Document:

exv10w7

 

EXHIBIT 10.7

AMENDMENT NO. 6 TO CREDIT AGREEMENT

     This Amendment No. 6 to Credit Agreement, dated as of October 4, 2004
(this “Amendment”), is entered into by and among Golfsmith International, L.P.,
Golfsmith NU, L.L.C., and Golfsmith USA, L.L.C., as Borrowers (the
“Borrowers”), the other Persons designated as Credit Parties to the Credit
Agreement (the “Credit Parties”), the lenders signatory thereto from time to
time (the “Lenders”), and General Electric Capital Corporation, for itself as a
Lender, as L/C Issuer and as Agent for the Lenders (in such capacity, the
“Agent”). Terms defined in the Credit Agreement and not otherwise defined
herein shall have the meanings assigned thereto in the Credit Agreement.

RECITALS

     A. The Borrowers, the other Credit Parties, the Agent and the Lenders are
parties to that certain Credit Agreement, dated as of October 15, 2002, as
amended by Amendment No. 1 thereto, dated as of January 10, 2003, Amendment No.
2 thereto, dated as of September 5, 2003, Amendment No. 3 thereto, dated as of
February 10, 2004, Amendment No. 4 thereto, dated as of March 18, 2004, and
Amendment No. 5 thereto, dated as of July 21, 2004 (as so amended and as it may
hereafter be further amended, restated or otherwise modified, the “Credit
Agreement”).

     B. The Borrowers, Credit Parties, Agent and Lenders are desirous of
amending the Credit Agreement as and to the extent set forth herein and subject
to the terms and conditions provided herein.

     C. This Amendment shall constitute a Loan Document and these Recitals
shall be construed as part of this Amendment.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1. Amendments. Section 4.1 of the Credit Agreement is amended and restated in
its entirety as follows:

“4.1 Capital Expenditure Limits. Holdings and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures during any Fiscal
Year that exceed the greater of: (a) one-third of EBITDA of Holdings and
its Subsidiaries on a consolidated basis in the immediately preceding
Fiscal Year, and (b) the sum of (i) $7,000,000 plus (ii) the amount, if
any, of the Excess Cash Flow Offer (as defined in the Indenture) made and
not accepted by the holders of the Senior Notes during the immediately
preceding Fiscal Year plus (iii) any amounts permitted to be made as
Capital Expenditures under this clause (b) (not to exceed $1,000,000)
that have not previously been made as Capital Expenditures.”

2. Conditions to Effectiveness. The effectiveness of this Amendment is
expressly conditioned upon the satisfaction of each of the following conditions
precedent in a manner acceptable to Agent:

1

 

     2.1. Agent’s receipt of counterparts of this Amendment, duly executed by
each Borrower, each other Credit Party, Agent and Requisite Lenders.

     2.2. No Default or Event of Default shall have occurred and be continuing
or would result from the effectiveness of this Amendment or the consummation of
any of the transactions contemplated hereby.

3. Reference to and Effect Upon the Credit Agreement and other Loan Documents.

     3.1. The Credit Agreement, the Notes and each other Loan Document shall
remain in full force and effect and each is hereby ratified and confirmed by
Borrower and each of the other Credit Parties. Without limiting the foregoing,
the Liens granted pursuant to the Collateral Documents shall continue in full
force and effect and the guaranties of each of the Guarantors shall continue in
full force and effect.

     3.2. The execution, delivery and effect of this Amendment shall be limited
precisely as written and shall not be deemed to (a) be a consent to any waiver
of any term or condition or to any amendment or modification of any term or
condition (except for the specific amendments provided in Section 1 above), of
the Credit Agreement or any other Loan Document or (b) prejudice any right,
power or remedy which the Agent or any Lender now has or may have in the future
under or in connection with the Credit Agreement, the Notes or any other Loan
Document.

     3.3. Each reference in the Credit Agreement to “this Agreement”,
“hereunder”, “hereof”, “herein” or any other word or words of similar import
shall mean and be a reference to the Credit Agreement as amended hereby, and
each reference in any other Loan Document to the Credit Agreement or any word
or words of similar import shall be and mean a reference to the Credit
Agreement as amended hereby.

4. Counterparts. This Amendment may be executed in any number of counterparts,
each of which when so executed shall be deemed an original but all such
counterparts shall constitute one and the same instrument. A counterpart
signature page delivered by fax transmission shall be as effective as delivery
of an originally executed counterpart.

5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW
PROVISIONS) OF THE STATE OF NEW YORK.

6. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

[SIGNATURE PAGES FOLLOW]

2

 

     IN WITNESS WHEREOF, this Amendment No. 6 to Credit Agreement has been duly
executed as of the date first written above.

	 	 	 	 	 
	 	GENERAL ELECTRIC CAPITAL CORPORATION,

as Agent, an L/C Issuer and Lender

 	 
	 	By:  	/s/ Susan K. Staub 	 
	 	Name:  	Susan K. Staub 	 
	 	 	       Its Duly Authorized Signatory 	 
	 

	 	 	 	 	 
	 	GOLFSMITH INTERNATIONAL, INC.

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	GOLFSMITH INTERNATIONAL HOLDINGS, INC.

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	GOLFSMITH GP HOLDINGS, INC.

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	DON SHERWOOD GOLF SHOP

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

AMENDMENT NO.6 TO GOLFSMITH CREDIT AGREEMENT

 

 

	 	 	 	 	 
	 	GOLFSMITH HOLDINGS, L.P.

By Golfsmith GP Holdings, Inc., as General Partner

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	GOLFSMITH GP, L.L.C.

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	GOLFSMITH DELAWARE, L.L.C.

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	GOLFSMITH CANADA, L.L.C.

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	GOLFSMITH EUROPE, L.L.C.

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

AMENDMENT NO.6 TO GOLFSMITH CREDIT AGREEMENT

 

 

	 	 	 	 	 
	 	GOLFSMITH USA, L.L.C.

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	GOLFSMITH NU, L.L.C.

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	GOLFSMITH LICENSING, L.L.C.

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	GOLFSMITH INTERNATIONAL, L.P.

By Golfsmith GP L.L.C., as General Partner

 	 
	 	By:  	/s/ Noel E. Wilens
 	 
	 	Name:  	Noel E. Wilens 	 
	 	Title:  	Vice President 	 
	 

AMENDMENT NO.6 TO GOLFSMITH CREDIT AGREEMENT<PAGE>
                                                                    EXHIBIT 10.1

            THIRD AMENDMENT TO AMENDED AND RESTATED MASTER AGREEMENT

         THIS THIRD AMENDMENT TO AMENDED AND RESTATED MASTER AGREEMENT (this
"THIRD AMENDMENT") is made and entered this 4th day of October, 2004, to be
effective as of October 1, 2004 (the "EFFECTIVE DATE"), by and among PMC
COMMERCIAL TRUST and its subsidiaries, PMCT Sycamore, L.P., PMCT Macomb, L.P.,
PMCT Marysville, L.P. and PMCT Plainfield, L.P. (collectively, the "LESSOR"),
ARLINGTON INNS, INC. (formerly Amerihost Inns, Inc.) (the "LESSEE") and
ARLINGTON HOSPITALITY, INC. ("ARLINGTON").

                                    RECITALS

         WHEREAS, the parties hereto entered into an Amended and Restated Master
Agreement dated January 24, 2001 (the "ORIGINAL MASTER AGREEMENT"), to set forth
their agreement to amend and restate provisions of the Master Agreements (as
therein defined) and other matters set forth therein; and

         WHEREAS, the parties hereto have previously amended the Original Master
Agreement by (a) that certain First Amendment to Amended and Restated Master
Agreement dated as of May 25, 2001 and (b) that certain Second Amendment to
Amended and Restated Master Agreement dated as of June 4, 2003 (the Original
Master Agreement, as so amended, herein called the "MASTER AGREEMENT"); and

         WHEREAS, Arlington has guaranteed the obligations of Lessee under the
Property Leases pursuant to that certain Guaranty Agreement dated June 30, 1998
(the "GUARANTY"); and

         WHEREAS, the parties wish to make further amendments to the Master
Agreement as more fully set forth herein.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the foregoing premises, the
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

1.       DEFINITIONS. Capitalized terms used but not defined herein shall have
         the meanings set forth in the Master Agreement.

2.       BASE RENT. Anything in the Master Agreement or the Property Leases to
         the contrary notwithstanding, the parties agree as follows:

         (a)      By letter agreements dated March 11, 2004, April 29, 2004,
                  June 2, 2004, July 5, 2004, July 30, 2004 and September 1,
                  2004 (collectively, the "PRIOR AGREEMENTS"), Lessor agreed to
                  accept the following reduced payments of Base Rent (each, a
                  "REDUCED PAYMENT"), all of which have been paid by Lessee to
                  Lessor:

                  (i)      March 1, 2004 Reduced Payment:       $385,319.00

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - PAGE 1
-------------------------

<PAGE>

                  (ii)     April 1, 2004 Reduced Payment:       $359,833.00

                  (iii)    May 1, 2004 Reduced Payment:         $359,833.00

                  (iv)     June 1, 2004 Reduced Payment:        $359,833.00

                  (v)      July 1, 2004 Reduced Payment:        $359,833.00

                  The Reduced Payment amount for March 1, 2004 included the late
                  fee due on the March 1 Base Rent payment and past due Base
                  Rent due to CPI increases as provided in the Property Leases.
                  Lessee paid to Lessor the March 1, 2004 Reduced Payment, less
                  the sum of $108,897.00 (which amount was funded by Lessor from
                  the Escrow Funds held under the Master Agreement), for a net
                  payment of $276,422.00. Lessee paid to Lessor the April 1,
                  2004 Reduced Payment, less the sum of $100,000 (which amount
                  was funded by Lessor from the Escrow Funds held under the
                  Master Agreement), for a net payment of $259,833.00. Pursuant
                  to the Prior Agreements, Lessor applied $425,056.00 of the
                  Escrow Funds held under the Master Agreement to pay the
                  Accrued Base Rent (as defined in the Prior Agreements)
                  outstanding as of September 1, 2004.

                  Pursuant to the Prior Agreements, Lessee paid the Base Rent
                  due on August 1, 2004 in the full amount required under the
                  Leases, being the sum of $444,844.25 and the Base Rent due on
                  September 1, 2004 in the full amount required under the
                  Leases, being the sum of $422,952.30.

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - PAGE 2
-------------------------

<PAGE>

         (b)      Provided no Contract Rate Event of Default or Default Rate
                  Event of Default (as both terms are hereinafter defined) has
                  occurred and is continuing, beginning on the Effective Date,
                  the Base Rent payments required to be paid under the Property
                  Leases shall be reduced to an amount equal to an annualized
                  rate (the "PAY RATE") of eight and one-half percent (8 1/2%)
                  of the Total Assigned Values of the Hotels then remaining
                  subject to a Property Lease (the "REDUCED BASE RENT PAYMENT").
                  The following events shall each constitute a "CONTRACT RATE
                  EVENT OF DEFAULT" hereunder: (i) the occurrence of the event
                  described in Paragraph 4(f)(i) below or (ii) the occurrence of
                  a non-monetary event of default by Lessee or Arlington under
                  the Master Agreement, the Property Leases, and any other
                  agreements between Lessee, Guarantor and Lessor, including,
                  without limitation, performance of any non-monetary
                  obligations under those certain notes and agreements listed on
                  Schedule 1 attached hereto (the "RELATED OBLIGATIONS") and
                  such event of default is not cured within any applicable grace
                  or cure periods. The following events shall each constitute a
                  "DEFAULT RATE EVENT OF DEFAULT" hereunder: (i) the occurrence
                  of the event described in Paragraph 4(f)(ii) below, (ii) the
                  failure of Lessee to pay the Arlington Fee Amount in
                  accordance with the terms of Paragraph 4(b) below, or (iii)
                  the occurrence of a monetary event of default by Lessee or
                  Arlington under the Master Agreement, the Property Leases, and
                  any other of the Related Obligations (including, without
                  limitation, the failure to pay any principal, interest, real
                  estate taxes or real estate tax escrow payments due and
                  payable thereunder), and such event of default is not cured
                  within any applicable grace or cure periods.

         (c)      Upon the occurrence of a Contract Rate Event of Default and
                  until such Contract Rate Event of Default has been cured, the
                  Base Rent will be calculated at the rate set forth for each
                  Hotel in the Master Agreement and the separate Property Leases
                  (herein the "CONTRACT RATE"). The increase to the Contract
                  Rate will be effective (A) commencing on the first (1st) day
                  of the month in which the Contract Rate Event of Default
                  occurs and will remain effective until the first (1st) day of
                  the first month following the month in which the Contract Rate
                  Event of Default is cured, at which time the Pay Rate will be
                  reinstated, or (B) as otherwise provided in Section 4(f)(i)
                  below.

         (d)      Upon the occurrence of a Default Rate Event of Default and
                  until such Default Rate Event of Default has been cured, the
                  Base Rent will be calculated at the rate of fifteen percent
                  (15%) per annum (the "DEFAULT RATE"). The increase to the
                  Default Rate will be effective (A) commencing on the first
                  (1st) day of the month in which the Default Rate Event of
                  Default occurs and will remain effective until the first (1st)
                  day of the first month following the month in which the
                  Default Rate Event of Default is cured, at which time the Pay
                  Rate will be reinstated, or (B) as otherwise provided in
                  Section 4(f)(ii) below.

3.       FOURTH PURCHASE OPTION; PAYMENTS UPON SALE. Lessee and Lessor
         acknowledge that the Fourth Purchase Option has been satisfied through
         the Sale Closing of the AmeriHost Inn, Port Huron, Michigan (the "PORT
         HURON HOTEL"), which occurred on or about August 25, 2004. There will
         be no further purchase options under the Master Agreement. The
         provisions of Article 10.6 of the Master Agreement that provide for the
         payment to Lessor of $125,000.00 and $150,000.00 are hereby deleted in
         their entirety.

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - PAGE 3
-------------------------

<PAGE>

4.       SALES OF THE HOTELS.

         (a)      Lessee shall cause the Hotels to be sold under Approved
                  Contracts in accordance with the following schedule (the
                  "SALES SCHEDULE"):

                  (i)      a minimum of six (6) Hotels on or before October 1,
                           2005 (which includes the sale of the Port Huron
                           Hotel);

                  (ii)     a minimum of eleven (11) Hotels (cumulative) on or
                           before October 1 , 2006;

                  (iii)    a minimum of sixteen (16) Hotels (cumulative) on or
                           before October 1, 2007; and

                  (iv)     a minimum of twenty-one Hotels (cumulative) on or
                           before October 1, 2008.

         (b)      Anything in Article 10.6 of the Master Agreement to the
                  contrary notwithstanding, upon the closing of the sale of any
                  of the Hotels (herein, a "SALE CLOSING"), Lessor shall be paid
                  the following amounts, in the following manner: (a)
                  concurrently with each Sale Closing, the sale proceeds, after
                  payment of the Closing Costs (the "NET SALES PROCEEDS") and
                  (b) an amount equal to twenty-five and three-tenths percent
                  (25.3%) of the gross room revenues for such Hotel for the
                  12-month period prior ending on the last day of the month
                  immediately preceding the month in which the Sale Closing
                  occurs (the "ARLINGTON FEE AMOUNT"), payable as provided
                  below. As used herein "CLOSING COSTS" shall mean fees, broker
                  fees, commissions, title premiums, recording fees, prepayment
                  penalties on related debt of the Lessor, if any, assumption
                  fees, or any transfer tax or taxes levied by any local or
                  state taxing authority and shall not include real estate taxes
                  and any other operating costs and expenses related to the
                  Hotel that are prorated and payable by the "seller" at the
                  Sale Closing. Lessee shall be responsible for the payment of
                  all such prorated amounts and such amounts shall not be
                  deducted from the sales proceeds to determine the Net Sales
                  Proceeds. The following example will illustrate the
                  calculation of the Net Sales Proceeds:

                           The purchase price for the Hotel is $1,000,000 and at
                           the closing date, Lessee has not yet paid real estate
                           taxes and Lessee's prorated share of such real estate
                           taxes is $80,000.00. In addition, Lessee's prorated
                           share of amounts due under service contracts and for
                           utilities is $10,000.00. Closing Costs are
                           $15,000.00. The Net Sales Proceeds payable to Lessor
                           by Lessee for the purpose of this Agreement would be
                           $985,000.00, notwithstanding that the settlement
                           statement would show a "net payment" to the Seller of
                           $895,000.00.

                  The applicable Arlington Fee Amount will be paid to Lessor
                  within forty-five (45) days following each Sale Closing date
                  and shall be accompanied by a certification by Lessee of the
                  calculation of such amount, together with backup
                  documentation. Upon receipt by Lessor, the Arlington Fee
                  Amount will be

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - PAGE 4
-------------------------

<PAGE>

                  applied by Lessor to reduce the principal balance of the
                  Deficit Note (as defined in the Proceeds Deficits Loan
                  Agreement (herein so called) between Arlington and Lessor
                  dated of even date herewith.

         (c)      If the amount of the Net Sales Proceeds for any Hotel exceeds
                  the Assigned Value (herein so called) for such Hotel as
                  reflected on Exhibit E attached to the Master Agreement
                  ("PROCEEDS EXCESS"), the amount of any such Proceeds Excess
                  shall be applied as follows: (a) if as of the Sale Closing of
                  such Hotel, there exists a Proceeds Deficit (as hereinafter
                  defined), the Proceeds Excess will be applied by Lessor (i)
                  first, to reduce any existing Proceeds Deficit amount and (ii)
                  second, reduce the Assigned Value of the remaining Hotels in
                  such amounts as determined by Lessor in its discretion and (b)
                  if as of the Sale Closing of such Hotel, no Proceeds Deficit
                  exists, the Proceeds Excess will be (i) applied by Lessor to
                  reduce the Assigned Value of the remaining Hotels, in such
                  amounts as determined by Lessor in its reasonable discretion,
                  taking into consideration, among other factors, the relative
                  operating deficits of the Hotels that are scheduled for sale
                  or (ii) if the Sale Closing is for the final Hotel or the
                  Total Assigned Values are reduced to zero (0), released to
                  Lessor. If at any time during the term of the Master
                  Agreement, the Total Assigned Values of the Hotels that have
                  not been sold is reduced to $1,500,000 or less and the
                  Proceeds Deficit has been paid in full, Lessor may, at its
                  option, terminate the Property Leases for such Hotels and
                  Lessee and Arlington will have no further right or interests
                  under the Property Leases or in the Hotels. As used herein,
                  the term "PROCEEDS DEFICIT" with respect to any Hotel, shall
                  mean an amount equal to the deficit between the amount of the
                  Net Sales Proceeds for a Hotel and the Assigned Value for such
                  Hotel and "PROCEEDS DEFICITS" shall mean the aggregate of such
                  deficits for all Hotels.

         (d)      The payment of the Proceeds Deficits shall become the absolute
                  and immediate obligation of Arlington pursuant to and subject
                  to the terms of the Proceeds Deficits Loan Agreement.

         (e)      Concurrently with the sale of the Port Huron Hotel, Arlington
                  executed, as maker, a promissory note in favor of Lessor, as
                  payee, in the original principal amount equal to the Proceeds
                  Deficits occasioned by the sale of the Port Huron Hotel, a
                  copy of which is attached hereto as Schedule 3 (the "PORT
                  HURON DEFICIT NOTE"). Lessor and Lessee acknowledge and
                  confirm that the current principal balance of the Port Huron
                  Deficit Note is $509,830.33. Concurrently with the execution
                  of this Third Amendment and the Proceeds Deficits Loan
                  Agreement, Arlington shall execute, as maker, and deliver to
                  Lessor a Deficit Note in the form contemplated under the
                  Proceeds Deficits Loan Agreement in the original principal
                  amount that is equal to the current outstanding principal
                  balance of the Port Huron Deficit Note. Concurrently with
                  Arlington's execution and delivery of the Deficit Note, Lessor
                  shall return the original Port Huron Deficit Note to
                  Arlington. Lessee further acknowledges and agrees that the
                  Arlington Fee Amount payable in connection with the sale of
                  the Port Huron Hotel in the amount of $164,889.60 remains
                  outstanding and will be paid by Lessee to Lessor on or before
                  October 11, 2004. Upon payment of such Arlington Fee Amount,
                  Lessor will apply such payment to reduce the principal balance
                  of the Deficit Note and will

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - PAGE 5
-------------------------

<PAGE>

                  note such principal reduction to the Deficit Note in
                  accordance with the provisions of the Proceeds Deficits Loan
                  Agreement.

         (f)      Anything herein, in the Master Agreement or the Property
                  Leases to the contrary notwithstanding, if the number of
                  Hotels required to be sold pursuant to the Sales Schedule
                  exceeds the number of Hotels actually sold as the last day of
                  a Sale Year (i) by five (5) or less Hotels, such event shall
                  be deemed a Contract Rate Event of Default, and beginning on
                  the first (1st) day of the first (1st) month in the next Sales
                  Year, the Base Rent will become payable at the Contract Rate
                  until the first (1st) day of the month following such time as
                  the minimum number of Hotels have been sold for such prior
                  Sales Year, at which time the Pay Rate will be reinstated and
                  (ii) by more than five (5) Hotels, such event shall be deemed
                  a Default Rate Event of Default, and beginning on the first
                  (1st) day of the first (1st) month in the next Sales Year,
                  Base Rent will accrue at the Default Rate until the first
                  (1st) day of the month following such time as the minimum
                  number of Hotels have been sold for such prior Sales Year, at
                  which time the Contract Rate will be reinstated and the
                  provisions of clause (i) of this subsection (f) will again be
                  applicable.

         (g)      As used herein the term "SALES YEAR" shall mean the period
                  beginning on October 1 of one calendar year and ending on
                  September 30 of the following year.

5.       CAPITAL EXPENDITURE RESERVE. Anything in the second sentence of Section
         10.8 to the contrary notwithstanding, upon any sale of a Hotel, 100% of
         the combined Capital Expenditure Reserve Account and the FF&E Reserve
         Account (collectively, the "RESERVES") for such Hotel shall be applied
         to such accounts for the remaining Hotels in such amounts as determined
         by Lessor in its reasonable discretion after taking into account the
         planned timing of remaining Hotel sales and the relative investment in
         each Hotel necessary to derive the greatest sales value; provided,
         however, that until the breakfast rooms for the Rochelle Hotel, the
         Wooster North Hotel and the Grand Rapids North Hotel are completed, the
         Reserves (inclusive of the Port Huron Reserves) shall be applied to the
         costs of completing these breakfast rooms. Lessee will use its
         reasonable efforts to utilize the Reserves for the Hotels prior to the
         sale of the Hotels for the purposes set forth in the Property Leases
         and as necessary to maintain the Hotels as required under the Property
         Leases. Any Reserves remaining at the time the last Hotel is sold will
         be applied to reduce the Proceeds Deficit, and if no Proceeds Deficit
         exists, released to Arlington.

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - PAGE 6
-------------------------

<PAGE>

6.       OPERATING STATUS REPORTS. Within thirty (30) days after the end of each
         calendar quarter, Lessee shall provide Lessor with a status report on
         each Hotel owned by Lessor at such time, which report shall include the
         following information: (a) market position information (per STAR or
         other similar reports), (b) information regarding any new competition
         of which Lessee is advised, and (c) information on any significant
         developments impacting the Hotel's business. Such reports shall be in
         addition to and not in substitution of the financial reports that
         Lessee is required to provide pursuant to the terms of the Property
         Leases and Master Agreement and Lessee shall continue to provide such
         financial reports as required under the terms of the Property Leases
         and Master Agreement.

7.       SALES PROCESSES; APPROVALS.

         (a)      Lessee shall submit offers it or Arlington receives on the
                  Hotels to the Lessor on a timely basis, with Lessee's and
                  Arlington's opinions as to whether such offer should be
                  pursued.

         (b)      Lessee and/or Arlington will provide a monthly written status
                  report to Lessor describing (i) the status of any pending
                  sales of the Hotels and (ii) indications of interest and
                  offers made with respect to the potential sale of any of the
                  Hotels. Along with such report, Lessee shall update the
                  operations status report referred to in Paragraph 6 above for
                  any offer being submitted by Lessee, but only to the extent it
                  is aware of new material developments per the terms set forth
                  in the last such operations status reports for the applicable
                  Hotel.

         (c)      Prior to the execution of any contract for the sale of a
                  Hotel, Lessee shall submit the following to Lessor for
                  Lessor's approval, not to be unreasonably withheld or delayed:
                  (i) a summary of the economic terms of such proposed sale,
                  (ii) the identity and financial information regarding the
                  proposed purchaser, (iii) a copy of the proposed letter of
                  intent and (iv) when available, the form of the final,
                  execution draft of the proposed contract of sale. Within five
                  (5) business days after actual receipt by Lessor of (A) the
                  items listed in (i) through (iii) in the preceding sentence,
                  Lessor shall indicate its approval or disapproval of the terms
                  of the proposed sale and (B) the form of the final, execution
                  draft of the proposed contract of sale, Lessor shall indicate
                  its approval or disapproval of such form; provided that if
                  Lessor fails to respond within said five (5) business day
                  period, the terms of such sale and the form of the final,
                  execution draft of contract of sale, respectively, shall be
                  deemed approved and Lessee may proceed to the Sale Closing
                  under the terms approved (or deemed approved) by Lessor. Any
                  material deviation from such terms shall require the further
                  approval of Lessor. Any contract of sale approved (or deemed
                  approved) by Lessor under this Paragraph 7(c) is herein called
                  an "APPROVED SALES CONTRACT". Lessee shall submit the items
                  described in subsections (i) and (ii) above by overnight
                  courier and they shall be deemed received upon acknowledgment
                  of receipt by Lessor.

         (d)      Lessor and Lessee hereby agree and acknowledge that (i) Lessor
                  has agreed to the sales of the Hotels listed on Schedule 2 at
                  the prices listed on Schedule 2 and (ii) that Lessee need not
                  seek further approvals for the sales of the Hotels listed on
                  Schedule 2 at such prices provided that (A) such sales occur
                  within six (6) months following the Effective Date, (B) Lessee
                  submits to Lessor the

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - PAGE 7
-------------------------

<PAGE>

                  proposed contract of sale for such Hotels prior to the
                  execution thereof in accordance with subparagraph (c) above
                  and (C) Lessee thereafter sells such Hotels pursuant to terms
                  and conditions that are substantially similar to those set
                  forth in the Approved Sales Contract and at prices
                  substantially similar or greater than those set forth in
                  Schedule 2. Lessor and Lessee may mutually agree at any time
                  to substitute Hotels for those Hotels listed in Schedule 2.

         (e)      Notwithstanding, to the extent a Hotel has not sold within six
                  (6) months of the date the anticipated sale price and terms
                  are approved by Lessor pursuant to the terms of this Paragraph
                  7, then Lessee shall either (i) request Lessor to agree to an
                  extension of the closing date under the Approved Sales
                  Contract or (ii) submit revised sales proposals pursuant to
                  the provisions of subparagraph (c) above.

         (f)      Lessee shall cause any brokers working directly with Lessee on
                  the sale of Hotels to communicate with Lessor and Lessee
                  concurrently at the request of the Lessor.

         (g)      All the Hotels will be sold as "AmeriHost Inn" hotels, with
                  the AmeriHost franchise agreement for such Hotel to continue
                  after such sale, unless agreed to otherwise by Lessor and
                  Lessee.

8.       NEGATIVE COVENANTS OF LESSEE AND ARLINGTON. Lessee and Arlington hereby
         agree and covenant as follows:

         (a)      No dividends shall be declared or distributed with respect to
                  the common stock of Arlington until all amounts owing to
                  Lessor under the Master Agreement, the Property Leases and the
                  Deficit Agreement are paid in full. Notwithstanding the
                  foregoing, provided no Default Rate Event of Default exists,
                  dividends for preferred stock of Arlington may be declared and
                  distributed.

         (b)      There shall be permitted no stock buy-backs of Arlington
                  stock, except (i) under executive employment contracts or
                  employee bonus plans, provided that any buy-back under an
                  executive employment contract may not exceed the exercised
                  amount plus taxes thereon, or (ii) pursuant to stock
                  repurchases in the open market with the amount of cash
                  received through option purchases, provided in no event shall
                  such net cash requirement be greater than $350,000, in the
                  aggregate, during the term of the Master Agreement for the
                  items described in (i), and (ii) above.

9.       CONFIDENTIALITY AGREEMENT; PRESS RELEASES. The Confidentiality
         Agreement dated February 19, 2004 and executed by the parties hereto is
         hereby terminated and of no further force and effect. Lessee and
         Arlington agree, however, that any press release regarding the terms or
         the subject matter of this Third Amendment, the Master Agreement, the
         Property Leases, the Deficit Agreement or in any way relating to the
         relationship between Lessee, Arlington and Lessor shall be subject to
         the prior approval of Lessor prior to its release. Notwithstanding the
         foregoing, either Lessor or Lessee may make any such disclosures and
         press releases as are necessary to comply with applicable federal or
         state laws, codes or regulations.

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - PAGE 8
-------------------------

<PAGE>

10.      CONTINUED VALIDITY. Except as expressly provided in this Third
         Amendment, all terms, conditions, representations, warranties, and
         covenants contained in the Master Agreement and shall remain in full
         force and effect, and are hereby ratified, confirmed and acknowledged
         by Lessee and Arlington. All references herein or the Property Leases
         to the Master Agreement shall be deemed to reference the Master
         Agreement as amended by this Third Amendment, and any default of the
         terms of this Third Amendment shall be deemed an event of default under
         the Master Agreement and Property Leases.

11.      CONSTRUCTION. This Third Amendment and the rights and obligations of
         the parties hereunder shall be construed and interpreted in accordance
         with and governed by, the laws of the State of Texas and applicable
         laws of the United States of America.

12.      BINDING EFFECT. This Third Amendment shall be binding upon and inure to
         the benefit of and be enforceable by the parties hereto and their
         respective successors and assigns.

13.      AGREEMENT OF ARLINGTON REGARDING GUARANTY. Arlington hereby confirms
         that (i) the execution and delivery of this Third Amendment will in no
         way reduce or impair Arlington's obligations under the Guaranty, which
         Guaranty remains in full force and effect and (ii) the obligations of
         Arlington under the Guaranty with respect to the performance of the
         Lessee under the Master Agreement, includes those obligations arising
         under the Master Agreement, as amended by this Third Amendment.

14.      ATTORNEY FEES. Arlington and Lessee, on demand, shall pay Lessor for
         all costs and expenses, including without limitation attorneys' fees
         paid or incurred by Lessor in connection with the collection of any sum
         due hereunder, or in connection with enforcement of any of Lessor's
         rights or Arlington's and Lessee's obligations under this Third
         Amendment and the Master Agreement.

15.      AMENDMENT FEE. In consideration of the execution of this Third
         Amendment, Arlington and Lessee have paid to Lessor as a non-refundable
         deposit in the amount of $50,000.00 (the "AMENDMENT FEE"). To the
         extent the actual attorney fees incurred by Lessor in connection with
         the negotiation and preparation of this Third Amendment exceed the
         Amendment Fee, Lessee and Arlington shall remit such excess to Lessor
         within ten (10) days following delivery to Lessee and Arlington of
         invoices detailing such fees.

16.      JOINT AND SEVERAL LIABILITY. The obligations of Arlington and Lessee
         hereunder shall be joint and several.

17.      COUNTERPARTS. This Third Amendment may be executed in several
         counterparts, each of which shall be fully effective as an original,
         and all of which together shall constitute one and the same instrument.

                            [SIGNATURE PAGES FOLLOW]

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - PAGE 9
-------------------------

<PAGE>

                                     LESSOR:
                                     -------

                                     PMC COMMERCIAL TRUST

                                     By:      /s/ Lance B. Rosemore
                                              ---------------------------------
                                     Name:    Lance B. Rosemore
                                     Title:   President

                                     PMCT SYCAMORE, L.P.

                                     By:      PMCT AH-SYCAMORE, INC.,
                                              ---------------------------------
                                              Its general partner

                                              By:      /s/ Lance B. Rosemore
                                                       ------------------------
                                              Name:    Lance B. Rosemore
                                              Title:   President

                                     PMCT MACOMB, L.P.

                                     By:      PMCT AH-MACOMB, INC.,
                                              ---------------------------------
                                              Its general partner

                                              By:      /s/ Lance B. Rosemore
                                                       ------------------------
                                              Name:    Lance B. Rosemore
                                              Title:   President

                                     PMCT PLAINFIELD, L.P.

                                     By:      PMCT AH, INC, its general partner

                                              By:      /s/ Lance B. Rosemore
                                                       ------------------------
                                              Name:    Lance B. Rosemore
                                              Title:   President

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - SIGNATURE PAGE
-------------------------

<PAGE>

                                     PMCT MARYSVILLE, L.P.

                                     By:      PMCT AH, INC, its general partner

                                              By:      /s/ Lance B. Rosemore
                                                       ------------------------
                                              Name:    Lance B. Rosemore
                                              Title:   President

                       [SIGNATURES CONTINUED ON NEXT PAGE]

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - SIGNATURE PAGE
-------------------------

<PAGE>

                                     LESSEE:

                                     ARLINGTON INNS, INC., formerly
                                     AMERIHOST INNS, INC.

                                     By:      /s/ Jerry H. Herman
                                              ---------------------------------
                                     Name:    Jerry H. Herman
                                     Title:   President

                                     By:      /s/ James B. Dale
                                              ---------------------------------
                                     Name:    James B. Dale
                                     Title:   Secretary

                                     ARLINGTON:
                                     ---------

                                     ARLINGTON HOSPITALITY, INC.

                                     By:      /s/ Jerry H. Herman
                                              ---------------------------------
                                     Name:    Jerry H. Herman
                                     Title:   President

                                     By:      /s/ James B. Dale
                                              ---------------------------------
                                     Name:    James B. Dale
                                     Title:   Secretary

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT - SIGNATURE PAGE
-------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}]]