<PAGE>




                                  $170,000,000


                      AMENDED AND RESTATED CREDIT AGREEMENT


                                      AMONG


                         HOMESTEAD VILLAGE INCORPORATED,


                            THE LENDERS NAMED HEREIN,


                        COMMERZBANK AG, NEW YORK BRANCH,


                                       AND


                     WELLS FARGO BANK, NATIONAL ASSOCIATION,
                     AS ADMINISTRATIVE AGENT FOR THE LENDERS


                           DATED AS OF MARCH 18, 1999


<PAGE>


                      AMENDED AND RESTATED CREDIT AGREEMENT

         AMENDED AND RESTATED CREDIT AGREEMENT (this  "Agreement"),  dated as of
March 18, 1999, 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"),  COMMERZBANK AG, NEW YORK BRANCH (the
"Arranger")  and  WELLS  FARGO  BANK,  NATIONAL   ASSOCIATION,   as  contractual
representative for the Lenders on the terms provided herein (the "Administrative
Agent").

                              W I T N E S S E T H:

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

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

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


                       ARTICLE . DEFINITIONS; CONSTRUCTION

 . As used herein, the following terms shall have the following meanings:

                  "Accounting  Period" means each accounting period of Borrower,
the first two such periods in any fiscal  quarter  consisting of four weeks each
and the last such period in any fiscal quarter consisting of five weeks.

                  "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 Administrative Agent) upon which it shall construct an
extended  stay  facility  and  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 the Administrative  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
Administrative Agent approves.



<PAGE>


                  "Adjusted EBITDA" means,  with respect to any quarter,  EBITDA
for  such  quarter  plus  non-cash  charges  minus a  reserve  for  replacements
equivalent to the greater of (a) actual  historical  recurring  property capital
expenditures  for the  prior  quarter  or (b) four  percent  (4.0%) of the prior
quarter's gross revenues from the Properties.

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

                  "Adjusted Property Net Operating Income" or "Adjusted Property
NOI" means, with respect to any period,  NOI adjusted for a capital  expenditure
reserve equal to 4% of gross  revenue and a management  fee equal to 4% of gross
revenue.

                  "Administrative   Agent"  means  Wells  Fargo  Bank   National
Association.,  in its  capacity as  contractual  representative  for the Lenders
hereunder,  or such successor  Administrative Agent as may be appointed pursuant
to Section 7.9 of this Agreement.

                  "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 fifty
percent (50%) or more of the  securities  having  ordinary  voting power for the
election of directors of such  corporation or (ii) direct or cause the direction
of the  management  and policies of such  corporation,  through the ownership of
voting securities, by contract or otherwise.

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

                  "Alternate Rate" means, as of any date of determination, a per
annum rate equal to the greater of(a) the Prime Lending Rate plus the Prime Rate
Applicable  Margin,  and (b) the  Federal  Funds  Rate  plus the  Federal  Funds
Applicable Margin.

                  "Applicable  Margin  Adjustment  Date" means the date on which
any Applicable Margin Adjustment Event occurs.

                  "Applicable  Margin  Adjustment  Event"  means each of (a) the
making of any Advance,  and (b) the receipt and collection by the Administrative
Agent, on behalf of the Lenders,  of any portion of the unpaid principal balance
of the Loan.

                  "Arranger" means Commerzbank AG, New York Branch.

                  "Average  Undrawn  Balance"  means 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     introductory
paragraph to this Agreement.

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

                  "Bridge  Facility" means the credit  facility  governed by the
Credit Agreement dated as of June 15, 1998, among Borrower,  certain lenders and
Arranger, as modified and amended, from time to time.

                  "Budget" means, for any Mortgaged Property (i) until the Final
Budget for such Mortgaged Property is received by the Administrative  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 the  Administrative
Agent, the Final Budget for such Mortgaged Property.

                  "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 San  Francisco,  California 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 May 6, 1997.

                  "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 Arranger.

                  "Commitment" means One Hundred Seventy Million Dollars
($170,000,000).

                  "Construction Budget" means, with respect to any Project under
Development,  the total  budgeted  costs  (including  soft and hard  costs),  as
indicated  in the  Budget  for such  Project  under  Development,  to cause such
Project  under  Development  to  become  Construction  Complete,  including  the
acquisition  cost of land.  If the Project  under  Development  is a multi-phase
development, the total budgeted costs shall include the acquisition cost of land
for all phases and the development  budget for any phases for which improvements
have commenced.

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

                  "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.

                  "Convertible   Preferred  Securities"  means  the  convertible
preferred securities to be issued by Borrower prior to July 22, 1999.

                  "Credit Exposure" has the meaning provided in Section 7.17.

                  "Debt  Service"  means,  with respect to any period,  Interest
Expense for such period, excluding financing costs and fees related to:

                           (i)      Indebtedness which has been incurred  before
the Effective Date,

                           (ii)     the Sale Leaseback Facility, or

                           (iii)    the Loan,

plus scheduled amortization of all Indebtedness of Borrower and its Subsidiaries
(excluding balloon payments and bullet maturities on loans).

                  "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:

                           (a)  all   non-monetary   easements,     restrictions
and encumbrances customary and appropriate for the development of property as an
extended stay facility, including ancillary facilities related thereto, which do
not and will not materially  impair the use of the Mortgaged  Property  affected
thereby as an extended stay facility or the ancillary facilities related thereto
or the expected value of the Mortgaged Property affected thereby and

                           (b)   all   other    easements,    restrictions   and
encumbrances customary and appropriate for the development of
property as an extended stay facility,  including  ancillary  facilities related
thereto,  which (i) are approved by the Arranger and the Administrative Agent or
(ii) do not and will not  materially  impair the use of the  Mortgaged  Property
affected  thereby as an  extended  stay  facility  or the  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 an extended stay
facility,  including  ancillary  facilities  related thereto,  on such Mortgaged
Property  to  be  Construction   Complete  in  accordance  with  the  Plans  and
Specifications,  as evidenced by the  documentation  and certificate of Borrower
furnished to the Administrative 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, with respect to any period and any Person, the
net income of such Person  (excluding  equity in net earnings or non-cash losses
of  its  Unconsolidated  Affiliates),  plus,  to  the  extent  included  in  the
calculation of earnings, any losses on the sale of a Property,  interest expense
(per GAAP), income taxes,  depreciation and amortization  expense,  other losses
relating to restructurings or extraordinary or unusual events of a non-recurring
nature,  accounting changes, or write-downs,  reclassifications,  or revaluation
(provided that for the purposes of this  definition  any severance  related cash
expenses,  charges or losses shall be spread in equal  portions over the quarter
in which  such  expenses,  charges  or losses  are  incurred  and the next three
succeeding  quarters),  and  the  distributed  earnings  of  its  Unconsolidated
Affiliates  minus, to the extent  excluded in the  calculation of earnings,  any
gains on the sale of a Property,  or  extraordinary  or unusual  events,  in all
cases as determined  on a  consolidated  basis in accordance  with GAAP for such
Person for such period.

                  "Effective Date" means March 18, 1999.

                  "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  Assignee"  means  a  Person  who,  at the  time  of
determination is (a) a Lender; (b) a commercial bank, trust company, savings and
loan association,  savings bank,  insurance company,  investment bank or pension
fund  organized  under the laws of the  United  States of  America  or any state
thereof,  and  having  total  assets  in  excess  of  $5,000,000,000;  or  (c) a
commercial  bank organized under the laws of any other country which is a member
of the  Organization  for Economic  Cooperation  and  Development or a political
subdivision  of  any  such  country,  and  having  total  assets  in  excess  of
$5,000,000,000,  provided such bank is acting through a branch or agency located
in the United  States of  America.  If such a Person is not  currently a Lender,
such  Person's  senior  unsecured  long term  indebtedness  must be rated BBB or
higher by Standard & Poor's, Baa2 or higher by Moody's Investor's  Services,  or
the  equivalent  or higher of  either  such  rating  by  another  rating  agency
acceptable to the Administrative Agent.

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

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

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

                  "Environmental Indemnity" means the Environmental Indemnity to
be executed by the Borrower in favor of the Arranger,  substantially in the form
attached hereto as Exhibit B.

                  "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.

                  "Estimated Operating Property Value"  or  "EOPV"  means, as of
any date of determination, the sum of:

                           (1) for each Mortgaged  Property that is Construction
Complete and open for business as an extended stay facility but has been so open
less than ten (10) full  calendar  months as of the end of the calendar  quarter
ending on or prior to the date of determination,  the lower of the undepreciated
GAAP cost value or the Stabilized Appraised Value;

                           (2) for each Property that is Construction   Complete
and has been open for  business as an extended  stay  facility at least ten (10)
full calendar months as of the end of the calendar quarter ending on or prior to
the date of determination, the lower of (a) the estimated asset value derived by
capitalizing  the appropriate  annualized  Adjusted  Property NOI (as determined
pursuant to the directions set forth below) at 11%, (b) the  undepreciated  GAAP
cost value and (c) only if the property is a Mortgaged Property,  the Stabilized
Appraised Value, plus

                         (3) for each Property that is not a Mortgaged  Property
and has been open for business as an extended stay facility but has been so open
less than ten (10) full  calendar  months as of the end of the calendar  quarter
ending on or prior to the date of  determination,  the  undepreciated  GAAP cost
value for such Property.

In order to determine  annualized Adjusted Property NOI, for a Property that has
been  open as an  extended  stay  facility  for at least  ten (10) but less than
thirteen (13) full calendar months,  the trailing quarter Adjusted  Property NOI
will be  annualized.  For a  Property  that has been  open as an  extended  stay
facility for at least  thirteen  (13) but less than  sixteen (16) full  calendar
months, the trailing two quarter Adjusted Property NOI will be annualized. For a
Property that has been open as an extended stay facility for sixteen (16) months
but less than nineteen (19) months,  the prior three quarter  Adjusted  Property
NOI will be  annualized.  Once a  Property  has been  open as an  extended  stay
facility for nineteen(19) full calendar months and thereafter, trailing 12-month
Adjusted Property NOI will be utilized.

"Estimated  Operating  Property Value of the Mortgaged  Properties" means, as of
any date of  determination,  for all Mortgaged  Properties,  the sum  calculated
pursuant  to the  foregoing  formula,  but only with  respect  to the  Mortgaged
Properties.

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

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

                  "Federal Funds Applicable  Margin" means, as of any Applicable
Margin  Adjustment  Date, (i) if the Leverage  Percentage as of such  Applicable
Margin  Adjustment  Date is less than fifteen  percent (15%),  one hundred fifty
(150) basis points, (ii) if the Leverage Percentage as of such Applicable Margin
Adjustment  Date is equal to or greater than fifteen percent (15%) but less than
twenty five percent  (25%),  two hundred  (200) basis  points,  and (iii) if the
Leverage  Percentage as of such Applicable Margin Adjustment Date is equal to or
greater  than  twenty  five  percent  (25%) and up to a maximum of thirty  eight
percent (38%), two hundred fifty (250) basis points.
<PAGE>

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

                  "Financing  Statements" means UCC-1 Financing  Statements made
by the Borrower or a Subsidiary Mortgagor,  as debtor, in favor of the Arranger,
as secured party, covering all fixtures,  equipment and personal property of the
Borrower or such Subsidiary Mortgagor 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 the
Administrative   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 one hundred ten percent (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  Arranger  determines  to be
adverse, and if either such party notifies the other of such determination, then
both  Borrower  and Arranger  shall  negotiate in good faith the extent to which
such change shall be adopted with respect to the matters to which the definition
of "GAAP" is applicable under the Loan Documents, and the term "GAAP" shall mean
(i) in the event a written agreement with respect to such change is executed and
delivered  by both  Borrower  and  Required  Lenders  within  thirty  (30)  days
following such notice,  generally  accepted  accounting  principles applied on a
consistent  basis giving effect to such  agreement,  or (ii) in any other event,
generally  accepted  accounting  principles as in effect at the time immediately
prior to the adoption of such change applied on a consistent basis.

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

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

                  "Gross Asset Value -- Market" or "GAV -- Market" means the sum
of:

                           (a)      EOPV,

                           (b)      cash and equivalents (not including any form
of restricted cash),

                           (c) the GAAP value of  construction  in  process  and
land held for development or sale (subject to a
value cap set forth in Sections 5.3(s) and (t)) plus

                           (d) the  contractual  purchase  price  of  properties
subject to purchase obligations,  repurchase obligations,  unfunded obligations,
and forward  commitments to the extent such  obligations are accounted for under
Total Liabilities and subject to specific enforcement.

With  respect  to  purchase  obligations,   repurchase   obligations,   unfunded
obligations,   and  forward   commitments  that  are  not  subject  to  specific
enforcement  but have earnest money or similar  payments  subject to forfeiture,
the amount of the  earnest  money or similar  payment  will be  included  in the
calculation of Gross Asset Value -- Market,  to the extent such  obligations are
accounted for in Total  Liabilities.  With respect to any property that is being
developed or redeveloped  pursuant a purchase agreement and that is not owned by
the  Borrower or a  Subsidiary,  the amount of the  purchase  agreement  will be
included in the  calculation of Gross Asset Value -- Market,  to the extent such
obligations are accounted for in Total Liabilities.

                  "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

<PAGE>

equity capital of the primary  obligor or otherwise to maintain the net worth or
solvency of the primary  obligor,  (iii) to purchase  property,  securities,  or
services  primarily  for the purpose of assuring  the owner of any such  primary
obligation of the ability of the primary obligor to make payment of such primary
obligation  or (iv)  otherwise to assure or hold  harmless the owner of any such
primary obligation against loss in respect thereof;  provided,  however that the
term Guarantee  Obligation  shall not include  endorsements  of instruments  for
deposit or  collection  in the ordinary  course of  business.  The amount of any
Guarantee  Obligation of any Guaranteeing Person shall be deemed to be the lower
of (a) an amount  equal to the  stated  or  determinable  amount of the  primary
obligation  in respect of which such  Guarantee  Obligation  is made and (b) the
maximum amount for which such Guaranteeing  Person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation  and the  maximum  amount for which such  Guaranteeing  Person may be
liable  are not  stated  or  determinable,  in  which  case the  amount  of such
Guarantee  Obligation shall be such  Guaranteeing  Person's  maximum  reasonably
anticipated  liability in respect  thereof as  determined by the Lenders in good
faith.

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

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

(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.

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

                  "Implied Debt Service"  means, as of any  determination  date,
the annual debt service of a  self-liquidating  loan with an original  principal
amount equal to the Maximum  Availability Amount, as of such date, and amortized
over 240 months (20 years)  (pursuant to regular and equal monthly  installments
of principal and interest) at an annual interest rate equal to the lesser of:

                           (a)      ten percent (10%) and

                           (b)      the  greater  of (i) eight and one half
percent (8.50%) and (ii) the 10 year Treasury Rate (as  hereinafter  defined) at
such time plus three and one quarter percent (3.25%).  "Treasury Rate" means the
annual yield on the Treasury Constant Maturity Series with maturity equal to ten
(10) years, for the week prior to the determination date, as reported in Federal
Reserve  Statistical  Release  H.15  -  Selected  Interest  Rates,  conclusively
determined by the  Administrative  Agent. In the event Release H.15 is no longer
published,  Administrative  Agent  shall  select  a  comparable  publication  to
determine the Treasury Rate.

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

(1) 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;

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

(3) all Guarantee Obligations of such Person;

(4) 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
<PAGE>

(5)  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 the
Administrative  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 C
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 Administrative Agent) showing
the amounts  budgeted  for the Total Costs  (including  contingencies)  for such
Mortgaged  Property,  provided and to the extent such budget and the amounts set
forth thereon reasonably conform, in the Administrative Agent's sole discretion,
to the Regional Prototypical Budget applicable to such Mortgaged Property.

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

                  "Interest  Expense" means (without  redundancy) the sum of all
accrued,  paid or capitalized  interest  costs of Borrower and its  consolidated
affiliates (excluding capitalized interest funded from an interest reserve) plus
Borrower's pro rata share (based on the higher of its nominal ownership interest
or the  ownership  percentage  used in the  calculation  of Gross Asset Value --
Cost) of interest  expense in its  Unconsolidated  Affiliates,  plus 100% of any
accrued,  paid, or capitalized  interest  incurred  (without  redundancy) on any
obligation  for which  Borrower is wholly or partially  liable under  repayment,
interest carry, or performance guarantees, or other relevant liabilities; minus,
to the extent included in the foregoing, financing costs and fees related to (i)
Indebtedness  which has been incurred  before the Effective  Date, (ii) the Sale
Leaseback Facility, and (iii) the Loan.

                  "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.

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

                  "Lending  Office"  means,  with respect to any of the Lenders,
the branch or  branches  (or  affiliate  or  affiliates)  from which any of such
Lender's  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 Arranger and the  Administrative
Agent and the Borrower.

                  "Leverage  Percentage"  means,  as of  any  Applicable  Margin
Adjustment  Date and after giving  effect to any  Applicable  Margin  Adjustment
Event giving rise thereto,  the quotient of the outstanding  principal amount of
the Loan, divided by the aggregate Eligible Costs for all Mortgaged  Properties,
expressed  as a  percentage.  In no event  shall  such  Leverage  Percentage  be
permitted to exceed thirty eight percent (38%).

                  "LIBO Rate" means,  with respect to any Interest  Period,  the
average rate of interest per annum (rounded upwards,  if necessary,  to the next
highest  1/16th  of 1%) at which  deposits  in  immediately  available  funds in
dollars are offered to Wells Fargo Bank National  Association (at  approximately
12:00 noon (New York  time),  two  Business  Days prior to the first day of such
Interest Period) by first class banks in the interbank  Eurodollar  market,  for
delivery on the first day of such Interest  Period,  such  deposits  being for a
period of time  equal or  comparable  to such  Interest  period and in an amount
equal to or  comparable  to the  principal  amount of the  Advance to which such
Interest  Period  relates.   Each   determination   of  the  LIBO  Rate  by  the
Administrative  Agent shall, in absence of demonstrable error, be conclusive and
binding.

                  "LIBOR  Applicable  Margin" means, as of any Applicable Margin
Adjustment  Date (i) if the Leverage  Percentage  as of such  Applicable  Margin
Adjustment  Date is less than fifteen  percent  (15%),  two hundred  (200) basis
points,  (ii) if the Leverage Percentage as of such Applicable Margin Adjustment
Date is equal to or greater than fifteen percent (15%) but less than twenty five
percent (25%),  two hundred fifty (250) basis points,  and (iii) if the Leverage
Percentage as of such Applicable  Margin  Adjustment Date is equal to or greater
than  twenty  five  percent  (25%) and up to a maximum of thirty  eight  percent
(38%), three hundred (300) basis points.

                  "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 D: (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 December 31, 2000, and any extensions
thereof.



<PAGE>


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

                           (a)      the Commitment,

                           (b)      thirty eight  percent  (38%) of the
aggregate  Stabilized  Appraised  Value of all of the Mortgaged Properties;

                           (c)      thirty eight percent (38%) of the Eligible
Costs of all of the Mortgaged Properties; and

                           (d) the sum of the Property Amount for each Mortgaged
Property, as hereinafter defined.

As used herein,  the "Property  Amount" with respect to any  Mortgaged  Property
means, as of any date of determination, the least of :

                           (i) the sum of: (A) forty five  percent(45%) of the
aggregate  Eligible  Acquisition  Costs for such  Mortgaged  Property,  plus (B)
thirty  five  percent  (35%) of the  aggregate  Eligible  Direct  Costs  and the
aggregate Eligible Indirect Costs for such Mortgaged Property; and

                           (ii) with respect to any Mortgaged  Property which is
a Stabilized Project, forty five percent
(45%) of the Estimated Operating Property Value of such Mortgaged Property.

                  "Merrill  Lynch  Facility"  means the credit  facility  in the
original amount of $122,028,471  arranged by, and secured by mortgage liens held
by, Merrill Lynch Mortgage Capital, Inc.

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

                  "Mortgages"  means  those  certain  deeds of  trust,  deeds to
secure debt,  mortgages  and security  agreements  with  assignments  of leases,
rents,  operating  agreements  and  management  agreements  and fixture  filings
delivered by the Borrower or any  Subsidiary  Mortgagor in favor of the Arranger
and  covering  the  Mortgaged   Properties,   substantially   (i.e.,  with  such
modifications   as  may  be  required  by,  or,  in  the   Arranger's   and  the
Administrative Agent's reasonable judgment, appropriate for, the jurisdiction in
which a particular Mortgaged Property is located) in the form attached hereto as
Exhibit E, as the same may be amended,  modified, or otherwise supplemented from
time to time.
<PAGE>

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

                  "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 on or  after  the
Effective Date.

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

                  "Notice of Borrowing" 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  Administrative Agent
located at 2120 E. Park Place, Suite 100, El Segundo, California 90245.

                  "Percentage"  means  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).
<PAGE>
                  "Permitted  Encumbrances"  means,  with respect to each of the
Mortgaged  Properties,  (i) all exceptions to title insurance coverage set forth
in the title insurance  policies insuring the Mortgages  covering such Mortgaged
Properties, other than standard printed exceptions, as of the date such policies
are issued, (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 thirty (30) days other than
those the  amount or  validity  of which are being  contested  in good  faith by
appropriate  proceedings  which  have  the  effect  of  staying  enforcement  or
execution  of such  liens  and  with  respect  to  which  adequate  reserves  in
conformity with GAAP have been provided on the books of Borrower, and (v) Leases
which are subordinate to the lien of the Mortgages.

                  "Permitted  Purpose" means  reimbursement to the Borrower of a
portion of the Total Costs with respect to each  Mortgaged  Property and general
working capital purposes (other than the purchase of Capital Stock).

                  "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).

                  "Preferred   Dividends"  means,   without   duplication,   the
dividends accrued, paid or declared under the Convertible Preferred Securities.

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


<PAGE>

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

                  "Prime Rate  Applicable  Margin"  means,  as of any Applicable
Margin  Adjustment  Date (i) if the Leverage  Percentage  as of such  Applicable
Margin  Adjustment  Date is less than fifteen  percent (15%),  one hundred (100)
basis  points,  (ii) if the Leverage  Percentage  as of such  Applicable  Margin
Adjustment  Date is equal to or greater than fifteen percent (15%) but less than
twenty five percent  (25%),  one hundred fifty (150) basis points,  and (iii) if
the Leverage Percentage as of such Applicable Margin Adjustment Date is equal to
or greater  than twenty five  percent  (25%) and up to a maximum of thirty eight
percent (38%), two hundred (200) basis points.

                  "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 F 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  Administrative  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 G 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  Arranger  and  the  Administrative  Agent  with  respect  to such
Mortgaged Property.

                  "Project  under  Development"  means a  Property  (a) on which
construction  of an extended  stay  facility has commenced and (b) which has not
been open as an extended stay facility for at least four (4) months.

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

                  "Properties"  means all land  owned or leased by the  Borrower
and/or  any  of  its  Subsidiaries,  all  buildings,  structures,  improvements,
fixtures and equipment,  and parking areas located thereon and therein,  and all
easements, rights, interests, privileges and other appurtenances thereto, of any
nature whatsoever. An individual "Property" is a portion of land owned or leased
by the Borrower and/or its Subsidiaries which is bound by a perimeter containing
no land not owned or leased by Borrower and/or any of its Subsidiaries, together
with all  buildings,  structures,  improvements  and parking areas  fixtures and
equipment located thereon, and all easements, rights, interests,  privileges and
other appurtenances thereto, of any nature whatsoever.
<PAGE>
                  "Purchasing Lender" has the meaning provided in Section 7.18.

                  "Regional   Prototypical  Budget"  means,  for  any  Mortgaged
Property, the prototypical budget in the form set forth in Exhibit I hereto with
respect to the region in which such Mortgaged Property is located.

                  "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.

                  "Required  Lenders"  means the Lenders  holding at least sixty
six and two thirds percent (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.

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

                  "Stabilized  Appraised Value" means appraised value reasonably
acceptable to all of the Lenders,  but at least  satisfying the requirements for
an acceptable real estate appraisal  imposed from time to time on each Lender by
the applicable Governmental Authority.

                  "Stabilized  Project" means a Mortgaged  Property which is (a)
Construction  Complete and is open for business as an extended stay facility and
(b) has been  either so open for at least  twenty four (24) weeks or has, at any
time, been at least eighty percent (80%) occupied for at least one (1) week.

                  "Stockholders' Equity" means stockholders' equity as reflected
on the balance sheet of the Borrower determined in accordance with GAAP.
<PAGE>

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

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

                  "Subsidiary  Mortgagor" means any  wholly-owned  Subsidiary of
Borrower, any wholly-owned  Subsidiary of a wholly-owned Subsidiary of Borrower,
or,  with  Lenders'  consent,  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).

                "Suburban Area" means an area outside a major metropolitan city.
                  "Tangible  Net Worth" is defined as the  tangible net worth of
the  Borrower,  calculated  on a  GAAP  basis,  plus  increases  in  accumulated
depreciation and amortization that occur subsequent to the Effective Date.

                  "Taxes" has the meaning provided in Section 2.17.

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

                  "Total Liabilities"  includes all GAAP liabilities and certain
non-GAAP (off balance sheet)  liabilities  with no redundancy.  Included are the
following:  non-recourse  mortgage  debt;  letters of credit;  binding  purchase
obligations;   repurchase  obligations;  forward  commitments;  unsecured  debt;
accounts payable;  accrued expenses,  capitalized lease obligations,  and to the
extent  required  under GAAP to be  reported  as a  liability,  any other  lease
obligations (including ground leases); guarantees of indebtedness;  subordinated
debt;  unfunded  obligations  of Borrower and its  Subsidiaries;  forward equity
commitments  (but  excluding  forward  equity  subscriptions  for which stock is
issued  within  thirty  (30) days of  receipt  of equity  proceeds);  Derivative
Exposure (as hereinafter  designed);  and any other non-GAAP  liability that the
Security and Exchange  Commission  has  determined,  either  currently or in the
future,  should be treated as debt.  Total  Liabilities  will  include  (without
redundancy):  (a) one  hundred  percent  (100%)  of the  recourse  liability  of
Borrower and its Subsidiaries under (i) guarantees of indebtedness or (ii) loans
where  Borrower  or a  Subsidiary  of  Borrower  is liable for debt as a general
partner and (b) Borrower's and its  Subsidiaries'  share of non-recourse debt in
their  Unconsolidated  Affiliates based on the greater of its nominal  ownership
interest or the percentage of ownership  interest used to calculate  Gross Asset
Value -- Cost. As used herein, "Derivative Exposure" means the maximum liability
(including costs, fees and expenses), based upon a liquidation or termination as
of the date of the applicable  covenant compliance test, of any Person under any
interest rate swap,  collar,  cap or other interest rate protection  agreements,
treasury locks,  foreign currency  exchange  agreements,  commodity  purchase or
option  agreements or other interest or exchange rate or commodity price hedging
agreements.
<PAGE>
For  purposes  of  purchase  obligations,  repurchase  obligations  and  forward
commitments,  the amount of Total  Liabilities  of a Person at any given time in
respect of a contract to purchase real property  shall be determined as follows:
(x) if, at such time,  the seller of such real  property  would be  entitled  to
specific  enforcement  of the contract  against such Person,  then the amount of
Total  Liabilities  shall equal the total  purchase price payable by such Person
under the contract,  otherwise,  (y) the amount of Total Liabilities shall equal
the aggregate amount of due diligence deposits, earnest money payments and other
similar  payments  made by such Person under the contract  which,  at such time,
would be subject to forfeiture upon termination of such contract.

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

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

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

                  "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
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  during  the  period  from  the
Effective Date to but excluding the Maturity Date.

b) The  aggregate  principal  amount  outstanding  of all Advances made pursuant
hereto  by the  Lenders,  at any  time,  shall  not  exceed  the  lesser  of the
Commitment or the then Maximum  Availability  Amount. 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.
<PAGE>

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.

     Sectioni 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.

     Section 2.3. Whenever the Borrower desires to receive an Advance hereunder,
it shall give the Arranger and the  Administrative  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
J, 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. The Administrative  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
specified   for  the  Advance,   each  Lender   shall  make   available  to  the
Administrative  Agent at the Payment Office no later than 12:00 noon.  (New York
time) in immediately available funds an amount equal to such Lender's Percentage
of such  Advance.  No later  than 3:00 p.m.  (New York time) on the date of each
Advance,  the  Administrative  Agent will make  available to the Borrower at the
Payment Office the full amount of the Advance.
<PAGE>
     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 Administrative Agent of the amount of principal outstanding
hereunder or under any Promissory Note shall, except for patent error, be final,
conclusive and binding upon the Borrower for all purposes.

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

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 LIBOR Applicable  Margin plus the relevant Adjusted
LIBO 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, in arrears,  with respect to each Advance, (i) on the first day of each
calendar month,  (ii) at maturity  (whether by  acceleration or otherwise),  and
(iii) after maturity, on demand. Notwithstanding the foregoing, interest on each
Advance  bearing  interest at the  Alternate  Rate pursuant to the terms of this
Agreement  shall be  payable in  arrears  (i) on the first day of each  calendar
month during the Interest  Period  applicable to such Advance,  (ii) at maturity
(whether by acceleration or otherwise),  and (iii) after maturity, on demand. No
later than five (5) Business Days prior to an Applicable Margin Adjustment Date,
Borrower shall furnish the  Administrative  Agent with calculations of the LIBOR
Applicable  Margin,  Federal Funds  Applicable  Margin and Prime Rate Applicable
Margin as of the Applicable  Margin  Adjustment  Date,  together with sufficient
detail to allow the Administrative Agent to review the Borrower's  calculations.
The LIBOR  Applicable  Margin,  Federal Funds  Applicable  Margin and Prime Rate
Applicable  Margin  shall be  recalculated  by the  Administrative  Agent (which
calculation  shall be binding on all  parties,  absent  patent  error),  and the
interest on each Advance shall be correspondingly increased or decreased, on and
as of each  Applicable  Margin  Adjustment  Date.  In the event that the date on
which the  interest on any Advance is converted  to, or  otherwise  commences to
accrue  at,  the  Alternate  Rate  is a date  that is not an  Applicable  Margin
Adjustment Date, then the Alternate Rate shall be calculated on the basis of the
Leverage Percentage as of the most recent Applicable Margin Adjustment Date.
<PAGE>
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 (3%) per annum plus the  interest  rate
otherwise  applicable thereto from the first day such amounts are overdue to but
excluding the date such overdue amounts are paid.

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

d) It is  expressly  stipulated  and agreed to be the intent of the  Lenders and
Borrower at all times to comply with the  applicable  law  governing the highest
lawful interest rate. If the applicable law is ever judicially interpreted so as
to render  usurious any amount  called for under this  Agreement or under any of
the other Loan  Documents,  or  contracted  for,  charged,  taken,  reserved  or
received with respect to the Indebtedness  evidenced thereby, or if acceleration
of the maturity of the obligations,  or the rights of the  Administrative  Agent
and the Lenders to any amounts due, under this Agreement, the Loan Documents and
the  Promissory  Notes,  any prepayment by Borrower,  or any other  circumstance
whatsoever,  results in Borrower having paid any interest, penalty, fee or other
amount in excess of that  permitted by  applicable  law,  then it is the express
intent of Borrower and Lenders that all excess amounts theretofore  collected by
Lenders be credited on the  principal  balance of the Advances  (or, at Lenders'
option,  paid over to Borrower),  and the  provisions of this  Agreement


<PAGE>

and the other Loan  Documents  immediately  be deemed  reformed  and the amounts
thereafter  collectible hereunder and thereunder reduced,  without the necessity
of the execution of any new document,  so as to comply with the applicable  law,
but so as to permit the  recovery of the  fullest  amount  otherwise  called for
hereunder and thereunder.  The right to accelerate  maturity of the obligations,
or the rights of the  Administrative  Agent and the Lenders to any amounts  due,
under this  Agreement,  the Loan  Documents and the Promissory  Notes,  does not
include the right to accelerate any interest which has not otherwise  accrued on
the date of such acceleration, and Lenders do not intend to collect any unearned
interest  in the  event of  acceleration.  All sums paid or agreed to be paid to
Lenders for the use, forbearance or detention of the obligations,  or the rights
of the  Administrative  Agent and the  Lenders to any  amounts  due,  under this
Agreement,  the Loan  Documents and the  Promissory  Notes shall,  to the extent
permitted  by  applicable  law, be  amortized,  prorated,  allocated  and spread
throughout the full term of such  obligations  and amounts until payment in full
so that the rate or amount of  interest on account of such  secured  obligations
does  not  exceed  the  maximum  rate or  amount  of  interest  permitted  under
applicable law.

     Section 2.7  "Interest  Periods."  An interest  period  (each an  "Interest
Period")  shall be  applicable  with respect to each  Advance,  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:

(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 K, to the
Administrative  Agent at any time  prior to 12:00  noon (New  York  time) on the
third Business Day prior to the expiration of the then current  Interest  Period
applicable to such Advance,  provided  that if no Interest  Period  selection is
delivered to the Administrative Agent by such time, the Borrower shall be deemed
to have  selected  an  Interest  Period of one month  and such  Interest  Period
selected  or deemed to have been  selected  for such  Advance may not be changed
without the consent of the  Administrative  Agent;

(iii) if any  Interest  Period  would  otherwise  expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding  Business
Day,  provided that if any Interest  Period in respect of 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;
<PAGE>
(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
Administrative  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 Arranger and the Administrative Agent,
the Borrower may terminate the Commitment by prepaying all outstanding  Advances
and all other amounts and fees due to the  Administrative  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.
<PAGE>
     Section 2.10 "Fees." The Borrower shall pay to the Administrative Agent for
the  account of the Lenders a  commitment  fee (the  "Commitment  Fee") equal to
three eighths of one percent  (0.375%) per annum of the Average  Undrawn Balance
of the  Commitment.  The amount of the Commitment Fee shall be calculated by the
Administrative  Agent and, absent patent error, shall be binding on all parties.
The Commitment Fee shall be due and payable (i) quarterly in arrears on the last
day of  each  calendar  quarter,  and  (ii)  on the  Maturity  Date  or  earlier
termination  of the Loan.  Each payment on account of the  Commitment  Fee for a
period  which  is less  than a full  calendar  quarter  shall be  prorated.  The
Borrower  agrees  to pay to the  Administrative  Agent  such  fees for  services
rendered  by the  Administrative  Agent as shall be  separately  agreed  upon in
writing between the Borrower and the Administrative Agent.

     Section 2.11 "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  Administrative  Agent not later than
12:00  noon (New York time) on the date when due and shall be made in Dollars in
immediately  available funds at the Payment Office and any funds received by the
Administrative  Agent after such time shall, for all purposes of this Agreement,
be  deemed  to  have  been  paid  on  the  next  succeeding  Business  Day.  The
Administrative Agent shall thereafter cause to be distributed to the Lenders, on
the  Business  Day when paid,  in like funds  their  Percentage  of  payments so
received.   Notwithstanding   the  foregoing,   any  payments  received  by  the
Administrative  Agent after 12:00 noon (New York time) shall be  distributed  to
the Lenders on the following Business Day.

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 LIBO 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.

     Section 2.12 "Interest Rate Not Ascertainable,  Etc." If the Administrative
Agent shall have determined (which determination shall be conclusive and binding
upon  the  Borrower)  that on any  date for  determining  the LIBO  Rate for any
Interest  Period,  by  reason  of  any  circumstances  affecting  the  interbank
Eurodollar  market  generally,   adequate  and  fair  means  do  not  exist  for
ascertaining  the  applicable  interest  rate on the basis  provided  for in the
definition  of  Adjusted  LIBO  Rate,   then,   and  in  any  such  event,   the
Administrative  Agent shall  forthwith  give notice (by  telephone  confirmed in
writing) to the Borrower of such determination.  Until the Administrative  Agent
notifies  the  Borrower  that the  circumstances  giving rise to the  suspension
described herein no longer exist:

                  (i)      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
Arranger and the Administrative Agent and the Borrower of such determination.
<PAGE>
b) Upon the giving of the notice to the  Arranger and the  Administrative  Agent
and the Borrower  referred to in subsection (a) above,  (i) the Borrower's right
to request and the  Notifying  Lender's  obligation  to 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  implementation  of or any
change  (including,  without  limitation,  any  change by way of  imposition  or
increase  of  reserve  or  capital   adequacy   requirements)   in,  or  in  the
interpretation by any Governmental  Authority or any other recognized  authority
of, any law or regulation,  or (y) the compliance  with any guideline or request
from any central  bank or other  Governmental  Authority  or  quasi-Governmental
Authority  exercising  control  over banks or financial  institutions  generally
(whether or not having the force of law) adopted or becoming effective after the
date hereof:

     (i) any Lender (or its Lending  Office) shall be subject to any tax,  duty,
or  other  charge,  with  respect  to the  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 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
Administrative  Agent, pay to the  Administrative  Agent for the account of such
Lender,  within five Business  Days after the date  specified in such notice and
demand,  additional  amounts  sufficient to indemnify  such Lender  against such
increased  cost. In the event that a Lender becomes aware of the imposition of a
cost to such Lender or a reduction in the amount to be received or receivable by
such Lender or its Lending  Office which is an additional  cost pursuant to this
Section 2.14, such Lender shall promptly notify the Administrative Agent and the
Borrower in writing of such imposition or reduction,  which notice shall include
such  Lender's  reasonable  details with respect to such  increased  cost.  With
respect to costs or  reductions  incurred by a Lender  pursuant to this  Section
2.14 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.
<PAGE>
b) If the Required  Lenders shall notify the Borrower in writing (with a copy to
the  Administrative  Agent)  that  at any  time,  because  of the  circumstances
described  in clause  (x) or (y) in Section  2.14(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, the
then applicable  Adjusted LIBO Rate, as determined by the Administrative  Agent,
will not  adequately  and fairly  reflect the cost to the Lenders of funding the
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 Required  Lenders shall notify the Borrower in writing (with a copy to
the  Administrative  Agent)  that  at any  time,  because  of the  circumstances
described  in clause  (x) or (y) in Section  2.14(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
Arranger  and the  Administrative  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  Administrative  Agent  and  the
Administrative Agent's delivery thereof to the Borrower (which request shall set
forth in  reasonable  detail the basis for  requesting  such  amounts),  for all
losses, expenses, and liabilities (including,  without limitation,  any interest
paid by such  Lender to  lenders  of funds  borrowed  by it to make or carry its
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.
<PAGE>
     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  Administrative
Agent a certified copy of an original  official receipt received by the Borrower
showing payment thereof.  If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the  Administrative  Agent the
required  receipts or other required  documentary  evidence (other than any such
failure  due to failure of any Lender to furnish  the  documents  required to be
furnished  by such  Lender  pursuant to Section  2.17(b)),  the  Borrower  shall
indemnify, defend and hold harmless the Administrative Agent and each Lender for
any  incremental  taxes,  interest,  or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. With respect
to any obligations of the Borrower pursuant to this Section 2.17 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) The  Administrative  Agent and each Lender  shall  furnish  Borrower  and the
Administrative  Agent,  at least thirty (30) days prior to the date on which the
first  payment to each Lender  (including  each  Purchasing  Lender) is due, and
annually  thereafter  during the term of the Loan,  with United States  Internal
Revenue Service Form 1001, 4224, W-8 or W-9 (or any other successor form) or any
other document evidencing such Lender's exemption from withholding of Taxes from
any amounts  payable to such Lender  hereunder  under as of the Closing Date. If
any Taxes are  required  to be withheld  from any amounts  payable to any Lender
hereunder or under the Promissory  Notes, then the Borrower shall be entitled to
require such Lender to assign its Credit  Exposure at par to any Person selected
by Borrower that is an Eligible Assignee  reasonably  acceptable to the Arranger
and the  Administrative  Agent,  which assignment shall be effected  pursuant to
Section 7.18 hereof.
<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 Effective
Date, all obligations of the Borrower hereunder to the Administrative Agent, the
Arranger and the Lenders  incurred  prior to the Effective  Date and any amounts
payable  to  the  Administrative  Agent,  the  Arranger  or the  Lenders  on the
Effective Date (other than legal fees payable  pursuant to the last paragraph of
subsection  3.1(a)),  shall have been paid in full.  In addition,  the following
conditions shall be satisfied:

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

     (i) an  officer's  certificate,  dated the  Effective  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 L with appropriate insertions,
together with copies of the Articles of Incorporation of Borrower certified,  as
of a recent  date,  by the  Secretary  of State of the  State of the  Borrower's
incorporation  and the By-Laws of Borrower and the  resolutions  of the Borrower
referred to in such certificate; and certified copies of all other documents, if
any, evidencing corporate action or governmental  authorization or approval with
respect to this  Agreement,  the  Promissory  Notes,  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 Affirmation of Environmental Indemnity;

     (iv)  opinions of counsel to the Borrower  addressed to the  Administrative
Agent and the Lenders as to the matters set forth in Exhibits M and N;  provided
that local counsel  opinions shall be limited to the  modifications of Mortgages
except for states where New  Mortgaged  Properties  are located;

     (v) financial  statements in the forms prescribed by Sections 5.2(a) to (d)
for fiscal year 1997, the fiscal quarter ending  September 30, 1998 and the most
recent Accounting Period;  provided that prior to March 31, 1999,  Borrower will
deliver audited  financial  statements for the year ended December 31, 1998;

     (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;
<PAGE>
     (vii)  such  consents  or  acknowledgements,  with  respect  to such of the
transactions  hereunder,  from such  Persons as the  Arranger 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)  duly  executed,  delivered  and  acknowledged  modifications  of  the
Mortgages,  in recordable  form,  sufficient to protect the Liens of Arranger in
such Mortgaged Properties;

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

     (xi) duly executed and delivered Subsidiary Guaranties.

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

b) Receipt of More Documents.  The Arranger and the  Administrative  Agent shall
have received the following, each dated as of or prior to the Effective Date, in
form and substance satisfactory to the Lenders:

     (i) originals of an estoppel letter executed by HPT; and

     (ii)  appraisals  on  the  forty  five  (45)  of the  Mortgaged  Properties
designated by the Arranger.

(c)  Sale-Leaseback.  Borrower  shall  have  evidenced  to the  satisfaction  of
Arranger that the Merrill Lynch  Facility has been repaid  through the execution
of the Sale-Leaseback Facility.

     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 Arranger and the Administrative Agent shall have received a timely Notice
of Borrowing from the Borrower in accordance with Article II;
<PAGE>
b) No Default or Event of Default shall have occurred and be continuing;

c)  Such  Advance  shall  not  cause  the  aggregate  principal  amount  of  all
outstanding  Advances to exceed the lesser of (i) the  Commitment,  and (ii) the
then Maximum Availability Amount;

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  Effective  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;

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)  the  Administrative  Agent  shall  have  received,  in  form  and  substance
satisfactory to the Administrative Agent:

     (i) prior to any  Advance  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  Administrative   Agent  shall  have
received):  (1) such  supporting  documentation  for Total  Costs and  Estimated
Operating Property Value of the Mortgaged Properties as the Administrative 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 the
Administrative  Agent,  which endorsement shall have the effect of redating such
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 an amount equal to at least 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
<PAGE>
Section  3.3(a)(iii)  dated the date of any such  Advance,  (4) a  Project  Cost
Report  for such  Mortgaged  Property,  dated as of the  date of the  Notice  of
Borrowing,  and (5) evidence that (A) the  Borrower's  sources and uses of funds
are in balance with respect to Borrower's  business in general,  which  evidence
may be in the form of Exhibit U (B) the Borrower  has  adequate  sources to make
each Project under  Development  Construction  Complete and (C) the Borrower has
adequate sources to satisfy the Borrower's cash requirements;

     (ii) prior to any  Advance  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 Administrative  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 the Administrative 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,  including 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, including ancillary facilities related thereto, on
such Mortgaged Property have been obtained and are in full force and effect; (3)
Borrower's  certificate  to the effect  that the  building  permit and all other
permits,  authorizations  and  approvals  required  to  be  obtained  under  any
Requirements of Law or Use Requirements for the construction and operation of an
extended stay facility,  including 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,  including 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 (4)
Borrower's   certification,   and  evidence   reasonably   satisfactory  to  the
Administrative  Agent,  that Borrower is in compliance  with  subsection  5.3(v)
hereof;  and

     (iii)  prior  to any  Advance  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  Administrative
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,  including  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  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,  including  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,  including  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.
<PAGE>
     (iv) prior to the first  Advance 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  Administrative
Agent shall have received):  (1) with respect to any Mortgaged Property which is
not a Stabilized  Project,  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 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
(30) days to commence  construction  on such  Mortgaged  Property.  In the event
construction is not commenced with one hundred twenty (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  Administrative  Agent shall have received such other  documents or legal
opinions as the  Administrative  Agent or counsel to the Arranger may reasonably
request, all in form and substance reasonably satisfactory to the Administrative
Agent;  and

j) (1) The  Administrative  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 the  Administrative  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 Administrative  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 the
Administrative Agent all advice respecting,  such items, actions, conditions and
requirements.
<PAGE>
         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  furnish,  with respect to each request for an Advance,
all  documents  referred to in  Sections  3.2(g)(i)(3),  3.2(g)(ii)(2),  3.2(i),
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 the  Administrative  Agent
and the Arranger'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 Arranger 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
Administrative  Agent to receive any such documents),  and (ii) copies of all of
the  foregoing  documents  delivered to such counsel  shall also be given to the
Administrative Agent as provided herein.

     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 to the  Administrative  Agent's  satisfaction  (after
consultation  with  Arranger's  counsel) with respect to each such New Mortgaged
Property:

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

     (i) a Mortgage for the New Mortgaged  Property duly  authorized,  executed,
acknowledged  and delivered in recordable  form and evidence of the recording of
such  instrument  as may be necessary  or, in the opinion of the  Administrative
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,  in
Administrative  Agent's  determination,   recorders  and  filing  offices,  with
evidence of the  recording and filing of each such  Financing  Statement in such
offices;
<PAGE>
     (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  Administrative  Agent,  in  form  and  substance
satisfactory  to the  Administrative  Agent,  (x)  insuring the Arranger and the
Lenders in an amount acceptable to the Administrative  Agent with respect to the
New Mortgaged  Property,  that 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  1  attached  hereto  and such  other
endorsements   and   affirmative   coverage  as   reasonably   required  by  the
Administrative  Agent to the extent available under applicable law and with such
reinsurance  (with direct access  provisions)  as the  Administrative  Agent may
reasonably  request;  and the  Administrative  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
Arranger  and  the  Administrative  Agent  and  such  title  insurance  company,
containing  the  certification  set forth on  Schedule  2  attached  hereto  and
certified to the Arranger,  the Lenders,  the Borrower,  and the title insurance
company, showing no state of facts reasonably unacceptable to the Administrative
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)  (A)   studies,   in  each  case   reasonably   satisfactory   to  the
Administrative Agent (and conducted by an experienced and reputable  engineering
firm  as  demonstrated  to  the  Administrative  Agent  by  evidence  reasonably
satisfactory to the Administrative 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 Administrative  Agent in its sole discretion;  and
(B) an appraisal for the New Mortgaged  Property  satisfactory to each Lender in
its sole  discretion;

     (v) UCC lien  searches with respect to the Borrower in the county and state
where the New Mortgaged  Property is located and in the state of organization of
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  Arranger and each Lender as an
additional  insured  thereunder,  accompanied  by a  certification  of  Borrower
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 Arranger and
the  Lenders  as to the  matters  set  forth  in  Exhibit  M and N and  in  form
reasonably  acceptable to the Administrative Agent;

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

     (ix) a Proforma Operating Statement acceptable in form and substance to the
Administrative  Agent in its sole  discretion  for each New Mortgaged  Property,
dated as of a recent date;
<PAGE>
     (x) certificates of occupancy for the New Mortgaged Property and such other
evidence  satisfactory  to the  Administrative  Agent  that  the  New  Mortgaged
Property is Construction Complete;

     (xi) evidence that the New Mortgaged Property is a Stabilized Project;

     (xii)  such  consents  or   acknowledgements   from  such  Persons  as  the
Administrative  Agent or the Arranger's  counsel may reasonably  determine to be
necessary;

     (xiii) such other documents, instruments and material as the Administrative
Agent  or the  Lenders  may  deem  reasonably  necessary  or  appropriate,  as a
condition  to the  granting  of the  Borrower's  request  to add  New  Mortgaged
Properties to the Collateral,  including information  addressing  environmental,
market and market concentration concerns; and

     (xiv) (1) the Administrative 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 the  Arranger and the  Administrative  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  Administrative  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 the  Arranger and the
Administrative Agent all advice respecting,  such items, actions, conditions and
requirements.

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  Administrative  Agent shall have received the following in form
and substance  satisfactory to the  Administrative  Agent: (x) a guaranty of the
Indebtedness  hereunder  in the form of  Exhibit  O  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)(ix)  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) Lender  Approval.  The  Administrative  Agent  shall  forward to each of the
Lenders,  with respect to each New Mortgaged Property,  copies of each document,
instrument and other material  described in Sections  3.2(g) and 3.2(i).  All of
Lenders  shall have given their  approval to the New Mortgaged  Property,  which
approval  may be withheld  for any reason or no reason at all. No New  Mortgaged
Property  or portion  thereof  which is not owned in fee simple by Borrower or a
Subsidiary  Mortgagor  shall be deemed to be a  Mortgaged  Property or a portion
thereof for the purposes of computing Maximum Availability  Amount,  without the
unanimous consent of Lenders, which consent shall not be unreasonably withheld.

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

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

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

     Section 4.5 "Financial Information and No Material Adverse Change."

a) Each of the financial  statements  delivered pursuant to Sections  3.1(a)(vi)
and  3.1(a)(vii)  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 3 hereof.
<PAGE>
b) Since December 31, 1997, there has been no Material Adverse Change, except as
otherwise  disclosed  in writing to the  Arranger  in the press  releases  dated
February  4, 1999 and March 15, 1999 and the reports on Forms 10-Q and 8-K filed
by the Borrower with the Securities and Exchange Commission.

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

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

     Section 4.8 "Labor Matters."

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

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

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

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

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

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

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

     Section 4.14 "Investment Company Act; Other  Regulations."  Borrower is not
an "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.

     Section  4.15  "Security  Capital."  Security  Capital  Group  Incorporated
directly or, through a wholly-owned Subsidiary, indirectly owns no less than (a)
fifty one percent (51%) of the voting stock in Borrower  before  dilution due to
the conversion of the mortgages in favor of Archstone Communities Trust shown on
Schedule 3 and (b) forty six percent (46%) after such dilution.

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

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

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

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

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

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

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

f) Except as set forth in  Schedule 4 hereto,  there are no  pending  or, to the
knowledge of the Borrower,  threatened proceedings relating to any (i) taking by
eminent domain or other  condemnation of any portion of any Mortgaged  Property,
(ii) condemnation or relocation of any roadways abutting any Mortgaged  Property
and (iii) denial of access to any Mortgaged Property from any point of access to
such  Mortgaged  Property,  in any such case not  accounted for in the Plans and
Specifications.

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

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

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

     Section  4.19  "Solvency."  Within  the  meaning  of  Section  548  of  the
Bankruptcy Code, the Uniform Fraudulent  Transfer Act and the Uniform Fraudulent
Conveyance Act as in effect in any relevant  jurisdiction,  and any similar laws
or statutes,  and after giving effect to the transactions  contemplated  hereby:
the fair saleable value of the Borrower's  assets exceeds and will,  immediately
following the 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 4.20 "Not Foreign  Person." The Borrower is not a "foreign  person"
within the meaning of Section 1445(f)(3) of the Code.
<PAGE>

     Section  4.21  "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  4.22  "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 4.23 "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 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 4.24 "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
related ancillary facilities thereon,  each Mortgaged Property is being operated
and maintained in accordance  with the Borrower's  usual and customary  business
practices.

     Section  4.25  "Margin  Regulations."  The  Borrower  is not engaged in the
business of  extending  credit for the  purpose of  purchasing  or carrying  any
margin stock or margin securities  (within the meaning of Regulations T, U and X
issued by the Board of Governors of the Federal Reserve System), and no proceeds
of any 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 4.26  "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.


<PAGE>

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

     Section 4.28 "Loan  Documents."  The  provisions of the Loan  Documents are
each  effective  to  create,  in  favor of the  Arranger,  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
Arranger or the  Administrative  Agent),  the Loan Documents  will  constitute a
perfected first Lien on and security  interest in all right,  title,  estate and
interest of the Borrower or a Subsidiary  Mortgagor,  as the case may be, in the
collateral  described therein,  prior and superior to all other Liens except for
Permitted Encumbrances and as otherwise permitted under this Agreement.

     Section 4.29 "Balloon  Payments." Except as reflected on Schedule 3 hereof,
as of the  Effective  Date,  there are no balloon  payments,  scheduled  balloon
amortizing payments or scheduled  amortizing payments required to be paid at any
time  in  respect  of  any   Indebtedness   (other  than   Permissible   Assumed
Indebtedness) of the Borrower or its Subsidiaries.

     Section 4.30 "Subsidiaries."

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

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

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

<PAGE>

                              ARTICLE V. COVENANTS

     Section 5.1  "Certain  Affirmative  Covenants."  So long as the  Commitment
remains  in effect or any  amounts  due to the  Lenders  hereunder  or under the
Promissory  Notes or the other Loan Documents shall remain unpaid,  the Borrower
will,  and, to the extent any of the following  relates to a Mortgaged  Property
any portion of or interest in which is owned by any  Subsidiary  Mortgagor,  the
Borrower  will  cause  each such  Subsidiary  Mortgagor,  with  respect  to such
Mortgaged  Property,  to (unless expressly waived by the Arranger 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 ten (10) days after Borrower's  notice of such Lien (unless the
taxes,  assessments or governmental charges to which such Lien relates are being
contested  in good  faith by  appropriate  proceedings  which have the effect of
staying enforcement or execution of such Lien and with respect to which adequate
reserves in  conformity  with GAAP have been provided on the books of Borrower).


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

f) Visitation, Inspection, Etc. Permit any representative of the Arranger 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 Arranger  during normal business hours.

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

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

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

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

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

(i) Property and casualty  insurance coverage evidenced by original or certified
copies of  insurance  policies  or binders  for such  insurance,  together  with
evidence  that the  premiums  for such  policies  have been paid  current.  Such
insurance policies shall insure each of the Mortgaged Properties for one hundred
percent  (100%) of their  full  replacement  cost  (exclusive  of  footings  and
foundations)  in  so-called  "all  risk"  form and  with  coverage  for  floods,
earthquakes (except as provided in subsection (ii) below) and such other hazards
(including  "collapse" and  "explosion")  as the Lenders may require for each of

<PAGE>

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

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

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

     (iv)  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 ancillary  facilities  related thereto on each Mortgaged  Property,
including all materials in storage and while in transit during construction.

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

     (vi) On and after  April 30,  1999,  the  insurance  coverage  set forth in
Schedule 8, to the extent such coverage is  inconsistent  with the  requirements
set forth above.

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

m) Final Budget; Major Trade Agreements.  If the Borrower commences  development
on a Mortgaged Property after the Effective Date, the Final Budget for each such
Mortgaged  Property  shall be received by the  Arranger  and the  Administrative
Agent no later  than one  hundred  twenty  (120)  days  after the first  Advance
relating to such Mortgaged  Property is made, and, with respect to all Mortgaged
Properties  which were  mortgaged to the  Arranger  prior to the date hereof and
which are not Stabilized  Projects,  all agreements with the general  contractor
and all major trade contractors and subcontractors required for the construction
of an extended stay facility on such  Mortgaged  Property shall be duly executed
and delivered by all parties thereto no later than one hundred twenty (120) days
after the first Advance relating to such Mortgaged Property shall have been made
and such  agreements  shall remain (or  substitutes  therefor  shall be) in full
force and effect until such  Mortgaged  Property is  Construction  Complete.

n)  Application  of Proceeds  From Equity  Offerings.  Except as provided in the
March 15, 1999 letter between the Borrower,  Arranger and  Administrative  Agent
attached  hereto as Exhibit Q,  Borrower  shall pay (i) to the  Arranger for the
benefit of the Lenders, upon receipt, all net proceeds from its equity offerings
to repay on a pari passu basis the Loan and the  Indebtedness  under the amended
and  restated  credit  agreement  dated as of this  date,  as  amended,  between
Borrower, the Arranger and one or more lenders with regard to a revolving credit
facility  of up to an  aggregate  principal  amount of  $30,000,000  secured  by
mortgage  liens  on   metropolitan   downtown   properties;   and  (ii)  to  the
Administrative  Agent all other amounts and fees due to the Administrative Agent
and the Lenders under this Agreement and the other Loan Documents.


<PAGE>

o) Year 2000  Compliance.

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

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

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

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

b)  Quarterly  Financial  Statements  With Respect to the  Borrower.  As soon as
available  and in any event  within sixty (60) days after the end of each fiscal
quarter  other than the last fiscal  quarter of a fiscal year (unless the filing
requirements have been extended by the SEC in which case the 60-day period shall
be  extended  until  the  earlier  of the  date of  filing  with the SEC or such
extended date granted by the SEC), a consolidated  balance sheet of the Borrower
and its Subsidiaries as at the end of such quarter and the related  consolidated
<PAGE>

statements of income and cash flow of the Borrower and its Subsidiaries for such
fiscal quarter and/or for the portion of the Borrower's fiscal year ended at the
end of such quarter,  setting forth in each case in comparative form the figures
for the corresponding  quarter and the  corresponding  portion of the Borrower's
previous  fiscal year, all in reasonable  detail and certified by the Controller
or chief  financial  officer of the Borrower  that they are complete and correct
and that they fairly present the consolidated  financial condition as at the end
of such fiscal quarter,  the  consolidated  results of operations and changes in
cash flow for such fiscal quarter  and/or such portion of the Borrower's  fiscal
year, of the Borrower and its  Subsidiaries  in accordance with GAAP (subject to
normal,  year-end  audit  adjustments),  and a statement  of sources and uses of
funds in the form of Exhibit U,  indicating  to  Arranger's  satisfaction,  that
evidence that (A) the  Borrower's  sources and uses of funds are in balance with
respect to Borrower's business in general, (B) the Borrower has adequate sources
to  make  each  Project  under  Development  Construction  Complete  and (C) the
Borrower has adequate  sources to satisfy the Borrower's cash  requirements.

c) Annual Financial  Statements With Respect to 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  Administrative  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 R
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) Monthly  Financial  Statements With Respect to the Operating  Mortgaged
Properties.  As soon as available and in any event within thirty (30) days after
the end of each  Accounting  Period,  a  statement  with  respect to each of the
operating Mortgaged  Properties as at the end of such Accounting Period, each of
which  statements  shall (i) be in the form of  Exhibit R 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 Accounting
Period, in accordance with GAAP (subject to normal, year-end audit adjustments).

e) Semi-annual Proformas.  Detailed twelve month forward proforma balance sheet,
operating  statement,  and cash flow projection together with proforma financial
covenant  calculations  acceptable to the Arranger and the Administrative Agent.
These should be  provided,  as soon as  available,  but in any event by December
31st  for the  calendar  year  projections  and by June 30 with  respect  to the
mid-year  projections  covering  the period  from July 1st to June  30th.
<PAGE>

f) 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 L to this  Agreement and shall certify
thereon that the Borrower is in compliance  with all financial  covenants  under
this  Agreement.

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

h) 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).

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

j) 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.

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

     Section 5.3  "Certain  Negative  Covenants."  Neither  Borrower  nor,  with
respect to  subsections  (a),  (i), (k) to (r), (u) and (v), any  Subsidiary  of
Borrower will:
<PAGE>

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 3;

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

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

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

     (vi)  Indebtedness due and payable solely to a Subsidiary of Borrower or by
a Subsidiary to Borrower;  and (7) subject to Lenders'  prior  written  consent,
which consent  shall not be  unreasonable  withheld,  and provided no Default or
Event of Default has occurred,  Indebtedness arising from the refinancing of the
Indebtedness referred to in Schedule 3; provided:

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

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

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

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

          (E) the eight (8)  properties  which are being  released from the Lien
     granted in connection with the Merrill Lynch Facility through the execution
     of the  Sale-Leaseback  Facility  are financed  only with the  Indebtedness
     governed by this Agreement.

b)  Total  Liabilities.  Permit  there  to  be  Total  Liabilities  of  Borrower
(excluding,  through April 23, 1999, liabilities under the Bridge Facility),  at
any time, in excess of the amount equal to the lower of fifty five percent (55%)
of
<PAGE>

          (i) Total Liabilities to Gross Asset Value -- Market; and

          (ii) Total Liabilities to Gross Asset Value -- Cost.

c) Aggregate  Indebtedness.  Permit there to be  aggregate  Indebtedness  of the
Borrower  (excluding,  through  April 23,  1999,  liabilities  under the  Bridge
Facility),  , at any time,  in excess of the amount  equal to the lower of fifty
percent (50%) of

          (i) Indebtedness to Gross Asset Value -- Market; and

          (ii) Indebtedness to Gross Asset Value -- Cost.

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

          (i) including the Bridge  Facility,  for the first calendar quarter of
     1999, 1.25:1.0;

          (ii) excluding the Bridge Facility,  for the first calendar quarter of
     1999, 1.60:1.0;

          (iii) for each of the  second,  third  and  fourth  quarters  of 1999,
     1.60:1.0;

          (iv) for the first calender quarter of 2000, 1.75:1.0; and

          (v) for  each of the  second,  third  and  fourth  quarters  of  2000,
     1.90:1.0.

e) Debt Service  Ratios.  Maintain a ratio of Adjusted EBITDA to the sum of Debt
Service plus the amount of Preferred Dividends less than:

          (i) including the Bridge  Facility,  for the first calendar quarter of
     1999, 1.00:1.0;

          (ii) excluding the Bridge Facility,  for the first calendar quarter of
     1999, 1.10:1.0;

          (iii) for each of the  second,  third  and  fourth  quarters  of 1999,
     1.10:1.0; and

          (iv) for each of the four quarters of 2000, 1.25:1.0.


<PAGE>

f) Implied  Debt  Service  Ratios.  Maintain a ratio of  Adjusted  Property  Net
Operating Income to Implied Debt Service less than:

          (i) for the first calendar quarter of 1999, 1.40:1.0;

          (ii)  for each of the  second,  third  and  fourth  quarters  of 1999,
     2.25:1.0; and

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

          (iv)  for each of the  second,  third  and  fourth  quarters  of 2000,
     2.25:1.0.

For the  purposes  of this  subsection  (f)  only,  the  Adjusted  Property  Net
Operating  Income  ("APNOI")  shall be  calculated  based only on the NOI of the
Mortgaged  Properties and shall be determined,  as follows.  With respect to any
Mortgaged Property which:

               (A) has been  open as an  extended  stay  facility  for less than
          three (3) full calendar months, the APNOI shall be deemed zero,

               (B) has been so open for at least three (3) full calendar  months
          but less than six (6) full calendar months, the trailing quarter APNOI
          will be annualized,

               (C) has been so open for at least  six (6) full  calendar  months
          but less than nine (9) full calendar months,  the trailing two quarter
          APNOI will be annualized,

               (D) has been so open for at least nine (9) full  calendar  months
          but less than twelve (12) full  calendar  months,  the trailing  three
          quarter APNOI will be annualized, and

               (E) has been so open  for at  least  twelve  (12)  full  calendar
          months, the trailing twelve month APNOI will be utilized.

g) Tangible  Net Worth.  Maintain,  at any time,  a Tangible Net Worth less than
eighty five  percent  (85%) of its  Tangible  Net Worth as of December 31, 1998,
less any reduction required by SOP 98-5, adjusted upwards (but not downwards) by
eighty five percent  (85%) of the net cash proceeds and other value derived form
the Borrower's issuance of equity securities after the Effective Date.

h) 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.

i)  Dividends  and  Distributions.  Make any  dividend  or  distribution  to the
shareholders  of  Borrower,  without the prior  written  consent of the Required
Lenders,  which consent may be withheld in the Lenders' sole discretion,  except
that payments may be made,  if no Event of Default has  occurred,  on account of
the  coupon  payable  on  up  to  $250,000,000  of  the  Convertible   Preferred
Securities.

j) Security Capital.  Permit Security Capital Group Incorporated to directly or,
through  a  wholly-owned  subsidiary,  indirectly  own less  than (a)  fifty one
percent  (51%)  of the  voting  stock in  Borrower  before  dilution  due to the
conversion  of the  mortgages in favor of Archstone  Communities  Trust shown on
Schedule 3 or (b) forty six percent (46%) after such dilution.
<PAGE>

k) Sales, Transfers.  Sell, transfer or enter into any agreement for the sale or
transfer of any of the Mortgaged Properties,  other than:

               (i) 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 or

               (ii) in connection  with the sale of any unimproved land which is
          a part (or all) of a Mortgaged  Property  which is not a Project under
          Development or a Stabilized Project,  without the unanimous consent of
          Lenders,  which consent shall not be unreasonably withheld. If Lenders
          do not reject  any such sale  within  fifteen  (15) days of receipt of
          written  notice  thereof  from  Borrower,  and such  notice is clearly
          marked  "URGENT -- THIS NOTICE MUST BE  RESPONDED  TO IN FIFTEEN  (15)
          DAYS," the sale shall be deemed approved.

l) 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.

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

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

               (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
<PAGE>

               (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.

o) 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 Effective Date and described in
Schedule 4 attached hereto, and (ii) any such transactions  between the Borrower
and any of its wholly-owned  Subsidiaries and between wholly-owned  Subsidiaries
of Borrower).

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

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

r) 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.

s)  Projects  under  Development.  Permit  the  Total  Costs of  Projects  under
Development, at any time, to exceed:
<PAGE>

     (i) during the first quarter of 1999, twenty percent (20%) of GAV -- Cost;

     (ii) during the second  quarter of 1999,  fifteen  percent  (15%) of GAV --
Cost; and

     (iii) thereafter, twelve and one half percent (12.5%) of GAV --Cost.

For the purposes of this section,  if a Project under Development is owned by an
Unconsolidated Affiliate of Borrower, then the Total Costs shall be deemed to be
the greater of:

     (iv)  the  product  of (A) the  greater  of  Borrower's  nominal  ownership
interest in such Unconsolidated  Affiliate or its ownership interest used in the
calculation  of GAV -- Cost and (B) the  amount of the  Construction  Budget for
such Project under Development and

     (v) the recourse  obligations of Borrower  relating to the  Indebtedness of
such Unconsolidated Affiliate.

t) Land and  Projects.  Permit  the sum of the  Total  Costs of  Projects  under
Development and the GAV -- Cost with respect to unimproved land, at any time, to
exceed:

     (i) during  the first  quarter  of 1999,  thirty  two and one half  percent
(32.5%) of GAV-- Cost;

     (ii) during the second  quarter of 1999,  twenty seven and one half percent
(27.5%) of GAV-- Cost; and

     (iii) thereafter, twenty percent (20.0%) of GAV -- Cost.

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

v)  Investments.  Owns or holds any direct or  indirect  interest in any Capital
Stock (other than in a Subsidiary of Borrower) or any mortgages or other debt or
security instruments, except as set forth in Schedule 5 hereto. Borrower and its
Subsidiaries  will not in the  aggregate  own or hold  any  direct  or  indirect
interest  in excess of (a)  twelve and one half  percent  (12.5%) of GAV -- Cost
with respect to unimproved  land or (b) twenty five percent (25%) of GAV -- Cost
with respect to,  collectively,  (i) any  interest in Persons in which  Borrower
owns less than 75% beneficial  interest therein and (ii) any interest in Persons
not managed by Borrower.

     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

<PAGE>

Arranger'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 Arranger's written request,  direct that the insurance proceeds
from the casualty be delivered over to the  Administrative  Agent, to be applied
by the Administrative Agent to repayment of or the Borrower's  obligations under
this Agreement and the other Loan Documents.

     Section  5.5  "Effect  of  Certain   Representations   or  Covenants  Being
Inaccurate  or  Breached."  In the  event  that any of the  representations  and
warranties contained in Sections 4.11, 4.13, 4.15, 4.16, 4.17, 4.21, 4.23, 4.24,
4.26,  4.27,  4.30,  4.31 and 4.32 of this Agreement (or any  representation  or
warranty contained in any other Loan Document which is substantially  similar to
any of the foregoing  representations and warranties) are not accurate when made
or deemed made, or in the event that any of the covenants  contained in Sections
5.1(c),  (d)(ii),  (h),  (i),  (j), (k), (m) and (o) and 5.3(r) (or any covenant
contained in any other Loan Document  which is  substantially  similar to any of
the foregoing  covenants) are breached,  then,  notwithstanding  anything to the
contrary,  such breach or inaccuracy shall not constitute or be deemed a Default
or  Event  of  Default,  and  Borrower  shall  not be  deemed  to have  made any
misrepresentation,  or breached any  warranty or covenant  unless and until (but
shall,  at Arranger'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 by the  Administrative  Agent
or the Arranger of the  circumstances  which,  but for this  Section 5.5,  would
constitute  such  misrepresentation,  or breach of warranty or covenant and such
circumstances are not remediated (i.e, the  circumstances  which would otherwise
constitute such  misrepresentation,  or breach of warranty or covenant no longer
exist)  within (1) in the case of  circumstances  which can be remediated by the
payment of a sum of money only,  10 days after such notice is given,  and (2) in
the case of all other circumstances, thirty (30) days after such notice is given
plus, if such  circumstances  cannot reasonably be remediated within thirty (30)
days after such notice is given and the Borrower  has during such 30-day  period
commenced to remediate such circumstances and thereafter  diligently pursues all
necessary efforts to effect such remediation,  such additional period of time as
may be required to effect such remediation;  provided,  however,  that if at any
time during any cure period described above regarding  circumstances the cost to
remediate  which are  quantifiable,  Borrower  shall not have provided  evidence
satisfactory to the Arranger and the Administrative  Agent that the Borrower has
available to it sufficient  funds (other than from  borrowings  pursuant to this
Agreement)  to  promptly  effect  any such  remediation,  then  the cure  period
provided for above regarding such circumstances shall immediately expire; and

               (ii) upon the expiration of the applicable cure period  described
in  Section  5.5(a)(i),  if such  circumstances  have not been  remediated,  the
aggregate principal amount of all outstanding  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 the
Arranger and the Administrative Agent in writing (Borrower hereby agreeing to so
certify such amount  promptly  upon the Arranger or the  Administrative  Agent's
request)  as  being  Borrower's  reasonable  estimate  (determined  in a  manner
reasonably  acceptable to the Arranger and the  Administrative  Agent, the basis
for  which  determination  shall  be set  forth  in  reasonable  detail  in such
<PAGE>

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) three  percent
(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 Lenders in
their sole, absolute and subjective discretion, (ii) all other conditions herein
to a property becoming a Mortgaged Property are satisfied and complied with, and
(iii) both before and after  giving  effect to such  proposed  substitution,  no
Default or Event of Default (other than as a result of such misrepresentation or
breach of warranty or covenant) shall exist.

     Section 5.6 "Appraisals and Environmental  Reports." Within forty (40) days
of the  Effective  Date,  the Arranger  shall  deliver to  Administrative  Agent
appraisals  of all of  the  Mortgaged  Properties.  Administrative  Agent  shall
forward copies of the  appraisals to the Lenders.  Within sixty (60) days of the
Effective  Date,  and  following  Lenders'  comments  on the  appraisals  (which
Administrative  Agent shall be sent and shall  thereupon  send to the Borrower),
the Arranger shall cause the appraisals to be finalized to the  satisfaction  of
Lenders. If the aggregate Stabilized Appraised Value of the Mortgaged Properties
is less than the  aggregate  Eligible  Direct  Costs  thereof,  and the  Maximum
Available Amount is therefor reduced, then Borrower,  within thirty (30) days of
the date of such appraisal, shall increase the Maximum Available Amount or shall
repay a portion of the Loan and reduce the principal  balance thereof to no more
than the Maximum Available Amount.

     Section  5.7  "New  Subsidiaries."  In  the  event  any  Person  becomes  a
Subsidiary  after  the  Effective  Date,  the  Borrower  shall  deliver  to  the
Administrative Agent within twenty (20) Business Days of such event, each of the
following items, in form and substance satisfactory to the Administrative Agent:


(a) an accession  agreement in the form annexed  hereto as Exhibit S executed by
such Subsidiary;
<PAGE>

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

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

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

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

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

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


                          ARTICLE VI. EVENTS OF DEFAULT

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

a) Payments.  The Borrower  shall fail to pay (i) any  principal of the 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.
<PAGE>

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

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

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

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


<PAGE>

g) Bankruptcy.  The Borrower shall commence a voluntary case  concerning  itself
under  Title  11 of the  United  States  Code  entitled  "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  ninety  (90)  days,  after  commencement  of the  case;  or a
custodian (as defined in the Bankruptcy  Code) is appointed for, or takes charge
of, all or any substantial part of the property of the Borrower; or the Borrower
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors,  dissolution,  insolvency, or liquidation or similar
law of any  jurisdiction  whether  now or  hereafter  in effect  relating to the
Borrower or there is commenced  against the Borrower any such  proceeding  which
remains  undismissed  for a period of  ninety  (90)  days;  or the  Borrower  is
adjudicated  insolvent  or  bankrupt;  or any  order of  relief  or other  order
approving any such case or proceeding  is entered;  or the Borrower  suffers any
appointment of any custodian or the like for it or any  substantial  part of its
property to continue  undischarged or unstayed for a period of ninety (90) days;
or the Borrower makes a general assignment for the benefit of creditors;  or the
Borrower shall fail to pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts  generally  as they become due; or the  Borrower  shall
call a meeting  of its  creditors  with a view to  arranging  a  composition  or
adjustment  of its  debts;  or the  Borrower  shall by any act or failure to act
indicate its consent to,  approval of, or  acquiescence in any of the foregoing;
or any action is taken by the Borrower  for the purpose of effecting  any of the
foregoing; or any of the foregoing shall occur with respect to any Subsidiary of
Borrower.

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

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

j) Urban Credit  Facility.  An Event of Default  shall have  occurred  under the
Amended and Restated  Credit  Agreement of even date  herewith  among  Borrower,
Commerzbank  AG, Los Angeles Branch and other lenders as set forth therein,  and
Arranger,  as agent,  governing a certain  credit  facility  secured by mortgage
liens on properties in central business districts.

(k)   Sale-Leaseback   Facility.   A  default  shall  have  occurred  under  the
Sale-Leaseback Facility.

     Section 6.2 "Global  Remedies." Upon the occurrence and  continuation of an
Event of Default, and at any time thereafter, if any Event of Default shall then
be continuing, the Required Lenders may, by written notice to the Borrower, take
any or all of the  following  actions,  without  prejudice  to the rights of the
<PAGE>

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  Arranger  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
Administrative Agent, the Arranger nor the Lenders shall be under any obligation
to marshall any assets in favor of the Borrower or any other party or against or
in  payment  of any or all of the  obligations  of such  parties.  To the extent
permitted by law the Borrower waives and renounces the benefit of all valuation,
appraisement,  homestead,  exemption,  stay,  redemption,  and moratorium rights
under  or by  virtue  of the  constitution  and laws of the  state in which  the
Mortgaged Properties are located and of any other state or of the United States,
now existing or hereafter enacted. To the extent the Administrative Agent or any
Lender  receives any payment by or on behalf of the  Borrower,  which payment or
any part  thereof is  subsequently  invalidated,  declared to be  fraudulent  or
preferential,  set aside or required to be repaid to the Borrower or its estate,
trustee, receiver, custodian, or any other party under any bankruptcy law, state
or federal  law,  common law,  or  equitable  cause,  then to the extent of such
payment  or  repayment,  the  obligation  or part  thereof  which has been paid,
reduced,  or satisfied by the amount so repaid shall be reinstated by the amount
so repaid and shall be included  within the  liabilities of the Borrower to such
party as of the date such initial payment,  reduction, or satisfaction occurred,
together  with interest at the Default  Rate.  The Borrower  agrees that (i) the
Arranger  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  Arranger,  in its  reasonable
discretion,  shall  determine from time to time, (ii) the Collateral may be sold
at such  proceeding or  proceedings in one or more sales and in such portions or
combinations  as the  Arranger,  in its  sole  and  absolute  discretion,  shall
determine,  (iii) the Arranger 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 Arranger and the Lenders under
this  Agreement  and the other  Loan  Documents  shall  remain in full force and
effect until the Arranger 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 Arranger 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.
<PAGE>

     Section  6.4  "Application  of  Proceeds."  All  proceeds  received  by the
Arranger 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  Arranger,  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 Arranger  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
Arranger  shall have no further  liability  with respect to such  proceeds.  All
costs and  expenses  of the  Arranger  in  connection  with such  action  may be
deducted  or charged by the  Arranger  against  such excess  proceeds  and shall
otherwise be reimbursed by the Borrower upon demand. The Arranger shall have the
right,  but not the obligation,  to request and rely on the  instructions of the
Borrower in connection  with the  disposition  of any such excess  proceeds and,
upon compliance  with such  instructions,  shall have no further  liability with
respect to such proceeds.

     Section 6.5 "Attorneys-in-Fact." The Borrower hereby makes, constitutes and
appoints the Arranger, 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 Arranger,  and
to cause such mail to be delivered to such designated address where the Arranger
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  Arranger  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 Arranger shall have the further right and power to endorse the
name of the Borrower on any documents otherwise relating to such Collateral, and
<PAGE>

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

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

     Section 7.3 "Exculpatory  Provisions." The Arranger and the  Administrative
Agent  shall not be (a) liable for any  action  lawfully  taken or omitted to be
taken by it, or any Person described in Section 7.2, under or in connection with
any Loan Document (except for those actions arising from the gross negligence or
willful misconduct of the Arranger or the Administrative  Agent, as the case may
be),  or (b)  responsible  in any  manner  to any of the  Lenders  for  (i)  any
recitals,  statements,  representations  or  warranties  made  by  the  Borrower

<PAGE>

contained in any Loan Document,  or by the Borrower in any certificate,  report,
statement or other document referred to or provided for in, or received under or
in connection with any Loan Document or (ii) the value, validity, effectiveness,
genuineness,  enforceability  or  sufficiency  of any Loan  Document or any such
certificate,  report,  statement or other document,  or (iii) any failure of the
Borrower,  or any  Lender to  perform  or  observe  its  respective  obligations
hereunder or  thereunder.  Except as expressly  required to do so under the Loan
Documents,  the  Arranger  and the  Administrative  Agent shall not be under any
obligation  to any Lender to  ascertain  or to inquire as to the  observance  or
performance  of any of the  agreements  contained  in, or conditions of any Loan
Document, or to inspect the properties, or the books or records of the Borrower.
This Section 7.3 is intended to govern solely the  relationship  between each of
the Arranger and the Administrative  Agent, on the one hand, and the Lenders, on
the other.

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

     Section 7.5 "Notices."  Neither the Arranger nor the  Administrative  Agent
shall be deemed to have  knowledge or notice of the occurrence of any Default or
Event of Default unless (i) such party has received  notice from a Lender or the
Borrower  referring  to this  Agreement,  describing  such  Default  or Event of
Default  and  stating  that such  notice is a "notice of  default"  or (ii) such
party, in its capacity as the Arranger of the  Administrative  Agent, has actual
knowledge  of  such  Default  or  Event  of  Default.  In  the  event  that  the
Administrative  Agent or the  Arranger  receives  such a notice or obtains  such
actual  knowledge,  it shall  promptly give notice  thereof to the Lenders.  The
Arranger 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
Arranger shall have received such directions, the Arranger 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 Arranger  shall deem advisable and in
the best interests of the Lenders. The Administrative Agent shall take no action
with respect to a Default or Event of Default except as directed by the Arranger
in writing and shall have no liability to the  Borrower or its  Subsidiaries  or
any Lender for acting on and carrying out any such direction.

b) Each  Lender  agrees  that it shall  promptly  notify  the  Arranger  and the
Administrative  Agent in writing  after it first has knowledge of any Default or
Event of Default  or of any matter  which in such  Lender's  judgment  adversely
affects any Lender's respective  interests in the Commitment,  which notice will
describe  the Default or Event of Default or matter in  reasonable  detail.  The
Administrative  Agent  shall  give a copy of any  such  notice  received  by the
Administrative  Agent to the other Lenders.  c) The Arranger shall promptly give
copies of the financial  reports it receives pursuant to Sections 5.2(a) and (b)
hereof to the other Lenders. The Administrative Agent shall promptly give copies
of the financial  reports it receives  pursuant to Sections 5.2(c) to (e) hereof
to the other Lenders.
<PAGE>

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

     Section 7.7  "Indemnification."  The Lenders agree to indemnify each of the
Arranger and the  Administrative  Agent (in their  capacities as such) and their
officers,  directors,  employees,  representatives and agents (to the extent not
reimbursed by the Borrower and without  limiting the obligation,  if any, of the
Borrower  to do so),  ratably in  accordance  with their  Percentages,  from and
against  any and  all  liabilities,  obligations,  losses,  damages,  penalties,
actions,  judgments,  suits,  costs,  expenses or  disbursements  of any kind or
nature whatsoever (including,  without limitation, the fees and disbursements of
counsel for the Arranger,  the Administrative Agent or such Person in connection
with any  investigative,  administrative  or judicial  proceeding  commenced  or
<PAGE>

threatened, whether or not the Arranger, the Administrative Agent or such Person
shall  be  designated  a party  thereto)  that may at any  time be  imposed  on,
incurred by or asserted against the Arranger,  the Administrative  Agent or such
Person as a result of, or arising  out of, or in any way related to or by reason
of, any of the transactions contemplated by the Loan Documents or the execution,
delivery  or   performance   of  any  Loan  Document  (but  excluding  any  such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or disbursements  resulting solely from the gross negligence or
willful misconduct of the Arranger,  the Administrative  Agent or such Person as
determined  by a  court  of  competent  jurisdiction).  The  agreements  in this
subsection  shall  survive  the  payment of the  Promissory  Notes and all other
amounts payable hereunder.

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

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

     Section 7.10  "Appointment  of a Substitute  Administrative  Agent."  Wells
Fargo Bank National Association shall be the initial  Administrative Agent under
this  Agreement  and the Loan  Documents  until  the Loan  Documents  have  been
terminated  and the  Lenders  have  been  paid in full.  In the  event  that the
Administrative  Agent  determines  that it is not in the  best  interest  of the
Administrative  Agent to continue to act as the  Administrative  Agent, then the
Administrative Agent may, at its option and upon thirty (30) days' prior written
notice to the  Borrower and the  Lenders,  request a  substitute  Administrative
Agent be selected  in  accordance  with the terms of this  Section to act as the
<PAGE>

Administrative  Agent with  respect to such  matters.  Within  fifteen (15) days
after  receipt of such  notice,  the  Required  Lenders  shall select a proposed
substitute  agent and shall notify the Borrower of the identity of such proposed
substitute  agent. In addition,  the Required  Lenders,  on not less than thirty
(30) days' notice to the Administrative Agent, may elect to appoint a substitute
Administrative  Agent in the  event  that the  Administrative  Agent  has  acted
hereunder with willful  misconduct,  gross  negligence or exhibited a continuing
pattern of  negligence  with  respect to its duties and  obligations  hereunder.
Provided  that no  Event of  Default  shall  have  occurred  and be  continuing,
Borrower shall have the right to approve any such proposed substitute agent. The
succeeding substitute Administrative Agent shall have all the rights, powers and
duties of the  Administrative  Agent and the term  "Administrative  Agent" shall
mean such substitute  Administrative Agent,  effective upon its appointment.  In
the event that the substitute  Administrative  Agent wishes to resign, it may do
so upon thirty (30) days' prior notice to the Borrower, the Administrative Agent
and the Lenders, and a new substitute Administrative Agent shall be appointed in
accordance  with this  Section.  After any  retiring  substitute  Administrative
Agent's resignation hereunder as substitute Administrative Agent, the provisions
of this  Section  7.10 and Section 8.4 hereof shall inure to the benefit of such
retired substitute Administrative Agent as to any actions taken or omitted to be
taken by it while it was substitute Administrative Agent under this Agreement.

     Section 7.11 "Loans." Each Lender shall make available to the Borrower such
Lender's  portion  of the  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
Administrative  Agent  may (but  shall not be  obligated  to),  and each  Lender
authorizes  the  Administrative  Agent to,  advance for such  Lender's  account,
pursuant  to the terms  hereof,  the  amount of the  Advance  to be made by such
Lender  and  each  Lender  agrees  to  reimburse  the  Administrative  Agent  in
immediately  available  funds for any amount so advanced  on its behalf.  If any
such reimbursement is not made in immediately available funds on the same day on
which the  Administrative  Agent shall have made such amount available on behalf
of any Lender, such Lender shall also pay interest thereon to the Administrative
Agent at the Federal Funds Rate.

     Section 7.12  "Priority of Loans." Each Lender's  portion of the 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 and 7.24 hereof.

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

     Section 7.14  "Decisions of the Lenders."  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 Arranger 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 Arranger (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
<PAGE>

long as such consent,  exercise or waiver would not, in the Arranger's  judgment
reasonably  exercised,  represent a departure from the standards followed by the
Arranger in the  administration  of loans held by the Arranger  entirely for its
own  account.  The  Arranger  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  Arranger  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  Arranger's
possession or under its control. The requested Decision shall be deemed approved
by the  Lenders if and when the  Arranger  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  Arranger  a
written  objection  thereto  within ten (10) Business Days after hand  delivery,
mailing  or  delivery  to an  express  courier  service  of the  request  by the
Arranger,  the Arranger shall make a second written  request for a Decision from
that   Lender.   If  the  Lender  does  not  deliver  to  the  Arranger  or  the
Administrative  Agent a written  objection  within five (5) Business  Days after
hand  delivery,  mailing or  delivery  to an express  courier  service of such a
second  request,  such Lender  shall be deemed to have  approved  the  requested
Decision.  If the Arranger is unable to contact the usual  representatives  of a
Lender for any reason,  the  Arranger  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 Arranger  reasonably deems necessary,  any
such  Decision may also be requested  telephonically  by the Arranger  from each
Lender  with  such  telephonic  request  to  be  confirmed  in  writing  by  the
Administrative  Agent. Any Decision as to which the Arranger has made telephonic
requests  for  approval  shall be  deemed  approved  by the  Lenders  after  the
Administrative   Agent  has  received  the  written  approval  of  the  required
percentage  of the Lenders as  specified in Sections  7.15 and 7.16 hereof.  The
Borrower shall be promptly  notified of the Decision,  if such Decision was made
in response to a request by the Borrower.

     Section 7.15 "Approvals by the Lenders."

(a) No amendment,  supplement,  modification or waiver shall be effective unless
consented to in writing by the Required  Lenders;  provided,  however,  that any
amendment,  supplement,  modification or waiver which adds, deletes,  changes or
waives any provisions of the Loan Documents the effect of which is to (i) extend
either the  Maturity  Date or any  installment  or  required  prepayment  of any
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  or extend the due date of any such fee;  (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) forgive
any  Indebtedness  of Borrower or any Subsidiary of Borrower;  (viii) change any
allocation  of payments  among the  Lenders,  (ix) change any  provision of this
Section 7.15 or Section 7.16 or the definition of Required  Lenders;  (x) modify
any  financial  covenants  or waive any  Default or Event of Default  (except as
provided in Section 7.16), (xi) release any guaranty, (xii) waive or release any
lien on any of the Mortgaged Properties (except as provided in Section 8.11)
<PAGE>

or (xiii) commence any judicial or nonjudicial foreclosure proceeding (except as
provided in Section 7.16), shall be ineffective in each case without the written
consent of all the Lenders. Furthermore, no amendment, supplement,  modification
or waive shall amend, modify or waive any provision of any Loan Document, if the
effect  thereof  is to  affect  the  rights or  duties  of the  Arranger  or the
Administrative  Agent,  without  the  written  consent  of the  Arranger  or the
Administrative  Agent,  as the case  may be.  Any  such  amendment,  supplement,
modification  or waiver shall apply to each of the Lenders  equally and shall be
binding upon the Borrower,  the Lenders,  Arranger, the Administrative Agent and
all future  holders of the  Promissory  Notes.  In the case of any  waiver,  the
Borrower,  the  Lenders,  the  Arranger  and the  Administrative  Agent shall be
restored to their former position and rights hereunder and under the outstanding
Promissory  Notes, and any Default or Event of Default waived shall be deemed to
be cured and not  continuing,  but no such waiver shall extend to any subsequent
or other Default or Event of Default, or impair any right consequent thereon.

     Section 7.16  "Approvals  by the  Required  Lenders."  Upon the  Arranger's
receipt  of a notice of default  (as  defined in  Section  7.5(a)  hereof)  with
respect to an Event of Default,  the Arranger  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 Arranger
shall  pursue any such  course of action  approved  in  writing by the  Required
Lenders in respect of any such Event of Default, including,  without limitation,
acceleration  of the  Advances.  In the event that the Required  Lenders  cannot
decide  which  remedies,  if any,  are to be pursued,  the Arranger may commence
proceedings  on behalf of the Lenders;  provided,  however,  that if at any time
thereafter  the Required  Lenders  shall  direct that a different or  additional
remedial  action shall be taken,  such different or additional  remedial  action
shall be taken in lieu of or in addition to such proceedings.

b) The Borrower  hereby  consents and agrees to the  provisions of Sections 7.14
through 7.16 and any modifications  thereof entered into by the Arranger 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 Arranger is
hereby  empowered  to act on  behalf  of the  Lenders  in  accordance  with  the
provisions  hereof and the  authority of the Arranger with respect to any action
taken by the Arranger  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").
Notwithstanding  any  such  sale by a Lender  of  participating  interests  to a
Participant,  such  Lender's  rights  and  obligations  hereunder  shall  remain
unchanged,  such Lender  shall remain  solely  responsible  for the  performance
thereof, such Lender shall remain the holder of any such Promissory Note for all
<PAGE>

purposes  hereunder (except as expressly  provided below),  and the Arranger and
the  Administrative  Agent shall  continue to deal solely and directly with such
Lender in connection with such Lender's rights and  obligations  hereunder.  The
Borrower also agrees that each Participant  shall be entitled to the benefits of
Sections  2.11,  2.13 and 2.15  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 other Eligible  Assignee  (each a "Purchasing  Lender") all or any
part of its Credit Exposure in amounts not less than $10,000,000.  The Borrower,
the Arranger  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 Arranger and the  Administrative  Agent and,
provided  no Default or Event of Default has  occurred,  the  Borrower  shall be
required prior to an assignment becoming  effective,  which consents will not be
unreasonably  withheld,  delayed or conditioned;  provided that the Arranger and
the  Administrative  Agent  shall be  entitled  to  continue  to deal solely and
directly with the assignor  Lender in connection  with the interests so assigned
to the  Purchasing  Lender unless and until such  Purchasing  Lender  executes a
supplement to this Agreement,  substantially  in the form of Exhibit T 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,  the  Arranger  and the
Administrative Agent, (iii) payment by such Purchasing Lender to such transferor
Lender of an amount equal to the purchase price agreed  between such  transferor
Lender and such Purchasing Lender, and (iv) payment to the Administrative  Agent
of an  assignment  fee of $2500 for each  assignment by any Lender of all or any
portion of its Credit  Exposure,  such transferor  Lender shall be released from
its  obligations  hereunder to the extent of such assignment and such Purchasing
Lender shall for all purposes be a Lender party to this Agreement and shall have
all the rights and  obligations  of a Lender  under this  Agreement  to the same
extent as if it were an original party hereto,  and no further consent or action
by the Borrower, the Lenders or the Administrative Agent shall be required. Such
Form of  Assignment  and  Assumption  Agreement  shall be deemed  to amend  this
Agreement  to the  extent,  and only to the  extent,  necessary  to reflect  the
addition of such Purchasing Lender as a Lender.  Promptly after the consummation
of any transfer to a Purchasing Lender pursuant hereto,  the transferor  Lender,
the Administrative Agent and the Borrower shall make appropriate arrangements so
that a replacement Promissory Note is issued to such transferor Lender and a new
Promissory Note is issued to such Purchasing  Lender,  in each case in principal
amounts  reflecting  such  transfer.  The  Purchasing  Lender  shall  furnish to
Borrower  and the  Administrative  Agent,  at least 10 days prior to the date on
which  the  first  payment  to such  Purchasing  Lender  is due,  the  documents
described in Section 2.17(b) hereof.

c)  Commerzbank  AG,  New  York  Branch,  agrees  that it will not  assign  to a
Purchasing Lender any part of its Credit Exposure such that, after giving effect
to such assignment,  Commerzbank AG, New York Branch's  Percentage shall be less
than  twenty  five  percent  (25%),  unless  its  failure  to do so shall (or in
<PAGE>

Commerzbank AG, New York Branch's reasonable judgment is likely to) constitute a
violation of any  Requirement of Law.  Notwithstanding  the  foregoing,  nothing
herein shall restrict or limit  Commerzbank AG, New York Branch,  from selling a
participating interest in any portion, or all, of its Credit Exposure.

     Section  7.19  "Withholding."  Notwithstanding  anything  to  the  contrary
herein,  no  Participant  or other  assignee  of all or any  part of the  Credit
Exposure of any Lender  (each,  a "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  Arranger  and the  Administrative  Agent  acting as the
contractual  representatives on behalf of the Lenders with regard to all aspects
of the  administration,  enforcement  and  collection of the Advances and to all
matters pertaining to the Loan Documents as provided for herein.

     Section 7.23 "Sharing of Payments."  Each of the Lenders  agrees that if it
should  receive  any  amount  under  this  Agreement  or any of the  other  Loan
Documents  (whether by voluntary payment,  by realization upon security,  by the
exercise of the right of banker's lien, by counterclaim or cross action,  by the
enforcement  of any  right  under the Loan  Documents,  or  otherwise)  which is
applicable  to the  payment of any  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
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  7.24  "Limitation  of  Liability."  No  claim  may be  made by the
Borrower or any other Person against the Arranger,  the Administrative  Agent or
any Lender or any of their affiliates, directors, officers, employees, attorneys
or agent of any of such  Persons  for any  special,  indirect  or  consequential
<PAGE>

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 5 annexed hereto or such other
address or telecopier  number as such party may  hereafter  specify by notice to
the Arranger,  the Administrative Agent and the Borrower. No notices,  requests,
and other  communications  given to any Person  other than the  Arranger  or the
Administrative  Agent (including,  without  limitation,  any Affiliate  thereof)
shall be deemed to have been given to the Arranger or the Administrative  Agent,
as the case may be. 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
Arranger,  the  Administrative  Agent or the Lenders  shall  operate as a waiver
thereof,  nor  shall  any  single  or  partial  exercise  of any right or remedy
hereunder  or under any  other  Loan  Document  preclude  any  other or  further
exercise  thereof or the  exercise of any other right or remedy  hereunder.  The
rights and remedies  herein and in the other Loan Documents  expressly  provided
are  cumulative  and not  exclusive  of any rights or remedies  that the Lenders
would  otherwise  have.  No notice to or demand  on the  Borrower  not  required
hereunder  or under the other  Loan  Documents  in any case  shall  entitle  the
Borrower  to any  other  or  further  notice  or  demand  in  similar  or  other
circumstances  or  constitute a waiver of the rights of the Lenders to any other
or further action in any circumstances without notice or demand.
<PAGE>

     Section 8.4 "Payment of Expenses,  Etc." The Borrower shall: whether or not
the  transactions  hereby  contemplated  are  consummated,  pay  all  reasonable
out-of-pocket costs and expenses of the Arranger,  the Administrative  Agent and
the Lenders in the  administration  (both before and after the execution  hereof
and including advice of counsel as to the rights and duties of the Arranger, the
Administrative Agent or the Lenders) of, and in connection with the preparation,
execution,  and delivery of, preservation of rights under,  enforcement of, and,
after an Event of Default, refinancing, renegotiation, or restructuring of, this
Agreement  and the  other  Loan  Documents  and the  documents  and  instruments
referred  to  therein;  any  amendment,  waiver,  or  consent  relating  thereto
(including, without limitation, the reasonable fees and disbursements of counsel
for the Arranger, the Administrative Agent and the Lenders);

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

c) indemnify the Arranger,  the Administrative Agent and the Lenders and each of
their officers, directors, employees,  Affiliates,  representatives,  and agents
from,  and  hold  each of them  harmless  against,  any and all  costs,  losses,
liabilities,  claims,  damages and expenses  incurred by any of them (whether or
not any of them is  designated a party  thereto)  arising out of or by reason of
any litigation, or other proceeding related to any actual or proposed use by the
Borrower of the proceeds of 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."  Subject to the Arranger's  written consent,
in  addition to and not in  limitation  of all rights of offset that the Lenders
may have under applicable law, the Lenders shall, upon the occurrence and during
the continuance of any Event of Default and whether or not the Lenders have made
any  demand  or the  Borrower's  obligations  are  matured,  have  the  right to
appropriate and apply to the payment of the Borrower's obligations hereunder and
under the other Loan  Documents,  all  deposits  (general  or  special,  time or
demand,  provisional  or final) of the Borrower then or thereafter  held by, and
other indebtedness or property then or thereafter owing by, the Lenders.

     Section 8.6 "Benefit of Agreement."  This  Agreement  shall be binding upon
and inure to the benefit of and be enforceable by the respective  successors and
assigns of the parties hereto, provided

<PAGE>


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." 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.

     . Section 8.10 Entire Agreement

                  (a)      The provisions:

                    (i) the letter  agreements among the Borrower,  the Arranger
               and  Administrative  Agent dated as of March 18, 1999,  March 15,
               1999,  February 4, 1999, January 25, 1999, and September 3, 1998,
               and



<PAGE>


                    (ii) the letter  agreement dated as of August 25, 1997 among
               the Borrower, Commerzbank AG, Los Angeles Branch and Arranger,

each of which letter agreement is attached hereto as Exhibit Q shall survive the
execution of this Agreement and shall be deemed incorporated  herein. The letter
agreement  referred to in clause (i) above  provides,  inter alia, that Borrower
may effect a single  issuance of  convertible  preferred  securities  with gross
proceeds not to exceed $250,000,000,  provided (x) the first $200,000,000 or the
lesser  amount  raised of net proceeds of such  issuance is used solely to repay
the sums due under the Bridge Facility, and (y) the Bridge Facility is repaid on
or before April 23, 1999,  even if such net  proceeds are  insufficient  for the
purpose  thereof.  The letter  agreement  further provides that Security Capital
Group  may  fund its  obligations  under a  certain  Subscription  Agreement  by
purchasing convertible  subordinated  debentures issued by the Borrower and that
such debentures may be refinanced with the proceeds of an offering of Borrower's
common, but not preferred, stock.

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

     Section 8.11 "Release of Certain Mortgaged Property." Arranger agrees that,
upon  Borrower's   request  (a  "Release  Request")  to  the  Arranger  and  the
Administrative  Agent, Arranger will deliver to Borrower a form of release, duly
executed  and  acknowledged  by the  Arranger,  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 Administrative  Agent to cause a Release in recordable form to
be  prepared  and shall be given at least ten (10)  Business  Days  prior to the
requested date of such Release;

     (ii) each Release Request shall constitute  Borrower's  representation  and
warranty  that,  and  shall be  accompanied  by  evidence  demonstrating  to the
Administrative  Agent's  satisfaction  that (a) no portion of the extended  stay
facility and 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 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 the Arranger and the Administrative  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;
<PAGE>

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

     (vi) (1) The Administrative  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  Arranger  and  the  Administrative  Agent  in
connection with such Release, including, but not limited to, all title insurance
premiums  arising  as a result of  endorsements  required  by  Arranger  and the
Administrative  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 Administrative Agent, promptly upon demand (together with
a reasonably detailed invoice(s) in respect thereof),  all reasonable legal fees
and expenses arising in connection with the preparation, execution, delivery and
review of each Release, the documents and instruments described in this Section,
and all other  documents  relating  to,  and  rendering  at the  request  of the
Administrative Agent all advice respecting, each Release.

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

     Section 8.12  "Subordination of Certain  Mortgaged  Property." The Arranger
and  the   Administrative   Agent  agree  that,  upon   Borrower's   request  (a
"Subordination  Request"),  it will deliver to Borrower a form of subordination,
duly executed and  acknowledged by the Arranger,  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 Administrative  Agent to cause a Subordination in
recordable  form to be  prepared  and shall be given at least ten (10)  Business
Days prior to the requested date of such Subordination;

     (ii) The  Administrative  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 the Administrative 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 the Administrative 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;
<PAGE>

     (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 Effective 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;

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

     (vi) (1) The Administrative  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 the  Arranger and the  Administrative  Agent in
connection  with such  Subordination,  including,  but not limited to, all title
insurance  premiums  arising  as  a  result  of  endorsements  required  by  the
Administrative 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 Administrative  Agent, promptly upon demand
(together  with a  reasonably  detailed  invoice(s)  in  respect  thereof),  all
reasonable  legal fees and expenses  arising in connection with the preparation,
execution,  delivery  and  review  of  each  Subordination,  the  documents  and
instruments  described in this Section, and all other documents relating to, and
rendering at the request of the Administrative Agent all advice respecting, each
Subordination.

     Section 8.13  "Confidentiality." The Administrative Agent, the Arranger and
the other  Lenders  agree  that,  unless  otherwise  agreed to in writing by us,
except  as  required  by law or  regulation  or by  legal  process,  to keep all
Non-public  Information delivered by the Borrower to the Administrative Agent or
the  Lenders   confidential  and  not  to  disclose  or  reveal  any  Non-public
Information  to any  person,  other  than  those  employed  or  retained  by the
Administrative Agent or the Lenders (including,  without limitation,  employees,
counsel,  accountants,  engineers,  advisers,  experts  and  consultants  to the
Administrative  Agent  or the  Lenders).  Except  as  provided  for in the  next
sentence,  in the event that the Administrative Agent or any Lender is requested
pursuant to, or required by, applicable law or regulation or by legal process to
disclose any Non-public  Information,  the  Administrative  Agent or such Lender
agrees that it shall provide the Borrower with prompt notice of such  request(s)
and,  unless  required by law or  regulation to disclose  sooner,  shall wait at
least forty eight (48) hours  before  disclosing  such  Non-public  information.
Notwithstanding  the foregoing or anything else to the contrary herein contained
or contained in any of the other Loan Documents, the provisions of this

<PAGE>


     Section  8.13  shall  not apply to (a) the  disclosure  or  sharing  of any
Non-public  information among the Administrative  Agent and the Lenders, (b) the
disclosure  by  the  Administrative  Agent  or  any  Lender  of  any  Non-public
information to federal,  state and local bank  regulators or other  governmental
agencies to the extent  required or  requested to do so (such  disclosure  shall
not, however, in and of itself be deemed to render such information public), and
(c)  the  Administrative  Agent  or any  Lender  may,  in  connection  with  any
assignment or participation or proposed assignment or participation, disclose to
the  assignee  or  participant  or  proposed  assignee  or  participant  under a
requirement  of  confidentiality,  any  Non-public  information  relating to the
Borrower,  the  Collateral,  the  Borrower's  assets,  properties  or  financial
condition or information  otherwise furnished to the Administrative Agent or the
Lenders by the Borrower.

         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 Arranger


                                                 By
                                                     Name:
                                                     Title:


                                                 And by
                                                          Name:
                                                          Title:

                                             COMMERZBANK AG, Los Angeles Branch,
                                             as a lender


                                                 By
                                                     Name:
                                                     Title:


                                                 And by
                                                          Name:
                                                          Title:

                                         WELLS FARGO BANK, NATIONAL ASSOCIATION,
                                        as a lender and the Administrative Agent


                                                 By
                                                     Name:
                                                     Title: