the Issuing Bank from time to time and the customary
charges from time to time of the Issuing Bank with respect to the issuance,
amendment, transfer, administration, cancellation and conversion of, and
drawings under, such Letters of Credit (collectively, the “Issuing Bank Fees”).

Section 4.7
Late Charge. 

In the event that Borrower fails to pay any principal, interest or other fees or
expenses payable hereunder for a period of at least ten (10) days after the same
shall become due, in addition to paying such sums, Borrower will pay to Agent a
late charge equal to five percent (5%) of such past due payment as compensation
for the expenses incident to such past due payment.

Section 4.8
Payment Method. 

Borrower irrevocably authorizes Agent to debit all payments required to be made
by Borrower hereunder or otherwise under the Line, on the date due, from any
deposit account maintained by Borrower with Bank (other than escrow funds owned
legally by Borrower but held in escrow for the beneficial interest of another
Person). Otherwise, Borrower will be obligated to make such payments directly to
Agent. All payments are to be made in immediately available funds. If Agent
accepts payment in any other form, such payment shall not be deemed to have been
made until the funds comprising such payment have actually been received by or
made available to Agent.

Section 4.9
Application of Payments. 

Prior to the occurrence of an Event of Default, any and all payments on account
of the Line will be applied first to any amounts due to Agent pursuant to the
Loan Documents, other than principal and interest on the Line; second to accrued
interest due under the Line; and third, to outstanding principal under the Line.
Following the occurrence of an Event of Default, any and all payments on account
of the Line will be applied to accrued and unpaid interest, outstanding
principal and other sums due hereunder or under the Loan Documents, in such
order as Bank, in its discretion, elects. If Borrower makes a payment or
payments and such payment or payments, or any part thereof, are subsequently
invalidated, declared to be fraudulent or preferential, set aside or are
required to be repaid to a trustee, receiver, or any other person under any
bankruptcy act, state or federal law, common law or equitable cause, then to the
extent of such payment or payments, the obligations or part thereof hereunder
intended to be satisfied shall be revived and continued in full force and effect
as if said payment or payments had not been made.

Section 4.10
Loan Account. 

Agent will open and maintain on its books a loan account with respect to
advances made, repayments, prepayments, the computation and payment of interest
and fees and the computation and final payment of all other amounts due and sums
paid to Agent under this Agreement. Except in the case of manifest error in
computation, such account will be conclusive and binding on the Borrower as to
the amount at any time due to Agent from Borrower under this Agreement or the
Notes.

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Section 4.11
Indemnity; Loss of Margin.

(a)   Borrower will indemnify Lenders against any loss or expense which Lenders
sustain or incur as a consequence of an Event of Default, including, without
limitation, any failure of Borrower to pay when due (at maturity, by
acceleration or otherwise) any principal, interest, fee or any other amount due
under this Agreement or the other Loan Documents. If a Lender sustains or incurs
any such loss or expense it will from time to time notify Agent in writing of
the amount determined in good faith by Lender to be necessary to indemnify
Lender for the loss or expense and Agent shall provide such notice to Borrower.
Such amount will be due and payable by Borrower to such Lender within ten (10)
days after presentation by Lender of a statement setting forth a brief
explanation of and Lender’s calculation of such amount, which statement shall be
conclusively deemed correct absent manifest error. Any amount payable to the
Lenders under this Section will bear interest at the default rate payable under
the Line from the due date until paid, both before and after judgment.

(b)    In the event that any present or future law, rule, regulation, treaty or
official directive or the interpretation or application thereof by any central
bank, monetary authority or governmental authority, or the compliance with any
guideline or request of any central bank, monetary authority or governmental
authority (whether or not having the force of law):

(i)     subjects a Lender to any tax with respect to any amounts payable under
this Agreement or the other Loan Documents by Borrower or otherwise with respect
to the transactions contemplated under this Agreement or the other Loan
Documents (except for taxes on the overall net income and/or revenues of Bank
imposed by the United States of America, the Commonwealth of Pennsylvania, or
any political subdivision of either of them); or

(ii)    imposes, modifies or deems applicable any deposit insurance, reserve,
special deposit, capital maintenance, capital adequacy, or similar requirement
against assets held by, or deposits in or for the account of, or loans or
advances or commitment to make loans or advances by, Lenders; or

(iii)   imposes upon a Lender any other condition with respect to advances or
extensions of credit or the commitment to make advances or extensions of credit
under this Agreement, and the result of any of the foregoing is to increase the
costs of such Lender, reduce the income receivable by or return on equity of
such Lender or impose any expense upon such Lender with respect to any advances
or extensions of credit or commitments to make advances or extensions of credit
under this Agreement, such Lender shall so notify Agent in writing and Agent
shall provide such notice to Borrower. Borrower agrees to pay such Lender the
amount of such increase in cost, reduction in income, reduced return on equity
or capital, or additional expense within ten (10) days after presentation by
such Lender of a statement concerning such increase in cost, reduction in
income, reduced return on equity or capital, or additional expense. Such
statement shall set forth a brief explanation of the amount and such Lender’s
calculation of the amount (in determining such amount the Lender may use any
reasonable averaging and attribution methods), which statement shall be
conclusively deemed correct absent manifest error. If the amount set forth in
such statement is not paid within ten (10) days after such presentation of such
statement, interest will be payable on the unpaid amount at the default rate
payable under the Line from the due date until paid, both before and after
judgment.

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Section 4.12
Extension of Expiration Date. 

Provided no Event of Default has occurred and is then continuing, Borrower, at
least ninety (90) days prior to the Expiration Date and at least ninety (90)
days prior to the end of each subsequent twelve (12) month period the Line of
Credit is provided to Borrower, may request in writing to Agent that Lenders
extend the Expiration Date then in effect for an additional period of one (1)
year. In the event Borrower requests an extension of the Expiration Date in
accordance with the preceding sentence, Agent will notify Borrower not less than
thirty (30) days prior to the Expiration Date and each subsequent anniversary of
the Closing Date that (a) Lenders have extended the Expiration Date then in
effect by twelve (12) months, or (b) Lenders will not extend the Expiration Date
then in effect. A failure by Agent to send any such notice shall be deemed to be
a determination by Lenders not to extend the Expiration Date then in effect. In
the event Lenders determine that they will extend the Expiration Date then in
effect, Borrower shall, at least five (5) days prior to the then current
Expiration Date, pay to Lenders an extension fee in the amount of one-eighth of
one percent (0.125%) of the Committed Amount, to be paid to Agent for the
account of each Lender. If Borrower shall fail to pay such extension fee to
Agent as and when required, Lenders’ extension of the Expiration Date shall be
deemed to be canceled and shall be null and void and of no further force or
effect and the Expiration Date then in effect shall continue as if Agent had not
provided any notice of extension.

Section 4.13
Collateral.

As security for the performance of this Agreement and the other Loan Documents
and the payment of the Notes, and as security for the performance of the
Guaranties and all other liabilities of Borrower to Lenders, Borrower and
Guarantors are, contemporaneously with the execution hereof, granting to Agent
security interests, collateral assignments and mortgage liens, as applicable, in
and to the Collateral.

Section 4.14
Release and Substitution of Collateral; Additional Collateral.

Agent may, upon request of Borrower, allow for the release of Mortgaged Property
from the Collateral, the release and substitution of Mortgaged Property and any
Guarantor with Substitute Collateral and a Replacement Guarantor, or the
addition of any Mortgaged Property to the Collateral (“Additional Collateral”)
and additional Guarantor (“Additional Guarantor”), respectively, subject to the
applicable requirements of Section 13.10 hereof and the following additional
conditions:

(a)    In connection with the release or release and substitution of Mortgaged
Property from the Collateral, Borrower shall either (i) repay the outstanding
principal amount of the Line in an amount equal to the amount by which the then
unpaid principal balance of the Line exceeds the Borrowing Base, after taking
into account the release of the subject Mortgaged Property, or (ii) in lieu of
such repayment, deliver to Agent Substitute Collateral, the Appraised Value of
which, when added to the Appraised Value of all other Mortgaged Properties that
will remain as Collateral for the Line following such release, will cause the
then outstanding principal balance of the Line to be not greater than the
Borrowing Base.

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(b)    Borrower shall pay all costs and fees of Agent and Lenders in connection
with the addition of any Substitute Collateral, Additional Collateral,
Replacement Guarantor or Additional Guarantor pursuant to this Agreement,
including, but not limited to, the payment of lien searches, title insurance,
appraisals, environmental reports, recording fees, mortgage satisfaction fees,
attorneys’ fees and all other costs and expenses incurred directly by Agent or
any Lender or payable to third parties in connection therewith.

(c)    Borrower shall provide the following documentation to Agent (and Agent
shall provide copies thereof to Lenders), as a condition to any such addition of
any Substitute Collateral, Additional Collateral, Replacement Guarantor or
Additional Guarantor:

(i)     An executive summary of such Collateral including the following
information:

(A)    a description of such Collateral in form and content reasonably
acceptable to Agent;

(B)    the purchase price paid or to be paid for such Collateral, if such
Collateral was acquired within twelve (12) months of the submission of such
Collateral to the Collateral hereunder;

(C)    the current and projected condition of the regional market and specific
submarket in which such Collateral is located (which may be satisfied with the
submission of market reports from Smith Travel Research or other firm acceptable
to Agent);

(D)    the current projected capital plans and, if applicable, current
renovation plans for such Collateral; and

(E)    such additional information as Agent may reasonably request.

(ii)    An Appraisal of such Collateral;

(iii)   a Mortgage and Assignment of Leases in respect of such Collateral;

(iv)   such items set forth in Section 10.1 in respect of such Collateral and
Guarantor as may be required by Agent;

(v)    a Loan Modification Agreement by and among Borrower and Agent and such
Guarantor, in form and substance reasonably acceptable to Agent, whereby the
terms and conditions of this Agreement and the other Loan Documents are modified
and amended and such Guarantor becomes a Credit Party, if such agreement is
requested by Agent;

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(vi)   an environmental indemnity agreement from such Guarantor, with regard to
such Collateral;

(vii)          operating statements for such Collateral in accordance with GAAP
for the previous two fiscal years and for the current fiscal year through the
fiscal quarter most recently ending, provided that, if such Collateral has been
operating for less than two fiscal years, Borrower shall provide such
projections and other information concerning the anticipated operation of such
Collateral as Agent may reasonably request; and

(viii)         such other documentation and information as Agent may reasonably
request in order to (A) evaluate such Collateral, (B) ensure the appropriate
amendment of the Loan Documents, if any, and (C) ensure the due authorization of
such Guarantor’s execution and delivery of documents and agreements in
connection with the foregoing.

ARTICLE V
 REPRESENTATIONS AND WARRANTIES

To induce the Lenders to enter into this Agreement and to make the Extensions of
Credit herein provided for, the Credit Parties, jointly and severally, hereby
represent and warrant to the Agent and to each Lender as follows:

Section 5.1
Valid Organization, Standing and Qualification. 

Borrower is a limited partnership, duly formed, validly existing and in good
standing under the laws of the Commonwealth of Virginia. The Trust is a real
estate investment trust duly organized, validly existing and in good standing
under the laws of the State of Maryland. Each other Guarantor is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. Each of the Credit Parties has full power and authority to
execute, deliver and comply with the Loan Documents, and to carry on its
business as it is now being conducted and is duly licensed or qualified as a
foreign corporation in good standing under the laws of each jurisdiction in
which the character or location of the properties owned by it or the business
transacted by it requires such licensing or qualification.

Section 5.2
Licenses.

Each of the Credit Parties has all licenses, registrations, approvals and other
authority as may be necessary to enable it to own and operate its business and
perform all services and business which it has agreed to perform in any state,
municipality or other jurisdiction.

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Section 5.3
Ownership Interests. 

The ownership of all partnership interests, stock, debentures, options,
warrants, bonds and other securities (debt and equity) of Borrower and
Guarantor, and all pledges, proxies, voting trusts, powers of attorney and other
agreements affecting the ownership or voting rights of said interests is as set
forth on Schedule 5.3 attached hereto.

Section 5.4
Subsidiaries. 

Except as set forth on Schedule 5.4 attached hereto, Borrower does not own any
shares of stock or other equity interests in any Person, directly or indirectly
(by any Subsidiary or otherwise).

Section 5.5
Financial Statements. 

Borrower has furnished to Bank the audited consolidated financial statements of
Borrower, certified without qualification by independent public accountants, for
the fiscal years ended December 31, 2002, 2003 and 2004 and all management and
comment letters from such accountants in connection therewith, and its
internally prepared interim financial statements as of September 30, 2005. Such
financial statements of Borrower (together with the related notes and comments),
are correct and complete, fairly present the financial condition and the assets
and liabilities of Borrower at such date, and have been prepared in accordance
with GAAP. With respect to the interim statements, such statements are subject
to year-end adjustment and any accompanying footnotes.

Section 5.6
No Material Adverse Change in Financial Condition. 

There has been no Material Adverse Change in the financial condition of Borrower
since December 31, 2004.

Section 5.7
Pending Litigation or Proceedings. 

Except as set forth on Schedule 5.7 attached hereto, there are no judgments
outstanding or actions, suits or proceedings pending or, to the best of
knowledge of the Credit Parties, threatened against or affecting Borrower or
Guarantor, at law or in equity or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, in which the amount claimed against
Borrower or Guarantor exceeds the lesser of $250,000 or the amount of insurance
coverage available to Borrower or Guarantor to pay such claim. Schedule 5.7
lists all judgments, actions, suits or proceedings pending whether or not
covered by insurance, and notes each judgment, action, suit or proceeding
covered by insurance.

