$50,000,000


                                CREDIT AGREEMENT


                                      AMONG


                         HOMESTEAD VILLAGE INCORPORATED,



                            THE LENDERS NAMED HEREIN,


                                       AND


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







                           DATED AS OF APRIL 24, 1998



                                       -0-

<PAGE>



                                CREDIT AGREEMENT



     CREDIT  AGREEMENT  (this  "Agreement"),  dated as of April 24, 1998,  among
HOMESTEAD  VILLAGE  INCORPORATED,   a  Maryland  corporation  (the  "Borrower"),
COMMERZBANK  AG, LOS ANGELES  BRANCH,  and the other lenders listed on Exhibit A
attached hereto, as amended from time to time (each a "Lender" and collectively,
the "Lenders")  and  COMMERZBANK  AG, NEW YORK BRANCH,  as agent for the Lenders
(the "Agent").

                              W I T N E S S E T H:


     WHEREAS, the Agent has agreed to arrange a revolving credit facility in the
amount of $50,000,000 on behalf of the Borrower;

     WHEREAS, certain of the Borrower's obligations under this Agreement will be
secured by a lien on the Collateral;

     WHEREAS,  in  consideration  of  the  fees,  representations,   warranties,
covenants  and  agreements  of the  Borrower  set forth  herein  and in the Loan
Documents,  the Lenders are willing to establish such revolving  credit facility
upon the terms and conditions set forth herein;

     NOW, THEREFORE, 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:

     "Acquisition  Costs"  means the actual  purchase  price paid by Borrower to
acquire the  property  constituting  a Mortgaged  Property or that  portion of a
Mortgaged  Property (the portion of such actual purchase price allocable to such
portion  of a  Mortgaged  Property  to  be  determined  in a  manner  reasonably
acceptable to Agent) upon which it shall construct an extended stay facility and
such ancillary  facilities  which are related to the purpose,  and shall enhance
the value,  of the extended  stay  facility  (the  "ancillary  facilities"),  as
evidenced by the  documentation  and certificate of Borrower  furnished to Agent
pursuant to Section 3.2(g)(i)(1) and (2) hereof, excluding,  without limitation,
all fees,  costs and expenses  incurred with regard to use,  planning and zoning
rules and regulations  relating to such Mortgaged  Property,  but including such
other expenses as the Agent approves in its sole discretion.

     "Adjusted Eurodollar Rate" means, with respect to each Interest Period, the
rate obtained by dividing (i) the  Eurodollar  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


                                       -1-

<PAGE>



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 Eurodollar  Advances is determined or any category of
extensions of credit or other assets that includes loans by a non-United  States
office of the Agent to United States  residents) or by any other  Requirement of
Law relating to reserve or capital adequacy requirements.

     "Advance" has the meaning provided in Section 2.1(a).

     "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 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.

     "Agent"  shall mean  Commerzbank  AG, New York  Branch,  in its capacity as
agent for the Lenders  hereunder,  or such  successor  Agent as may be appointed
pursuant to Section 7.9 of this Agreement.

     "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 hundred seventy-five
(175) basis  points per annum,  and (b) the Federal  Funds Rate plus two hundred
twenty-five (225) basis points per annum.

     "Applicable Margin" means two hundred seventy-five (275) basis

     "Average  Undrawn  Balance"  shall  mean the  average  daily  amount of the
Commitment which remained 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  introductor  paragraph to this
Agreement.

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

     "Budget" means,  for any Mortgaged  Property (i) until the Final Budget for
such  Mortgaged  Property  is received  by Agent,  the  Initial  Budget for such
Mortgaged  Property,  and (ii) upon and after such time as the Final  Budget for
such  Mortgaged  Property  is  received  by  Agent,  the Final  Budget  for such
Mortgaged Property.


                                       -2-

<PAGE>



     "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 April 24, 1998, or such other Business Day selected by
the parties to be the first day on which funds under the  Commitment  under this
Agreement will be first made  available,  but in no event prior to the execution
hereof and satisfaction of all conditions precedent set forth in Section 3.1.

     "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 Agent.

     "Central Business District" means the downtown section of a city, generally
consisting of retail, office, hotel,  entertainment,  and governmental land uses
with some high density housing.

     "Commitment" has the meaning provided in Section 2.1(b).

     "Construction  Interest" means all interest expense of the Borrower and its
Subsidiaries for the construction of projects which is capitalized in accordance
with GAAP.

     "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"  shall  mean  for any  period  the sum of (i) all  interest
obligations  required to be paid in respect of any  Indebtedness of the Borrower
or its  Subsidiaries,  including  Construction  Interest,  (ii) all  payments of
principal  required to be made with respect to any  Indebtedness of the Borrower
or its Subsidiaries during such period, other than balloon payments or scheduled
amortizing  payments  on senior  Indebtedness,  and  (iii)  all  other  payments
required  to be made in  respect  of any  Indebtedness  of the  Borrower  or its
Subsidiaries.



                                       -3-

<PAGE>



     "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 2.6(b) hereof.

     "Development   Encumbrances"   means  all   easements,   restrictions   and
encumbrances  customary and  appropriate  for the  development of property as an
extended stay facility with such ancillary  facilities related thereto and which
do not and will not materially impair the use of the Mortgaged Property affected
thereby as an  extended  stay  facility  or such  ancillary  facilities  related
thereto or the expected value of the Mortgaged Property affected thereby.

     "Direct Costs" means, for each Mortgaged  Property,  the aggregate costs of
all items described under the categories entitled "Hard Costs-Contractor Costs",
"Hard  Costs-Other Hard Costs",  "Hard  Costs-Hard Costs  Contingency" and "Hard
Costs-Furniture, Fixtures & Equipment" in the Budget for such Mortgaged Property
actually  paid which are  necessary for the  completion  of  construction  of an
extended stay facility and such  ancillary  facilities  related  thereto on such
Mortgaged Property in accordance with the Plans and Specifications, as evidenced
by the documentation and certificate of Borrower  furnished to Agent pursuant to
Sections 3.2(g)(i)(1) and (2) hereof.

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

     "EBITDA" means, for any period and for any Person,  the amount derived from
(i) net earnings  plus (ii)  depreciation,  amortization,  interest  expense and
income  taxes plus or minus  (iii) any  losses or gains  resulting  from  sales,
write-downs,  write-ups,  write-offs or other valuation adjustments of assets or
liabilities of such Person,  in each case as determined on a consolidated  basis
in accordance with GAAP for such Person for such period.

     "Eligible Acquisition Costs" means, for each Mortgaged Property, the lesser
of (i) the Acquisition Costs with respect to such Mortgaged  Property,  and (ii)
the amount  budgeted,  in the aggregate,  for Acquisition  Costs as shown on the
Budget for such Mortgaged  Property  (including any  contingency for Acquisition
Costs shown on such Budget).

     "Eligible Costs" means Eligible  Acquisition  Costs,  Eligible Direct Costs
and Eligible Indirect Costs.

     "Eligible Direct Costs" means, for each Mortgaged  Property,  the lesser of
(i) the Direct  Costs  with  respect to such  Mortgaged  Property,  and (ii) the
amount budgeted,  in the aggregate,  for Direct Costs as shown on the Budget for
such Mortgaged  Property  (including any  contingency  for Direct Costs shown on
such Budget).

     "Eligible Indirect Costs" means, for each Mortgaged Property, the lesser of
(i) the Indirect  Costs with respect to such  Mortgaged  Property,  and (ii) the
amount budgeted, in the aggregate, for Indirect  Costs  as  shown on the  Budget


                                       -4-

<PAGE>



for such Mortgaged Property  (including any contingency for Indirect Costs shown
on such Budget).

     "Environment" shall mean 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.

      "Environmental  Indemnity"  means  that  certain  Environmental  Indemnity
to be executed by the Borrower in favor of the Agent, substantially in  the form
attached hereto as Exhibit E.

     "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.

     "Eurodollar Rate" means:

     (a) the rate per annum  appearing on the 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 service, two Business Days prior to the commencement of the
Interest  Period for which  such  Eurodollar  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 Eurodollar Rate will apply; or

     (b) if

          (i) no relevant  rate appears on the Telerate  Screen for the purposes
     of the foregoing subparagraph (a), or
 
          (ii) the  Agent  determines  that no rate for a period  of  comparable
     duration to that  Interest  Period  appears on the  Telerate  Screen at the
     relevant time,

the arithmetic mean (rounded  upwards,  if necessary,  to two decimal places) of
the  respective  rates,  as supplied to the Agent at its request,  quoted by the
Lenders to leading banks 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  Eurodollar 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,  Eurodollar
Rate shall,  subject to Section 2.12 hereof,  be  determined on the basis of the
quotations of the remaining Lenders.


                                       -5-

<PAGE>



     "Event of Default" has the meaning provided in Article VI.

     "Exchange  Act" shall mean 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 Agent on such day on such transactions as determined by the Agent.

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

     "Final  Budget"  means,  for any  Mortgaged  Property,  a final budget with
respect to such  Mortgaged  Property in the same form as the Initial  Budget for
such  Mortgaged  Property  (as the form of such final budget may be changed from
time to time by Borrower  upon the prior written  consent of Agent)  showing the
amounts  budgeted  for  the  Total  Costs  (including  contingencies)  for  such
Mortgaged Property, provided that Total Costs (including contingencies) as shown
on such final budget do not exceed,  in the aggregate,  the amount equal to 110%
of the Total Costs (including contingencies) as shown on such Initial Budget, in
the aggregate.

     "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 Agent  determines  to be adverse,  and if
either such party notifies the other of such  determination,  then both Borrower
and 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 Agent  within 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.

     "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" means the value of all cash,  cash  equivalents and the
value of all real  property  assets  owned by  Borrower  valued  at one  hundred
percent (100%) of cost.


                                       -6-

<PAGE>



     "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" shall mean 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

          (b) which is or becomes  defined as a  "hazardous  waste",  "hazardous
     material" or "hazardous  substance"  or  "controlled  industrial  waste" or
     "Pollutant"  or  "contaminant"   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.


                                       -7-

<PAGE>



     "Indebtedness"  of any  Person  means as of the  date of any  determination
thereof:

               (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;

               (iv) 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

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

     "Indirect  Costs" means the aggregate  costs of all items  described in the
line items entitled  "Title  Insurance",  "Commissions",  "Closing  Costs/Escrow
Fees",  "Property  Taxes",  "Legal" and "Soft Costs  Contingency"  and under the
categories entitled "Soft Costs-Design  Costs", "Soft Costs-Permits & Fees", and
"Soft Costs-Other Soft Costs" in the Budget for such Mortgaged Property actually
paid, in all cases as evidenced by the documentation and certificate of Borrower
furnished to Agent  pursuant to Section  3.2(g)(i)(1)  and (2) hereof,  it being
understood  that Indirect Costs shall in no event  include,  with respect to any
Mortgaged Property,  any portion of the legal fees for zoning and planning board
approval and similar matters.

     "Initial Budget" means, for any Mortgaged Property, a pro forma budget with
respect to such  Mortgaged  Property in the form of Exhibit G annexed hereto (as
the form of such pro forma  budget may be changed  from time to time by Borrower
upon the prior written  consent of Agent)  showing the amounts  budgeted for the
Total Costs (including  contingencies)  for such Mortgaged  Property,  which pro
forma  budget  is  acceptable  in form and  substance  to the  Agent in its sole
discretion.

     "Intellectual Property" has the meaning set forth in Section 4.12.

     "Interest Period" has the meaning set forth in Section 2.7.

     "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.


                                       -8-

<PAGE>



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

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

     "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" means,  collectively,  the loans made by the Lenders pursuant to the
Loan Documents.

     "Loan Documents" means, collectively, this Agreement, the Promissory Notes,
all  Mortgages,  all Financing  Statements,  the  Environmental  Indemnity,  all
Subsidiary   Mortgagor   Guaranties  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.

     "Market  Studies" means, for any Mortgaged  Property,  all of the following
with  respect to such  Mortgaged  Property  in the form of the  examples  of the
following attached hereto as Exhibit H: (i) a target submarket overview,  (ii) a
comparison with the Borrower's  acquisition criteria,  (iii) an area map, (iv) a
neighborhood map, (v) an aerial photograph,  (vi) a contextual site plan, (vi) a
preliminary  site plan,  (vii) a map indicating  retail and restaurant  support,
(viii) the identity of and  information  respecting  demand  generators and area
employers,  (ix) a demand  location  map, (x) a competitive  survey,  and (xi) a
competitive survey map.

     "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 April 23, 1999, and any extensions thereof.

     "Maximum  Availability Amount" means, as of any date of determination,  the
sum of:



                                       -9-

<PAGE>



          (a)  forty-five  (45%) percent of the aggregate  Eligible  Acquisition
     Costs for all of the Mortgaged Properties, and

          (b)  thirty-five  (35%)  percent  of the  sum of:  (1)  the  aggregate
     Eligible  Direct  Costs for all of the  Mortgaged  Properties,  and (2) the
     aggregate Eligible Indirect Costs for all of the Mortgaged Properties.

     "Mortgaged Properties" means,  collectively,  each New Mortgage Property of
the Borrower or any Subsidiary  Mortgagor which is located in a Central Business
District  and which  subsequent  to the Closing Date is (and for so long as same
is) mortgaged to the 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 rents and fixture filings
delivered by the Borrower or any Subsidiary  Mortgagor in favor of the Agent and
covering  the  Mortgaged  Properties  (which  such  Mortgages  are  recorded  or
unrecorded), substantially (i.e., with such modifications as may be required by,
or, in the Agent's  reasonable  judgment,  appropriate  for, the jurisdiction in
which a particular Mortgaged Property is located) in the form attached hereto as
Exhibit N, as the same may be amended,  modified, or otherwise supplemented from
time to time.

     "Net Operating  Income" means,  with respect to the most recent twelve (12)
months or, at the option of the Agent,  the most  recent  fiscal  quarter of the
Borrower  calculated  on a year to date  basis,  the  gross  revenues  from  the
Mortgaged  Properties for such period less all direct operating  expenses of the
Mortgaged Properties,  including, without limitation, expenses for the following
to the extent same relate to the Mortgaged 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).

     "New  Mortgaged  Property"  means any property  and all rights,  titles and
interests  appurtenant  thereto which the Borrower or any  Subsidiary  Mortgagor
proposes to encumber by a Mortgage at any time subsequent to the Closing Date.

     "Non-public Information" means any information delivered by the Borrower to
the  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" has the meaning provided in Section 2.3.

     "Notifying Lender" has the meaning provided in Section 2.13.

     "Participant" has the meaning provided in Section 7.17.

     "Payment Office" means the office of the Agent located at 2 World Financial
Center, New York, New York 10281-1050.


                                      -10-

<PAGE>



     "Percentage" shall mean each Lender's percentage share of the Commitment as
set forth on Exhibit A 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).

     "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, (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)
Development Encumbrances, (iv) 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 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,  and (v) Leases which are subordinate to
the lien of the Mortgages.

     "Permitted  Purpose" shall mean  reimbursement to the Borrower of a portion
of the Total Costs with  respect to each  Mortgaged  Property,  and in addition,
with  respect  only  to  Unsecured  Advances,  for  Borrower's  working  capital
purposes.

     "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" has the meaning specified in Section 3.2(g).

     "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 Agent  announces 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.  The Agent and  each  Lender  may


                                      -11-

<PAGE>



make commercial loans or other loans at rates of interest at, above or below the
Prime Lending Rate.

     "Proforma  Operating  Statement"  means,  for  any  Mortgaged  Property,  a
completed pro forma operating  statement with respect to such Mortgaged Property
in the  form of  Exhibit  I  attached  hereto,  accurate  as of the date of such
statement,  and containing the information required to complete such schedule in
the manner and detail contemplated by such Exhibit, which shall be acceptable in
form and substance to the Agent in its sole discretion.

     "Project  Cost  Report"  means,  for any  Mortgaged  Property,  a completed
project  cost  report  with  respect to such  Mortgaged  Property in the form of
Exhibit J attached hereto,  accurate as of the date of such form, and containing
the  information  required  to complete  such  schedule in the manner and detail
contemplated by such Exhibit,  and including,  without  limitation,  the current
actual and projected Total Costs with respect to such Mortgaged Property and the
deviations of same (on line-item by line-item  basis) from the Budget  furnished
to Agent with respect to such Mortgaged Property.

     "Promissory  Notes" means the promissory notes made by the Borrower to each
Lender substantially in the form annexed hereto as Exhibit C.

     "Purchasing Lender" has the meaning provided in Section 7.18.

     "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.

     "Realty" means SC Realty Incorporated, a Nevada corporation.

     "Release" has the meaning provided in Section 8.11.

     "Release Parcel" has the meaning provided in Section 8.11.

     "Release Request" has the meaning provided in Section 8.11.

     "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.



                                      -12-

<PAGE>



     "Required  Lenders"  means the  Lenders  holding  at least  66-2/3%  of the
Commitment.

     "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.

     "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 (or  partnership) 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 Subsidiary of Borrower or any other Person
which owns any portion of or interest in any New Mortgaged Property.

     "Subsidiary Mortgagor Guaranty" has the meaning provided in Section 3.3(b).

     "Taxes" has the meaning provided in Section 2.17.

     "Total  Costs"  means,  for  each  Mortgaged  Property,  the sum of (i) the
Acquisition Costs with respect to such Mortgaged Property, (ii) the Direct Costs
with  respect to such  Mortgaged  Property,  and (iii) the  Indirect  Costs with
respect to such Mortgaged Property.

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

     "Unsecured Advances" has the meaning provided in Section 3.4.

     "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


                                      -13-

<PAGE>



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 "hereof,"  "herein," and
"hereunder"  and words of similar import when used in this Agreement shall refer
to  this  Agreement  as a  whole  and not to any  particular  provision  of this
Agreement, and 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

                           AMOUNTS AND TERMS OF LOANS

     Section 2.1 Commitment.

          (a)    Subject to and upon  the terms and conditions herein set forth,
each Lender,  severally and not jointly, agrees to make loans (each an "Advance"
and collectively, the  "Advances")  pro  rata  in  accordance with such Lender's
Percentage to the Borrower from time to time on and/or after the Closing Date.

          (b)    The aggregate principal amount outstanding of all Advances made
pursuant hereto by the Lenders shall not exceed $50,000,000 (the  "Commitment").
The aggregate principal amount outstanding of all Advances (other than Unsecured
Advances) shall not exceed the then Maximum  Availability  Amount. The aggregate
principal  amount  outstanding  of  all  Unsecured  Advances  shall  not  exceed
$30,000,000.  There may not be more than one Advance made on any day. Within the
foregoing  limits and subject to the conditions set out  in this Agreement,  the
Borrower  may borrow  Advances  under  this  Section 2.1, repay  Advances  under
Section 2.8, and reborrow Advances.

          (c)    The aggregate principal amount of each Advance  hereunder shall
be  not less than $500,000 and shall be in integral multiples of $100,000.

     Section 2.2  Advances.  (a) The Lenders will make  Advances of the Loan for
(and only for) any Permitted Purpose subject to and in accordance with the terms
and conditions of this  Agreement,  including,  without  limitation,  subject to
satisfaction of all conditions precedent to Advances set forth herein.

          (b)    The initial Advance  of  the loan  proceeds  will  be made upon
satisfaction of the conditions set forth in Article III of this  Agreement,  and
all subsequent  advances shall be made no more  frequently than (i) twice during
any calendar month  thereafter and (ii) once every 12 days,  provided,  that for
Unsecured Advances, such Advances can be made as frequently as once each week.



                                      -14-

<PAGE>



     Section 2.3 Notices of Borrowing.  Whenever the Borrower desires to receive
an Advance hereunder, it shall give the Agent at least five Business Days' prior
written notice of the proposed  Advance to be made hereunder,  such notice to be
given  prior to 12:00  noon (New  York  time) on the date  specified.  Each such
notice  (each a "Notice  of  Borrowing")  shall be in the form of  Exhibit B, be
irrevocable,  and specify the principal amount of the Advance to be made and the
date (which shall be a Business Day) of the Advance.

     Section 2.4  Disbursement  of Funds.  The Agent shall  promptly  (but in no
event less than three  Business  Days prior to the date of the  Advance)  notify
each Lender of its  Percentage of each Advance and the date of such Advance.  On
the date so  specified,  each Lender  shall make  available  to the Agent at the
Payment Office no later than 11:00 a.m. (New York time) in immediately available
funds an amount equal to such Lender's Percentage of such Advance. No later than
1:00  p.m.  (New York  time) on the date of each  Advance,  the Agent  will make
available to the Borrower at the Payment Office the full amount of the Advance.

     Section 2.5 Promissory Notes; Collateral.

          (a)      The  Borrower's  obligation  to  pay  the  principal of,  and
interest on, the Advances made by each Lender shall be evidenced by one  or more
Promissory  Notes in the face amount of each such  Lender's  Percentage  of  the
Commitment,  with blanks as to payee, date and  principal  amount  appropriately
completed.   The   determination  by  the  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, prepayment and reborrowing hereunder shall be
recorded by the Agent;  provided,  however,  that no failure to make or error in
making a recordation of an Advance shall in any way limit,  affect or modify the
obligation of the Borrower to repay any obligations,  or the rights of the Agent
and the Lenders to any amounts due under this Agreement,  the Loan Documents and
the Promissory Notes.

          (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 2.14 hereof, and each other
Loan Document.

     Section 2.6 Interest on Advances.

          (a)      The Borrower agrees to pay interest in respect of  the unpaid
principal amount of each  Advance  from the date such  Advance is made at a rate
per annum for each  Interest  Period  equal to the  Applicable  Margin  plus the
relevant  Adjusted  Eurodollar  Rate.  Interest  on each  Advance  shall  accrue
from and including  the date of such Advance to but  excluding  the date of  any
repayment  thereof and shall be payable  (i) (x) with  respect to  all  Advances
other than Advances the Interest  Period  applicable to which is six months,  in
arrears on  the last day of the Interest Period for each such  Advance,  and (y)
with respect to all Advances  the  Interest  Period  applicable  to which is six
months,  in  arrears on the  90th  day following  the first day of such Interest
Period and on the last day of such Interest Period, (ii) at maturity (whether by
acceleration or otherwise), and (iii) after maturity, on demand. Notwithstanding


                                      -15-

<PAGE>



the foregoing,  interest on each Advance bearing interest at the Alternate  Rate
pursuant to the terms of this Agreement  shall be payable in arrears on the last
day of each  calendar  month  during the Interest Period  applicable to     such
Advance and on the last day of such Interest  Period, (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  each  Advance,  and  all  other  overdue  amounts  owing
hereunder, shall   bear interest for each day that such amounts are overdue at a
rate (the "Default Rate")  per annum  equal to three  percent  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 Agent, upon determining the Adjusted Eurodollar  Rate  for
any  Interest Period, shall promptly notify by  telephone (confirmed in writing)
or in writing the Borrower thereof.

          (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 judiciall
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 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,   the  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 Advances  (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 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
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 2.7 Interest  Periods.  In  connection  with each  Advance  bearing
interest at the rate described in Section 2.6(a) above, an interest period (each
an "Interest  Period") shall be applicable  thereto,  which shall be a period of
one,  two,  three or six months as  selected  by the  Borrower  in the Notice of
Borrowing for such Advance, provided that:


                                      -16-

<PAGE>



          (i) the initial  Interest Period for any Advance shall commence on the
     date of such Advance;

          (ii) subject to the provisions of Section 6.2 hereof and 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 for any
     Advance,  the Borrower shall be permitted to select an additional  Interest
     Period for such Advance by delivering a written notice thereof, in the form
     of  Exhibit  B-1,  to the 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 Advance,  provided that if no Interest
     Period selection is delivered to the 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 Advance
     may not be changed without the consent of the 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
     an Advance  (other than an Advance  referred to in Section  2.13(b)(ii)  or
     Section 2.14(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 an Advance 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.

     Section 2.8 Repayment of Advances.  The Borrower  shall repay to the Agent,
for the account of the Lenders, the unpaid principal amount of each Advance made
by the Lenders hereunder,  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 2.9 Prepayments of Advances.

          (a)      The Borrower may prepay all  outstanding   Advances, any  one
Advance  or portion  thereof on any Business Day  without  penalty,  premium  or
additional  charge,  except as set forth in Section 2.16 hereof;  provided  such
prepayment shall be at least equal to the lesser of $100,000 or the  outstanding
amount of such Advance. Upon three (3) days written  notice to   the Agent,  the


                                      -17-

<PAGE>



Borrower may terminate the  Commitment by prepaying  all  outstanding   Advances
and all other  amounts and fees due  to  the  Agent and  the Lenders  under this
Agreement and the other Loan Documents.

          (b)   The Borrower shall be liable for all amounts payable pursuant to
Section 2.16 with  respect to a prepayment  of an Advance on any date other than
the  last  day of the  Interest  Period  related  to such  Advance  where no new
Interest  Period  shall  have been  selected  or  deemed  to have been  selected
pursuant to Section 2.7(ii) for such Advance.

          (c)    The Borrower shall apply upon receipt (i) all net proceeds from
its   equity  offerings  to  repay  on  a  pari  passu  basis  the  Loan and the
Indebtedness  referred to in Section 5.3(a)(vii) of this Agreement, and (ii) all
other amounts  and fees due to the Agent and the  Lenders  under this  Agreement
and the other Loan Documents.

     Section 2.10 Fees.  The Borrower  shall pay to the Agent for the account of
the Lenders a commitment fee (the "Commitment  Fee") equal to 0.50% per annum of
the Average Undrawn Balance of the Commitment.  Such 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. Each payment on account of the Commitment Fee for
a period which is less than a full calendar quarter shall be prorated.

     Section 2.11 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 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 Agent after
such time shall, for all purposes of this Agreement, be deemed to have been paid
on the next  succeeding  Business  Day. The 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.

          (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  2.7(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 Advances shall be made on
the basis of a year of (x) in the case of Advances on which interest is computed
on the basis of the  Eurodollar  Rate, 360 days, and (y) in the case of Advances
on which interest is 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.



