$110,000,000

                                     SECOND
                      AMENDED AND RESTATED CREDIT AGREEMENT


                                      AMONG


                         HOMESTEAD VILLAGE INCORPORATED,


                            THE LENDERS NAMED HEREIN,


                                       AND


                        COMMERZBANK AG, NEW YORK BRANCH,
                     AS ADMINISTRATIVE AGENT FOR THE LENDERS


                          DATED AS OF FEBRUARY 29, 2000




<PAGE>




                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

         SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this Agreement ),  dated
as of February  29,  2000,  among  HOMESTEAD  VILLAGE  INCORPORATED,  a Maryland
corporation  (the  Borrower ),  COMMERZBANK AG, NEW YORK BRANCH,  and the other
lenders listed on Exhibit A annexed hereto, as amended from time to time (each a
Lender  and  collectively,  the Lenders ) and COMMERZBANK AG, NEW YORK BRANCH,
as contractual  representative for the Lenders on the terms provided herein (the
Administrative Agent ).

                              W I T N E S S E T H:

         WHEREAS,  the Administrative Agent arranged a revolving credit facility
in the  original  principal  amount of  $50,000,000  on  behalf of the  Borrower
pursuant  to a  Credit  Agreement  dated  as of  May  6,  1997  among  Borrower,
Administrative  Agent and certain  lenders  named therein  (said  Agreement,  as
amended to, but not including, this date, the Original Agreement );

         WHEREAS, the parties to the Original Agreement amended and restated the
Original  Agreement  in its  entirety  pursuant  to the terms of an Amended  and
Restated Credit Agreement dated as of March 18, 1999 (the First  Restatement );
and

         WHEREAS,  the parties to the First Restatement have agreed to amend and
restate the First Restatement in its entirety,  including the letters modifying,
amending or waiving the terms thereof.

         NOW,  THEREFORE,   in  consideration  of  the  fees,   representations,
warranties, covenants and agreements of the Borrower set forth herein and in the
Loan Documents, the parties hereto agree as follows:


                      ARTICLE I.. DEFINITIONS; CONSTRUCTION

          Section 1.1 Definitions As used herein, the following terms shall have
     the following meanings:

                  Accounting   Period  means  any  accounting   period  within
Borrower's  fiscal year,  provided that such fiscal year is in  accordance  with
GAAP and generally coincides with the calendar year.

                  Acquisition  Costs  means the actual  purchase  price paid by
Borrower or a Subsidiary of Borrower to acquire a Property.



<PAGE>



                                                        -2-

                  Adjusted EBITDA means,  with respect to any quarter,  EBITDA
for such  quarter,  plus  non-cash  charges,  minus a reserve  for  replacements
equivalent  to the  greater of (i) the average of actual,  historical  recurring
Property  capital  expenditures  incurred  during  the  four  calender  quarters
immediately  preceding the calender quarter in which the calculation is made and
(ii) four  percent  (4.0%) of the gross  revenues  derived  from the  Properties
during the  calendar  quarter  immediately  preceding  the  quarter in which the
calculation is made.

                  Adjusted  LIBOR Rate  means,  with  respect to each  Interest
Period,  the rate  obtained  by  dividing  (i) the LIBOR Rate for such  Interest
Period by (ii) a  percentage  equal to one minus the  actual  rate  (stated as a
decimal) of all reserves then actually  required to be maintained by each Lender
(provided  that  reasonable  evidence of the  imposition of such  requirement is
furnished  to  Borrower)  against  eurocurrency  liabilities   as  specified in
Regulation  D (or  against  any other  category  of  liabilities  that  includes
deposits by  reference  to which the interest  rate on  borrowings  hereunder is
determined or any category of extensions of credit or other assets that includes
loans by a non-United States office of the Administrative Agent to United States
residents)  or by any other  Requirement  of Law  relating to reserve or capital
adequacy requirements.

                  Adjusted  Maximum  Availability  Amount  means  the  Maximum
Availability  Amount,  except that, for periods  occurring  prior to the Closing
Date, the Adjusted Maximum Availability Amount  shall mean $170,000,000.

                  Adjusted Pool NOI means,  as of the last day of any calendar
quarter,  the NOI derived from the Mortgaged  Properties during such quarter and
the three  calendar  quarters  immediately  preceding  such  quarter  less (i) a
reserve for  replacements  equivalent to four percent  (4.0%) of gross  revenues
derived from such Mortgaged  Properties during such period and (ii) a management
fee equal to four percent (4.0%) of gross  revenues  derived from such Mortgaged
Properties during such period.

                  Administrative  Agent  means Commerzbank AG, New York Branch,
in its capacity as contractual representative for the Lenders hereunder, or such
successor  Administrative  Agent as may be appointed  pursuant to Section 7.9 of
this Agreement.

                  Affiliate  means,  with  respect  to any  Person,  any other
Person  directly  or  indirectly  controlling,  controlled  by, or under  common
control with such Person, whether through the ownership of voting securities, by
contract,  or otherwise.  A Person shall be deemed to control a  corporation  if
such  Person  possesses,  directly  or  indirectly,  the power to (i) vote fifty
percent (50%) or more of the  securities  having  ordinary  voting power for the
election of directors of such  corporation or (ii) direct or cause the direction
of the  management  and policies of such  corporation,  through the ownership of
voting securities, by contract or otherwise.

                  Agreement means this Agreement, as amended, supplemented, or
modified from time to time.

                  Alternate Rate means, as of any date of determination, a per
annum  rate  equal to the  greater  of (a) the Prime  Lending  Rate plus one and
one-half percent (1.5%) and (b) the Federal Funds Rate plus two percent (2%).

                  Applicable Margin  means two and one-half percent (2.5%).



<PAGE>



                                                       -15-

                  Appraised Value  shall have the following meanings:

               (i) At all times prior to May 1, 2001:

                    (x) With respect to each of the fifty-six (56) Mortgaged
Properties to which a value is ascribed on Schedule 1 annexed hereto, Appraised
Value  shall mean the value ascribed on Schedule 1 annexed hereto; and

                    (y) With  respect  to each of the  Mortgaged  Properties  to
which a value is not ascribed on Schedule 1 annexed hereto,  (x) until such time
as Borrower shall have delivered to  Administrative  Agent a FIRREA Appraisal of
such Mortgaged  Property in accordance  with the terms of Section 5.2(k) hereof,
Appraised Value shall mean undepreciated GAAP cost value and (y) upon delivery
of a FIRREA Appraisal as aforesaid,  Appraised  Value shall mean the value set
forth in the FIRREA Appraisal of the Mortgaged Property; and

               (ii)  During the period  commencing  May 1, 2001 and at all times
thereafter up to and including the Maturity Date, Appraised Value shall mean the
value ascribed to the Mortgaged  Properties in the Updated Appraisals  delivered
to Administrative Agent pursuant to the terms of Section 5.2(l) hereof.

                  Average  Undrawn  Balance   means the average daily amount of
the Revolving Portion of the Loan which remains undrawn upon by the Borrower for
the related period of determination  (on the basis of a year of 365/366 days for
the actual number of days which have elapsed during such period).

                  Bankruptcy Code  has the meaning provided in Section 6.1(g).

                  Borrower  has the  meaning  set  forth  in the  introductory
paragraph to this Agreement.

                  Borrower's Authorized  Representative means any duly elected
officer  designated  by the Borrower in a written  notice to the  Administrative
Agent, as such officer may be changed from time to time by written notice to the
Administrative Agent.

                  Business  Day means any day excluding  Saturday,  Sunday and
any other day on which  banks are  required or  authorized  to close in New York
City or on which  trading  is not  carried  on by and  between  banks in  Dollar
deposits in the applicable interbank Eurodollar market.

                  Capital   Stock   means  any  and  all  shares,   interests,
participation,  or other equivalents  (however designated) of capital stock of a
corporation,  any and all  equivalent  ownership  interests,  including  but not
limited to partnership  interests,  in a Person (other than a corporation),  and
any and all warrants or options to purchase any of the foregoing.

                  Closing Date means the date hereof.



<PAGE>


                    Code means the  Internal  Revenue  Code of 1986,  as amended
from time to time, or any successor  thereto.

                  Collateral means, collectively, the Mortgaged Properties and
all other property and interests in property now owned or hereafter acquired and
upon which a Lien has been or is  purported  or intended to have been granted in
favor  of  the   Administrative   Agent  or  its  predecessor   -in-interest  as
Administrative Agent, Wells Fargo Bank, National Association.

                  Construction Budget  means, with respect to any Project under
Development,  the total budgeted costs (including soft and hard costs), required
to cause  such  Project  under  Development  to  become  Construction  Complete,
including the acquisition cost of land.

                  Construction  Complete means,  with respect to any Mortgaged
Property,  that (a)  construction  of such  Mortgaged  Property is complete,  in
accordance with the Plans and  Specifications  of such Mortgaged  Property,  (b)
final,   permanent  and  unconditional   certificates  of  occupancy  permitting
occupancy  of all  portions  of such  Mortgaged  Property  as an  extended  stay
facility have been issued and are in full force and effect,  (c) all portions of
such Mortgaged  Property are, or may become at any time,  without the consent or
approval of any Person,  open for business to the general  public as an extended
stay  hotel,  and (d) the  Administrative  Agent  shall have  received  evidence
satisfactory  to it that the  conditions set forth in (a), (b) and (c) have been
satisfied.

                  Contractual  Obligation means as to any Person, any material
provision of any security issued by such Person or of any agreement, instrument,
or other  undertaking  to which such  Person is a party or by which it or any of
its property is bound.

                  Credit Exposure has the meaning provided in Section 7.17.

                  Debt  Service  means,  with respect to any period,  Interest
Expense for such period,  plus scheduled  amortization  of all  Indebtedness  of
Borrower or its Subsidiaries  (excluding  balloon payments and bullet maturities
on loans.)

                  Debt  Yield  shall  mean  the   quotient,   expressed  as  a
percentage,  obtained by dividing (x) the aggregate Net Operating Income derived
from the Mortgaged  Properties during the four calendar  quarters  preceding the
calendar quarter in which the calculation occurs by (y) the average  outstanding
principal balance of the Loan during the calendar quarter preceding the calendar
quarter in which the calculation occurs.

                  Decisions has the meaning set forth in Section 7.14.

                  Default  means any condition or event that,  with the giving
of notice or the lapse of time or both,  would  constitute an Event of Default
hereunder or under the Promissory Notes or the other Loan Documents.

                  Default  Rate has the  meaning  set forth in Section  2.3(b)
hereof.



<PAGE>


                  Direct  Costs  means  actual  costs paid by  Borrower or any
Subsidiary  of  Borrower  for  labor,  materials,   equipment,   contractor  and
subcontractor  fees and all  other  costs  (other  than  Acquisition  Costs  and
Indirect  Costs)  in  connection  with the  construction  of  improvements  on a
Property.

                  Dollar  and the sign $ each mean  lawful  currency  of the
United States of America.

                  EBITDA means, with respect to any period and any Person, the
net income of such Person,  plus, to the extent  included in the  calculation of
earnings,   interest  expense  (per  GAAP),   income  taxes,   depreciation  and
amortization   expense,   other  non-cash  losses  relating  to   restructuring,
downsizing  in  connection  with a corporate  personnel  restructuring  or other
unusual  events,   accounting   changes,   write-downs,   reclassifications   or
revaluations,  distributed  earnings of Unconsolidated  Affiliates and losses on
sales of property,  less, to the extent excluded in the calculation of earnings,
gains on sales of property.

                  Eligible  Assignee  means  a  Person  who,  at the  time  of
determination is (a) a Lender; (b) a commercial bank, trust company, savings and
loan association,  savings bank,  insurance company,  investment bank or pension
fund  organized  under the laws of the  United  States of  America  or any state
thereof,  and  having  total  assets  in  excess  of  $5,000,000,000;  or  (c) a
commercial  bank organized under the laws of any other country which is a member
of the  Organization  for Economic  Cooperation  and  Development or a political
subdivision  of  any  such  country,  and  having  total  assets  in  excess  of
$5,000,000,000,  provided such bank is acting through a branch or agency located
in the United  States of  America.  If such a Person is not  currently a Lender,
such  Person's  senior  unsecured  long term  indebtedness  must be rated BBB or
higher by Standard & Poor's, BA2 or higher by Moody's Investor's  Services,  or
the  equivalent  or higher of  either  such  rating  by  another  rating  agency
acceptable to the Administrative Agent.

                  Eligible  Costs  means,   with  respect  to  each  Mortgaged
Property, the Eligible Cost ascribed thereto in Schedule 2 annexed hereto.

                  Environment means soil, surface waters, groundwaters,  land,
stream, sediments, surface or subsurface strata and ambient air.

                  Environmental Discharge means any discharge of pollutants or
effluent into any aquifer or water source or system (whether naturally occurring
or man made), gaseous emissions (including,  without limitation, air emissions),
particulate  emissions  and noise  emissions,  in each case, in violation of any
Relevant Environmental Law.

                  ERISA means the Employee  Retirement  Income Security Act of
1974, as amended from time to time.

                  ERISA Affiliate means each trade or business (whether or not
incorporated)  that  together  with the Borrower or a Subsidiary of the Borrower
would be deemed to be a single  employer  within the meaning of Section 4001 of
ERISA.



<PAGE>


                  Event of Default has the meaning provided in Article VI.

                  Exchange  Act  means the Securities and Exchange Act of 1934,
as amended.

                  Federal Funds Rate means, for any day of determination,  the
rate per annum (rounded  upwards,  if necessary,  to the nearest  1/100th of one
percent) equal to the weighted  average of the rates on overnight  Federal Funds
transacted  with members of the Federal Reserve System arranged by Federal Funds
brokers on such date,  as published  by the Federal  Reserve Bank of New York on
the Business Day next succeeding such day,  provided that (i) if such day is not
a Business  Day, the Federal  Funds Rate for such day shall be such rate on such
transactions  on the next  preceding  Business  Day as so  published on the next
succeeding  Business  Day, and (ii) if no such rate is so published on such next
succeeding  Business  Day,  the  Federal  Funds  Rate for such day  shall be the
average rate quoted to the Administrative Agent on such day on such transactions
as determined by the Administrative Agent.

                  Financing  Statements means UCC-1 Financing  Statements made
by  the  Borrower  or a  Subsidiary  Mortgagor,  as  debtor,  in  favor  of  the
Administrative  Agent,  as secured party,  covering all fixtures,  equipment and
personal property of the Borrower or such Subsidiary  Mortgagor at the Mortgaged
Properties.

                  FIRREA  Appraisal  means  an  appraisal  conforming  in  all
respects with the requirements of the Financial  Institutions  Reform,  Recovery
and  Enforcement  Act of 1989,  12 USC 1811,  as amended  and as the same may be
amended from time to time,  which  appraisal is  otherwise  satisfactory  to the
Administrative  Agent  and  is  prepared  by an  appraiser  satisfactory  to the
Administrative Agent at the sole cost and expense of Borrower.

                  Free Cash  Flow  means,  with  respect to any Person for any
period, such Person's EBITDA for such period, plus Net Cash Proceeds of sales of
assets,  less (i) interest expense paid or accrued (without  duplication),  (ii)
income  taxes paid or  accrued  (without  duplication),  (iii)  routine  capital
expenditures  on  operating  properties  and (iv) to the extent  excluded in the
calculation of earnings, payments made under the Sale-Leaseback Facility.

                  GAAP means generally  accepted  accounting  principles as in
effect at the time of  application  applied  on a  consistent  basis;  provided,
however,  if any change is adopted after the Closing Date in generally  accepted
accounting   principles  which  either  Borrower  or  the  Administrative  Agent
determines  to be adverse,  and if either such party  notifies the other of such
determination,  then both Borrower and the Administrative  Agent shall negotiate
in good faith the extent to which such change  shall be adopted  with respect to
the  matters  to which the  definition  of GAAP  is  applicable  under the Loan
Documents,  and the term GAAP  shall mean (i) in the event a written  agreement
with  respect to such change is executed  and  delivered  by both  Borrower  and
Required  Lenders  within  thirty (30) days  following  such  notice,  generally
accepted  accounting  principles  applied on a consistent basis giving effect to
such  agreement  or (ii)  in any  other  event,  generally  accepted  accounting
principles  as in effect at the time  immediately  prior to the adoption of such
change applied on a consistent basis.



<PAGE>


                  Governmental  Authority  means any  nation  and any state or
other  political  subdivision  thereof,  and any  entity  exercising  executive,
legislative,  judicial, regulatory, or administrative functions of or pertaining
to government,  including,  but not limited to, the Federal  Reserve Board,  any
Federal  Reserve Bank,  any other central  banking  authority,  or any agency or
subdivision thereof.

                  Gross  Asset Value Cost or GAV Cost  means the value of
all  cash,  cash  equivalents  and  Properties  owned  by the  Borrower  and its
Subsidiaries, valued at one hundred percent (100%) of cost.

                  Gross  Asset  Value Market (GAV Market)  means  Adjusted
EBITDA  capitalized at a rate per annum equal to 11%,  calculated with reference
to the four  calendar  quarters  preceding  the  calendar  quarter  in which the
calculation occurs.

                  Guarantee   Obligation   means,   as  to  any  Person   (the
Guaranteeing  Person ),  any obligation of (a) the  Guaranteeing  Person or (b)
another  Person  (including,  without  limitation,  any bank under any letter of
credit) to induce the  creation  of which the  Guaranteeing  Person has issued a
reimbursement,   counterindemnity,   or  similar  obligation,   in  either  case
guaranteeing any  Indebtedness,  leases,  dividends,  or other  obligations (the
primary  obligations ) of any other third Person (the primary obligor ) in any
manner,  whether  directly or indirectly,  including,  without  limitation,  any
obligation  of  the  Guaranteeing  Person,  whether  or not  contingent,  (i) to
purchase any such primary  obligation  or any  property  constituting  direct or
indirect security therefor, (ii) to advance or supply funds (x) for the purchase
or payment of any such primary  obligation or (y) to maintain working capital or
equity capital of the primary  obligor or otherwise to maintain the net worth or
solvency of the primary  obligor,  (iii) to purchase  property,  securities,  or
services  primarily  for the purpose of assuring  the owner of any such  primary
obligation of the ability of the primary obligor to make payment of such primary
obligation  or (iv)  otherwise to assure or hold  harmless the owner of any such
primary obligation against loss in respect thereof;  provided,  however that the
term Guarantee  Obligation  shall not include  endorsements  of instruments  for
deposit or  collection  in the ordinary  course of  business.  The amount of any
Guarantee  Obligation of any Guaranteeing Person shall be deemed to be the lower
of (a) an amount  equal to the  stated  or  determinable  amount of the  primary
obligation  in respect of which such  Guarantee  Obligation  is made and (b) the
maximum amount for which such Guaranteeing  Person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation  and the  maximum  amount for which such  Guaranteeing  Person may be
liable  are not  stated  or  determinable,  in  which  case the  amount  of such
Guarantee  Obligation shall be such  Guaranteeing  Person's  maximum  reasonably
anticipated  liability in respect  thereof as  determined by the Lenders in good
faith.

                  Hazardous Materials means any substance in quantities and/or
form:

                           (a)      the  presence  of which  requires  or  shall
hereafter require notification,  investigation or remediation under any Relevant
Environmental Law; or



<PAGE>


                        (b)  which is or becomes  defined as a hazardous  waste,
hazardous material or hazardous  substance or controlled  industrial waste
or Pollutant or Acontaminant   under any Relevant  Environmental  Law, including
without  limitation,  which contains  gasoline,  diesel fuel or other  petroleum
hydrocarbons or volatile organic  compounds,  or which contains  polychlorinated
biphenyls or asbestos or urea formaldehyde foam insulation, or which contains or
emits radioactive particles, waves or material, including radon gas; or

                        (c) which is  toxic,  explosive,  corrosive,  flammable,
infectious, radioactive,  carcinogenic,  mutagenic or otherwise hazardous and is
or becomes regulated under any Relevant Environmental Law or by any Governmental
Authority; or

                        (d)pursuant to applicable  Relevant  Environmental Laws,
the presence of which on the Mortgaged  Property  causes or threatens to cause a
nuisance  upon  the  Mortgaged  Property  or  adjacent  properties;  or poses or
threatens to pose a hazard to the Mortgaged  Property or to the health or safety
of persons or property on or about the Mortgaged Property.

                  HPT means HPT HSD  Properties  Trust,  the  purchaser-lessor
under the Sale- Leaseback Facility.

                  Implied Pool Debt Service  means,  as of the last day of any
calendar  quarter,  the debt service,  calculated on an annualized  basis,  of a
self-liquidating  loan with an original  principal  amount  equal to the average
daily  Adjusted  Maximum  Availability  Amount  during  such  calendar  quarter,
amortized over 300 months (25 years) at an interest rate per annum equivalent to
the  higher of (i) the  actual  interest  rate  under the Loan and (ii) the then
current 10-year Treasury Rate plus three percent (3.0%).

                  Indebtedness of any  Person  means,  as of the  date of any
determination thereof, without duplication:

                   (i) all  obligations  of such  Person  for  borrowed  money
and for the deferred  purchase  price of property or services,  and  obligations
evidenced by bonds, debentures, notes, or other similar instruments;

                   (ii) all  rental  or other  obligations  under  leases
required to be capitalized under
GAAP;

                   (iii) all  Guarantee Obligations  of  such  Person, including
obligations  of  Unconsolidated  Affiliates  guaranteed  by such  Person or with
respect to which such Person is otherwise obligated on a recourse basis;

                   (iv) such  Person's  Ownership Share  of all  obligations and
liabilities of its Unconsolidated Affiliates;



<PAGE>


                  (v) all  liabilities  in respect of currency or interest  rate
swap, cap or collar arrangements or any similar derivative instrument;  provided
that if such currency or interest rate swap, cap or collar  arrangements  or any
similar  derivative  instrument  has been  entered  into in  order to hedge  the
currency  or  interest  rate  exposure  of such  Person in respect of current or
contemplated  Indebtedness,  the  amount of any  liability  in  respect  of such
arrangement  or  instrument  shall  not  be  included  in the  determination  of
Indebtedness; and

                  (vi) Indebtedness  of others secured by any Lien upon property
owned by such Person, whether or not assumed by such Person.

                  Indirect  Costs means actual costs incurred by Borrower or a
Subsidiary of Borrower for title insurance, brokerage commissions, closing costs
and escrow fees, real estate taxes,  legal fees design and  architectural  fees,
permits and all other costs or fees  (other  than  Acquisition  Costs and Direct
Costs) incurred in connection with the development of a Property.

                  Intellectual  Property  has the meaning set forth in Section
4.12.

                  Interest  Expense means (without  redundancy) the sum of all
accrued,  paid or capitalized  interest  costs of Borrower and its  consolidated
Affiliates  (excluding  capitalized  interest funded from an interest  reserve),
including,  without limitation,  payments made under the Sale-Leaseback Facility
(to the extent deemed  interest costs under GAAP) plus (i) Borrower's  Ownership
Share of interest expense in its Unconsolidated  Affiliates and (ii) 100% of any
accrued,  paid, or capitalized  interest  incurred  (without  redundancy) on any
obligation  for which  Borrower is wholly or partially  liable under  repayment,
interest carry or performance guarantees, or other relevant liabilities,  minus,
to the extent included in the foregoing,  financing costs and fees paid prior to
the Closing Date which relate to (x) Indebtedness  which has been incurred prior
to the Closing Date, (y) the Sale-Leaseback Facility and (z) the Loan.

                  Interest Period has the meaning set forth in Section 2.4.

                  Leases  means all leases,  licenses  and other  arrangements
pursuant  to which  any  Person  has the  right or  option  to occupy or use any
portion of any  Mortgaged  Property,  and shall  include  all  right,  title and
interest to receive all rent and other revenue thereunder, and shall include all
guaranties of the obligations of all such Persons.

                  Lender  or  Lenders  has  the  meaning  set  forth  in the
introductory  paragraph of this Agreement,  and their  permitted  successors and
assigns.

                  Lending  Office  means,  with respect to any of the Lenders,
the branch or  branches  (or  affiliate  or  affiliates)  from which any of such
Lender's  loans are made or maintained and for the account of which all payments
of principal of, and interest on, such Lender's loans are made, as designated in
writing from time to time to the Administrative Agent and the Borrower.



<PAGE>


                  LIBO Rate means,  with respect to any Interest  Period,  the
sum of the  Applicable  Margin  plus the rate per annum  appearing  on Dow Jones
Markets (Telerate) Page 3750 (the Telerate Screen) at or about 11:00 a.m. (New
York time),  subject to corrections  (if any) made on the Telerate  Screen,  two
Business Days prior to the  commencement  of the Interest  Period for which such
LIBO Rate will apply (the Rate  Fixing  Day ) for the  offering  of deposits in
Dollars for a period  comparable to the Interest Period for which such LIBO Rate
will  apply;  provided,  however,  that if (x) no relevant  rate  appears on the
Telerate  Screen  for  the  purposes  of the  foregoing  calculation  or (y) the
Administrative Agent determines that no rate for a period of comparable duration
to that Interest  Period  appears on the Telerate  Screen at the relevant  time,
then LIBO  Rate shall mean the  Applicable  Margin  plus the  arithmetic  mean
(rounded upwards, if necessary,  to two decimal places) of the respective rates,
as supplied to the Administrative Agent at its request,  quoted by leading banks
to the Lenders in the London  Interbank  Market at or about 11:00 a.m. (New York
time) on the Rate  Fixing Day for the  offering  of  deposits  in Dollars  for a
period comparable to the Interest Period for which such LIBO Rate will apply. If
any of the  Lenders is unable or  otherwise  fails to supply an offered  rate by
11:30  a.m.  (New  York  time) on the Rate  Fixing  Day,  LIBO  Rate   shall be
determined on the basis of the quotations of the remaining Lenders so long as at
least two Lenders  supply an offered  rate. In the event there are less than two
Lenders  supplying  offered rates, then such offered rate shall be determined by
the Administrative  Agent from an alternate,  substantially  similar independent
source  available  to the  Administrative  Agent or shall be  calculated  by the
Administrative Agent by a substantially  similar methodology as that theretofore
used to  determine  such  offered  rate on the  Telerate  Screen  in the  London
Interbank  market for a term comparable to such Interest Period and in an amount
equal to or comparable  to the  principal  amount of the borrowing to which such
Interest  Period  relates.   Each   determination   of  the  LIBO  Rate  by  the
Administrative  Agent, in absence of demonstrable error, shall be conclusive and
binding.