Section 5.8
Due Authorization; No Legal Restrictions. 

The execution and delivery by the Credit Parties of the Loan Documents, the
consummation of the transactions contemplated by the Loan Documents and the
fulfillment and compliance with the respective terms, conditions and provisions
of the Loan Documents: (a) have been duly authorized by all requisite
partnership or trust action, as the case may be, by the Credit Parties, (b) will
not conflict with or result in a breach of, or constitute a default (or might,
upon the passage of time or the giving of notice or both, constitute a default)
under, any of the terms, conditions or provisions of (i) any applicable statute,
law, rule, regulation or ordinance, (ii) Borrower’s Limited Partnership
Agreement or Certificate of Limited Partnership, (iii) the Trust’s Trust
Indenture or Bylaws or the charter and constituent documents of any other
Guarantor, (iv) any indenture, mortgage, loan or credit agreement or instrument
to which any of the Credit Parties is a party or by which it may be bound or
affected, or (v) any judgment or order of any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, and
(c) will not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of the
Credit Parties under the terms or provisions of any such agreement or
instrument, except liens in favor of Agent.

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Section 5.9
Enforceability. 

(a)   Borrower has duly executed and delivered each of the Loan Documents to
which it is party and each of the Loan Documents to which Borrower is party
constitutes the legal, valid and binding obligation of Borrower, enforceable in
accordance with its terms.

(b)   Guarantor has duly executed and delivered each of the Loan Documents to
which it is party and each of the Loan Documents to which Guarantor is party
constitutes the legal, valid and binding obligation of Guarantor, enforceable in
accordance with its terms.

Section 5.10
No Default Under Other Obligations Orders or Governmental Obligations. 

Borrower is not in violation of its Limited Partnership Agreement or Certificate
of Limited Partnership, the Trust is not in violation of its Trust Indenture or
Bylaws, none of the other Guarantors is in violation of its certificate of
limited partnership, certificate of organization, partnership agreement,
operating agreement or other charter or governing documents, as applicable, and
none of the Credit Parties is in default in the performance or observance of any
of its obligations, covenants or conditions contained in any indenture or other
agreement creating, evidencing or securing any Indebtedness or pursuant to which
any such Indebtedness is issued, nor are any of the Credit Parties in violation
of or in default under any other agreement or instrument or any judgment,
decree, order, statute, rule or governmental regulation, applicable to it or by
which its properties may be bound or affected.

Section 5.11
Governmental Consents. 

No consent, approval or authorization of or designation, declaration or filing
with any governmental authority on the part of Borrower or Guarantor is required
in connection with the execution, delivery or performance by Borrower or
Guarantor of the Loan Documents to which it is party or the consummation of the
transactions contemplated thereby.

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Section 5.12
Taxes. 

Borrower has filed all tax returns which it is required to file and has paid, or
made provision for the payment of, all taxes which have or may have become due
pursuant to such returns or pursuant to any assessment received by them. Such
tax returns are complete and accurate in all respects. Borrower does not know of
any proposed additional assessment or basis for any assessment of additional
taxes.

Section 5.13
Addresses. 

During the past five (5) years, Borrower has not been known by any names
(including tradenames) other than those set forth in Schedule 5.13 attached
hereto and has been located at any addresses other than those set forth on
Schedule 5.13 attached hereto. Borrower's books and records pertaining to the
Collateral will at all times be located at the addresses set forth on Schedule
5.13; or such other location determined by Borrower after prior notice to Agent
and delivery to Agent of any items requested by Agent to maintain perfection and
priority of Agent's security interests and access to Borrower's books and
records.

Section 5.14
Investment Company.

 
No Credit Party is an “investment company” or a company “controlled” by an
“investment company”, within the meaning of the Investment Company Act of 1940,
as amended.

Section 5.15
Current Compliance. 

Each of the Credit Parties is currently in compliance with all of the terms and
conditions of the Loan Documents applicable to it.

Section 5.16
Deferred Compensation Plans. 

Neither Borrower nor any ERISA Affiliate has ever been a participant in or has
in any way provided or maintained, any Deferred Compensation Plan for the
benefit of Borrower’s or any ERISA Affiliate’s employees, or has ever
contributed to a Multiemployer Plan.

Section 5.17
Leases and Contracts. 

Each of the Credit Parties has complied with the provisions of all material
leases, contracts or commitments of any kind to which it is a party and is not
in default thereunder. No other party is in default under any such leases,
contracts or other commitments and no event has occurred which, but for the
giving of notice or the passage of time or both, would constitute an event of
default thereunder.

Section 5.18
Contingent Liabilities. 

There are no suretyship agreements, guarantees or other contingent liabilities
of Borrower which are not disclosed by the financial statements mentioned in
Section 5.5 herein.

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Section 5.19
Encumbrances. 

The property and assets of Borrower are not subject to any lien, encumbrance or
security interest except as set forth on Exhibit 5.19 attached.
 
Section 5.20
Environmental Matters.

 
(a)   Except as otherwise set forth on Schedule 5.20 hereto, to the knowledge of
the Credit Parties and their Environmental Affiliates, the Mortgaged Properties
do not contain any Hazardous Materials which are not being used in compliance
with applicable Environmental Requirements.
 
(b)   To the knowledge of the Credit Parties and their Environmental Affiliates,
(i) the Mortgaged Properties and all operations of any Credit Parties and/or
their Environmental Affiliates at the Mortgaged Properties are in compliance in
all material respects, and have in the period of such ownership, lease or
operation been in compliance in all material respects, with all applicable
Environmental Requirements, and (ii) there is no contamination at, under or
about the Mortgaged Properties in concentrations constituting a material
violation of Environmental Requirements or any material violation of any
Environmental Requirements with respect to the Mortgaged Properties.
 
(c)   Neither any Credit Party nor any Environmental Affiliates have received
any written or actual notice of violation, alleged violation, non-compliance,
liability or potential liability with respect to environmental matters or
Environmental Requirements regarding any of the Mortgaged Properties, nor does
any Credit Party or any Environmental Affiliate have knowledge that any such
notice will be received or is being threatened.
 
(d)   To the knowledge of the Credit Parties and their Environmental Affiliates,
Materials of Environmental Concern have not been transported or disposed of from
the Mortgaged Properties, during any period of ownership, lease, operation or
use by any Credit Party or Environmental Affiliate, in material violation of, or
in a manner or to a location that reasonably could be expected to give rise to
liability under any Environmental Requirements, and no Hazardous Materials have
been generated, treated, stored or disposed of at, on or under any of the
Mortgaged Properties, during any period of ownership, lease, operation or use by
any Credit Party or Environmental Affiliate, in material violation of, or in a
manner that reasonably could be expected to give rise to liability under, any
applicable Environmental Requirement.
 
(e)    No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of any Credit Party or Environmental Affiliate,
threatened, under any Environmental Requirement to which any Credit Party or any
Environmental Affiliate is or, to any such Credit Party’s or Environmental
Affiliate’s knowledge, will be named as a party with respect to the Mortgaged
Properties, nor, to any Credit Party’s or Environmental Affiliate’s knowledge,
are there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Requirement with respect to the Mortgaged
Properties.
 
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(f)   There has been no release or threat of release of Hazardous Materials at
or from the Mortgaged Properties arising from or related to the operations of
any Credit Party or any Environmental Affiliate in connection with the Mortgaged
Properties or otherwise, in violation of or in amounts or in a manner that
reasonably could be expected to give rise to liability under Environmental
Requirements.
 

Section 5.21
Insurance.

The present insurance coverage of the Credit Parties is outlined as to carrier,
policy number, expiration date, type and amount on Schedule 5.21 hereto, and
such insurance coverage complies with the requirements set forth in Section 6.5
hereof.

Section 5.22
Anti-Terrorism Laws.

Neither any Credit Party nor any of their respective Affiliates is an “enemy” or
an “ally of the enemy” within the meaning of Section 2 of the Trading with the
Enemy Act of the United States of America (50 U.S.C. App. §§ 1 et seq.), as
amended. Neither any Credit Party nor any of their respective Affiliates is in
violation of (a) the Trading with the Enemy Act, as amended, (b) any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto or (c) the Patriot Act. None of the Credit Parties (i) is
a blocked person described in Section 1 of the Anti-Terrorism Order or (ii) to
the best of its knowledge, engages in any dealings or transactions, or is
otherwise associated, with any such blocked person.

Section 5.23
Compliance with OFAC Rules and Regulations.

 
None of the Credit Parties or their Subsidiaries or their respective Affiliates
(a) is a Sanctioned Person, (b) has any of its assets in Sanctioned Countries,
or (c) derives any of its operating income from investments in, or transactions
with Sanctioned Persons or Sanctioned Countries. No part of the proceeds of any
Extension of Credit hereunder will be used directly or indirectly to fund any
operations in, finance any investments or activities in or make any payments to,
a Sanctioned Person or a Sanctioned Country.

Section 5.24
Securities Act. 

Borrower has not, directly or through any agent, offered the Line Note or any
part thereof or any similar security for sale to, or solicited offers to buy the
same from, or otherwise approached or negotiated in respect thereof with, anyone
other than Agent so as to bring the issue or sale of the Line Note or any part
thereof within the provisions of Section 5 of the Securities Act 1933, as
amended.

Section 5.25
Disclosure. 

Neither this Agreement, nor the schedules attached to this Agreement, nor the
financial statements referred to in this Agreement, nor any certificate,
statement, report or other document furnished or to be furnished by Borrower to
Agent in connection with this Agreement, contain any untrue statement of a
material fact, or omit to state any material fact necessary in order to make the
statements contained in any of the foregoing not misleading. Borrower has
disclosed to Agent in writing every fact that materially and adversely affects
the business or financial condition of Borrower or its ability to perform its
obligations under this Agreement, the Line Note, or any other documents or
instruments required hereby.

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Section 5.26
Margin Stock.

Borrower is not engaged in, nor does it have as one of its substantial
activities, the business of extending or obtaining credit for the purpose of
purchasing or carrying “margin stock” (as that term is defined in Regulation U,
G, T, or X of the Board of Governors of the Federal Reserve System) and no
proceeds of any advance of the Line will be used for such purpose of for the
purpose of purchasing or carrying any shares of margin stock.

Section 5.27
Bank Accounts. 

Other than the bank accounts set forth on Schedule 5.27 hereto (the “Deposit
Accounts”), Borrower does not maintain any accounts with any bank or other
financial institution.

ARTICLE VI 
GENERAL AFFIRMATIVE COVENANTS

The Credit Parties hereby covenant and agree that on the Closing Date, and
thereafter for so long as this Agreement is in effect and until the Commitments
have terminated, no Note remains outstanding and unpaid and the Obligations and
all other amounts owing to the Agent or any Lender hereunder are paid in full,
that:

Section 6.1
Existence, Approvals, Qualification, Business Operations; Compliance with Laws.

Each of the Credit Parties (a) will obtain, preserve and keep in full force and
effect its separate trust, partnership or limited liability company existence,
as the case may be, and all rights, licenses, registrations and franchises
necessary to the proper conduct of its business or affairs; (b) will qualify and
remain qualified as a foreign trust or partnership, as the case may be, in each
jurisdiction in which the character or location of the properties owned by it or
the business transacted by it requires such qualification; (c) will continue to
operate its business as presently operated and will not engage in any new
businesses without the prior written consent of Bank; and (d) will comply with
the requirements of all applicable laws and all rules, regulations (including
environmental regulations) and orders of regulatory agencies and authorities
having jurisdiction over it.

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Section 6.2
Taxes; Claims for Labor and Materials. 

Borrower will pay or cause to be paid when due all taxes, assessments,
governmental charges or levies imposed upon it or its income, profits, payroll
or any property belonging to it, including without limitation all withholding
taxes, and all claims for labor, materials and supplies which, if unpaid, might
become a lien or charge upon any of its properties or assets.

Section 6.3
Maintenance of Properties. 

Borrower will maintain, preserve, protect and keep or cause to be maintained,
preserved, protected and kept its real and personal property used or useful in
the conduct of its business in good working order and condition, reasonable wear
and tear excepted, and will pay and discharge when due the cost of repairs to
and maintenance of the same.

Section 6.4
Insurance. 

Each of the Credit Parties will carry adequate insurance issued by an insurer
acceptable to Agent, in amounts acceptable to Agent (at least adequate to comply
with any co-insurance provisions) and against all such liability and hazards as
are usually carried by entities engaged in the same or a similar business
similarly situated or as may be required by Agent, and shall cause Agent to be
named as loss payee (with a lender's loss payable endorsement) with respect to
all personal property, and additional insured with respect to all liability
insurance, as its interests may appear with thirty (30) days’ notice to be given
Agent by the insurance carrier prior to cancellation or material modification of
such insurance coverage. Borrower shall cause to be delivered to Agent the
insurance policies therefor or in the alternative, evidence of insurance, and at
least thirty (30) business days prior to the expiration of any such insurance,
additional policies or duplicates thereof or in the alternative, evidence of
insurance evidencing the renewal of such insurance and payment of the premiums
therefor. Borrower and Grantors shall direct all insurers that in the event of
any loss thereunder or the cancellation of any insurance policy, the insurers
shall make payments for such loss and pay all return or unearned premiums
directly to Agent and not to Borrower and Agent jointly. Borrower and Grantors
shall not take out any insurance without having Agent named as loss payee or
additional insured thereon.

Section 6.5
Inspections; Examinations.  