                                      -18-

<PAGE>



     Section 2.12 Interest Rate Not Ascertainable,  Etc. If the Agent shall have
determined  (which  determination  shall  be  conclusive  and  binding  upon the
Borrower) that on any date for  determining the Eurodollar 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 Eurodollar
Rate,  then,  and in any such event,  the Agent shall  forthwith give notice (by
telephone confirmed in writing) to the Borrower of such determination. Until the
Agent notifies the Borrower that the circumstances giving rise to the suspension
described herein no longer exist:

          (i) any  Advance  made  hereunder  shall  bear  interest  at the  then
     applicable Alternate Rate; and

          (ii) if any Advance  affected is then  outstanding,  each such Advance
     shall  immediately  convert  into an Advance  bearing  interest at the then
     applicable  Alternate  Rate with an Interest  Period  ending on the date on
     which the Interest Period applicable to the Advance affected expires.

     Section 2.13 Illegality.

          (a)     If any Lender (a "Notifying Lender") shall have  determined at
any time   that the making or continuance of any Advance 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 Agent and the Borrower of such determination.

          (b)     Upon the giving of the notice to the  Agent and  the  Borrower
referred to in  subsection  (a)  above,  (i) the  Borrower's  right  to  request
and the  Notifying Lender's  obligation to make Advances shall  be   immediately
suspended, and  (ii) if any  Advance  of the Notifying  Lender affected  thereby
is then outstanding, each such Advance shall immediately convert into an Advance
bearing  interest at the then applicable Alternate  Rate with an Interest Period
ending on the date on  which  the  Interest  Period  applicable  to the  Advance
affected expires.

     Section 2.14 Increased Costs.

          (a)       If, by  reason of (x) after the  date  hereof, the implemen-
tation 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 Advances or its  obligation to
     make  Advances,  or shall  change the basis of  taxation of payments to any
     Lender of the principal of or interest on the Advances or its obligation to
     make  Advances  (except  for  changes in the rate of tax on the overall net
     income


                                      -19-

<PAGE>



     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 the Advances 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  Advances,  or there  shall be a  reduction  in the amount
received or receivable by such Lender or its Lending  Office,  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
Agent,  pay to the 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 2.14,  such
Lender  shall  promptly  notify  the 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  2.14  relating to any period in
which the  Commitment  is in effect,  the  provisions of this Section 2.14 shall
survive the  termination  of this  Agreement  and the payment of the  Promissory
Notes and all other amounts payable hereunder.

          (b)      If the Lenders shall  notify the Borrower in  writing that at
any time, because of  the  circumstances  described  in  clause  (x)  or  (y) in
Section 2.14(a) or any other circum  stances  arising after the Closing Date and
relating to any   period in which  the Commitment  is  in  effect  affecting the
interbank  Eurodollar  market generally, the then applicable Adjusted Eurodollar
Rate, as determined by the Agent,  will not  adequately  and fairly  reflect the
cost to the Lenders of  funding the Advances, then, subject to  Section 2.14(c),
thereafter:

          (i) any Advance made  hereunder  shall bear  interest at the Alternate
     Rate; and

          (ii) if the affected Advance is then  outstanding,  the Borrower shall
     immediately,  or if  permitted  by  applicable  law, no later than the date
     permitted  thereby,  upon at least one Business Day's written notice to the
     Lenders,  convert each such Advance into an Advance bearing interest at the
     Alternate  Rate  with an  Interest  Period  ending on the date on which the
     Interest Period applicable to the affected Advance expires.

          (c)       If the Lenders  shall  notify the Borrower in writing that 
at any time,  because of the  circumstances  described  in  clause (x) or (y) in
Section 2.14(a) or any other circumstances  arising after the Closing  Date  and
relating to any period  in  which  the  Commitment is  in  effect  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  Agent,  which assignment   shall  be
effected pursuant to Section 7.18 hereof.

     Section 2.15 Change of Lending Office.  Each Lender agrees that it will use
reasonable  efforts to designate an alternate Lending Office with respect to its
Advances  affected by the matters or  circumstances  described in Section  2.12,
2.13 or 2.14 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 2.16 Funding  Losses.  The Borrower shall  compensate  each Lender,
upon such Lender's written request to the Agent and the 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 Advances 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) an Advance  does not occur on the
date  specified  therefor in a Notice of Borrowing  (whether or not  withdrawn);
(ii) if any repayment of any Advance  occurs on a date which is not the Maturity
Date or the last day of an Interest Period  applicable to such Advance  (subject
to Section  2.9(b));  (iii) if, for any  reason,  the  Borrower  defaults in its
obligation to repay any Advances  when required by the terms of this  Agreement;
or (iv) the occurrence of any of the events  described in Sections 2.12, 2.13 or
2.15.  With  respect  to losses,  expenses  and  liabilities  which a Lender may
sustain as described  in this  Section 2.16  relating to any period in which the
Commitment is in effect,  the  provisions of this Section 2.16 shall survive the
termination of this  Agreement and the payment of the  Promissory  Notes and all
other amounts payable hereunder.

     Section  2.17  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  Agent a  certified  copy of an original  official  receipt


                                      -20-

<PAGE>



received by the Borrower showing payment  thereof.  If any Borrower fails to pay
any Taxes when due to the appropriate  taxing authority or fails to remit to the
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 2.17(b)),  the Borrower shall
indemnify,  defend  and  hold  harmless  the  Agent  and  each  Lender  for  any
incremental taxes,  interest,  or penalties that may become payable by the Agent
or any Lender as a result of any such failure.  With respect to any  obligations
of the Borrower  pursuant to this  Section 2.17  relating to any period in which
the Commitment is in effect,  the agreements in this Section 2.17, as they apply
to any Advance,  shall survive the termination of this Agreement and the payment
of the Promissory Notes and all other amounts payable hereunder.

          (b)       Agent and each Lender shall  furnish  Borrower, at  least 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 a  financial  institution
reasonably  acceptable to the Agent, which assignment shall be effected pursuant
to Section 7.18 hereof.

     Section 2.18  Extension of Maturity Date. At least sixty (60) days prior to
the first anniversary of the Closing Date, the Borrower may, by notice to Agent,
request that Agent and each Lender review whether or not it is willing to extend
the Maturity  Date. In the event and to the extent that the Agent and all of the
Required  Lenders agree, in their  respective sole and absolute  discretion,  to
extend the Maturity Date on such terms and  conditions as shall be acceptable to
the Agent and all of the Required Lenders, in their respective sole and absolute
discretion,  then the  Agent  shall so  advise  the  Borrower.  If the terms and
conditions  to such  extension  are  acceptable  to  Borrower,  in its  sole and
absolute discretion, then the Borrower shall so notify the Agent within the time
period set forth in such notice to the Borrower  and,  provided  that all of the
conditions to the effectiveness of such extension as set forth in such notice to
the Borrower are satisfied, the Maturity Date shall be extended pursuant to such
terms and  conditions and the  provisions of this Section.  Notwithstanding  the
foregoing or anything else to the contrary, the Agent and each Lender shall have
the right to refuse to extend the Maturity  Date for any reason or for no reason
whatsoever.  If the Maturity Date is extended  pursuant to this Section but less
than all of the Lenders agree to such extension, then either (i) the Commitment,
for all  purposes  during  the period of such  extension,  shall be equal to the
product of the Commitment times the aggregate Percentage of the Lenders agreeing
to such extension, or (ii) the Borrower shall be entitled to require each Lender
which does not agree to such  extension to assign its Credit  Exposure at par to
any Person  selected by  Borrower  that is a  financial  institution  reasonably
acceptable to the Agent,  which assignment shall be effected pursuant to Section
7.18 hereof.




                                      -21-

<PAGE>



                                   ARTICLE III

                            CONDITIONS TO BORROWINGS

     The obligation of the Lenders to make an Advance to the Borrower is subject
to the satisfaction of the following conditions:

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

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

          (i) an officer's  certificate,  dated the Closing Date,  signed by any
     Co-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  D with
     appropriate   insertions,   together   with  copies  of  the   Articles  of
     Incorporation of Borrower  certified 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, the Advances and the Loan Documents;

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

          (iii) a duly executed and delivered Environmental Indemnity;

          (iv) an opinion of counsel to the Borrower  addressed to the Agent and
     the  Lenders as to the  matters  set forth in Exhibit F and F-1 and in form
     reasonably acceptable to the Agent;

          (v)  financial   statements  in  the  forms   prescribed  by  Sections
     5.2(a)-(d) for the most recent fiscal year and fiscal quarter;

          (vi) 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;



                                      -22-

<PAGE>



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

          (viii) (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

          (ix) a letter of comfort  from  Security  Capital  Group  Incorporated
     substantially in the form of Exhibit O attached hereto.

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

     Section 3.2 Conditions Precedent to Each Advance. At the time of the making
by the Lenders of each Advance  (before as well as after  giving  effect to such
Advance and to the proposed use of the proceeds thereof):

          (a)       The Agent shall have  received a timely  Notice of Borrowing
from the Borrower in accordance with Article II;

          (b)       No Default or Event of  Default  shall  have occurred and be
continuing;

          (c)       Such Advance shall not cause  (i)  the  aggregate  principal
amount of all outstanding Advances to exceed the Commitment,  (ii) the aggregate
principal amount of all outstanding  Advances (other than Unsecured Advances) to
exceed the then Maximum  Availability  Amount, and (iii) the aggregate principal
amount of all outstanding Unsecured Advances to exceed $30,000,000;

          (d)       Subject  to  the  provisions  of  Section  5.5  hereof,  all
representations  and  warranties  contained  herein and  incorporated  herein by
reference  (other  than  representations  and  warranties  which  are  expressly
provided 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 Advance and the Borrower
shall  be in  compliance  in  all  material  respects  with  all  covenants  and
agreements contained in Article V hereof and elsewhere in this Agreement;

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



                                      -23-

<PAGE>



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

          (g)       Agent shall have received:

               (i) prior to any Advance  (other than  Unsecured  Advances)  with
          respect to any Mortgaged  Property (and,  notwithstanding  anything to
          the  contrary,  no  portion of the Total  Costs  with  respect to such
          Mortgaged Property shall be included in the computation of the Maximum
          Availability  Amount unless the Agent shall have  received):  (1) such
          supporting documentation for Total Costs as Agent may require and such
          supporting  documentation  evidencing  that the Mortgaged  Property is
          located  in a Central  Business  District  as Agent may  require,  (2)
          Borrower's certificate to the effect that it has actually incurred the
          Total Costs for which it is seeking  reimbursement with respect to the
          requested  Advance,  that such  costs have not been made the basis for
          any  other  request  for an  Advance  under  this  Agreement,  that no
          Material  Adverse Change has occurred since the immediately  preceding
          Advance,  and that the  requested  Advance  will be used for (and only
          for) the Permitted  Purpose,  (3) a notice of title continuation or an
          endorsement  to each title policy  referred to in Section  3.3(a)(iii)
          dated  no more  than  seven  (7)  days  prior  to the date of any such
          Advance,  indicating that since the date of the last preceding Advance
          there  has  been no  change  in the  state of  title  not  theretofore
          approved by Agent, which endorsement shall have the effect of redating
          the title  policy to a date no more than  seven (7) days  prior to the
          date of any such Advance,  and increasing the coverage  thereof by the
          amount of the  Advance  then  being  made,  together  with  Borrower's
          certificate  dated on the date of any such  Advance to the effect that
          there has been no change in the state of title  since the date of such
          title continuation or endorsement or title policy, as the case may be,
          and the  date  of  such  Advance;  or in the  case of a New  Mortgaged
          Property,  a title policy as referred to in Section  3.3(a)(iii) dated
          the date on any such  Advance,  and (4) a Project Cost Report for such
          Mortgaged Property, dated as of the date of the Notice of Borrowing;

               (ii) prior to any Advance  (other than  Unsecured  Advances) with
          respect  to any  Acquisition  Cost for any  Mortgaged  Property  (and,
          notwithstanding  anything  to the  contrary,  no  portion of the Total
          Costs with respect to such Mortgaged Property shall be included in the
          computation of the Maximum  Availability Amount unless the Agent shall
          have  received):  (1) a Budget for such Mortgaged  Property,  together
          with a full  copy of the  material  agreement(s)  (together  with  all
          amendments  thereto)  pursuant to which such  Mortgaged  Property  was
          acquired,  certified  by the  Borrower  as being  true,  complete  and
          accurate;  (2) Borrower's  certification that, and evidence reasonably
          satisfactory to Agent that, the zoning district in which the Mortgaged
          Property is located permits the development,  use and operation of the
          Mortgaged  Property as an extended stay  facility with such  ancillary
          facilities  related thereto,  and that all zoning,  planning board and
          similar  approvals  required to be obtained under any  Requirements of
          Law or Use Requirements  for the development,  use and operation of an
          extended stay facility with such ancillary  facilities related thereto
          on such  Mortgaged  Property  have been obtained and are in full force
          and  effect;  and (3)  Borrower's  certificate  to the effect that the
          building  permit and all other permits,  authorizations  and approvals
          required to be obtained


                                      -24-

<PAGE>



          under any Requirements of Law or Use Requirements for the construction
          and  operation  of an  extended  stay  facility  with  such  ancillary
          facilities related thereto on such Mortgaged Property will be promptly
          and duly applied for, are capable of being obtained, and that Borrower
          will  pursue  the  obtainment  of  such  permits,  authorizations  and
          approvals with due diligence,  and that the construction and operation
          of an extended stay facility with such  ancillary  facilities  related
          thereto on such  Mortgaged  Property  shall at all times comply in all
          material  respects  with all  applicable  Requirements  of Law and Use
          Requirements; and

               (iii) prior to any Advance (other than  Unsecured  Advances) with
          respect  to  any  Direct  Cost  for  any  Mortgaged   Property   (and,
          notwithstanding  anything  to the  contrary,  no portion of the Direct
          Costs with respect to such Mortgaged Property shall be included in the
          computation of the Maximum  Availability Amount unless the Agent shall
          have received):  (1) Borrower's certification that the building permit
          and all other permits,  authorizations  and approvals then required to
          be obtained under any  Requirements of Law or Use Requirements for the
          construction  and  operation of an extended  stay  facility  with such
          ancillary facilities related thereto on such Mortgaged Property (i.e.,
          only to the extent such  permits,  authorizations  and  approvals  are
          required to have been  obtained for an extended stay facility and such
          ancillary  facilities  related  thereto on such Mortgaged  Property as
          constructed  and/or operated as of the date of such Advance) have been
          obtained  and are in full force and effect in all  material  respects;
          (2)  Borrower's  certificate  to  the  effect  that  final  plans  and
          specifications (the "Plans and  Specifications")  for the construction
          of an extended stay facility with such  ancillary  facilities  related
          thereto  on such  Mortgaged  Property  have been duly  filed  with all
          Governmental  Authorities having jurisdiction over the construction of
          such facility; (3) a Final Budget for such Mortgaged Property; and (4)
          prior to the first  Advance  with  respect to any Direct  Cost for any
          particular  Mortgaged Property,  Borrower's  certificate to the effect
          that  agreements  with the  general  contractor  and all  major  trade
          contractors  and  subcontractors  required for the  construction of an
          extended stay facility and such ancillary  facilities  related thereto
          on such  Mortgaged  Property  have been duly executed and delivered by
          all parties thereto and are in full force and effect.

               (iv) prior to the first Advance (other than  Unsecured  Advances)
          with respect to the Indirect  Cost for any  Mortgaged  Property  (and,
          notwithstanding  anything to the contrary,  no portion of the Indirect
          Costs with respect to such Mortgaged Property shall be included in the
          computation of the Maximum  Availability Amount unless the Agent shall
          have received):  (1) Borrower's  certification that construction shall
          commence  in  accordance  with the Plans and  Specifications  for such
          Mortgaged  Property  not  later  than  ninety  (90)  days of the first
          advance for Indirect  Costs for such Mortgaged  Property,  and (2) all
          other documents required under clauses (i), (ii) and (iii) above.


          (h)       The Borrower  shall  have  commenced  construction  of  each
extended stay facility,  including the ancillary  facilities related thereto, to
be  constructed  on a  Mortgaged  Property  in  accordance  with the  Plans  and
Specifications  therefor  not  later  than  ninety  (90) days from the date that
Borrower  receives the first  Advance  with  respect to Indirect  Costs for such
Mortgaged Property; provided, however,  notwithstanding the foregoing, if either
(x) despite the use of commercially reasonable efforts, such construction cannot


                                      -25-

<PAGE>



be  commenced   within  such  90-day   period  as  a  result  of  conditions  or
circumstances outside of the Borrower's control (it being agreed that conditions
or  circumstances  which can be cured by the  payment  of money on  commercially
reasonable terms shall not be deemed outside of the Borrower's control),  or (y)
commencement  of  construction  within such 90-day period shall or is reasonably
likely to result in the Direct  Costs or  Indirect  Costs  with  respect to such
Mortgaged Property being materially greater than the amount thereof set forth in
the Budget for such  Mortgaged  Property,  then, in either such event,  Borrower
shall have an additional thirty days to commence  construction on such Mortgaged
Property.  In the event  construction  is not commenced  with 120 days after the
first advance of Indirect Costs with respect to such Mortgaged Property, then no
additional Advances for such Mortgaged Property shall be made until construction
commences..


               (i) The Agent shall have received  such other  documents or legal
          opinions as the Agent or counsel to the Agent may reasonably  request,
          all in form and substance reasonably satisfactory to the Agent; and

               (j) (1) The Agent  shall have  received  payment of all costs and
          expenses (other than the legal fees described in the following  clause
          (2) of  this  subparagraph)  incurred  by  Agent  in  connection  with
          reviewing  and  evaluating   the  items   furnished  and  the  actions
          purporting to satisfy the conditions and  requirements to be satisfied
          pursuant to this Section 3.2, and (2) receipt of a Notice of Borrowing
          for each Advance shall constitute Borrower's agreement and covenant to
          pay to the Agent,  promptly  upon demand  (together  with a reasonably
          detailed invoice(s) in respect thereof), all reasonable legal fees and
          expenses  incurred in connection with preparing  and/or  reviewing all
          documents  relating  to,  and  rendering  at the  request of Agent all
          advice respecting, such items, actions, conditions and requirements.

     Each  request  for an Advance by the  Borrower,  each  selection  or deemed
selection  by the  Borrower  of an  additional  Interest  Period for any Advance
pursuant to Section 2.7(ii),  shall constitute a representation  and warranty by
the Borrower,  as of the date of the Advance,  the selection or deemed selection
of such  additional  Interest  Period,  as the case may be, that the  conditions
specified in subsections (a)-(j) of this Section 3.2 have been satisfied.

     Borrower  shall use  reasonable  efforts to furnish,  with  respect to each
request for an  Advance,  unless  otherwise  directed  by Agent,  all  documents
referred to in Sections 3.2(g)(i)(3),  3.2(g)(ii)(2), 3.2(h), 3.3(a) (other than
those  referred to in  subsections  (viii) and (ix) thereof) and 3.3(b),  to the
extent applicable to such Advance, to Agent's counsel, Robinson Silverman Pearce
Aronsohn & Berman LLP,  1290 Avenue of the Americas,  New York,  New York 10104,
Attention:  Michael B.  Levy,  Esq.,  or at such other  address or to such other
counsel  as  Agent  may from  time to time  designate  by  notice  to  Borrower.
Notwithstanding  the  foregoing:  (i) the  failure of any such  documents  to be
furnished  to such  counsel  shall not  constitute a Default or Event of Default
(provided,  however,  nothing  herein  shall  negate or vitiate any  requirement
hereunder to cause the Agent to receive any such documents),  and (ii) copies of
all of the foregoing  documents delivered to such counsel shall also be given to
Agent as provided herein.



                                      -26-

<PAGE>



     Section 3.3 Additional Conditions Precedent to an Advance in Respect of New
Mortgaged Property.  Notwithstanding anything to the contrary, no portion of the
Total Costs with respect to a New  Mortgaged  Property  shall be included in the
computation of the Maximum  Availability Amount unless the following  conditions
are satisfied with respect to each such New Mortgaged Property:

          (a)      Receipt of  Documents.   The  Agent shall  have received  the
following in form and substance satisfactory to the Agent:

               (i) a Mortgage for the New Mortgaged  Property  duly  authorized,
          executed, acknowledged and delivered in recordable form and (except as
          otherwise  expressly  provided  in  Section  3.3(c))  evidence  of the
          recording of such instrument as may be necessary or, in the opinion of
          the  Agent,  desirable  to  perfect  and  protect  the Liens or rights
          purported to be created thereby;

               (ii)  Financing   Statements  for  the  New  Mortgaged   Property
          (including,  without limitation, all furniture, fixtures and equipment
          the cost of which is or has been  included in Total Costs for purposes
          of computing the Maximum  Availability  Amount),  duly  authorized and
          executed and  delivered in form  suitable for  recording and filing in
          all  necessary and  appropriate  recorders  and filing  offices,  with
          evidence of the recording and filing of each such Financing  Statement
          in such offices;

               (iii)  with  respect  to  the  New   Mortgaged   Property  (i)  a
          mortgagee's  policy of title insurance issued by a reputable  national
          title insurance  company  reasonably  acceptable to the Agent, in form
          and substance  satisfactory  to the Agent,  (x) insuring the Agent and
          the Lenders in an amount  acceptable  to the Agent with respect to the
          New Mortgaged Property, that, except for unrecorded Mortgages pursuant
          to Section  3.3(c),  each Mortgage  constitutes a valid first mortgage
          lien on the Borrower's fee interest in the New Mortgaged Property, (y)
          providing  full  coverage  against all  mechanics'  and  materialmen's
          liens,  and (z)  containing the  endorsements  described on Schedule 5
          attached hereto and such other  endorsements and affirmative  coverage
          as  reasonably  required  by the Agent to the extent  available  under
          applicable  law  and  with  such   reinsurance   (with  direct  access
          provisions) as the Agent may reasonably  request;  and the Agent shall
          also have received evidence that the premiums in respect of such title
          insurance  policies  have  been  paid;  (ii) a  survey  by a  licensed
          surveyor reasonably satisfactory to the Agent and such title insurance
          company, containing the certification set forth on Schedule 6 attached
          hereto and certified to the Agent, the Lenders, the Borrower,  and the
          title  insurance  company,   showing  no  state  of  facts  reasonably
          unacceptable to the Agent; and (iii) a copy of all recorded  documents
          referred to, or listed as exceptions  to title in, the title  policies
          referred  to  in  this  Section   3.3(a)(iii),   including  copies  of
          appurtenant  easements  affecting  or  benefitting  the New  Mortgaged
          Property;

               (iv) studies,  in each case reasonably  satisfactory to the Agent
          (and conducted by an  experienced  and reputable  engineering  firm as
          demonstrated to Agent by evidence reasonably satisfactory


                                      -27-

<PAGE>



          to Agent) confirming that there are no Hazardous Materials on or under
          the New  Mortgaged  Property,  except as set forth in such Studies and
          acceptable to the Agent in its sole discretion;

               (v) UCC lien searches with respect to the Borrower, whether filed
          against the New Mortgaged Property or otherwise;

               (vi) copies of each policy of insurance  required  hereunder  and
          under the other Loan  Documents,  and,  with  respect to  policies  of
          insurance covering the New Mortgaged Property,  to the extent such New
          Mortgaged Property is not insured under existing policies of insurance
          required hereunder and under the other Loan Documents, certificates or
          binders  naming  the Agent and each  Lender as an  additional  insured
          thereunder,  accompanied by a certification stating that all insurance
          required  hereunder  and  under  the  other  Loan  Documents  has been
          obtained,   such  insurance  satisfies  the  requirements  hereof  and
          thereof,  and is in full  force and effect  and that all  current  due
          premiums therefor have been paid in full;

               (vii) an  opinion of counsel  to the  Borrower  addressed  to the
          Agent and the Lenders as to the matters set forth in Exhibit F and F-1
          and in form reasonably acceptable to the Agent;

               (viii)  copies of Market  Studies  acceptable to the Agent in its
          reasonable discretion with respect to the New Mortgaged Property;

               (ix) a  Proforma  Operating  Statement  acceptable  in  form  and
          substance to the Agent in its sole  discretion  for each New Mortgaged
          Property, dated as of a recent date;

               (x) Intentionally omitted;

               (xi) such consents or  acknowledgements  from such Persons as the
          Agent or its counsel may reasonably determine to be necessary;

               (xii) such other  documents and  instruments  as the Agent or the
          Lenders may deem reasonably necessary or appropriate as a condition to
          its granting of the Borrower's request to add New Mortgaged Properties
          to the Collateral; and

               (xiii) (1) The Agent shall have received payment of all costs and
          expenses (other than the legal fees described in the following  clause
          (2) of  this  subparagraph)  incurred  by  Agent  in  connection  with
          reviewing  and  evaluating   the  items   furnished  and  the  actions
          purporting to satisfy the conditions and  requirements to be satisfied
          pursuant to this Section 3.3, and (2) receipt of any of the  documents
          or  instruments   described  in  this  Section  3.3  shall  constitute
          Borrower's  agreement and covenant to pay to the Agent,  promptly upon
          demand  (together  with a reasonably  detailed  invoice(s)  in respect
          thereof),   all  reasonable  legal  fees  and  expenses   incurred  in
          connection with preparing and/or reviewing all documents  relating to,
          and  rendering at the request of rendering at the request of Agent all
          advice respecting, such items, actions, conditions and requirements.


                                      -28-

<PAGE>


               
          (b)      Subsidiary-Owned New Mortgaged Properties.   With  respect to
each  Mortgaged  Property  any  portion of or  interest in which is owned by any
Subsidiary  Mortgagor,  the Agent shall have  received the following in form and
substance  satisfactory  to  the  Agent:  (x) a  guaranty  of  the  Indebtedness
hereunder  in the  form of  Exhibit  K  attached  hereto  from  such  Subsidiary
Mortgagor (the "Subsidiary  Mortgagor  Guaranty"),  (y) all of the documents and
instruments  described  in Section  3.3(a)  hereof,  and (z) the  documents  and
instruments  described  in Section  3.1(a)(i)  with  respect  to the  authority,
execution and delivery of documents and  instruments  by, and the performance of
the obligations thereunder by, such Subsidiary Mortgagor,  and the documents and
instruments  described  in Section  3.1(a)(viii).  For  purposes of this Section
3.3(b) (and for no other  purpose),  all  references  to  "Borrower" in Sections
3.1(a)(i),  3.1(a)(viii) and 3.3(a) (and in the definitions and other provisions
referred  to in such  Sections)  shall be  deemed  to  include  such  Subsidiary
Mortgagor.