                  Lien means with respect to any asset: any mortgage,  pledge,
security interest,  encumbrance,  lien, charge, or deposit  arrangement or other
arrangement  having the practical  effect of the foregoing and shall include the
interest of a vendor or lessor under any conditional sale agreement, capitalized
lease, or other title retention  agreement  relating to such asset or the filing
of any financing statement under the UCC or comparable law.

                  Loan has the meaning provided in Section 2.1 hereof.

                  Loan  Documents  means,  collectively,  this Agreement,  the
Promissory  Notes, all Mortgages,  all Financing  Statements,  the Environmental
Indemnity,  all Subsidiary  Mortgagor Guaranties (as that term is defined in the
First Restatement) and all other documents,  certificates,  affidavits and other
instruments  executed and delivered by the Borrower and its Affiliates  pursuant
thereto or in connection therewith, as each of the same may be amended, modified
or otherwise supplemented from time to time.

                  Loss has the meaning provided in Section 7.16(c).

                  Margin Stock has the meaning provided in Regulation U.

                  Material   Adverse   Change  means  any  change,   event  or
circumstance which has or is reasonably likely to have a material adverse effect
on (i) the  ability  of the  Borrower  and its  Subsidiaries  to  perform  their
respective  obligations under this Agreement or any of the other Loan Documents,
or (ii) the business, condition (financial or otherwise) or results of operation
of the Borrower and its Subsidiaries when taken as a whole.

                  Maturity Date means February 28, 2003.



<PAGE>


                  Maximum  Availability  Amount  means,  as  of  any  date  of
calculation,  the sum of (x)  the  Revolving  Portion  of the  Loan  and (y) the
outstanding principal balance of the Term Portion of the Loan.

                  Maximum   Dividend   Amount   means,   as  of  any  date  of
determination,  fifty percent (50%) of Free Cash Flow of Borrower derived during
the  period   commencing   September  30,  1999  and  ending  on  such  date  of
determination.

                  Mortgaged Properties means,  collectively,  each Property of
the Borrower or any Subsidiary  Mortgagor  which is (and for so long as same is)
mortgaged to the  Administrative  Agent pursuant to the terms hereof,  and shall
include all of the Property , as such term is defined in the Mortgages.

                  Mortgages  means  those  certain  deeds of  trust,  deeds to
secure debt,  mortgages  and security  agreements  with  assignments  of leases,
rents,  operating  agreements  and  management  agreements  and fixture  filings
delivered  by  the  Borrower  or  any  Subsidiary  Mortgagor  in  favor  of  the
Administrative Agent and covering the Mortgaged  Properties,  as the same may be
amended, modified, or otherwise supplemented from time to time.

                  Net Cash Proceeds  means with respect to any sale,  transfer
or other  disposition  by the Borrower or a Subsidiary  of any asset  (including
stock of a  Subsidiary),  the aggregate cash proceeds  (including  cash proceeds
received by way of deferred payment of principal pursuant to a note, installment
receivable,  reserve for adjustment or otherwise, but only as and when received)
received by the  Borrower  or a  Subsidiary  pursuant to such sale,  transfer or
other  disposition,  net  (subject to reserves  for normal  course  post-closing
adjustments and reserves for indemnification obligations in connection with such
asset sale) of (i) the direct  costs  relating  to such sale,  transfer or other
disposition  (including sales  commissions and legal and accounting  fees), (ii)
taxes  paid or  payable as a result  thereof  (after  taking  into  account  any
available tax credits or  deductions  and any tax sharing  arrangements),  (iii)
amounts required to be applied to the repayment of any Indebtedness secured by a
Lien on the asset  subject to such sale,  transfer or other  disposition  (other
than hereunder), and (iv) liabilities of the entity, or relating to the business
or assets sold,  transferred or otherwise  disposed of which are retained by the
Borrower or the applicable Subsidiary.

                 Net  Operating  Income or NOI  means,  with respect to any
appropriate  period and any Properties,  the gross revenues from such Properties
for  such  period  less  all  direct  operating  expenses  of  such  Properties,
including,  without  limitation,  expenses for the  following to the extent same
relate  to  such  Properties:  personnel,  landscaping,   contracts,  utilities,
housekeeping,  repairs  and  maintenance,   marketing,   administrative  duties,
insurance and real estate taxes for such period  (other than  interest  expense,
depreciation,  amortization  and  expenditures  capitalized  in accordance  with
GAAP).

                  Net  Worth  means the  tangible  net worth of the  Borrower,
calculated  on a GAAP basis,  plus  increases in  accumulated  depreciation  and
amortization that occur subsequent to Closing.



<PAGE>


                  Non-public  Information  means any information  delivered by
the Borrower to the Administrative  Agent or the Lenders (in their capacities as
such) pursuant to this Agreement  which is not publicly  disclosed or known,  or
which cannot be readily derived from information which is publicly  disclosed or
known.

                  Notice of Borrowing  means a notice in the form of Exhibit C
annexed  hereto  pursuant to which  Borrower may request a  disbursement  of the
Revolving Portion of the Loan.

                  Notice  of  Conversion   means,  with  respect  to  proposed
conversion of a Short-Notice  Borrowing in accordance  with the terms of Section
2.16 hereof, a notice substantially in the form of Exhibit D annexed hereto.

                  Notice  of  Additional  Interest  Period  Selection  means a
notice in the form of Exhibit E-1 annexed hereto  pursuant to which Borrower may
specify an additional Interest Period or Interest Periods applicable to portions
of the Loan.

                  Notice of Interest  Period  Selection  means a notice in the
form of Exhibit E annexed  hereto  pursuant to which  Borrower  shall specify an
Interest Period or Interest  Periods  applicable to the initial  disbursement of
the Loan.

                  Notifying Lender has the meaning provided in Section 2.10.

                  Ownership  Share means,  with respect to any Subsidiary of a
Person that is not a wholly owned Subsidiary and any Unconsolidated Affiliate of
a Person,  the greater of (i) such Person's relative nominal direct and indirect
ownership   interest   (expressed  as  a  percentage)  in  such   Subsidiary  or
Unconsolidated  Affiliate  and (ii) such Persons  relative  direct and indirect
economic   interest   (expressed  as  a  percentage)   in  such   Subsidiary  or
Unconsolidated   Affiliate,   determined  in  accordance   with  the  applicable
provisions of the declaration of trust, articles or certificate of organization,
articles of  organization,  partnership  agreement,  joint venture  agreement or
other applicable  organizational  document of such Subsidiary or  Unconsolidated
Affiliate.

                  Participant has the meaning provided in Section 7.17.

                  Payment Office means the office of the Administrative  Agent
located at Two World Financial Center, New York, New York 10281-1050.

                  Percentage  means each Lender's  percentage share of the Loan
as set forth on Exhibit A annexed hereto.

                  Period Fraction means, with respect to any period of time, a
fraction,  the  numerator of which is the actual  number of days in such period,
and the denominator of which is 360.

                  Permissible Assumed Indebtedness has the meaning provided in
Section 5.3(a)(iv).



<PAGE>


                  Permitted  Encumbrances  means,  with respect to each of the
Mortgaged  Properties,  (i) all exceptions to title insurance coverage set forth
in the title insurance  policies insuring the Mortgages  covering such Mortgaged
Properties, other than standard printed exceptions, as of the date such policies
are issued or updated by  endorsement,  (ii) all liens for real estate taxes and
assessments  provided  either  (x) that the  last  day by  which  such  taxes or
assessments may be paid without the imposition of any interest,  fine or penalty
has not occurred, or (y) the amount or validity of such taxes or assessments are
being contested in good faith by appropriate  proceedings  which have the effect
of staying  enforcement  or  execution  of such liens and with  respect to which
adequate  reserves in  conformity  with GAAP have been  provided on the books of
Borrower,  (iii) mechanics and  materialmen's  liens, the existence of which do
not  constitute  or  create  a  Material   Adverse  Change,   and  which  remain
unsatisfied,  unbonded or unstayed  for no more than thirty (30) days other than
those the  amount or  validity  of which are being  contested  in good  faith by
appropriate  proceedings  which  have  the  effect  of  staying  enforcement  or
execution  of such  liens  and  with  respect  to  which  adequate  reserves  in
conformity  with GAAP have been  provided on the books of Borrower,  (iv) Leases
which are  subordinate  to the lien of the  Mortgages and (v) such other matters
affecting title to the Mortgaged  Properties as the  Administrative  Agent shall
from time to time approve in writing.

                  Person means any individual, partnership, firm, corporation,
association,   joint  venture,  joint  stock  company,   trust,   unincorporated
organization or other entity,  or any  governmental or political  subdivision or
agency, department, or instrumentality thereof.

                  Plan means any  multiemployer  plan or single employer plan,
as  defined  in  Section  4001  and  subject  to  Title  IV of  ERISA,  which is
maintained,  or at any time during the five calendar years preceding the date of
this Agreement was maintained,  for employees of the Borrower or a Subsidiary of
the Borrower or an ERISA Affiliate.

                  Plans  and   Specifications   means  the  final   plans  and
specifications filed with the appropriate  Governmental Authorities with respect
to the construction of an extended stay hotel facility on a Mortgaged Property.

                  Presence  means,  when  used in  connection  with  Hazardous
Materials,  treatment, use, storage, handling, repair, encapsulation,  disposal,
transportation, spill, discharge and release.

                  Prime   Lending   Rate   means   the  rate  at   which   the
Administrative  Agent  announces in New York,  New York from time to time as its
prime lending rate, as in effect from time to time.  The Prime Lending Rate is a
reference  rate and does not  necessarily  represent  the  lowest  or best  rate
actually charged to any customer by the Administrative  Agent or any Lender. The
Administrative Agent and each Lender may make commercial loans or other loans at
rates of interest at, above or below the Prime Lending Rate.

                  Project  under  Development  means a  Property  (a) on which
construction  of an extended stay facility has commenced and (b) which lacks any
permit  or  certificate   required  for  the  lawful  occupancy  thereof  as  an
extended-stay facility.



<PAGE>


                  Promissory  Notes  means the  promissory  notes  made by the
Borrower to each Lender substantially in the form of Exhibit F annexed hereto.

                  Properties  means all land  owned or leased by the  Borrower
and/or  any  of  its  Subsidiaries,  all  buildings,  structures,  improvements,
fixtures and equipment,  and parking areas located thereon and therein,  and all
easements, rights, interests, privileges and other appurtenances thereto, of any
nature whatsoever. An individual Property  is a portion of land owned or leased
by the Borrower and/or its Subsidiaries which is bound by a perimeter containing
no land not owned or leased by Borrower and/or any of its Subsidiaries, together
with all  buildings,  structures,  improvements  and parking areas  fixtures and
equipment located thereon, and all easements, rights, interests,  privileges and
other appurtenances thereto, of any nature whatsoever.

                  Purchasing Lender has the meaning provided in Section 7.18.

                  Reaffirmation  of  Environmental  Indemnity means the Fourth
Reaffirmation of Environmental Indemnity to be executed by the Borrower in favor
of the  Administrative  Agent,  substantially  in the form of  Exhibit B annexed
hereto.

                  Reaffirmation of Subsidiary Guaranty means the Reaffirmation
of  Subsidiary  Guaranty  in  favor of the  Administrative  Agent in the form of
Exhibit H annexed hereto.

                  Realty means SC Realty Incorporated, a Nevada corporation.

                  Regulation  D and  Regulation  U mean  Regulation  D and
Regulation  U,  respectively,  of the Board of Governors of the Federal  Reserve
System as from time to time in effect and any successor thereto.

                  Release has the meaning provided in Section 8.11.

                  Release Parcel has the meaning provided in Section 8.11.

                  Release   Price  means,   with  respect  to  each  Mortgaged
Property, the release price allocated thereto on Schedule 2 annexed hereto.

                  Release Request has the meaning provided in Section 8.11.



<PAGE>


                  Relevant  Environmental  Laws means all  Requirements of Law
and all  other  applicable  Federal,  state and  local  environmental  statutes,
regulations,  rules, ordinances,  codes, licenses,  permits,  approvals,  plans,
authorizations,  guidelines, concessions,  franchises, orders and similar items,
and  rules  of  common  law  (whether  now  existing  or  hereafter  enacted  or
promulgated and whether now contemplated,  anticipated or foreseeable or not) of
all  courts  and  Governmental  Authorities,  and all  applicable  judicial  and
administrative and regulatory  decrees,  judgments and orders,  including common
law rulings and  determinations,  relating to injury to or the protection of the
Environment,  including,  without  limitation,  all  requirements  pertaining to
reporting,  licensing,  permitting,  investigation,  remediation  and removal of
emissions,  discharges,  releases or threatened  releases of Hazardous Materials
into the Environment, or relating to the manufacture,  processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials.

                  Required  Lenders  means the Lenders  holding at least sixty
six and two thirds percent (66 2/3%) of the Maximum Availability Amount.

                  Requirement of Law means, as to any Person,  the certificate
of  incorporation  and  by-laws,  certificate  of  partnership  and  partnership
agreement or other organizational or governing documents of such Person, and any
law, treaty, rule, or regulation or determination of an arbitrator or a court or
other  Governmental  Authority,  in each case applicable to or binding upon such
Person or any of its  property or to which such Person or any of its property is
subject.

                  Revolving  Portion  of  the  Loan  shall  have  the  meaning
provided in Section 2.15.

                  Sale-Leaseback  Facility  means the lease dated  February 23,
1999 between HPT, as lessor, and HVI (2) Incorporated,  a Delaware  corporation,
as lessee.

                  Stockholders Equity means stockholders equity as reflected
on the balance sheet of the Borrower determined in accordance with GAAP.

                  Studies  means  environmental   studies  and  investigations
respecting (i) the condition and  circumstances  of the  Environment  on, under,
about or  affecting  any  Mortgaged  Property,  (ii)  any  actual  or  suspected
Environmental  Discharge or Presence of any Hazardous Materials on, under, about
or affecting any Mortgaged Property, and (iii) any actual or suspected violation
of any Relevant  Environmental Laws on, under, about or related to any Mortgaged
Property.

                  Subsidiary  of any Person means a corporation,  partnership,
limited liability,  trust or other entity of which a majority of the outstanding
shares of stock or  beneficial  interests of each class having  ordinary  voting
power is owned by such Person, by one or more Subsidiaries of such Person, or by
such Person and one or more of its Subsidiaries.

                  Subsidiary  Mortgagor means any  wholly-owned  Subsidiary of
Borrower or wholly-owned Subsidiary of a wholly-owned Subsidiary of Borrower.

                  Taxes has the meaning provided in Section 2.17.

                  Term  Portion  of the Loan  means  that  portion of the Loan
which is not the Revolving Portion of the Loan.

                  Total Costs means, with respect to any Property,  the sum of
(i) the Acquisition  Costs with respect to such Property,  (ii) the Direct Costs
with respect to such Property, and (iii) the Indirect Costs with respect to such
Property, all calculated on a cost to completion basis.



<PAGE>



                                      -19-

                  Total Liabilities  includes all GAAP liabilities and certain
non-GAAP (off balance sheet)  liabilities  with no redundancy.  Included are the
following:  non-recourse  mortgage  debt;  letters of credit;  binding  purchase
obligations;   repurchase  obligations;  forward  commitments;  unsecured  debt;
accounts payable;  accrued expenses,  capitalized lease obligations,  and to the
extent  required  under GAAP to be  reported  as a  liability,  any other  lease
obligations (including ground leases); guarantees of indebtedness;  subordinated
debt;  unfunded  obligations  of Borrower and its  Subsidiaries;  forward equity
commitments  (but  excluding  forward  equity  subscriptions  for which stock is
issued  within  thirty  (30) days of  receipt  of equity  proceeds);  Derivative
Exposure (as  hereinafter  defined);  and any other non-GAAP  liability that the
Security and Exchange  Commission  has  determined,  either  currently or in the
future,  should be treated as debt.  Total  Liabilities  will  include  (without
redundancy):  (a) one  hundred  percent  (100%)  of the  recourse  liability  of
Borrower and its Subsidiaries under (i) guarantees of indebtedness or (ii) loans
where  Borrower  or a  Subsidiary  of  Borrower  is liable for debt as a general
partner and (b) Borrower's and its Subsidiaries Ownership Share of non-recourse
debt in their Unconsolidated  Affiliates. As used herein,  Derivative Exposure
means the maximum liability  (including costs, fees and expenses),  based upon a
liquidation or termination as of the date of the applicable  covenant compliance
test, of any Person under any interest rate swap,  collar, cap or other interest
rate  protection   agreements,   treasury  locks,   foreign  currency   exchange
agreements,  commodity  purchase  or  option  agreements  or other  interest  or
exchange rate or commodity price hedging agreements.

                  For purposes of purchase obligations,  repurchase  obligations
and  forward  commitments,  the amount of Total  Liabilities  of a Person at any
given  time in  respect  of a  contract  to  purchase  real  property  shall  be
determined  as follows:  (x) if, at such time,  the seller of such real property
would be entitled to specific  enforcement of the contract  against such Person,
then the  amount of Total  Liabilities  shall  equal the  total  purchase  price
payable by such Person under the  contract,  otherwise,  (y) the amount of Total
Liabilities shall equal the aggregate amount of due diligence deposits,  earnest
money payments and other similar payments made by such Person under the contract
which,  at such time,  would be subject to forfeiture  upon  termination of such
contract.

                  For purposes of purchase obligations,  repurchase  obligations
and  forward  commitments,  the amount of Total  Liabilities  of a Person at any
given time in respect of a contract to purchase a property  being  renovated  or
developed by a third party shall equal the maximum amount  reasonably  estimated
to be payable under such contract during the remaining term of such contract.

                  Treasury  Rate means for any day the weekly average  auction
rate on United States  Treasury Bonds with a maturity of ten years, as published
in the Federal  Reserve  Bulletin  and made  available  each week by the Federal
Reserve Board in Statistical Release H.15(519) or any successor publication.

                  UCC means the Uniform  Commercial  Code as from time to time
in effect in the relevant jurisdiction.

                  Unconsolidated  Affiliate means, with respect to any Person,
an unconsolidated affiliate of such Person (determined in accordance with GAAP).

                  Updated  Appraisals  shall  have the  meaning  set  forth in
Section 5.2(l).



<PAGE>


                  Use  Requirements  means  any  and  all  building  codes  or
permits,  certificates  of  occupancy  or  compliance,  restrictions  of record,
easements,  reciprocal  easements  or  other  agreements,  subdivision,  zoning,
wetlands  protection,  or land use laws or ordinances and any and all applicable
rules or regulations  of any  Governmental  Authority  affecting any part of any
Mortgaged Property.

     Section 1.2 Accounting Terms and  Determinations.  Unless otherwise defined
or  specified  herein,  all  accounting  terms shall be  construed  herein,  all
accounting  determinations  hereunder  shall be made,  all financial  statements
required to be delivered hereunder shall be prepared,  and all financial records
shall be maintained in accordance with GAAP.

     Section 1.3 Other  Definitional  Terms.  The words  Ahereof,  Aherein,  and
Ahereunder 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 Article, section,  schedule,  exhibit, and like references are to
this   Agreement   unless   otherwise   specified.   References  to  agreements,
instruments,  documents,  statutes,  and  regulations  include  all  amendments,
supplements, and modifications thereof as may be in effect from time to time.


                              ARTICLE II. THE LOAN

     Section 2.1 The Loan.  Subject to and upon the terms and conditions  herein
set forth,  each Lender,  severally  and not  jointly,  agrees to make a loan to
Borrower on the Closing  Date in the amount of  $110,000,000  (such loans of the
Lenders,  the ALoan ), pro rata in  accordance  with such  Lender's  Percentage.
Borrower hereby agrees to accept the Loan. Borrower may not reborrow any portion
of the Loan,  except as  provided  in  Section  2.15  hereof.  The Loan shall be
disbursed  to Borrower  upon the  satisfaction  of the  conditions  set forth in
Article III of this Agreement.

         Section 2.2      Promissory Notes; Collateral

                  (a) The  Borrower's  obligation  to pay the  principal of, and
interest on, the Loan shall be evidenced by one or more Promissory  Notes in the
face amount of each Lender's  Percentage  of the Loan,  with blanks as to payee,
date and principal  amount  appropriately  completed.  The  determination by the
Administrative Agent of the amount of principal  outstanding  hereunder or under
any Promissory  Note shall,  except for patent error,  be final,  conclusive and
binding upon the Borrower for all purposes.

                  (b)  Each  borrowing,   repayment  and  permitted  reborrowing
hereunder shall be recorded by the Administrative  Agent and the entries in such
records shall, except for patent error, be final,  conclusive and binding on the
Borrower;  provided,  however,  that no  failure  to make or error  in  making a
recordation  of a  borrowing  shall  in any way  limit,  affect  or  modify  the
obligation  of the  Borrower  to repay  any  obligations,  or the  rights of the
Administrative  Agent and the Lenders to any  amounts due under this  Agreement,
the Loan Documents and the Promissory Notes.



<PAGE>


                  (c) Except as otherwise set forth in the Loan Documents,  each
item of Collateral  shall secure the payment and performance of all indebtedness
and  obligations  of  the  Borrower  under  this  Agreement,  including  without
limitation,  any increased  cost under Section 2.11 hereof,  and each other Loan
Document.

         Section 2.3      Interest on the Loan.

                  (a) Subject to the  provisions  of Section  2.15  hereof,  the
unpaid  principal amount of the Loan shall bear interest at a rate per annum for
each Interest Period equal to the Adjusted LIBO Rate. Interest on the Loan shall
accrue from the date of any borrowing hereunder to but excluding the date of any
repayment  thereof  and shall be payable (i) in arrears on the first day of each
calendar  month,  (ii) at maturity  (whether by  acceleration  or otherwise) and
(iii) after maturity, on demand.  Notwithstanding the foregoing, should the Loan
bear  interest at the Alternate  Rate  pursuant to the terms of this  Agreement,
interest  shall be  payable  (i) in  arrears  on the first day of each  calendar
month,  (ii) at maturity  (whether by acceleration or otherwise) and (iii) after
maturity, on demand.

                  (b) Overdue  principal  and, to the extent  permitted  by law,
overdue  interest in respect of the Loan,  and all other  overdue  amounts owing
hereunder,  shall bear  interest for each day that such amounts are overdue at a
rate  (the  Default  Rate )  equal to three  percent  (3%) per  annum  plus the
interest rate otherwise  applicable  thereto from the first day such amounts are
overdue to but excluding the date such overdue amounts are paid.

                  (c) The  Administrative  Agent,  upon determining the Adjusted
LIBO Rate for any Interest Period, shall promptly notify by telephone (confirmed
in writing) or in writing the Borrower thereof. All such determinations shall be
binding on all parties, absent patent error.



<PAGE>


                  (d) It is expressly  stipulated and agreed to be the intent of
the  Lenders  and  Borrower  at all  times to  comply  with the  applicable  law
governing  the highest  lawful  interest  rate.  If the  applicable  law is ever
judicially interpreted so as to render usurious any amount called for under this
Agreement or under any of the other Loan Documents,  or contracted for, charged,
taken, reserved or received with respect to the Indebtedness  evidenced thereby,
or if  acceleration  of the  maturity of the  obligations,  or the rights of the
Administrative  Agent and the Lenders to any amounts due, under this  Agreement,
the Loan Documents and the Promissory Notes, any prepayment by Borrower,  or any
other  circumstance  whatsoever,  results in Borrower  having paid any interest,
penalty, fee or other amount in excess of that permitted by applicable law, then
it is the  express  intent of  Borrower  and  Lenders  that all  excess  amounts
theretofore  collected  by Lenders be credited on the  principal  balance of the
Loan (or, at Lenders option, paid over to Borrower), and the provisions of this
Agreement and the other Loan Documents  immediately  be deemed  reformed and the
amounts thereafter  collectible  hereunder and thereunder  reduced,  without the
necessity  of the  execution  of any new  document,  so as to  comply  with  the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder  and  thereunder.  The right to accelerate  maturity of the
obligations,  or the rights of the  Administrative  Agent and the Lenders to any
amounts due, under this Agreement,  the Loan Documents and the Promissory Notes,
does not include the right to  accelerate  any interest  which has not otherwise
accrued on the date of such  acceleration,  and Lenders do not intend to collect
any unearned  interest in the event of acceleration.  All sums paid or agreed to
be paid to Lenders for the use, forbearance or detention of the obligations,  or
the rights of the Administrative Agent and the Lenders to any amounts due, under
this Agreement, the Loan Documents and the Promissory Notes shall, to the extent
permitted  by  applicable  law, be  amortized,  prorated,  allocated  and spread
throughout the full term of such  obligations  and amounts until payment in full
so that the rate or amount of  interest on account of such  secured  obligations
does  not  exceed  the  maximum  rate or  amount  of  interest  permitted  under
applicable law.