Borrower hereby irrevocably authorizes and directs all accountants and auditors
employed by Borrower at any time to exhibit and deliver to Agent copies of any
and all of Borrower’s financial statements, or other accounting records of any
sort in the accountant's or auditor's possession and copies of all reports
submitted to Borrower by such accountants or auditors, including management
letters, “comment” letters and audit reports, and to disclose to Agent any
information they may have concerning Borrower’s financial status and business
operations. Borrower further authorizes all federal, state and municipal
authorities to furnish to Agent copies of reports or examinations relating to
any Borrower, whether made by Borrower or otherwise. The officers of Agent, or
such Persons as any of them may designate, may visit and inspect any of the
properties of Borrower, examine (either by Agent’s employees or by independent
accountants) any of the Collateral or other assets of Borrower, including the
books of account of Borrower, and discuss the affairs, finances and accounts of
Borrower with its officers and with its independent accountants, at such times
as Agent may desire.
 
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Section 6.6
Bank Accounts. 

Borrower will maintain its primary deposit, cash management and operating
accounts with Bank, including without limitation the Loan Account referred to
herein.
 
Section 6.7
Maintenance of Management. 

Borrower will cause its business to be continuously managed by its present
management or such other persons (serving in such management positions) as may
be reasonably satisfactory to Agent.

Section 6.8
Notices. 

Borrower will promptly notify Agent of (a) any action or proceeding brought
against Borrower or any Guarantor wherein such action or proceeding would, if
determined adversely to Borrower or any Guarantor result in liability of
Borrower or any Guarantor in excess of $100,000 individually, or $250,000 in the
aggregate, (b) the occurrence of any Event of Default, (c) any fact, condition
or event which, with the giving of notice or the passage of time or both, could
become an Event of Default, (d) the failure of Borrower or any Guarantor to
observe any of its undertakings under the Loan Documents, or (e) any material
adverse change in the assets, business, operations or financial condition of
Borrower.

Section 6.9
Appraisals. 

Agent shall have the right, in the exercise of its reasonable discretion, and/or
as required by any applicable governmental authority, at Borrower's cost and
expense, to obtain additional or updated Appraisals on any or all of the
Mortgaged Properties.

Section 6.10
Further Assurances.

Upon the request of the Agent, promptly perform or cause to be performed any and
all acts and execute or cause to be executed any and all documents for filing
under the provisions of the UCC or any other applicable laws which are necessary
or advisable to maintain in favor of the Agent, for the benefit of the Lenders,
Liens on the Collateral that are duly perfected in accordance with the
requirements of, or the obligations of the Credit Parties under, the Loan
Documents and all applicable laws.
 
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ARTICLE VII
FINANCIAL COVENANTS

So long as any Line Note remains unpaid or Agent has any obligation hereunder
with respect to the Line:

Section 7.1
Debt Service Coverage Ratio. 

Borrower shall maintain a Debt Service Coverage Ratio, calculated for the
previous twelve (12) month period, of not less than 1.35:1.00, calculated as of
each March 31, June 30, September 30 and December 31.

Section 7.2
Total Funded Debt to Gross Asset Value. 

Borrower shall maintain a ratio of Total Funded Debt to Gross Asset Value,
calculated for the previous twelve (12) month period, of not more than
0.67:1.00, calculated as of each March 31, June 30, September 30 and December
31.

Section 7.3
EBITDA to Debt Service.

Borrower shall maintain a ratio of EBITDA to Debt Service, calculated for the
previous twelve (12) month period, of not less than 1.40:1.00, calculated as of
each March 31, June 30, September 30 and December 31.

Section 7.4
Tangible Net Worth. 

Borrower shall maintain a minimum Tangible Net Worth, calculated as of the
fiscal year ended June 30, 2005, of not less than $110,000,000. Borrower shall
maintain a minimum Tangible Net Worth calculated as of June 30 of each
subsequent fiscal year, in an amount not less than the sum of $110,000,000, plus
100% of Borrower’s undistributed net income for the 2005 fiscal year and for
each subsequent fiscal year, including the fiscal year then ended.

Section 7.5
Certain Indebtedness.

The aggregate of all accounts receivable, notes receivable and loans receivable
or due from officers, employees or Affiliates of the Borrower shall not exceed
$75,000,000 as of June 30, 2005 and at all times thereafter.

Section 7.6
Changes to Financial Covenants. 

Lenders may condition any extension of the Expiration Date upon revision of the
foregoing financial covenants, as Lenders in their reasonable discretion may
require prior to the date that Agent must give Borrower notice of extension.
 
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ARTICLE VIII
NEGATIVE COVENANTS

The Credit Parties hereby covenant and agree that on the Closing Date, and
thereafter for so long as this Agreement is in effect and until the Commitments
have terminated, no Note remains outstanding and unpaid and the Obligations and
all other amounts owing to the Agent or any Lender hereunder are paid in full,
that:

Section 8.1
Limitation on Indebtedness. 

The Credit Parties will not, contract, create, incur, assume or permit to exist
any Indebtedness, except:
 
(a)    Indebtedness arising or existing under this Agreement and the other Loan
Documents and Indebtedness constituting permanent mortgage financing for a hotel
property;
 
(b)    Indebtedness of the Credit Parties existing as of the Closing Date as
referenced in the financial statements referenced in Section 5.5 (and set out
more specifically in Schedule 8.1) hereto and renewals, refinancings or
extensions thereof in a principal amount not in excess of the original principal
balance thereof, except if such excess arises from an increase in the value of
collateral, as demonstrated by an Appraisal;
 
(c)    Indebtedness of the Credit Parties incurred after the Closing Date
consisting of Capital Leases or Indebtedness incurred to provide all or a
portion of the purchase price or cost of construction of an asset; provided that
(i) such Indebtedness when incurred shall not exceed the purchase price or cost
of construction of such asset; and (ii) no such Indebtedness shall be refinanced
for a principal amount in excess of the original principal balance thereof,
except if such excess arises from an increase in the value of collateral, as
demonstrated by an Appraisal;
 
(d)    Unsecured intercompany Indebtedness among the Credit Parties; provided
that any such Indebtedness shall be (i) fully subordinated to the Obligations
hereunder on terms reasonably satisfactory to the Agent and (ii) evidenced by
promissory notes which shall be pledged to the Agent as Collateral for the
Obligations;
 
(e)    Indebtedness and obligations owing under Hedging Agreements entered into
in order to manage existing or anticipated interest rate risks and not for
speculative purposes; and
 
(f)    Guaranty Obligations in respect of Indebtedness of a Credit Party to the
extent such Indebtedness is permitted to exist or be incurred pursuant to this
Section 8.1.

Section 8.2
Guaranties. 

Borrower shall not, directly or indirectly, guarantee, endorse (other than for
collection or deposit in the ordinary course of business), discount, sell with
recourse or for less than the face value or agree (contingently or otherwise) to
purchase or repurchase or otherwise acquire, or otherwise become directly or
indirectly liable for, or agree (contingently or otherwise) to supply or advance
funds (whether by loan, stock purchase, capital contribution or otherwise) in
respect of, any Indebtedness, obligations or liabilities of any Person other
than an Affiliate.

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Section 8.3
Disposition of Assets. 

The Credit Parties shall not sell, lease, transfer or otherwise dispose of (a)
all or substantially all of its property or assets, or (b) any material portion
of its property or assets unless, in the case of (b) herein, following any such
sale, lease, transfer or other disposition, Borrower shall be in compliance with
the covenants contained in Article VII herein, calculated as of the date
immediately following such sale, lease, transfer or other disposition.

Section 8.4
Liens. 

Borrower shall not create, incur or permit to exist any mortgage, pledge,
encumbrance, lien, security interest or charge of any kind (including liens or
charges upon properties acquired or to be acquired under conditional sales
agreements or other title retention devices) on its property or assets, whether
now owned or hereafter acquired, or upon any income, profits or proceeds
therefrom, except Permitted Liens.

Section 8.5
Nature of Business.

None of the Credit Parties will alter the character of its business in any
material respect from that conducted as of the Closing Date without the prior
written consent of the Agent.

Section 8.6
Consolidation, Merger, Sale or Purchase of Assets.

 
The Credit Parties will not:
 
(a)    dissolve, liquidate or wind up their affairs, or sell, transfer, lease or
otherwise dispose of their property or assets or agree to do so at a future
time, except the following, without duplication, shall be expressly permitted:
 
(i)     the sale, transfer, lease or other disposition of cash and Cash
Equivalents, inventory and materials in the ordinary course of business;
 
(ii)    Recovery Events; provided that the net proceeds from any such Recovery
Event shall be used either (A) to repair or replace the property damaged in such
Recovery Event or to purchase or otherwise acquire new assets or property within
one hundred eighty (180) days (or such longer period of time (not to exceed 360
days) as may be permitted pursuant to the lease of the property damaged in such
Recovery Event) of receipt of such net proceeds and the Borrowers shall deliver
to the Agent a certificate stating that Credit Parties intend to use such net
proceeds in such manner, it being expressly agreed that any net proceeds not so
reinvested shall be applied to prepay Loans and cash collateralize Letter of
Credit Obligations immediately thereafter, or (B) to prepay Loans and cash
collateralize Letter if Credit Obligations;
 
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(iii)   the sale, lease, transfer or other disposition of machinery, parts and
equipment no longer used or useful in the conduct of the business of the Credit
Parties or any of their Subsidiaries;
 
(iv)   the sale, lease or transfer of property or assets (at fair value) between
any Credit Parties;
 
(v)    the merger of any Credit Party with and into another Credit Party, so
long as (A) a Borrower is the surviving entity of any such merger among a
Borrower and any other Credit Party, (B) the security interests granted to the
Agent for the benefit of the Secured Parties pursuant to the Collateral
Documents in the assets of the Credit Parties so merged shall remain in full
force and effect and perfected (to at least the same extent as in effect
immediately prior to such merger) and (C) no Person other than the surviving
Credit Party receives any consideration in respect or as a result of such
transaction;
 
(vi)   payments otherwise permitted under Section 8.7 hereof;
 
(vii)          the liquidation or voluntary dissolution of a Credit Party so
long as such liquidation or dissolution is not reasonably likely to have a
Material Adverse Effect and, in connection therewith, either (A) all of the
remaining assets of such entity are transferred to a Credit Party, or (B) all
consideration received by such Credit Party in connection with the liquidation
of its assets is used to make a prepayment of the Loan.
 
(b)   purchase, lease or otherwise acquire (in a single transaction or a series
of related transactions) all or substantially all of the property or assets of
any Person, or (ii) enter into any transaction of merger or consolidation,
except for (A) Investments or acquisitions permitted pursuant to Section 8.7 and
(B) the merger or consolidation of a Credit Party with and into another Credit
Party; provided that if any Borrower is a party thereto, such Borrower will be
the surviving Person.

This Section 8.6 shall not prohibit or otherwise affect the issuance of Capital
Stock or any other equity or debt securities by the Borrower and the Trust in
the ordinary course of business.

Section 8.7
Advances, Investments and Loans.

The Credit Parties will not make any Investment except for Permitted Investments
and Investments described on Schedule 8.7 hereto.

Section 8.8
Default Under Other Indebtedness. 

None of the Credit Parties shall permit any of its material Indebtedness to be
in default. If any material Indebtedness of a Credit Party is declared or
becomes due and payable before its expressed maturity by reason of default or
otherwise, or to the knowledge of Borrower, the holder of any such Indebtedness
shall have the right (or upon the giving of notice or the passage of time, or
both, shall have the right) to declare such Indebtedness to be so due and
payable, Borrower will immediately give Agent written notice of such
declaration, acceleration or right of declaration.

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Section 8.9
Deferred Compensation Plans. 

Neither Borrower nor any ERISA Affiliate shall become a participant in, or in
any way provide or maintain, any Deferred Compensation Plan for the benefit of
any or Borrower’s or any ERISA Affiliates’ employees, or shall contribute to any
Multiemployer Plan, without giving Bank prior written notice of such action and
executing such related amendments to this Agreement as Agent may request.

Section 8.10
Transactions with Affiliates. 

Borrower shall not enter into or conduct any transaction with any Affiliate
except on terms that would be usual and customary in a similar transaction
between Persons not affiliated with each other and except as disclosed to Agent.
Borrower shall not make any loans or extensions of credit to any of its
Affiliates, shareholders, directors or officers, except for the existing loans
described in Schedule 8.7 attached hereto and loans made in the future in
compliance with Section 7.5 herein. Borrower will cause all of its Indebtedness
at any time owed to its Affiliates, shareholders, directors and officers to be
subordinated in all respects to all present and future Bank Indebtedness and
will not make any payments thereon, except as approved by Agent in writing.

Section 8.11
Restriction on Transfer. 

Borrower shall not, and shall not permit its general partner to, directly or
indirectly, issue, transfer, sell or otherwise dispose of, or part with control
of, or permit the transfer of, any partnership interests of Borrower, as a
result of which the Trust shall cease to own, legally and beneficially, at least
a majority of all outstanding partnership interests of the Borrower.
 
Section 8.12
Corporate Changes.

 
No Credit Party will (a) change its fiscal year, (b) amend, modify or change its
articles of incorporation, certificate of formation (or corporate charter or
other similar organizational document), partnership agreement, operating
agreement or bylaws (or other similar document) in any respect adverse to the
interests of the Lenders without the prior written consent of the Agent, (c)
amend, modify, cancel or terminate or fail to renew or extend or permit the
amendment, modification, cancellation or termination of any of its Material
Contracts in any respect adverse to the interests of the Lenders without the
prior written consent of the Required Lenders, except in the event such
amendment, modification, cancellation or termination could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect, (d)
change its state of incorporation, organization or formation or have more than
one state of incorporation, organization or formation or (e) materially change
its accounting method (except in accordance with GAAP) in any manner materially
adverse to the interests of the Lenders without the prior written consent of the
Required Lenders. This Section 8.12 shall not prohibit any Credit Party from
qualifying to conduct business as a foreign entity in any jurisdiction.