          (c)      Unrecorded Mortgages of Subsidiary Mortgagor.  Subject to and
in accordance with the terms of this Section  3.3(c),  the Mortgage with respect
to any  Mortgaged  Property  may  remain  unrecorded  provided  that  all of the
following conditions are satisfied: (i) the mortgage recording tax that would be
payable by the mortgagor under such Mortgage with the jurisdiction in which such
Mortgaged  Property is located as a condition  precedent to the  recordation  in
such jurisdiction of such Mortgage, shall exceed 1.0% of the Eligible Costs with
respect to such Mortgaged  Property,  (ii) such Mortgaged Property is owned by a
Subsidiary  Mortgagor  that is and shall remain a  single-purpose  entity which,
among other  things,  (A) has the ability and capacity as determined in the sole
discretion  of the Agent to pay the  mortgage  recording  tax,  (B) does not and
shall not engage in any business  other than owning and operating such Mortgaged
Property,  or acquire  or own assets  other  than such  Mortgaged  Property  and
incidental  personal  property  without the prior written  consent of the Agent,
which consent may be withheld for any reason or no reason, (C) has no debt as of
the date  hereof and shall not incur or create any debt  except such debt agreed
to in advance by the Agent in writing,  (D)  maintains its assets in a way which
segregates and identifies  such assets separate and apart from the assets of any
other person or entity,  (E) holds itself out to the public as a separate  legal
entity from any other person or entity,  and (F) conducts business solely in its
own name,  (iii) the entire stock,  partnership,  membership and other ownership
interests and  privileges in such  Subsidiary  Mortgagor and any other  property
owned by such  Subsidiary  Mortgagor under clause (ii)(B) above are assigned and
pledged to the Lenders  pursuant to a Pledge and Security  Agreement in the form
of Exhibit P and  appropriate  Financing  Statements  are filed  evidencing  the
collateral  under the Pledge and Security  Agreement , (iv) the  jurisdiction in
which such Mortgaged  Property is located  permits the immediate  recordation of
such  Mortgage  at no cost or  expense  to the Agent or the  Lenders  other than
payment of such mortgage  recording tax and nominal recording  charges,  (v) the
Borrower provides written evidence, accompanying the Initial Budget with respect
to such Mortgaged  Property,  satisfactory  to the Agent that the conditions set
forth in clauses (i),  (ii) and (iv) above are  satisfied,  (vi) the Agent shall
have  received an opinion of counsel to the Borrower  addressed to the Agent and
the Lenders as set forth in Exhibits F and F-1 in form and substance  reasonably
acceptable  to the Agent,  (vii) the Agent  shall have  received  payment of all
costs  and  expenses  (other  than the legal  fees  described  in the  following
subclause of this clause (vii))  incurred by Agent in connection  with reviewing
and evaluating the items furnished and the  actions  purporting  to  satisfy the


                                      -29-

<PAGE>



conditions and requirements to be satisfied pursuant to this Section 3.3(c), and
receipt of a Notice of  Borrowing  for the first  Advance  with  respect to such
Mortgaged Property shall constitute  Borrower's agreement and covenant to pay to
the Agent,  promptly upon demand (together with a reasonably detailed invoice(s)
in  respect  thereof),  all  reasonable  legal  fees and  expenses  incurred  in
connection  with  preparing  and/or  reviewing  all  documents  relating to, and
rendering at the request of Agent all advice  respecting,  such items,  actions,
conditions and  requirements,  (viii) all of the conditions set forth in Section
3.3(b) shall have been satisfied with respect to such Mortgaged  Property (other
than the condition that such Mortgage be recorded and evidence thereof delivered
to the Agent), (ix) the Agent consents to such Mortgage not being recorded,  and
(x) the form and substance of all of the foregoing evidence, opinion letters and
other documents are  satisfactory to the Agent in all respects.  Failure for any
reason  of  any  of  the  foregoing  conditions  to  be  satisfied  prior  to or
contemporaneously  with the  giving  of the  Notice of  Borrowing  for the first
Advance,  or with regard to clauses (vi),  (vii) and (ix) above,  by the date of
the first Advance,  with respect to such Mortgaged  Property shall constitute an
irrevocable waiver by Borrower of its right to request that such Mortgage not be
recorded.  Notwithstanding  anything to the contrary,  the Borrower  irrevocably
agrees that each and every  unrecorded  Mortgage may be recorded at any time (A)
immediately  upon an Event of Default  described in Section 6.1(a),  (B) for any
insubstantial,   immaterial,   technical  Default  in  the  Agent's   reasonable
discretion,  at the earlier of ninety (90) days following  such Default  (unless
such Default has been cured) or  immediately  upon an Event of Default,  and (C)
for any Default not covered in either (A) or (B) above, immediately,  after such
Default  (unless  such  Default has been cured) or after the Agent,  in its sole
discretion,  reasonably  believes  that a Default  is likely to occur.  Borrower
shall pay upon demand all mortgage  recording  taxes,  charges,  fees,  cost and
expenses  incurred  by the Agent or any of the Lenders in  connection  with such
recordation.

     Section 3.4 Additional  Conditions Relating to Unsecured Advances.  Subject
to and in accordance  with the terms of this Section 3.4,  Borrower may elect to
receive certain Advances without  satisfying the conditions set forth in Section
3.2(g) with respect to such Advance.  All such Advances made hereunder  which do
not satisfy the  conditions  set forth in Section 3.2(g) are referred to in this
Agreement as "Unsecured Advances". No Unsecured Advance shall be made unless all
of the  conditions  and  requirements  set forth in Article  III (other than the
conditions set forth in Section 3.2(g)) and all of the other  provisions of this
Agreement  and the other Loan  Documents  to be  satisfied as a condition to any
Advance shall be satisfied as a condition to the making of any Unsecured Advance
(including,  without  limitation,  that the  aggregate  principal  amount of all
outstanding  Unsecured Advances shall not exceed  $30,000,000).  Notwithstanding
anything to the contrary, no Unsecured Advance shall be made after September 30,
1998. The Borrower shall repay to the Agent, for the account of the Lenders, the
unpaid principal amount of all Unsecured Advances, together with all accrued and
unpaid interest thereon,  on September 30, 1998, unless, on or before such date,
(i) the  conditions  set forth in Section  3.2(g) with respect to any  Unsecured
Advances  not so  repaid  are  satisfied,  and (ii) as of the date on which  the
conditions  set forth in Section  3.2(g) with respect to any Unsecured  Advances
not so repaid are satisfied,  all of the other  conditions and  requirements set
forth in Article III and all of the other  provisions of this  Agreement and the
other Loan  Documents to be  satisfied  as a condition  to any Advance  shall be
satisfied.



                                      -30-

<PAGE>



                                   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 each Advance:

     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).

     Section 4.2  Authorization  of  Agreement;  No  Violation.  The  execution,
delivery,  and  performance  by  Borrower  of  this  Agreement  and of the  Loan
Documents (i) are within the Borrower's  powers,  (ii) have been duly authorized
by all necessary action,  and (iii) do not violate or create a default under any
Requirement of Law, the Borrower's  Certificate of Incorporation  and By-Laws or
any Contractual  Obligation binding on or affecting the Borrower or its property
(other  than any  violation  or  default  that would not  constitute  a Material
Adverse Change).

     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).

     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)(v) and  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 2 hereof.



                                      -31-

<PAGE>




          (b)       Since  December  31,  1997,  there  has  been  no   Material
Adverse Change.

     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  Certifi cate 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).

     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 Agent.



                                      -32-

<PAGE>



          (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.

     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 "employee 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  "plan assets" of
one or more such plans within the meaning of 29 C.F.R. ss.  2510.3-101 and (iii)
the  Borrower is not and will not be a  "government  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)      Except  for  portions  of   the   Mortgaged   Property  under
construction or which are to be demolished in the course of construction, 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.



                                      -33-

<PAGE>




          (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.

     Section 4.13 Unrecorded  Mortgages.  Each Subsidiary Mortgagor which owns a
Mortgaged  Property for which the Mortgage  encumbering such Mortgaged  Property
remains   unrecorded   pursuant  to  Section   3.3(c)  is  and  shall  remain  a
single-purpose  entity  which,  among  other  things,  (i) has the  ability  and
capacity  to pay the  mortgage  recording  tax,  (B) does not engage and has not
engaged in any business other than owning and operating such Mortgaged Property,
and has not  acquired  and does not own any  assets  other  than such  Mortgaged
Property,  any incidental  personal  property,  or such other property which has
been acquired  without the prior written consent of the Agent,  (C) has incurred
no debt as of the date hereof and shall not incur or create any debt except such
debt agreed to in advance by the Agent in writing, (D) maintains its assets in a
way which  segregates  and  identifies  such assets  separate and apart from the
assets of any other  person or entity,  (E) holds  itself out to the public as a
separate legal entity from any other person or entity, and (F) conducts business
solely in its own name.

     Section  4.14  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
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 4.15 Investment Company Act; Other Regulations.  Borrower is not an
"investment  company," or a company  "controlled"  by an  "investment  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.



                                      -34-

<PAGE>




     Section 4.16 Intentionally omitted.

     Section 4.17 Insurance.  Subject in all events to the provisions of Section
5.5 hereof,  notwithstanding anything to the contrary contained in the Mortgages
and subject to Section  4.17(b),  the Borrower  maintains  upon or in connection
with each of the Mortgaged Properties:

          (a)      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 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 Section  4.17(b))  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 Section 4.17 shall be
with companies and in amounts and with coverage and deductibles  satisfactory to
the Lenders.  All insurance  required under this Section 4.17(a) with respect to
the Mortgaged  Properties shall include  endorsements naming the Lenders as loss
payees,  and shall have endorsed thereon the standard  mortgagee clause in favor
of the Lenders. All companies issuing policies required under Section 4.17 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 Section
4.17  shall  provide  that (i) 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 Agent, or,
in any other circumstance,  at least thirty (30) days' prior written notice from
the  insurance  carrier  to the  Agent;  and  (ii) 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  Section  4.17,  together  with  written
evidence that the premiums are paid current, at least ten (10) days prior to the
expiration of the then current policy.

          (b)       earthquake  insurance  provided  for   in  Section   4.17(a)
only for the  Mortgaged  Properties  and only to the  extent  (i) any  Mortgaged
Property  is located in an  earthquake  prone  area and (ii) such  insurance  is
available at commercially reasonable rates.


                                      -35-

<PAGE>



          (c)      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 (i)
commercial general liability (including  contractual liability) covering each of
the Mortgaged Properties and the Borrower's  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;  (ii)  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 (iii) worker's compensation insurance covering all of
the Borrower's  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 "products-completed operations endorsement."

          (d)       Insurance  insuring   against  loss   or  damage  by  perils
customarily   included  under   standard   "builder's   risk   completed   value
non-reporting  form" and which include all  insurance  required to be carried by
Borrower, as "owner," 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 such  ancillary  facilities  related  thereto on each
Mortgaged  Property,  including  all  materials  in storage and while in transit
during construction.

     Section 4.18  Properties.  Subject to the provisions of Section 5.5 hereof:

          (a)      Borrower  and/or  each  Subsidiary  Mortgagor  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, except for unrecorded Mortgages, 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.



                                      -36-

<PAGE>



          (d)      The Collateral is now, and so long as the Commitment  remains
in effect or any monetary  obligation  to the 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,  and said  Collateral,  including the proceeds
resulting from the sale or other disposition (other than Permitted  Transfers of
the Mortgaged  Property) thereof, is and will remain free and clear of any Liens
except the Liens  granted  pursuant to the Loan  Documents  to the Agent and the
Lenders,  which Liens to the Agent and the Lenders 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  such  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 such  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.

          (f)      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  connections  available on publicly dedicated roadways
directly  abutting such  Mortgaged  Property),  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 4.19 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 Agent 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.


                                      -37-

<PAGE>





     Section 4.20 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 making of the Advances,  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 making of each Advance, 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 making of the Advances will not, 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 4.21 Not Foreign  Person.  The  Borrower is not a "foreign  person"
within the meaning of Section 1445(f)(3) of the Code.

     Section 4.22 Assessments.  Subject to the provisions of Section 5.5 hereof,
except as set forth in the  Budget  with  respect  to the  applicable  Mortgaged
Property, 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 4.23 Flood Zone. Except as disclosed by a survey delivered pursuant
to Section 3.3(a)(iii),  no Mortgaged Property is located in a flood hazard area
as defined by the Federal Emergency Management Agency.

     Section 4.24 Physical  Condition.  Subject to the provisions of Section 5.5
hereof, except for portions of any Mortgaged Property which are to be demolished
in the course of  construction  of an extended  stay  facility  and such related
ancillary  facilities  thereon,  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 4.25  Operation of Premises.  Subject to the  provisions of Section
5.5  hereof,  except for  portions  of any  Mortgaged  Property  which are to be
demolished in the course of  construction  of an extended stay facility and such
related ancillary facilities thereon,  each Mortgaged Property is being operated
and maintained in accordance  with the Borrower's  usual and customary  business
practices.