     Section  2.4  Interest  Periods.  One or more  interest  periods  (each  an
AInterest Period ) shall be applicable with respect to the outstanding principal
amount of the Loan. Each Interest Period shall be a period of one, two, three or
six  months  as  specified  by  Borrower  in  accordance  with the terms of this
Agreement. Simultaneously with the execution and delivery hereof, Borrower shall
furnish  the  Administrative  Agent with a Notice of Interest  Period  Selection
specifying the initial  Interest  Period or Interest  Periods  applicable to the
Loan. Notwithstanding the foregoing:

                           (i)      the initial  Interest  Period for all or any
portion of the Loan shall commence on the date of the disbursement of the Loan;

                          (ii)  Provided  that no Event of  Default  shall  have
occurred and be continuing,  at the end of the initial  Interest Period and each
subsequent  Interest Period  applicable to any portion of the Loan, the Borrower
shall be permitted to select an additional  Interest  Period for the  applicable
portion  of the  Loan by  delivering  a Notice  of  Additional  Interest  Period
Selection to the Administrative  Agent at any time prior to 12:00 noon (New York
time) on the third  Business  Day prior to the  expiration  of the then  current
Interest  Period  applicable  to such portion of the Loan,  provided  that if no
Interest Period selection is delivered to the Administrative Agent by such time,
the Borrower  shall be deemed to have  selected an Interest  Period of one month
and such  Interest  Period  selected  or deemed to have been  selected  for such
portion of the Loan may not be changed without the consent of the Administrative
Agent;

                           (iii)      if any Interest Period would otherwise
expire on a day which is not a Business Day,  such Interest  Period shall expire
on the next  succeeding  Business Day,  provided that if any Interest  Period in
respect of a portion of the Loan (other than a borrowing  referred to in Section
2.10(b)(ii) or Section  2.11(b)(ii)) would otherwise expire on a day that is not
a Business  Day but is a day of the month  after which no further  Business  Day
occurs in such month,  such Interest  Period shall expire on the next  preceding
Business Day;

                           (iv)   any  Interest  Period in respect  of a portion
of the Loan which 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,  subject to clause (v) below, end on the
last Business Day of a calendar month;

                           (v)      no Interest Period shall extend beyond the
Maturity Date; and

                           (vi there shall be no more than six Interest  Periods
in effect at any time.



<PAGE>



                                      -31-

     Section  2.5  Repayment  of the  Loan.  The  Borrower  shall  repay  to the
Administrative  Agent,  for the  account of the  Lenders,  the unpaid  principal
amount of the Loan,  together with all accrued and unpaid  interest  thereon and
any other sums due and payable to the Lenders  hereunder or under the other Loan
Documents, on the Maturity Date.

     Section 2.6  Prepayments of the Loan. The Loan may be prepaid in full or in
part  without  penalty,  premium or  additional  charge,  except as set forth in
Section  2.13  hereof;  provided  such  prepayment  shall be at  least  equal to
$100,000 and provided further that in no event may any prepayment  (other than a
prepayment in full of the entire unpaid principal balance of the Loan) cause the
Maximum Availability Amount to be less than $50,000,000.  Any partial prepayment
of the Loan  shall be  applied  to the  Revolving  Portion  of the Loan,  unless
Borrower,  simultaneously  with the  making of such  prepayment,  instructs  the
Administrative  Agent  to  apply  the  same to the  Term  Portion  of the  Loan.
Notwithstanding  the  foregoing,  any  prepayment  made in  connection  with the
Release of a Mortgaged  Property  pursuant to Section 2.15 shall be applied only
to the Term Portion of the Loan. Borrower shall furnish the Administrative Agent
with not less than three (3) business  days notice of the  prepayment in full of
the Loan. At the time of any prepayment in full of the Loan,  Borrower shall pay
all  accrued  and  unpaid  interest  and all fees and other  amounts  due to the
Administrative  Agent and the Lenders  under this  Agreement  and the other Loan
Documents.

     Section 2.7 Fees.  The Borrower shall pay to the  Administrative  Agent for
the  account of the Lenders a  commitment  fee (the  ACommitment  Fee ) equal to
three eighths of one percent  (0.375%) per annum of the Average  Undrawn Balance
of the Revolving  Portion of the Loan. The amount of the Commitment Fee shall be
calculated  by the  Administrative  Agent and,  absent  patent  error,  shall be
binding  on all  parties.  The  Commitment  Fee  shall  be due and  payable  (i)
quarterly in arrears on the last day of each calendar  quarter,  and (ii) on the
Maturity Date or earlier termination of the Loan. Each payment on account of the
Commitment Fee for a period which is less than a full calendar  quarter shall be
prorated.  The Borrower agrees to pay to the Administrative  Agent such fees for
services rendered by the Administrative Agent as shall be separately agreed upon
in writing between the Borrower and the Administrative Agent.

        Section 2.8      Payments, Etc

                  (a) All payments under this Agreement  shall be pro rata among
the  Lenders  in  accordance  with  their  Percentages  and shall be made by the
Borrower, without defense, setoff, or counterclaim,  to the Administrative Agent
not later than 12:00 noon (New York time) on the date when due and shall be made
in Dollars in  immediately  available  funds at the Payment Office and any funds
received by the Administrative  Agent after such time shall, for all purposes of
this Agreement, be deemed to have been paid on the next succeeding Business Day.
The  Administrative  Agent  shall  thereafter  cause  to be  distributed  to the
Lenders,  on the  Business  Day when paid,  in like funds  their  Percentage  of
payments so received.  Notwithstanding  the foregoing,  any payments received by
the  Administrative  Agent after 12:00 noon (New York time) shall be distributed
to the Lenders on the following Business Day.



<PAGE>


                  (b)  Whenever  any payment to be made  hereunder  or under the
Promissory Notes shall be stated to be due on a day which is not a Business Day,
the due date  thereof  shall be extended  to the next  succeeding  Business  Day
(unless the relevant Interest Period expires on the next preceding  Business Day
pursuant  to  Section  2.4(iii),  in which  case the due date  shall be the next
preceding  Business Day) and,  with respect to payments of  principal,  interest
thereon shall be payable at the applicable rate during such extension.

                  (c) All  computations  of  interest  on the  unpaid  principal
amount  of the Loan  shall be made on the  basis of a year of (x) in the case of
interest  computed on the basis of the Adjusted LIBO Rate,  360 days, and (y) in
the case of interest computed on the basis of the Alternate Rate,  365/366 days,
in  either  case for the  actual  number  of days  (including  the first day but
excluding  the last day)  occurring  in the period for which  such  interest  is
payable.

     Section 2.9 Interest  Rate not  Ascertainable,  etc. If the  Administrative
Agent shall have determined (which determination shall be conclusive and binding
upon  the  Borrower)  that on any  date for  determining  the LIBO  Rate for any
Interest  Period,  by  reason  of  any  circumstances  affecting  the  interbank
Eurodollar  market  generally,   adequate  and  fair  means  do  not  exist  for
ascertaining  the  applicable  interest  rate on the basis  provided  for in the
definition  of  Adjusted  LIBO  Rate,   then,   and  in  any  such  event,   the
Administrative  Agent shall  forthwith  give notice (by  telephone  confirmed in
writing) to the Borrower of such determination.  Until the Administrative  Agent
notifies  the  Borrower  that the  circumstances  giving rise to the  suspension
described herein no longer exist:

                           (i)      each  borrowing of the  Revolving  Portion
of the Loan made pursuant to Section 2.15 hereof shall bear interest at the then
applicable Alternate Rate; and

                           (ii) the entire unpaid  principal  amount of the Loan
shall immediately convert into
a Loan bearing  interest at the then applicable  Alternate Rate with an Interest
Period  ending  on the date on  which  the  Interest  Period  applicable  to the
affected borrowing expires.

         Section 2.10     Illegality

                  (i) If any Lender (a ANotifying Lender ) shall have determined
at any time that the making or continuance of any portion of the Loan has become
unlawful  by  compliance  by such  Lender  in good  faith  with  any  applicable
Requirement of Law adopted or becoming effective after the date hereof, then, in
any such event,  the  Notifying  Lender shall give prompt  notice (by  telephone
confirmed  in  writing)  to the  Administrative  Agent and the  Borrower of such
determination.

                 (ii) Upon the giving of the notice to the Administrative  Agent
and the Borrower  referred to in subsection (a) above,  (i) the Borrower's right
to request  and the  Notifying  Lender's  obligation  to fund any portion of the
Revolving  Portion of the Loan shall be  suspended  and (ii) any  portion of the
Loan held by such Lender shall immediately  convert into a Loan bearing interest
at the then applicable Alternate Rate with an Interest Period ending on the date
on which the Interest Period applicable to the affected borrowing expires.



<PAGE>


         Section 2.11     Increased Costs

                  (a)  If,  by  reason  of  (x)  after  the  date  hereof,   the
implementation of or any change (including,  without  limitation,  any change by
way of imposition or increase of reserve or capital adequacy  requirements)  in,
or in the  interpretation by any Governmental  Authority or any other recognized
authority of, any law or regulation, or (y) the compliance with any guideline or
request   from  any   central   bank  or   other   Governmental   Authority   or
quasi-Governmental   Authority   exercising  control  over  banks  or  financial
institutions  generally  (whether  or not  having  the force of law)  adopted or
becoming effective after the date hereof:

                           (i)      any Lender (or its Lending  Office) shall be
subject  to any tax,  duty,  or other  charge  with  respect  to the Loan or its
obligation  to fund any portion of the  Revolving  Portion of the Loan, or shall
change the basis of taxation of  payments to any Lender of the  principal  of or
interest  on the Loan or its  obligation  to fund any  portion of the  Revolving
Portion of the Loan  (except  for  changes in the rate of tax on the overall net
income of such Lender or its Lending Office imposed by the jurisdiction in which
such Lender's principal executive office or Lending Office is located); or

                          (ii)      any  reserve,  special  deposit,  or similar
requirement  (including,  without limitation,  any reserve,  special deposit, or
similar  requirement  imposed by the Board of Governors  of the Federal  Reserve
System)  against  assets  of,  deposits  with or for the  account  of, or credit
extended  by,  any  Lender or its  Lending  Office  shall be  imposed  or deemed
applicable  or any  other  condition  affecting  borrowings  hereunder  shall be
imposed on such Lender or its Lending Office or the interbank Eurodollar market;

and as a result  thereof  there  shall be any cost to such Lender of agreeing to
make or maintain the Loan or to fund any portion of the Revolving Portion of the
Loan (excluding any cost reflected in the Adjusted LIBO Rate or in the Alternate
Rate),  or there shall be a reduction in the amount  received or  receivable  by
such Lender or its Lending  Office  (excluding  any  reduction  reflected in the
Adjusted LIBO Rate or in the Alternate Rate),  then the Borrower shall from time
to time,  upon written  notice and demand  (including  such Lender's  reasonable
details  with  respect  to  such   increased   cost)   promptly   given  by  the
Administrative  Agent, pay to the  Administrative  Agent for the account of such
Lender,  within five Business  Days after the date  specified in such notice and
demand,  additional  amounts  sufficient to indemnify  such Lender  against such
increased  cost. In the event that a Lender becomes aware of the imposition of a
cost to such Lender or a reduction in the amount to be received or receivable by
such Lender or its Lending  Office which is an additional  cost pursuant to this
Section 2.11, such Lender shall promptly notify the Administrative Agent and the
Borrower in writing of such imposition or reduction,  which notice shall include
such  Lender's  reasonable  details with respect to such  increased  cost.  With
respect to costs or  reductions  incurred by a Lender  pursuant to this  Section
2.11  relating  to  any  period  in  which  any  portion  of  the  Loan  remains
outstanding,  the provisions of this Section 2.11 shall survive the  termination
of this Agreement and the payment of the Promissory  Notes and all other amounts
payable hereunder.



<PAGE>


                  (b) If the  Required  Lenders  shall  notify the  Borrower  in
writing (with a copy to the  Administrative  Agent) that at any time, because of
the circumstances described in clause (x) or (y) in Section 2.11(a) or any other
circumstances arising after the Closing Date and relating to any period in which
any portion of the Loan remains outstanding  affecting the interbank  Eurodollar
market generally,  the then applicable  Adjusted LIBO Rate, as determined by the
Administrative  Agent,  will not  adequately  and fairly reflect the cost to the
Lenders of funding the borrowings, then, subject to Section 2.11(c), thereafter:

                           (i)      any borrowing of the  Revolving  Portion of
the Loan shall bear interest at the Alternate Rate; and

                           (ii)  any   affected   portion   of  the  Loan  shall
immediately  convert to a loan bearing  interest at the  Alternate  Rate with an
Interest  Period ending on the date on which the Interest  Period  applicable to
the affected portion expires.

                  (c) If the  Required  Lenders  shall  notify the  Borrower  in
writing (with a copy to the  Administrative  Agent) that at any time, because of
the circumstances described in clause (x) or (y) in Section 2.11(a) or any other
circumstances arising after the Closing Date and relating to any period in which
any portion of the Loan remains outstanding  affecting the interbank  Eurodollar
market generally,  then the Borrower shall be entitled to require each Lender to
which  such  circumstances  apply to assign its  Credit  Exposure  at par to any
Person  selected  by  Borrower  that  is  a  financial  institution   reasonably
acceptable  to the  Administrative  Agent,  which  assignment  shall be effected
pursuant to Section 7.18 hereof.

     Section 2.12 Change of Lending Office.  Each Lender agrees that it will use
reasonable  efforts to  designate an  alternate  Lending  Office with respect to
portions  of the Loan  affected  by the matters or  circumstances  described  in
Section 2.9,  2.10 or 2.11 to reduce the  liability of the Borrower or avoid the
results provided thereunder,  so long as such designation is not disadvantageous
to such Lender as determined by such Lender in its sole discretion.

     Section 2.13 Funding  Losses.  The Borrower shall  compensate  each Lender,
upon  such  Lender's  written  request  to  the  Administrative  Agent  and  the
Administrative Agent's delivery thereof to the Borrower (which request shall set
forth in  reasonable  detail the basis for  requesting  such  amounts),  for all
losses, expenses, and liabilities (including,  without limitation,  any interest
paid by such  Lender to  lenders  of funds  borrowed  by it to make or carry its
Percentage  of the Loan to the extent not recovered by such Lender in connection
with the re-employment of such funds but excluding loss of anticipated profits),
which such Lender may  sustain:  (i) if for any reason  (other than a default by
such Lender) a borrowing of the Revolving  Portion of the Loan does not occur on
the date specified therefor in a Notice of Borrowing (whether or not withdrawn);
(ii) if any repayment of a portion of the Loan occurs on a date which is not the
Maturity Date or the last day of an Interest  Period  applicable to such portion
(subject to Section 2.6(b));  (iii) if, for any reason, the Borrower defaults in
its  obligation  to repay any portion of the Loan when  required by the terms of
this Agreement; or (iv) the occurrence of any of the events described in Section
2.9,  2.10 or 2.11.  With respect to losses,  expenses and  liabilities  which a
Lender may sustain as described  in this Section 2.13  relating to any period in
which any portion of the Loan remains  unpaid,  the  provisions  of this Section
2.13 shall  survive the  termination  of this  Agreement  and the payment of the
Promissory Notes and all other amounts payable hereunder.



<PAGE>


         Section 2.14     Taxes

                  (a) All payments made by the Borrower under this Agreement and
the Promissory  Notes shall be made free and clear of, and without  deduction or
withholding for or on account of, any present or future income,  stamp, or other
taxes,  levies,  imposts,   duties,  charges,  fees,  deductions,   reserves  or
withholdings,  now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority,  excluding in the case of each Lender, net income
taxes and franchise  taxes (imposed in lieu of net income taxes) imposed on such
Lender as a result of a present or former connection between the jurisdiction of
the government or taxing authority  imposing such tax and such Lender (excluding
a connection  arising  solely from such Lender having  executed,  delivered,  or
performed  its  obligations  or  received a payment  under,  or  enforced,  this
Agreement  or the  Promissory  Notes)  or any  political  subdivision  or taxing
authority  thereof or therein (all such  non-excluded  taxes,  levies,  imposts,
duties,  charges,  fees,  deductions and withholdings  being hereinafter  called
Taxes ).  If any Taxes are required to be withheld from any amounts  payable to
any Lender  hereunder or under the Promissory  Notes,  the amounts so payable to
such Lender shall be  increased to the extent  necessary to yield to such Lender
(after  payment  of all  Taxes)  interest  or any  such  other  amounts  payable
hereunder  at the rates or in the amounts  specified in this  Agreement  and the
appropriate  Promissory  Note.  Whenever  any Taxes are payable by the  Borrower
pursuant to  applicable  law, as promptly as possible  thereafter  the  Borrower
shall send to the Administrative  Agent a certified copy of an original official
receipt received by the Borrower showing payment thereof.  If the Borrower fails
to pay any Taxes when due to the appropriate  taxing authority or fails to remit
to the Administrative  Agent the required receipts or other required documentary
evidence  (other  than any such  failure due to failure of any Lender to furnish
the  documents  required  to be  furnished  by such  Lender  pursuant to Section
2.14(b)),   the  Borrower  shall   indemnify,   defend  and  hold  harmless  the
Administrative  Agent and each Lender for any incremental  taxes,  interest,  or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such  failure.  With  respect to any  obligations  of the Borrower
pursuant to this Section 2.14 relating to any period in which any portion of the
Loan remains outstanding,  the agreements in this Section 2.14, as they apply to
any borrowing hereunder, shall survive the termination of this Agreement and the
payment of the Promissory Notes and all other amounts payable hereunder.

                  (b) The  Administrative  Agent and each Lender  shall  furnish
Borrower and the  Administrative  Agent,  at least thirty (30) days prior to the
date on which  the first  payment  to each  Lender  (including  each  Purchasing
Lender) is due, and annually thereafter during the term of the Loan, with United
States  Internal  Revenue  Service  Form  1001,  4224,  W-8 or W-9 (or any other
successor form) or any other document  evidencing  such Lender's  exemption from
withholding of Taxes from any amounts payable to such Lender  hereunder under as
of the Closing  Date.  If any Taxes are required to be withheld from any amounts
payable to any Lender hereunder or under the Promissory Notes, then the Borrower
shall be entitled to require such Lender to assign its Credit Exposure at par to
any  Person  selected  by  Borrower  that  is an  Eligible  Assignee  reasonably
acceptable  to the  Administrative  Agent,  which  assignment  shall be effected
pursuant to Section 7.18 hereof.



<PAGE>


         Section 2.15     Revolving Portion of the Loan

                  (1) Subject to the terms and conditions  hereof,  the Borrower
may  reborrow  portions of the Loan in an  aggregate  principal  amount of up to
$35,000,000  (the  ARevolving  Portion of the  Loan ).  Subject to the terms and
conditions of this  Agreement,  the Borrower may borrow,  repay and reborrow the
Revolving Portion of the Loan, provided that:

                           (i)    the  Administrative  Agent shall have received
a Notice of  Borrowing  either  (x) prior to 12:00  noon (New York  time) on the
third  Business  Day  prior  to the date of the  proposed  borrowing  (any  such
proposed borrowing,  a ALong-Notice  Borrowing ) or (y) prior to 11:30 A.M. (New
York time) on the date of the proposed borrowing (any such proposed borrowing, a
AShort-Notice  Borrowing ).  Each Notice of Borrowing  shall be irrevocable  and
shall advise the Administrative Agent as to whether it pertains to a Long-Notice
Borrowing or a  Short-Notice  Borrowing,  provided  that any Notice of Borrowing
which purports to pertain to a  Short-Notice  Borrowing but which is received by
the  Administrative  Agent after  11:30 A.M.  (New York time) on the date of the
proposed  borrowing  shall be deemed to constitute a request for a  Short-Notice
Borrowing on the next Business Day.

                           (ii) before  as well as after  giving  effect  to the
proposed borrowing, no Default or
Event of Default shall have occurred or be continuing;

                           (iii)     subject to the  provisions  of Section  5.5
hereof, all representations and warranties contained herein (including,  without
limitation,  those  incorporated  herein by reference,  but not including  those
expressly  provided  to be made only as of the  Closing  Date) shall be true and
correct in all material  respects  (before as well as after giving effect to the
proposed  borrowing)  with the same  effect as though such  representations  and
warranties  had been made on and as of the date of the  proposed  borrowing  and
Borrower  shall be in  compliance  in all material  respects  (before as well as
after giving effect to the proposed borrowing) with all covenants and agreements
contained in Article V hereof and elsewhere in this Agreement.

                          (iv) there shall have been no Material  Adverse Change
and no  Requirement  of Law or  Contractual  Obligation  of the  Borrower or any
Subsidiary  which could  reasonably be expected to result in a Material  Adverse
Change;

                           (v)    no  litigation,  investigation  or  proceeding
before or by any  arbitrator or  Governmental  Authority  shall be continuing or
threatened  against the Borrower or any  Subsidiary  thereof in connection  with
this  Agreement  and the other Loan  Documents  which could result in a Material
Adverse Change;

                          (vi)      the proposed  borrowing  shall not cause the
aggregate  outstanding  principal amount of the Loan to exceed the lowest of (i)
the Maximum  Availability  Amount,  (ii)  $110,000,000 and (iii) an amount which
would violate the provisions of Section 5.3(k) hereof.

                         (vii)      the proposed  borrowing  shall not cause the
aggregate  outstanding  principal amount of the Revolving Portion of the Loan to
exceed $35,000,000.



<PAGE>


                  (b) Each Long-Notice  Borrowing shall be in an amount equal to
$1,000,000 or a whole multiple of $100,000 in excess thereof.  Each Short-Notice
Borrowing  shall be in an amount  equal to  $2,000,000  or a whole  multiple  of
$100,000 in excess thereof.

                  (c)      There shall be no more than ten  borrowings of the
Revolving Portion of the Loan in any calendar month.

                  (d)  Interest on  Long-Notice  Borrowings  shall accrue at the
Adjusted  LIBO Rate,  subject to and in accordance  with the  provisions of this
Article 2. Each Notice of Borrowing  which  pertains to a Long-Notice  Borrowing
shall specify the Interest Period applicable  thereto.  Interest shall accrue on
Short-Notice Borrowings at the Alternate Rate.

                  (e) The proceeds of any borrowing of the Revolving  Portion of
the Loan shall be used solely to fund  ongoing  cash needs,  interest  payments,
dividend payments,  working capital requirements and reserve requirements of the
Borrower.

     Section 2.16 Conversion Option.  Provided that there is no Default or Event
of Default hereunder, the Borrower shall have the option to convert Short-Notice
Borrowings  to  borrowings  bearing  interest  at the  Adjusted  LIBO Rate.  Any
proposed conversion shall pertain to Short-Notice  Borrowings in an amount equal
to $2,000,000 or a whole  multiple of $100,000 in excess  thereof.  In the event
the Borrower shall elect to convert a Short-Notice  Borrowing as aforesaid,  the
Borrower  shall deliver a Notice of Conversion  to the  Administrative  Agent no
later than 11:30 A.M.  (New York time) at least three (3) Business Days prior to
the date of the proposed  conversion.  A Notice of Conversion  shall specify the
proposed  conversion  date,  the  amount  of the  Short-Notice  Borrowing  to be
converted and the Interest Rate  applicable  thereto.  If no Interest  Period is
specified  in a Notice  of  Conversion,  the  Borrower  shall be  deemed to have
selected  an Interest  Period of one month.  Any Notice of  Conversion  shall be
irrevocable  and the Borrower  shall be  obligated  to convert the  Short-Notice
Borrowing to which it relates in accordance therewith.


                      ARTICLE III. CONDITIONS TO BORROWINGS

         The  obligation  of the Lenders to disburse the Loan to Borrower on the
Closing Date is subject to the satisfaction of the following conditions:

     Section 3.1  Conditions  oPrecedent to Closing.  On or prior to the Closing
Date, all obligations of the Borrower hereunder to the Administrative  Agent and
the Lenders  incurred  prior to the Closing Date and any amounts  payable to the
Administrative  Agent or the Lenders on the Closing  Date (other than legal fees
payable  pursuant to the last paragraph of subsection  3.1(a)),  shall have been
paid in full. In addition, the following conditions shall be satisfied:

                  (1) Receipt of Documents.  The Administrative Agent shall have
received the  following,  each dated as of or prior to the Closing Date, in form
and substance satisfactory to the Administrative Agent:



<PAGE>


                  (i)  an officer's  certificate, dated the Closing Date, signed
by any Chairman, the President, any Senior Vice President, any Vice President or
the  Controller  of  the  Borrower,  and  attested  to by the  Secretary  or any
Assistant  Secretary of the  Borrower,  in the form of Exhibit G annexed  hereto
with   appropriate   insertions,   together  with  copies  of  the  Articles  of
Incorporation of the Borrower  certified,  as of a recent date, by the Secretary
of State  of the  State  of the  Borrower's  incorporation  and the  By-Laws  of
Borrower and the  resolutions of the Borrower  referred to in such  certificate;
and certified copies of all other documents, if any, evidencing corporate action
or governmental  authorization  or approval with respect to this Agreement,  the
Promissory Notes and the Loan Documents;

                  (ii)  duly  executed  and  completed   replacement  or
substitute Promissory Notes payable to the order of each Lender;

                  (iii)  a duly executed and delivered Reaffirmation of Environ-
mental Indemnity;

                  (iv) a duly executed and delivered Reaffirmation of Subsidiary
 Guaranty;

                  (v)  an opinion of counsel to the Borrower as to such matters
as the Administrative Agent shall require;

                 (vi)  preliminary  financial statements in the forms prescribed
by Sections  5.2(a) to (d) hereof for fiscal year 1999,  the  accounting  period
ending in December,  1999 and the most recent Accounting  Period, to be followed
on or before March 31, 2000 by final financial statements in the aforesaid forms
for the aforesaid  periods which disclose a financial  condition of the Borrower
and the  Mortgaged  Properties  which is no worse in all material  respects than
that disclosed by the preliminary financial statements;

                 (vii)  copies of all financial  statements,  reports, and proxy
statements  mailed to the  Borrower's  shareholders  within the last  year,  and
copies of all registration  statements,  periodic  reports,  and other documents
filed by the  Borrower  with the  Securities  and  Exchange  Commission  (or any
successor thereto) and any national securities exchange within the last year;

                (viii) such  consents or  acknowledgments, with  respect to such
of the transactions hereunder,  from such Persons as the Administrative Agent or
its counsel may reasonably determine to be necessary or appropriate;

                   (ix) (A) a good standing certificate from the State of
Maryland in respect of the Borrower as of a recent date;  and (B) a  certificate
of the  Secretary of State of each state in which the Borrower  owns a Mortgaged
Property or is required to qualify to do business, as to due qualification to do
business as a foreign  entity and good standing of Borrower as of a recent date;
and

                   (x) title policy  endorsements which have the effect
of redating  the title  policies  insuring  the Liens of the  Mortgages  with no
additional exceptions; and



<PAGE>


                   (xi) originals of an estoppel letter executed by HPT.