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Section 8.13
Limitation on Restricted Actions.

Except as set forth on Schedule 8.13 hereto, the Credit Parties will not, nor
will they permit any Subsidiary to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any such Person to (a) pay dividends or make any other
distributions to any Credit Party on its Capital Stock or with respect to any
other interest or participation in, or measured by, its profits, (b) pay any
Indebtedness or other obligation owed to any Credit Party, (c) make loans or
advances to any Credit Party except in compliance with Section 7.5 herein,
(d) sell, lease or transfer any of its properties or assets to any Credit Party,
or (e) act as a Guarantor and pledge its assets pursuant to the Credit Documents
or any renewals, refinancings, exchanges, refundings or extension thereof,
except for such encumbrances or restrictions existing under or by reason of
(i) this Agreement and the other Loan Documents, (ii) applicable law, (iii) any
document or instrument governing Indebtedness incurred pursuant to
Section 8.1(b) or Section 8.1(c); provided that any such restriction contained
in any such document referenced in Section 8.1(c) relates only to the asset or
assets constructed or acquired in connection therewith, or (iv) any Permitted
Lien or any document or instrument governing any Permitted Lien.
 
Section 8.14
Restricted Payments.

 
The Credit Parties will not, nor will they permit any Subsidiary to, directly or
indirectly, declare, order, make or set apart any sum for or pay any Restricted
Payment, except: to make (a)  dividends payable solely in the same class of
Capital Stock of such Person; (b) dividends or other distributions (directly or
indirectly through Subsidiaries) payable to any Credit Party; (c) contractually
required distributions to holders of minority interests in non-wholly owned
Subsidiaries; and (d) management and consulting fees pursuant to agreements with
other Credit Parties. In addition, the Borrowers may request the ability to make
additional dividends and distributions, which shall be at the sole discretion of
the Agent.
 
Section 8.15
Negative Pledges.

 
The Credit Parties will not, nor will they permit any Subsidiary to, enter into,
assume or become subject to any agreement prohibiting or otherwise restricting
the creation or assumption of any Lien upon any of their properties or assets,
whether now owned or hereafter acquired, or requiring the grant of any security
for such obligation if security is given for some other obligation, except
(a) pursuant to this Agreement and the other Loan Documents, (b) pursuant to any
document or instrument governing Indebtedness incurred pursuant to
Section 8.1(c); provided that any such restriction contained therein relates
only to the asset or assets constructed or acquired in connection therewith,
(c) in connection with any Permitted Lien or any document or instrument
governing any Permitted Lien; provided that any such restriction contained
therein relates only to the asset or assets subject to such Permitted Lien.

Section 8.16
Name or Address Change. 

Borrower shall not change its name or address except upon thirty (30) days prior
written notice to Agent and delivery to Agent of any items requested by Agent to
maintain perfection and priority of Agent's security interests and access to
Borrower's books and records.

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Section 8.17
Material Adverse Contracts. 

Borrower shall not become or be a party to any contract or agreement which has a
Material Adverse Effect on Borrower's ability to perform under this Agreement or
any other agreement with Bank to which Borrower is a party.

ARTICLE IX
ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS

The Credit Parties will maintain books of record and account in which full,
correct and current entries in accordance with GAAP will be made of all of its
dealings, business and affairs, and will deliver to Agent the following:

Section 9.1
Annual Statements. 

As soon as available and in any event within one hundred twenty (120) days after
the end of each fiscal year of the Credit Parties, beginning with the close of
the current fiscal year, the audited annual consolidated and consolidating
financial statements for such fiscal year, including (a) income and retained
earnings statements of the Credit Parties for such fiscal year, (b) balance
sheet of the Credit Parties as at the end of such fiscal year, and (c) statement
of cash flow of the Credit Parties for such fiscal year, all setting forth in
comparative form the corresponding figures as at the end of the previous fiscal
year, all in reasonable detail, including all supporting schedules and comments.
The foregoing statements and balance sheets shall be prepared in accordance with
GAAP and shall be audited by independent certified public accountants of
recognized standing acceptable to Agent in the reasonable exercise of its
discretion with respect to which such accountants shall deliver their
unqualified opinion.

Section 9.2
Quarterly Statements. 

As soon as available and in any event within forty-five (45) days after the
close of each fiscal quarter of the Credit Parties, beginning with the close of
the current fiscal quarter, (a) the consolidated and consolidating income and
retained earnings statements of the Credit Parties for such quarter, (b) the
consolidated and consolidating balance sheet of the Credit Parties as of the end
of such quarter and (c) the consolidated and consolidating statement of cash
flow of the Credit Parties for such quarter, all setting forth in comparative
form the corresponding figures as at the end of the corresponding quarter of the
previous fiscal year (if applicable) all in reasonable detail, subject to year
end adjustments and certified by the chief financial officer of each of the
Credit Parties to be accurate and to have been prepared in accordance with GAAP.

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Section 9.3
Requested Information. 

With reasonable promptness, all such other data and information in respect of
the condition, operation and affairs of the Credit Parties as Agent may
reasonably request from time to time.

Section 9.4
Compliance Certificates. 

Together with the annual statements required by Section 9.1 above and the
quarterly statements required by Section 9.2 above, a certificate of the chief
financial officer of each of the Credit Parties: (a) stating that such Credit
Party has observed, performed and complied with each and every undertaking
contained herein, (b) setting forth the information and computations (in
sufficient detail) required in order to establish whether such Credit Party was
operating in compliance with the financial covenants in Article VII of this
Agreement, and (c) certifying that as of the date of such certification, there
does not exist any Event of Default or any occurrence or state of affairs which
with the giving of notice, passage of time or both would constitute an Event of
Default.

Section 9.5
Other Operating Information.

As soon as available and in any event within twenty (20) days after the close of
each fiscal quarter of the Credit Parties, beginning with the close of the
current fiscal quarter, accounts receivable agings reports, accounts payable
agings reports and management reports providing for each of Borrower’s
properties: (a) rooms available and rooms occupied for the quarter then ended
and year-to-date; (b) percentage occupancy for the quarter then ended and
year-to-date; (c) average daily rate for the quarter then ended and
year-to-date; and (d) the RevPAR for the quarter then ended and year-to-date.

Section 9.6
Annual Budget and Financial Projections.

As soon as available and in any event within sixty (60) days after the close of
each fiscal year of the Credit Parties, beginning with the close of the current
fiscal year, an annual budget and financial projections of the Credit Parties
for the current fiscal year, containing monthly revenue and expenses and a
listing of all assumptions related to such budget and projections for such
fiscal year.

ARTICLE X
CONDITIONS OF CLOSING

The obligation of Lenders to make available the Line is subject to the
performance by Borrower of all of its agreements to be performed hereunder and
to the following further conditions:

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Section 10.1
Conditions Precedent. 

(a)    On or before the Closing Date, the Agent shall have received the
following documents, instruments, opinions and certificates, each in form and
substance satisfactory to the Agent:

(i)     a duly executed original counterpart of this Agreement and each of the
other Loan Documents;
 
(ii)    the opinion of counsel for the Credit Parties dated the Closing Date,
addressed to Agent and the Lenders, addressing such matters as the Agent and the
Lenders may reasonably request;

(iii)    a certificate, dated the Closing Date, signed by the appropriate
officer of the Borrower, certifying: (A) that attached thereto is a copy of the
certificate of limited partnership of the Borrower and all amendments thereto
certified as of a recent date by the appropriate Governmental Authority in its
jurisdiction of organization, and that such organizational documents have not
been amended since such date; (B) that attached thereto is a true and correct
copy of the partnership agreement of the Borrower as in effect on the Closing
Date; (C) that attached thereto is a true and correct copy of resolutions
adopted by the general partner of the Borrower, authorizing the execution,
delivery and performance of this Agreement and the other Loan Documents, as
applicable; and (D) as to the incumbency and genuineness of the signature of
each representative of the Borrower executing this Agreement or any of the other
Loan Documents;

(iv)           a certificate of good standing for the Borrower from the
Commonwealth of Virginia and a certificate of authority to transact business
from any jurisdiction where Borrower is required to be licensed to transact
business;

(v)    a certificate of each Guarantor, dated the Closing Date, signed by the
appropriate officer of such Guarantor, certifying: (A) that attached thereto is
a copy of the charter and governing documents of such Guarantor and all
amendments thereto certified as of a recent date by the appropriate Governmental
Authority in its jurisdiction of organization, and that such documents have not
been amended since such date; (B) that attached thereto is a true and correct
copy of the bylaws, partnership agreement, operating agreement or other
governing documents of such Guarantor as in effect on the Closing Date; (C) that
attached thereto is a true and correct copy of resolutions adopted by the
governing body of such Guarantor, authorizing the execution, delivery and
performance of the Loan Documents to which it is a party; and (iv) as to the
incumbency and genuineness of the signature of each officer of the Guarantor
executing the Loan Documents;

(vi)   a certificate of good standing for each Guarantor from its jurisdiction
of organization and a certificate of authority to transact business from any
jurisdiction where any Guarantor is required to be licensed to transact
business; and

(vii)          such other documents, instruments, opinions, certificates,
approvals or consents as Agent may reasonably request.

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(b)    No less than ten (10) days before the Closing Date the Agent shall have
received:
 
(i)     a mortgagee title insurance commitment (“Title Commitment”) dated within
forty-five (45) days of the Closing Date, that provides for the issuance of a
policy that shall: (A) be in an amount not less than the amount of the Loan;
(B) insure that each of the Mortgages creates a valid first lien on the
Mortgaged Property free and clear of all defects and encumbrances (except those
acceptable to the Agent); (C) name the Agent as the insured party thereunder;
(D) be in the form of ALTA Loan Policy-1992 (amended 10-17-92) or other form
approved by the Agent; (E) provide mechanic’s lien protection; and (F) contain
such endorsements and effective coverage as Agent may reasonably require,
including without limitation an ALTA Form 3 Zoning Endorsement, an ALTA Form 6
Variable Rate Endorsement, an ALTA Form 9 Comprehensive Endorsement, a usury
endorsement, an access endorsement, a “same as survey” endorsement, a separate
tax parcel endorsement, a doing business endorsement, a first loss endorsement,
a tie-in endorsement, a last dollar endorsement, and a “future advances”
endorsement, or the equivalent;
 
(ii)    copies of all exceptions to title coverage listed in the Title
Commitment and copies of all recorded plats referenced in the Title Commitment
or an exception to title coverage;
 
(iii)   one (1) print of a current (dated not more than six (6) months before
the Closing Date, but more recently if new construction is underway) physical
survey of the Land certified to the Agent and the title insurance company, in a
manner acceptable to each of them, by an independent professional licensed land
surveyor, which survey shall indicate, without limitation, the following:
(A) all boundaries of the Land with a metes and bounds description (course and
distance indicated); (B) the course and distance to and names of the nearest
intersecting public street or roads; (C) the locations on the Land and
dimensions of all the Improvements and the established building setback lines;
(D) the lines of streets abutting the Land and width thereof; (E) all access and
other easements appurtenant to the Land necessary or desirable to use the Land;
(F) all roadways, paths, driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the Land, whether recorded,
apparent from a physical inspection of the Land or otherwise known to the
surveyor; (G) any encroachments on any adjoining property by the Improvements on
the Land; and (H) if the Land is described as being on a filed map, a legend
relating the survey to said map, all in form satisfactory to the Agent; together
with a certification as to the location of the Land or the Improvements in any
“special flood hazard” area within the meaning of the Federal Flood Disaster
Protection Act of 1973;
 
(iv)   an appraisal of the Mortgaged Property acceptable to the Agent and the
Lenders, supporting a Loan-to-Value ratio of 67% or less, calculated using the
principal amount of the Loan and a “Value” equal to the “as completed” market
value of the Mortgaged Property as determined by such appraisal; and
 
(v)    evidence that the Mortgaged Property complies with applicable laws and
regulations pertaining to the protection and preservation of the environment.
Such evidence shall include, without limitation, an inspection report by an
environmental engineer satisfactory to Agent and Lenders, who may conduct soil
and chemical testing, addressing the probability of toxic or hazardous waste on,
at or adjacent to the Land, in soil or water, taking into consideration the
history of the Land, including an identification of all owners and tenants for
at least the most recent forty (40) years and its uses, adjacent land uses and
the result of a site inspection by such engineer, and certifying that there are
no hazardous or toxic wastes on or at the Land. In addition, if fill dirt is at
any time to be brought to the Land from another tract of land, the Agent shall
require similar evidence regarding such other tract prior to such fill dirt
being placed on the Land.
 