                                      -38-

<PAGE>



     Section  4.26  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 G, T, U and
X issued  by the Board of  Governors  of the  Federal  Reserve  System),  and no
proceeds of any Advance  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 4.27 Hazardous Materials.  Subject to the provisions of Section 5.5
hereof,  except  as  disclosed  in the  Studies,  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 4.28 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 4.29 Loan Documents.  The provisions of the Loan Documents are each
effective to create, in favor of the 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 Agent), the Loan Documents
will  constitute a perfected  first Lien on and security  interest in all right,
title, estate and interest of the Borrower in the collateral  described therein,
prior and superior to all other Liens except for Permitted  Encumbrances  and as
otherwise permitted under this Agreement.

     Section 4.30 Balloon Payments. Except as reflected on Schedule 2 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.



                                      -39-

<PAGE>



     Section  4.31  Subsidiary  Mortgagors.   Each  Subsidiary  Mortgagor  is  a
Subsidiary of Borrower.

     Section  4.32 Nature of Business.  Neither the Borrower nor any  Subsidiary
Mortgagor is engaged in any  business  other than the  ownership,  construction,
development,  operation and management of extended stay  facilities  (other than
businesses  incidental to the development,  operation and management of extended
stay facilities).


                                    ARTICLE V

                                    COVENANTS

     Section  5.1  Certain  Affirmative  Covenants.  So long  as the  Commitment
remains in effect or any amounts due to the Agent or 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 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).

          (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 Property),  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,   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 10 days after Borrower's notice of such Lien (unless the taxes,


                                      -40-

<PAGE>



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
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 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 with such
ancillary  facilities  related  thereto and  otherwise  consistent  with prudent
business practices.

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

          (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,
keep the Mortgaged Properties insured in the manner and in the amounts set forth
in Section 4.17.

          (l)      Further Assurances.  The Borrower agrees upon demand  of  the
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 Agent to confirm the Lien
of the Loan Documents or to exercise or enforce its rights under this Agreement,


                                      -41-

<PAGE>



the Promissory Notes or the Loan Documents and to realize  thereon,  and (ii) to
execute and deliver to the Agent  and/or the Lenders such  additional  documents
and to provide such  additional  information as the 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)      Application of Proceeds From Equity Offerings. Subject to the
provisions of Section 5.5 hereof,  the Borrower shall apply upon receipt (i) all
net proceeds  from its equity  offerings to repay on a pari passu basis the Loan
and the Indebtedness  referred to in Section 5.3(a)(vii) of this Agreement,  and
(ii) all other  amounts  and fees due to the Agent and the  Lenders  under  this
Agreement and the other Loan Documents.

     Section  5.2  Reporting  Covenants.  So long as the  Commitment  remains in
effect or any monetary obligation to the Agent or the Lenders hereunder or under
the  Promissory  Notes or the other Loan  Documents  shall  remain  unpaid,  the
Borrower  will  furnish  to the Agent at the  Borrower's  sole cost and  expense
(unless expressly waived by the 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  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, retained earnings, 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 Ernst & Young or other  independent  public  accountants  of
comparable  recognized  national  standing  acceptable to the 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.

          (b)      Quarterly Financial Statements With  Respect to the Borrower.
As soon as  available  and in any  event  within  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,  and 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).


                                      -42-

<PAGE>





          (c)      Annual   Financial  Statements  With  Respect  to   Operating
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 Agent,  a
statement  with respect to each of the operating  Mortgaged  Properties for such
fiscal  year,  each of which  statements  shall (i) be in the form of  Exhibit L
attached  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 the  Operating
Mortgaged Properties. As soon as available and in any event within 45 days after
the end of each fiscal  quarter of the Borrower or at such time as the financial
statements  described in Section  5.2(b) are furnished to the Agent, a statement
with respect to each of the operating Mortgaged Properties as at the end of such
quarter, each of which statements shall (i) be in the form of Exhibit L attached
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,  (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 quarter, in accordance with GAAP (subject to normal, year-end
audit adjustments).

          (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 or the chief financial officer or the Controller
of the Borrower shall complete the form of certificate  attached as Exhibit D 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,  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.


                                      -43-

<PAGE>



          (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 Borrowe   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)      Intentionally omitted.

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

     Section  5.3  Certain  Negative  Covenants.  So long as any  portion of the
Commitment  remains in effect or any  monetary  obligations  to the Agent or the
Lenders  hereunder  or under the  Promissory  Notes or the other Loan  Documents
shall remain unpaid, the Borrower will not:

          (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 2;

               (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;


                                      -44-

<PAGE>



               (iv)    non-recourse    Indebtedness     ("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; and

               (vii)  Indebtedness  under that certain Credit Agreement dated as
          of May 6, 1997, as amended,  between  Borrower,  Agent and one or more
          lenders  with  regard  to a  revolving  credit  facility  of  up to an
          aggregate principal amount of $150,000,000.00.

          (b)      Total Debt.  Permit there to be aggregate Indebtedness of the
Borrower of more than an amount equal to fifty-five percent (55%) of Gross Asset
Value,  or permit there to be aggregate  Indebtedness  of the Borrower  which is
secured by a Lien of more than an amount equal to fifty  percent  (50%) of Gross
Asset Value.

          (c)      Debt Service Ratios.  Maintain a  ratio  of  EBITDA  to  Debt
Service on a quarterly basis (i) for the first calendar  quarter of 1998 of less
than  1.1:1.0,  (ii)  for the  second  calender  quarter  of  1998 of less  than
1.25:1.0,  and (iii) of less than 1.75:1.0 after the second calender  quarter of
1998.

          (d)      Available Amount.  Permit the aggregate principal  amount  of
all outstanding Advances at any time to exceed the lesser of (i) the Commitment,
and (ii) the Maximum Availability Amount at such time.

          (e)      Dividends.  Make any dividend or distribution  to  the share-
holders of  Borrower,  without  the prior  written  consent of the Agent,  which
consent may be withheld in the Agent's sole discretion.

          (f)      Stockholders Equity.  Permit Stockholders' Equity to be  less
than $325,000,000.00.

          (g)      Sales, Transfers.  Sell, transfer or enter into any agreement
for the sale or transfer,  except for operating  leases, of any of the Mortgaged
Properties  without the prior written consent of the Agent, which consent may be
withheld in the  Agent's  sole  discretion,  other than a sale or transfer or an
agreement for the sale or transfer of a Release Parcel 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.

          (h)      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.


                                      -45-

<PAGE>



               (i) 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 assets 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 the adoption of a plan
          by the  stockholders  of the Borrower  relating to the  dissolution or
          liquidation  of the Borrower;  (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.

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

               (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.

          (k)      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 attached hereto, and (ii) any such transactions
between the Borrower and any of its  Subsidiaries  and between  Subsidiaries  of
Borrower).

          (l)      Use of Proceeds.  Use the proceeds of the Advances for  other
than any Permitted Purpose.



                                      -46-

<PAGE>



          (m)      Change of Business.  Make or allow any material change in the
nature or scope of the business of the Borrower or any Subsidiary.

          (n)       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.

               (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.

     Section 5.4 Material  Casualties.  The Borrower  agrees that if at any time
prior  to the  repayment  in full of the  Advances  and the  termination  of the
Commitment  (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
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 Agent's  written  request,  direct that the  insurance  proceeds from the
casualty be delivered over to the Agent, to be applied by the Agent to repayment
of or the  Borrower's  obligations  under  this  Agreement  and the  other  Loan
Documents.

     Section 5.5 Effect of Certain Representations or Covenants Being Inaccurate
or  Breached.  In the  event  that  any of the  representations  and  warranties
contained in Sections 4.11,  4.17, 4.18, 4.22, 4.24, 4.25, 4.27 and 4.28 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 (m) and 5.3(n) (or any covenant  contained in any other Loan Document  which
is substantially similar to any of the foregoing  covenants) are breached, then,


                                      -47-

<PAGE>



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 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):

          (a)  (i) Borrower is given notice 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,  30 days after such notice is given plus,  if such
               circumstances  cannot  reasonably  be  remediated  within 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
               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
               Advances 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 Agent in writing (Borrower hereby agreeing
               to so certify such amount promptly upon Agent's request) as being
               Borrower's reasonable estimate (determined in a manner reasonably
               acceptable to 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  Availability  Amount as of
               such date recomputed by subtracting from the Eligible Costs as of
               such date 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)


                                      -48-

<PAGE>



               3% of the  Eligible  Costs as of such  date;  provided,  however,
               notwithstanding the foregoing,  the aggregate principal amount of
               all outstanding  Advances shall not at any time exceed the lesser
               of (i) the Commitment,  and (ii) the Maximum  Availability Amount
               at such time; 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 Agent in
its 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.

                                   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  Advances  hereunder  when due,  or (ii)  within  three (3) days when due
(including, without limitation, by mandatory prepayment) (1) any interest on any
of the Advances 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.

     (c) Other  Covenants.  The  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 3 days after notice from the
Agent, (ii) in the case of covenants or agreements  contained in Section 5.2(a),
(b), (c) and (d) of this  Agreement,  for 20 Business Days after the  occurrence
thereof;  or (iii) in all other cases, for 30 days after the occurrence thereof.
In the event that a breach of a covenant  described in clause (iii) above cannot
be cured within 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 60 days after the occurrence thereof.


                                      -49-

<PAGE>





          (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 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 shall  fail
to make any  payment of  principal  of or interest  on any  Indebtedness  of the
Borrower  (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 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 3 days after notice from the 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 20  Business  Days after the
occurrence  thereof;  or  (iii)  in all  other  cases,  for 30  days  after  the
occurrence thereof. In the event that a breach of a covenant described in clause
(iii) above cannot be cured within 30 days after the occurrence  thereof and the
Borrower or such other  Person 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 60 days  after  the
occurrence thereof.

          (g)      Bankruptcy.  The  Borrower  shall  commence a  voluntary case
concerning itself under Title 11 of the United States Code entitled "Bankruptcy"
as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code");
or an involuntary case is commenced against the Borrower and the petition is not
dismissed  within 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 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  90 days;  or the Borrower makes   a


                                      -50-

<PAGE>




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 Mortgagor.

          (h)      Money Judgement. A judgment or order for the payment of money
in excess of $5,000,000 shall be rendered against the Borrower and such judgment
or order shall  continue  unsatisfied  (in the case of a money  judgment) and in
effect for a period of 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 is appealing or otherwise contesting such judgment in good faith).

          (i) Second Amendment to Credit Agreement and Other Loan Documents.  An
     Event of Default (as defined in that certain Credit  Agreement  referred to
     in Section 5.3(a)(vii)0 shall have occurred.

     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 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 Commitment terminated,
whereupon the Commitment  shall terminate  immediately;  (ii) declare all or any
portion of the  principal  of and any accrued  interest on the  Advances 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 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.

     Section 6.3 Marshalling;  Waiver of Certain Rights; Recapture.  Neither the
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 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


                                      -51-

<PAGE>



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 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 Agent,  in its sole and absolute  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 Agent, in its sole and
absolute discretion,  shall determine,  (iii) the 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 "one action" or "election 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 Agent and
the Lenders under this  Agreement and the other Loan  Documents  shall remain in
full force and effect  until the 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 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 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  Advances and any unpaid fees
payable  under  this  Agreement  and the other Loan  Documents  in such order of
priority as the 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 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
Agent shall have no further  liability with respect to such proceeds.  All costs
and  expenses  of the Agent in  connection  with such  action may be deducted or
charged  by the Agent  against  such  excess  proceeds  and shall  otherwise  be
reimbursed by the Borrower upon demand.  The Agent shall have the right, but not


                                      -52-

<PAGE>



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.

     Section 6.5 Attorneys-in-Fact.  The Borrower hereby makes,  constitutes and
appoints the 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 Agent,  and to
cause such mail to be delivered to such  designated  address where the 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
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
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 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 Agent of such Lender under the
Loan Documents,  and each such Lender irrevocably authorizes Commerzbank AG, New
York  Branch,  to act as the Agent 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
Agent by the terms of this Agreement and the Loan Documents,  together with such
other powers as are reasonably  incidental thereto. The 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  Agent  shall  be  read  into  any of the  Loan
Documents or otherwise  exist against the Agent.  The provisions of this Article
VII are solely for the benefit of the 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 functions and duties under
the Loan  Documents,  the Agent shall act solely as the agent of the Lenders and
does not assume nor shall the 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.


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<PAGE>




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

     Section 7.3 Exculpatory  Provisions.  The 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 Agent's own gross negligence or willful misconduct), or
(b)  responsible  in  any  manner  to  any  of the  Lenders  for  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 for the  value,  validity,  effectiveness,  genuineness,
enforceability  or  sufficiency  of any Loan  Document or any such  certificate,
report,  statement or other document, or for any failure of the Borrower, or any
Lender to perform or observe its respective obligations hereunder or thereunder.
Unless the Agent shall have been requested to do so by a Lender on such Lender's
behalf,  the 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 the Agent, on the one hand, and the Lenders, on
the other.

     Section 7.4 Reliance by the Agent. The 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
Agent.  The 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 Notice of  Default.  (a) The Agent shall not be deemed to have
knowledge or notice of the  occurrence of any Default or Event of Default unless
(i) the Agent 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) the Agent,  in its capacity as a
Lender,  has actual knowledge of such Default or Event of Default.  In the event
that the Agent  receives  such a notice,  the Agent shall  promptly  give notice
thereof to the  Lenders.  The 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 Agent shall have  received  such  directions,
the Agent may (but shall not be obligated to) take such action,  or refrain from
taking  such  action,  with  respect to such  Default or Event of Default as the
Agent shall deem advisable and in the best interests of the Lenders.


                                      -54-

<PAGE>





          (b)      Each Lender agrees that it shall promptly notify the 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 Commitment,  which notice will describe the Default
or Event of Default or matter in reasonable  detail. The Agent shall give a copy
of any such  notice  received  by the Agent to the other  Lenders if such notice
pertains to a Decision by the Lenders pursuant to Section 7.14 or 7.15 hereof.

     Section 7.6  Non-Reliance  on the Agent and the Other Lenders.  Each Lender
expressly  acknowledges  that  neither  the  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 the  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 Agent. Each
Lender  represents  and  warrants  to the Agent that it has,  independently  and
without  reliance upon the 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 Commitment  pursuant to this Agreement.  Each Lender
also represents that it will,  independently and without reliance upon the Agent
or any other Lender,  and based on such  documents and  information  as it shall
deem  appropriate  at the  time,  continue  to  make  its own  credit  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 Agent to the Lenders, the Agent 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 Agent
or any of its  officers,  directors,  employees,  agents,  attorneys-in-fact  or
affiliates.

     Section 7.7  Indemnification.  The Lenders agree to indemnify the Agent (in
its capacity as such) and its 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 Agent or such Person in connection
with any  investigative,  administrative  or judicial  proceeding  commenced  or
threatened,  whether or not the Agent or such Person shall be designated a party
thereto) that may at any time be imposed on, incurred by or asserted against the
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,


                                      -55-

<PAGE>



suits,  costs,  expenses  or  disbursements  resulting  solely  from  the  gross
negligence or willful  misconduct of the 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 The  Agent  in Its  Individual  Capacity.  The  Agent  and its
Affiliates may make loans to, accept  deposits from and generally  engage in any
kind of business  with the  Borrower as though it were not the Agent  hereunder.
With respect to Advances made or renewed by it and any Promissory Note issued to
it, the Agent shall have the same rights and powers under this  Agreement as any
Lender and may exercise the same as though it were not the Agent.

     Section 7.9 Agent's Resignation. The Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower.  Upon any such resignation,  the
Required Lenders shall designate within 45 days in writing another Person as the
successor  Agent.  Provided  that no Event of Default shall have occurred and be
continuing,  Borrower shall have the right to approve such successor  Agent.  If
such  proposed  successor  Agent  agrees  in  writing  to act as  the  Agent  in
accordance with the terms hereof,  such successor Agent shall thereupon  succeed
to and  become  vested  with all the  rights,  powers,  privileges,  duties  and
obligations of the resigning  Agent, and the resigning Agent shall be discharged
from its  duties  and  obligations  as Agent  under  this  Agreement.  After any
retiring 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 Agent under this Agreement.

     Section 7.10  Appointment of a Substitute  Agent.  (a)  Commerzbank AG, New
York  Branch,  shall be the  initial  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 any Agent  determines,  for good  cause
(including,  without limitation,  a conflict which, in such Agent's judgment, is
material),  that it is not in the best  interest of the Agent to continue to act
as the Agent, then the Agent may, at its option and upon thirty (30) days' prior
written  notice to the Borrower and the Lenders,  request a substitute  Agent be
selected in  accordance  with the terms of this Section to act as the 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 Agent,  may
elect to  appoint  a  substitute  Agent in the  event  that the  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 Agent shall have all the rights, powers and duties of the
Agent and the term "Agent" shall mean such substitute Agent,  effective upon its
appointment.  In the event that the substitute Agent wishes to resign, it may do
so upon  thirty  (30)  days'  prior  notice to the  Borrower,  the Agent and the
Lenders,  and a new substitute  Agent shall be appointed in accordance with this
Section.   After  any  retiring  substitute  Agent's  resignation  hereunder  as
substitute  Agent,  the  provisions  of this Section 7.10 and Section 8.4 hereof
shall inure to the benefit of such  retired  substitute  Agent as to any actions
taken or  omitted  to be taken by it while it was  substitute  Agent  under this
Agreement.



                                      -56-

<PAGE>



     Section 7.11 Loans.  Each Lender shall make  available to the Borrower such
Lender's  portion  of the  Commitment  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  Commitment,  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 Advance,  the Agent may
(but  shall not be  obligated  to),  and each  Lender  authorizes  the Agent to,
advance for such Lender's account,  pursuant to the terms hereof,  the amount of
the Advance to be made by such Lender and each Lender  agrees to  reimburse  the
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 Agent  shall have made such amount  available  on behalf of any
Lender,  such Lender shall also pay interest thereon to the Agent at the Federal
Funds Rate.

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

     Section 7.13 Books and  Records.  The Agent will keep  customary  books and
records relating to the Advances,  and such books and records shall be available
at the Agent's office for the Lenders' reasonable  inspection during the Agent's
normal business hours. The original Loan Documents shall be kept at the New York
office of the Agent or at such other  office of the Agent or at such other place
as may be designated  from time to time by the 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.

     Section 7.14 Decisions of the Lenders. (a) Except as expressly set forth in
Sections 7.15 and 7.16 hereof, all decisions,  consents,  waivers, approvals and
other  actions  (collectively,  "Decisions")  authorized to be taken under or in
connection  with this Agreement and the other Loan Documents by any Lender shall
be taken by the 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 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 Advances,  and/or (iii) may waive any conditions in any Loan  Documents,  so
long as such  consent,  exercise or waiver  would not,  in the Agent's  judgment
reasonably  exercised,  represent a departure from the standards followed by the
Agent in the  administration  of loans  held by the Agent  entirely  for its own
account.  The 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
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 Agent's  possession or under its control.  The
requested Decision shall be deemed approved by the Lenders if and when the 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 Agent a written  objection  thereto  within ten (10) Business
Days after hand delivery,  mailing or  delivery  to   an express courier service



                                      -57-

<PAGE>



of the request by the Agent, the Agent shall make a second written request for a
Decision from that Lender. If the Lender does not deliver to the 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  Agent is unable to
contact the usual  representatives  of a Lender for any  reason,  the 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
Agent  reasonably  deems  necessary,  any such  Decision  may also be  requested
telephonically by the Agent from each Lender with such telephonic  request to be
confirmed  in writing by the Agent.  Any Decision as to which the Agent has made
telephonic  requests for approval shall be deemed  approved by the Lenders after
the 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.

     Section 7.15  Unanimous  Approvals by the  Lenders.  No written  amendment,
supplement,  modification or waiver which adds,  deletes,  changes or waives any
provisions  of the Loan  Documents  shall (i) extend either the Maturity Date or
any installment or required prepayment of any Advances;  (ii) reduce the rate or
extend  the time of  payment  of  interest  on any  Advances;  (iii)  reduce the
principal  amount of any  Advances;  (iv)  reduce  the fees  payable  under this
Agreement and the other Loan Documents, or any other fee payable to the Lenders;
(v) change any Lender's  portion of the  Commitment or the amount of any Advance
of any Lender (except to the extent permitted by Sections 7.18 and 7.19 hereof);
(vii) change any  provision of this Section 7.15 or the  definition  of Required
Lenders;  (viii) modify any financial  covenants,  waive any Default or Event of
Default,  or waive or release  any lien on any of the  Mortgaged  Properties  or
commence  any  judicial  or  nonjudicial  foreclosure  proceeding,  in each case
without the written consent of all the Lenders;  or (ix) amend,  modify or waive
any  provision  of any Loan  Document,  if the  effect  thereof is to affect the
rights or duties of the  Agent,  without  the  written  consent  of the then the
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,
Agent and all future holders of the Promissory Notes. In the case of any waiver,
the  Borrower,  the Lenders  and the 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  Agent's
receipt  of a notice of default  (as  defined in  Section  7.5(a)  hereof)  with
respect to an Event of  Default,  the 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 Agent
shall  pursue any such  course of action  approved  by the  Required  Lenders in
respect  of  any  such  Event  of  Default,   including,   without   limitation,
acceleration  of the  Advances.  In the event that the Required  Lenders  cannot
decide  which  remedies,  if any,  are to be  pursued,  the 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.


                                      -58-

<PAGE>





          (b)      The Agent  shall  not  without  the  prior  approval  of  the
Required Lenders, (i) enter into written amendments, supplements,  modifications
or waivers for the purpose of adding,  deleting,  changing or waiving any of the
provisions  of Article V or Section  6.1,  except to the extent such  amendment,
supplement, modification or waiver requires the unanimous consent of the Lenders
pursuant  to  Section  7.15  hereof,  or (ii)  enter  into  written  amendments,
supplements,  modifications  or waivers  for the  purpose  of adding,  deleting,
changing or waiving any  provision of the Loan  Documents,  except to the extent
such  amendment,  supplement,  modification  or waiver  requires  the  unanimous
consent of the Lenders  (pursuant to Section 7.15 hereof),  or (iii) consent to,
approve, or waive the requirement of receipt of, any documents,  certificates or
other  agreements or statements  delivered or to be delivered by the Borrower or
any other  Person  pursuant to Article III hereof,  or (iv) consent to or permit
(if not expressly permitted under the Loan Documents) the assignment or transfer
by the Borrower of any of its rights and obligations under any Loan Document, or
consent to any merger or  consolidation  or sale, lease or other disposal of all
or a substantial part of the Borrower's property or assets.

          (c)      All losses, costs, expenses, disbursements, liabilities, fees
(including reasonable attorneys' fees and disbursements),  obligations, damages,
suits, actions and penalties of any kind or nature whatsoever  (collectively,  a
"Loss") incurred by the Agent in connection with the Advances or the enforcement
thereof  shall  be  borne  by the  Lenders  in  accordance  with  each  Lender's
Percentage.

          (d)      Each Lender shall, upon demand by the  Agent,  reimburse  the
Agent (to the extent not otherwise reimbursed by the Borrower) for such Lender's
Percentage of (i) any out-of-pocket expenses incurred by the Agent in good faith
in  connection  with any Event of Default under the Loan  Documents  (including,
without limitation,  reasonable fees and disbursements of outside counsel),  and
(ii) any other  expenses  incurred in good faith to the extent not reimbursed by
the Borrower in connection with the enforcement of the Loan Documents.

          (e)      The Borrower hereby consents and agrees to the provisions  of
Sections  7.14 through 7.16 and any  modifications  thereof  entered into by the
Agent and the  Lenders of such  provisions  and  specifically  acknowledges  and
agrees that,  notwithstanding  any  provisions in the Loan  Documents  requiring
action by the "Lenders" 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
Agent is hereby empowered to act on behalf of the Lenders in accordance with the
provisions  hereof and the  authority  of the Agent  with  respect to any action
taken by the 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.

     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
"Participant")  participating interests in any Advance 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 "Credit Exposure").


                                      -59-

<PAGE>



Notwithstanding  any  such  sale by a Lender  of  participating  interests  to a
Participant,  unless the Agent shall have agreed otherwise, 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 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 2.15  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 Advance 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
affiliate thereof or to any other Person (each a "Purchasing Lender") all or any
part of its Credit Exposure in amounts not less than $10,000,000.  The Borrower,
the 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 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 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 M
hereto (a "Form 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 and the
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 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
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 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,  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.



                                      -60-

<PAGE>




          (c)       Commerzbank  AG, Los Angeles 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,  Los  Angeles  Branch's
Percentage shall be less than 20%, unless the foregoing shall (or in Commerzbank
AG,  Los  Angeles  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, Los Angeles 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 "Non-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 the 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 Advances  with respect to all
sums of any kind  paid to or  received  by such  Lender in  payment  of all or a
portion of the Advances 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 Advances 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  Acknowledgment  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 Agent's acting as the Agent on behalf of the Lenders with
regard to all aspects of the  administration,  enforcement and collection of the
Advances  and to all matters  pertaining  to the Loan  Documents as provided for
herein.

     Section 7.23 Right of the Lenders and the Agent to Transact  Business.  The
Lenders, the Agent and/or any of their respective affiliates may accept deposits
from, lend money to, act as trustee under indentures of, and generally engage in
any kind of business  with, the Borrower or any other Person without any duty to
account therefor to the other Lenders and/or the Agent, as the case may be.

     Section  7.24 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  Advance  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  Advance  then owed and due to such  Lender  bears to the
total of such Advance then owed and due to all of the Lenders immediately  prior


                                      -61-

<PAGE>



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
Advance  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.

     Section 7.25 Limitation of Liability.  No claim may be made by the Borrower
or any other Person against the 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 3 annexed hereto or such other address or
telecopier number as such party may hereafter specify by notice to the Agent and
the Borrower. No notices, requests, and other communications given to any Person
other than the Agent (including, without limitation, any Affiliate of the Agent)
shall be deemed to have been given to the 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.

     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 Agent or the
Lenders shall operate as a waiver thereof,  nor  shall  any  single  or  partial


                                      -62-

<PAGE>



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 Lenders in the  administration  (both
before and after the execution  hereof and including advice of counsel as to the
rights and duties of the 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 Agent and the Lenders);

          (b)      to the extent permitted by applicable law, pay and  hold  the
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  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 any of the Advances 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.

     Section 8.5 Right of Setoff.  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.


                                      -63-

<PAGE>





     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.



                                      -64-

<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, 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 Certain Mortgaged Property. Agent agrees that, upon
Borrower's request (a "Release Request"),  it will deliver to Borrower a form of
release, duly executed and acknowledged by the Agent, releasing from the lien of
the applicable Mortgage (a "Release"),  any real property constituting a portion
of a Mortgaged  Property (a "Release  Parcel") but only if and on the  condition
that:

          (i) each  Release  Request  shall be in  writing,  shall  contain  all
     information  necessary for the Agent to cause a Release in recordable  form
     to be prepared and shall be given at least five (5) Business  Days prior to
     the requested date of such Release;

          (ii) each Release Request shall constitute  Borrower's  representation
     and warranty that, and shall be  accompanied by evidence  demonstrating  to
     the Agent's  satisfaction that (a) no portion of the extended stay facility
     and such related ancillary facilities constructed (or to be constructed) on
     the Mortgaged  Property from which the Release  Parcel is to be Released is
     (or will be) located on such  Release  Parcel,  (b) the  requested  Release
     shall  not  cause or result in the  remaining  Mortgaged  Property  and the
     existence and use of the extended stay facility and such related  ancillary
     facilities  constructed  (or to be  constructed)  thereon to fail to comply
     with any Use Requirements or Requirements of Law, and (c) no portion of the
     Total  Costs  allocated  in a manner  satisfactory  to Agent to the Release
     Parcel is included in the computation of the Maximum Availability Amount;

          (iii) as of the date of such Release Request,  and as of the effective
     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;

          (iv) 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;

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

          (vi) (1) The  Agent  shall  have  received  payment  of all  costs and
     expenses  (other than the legal fees described in the following  clause (2)
     of this  subparagraph)  incurred by Agent in connection  with such Release,
     including,  but not limited to, all title insurance  premiums  arising as a
     result of  endorsements  required by Agent in connection with such Release,
     and (2) receipt of a Release  Request  for each  Release  shall  constitute
     Borrower's agreement and covenant to pay to the Agent, promptly upon demand
     (together with a


                                      -65-

<PAGE>



                   
     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 Agent all advice respecting, each Release.

     In the event that all of the  foregoing  conditions  to a Release have been
satisfied, then, at Borrower's request, the Agent shall furnish such Release for
recordation to the title company  insuring the Agent's interest in the Mortgaged
Property affected by such Release or as otherwise designated by Borrower.

     Section 8.12  Subordination  of Certain  Mortgaged  Property.  Agent agrees
that, upon Borrower's  request (a "Subordination  Request"),  it will deliver to
Borrower a form of  subordination,  duly executed and acknowledged by the Agent,
subordinating the lien of the applicable  Mortgage (a  "Subordination"),  to any
Development  Encumbrances  on a  Mortgaged  Property,  but  only  if  and on the
condition that:

          (i) each Subordination Request shall be in writing,  shall contain all
     information  necessary for the Agent to cause a Subordination in recordable
     form to be  prepared  and shall be given at least  five (5)  Business  Days
     prior to the requested date of such Subordination;

          (ii) Agent shall have  received  an  endorsement  to the title  policy
     referred to in Section 3.3(a)(iii) with respect to the applicable Mortgaged
     Property  indicating  that since the date of the last  endorsement  to such
     policy  there has been no  change  in the  state of title  not  theretofore
     approved by Agent, providing with respect to such Development  Encumbrances
     a so-called  "comprehensive  endorsement"  (or  equivalent),  to the extent
     available in the jurisdiction in which such Mortgaged  Property is located,
     and such other  affirmative  insurance as Agent shall  reasonably  require,
     which endorsement shall have the effect of redating the title policy to the
     date  of  recordation  of,  and  insuring  the  lien  of  the  Mortgage  as
     subordinated pursuant to, the Subordination;

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

          (iv)  before as well as after  giving  effect  to such  Subordination,
     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 Subordination;



                                      -66-

<PAGE>



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

          (vi) (1) The  Agent  shall  have  received  payment  of all  costs and
     expenses  (other than the legal fees described in the following  clause (2)
     of  this   subparagraph)   incurred  by  Agent  in  connection   with  such
     Subordination,  including, but not limited to, all title insurance premiums
     arising as a result of  endorsements  required by Agent in connection  with
     such  Subordination,  and (2) receipt of a  Subordination  Request for each
     Subordination shall constitute  Borrower's agreement and covenant to pay to
     the 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  Subordination,  the  documents and  instruments  described in this
     Section,  and all other documents relating to, and rendering at the request
     of Agent all advice respecting, each Subordination.

     Section 8.13  Confidentiality  by the Agent and the Lenders.  The Agent and
the 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 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 Agent or the Lenders (including,  without
limitation,  employees, counsel, accountants,  engineers,  advisers, experts and
consultants  to the Agent or the  Lenders).  Except as provided  for in the next
sentence, in the event that the 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 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 8.13 shall not apply to (a) the
disclosure  or sharing  of any  non-public  information  among the Agent and the
Lenders,  (b) the  disclosure  by the  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  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 Agent or the Lenders by the Borrower.








                      [Signature is on the Following Page]


                                      -67-

<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: _____________________________________
                                        Name:
                                        Title:


                                      COMMERZBANK AG, New York Branch,
                                         as Agent


                                      By: _____________________________________
                                        Name:
                                        Title:


                                      By: _____________________________________
                                        Name:
                                        Title:


                                      COMMERZBANK AG, Los Angeles Branch,
                                         as a lender


                                      By: _____________________________________
                                        Name:
                                        Title:


                                      By: _____________________________________
                                        Name:
                                        Title:




                                      -68-

<PAGE>




                                     


                                TABLE OF CONTENTS


                                                                           Page

ARTICLE I

     DEFINITIONS; CONSTRUCTION..............................................-1-
     Section 1.1  Definitions...............................................-1-
     Section 1.2  Accounting Terms and Determinations......................-14-
     Section 1.3  Other Definitional Terms.................................-14-

ARTICLE II

     AMOUNTS AND TERMS OF LOANS............................................-14-
     Section 2.1  Commitment...............................................-14-
     Section 2.2  Advances.................................................-14-
     Section 2.3  Notices of Borrowing.....................................-15-
     Section 2.4  Disbursement of Funds....................................-15-
     Section 2.5  Promissory Notes; Collateral.............................-15-
     Section 2.6  Interest on Advances.....................................-15-
     Section 2.7  Interest Periods.........................................-16-
     Section 2.8  Repayment of Advances....................................-17-
     Section 2.9  Prepayments of Advances..................................-17-
     Section 2.10 Fees.....................................................-18-
     Section 2.11 Payments, Etc............................................-18-
     Section 2.12 Interest Rate Not Ascertainable, Etc.....................-19-
     Section 2.13 Illegality...............................................-19-
     Section 2.14 Increased Costs..........................................-19-
     Section 2.15 Change of Lending Office.................................-21-
     Section 2.16 Funding Losses...........................................-21-
     Section 2.17 Taxes....................................................-21-
     Section 2.18 Extension of Maturity Date...............................-22-

ARTICLE III

     CONDITIONS TO BORROWINGS..............................................-23-
     Section 3.1  Conditions Precedent to Closing..........................-23-
     Section 3.2  Conditions Precedent to Each Advance.....................-24-
     Section 3.3  Additional Conditions Precedent to an Advance in
                    Respect of New Mortgaged Property......................-27-
     Section 3.4  Additional Conditions Relating to Unsecured Advances.....-30-





                                       -i-

<PAGE>


                                                                           Page


ARTICLE IV

    REPRESENTATIONS AND WARRANTIES.........................................-31-
    Section 4.1  Corporate Existence.......................................-31-
    Section 4.2  Authorization of Agreement; No Violation..................-31-
    Section 4.3  Governmental Approvals....................................-31-
    Section 4.4  Binding Effect............................................-31-
    Section 4.5  Financial Information and No Material Adverse Change......-32-
    Section 4.6  Litigation................................................-32-
    Section 4.7  Compliance with Law.......................................-32-
    Section 4.8  Labor Matters.............................................-32-
    Section 4.9  ERISA.....................................................-33-
    Section 4.10 No Default................................................-33-
    Section 4.11 Improvements..............................................-33-
    Section 4.12 Intellectual Property.....................................-34-
    Section 4.13 Unrecorded Mortgages......................................-34-
    Section 4.14 Taxes.....................................................-34-
    Section 4.15 Investment Company Act; Other Regulations.................-34-
    Section 4.16 Intentionally omitted.....................................-35-
    Section 4.17 Insurance.................................................-35-
    Section 4.18 Properties................................................-36-
    Section 4.19 Full and Accurate Disclosure..............................-37-
    Section 4.20 Solvency..................................................-38-
    Section 4.21 Not Foreign Person........................................-38-
    Section 4.22 Assessments...............................................-38-
    Section 4.23 Flood Zone................................................-38-
    Section 4.24 Physical Condition........................................-38-
    Section 4.25 Operation of Premises.....................................-38-
    Section 4.26 Margin Regulations........................................-38-
    Section 4.27 Hazardous Materials.......................................-39-
    Section 4.28 Representations and Warranties in the Loan Documents......-39-
    Section 4.29 Loan Documents............................................-39-
    Section 4.30 Balloon Payments..........................................-39-
    Section 4.31 Subsidiary Mortgagors.....................................-39-
    Section 4.32 Nature of Business........................................-39-

ARTICLE V

    COVENANTS..............................................................-40-
    Section 5.1  Certain Affirmative Covenants.............................-40-
    Section 5.2  Reporting Covenants.......................................-42-


                                      -ii-

<PAGE>


                                                                          Page


    Section 5.3  Certain Negative Covenants................................-45-
    Section 5.4  Material Casualties.......................................-48-
    Section 5.5  Effect of Certain Representations or Covenants
                   Being Inaccurate........................................-48-

ARTICLE VI

    EVENTS OF DEFAULT......................................................-50-
    Section 6.1  Events of Default.........................................-50-
    Section 6.2  Global Remedies...........................................-52-
    Section 6.3  Marshalling; Waiver of Certain Rights; Recapture..........-52-
    Section 6.4  Application of Proceeds...................................-53-
    Section 6.5  Attorneys-in-Fact.........................................-53-

ARTICLE VII

    AGENCY AND INTERCREDITOR RELATIONSHIPS.................................-54-
    Section 7.1  Appointment...............................................-54-
    Section 7.2  Delegation of Duties......................................-54-
    Section 7.3  Exculpatory Provisions....................................-54-
    Section 7.4  Reliance by the Agent.....................................-55-
    Section 7.5  Notice of Default.........................................-55-
    Section 7.6  Non-Reliance on the Agent and the Other Lenders...........-55-
    Section 7.7  Indemnification...........................................-56-
    Section 7.8  The Agent in Its Individual Capacity......................-56-
    Section 7.9  Agent's Resignation.......................................-56-
    Section 7.10 Appointment of a Substitute Agent.........................-57-
    Section 7.11 Loans.....................................................-57-
    Section 7.12 Priority of Loans.........................................-57-
    Section 7.13 Books and Records.........................................-58-
    Section 7.14 Decisions of the Lenders..................................-58-
    Section 7.15 Unanimous Approvals by the Lenders........................-59-
    Section 7.16 Approvals by the Required Lenders.........................-59-
    Section 7.17 Participation.............................................-60-
    Section 7.18 Assignments...............................................-60-
    Section 7.19 Withholding...............................................-61-
    Section 7.20 Amounts Received by the Lenders...........................-61-
    Section 7.21 No Joint Venture..........................................-62-
    Section 7.22 Acknowledgment by Parties Hereto..........................-62-
    Section 7.23 Right of the Lenders and the Agent to Transact Business...-62-
    Section 7.24 Sharing of Payments.......................................-62-
    Section 7.25 Limitation of Liability...................................-62-


                                      -iii-

<PAGE>


                                                                          Page


ARTICLE VIII
    MISCELLANEOUS..........................................................-63-
    Section 8.1  Notices...................................................-63-
    Section 8.2  Amendments, Etc...........................................-63-
    Section 8.3  No Waiver; Remedies Cumulative............................-63-
    Section 8.4  Payment of Expenses, Etc..................................-63-
    Section 8.5  Right of Setoff...........................................-64-
    Section 8.6  Benefit of Agreement......................................-64-
    Section 8.7  Governing Law; Submission to Jurisdiction.................-64-
    Section 8.8  Counterparts..............................................-65-
    Section 8.9  Headings Descriptive......................................-65-
    Section 8.10 Entire Agreement..........................................-65-
    Section 8.11 Release of Certain Mortgaged Property.....................-65-
    Section 8.12 Subordination of Certain Mortgaged Property...............-66-
    Section 8.13 Confidentiality by the Agent and the Lenders..............-67-



                                      -iv-