Execution and delivery of this Agreement by Borrower shall constitute Borrower's
agreement and covenant to pay to the Administrative  Agent, promptly upon demand
(together  with a  reasonably  detailed  invoice(s)  in  respect  thereof),  all
reasonable fees and disbursements of counsel to the Administrative Agent and the
Lenders incurred prior to or on the Closing Date.



     Section  3.2 Post  Closing  Covenant.  On or  before  March 10,  2000,  the
Borrower  shall  furnish the  Administrative  Agent with a  certificate  of good
standing  with  respect  to each of the  entities  listed on  Schedule 9 annexed
hereto  from  the  Secretary  of  State  of  its  state  of   incorporation   or
organization,  and, if such  entity  owns a Mortgaged  Property in a state other
than  its  state  of  incorporation  or  organization,  a  certificate  from the
applicable  Secretary  of State as to its  qualification  to do business in such
state.


                   ARTICLE IV. REPRESENTATIONS AND WARRANTIES

         Borrower  represents  and warrants the  following as of the date hereof
and,  except  with  respect  to the  representations  and  warranties  expressly
provided  herein as being made only as of the Closing Date,  further  represents
and warrants on the date of any borrowing of the Revolving Portion of the Loan.

     Section 4.1  Corporate  Existence.  Borrower is duly  organized and validly
existing under the laws of the jurisdiction of its  incorporation.  In addition,
Borrower  is in  good  standing  under  the  laws  of  the  jurisdiction  of its
incorporation,  is duly qualified to do business as a foreign corporation and is
in good  standing  in each  jurisdiction  where it owns  property  or where  the
conduct of its business or the  ownership of its property or assets  (including,
without  limitation,  the  Mortgaged  Properties)  requires  such  qualification
(unless the failure to be so qualified or in good standing  would not constitute
a Material  Adverse  Change),  and has all corporate powers and all governmental
licenses,  authorizations,  consents,  and  approvals  required  to carry on its
business as is now or is proposed  to be  conducted  (unless the failure to have
same would not constitute a Material Adverse Change).

         The  execution,  delivery,  and  performance  by  Borrower  of  this
Agreement and of the Loan  Documents (i) are within the Borrower's  powers,  and
(ii) have been duly authorized by all necessary action.

     Section 4.3 Governmental  Approvals.  No authorization or approval or other
action by, and no notice to or filing or  registration  with,  any  Governmental
Authority  is  required  in  connection  with  the  execution,   delivery,   and
performance by Borrower of this  Agreement or the other Loan  Documents  (unless
the  failure  to have  obtained  or made same  would not  constitute  a Material
Adverse Change).



<PAGE>


     Section 4.4 Binding  Effect.  This  Agreement and the other Loan  Documents
have each been duly executed by Borrower and each  constitutes  a legal,  valid,
and binding obligation of Borrower,  enforceable  against Borrower in accordance
with its terms,  except as enforcement  thereof may be subject to (i) the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium, or similar
law affecting creditors, rights generally, and (ii) general principles of equity
(regardless  of whether such  enforcement is sought in a proceeding in equity or
at law).

         Section 4.5      Financial Information and No Material Adverse Change

                  (a) Each of the  financial  statements  delivered  pursuant to
Sections 3.1(a)(vi) were prepared in accordance with GAAP and fairly present the
financial  condition and results of operation of the Persons  and/or  properties
covered  thereby on the dates and for the  periods  covered  thereby,  except as
disclosed in the notes thereto and, with respect to normally  recurring year-end
adjustments.  As of  the  date  hereof  Borrower  does  not  have  any  material
liability,  absolute or contingent,  not reflected in such financial statements,
the notes thereto or Schedule 4 hereof.

                  (b)  Since  December  31,  1999,  there  has been no  Material
Adverse Change,  except as otherwise  disclosed in writing to the Administrative
Agent and in the  reports on Forms 10-Q and 8-K filed by the  Borrower  with the
Securities and Exchange Commission.

     Section 4.6  Litigation.  There is no action,  suit, or proceeding,  or any
governmental  investigation or any arbitration,  in each case pending or, to the
knowledge of the Borrower,  threatened against Borrower,  or any property of the
Borrower before any court or arbitrator or any  governmental  or  administrative
body, agency, or official (i) which challenges the validity of this Agreement or
any of the other  Loan  Documents  or (ii)  which,  as  reasonably  likely to be
determined,  and taking into account any insurance with respect  thereto,  would
constitute a Material Adverse Change.

     Section 4.7  Compliance  with Law. The Borrower is in  compliance  with all
Requirements of Law, the Borrower's Certificate of Incorporation and By-Laws and
all Contractual  Obligations binding on or affecting it or any of its properties
(other  than where the  failure  to so comply  would not  constitute  a Material
Adverse Change).  The execution and delivery by Borrower of this Agreement,  the
Promissory  Notes and the Loan Documents do not, and the performance by Borrower
of this Agreement, the Promissory Notes and each of the Loan Documents will not,
(a) violate any  Requirement  of Law, (b) violate or contravene any provision of
the  Borrower's  Certificate  of  Incorporation  and By-Laws,  or any law, rule,
regulation,  order, writ, judgment, decree, determination or award applicable to
the Borrower,  (c) violate,  contravene or result in a breach of or constitute a
default  under any  Contractual  Obligation,  or (d) result  in, or require  the
creation or imposition  of, any Lien upon or with respect to any of its property
or assets (including,  without limitation,  the Mortgaged Properties) other than
the Liens created by the Loan  Documents  (other than,  in any such case,  where
such violation, contravention, default or result would not constitute a Material
Adverse Change).



<PAGE>


         Section 4.8      Labor Matters

                  (a)  There  are  no  strikes,  work  stoppages,  slowdowns  or
lockouts pending, or reasonably likely to occur in the immediate future, against
or involving the Borrower or any of its Subsidiaries,  other than those which in
the aggregate would not constitute or result in a Material Adverse Change.

                  (b) There are no arbitrations or grievances pending against or
involving the Borrower or any of its Subsidiaries, nor, to the best knowledge of
Borrower,  are there any  arbitrations  or grievances  threatened  involving the
Borrower or any of its  Subsidiaries,  other than those  which in the  aggregate
would not constitute or result in a Material Adverse Change.

                  (c)  Neither  the  Borrower  nor any of its  Subsidiaries  are
parties to, or have any obligations under, any collective  bargaining agreement,
other than collective bargaining  agreement(s) copies of which (certified by the
Borrower  as being  true,  correct  and  complete)  have been  furnished  to the
Administrative Agent.

                  (d) There are no representation  proceedings  pending,  or, to
the best knowledge of the Borrower, threatened with the National Labor Relations
Board, and no labor organization or group of employees of the Borrower or any of
its Subsidiaries  have made a pending demand for  recognition,  other than those
which in the  aggregate  would not  constitute  or result in a Material  Adverse
Change.

                  (e) There are no unfair labor practice charges,  grievances or
complaints  pending  or in  process  or,  to the  best  knowledge  of  Borrower,
threatened by or on behalf of any employee or group of employees of the Borrower
or any of its  Subsidiaries  other than those which in the  aggregate  would not
constitute or result in a Material Adverse Change.

                  (f) There are no complaints or charges against the Borrower or
any of  its  Subsidiaries  pending  or,  to  the  best  knowledge  of  Borrower,
threatened to be filed with any  Governmental  Authority or arbitrator based on,
arising out of, in connection  with, or otherwise  relating to the employment by
the  Borrower or any of its  Subsidiaries  of any  individual,  other than those
which in the  aggregate  would not  constitute  or result in a Material  Adverse
Change.

                  (g) The Borrower and each of its Subsidiaries is in compliance
with all laws, and all orders of any court,  governmental  agency or arbitrator,
relating to the employment of labor,  including all such laws relating to wages,
hours, collective bargaining,  discrimination,  civil rights, and the payment of
withholding   and/or  social  security  and  similar  taxes,   other  than  such
non-compliances as in the aggregate would not constitute or result in a Material
Adverse Change.



<PAGE>


     Section 4.9 ERISA. As of the date of this Agreement and throughout the term
of this Agreement,  (i) the Borrower is not and will not be an Aemployee benefit
plan as defined in Section 3(3) of ERISA,  which is subject to Title I of ERISA,
(ii) the assets of the Borrower do not and will not  constitute  Aplan assets of
one or more such plans within the meaning of 29 C.F.R.  '  2510.3-101  and (iii)
the  Borrower  is not and will not be a  Agovernment  plan within the meaning of
Section 3(32) of ERISA.

     Section  4.10 No Default.  The  Borrower is not in default  under,  or with
respect  to, any of its  Contractual  Obligations  in any  respect  which  could
reasonably be expected to result in a Material  Adverse Change and no Default or
Event of Default has occurred and is continuing.

     Section 4.11 Improvements. Subject to the provisions of Section 5.5 hereof:

                  (a)  All  of  the   improvements   located  on  the  Mortgaged
Properties  and the use of such  improvements  are  covered  by  existing  valid
certificates  of occupancy and all other  certificates  and permits  required by
applicable laws,  rules,  regulations,  and ordinances or in connection with the
use, occupancy, and operation thereof.

                  (b) No material  portion of any of the  Mortgaged  Properties,
nor any improvements  located on such Mortgaged  Properties that are material to
the  operation,  use, or value  thereof,  have been  damaged in any respect as a
result of any fire, explosion, accident, flood, or other casualty, except to the
extent that the same have been or will with due diligence and in compliance with
this  Agreement  and all of the  other  Loan  Documents  be  restored  to  their
condition prior thereto.

                  (c) No written notices of violation of any federal,  state, or
local law or ordinance or order or  requirement  have been received with respect
to any Mortgaged Properties.

     Section 4.12 Intellectual  Property.  Borrower owns, or is licensed to use,
all trademarks,  trade names,  copyrights,  technology,  know-how, and processes
necessary  for  the  conduct  of  its  business  as  currently   conducted  (the
Intellectual  Property ) except for those the  failure to own or license  which
could not reasonably be expected to have a Material Adverse Change. No claim has
been asserted and is pending by any Person challenging or questioning the use of
any such  Intellectual  Property or the  validity or  effectiveness  of any such
Intellectual  Property,  nor does the  Borrower  know of any valid basis for any
such claim  (other than claims  which would not  constitute  a Material  Adverse
Change). The use of such Intellectual Property by the Borrower does not infringe
on the rights of any Person,  except for such claims and infringements  that, in
the  aggregate,  could not  reasonably  be expected  to have a Material  Adverse
Change.



<PAGE>


     Section  4.13  Taxes.  Borrower  has  filed or  caused  to be filed all tax
returns  that,  to the  knowledge of Borrower,  are required to be filed and has
paid all taxes shown to be due and payable on such returns or on any assessments
made  against it or any of its  property  and all other  taxes,  fees,  or other
charges  now  due  and  payable  imposed  on it or any of  its  property  by any
Governmental  Authority  (other  than any the  amount or  validity  of which are
currently  being  contested in good faith by  appropriate  proceedings  and with
respect to which adequate reserves in conformity with GAAP have been provided on
the books of Borrower). No tax Lien has been filed which could constitute a Lien
senior in priority to the Lien of any of the  Mortgages or Financing  Statements
and which has not been (or will not be) removed or  discharged  of record within
ten (10) days after  Borrower's  notice of such Lien (or the taxes to which such
Lien relates are being contested in good faith by appropriate  proceedings which
have the  effect  of  staying  enforcement  or  execution  of such Lien and with
respect to which adequate reserves in conformity with GAAP have been provided on
the books of Borrower).

     Section 4.14 Investment Company Act; Other Regulations.  Borrower is not an
Ainvestment company, or a company Acontrolled by an Ainvestment company,  within
the meaning of the Investment  Company Act of 1940, as amended.  Borrower is not
subject to regulation  under any Federal or state  statute or  regulation  which
limits its ability to incur Indebtedness.

     Section 4.15 SEcurity Capital. Security Capital Group Incorporated directly
or, through a wholly-owned  Subsidiary,  indirectly  owns no less than (a) fifty
one percent  (51%) of the voting  stock in Borrower  before  dilution due to the
conversion  of the  mortgages in favor of Archstone  Communities  Trust shown on
Schedule 4 and (b) forty-six percent (46%) after such dilution.

     Section 4.16  Insurance.  Subject to the  provisions of Section 5.5 hereof,
the Borrower  keeps the  Mortgaged  Properties  insured in the manner and in the
amounts set forth in subsection 5.1(k) hereof.

     Section 4.17 Properties. Subject to the provisions of Section 5.5 hereof:

                  (a) Borrower and each  Subsidiary  Mortgagor,  as the case may
be, has good and marketable title to all of the Mortgaged Properties, subject to
no mortgage,  security  interest,  pledge,  lien,  charge,  encumbrance or title
retention or other security  agreement or arrangement of any nature  whatsoever,
except Permitted  Encumbrances.  Borrower shall, and shall cause each Subsidiary
Mortgagor to, forever warrant and defend the title of their respective Mortgaged
Properties  against  the lawful  claims and  demands of all  persons  whomsoever
subject to the Permitted Encumbrances.

                  (b)  There  are no  pending  or,  to  the  best  knowledge  of
Borrower,  threatened  proceedings  or actions to  revoke,  attack,  invalidate,
rescind,  or modify in any  material  respect  (i) the  zoning of any  Mortgaged
Property or any part thereof,  or (ii) any building or other permits  heretofore
issued with respect to any Mortgaged Property or any part thereof,  or asserting
that any such  zoning or permits do not permit the  operation  of any  Mortgaged
Property or any part thereof or that any improvements  located on such Mortgaged
Property  cannot  be  operated  in  accordance  with its  intended  use or is in
violation of applicable Use Requirements.

                  (c) The Mortgage covering each such Mortgaged Property creates
a valid and  enforceable  first Lien, on such  property  described  therein,  as
security  for  the  repayment  of the  Indebtedness  incurred  by  the  Borrower
hereunder  and under the other Loan  Documents,  subject  only to the  Permitted
Encumbrances applicable to such property.



<PAGE>


                  (d) The  Collateral  is now, and so long as any portion of the
Loan remains outstanding or any monetary obligation to the Administrative  Agent
or the  Lenders  hereunder  or under  the  Promissory  Notes or the  other  Loan
Documents  shall  remain  unpaid,  will be owned  solely  by the  Borrower  or a
Subsidiary  Mortgagor,  as the case may be, and said  Collateral,  including the
proceeds  resulting from the sale or other disposition  (other than as permitted
by  Section  5.3(k))  thereof,  is and will  remain  free and clear of any Liens
except the Liens granted  pursuant to the Loan  Documents to the  Administrative
Agent, which Liens shall, at all times, be first and prior on the Collateral and
all  proceeds  resulting  from  the sale or other  disposition  thereof,  and no
further action need be taken to perfect said Liens.

                  (e) Neither the existence of any improvements upon a Mortgaged
Property nor the intended use or condition of any Mortgaged Property violates in
any  material  respect  any Use  Requirements.  With  respect to each  Mortgaged
Property,  neither  the zoning  nor any other  right to carry on the use of such
Mortgaged Property as an extended stay facility,  including ancillary facilities
related  thereto,  is to any extent  dependent upon or related to any other real
estate.  Each  Mortgaged  Property may be operated as an extended  stay facility
with  ancillary  facilities  related  thereto and the  Borrower  has received no
written notices from any Governmental  Authorities alleging any violation by any
Mortgaged  Property  of any  Requirement  of Law,  including  but not limited to
applicable  Use  Requirements.  Each of the  Mortgaged  Properties  includes  an
extended-stay  hotel  facility  which  is  Construction  Complete  and  open for
business.

                  (f) Except as set forth in  Schedule 6 annexed  hereto,  there
are no pending or, to the  knowledge  of the  Borrower,  threatened  proceedings
relating  to any (i)  taking  by  eminent  domain or other  condemnation  of any
portion of any  Mortgaged  Property,  (ii)  condemnation  or  relocation  of any
roadways  abutting  any  Mortgaged  Property  and (iii)  denial of access to any
Mortgaged Property from any point of access to such Mortgaged  Property,  in any
such case not accounted for in the Plans and Specifications.

                  (g) Each Mortgaged  Property has adequate and permanent  legal
access to water,  gas, and  electrical  supply,  storm,  and  sanitary  sewerage
facilities,  other  required  public  utilities  (with  respect  to  each of the
aforementioned  items by means of either a direct  connection  to the  source of
such  utilities  or through  easements  or  connections  available  on  publicly
dedicated  roadways directly  abutting such Mortgaged  Property),  parking,  and
means of access  between  such  Mortgaged  Property  and  public  highways  over
recognized  curb cuts,  and all of the foregoing  comply with all applicable Use
Requirements.

                  (h) Each Mortgaged  Property  constitutes a legally subdivided
lot under all applicable Use Requirements (or, if not subdivided, no subdivision
or platting of such Mortgaged Property is required under applicable Requirements
of Law), and for all material purposes each Mortgaged Property may be mortgaged,
conveyed, and otherwise dealt with as an independent parcel.

     Section 4.18 Full and Accurate Disclosure.  No statement of fact made by or
on  behalf  of the  Borrower  in  this  Agreement  or in any of the  other  Loan
Documents  (other than any Loan  Documents to which neither the Borrower nor any
Affiliate is a party),  or any certificate or financial  statement  furnished by
the Borrower to the Administrative  Agent or any Lender when made or deemed made
or the date as of which such  certificate  or  statement  speaks or is deemed to
speak, as the case may be, contains any untrue  statement of a material fact or,
to the best of Borrower's knowledge,  omits to state any material fact necessary
to make statements contained herein or therein not misleading.



<PAGE>


     Section 4.19 Solvency.  Within the meaning of Section 548 of the Bankruptcy
Code, the Uniform Fraudulent Transfer Act and the Uniform Fraudulent  Conveyance
Act as in effect in any relevant jurisdiction, and any similar laws or statutes,
and  after  giving  effect to the  transactions  contemplated  hereby:  the fair
saleable value of the Borrower's assets exceeds and will,  immediately following
the disbursement of the Loan or of any borrowing of the Revolving Portion of the
Loan, exceed the Borrower's total  liabilities  including,  without  limitation,
subordinated,  unliquidated,  disputed,  and  contingent  liabilities;  the fair
saleable value of the Borrower's assets is and will,  immediately  following the
disbursement  of the Loan or of any  borrowing of the  Revolving  Portion of the
Loan, be greater than the Borrower's probable liabilities, including the maximum
amount of its contingent  liabilities on its debts as such debts become absolute
and  matured;  the  Borrower's  assets  do not and,  immediately  following  the
disbursement  of the Loan or of any  borrowing of the  Revolving  Portion of the
Loan,  constitute  unreasonably  small  capital  to carry  out its  business  as
conducted or as proposed to be  conducted;  and the Borrower does not intend to,
and does not  believe  that it will,  incur  debts  and  liabilities  (including
without  limitation  contingent  liabilities and other  commitments)  beyond its
ability to pay such debts as they  mature  (taking  into  account the timing and
amounts of cash to be received by the  Borrower and the amounts to be payable on
or in respect of obligations of the Borrower).

     Section  4.20 Not Foreign  Person.  The  Borrower is not a Aforeign  person
within the meaning of Section 1445(f)(3) of the Code.

     Section 4.21 Assessments.  Subject to the provisions of Section 5.5 hereof,
except as set forth in  budgets  submitted  to the  Administrative  Agent or its
predecessor-in-interest  under the Original  Agreement or the First Restatement,
there are no pending or, to the Borrower's knowledge,  proposed special or other
assessments  for  public  improvements  or  otherwise  affecting  any  Mortgaged
Property,  nor,  to  the  Borrower's  knowledge,   are  there  any  contemplated
improvements to any Mortgaged  Property that may result in such special or other
assessments.

     Section  4.22  Flood  Zone.  Except  as  disclosed  by a survey  heretofore
delivered to the  Administrative  Agent,  no Mortgaged  Property is located in a
flood hazard area as defined by the Federal Emergency Management Agency.

     Section 4.23 Physical  Condition.  Subject to the provisions of Section 5.5
hereof,  each Mortgaged Property is free of material  structural defects and all
building systems contained therein are in good working order subject to ordinary
wear and tear.

     Section 4.24  Operation of Premises.  Subject to the  provisions of Section
5.5  hereof,  each  Mortgaged  Property  is being  operated  and  maintained  in
accordance with the Borrower's usual and customary business practices.



<PAGE>


     Section  4.25  Margin  Regulations.  The  Borrower  is not  engaged  in the
business of  extending  credit for the  purpose of  purchasing  or carrying  any
margin stock or margin securities  (within the meaning of Regulations T, U and X
issued by the Board of Governors of the Federal Reserve System), and no proceeds
of any borrowing will be used, directly or indirectly,  to purchase or carry any
margin stock or margin  securities or to extend credit to others for the purpose
of  purchasing  or carrying any margin stock or margin  securities.  None of the
transactions  contemplated  by  this  Agreement  will  violate  or  result  in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended.

     Section 4.26 Hazardous Materials.  Subject to the provisions of Section 5.5
hereof,  except  as  disclosed  in  the  Studies  heretofore  delivered  to  the
Administrative  Agent,  to the best of the  Borrower's  knowledge,  no Hazardous
Materials  are located on or about the Mortgaged  Properties,  and the Mortgaged
Properties do not contain any  underground  tanks for the storage or disposal of
Hazardous Materials.  Further,  subject to the provisions of Section 5.5 hereof,
except  as  disclosed  in the  Studies,  (i) the  Borrower  has not,  and to the
knowledge of the  Borrower no other party has,  (A) stored or treated  Hazardous
Materials on the Mortgaged  Properties,  (B) disposed of Hazardous  Materials or
incorporated Hazardous Materials on the Mortgaged Properties,  and (C) permitted
any  underground  storage  tanks to exist on the Mortgaged  Properties,  (ii) no
complaint,  order,  citation  or  notice  with  regard to air  emissions,  water
discharges,  noise  emissions,  or  Hazardous  Materials,  if any,  or any other
environmental,  health, or safety matters affecting the Mortgaged  Properties or
any portion thereof,  from any person,  government or entity, has been issued to
the Borrower  which has not been  remedied or cured,  and (iii) the Borrower has
complied with all Requirements of Law affecting the Mortgaged Properties.

     Section 4.27 Representations and Warranties in the Loan Documents.  Subject
to the provisions of Section 5.5 hereof, the  representations  and warranties in
each of the Loan  Documents  (except  with  respect to the  representations  and
warranties  expressly  provided as being made only as of the  Closing  Date) are
true,  complete and correct in all material  respects,  and the Borrower  hereby
confirms  each such  representation  and  warranty as being true,  complete  and
correct in all material  respects as of the relevant  dates with the same effect
as if set forth in its entirety herein.

     Section 4.28 Loan Documents.  The provisions of the Loan Documents are each
effective to create, in favor of the  Administrative  Agent, a legal,  valid and
enforceable  Lien on or  security  interest in all of the  collateral  described
therein,  and when the appropriate  recordings and filings have been effected in
the  appropriate  public  offices (or, in the case of collateral  represented by
certificates,  when such  certificates  have been pledged to and received by the
Administrative Agent), the Loan Documents will constitute a perfected first Lien
on and  security  interest  in all  right,  title,  estate and  interest  of the
Borrower  or a  Subsidiary  Mortgagor,  as the  case may be,  in the  collateral
described  therein,  prior and superior to all other Liens except for  Permitted
Encumbrances and as otherwise permitted under this Agreement.

     Section 4.29 Balloon Payments. Except as reflected on Schedule 4 hereof, as
of the Closing Date, there are no balloon payments, scheduled balloon amortizing
payments or  scheduled  amortizing  payments  required to be paid at any time in
respect of any Indebtedness (other than Permissible Assumed Indebtedness) of the
Borrower or its Subsidiaries.

         Section 4.30     Subsidiaries

                  (a)     Each Subsidiary Mortgagor is a Subsidiary of Borrower.



<PAGE>


                  (b)  Each   Subsidiary   of  Borrower   has   guaranteed   the
Indebtedness   hereunder  and   reaffirmed   such   guaranty   pursuant  to  the
Reaffirmation of Guaranty, other than (i) any Non-Guarantor Subsidiary which has
no  other  Indebtedness  other  than  non-recourse  debt to  third  parties  and
inter-company  Indebtedness  to the Borrower  which would be  accelerated by the
occurrence of a Default or Event of Default  hereunder  and (ii) the  bankruptcy
remote  Subsidiary  which was formed for the purpose of  entering  into the Sale
Leaseback  Facility.  A  Non-Guarantor  Subsidiary   shall mean a Subsidiary of
Borrower  that all of the  Lenders  agree (i) is  prohibited  from  providing  a
guaranty or (ii) would not be an appropriate  Person,  for reasons acceptable to
Lenders, to provide a guaranty of the Indebtedness hereunder.

     Section 4.31 Nature of Business. Neither the Borrower nor any Subsidiary of
Borrower  is engaged in any  business  other than the  ownership,  construction,
development,  operation and management of extended stay hotel facilities  (other
than businesses and  investments  incidental to the  development,  operation and
management of extended stay hotel facilities), the management for a fee of other
lodging facilities or the licensing of the operation of extended stay facilities
under the AHomestead name, which licensing business does not have start-up costs
in excess of one million dollars ($1,000,000).

     Section 4.32 Indebtedness. The Indebtedness set forth on Schedule 4 annexed
hereto  represents  the  only  outstanding  Indebtedness  of  Borrower  and  its
Subsidiaries on the Closing Date.