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(c)    On or before the Closing Date the Agent shall have received:
 
(i)     a mortgagee’s title insurance policy dated no later than the Closing
Date, issued pursuant to the Title Commitment and showing no exceptions to title
coverage not previously approved by the Agent and included in the Title
Commitment, together with evidence that all premiums in respect of such policy
have been paid;
 
(ii)    evidence satisfactory to the Agent that the Mortgages and the
Assignments of Leases have been properly recorded;
 
(iii)   evidence satisfactory to Agent that all Uniform Commercial Code
financing statements necessary to perfect the security interests granted to the
Agent pursuant to the Mortgages and the Security Agreement have been duly filed
in all appropriate offices and that each such security interest constitutes a
valid, perfected, first-priority security interest in favor of the Agent, which
evidence shall include, without limitation, official UCC search reports from all
appropriate offices;
 
(iv)   evidence of insurance in form and substance satisfactory to the Agent and
Lenders upon the collateral described in the Collateral Documents and the
business of the Borrower, which must: (1) include fire, vandalism and malicious
mischief coverage; (2) be in an amount sufficient to avoid co-insurance
liability and equal to the total replacement value of the Improvements with
extended coverage endorsement covering all Improvements located on the Land;
(3) business interruption insurance in amounts and with coverages (not less than
6 months) satisfactory to the Agent; (4) be issued by a company approved by the
Agent and licensed to transact business in the state where the Land is located;
(5) contain a standard mortgagee clause designating the Agent as mortgagee and
lender loss payee; and (6) contain provisions providing for written notice to
the Agent at least thirty (30) days prior to any cancellation, termination, or
modification thereof or of any coverage therein;
 
(v)    evidence of liability insurance in form and in amount satisfactory to the
Agent issued by a company approved by the Agent and licensed to transact
business in the state where the Land is located;
 
(vi)   an independent flood certification made by the Agent or its
representative or agent, which shall be in form and substance satisfactory to
the Agent and support a finding that none of the Land or the Improvements, are
in any “special flood hazard” area within the meaning of the Federal Flood
Disaster Protection Act of 1973;
 
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(vii)           evidence of compliance of the Mortgaged Properties with all
zoning requirements; and
 
(viii)          copies of all security agreements or instruments constituting
liens or encumbrances on any portion of the Mortgaged Properties or on any
property located on the Land, and related UCC-1 financing statements.

Section 10.2
Representations and Warranties. 

All representations and warranties of the Credit Parties set forth in the Loan
Documents will be true at and as of the date hereof.

Section 10.3
No Default. 

No condition or event shall exist or have occurred which would constitute an
Event of Default or a Potential Default.

Section 10.4
Environmental Matters. 

Agent shall have received a report from an environmental consultant or engineer
acceptable to Agent, satisfactory in form and substance to Agent as to such
environmental matters pertaining to the Mortgaged Properties as Agent may
require.

Section 10.5
Additional Documents. 

Copies of record searches (including UCC searches and judgments, suits, tax and
other lien searches) confirming that Agent has a first priority security
interest in the Collateral, acceptable to Agent, shall have been delivered to
Agent.

Section 10.6
No Material Adverse Change. 

As of the Closing Date, the Agent shall be satisfied that there has been no
Material Adverse Change, and that all information, representations and materials
submitted to the Agent by the Credit Parties in connection with the Loan are
accurate and complete in all material respects.

Section 10.7
Conditions Subsequent. 

(a)    Within seven (7) Business Days after the Closing Date, Agent shall have
received an ALTA survey of each Mortgaged Property, each in form and substance
satisfactory to Agent.

(b)    Within five (5) Business Days following the receipt by Borrower of a
determination by Promus Hotels, Inc., the franchisor of the Philadelphia
Property, upon the pending request that it approve the assignment of the
Franchise License Agreement for the Philadelphia Property from the current
franchisee to Philly One TRS, LLC or another Subsidiary or Affiliate of
Borrower, Borrower, Affordable Hospitality Associates, LP, Philly One TRS, LLC
and any other Affiliate or Subsidiary of Borrower that is an owner, lessee or
operator of the Philadelphia Property shall execute and deliver such documents,
instruments, opinions and certificates as Agent may require in connection with
the addition of the Philadelphia Property to the Collateral, including, without
limitation, a Mortgage, an Assignment of Leases an Assignment of Hotel
Management Contract and the items set forth in Section 10.1 hereof.

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ARTICLE XI
CERTAIN CONDITIONS TO SUBSEQUENT ADVANCES

Subsequent advances under the Line shall be conditioned upon the following
conditions and each Line Request shall constitute a representation by the Credit
Parties to Agent that each condition has been met or satisfied:

Section 11.1
Representations and Warranties. 

All representations and warranties of the Credit Parties contained herein or in
the Loan Documents shall be true at and as of the date of such advance as if
made on such date, and each Line Request shall constitute reaffirmation by the
Credit Parties that such representations and warranties are then true.

Section 11.2
No Default. 

No condition or event shall exist at or as of the date of such advance which
would constitute an Event of Default hereunder or a Potential Default.

Section 11.3
Additional Conditions.

All applicable conditions set forth in Article II hereof shall have been
satisfied.

Section 11.4
Other Requirements. 

Agent shall have received all certificates, authorizations, affidavits,
schedules and other documents which are provided for hereunder or under the Loan
Documents, or which Agent may reasonably request.

ARTICLE XII
DEFAULT AND REMEDIES

Section 12.1
Events of Default. 

An Event of Default shall exist upon the occurrence of any of the following
specified events (each an “Event of Default”):
 
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(a)
Payment.

 
(i)     Borrower shall fail to pay any principal on any Loan within five (5)
Business Days following the date when due in accordance with the terms hereof
(including, without limitation, any mandatory prepayment); or
 
(ii)    Borrower shall fail to reimburse the Issuing Lender for any Letter of
Credit Obligations within five (5) Business Days following the date when due in
accordance with the terms hereof; or
 
(iii)   Borrower shall fail to pay any interest on any Loan or any fee or other
amount payable hereunder within five (5) Business Days following the date when
due in accordance with the terms hereof; or
 
(iv)   Any Guarantor shall fail to pay on the its Guaranty in respect of any of
the foregoing, on demand; or
 

 
(b)
Misrepresentation.

 
Any representation or warranty made or deemed made herein, in the Collateral
Documents or in any of the other Loan Documents or which is contained in any
certificate, document or financial or other statement furnished at any time
under or in connection with this Agreement shall prove to have been incorrect,
false or misleading in any material respect on or as of the date made or deemed
made; or
 

 
(c)
Covenant.

 
A Credit Party shall fail to perform, comply with or observe any term, covenant
or agreement applicable to it contained herein and, in the event such breach or
failure to comply is capable of cure, such breach or non-compliance is not cured
within ten (10) days after its occurrence; or
 

 
(d)
Cross Default.

 
A Credit Party shall (i) default in any payment of principal of or interest on
any Indebtedness (other than the Obligations) in a principal amount outstanding
of at least $100,000 in the aggregate for the Credit Parties beyond the period
of grace (not to exceed 30 days), if any, provided in the instrument or
agreement under which such Indebtedness was created; or (ii) default in the
observance or performance of any other agreement or condition relating to any
Indebtedness in a principal amount outstanding of at least $1,000,000 in the
aggregate for the Credit Parties or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause, with the giving of
notice if required, such Indebtedness to become due prior to its stated
maturity; or (iii) breach or default any Hedging Agreement; or
 
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(e)
Bankruptcy.

 
(i)     Any Credit Party or any of their Subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets, or any
Credit Party or any of their Subsidiaries shall make a general assignment for
the benefit of its creditors; or
 
(ii)    There shall be commenced against any Credit Party or any of their
Subsidiaries, any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or 
 
(iii)   There shall be commenced against any Credit Party or any of their
Subsidiaries, any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, distraint or similar process against all or any
substantial part of their assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within sixty (60) days from the entry thereof; or
 
(iv)   Any Credit Party or any of their Subsidiaries, shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii) above; or 
 
(v)    Any Credit Party or any of their Subsidiaries, shall generally not, or
shall be unable to, or shall admit in writing their inability to, pay its debts
as they become due; or
 

 
(f)
Dissolution.

 
Any Credit Party or any of their Subsidiaries shall commence any reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, or composition
other than as expressly permitted by Section 8.6 hereof; or
 

 
(g)
Judgment.

 
One or more judgments or decrees shall be entered against a Credit Party or any
of its Subsidiaries involving in the aggregate a liability (to the extent not
covered by insurance) of $100,000 or more and all such judgments or decrees
shall not have been paid and satisfied, vacated, discharged, stayed or bonded
pending appeal within ten (10) Business Days from the entry thereof or any
injunction, temporary restraining order or similar decree shall be issued
against a Credit Party or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
 
Section 12.2
Acceleration; Remedies.

 
Upon the occurrence and during the continuance of an Event of Default, then, and
in any such event,

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(a)    if such event is an Event of Default specified in Section 8.1(e) above,
automatically the Commitments shall immediately terminate and the Loans (with
accrued interest thereon), and all other amounts under the Loan Documents
(including without limitation the maximum amount of all contingent liabilities
under Letters of Credit) shall immediately become due and payable, and

(b)    if such event is any other Event of Default, any or all of the following
actions may be taken: (i) with the written consent of the Required Lenders under
any Commitment, the Agent may, or upon the written request of such Required
Lenders, the Agent shall, by written notice to Borrowers declare such Commitment
to be terminated forthwith, whereupon such Commitment shall immediately
terminate; (ii) with the written consent of the Required Lenders, the Agent may,
or upon the written request of the Required Lenders, the Agent shall, by written
notice to Borrower, declare the Loans (with accrued interest thereon) and all
other amounts owing under this Agreement and the Notes to be due and payable
forthwith and direct the Borrowers to pay to the Agent cash collateral as
security for the LOC Obligations for subsequent drawings under then outstanding
Letters of Credit an amount equal to the maximum amount of which may be drawn
under Letters of Credit then outstanding, whereupon the same shall immediately
become due and payable; and/or (iii) with the written consent of the Required
Lenders, the Agent may, or upon the written request of the Required Lenders, the
Agent shall, exercise such other rights and remedies as provided under the Loan
Documents and under applicable law, providing such notices thereof to Borrowers
as may be required by applicable law.

ARTICLE XIII
THE AGENT

Section 13.1
Appointment of Agent. 

(a)    Each Lender hereby designates the Bank as Agent to act as herein
specified. Each Lender hereby irrevocably authorizes, and each holder of any
Note or participation in any Letter of Credit by the acceptance of a Note or
participation shall be deemed irrevocably to authorize, the Agent to take such
action on its behalf under the provisions of this Agreement and the Notes and
any other instruments and agreements referred to herein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof. Except as
otherwise provided in this Agreement, the Agent shall hold all Collateral and
all payments of principal, interest, Fees, charges and expenses received
pursuant to this Agreement or any other Loan Document for the ratable benefit of
the Lenders. The Agent may perform any of its duties hereunder by or through its
agents or employees.

(b)    The provisions of this Article XIII are solely for the benefit of the
Agent and the Lenders, and Borrower shall have no rights as a third party
beneficiary of any of the provisions hereof (other than Section 13.9). In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Lenders and does not assume and shall not be deemed to
have assumed any obligation toward or relationship of agency or trust with or
for Borrower.

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Section 13.2
Nature of Duties of Agent. 

The Agent shall have no duties or responsibilities except those expressly set
forth in this Agreement. Neither the Agent nor any of its officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such hereunder or in connection herewith, unless caused by its or their gross
negligence or willful misconduct. The duties of the Agent shall be mechanical
and administrative in nature; the Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein.

Section 13.3
Lack of Reliance on Agent.

(a)    Independently and without reliance upon the Agent, each Lender, to the
extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial or other condition and affairs of
Borrower in connection with the taking or not taking of any action in connection
herewith and (ii) its own appraisal of the creditworthiness of Borrower, and,
except as expressly provided in this Agreement, the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before the making of the Loans or at any time or times
thereafter.

(b)    The Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability,
collectability, priority or sufficiency of this Agreement or the Notes or the
financial or other condition of Borrower. The Agent shall not be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement or the Notes, or the financial
condition of Borrower, or the existence or possible existence of any Default or
Event of Default, unless expressly provided in this Agreement or specifically
requested to do so in writing by any Lender.

Section 13.4
Certain Rights of the Agent. 

Without limiting Agent's rights and discretion under any provisions hereof, the
Agent shall have the right to request instructions from the Required Lenders or,
as required, each of the Lenders. If the Agent shall request instructions from
the Required Lenders or each of the Lenders, as the case may be, with respect to
any act or action (including the failure to act) in connection with this
Agreement, the Agent shall be entitled to refrain from such act or taking such
action unless and until the Agent shall have received instructions from the
Required Lenders or each of the Lenders, as the case may be, and the Agent shall
not incur liability to any Person by reason of so refraining. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting hereunder in
accordance with the instructions of the Required Lenders or each of the Lenders,
as the case may be.

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Section 13.5
Reliance by Agent. 

The Agent shall be entitled to rely, and shall be fully protected in relying,
upon any note, writing, resolution, notice, statement, certificate, telex
teletype or telecopier message, cablegram, radiogram, order or other
documentary, teletransmission or telephone message believed by it to be genuine
and correct and to have been signed, sent or made by the proper person. The
Agent may consult with legal counsel (including counsel for Borrower with
respect to matters concerning Borrower), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
 
Section 13.6
Indemnification of Agent.

To the extent the Agent is not reimbursed and indemnified by Borrower, each
Lender will reimburse and indemnify the Agent, in proportion to its respective
Commitment, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
counsel fees and disbursements) or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of this Agreement, provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent’s gross negligence or willful misconduct.

Section 13.7
The Agent in its Individual Capacity. 

With respect to its obligation to lend under this Agreement, the Loans made by
it and the Notes issued to it, its participation in Letters of Credit issued
hereunder, and all of its rights and obligations as a Lender hereunder and under
the other Loan Documents, the Agent shall have the same rights and powers
hereunder as any other Lender or holder of a Note or participation interests and
may exercise the same as though it was not performing the duties specified
herein; and the terms “Lenders”, “Required Lenders”, “holders of Notes”, or any
similar terms shall, unless the context clearly otherwise indicates, include the
Agent in its individual capacity. The Agent may accept deposits from, lend money
to, acquire equity interests in, and generally engage in any kind of banking,
trust, financial advisory or other business with Borrower or any Affiliate of
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from Borrower for services in connection
with this Agreement and otherwise without having to account for the same with
the Lenders.

Section 13.8
Holders of Notes. 

The Agent may deem and treat the payee of any Note as the owner thereof for all
purposes hereof unless and until a written notice of the assignment or transfer
thereof shall have been filed with the Agent. Any request, authority or consent
of any Person who, at the time of making such request or giving such authority
or consent, is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.

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Section 13.9
Successor Agent.

(a)    The Agent may, upon five (5) Business Days’ notice to the Lenders and
Borrower, resign at any time (effective upon the appointment of a successor
Agent pursuant to the provisions of this Section 13.9(a)) by giving written
notice thereof to the Lenders and Borrower. Upon any such resignation, the
Required Lenders shall have the right, upon five (5) days’ notice, to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within thirty (30)
days after the retiring Agent’s giving of notice of resignation, then, upon five
(5) days’ notice, the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be a bank or a trust company or other financial
institution which maintains an office in the United States, or a commercial bank
organized under the laws of the United States of America or of any State
thereof, or any affiliate of such bank or trust company or other financial
institution which is engaged in the banking business, having a combined capital
and surplus of at least $500,000,000. Notwithstanding anything herein to the
contrary, so long as no Event of Default shall have occurred and be continuing,
any successor Agent (whether appointed by the Required Lenders or the Agent)
shall have been approved in writing by Borrower (such approval not to be
unreasonably withheld).

(b)    Upon the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent’s resignation hereunder as Agent, the
provisions of this Article XIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.

Section 13.10
 Collateral Matters.

(a)    Each Lender authorizes and directs the Agent to enter into the Collateral
Documents and accept the other Loan Documents for the benefit of the Lenders.
Agent is hereby authorized, on behalf of all Lenders, without the necessity of
any notice to or further consent from any Lender, from time to time prior to an
Event of Default, to take any action, in its sole discretion, with respect to
any Collateral or Loan Document which may be necessary or appropriate to perfect
and maintain perfected or enforce the Liens upon the Collateral granted pursuant
to the Collateral Documents.

(b)    The Lenders hereby authorize the Agent to release any Lien granted to or
held by the Agent upon any Collateral and to accept Substitute Collateral or
Additional Collateral in accordance with Section 4.14 hereof, in accordance with
the following requirements:

(i)     Agent may accept Substitute Collateral or Additional Collateral if
approved, authorized or ratified in writing by the Required Lenders;

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(ii)    Agent, at its option and in its discretion, may release any Lien granted
to or held by Agent upon any Collateral if, after giving effect to the release
of such Lien upon the Collateral, the aggregate amount of all Type A Loans
outstanding does not exceed the Borrowing Base; and

(iii)   Agent may not release any Lien granted to or held by Agent upon any
Collateral if, after giving effect to the release of such Lien upon the
Collateral, the aggregate amount of all Type A Loans outstanding exceeds the
Borrowing Base, unless such release has been approved by all Lenders.

Upon request by the Agent at any time, the Lenders will confirm in writing the
Agent’s authority to release particular types or items of Collateral pursuant to
this Section 13.10(b). Notwithstanding the foregoing, the Lenders hereby
authorize and approve the addition of the Philadelphia Property to the
Collateral.

(c)   Upon any sale and transfer of Collateral which is expressly permitted
pursuant to the terms of this Agreement, or consented to in writing by the
Required Lenders or all of the Lenders, as applicable, and upon at least five
(5) Business Days’ prior written request by Borrower, the Agent shall (and is
hereby irrevocably authorized by the Lenders to execute such documents as may be
necessary to evidence the release of the Liens granted to the Agent for the
benefit of the Lenders herein or pursuant hereto upon the Collateral that was
sold or transferred; provided that (i) the Agent shall not be required to
execute any such document on terms which, in the Agent’s opinion, would expose
the Agent to liability or create any obligation or entail any consequence other
than the release of such Liens without recourse or warranty and (ii) such
release shall not in any manner discharge, affect or impair the Obligations or
any Liens upon (or obligations of Borrower in respect of) all interests retained
by Borrower, including (without limitation) the proceeds of the sale, all of
which shall continue to constitute part of the Collateral. In the event of any
sale or transfer of Collateral, or any foreclosure with respect to any of the
Collateral, the Agent shall be authorized to deduct all of the expenses
reasonably incurred by the Agent from the proceeds of any such sale, transfer or
foreclosure.

(d)   The Agent shall have no obligation whatsoever to the Lenders or to any
other Person to assure that the Collateral exists or is owned by a Credit Party
or is cared for, protected or insured or that the liens granted to the Agent
herein or pursuant hereto have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any particular
priority, or to exercise or to continue exercising at all or in any manner or
under any duty of care, disclosure or fidelity any of the rights, authorities
and powers granted or available to the Agent in this Section 13.10 or in any of
the Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the Agent may act in
any manner it may deem appropriate, in its sole discretion, given the Agent’s
own interest in the Collateral as one of the Lenders and that the Agent shall
have no duty or liability whatsoever to the Lenders, except for its gross
negligence or willful misconduct.

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Section 13.11
Actions with Respect to Defaults. 

In addition to the Agent’s right to take actions on its own accord as permitted
under this Agreement, the Agent shall take such action with respect to a Default
or Event of Default as shall be directed by the Required Lenders or all of the
Lenders, as the case may be; provided that, until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable and in the best interests of the Lenders,
including without limitation, exercising any right of offset in respect of the
Collateral.

Section 13.12
Delivery of Information.  

The Agent shall not be required to deliver to any Lender originals or copies of
any documents, instruments, notices, communications or other information
received by the Agent from Borrower, the Required Lenders, any Lender or any
other Person under or in connection with this Agreement or any other Loan
Document except (a) copies of credit or other information with respect thereto
received by Agent, (b) as otherwise specifically provided in this Agreement or
any other Loan Document and (c) as specifically requested from time to time in
writing by any Lender with respect to a specific document instrument, notice or
other written communication received by and in the possession of the Agent at
the time of receipt of such request and then only in accordance with such
specific request.

Section 13.13
Disbursements to Lenders.

(a)    The Agent shall pay to each Lender, from the interest actually received
by Agent from Borrower, a sum equal to the interest calculated for the actual
number of days elapsed on the basis of a year of 360 days, on each Lender’s
outstanding balance of its Loans at the rate equal to the applicable rate of
interest with respect to such Lender’s Commitment Percentage of the Loans
outstanding. Agent shall make such payments to Lenders on the day Agent receives
payment from Borrower, if payment is received by Agent at or before 11:00 a.m.,
or on the next Business Day following the day Agent receives payment from
Borrower, if payment is received by Agent after 11:00 a.m. Any payment from
Borrower that is not timely disbursed by Agent to Lenders in accordance with the
preceding sentence shall bear interest payable by Agent to Lenders at a rate
equal to the interest rate then applicable to Prime Rate Loans. If Agent should
for any reason receive less than the full amount of the interest or other
compensation due under the Loan Documents, each Lender’s share of such interest
or compensation shall decrease in proportion to each Lender’s Commitment
Percentage.

(b)    If any such payment received by Agent is rescinded, determined to be
unenforceable or invalid or is otherwise required to be returned for any reason
at any time, whether before or after termination of this Agreement and the Loan
Documents, each Lender will, upon written notice from the Agent, promptly pay
over to Agent its Commitment Percentage of the amount so rescinded, held
unenforceable or invalid or required to be returned, together with interest and
other fees thereon if also required to be rescinded or returned.

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(c)    In the event that any Lender shall receive any payments in reduction of
the Obligations in an amount greater than its applicable Commitment Percentage
in respect of indebtedness to Lenders evidenced hereby (including, without
limitation, amounts obtained by reason of setoffs), such Lender shall hold such
excess in trust (to the extent such Lender is lawfully able to do so) for Agent
(on behalf of all other Lenders) and shall promptly remit to Agent such excess
amount so that the amounts received by each Lender hereunder shall at all times
be in accordance with its applicable Commitment Percentage.

ARTICLE XIV
COMMUNICATIONS AND NOTICES

Section 14.1
Communications and Notices. 

All notices, requests and other communications made or given in connection with
the Loan Documents shall be in writing and, unless receipt is stated herein to
be required, shall be deemed to have been validly given if delivered personally
to the individual or division or department to whose attention notices to a
party are to be addressed, or by private carrier, or registered or certified
mail, return receipt requested, or by telecopy with the original forwarded by
first-class mail, in all cases, with charges prepaid, addressed as follows,
until some other address (or individual or division or department for attention)
shall have been designated by notice given by one party to the other:

To Credit Parties:
Hersha Hospitality Limited Partnership
Hersha Hospitality Trust
148 Sheraton Drive
New Cumberland, PA 17070
Attention: Ashish R. Parikh, CFO
Facsimile No.: 215-238-0157
   
With a copy to:
Shah & Byler, LLP
Penn Mutual Towers
510 Walnut Street, 9th Floor
Philadelphia, PA 19106
Attention: Lokanath Mohapatra, Esquire
Facsimile No.: 267-238-1874
   
To Agent:
Commerce Bank, N.A.
2005 Market Street, 2nd Floor
Philadelphia, PA 19103
Attention: William J. Fink, Vice President
Facsimile No.: 215-557-6209

 
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With a copy to:
Obermayer Rebmann Maxwell & Hippel LLP
1617 John F. Kennedy Boulevard, 19th Floor
Philadelphia, PA 19103
Attention: David A. Nasatir, Esquire
Facsimile No.: 215-665-3165

ARTICLE XV
WAIVERS

Section 15.1
Waivers. 

In connection with any proceedings under the Loan Documents, including without
limitation any action by Agent in replevin, foreclosure or other court process
or in connection with any other action related to the Loan Documents or the
transactions contemplated hereunder, each of the Credit Parties waives:

(a)    all errors, defects and imperfections in such proceedings;

(b)    all benefits under any present or future laws exempting any property,
real or personal, or any part of any proceeds thereof from attachment, levy or
sale under execution, or providing for any stay of execution to be issued on any
judgment recovered under any of the Loan Documents or in any replevin or
foreclosure proceeding, or otherwise providing for any valuation, appraisal or
exemption;

(c)    all rights to inquisition on any real estate, which real estate may be
levied upon pursuant to a judgment obtained under any of the Loan Documents and
sold upon any writ of execution issued thereon in whole or in part, in any order
desired by Agent;

(d)    presentment for payment, demand, notice of demand, notice of non-payment,
protest and notice of protest of any of the Loan Documents, including the Line
Note;

(e)    any requirement for bonds, security or sureties required by statute,
court rule or otherwise;

(f)    any demand for possession of Collateral prior to commencement of any
suit; and

(g)    all rights to claim or recover attorney's fees and costs in the event
that Borrower is successful in any action to remove, suspend or enforce a
judgment entered by confession.

Section 15.2
Forbearance. 

Agent may release, compromise, forbear with respect to, waive, suspend, extend
or renew any of the terms of the Loan Documents, without notice to the Credit
Parties.

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Section 15.3
Limitation on Liability. 

Each Credit Party shall be responsible for and Agent is hereby released from any
claim or liability in connection with:

(a)    Safekeeping any Collateral;

(b)    Any loss or damage to any Collateral;

(c)    Any diminution in value of the Collateral; or

(d)    Any act or default of another Person.

Agent shall only be liable for any act or omission on its part constituting
willful misconduct. In the event that Agent breaches its required standard of
conduct, Borrower agrees that Agent's liability shall be only for direct damages
suffered and shall not extend to consequential or incidental damages. In the
event Borrower brings suit against Agent in connection with the transactions
contemplated hereunder and Agent is found not to be liable, Borrower will
indemnify and hold Agent harmless from all costs and expenses, including
attorney's fees, incurred by Agent in connection with such suit. This Agreement
is not intended to obligate Agent to take any action with respect to the
Collateral or incur expenses or perform any obligation or duty of Borrower.

ARTICLE XVI
SUBMISSION TO JURISDICTION

Section 16.1
Submission to Jurisdiction. 

Each Credit Party hereby consents to the exclusive jurisdiction of any state or
federal court located within the Commonwealth of Pennsylvania, and irrevocably
agrees that, subject to the Agent's election, all actions or proceedings
relating to the Loan Documents or the transactions contemplated hereunder shall
be litigated in such courts, and each Credit Party waives any objection which it
may have based on lack of personal jurisdiction, improper venue or forum non
conveniens to the conduct of any proceeding in any such court and waives
personal service of any and all process upon it, and consents that all such
service of process be made by mail or messenger directed to it at the address
set forth in Section 14.1. Each Credit Party hereby irrevocably appoints any
officer, trustee, or partner of either of them as their agent for the purpose of
accepting service of any process within the Commonwealth of Pennsylvania.
Nothing contained in this Section 16.1 shall affect the right of Agent to serve
legal process in any other manner permitted by law or affect the right of Agent
to bring any action or proceeding against a Credit Party or its property in the
courts of any other jurisdiction.

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ARTICLE XVII
MISCELLANEOUS

Section 17.1
Brokers. 

The transaction contemplated hereunder was brought about and entered into by
Agent and Borrower acting as principals and without any brokers, agents or
finders being the effective procuring cause hereof. Each Credit Party represents
to Agent that it has not committed Agent to the payment of any brokerage fee or
commission in connection with this transaction. Whether any such claim is made
against Agent or any Lender by any broker, finder or agent or any other Person,
the Credit Parties agree to indemnify, defend and hold Agent and Lenders
harmless against any such claim, at their own cost and expense, including
Agent’s and Lenders’ attorneys’ fees. Each Credit Party further agrees that
until any such claim or demand is adjudicated in Agent's favor, the amount
claimed and/or demanded shall be deemed part of the Obligations secured by the
Collateral.

Section 17.2
No Joint Venture. 

Nothing contained herein is intended to permit or authorize any Credit Party to
make any contract on behalf of Agent, nor shall this Agreement be construed as
creating a partnership, joint venture or making Agent an investor in any Credit
Party.

Section 17.3
Survival. 

All covenants, agreements, representations and warranties made by the Credit
Parties in the Loan Documents or made by or on its behalf in connection with the
transactions contemplated hereunder shall be true at all times this Agreement is
in effect and shall survive the execution and delivery of the Loan Documents,
any investigation at any time made by Agent or on its behalf and the making by
Lenders of the loans or advances to Borrower. All statements contained in any
certificate, statement or other document delivered by or on behalf of any Credit
Party pursuant hereto or in connection with the transactions contemplated
hereunder shall be deemed representations and warranties by such Credit Party.

Section 17.4
No Assignment by Borrower. 

Borrower may not assign any of its rights hereunder without the prior written
consent of Agent, and Lenders shall not be required to lend hereunder except to
Borrower as it presently exists.

Section 17.5
Assignment or Sale by Lenders. 

Each Lender may sell, assign or participate all or a portion of its interest in
the Loan Documents in the minimum amount of $1,000,000 and integral multiples of
$1,000,000 in excess thereof, and in connection therewith may make available to
any prospective purchaser, assignee or participant any information relative to
the Credit Parties in its possession. All sales and assignments shall be made
pursuant to an Assignment and Assumption Agreement substantially in the form of
Exhibit C attached hereto and shall be subject to the approval of the Agent and
to the payment to the Agent of an administrative fee of $3,500.

66

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Section 17.6
Binding Effect. 

This Agreement and all rights and powers granted hereby will bind and inure to
the benefit of the parties hereto and their respective permitted successors and
assigns.

Section 17.7
Severability. 

The provisions of this Agreement and all other Loan Documents are deemed to be
severable, and the invalidity or unenforceability of any provision shall not
affect or impair the remaining provisions which shall continue in full force and
effect.

Section 17.8
No Third Party Beneficiaries. 

The rights and benefits of this Agreement and the Loan Documents shall not inure
to the benefit of any third party.

Section 17.9
Modifications. 

No modification of this Agreement or any of the Loan Documents shall be binding
or enforceable unless in writing and signed by or on behalf of the party against
whom enforcement is sought. Notwithstanding any other provision contained in any
Loan Document, no amendment, modification, termination or waiver shall (a)
affect the payment of principal (including without limitation the date when
due), (b) reduce any interest rate margin or any fee provided herein, (c)
increase any Commitment, (d) extend the Expiration Date, (e) modify the
definition of “Required Lenders” or (f) modify any voting rights of the Lenders
without the written consent of all the Lenders.

Section 17.10
 Holidays. 

If the day provided herein for the payment of any amount or the taking of any
action falls on a Saturday, Sunday or public holiday at the place for payment or
action, then the due date for such payment or action will be the next succeeding
Business Day.

Section 17.11
Law Governing. 

This Agreement has been made, executed and delivered in the Commonwealth of
Pennsylvania and will be construed in accordance with and governed by the laws
thereof.

67

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Section 17.12
Integration. 

The Loan Documents shall be construed as integrated and complementary of each
other, and as augmenting and not restricting Bank's rights, powers, remedies and
security. The Loan Documents contain the entire understanding of the parties
thereto with respect to the matters contained therein and supersede all prior
agreements and understandings between the parties with respect to the subject
matter thereof and do not require parol or extrinsic evidence in order to
reflect the intent of the parties. In the event of any inconsistency between the
terms of this Agreement and the terms of the other Loan Documents, the terms of
this Agreement shall prevail.

Section 17.13
Exhibits and Schedules. 

All exhibits and schedules attached hereto are hereby made a part of this
Agreement.

Section 17.14
Headings. 

The headings of the Articles, Sections, paragraphs and clauses of this Agreement
are inserted for convenience only and shall not be deemed to constitute a part
of this Agreement.

Section 17.15
Counterparts. 

This Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument, and any of the parties
hereto may execute this Agreement by signing any such counterpart.

Section 17.16
Waiver of Right to Trial by Jury. 

EACH OF THE CREDIT PARTIES, LENDERS AND AGENT WAIVE ANY RIGHT TO TRIAL BY JURY
ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER ANY OF THE
LOAN DOCUMENTS OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF A CREDIT PARTY, A LENDER OR AGENT WITH RESPECT TO ANY OF THE LOAN
DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH OF THE CREDIT PARTIES, LENDERS
AND AGENT AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE CREDIT PARTIES, LENDERS AND
AGENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. EACH CREDIT PARTY
ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL REGARDING
THIS SECTION, THAT IT FULLY UNDERSTANDS ITS TERMS, CONTENT AND EFFECT, AND THAT
IT VOLUNTARILY AND KNOWINGLY AGREES TO THE TERMS OF THIS SECTION.

68

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

 
BORROWER:
         
HERSHA HOSPITALITY LIMITED PARTNERSHIP, a Virginia limited partnership
         
By:
Hersha Hospitality Trust, a Maryland Real Estate Investment Trust, General
Partner
                 
By:
       
Name:
     
Title:
                   
GUARANTORS:
         
HERSHA HOSPITALITY TRUST
                 
By:
       
Name:
     
Title:
                   
2844 ASSOCIATES, a Pennsylvania limited partnership
                 
By:
Hersha Hospitality, LLC, a Virginia limited liability- company, its general
partner
                 
By:
       
Name:
     
Title:
 

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

 

 
HHLP VALLEY FORGE ASSOCIATES, a Pennsylvania limited partnership
     
By:
Hersha Hospitality, LLC, a Virginia limited liability company, its general
partner
                   
By:
       
Name:
     
Title:
           
44 LAUREL ASSOCIATES, LLC, a Maryland limited liability company
                 
By:
       
Name:
     
Title:
           
44 NEW ENGLAND MANAGEMENT COMPANY, a Virginia corporation
                 
By:
       
Name:
     
Title:
                   
AGENT AND LENDER:
         
COMMERCE BANK, N.A.
                 
By:
       
William J. Fink
     
Vice President
 

[Signatures continued on following page]
 

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

 

 
LENDERS:
                 
COMMERCE BANK/HARRISBURG, N.A
                         
By:
       
Eric Warfel
     
Vice President
                                           
MANUFACTURERS AND TRADERS TRUST COMPANY
                         
By:
       
Peter J. Ostrowski
     
Vice President
 

 

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SCHEDULE A
 

(Commitment Percentages of Lenders)

Commerce Bank, N.A.
50.00%
       
Commerce Bank/Harrisburg, N.A.
8.33%
       
Manufacturers and Traders Trust Company
41.67%

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EXHIBIT A

FORM OF LINE NOTE

 
$
[Date]

FOR VALUE RECEIVED, the undersigned, HERSHA HOSPITALITY LIMITED PARTNERSHIP, a
Virginia limited partnership (“Borrower”), promises to pay to the order of
_____________________ (“Bank”), at the place and times provided in the Revolving
Credit Loan and Security Agreement of even date herewith among Borrower, Hersha
Hospitality Trust, as Guarantor, the other Guarantors party thereto, and Bank
and the other Lenders party thereto (the “Loan Agreement”), the principal sum of
_________________ Dollars ($______________) or, if less, the aggregate principal
amount (as shown by Bank’s records which shall constitute prima facie evidence
thereof) outstanding under the Line (as such term is defined in the Loan
Agreement) extended by Bank to Borrower pursuant to the Loan Agreement, such
principal sum, together with any other sums that may be due hereunder, unless
sooner paid as required by the terms of the Loan Agreement, to be paid in full
upon the Expiration Date.

This Note and the other Line Notes collectively amend and restate that certain
Revolving Line of Credit Note dated August 18, 2004 by Maker in favor of
Sovereign Bank (“Sovereign”) in the principal amount of $35,000,000 (the
“Original Note”), which was assigned by Sovereign to Commerce Bank, N.A., as
Agent on behalf of Lenders, pursuant to that certain Assignment of Loan
Documents of even date herewith between Sovereign and Agent. The indebtedness
evidenced by the Original Note has not been repaid, discharged, extinguished or
satisfied, but the terms of the Original Note have been amended and restated in
their entirety as set forth herein and are superseded by the terms hereof and
all of such indebtedness for all purposes is continued, replaced and substituted
and shall constitute indebtedness outstanding under the Line Notes.

Borrower further promises to pay to the order of Bank interest on the unpaid
principal amount of the Line from the respective dates on which portions of the
Line are disbursed until such principal amounts have been repaid in full, at the
rates provided in the Loan Agreement.

Upon the Expiration Date, as well as upon the occurrence of an Event of Default
(as such term is defined in the Loan Agreement), until final payment of all sums
owed under this Note, the outstanding principal balance and all other sums due
hereunder shall bear interest at a rate which is three percent (3%) in excess of
the non-default rate otherwise set forth in the Loan Agreement with respect to
the Line (“Default Rate”). Notwithstanding the provisions of 42 Pa.C.S.A. §8101,
or any other statute or regulation to the contrary, the Default Rate shall apply
to all sums evidenced hereby as set forth above, including after entry of a
judgment or judgments against Borrower, and said judgment or judgments shall
bear interest at the Default Rate until satisfied in full.

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

In no event will the rate of interest payable hereunder exceed the maximum rate
of interest permitted to be charged by applicable law (including the choice of
law rules) and any interest paid in excess of the permitted rate will be
refunded to Borrower. Such refund will be made by application of the excess
amount of interest paid against any sums outstanding hereunder and will be
applied in such order as Bank may determine. If the excess amount of interest
paid exceeds the sums outstanding, the portion exceeding the sums outstanding
will be refunded in cash by Bank. Any such crediting or refunding will not cure
or waive any default by Borrower. Borrower agrees, however, that in determining
whether or not any interest payable hereunder exceeds the highest rate permitted
by law, any non-principal payment, including without limitation prepayment fees
and late charges, will be deemed to the extent permitted by law to be an
expense, fee, premium or penalty rather than interest.

All payments of principal and interest and all other amounts due hereunder shall
be made without set-off, counterclaim, deduction or withholding for any reason
whatsoever.
 
In the event that any scheduled payment of principal or interest or any other
amount due hereunder shall be overdue for a period in excess of ten (10) days
after the same shall become due, Borrower shall pay to Bank a late charge of
five percent (5%) of the overdue amount to cover the additional expense incident
to such delinquency.
 
This Note is one of the Line Notes referred to in, is issued pursuant to, and is
payable in accordance with the Loan Agreement the terms and conditions of which
are incorporated herein by reference. Reference is made to the Loan Agreement as
to rights and obligations of prepayment. The holder of this Note is entitled to
all the benefits of the Loan Agreement.
 
From the Expiration Date, as well as upon the occurrence, and only during the
continuance, of any Event of Default (after all applicable grace and cure
periods) set forth in the Loan Agreement (including, without limitation, the
failure by the Borrower to pay any installment of interest on this Note when
due), the entire unpaid balance of principal and interest of this Note shall, at
the option of Bank, be immediately due and payable without presentment, demand,
protest or notice of any kind, all of which are expressly waived by Borrower to
the extent waiveable under applicable law or public policy, and Bank may
forthwith exercise or cause to be exercised the warrant of attorney to confess
judgment set forth herein, in addition to such rights and remedies as may herein
be provided or any of the rights or remedies provided in the Loan Documents (as
such term is defined in the Loan Agreement), or which may be available to Bank
by law, without further stay, any law, usage or custom to the contrary
notwithstanding.
 
BORROWER DOES HEREBY AUTHORIZE AND EMPOWER THE CLERK OF COURT OR ANY ATTORNEY OF
ANY COURT OF RECORD OF THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AFTER THE
OCCURRENCE AND ONLY DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, TO APPEAR FOR
AND CONFESS JUDGMENT AGAINST BORROWER AND IN FAVOR OF BANK, ITS SUCCESSORS OR
ASSIGNS, AS OF ANY TERM, PAST, PRESENT OR FUTURE, WITH OR WITHOUT DECLARATION,
FOR EACH AND ALL OF THE FOLLOWING:
 

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

(A)    THE UNPAID PRINCIPAL SUM EVIDENCED BY THIS NOTE WITH ALL OF THE ACCRUED
AND UNPAID INTEREST HEREON, WHETHER BASIC INTEREST, DEFAULT INTEREST AT THE
DEFAULT RATE, OR BOTH, AS HEREIN PROVIDED;
 
(B)    ALL OTHER SUMS AS ARE DUE AND PAYABLE TO BANK UNDER THE TERMS OF THIS
NOTE OR UNDER THE TERMS OF THE LOAN DOCUMENTS, WHETHER BY ACCELERATION OR
OTHERWISE;
 
(C)    THE AGGREGATE OF ALL SUMS EXPENDED BY BANK AT ANY TIME AND FROM TIME TO
TIME, WHETHER PERMITTED UNDER THE TERMS OF THE LOAN DOCUMENTS, PERMITTED BY LAW,
OR PERMITTED BY STATUTE, (i) TO EXTINGUISH OR KEEP CURRENT, AS THE CASE MAY BE,
ENCUMBRANCES AND LIENS ON THE COLLATERAL (AS SUCH TERM IS DEFINED IN THE LOAN
AGREEMENT), (ii) TO PRESERVE, PROTECT, DEFEND AND MAINTAIN THE COLLATERAL, TO
PRESERVE, RESTORE AND MAINTAIN THE COLLATERAL, TO PAY INSURANCE PREMIUMS OF ANY
NATURE BENEFITTING OR RELATING TO THE COLLATERAL, (iii) TO PRESERVE, PROTECT,
DEFEND AND MAINTAIN THE LIEN PRIORITY OF THE BANK'S SECURITY INTEREST IN THE
COLLATERAL, AND/OR (iv) DUE TO AN EVENT OF DEFAULT UNDER THIS NOTE OR UNDER THE
LOAN DOCUMENTS; AND
 
(D)    THE COSTS OF SUIT AND AN ATTORNEY'S FEE OF FIVE PERCENT (5%) OF THE SUM
OF ALL OF THE ITEMS (A), (B) AND (C) ABOVE FOR COLLECTION, WITH RELEASE OF ALL
ERRORS, AND ON WHICH JUDGMENT BANK MAY ISSUE OR CAUSE TO BE ISSUED AN EXECUTION
OR EXECUTIONS, WAIVING (TO THE EXTENT WAIVEABLE UNDER APPLICABLE LAW OR PUBLIC
POLICY) (X) APPRAISEMENT AS TO ANY PROPERTY LEVIED UPON BY VIRTUE OF ANY SUCH
EXECUTION, (Y) ANY RIGHT TO A HEARING BEFORE EXECUTION ON ANY SUCH JUDGMENT, AND
(Z) ALL EXEMPTIONS FROM LEVY AND SALE OF ANY PROPERTY WHICH NOW OR HEREAFTER IS
EXEMPT UNDER ANY ACT OF THE STATE WHEREIN THE JUDGMENT IS ENTERED. NO SINGLE
EXERCISE OF THIS WARRANT AND POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO
EXHAUST THIS POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE STRICKEN, VACATED,
REMOVED OR OTHERWISE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID, BUT THIS
POWER SHALL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS
OFTEN AS PAYEE SHALL ELECT UNTIL THIS NOTE AND ALL SUMS DUE HEREUNDER SHALL BE
PAID IN FULL, AND BORROWER HAS PERFORMED ALL OF THE OTHER PROVISIONS THEREUNDER
AND/OR UNDER THE TERMS OF THE OTHER LOAN DOCUMENTS. BORROWER HEREBY AUTHORIZES
BANK TO RE-ASSESS DAMAGES FROM TIME TO TIME AND AS OFTEN AS BANK DEEMS NECESSARY
SO THAT ANY AND ALL JUDGMENTS CONFESSED HEREUNDER SHALL INCLUDE ALL SUMS LISTED
UNDER SUBPARAGRAPHS (A) THROUGH (D) ABOVE AS THE SAME ARE INCURRED FROM TIME TO
TIME, EVEN AFTER ENTRY OF JUDGMENT UNDER THIS WARRANT OF ATTORNEY.
 

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

All written notices to be given by either party to the other shall be sent in
accordance with the provisions of the Loan Agreement.

Borrower consents to the in personam jurisdiction of the courts of the
Commonwealth of Pennsylvania and the United States District Court for the
Eastern District of Pennsylvania in connection with any claim or dispute arising
under or in connection with this Note. If any action in connection with any such
claim is commenced by the Bank against Borrower in any such court, Borrower also
agrees that service of process may be made on Borrower by certified or
registered mail addressed to Borrower at its address specified in the Loan
Agreement.
 
Borrower, and the Bank by its acceptance of this Note, waive trial by jury in
any action by or against the Borrower or the Bank, as the case may be, in
connection with any claim or dispute arising under or in connection with this
Note or any other instrument or document delivered hereunder.
 
This Note shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania. Except where the context otherwise requires, the
term “Bank” shall be deemed to include any subsequent holder of this Note.
 
This Note shall be binding upon Borrower and its successors and permitted
assigns and shall inure to the benefit of Lender and its successors and assigns.
 
BORROWER ACKNOWLEDGES THAT THIS NOTE IS ACCOMPANIED BY AN AUTHORIZATION TO
CONFESS JUDGMENT, THAT IT HAS CONSULTED LEGAL COUNSEL WITH RESPECT THERETO (OR
KNOWINGLY WAIVED ITS RIGHT TO DO SO), AND THAT IT UNDERSTANDS THAT THE EXERCISE
BY BANK OF THE CONFESSION WILL RESULT IN THE ENTRY OF A JUDGMENT AGAINST
BORROWER AND COULD RESULT IN THE SALE OR ATTACHMENT OF, OR EXECUTION UPON,
BORROWER'S PROPERTY (INCLUDING WITHOUT LIMITATION PERSONAL PROPERTY AND REAL
PROPERTY) IN EACH CASE WITHOUT PRIOR NOTICE OR THE OPPORTUNITY FOR A HEARING.

 
 
[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, Borrower, intending to be legally bound hereby, has duly
executed this Note as of the date first written above.
 

 

 
HERSHA HOSPITALITY LIMITED PARTNERSHIP,
 
a Virginia limited partnership
         
By:
Hersha Hospitality Trust, a Maryland Real Estate Investment Trust, General
Partner
                         
By:
       
Ashish R. Parikh
     
Chief Financial Officer
 

 

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EXHIBIT B

(Form of Line Request)

LINE REQUEST

Dated: ______________

Commerce Bank, N.A.
2005 Market Street
Philadelphia, PA 19103
Attention:
Facsimile: (215)

Ladies and Gentlemen:

This irrevocable Line Request is delivered to you pursuant to Section [2.1]
[2.2] of the Revolving Credit Loan and Security Agreement dated January 17, 2006
(as amended, restated or otherwise modified, the “Credit Agreement”), among
Hersha Hospitality Limited Partnership (the “Borrower”), Hersha Hospitality
Trust, Commerce Bank, N.A., in its capacity as Agent (the “Agent”) for the banks
and other financial institutions from time to time signatory thereto (the
“Lenders”) and the Lenders. All terms used in this Request which are defined in
the Credit Agreement and not otherwise defined herein shall have the respective
meanings ascribed to such terms in the Credit Agreement.

1.    The Borrower hereby requests that the Lenders [make a _____Type A Loan
______ Type B Loan] [_____ issue a Letter of Credit].

2.    The Borrower hereby requests that the Lenders [make such advance] [issue
such Letter of Credit] to the Borrower in the amount of $___________.

3.    The Borrower hereby requests that such [advance be made] [Letter of Credit
be issued] on the following Business Day: _____________________.

4.    The Borrower hereby requests that the advance be a [ ____Prime Rate Loan]
[____LIBOR Rate Loan (with an Interest Period of ___(1) _____(2) _____(3)
_____(6) months).]

5.    The Credit Parties are, and following receipt of the requested Advance
will be, in compliance with Sections 2.1, 2.2 and Article XI of the Credit
Agreement.

6.    The representations and warranties set forth in Article V of the Credit
Agreement are true and correct (except to the extent that (a) such
representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct as of such earlier date, and (b) any such
representation or warranty that has been rendered incorrect or incomplete as a
result of any action permitted, in writing, by the Required Lenders to be taken
or omitted pursuant to the terms of this Agreement.

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7.    No Default or Event of Default under the Credit Agreement has occurred and
is continuing.

IN WITNESS WHEREOF, the undersigned has executed this Line Request as of the day
and year first written above.

 
BORROWER:
         
HERSHA HOSPITALITY LIMITED PARTNERSHIP, a Virginia limited partnership
         
By:
Hersha Hospitality Trust, a Maryland Real Estate Investment Trust, General
Partner
                         
By:
       
Name:
     
Title:
 

 

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EXHIBIT C

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

Dated: _________

Reference is hereby made to that certain Revolving Credit Loan and Security
Agreement, dated as of January 17, 2006 (as amended, restated, supplemented or
otherwise modified, the “Loan Agreement”), among Hersha Hospitality Limited
Partnership, a Virginia limited partnership, as Borrower (the “Borrower”),
Hersha Hospitality Trust, a Maryland real estate investment trust, as Guarantor,
each of the other Guarantors parties thereto (collectively, the “Guarantors”)
(Borrower and Guarantors, each together with its respective successors and/or
assigns, the “Credit Parties”), Commerce Bank, N.A., in its capacity as
Administrative Agent (the “Agent”) for the banks and other financial
institutions from time to time signatory thereto (the “Lenders”) and the Lenders
from time to time party thereto. Capitalized terms used but not otherwise
defined herein shall have the respective meanings given to them in the Loan
Agreement.

_____________ (the “Assignor”) and _____________ (the “Assignee”) agree as
follows:

1.    The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, as of the Transfer Effective
Date (as defined below), pursuant to, and authorized by, Section 17.5 of the
Loan Agreement, a ____% interest in and to all of the Assignor’s interest,
rights and obligations with respect to its Commitment and Loans, and the
Assignor thereby retains ____% of its interest therein.

2.    The Assignor represents that, as of the date hereof, its pro rata share of
the Commitment (without giving effect to assignments thereof which have not yet
become effective) is ____%, and its outstanding balance of the Loan (unreduced
by any assignments thereof which have not yet become effective) is
$_________________.

3.    The Assignor:

(a)    makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Loan Agreement or any other Loan Document or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Loan Agreement or any other instrument or document furnished pursuant thereto,
other than that the Assignor is the legal and beneficial owner of the interest
being assigned by it hereunder and that such interest is free and clear of any
adverse claim;

(b)    makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Credit Parties or the performance or
observance by the Credit Parties of any of their obligations under the Loan
Agreement or any other instrument or document furnished or executed pursuant
thereto; and

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

 
(c)    as applicable, attaches the Note(s) delivered to it under the Loan
Agreement and requests that the Borrower exchange such Note(s) for new Note(s)
payable to each of the Assignor and the Assignee as follows:

Note:
Payable to the Order of:
Principal Amount of:
                       

4.    The Assignee: (a) represents and warrants that it is legally authorized to
enter into this Assignment and Acceptance; (b) confirms that it has received a
copy of the Loan Agreement and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (c) agrees that it will, independently and
without reliance upon the Assignor or any other Lender or the Agent and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Agreement; (d) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the Loan Agreement and the
other Loan Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; and (e) agrees
that it will perform in accordance with their terms all the obligations which by
the terms of the Loan Agreement and the other Loan Documents are required to be
performed by it as a Lender.

5.    Subject to any consents required by the Loan Agreement, the effective date
for this Assignment and Acceptance shall be as set forth in Section 1 of
Schedule 1 hereto (the “Transfer Effective Date”). Following the execution of
this Assignment and Acceptance, it will be delivered to the Agent for consent by
the Agent.

6.    Upon such consent, acceptance and recording, and the payment to Agent of
any administrative fee in connection therewith, from and after the Transfer
Effective Date: (a) the Assignee shall be a party to the Loan Agreement and the
other Loan Documents to which Lenders are parties and, to the extent provided in
this Assignment and Acceptance, have the rights and obligations of a Lender
under each such Loan Document; and (b) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Agreement and the other Loan
Documents.

7.    Upon such consent, acceptance and recording, from and after the Transfer
Effective Date, the Administrative Agent shall make all payments in respect of
the interest assigned hereby (including payments of principal, interest, fees
and other amounts) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments for periods prior to the Transfer Effective
Date or with respect to the making of this assignment directly between
themselves.

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8.    THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO BE A CONTRACT UNDER SEAL
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO THE CONFLICTS OR CHOICE OF LAW
PRINCIPLES THEREOF.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement to be executed under seal by their duly authorized officers
as of the day and year first written above.

 
[ASSIGNOR:]
               
By:
       
Name:
       
Title:
                         
[ASSIGNEE:]
               
By:
       
Name:
       
Title:
   

Consented to and Accepted by:
     
COMMERCE BANK, N.A., as Agent
           
By:
     
Name:
   
Title:
 

 

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SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE
 

1.
Transfer Effective Date ___________ ____, ______
           
2.
Outstanding principal amount of Loans on the Effective Date:
             
$ ____________
                   
3.
The Assignor’s pro rata share:
               
(a)
prior to the Transfer Effective Date, of the Commitment and Loans:
   
%
           
(b)
as of the Transfer Effective Date, of the Commitment and the Loans:
 
%
         
4.
As of the Transfer Effective Date, the Assignee’s pro rata share of the
Commitment and the Loans:
   
%
       
5.
As of the Transfer Effective Date, the Assignor’s retained interest in the
outstanding balance of the Loans:
$
            
6.
As of the Transfer Effective Date, the Assignee’s interest in the outstanding
balance of the Loans:
$
               
7.
Payment Instructions
                 
(a)
If payable to Assignor,
         
to the account of Assignor to:
                                 
ABA No.:
Account Name:
Account No.
Attn:
Ref:
     

 

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(b)
If payable to Assignee, to the account
   
of Assignee to:
                     
ABA No.:
   
Account Name:
   
Account No.:
   
Attn:
   
Ref:
 

 
 

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