Document:

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                                                                   Exhibit 10.28
                                 LOAN AGREEMENT
                                       FOR
                            REVOLVING CREDIT FACILITY

         THIS AGREEMENT is made as of this 20th day of October, 1999, by and
between Supertel Hospitality, Inc., a Delaware corporation ("Borrower"), and
U.S. Bank National Association, a national banking association ("Bank"). In
consideration of the promises and mutual agreements hereinafter contained, and
other good and valuable consideration, the Borrower and the Bank agree as
follows:

                            SECTION 1. REVOLVING LOAN

         1.1 REVOLVING LOAN. Upon the execution of this Agreement, the Bank
agrees to loan to the Borrower, and Borrower may borrow, repay and reborrow, up
to the maximum principal sum outstanding at any time of the lesser of (i) Seven
Million and No/100 Dollars ($7,000,000) from the date of this Agreement to
October 15, 2000, and Five Million and No/100 Dollars ($5,000,000) from October
15, 2000 to October 15, 2001, or (ii) fifty percent (50%) of the then current
Borrowing Base as determined on the basis of the information contained in the
most recent Borrowing Base Certificate (herein the "Revolving Loan Commitment"
or "Revolving Loan").

         1.2 REVOLVING LOAN NOTE. The loan to the Borrower under this Section 1
shall be evidenced by a certain Revolving Loan Note (herein, together with any
and all extensions, renewals, modifications and substitutions thereof or
exchanges therefor, referred to as the "Revolving Loan Note") dated the date of
issuance, payable to the order of the Bank, in the maximum principal amount of
the Revolving Loan Commitment, and with the amounts borrowed and repaid and the
balance indorsed or recorded on the grid attached to or on the reverse side of
the Revolving Loan Note. As long as the Bank is the holder of the Revolving Loan
Note it may, at its option, in lieu of indorsing the grid, record the amounts
borrowed and repaid and enter the balance due on the Revolving Loan Note in its
books and records, which books and records may treat each borrowing as a
separate loan; such indorsement or recording on the grid or by the Bank in its
books shall be presumptive evidence of the principal balance due on the
Revolving Loan Note. A copy of the Revolving Loan Note is attached hereto as
Exhibit "A" and is incorporated herein by this reference.

         1.3 INTEREST. The unpaid principal amount of the Revolving Loan Note
outstanding from time to time shall bear interest at the following rates per
year:

                  (a) Variable Rate. Borrower may elect to have interest on the
         Revolving Loan at the "Reference Rate" or at the "Adjusted LIBOR Rate"
         by giving the Bank telephonic, telecopier or telex notice (which notice
         shall be promptly confirmed in writing) no later than two (2) Banking
         Days prior to the date of any requested change in the interest rate.
         Interest at the Reference Rate shall be adjusted at the time of any
         change in the Reference Rate. Interest at the Adjusted LIBOR Rate shall
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         be adjusted monthly based on the LIBOR Rate, as determined by the Bank
         on the last business day of the preceding month.

                  "Reference Rate" shall mean the rate of interest per annum
         which has been publicly announced by U.S. Bank National Association in
         Minneapolis, Minnesota (USBNA) as its "Reference Rate," which is not
         necessarily the lowest rate charged by the Bank or USBNA on loans and
         is set by the Bank in its sole discretion.

                  "LIBOR Rate" shall mean the London Interbank Offered Rate per
         annum for a 30-day period as obtained by the Bank from the Reuters
         Service. In the event the Reuters Service shall discontinue quoting
         LIBOR rates, the Bank shall designate an alternate method to determine
         the LIBOR rates. The Bank's designation shall be binding on the
         undersigned.

                  "Adjusted LIBOR Rate" shall mean the LIBOR Rate obtained by
         the Bank from the Reuters Service as of the close of business on the
         last banking day of each month; plus any reserves the Bank determines
         it is required to maintain with respect to LIBOR or Eurodollar currency
         loans; and plus 1 3/4%. Each determination of the Adjusted LIBOR Rate
         made by the Bank in accordance with this paragraph shall be conclusive
         and binding on the Borrower.

                  "Banking Day" shall mean a day on which banks are open for
         business in London, England and Lincoln, Nebraska, and dealing in
         United States dollar deposits in London, England.

                  "Revolving Loan-to-Value Ratio" shall be determined as
         provided in Section 4.4(c).

                  (b) LIBOR Rate Lock-In. Borrower may elect to have the
         Adjusted LIBOR Rate fixed for periods of 60, 90 or 180 days (the "LIBOR
         Interest Period") by giving the Bank telephonic, telecopier or telex
         notice (which notice shall be promptly confirmed in writing) no later
         than three (3) Banking Days prior to the effective date of any such
         request; provided that (i) Borrower may only elect to have the Adjusted
         LIBOR Rate fixed with respect to advances in increments of $1,000,000,
         (ii) such advances shall not be repaid by the Borrower until the
         expiration of the applicable LIBOR Interest Period elected by the
         Borrower, (iii) the Borrower shall pay an additional 0.10% interest on
         90 or 180-day periods, and (iv) the LIBOR Interest Period shall not
         extend beyond the Revolving Loan Maturity Date.

                  (c) Funding Indemnity. In the event the Bank shall incur any
         loss, cost, expense or premium (including, without limitation, any loss
         of profit and any loss, cost, expense or premium incurred by reason of
         the liquidation or re-employment of deposits or other funds acquired by
         the Bank to fund or maintain any advance to Borrower under Section
         1.3(b) or the relending or reinvesting of such deposits or amounts paid
         or prepaid to the Bank as a result of:

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                  (i) any payment or prepayment of an advance on a date other
         than the last day of the applicable LIBOR Interest Period; or

                  (ii) any failure by the Borrower to borrow any amount on the
         date specified in the notice given pursuant to Section 1.3(b) hereof;
         or

                  (iii) the occurrence of any Event of Default;

         then, upon the demand of the Bank, the Borrower shall pay the Bank such
         amount as will reimburse the Bank for any such loss, cost or expense.

                  If the Bank makes a claim for compensation under this Section
         1.3(c), it shall provide to the Borrower a certificate setting forth
         the amount of such loss, cost or expense in reasonable detail and such
         certificate shall be conclusive and binding on the Borrower as to the
         amount thereof except in the case of manifest error.

                  (d) Default Rate. After maturity, whether by lapse of time,
         default, acceleration or otherwise, at a rate equal to the Reference
         Rate plus three percent (3%) per annum (the "Default Rate").

                  (e) Late Fees. The Borrower shall pay the Bank a late fee of
         5% of the amount of any payment received 15 days or more after its due
         date.

         1.4 INTEREST AND PRINCIPAL DATES. The principal shall be paid at
maturity on October 15, 2001 (the "Revolving Loan Maturity Date").

         Accrued interest on the outstanding and unpaid principal shall be paid
monthly with the first payment due on October 31, 1999 and continuing on the
last day of each month thereafter to October 15, 2001, upon which date the total
unpaid principal balance and all accrued but unpaid interest shall be due and
payable.

         1.5 REQUESTS FOR ADVANCES. Advances hereunder may be effected in
writing, in person, or by telephone notification to the Bank Officer named below
or such other loan officer as the Bank may from time to time designate for
purposes of receiving such notifications, and the advances of funds to the
Borrower by the Bank shall be conclusive evidence of an authorized notification
and request by the Borrower for further advances. Notification must be received
by the Bank Officer named below or such other loan officer as the Bank may from
time to time designate for purposes of receiving such notifications on or before
10:00 a.m. for an advance to be made on the day of the notification. Requests
for advances by the Borrower shall be made only by the Chief Financial Officer
or Chief Executive Officer or such other persons designated by Borrower in
writing from time to time as persons authorized to request advances on behalf of
Borrower.

         1.6 BORROWING BASE. The maximum amount of the Revolving Loan shall be
determined by the most recent quarterly Borrowing Base Certificate submitted by

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Borrower and shall not exceed the lesser of (a) the aggregate appraised value of
the Revolving Loan Properties listed on Exhibit "B", as that list may be amended
from time to time by adding or substituting properties approved by the Bank, or
(b) the sum of (i) the Adjusted Net Operating Income for the trailing one-year
period from the Revolving Loan Properties owned throughout that period
capitalized at 12%, plus (ii) the lesser of the acquisition cost or the
appraised value of any of the Revolving Loan Properties acquired by the Borrower
within the preceding 12 months.

         "Adjusted Net Operating Income" is defined as the remainder of the Net
Operating Income after reducing Net Operating Income by an amount equal to the
sum of (a) 4% of gross room revenue for FF&E reserve, plus (b) 4% of gross room
revenue for management fees and expenses.

         1.7 FUNDS. Payments and prepayments of principal and interest shall be
made in immediately available funds to the Bank by payment at its main office at
233 South 13th Street, Lincoln, Nebraska 68508, or at such other place as the
Bank or the holder hereof may designate in writing to the Borrower.

         1.8 PERMISSIBLE BORROWING PURPOSES. The Revolving Loan extended by the
Bank to the Borrower hereunder shall be used for the purpose of meeting general
corporate needs of the Borrower.

         1.9 COMMITMENT FEE. Upon the execution of this Agreement, Borrower
shall pay the Bank a commitment fee in the amount of Seven Thousand and No/100
Dollars ($7,000).

         1.10 UNUSED COMMITMENT FEE. The Borrower shall pay the Bank a
commitment fee equal to one-quarter percent (0.25%) per annum (computed on the
basis of a year of 360 days and actual days elapsed) on the unused portion of
the maximum Revolving Loan Commitment payable quarterly in arrears on the last
day of each quarter from the date hereof until the Revolving Loan Commitment
terminates, on which date the final payment will be made.

         1.11 LATE FEES. Borrower shall pay a late fee of 5% of the amount of
any payment received 10 days or more after its due date.

         1.12 TERMINATION OF REVOLVING LOAN. Borrower and the Bank are currently
parties to that Revolving Term Promissory Note and Loan Agreement (Modified and
Extended) dated December 30, 1996, as amended or modified, which provides for a
revolving loan from the Bank to Borrower as set forth therein. Upon the
execution of this Agreement, Borrower agrees to pay all amounts due thereunder,
and Borrower and Bank agree that the Revolving Term Promissory Note and Loan
Agreement (Modified and Extended) is hereby terminated.

                       SECTION 2. COLLATERAL AND SECURITY

         2.1 SECURITY. As security for the payment of the Revolving Loan Note,
which Revolving Loan Note is executed in connection herewith (including any and

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all extensions, renewals, modifications and substitutions thereof or exchanges
therefor), any and all future advances of credit to the Borrower, the
performance of this Agreement and any other agreement executed in connection
herewith, the payment of any and all amounts advanced by the Bank hereunder or
otherwise on behalf of the Borrower, any legal fees and all other fees, charges,
expenses, or costs incurred by the Bank in connection herewith, (herein
collectively called the "Obligations"), the Borrower will execute and deliver to
the Bank certain documents in connection with this Agreement as follows:

                  (a) Deeds of Trust or Mortgages, in form and substance
         satisfactory to the Bank, on all of the real estate described on
         Exhibit "B" attached hereto and incorporated herein by this reference,
         and any additions thereto or substitutions therefor approved by the
         Bank giving the Bank a first lien on all of the real estate described
         on Exhibit "B" to secure the Obligations.

                  (b) Assignments of Leases and Rents, in the form attached
         hereto as Exhibit "C", assigning the rights of the Borrower as lessor
         of each of the Revolving Loan Properties that are leased by the
         Borrower, together with resolutions of authority as applicable to
         Borrower. The foregoing provision notwithstanding, Borrower shall not
         lease any of the Revolving Loan Properties without the Bank's prior
         written consent. The Bank consents to the lease of the Term Loan
         Properties to Supertel Hospitality Management, Inc. provided that the
         merger between Supertel Hospitality, Inc. ("Supertel") and Humphrey
         Hospitality Trust, Inc. ("HH Trust") described in the Disclosure
         Schedule has been consummated and all conditions of this Agreement have
         been satisfied.

                  (c) Lease Subordination Agreements, in the form attached
         hereto as Exhibit "D", from the lessees of each of the Revolving Loan
         Properties.

                  (d) Collateral Assignments from Supertel Hospitality
         Management, Inc. in form and substance satisfactory to the Bank and in
         substantially the form attached hereto as Exhibit "E" assigning the
         franchises for each of the Revolving Loan Properties.

                  (e) Agreements from the franchisors or licensors of all of the
         Revolving Loan Properties in form and substance satisfactory to the
         Bank providing the Bank with assurances in substantially the form
         attached hereto as Exhibit "F" to the effect that they will not
         terminate the franchises with Borrower in the event the Bank enforces
         its rights under the Security Documents or in the event of a default
         under the franchises.

                  (f) Security Agreement(s) and Financing Statement(s) on all
         the personal property now owned or held or hereafter acquired, and any
         proceeds thereof together with resolutions of authority as applicable
         to Borrower giving the Bank a first lien on all personal property of
         Borrower relating to or pertaining to the Revolving Loan Properties. A
         copy of the Security Agreement is attached hereto as Exhibit "G" and is

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         incorporated herein by this reference. A copy of the form of Financing
         Statement to be used is attached hereto as Exhibit "H" and is
         incorporated herein by this reference.

                  Borrower hereby agrees to execute and deliver on demand and
         hereby irrevocably constitutes and appoints Bank the attorney-in-fact
         of Borrower coupled with an interest, to execute, deliver, and if
         appropriate, to file with the appropriate filing officer or office such
         security agreements, financing statements or other instruments as Bank
         may request or require in order to impose or perfect the lien or
         security interest hereof more specifically thereon.

                  (f) Guaranties, in the form attched hereto as Exhibit "I",
         from Steve H. Borgmann and Paul J. Schulte.

         2.2 RIGHTS IN PROPERTY HELD BY BANK. As further security for the prompt
satisfaction of all the Obligations of the Borrower to the Bank, the Borrower
hereby assigns, transfers, and sets over to the Bank all of its right, title and
interest in and to, and grants the Bank a lien on and a security interest in,
and agrees that the Bank may set off against, all amounts that may be owing from
time to time by the Borrower to the Bank in any capacity, including, but without
limitation, any balances, credits, deposits, accounts, monies, or any other
property of the Borrower, now or hereafter in the possession of the Bank.

         2.3 SECURITY DOCUMENTS. The executed Deeds of Trust, Mortgages,
Assignments of Leases and Rents, Subordination, Nondisturbance and Attornment
Agreements, Security Agreement(s) and Financing Statements described in Section
2.1 and the rights, liens and security interests and setoff described in Section
2.2 are collectively and individually referred to as "Security Documents."

         2.4 NORFOLK, NEBRASKA AND BULLHEAD CITY, ARIZONA. Borrower and Bank
have agreed that the office building in Norfolk, Nebraska owned by Simplex,
Inc., a wholly-owned subsidiary of Borrower, and Borrower's property in Bullhead
City, Arizona will be included as part of the Revolving Loan Properties.
Borrower agrees that it will provide the Bank with any and all information and
documentation requested by the Bank to include those properties in the Revolving
Loan Properties, including, without limitation, information and documentation
substantially similar to that provided with respect to the existing Revolving
Loan Properties. Borrower agrees to provide such information and documentation
as soon as possible after the execution of this Agreement, but no later than
thirty (30) days thereafter.

         2.5 SUBSTITUTION AND ADDITION TO TERM LOAN PROPERTIES. Subject to the
approval of the Bank, as hereinafter set forth, Borrower may request permission
for any reason to substitute real estate and obtain the release of real estate
that is a part of the Revolving Loan Properties, and Borrower may also request
permission to add real estate to the Revolving Loan Properties to maintain
compliance with, or cure any failure to maintain compliance with, any of the
ratios set forth in Section 4.4 of this Agreement. At the time of making any
such request, the Borrower shall provide the Bank with such information and
documents as the Bank may require, including, without limitation, the following:
an appraisal, a title insurance commitment, an ALTA survey, an environmental

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report, a U.C.C. search, flood hazard certification, evidence of insurance,
zoning information, the franchise agreement, tax and judgment lien searches, and
a building inspection report. The Bank shall have thirty (30) days after the
request by the Borrower to determine, in its sole discretion, if the real estate
proposed to be substituted or added is of appropriate character, quality and
value. Any request to add real estate to the Revolving Loan Properties to cure a
failure to comply with any ratios set forth in Section 4.4 shall be made within
the thirty-day period provided herein to cure any noncompliance with this
Agreement.

         If the Bank determines in its sole discretion that it will permit the
substitution and release or addition of real estate to the Revolving Loan
Properties, Borrower shall provide the Bank with documentation, in form and
substance acceptable to the Bank, to provide the Bank with the same rights with
respect to the substituted or added real estate and related personal property
and franchise rights as are provided by the Security Documents described herein
with respect to the existing Revolving Loan Properties. The documentation shall
be provided by the Borrower within the time required by the Bank. The
documentation relating to the substituted or additional real estate and related
personal property and franchise rights shall thereafter be considered to be a
part of the Security Documents for purposes of this Agreement and all other
documents relating to or pertaining to this Agreement.

                    SECTION 3. REPRESENTATIONS AND WARRANTIES

         To induce the Bank to make the Revolving Loan, the Borrower represents
and warrants to the Bank that:

         3.1 ORGANIZATION. Borrower is a corporation existing and in good
standing under the laws of the State of Delaware. The Borrower is duly
qualified, in good standing and authorized to do business in each jurisdiction
where, because of the nature of its activities or properties, such qualification
is required, and where a failure to so qualify would have a material adverse
effect on the Borrower; and the Borrower has the corporate power and authority
to own its properties and to carry on its business as now being conducted.

         3.2 AUTHORIZATION; NO CONFLICT. The borrowings hereunder, the execution
and delivery of the Revolving Loan Note and the Security Documents and the
performance by the Borrower of its obligations under this Agreement, the
Revolving Loan Note and Security Documents are within the Borrower's corporate
powers, have been authorized by all necessary corporate action, have received
all necessary governmental approval (if any shall be required) and do not and
will not contravene or conflict with any provision of law or of the articles of
incorporation or bylaws of the Borrower or of any agreement binding upon the
Borrower and are and will continue to be enforceable under the laws of the State
of Nebraska in accordance with their respective terms, except as such
enforcement may be qualified or limited by bankruptcy, insolvency, or other
similar laws affecting creditors rights in general.

         3.3 FINANCIAL STATEMENTS; CONTINGENT LIABILITIES. The financial
statements of the Borrower dated June 30, 1999, copies of which have been
furnished to the Bank, were prepared in conformity with generally accepted

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accounting principles applied on a basis consistent with that of said Borrower's
preceding fiscal year, and accurately present the financial condition of said
Borrower as at such dates and the results of their operations for the respective
period then ended. Since the date of such financial statements, no material
adverse change in the business, properties, assets, operations, conditions or
prospects of said Borrower has occurred. There are no contingent liabilities of
said Borrower in an amount in excess of $100,000 individually, or $1,000,000 in
the aggregate, which is known to the Borrower or which should reasonably be
known to the Borrower, which is not reflected in such financial statements or
which is not disclosed in the Disclosure Schedule attached hereto at Exhibit "J"
(the "Disclosure Schedule") and incorporated herein by this reference. The Bank
hereby acknowledges that it is aware of the proposed merger of Supertel into HH
Trust, as described in the Disclosure Schedule.

         3.4 TAXES. The Borrower has filed or caused to be filed all federal,
state, county and local tax returns which are required to be filed, and has paid
or caused to be paid all personal property taxes, real estate taxes, income
taxes, other taxes, special assessments, assessments, withholding, contributions
and governmental charges or levies (collectively and individually referred to as
"Taxes") as shown on such returns and reports, or on any assessment received by
them, to the extent that such Taxes have become due (except for current Taxes
not delinquent and Taxes being contested as provided by law, in good faith and
by appropriate legal proceedings for which adequate reserves have been provided
on the books of the Borrower, and as to which no foreclosure, distraint, sale or
similar proceedings have been commenced).

         3.5 TITLE AND LIENS. Borrower has good and marketable title to all of
the assets described in the Security Documents, including, without limitation,
the Revolving Loan Properties. None of the assets of the Borrower described in
the Security Documents are subject to any mortgage, pledge, title retention
lien, or other lien, encumbrance or security interest, except for: (a) liens in
favor of the Bank granted hereunder; (b) current Taxes not delinquent or Taxes
being contested as provided by law in good faith and by appropriate legal
proceedings; (c) liens arising in the ordinary course of business for sums not
due or sums being contested in good faith and by appropriate legal proceedings,
but not involving any deposits or advances of borrowed money or the deferred
purchase price of property or services; (d) to the extent specifically shown in
the financial statements referred to above; and (e) to the extent reflected in
the attached Disclosure Schedule.

         3.6 ADVERSE CONTRACTS. The Borrower is not a party to any agreement or
instrument, or subject to any charter or other corporate restriction, nor is it
subject to any judgment, decree or order of any court or governmental body,
which Borrower knows or reasonably should know may have a material and adverse
effect on the business, assets, liabilities, financial condition, operations or
business obligations under this Agreement or the Revolving Loan Note or Security
Documents. Except as disclosed in the Disclosure Schedule, the Borrower has no,
nor with reasonable diligence should have had, knowledge of or notice that it is
in default on the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement, instrument,
charter or other corporate restriction, judgment, decree or order of any court

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or governmental body that might have a material adverse impact on the Borrower.
The Bank hereby acknowledges that it is aware of the proposed merger of Supertel
into HH Trust, as described in the Disclosure Schedule.

         3.7 REGULATION U. The Borrower is not engaged principally in, nor is
one of the Borrower's important activities, the business of extending credit for
the purpose of purchasing or carrying "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereinafter in effect.

         3.8 LITIGATION. No litigation (including derivative actions),
arbitration proceedings or governmental proceedings are pending or threatened
against the Borrower which would (singly or in the aggregate), if adversely
determined, have a material and adverse effect on the financial condition,
continued operations or prospects of the Borrower, except as set forth
(including estimates of the dollar amounts involved) in the Disclosure Schedule.

         3.9 SELL, CONVEY AND TRANSFER. Except in the ordinary course of
business, the Borrower has not sold, conveyed, transferred, disposed of, or
otherwise further encumbered, any of the Borrower's assets within the last
ninety (90) days that is not disclosed in the Disclosure Schedule.

         3.10 LAWFUL INTEREST. The amounts to be received by Bank as interest
payments under the Revolving Loan Note shall constitute lawful interest and
shall be neither usurious nor illegal under the laws of the State of Nebraska.

         3.11 SECURITY DOCUMENTS. The provisions of the Security Documents as
provided herein, are effective to create, in favor of the Bank, legal, valid and
enforceable liens on all of the real estate and personal property described
therein. The Deeds of Trust, Mortgages and Assignments of Leases and Rents when
filed with the recording offices listed on Exhibit "B" and the Financing
Statements when filed with the Secretaries of State (or other appropriate
recording office) in Nebraska, Texas, Illinois, Wisconsin, Iowa, Arizona,
Virginia and Maryland will constitute fully perfected first security interests
and liens on all right, title and interest of the Borrower in the real estate
and personal property described therein, prior and superior to all other liens.

         3.12 PLACE OF BUSINESS. Borrower's principal place of business and
chief executive offices are located in Norfolk, Nebraska. In the event of the
merger described in Section 4.1, Borrower's principal place of business and
chief executive offices shall be located in Silver Spring, Maryland.

         3.13 ENVIRONMENTAL COMPLIANCE. Except as set forth in the Disclosure
Statement, the Borrower and its subsidiaries are in material compliance with all
environmental protection laws in each jurisdiction where they are presently
doing business, the violation of which would have a material, adverse effect on
the use, operation or value of the Revolving Loan Properties. The Borrower is
not subject to any liabilities nor have they received any notice from any
governmental agency regarding any action, pending or contemplated, pertaining to
any alleged violation of any environmental protection laws with respect to any

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of the present or previously owned real properties of the Borrower where the
effect of which could be reasonably expected to have a material adverse effect
on the Borrower or any of its properties.

         3.14 ERISA. Borrower has fulfilled all obligations under the Employee
Retirement Income Security Act of 1974, as amended, in respect of any employee
benefit plan maintained for employees of the Borrower, and no reportable event
or prohibited transaction has occurred with respect to any such employee benefit
plan.

         3.15 DEFAULTS. The Borrower is not in default, nor has any event or
circumstance occurred which, but for the passage of time or the giving of
notice, or both, would constitute an Event of Default, as defined herein.

         3.16 COMPLIANCE WITH THE LAW. Borrower (a) is not in violation of any
federal, state or county governmental rule, regulation or ordinance; and (b) has
not failed to obtain any license, permit, franchise or other governmental
authorization necessary to the ownership of Borrower's properties or the conduct
of its business; which violation or failure (in the event that such violation or
failure were asserted by any person or entity by appropriate action) would
result in a material impediment to the conduct of the Borrower's regular
business generally or at any of its properties.

         3.17 INVESTMENT COMPANY ACT. The Borrower is not a "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

         3.18 SUBSIDIARIES. Exhibit "K", attached hereto lists all of the
subsidiaries and affiliates of Borrower. Borrower represents that all of its
subsidiaries and affiliates are duly organized and existing under the laws of
their respective jurisdictions of their creation, and are duly qualified, in
good standing and authorized to do business in each jurisdiction where, because
of the nature of its activities or properties, such qualification is required,
and where a failure to so qualify would have a material adverse effect on the
Borrower; and the Borrower has the corporate power and authority to own its
properties and to carry on its business as now being conducted.

         3.19 YEAR 2000 COMPLIANCE. Borrower has reviewed and assessed its
business operations and computer systems and applications to address the "year
2000 problem" (that is, that computer applications and equipment used by
Borrower, directly or indirectly through third parties, may be unable to
properly perform date-sensitive functions before, during and after January 1,
2000). Borrower reasonably believes that the year 2000 problem will not result
in a material adverse change in Borrower's business condition (financial or
otherwise), operations, properties or prospects or ability to repay the Bank.
Borrower agrees that this representation will be true and correct on and shall
be deemed made by Borrower on each date Borrower requests any advance under this
Agreement or the Revolving Loan Note or delivers any information to the Bank.
Borrower will promptly deliver to the Bank such information relating to this
representation as the Bank requests from time to time.

         3.20 FRANCHISES, PATENTS, COPYRIGHTS, ETC. The Borrower possesses, and
will at all times possess, all franchises, including, without limitation, motel
franchises or licenses, patents, copyrights, trademarks, trade names, licenses

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and permits, and rights in respect of the foregoing, adequate for the conduct of
its business substantially as now conducted or as it is intended to be
conducted, without known conflict with any rights of others.

         3.21 SALE TO SUPERTEL HOSPITALITY MANAGEMENT, INC. Borrower represents
that all personal property assets relating to or pertaining to the Revolving
Loan Properties, excluding furniture, fixtures and equipment, will, immediately
prior to the merger, be sold to Supertel Hospitality Management, Inc., as
described in the Disclosure Schedule.

                              SECTION 4. COVENANTS

         Until all Obligations of the Borrower hereunder and under the Revolving
Loan Note are paid and fulfilled in full, the Borrower agrees that they shall
comply with the following covenants, unless the Bank consents otherwise in
writing:

         4.1 CORPORATE EXISTENCE. The Borrower shall preserve and maintain its
corporate existence, rights, franchises and licenses, and will not liquidate,
dissolve, or merge, or consolidate with or into any other corporation, or sell,
lease, transfer or otherwise dispose of all or a substantial part of its assets
without the Bank's prior written consent. The Bank hereby consents to the
contemplated merger of Borrower into Humphrey Hospitality Trust, Inc. ("HH
Trust"), a Virginia corporation, and the transfer of the real and personal
property of Borrower subject to the Security Documents into Humphrey Hospitality
Limited Partnership ("HHLP"), a Virginia limited partnership; provided that HH
Trust, HHLP and Humphrey Hospitality REIT Trust, a Maryland real estate
investment trust ("HH REIT") (HH Trust, HHLP and HH REIT are collectively
referred to herein as the "HH Parties"); agree to assume and perform the
Obligations of Borrower under this Agreement, the Revolving Loan Note, Security
Documents, and to execute such documents as are required by the Bank to evidence
said assumption and agreement to perform by the HH Parties. The Bank further
consents to any merger after which HH Trust is the surviving entity; provided
that the surviving entity is otherwise in compliance with the provisions of this
Agreement.

         4.2 REPORTS, CERTIFICATES AND OTHER INFORMATION. The Borrower shall
furnish to the Bank:

                  (a) Audit Report. Within one hundred-twenty (120) days after
         the end of each fiscal year of the Borrower, a copy of an unqualified
         annual consolidated audit report of the Borrower prepared on a basis
         and in conformity with generally accepted accounting principles
         ("GAAP") applied on a basis consistent with the audited financial
         statement of the Borrower duly certified by independent certified
         public accountants of recognized standing reasonably satisfactory to
         the Bank, and including, without limitation, footnotes required by GAAP
         regarding any defaults on the Revolving Loan identified in the audit,
         and including any management letter provided to the Borrower by its
         accountants.

                                       11
<PAGE>

                  (b) Certificates. Contemporaneously with the furnishing of a
         copy of each annual audit report and all required interim reports
         required by subsection (e) a certificate dated the date of such annual
         report and interim reports and signed by either the President or the
         Chief Financial Officer of Borrower, to the effect that no Event of
         Default has occurred and is continuing or, if there is any such event,
         describing it and the steps, if any, being taken to cure it.

                  (c) Reports to SEC and to Shareholders. Copies of each filing
         and report made by the Borrower to any securities exchange or the
         Securities and Exchange Commission, except in respect of any single
         shareholder, and of each communication from the Borrower to
         shareholders generally, promptly upon the filing or making thereof.

                  (d) Notice of Default, Litigation and ERISA Matters.
         Immediately upon learning of the occurrence of any of the following,
         written notice describing the same and the steps being taken by the
         Borrower or any subsidiary affected in respect thereof: (i) the
         occurrence of any Event of Default or any event or condition which with
         the passage of time or the giving of notice, or both, might become an
         Event of Default; or (ii) the institution of, or any adverse
         determination in, any litigation, arbitration or governmental
         proceeding which is material to the Borrower, or (iii) the occurrence
         of a reportable event under, or the institution of any steps by
         Borrower to withdraw from, or the institution of any proceedings to
         terminate, any employee benefit plans as to which the Borrower may have
         any liability.

                  (e) Interim Reports. Within forty-five (45) days after the end
         of each fiscal quarter, a copy of an internally prepared financial
         statement of the Borrower prepared on a basis consistent with the
         audited financial statements of the Borrower, signed by an authorized
         officer of the Borrower and consisting of at least (i) a balance sheet
         as at the close of the preceding quarter, (ii) a statement of earnings
         for the preceding quarter, and (iii) operating statements for each of
         the Revolving Loan Properties; provided, however, that such financial
         statements will not include footnotes and will be subject to normal
         year-end adjustments.

                  (f) Borrowing Base Certificate. A quarterly Borrowing Base
         Certificate in the form attached hereto as Exhibit " L" within
         forty-five (45) days of each fiscal quarter end.

                  (g) Annual Corporate Tax Return. A copy of Borrower's annual
         tax return promptly after it is submitted to the Internal Revenue
         Service.

                  (h) Capital Expenditure Account. A quarterly report detailing
         Borrower's use of the funds in the Capital Expenditure Account created
         pursuant to Section 4.25.

                                       12
<PAGE>

                  (i) Other Information. From time to time such other
         information, financial or otherwise, concerning the Borrower as the
         Bank may reasonably request.

         4.3 INSPECTION. The Borrower will permit the Bank or any officer,
employee or agent of the Bank at any time during the Borrower's regular business
hours to inspect their properties and to inspect and copy their books and
records. Upon the occurrence of an Event of Default, the Bank shall also be
entitled to have an independent audit of Borrower's books and records. Borrower
shall pay all costs associated with annual inspections of the real and personal
properties described in the Security Documents.

         4.4 FINANCIAL REQUIREMENTS. Borrower shall comply with the following
financial covenants to be tested in accordance with GAAP consistently applied:

                  (a) Revolving Loan Debt Service Coverage Ratio. Borrower shall
         maintain a Revolving Loan Debt Service Coverage Ratio greater than 1.5
         to 1, to be tested quarterly at the end of each calendar quarter based
         on the trailing one-year period.

                  The Revolving Loan Debt Service Coverage Ratio shall be
         measured as of December 31, 1999, and at quarterly intervals
         thereafter, and for any period shall be determined as the quotient
         obtained by dividing (a) Adjusted Net Operating Income from the
         Revolving Loan Properties for such period by (b) the Imputed Debt
         Service during such period.

                  "Adjusted Net Operating Income" for this and the other
         financial covenants is defined as the remainder of the Net Operating
         Income after reducing Net Operating Income by an amount equal to the
         sum of (a) 4% of gross room revenue for FF&E reserve, plus (b) 4% of
         gross room revenue for management fees and expenses.

                  "Net Operating Income" shall be the net operating income of
         the relevant properties determined for this and the other financial
         covenants from Borrower's internally generated operating statements
         prepared consistently with Borrower's internally prepared 1999 Profit
         and Loss Statement.

                  "Imputed Debt Service" means the annual payments of principal
         and interest that would be required to fully amortize the outstanding
         Revolving Loan for the trailing one-year period as if the Revolving
         Loan was a loan to be amortized in equal monthly payments of principal
         and interest over a 25-year period, with an assumed interest rate of
         the yield on U.S. Treasury securities having a 10-year maturity at the
         time of the determination, plus 3.0%.

                  (b) Consolidated Debt Service Coverage Ratio. Borrower shall
         maintain a Consolidated Debt Service Coverage Ratio greater than 1.5 to
         1, to be tested at the end of each calendar quarter based on the
         trailing one-year period.

                                       13
<PAGE>

                  The Consolidated Debt Service Coverage Ratio shall be measured
         as of December 31, 1999, and at quarterly intervals thereafter, and for
         any period shall be determined as the quotient obtained by dividing (a)
         Adjusted Net Operating Income from all of Borrower's properties for
         such period by (b) the amount of Borrower's total debt service payments
         (principal and interest) which would be required to be made during such
         period, including Aggregate Imputed Debt Service.

                  "Aggregate Imputed Debt Service" means the annual payments of
         principal and interest that would be required to fully amortize the
         outstanding revolving loan balance of Borrower's aggregate revolving
         loan indebtedness for the trailing one-year period as if the revolving
         loans were loans to be amortized in equal monthly payments of principal
         and interest over a 25-year period, with an assumed interest rate of
         the yield on U.S. Treasury securities having a 10-year maturity at the
         time of the determination, plus 3.0%.

                  (c) Revolving Loan to Value Ratio. The ratio of the principal
         balance outstanding on the Revolving Loan to the value of the Revolving
         Loan Properties shall be less than 50% tested at the end of each
         calendar quarter.

                  For purposes of calculation of the Revolving Loan to Value
         Ratio as of December 31, 1999, and at quarterly measurement intervals
         thereafter, the value of the Revolving Loan Properties shall be the sum
         of (i) the Adjusted Net Operating Income for the trailing one-year
         period from the Revolving Loan Properties owned throughout that period
         capitalized at 12%, plus (ii) the lesser of the acquisition cost or the
         appraised value of any of the Revolving Loan Properties acquired by the
         Borrower within the preceding 12 months.

                  (d) Consolidated Loan to Value Ratio. The ratio of Borrower's
         aggregate interest bearing debt to the value of all of Borrower's real
         estate assets shall be less than 60% tested at each fiscal year end.

                  For purposes of calculation of the Consolidated Loan to Value
         Ratio as of December 31, 1999, and at yearly intervals thereafter, the
         value of all of Borrower's real estate assets shall be the sum of (i)
         the Adjusted Net Operating Income for the trailing one-year period from
         all of Borrower's real estate assets capitalized at 12%, plus (ii) the
         lesser of the acquisition cost, or the appraised value of any of
         Borrower's real estate assets acquired within the preceding 12 months.

                  (e) IBD/EBITDA Ratio. Borrower shall maintain a ratio of
         interest bearing debt divided by earnings before interest, taxes,
         depreciation and amortization of less than 4.5 to 1 to be tested at
         each fiscal year end.

                                       14
<PAGE>

         4.5 INDEBTEDNESS, LIENS AND TAXES. Without the Bank's prior written
consent, the Borrower and its subsidiaries shall:

                  (a) Indebtedness. Not incur, permit to remain outstanding,
         assume or in any way become committed for indebtedness in respect of
         borrowed money, except indebtedness incurred hereunder, indebtedness
         related to the transactions described in the Disclosure Schedule and
         additional indebtedness provided that Borrower is in compliance with
         all of the Financial Requirements of Section 4.4 before and immediately
         after incurring any such additional indebtedness.

                  (b) Liens. Not create, suffer or permit to exist any lien or
         encumbrance of any kind or nature upon any of the real and personal
         property subject to the Security Documents now or hereafter owned or
         acquired, or acquire or agree to acquire any property or assets of any
         character under any conditional sale agreement or other title retention
         agreement, but this Section shall not be deemed to apply to: (i) liens
         for taxes, assessments and other governmental charges not yet due or
         which are being contested in good faith and for which such reserves as
         shall be required by generally accepted accounting principles shall
         have been made therefor; (ii) liens of landlords, vendors, carriers,
         warehousemen, mechanics, laborers and materialmen arising at law in the
         ordinary course of business for sums not yet due or being contested in
         good faith if such reserves as shall be required by generally accepted
         accounting principles shall have been made therefor; (iii) pledges or
         deposits in connection with or to secure worker's compensation,
         unemployment insurance, pensions or other employee benefits; and (iv)
         liens and encumbrances arising out of the transactions described on the
         attached Disclosure Schedule.

                  (c) Taxes. Pay and discharge all taxes, assessments and
         governmental charges or levies imposed upon it, upon its income or
         profits or upon any properties belonging to it, prior to the date on
         which penalties attach thereto, and all lawful claims for labor,
         materials and supplies when due, except that no such tax, assessment,
         charge, levy or claim need be paid which is being contested in good
         faith and by appropriate legal proceedings and as to which adequate
         reserves shall have been established, and as to which no foreclosure,
         distraint, sale or similar proceedings have commenced.

                  (d) Guarantee/Indemnity Agreements. Not assume, guarantee,
         borrow, indorse or otherwise become or be responsible in any manner
         (whether by agreement to purchase any obligations, stock, assets, goods
         or services, or to supply or advance any funds, assets, goods or
         services, or otherwise) with respect to the obligation of any other
         person or entity, except by the indorsement of negotiable instruments
         for deposit or collection in the ordinary course of business, and
         except with respect to the acquisition of motels in the ordinary course
         of Borrower's business. The Bank acknowledges that Borrower intends to

                                       12
<PAGE>

         pay a dividend prior to the merger of Supertel into HH Trust, as
         described in the Disclosure Schedule, and the Bank agrees that the
         payment of the dividend will not violate this covenant.

         4.6 INVESTMENT AND LOANS. Borrower shall not make any loan, advance,
extension of credit, or capital contribution to any person or legal entity; nor
purchase or otherwise acquire for a consideration, evidences of indebtedness,
capital stock or other securities of any person or legal entity, and except with
respect to the acquisition of motels in the ordinary course of Borrower's
business.

         4.7 DIVIDENDS AND TRANSFERS. Borrower shall not issue any dividends or
other distribution (i) in excess of seventy-five percent (75%) of Borrower's
funds from operations per year, or such higher amounts as may be required to
maintain the status of Borrower as a real estate investment trust, or (ii) after
the occurrence of an Event of Default that continues for a period of sixty (60)
days or more.

         4.8 MAINTENANCE OF PROPERTIES. The Borrower shall maintain, or cause to
be maintained, in good repair, working order and condition (ordinary wear and
tear excepted), all of its properties (whether owned or held under lease), and
from time to time make or cause to be made all needed and appropriate repairs,
renewals, replacements, additions, betterments and improvements thereto, so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times.

         4.9 INSURANCE. The Borrower shall maintain insurance in responsible
companies in such amounts and against such risks as is required by the Bank and,
at a minimum, insurance on its respective businesses, fixed assets, inventory
and other properties, including specifically, but without limitation, flood and
title insurance, worker's compensation or similar insurance as required by law,
and adequate public liability (including product liability) insurance against
claims for personal injury, death or property damage arising out of its
services, products, facilities or operations, as is usually carried by similar
businesses conducting operations in similar areas, all such policies naming the
Bank as loss payee with respect to the real and personal properties subject to
the Security Documents and the business operations related thereto.

         4.10     USE OF PROCEEDS.

                  (a) The Borrower shall not use or permit any proceeds of the
         Revolving Loan Note to be used, either directly or indirectly, for the
         purpose, whether immediate, incidental or ultimate, of "purchasing or
         carrying any margin stock" within the meaning of Regulations U or X of
         the Board of Governors of the Federal Reserve System, as amended from
         time to time. If requested by the Bank, the Borrower will furnish to
         the Bank a statement in conformity with the requirements of Federal
         Reserve Form U-1 to the foregoing effect. No part of the proceeds of
         the Revolving Loan Note will be used for any purpose which violates or
         is inconsistent with the provisions of Regulations U or X of the Board
         of Governors.

                  (b) Tender Offers and Going Private. The Borrower shall not
         use (or permit to be used) any proceeds of the Revolving Loan Note to
         acquire any security in any transaction which is subject to Section 13

                                       16
<PAGE>

         or 14 of the Securities Exchange Act of 1934, as amended, or any
         regulations or rulings thereunder.

         4.11 LIMITATION ON BUSINESS. The Borrower shall not engage in any
business or activity other than the business engaged in as of the date hereof
and in activities related or incidental to such business without the Bank's
prior written consent, which consent shall not be unreasonably withheld.

         4.12 MANAGEMENT. The management of Borrower includes Paul J. Schulte
and Steve H. Borgmann and will include Jim Humphrey in the event of the
contemplated merger described in Section 4.1 ("Management Personnel"). Until the
Revolving Loan Maturity Date, at least two of such persons will continue to be
on the Board of Directors of Borrower or HH Trust unless the Bank consents
otherwise in writing, which consent shall not be unreasonably withheld.

                                       17
<PAGE>

         4.13 FEDERAL, STATE, COUNTY AND LOCAL LAWS AND REGULATIONS. The
Borrower shall comply in all respects with any and all applicable state and
federal securities laws and regulations and any and all applicable rules and
regulations of any securities exchange or the Securities and Exchange Commission
as the same relate to the issuance, purchase, sale or registration of
securities. The Borrower shall comply in all respects with any and all
applicable federal, state, county and local laws, statutes, ordinances, court
orders, rules, and regulations with respect to Borrower's businesses, fixed
assets, inventory, employees, corporate structures and properties.

         4.14 NOTIFICATION OF LEGAL ACTIONS. The Borrower shall notify the Bank,
in writing, of any material legal action commenced or threatened against the
Borrower within five (5) days of receipt of such information by the Borrower.
For purposes of this Agreement, any material legal action shall be deemed one
where the amount in controversy, either directly or indirectly, exceeds the sum
of Five Hundred Thousand and No/100 Dollars ($500,000).

         4.15 ADVERSE CHANGE. The Borrower shall immediately upon obtaining any
knowledge of any material adverse change in the financial condition or position
of the Borrower provide the Bank with written notice describing in detail the
nature of such adverse change.

         4.16 CORPORATE OFFICES. The chief executive office of Borrower is in
Norfolk, Nebraska. Borrower shall not change the location of its principal place
of business unless Borrower shall give the Bank at least 60 days prior written
notice thereof and all actions necessary or advisable in the Bank's opinion to
protect the Bank's liens covered by the Security Documents shall have been
taken.

         4.17 LOAN TO EMPLOYEES. Borrower shall not make any loans to any
employees, officers or shareholders of the Borrower after the date of this
Agreement, except with respect to incidental expenses related to the performance
of the duties of the employees and officers such as travel expenses.

         4.18 SELL, CONVEY AND TRANSFER. Borrower shall not sell, convey,
transfer, dispose of or further encumber the Borrower's properties subject to

                                       17
<PAGE>

the liens created by the Security Documents or any part thereof or any interest
therein except as otherwise provided in the Security Documents or this Agreement
covering all or any portion thereof or an undivided interest therein, either
voluntarily, involuntarily or otherwise, or enter into an agreement to do so
without the prior written consent of the Bank, except sales and dispositions of
personal property in the ordinary course of Borrower's business. The Bank hereby
consents to the transaction contemplated by Section 4.1, provided that the HH
Parties agree to assume and perform the Obligations of Borrower under this
Agreement, the Revolving Loan Note and Security Documents, and to execute such
documents as are required by the Bank to evidence said assumption and agreement
to perform by the HH Parties.

         4.19 RECORDS. Borrower shall keep and maintain full and accurate
accounts and records of Borrower's operations and businesses according to
generally accepted accounting principles and practices for Borrower's type of
business.

         4.20 INDEMNIFICATION. Borrower shall, at Borrower's expense, protect,
defend, indemnify, save and hold Bank harmless against any and all claims,
demands, losses, expenses, damages, causes of action (whether legal or equitable
in nature) asserted by any person or entity arising out of, caused by or
relating to this Agreement, the Revolving Loan and Security Documents, and
Borrower shall pay Bank upon demand all claims, judgments, damages, losses, and
expenses (including court costs and expenses) incurred by Bank as a result of
any legal or other action arising out of this Agreement, the Revolving Loan or
Security Documents as aforesaid, except for costs arising out of the Bank's
gross negligence or willful misconduct.

         4.21 THIRD PARTY CLAIMS. Bank shall not be liable to, and Borrower
shall save Bank harmless against the claims of, materialmen, contractors,
subcontractors, laborers and others for goods delivered by them to the Borrower
or Borrower's properties or services performed by them in or upon the Borrower's
properties or otherwise in connection with the Borrower. Borrower is not and
shall not be considered to be the agent of Bank for any purpose.

         4.22 INSURANCE. Borrower shall not obtain or carry any separate
insurance whatsoever which is concurrent in form, or contributing in the event
of loss, with that required under Section 4.9 hereof unless Bank is also named
therein as an insured, with loss payable as provided in Section 4.9 hereof.
Borrower shall notify Bank at least 30 days before any such separate insurance
is obtained and shall deliver to the Bank the policy or policies or certificates
evidencing such insurance immediately after such policy or policies or such
certificates are issued.

         4.23 SUBSIDIARIES. Borrower shall not assign, pledge or grant a
security interest in the stock of any of its subsidiaries.

         4.24 CAPITAL EXPENDITURE ACCOUNT. Borrower shall establish a Capital
Expenditure Account with the Bank upon the execution of this Agreement, and
shall maintain the account until all amounts owed to the Bank have been repaid
and the Bank shall have no remaining obligation to make further advances to the
Borrower. Borrower shall deposit, or shall direct any tenant, lessor or manager
to deposit, 4% of the total revenue from the Revolving Loan Properties into the

                                       18
<PAGE>

Capital Reserve Account to be used solely for the purpose of maintenance and
capital expenditures relating to properties owned by the Borrower. Until the
occurrence of an Event of Default, or until otherwise notified by the Bank,
Borrower may use the funds in the Capital Expenditure Account at its discretion
for the purposes set forth herein.

         4.25 FRANCHISOR PERFORMANCE REPORTS. Borrower shall comply, and shall
cause any tenant approved by the Bank to comply, with all recommendations of its
franchisors or licensors in any performance reports for the operation and
maintenance of the Revolving Loan Properties within the time frames required or
recommended by the respective franchisors or licensors.

         4.26 HOTEL OPERATOR. Borrower acknowledges that the Bank has agreed to
make this loan and to consent to the merger with HH Trust and the transfer of
real estate to HHLP in reliance on the expertise of Paul J. Schulte, Steve H.
Borgmann, Jim Humphrey and Randy P. Smith in operating properties such as the
Revolving Loan Properties. Borrower agrees that unless the Bank otherwise
consents in writing (which consent shall not be unreasonably withheld) one or
more of the individuals listed in the preceding sentence shall be actively
involved in the operation and management of the Revolving Loan Properties
throughout the term of this Agreement.

         4.27 ADDITIONAL COLLATERAL. In the event the merger described in the
Disclosure Schedule does not occur on or before October 31, 1999, Borrower shall
provide the Bank with such additional documents as is required by the Bank to
perfect a lien on all personal property and grant an assignment of all rents and
leases relating to or pertaining to the Revolving Loan Properties. Borrower
further covenants and agrees that it shall not transfer or grant any liens on
any of Borrower's personal property relating to or pertaining to the Revolving
Loan Properties, or assign any of the rents and leases relating to or pertaining
to the Revolving Loan Properties after the execution of this Agreement unless
the merger described in the Disclosure Schedule occurs on or before October 31,
1999, and then only as provided in the Disclosure Schedule.

                               SECTION 5. DEFAULT

         5.1 EVENTS OF DEFAULT. Each of the following occurrences is hereby
defined as an "Event of Default."

                  (a) Nonpayment. The Borrower shall fail to make any payment of
         principal or interest on the Revolving Loan Note or shall fail to make
         payment of other amounts payable by the Borrower hereunder or under the
         Security Documents when and as due and such failure shall continue for
         a period of three (3) Banking Days after Borrower's receipt of written
         notice that the same is due (for the purposes of this Section 5.1(a)
         only, and notwithstanding anything to the contrary contained in Section
         7.2 below, the Borrower shall be deemed to have received the Bank's
         notice of a payment default on the same day such notice is sent to
         Borrower via telecopier, provided that the Bank receives a confirmation
         upon completion of the Bank's telecopier transmission that the
         respective notice has been successfully transmitted to the Borrower at
         the telecopier number provided in Section 7.2 below, unless the

                                       19
<PAGE>

         transmission cannot be completed because the Borrower has not
         maintained the ability to receive telecopier transmissions at the
         telecopier number set forth in Section 7.2); or

                  (b) Nonperformance. There shall occur any default or event of
         default, (subject to curative rights, if any) or any event which
         requires the prepayment of borrowed money or the acceleration of the
         maturity thereof, under the terms of any other evidence of indebtedness
         or any other agreement for borrowed money issued or assumed or entered
         into by the Borrower with this Bank or with any other bank or third
         party, or under the terms of any indenture agreement or instrument
         under which any such evidence of indebtedness or other agreement is
         issued, assumed, secured or guaranteed, and such event shall continue
         beyond any applicable period of grace; or

                  (c) Dissolutions, etc. The Borrower shall fail to comply with
         any prohibition against dissolution, liquidation, merger, consolidation
         or sale of assets; or

                  (d) Warranties. Any representation, warranty, schedule,
         certificate, financial statement, report, notice or other writing
         furnished by or on behalf of the Borrower to the Bank or any
         representation, warranty or covenant contained in this Agreement, the
         Revolving Loan Note or Security Documents, is false or misleading in
         any material respect on the date as of which the facts therein set
         forth are stated certified or reaffirmed; or

                  (e) ERISA. Any reportable event shall occur under the Employee
         Retirement Income Security Act of 1974, as amended, in respect of any
         employee benefit plan maintained for employees of the Borrower or its
         subsidiaries; or

                  (f) Litigation. Any financial judgment, resulting from
         judicial or administrative action, shall be entered against the
         Borrower, or with respect to any assets of the Borrower, in which the
         amount of such judgment exceeds One Hundred Thousand and No/100 Dollars
         ($100,000), if such judgment remains undischarged for a period of sixty
         (60) days or more after the date on which such judgment becomes final,
         without regard to any right of appeal to a higher court of law, unless
         Borrower shall have taken whatever action is required, including,
         without limitation, posting a supersedeas bond, to stay proceedings to
         enforce any such judgment; or any proceeding (judicial or
         administrative) could have a material and adverse effect on the future
         operations of the Borrower; or

                  (g) Noncompliance with this Agreement, Revolving Loan Note or
         Security Documents. The Borrower shall fail to comply with any
         provision hereof or any provision of the Revolving Loan Note or any
         Security Documents, which failure does not otherwise constitute an

                                       20
<PAGE>

         Event of Default under Section 5.1(a), and such failure shall continue
         for thirty (30) days after written notice thereof to the Borrower by
         the Bank or any other holder, beneficiary, or secured party of the
         Revolving Loan Note or Security Documents; or

                  (h) Bankruptcy - Filing of Petition. The Borrower shall file a
         petition seeking relief, or consent or answer consenting to a petition
         seeking relief against Borrower under the federal Bankruptcy Code, as
         now constituted or hereafter amended, or any other applicable federal,
         state or foreign bankruptcy law or other similar law, or the Borrower
         shall consent to the institution of proceedings thereunder or the
         filing of any such petition or to the appointment or taking possession
         of a receiver, liquidator, assignee, trustee, custodian, sequestrator
         or similar official of the Borrower or any subsidiary; or

                  (i) Bankruptcy - Entry of Order for Relief. There shall be
         entered a decree or order by a court constituting an order for relief
         in respect of the Borrower, under the federal Bankruptcy Code, as now
         constituted or hereafter amended, or any other applicable federal,
         state or foreign bankruptcy law or other similar law, or appointing a
         receiver, liquidator, assignee, trustee, custodian, sequestrator or
         similar official of the Borrower or of any substantial part of their
         properties, or ordering the winding-up of or liquidation of the affairs
         of the Borrower and any such decree or order shall continue unstayed
         and in effect for a period of sixty (60) consecutive days; or

                  (j) Insolvency. The Borrower shall become insolvent or shall
         fail or be unable to pay its debts as they mature, or shall admit in
         writing its inability to pay its debts as they mature, or shall make a
         general assignment for the benefit of its creditors, or shall enter
         into any composition or similar agreement, or shall suspend the
         transaction of all or a substantial portion of its usual business; or

                  (k) Environmental Noncompliance. Notice shall be given of any
         alleged violation of environmental laws relating to the present or
         previously-owned or leased real properties of the Borrower or any of
         its subsidiaries, the effect of which could be reasonably expected to
         have a material adverse effect on the Borrower; or

                  (l) E&P Financing Default. E&P Financing Limited Partnership,
         a Maryland limited partnership, shall fail to make any payment of
         principal or interest due or otherwise default on any other obligations
         to the Bank beyond any applicable grace or cure period; or

                  (m) Franchise Agreement Default. Borrower or any tenant of
         Borrower shall default on any franchise or license agreement relating
         to any of the Revolving Loan Properties, and such default shall
         continue beyond any applicable grace or cure period provided in the
         franchise or license agreement.

                                       21
<PAGE>

         5.2 REMEDIES. Time is of the essence. Upon the occurrence of any such
Event of Default and during the continuance thereof, any obligation of the Bank,
or any other holders of the Revolving Loan Note, with respect to the Revolving
Loan shall automatically terminate, and the Bank or any other holders of the
Revolving Loan Note may declare the Revolving Loan Note to be immediately due
and payable, whereupon the Revolving Loan Note and any other amounts at the time
accrued or payable hereunder but unpaid, shall immediately become due and
payable, which acceleration shall occur automatically upon the occurrence of the
Events of Default provided in Sections 5.1(h) and (i), without presentment,
demand, notice or protest of any kind, all of which are hereby expressly waived
by the Borrower. No delay or omission on the part of the Bank or any holder of
the Revolving Loan Note in exercising any power or right hereunder or under the
Revolving Loan Note or Security Documents shall impair such right or power or be
construed to be a waiver of any Event of Default or any acquiescence therein,
nor shall any single or partial exercise of any power or right hereunder
preclude other or further exercise thereof, or the exercise of any other power
or right.

                        SECTION 6. CONDITIONS OF LENDING

         The obligation of the Bank to make the Revolving Loan is subject to the
following conditions:

         6.1 DOCUMENTATION. In addition to the conditions precedent set forth in
Section 6.2, the obligation of the Bank to make the Revolving Loan is subject to
the conditions precedent that the Bank shall have received all of the following,
each duly executed and dated the date of the Revolving Loan in form and
substance satisfactory to the Bank and its counsel, at the expense of the
Borrower, and in such number of signed counterparts as the Bank may request
(except for the Revolving Loan Note, of which only the original shall be
signed):

                  (a) Notes. The duly executed Revolving Loan Note;

                  (b) Security Documents. The duly executed or endorsed Deeds of
         Trust, Mortgages, Assignments of Leases and Rents, Subordination,
         Nondisturbance and Attornment Agreements, Security Agreement(s) and
         Financing Statements;

                  (c) Insurance. Original insurance policies or certificates
         thereof for the insurance required by Section 4.9 hereof;

                  (d) Taxes. Evidence satisfactory to Bank that all taxes are
         fully paid and not delinquent;

                  (e) Resolution. A certified copy of the resolution of the
         Board of Directors of the Borrower authorizing or ratifying the
         execution, delivery and performance, respectively, of this Agreement,
         the Revolving Loan Note, Security Documents, and the other agreements,

                                       22
<PAGE>

         documents and instruments provided for in this Agreement, certified by
         the Secretary of the Borrower;

                  (f) Articles of Incorporation and Bylaws. A certified copy of
         the articles of incorporation and bylaws of the Borrower certified by
         the Secretary and a certificate of good standing issued by the
         Secretary of State of the states of Delaware;

                  (g) Certificate of Incumbency. A certificate of the Secretary
         of the Borrower certifying the names of the officer or officers of the
         Borrower authorized to sign this Agreement, the Revolving Loan Note and
         Security Documents and the other agreements, documents, and instruments
         provided for in this Agreement, together with a sample of the true
         signature of each such officer (the Bank may conclusively rely on such
         certificate);

                  (h) Certificate of No Default. A certificate signed by the
         Chief Financial Officer of the Borrower to the effect that (i) no Event
         of Default has occurred and is continuing or will result from the
         making of the Revolving Loan; and (ii) the representations and
         warranties of the Borrower contained herein are true and correct as at
         the date of the Revolving Loan as though made on that date;

                  (i) Opinion of Counsel for the Borrower. A written opinion of
         counsel to the Borrower in form and substance acceptable to the Bank
         confirming to Bank the accuracy of the representations and warranties
         of Borrower set forth in this Agreement and other matters and things as
         Bank shall request;

                  (j)      Collateral Documents.

                           U.C.C. searches with respect to the Borrower.

                           Phase I Environmental Reports.

                           Lender's Title Policies.

                           Surveys.

                           Appraisals.

                           Comfort Letters or Agreements.

                  (k) Miscellaneous. Such other documents and certificates as
         the Bank may reasonably request.

         6.2      REPRESENTATIONS AND WARRANTIES; NO DEFAULT.

                  (a) Representations and Warranties. At the date of this
         Agreement and any advance under the Revolving Loan, the Borrower's

                                       23
<PAGE>

         representations and warranties set forth herein shall be true and
         correct as at such date with the same effect as though those
         representations and warranties had been made on and as at such date.

                  (b) No Default. At the time of this Agreement and any advance
         under the Revolving Loan, and immediately after giving effect to the
         Revolving Loan, the Borrower shall be in compliance with all the terms
         and provisions set forth herein on its part to be observed or
         performed, and no Event of Default shall have occurred and be
         continuing at the time of the Revolving Loan or would result from the
         making of the Revolving Loan or any subsequent advances thereunder.

         6.3 SUCCEEDING LOANS. The application or request by the Borrower for
any loan other than the Revolving Loan, including requests for advances
thereunder, shall be deemed a representation and warranty by the Borrower that
the statements in Sections 3 and 4 are true and correct on and as of the date of
each such loan except with respect to any changes in those statements permitted
by this Agreement, changes of which Borrower has given written notice to Bank
pursuant to the terms of this Agreement and changes agreed upon by the Bank in
writing subsequent to the date of this Agreement.

                            SECTION 7. MISCELLANEOUS

         7.1 WAIVER OF DEFAULT. The Bank may, by written notice to the Borrower,
at any time and from time to time, waive any default in the performance or
observance of any condition, covenant or other term hereof, which shall be for
such period and subject to such conditions as shall be specified in any such
notice. In the case of any such waiver, the Bank and the Borrower shall be
restored to their former position and rights hereunder and under the Revolving
Loan Note, and any Event of Default so waived shall be deemed to be cured and
not continuing; but no such waiver shall affect, extend or impair any rights of
the Bank with respect to any default, except as specifically set forth in the
Bank's written notice, nor shall it affect Bank's rights with respect to any
subsequent or other Event of Default.

         7.2 NOTICES. All notices, communications and distributions hereunder
shall be given or made to the following parties at the following addresses:

         (a)      if to the Borrower:

                  Pre-Merger:

                  SUPERTEL HOSPITALITY, INC.
                  309 North 5th Street
                  Norfolk, Nebraska 68702-2520
                  (402) 371-4229

                                       24
<PAGE>

                  with a copy thereof to:

                  MCGRATH, NORTH, MULLIN, KRATZ, P.C.
                  222 South 15th Street, Suite 1400
                  Omaha, Nebraska 68102
                  (402)341-3070
                  Attention: Ronald L. Comes
                  Telecopier: (402) 341-0216

                  Post-Merger:

                  c/o HUMPHREY HOSPITALITY TRUST, INC.
                  12301 Old Columbia Pike
                  Silver Spring, Maryland 20904
                  Attention: Bethany Hooper
                  Telecopier: (301) 680-4342

                  with a copy thereof to:

                  GALLAGHER, EVELIUS & JONES, LLP
                  218 North Charles Street, Suite 400
                  Baltimore, Maryland 21201
                  (410)727-7702
                  Attention: Stephen A. Goldberg
                  Telecopier: (410) 837-3085

         (b)      if to the Bank:

                  U.S. BANK NATIONAL ASSOCIATION
                  233 South 13th Street, Suite 911
                  Lincoln, Nebraska  68508
                  Attention: Steven D. Erwin, Senior Vice President

                  with a copy thereof to:

                  CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER
                  1900 U.S. Bank Building
                  233 South 13th Street
                  Lincoln, Nebraska  68508
                  (402) 474-6900
                  Attention:  Stephen H. Nelsen

or in any of the foregoing cases at such other addresses as the addressee may
hereafter specify for such purpose by written notice to the parties. Such
notices and other communications will be effectively given only if and when
given in writing and delivered at the address set forth herein duly deposited in
the mails with first-class postage prepaid, or delivered to a telegraph company
with all charges prepaid, addressed as aforesaid.

         7.3 WAIVERS. If the Bank does not require certain conditions precedent
to closing of the Revolving Loan as described in Section 6, such act shall be
construed only as a conditional waiver of those conditions as to closing on the

                                       25
<PAGE>

Revolving Loan on the date hereof and shall not be a general waiver of the
compliance with those conditions by the Borrower, and the Borrower shall comply
with those conditions hereafter on demand by the Bank. Any condition precedent
to closing of the Revolving Loan waived by the Bank under this paragraph shall
automatically be a condition precedent to all other future corresponding loans
and disbursements of the Revolving Loan.

         7.4 NONWAIVER; CUMULATIVE REMEDIES. No failure to exercise, and no
delay in exercising, on the part of the Bank of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies of the Bank
herein provided are cumulative and not exclusive of any rights or remedies
provided by law.

         7.5 SURVIVAL OF AGREEMENTS. All agreements, representations and
warranties made herein shall survive the delivery of this Agreement, the
Revolving Loan Note and the Security Documents and the making of any loans or
advances.

         7.6 SUCCESSORS. This Agreement shall, upon execution and delivery by
the Borrower, become effective and shall be binding upon and inure to the
benefit of the Borrower and the Bank, and their respective successors and
assigns, except that the Borrower may not transfer or assign any of its rights
or interest hereunder without the prior written consent of the Bank.

         7.7 CAPTIONS. Captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof. Reference herein to Sections without reference to the document in which
they are contained are references to this Agreement.

         7.8 SINGULAR AND PLURAL. Unless the context requires otherwise,
wherever used herein the singular shall include the plural and vice versa.

         7.9 COUNTERPARTS. This Agreement may be executed by the parties on any
number of separate counterparts, and by each party on separate counterparts,
each counterpart shall be deemed an original instrument; and all of the
counterparts taken together shall be deemed to constitute one and the same
instrument.

         7.10 FEES. The Borrower agrees, upon written request of the Bank, to
pay or reimburse the Bank for all costs and expenses incurred by the Bank
relating to this Agreement, including, without limitation, the costs and
expenses of seeking advice in regard to preparing and enforcing this Agreement
or the Revolving Loan Note or Security Documents, or preserving its rights
hereunder or under any document or instrument executed in connection herewith
(including legal fees and reasonable time charges of attorneys who may be
employees of the Bank, whether in or out of court, in original or appellate
proceedings or in bankruptcy), together with all expenses of record searches,
environmental studies, surveys, title insurance policies, appraisals, and filing
and closing fees paid by the Bank with respect to this Agreement and the
perfection of the Bank's liens.

         7.11 FURTHER ASSURANCES. From time to time, the Borrower will execute
and deliver to the Bank such additional documents, and will provide such

                                       27
<PAGE>

additional information as the Bank may reasonably require to carry out the terms
of this Agreement and be informed of the Borrower's status and affairs.

         7.12 CONSTRUCTION. This Agreement, the Revolving Loan Note and Security
Documents and any document or instrument or other agreement executed in
connection herewith and except as otherwise specifically provided therein shall
be governed by, and construed and interpreted in accordance with, the internal
laws of the State of Nebraska, and shall be deemed to have been executed in the
State of Nebraska.

         7.13 ENTIRE AGREEMENT. This Agreement may not be assigned by Borrower
without the prior written consent of Bank which consent may be withheld. This
Agreement constitutes the entire understanding between the parties hereto with
respect to the subject matter hereof, superseding all prior written or oral
understandings, and may not be modified, amended or terminated except by a
written agreement signed by each of the parties hereto or thereto.
Notwithstanding the foregoing, the provisions of this Agreement are not intended
to supersede the provisions of the Revolving Loan Note or Security Documents,
but shall be construed as supplemental thereto.

         7.14 SEVERABILITY. If any term or provision of this Agreement, or the
Revolving Loan Note or Security Documents, or any document or instrument
executed in connection therewith, including amendments and modifications or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the terms and provisions or the application of such term or
provision to person or circumstances other than those as to which it is held
invalid or unenforceable shall not be affected thereby, and each form and
provision shall be valid or enforced to the fullest extent possible by law.

         7.15 SUBMISSION TO JURISDICTION; VENUE. To induce the Bank to make the
Revolving Loan, as evidenced by the Revolving Loan Note and Security Documents
and this Agreement, the Borrower irrevocably agrees that, subject to the Bank's
sole and absolute election, all suits, actions or other proceedings in any way,
manner or respect, arising out of or from or related to this Agreement, the
Revolving Loan Note and Security Documents, or any document executed in
connection herewith, shall be subject to litigation in courts having situs
within Nebraska. The Borrower hereby consents and submits to the jurisdiction of
any local, state or federal court located within Nebraska. The Borrower hereby
waives any right it may have to transfer or change the venue of any suit, action
or other proceeding brought against the Borrower by the Bank in accordance with
this section.

         7.16 WAIVER OF TRIAL BY JURY. BANK BY ITS ACCEPTANCE HEREOF AND
BORROWER HEREBY VOLUNTARILY, KNOWINGLY AND INTENTIONALLY WAIVE ANY AND ALL
RIGHTS TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING UNDER THIS
AGREEMENT OR CONCERNING THE OBLIGATIONS OR ANY REAL OR PERSONAL PROPERTY PLEDGED
AS COLLATERAL UNDER THE SECURITY DOCUMENTS, REGARDLESS OF WHETHER SUCH ACTIONS
OR PROCEEDINGS CONCERN ANY CONTRACTUAL OR TORTIOUS OR OTHER CLAIM. BORROWER
ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A MATERIAL TO BANK IN EXTENDING
CREDIT TO BORROWER, THAT BANK WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS
JURY TRIAL WAIVER, AND THAT BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS
HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY
TRIAL WAIVER AND UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.

                                       27
<PAGE>

         7.17 CREDIT AGREEMENT NOTICE. A credit agreement must be in writing to
be enforceable under Nebraska law. To protect you and us from any
misunderstandings or disappointments, any contract, promise, undertaking, or
offer to forebear repayment of money or to make any other financial
accommodation in connection with this loan of money or grant or extension of
credit, or any amendment of, cancellation of, waiver of, or substitution for any
or all of the terms or provisions of any instrument or document executed in
connection with this loan of money or grant or extension of credit, must be in
writing to be effective.

         7.18 APPLICATION OF PROCEEDS. The Bank shall have sole discretion
regarding the application of any payments or proceeds received from the
Borrower, voluntary or involuntary, including, without limitation, any proceeds
from the sale or other disposition of any of the collateral or security
described in Section 2.

         7.19 CONSENT TO TRANSACTIONS. Notwithstanding any provisions of this
Agreement or the Security Documents to the contrary, the Bank hereby consents to
the transactions described in the Disclosure Schedule attached hereto as Exhibit
"J", provided that the transactions are consummated on or before October 31,
1999 and strictly in accordance with the Disclosure Schedule. The Disclosure
Schedule was prepared by the Borrower, and the Borrower represents and warrants
the truth and accuracy of information provided in the Disclosure Schedule, which
representation and warranty shall survive the execution of this Agreement.

                                       "BORROWER"

                                       SUPERTEL HOSPITALITY, INC.

                                       By:___________________________
                                          Paul J. Schulte, President

                                       "BANK"

                                       U.S. BANK NATIONAL ASSOCIATION

                                       By:___________________________
                                            Steven D. Erwin
                                            Senior Vice President

STATE OF _____________                )
                                      ) ss.
COUNTY OF ___________                 )

                                       28
<PAGE>

         The foregoing instrument was acknowledged before me this ___ day of
October, 1999, by Paul J. Schulte, President of Supertel Hospitality, Inc., a
Delaware corporation, on behalf of said corporation.

                                                  ______________________________
                                                            Notary Public

STATE OF _____________                )
                                      ) ss.
COUNTY OF ___________                 )

         The foregoing instrument was acknowledged before me this ___ day of
October, 1999, by Steven D. Erwin, Senior Vice President of U. S. Bank National
Association, a national banking association, on behalf of said Association.

                                                  ______________________________
                                                          Notary Public

                                       30
<PAGE>

                                    EXHIBITS

Exhibit A                     Revolving Loan Note

Exhibit B                     Revolving Loan Properties and Recording Offices

Exhibit C                     Assignment of Leases and Rents

Exhibit D                     Lease Subordination Agreements

Exhibit E                     Collateral Assignment of Franchise
                              Agreements

Exhibit F                     Agreements with Franchisors

Exhibit G                     Security Agreement

Exhibit H                     Financing Statement

Exhibit I                     Guaranties

Exhibit J                     Disclosure Schedule

Exhibit K                     Subsidiaries

Exhibit L                     Borrowing Base Certificate

                                       31<PAGE>

                                                                   Exhibit 10.29

                                                                        10/22/99

                                 LOAN AGREEMENT

                  This loan agreement (this "Agreement") is made and entered
into as of the 22nd day of October, 1999, by and among Marquette Capital Bank,
N. A. ("Marquette") and Bremer Bank, National Association ("Bremer")
(collectively, the "Lender") and Supertel Hospitality, Inc., a Delaware
corporation (including its subsidiaries, the "Borrower").

                  In consideration of the mutual agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by the parties, the Borrower and the Lender agree
as follows:

                  1. Loan. Subject to the provisions of this Agreement, upon
satisfaction of the conditions herein contained, the Lender shall make one or
more loans to the Borrower in an aggregate amount equal to $26,000,000.00
(collectively, the "Loan"). The Loan is not a revolving line of credit. The
Borrower shall use all proceeds of the Loan solely for refinancing existing
indebtedness on existing properties owned by Borrower and for other corporate
purposes in anticipation of the merger of Borrower into Humphrey Hospitality
Trust, Inc., a Virginia corporation ("Humphrey") contemplated by the Plan of
Merger dated June 11, 1999 (the "Humphrey Merger"). Pursuant to and following
the Humphrey Merger, Humphrey, as the surviving entity, will be responsible for
all liabilities and obligations of Borrower with respect to the Loan under the
Loan Documents (defined below) and Humphrey Hospitality Limited Partnership, a
Virginia limited partnership ("HHLP") will assume and agree to pay and perform
all such liabilities and obligations; from and after such time as the Humphrey
Merger becomes effective, Humphrey shall be and become the Borrower hereunder
and for all purposes hereof.

                  a.  Conditions.  Lender's  obligation  to  make  the  Loan  is
contingent upon the following:

                  (i)      Borrower's repayment, either prior to funding of the
                           Loan or out of the proceeds of the Loan, of certain
                           existing loans to Borrower by Marquette affiliates in
                           the approximate aggregate amount of $11,300,000.00;

                  (ii)     Lender's receipt of the Notes, Mortgages, Assignment
                           of Leases, Franchise Assignments, Indemnity and
                           Financing Statements, in each case duly executed by
                           Borrower;

                  (iii)    Lender's approval of environmental assessments,
                           engineering reports, quality inspections, surveys and
                           title work of the Multi-State Collateral, franchisor
                           consents, organizational documents and resolutions,
                           and supporting opinions; and
<PAGE>

                  (iv)     Lender's approval of a Year 2000 Readiness survey
                           completed by Borrower and its affiliates.

                  b. Notes. Borrower's obligation to repay the Loan and to pay
interest and other charges, fees and expenses thereon is evidenced by the
Borrower's promissory note of even date herewith payable to the order of
Marquette in the principal amount of Sixteen Million and No/100 Dollars
($16,000,000.00) and by Borrower's promissory note of even date herewith payable
to the order of Bremer in the principal amount of Ten Million and No/100 Dollars
($10,000,000.00) (together with any amendments, extensions, renewals and
replacements thereof, collectively called the "Notes"). Unless and until
Borrower shall receive written notice from either of Marquette or Bremer
instructing Borrower to make separate payments to each of Marquette and Bremer
under the Notes, Borrower shall make all payments due under the Notes to
Marquette, and Marquette shall remit the appropriate portion of such payments to
Bremer for application against the Note held by it.

                  c. Mortgages. The Notes are secured by the mortgages and deeds
of trust of even date herewith encumbering the Multi-State Collateral executed
by Borrower in favor of Lender described on Exhibit A hereto (collectively, the
"Mortgages").

                  d. Assignment of Leases and Rents. The Notes are further
secured by assignments of leases and rents of even date herewith executed by
Borrower in favor of Lender with respect to the same property encumbered by the
Mortgages (the "Assignment of Leases").

                  e. Franchise Assignments. The Notes are further secured by
Collateral Assignments of Franchise Agreements of even date herewith executed by
Borrower in favor of Lender (the "Franchise Assignments").

                  f. Environmental, ADA and ERISA Indemnification Agreement. To
induce Lender to enter into this Loan Agreement, Borrower has also executed and
delivered in favor of Lender an Environmental, ADA and ERISA Indemnification
Agreement (the "Indemnity").

                  g. Financing Statements. To further evidence Lender's interest
in the Multi-State  Collateral,  Borrower shall deliver Financing  Statements in
such form as Lender may request (the "Financing Statements").

                  2. Fees. In  consideration  of Lender's  agreement to make the
Loan, Borrower shall pay the following fees to Lender:

                  a.  Due  Diligence  Fee.  Lender  acknowledges  receipt  of  a
non-refundable Due Diligence Fee in the amount of $65,000.

                                       2
<PAGE>

                  b. Commitment Fee. Borrower has paid or concurrently with the
execution of this Agreement will pay to Lender a non-refundable Commitment Fee
in an amount equal to $65,000.

                  c. Closing Fee. Borrower shall pay Lender a Closing Fee in the
amount of 1.50% of the Loan on the date on which the Loan closes (the "Closing
Date"). The Due Diligence Fee and the Commitment Fee shall be credited against
the Closing Fee at closing.

                  3. Take-Out Broker. Borrower has retained Northland/Marquette
Capital Group ("Northland") to attempt to obtain take-out financing for the
Loan; provided, however, that Borrower shall be under no obligation to accept
any financing proposed by Northland, and Northland need not be Borrower's
exclusive source of take-out financing during the term of the Loan.

                  4. Covenants. As long as any now existing or hereafter arising
debt, obligation or liability of the Borrower to the Lender (including but not
limited to any debt, obligation or liability relating to any letter of credit)
shall remain outstanding, the Borrower shall comply with the following
requirements:

                  a. Reporting. Borrower shall deliver to each of Marquette and
Bremer, in form and substance acceptable to the Lender, the following:

                  (i)      within 120 days after the close of each fiscal year
                           of Borrower, a consolidated and consolidating
                           statement of Borrower's (and, following the Humphrey
                           Merger, Humphrey's) equity and a consolidated and
                           consolidating statement of cash flow of the Borrower
                           (and Humphrey) and any subsidiaries for such fiscal
                           year--all such statements to be in reasonable detail,
                           including all supporting schedules and comments; the
                           consolidated statements to be audited by independent
                           certified public accountants selected by Borrower and
                           certified by such accountants to have been prepared
                           in accordance with GAAP and accompanied by such
                           unqualified accountants' opinion thereon that such
                           documents have been audited in compliance with the
                           American Institute of Certified Public Accounts
                           Statements of Auditing standards in effect as of the
                           execution hereof;

                  (ii)     within 120 days after the close of each fiscal year
                           of Borrower, consolidated and consolidating income
                           statements and balance sheets of the Borrower (and,
                           following the Humphrey Merger, Humphrey and HHLP) and
                           any subsidiaries as of the end of such fiscal
                           year--all such statements to be in reasonable detail,
                           including all supporting schedules and comments; the
                           consolidated income statements and balance sheets of
                           the Borrower (and Humphrey) to be audited by
                           independent certified public accountants selected by
                           Borrower and certified by such accountants to have
                           been prepared in accordance with GAAP and to present

                                       3
<PAGE>

                           fairly the consolidated financial position and
                           results of operations of the Borrower (and Humphrey)
                           and any subsidiaries (including HHLP) and accompanied
                           by such unqualified accountants' opinion thereon that
                           such documents have been audited in compliance with
                           the American Institute of Certified Public Accounts
                           Statements of Auditing standards in effect as of the
                           execution hereof; the Lender shall have the right,
                           from time to time, to discuss the affairs of the
                           Borrower (and Humphrey) directly with such
                           independent certified public accountants after notice
                           to the Borrower (and Humphrey) and opportunity of the
                           Borrower (and Humphrey) to be represented at such
                           discussions;

                  (iii)    As soon as available, and in any event within 45 days
                           after the end of each fiscal quarter of Borrower,
                           quarterly operating statements for each hotel
                           encumbered by the Mortgages, together with a summary
                           of key statistics relating to such operations,
                           including average daily rates, occupancy levels, and
                           revenue per available room, all in substantially the
                           form as such statements have previously been
                           furnished to Lender, and such other information as
                           Lender may request;

                  (iv)     As soon as available, and in any event within 45 days
                           after the end of each fiscal quarter of Borrower, its
                           quarterly 10-Q with consolidated financials; and

                  (v)      As soon as available, and in any event within 120
                           days after the end of each fiscal year of Borrower,
                           its annual 10-K with consolidated financials.

                  b. Financial. The Borrower (and, following the Humphrey
Merger, Humphrey) shall maintain:

                  (i)      A Combined Debt Service Coverage Ratio of more than
                           1.5:1 for the Multi-State Collateral on a combined
                           basis. The Combined Debt Service Coverage Ratio shall
                           be measured as of December 31, 1999, and at quarterly
                           intervals thereafter.

                  (ii)     A Consolidated Debt Service Coverage Ratio of more
                           than 1.5:1 for all of Borrower's properties and
                           obligations on a consolidated basis. The Consolidated
                           Debt Service Coverage Ratio shall be measured as of
                           December 31, 1999, and at quarterly intervals
                           thereafter.

                  (iii)    A Combined Loan to Value Ratio not in excess of 65%,
                           to be tested on a quarterly basis, with respect to
                           the Multi-State Collateral and the outstanding
                           balance of the Loan and a Consolidated Loan to Value
                           Ratio not in excess of 60%, to be tested on a
                           quarterly basis, with respect to all properties owned
                           by Borrower and all debt obligations of Borrower on a

                                       4
<PAGE>

                           consolidated basis. For purposes of calculation of
                           the Combined Loan to Value Ratio and the Consolidated
                           Loan to Value Ratio, respectively, as of December 31,
                           1999, and at quarterly measurement intervals
                           thereafter the value of the Multi-State Collateral
                           and of all properties owned by Borrower,
                           respectively, shall be determined by applying a
                           capitalization rate of 12% to the trailing twelve
                           (12) months Adjusted Net Operating Income determined
                           with respect to the Multistate Collateral and all
                           properties owned by Borrower, respectively.

                  (iv)     After the Humphrey Merger, the foregoing ratios
                           continue to be applicable to Humphrey (including HHLP
                           and all Humphrey affiliates).

                  (v)      The failure of Borrower to maintain the Consolidated
                           Debt Service Coverage Ratio or the Consolidated Loan
                           to Value Ratio shall constitute an Event of Default
                           hereunder. The failure of Borrower to maintain the
                           Combined Debt Service Coverage Ratio or the Combined
                           Loan to Value Ratio shall constitute an Event of
                           Default hereunder, unless (A) within 30 days of such
                           failure the Borrower shall deliver to the Lender, and
                           the Lender shall agree to accept, additional security
                           for the Loan (together with supporting documents,
                           title policies, opinions and other materials required
                           by Lender) acceptable in all respects to the Lender
                           in its sole discretion, and (B) the additional
                           security would cause the Borrower (on a pro forma
                           basis, as if the additional security had been
                           included as part of the Multi-State Collateral on the
                           relevant covenant measurement date) to be in
                           compliance with the relevant ratio.

                  c. Compliance with Other Agreements. Borrower will take all
necessary steps to preserve its existence and franchises, will permit no uncured
event of default to exist under any loan or loan document with any other lender,
and will comply with all present and future laws applicable to it in the
operation of its business, and all material agreements to which it is subject.
If Supertel Hospitality Management, Inc., as tenant, shall be in default of its
obligations under the Lease (referred to in the Mortgages), Borrower shall,
unless Lender otherwise agrees, promptly institute and pursue appropriate
enforcement action. The Borrower will cause all franchise and license agreements
which are the subject of the Franchise Assignments to be and remain in full
force and effect.

                  d. Litigation. Borrower will give immediate notice to Lender
of (i) any litigation or proceeding in which it is a party if an adverse
decision therein would require it to pay more than $100,000 or deliver assets,
the value of which exceeds such sum (whether or not the claim is considered to
be covered by insurance); and (ii) the institution of any other suit or
proceeding involving it that might materially and adversely affect its
operation, financial condition, property, or business prospects.

                                       5
<PAGE>

                  e. Debt Service. Borrower will pay when due all of its
material indebtedness due third Persons within any applicable grace and or cure
periods except when the amount thereof is being contested in good faith by
appropriate proceedings and with adequate reserves therefor being set aside on
its books; for purposes hereof, indebtedness of the Borrower aggregating
$100,000 or less shall not be deemed material.

                  f. Lender Notification. Borrower will notify Lender
immediately (i) if it becomes aware of the occurrence of any Event of Default or
of any fact, condition, or event that only with the giving of notice or passage
of time, or both, could become an Event of Default; (ii) if it becomes aware of
any material adverse change in the business prospects, financial condition
(including, without limitation, proceedings in bankruptcy, insolvency, or
reorganization), or results of operations of the Borrower; or (iii) upon the
failure of the Borrower to observe any of its respective undertakings hereunder
or under any one or more of the Loan Documents.

                  g. ERISA. Borrower will (i) fund any of its Employee Pension
Benefit Plans in accordance with no less than the minimum funding standards of
29 U.S.C. Sec. 1082 (Section 302 of ERISA) and (ii) furnish the Lender, promptly
after the filing of the same, with copies of any reports or other statements
filed with any applicable governmental agency.

                  h. Year 2000 Compliance. "Year 2000 Compliance" means, with
regard to any person or entity, that all software, embedded microchips, and
other processing capabilities utilized by, and material to the business
operations or financial condition of, such person or entity are able to
interpret and manipulate data on and involving all calendar dates correctly and
without causing any abnormal ending scenario, including but not limited to all
dates in and after the year 2000. The Borrower represents and warrants to the
Lender and agrees that: (a) the Borrower has made due inquiry to determine
whether the computer applications and hardware the Borrower and the Borrower's
material suppliers and customers will be Year 2000 Compliant by January 1, 2000;
and (b) the Borrower has a plan to become Year 2000 compliant. By January 1,
2000, and the Borrower agrees to devote adequate resources toward, diligently
pursue, and take all actions necessary to complete such plan and become Year
2000 Compliant by January 1, 2000; and (c) to the best of the Borrower's
knowledge, all of the Borrower's material suppliers and customers will be Year
2000 Compliant by January 1, 2000; and (d) the Borrower agrees to deliver to the
Lender such information regarding the plans and progress of the Borrower and the
Borrower's material suppliers and customers toward becoming Year 2000 Compliant
as the Lender may reasonably request from time to time, including but not
limited to any assessment by a third party of the Borrower's efforts to become
Year 2000 Compliant; (e) at the Lender's request from time to time, the Borrower
shall order, obtain, and deliver to the Lender a copy of audits of the

                                       6
<PAGE>

Borrower's plans and progress to become Year 2000 Compliant by January 1, 2000,
and the Borrower shall permit the Lender and the Lender's representatives to
conduct audits of the Borrower's operations for such purpose, and (f) the
Borrower has substantially completed implementation of the Borrower's plan and
remediation of material Year 2000 problems. Breach of any representation,
warranty or agreement in this paragraph, or failure of the Borrower or a
significant portion of the Borrower's material suppliers and customers to become
Year 2000 Compliant by January 1, 2000 shall constitute an Event of Default
hereunder, if such breach or failure would have a material, adverse effect on
the operations of Borrower.

                  i. Inspection. Borrower shall keep accurate books and records
in which true and complete entries will be made in accordance with GAAP. Upon
request of Lender, Borrower, during normal business hours, shall give any
representatives of Lender access to and permit such representatives to examine
and copy all books, records and other writings in its possession, to inspect its
property and to discuss its finances, accounts, property and business with any
of its officers and directors. Borrower will permit the Lender, or its
employees, accountants, attorneys or agents, to examine and inspect any of the
Multi-State Collateral, other collateral covered by any other document securing
the Loan or any other property of the Borrower at any time during ordinary
business hours.

                  j. Sale or Transfer of Assets; Suspension of Business
Operations. Except as permitted by the Mortgages, Borrower will not sell, lease,
assign, transfer or otherwise dispose of (i) the stock of any Subsidiary (except
that, after the Humphrey Merger, Simplex, Inc., and Motel Developers Inc., may
be merged into Borrower), (ii) all or a substantial part of its assets, or (iii)
any Multi-State Collateral or any interest therein (whether in one transaction
or in a series of transactions) to any other Person and will not liquidate,
dissolve or suspend business operations. Borrower may purchase and sell personal
property in the ordinary course of its business, provided Lender shall be given
a first priority security interest in any replacement property relating to the
Multi-State Collateral. Borrower will not in any manner transfer any property
without prior or present receipt of full and adequate consideration.

                  k. Consolidation and Merger; Asset Acquisitions. Borrower will
not consolidate with or merge into any Person without the prior written approval
of Lender, except for any consolidation or merger which occurs in connection
with Borrower's acquisition of additional hotel properties (provided, however,
that Lender's approval shall nonetheless be required if the merger or
consolidation occurs in connection with a single transaction or series of
related transactions by which Borrower seeks to acquire more than 10 additional
hotel properties).

                  l. Sale and Leaseback. Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.

                                       7
<PAGE>

                  m. Restrictions on Nature of Business. Borrower will not
engage in any line of business materially different from that presently engaged
in by Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.

                  n. Accounting. Borrower will not adopt any material change in
accounting principles other than as required by GAAP. Borrower will not adopt,
permit or consent to any change in its fiscal year.

                  o. Place of Business; Name. Except in connection with the
Humphrey Merger, Borrower will not transfer its chief executive office or
principal place of business, or move, relocate, close or sell any business
location, unless Borrower gives Lender 30 days prior written notice of such
change, together with such amendments to financing statements as Lender may
request. Borrower will not permit any tangible Multi-State Collateral or any
records pertaining to the Multi-State Collateral to be located in any state or
area in which, in the event of such location, a financing statement covering
such Multi-State Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. Borrower will not change its
name.

                  p. Organizational Documents. Except in connection with the
Humphrey Merger, Borrower will not amend its certificate of incorporation,
articles of incorporation or bylaws.

                  q. REIT Status. Upon completion of the Humphrey Merger,
Humphrey will be a Real Estate Investment Trust within the meaning of the
Internal Revenue Code of 1986, as amended, and shall not change or rescind its
status as a Real Estate Investment Trust.

                  r. Capital Expenditure Account. Borrower shall establish an
interest-bearing Capital Expenditure Account with Marquette (for the benefit of
both Marquette and Bremer) upon the execution of this Agreement, and shall
maintain the account until all amounts owed to the Lender have been repaid.
Borrower shall deposit, or shall direct any tenant, lessor or manager to
deposit, 4% of the room revenue from the Multi-State Collateral into the Capital
Reserve Account to be used solely for the purpose of maintenance and capital
expenditures relating to properties owned by the Borrower. Until the occurrence
of an Event of Default, or until otherwise notified by the Lender, Borrower may
use the funds in the Capital Expenditure Account at its discretion for the
purposes set forth herein.

                  s. Covenant Compliance. As soon as available, and in any event
within 45 days after the end of each fiscal quarter of Borrower, Borrower shall
execute and deliver to Lender a Covenant Compliance Certificate in the form of
Exhibit B attached hereto.

                  5. Definitions. In this Agreement:

                  a. "Adjusted Net Operating Income" means the remainder of the
Net Operating Income from the Multi-State Collateral or all properties owned by
Borrower, as the case may be, after reducing Net Operating Income by an amount

                                       8
<PAGE>

equal to the sum of (i) 4% of gross room revenue for FF&E reserve, plus (ii) 4%
of gross room revenue for management fees and expenses.

                  b. "Combined Debt Service Coverage Ratio" for any period shall
be determined as the quotient obtained by dividing (i) Adjusted Net Operating
Income derived from the Multi-State Collateral for the most recent trailing
12-month period by (ii) the amount of debt service payments (principal and
interest) (computed on an annualized basis, based upon the loan terms in effect
on the date of determination) which would be required to be made under this
Agreement and related Loan Documents during such period.

                  c. "Consolidated Debt Service Coverage Ratio" for any period
shall be determined by dividing (i) the Adjusted Net Operating Income derived
from all properties of Borrower for the most recent trailing 12-month period by
(ii) the required debt service for all of the Borrower's indebtedness (computed
on an annualized basis, based upon the loan terms in effect on the date of
determination). For purposes of determining this ratio, the debt service on any
non-amortizing indebtedness shall be assumed to equal the monthly payment
required to fully amortize such indebtedness over a 25-year term at the interest
rate in effect at the end of each quarter.

                  d. "Debt" means (i) all items of indebtedness or liability of
the Borrower which in accordance with GAAP would be included in determining
total liabilities as shown on the liabilities side of the Borrower's balance
sheet on the date as of which Debt is to be determined, plus (ii) indebtedness
secured by any mortgage, pledge, lien or security interest on property of the
Borrower, whether or not the indebtedness secured thereby shall have been
assumed, plus (iii) guaranties, endorsements (other than for purposes of
collection in the ordinary course of business) and other contingent obligations
of the Borrower in respect of, or to purchase or otherwise acquire indebtedness
of others.

                  e. "Events of Default" means the occurrence and continuance of
any of the following events shall constitute an "Event of Default" hereunder:

                  (i)      the Borrower shall fail to pay any installment of
                           principal on the Loan when due, whether at stated
                           maturity, upon acceleration or otherwise, or pay when
                           due any interest, fees or other amounts payable
                           hereunder or under the other Loan Documents, and such
                           failure shall continue for ten (10) days after the
                           due date thereof; or

                  (ii)     any representation or warranty made by the Borrower
                           herein or in any other Loan Document shall at the
                           time made be incorrect in any material respect; or

                  (iii)    the Borrower shall fail to perform or observe any
                           term, covenant or agreement contained in this Loan
                           Agreement or any other Loan Document, and such
                           failure shall remain unremedied for thirty (30) days
                           after written notice thereof from the Lender to the
                           Borrower; or

                                       9
<PAGE>

                  (iv)     any event of default (however described) under any
                           other Loan Document shall occur and not be cured
                           within the applicable grace period, if any; or

                  (v)      the Borrower shall fail to comply with any of the
                           financial covenants set forth in Paragraph 4(b); or

                  (vi)     a material event of default shall occur under any
                           loan or credit agreement relating to Debt in excess
                           of $100,000 of the Borrower; or

                  (vii)    both Paul Schulte is no longer the Chief Executive
                           Officer of Borrower and Steve Borgmann is no longer a
                           senior officer of Borrower; provided, however, that
                           if Paul Schulte and Steve Borgmann no longer hold
                           such positions due to death or disability, it shall
                           not be an Event of Default hereunder if Lender has
                           approved in writing (which approval will not be
                           unreasonably withheld) the replacement officers; or

                  (viii)   the Humphrey Merger has not occurred pursuant to the
                           Plan of Merger referred to in Section 1 hereof within
                           90 days of the date hereof.

                  f. "GAAP" means generally accepted accounting principles
consistently applied. Except as otherwise approved by the Lender in writing, all
financial reporting, financial record keeping, and financial calculations in
connection with this Agreement shall be made on the basis of accounting
principles, methods, elections and estimates that are consistent and that are
consistent with the accounting principles, methods, elections and estimates used
in the last annual financial statements of the Borrower delivered by the
Borrower to the Lender before or upon the execution of this Agreement, and that
fairly present the financial condition or results of operations for the period
then ended.

                  g. "Loan Documents" means, collectively, all documents
executed by Borrower in connection with or as security for the Loan.

                  h. "Multi-State Collateral" means, collectively, all property
encumbered by the Mortgages.

                  i. "Net Operating Income" means gross income generated by or
at the property in question from whatever source, less the direct operating
expenses (not including depreciation or other non-cash items) for such property.

                  j. "Person" means any individual, corporation, partnership,
joint venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

                                       10
<PAGE>

                  6. Jurisdiction; Choice of Law. The Borrower consents to the
personal jurisdiction of the state and federal courts located in the State of
Minnesota in connection with any controversy relating in any way to this
Agreement or to any transaction or matter relating to this Agreement, waives any
argument that venue in such forums is not convenient, and agrees that any
litigation initiated by the Borrower against the Lender relating in any way to
this Agreement or to any transaction or matter relating to this Agreement shall
be venued in either the Minnesota District Court of the county where the Lender
is located, or the United States District Court, District of Minnesota. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Minnesota.

                  7. Modifications; Successors and Assigns. No provision of this
Agreement can be amended, modified, waived or terminated, except by a writing
executed by the Borrower and the Lender. This Agreement shall bind and benefit
the parties and their respective successors and assigns; provided, the Borrower
shall not assign any of its rights or obligations under this Agreement without
the prior written consent of the Lender, and any assignment in violation of this
sentence shall be null and void. Lender consents to the Humphrey Merger and the
assignment of Borrower's rights and obligations under this Agreement in
connection therewith.

                  8. Lender's Expenses. Regardless of whether the Loan closes,
the Borrower shall pay to the Lender on demand all of the Lender's costs and
expenses, (including legal expenses, appraisals, and environmental assessments)
to perform due diligence and to document and close the transaction contemplated
by this Agreement.

                  9. Further Assurances.

                  a. Borrower will, at its sole cost and expense, do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged and
delivered all such further acts, conveyances, notes, mortgages, deeds of trust,
assignments, security agreements, financing statements and assurances as Lender
shall from time to time reasonably require (a) to carry into effect the purposes
of this Agreement and the other Loan Documents, (b) for the better assuring,
conveying, mortgaging, assigning and confirming unto Lender of all property and
rights mortgaged, granted, bargained, alienated, confirmed, pledged,
hypothecated, conveyed or assigned by this Agreement, or any of the other Loan
Documents or property intended now or hereafter to be, or which Borrower may be
or may hereafter become bound to convey or assign to Lender, (c) for the
perfection of any such lien or security interest granted herein or in the other
Loan Documents, and (d) for the better assuring and confirming of all of
Lender's rights, powers and remedies hereunder. Borrower, within ten (10) days
after Lender's request, will execute and deliver and hereby authorizes Lender to
execute in the name of Borrower or without the signature of Borrower to the
extent Lender may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Lender in the Multi-State Collateral and the other collateral under
the Loan Documents.

                                       11
<PAGE>

                  b. Borrower forthwith upon the execution and delivery of this
Agreement and thereafter, from time to time, will cause the Mortgages and any
security instrument creating a lien or security interest or evidencing the lien
of the Mortgages and the other applicable Loan Documents upon the Multi-State
Collateral or other property and each instrument of further assurance to be
filed, registered or recorded in such manner and in such places as may be
required in order to publish notice of and fully to protect the lien or security
interest of, and the priority of, each of the Mortgages and the other Loan
Documents upon, and the interest of Lender in, the Multi-State Collateral or
other applicable property. Borrower will pay all filing, registration or
recording fees, and all expenses incidental to the foregoing and all taxes,
duties, assessments and charges arising out of or in connection with the
execution and delivery of the Mortgages, any other security instrument, any
instrument of further assurance or any other Loan Document. Upon Lender's
request, Borrower shall, from time to time, furnish Lender with evidence
reasonably satisfactory to Lender that such property is free of liens and
security interests (except as permitted hereunder), including searches of
applicable public records.

                  c. Upon any failure by Borrower to do so as provided in this
Paragraph 9, Lender may make, execute, record, file, re-record or refile any and
all such mortgages, deeds of trust, instruments, certificates and documents for
and in the name of Borrower, and Borrower hereby irrevocably appoints (which
appointment is coupled with an interest and with full power of substitution)
Lender the agent and attorney-in-fact of Borrower to do so; and Borrower shall
reimburse Lender, on demand, for all costs and expenses (including reasonable
attorneys' fees) incurred by Lender in connection therewith.

                  10. Prior Agreements Superseded. This Agreement supersedes and
replaces all prior commitment letters, proposal letters, term sheets, and other
statements of loan terms issued by the Lender to the Borrower, and all such
letters and term sheets are terminated.

                                       12
<PAGE>

                       [Signature Page to Loan Agreement]

Sincerely,
<TABLE>
<S>                                                           <C>
Marquette Capital Bank, National Association                  Bremer Bank, National Association

By                                                            By
  --------------------------------                              ----------------------------------

Title                                                         Title
     -----------------------------                                 -------------------------------
</TABLE>
                  The Borrower agrees to this Agreement.

                  THE BORROWER REPRESENTS AND WARRANTS TO THE LENDER AND AGREES
THAT THE BORROWER HAS READ ALL OF THIS AGREEMENT AND UNDERSTANDS ALL OF THE
PROVISIONS OF THIS AGREEMENT.

Supertel Hospitality, Inc.                               Date:  October __, 1999

By
  ------------------------------------

Title
     ---------------------------------

                                      13
<PAGE>

                                    EXHIBIT A

                               [List of Mortgages]

                  Mortgages and Deeds of Trust executed by Borrower in favor of
Lender and encumbering the following properties:

<TABLE>
<CAPTION>
         PROPERTY                              LOCATION                             TITLE
         --------                              --------                             -----
   <S>                                 <C>                                      <C>
   Creston Super 8 Motel               804 W Taylor St.                         CTIC NBU 180981260
                                       Creston, IA 50801 (Union Co.)            2601642

   O'Neill Super 8 Motel               309 N 5th Street                         CTIC NBU 180 981287
                                       Norfolk, NE 68792-1448 (Holt Co.)        TC 2962

   Keokuk Super 8 Motel                3511 Main Street                         CTIC NBU 180 981262
                                       Keokuk, IA  (Lee Co.)                    2601638

   Iowa City Super 8 Motel             611 First Avenue                         CTIC NBU 180 981261
                                       Coralville, IA 52241 (Johnson Co.)       2601637

   Burlington Super 8 Motel            3100 Kirkwood Street                     CTIC NBU 180 981258
                                       Burlington, IA (Des Moines Co.)          2601644

   Pittsburgh Super 8 Motel            3108 N Broadway                          CTIC NBU
                                       Pittsburg, KS (Crawford Co.)             T-19137

   Clinton Super 8 Motel               1711 Lincoln Way                         CTIC NBU 180 981259
                                       Clinton, IA 52732 (Clinton Co.)          2601643

   Mt. Pleasant Super 8 Motel          1000 N Grand Ave                         CTIC NBU 180 981286
                                       Mt. Pleasant, IA (Henry Co.)             9851017264

   Pella Super 8 Motel                 105 E Oskaloosa Street                   CTIC NBU 180 981264
                                       Pella, IA 50219  (Marion Co.)            2601640

   Storm Lake Super 8 Motel            101 W Milwaukee Ave                      CTIC NBU 180 981265
                                       Storm Lake, IA  50588 (Buena Vista Co.)  2601639

   McKinney Super 8 Motel              910 N Central Expressway                 CTIC NBU 180 990140
                                       McKinney, TX 75070 (Collin Co.)          GF# 236793-H

   Denton Super 8 Motel                620 South I-35 East                      CTIC GF# 236793-D
                                       Denton, TX 76205 (Denton Co.)            44-901-80-236793-D

   Grapevine Super 8 Motel             250 E Hwy 114                            CTIC GF# 236793-C
                                       Grapevine, TX 76051 (Tarrant Co.)        44-901-80-236793-C

   Menomonie Super 8 Motel             1622 N Broadway                          CTIC NBU 180 990147
                                       Menomonie, WI (Dunn Co.)                 DUN00311

   Las Colinas Wingate Inn             850 W Walnut Hill Lane                   CTIC NBU 180 990139
                                       Irving, TX  75038 (Dallas Co.)           GF# 236793-I

   Houston Wingate Inn                 ________________________________         CTIC NBU 180 990137
                                       Houston, TX (Harris Co.)                 GF# 236793-A

   Portage Super 8 Motel               3000 New Pinery Road                     CTIC NBU 180 990149
                                       Portage, WI  53901 (Columbia Co.)        CP-168456
</TABLE>

                                      A-1
<PAGE>

                                    EXHIBIT B
                         COVENANT COMPLIANCE CERTIFICATE
                         -------------------------------
      I,_________________, the ___________of ____________ , a ______________
(the "Borrower"), pursuant to the letter agreement dated (the "Agreement"),
hereby certify to Marquette Bank, National Association and to Bremer Bank,
National Association (the "Lender") as follows:

                  As of the close of business on __________________, the
following was true and correct:

         [Borrower to confirm compliance with each covenant contained in
                            Section 4 of Agreement]

                  AS OF THE DATE OF THIS CERTIFICATE, NO EVENT HAS OCCURRED
WHICH CONSTITUTES AN EVENT OF DEFAULT AS DEFINED IN THE AGREEMENT.

Date of Certificate:
                    --------------------------------------

Signature
         -------------------------------------------------

                                      B-1

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