                              ARTICLE V. COVENANTS

     Section 5.1 Certain  Affirmative  Covenants.  So long as any portion of the
Loan remains  outstanding  or any amounts due to the Lenders  hereunder or under
the  Promissory  Notes or the other Loan  Documents  shall  remain  unpaid,  the
Borrower  will,  and, to the extent any of the following  relates to a Mortgaged
Property  any  portion  of or  interest  in which  is  owned  by any  Subsidiary
Mortgagor, the Borrower will cause each such Subsidiary Mortgagor,  with respect
to such Mortgaged  Property,  to (unless expressly waived by the  Administrative
Agent or the Lenders as provided herein):

                  (a) Payment. Duly and punctually pay or reimburse when due or,
if there is no specified due date, when demanded,  the principal and interest on
the  Promissory  Notes and all other  amounts due under this  Agreement  and the
other Loan Documents.

                  (b) Existence, Etc. (i) Preserve and maintain its existence in
Maryland, and (ii) preserve and maintain its rights and franchises in each state
in which there  exists a Mortgaged  Property  (unless the failure to so preserve
and maintain its rights and franchises  would not constitute a Material  Adverse
Change).



<PAGE>


                  (c) Compliance  With Laws,  Etc.  Subject to the provisions of
Section  5.5  hereof,  comply  with  all  applicable  Requirements  of Law,  Use
Requirements  and all  agreements  and  grants of  easements  or  rights-of-way,
permits, declarations of covenants, conditions and restrictions, disposition and
development  agreements,  planned unit  development  agreements,  management  or
parking  agreements,  party wall agreements or other  instruments  affecting the
Mortgaged Properties.

                  (d)  Payment  of Taxes and  Claims,  Etc.  Pay (i) all  taxes,
assessments and governmental charges imposed upon it or upon its property (other
than  the  Mortgaged  Properties),  unless  the  failure  to so  pay  would  not
constitute  or  result  in a  Material  Adverse  Change,  (ii)  subject  to  the
provisions of Section 5.5 hereof and subparagraph  (iii) of this Section 5.1(d),
all taxes,  assessments  and  governmental  charges  imposed upon the  Mortgaged
Properties,  and all claims (including,  without  limitation,  claims for labor,
materials, supplies, or services) which might, if unpaid, become a Lien upon the
Mortgaged Properties or any of them unless, in each case, the validity or amount
thereof is being  contested  in good faith by  appropriate  proceedings  and the
Borrower has maintained  adequate  reserves with respect thereto,  and (iii) all
taxes,   assessments  and  governmental   charges  imposed  upon  the  Mortgaged
Properties which would, if unpaid,  become a Lien senior in priority to the Lien
of any of the  Mortgages  within ten (10) days after  Borrower's  notice of such
Lien (unless the taxes,  assessments or governmental  charges to which such Lien
relates are being contested in good faith by appropriate  proceedings which have
the effect of staying  enforcement or execution of such Lien and with respect to
which adequate  reserves in conformity with GAAP have been provided on the books
of Borrower).

                  (e)  Keeping  of Books.  Keep  accurate  records  and books of
account  in  which  full,  accurate  and  correct  entries  shall be made of all
dealings or  transactions  in relation to its business and affairs in accordance
with GAAP.  Upon reasonable  prior notice and during normal business hours,  the
Borrower  shall  permit  representatives  of any Lender to visit its offices and
inspect,  examine and make abstracts  from any of its books and records,  and to
discuss the  business,  operations,  and  financial  and other  condition of the
Borrower with  officers and  employees of the Borrower and with its  independent
certified public accountants, if any, in the presence of a representative of the
Borrower.

                  (f) Visitation,  Inspection, Etc. Permit any representative of
the  Administrative  Agent  or the  Lenders  to  visit  and  inspect  any of the
Mortgaged  Properties,  to examine  its books and records and to make copies and
take extracts therefrom, and to discuss its affairs, finances, and accounts with
its  officers,  accountants,  and agents,  all upon  reasonable  notice from the
Administrative Agent during normal business hours.

                  (g) Maintenance of Property.  Keep all Mortgaged Properties in
good working order and condition  and operate  Mortgaged  Properties in a manner
consistent  with the operation  thereof as an extended stay facility,  including
ancillary  facilities  related  thereto,  and otherwise  consistent with prudent
business practices.

                  (h)0  Management of  Properties. Subject to the  provisions of
Section 5.5 hereof,  Borrower or a Subsidiary of Borrower shall directly operate
and manage the  business of the  Borrower at each of the  Mortgaged  Properties;
provided,  however,  that with the prior written  consent of all of the Lenders,
which consent shall not be unreasonably  withheld, the Borrower may hire another
Person to operate and manage any Mortgaged Property.



<PAGE>


                  (i)      Hazardous  Materials  Removal.  Subject to the
provisions of Section 5.5 hereof,  abate and/or  remove any Hazardous  Materials
present in, on or under any of the  Mortgaged  Properties  in  violation  of any
applicable Requirement of Law.

                  (j)  Covenants  in  the  Loan   Documents.   Subject  to  the
provisions  of Section  5.5  hereof,  perform  all  covenants  (affirmative  and
negative) contained in each of the Loan Documents with the same effect as if set
forth in their entirety herein.

                  (k)     Insurance.  Subject  to the  provisions  of  Section
5.5  hereof,  maintain  upon  or  in  connection  with  each  of  the  Mortgaged
Properties:

                           (i)      Property and  casualty  insurance  coverage
evidenced by original or certified  copies of insurance  policies or binders for
such insurance,  together with evidence that the premiums for such policies have
been paid current.  Such  insurance  policies shall insure each of the Mortgaged
Properties  for one  hundred  percent  (100%)  of their  full  replacement  cost
(exclusive of footings and  foundations)  in so-called  All risk  form and with
coverage for floods,  earthquakes  (except as provided in subsection (ii) below)
and such other hazards (including collapse  and explosion ) as the Lenders may
require  for  each  of the  Mortgaged  Properties  and as  are  consistent  with
reasonable and customary  requirements in the industry.  Such insurance policies
shall contain replacement cost and agreed amount endorsements (with no reduction
for depreciation),  an endorsement  providing Building Ordinance Coverage and an
endorsement covering the costs of demolition and increased costs of construction
due to the  enforcement  of building  codes or  ordinances.  To the extent there
exists a boiler on the  premises of any of the  Mortgaged  Properties,  Borrower
shall  also  furnish  insurance  providing  boiler and  machinery  comprehensive
coverage for all mechanical  and electrical  equipment at each of such Mortgaged
Properties  insuring  against  breakdown  or  explosion  of such  equipment on a
replacement cost value basis.  Borrower shall also furnish business interruption
or loss of rental  income  insurance in  connection  with all policies  covering
property and boiler and  machinery  insurance  for a period of not less than one
(1) year endorsed, other than with respect to boiler and machinery insurance, to
provide a 180 day extended  period of indemnity.  All insurance  required  under
this subsection  5.1(k) shall be with companies and in amounts and with coverage
and deductibles  satisfactory to the Lenders.  All insurance required under this
subsection  5.1(k)(i)  with respect to the  Mortgaged  Properties  shall include
endorsements  naming  the  Administrative  Agent as loss  payee,  and shall have
endorsed thereon the standard  mortgagee  clause in favor of the  Administrative
Agent.  All companies  issuing policies  required under subsection  5.1(k) shall
have a current Best  Insurance  Reports  rating no less favorable than A- , and
all such  companies  shall be licensed  to do  business in the states  where the
applicable Mortgaged Property is located. All policies required under subsection
5.1(k)  shall  provide that (A) the  insurance  evidenced  thereby  shall not be
canceled or modified without,  in the case of non-payment of premiums,  at least
ten  (10)  days  prior  written  notice  from  the  insurance  carrier  to  the
Administrative Agent, or, in any other circumstance,  at least thirty (30) days
prior written notice from the insurance carrier to the Administrative Agent; and
(B) no act or thing done by the  Borrower,  or any  Affiliate of any of Borrower
shall  invalidate the policy as against the Lenders.  The Borrower shall deliver
renewal  certificates  of all policies of insurance  required  under  subsection
5.1(k) and requested by the Administrative Agent, together with written evidence
that  the  premiums  are paid  current,  at least  ten  (10)  days  prior to the
expiration of the then current policy.



<PAGE>


                           (ii)      earthquake  insurance  provided  for  in
subsection  5.1(k)(i)  only for the Mortgaged  Properties and only to the extent
(A) any Mortgaged  Property is located in an earthquake  prone area and (B) such
insurance is available at commercially reasonable rates.

                           (iii)0      Liability  and  worker's  compensation
insurance  evidenced  by original or  certified  copies of  insurance  policies,
binders for such insurance policies, or certificates of insurance, together with
evidence  that the  premiums  for such  policies  have been paid  current.  Such
insurance  shall  provide  for  (A)  commercial  general  liability   (including
contractual  liability)  covering  each  of the  Mortgaged  Properties  and  the
Borrower's and its Subsidiaries  operations  thereon in an amount not less than
$1,000,000  per  occurrence  and not less than  $1,000,000 per occurrence in the
aggregate;  (B)  commercial  automobile  liability  with a limit  not less  than
$1,000,000  combined  single  limit and be  endorsed to cover  owned,  hired and
non-owned  automobiles;  and (C) worker's compensation insurance covering all of
the Borrower's and its Subsidiaries employees and contracted parties (including
their  employees)  situated at the Mortgaged  Properties in accordance  with the
statutory  requirements of the states where the applicable Mortgaged Property is
located and including an endorsement  for  employer's  liability  coverage.  The
Borrower  shall  also  furnish  umbrella  liability  coverage  in  excess of the
foregoing  liability  coverage  with a limit of not less  than  $9,000,000.  The
commercial  general  liability and  automobile  policies and umbrella  liability
policy shall name the Lenders as additional  insureds.  Such policies shall also
contain a so-called Aproducts-completed operations endorsement.

                           (iv)     Insurance insuring against loss or damage by
perils  customarily  included under  standard  Abuilder's  risk completed  value
non-reporting  form  and which include all  insurance  required to be carried by
Borrower, as Aowner,  under the provisions of all construction  contracts let by
Borrower;  provided that such insurance shall insure all  construction on all of
the Mortgaged Properties,  including, without limitation, the construction of an
extended  stay  facility  and  ancillary  facilities  related  thereto  on  each
Mortgaged  Property,  including  all  materials  in storage and while in transit
during construction.

                           (v)      flood  insurance  with respect to any
Mortgaged  Property which is at any time  identified by the Secretary of Housing
and Urban Development as having special flood hazards.



<PAGE>


                  (l) Further  Assurances.  The Borrower  agrees upon demand of
the Administrative  Agent (i) to do any act or execute any additional  documents
(including,  but not limited to, security  agreements on any personalty included
or to be  included  in the  Collateral)  as may be  reasonably  required  by the
Administrative Agent to confirm the Lien of the Loan Documents or to exercise or
enforce  its  rights  under this  Agreement,  the  Promissory  Notes or the Loan
Documents  and to  realize  thereon,  and (ii) to  execute  and  deliver  to the
Administrative Agent and/or the Lenders such additional documents and to provide
such additional  information as the Administrative  Agent and/or the Lenders may
reasonably  require to carry out or confirm the terms of this  Agreement  or the
other Loan  Documents.  This  covenant  shall  survive the  termination  of this
Agreement  until  payment  in full of all  amounts  due  hereunder  or under the
Promissory  Notes and the Loan  Documents,  provided that the covenant  shall be
reinstated if any payment of all amounts due  hereunder or under the  Promissory
Notes and the Loan  Documents  is  required  to be  returned to the payor or any
other party under any applicable bankruptcy law.

                  (m)     Year 2000 Compliance.

                           (i)      Borrower has reviewed its  business  and
operations  and has  developed  a plan (the Y2K  Plan ) to  address on a timely
basis  the  risk  that  computer  applications  used  by it in  performing  date
sensitive  functions  and  involving  dates  prior  to  December  31,  1999  and
thereafter  (such risk being  herein  referred  to as the AY2K  Problem )  would
reasonably be expected to have a Material Adverse Effect.

                           (ii)     Pursuant to the Y2K Plan, Borrower is taking
and will take reasonable efforts to address the Y2K Problem on an ongoing basis.

     Section 5.2 Reporting  Covenants.  So long as the Loan remains in effect or
any monetary  obligation to the Lenders  hereunder or under the Promissory Notes
or the other Loan Documents  shall remain  unpaid,  the Borrower will furnish to
the  Administrative  Agent  at the  Borrower's  sole  cost and  expense  (unless
expressly waived by the Administrative Agent or the Lenders as provided herein).

                  (a) Annual Financial  Statements With Respect to the Borrower.
As soon as available  and in any event within  ninety (90) days after the end of
each  fiscal  year  (unless the filing  requirements  have been  extended by the
Securities  and Exchange  Commission  (SEC ),  in which case the 90-day  period
shall be  extended  until the earlier of the date of filing with the SEC or such
extended date granted by the SEC), a consolidated  balance sheet of the Borrower
and its  Subsidiaries  as at the end of such year and the  related  consolidated
statements of income,  shareholders  equity,  and cash flow of the Borrower and
its Subsidiaries for such fiscal year, setting forth in each case in comparative
form the figures for the previous  fiscal  year,  all in  reasonable  detail and
accompanied by a report thereon of Arthur Andersen or other  independent  public
accountants  of  comparable  recognized  national  standing  acceptable  to  the
Administrative  Agent,  which such report  shall be  unqualified  as to scope of
audit and shall state that such consolidated financial statements present fairly
the consolidated  financial condition as at the end of such fiscal year, and the
consolidated  results of  operations  and  changes in cash flow for such  fiscal
year,  of the Borrower  and its  Subsidiaries  in  accordance  with GAAP,  and a
statement of sources and uses of funds in the form of Exhibit I,  indicating  to
Administrative Agent's satisfaction, that (A) the Borrower's sources and uses of
funds are in balance with  respect to  Borrower's  business in general,  (B) the
Borrower  has  adequate   sources  to  make  each  Project   under   Development
Construction  Complete and (C) the Borrower has adequate  sources to satisfy the
Borrower's cash requirements.



<PAGE>


                  (b)  Quarterly  Financial   Statements  With  Respect  to  the
Borrower. As soon as available and in any event within sixty (60) days after the
end of each fiscal  quarter other than the last fiscal  quarter of a fiscal year
(unless the filing  requirements have been extended by the SEC in which case the
60-day period shall be extended until the earlier of the date of filing with the
SEC or such extended date granted by the SEC), a  consolidated  balance sheet of
the Borrower and its  Subsidiaries as at the end of such quarter and the related
consolidated  statements  of  income  and  cash  flow  of the  Borrower  and its
Subsidiaries  for such fiscal  quarter  and/or for the portion of the Borrower's
fiscal  year  ended at the end of such  quarter,  setting  forth in each case in
comparative form the figures for the corresponding quarter and the corresponding
portion of the Borrower's  previous  fiscal year,  all in reasonable  detail and
certified by the Controller or chief financial officer of the Borrower that they
are complete and correct and that they fairly present the consolidated financial
condition  as at the end of such fiscal  quarter,  the  consolidated  results of
operations  and changes in cash flow for such fiscal quarter and/or such portion
of the  Borrower's  fiscal  year,  of  the  Borrower  and  its  Subsidiaries  in
accordance  with GAAP (subject to normal,  year-end  audit  adjustments),  and a
statement of sources and uses of funds in the form of Exhibit I,  indicating  to
Administrative  Agent's satisfaction that (A) the Borrower's sources and uses of
funds are in balance with  respect to  Borrower's  business in general,  (B) the
Borrower  has  adequate   sources  to  make  each  Project   under   Development
Construction  Complete and (C) the Borrower has adequate  sources to satisfy the
Borrower's cash requirements.

                  (c) Annual  Financial  Statements  With  Respect to  Mortgaged
Properties.  As soon as available  and in any event within 90 days after the end
of each fiscal year of the Borrower or at such time as the financial  statements
described in Section 5.2(a) above are furnished to the  Administrative  Agent, a
statement with respect to each of the Mortgaged Properties for such fiscal year,
each of which  statements  shall (i) be in the form of Exhibit J annexed hereto,
and contain in  comparative  form the  information  required  to  complete  such
Exhibit in the manner and detail  contemplated  by such Exhibit,  (ii) set forth
the Net Operating  Income of each such Mortgaged  Property in comparative  form,
and (iii) be  certified  by the  Controller  or chief  financial  officer of the
Borrower  that they are  complete  and correct and that they fairly  present the
information  required to complete  such Exhibit for each such property as at the
end of such  fiscal  year,  in  accordance  with GAAP and (iv)  state  that such
statement presents fairly the information  required to complete such Exhibit for
each such property as at the end of such fiscal year, in accordance with GAAP.

                  (d) Quarterly  Financial  Statements With Respect to Mortgaged
Properties.  As soon as available and in any event within thirty (30) days after
the end of each fiscal quarter of Borrower,  a statement with respect to each of
the  Mortgaged  Properties as at the end of such fiscal  quarter,  each of which
statements shall (i) be in the form of Exhibit J annexed hereto,  and contain in
comparative form the information required to complete such Exhibit in the manner
and detail contemplated by such Exhibit, (ii) set forth the Net Operating Income
of each such Mortgaged  Property in comparative  form, and (iii) be certified by
the Controller or chief financial officer of the Borrower that they are complete
and correct and that they fairly  present the  information  required to complete
such Exhibit for each such property as at the end of such Accounting  Period, in
accordance with GAAP (subject to normal, year-end audit adjustments).



<PAGE>


                  (e)  No  Default/Compliance  Certificate.  Together  with  the
financial  statements  required  pursuant to  subsections  (a), (b), (c) and (d)
above,  a certificate of the  President,  the Controller or the chief  financial
officer  of the  Borrower  to the  effect  that,  based  upon  a  review  of the
Borrower's  activities and such financial  statements  during the period covered
thereby,  there exists no Event of Default and no Default under this  Agreement,
or if there exists an Event of Default or a Default  hereunder,  specifying  the
nature  thereof  and the  Borrower's  actions  taken or  proposed to be taken in
response thereto.  The President,  the Chief Financial Officer or the Controller
of the Borrower shall  complete the form of certificate  annexed as Exhibit G to
this Agreement and shall certify thereon that the Borrower is in compliance with
all financial covenants under this Agreement.

                  (f)  Notice of Default or Events of  Default.  Promptly  after
acquiring  knowledge of the  occurrence  of a Default or an Event of Default (or
the  occurrence  of any event or  existence of any  condition  which but for the
application  of Section 5.5 would  constitute a Default or Event of Default),  a
certificate of the president or chief financial officer or the Controller of the
Borrower  specifying  the nature thereof and the  Borrower's  proposed  response
thereto.

                  (g) Litigation. Promptly after (i) the occurrence thereof, the
Borrower  shall deliver notice of the  institution of or any  development in any
action,   suit,  or  proceeding  or  any   governmental   investigation  or  any
arbitration,   before  any  court  or   arbitrator   or  any   governmental   or
administrative body, agency, or official,  against the Borrower or any Mortgaged
Property in writing,  (ii) the Borrower receives actual knowledge  thereof,  the
Borrower  shall  deliver  notice  of  the  threat  of  any  such  action,  suit,
proceeding,  investigation,  or  arbitration,  or  (iii)  receipt  thereof,  the
Borrower shall deliver notice of any claims  relating to the Lenders  interests
or any proposal by a Governmental Authority to acquire any part of the Mortgaged
Properties  (other than any such proceeding or development  which, as reasonably
likely to be determined,  would not  constitute or result in a Material  Adverse
Change).

                  (h) Adverse  Change.  Immediately  after the Borrower knows of
the occurrence of any Material Adverse Change, a certificate of any Co-Chairman,
the President,  any Senior Vice President,  any Vice President or the Controller
or chief financial officer of the Borrower specifying the nature of such change.

                  (i) Shareholder  Communications,  Filings,  Etc. Promptly upon
the  mailing  or  filing  thereof,  the  Borrower  shall  deliver  copies of all
financial  statements,  reports,  and proxy statements  mailed to the Borrower's
shareholders  generally,  and copies of all final  registration  statements  and
other final documents filed with the Securities and Exchange  Commission (or any
successor thereto) or any national securities exchange.

                  (j) Title Endorsements. On or before March 31, 2001 and on or
before each March 31  occurring  thereafter  during the term of the Loan,  title
policy  endorsements  which  have the  effect of  redating  the  title  policies
insuring the Liens of the Mortgages with no exceptions  other than the Permitted
Exceptions,  to be obtained at Borrower's  sole cost and expense and to be dated
as of a date no later  than the date  which is  thirty  (30)  days  prior to the
outside date for the delivery thereof.

                  (k) FIRREA  Appraisals.  On or before the date which is sixty
(60) days after the Closing Date,  FIRREA Appraisals with respect to each of the
eight  Mortgaged  Properties  to which an  appraised  value is not  ascribed  on
Schedule 1 annexed hereto.

                  (l)     Updated  Appraisals.  On or before  April 30,  2001,
FIRREA Appraisals with respect to each of the Mortgaged Properties,  dated as of
a date not more  than 60 days  prior to April  30,  2001.  Such  appraisals  are
referred to herein , collectively, as the AUpdated Appraisals.



<PAGE>


                  (M)    Other  Information.  With reasonable  promptness,  such
information  about the  Borrower,  Realty and the  Mortgaged  Properties  as the
Administrative Agent or the Lenders may reasonably request from time to time.

         Section 5.3  Certain Negative Covenants. Neither  Borrower nor, with
respect to  subsection  (a),  (m) to (t),  (v), (w) or (x),  any  Subsidiary  of
Borrower will:

                  (a)      Indebtedness. Create, incur, assume, or suffer to
exist, any Indebtedness other than:

                           (i)      the Indebtedness hereunder and under the
other Loan Documents; and

                           (ii)      Indebtedness  outstanding  on  the  date
hereof which is reflected in the Borrower's  financial statements referred to in
Section 4.5(a) and in Schedule 4 annexed hereto;

                           (iii)      unsecured  liabilities  (not the result of
borrowing)  incurred in the ordinary course of business for current purposes and
not represented by any note or other evidence of Indebtedness  and which are not
past due more than 90 days;

                           (iv)      non-recourse   Indebtedness   to   third
parties (Permissible Assumed Indebtedness);

                           (v) liability to a surety under  performance bonds or
similar instruments  incurred in connection with the Borrower's  construction of
extended stay facilities on the Borrower's property;

                           (vi)      Indebtedness  due and  payable  solely  to
a Subsidiary of Borrower or by a Subsidiary to Borrower; and

                           (vii)      The guaranty of lease obligations under
the Sale-Leaseback Facility;

                           (viii) subject to Lenders prior written consent,
which consent  shall not be  unreasonably  withheld,  and provided no Default or
Event of Default has occurred,  Indebtedness arising from the refinancing of the
Indebtedness referred to in Schedule 4 annexed hereto; provided:

                                    (a)     such refinanced Indebtedness is not
secured by any of the Collateral;

                                    (b)     then existing  non-recourse
Indebtedness is not exchanged for recourse (however limited) Indebtedness;

                                    (c)     Borrower,  prior to and following
the closing of such  refinancing,  is in compliance with the covenants set forth
in this Article V; and



<PAGE>


                                    (d)     such  refinanced   Indebtedness
does not make any change in, the condition or affairs of Borrower  which, in any
Lender's opinion, increases its credit risk.

                  (b)  Total   Liabilities.   (1)  Permit   there  to  be  Total
Liabilities of Borrower,  at any time, in excess of the amount equal  fifty-five
percent (55%) of Gross Asset Value C Cost.

                           (i)   Permit there to be Total  Liabilities  of
Borrower, at any time, in excess of the amount equal to:

                                    (a)     for the first  calendar  quarter of
2000, 65% of Gross Asset Value C Market;

                                    (b)     for the second  calendar  quarter of
2000, 60% of Gross Asset Value C Market;

                                    (c)     for the third  calendar  quarter of
2000, 57.5% of Gross Asset Value C Market; and

                                    (d)     for the fourth  calendar  quarter of
2000 and  thereafter at all times up to and including the Maturity  Date, 55% of
Gross Asset Value Market.

                  (c) Aggregate  Indebtedness.  (1) Permit there to be aggregate
Indebtedness  of the  Borrower,  at any time,  in excess of the amount  equal to
fifty percent (50%) Gross Asset Value Cost.

                           (i)      Permit there to be aggregate  Indebtedness
of the Borrower, at any time, in excess of the amount equal to:

                                    (a)     for the first  calendar  quarter of
2000, 60% of Gross Asset Value Market;

                                    (b)     for the second  calendar  quarter of
2000, 55% of Gross Asset Value Market;

                                    (c)     for the third  calendar  quarter of
2000, 52.5% of Gross Asset Value Market; and

                                    (d)     for the fourth  calendar  quarter of
2000 and at all times  thereafter up to and including the Maturity  Date, 50% of
Gross Asset Value Market.

                  (d)  Interest  Expense  Ratios.  Maintain a ratio of EBITDA to
Interest Expense less than:

                           (i) for the first calendar quarter of 2000, 1.75:1.0;



<PAGE>


                           (ii)      for the second calendar quarter of 2000,
1.90:1.0; and

                           (iii)      for the third  calendar  quarter of 2000
and at all times thereafter up to and including the Maturity Date, 2.00:1.0.

                  (e) Debt Service  Ratios.  Maintain a ratio of Adjusted EBITDA
to Debt Service less than:

                           (i)      for the first calendar quarter of 2000,
1.25:1.0; and

                           (ii)      for the second calendar  quarter of 2000
and at all times thereafter up to and including the Maturity Date, 1.5:1.0.

                  (f) Implied Debt Service Ratios.  Maintain a ratio of Adjusted
Pool NOI to Implied Pool Debt Service less than:

                           (i)      for the first calendar quarter of 2000,
2.00:1.0; and

                           (ii2)      for the second calendar  quarter of 2000
and at all times thereafter up to and including the Maturity Date, 2.25:1.0.

                  (g) Net Worth.  Maintain,  at any time,  a Net Worth less than
eighty five percent  (85%) of its Net Worth as of December  31,  1999,  adjusted
upwards  (but  not  downwards)  by  eighty  five  percent  (85%) of the net cash
proceeds  and  other  value  derived  form the  Borrower's  issuance  of  equity
securities after the Closing Date.

                  (h) Available Amount. Permit the aggregate principal amount of
the Loan at any time to exceed  $110,000,000,  or the aggregate principal amount
of all borrowings of the Revolving Portion of the Loan to exceed $35,000,000.

                  (i)  Dividends  and   Distributions.   Make  any  dividend  or
distribution  prior  to  March  31,  2000.  Thereafter,  make  any  dividend  or
distribution  which would cause the aggregate of all dividends or  distributions
made by the  Borrower  at any time  subsequent  to March 31,  2000 to exceed the
Maximum Dividend Amount,  as determined as of the date of the declaration of the
dividend or distribution,  provided,  however, that in no event may the Borrower
make a dividend or distribution  during the continuance of a Default or Event of
Default.

                  (j) Debt Yield.  Permit  there at any time to be a Debt Yield
with respect to the Mortgaged Properties of less than 20%.

                  (k)     Loan to Appraised Value and Loan to Eligible Costs.

                           (i)      At all times  during the period  commencing
on the  Closing  Date and  ending  on April 30,  2001,  permit  the  outstanding
principal  balance of the Loan to exceed an amount equal to 20% of the aggregate
Appraised Value of the Mortgaged Properties.



<PAGE>


                           (ii)      At all  times  during  the  period
commencing May 1, 2001 and ending on the Maturity Date,  permit the  outstanding
principal  balance of the Loan to exceed an amount equal to 30% of the aggregate
Appraised Value of the Mortgaged Properties.

                         (iii) At all times during the term of the Loan,  permit
the outstanding principal
amount of the Loan to exceed an amount equal to 25% of Eligible Costs applicable
to the Mortgaged Properties.

                  (l)  Security   Capital.   Permit   Security   Capital  Group
Incorporated to directly or, through a wholly-owned  subsidiary,  indirectly own
less than (a)  fifty-one  percent  (51%) of the voting stock in Borrower  before
dilution  due  to  the  conversion  of  the  mortgages  in  favor  of  Archstone
Communities  Trust shown on Schedule 4 or (b) forty-six percent (46%) after such
dilution.

                  (m)  Sales,  Transfers.  Sell,  transfer  or  enter  into any
agreement  for the sale or transfer of any of the  Mortgaged  Properties,  other
than a sale or transfer or an agreement  for the sale or transfer of a Mortgaged
Property with respect to which all  conditions and  requirements  to the Release
thereof  pursuant to Section 8.11 hereof are (as of the date of such  agreement)
capable of being, and upon such sale or transfer shall be, satisfied.

                  (n) Liens. Create, incur, assume, or suffer to exist any Lien
on any  Mortgaged  Property to secure any  Indebtedness  of the  Borrower or any
other Person, other than Permitted Encumbrances.

                  (o) Mergers,  Sales,  Etc. (i) Merge into or consolidate with
any other  Person;  (ii) sell,  assign,  lease,  transfer,  convey or  otherwise
dispose of (in one transaction or a series of transactions) all or substantially
all of the Borrower's or such  Subsidiary's  assets,  as the case may be, to any
Person or group (as such term is used in Section  13(d)(3) of the Exchange Act),
(iii) the liquidation or dissolution of the Borrower or such Subsidiary,  as the
case may be, or the  adoption of a plan by the  stockholders  of the Borrower or
such Subsidiary,  as the case may be, relating to the dissolution or liquidation
of the Borrower or such Subsidiary,  as the case may be, (iv) the acquisition by
any Person or group (as such term is used in Section  13(d)(3)  of the  Exchange
Act), except for Realty or Affiliates  thereof, of a direct or indirect majority
interest  (more  than  50%) of the  voting  power  of the  capital  stock of the
Borrower by way of purchase, merger or consolidation or otherwise; or (v) during
any period of two  consecutive  years,  individuals who at the beginning of such
period  constituted  the Board of Directors of the Borrower  (which includes any
new directors whose election by such Board of Directors or whose  nomination for
election by the  stockholders of the Borrower was approved by a vote of at least
two thirds (2/3) of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously  so  approved)  cease for any reason to  constitute a majority of the
Board of Directors of the Borrower.

                  (p)  Changes in Property or  Business.  Except in  connection
with the  development  of an extended  stay  facility and  ancillary  facilities
related thereto or with the prior written consent of the Required Lenders:



<PAGE>


                           (a)       Make or allow any  material  change to be
made in the nature of the use of any  Mortgaged  Property,  or any part  thereof
from that in effect on the date hereof or the date acquired, as the case may be;
or

                           (b)       Initiate or acquiesce in any change in any
Use Requirements now or hereafter in effect and affecting any Mortgaged Property
or any part thereof.

                  (q) Transactions with Affiliates. Purchase, acquire, or lease
any  property  from,  or sell,  transfer,  or lease any  property to, or lend or
advance any money to, or borrow any money from, or guarantee any  obligation of,
or acquire any stock, obligations, or securities of, or enter into any merger or
consolidation  agreement,  or any  management  or similar  agreement  with,  any
Affiliate,  or enter  into any  other  transaction  or  arrangement  or make any
payments to (including,  without limitation,  on account of any management fees,
service fees, office charges, consulting fees, technical service charges, or tax
sharing  charges) or otherwise deal with, in the ordinary  course of business or
otherwise,   any  Affiliate  on  terms  other  than  arm's-length   commercially
reasonable terms (other than (i) any such  transactions in effect on the Closing
Date and described in Schedule 7 annexed hereto,  and (ii) any such transactions
between  the  Borrower  and any of its  wholly-owned  Subsidiaries  and  between
wholly-owned Subsidiaries of Borrower).

                  (r) Use of Proceeds. Use the proceeds of any borrowing of the
Revolving  Portion  of the Loan for any  purpose  other  than those set forth in
Section 2.15(e) hereof.

                  (s) Change of Business.  Make or allow any material change in
the nature or scope of the business of the Borrower or any Subsidiary, except as
permitted under Section 4.31.

                  (t)     Hazardous Materials. Subject to the provisions of
Section 5.5 hereof:


                           (i)      Use or permit or suffer use of any
Mortgaged  Property or any part thereof or any  interest  therein or conduct any
activity or operations thereon in any manner which:

                                    (a)     would  involve or result in the
occurrence or presence of or exposure to Hazardous  Materials  at, upon,  under,
across or within any Mortgaged  Property or any part thereof not in the ordinary
course of operation;

                                    (b)     would violate any Relevant
Environmental Laws; or

                                    (c)     would result in the occurrence of
any Environmental Discharge.



<PAGE>


                           (ii)      Install  or suffer  or  permit installation
or Presence  on, in or under any  Mortgaged  Property or any part thereof of any
underground or above-ground  containers for the storage of fuel oil, gasoline or
other petroleum products or by-products, except (i) such above-ground containers
that are required for the  operation of the  Mortgaged  Property and that are at
all  times in  compliance  with all  Relevant  Environmental  Laws and any other
applicable  Requirements  of Law and (ii) such  underground  containers that are
required  for the  operation of the  Mortgaged  Property and are at all times in
compliance  with  all  Relevant  Environmental  Laws  and any  other  applicable
Requirements of Law.

                  (u)     Projects under Development.

                           (i)      Permit there to be any Project under
Development other than those with respect to which Borrower shall have delivered
to Agent  evidence  reasonably  satisfactory  to Agent  demonstrating  that such
Projects under Development are capable of being made Construction Complete using
funds readily available to Borrower.

                           (ii)  Permit  the  Total  Costs  of   Projects  under
Development, at any time, to exceed
ten percent (10%) of the lesser of (i) GAV Cost and (ii) GAV Market.

                           (iii)      Permit the  aggregate  amount of
Construction  Budgets to exceed ten percent (10%) of the lesser of (i) GAV Cost
and (ii) GAVC Market.

                  (v) Guarantors. Except as provided in Section 4.30(b), permit
or  suffer  any  Subsidiary  of  Borrower  to  not  guarantee  the  Indebtedness
hereunder.

                  (w)     Investments.

                           (i)      Except  as  set  forth  in  Schedule  5
annexed hereto,  Borrower and its Subsidiaries  shall not own or hold any direct
or indirect  interest in any Capital  Stock,  other than (x) Capital  Stock in a
Subsidiary  of  Borrower  and (y)  Capital  Stock  which  does  not and will not
constitute plan assets , as defined in Section 4.9 hereof.

                           (ii)      Borrower and its Subsidiaries  will not in
the  aggregate  own or hold any  direct or  indirect  interest  with  respect to
unimproved  land in excess of (a) five  percent  (5%) of the lesser of (i) GAV
Cost and (ii) GAV Market.

                           (iii)      Borrower and its Subsidiaries  will not in
the  aggregate  own or hold any direct or indirect  interest in any  mortgage or
other debt or security  instrument  in excess of the lesser of ten percent (10%)
of the lesser of (i) GAV Cost and (ii) GAV Market.

                           (iv)      Borrower and its Subsidiaries  will not in
the aggregate own or hold any direct or indirect  interest,  whether economic or
nominal,  in any limited liability company,  joint venture or partnership (other
than a wholly owned Subsidiary) in excess of fifteen percent (15%) of the lesser
of (i) GAV Cost and (ii) GAV Market, provided that in no event shall Borrower
or its  Subsidiaries  hold an interest in any such entity unless Borrower or the
applicable Subsidiary owns not less than 25% of the beneficial interests in such
entity and has the sole power at all times to direct the  management and affairs
of such entity.



<PAGE>


                           (v)      Borrower  and its  Subsidiaries  will not,
in the  aggregate,  own or hold any direct or indirect  interest  in  unimproved
land,  joint  venture,  limited  liability  company  or  partnership  interests,
mortgages  or other debt or security  instruments  or any other  investments  in
excess of twenty-five percent (25%) of the lesser of (i) GAV Cost and (ii) GAV
Market.

                  (x) Preferred Stock Issuance. Permit there to be any issuance
of preferred stock in Borrower or any Subsidiary Mortgagor.

         Section 5.4  Material Casualties. The  Borrower  agrees that if at any
time prior to the repayment in full of the Loan (including,  but not limited to,
at any time,  prior to or after an Event of Default) any  Mortgaged  Property is
damaged by fire,  earthquake  or other  casualty  in such a manner or to such an
extent  so  that  it is  unlikely,  in  the  Administrative  Agent's  reasonable
judgment,  that such  Mortgaged  Property  will be  restored  on or prior to the
Maturity Date to the same physical,  leased and operating condition as it exists
prior to such  casualty,  the  Borrower  shall,  within  twenty (20) days of the
Administrative Agent's written request,  direct that the insurance proceeds from
the casualty be delivered over to the Administrative Agent, to be applied by the
Administrative  Agent to repayment of or the Borrower's  obligations  under this
Agreement and the other Loan Documents.

         Section 5.5  Effect of Certain Representations of Covenants Being
Inaccurate  or  Breached.  In the  event  that  any of the  representations  and
warranties contained in Sections 4.11, 4.13, 4.15, 4.16, 4.17, 4.21, 4.23, 4.24,
4.26,  4.27,  4.30,  4.31 and 4.32 of this Agreement (or any  representation  or
warranty contained in any other Loan Document which is substantially  similar to
any of the foregoing  representations and warranties) are not accurate when made
or deemed made, or in the event that any of the covenants  contained in Sections
5.1(c),  (d)(ii),  (h),  (i),  (j),  (k)  and (o) and  5.3(t)  (or any  covenant
contained in any other Loan Document  which is  substantially  similar to any of
the foregoing  covenants) are breached,  then,  notwithstanding  anything to the
contrary,  such breach or inaccuracy shall not constitute or be deemed a Default
or  Event  of  Default,  and  Borrower  shall  not be  deemed  to have  made any
misrepresentation,  or breached any  warranty or covenant  unless and until (but
shall, at Administrative Agent's option,  constitute and be deemed a Default and
Event  of   Default,   and   Borrower   shall  be   deemed  to  have  made  such
misrepresentation, or breached such warranty or covenant, if and when):



<PAGE>


                  (a) (1) Borrower is given notice by the  Administrative  Agent
of the  circumstances  which,  but for this Section 5.5, would  constitute  such
misrepresentation,  or breach of warranty or covenant and such circumstances are
not remediated  (i.e, the  circumstances  which would otherwise  constitute such
misrepresentation, or breach of warranty or covenant no longer exist) within (1)
in the case of circumstances  which can be remediated by the payment of a sum of
money only, 10 days after such notice is given, and (2) in the case of all other
circumstances,  thirty  (30)  days  after  such  notice is given  plus,  if such
circumstances cannot reasonably be remediated within thirty (30) days after such
notice is given and the  Borrower  has during such 30-day  period  commenced  to
remediate such  circumstances  and thereafter  diligently  pursues all necessary
efforts to effect such  remediation,  such  additional  period of time as may be
required  to effect such  remediation;  provided,  however,  that if at any time
during any cure  period  described  above  regarding  circumstances  the cost to
remediate  which are  quantifiable,  Borrower  shall not have provided  evidence
satisfactory to the  Administrative  Agent that the Borrower has available to it
sufficient  funds (other than from  borrowings  pursuant to this  Agreement)  to
promptly  effect any such  remediation,  then the cure period provided for above
regarding such circumstances shall immediately expire; and

                           (ii)      upon  the  expiration  of the  applicable
cure period described in Section 5.5(a)(i),  if such circumstances have not been
remediated, the aggregate principal amount of all outstanding borrowings at such
time exceeds the Eligible Maximum  Availability  Amount , as herein defined, at
such  time.  The term  Remediation  Amount  means  the  amount  which  Borrower
certifies to the Administrative Agent in writing (Borrower hereby agreeing to so
certify such amount promptly upon the  Administrative  Agent's request) as being
Borrower's  reasonable estimate (determined in a manner reasonably acceptable to
the Administrative  Agent, the basis for which  determination shall be set forth
in reasonable detail in such certification) of the aggregate cost of remediating
all  circumstances  which  would  constitute  a  misrepresentation  or breach of
warranty or  covenant of any of the  representations,  warranties  or  covenants
described  above in this Section 5.5. The term  Eligible  Maximum  Availability
Amount means, as of the date of expiration of such  applicable cure period,  the
maximum outstanding  principal balance permitted under Section 5.3(k) as of such
date  recomputed by subtracting  from the Eligible Costs and the Appraised Value
of the Mortgaged  Properties the amount by which the Remediation Amount exceeds,
if at  all,  the  lesser  of (x)  $3,000,000.00,  and  (y)  the  greater  of (A)
$300,000.00, and (B) three percent (3%) of the greater of (I) the Eligible Costs
of the  Mortgaged  Properties,  and (II) the  Appraised  Value of the  Mortgaged
Properties; or

                  (b)   all    circumstances    which   would    constitute    a
misrepresentation   or  breach  of   warranty   or   covenant   of  any  of  the
representations,  warranties or covenants  described  above in this Section 5.5,
when taken as a whole, constitute a Material Adverse Change.

In the event that any  misrepresentation  or breach of warranty or covenant with
respect  to one or more  Mortgaged  Properties  occurs  which,  pursuant  to the
provisions  of this Section 5.5,  constitutes  or will  constitute a Default and
Event of Default,  then,  subject to the terms hereof,  Borrower  shall have the
right to substitute  for such affected  Mortgaged  Properties  one or more other
properties  of the Borrower or its  Subsidiaries,  provided that (i) all of such
proposed substitute  properties are acceptable in all respects to the Lenders in
their sole, absolute and subjective discretion, (ii) all other conditions herein
to a property becoming a Mortgaged Property are satisfied and complied with, and
(iii) both before and after  giving  effect to such  proposed  substitution,  no
Default or Event of Default (other than as a result of such misrepresentation or
breach of warranty or covenant) shall exist.

         Section 5.6 New Subsidiaries. In the event any Person becomes a
Subsidiary   after  the  Closing  Date,   the  Borrower  shall  deliver  to  the
Administrative Agent within twenty (20) Business Days of such event, each of the
following items, in form and substance satisfactory to the Administrative Agent:

                  (a)      an  accession  agreement  in the form  annexed
hereto as Exhibit K executed by such Subsidiary;



<PAGE>


                  (b) the articles of  incorporation,  articles of organization,
certificate of limited partnership or other comparable organizational instrument
(if any) of such  Subsidiary  certified as of a recent date by the  Secretary of
State of the State of formation of such Subsidiary;

                  (c) a Certificate  of Good Standing or  certificate of similar
meaning  with  respect  to such  Subsidiary  issued  as of a recent  date by the
Secretary of State of the State of formation of such Subsidiary and certificates
of qualification to transact business or other comparable certificates issued by
each Secretary of State (and any state department of taxation, as applicable) of
each state in which such Subsidiary is required to be so qualified;

                  (d) a  certificate  of  incumbency  signed by the Secretary or
Assistant  Secretary (or other individual  performing similar functions) of such
Subsidiary with respect to each of the officers or other representatives of such
Subsidiary  authorized  to execute and deliver the Loan  Documents to which such
Subsidiary is a party;

                  (e) copies  certified by the Secretary or Assistant  Secretary
of such Subsidiary (or other individual performing similar functions) of (i) the
bylaws of such  Subsidiary,  if a  corporation,  the operating  agreement,  if a
limited liability company,  the partnership  agreement,  if a limited or general
partnership, or other comparable document in the case of any other form or legal
entity and (ii) all corporate, partnership, member or other similar action taken
by such  Subsidiary to authorize the execution,  delivery and performance of the
Loan Documents to which it is a party;

                  (f) an opinion of legal counsel to such Subsidiary,  regarding
the due  formation  and good  standing of such  Subsidiary,  the  authorization,
execution,  delivery and  enforceability  of the Loan Documents to which it is a
party, and such other matter as the Administrative Agent may reasonably request;
and

                  (g)      such  other  documents  and  instruments  as the
Administrative Agent may reasonably request.


                          ARTICLE VI. EVENTS OF DEFAULT

        Section 6.1  Events of Default. The occurrence and continuance of any of
the following specified events shall constitute an Event of Default :

                  (a) Payments. The Borrower shall fail to pay (i) any principal
of the Loan when due, or (ii) within three (3) days when due (including, without
limitation, by mandatory prepayment) (1) any interest on the Loan or any fees or
(2) any other amount payable hereunder or under the other Loan Documents.

                  (b)  Certain  Property   Representations  and  Covenants.  Any
misrepresentation  or breach of warranty or covenant  occurs which,  pursuant to
the  provisions  of  Section  5.5  hereof,  constitutes  a Default  and Event of
Default.



<PAGE>


                  (c)  Other  Covenants.  The  Borrower  or  any  Subsidiary  of
Borrower shall fail to observe or perform any covenant or agreement  (other than
those  referred to in Sections  6.1(a) and (b)) and such  failure  shall  remain
unremedied (i) in the case of any amounts  payable  hereunder or under the other
Loan Documents for three (3) Business Days after notice from the  Administrative
Agent, (ii) in the case of covenants or agreements  contained in Section 5.2(a),
(b), (c) and (d) of this  Agreement,  for fifteen (15)  Business  Days after the
occurrence  thereof;  or (ii) in all other cases, for thirty (30) days after the
occurrence thereof. In the event that a breach of a covenant described in clause
(ii) above cannot be cured within thirty (30) days after the occurrence  thereof
and the Borrower has during such 30-day period commenced to cure such breach and
thereafter  diligently  pursues all necessary efforts to effect a cure, an Event
of Default  shall be deemed only to have occurred if the breach either cannot be
remedied,  or  remains  unremedied,  for sixty  (60) days  after the  occurrence
thereof.

                  (d)   Representations.   Any  representation,   warranty,   or
statement  (other than those referred to in Section 6.1(b)) made or deemed to be
made by the Borrower or any other Person (other than the Administrative Agent or
any Lender) that is a party to any Loan Document under or in connection with any
Loan Document shall have been  incorrect in any material  respect as of the date
hereof, or as of the date deemed to have been made.

                  (e)  Non-Payments of Other  Indebtedness.  The Borrower or any
Subsidiary  of  Borrower  shall  fail to make any  payment  of  principal  of or
interest on any Indebtedness of the Borrower or any such Subsidiary  (other than
any Indebtedness under this Agreement or the other Loan Documents and other than
Permissible  Assumed  Indebtedness) in an aggregate principal amount of not less
than  $5,000,000.00  within the applicable cure period or any event specified in
any note,  agreement,  indenture or other document evidencing or relating to any
such  Indebtedness  shall  occur;  and the effect of such failure or event is to
accelerate,  or to permit the holder of such aggregate Indebtedness or any other
Person to accelerate,  the maturity of such  Indebtedness;  or such Indebtedness
shall be required to be prepaid  (other than by a regularly  scheduled  required
prepayment) in whole or in part prior to its stated maturity.

                  (f) Defaults Under Loan  Documents.  The Borrower or any other
Person  (other than the  Administrative  Agent or any Lender) that is a party to
any Loan  Document  shall fail to observe or perform any  covenant or  agreement
(other than those referred to in Sections 6.1(a) and (b)) contained in any other
Loan Document,  or any default shall occur under any other Loan Document  (other
than those  referred to in Sections  6.1(a) and (b)) and such failure or default
shall remain  unremedied (i) in the case of any amounts  payable under the other
Loan Documents, for three (3) days after notice from the Administrative Agent or
the Administrative Agent, (ii) in the case of covenants or agreements similar to
the covenants or  agreements  contained in Section  5.2(a),  (b), (c) and (d) of
this Agreement,  for fifteen (15) Business Days after the occurrence thereof; or
(iii) in all other cases,  thirty (30) days after the occurrence thereof. In the
event that a breach of a covenant described in clause (ii) above cannot be cured
within thirty (30) days after the occurrence thereof and the Borrower has during
such  30-day  period  commenced  to cure such breach and  thereafter  diligently
pursues all  necessary  efforts to effect a cure,  an Event of Default  shall be
deemed only to have occurred if the breach either cannot be remedied, or remains
unremedied, for sixty (60) days after the occurrence thereof.



<PAGE>


                  (g)  Bankruptcy.  The Borrower shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled ABankruptcy
as now or hereafter in effect, or any successor thereto (the ABankruptcy Code );
or an involuntary case is commenced against the Borrower and the petition is not
dismissed  within  ninety  (90)  days,  after  commencement  of the  case;  or a
custodian (as defined in the Bankruptcy  Code) is appointed for, or takes charge
of, all or any substantial part of the property of the Borrower; or the Borrower
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors,  dissolution,  insolvency, or liquidation or similar
law of any  jurisdiction  whether  now or  hereafter  in effect  relating to the
Borrower or there is commenced  against the Borrower any such  proceeding  which
remains  undismissed  for a period of  ninety  (90)  days;  or the  Borrower  is
adjudicated  insolvent  or  bankrupt;  or any  order of  relief  or other  order
approving any such case or proceeding  is entered;  or the Borrower  suffers any
appointment of any custodian or the like for it or any  substantial  part of its
property to continue  undischarged or unstayed for a period of ninety (90) days;
or the Borrower makes a general assignment for the benefit of creditors;  or the
Borrower shall fail to pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts  generally  as they become due; or the  Borrower  shall
call a meeting  of its  creditors  with a view to  arranging  a  composition  or
adjustment  of its  debts;  or the  Borrower  shall by any act or failure to act
indicate its consent to,  approval of, or  acquiescence in any of the foregoing;
or any action is taken by the Borrower  for the purpose of effecting  any of the
foregoing; or any of the foregoing shall occur with respect to any Subsidiary of
Borrower.

                  (h) Money  Judgment.  A judgment  or order for the  payment of
money in excess of  $5,000,000  shall be rendered  against  the  Borrower or any
Subsidiary of Borrower and such judgment or order shall continue unsatisfied (in
the case of a money  judgment)  and in effect  for a period of thirty  (30) days
during which execution shall not be effectively  stayed or deferred  (whether by
action of a court, by agreement,  or otherwise) (or, if such judgment is covered
by insurance, such longer period during which the Borrower or such Subsidiary is
appealing or otherwise contesting such judgment in good faith).

                  (i)  Cessation.  Borrower or, without the prior consent of all
Lenders,  which  consent may not be  unreasonably  withheld,  any  Subsidiary of
Borrower which is not an Urban Subsidiary (as hereinafter  defined)  ceases,  or
threatens to cease,  to carry on all or a substantial  part of its business.  As
used  herein,  an Urban  Subsidiary   is a  Subsidiary  of  Borrower  which has
mortgaged property to the Administrative Agent, as agent, pursuant to the credit
facility referred to in subsection (j) below.

                  (j)  Sale-Leaseback  Facility.  A default shall have occurred
under the Sale-Leaseback Facility and shall remain uncured beyond the expiration
of any applicable notice or grace period.



<PAGE>


         Section 6.2  Global Remedies. Upon the occurrence and  continuation of
an Event of Default,  and at any time thereafter,  if any Event of Default shall
then be continuing, the Required Lenders may, by written notice to the Borrower,
take any or all of the following actions, without prejudice to the rights of the
Lenders to  enforce  its claims  against  the  Borrower:  (i)  declare  the Loan
terminated,  whereupon the Loan shall terminate immediately; (ii) declare all or
any portion of the  principal  of and any  accrued  interest on the Loan and all
other  obligations  owing hereunder and under the other Loan  Documents,  to be,
whereupon the same shall become,  forthwith due and payable without presentment,
demand,  protest, or other notice of any kind, all of which are hereby waived by
the Borrower; (iii) foreclose on any Collateral concurrently or in such order as
the Administrative  Agent may from time to time see fit; or (iv) take any action
permitted  under any Loan  Document;  provided,  that,  if any Event of  Default
specified in Section  6.1(g) shall occur,  the actions  specified in clauses (i)
and (ii) above shall be deemed to have  immediately and  automatically  occurred
without the giving of any notice to the Borrower.



<PAGE>


         Section 6.3  Marshalling Waiver of Certain Rights; Recapture. Neither
the  Administrative  Agent  nor the  Lenders  shall be under any  obligation  to
marshall any assets in favor of the Borrower or any other party or against or in
payment  of any  or  all of the  obligations  of  such  parties.  To the  extent
permitted by law the Borrower waives and renounces the benefit of all valuation,
appraisement,  homestead,  exemption,  stay,  redemption,  and moratorium rights
under  or by  virtue  of the  constitution  and laws of the  state in which  the
Mortgaged Properties are located and of any other state or of the United States,
now existing or hereafter enacted. To the extent the Administrative Agent or any
Lender  receives any payment by or on behalf of the  Borrower,  which payment or
any part  thereof is  subsequently  invalidated,  declared to be  fraudulent  or
preferential,  set aside or required to be repaid to the Borrower or its estate,
trustee, receiver, custodian, or any other party under any bankruptcy law, state
or federal  law,  common law,  or  equitable  cause,  then to the extent of such
payment  or  repayment,  the  obligation  or part  thereof  which has been paid,
reduced,  or satisfied by the amount so repaid shall be reinstated by the amount
so repaid and shall be included  within the  liabilities of the Borrower to such
party as of the date such initial payment,  reduction, or satisfaction occurred,
together  with interest at the Default  Rate.  The Borrower  agrees that (i) the
Administrative Agent on behalf of the Lenders shall have the right to pursue all
of its rights and remedies in one proceeding, or separately and independently in
separate  proceedings  from time to time, as the  Administrative  Agent,  in its
reasonable  discretion,  shall  determine from time to time, (ii) the Collateral
may be sold at such  proceeding or  proceedings in one or more sales and in such
portions or combinations as the  Administrative  Agent, in its sole and absolute
discretion,  shall determine,  (iii) the  Administrative  Agent on behalf of the
Lenders shall not be required to marshall assets,  sell any of the Collateral in
any inverse order of  alienation,  or be subject to any Aone action or Aelection
of  remedies  law or rule,  (iv) the  exercise  by the  Lenders of any  remedies
against any one item of Collateral will not impede the Lenders from subsequently
or simultaneously exercising remedies against any other item of Collateral,  and
(v) all  Liens  and  other  rights,  remedies,  or  privileges  provided  to the
Administrative  Agent and the Lenders  under this  Agreement  and the other Loan
Documents shall remain in full force and effect until the  Administrative  Agent
and the Lenders have exhausted all of their remedies  against the Collateral and
all of the Collateral has been  foreclosed,  sold or otherwise  realized upon in
satisfaction of the Promissory  Notes and the other  obligations of the Borrower
to the  Administrative  Agent and the  Lenders.  Each  Lender and its  officers,
directors,  shareholders,  employees,  counsel  and  agents  shall not incur any
liability as a result of the sale of the  Collateral,  or any part  thereof,  in
accordance  with the provisions of this  Agreement or any Loan Document,  or for
the failure to sell or offer for sale the Collateral,  or any part thereof,  for
any reason  whatsoever.  The Borrower  waives any claims against each Lender and
its officers,  directors,  shareholders,  employees,  counsel and agents arising
with respect to the price at which the Collateral, or any part thereof, may have
been sold by reason  of the fact  that  such  price was less than the  aggregate
amount of the  indebtedness due under the Promissory  Notes,  this Agreement and
the other Loan Documents.

         Section 6.4      Application of Proceeds

                  (a) All proceeds received by the  Administrative  Agent or the
Lenders in respect of the  repayment of any sums due  hereunder or in connection
with a  foreclosure  sale of all or any  portion  of the  Collateral  after  the
occurrence  of an Event of  Default  shall be  applied,  first,  to the costs of
enforcement of the Lenders rights hereunder and under the other Loan Documents;
second, to pay any accrued and unpaid interest  (including all interest owing at
the Default Rate),  the principal amount of the Loan and any unpaid fees payable
under this  Agreement and the other Loan  Documents in such order of priority as
the  Administrative  Agent, in its sole and absolute  discretion shall determine
but  subject to the rights of the  Lenders;  and third,  if any excess  proceeds
exist, to the Borrower or any party entitled  thereto as a matter of law. If the
amount of all proceeds  received in liquidation of the Collateral which shall be
applied to payment of the  indebtedness  due in respect of this  Agreement,  the
Promissory  Notes and the Loan Documents  shall be  insufficient to pay all such
indebtedness  or obligations in full,  the Borrower  acknowledges  that it shall
remain liable for any  deficiency,  together with interest  thereon and costs of
collection thereof (including reasonable counsel fees and legal expenses).

                  (b) The Administrative Agent shall have the right, but not the
obligation,  to deposit any proceeds in its possession which are available under
clause third of Section 6.4(a) above into a court of competent  jurisdiction for
determination  by such court of the disposition of such excess proceeds and upon
such deposit,  the  Administrative  Agent shall have no further  liability  with
respect to such proceeds.  All costs and expenses of the Administrative Agent in
connection  with such action may be  deducted  or charged by the  Administrative
Agent  against such excess  proceeds and shall  otherwise be  reimbursed  by the
Borrower upon demand. The Administrative Agent shall have the right, but not the
obligation,  to  request  and  rely  on  the  instructions  of the  Borrower  in
connection with the disposition of any such excess proceeds and, upon compliance
with such  instructions,  shall have no further  liability  with respect to such
proceeds.



<PAGE>


         Section 6.5  Attorneys in Fact.  The   Borrower   hereby   makes,
constitutes and appoints the Administrative Agent, and its agents and designees,
the true and lawful  agents and  attorneys-in-fact  of the  Borrower,  with full
power of  substitution,  to take any or all of the following  actions during the
continuance of an Event of Default: (i) to receive, open and dispose of all mail
addressed to the Borrower relating to the Collateral,  (ii) to notify and direct
the United  States Post Office  authorities  by notice  given in the name of the
Borrower  and signed on its behalf,  to change the  address for  delivery of all
mail  addressed to the Borrower  relating to the  Collateral to an address to be
designated by the  Administrative  Agent, and to cause such mail to be delivered
to such designated address where the Administrative Agent may open all such mail
and remove therefrom any notes,  checks,  acceptances,  drafts,  money orders or
other instruments in payment of the Collateral in which the Administrative Agent
has a security interest hereunder and any documents relative thereto,  with full
power  to  endorse  the  name of the  Borrower  upon  any  such  notes,  checks,
acceptances,  drafts,  money orders or other form of payment or on Collateral or
security of any kind and to effect the deposit and collection  thereof,  and the
Administrative  Agent shall have the further right and power to endorse the name
of the Borrower on any  documents  otherwise  relating to such  Collateral,  and
(iii) to do any and all other things necessary or proper to carry out the intent
of this  Agreement  and to  perfect  and  protect  the liens  and  rights of the
Administrative   Agent  created  under  this   Agreement,   including,   without
limitation, to claim, bring suit, settle or adjust any insurance proceeds claims
relating to the Collateral. The Borrower agrees that neither the Lenders nor any
of  their  officers,  directors,   shareholders,   employees,  counsel,  agents,
designees  or  attorneys-in-fact  will be liable for any acts of  commission  or
omission, or for any error of judgment or mistake of fact or law, except for any
acts of gross negligence or willful misconduct. The powers granted hereunder are
coupled with an interest and shall be irrevocable during the term hereof.


               ARTICLE VII. AGENCY AND INTERCREDITOR RELATIONSHIPS

         Section 7.1  Appointment. Each Lender hereby  irrevocably  designates
and appoints  Commerzbank AG, New York Branch as the contractual  representative
of such  Lender  under  the Loan  Documents,  and each such  Lender  irrevocably
authorizes   Commerzbank   AG,  New  York  Branch  to  act  as  the  contractual
representative  for such  Lender,  to take such  action on its behalf  under the
provisions of this  Agreement and the Loan Documents and to exercise such powers
and perform such duties as are expressly  delegated to the Administrative  Agent
by the terms of this Agreement and the Loan Documents,  together with such other
powers as are reasonably  incidental thereto. The Administrative Agent shall not
have any duties or  responsibilities,  except those  expressly set forth in this
Agreement and the Loan Documents, or any fiduciary relationship with any Lender,
and no implied covenants,  functions,  responsibilities,  duties, obligations or
liabilities  on the part of the  Administrative  Agent shall be read into any of
the Loan  Documents or otherwise  exist against the  Administrative  Agent.  The
provisions of this Article VII are solely for the benefit of the  Administrative
Agent, the Administrative Agent and the Lenders, and the Borrower shall not have
any rights as a third party beneficiary or otherwise under any of the provisions
of this Article VII. In performing its respective functions and duties under the
Loan  Documents,  the  Administrative  Agent shall act solely as the contractual
representatives  of the Lenders  and do not assume nor shall the  Administrative
Agent be deemed to have  assumed  any  obligation  or  relationship  of trust or
agency with or for the Borrower or any of such party's respective successors and
assigns.

        Section 7.2  Delegation of Duties. The  Administrative  Agent may
execute any of their  duties under the Loan  Documents  by or through  agents or
attorneys-in-fact  and shall be entitled to advice of counsel  (including  their
internal  counsel)  concerning  all  matters  pertaining  to  such  duties.  The
Administrative  Agent shall not be responsible  for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care.



<PAGE>


     Section 7.3 Exculpatory  Provisions.  The Administrative Agent shall not be
(a) liable for any  action  lawfully  taken or omitted to be taken by it, or any
Person  described in Section 7.2, under or in connection  with any Loan Document
(except  for  those  actions  arising  from  the  gross  negligence  or  willful
misconduct of the Administrative Agent), or (b) responsible in any manner to any
of the Lenders for (i) any recitals,  statements,  representations or warranties
made by the Borrower  contained in any Loan Document,  or by the Borrower in any
certificate, report, statement or other document referred to or provided for in,
or received  under or in  connection  with any Loan  Document or (ii) the value,
validity, effectiveness,  genuineness, enforceability or sufficiency of any Loan
Document or any such certificate,  report, statement or other document, or (iii)
any failure of the Borrower,  or any Lender to perform or observe its respective
obligations hereunder or thereunder. Except as expressly required to do so under
the Loan Documents,  the Administrative  Agent shall not be under any obligation
to any Lender to ascertain or to inquire as to the  observance or performance of
any of the agreements  contained in, or conditions of any Loan  Document,  or to
inspect the  properties,  or the books or records of the Borrower.  This Section
7.3  is  intended  to  govern  solely  the  relationship  between  each  of  the
Administrative Agent, on the one hand, and the Lenders, on the other.

     Section 7.4 Reliance by the Administrative  Agent. The Administrative Agent
shall be entitled to rely,  and shall be fully  protected  in relying,  upon any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram,  telecopy,  telex  or  teletype  message,  statement,  order  or other
document or conversation  (including by telephone)  believed by it to be genuine
and  correct  and to have  been  signed,  sent or made by the  proper  Person or
Persons and upon advice and  statements  of legal  counsel  (including,  without
limitation,  its  internal  counsel  and counsel to the  Borrower),  independent
accountants  and  other  experts  selected  by  the  Administrative  Agent.  The
Administrative Agent shall be fully justified in failing or refusing to take any
action  under any Loan  Document  unless it shall first  receive  such advice or
concurrence of the Lenders required pursuant to this Agreement or it shall first
be indemnified to its  satisfaction by the Lenders against any and all liability
and expense  which may be incurred  by it by reason of taking or  continuing  to
take any such action.

         Section 7.5     Notices

                  (a) The  Administrative  Agent  shall  not be  deemed  to have
knowledge or notice of the  occurrence of any Default or Event of Default unless
(i) such party has received  notice from a Lender or the  Borrower  referring to
this  Agreement,  describing  such  Default or Event of Default and stating that
such notice is a notice of default  or (ii) such party,  in its capacity as the
Administrative  Agent, has actual knowledge of such Default or Event of Default.
In the event that the  Administrative  Agent  receives  such a notice or obtains
such actual knowledge, it shall promptly give notice thereof to the Lenders. The
Administrative  Agent  shall take such action  with  respect to such  Default or
Event of Default as shall be directed by the  Required  Lenders;  provided  that
unless and until the  Administrative  Agent shall have received such directions,
the  Administrative  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 the  Administrative  Agent  shall  deem  advisable  and in the  best
interests of the  Lenders.  The  Administrative  Agent shall take no action with
respect  to  a  Default  or  Event  of  Default   except  as   directed  by  the
Administrative  Agent in writing and shall have no  liability to the Borrower or
its  Subsidiaries  or any  Lender  for  acting  on and  carrying  out  any  such
direction.

                  (b) Each  Lender  agrees  that it shall  promptly  notify  the
Administrative  Agent in writing  after it first has knowledge of any Default or
Event of Default  or of any matter  which in such  Lender's  judgment  adversely
affects  any  Lender's  respective  interests  in the Loan,  which  notice  will
describe  the Default or Event of Default or matter in  reasonable  detail.  The
Administrative  Agent  shall  give a copy of any  such  notice  received  by the
Administrative Agent to the other Lenders.



<PAGE>


                  (c) The Administrative Agent shall promptly give copies of the
financial  reports it receives pursuant to Sections 5.2(a) and (b) hereof to the
other  Lenders.  The  Administrative  Agent  shall  promptly  give copies of the
financial  reports it receives  pursuant to Sections 5.2(c) to (e) hereof to the
other Lenders.

        Section 7.6  Non-Reliance on the Administrative Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors,  employees, agents,  attorneys-in-fact or affiliates
has made any  representations  or  warranties to it and that no act by either of
the Administrative  Agent hereafter taken,  including,  without limitation,  any
review  of the  affairs  of the  Borrower  shall be  deemed  to  constitute  any
representation or warranty by the  Administrative  Agent. Each Lender represents
and warrants to the Administrative Agent that it has,  independently and without
reliance  upon the  Administrative  Agent or any other  Lender and based on such
documents  and  information  as it has  deemed  appropriate,  (a)  made  its own
appraisal  of  and  investigation  into  the  business,  operations,   property,
prospects,  financial and other condition,  creditworthiness and solvency of the
Borrower,  (b) satisfied  itself as to the due  execution,  legality,  validity,
enforceability,  genuineness, sufficiency and value of all of the Loan Documents
and all other instruments and documents furnished pursuant to any Loan Document,
and (c) made its own decision as to its  Percentage of the Loan pursuant to this
Agreement.  Each Lender also represents that it will,  independently and without
reliance upon the  Administrative  Agent or any other Lender,  and based on such
documents and information as it shall deem appropriate at the time,  continue to
make its own credit  analyses,  appraisals and decisions in taking or not taking
action  under  this  Agreement,  and to  make  such  investigation  as it  deems
necessary to inform itself as to the business, operations,  property, prospects,
financial and other condition and  creditworthiness of the Borrower.  Except for
notices,  reports and other documents  expressly  required  pursuant to the Loan
Documents  to be  furnished  by the  Administrative  Agent to the  Lenders,  the
Administrative  Agent, as applicable,  shall not have any duty or responsibility
to  provide  any  Lender  with any credit or other  information  concerning  the
business,  operations,  property,  prospects,  financial and other  condition or
creditworthiness  of the  Borrower  which  may come into the  possession  of the
Administrative  Agent or any of their officers,  directors,  employees,  agents,
attorneys-in-fact or affiliates.



<PAGE>


     Section 7.7  Indemnification.  The Lenders  agree to indemnify  each of the
Administrative   Agent  (in  their  capacities  as  such)  and  their  officers,
directors,  employees,  representatives and agents (to the extent not reimbursed
by the Borrower and without limiting the obligation,  if any, of the Borrower to
do so), ratably in accordance with their  Percentages,  from and against any and
all liabilities,  obligations,  losses, damages, penalties,  actions, judgments,
suits,  costs,  expenses  or  disbursements  of any  kind or  nature  whatsoever
(including,  without  limitation,  the fees and disbursements of counsel for the
Administrative  Agent or such  Person  in  connection  with  any  investigative,
administrative or judicial  proceeding  commenced or threatened,  whether or not
the  Administrative  Agent or such Person shall be  designated a party  thereto)
that  may at any  time be  imposed  on,  incurred  by or  asserted  against  the
Administrative Agent or such Person as a result of, or arising out of, or in any
way related to or by reason of, any of the transactions contemplated by the Loan
Documents or the  execution,  delivery or  performance of any Loan Document (but
excluding  any  such  liabilities,   obligations,  losses,  damages,  penalties,
actions,  judgments,  suits, costs,  expenses or disbursements  resulting solely
from the gross negligence or willful misconduct of the  Administrative  Agent or
such Person as determined by a court of competent jurisdiction).  The agreements
in this  subsection  shall survive the payment of the  Promissory  Notes and all
other amounts payable hereunder.

     Section  7.8  Individual   Capacity.   The  Administrative  Agent  and  its
Affiliates may make loans to, accept  deposits from and generally  engage in any
kind of business  with the Borrower and any of its  Affiliates as though it were
not the  Administrative  Agent  hereunder.  With respect to portions of the Loan
made or renewed by it and any Promissory  Note issued to it, the  Administrative
Agent shall have the same rights and powers  under this  Agreement as any Lender
and may exercise the same as though they were not the Administrative Agent.

     Section 7.9 The administrative Agents Resignation. The Administrative Agent
may resign at any time by giving notice thereof to the Administrative Agent, the
other Lenders and the Borrower.  If the  Administrative  Agent's  resignation is
given in conjunction with an assignment of the  Administrative  Agent's interest
in the  Promissory  Note held by the  Administrative  Agent to another Person or
Persons,  the  Administrative  Agent,  with the consent of the Required Lenders,
shall have the right to name a successor  Administrative  Agent by giving notice
thereof  to the  Administrative  Agent,  the  Borrower  and the  other  Lenders.
Otherwise,  upon the  resignation  of the  Administrative  Agent,  the  Required
Lenders shall designate within forty-five (45) days in writing another Person as
the successor  Administrative  Agent. If such proposed successor  Administrative
Agent agrees in writing to act as the  Administrative  Agent in accordance  with
the terms hereof, such successor Administrative Agent shall thereupon succeed to
and  become  vested  with  all  the  rights,  powers,  privileges,   duties  and
obligations   of  the  resigning   Administrative   Agent,   and  the  resigning
Administrative  Agent shall be discharged from its duties and obligations as the
Administrative  Agent under this  Agreement.  After any retiring  Administrative
Agent's resignation hereunder, the provisions of this Article VII shall inure to
its  benefit as to any  actions  taken or omitted to be taken by it while it was
the Administrative Agent under this Agreement.



<PAGE>


     Section 7.10 Appointment of a Substitute  Administrative Agent. Commerzbank
AG,  New York  Branch  shall be the  initial  Administrative  Agent  under  this
Agreement and the Loan Documents  until the Loan Documents have been  terminated
and the  Lenders  have been paid in full.  In the event that the  Administrative
Agent determines that it is not in the best interest of the Administrative Agent
to continue to act as the Administrative  Agent, then the  Administrative  Agent
may,  at its  option  and upon  thirty  (30) days  prior  written  notice to the
Borrower and the Lenders, request a substitute  Administrative Agent be selected
in accordance with the terms of this Section to act as the Administrative  Agent
with respect to such  matters.  Within  fifteen (15) days after  receipt of such
notice, the Required Lenders shall select a proposed  substitute agent and shall
notify the  Borrower  of the  identity of such  proposed  substitute  agent.  In
addition,  the Required Lenders, on not less than thirty (30) days notice to the
Administrative Agent, may elect to appoint a substitute  Administrative Agent in
the  event  that the  Administrative  Agent  has acted  hereunder  with  willful
misconduct,  gross  negligence  or exhibited a continuing  pattern of negligence
with respect to its duties and obligations hereunder.  Provided that no Event of
Default shall have occurred and be continuing,  Borrower shall have the right to
approve  any  such  proposed   substitute   agent.  The  succeeding   substitute
Administrative  Agent  shall  have all the  rights,  powers  and  duties  of the
Administrative   Agent  and  the  term  Administrative  Agent  shall  mean  such
substitute  Administrative Agent,  effective upon its appointment.  In the event
that the  substitute  Administrative  Agent wishes to resign,  it may do so upon
thirty (30) days prior notice to the Borrower,  the Administrative Agent and the
Lenders,  and a new  substitute  Administrative  Agent  shall  be  appointed  in
accordance  with this  Section.  After any  retiring  substitute  Administrative
Agent's resignation hereunder as substitute Administrative Agent, the provisions
of this  Section  7.10 and Section 8.4 hereof shall inure to the benefit of such
retired substitute Administrative Agent as to any actions taken or omitted to be
taken by it while it was substitute Administrative Agent under this Agreement.

     Section 7.11 Loans.  Each Lender shall make  available to the Borrower such
Lender's portion of the Loan subject to and in accordance with the provisions of
the Loan  Documents.  The  Borrower  shall  look  solely to each  Lender for the
performance of such Lender's  obligations,  covenants and  agreements  under the
Loan  Documents  on the part of each Lender to be  performed  or  observed  with
respect to each such  portion of the Loan,  subject to and upon the  conditions,
limitations and  restrictions  set forth herein and in the other Loan Documents,
as evidenced by the signature of each such party hereto. In the event any Lender
has not made available its Percentage of any borrowing, the Administrative Agent
may  (but  shall  not  be  obligated   to),  and  each  Lender   authorizes  the
Administrative  Agent to,  advance for such  Lender's  account,  pursuant to the
terms  hereof,  the amount of the  borrowing  to be made by such Lender and each
Lender agrees to reimburse the  Administrative  Agent in  immediately  available
funds for any amount so advanced on its behalf. If any such reimbursement is not
made in immediately  available funds on the same day on which the Administrative
Agent shall have made such amount available on behalf of any Lender, such Lender
shall also pay interest thereon to the Administrative Agent at the Federal Funds
Rate.

     Section 7.12 Priority of Loans.  Each Lender's portion of the Loan shall be
of equal priority with each other  Lender's  portion of the Loan, and no portion
of the Loan shall have priority or preference over any other portion of the Loan
or the security therefor, except as provided in Sections 7.20 and 7.24 hereof.

     Section  7.13  Books  and  Records.  The  Administrative  Agent  will  keep
customary books and records relating to all borrowings hereunder, and such books
and records  shall be available  at the  Administrative  Agent's  office for the
Lenders reasonable inspection during the Administrative  Agent's normal business
hours.  The original Loan Documents  shall be kept at the New York office of the
Administrative  Agent or at such other office of the Administrative  Agent or at
such other place as may be  designated  from time to time by the  Administrative
Agent and shall be made  available to any Lender for  inspection  at such office
within a reasonable  period of time following such Lender's  written  request to
inspect same.



<PAGE>


     Section  7.14  Decisions  of  Lenders.  Except  as  expressly  set forth in
Sections 7.15 and 7.16 hereof, all decisions,  consents,  waivers, approvals and
other  actions  (collectively,  ADecisions ) authorized  to be taken under or in
connection  with this Agreement and the other Loan Documents by any Lender shall
be taken by the  Administrative  Agent in its discretion  reasonably  exercised,
subject to the provisions of Section 7.4 hereof. Except as expressly provided in
Sections  7.15 and 7.16  hereof,  the  Administrative  Agent (i) may  consent or
withhold  consent to any action by the  Borrower,  (ii) may  exercise or refrain
from exercising any power,  rights or remedies hereunder or under the other Loan
Documents or otherwise in respect of the borrowings made hereunder, and/or (iii)
may  waive  any  conditions  in any  Loan  Documents,  so long as such  consent,
exercise or waiver would not, in the Administrative  Agent's judgment reasonably
exercised,   represent  a  departure   from  the   standards   followed  by  the
Administrative  Agent in the  administration of loans held by the Administrative
Agent  entirely  for its own  account.  The  Administrative  Agent may request a
Decision  with respect to matters  described in Sections 7.15 and 7.16 hereof at
any time by making a request for such Decision in writing to all of the Lenders.
Any such  request  (x) shall  contain  an  adequate  description  together  with
relevant  background  information  of the Decision  being  requested,  (y) shall
specify  the  reasons  for such  request,  and (z) shall state the effect of not
responding to such notice as set forth in this Section. The Administrative Agent
will provide the Lenders  with such  additional  information  as the Lenders may
reasonably request to assist such Lenders in reaching a Decision,  to the extent
such  information  is in the  Administrative  Agent's  possession  or under  its
control.  The requested  Decision shall be deemed approved by the Lenders if and
when the  Administrative  Agent  receives  written  approval  from the  required
percentage of the Lenders as specified in Sections 7.15 and 7.16 hereof,  as the
case may be. If a Lender does not deliver to the Administrative  Agent a written
objection thereto within ten (10) Business Days after hand delivery,  mailing or
delivery  to an express  courier  service of the  request by the  Administrative
Agent,  the  Administrative  Agent  shall make a second  written  request  for a
Decision from that Lender. If the Lender does not deliver to the  Administrative
Agent a written  objection  within five (5) Business  Days after hand  delivery,
mailing or delivery to an express courier service of such a second request, such
Lender  shall  be  deemed  to  have  approved  the  requested  Decision.  If the
Administrative Agent is unable to contact the usual  representatives of a Lender
for any  reason,  the  Administrative  Agent  will make a good  faith  effort to
contact  other  representatives  of such Lender as necessary to reach a Decision
within the allotted time. To the extent that the Administrative Agent reasonably
deems necessary,  any such Decision may also be requested  telephonically by the
Administrative  Agent  from each  Lender  with  such  telephonic  request  to be
confirmed in writing by the  Administrative  Agent. Any Decision as to which the
Administrative  Agent has made telephonic  requests for approval shall be deemed
approved by the Lenders after the Administrative  Agent has received the written
approval of the required percentage of the Lenders as specified in Sections 7.15
and 7.16 hereof.  The Borrower  shall be promptly  notified of the Decision,  if
such Decision was made in response to a request by the Borrower.



<PAGE>


     Section  7.15   Approvals  by  the  Lenders.   No  amendment,   supplement,
modification or waiver shall be effective  unless consented to in writing by the
Required   Lenders;   provided,   however,   that  any  amendment,   supplement,
modification or waiver which adds, deletes,  changes or waives any provisions of
the Loan Documents the effect of which is to (i) extend either the Maturity Date
or any  installment or required  prepayment of any  borrowings;  (ii) reduce the
rate or extend the time of payment of interest on any  borrowings;  (iii) reduce
the principal amount of any borrowings;  (iv) reduce the fees payable under this
Agreement and the other Loan Documents,  or any other fee payable to the Lenders
or extend the due date of any such fee; (v) change any  Lender's  portion of the
Loan  or the  amount  of any  borrowing  of any  Lender  (except  to the  extent
permitted by Sections 7.18 and 7.19 hereof);  (vii) forgive any  Indebtedness of
Borrower or any Subsidiary of Borrower; (viii) change any allocation of payments
among the  Lenders,  (ix) change any  provision  of this Section 7.15 or Section
7.16 or the definition of Required Lenders;  (x) modify any financial  covenants
or waive any Default or Event of Default  (except as provided in Section  7.16),
(xi)  release  any  guaranty,  (xii)  waive  or  release  any lien on any of the
Mortgaged Properties (except as provided in Section 8.11) or (xiii) commence any
judicial or nonjudicial  foreclosure  proceeding  (except as provided in Section
7.16),  shall be ineffective in each case without the written consent of all the
Lenders.  Furthermore,  no amendment,  supplement,  modification  or waive shall
amend, modify or waive any provision of any Loan Document, if the effect thereof
is to affect  the  rights or duties of the  Administrative  Agent,  without  the
written consent of the  Administrative  Agent.  Any such amendment,  supplement,
modification  or waiver shall apply to each of the Lenders  equally and shall be
binding upon the Borrower, the Lenders, Administrative Agent, the Administrative
Agent and all future holders of the Promissory Notes. In the case of any waiver,
the Borrower,  the Lenders,  the Administrative Agent shall be restored to their
former position and rights hereunder and under the outstanding Promissory Notes,
and any Default or Event of Default  waived  shall be deemed to be cured and not
continuing,  but no such waiver shall extend to any  subsequent or other Default
or Event of Default, or impair any right consequent thereon.

         Section 7.16    Approvals by the Required Lenders

                  (a) Upon the  Administrative  Agent's  receipt  of a notice of
default  (as  defined  in Section  7.5(a)  hereof)  with  respect to an Event of
Default,  the Administrative  Agent shall consult with the Lenders in respect of
any such Event of Default to determine a course of action which is acceptable to
the Required Lenders.  Subject to Section 7.15 hereof, the Administrative  Agent
shall  pursue any such  course of action  approved  in  writing by the  Required
Lenders in respect of any such Event of Default, including,  without limitation,
acceleration  of the Loan. In the event that the Required  Lenders cannot decide
which remedies, if any, are to be pursued, the Administrative Agent may commence
proceedings  on behalf of the Lenders;  provided,  however,  that if at any time
thereafter  the Required  Lenders  shall  direct that a different or  additional
remedial  action shall be taken,  such different or additional  remedial  action
shall be taken in lieu of or in addition to such proceedings.

                  (b) The Borrower  hereby consents and agrees to the provisions
of Sections 7.14 through 7.16 and any modifications  thereof entered into by the
Administrative  Agent  and the  Lenders  of  such  provisions  and  specifically
acknowledges  and  agrees  that,  notwithstanding  any  provisions  in the  Loan
Documents  requiring action by the ALenders  or similar provisions in connection
with  the  declaration  of  an  Event  of  Default,   the  acceleration  of  the
indebtedness evidenced by the Loan Documents and/or the exercise of any remedies
under the Loan Documents, the Administrative Agent is hereby empowered to act on
behalf of the Lenders in accordance with the provisions hereof and the authority
of  the   Administrative   Agent  with  respect  to  any  action  taken  by  the
Administrative Agent pursuant to and in accordance with this Agreement shall not
be contested by the Borrower by reason of any different or conflicting provision
contained in any of the Loan Documents.



<PAGE>


     Section 7.17 Participation.  Any Lender may at any time after the execution
and delivery of this Agreement, sell to one or more Persons (each a AParticipant
) participating  interests in any borrowing owing to such Lender, any Promissory
Note held by such Lender and/or any other interest of such Lender  hereunder (in
respect of any such Lender,  its ACredit  Exposure ).  Notwithstanding  any such
sale by a Lender of  participating  interests to a  Participant,  such  Lender's
rights and  obligations  hereunder  shall  remain  unchanged,  such Lender shall
remain solely responsible for the performance thereof,  such Lender shall remain
the holder of any such  Promissory  Note for all purposes  hereunder  (except as
expressly provided below),  and the Administrative  Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations  hereunder.  The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections  2.11,  2.13 and 2.14  hereof.  Each Lender
agrees  that any  agreement  between  such  Lender and any such  Participant  in
respect of such participating interest shall not restrict such Lender's right to
agree to any amendment, supplement, waiver or modification to any Loan Document,
except  where the  result of any of the  foregoing  would be to extend the final
maturity of any  borrowing or any  regularly  scheduled  installment  thereof or
reduce the rate or extend the time of payment of interest  thereon or reduce the
principal amount thereof.

         Section 7.18    Assignments

                  (a) Any Lender may, in the ordinary course of its business and
in accordance  with applicable law, at any time after the execution and delivery
of this  Agreement  and from  time to time  assign  to any  Lender  or any other
Eligible  Assignee  (each a  APurchasing  Lender ) all or any part of its Credit
Exposure in amounts not less than $10,000,000.  The Borrower, the Administrative
Agent and the Lenders agree that to the extent of any assignment, the Purchasing
Lender  shall be  deemed to have the same  rights  and  benefits  under the Loan
Documents and the same obligation to share pursuant to Section 7.24 hereof as it
would  have had if it had been a Lender  which was one of the  original  parties
hereto.  The  consent of the  Administrative  Agent and,  provided no Default or
Event of Default  has  occurred,  the  Borrower  shall be  required  prior to an
assignment becoming effective, which consents will not be unreasonably withheld,
delayed or conditioned; provided that the Administrative Agent shall be entitled
to continue to deal solely and directly  with the assignor  Lender in connection
with the  interests so assigned to the  Purchasing  Lender unless and until such
Purchasing Lender executes a supplement to this Agreement,  substantially in the
form of Exhibit L hereto (a AForm of Assignment and Assumption Agreement ).

                  (b) Upon (i) execution of a Form of Assignment  and Assumption
Agreement,  (ii)  delivery  of an executed  copy  thereof to the  Borrower,  the
Administrative Agent, (iii) payment by such Purchasing Lender to such transferor
Lender of an amount equal to the purchase price agreed  between such  transferor
Lender and such Purchasing Lender, and (iv) payment to the Administrative  Agent
of an  assignment  fee of $2500 for each  assignment by any Lender of all or any
portion of its Credit  Exposure,  such transferor  Lender shall be released from
its  obligations  hereunder to the extent of such assignment and such Purchasing
Lender shall for all purposes be a Lender party to this Agreement and shall have
all the rights and  obligations  of a Lender  under this  Agreement  to the same
extent as if it were an original party hereto,  and no further consent or action
by the Borrower, the Lenders or the Administrative Agent shall be required. Such
Form of  Assignment  and  Assumption  Agreement  shall be deemed  to amend  this
Agreement  to the  extent,  and only to the  extent,  necessary  to reflect  the
addition of such Purchasing Lender as a Lender.  Promptly after the consummation
of any transfer to a Purchasing Lender pursuant hereto,  the transferor  Lender,
the Administrative Agent and the Borrower shall make appropriate arrangements so
that a replacement Promissory Note is issued to such transferor Lender and a new
Promissory Note is issued to such Purchasing  Lender,  in each case in principal
amounts  reflecting  such  transfer.  The  Purchasing  Lender  shall  furnish to
Borrower  and the  Administrative  Agent,  at least 10 days prior to the date on
which  the  first  payment  to such  Purchasing  Lender  is due,  the  documents
described in Section 2.17(b) hereof.



<PAGE>


                  (c) Commerzbank  AG, New York Branch,  agrees that it will not
assign to a Purchasing  Lender any part of its Credit Exposure such that,  after
giving effect to such assignment,  Commerzbank AG, New York Branch's  Percentage
shall be less than twenty five percent (25%),  unless its failure to do so shall
(or in  Commerzbank  AG, New York  Branch's  reasonable  judgment  is likely to)
constitute a violation of any Requirement of Law. Notwithstanding the foregoing,
nothing herein shall  restrict or limit  Commerzbank  AG, New York Branch,  from
selling a participating interest in any portion, or all, of its Credit Exposure.

     Section 7.19 Withholding.  Notwithstanding anything to the contrary herein,
no Participant  or other  assignee of all or any part of the Credit  Exposure of
any Lender (each, a ANon-Party Holder ), other than a Purchasing  Lender,  shall
be entitled to any of the benefits of Section 2.16 hereof.

     Section 7.20 Amounts Received by Lenders.  Each Lender agrees that it shall
act as a trustee  for the  benefit  of the other  Lenders  to the  extent of the
respective  interests of the other  Lenders in the Loan with respect to all sums
of any kind paid to or received by such Lender in payment of all or a portion of
the Loan by or on behalf of the Borrower.

     Section 7.21 No Joint Venture.  Neither the execution of this Agreement nor
the selling of an interest in the Loan nor any  agreement to share in profits or
losses as provided  herein is intended to be, nor shall it be  construed  to be,
the  formation  of a  partnership  or joint  venture  among the  parties to this
Agreement.

     Section  7.22  Acknowledgement  by Parties  Hereto.  The  agreement  to and
acceptance of this Agreement by the parties  hereto,  indicated by the execution
of this Agreement,  shall evidence (a) each party's  acceptance of all the terms
and  conditions  of this  Agreement  and the other Loan  Documents  and (b) each
party's  consent  to  the   Administrative   Agent  acting  as  the  contractual
representatives  on behalf of the  Lenders  with  regard to all  aspects  of the
administration,  enforcement  and  collection  of the  Loan  and to all  matters
pertaining to the Loan Documents as provided for herein.

     Section  7.23 Sharing of  Payments.  Each of the Lenders  agrees that if it
should  receive  any  amount  under  this  Agreement  or any of the  other  Loan
Documents  (whether by voluntary payment,  by realization upon security,  by the
exercise of the right of banker's lien, by counterclaim or cross action,  by the
enforcement  of any  right  under the Loan  Documents,  or  otherwise)  which is
applicable  to the payment of any  borrowing  of a sum which with respect to the
related  sum or sums  received by the other  Lenders is in a greater  proportion
than the total of such  borrowings then owed and due to such Lender bears to the
total of  borrowings  made  hereunder  then  owed and due to all of the  Lenders
immediately  prior to such  receipt,  then such  Lender  receiving  such  excess
payment  shall  purchase  for cash without  recourse or warranty  from the other
Lenders an interest in such  borrowings  owing to such Lenders in such amount as
shall  result in a  proportional  participation  by all of the  Lenders  in such
amount;  provided that if all or any portion of such excess amount is thereafter
recovered  from such Lender,  such purchase  shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.



<PAGE>


     Section 7.24 Limitation of Liability.  No claim may be made by the Borrower
or any other  Person  against the  Administrative  Agent or any Lender or any of
their affiliates,  directors,  officers, employees, attorneys or agent of any of
such Persons for any special,  indirect or  consequential  damages in respect of
any claim for breach of contract or any other theory of liability arising out of
or under this Article VII; and the Borrower  hereby waives,  releases and agrees
not to sue upon any such claim for any such damages,  whether or not accrued and
whether or not known or suspected to exist in its favor.


                           ARTICLE VIII. MISCELLANEOUS

     Section 8.1 Notices. All notices, requests, and other communications to any
party hereunder shall be in writing (including bank wire,  telecopy,  or similar
teletransmission  or writing) and shall be given to such party at its address or
telecopy  number set forth on Schedule 8 annexed hereto or such other address or
telecopier  number  as  such  party  may  hereafter  specify  by  notice  to the
Administrative  Agent  and  the  Borrower.  No  notices,   requests,  and  other
communications   given  to  any  Person  other  than  the  Administrative  Agent
(including,  without limitation,  any Affiliate thereof) shall be deemed to have
been given to the  Administrative  Agent.  Each such notice,  request,  or other
communication shall be effective (i) when delivered personally, (ii) if given by
telecopier, when such telecopy is transmitted to the telecopier number specified
in this Section 8.1,  (iii) if given by certified  or  registered  mail,  return
receipt  requested,  72 hours after such communication is deposited in the mails
with first class postage  prepaid,  addressed as  aforesaid,  or (iv) by Federal
Express or other recognized overnight delivery service (provided that, in either
such  case,  such  delivery  is made with a request  for  receipt),  on the next
Business Day after such  communication is deposited with such delivery  service,
or (v) if given by any other means when  delivered  at the address  specified in
this Section 8.1.

     Section 8.2  Amendments,  Etc. No amendment  or waiver of any  provision of
this  Agreement  or the other Loan  Documents,  nor consent to any  departure by
either party therefrom, shall in any event be effective unless the same shall be
in writing  and signed by the party or its agent,  if  authorized  to act on its
behalf, against whom enforcement of such waiver or amendment is sought, and then
such waiver or consent shall be effective only in the specific  instance and for
the specified  purpose for which given.  None of the  foregoing  shall negate or
vitiate any of the provisions of Sections 7.14, 7.15 or 7.16.



<PAGE>


     Section 8.3 No Waiver Remedies Cumulative.  No failure or delay on the part
of the Lenders in  exercising  any right or remedy  hereunder or under any other
Loan   Document  and  no  course  of  dealing   between  the  Borrower  and  the
Administrative Agent or the Lenders shall operate as a waiver thereof, nor shall
any single or partial  exercise  of any right or remedy  hereunder  or under any
other  Loan  Document  preclude  any other or  further  exercise  thereof or the
exercise of any other right or remedy hereunder.  The rights and remedies herein
and in the other  Loan  Documents  expressly  provided  are  cumulative  and not
exclusive of any rights or remedies  that the Lenders would  otherwise  have. No
notice to or demand on the Borrower  not  required  hereunder or under the other
Loan  Documents  in any case shall  entitle the Borrower to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the  Lenders  to any  other or  further  action  in any  circumstances
without notice or demand.

     Section 8.4 Payment of Expenses,  Etc. The Borrower shall:

                  (a) whether or not the  transactions  hereby  contemplated are
consummated,  pay  all  reasonable  out-of-pocket  costs  and  expenses  of  the
Administrative  Agent and the  Lenders in the  administration  (both  before and
after the execution  hereof and including advice of counsel as to the rights and
duties of the  Administrative  Agent or the Lenders) of, and in connection  with
the  preparation,  execution,  and delivery of,  preservation  of rights  under,
enforcement of, and, after an Event of Default, refinancing,  renegotiation,  or
restructuring  of, this Agreement and the other Loan Documents and the documents
and instruments referred to therein; any amendment,  waiver, or consent relating
thereto (including, without limitation, the reasonable fees and disbursements of
counsel for the Administrative Agent and the Lenders);

                  (b) to the extent  permitted by  applicable  law, pay and hold
the  Administrative  Agent and the Lenders harmless from and against any and all
present  and future  stamp,  recording,  and other  similar  taxes and fees with
respect to the foregoing  matters and save the Lenders harmless from and against
any and all liabilities  with respect to or resulting from any delay or omission
to pay such taxes and fees; and

                  (c)  indemnify  the  Administrative  Agent and the Lenders and
each of their officers, directors, employees, Affiliates,  representatives,  and
agents from, and hold each of them harmless against,  any and all costs, losses,
liabilities,  claims,  damages and expenses  incurred by any of them (whether or
not any of them is  designated a party  thereto)  arising out of or by reason of
any litigation, or other proceeding related to any actual or proposed use by the
Borrower  of the  proceeds  of  the  Loan  or the  Borrower  entering  into  and
performing of this  Agreement or the other Loan  Documents or resulting from the
ownership  of  any  Mortgaged  Property,   including,  without  limitation,  the
reasonable  fees and  disbursements  of counsel  incurred in connection with any
such investigation,  litigation, or other proceeding; provided that the Borrower
shall not be obligated to indemnify  any such Person to the extent of any costs,
losses, liabilities, claims, damages, or expenses caused by the gross negligence
or willful misconduct of such Person.

         If and to the extent that the  obligations  of the Borrower  under this
Section 8.4 are unenforceable for any reason, the Borrower hereby agrees to make
the maximum  contribution to the payment and  satisfaction  of such  obligations
which is permissible under applicable law. The Borrower's obligations under this
Section 8.4 shall survive any  termination  of this Agreement and the payment of
the sums due hereunder and under the other Loan Documents.



<PAGE>


     Section 8.5 Right of Setoff.  Subject to the Administrative Agent's written
consent,  in addition to and not in  limitation of all rights of offset that the
Lenders may have under  applicable  law, the Lenders shall,  upon the occurrence
and  during  the  continuance  of any Event of  Default  and  whether or not the
Lenders have made any demand or the Borrower's obligations are matured, have the
right to  appropriate  and apply to the  payment of the  Borrower's  obligations
hereunder and under the other Loan Documents,  all deposits (general or special,
time or demand,  provisional  or final) of the Borrower then or thereafter  held
by, and other indebtedness or property then or thereafter owing by, the Lenders.

     Section 8.6 Benefit of Agreement.  This Agreement shall be binding upon and
inure to the benefit of and be  enforceable  by the  respective  successors  and
assigns of the parties  hereto,  provided  that the  Borrower  may not assign or
transfer any of its interest  hereunder without the prior written consent of the
Lenders.

         Section 8.7    Governing Law; Submission to Jurisdiction

                  (a) This  Agreement  and the  rights  and  obligations  of the
parties  hereunder  shall be construed in accordance with and be governed by the
law (without  giving  effect to the conflict of law  principles  thereof) of the
State  of New  York  except  as  otherwise  specifically  provided  in the  Loan
Documents with respect to the perfection, priority and enforcement of liens upon
real property and fixtures not located in the State of New York.

                  (b) Any  legal  action  or  proceeding  with  respect  to this
Agreement or the other Loan  Documents or any  document  related  thereto may be
brought  in the  courts  of the  State of New York or of the  United  States  of
America for the Southern  District of New York, and by execution and delivery of
this  Agreement,  the Borrower  hereby  accepts for itself and in respect of its
property  generally  and  unconditionally,  the  jurisdiction  of the  aforesaid
courts. The Borrower hereby irrevocably waives any objection, including, without
limitation,  any  objection  to the  laying of venue or based on the  grounds of
forum non conveniens,  which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions.  The Borrower agrees
that any  process  in any  proceeding  in any such  court  may be  served on the
Borrower through the United States mails in accordance with Section 8.1.

                  (c)  WAIVER  OF  JURY  TRIAL.  TO  THE  EXTENT   PERMITTED  BY
APPLICABLE   LAW,   EACH  OF  THE  PARTIES   HERETO   HEREBY   IRREVOCABLY   AND
UNCONDITIONALLY  WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS  AGREEMENT OR THE  PROMISSORY  NOTE OR ANY OTHER LOAN DOCUMENTS AND FROM
ANY COUNTERCLAIM THEREIN.

                  (d) Nothing  herein  shall  affect the right of the Lenders to
serve  process  in any  other  manner  permitted  by law  or to  commence  legal
proceedings or otherwise proceed against the Borrower in any other jurisdiction.

     Section 8.8  Counterparts.  This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,  each
of which when  executed and  delivered  shall be an  original,  but all of which
shall together constitute one and the same instrument.

     Section 8.9 Headings Descriptive . The headings contained in this Agreement
are for  convenience  only  and  shall  not in any way  affect  the  meaning  or
construction of any provision of this Agreement.



<PAGE>


     Section 8.10 Entire Agreement.  This Agreement and the other Loan Documents
constitute  the entire  agreement  of the  parties  with  respect to the subject
matter hereof and thereof, and all prior discussions, negotiations, term sheets,
commitment   letters,   waiver   letters,    agreements,    letter   agreements,
correspondence  and  document  drafts  with  respect to such  matters are merged
herein and therein. Neither the Lenders nor any employee of the Lenders has been
authorized to make any  representation  or agreement  upon which the Borrower or
its Affiliates may rely unless such matter is set forth in this Agreement or the
other Loan Documents.

     Section 8.11  Release of Mortgaged  Properties.  The  Administrative  Agent
agrees  that,  upon  the  Borrower's  request  (a  ARelease  Request  )  to  the
Administrative  Agent, the Administrative  Agent will deliver to Borrower a form
of  release,  duly  executed  and  acknowledged  by  the  Administrative  Agent,
releasing  from the lien of the  applicable  Mortgage  (a ARelease ) a Mortgaged
Property (a ARelease Parcel ) but only if and on the condition that:

                           (i)      each  Release  Request  shall be in writing,
shall contain all information  necessary for the Administrative Agent to cause a
Release in  recordable  form to be prepared and shall be given at least ten (10)
Business Days prior to the requested date of such Release;

                           (ii)      as of the date of such  Release  Request,
and as of the  Closing  Date of such  Release  (before  as well as after  giving
effect to such Release),  no Default or Event of Default shall have occurred and
be   continuing,   and  each  Release   Request  shall   constitute   Borrower's
representation and warranty that the foregoing is true, complete and accurate;

                           (iii)  before as well as after  giving effect to such
Release,  subject to the provisions of Section 5.5 hereof,  all  representations
and warranties contained herein (except representations and warranties expressly
provided  herein as being made only as of the  Closing  Date)  shall be true and
correct  in  all  material   respects  with  the  same  effect  as  though  such
representations  and  warranties  had  been  made on and as of the  date of such
Release;

                           (iv)      the Borrower executes,  acknowledges and
delivers  to the  Administrative  Agent,  at  Borrower's  expense,  any  and all
documents and instruments  reasonably  required by the  Administrative  Agent to
preserve and maintain the  Administrative  Agent's and Lenders rights,  upon and
following any such Release, under and with respect to the Loan Documents; and

                           (v)      the Borrower  pays to the  Administrative
Agent for the account of the Lenders and for  application to the Term Portion of
the Loan an amount equal to the Release Price for the Mortgaged  Property,  less
any previous  prepayment  of the Term Portion of the Loan not made in connection
with a Release or otherwise applied to a Release Price.



<PAGE>


In the  event  that all of the  foregoing  conditions  to a  Release  have  been
satisfied,  then, at Borrower's request,  the Administrative Agent shall furnish
such Release for execution by the  Administrative  Agent and for  recordation by
the title  company  which had insured  the  Lenders  interest in the  Mortgaged
Property subject to the Release or as otherwise designated by Borrower.  Receipt
of a Release Request for each Release shall constitute  Borrower's agreement and
covenant to pay to the Administrative Agent, promptly upon demand (together with
a reasonably detailed invoice(s) in respect thereof),  all reasonable legal fees
and expenses arising in connection with the preparation, execution, delivery and
review of each Release, the documents and instruments described in this Section,
and all other  documents  relating  to,  and  rendering  at the  request  of the
Administrative Agent all advice respecting, each Release.

     Section  8.12  Confidentiality.  The  Administrative  Agent  and the  other
Lenders  agree  that,  unless  otherwise  agreed to in writing by us,  except as
required  by law or  regulation  or by legal  process,  to keep  all  Non-public
Information delivered by the Borrower to the Administrative Agent or the Lenders
confidential  and not to disclose or reveal any  Non-public  Information  to any
person, other than those employed or retained by the Administrative Agent or the
Lenders  (including,   without  limitation,   employees,  counsel,  accountants,
engineers,  advisers, experts and consultants to the Administrative Agent or the
Lenders).  Except as provided  for in the next  sentence,  in the event that the
Administrative  Agent or any Lender is  requested  pursuant  to, or required by,
applicable  law or  regulation  or by legal  process to disclose any  Non-public
Information,  the  Administrative  Agent  or such  Lender  agrees  that it shall
provide the Borrower with prompt notice of such  request(s) and, unless required
by law or  regulation to disclose  sooner,  shall wait at least forty eight (48)
hours  before  disclosing  such  Non-public  information.   Notwithstanding  the
foregoing or anything else to the contrary herein  contained or contained in any
of the other Loan Documents, the provisions of this Section 8.12 shall not apply
to (a) the  disclosure  or  sharing  of any  Non-public  information  among  the
Administrative  Agent and the Lenders,  (b) the disclosure by the Administrative
Agent or any Lender of any Non-public  information  to federal,  state and local
bank  regulators  or other  governmental  agencies  to the  extent  required  or
requested  to do so (such  disclosure  shall not,  however,  in and of itself be
deemed to render such information  public),  and (c) the Administrative Agent or
any Lender may, in connection with any assignment or  participation  or proposed
assignment or participation, disclose to the assignee or participant or proposed
assignee or participant under a requirement of  confidentiality,  any Non-public
information  relating to the Borrower,  the Collateral,  the Borrower's  assets,
properties  or financial  condition or  information  otherwise  furnished to the
Administrative Agent or the Lenders by the Borrower.

     Section 8.13 No Discharge.  The  execution  and delivery of this  Agreement
shall  not  extinguish  the  indebtedness  or  the  obligations  secured  by the
Mortgages,  and no part thereof  shall be  discharged,  disturbed,  cancelled or
impaired by the execution and delivery of this Agreement.



<PAGE>




                       [Signatures Continued on Next Page]


         IN  WITNESS  WHEREOF,   the  parties  hereto  have  caused  their  duly
authorized  officers to execute and deliver this  Agreement as of the date first
written above.

                                                 HOMESTEAD VILLAGE INCORPORATED


                                                 By
                                                    Laura L. Hamilton
                                                    Senior Vice President


                                                COMMERZBANK AG, New York Branch,
                                                as Administrative Agent


                                                 By
                                                    Name:
                                     Title:


                                                 By
                                                    Name:
                                     Title:


                                                COMMERZBANK AG, New York Branch,
                                                as Lender


                                                 By
                                                    Name:
                                     Title:


                                                 By
                                                    Name:
                                     Title:


<PAGE>





                                       K-2





                                WELLS FARGO BANK


                                                 By
                                                    Name:
                                     Title:


                                BANKBOSTON, N.A.


                                                 By
                                                    Name:
                                     Title:


                                                 CHASE BANK OF TEXAS, N.A.


                                                 By
                                                    Name:
                                     Title: