Document:

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                                CREDIT AGREEMENT

                           Dated as of March 26, 2002

                                  by and among

                          Hospitality Properties Trust,
                                             as Borrower

                          FIRST UNION SECURITIES, INC.,
                            d/b/a WACHOVIA SECURITIES
                                             as Lead Arranger,

                            DRESDNER BANK REAL ESTATE
                                             as Co-Lead Arranger,

                           FIRST UNION NATIONAL BANK,
                                             as Administrative Agent,

                                     Each of
              DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
                                       and
                                ING CAPITAL LLC,
                                             as Syndication Agent,

                                     Each of
                            CIBC WORLD MARKETS CORP.
                                       and
                                SOCIETE GENERALE,
                                             as Documentation Agent,

                                       and

                     THE FINANCIAL INSTITUTIONS PARTY HERETO
                    AND THEIR ASSIGNEES UNDER SECTION 12.5.,
                                             as Lenders

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<PAGE>
<TABLE>
<CAPTION>
                                             TABLE OF CONTENTS

<S>                                                                                                     <C>
Article I. Definitions...................................................................................1

         Section 1.1.  Definitions.......................................................................1
         Section 1.2.  General; References to Times.....................................................25

Article II. Credit Facility.............................................................................25

         Section 2.1.  Revolving Loans..................................................................25
         Section 2.2.  Swingline Loans..................................................................26
         Section 2.3.  Letters of Credit................................................................28
         Section 2.4.  Rates and Payment of Interest on Loans...........................................32
         Section 2.5.  Number of Interest Periods.......................................................33
         Section 2.6.  Repayment of Loans...............................................................33
         Section 2.7.  Prepayments......................................................................33
         Section 2.8.  Continuation.....................................................................34
         Section 2.9.  Conversion.......................................................................34
         Section 2.10.  Notes...........................................................................35
         Section 2.11.  Voluntary Reductions of the Commitment..........................................35
         Section 2.12.  Expiration or Maturity Date of Letters of Credit Past Termination Date..........35
         Section 2.13.  Amount Limitations..............................................................36
         Section 2.14.  Increase of Commitments.........................................................36
         Section 2.15.  Extension of Termination Date...................................................37

Article III. Payments, Fees and Other General Provisions................................................37

         Section 3.1.  Payments.........................................................................37
         Section 3.2.  Pro Rata Treatment...............................................................38
         Section 3.3.  Sharing of Payments, Etc.........................................................38
         Section 3.4.  Several Obligations..............................................................39
         Section 3.5.  Minimum Amounts..................................................................39
         Section 3.6.  Fees.............................................................................39
         Section 3.7.  Computations.....................................................................40
         Section 3.8.  Usury............................................................................40
         Section 3.9.  Agreement Regarding Interest and Charges.........................................41
         Section 3.10.  Statements of Account...........................................................41
         Section 3.11.  Defaulting Lenders..............................................................41
         Section 3.12.  Taxes...........................................................................42

Article IV. Yield Protection, Etc.......................................................................44

         Section 4.1.  Additional Costs; Capital Adequacy...............................................44
         Section 4.2.  Suspension of LIBOR Loans........................................................45
         Section 4.3.  Illegality.......................................................................46
         Section 4.4.  Compensation.....................................................................46
         Section 4.5.  Affected Lenders.................................................................47
         Section 4.6.  Treatment of Affected Loans......................................................47
         Section 4.7.  Change of Lending Office.........................................................48
</TABLE>

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<TABLE>
<CAPTION>
<S>                                                                                                     <C>
         Section 4.8.  Assumptions Concerning Funding of LIBOR Loans....................................48

Article V. Conditions Precedent.........................................................................48

         Section 5.1.  Initial Conditions Precedent.....................................................48
         Section 5.2.  Conditions Precedent to All Loans and Letters of Credit..........................51
         Section 5.3.  Conditions as Covenants..........................................................51

Article VI. Representations and Warranties..............................................................52

         Section 6.1.  Representations and Warranties...................................................52
         Section 6.2.  Survival of Representations and Warranties, Etc..................................58

Article VII. Affirmative Covenants......................................................................58

         Section 7.1.  Preservation of Existence and Similar Matters....................................58
         Section 7.2.  Compliance with Applicable Law and Material Contracts............................58
         Section 7.3.  Maintenance of Property..........................................................59
         Section 7.4.  Conduct of Business..............................................................59
         Section 7.5.  Insurance........................................................................59
         Section 7.6.  Payment of Taxes and Claims......................................................59
         Section 7.7.  Visits and Inspections...........................................................59
         Section 7.8.  Use of Proceeds; Letters of Credit...............................................60
         Section 7.9.  Environmental Matters............................................................60
         Section 7.10.  Books and Records...............................................................60
         Section 7.11.  Further Assurances..............................................................61
         Section 7.12.  New Subsidiaries/Guarantors.....................................................61
         Section 7.13.  REIT Status.....................................................................61
         Section 7.14.  Exchange Listing................................................................61

Article VIII. Information...............................................................................62

         Section 8.1.  Quarterly Financial Statements...................................................62
         Section 8.2.  Year-End Statements..............................................................62
         Section 8.3.  Compliance Certificate...........................................................63
         Section 8.4.  Other Information................................................................63

Article IX. Negative Covenants..........................................................................66

         Section 9.1.  Financial Covenants..............................................................66
         Section 9.2.  Indebtedness.....................................................................67
         Section 9.3. Certain Permitted Investments.....................................................67
         Section 9.4.  Investments Generally............................................................68
         Section 9.5.  Liens; Negative Pledges; Other Matters...........................................69
         Section 9.6.  Restricted Payments..............................................................69
         Section 9.7.  Merger, Consolidation, Sales of Assets and Other Arrangements....................70
         Section 9.8.  Fiscal Year......................................................................71
         Section 9.9.  Modifications to Advisory Agreement and Other Material Contracts.................71
         Section 9.10.  Transactions with Affiliates....................................................71
         Section 9.11.  ERISA Exemptions................................................................71
</TABLE>

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<TABLE>
<CAPTION>
<S>                                                                                                     <C>
Article X. Default......................................................................................72

         Section 10.1.  Events of Default...............................................................72
         Section 10.2.  Remedies Upon Event of Default..................................................75
         Section 10.3.  Remedies Upon Default...........................................................76
         Section 10.4.  Allocation of Proceeds..........................................................77
         Section 10.5.  Collateral Account..............................................................77
         Section 10.6.  Performance by Agent............................................................78
         Section 10.7.  Rights Cumulative...............................................................78

Article XI. The Agent...................................................................................79

         Section 11.1.  Authorization and Action........................................................79
         Section 11.2.  Agent's Reliance, Etc...........................................................79
         Section 11.3.  Notice of Defaults..............................................................80
         Section 11.4.  First Union as Lender...........................................................80
         Section 11.5.  Approvals of Lenders............................................................80
         Section 11.6.  Lender Credit Decision, Etc.....................................................81
         Section 11.7.  Indemnification of Agent........................................................82
         Section 11.8.  Successor Agent.................................................................82
         Section 11.9.  Titled Agents...................................................................83

Article XII. Miscellaneous..............................................................................83

         Section 12.1.  Notices.........................................................................83
         Section 12.2.  Expenses........................................................................84
         Section 12.3.  Setoff..........................................................................85
         Section 12.4.  Litigation; Jurisdiction; Other Matters; Waivers................................85
         Section 12.5.  Successors and Assigns..........................................................86
         Section 12.6.  Amendments......................................................................88
         Section 12.7.  Nonliability of Agent and Lenders...............................................89
         Section 12.8.  Confidentiality.................................................................89
         Section 12.9.  Indemnification.................................................................90
         Section 12.10.  Termination; Survival..........................................................92
         Section 12.11.  Severability of Provisions.....................................................92
         Section 12.12.  GOVERNING LAW..................................................................92
         Section 12.13.  Counterparts...................................................................92
         Section 12.14.  Obligations with Respect to Loan Parties.......................................93
         Section 12.15.  Limitation of Liability........................................................93
         Section 12.16.  Entire Agreement...............................................................93
         Section 12.17.  Construction...................................................................93
         Section 12.18.  LIABILITY OF TRUSTEES, ETC.....................................................93
</TABLE>

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SCHEDULE 1.1.(a)               Applicable Margin
SCHEDULE 1.1.(b)               Facility Fee
SCHEDULE 1.1.(c)               List of Loan Parties
SCHEDULE 6.1.(b)               Ownership Structure
SCHEDULE 6.1.(f)               Title to Properties; Liens
SCHEDULE 6.1.(g)               Indebtedness and Guaranties
SCHEDULE 6.1.(h)               Material Contracts
SCHEDULE 6.1.(i)               Litigation
SCHEDULE 6.1.(k)               Financial Statements
SCHEDULE 6.1.(y)               List of Unencumbered Assets

EXHIBIT A                      Form of Assignment and Acceptance Agreement
EXHIBIT B                      Form of Guaranty
EXHIBIT C                      Form of Notice of Borrowing
EXHIBIT D                      Form of Notice of Continuation
EXHIBIT E                      Form of Notice of Conversion
EXHIBIT F                      Form of Notice of Swingline Borrowing
EXHIBIT G                      Form of Swingline Note
EXHIBIT H                      Form of Revolving Note
EXHIBIT I-1                    Form of Opinion of Counsel
EXHIBIT I-2                    Form of Opinion of Special Counsel
EXHIBIT J                      Form of Compliance Certificate

                                      -iv-

<PAGE>
         THIS  CREDIT  AGREEMENT  dated  as of  March  26,  2002  by  and  among
HOSPITALITY PROPERTIES TRUST, a real estate investment trust organized under the
laws of the State of Maryland (the "Borrower"),  FIRST UNION  SECURITIES,  INC.,
d/b/a  WACHOVIA  SECURITIES,  as Lead  Arranger,  DRESDNER BANK REAL ESTATE,  as
Co-Lead Arranger, First Union National Bank, as Agent, each of DRESDNER BANK AG,
NEW YORK AND GRAND CAYMAN  BRANCHES and ING CAPITAL LLC, as  Syndication  Agent,
each of CIBC WORLD MARKETS CORP. and SOCIETE GENERALE,  as Documentation  Agent,
and each of the financial  institutions  initially a signatory  hereto  together
with their assignees pursuant to Section 12.5.(d).

         WHEREAS,  the Agent and the  Lenders  desire to make  available  to the
Borrower a revolving  credit  facility in the  initial  amount of  $350,000,000,
which will include a $50,000,000  letter of credit subfacility and a $25,000,000
swingline subfacility, on the terms and conditions contained herein.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which are hereby  acknowledged by the parties hereto, the parties
hereto agree as follows:

                             ARTICLE I. DEFINITIONS

Section 1.1.  Definitions.

         In addition to terms defined  elsewhere  herein,  the  following  terms
shall have the following meanings for the purposes of this Agreement:

         "Accession Agreement" means an Accession Agreement substantially in the
form of Annex I to the Guaranty.

         "Additional Costs" has the meaning given that term in Section 4.1.

         "Adjusted  EBITDA" means,  with respect to a Person for a given period,
such Person's EBITDA for such period determined on a consolidated basis less the
sum of (a) any FF&E  Reserves  to the  extent  included  in  EBITDA  and (b) the
excess, if any, with respect to each Hotel or Hotel Pool (as applicable) of such
Person, of (i) 4.0% of total gross room revenues of such Hotel or Hotel Pool for
such period over (ii) the FF&E Reserve  actually  funded during such period with
respect to such Property or Hotel Pool pursuant to the  applicable  Lease or any
related  Ancillary  Agreement,  and  (c)  to  the  extent  included  in  EBITDA,
replacement  reserves for (i) any Property  that is not a Hotel and is part of a
Hotel Pool included in Unencumbered Hotels, or (ii) Other Acceptable Properties.

         "Adjusted  Eurodollar Rate" means, with respect to each Interest Period
for any LIBOR Loan,  the rate  obtained by dividing (a) LIBOR for such  Interest
Period by (b) a percentage equal to 1 minus the stated maximum rate (stated as a
decimal)  of  all  reserves,   if  any,   required  to  be  maintained   against
"Eurocurrency  liabilities"  as  specified  in  Regulation  D of  the  Board  of
Governors  of the  Federal  Reserve  System (or  against  any other  category of
liabilities  which
<PAGE>
includes  deposits by  reference  to which the  interest  rate on LIBOR Loans is
determined  or any  category  of  extensions  of  credit or other  assets  which
includes  loans by an office  of any  Lender  outside  of the  United  States of
America to residents of the United States of America).

         "Advisory  Agreement" means that certain Advisory Agreement dated as of
January 1, 1998 by and between the Borrower and RMR.

         "Affiliate" means any Person (other than the Agent or any Lender):  (a)
directly or indirectly controlling, controlled by, or under common control with,
the Borrower;  (b) directly or indirectly  owning or holding ten percent (10.0%)
or more of any Equity  Interest in the Borrower;  or (c) ten percent  (10.0%) or
more of whose voting stock or other  Equity  Interest is directly or  indirectly
owned  or held by the  Borrower.  For  purposes  of this  definition,  "control"
(including with correlative meanings,  the terms "controlling",  "controlled by"
and "under common control with") means the possession  directly or indirectly of
the power to direct or cause the direction of the  management  and policies of a
Person,  whether  through the  ownership of voting  securities or by contract or
otherwise.  The  Affiliates of a Person shall include any officer or director of
such Person.

         "Agent" means First Union National Bank, as contractual  representative
for the Lenders under the terms of this Agreement, and any of its successors.

         "Agreement Date" means the date as of which this Agreement is dated.

         "Ancillary  Agreement"  means,  with respect to any Lease, any material
incidental  agreement with respect to such Lease (including,  by way of example,
guarantees,  franchise  agreements,  and  management  agreements)  to which  the
Borrower or any Subsidiary is a party.

         "Applicable  Law" means all  applicable  provisions  of  constitutions,
statutes,  rules,  regulations  and  orders of all  governmental  bodies and all
orders and decrees of all courts, tribunals and arbitrators.

         "Applicable  Margin" means the percentage per annum determined,  at any
time, based on the range into which the Borrower's  Credit Rating then falls, in
accordance  with the table  set forth in  Schedule  1.1.(a).  Any  change in the
Borrower's  Credit  Rating which would cause it to move to a different  Level in
such table shall effect a change in the Applicable Margin on the Business Day on
which such change  occurs.  During any period  that the  Borrower  has  received
Credit  Ratings  that  are  not  equivalent,  the  Applicable  Margin  shall  be
determined by the lower of such two Credit Ratings.  During any period for which
the  Borrower has not received a Credit  Rating from a Rating  Agency,  then the
Applicable  Margin shall be determined as Level 4. As of the Agreement Date, the
Applicable Margin is determined based on Level 3.

         "Asset Under Development"  means, as of any date of determination,  any
Property on which  construction of new  income-producing  improvements  has been
commenced and is continuing.  If such construction  consists of the construction
of tenant improvements, as opposed to material expansion of such Property or any
"ground up"  development,  such Property  shall not be considered to be an Asset
Under  Development.   In  addition,  to  the  extent  any  Property

                                      -2-
<PAGE>
includes a revenue-generating  component (e.g. an existing Hotel) and a building
under development,  such revenue-generating component shall not be considered to
be an Asset Under  Development  but such  building  under  development  shall be
considered  to be an  Asset  Under  Development.  Further,  no  Hotel  shall  be
considered an Asset Under  Development  if the opening date with respect to such
Hotel has occurred.

         "Assignee" has the meaning given that term in Section 12.5.(d).

         "Assignment   and  Acceptance   Agreement"   means  an  Assignment  and
Acceptance Agreement among a Lender, an Assignee and the Agent, substantially in
the form of Exhibit A.

         "Base Rate"  means the per annum rate of interest  equal to the greater
of (a) the Prime Rate or (b) the Federal Funds Rate plus one-half of one percent
(0.5%). Any change in the Base Rate resulting from a change in the Prime Rate or
the Federal  Funds Rate shall become  effective as of 12:01 a.m. on the Business
Day on which each such change occurs.  The Base Rate is a reference rate used by
the Lender acting as the Agent in  determining  interest  rates on certain loans
and is not  intended  to be the lowest  rate of  interest  charged by the Lender
acting  as the  Agent or any  other  Lender  on any  extension  of credit to any
debtor.

         "Base Rate Loan" means a Loan  bearing  interest at a rate based on the
Base Rate.

         "Base  Rent"  means the  minimum  or base rent that a Lease  requires a
Lessee to pay.  The term  excludes:  (a)  payments  (such as real estate  taxes,
insurance premiums, and costs of maintenance) that the Lease requires the Lessee
to pay third parties;  (b) any element of rent that is conditional,  contingent,
or not yet capable of  determination;  and (c) FF&E  Reserves.  If Lease(s)  for
multiple Hotels do not separately  allocate Base Rent to such Hotels,  then Base
Rent shall be  reasonably  allocated  among such Hotels  (where  necessary) in a
manner satisfactory to Agent.

         "Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise  contributed  to by any member of the ERISA
Group.

         "Borrower"  has the  meaning  set forth in the  introductory  paragraph
hereof and shall include the Borrower's successors and permitted assigns.

         "Business Day" means (a) any day other than a Saturday, Sunday or other
day on which  banks in  Charlotte,  North  Carolina  or New  York,  New York are
authorized or required to close and (b) with reference to a LIBOR Loan, any such
day that is also a day on which  dealings in Dollar  deposits are carried out in
the London interbank market.

         "Capitalization Rate" means 10.0%.

         "Capitalized  Lease Obligation" means obligations under a lease that is
required to be capitalized for financial  reporting  purposes in accordance with
GAAP. The amount of a Capitalized Lease Obligation is the capitalized  amount of
such  obligation  as would be required  to

                                      -3-
<PAGE>
be  reflected  on the  balance  sheet  prepared in  accordance  with GAAP of the
applicable Person as of the applicable date.

         "Cash Equivalents" means: (a) securities issued,  guaranteed or insured
by the United  States of America or any of its agencies  with  maturities of not
more than one year from the date  acquired;  (b)  certificates  of deposit  with
maturities of not more than one year from the date  acquired  issued by a United
States federal or state chartered commercial bank of recognized  standing,  or a
commercial  bank organized under the laws of any other country which is a member
of the  Organization for Economic  Cooperation and  Development,  or a political
subdivision of any such country,  acting through a branch or agency,  which bank
at the time of the  acquisition  thereof has capital and  unimpaired  surplus in
excess of  $500,000,000.00  and which bank or its holding company at the time of
the acquisition thereof has a short-term commercial paper rating of at least A-2
or the  equivalent  by S&P or at least P-2 or the  equivalent  by  Moody's;  (c)
reverse  repurchase  agreements  with terms of not more than seven days from the
date  acquired,  for  securities  of the type  described in clause (a) above and
entered into only with commercial banks having the  qualifications  described in
clause (b) above; (d) commercial paper issued by any Person  incorporated  under
the laws of the United  States of America or any State  thereof and rated at the
time of the acquisition thereof at least A-2 or the equivalent thereof by S&P or
at least P-2 or the equivalent thereof by Moody's,  in each case with maturities
of not more than one year from the date acquired;  and (e)  investments in money
market funds registered under the Investment  Company Act of 1940, which have at
the time of the acquisition  thereof net assets of at least  $500,000,000.00 and
at least 85% of whose assets consist of securities and other  obligations of the
type described in clauses (a) through (d) above.

         "Collateral  Account"  means a  special  non-interest  bearing  deposit
account  maintained  by the  Agent at the  Principal  Office  and under its sole
dominion and control.

         "Commitment" means, as to each Lender, such Lender's obligation to make
Revolving Loans pursuant to Section 2.1., to issue (in the case of the Agent) or
participate  in (in the case of the  Lenders)  Letters  of  Credit  pursuant  to
Section 2.3.(a) and 2.3.(i), respectively, and to participate in Swingline Loans
pursuant to Section  2.2.(e),  to an amount up to, but not exceeding (but in the
case of the  Lender  acting  as the  Agent  excluding  the  aggregate  amount of
participations  in the Letters of Credit held by other Lenders),  the amount set
forth for such Lender on its signature page hereto as such Lender's  "Commitment
Amount" or as set forth in the applicable  Assignment and Acceptance  Agreement,
as the  same  may be  reduced  from  time to time  pursuant  to  Section  2.11.,
increased   pursuant  to  Section  2.14.,  or  as  appropriate  to  reflect  any
assignments to or by such Lender effected in accordance with Section 12.5.

         "Commitment  Percentage" means, as to each Lender, the ratio, expressed
as a  percentage,  of (a) the  amount  of such  Lender's  Commitment  to (b) the
aggregate amount of the Commitments of all Lenders hereunder; provided, however,
that if at the time of  determination  the  Commitments  have terminated or been
reduced  to  zero,  the  "Commitment  Percentage"  of each  Lender  shall be the
Commitment  Percentage  of such  Lender  in  effect  immediately  prior  to such
termination or reduction.

         "Compliance  Certificate"  has the  meaning  given that term in Section
8.3.

                                      -4-
<PAGE>
         "Continue",   "Continuation"   and  "Continued"   each  refers  to  the
continuation of a LIBOR Loan from one Interest Period to another Interest Period
pursuant to Section 2.8.

         "Convert",  "Conversion"  and "Converted" each refers to the conversion
of a Loan of one Type into a Loan of another Type pursuant to Section 2.9.

         "Credit  Event" means any of the  following:  (a) the making (or deemed
making) of any Loan,  (b) the  Conversion  of a Loan and (c) the  issuance  of a
Letter of Credit.

         "Credit  Rating" means the lowest rating assigned by a Rating Agency to
each series of rated senior unsecured long term indebtedness of the Borrower.

         "Debt Service" means, for any period,  the sum of: (a) Interest Expense
of the Borrower and its Subsidiaries determined on a consolidated basis for such
period and (b) all regularly  scheduled  principal payments made with respect to
Indebtedness of the Borrower and its Subsidiaries during such period, other than
any balloon,  bullet or similar principal payment which repays such Indebtedness
in full.

         "Default" means any of the events  specified in Section 10.1.,  whether
or not there has been satisfied any  requirement  for the giving of notice,  the
lapse of time, or both.

         "Defaulting Lender" has the meaning set forth in Section 3.11.

         "Developable  Property"  means (a) any  Property  on which there are no
improvements or (b) any Property (or portion  thereof)  acquired by the Borrower
or any Subsidiary for the purpose of being developed. Developable Property shall
not include any Property that is an Asset Under Development.

         "Dollars"  or "$" means the lawful  currency  of the  United  States of
America.

         "Due Diligence Reports" means, as to any Hotel Pool or individual Hotel
not in a Hotel Pool, (a) a Lease Abstract and (b) such other  information as the
Agent may reasonably request in order to evaluate such Hotel Pool or Hotel.

         "EBITDA"  means,  with respect to a Person for a given period:  (a) net
earnings (or loss) of such Person for such period  determined on a  consolidated
basis  exclusive of the following (to the extent  included in  determination  of
such net earnings  (loss)):  (i)  depreciation and  amortization  expense;  (ii)
Interest  Expense;   (iii)  income  tax  expense;   and  (iv)  extraordinary  or
non-recurring  gains and losses; plus (b) such Person's pro rata share of EBITDA
of its Unconsolidated  Affiliates.  Straight line rent leveling  adjustments and
deferred percentage rent adjustments required under GAAP shall be disregarded in
determinations of EBITDA.

         "Effective  Date" means the later of: (a) the Agreement  Date;  and (b)
the date on which all of the  conditions  precedent  set forth in  Section  5.1.
shall have been fulfilled or waived in writing by the Requisite Lenders.

                                      -5-
<PAGE>
         "Eligible  Assignee"  means any Person who is: (i)  currently a Lender;
(ii) a commercial bank,  trust company,  insurance  company,  investment bank or
pension fund  organized  under the laws of the United States of America,  or any
state  thereof,  and having  total assets in excess of  $5,000,000,000;  (iii) a
savings and loan  association  or savings bank  organized  under the laws of the
United States of America, or any state thereof,  and having a tangible net worth
of at least $500,000,000;  or (iv) a commercial bank organized under the laws of
any other country which is a member of the Organization for Economic Cooperation
and  Development,  or a political  subdivision  of any such country,  and having
total  assets in excess of  $10,000,000,000,  provided  that such bank is acting
through a branch or agency  located in the  United  States of  America.  If such
Person is not  currently a Lender,  such  Person's  senior  unsecured  long term
indebtedness  must be rated BBB or higher by S&P, Baa2 or higher by Moody's,  or
the  equivalent  or higher of  either  such  rating  by  another  rating  agency
acceptable to the Agent.  Notwithstanding  the  foregoing,  during any period in
which an Event of Default  shall have  occurred and be  continuing  under any of
subsections (a), (b), (f) or (g) of Section 10.1., the term "Eligible  Assignee"
shall mean any Person that is not an individual.

         "Environmental Laws" means any Applicable Law relating to environmental
protection  or the  manufacture,  storage,  disposal or  clean-up  of  Hazardous
Materials  including,  without  limitation,  the  following:  Clean Air Act,  42
U.S.C.ss.  7401 et seq.; Federal Water Pollution Control Act, 33 U.S.C.ss.  1251
et seq.;  Solid Waste Disposal Act, as amended by the Resource  Conservation and
Recovery Act, 42 U.S.C.ss. 6901 et seq.;  Comprehensive  Environmental Response,
Compensation   and  Liability   Act,  42  U.S.C.ss.   9601  et  seq.;   National
Environmental  Policy  Act,  42  U.S.C.ss.  4321  et  seq.;  regulations  of the
Environmental  Protection  Agency and any applicable  rule of common law and any
judicial  interpretation  thereof  relating  primarily  to  the  environment  or
Hazardous Materials.

         "Equity  Interest"  means,  with  respect to any  Person,  any share of
capital stock of (or other  ownership or profit  interests in) such Person,  any
warrant,  option or other right for the purchase or other  acquisition from such
Person of any share of capital stock of (or other ownership or profit  interests
in) such Person, any security (other than a security constituting  Indebtedness)
convertible  into or  exchangeable  for any share of capital  stock of (or other
ownership or profit  interests  in) such Person or warrant,  right or option for
the purchase or other acquisition from such Person of such shares (or such other
interests),   and  any  other  ownership  or  profit  interest  in  such  Person
(including, without limitation, partnership, member or trust interests therein),
whether  voting or nonvoting,  and whether or not such share,  warrant,  option,
right or other  interest  is  authorized  or  otherwise  existing on any date of
determination.

         "Equity Issuance" means any issuance by a Person of any Equity Interest
and shall in any event  include  the  issuance of any Equity  Interest  upon the
conversion  or  exchange  of any  security  constituting  Indebtedness  that  is
convertible  or  exchangeable,  or is being  converted or exchanged,  for Equity
Interests.

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

                                      -6-
<PAGE>
         "ERISA Group" means the Borrower,  any  Subsidiary and all members of a
controlled  group of corporations  and all trades or businesses  (whether or not
incorporated)  under common  control  which,  together  with the Borrower or any
Subsidiary,  are treated as a single  employer under Section 414 of the Internal
Revenue Code.

         "Event of Default" means any of the events  specified in Section 10.1.,
provided that any requirement for notice or lapse of time or any other condition
has been satisfied.

         "Excluded  Subsidiary"  means  any  Subsidiary  (a)  which  has a legal
structure  and  capitalization  intended to make such  entity a single  purpose,
"bankruptcy  remote" entity; (b) for which none of the Borrower,  any Subsidiary
(other than another Excluded  Subsidiary) or any other Loan Party has Guaranteed
any of the  Indebtedness  of such  Subsidiary  or has any direct  obligation  to
maintain or preserve  such  Subsidiary's  financial  condition  or to cause such
Subsidiary to achieve any specified levels of operating results,  except for (i)
customary   exceptions  for  fraud,   misapplication  of  funds,   environmental
indemnities,  and other  similar  exceptions  to  recourse  liability,  and (ii)
guaranties  of the  refund of any  Lessee  Deposit;  and (c)  which is  directly
obligated for any Secured Indebtedness.

         "Excluded  Property" means any Property that is not located entirely in
a state of the United States or the District of Columbia.

         "Existing  Credit  Agreement"  means that  certain  Second  Amended and
Restated  Revolving  Loan  Agreement  dated as of June 10, 1998 by and among the
Borrower, the financial  institutions party thereto as "Lenders",  Dresdner Bank
AG, New York and Grand Cayman Branches,  as Agent,  and certain  Subsidiaries of
the Borrower.

         "Facility Fee" means the per annum percentage in the table set forth in
Schedule 1.1.(b)  corresponding to the Level at which the "Applicable Margin" is
determined in accordance with the definition  thereof. As of the Agreement Date,
the Facility Fee equals 0.30%.

         "Fair Market Value" means,  with respect to (a) a security  listed on a
principal national securities  exchange,  the price of such security as reported
on such exchange by any widely recognized  reporting method  customarily  relied
upon by financial  institutions and (b) with respect to any other property,  the
price which could be negotiated in an arm's-length free market transaction,  for
cash,  between a willing seller and a willing  buyer,  neither of which is under
pressure or compulsion to complete the transaction.

         "Federal  Funds Rate" means,  for any day, the rate per annum  (rounded
upward to the nearest 1/100th of 1%) equal to the weighted  average of the rates
on overnight  Federal  funds  transactions  with members of the Federal  Reserve
System  arranged  by Federal  funds  brokers on such day,  as  published  by the
Federal  Reserve Bank of New York on the Business Day next  succeeding such day,
provided  that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding  Business
Day, and (b) if no such rate is so published  on such next  succeeding  Business
Day, the Federal Funds Rate for such day shall be the average rate quoted to the
Agent  by  federal  funds  dealers  selected  by the  Agent  on such day on such
transaction as determined by the Agent.

                                      -7-
<PAGE>
         "Fees"  means the fees and  commissions  provided for or referred to in
Section 3.6.  and any other fees payable by the Borrower  hereunder or under any
other Loan Document.

         "FF&E  Reserve"  means,  for any  period  and with  respect  to a given
Property  or Hotel  Pool,  an amount  equal to the amount  that the Lease or any
Ancillary  Agreement  for such  Property  or Hotel Pool  requires  the Lessee or
Manager to reserve during such period for (i)  replacements and renewals to such
Property's or Hotel Pool's  furnishings,  fixtures and  equipment,  (ii) routine
repairs and maintenance to buildings which are normally  capitalized  under GAAP
and (iii) major repairs, alterations,  improvements, renewals or replacements to
building  structures,  roofs or exterior facade, or for mechanical,  electrical,
HVAC, plumbing or vertical transportation systems.

         "First  Union"  means  First Union  National  Bank,  together  with its
successors and assigns.

         "Fitch" means Fitch, Inc. and its successors.

         "Fixed Charges" means, for any period, the sum (without duplication) of
(a) Debt Service for such period and (b) Preferred Dividends for such period.

         "Floating  Rate Debt" means all  Indebtedness  of the  Borrower and its
Subsidiaries  which bears interest at fluctuating  rates (and in any event shall
include all Loans and other  Indebtedness  of the Borrower under any of the Loan
Documents)  and for which the Borrower or any such  Subsidiary  has not obtained
Interest Rate Agreements  which Interest Rate  Agreements (a) effectively  cause
such variable  rates to be equivalent  to, or to be capped at, fixed rates,  (b)
have scheduled  termination  dates later than the Termination  Date and (c) have
terms approved of by the Agent, such approval not to be unreasonably withheld.

         "Funds From Operations"  means,  for any period,  (a) net income of the
Borrower for such period  determined on a  consolidated  basis  exclusive of the
following (to the extent included in the determination of such net income):  (i)
depreciation  and  amortization;  (ii) gains and losses  from  extraordinary  or
non-recurring  items; (iii) gains and losses on sales of real estate; (iv) gains
and losses on investments in marketable securities;  and (v) provisions/benefits
for income taxes for such period,  plus (b) FF&E Reserves  required under Leases
but not  included in net  income,  plus (c) the  Borrower's  share of Funds From
Operations  from   Unconsolidated   Affiliates.   Straight  line  rent  leveling
adjustments and deferred  percentage rent adjustments  required under GAAP shall
be disregarded in  determinations  of Funds From  Operations (to the extent such
adjustments  otherwise  would be  included  in the  determination  of Funds From
Operations).

         "GAAP" means generally accepted accounting  principles set forth in the
opinions and  pronouncements of the Accounting  Principles Board of the American
Institute of Certified Public  Accountants and statements and  pronouncements of
the Financial  Accounting  Standards  Board or in such other  statements by such
other  entity as may be  approved  by a  significant  segment of the  accounting
profession, which are applicable to the circumstances as of the Agreement Date.

                                      -8-
<PAGE>
         "Governing  Documents"  of any Person means the  declaration  of trust,
certificate  or articles of  incorporation,  by-laws,  partnership  agreement or
operating or members agreement, as the case may be, and any other organizational
or governing documents, of such Person.

         "Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of,  registrations and filings with, and reports to, all
Governmental Authorities.

         "Governmental  Authority" means any national, state or local government
(whether domestic or foreign),  any political  subdivision  thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority,  body, agency, bureau or entity (including,  without limitation,  the
Federal Deposit  Insurance  Corporation,  the Comptroller of the Currency or the
Federal  Reserve  Board,  any central bank or any  comparable  authority) or any
arbitrator with authority to bind a party at law.

         "Ground Lease" means a ground lease  containing the following terms and
conditions:  (a) either (i) a remaining  term (taking  into  account  extensions
which may be  effected  by the lessee  without  the consent of the lessor) of no
less than 30 years from the  Agreement  Date, or (ii) the right of the lessee to
purchase the property on terms reasonably acceptable to the Agent; (b) the right
of the lessee to mortgage and encumber its interest in the leased property;  (c)
the  obligation  of the lessor to give the holder of any  mortgage  Lien on such
leased  property  written  notice of any  defaults on the part of the lessee and
that such lease will not be  terminated  until such holder has had a  reasonable
opportunity to cure or complete  foreclosures,  and fails to do so; and (d) free
transferability of the lessee's interest under such lease,  including ability to
sublease, subject to only reasonable consent provisions.

         "Guarantor"  means  any  Person  that is a party to the  Guaranty  as a
"Guarantor" and in any event shall include each Material  Subsidiary  (unless an
Excluded Subsidiary).

         "Guaranty", "Guaranteed" or to "Guarantee" as applied to any obligation
means and  includes:  (a) a guaranty  (other than by  endorsement  of negotiable
instruments  for  collection in the ordinary  course of  business),  directly or
indirectly,  in any  manner,  of any part or all of such  obligation,  or (b) an
agreement,  direct or  indirect,  contingent  or  otherwise,  and whether or not
constituting a guaranty,  the practical effect of which is to assure the payment
or  performance  (or payment of damages in the event of  nonperformance)  of any
part or all of such  obligation  whether by: (i) the purchase of  securities  or
obligations,  (ii) the purchase, sale or lease (as lessee or lessor) of property
or the  purchase or sale of services  primarily  for the purpose of enabling the
obligor with respect to such  obligation to make any payment or performance  (or
payment of damages in the event of  nonperformance) of or on account of any part
or all of such  obligation,  or to assure the owner of such  obligation  against
loss,  (iii) the  supplying of funds to or in any other manner  investing in the
obligor with respect to such obligation, (iv) repayment of amounts drawn down by
beneficiaries  of letters of credit  (including  Letters of Credit),  or (v) the
supplying  of funds to or investing in a Person on account of all or any part of
such Person's  obligation  under a Guaranty of any obligation or indemnifying or
holding  harmless,  in any  way,  such  Person  against  any part or all of such
obligation. As the context requires,  "Guaranty" shall also mean the Guaranty to
which the Guarantors are parties substantially in the form of Exhibit B.

                                      -9-
<PAGE>
         "Hazardous Materials" means all or any of the following: (a) substances
that are  defined  or listed  in,  or  otherwise  classified  pursuant  to,  any
applicable Environmental Laws as "hazardous substances",  "hazardous materials",
"hazardous  wastes",  "toxic  substances" or any other  formulation  intended to
define, list or classify substances by reason of deleterious  properties such as
ignitability, corrosivity, reactivity,  carcinogenicity,  reproductive toxicity,
"TCLP"  toxicity or "EP  toxicity";  (b) oil,  petroleum  or  petroleum  derived
substances,  natural  gas,  natural gas liquids or  synthetic  gas and  drilling
fluids,  produced  waters  and other  wastes  associated  with the  exploration,
development or production of crude oil, natural gas or geothermal resources; (c)
any  flammable  substances  or  explosives  or any  radioactive  materials;  (d)
asbestos in any form;  and (e)  electrical  equipment  which contains any oil or
dielectric fluid  containing  levels of  polychlorinated  biphenyls in excess of
fifty parts per million.

         "Hotel" means any Property, the improvements on which are operated as a
hotel,  inn or the providing of lodging  services,  together with any incidental
improvements  on such Property  operated in connection  with such hotel,  inn or
lodging facility.

         "Hotel Net Cash  Flow"  means the net  operating  cash flow of a Hotel,
after (a) all taxes (except income taxes), insurance,  salaries,  utilities, and
other  operating  expenses,  all sums that the  applicable  Lease or any related
Ancillary  Agreement requires the applicable Lessee or the applicable Manager to
pay  (excluding (i) all items payable to such Manager that are  subordinated  to
Base Rent and (ii) Base Rent), and (b) the greater of (a) FF&E Reserves,  or (b)
4.0% of total gross room revenues for such period.  Hotel Net Cash Flow shall be
determined as of any date based on the last four  completed  fiscal  quarters of
the  Person  that  owns  such  Hotel   (subject  to  reasonable   adjustment  or
interpolation to accommodate  differences  between such Person's fiscal quarters
and those of its Lessee).

         "Hotel Pool" means any group of two or more  Properties,  substantially
all of the value of which is  attributable  to Hotels,  that are (a) leased to a
Lessee  pursuant to a single  Lease,  or (b) leased  pursuant to Leases that are
cross-defaulted  (as to defaults by Lessee),  together with all other Properties
whose Leases are cross-defaulted (as to defaults by Lessee) with such Lease.

         "Indebtedness"  means,  with  respect  to a  Person,  at  the  time  of
computation  thereof,  all of  the  following  (without  duplication):  (a)  all
obligations of such Person in respect of money borrowed;  (b) all obligations of
such Person, whether or not for money borrowed (1) represented by notes payable,
or  drafts  accepted,  in each  case  representing  extensions  of  credit,  (2)
evidenced  by  bonds,   debentures,   notes  or  similar  instruments,   or  (3)
constituting  purchase money  indebtedness,  conditional sales contracts,  title
retention  debt  instruments or other similar  instruments,  upon which interest
charges  are  customarily  paid or that are issued or assumed as full or partial
payment for property or services rendered;  (c) Capitalized Lease Obligations of
such Person; (d) all reimbursement  obligations of such Person under any letters
of credit or  acceptances  (whether  or not the same  have  been  presented  for
payment); (e) all obligations, contingent or otherwise, of such Person under any
synthetic  lease,  tax  retention  operating  lease,  off balance  sheet loan or
similar off balance sheet financing  arrangement if the transaction  giving rise
to such  obligation  (1) is considered  indebtedness  for borrowed money for tax
purposes but is  classified  as an  operating  lease under GAAP and (2) does not
(and is not  required  pursuant to GAAP to) appear as a liability on the balance
sheet of such Person;  (f) all  obligations of such

                                      -10-
<PAGE>
Person to purchase,  redeem,  retire,  defease or otherwise  make any payment in
respect of any Mandatorily  Redeemable  Stock issued by such Person or any other
Person,  valued at the  greater  of its  voluntary  or  involuntary  liquidation
preference plus accrued and unpaid dividends; (g) all obligations of such Person
in respect of any take-out  commitment or forward equity commitment  (excluding,
in the case of the Borrower and its  Subsidiaries,  any such obligation that can
be satisfied  solely by the issuance of Equity Interests (other than Mandatorily
Redeemable Stock));  (h) all Indebtedness of other Persons which such Person has
Guaranteed or is otherwise recourse to such Person,  valued at the lesser of (1)
the stated or determinable amount of the Indebtedness such Person Guaranteed or,
if the amount of such  Indebtedness is not stated or  determinable,  the maximum
reasonably  anticipated  liability in respect thereof, and (2) the amount of any
express  limitation on such  Guaranty;  (i) all  Indebtedness  of another Person
secured by (or for which the holder of such  Indebtedness has an existing right,
contingent or otherwise,  to be secured by) any Lien on property or assets owned
by such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness or other payment obligation, valued, in the case of
any such  Indebtedness as to which recourse for the payment thereof is expressly
limited to the  property or assets on which such Lien is granted,  at the lesser
of (1) the stated or determinable  amount of the Indebtedness that is so secured
or, if not stated or determinable,  the maximum reasonably anticipated liability
in respect thereof (assuming such Person is required to perform  thereunder) and
(2) the Fair Market Value of such property or assets;  and (j) such Person's pro
rata share of the Indebtedness of any Unconsolidated Affiliate of such Person.

         "Intellectual  Property"  has the  meaning  given  that term in Section
6.1.(t).

         "Interest  Expense"  means,  with respect to a Person for any period of
time, (a) the interest expense,  whether paid,  accrued or capitalized  (without
deduction of consolidated  interest  income) of such Person for such period plus
(b) in the case of the  Borrower,  the  Borrower's  pro rata  share of  Interest
Expense of its  Unconsolidated  Affiliates.  Interest  Expense shall exclude any
amortization of (i) deferred financing fees and (ii) debt discounts (but only to
the extent  such  discounts  do not exceed 3.0% of the  initial  face  principal
amount of such debt).

         "Interest  Period"  means with  respect to any LIBOR Loan,  each period
commencing  on the  date  such  LIBOR  Loan is made or the  last day of the next
preceding  Interest  Period  for such  Loan  and  ending  7,  30,  60 or 90 days
thereafter,  as the  Borrower  may  select in a Notice of  Borrowing,  Notice of
Continuation  or  Notice of  Conversion,  as the case may be,  except  that each
Interest  Period  of 30,  60 or 90 day's  duration  that  commences  on the last
Business  Day of a  calendar  month  shall end on the last  Business  Day of the
appropriate subsequent calendar month. Notwithstanding the foregoing: (i) if any
Interest Period would  otherwise end after the  Termination  Date, such Interest
Period shall end on the  Termination  Date;  and (ii) each Interest  Period that
would  otherwise  end on a day which is not a Business Day shall end on the next
succeeding  Business Day (or, if such next succeeding  Business Day falls in the
next succeeding calendar month, on the next preceding Business Day).

         "Interest  Rate  Agreement"  means any  interest  rate swap  agreement,
interest rate cap  agreement,  interest  rate collar  agreement or other similar
contractual  agreement or arrangement entered into with a nationally  recognized
financial  institution then having an Investment Grade Rating for the purpose of
protecting against fluctuations in interest rates.

                                      -11-
<PAGE>
         "Internal  Revenue  Code" means the Internal  Revenue Code of 1986,  as
amended.

         "Investment"  means, (x) with respect to any Person, any acquisition or
investment  (whether or not of a controlling  interest) by such Person, by means
of any of the  following:  (a) the purchase or other  acquisition  of any Equity
Interest  in another  Person,  (b) a loan,  advance or  extension  of credit to,
capital  contribution  to,  Guaranty  of  Indebtedness  of, or purchase or other
acquisition of any Indebtedness of, another Person, including any partnership or
joint  venture  interest  in such other  Person,  or (c) the  purchase  or other
acquisition  (in one  transaction  or a series  of  transactions)  of  assets of
another  Person that  constitute the business or a division or operating unit of
another  Person  and (y)  with  respect  to any  Property  or other  asset,  the
acquisition  thereof.  Any commitment to make an Investment in any other Person,
as well as any option of another Person to require an Investment in such Person,
shall  constitute an Investment.  Except as expressly  provided  otherwise,  for
purposes  of  determining  compliance  with  any  covenant  contained  in a Loan
Document,  the amount of any Investment  shall be the amount actually  invested,
without  adjustment for  subsequent  increases or decreases in the value of such
Investment.

         "Investment  Grade  Rating"  means a Credit  Rating  of  BBB-/Baa3  (or
equivalent) or higher from both Rating Agencies.

         "Lease"  means a  (sub)lease  of a Property,  between the Borrower or a
Subsidiary, as Lessor, and a Lessee.

         "Lease  Abstract" means, as to any Lease for a Hotel Pool or individual
Hotel not in a Hotel Pool, an abstract of such Lease and Ancillary Agreements in
form and substance  reasonably  acceptable to the Lender,  which shall include a
reasonably  detailed  description  of the following for such Lease and Ancillary
Agreements:  (a) all rent payable under such Lease,  including a description  of
Base Rent and other  components of rent payable  under such Lease,  (b) the term
(including  provisions  for  extension)  of the Lease and any related  Ancillary
Agreements,  (c) reserves for items of the type  described in the  definition of
FF&E Reserve,  (d) security deposits and other similar deposits required to made
by the Lessee,  (e) the terms of any Guaranty of such Lease,  including  without
limitation,  the identity of the guarantor(s),  any collateral  security for the
obligations of such  guarantor(s) and any provisions  providing for reduction or
release of the  obligations of such  guarantor(s)  thereunder,  (f)  termination
events,  (g) the terms of any Ancillary  Agreements  for the Hotel Pool or Hotel
subject to such Lease, (h) a summary of any restrictions on the Lessor's ability
to sell, encumber, pledge, mortgage or otherwise grant Liens upon the Properties
subject  to such  Lease,  (i)  restrictions,  requirements  or other  provisions
regarding  the hotel brand name,  trademark or trade name under which the Lessee
may operate any Hotel subject to such Lease,  and (j) any  materials  terms that
are  unusual  in  nature  or not  contained  in the  majority  of the  Leases or
Ancillary Agreement for the Unencumbered Hotels at such time.

         "L/C Commitment Amount" equals $50,000,000.

                                      -12-
<PAGE>
         "Lender"  means  each  financial  institution  from time to time  party
hereto as a "Lender",  together  with its  respective  successors  and permitted
assigns.

         "Lending  Office" means, for each Lender and for each Type of Loan, the
office of such Lender  specified as such on its signature  page hereto or in the
applicable  Assignment  and Acceptance  Agreement,  or such other office of such
Lender as such Lender may notify the Agent in writing from time to time.

         "Lessee"  means the  (sub)lessee  of a  Property  pursuant  to a Lease,
provided that  (without the Agent's  approval) no such  (sub)lessee  shall be an
Affiliate (including,  without limitation,  RMR, or any Managing Trustee) of the
Borrower, other than a TRS.

         "Lessee Deposits" means the following:  (a) any cash or Cash Equivalent
deposited  with any Loan  Party to  secure a  Lessee's  obligations  under  such
Lessee's Lease or the obligations of a manager or franchisor  under an Ancillary
Agreement (including,  without limitation, any cash or Cash Equivalent deposited
in connection with a Guaranty of a Lessee's  obligations  under a Lease); or (b)
the total amount of any deferred  purchase  price payable by the Borrower or any
of its Subsidiaries to a Lessee or a Lessee's Affiliates, against which purchase
price the Borrower or such Subsidiary, as applicable,  is entitled,  pursuant to
such Lessee's  Lease,  to offset damages  resulting  from such Lessee's  default
under its Lease or from a default by a manager or franchisor  under an Ancillary
Agreement.

         "Letter of Credit" has the meaning given that term in Section 2.3.(a).

         "Letter  of Credit  Documents"  means,  with  respect  to any Letter of
Credit,  collectively,  any  application  therefor,  any  certificate  or  other
document  presented in connection with a drawing under such Letter of Credit and
any other agreement, instrument or other document governing or providing for (a)
the rights and  obligations of the parties  concerned or at risk with respect to
such  Letter  of  Credit  or  (b)  any  collateral  security  for  any  of  such
obligations.

         "Letter of Credit Liabilities" means, without duplication,  at any time
and in respect of any Letter of Credit, the sum of (a) the Stated Amount of such
Letter  of  Credit  plus  (b)  the  aggregate  unpaid  principal  amount  of all
Reimbursement  Obligations  of the  Borrower  at such  time due and  payable  in
respect of all drawings  made under such Letter of Credit.  For purposes of this
Agreement,  a Lender (other than the Lender acting as the Agent) shall be deemed
to hold a Letter of Credit  Liability  in an amount  equal to its  participation
interest in the related Letter of Credit under Section  2.3.(i),  and the Lender
acting as the Agent shall be deemed to hold a Letter of Credit  Liability  in an
amount  equal to its  retained  interest in the related  Letter of Credit  after
giving effect to the  acquisition by the Lenders other than the Lender acting as
the Agent of their participation interests under such Section.

         "LIBOR" means, for any LIBOR Loan for any Interest Period therefor, the
rate per annum  (rounded  upwards,  if  necessary,  to the nearest  1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London  interbank
offered rate for deposits in Dollars at  approximately  11:00 a.m. (London time)
two  Business  Days  prior to the first day of such  Interest  Period for a term
comparable  to  such  Interest  Period.  If for  any  reason  such  rate  is not
available,

                                      -13-
<PAGE>
the  term  "LIBOR"  shall  mean,  for any  LIBOR  Loan for any  Interest  Period
therefor,  the rate per annum  (rounded  upwards,  if necessary,  to the nearest
1/100 of 1%) appearing on the Reuters  Screen LIBO Page as the London  interbank
offered rate for deposits in Dollars at  approximately  11:00 a.m. (London time)
two  Business  Days  prior to the first day of such  Interest  Period for a term
comparable to such Interest Period; provided,  however, if more than one rate is
specified  on the Reuters  Screen LIBO Page,  the  applicable  rate shall be the
arithmetic mean of all such rates.

         "LIBOR Loans" means Loans bearing interest at a rate based on LIBOR.

         "Lien" as applied to the property of any Person means: (a) any security
interest,  encumbrance,  mortgage,  deed to secure debt, deed of trust,  pledge,
lien, charge or lease  constituting a Capitalized Lease Obligation,  conditional
sale or other title retention agreement,  or other security title or encumbrance
of any kind in respect of any  property  of such  Person,  or upon the income or
profits  therefrom;  (b) any  arrangement,  express or implied,  under which any
property of such Person is transferred,  sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other  obligation  in priority to the payment of the  general,  unsecured
creditors of such Person;  (c) the filing of any financing  statement  under the
Uniform  Commercial  Code or its  equivalent in any  jurisdiction,  other than a
financing  statement  filed  (i)  in  respect  of a  lease  not  constituting  a
Capitalized  Lease  Obligation   pursuant  to  Section  9-408  (or  a  successor
provision)  of  the  Uniform  Commercial  Code  as in  effect  in an  applicable
jurisdiction or (ii) in connection with a sale or other  disposition of accounts
or other assets not prohibited by this Agreement in a transaction  not otherwise
constituting  or giving rise to a Lien;  and (d) any agreement by such Person to
grant, give or otherwise convey any of the foregoing.

         "Loan" means a Revolving Loan or a Swingline Loan.

         "Loan Document" means this Agreement,  each Note, each Letter of Credit
Document,  the Guaranty and each other  document or instrument  now or hereafter
executed  and  delivered  by a Loan Party in  connection  with,  pursuant  to or
relating to this Agreement.

         "Loan  Party"  means each of the  Borrower  and each  other  Person who
guarantees all or a portion of the Obligations and/or who pledges any collateral
security to secure all or a portion of the  Obligations.  Schedule  1.1.(c) sets
forth the Loan Parties in addition to the Borrower as of the Agreement Date.

         "Manager"  means  the  manager  of a  Hotel  pursuant  to an  Ancillary
Agreement.

         "Managing  Trustee"  means either Mr. Barry M. Portnoy or Mr. Gerard M.
Martin, both having a business address c/o RMR.

         "Mandatorily  Redeemable Stock" means, with respect to any Person,  any
Equity Interest of such Person which by the terms of such Equity Interest (or by
the  terms of any  security  into  which it is  convertible  or for  which it is
exchangeable or  exercisable),  upon the happening of any event or otherwise (a)
matures or is mandatorily  redeemable,  pursuant to a sinking fund obligation or
otherwise (other than an Equity Interest which is redeemable  solely in

                                      -14-
<PAGE>
exchange for common stock or other equivalent common Equity  Interests),  (b) is
convertible  into or exchangeable or exercisable for Indebtedness or Mandatorily
Redeemable  Stock, or (c) is redeemable at the option of the holder thereof,  in
whole or in part (other than an Equity  Interest  which is redeemable  solely in
exchange for common stock or other equivalent common Equity Interests),  in each
case on or prior to the date on which all  Revolving  Loans are  scheduled to be
due and payable in full.

         "Material Adverse Effect" means a materially  adverse effect on (a) the
business,  assets,  liabilities,  financial condition,  results of operations or
business  prospects of the Borrower and its  Subsidiaries  taken as a whole, (b)
the ability of the  Borrower or any other Loan Party to perform its  obligations
under  any  Loan  Document  to  which  it  is  a  party,  (c)  the  validity  or
enforceability of any of the Loan Documents,  (d) the rights and remedies of the
Lenders and the Agent under any of the Loan  Documents or (e) the timely payment
of the  principal  of or  interest  on the  Loans or other  amounts  payable  in
connection therewith.

         "Material Contract" means any contract or other arrangement (other than
Loan Documents),  whether written or oral, to which the Borrower, any Subsidiary
or any  other  Loan  Party is a party as to which  the  breach,  nonperformance,
cancellation  or  failure  to renew by any party  thereto  could  reasonably  be
expected to have a Material  Adverse Effect,  and in any event shall include the
Advisory Agreement.

         "Material  Plan"  means at any time a Plan or  Plans  having  aggregate
Unfunded Liabilities in excess of $10,000,000.

         "Material  Subsidiary"  means any  Subsidiary  to which 2.0% or more of
Total Asset Value is, directly or indirectly, attributable.

         "Moody's" means Moody's Investors Service, Inc. and its successors.

         "Multiemployer Plan" means at any time an employee pension benefit plan
within the  meaning of  Section  4001(a)(3)  of ERISA to which any member of the
ERISA Group is then making or accruing an  obligation to make  contributions  or
has within the preceding five plan years made contributions, including for these
purposes  any Person  which ceased to be a member of the ERISA Group during such
five year period.

         "Negative  Pledge" means a provision of any agreement  (other than this
Agreement or any other Loan  Document)  that prohibits or limits the creation or
assumption of any Lien on any assets of a Person or entitles  another  Person to
obtain or claim the  benefit of a Lien on any assets of such  Person;  provided,
however, that an agreement that establishes a maximum ratio of unsecured debt to
unencumbered  assets,  or of secured  debt to total  assets,  or that  otherwise
conditions a Person's ability to encumber its assets upon the maintenance of one
or more specified ratios that limit such Person's ability to encumber its assets
but  that do not  generally  prohibit  the  encumbrance  of its  assets,  or the
encumbrance of specific assets or that limits the encumbrance of specific assets
or pools or assets in  combination  with other assets or pools of assets,  shall
not constitute a Negative Pledge for purposes of this Agreement.

                                      -15-
<PAGE>
         "Net Proceeds"  means with respect to any Equity  Issuance by a Person,
the aggregate amount of all cash and the Fair Market Value of all other property
received  by such Person in respect of such Equity  Issuance  net of  investment
banking  fees,  legal  fees,   accountants'  fees,  underwriting  discounts  and
commissions  and other  customary  fees and expenses  actually  incurred by such
Person in connection with such Equity Issuance.

         "Nonrecourse   Indebtedness"   means,   with   respect   to  a  Person,
Indebtedness for borrowed money in respect of which recourse for payment (except
for  customary  exceptions  for fraud,  misapplication  of funds,  environmental
indemnities,   and  other   similar   exceptions   to  recourse   liability)  is
contractually  limited to specific  assets of such Person  encumbered  by a Lien
securing such Indebtedness.

         "Note" means a Revolving Note or a Swingline Note.

         "Notice  of  Borrowing"  means a notice in the form of  Exhibit C to be
delivered to the Agent  pursuant to Section  2.1.(b)  evidencing  the Borrower's
request for a borrowing of Revolving Loans.

         "Notice of Continuation"  means a notice in the form of Exhibit D to be
delivered  to the Agent  pursuant  to Section  2.8.  evidencing  the  Borrower's
request for the Continuation of a LIBOR Loan.

         "Notice  of  Conversion"  means a notice in the form of Exhibit E to be
delivered  to the Agent  pursuant  to Section  2.9.  evidencing  the  Borrower's
request for the Conversion of a Loan from one Type to another Type.

         "Notice of Swingline Borrowing" means a notice in the form of Exhibit F
to be delivered to the Agent pursuant to Section 2.2.  evidencing the Borrower's
request for a borrowing of Swingline Loans.

         "Obligations" means,  individually and collectively:  (a) the aggregate
principal balance of, and all accrued and unpaid interest on, all Loans; (b) all
Reimbursement  Obligations and all other Letter of Credit  Liabilities;  and (c)
all other indebtedness,  liabilities,  obligations,  covenants and duties of the
Borrower and the other Loan Parties owing to the Agent,  the Swingline Lender or
any Lender of every kind,  nature and  description,  under or in respect of this
Agreement or any of the other Loan Documents, including, without limitation, the
Fees and indemnification  obligations,  whether direct or indirect,  absolute or
contingent, due or not due, contractual or tortious, liquidated or unliquidated,
and whether or not evidenced by any promissory note.

         "Other Acceptable Property" means any Excluded Property or any Property
not otherwise  qualifying as an Unencumbered  Hotel which the Requisite  Lenders
have  agreed in their sole  discretion  and in writing is to be  included  as an
Unencumbered  Asset;  provided,  however,  that,  unless waived by the Requisite
Lenders, such Property must satisfy all the following requirements:

                  (a)  such  Property  is  owned  in fee  simple  solely  by the
         Borrower or a

                                      -16-
<PAGE>
         Guarantor or leased solely by the Borrower or a Guarantor pursuant to a
         Ground Lease;

                  (b) such Property is in service;

                  (c) neither such Property, nor any interest of the Borrower or
         such  Guarantor  therein,  is subject to any Lien (other than Permitted
         Liens of the types  described in clauses (a) through (c) or (e) through
         (h) of the  definition  thereof or Liens in favor of the  Borrower or a
         Guarantor) or to any Negative Pledge;

                  (d) if such Property is owned or leased by a  Subsidiary,  (i)
         none of the Borrower's  direct or indirect  ownership  interest in such
         Subsidiary  is subject to any Lien (other than  Permitted  Liens of the
         types  described  in clauses  (a) through (c) or (e) through (h) of the
         definition thereof or Liens in favor of the Borrower or a Guarantor) or
         to any Negative Pledge,  (ii) no Property of such Subsidiary is subject
         to a Lien (except for Permitted  Liens) and (iii) such  Subsidiary  has
         not directly or  indirectly  guarantied  or assumed  liability  for any
         Indebtedness  of any Subsidiary  that is not a Guarantor  except Lessee
         Deposits  for  which  any  Subsidiary   that  is  not  a  Guarantor  is
         responsible;

                  (e) such Property is free of all  structural  defects or major
         architectural deficiencies,  title defects, environmental conditions or
         other adverse matters which, collectively,  materially impair the value
         of such Property;

                  (f) such  Property  shall be subject to a Lease and  Ancillary
         Documents satisfactory to the Agent;

                  (g) the Lessee is not more than 30 days past due with  respect
         to  any  payment  obligations  under  the  applicable  Lease  for  such
         Property; and

                  (h) such  Property  has not been  removed  voluntarily  by the
         Borrower from "Other Acceptable Property" pursuant to Section 8.4(p).

         "Participant" has the meaning given that term in Section 12.5.(c).

         "PBGC" means the Pension Benefit Guaranty Corporation and any successor
agency.

         "Permitted  Liens" means,  as to any Person:  (a) Liens securing taxes,
assessments  and other charges or levies imposed by any  Governmental  Authority
(excluding  any Lien imposed  pursuant to any of the provisions of ERISA) or the
claims of materialmen, mechanics, carriers, warehousemen or landlords for labor,
materials,  supplies or rentals  incurred in the  ordinary  course of  business,
which (i) are not at the time  required to be paid or  discharged  under Section
7.6.,  or (ii) if such  Lien is the  responsibility  of a tenant or  manager  to
discharge,  do not materially  detract from (A) if the Property  subject to such
Lien is part of a Hotel  Pool,  the  value  of such  Hotel  Pool,  or (B) if the
Property  subject  to such Lien is not part of a Hotel  Pool,  the value of such
Property;  (b) Liens  consisting  of deposits or pledges  made,  in the ordinary
course of business,  in connection  with, or to secure  payment of,  obligations
under workers' compensation,  unemployment insurance or similar Applicable Laws;
(c) Liens  consisting  of

                                      -17-
<PAGE>
encumbrances  in the  nature of zoning  restrictions,  easements,  and rights or
restrictions  of record  on the use of real  property,  which do not  materially
detract  from the  value of such  property  or  impair  the use  thereof  in the
business of such Person; (d) Liens in existence as of the Agreement Date and set
forth in Part II of Schedule  6.1.(f);  (e) deposits to secure  trade  contracts
(other than for Indebtedness),  statutory obligations,  surety and appeal bonds,
performance  bonds  and  other  obligations  of a like  nature  incurred  in the
ordinary course of business; (f) the lessor's interest in property leased to the
Borrower  or any of its  Subsidiaries  pursuant  to a  lease  permitted  by this
Agreement; (g) the interests of tenants, operators,  franchisors, or managers of
Properties; and (h) Liens in favor of the Agent for the benefit of the Lenders.

         "Person"  means  an  individual,   corporation,   partnership,  limited
liability  company,  association,  trust or  unincorporated  organization,  or a
government or any agency or political subdivision thereof.

         "Plan" means at any time an employee pension benefit plan (other than a
Multiemployer  Plan)  which is  covered  by Title IV of ERISA or  subject to the
minimum  funding  standards  under Section 412 of the Internal  Revenue Code and
either (a) is maintained,  or  contributed  to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (b) has at any time within the
preceding five years been maintained, or contributed to, by any Person which was
at such time a member of the ERISA Group for  employees  of any Person which was
at such time a member of the ERISA Group.

         "Post-Default  Rate" means,  in respect of any principal of any Loan or
any other Obligation that is not paid when due (whether at stated  maturity,  by
acceleration,  by optional or mandatory  prepayment  or  otherwise),  a rate per
annum equal to four percent  (4.0%) plus the Base Rate as in effect from time to
time.

         "Preferred   Dividends"   means,  for  any  given  period  and  without
duplication,  all  Restricted  Payments  accrued  or paid  (and  in the  case of
Restricted  Payments paid,  which were not accrued during a prior period) during
such period on Preferred Stock issued by the Borrower or a Subsidiary. Preferred
Dividends  shall not  include  dividends  or  distributions  paid or payable (a)
solely in Equity Interests (other than Mandatorily  Redeemable Stock) payable to
holders of such class of Equity Interests;  (b) to the Borrower or a Subsidiary;
or (c)  constituting  or resulting in the redemption of Preferred  Stock,  other
than  scheduled  redemptions  not  constituting   balloon,   bullet  or  similar
redemptions in full.

         "Preferred Stock" means,  with respect to any Person,  Equity Interests
in such Person  which are  entitled  to  preference  or priority  over any other
Equity  Interest  in such  Person in respect  of the  payment  of  dividends  or
distribution of assets upon liquidation or both.

         "Prime Rate" means the rate of interest per annum announced publicly by
the Lender  acting as the Agent as its prime  rate from time to time.  The Prime
Rate is not necessarily  the best or the lowest rate of interest  offered by the
Lender acting as the Agent or any other Lender.

                                      -18-
<PAGE>
         "Principal  Office"  means the office of the Agent located at One First
Union Center,  Charlotte,  North Carolina,  or such other office of the Agent as
the Agent may designate from time to time.

         "Property"  means  any  parcel  of real  property,  together  with  all
improvements thereon, owned or leased pursuant to a Ground Lease by the Borrower
or any Subsidiary.

         "Rating  Agencies"  means S&P and Moody's.  If either such  corporation
ceases to act as a securities  rating  agency or ceases to provide  ratings with
respect to the senior long-term unsecured debt obligations of the Borrower, then
the  Borrower  may  designate  as a  replacement  Fitch or any other  nationally
recognized securities rating agency acceptable to the Agent.

         "Register" has the meaning given that term in Section 12.5.(e).

         "Regulatory  Change"  means,  with  respect to any  Lender,  any change
effective  after  the  Agreement  Date  in  Applicable  Law  (including  without
limitation,  Regulation  D of the  Board of  Governors  of the  Federal  Reserve
System)  or the  adoption  or  making  after  such  date of any  interpretation,
directive or request applying to a class of banks,  including such Lender, of or
under any  Applicable Law (whether or not having the force of law and whether or
not failure to comply therewith would be unlawful) by any Governmental Authority
or monetary authority charged with the interpretation or administration  thereof
or  compliance  by any Lender with any request or  directive  regarding  capital
adequacy.

         "Reimbursement  Obligation"  means  the  absolute,   unconditional  and
irrevocable  obligation  of the Borrower to reimburse  the Agent for any drawing
honored by the Agent under a Letter of Credit.

         "REIT"  means a  Person  qualifying  for  treatment  as a "real  estate
investment trust" under the Internal Revenue Code.

         "RMR"  means  REIT  Management  &  Research  LLC,   together  with  its
successors and permitted assigns.

         "Requisite  Lenders" means, as of any date,  Lenders having at least 66
2/3% of the aggregate amount of the Commitments  (excluding  Defaulting  Lenders
who,  accordingly,  are not entitled to vote),  or, if the Commitments have been
terminated or reduced to zero, Lenders holding at least 66 2/3% of the principal
amount of the Loans and  Letter  of  Credit  Liabilities  (excluding  Defaulting
Lenders who, accordingly, are not entitled to vote).

         "Responsible  Officer"  means (a) with  respect  to the  Borrower,  the
Borrower's  President or  Treasurer or any Managing  Trustee of the Borrower and
(b) with  respect to any other Loan Party,  such Loan  Party's  chief  executive
officer or chief financial officer.

         "Restricted  Payment"  means:  (a) any dividend or other  distribution,
direct or indirect,  on account of any Equity Interest of the Borrower or any of
its Subsidiaries now or hereafter outstanding,  except a dividend payable solely
in Equity  Interests  of identical  class to the holders

                                      -19-
<PAGE>
of that class; (b) any redemption,  conversion,  exchange,  retirement,  sinking
fund or similar  payment,  purchase or other  acquisition  for value,  direct or
indirect,  of any Equity Interest of the Borrower or any of its Subsidiaries now
or hereafter  outstanding;  and (c) any payment made to retire, or to obtain the
surrender of, any outstanding  warrants,  options or other rights to acquire any
Equity  Interests  of the Borrower or any of its  Subsidiaries  now or hereafter
outstanding.

         "Revolving Loan" means a loan made by a Lender to the Borrower pursuant
to Section 2.1.(a).

         "Revolving Note" has the meaning given that term in Section 2.10.(a).

         "Secured  Indebtedness" means, with respect to a Person as of any given
date,  the  aggregate  principal  amount  of all  Indebtedness  of  such  Person
outstanding  at such date and that is secured in any manner by any Lien,  and in
the case of the Borrower and the Guarantors, shall include (without duplication)
the Borrower's and such  Guarantors' pro rata share of the Secured  Indebtedness
of its Unconsolidated Affiliates.

         "Securities Act" means the Securities Act of 1933, as amended from time
to time, together with all rules and regulations issued thereunder.

         "Solvent"  means,  when used with  respect to any Person,  that (a) the
fair value and the fair salable value of its assets  (excluding any Indebtedness
due from any affiliate of such Person) are each in excess of the fair  valuation
of its total liabilities  (including all contingent  liabilities computed at the
amount which, in light of all the facts and circumstances existing at such time,
represents the amount that could  reasonably be expected to become an actual and
matured  liability);  (b)  such  Person  is  able  to pay  its  debts  or  other
obligations  in the  ordinary  course as they  mature;  and (c) such  Person has
capital not  unreasonably  small to carry on its  business  and all  business in
which it proposes to be engaged.

         "S&P"  means  Standard & Poor's  Rating  Services,  a  division  of The
McGraw-Hill Companies, Inc. and its successors.

         "Stated Amount" means the amount available to be drawn by a beneficiary
under a Letter of Credit from time to time,  as such amount may be  increased or
reduced from time to time in accordance with the terms of such Letter of Credit.

         "Subsidiary"  means, for any Person,  any  corporation,  partnership or
other entity of which at least a majority of the  securities or other  ownership
interests  having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons  performing similar functions of such
corporation,  partnership or other entity  (without  regard to the occurrence of
any  contingency)  is at the time directly or indirectly  owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person,  and shall include all Persons the accounts
of which are consolidated with those of such Person pursuant to GAAP.

                                      -20-
<PAGE>
         "Supermajority  Lenders" means, as of any date, Lenders having at least
75% of the aggregate  amount of the Commitments  (excluding  Defaulting  Lenders
who,  accordingly,  are not entitled to vote),  or, if the Commitments have been
terminated  or reduced to zero,  Lenders  holding at least 75% of the  principal
amount of the Loans and  Letter  of  Credit  Liabilities  (excluding  Defaulting
Lenders who, accordingly, are not entitled to vote).

         "Swingline  Commitment" means the Swingline Lender's obligation to make
Swingline  Loans pursuant to Section 2.2. in an amount up to, but not exceeding,
$25,000,000,  as such amount may be reduced from time to time in accordance with
the terms hereof.

         "Swingline  Lender" means First Union National Bank,  together with its
respective successors and assigns.

         "Swingline  Loan"  means a loan  made by the  Swingline  Lender  to the
Borrower pursuant to Section 2.2.(a).

         "Swingline  Note" means the promissory note of the Borrower  payable to
the order of the Swingline  Lender in a principal  amount equal to the amount of
the Swingline  Commitment as originally in effect and otherwise duly  completed,
substantially in the form of Exhibit G.

         "Tangible  Net Worth" means,  as of any given time:  (a) the book value
(exclusive  of  depreciation)  of all real estate assets of the Borrower and its
Subsidiaries that constitute Properties at such time; plus (b) the book value of
other  assets  (excluding  any  real  estate  assets)  of the  Borrower  and its
Subsidiaries;   less  (c)  all  amounts  appearing  on  the  assets  side  of  a
consolidated  balance sheet of the Borrower for assets separately  classified as
intangible  assets under GAAP;  less (d) all Total  Indebtedness of the Borrower
and its  Subsidiaries  determined on a  consolidated  basis;  less (e) all other
liabilities  of the Borrower and its  Subsidiaries  determined on a consolidated
basis.

         "Taxes" has the meaning given that term in Section 3.12.

         "Termination Date" means June 30, 2005.

         "Titled  Agent" means any of the Lead Arranger,  the Co-Lead  Arranger,
the  Syndication  Agents  or the  Documentation  Agents,  and  their  respective
successors and permitted assigns.

         "Total  Asset  Value"   means  the  sum  of  the   following   (without
duplication)  of the Borrower and its  Subsidiaries  for the fiscal quarter most
recently ended:  (a)(i) with respect to all Properties owned (or leased pursuant
to a Ground  Lease) by the  Borrower  or any  Subsidiary  for the entire  fiscal
quarter most recently  ending,  Adjusted EBITDA  attributable to such Properties
for such period  multiplied  by (ii) 4 and  divided by (iii) the  Capitalization
Rate; (b) the purchase price paid for any Property  acquired  during such fiscal
quarter (less any amounts paid as a purchase price  adjustment,  held in escrow,
retained as a contingency  reserve, or other similar  arrangements but including
amounts  retained  as Lessee  Deposits);  (c) all  cash,  cash  equivalents  and
accounts receivable that are not (i) owing in excess of 90 days as of the end of
such fiscal period or (ii) being  contested in writing by the obligor in respect
thereof (in which case only such

                                      -21-
<PAGE>
portion being contested  shall be excluded from Total Asset Value);  (d) prepaid
taxes and operating expenses as of the end of such fiscal quarter;  (e) the book
value of all Developable  Property as of the end of such fiscal quarter; (f) the
book value of all other tangible assets  (excluding land or other real property)
as of the end of such  fiscal  quarter;  (g) the book value of all  Unencumbered
Mortgage Notes as of the end of such fiscal quarter;  and (h) the Borrower's pro
rata  share  of the  preceding  items  of any  Unconsolidated  Affiliate  of the
Borrower.

         "Total  Indebtedness" means, as of a given date, all liabilities of the
Borrower and its Subsidiaries  which would, in conformity with GAAP, be properly
classified  as a liability on a  consolidated  balance sheet of the Borrower and
its  Subsidiaries  as of such  date,  and in any event  shall  include  (without
duplication): (a) all Indebtedness of the Borrower and its Subsidiaries; (b) the
Borrower's pro rata share of Indebtedness of its Unconsolidated  Affiliates; and
(c) the  aggregate  amount of all  Lessee  Deposits  (other  than  those  Lessee
Deposits  held by a Loan Party in  connection  with  Leases for which a monetary
default exists and has existed for a period of 30 days or more).

         "TRS"  means a  Subsidiary  of the  Borrower  that is a  "taxable  REIT
subsidiary" within the meaning of Section 856(l) of the Internal Revenue Code.

         "Type" with respect to any Loan, refers to whether such Loan is a LIBOR
Loan or Base Rate Loan.

         "Unconsolidated Affiliate" means, with respect to any Person, any other
Person in whom such Person holds an  Investment,  which  Investment is accounted
for in the financial  statements of such Person on an equity basis of accounting
and whose  financial  results  would  not be  consolidated  under  GAAP with the
financial  results of such Person on the  consolidated  financial  statements of
such Person.

         "Unencumbered Asset" means any (a) Unencumbered Hotel, (b) Unencumbered
Mortgage Note, or (c) Other Acceptable Property.

         "Unencumbered  Asset  Certificate"  has the meaning  given that term in
Section 8.3.

         "Unencumbered  Asset Value" means,  as of the end of a fiscal  quarter,
the sum of: (a) unrestricted cash of the Borrower and its  Subsidiaries;  (b)(i)
Adjusted  EBITDA for the fiscal  quarter most  recently  ended  attributable  to
Unencumbered  Hotels (excluding a proportionate  share of EBITDA attributable to
Excluded  Properties)  owned or leased by the Borrower or any Subsidiary for the
entire fiscal quarter of the Borrower most recently ended,  multiplied by (ii) 4
divided by (iii) the  Capitalization  Rate;  (c) the purchase price paid for any
Unencumbered  Hotel  (excluding  a  proportionate  share of the  purchase  price
attributable to Excluded  Properties)  acquired during such fiscal quarter (less
any amounts paid as a purchase price adjustment,  held in escrow,  retained as a
contingency reserve, or other similar  arrangements);  (d) the book value of all
Unencumbered Mortgage Notes of the Borrower and its Subsidiaries  (excluding any
Unencumbered  Mortgage Note where the obligor is more than 30 days past due with
respect to any payment obligation and a proportionate amount of the value of any
Unencumbered Mortgage Note that is secured by Excluded Properties); and (e) with
respect  to all Other  Acceptable

                                      -22-
<PAGE>
Properties,  the value of each such Property  determined in accordance  with the
valuation method established by the Requisite Lenders when the Requisite Lenders
approved of such Property as an Other  Acceptable  Property.  To the extent that
the  sum  of the  book  value  of  Unencumbered  Mortgage  Notes  would,  in the
aggregate,  account for more than 10.0% of Unencumbered Asset Value, such excess
shall be  excluded.  To the extent that  Properties  leased by the Borrower or a
Guarantor  pursuant to a Ground Lease would, in the aggregate,  account for more
than 10.0% of  Unencumbered  Asset Value,  such excess shall be excluded.  If an
Unencumbered Hotel or Unencumbered Mortgage Note is not owned as of the last day
of a quarter then such asset shall be excluded from the foregoing calculations.

         "Unencumbered EBITDA" means, for a given period, the aggregate Adjusted
EBITDA  attributable to the Unencumbered Hotels (excluding a proportionate share
of EBITDA  attributable  to Excluded  Properties),  Unencumbered  Mortgage Notes
(excluding any EBITDA from that portion of the  Unencumbered  Mortgage Note that
is secured by Excluded Properties) and Other Acceptable Properties.

         "Unencumbered Hotels" means every Hotel Pool and Hotel that is not in a
Hotel Pool that satisfy all of the following requirements:

                  (a) such  Hotel or each  Property  in such  Hotel  Pool is (i)
         owned in fee  simple  solely by the  Borrower  or a  Guarantor  or (ii)
         leased  solely by the  Borrower  or a  Guarantor  pursuant  to a Ground
         Lease;

                  (b) such Hotel,  or in the case of a Hotel Pool, each Property
         in such Hotel Pool (i) is not an Asset Under Development and (ii) is in
         service;

                  (c)  neither  such Hotel (or in the case of a Hotel  Pool,  no
         Property in such Hotel Pool),  nor any interest of the Borrower or such
         Guarantor  therein,  is subject to any Lien (other than Permitted Liens
         of the types described in clauses (a) through (c) or (e) through (h) of
         the  definition  thereof  or  Liens  in  favor  of  the  Borrower  or a
         Guarantor) or to any Negative Pledge;

                  (d) if such  Hotel or  Hotel  Pool is  owned  or  leased  by a
         Subsidiary,  (i) none of the  Borrower's  direct or indirect  ownership
         interest  in  such  Subsidiary  is  subject  to any  Lien  (other  than
         Permitted  Liens of the types  described  in clauses (a) through (c) or
         (e)  through  (h) of the  definition  thereof  or Liens in favor of the
         Borrower  or a  Guarantor)  or to any  Negative  Pledge,  and (ii) such
         Subsidiary  has  not  directly  or  indirectly  guarantied  or  assumed
         liability  for  any  Indebtedness  of  any  Subsidiary  that  is  not a
         Guarantor except Lessee Deposits for which any Subsidiary that is not a
         Guarantor is responsible;

                  (e) such Hotel,  or in the case of a Hotel Pool, each Property
         in such  Hotel  Pool,  is  free  of all  structural  defects  or  major
         architectural deficiencies,  title defects, environmental conditions or
         other adverse matters which, collectively,  materially impair the value
         of such Property or Hotel Pool;

                  (f) such Hotel or Hotel  Pool  shall be subject to  agreements
         containing  terms

                                      -23-
<PAGE>
         and conditions which provide the Borrower with  substantially  the same
         benefits and risks as Leases and  Ancillary  Documents of  Unencumbered
         Hotels as of the  Agreement  Date,  or  otherwise  satisfactory  to the
         Agent, with Persons reasonably satisfactory to Agent;

                  (g) the Lessee is not more than 30 days past due with  respect
         to any  payment  obligations  under any  Lease for such  Hotel or Hotel
         Pool; and

                  (h) such  Hotel or Hotel Pool (i) has been  designated  by the
         Borrower  as  an  "Unencumbered  Hotel"  on  Schedule  6.1(y)  or on an
         Unencumbered  Asset Certificate  delivered by the Borrower to the Agent
         pursuant  to  Section  8.3 or  8.4(o),  and (ii)  has not been  removed
         voluntarily  by the Borrower  from  "Unencumbered  Hotels"  pursuant to
         Section 8.4(p).

         "Unencumbered  Mortgage Note" means a promissory note satisfying all of
the  following  requirements:  (a) such  promissory  note is owned solely by the
Borrower or a Guarantor;  (b) such  promissory note is secured by a Lien on real
property  and the  improvements  on which,  include,  but are not  limited to, a
hotel, inn or other lodging facility or other  improvements of a type similar to
improvements  located on the  Properties as of the Agreement  Date;  (c) neither
such  promissory  note,  nor any  interest  of the  Borrower  or such  Guarantor
therein,  is  subject  to any Lien  (other  than  Permitted  Liens of the  types
described in clauses (a) through (c) and (e) of the definition  thereof or Liens
in favor of the Borrower or a Guarantor) or to any Negative Pledge;  (d) if such
promissory note is owned by a Subsidiary,  (i) none of the Borrower's  direct or
indirect  ownership  interest in such  Subsidiary  is subject to any Lien (other
than Permitted  Liens of the types  described in clauses (a) through (c) and (e)
of the  definition  thereof or Liens in favor of the Borrower or a Guarantor) or
to any Negative Pledge and (ii) the Borrower  directly,  or indirectly through a
Subsidiary,  has the  right to  sell,  transfer  or  otherwise  dispose  of such
promissory  note without the need to obtain the consent of any Person;  (d) such
real  property  and related  improvements  are not subject to (i) any other Lien
(other than  Permitted  Liens of the types  described in clauses (a) through (c)
and (e) of the  definition  thereof  or  Liens in  favor  of the  Borrower  or a
Guarantor) or (ii) any environmental  conditions or other adverse matters which,
individually or collectively,  materially impair the value of such real property
or related  improvements;  (e) the obligor in respect of such promissory note is
not an Affiliate  of the Borrower or RMR; (f) if the Borrower or any  Subsidiary
were to acquire such real property and related improvements, no Default or Event
of Default would result from such acquisition;  and (g) such promissory note (i)
has been  designated  by the  Borrower  as an  "Unencumbered  Mortgage  Note" on
Schedule  6.1(y)  or on an  Unencumbered  Asset  Certificate  delivered  by  the
Borrower to the Agent  pursuant to Section 8.3 or 8.4(o),  and (ii) has not been
removed by the Borrower from  "Unencumbered  Mortgage Notes" pursuant to Section
8.4(p).

         "Unfunded Liabilities" means, with respect to any Plan at any time, the
amount  (if any) by which (a) the value of all  benefit  liabilities  under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for  purposes  of Section  4044 of ERISA,  exceeds  (b) the fair market
value of all Plan assets allocable to such  liabilities  under Title IV of ERISA
(excluding any accrued but unpaid contributions),  all determined as of the then
most  recent  valuation  date for such Plan,  but only to the  extent  that such
excess  represents  a potential

                                      -24-
<PAGE>
liability  of a member of the ERISA Group to the PBGC or any other  Person under
Title IV of ERISA.

         "Unsecured  Debt Service" means,  for a given period,  Debt Service for
such  period,  with respect to  Unsecured  Indebtedness  of the Borrower and its
Subsidiaries.

         "Unsecured  Indebtedness"  means,  with  respect  to a Person as of any
given date, the aggregate  principal  amount of all  Indebtedness of such Person
outstanding   at  such  date  that  is  not  Secured   Indebtedness   (excluding
Indebtedness associated with Unconsolidated Affiliates that is not Guaranteed by
a  Loan  Party)  and  in  the  case  of  the  Borrower  shall  include  (without
duplication) Indebtedness that does not constitute Secured Indebtedness.

         "Wholly Owned  Subsidiary"  means any Subsidiary of a Person in respect
of which all of the equity securities or other ownership  interests (other than,
in the case of a  corporation,  directors'  qualifying  shares)  are at the time
directly or  indirectly  owned or controlled by such Person or one or more other
Subsidiaries of such Person or by such Person and one or more other Subsidiaries
of such Person.

Section 1.2.  General; References to Times.

         Unless  otherwise   indicated,   all  accounting   terms,   ratios  and
measurements  shall be  interpreted  or determined  in  accordance  with GAAP in
effect as of the Agreement  Date.  References in this  Agreement to  "Sections",
"Articles",  "Exhibits" and "Schedules" are to sections,  articles, exhibits and
schedules  herein and hereto  unless  otherwise  indicated.  references  in this
Agreement  to any  document,  instrument  or  agreement  (a) shall  include  all
exhibits,  schedules  and  other  attachments  thereto,  (b) shall  include  all
documents,  instruments or agreements issued or executed in replacement thereof,
to the extent permitted  hereby and (c) shall mean such document,  instrument or
agreement,  or  replacement or predecessor  thereto,  as amended,  supplemented,
restated or otherwise modified as of the date of this Agreement and from time to
time  thereafter to the extent not prohibited  hereby and in effect at any given
time.  Wherever  from the  context it appears  appropriate,  each term stated in
either the  singular or plural  shall  include  the  singular  and  plural,  and
pronouns  stated in the  masculine,  feminine or neuter gender shall include the
masculine,  the  feminine  and the neuter.  Unless  explicitly  set forth to the
contrary,  a reference to  "Subsidiary"  means a Subsidiary of the Borrower or a
Subsidiary  of  such  Subsidiary  and a  reference  to an  "Affiliate"  means  a
reference  to an  Affiliate  of the  Borrower.  Titles and captions of Articles,
Sections,  subsections and clauses in this Agreement are for  convenience  only,
and neither limit nor amplify the provisions of this Agreement. Unless otherwise
indicated,  all references to time are  references to Charlotte,  North Carolina
time.

                           ARTICLE II. CREDIT FACILITY

Section 2.1.  Revolving Loans.

         (a) Generally.  Subject to the terms and conditions hereof,  during the
period from the  Effective  Date to but  excluding the  Termination  Date,  each
Lender  severally and not jointly agrees to make Revolving Loans to the Borrower
in an  aggregate  principal  amount at any one time  outstanding  up to, but not
exceeding,  the  amount of such  Lender's  Commitment.  Subject to

                                      -25-
<PAGE>
the terms and conditions of this Agreement, during the period from the Effective
Date to but excluding the Termination  Date, the Borrower may borrow,  repay and
reborrow Revolving Loans hereunder.

         (b)  Requesting  Revolving  Loans.  The  Borrower  shall give the Agent
notice pursuant to a Notice of Borrowing or telephonic  notice of each borrowing
of Revolving  Loans.  Each Notice of  Borrowing  shall be delivered to the Agent
before  11:00 a.m. (i) in the case of LIBOR  Loans,  on the date three  Business
Days prior to the proposed  date of such  borrowing and (ii) in the case of Base
Rate Loans,  on the date one  Business  Day prior to the  proposed  date of such
borrowing.  Any such  telephonic  notice  shall  include all  information  to be
specified in a written  Notice of Borrowing  and shall be promptly  confirmed in
writing by the Borrower  pursuant to a Notice of Borrowing  sent to the Agent by
telecopy on the same day of the giving of such telephonic notice. The Agent will
transmit by telecopy the Notice of Borrowing  (or the  information  contained in
such Notice of Borrowing) or the information contained in a telephonic notice of
borrowing (if such telephonic notice is received prior to a Notice of Borrowing)
to each Lender  promptly upon receipt by the Agent.  Each Notice of Borrowing or
telephonic  notice of each borrowing shall be irrevocable once given and binding
on the Borrower.

         (c)  Disbursements of Revolving Loan Proceeds.  No later than 1:00 p.m.
on the date  specified  in the  Notice  of  Borrowing,  each  Lender  will  make
available for the account of its  applicable  Lending Office to the Agent at the
Principal Office, in immediately  available funds, the proceeds of the Revolving
Loan to be made by such Lender. With respect to Revolving Loans to be made after
the  Effective  Date,  unless the Agent  shall have been  notified by any Lender
prior to the  specified  date of  borrowing  that such Lender does not intend to
make available to the Agent the Revolving Loan to be made by such Lender on such
date,  the Agent may assume  that such  Lender  will make the  proceeds  of such
Revolving Loan available to the Agent on the date of the requested  borrowing as
set  forth in the  Notice  of  Borrowing  and the  Agent  may (but  shall not be
obligated to), in reliance upon such assumption,  make available to the Borrower
the amount of such  Revolving  Loan to be  provided by such  Lender.  Subject to
satisfaction  of the  applicable  conditions  set forth in  Article  V. for such
borrowing,  the Agent will make the proceeds of such borrowing  available to the
Borrower no later than 2:00 p.m. on the date and at the account specified by the
Borrower in such Notice of Borrowing.

Section 2.2.  Swingline Loans.

         (a) Swing  Line  Loans.  Subject  to the terms and  conditions  hereof,
during the period from the Effective Date to but excluding the Termination Date,
the  Swingline  Lender  agrees to make  Swingline  Loans to the  Borrower  in an
aggregate principal amount at any one time outstanding up to, but not exceeding,
the amount of the Swingline  Commitment.  If at any time the aggregate principal
amount of the  Swingline  Loans  outstanding  at such time exceeds the Swingline
Commitment in effect at such time, the Borrower shall  immediately pay the Agent
for the account of the  Swingline  Lender the amount of such excess.  Subject to
the terms and conditions of this Agreement,  the Borrower may borrow,  repay and
reborrow Swingline Loans hereunder.

         (b) Procedure for Borrowing  Swingline  Loans.  The Borrower shall give
the Agent and the  Swingline  Lender  notice  pursuant to a Notice of  Swingline
Borrowing  or  telephonic

                                      -26-
<PAGE>
notice of each borrowing of a Swingline Loan. Each Notice of Swingline Borrowing
shall be  delivered  to the  Swingline  Lender no later  than  3:00 p.m.  on the
proposed date of such borrowing.  Any such  telephonic  notice shall include all
information to be specified in a written Notice of Swingline Borrowing and shall
be  promptly  confirmed  in  writing  by the  Borrower  pursuant  to a Notice of
Swingline  Borrowing sent to the Swingline Lender by telecopy on the same day of
the giving of such  telephonic  notice.  On the date of the requested  Swingline
Loan and  subject to  satisfaction  of the  applicable  conditions  set forth in
Article V. for such  borrowing,  the Swingline  Lender will make the proceeds of
such  Swingline  Loan  available  to the  Borrower  in Dollars,  in  immediately
available  funds,  at the  account  specified  by the  Borrower in the Notice of
Swingline  Borrowing  not later than 11:00  a.m.  on such date if the  Swingline
Lender  received  such Notice of Swingline  Borrowing by 9:00 a.m. on such date,
and otherwise not later than 4:00 p.m. on such date.

         (c) Interest.  Swingline  Loans shall bear interest at a per annum rate
equal to the Base Rate plus the  Applicable  Margin  for Base Rate  Loans (or at
such other rate or rates as the Borrower and the Swingline Lender may agree from
time to time in writing).  Interest payable on Swingline Loans is solely for the
account of the Swingline  Lender.  All accrued and unpaid  interest on Swingline
Loans shall be payable on the dates and in the manner  provided in Section  2.4.
with respect to interest on Base Rate Loans (except as the Swingline  Lender and
the Borrower may otherwise  agree in writing in connection  with any  particular
Swingline Loan).

         (d) Swingline  Loan Amounts,  Etc. Each  Swingline Loan shall be in the
minimum  amount of $1,000,000  and integral  multiples of $500,000 or such other
minimum  amounts  agreed  to by the  Swingline  Lender  and  the  Borrower.  Any
voluntary  prepayment  of a  Swingline  Loan must be in  integral  multiples  of
$100,000 or the aggregate  principal  amount of all outstanding  Swingline Loans
(or such other minimum amounts upon which the Swingline  Lender and the Borrower
may agree) and in connection  with any such  prepayment,  the Borrower must give
the Swingline  Lender prior written  notice  thereof no later than 10:00 a.m. on
the date of such  prepayment.  The  Swingline  Loans shall,  in addition to this
Agreement, be evidenced by the Swingline Note.

         (e)  Repayment  and  Participations  of Swingline  Loans.  The Borrower
agrees to repay each Swingline  Loan within one Business Day of demand  therefor
by the Swingline Lender and in any event,  within 5 Business Days after the date
such Swingline Loan was made.  Notwithstanding the foregoing, the Borrower shall
repay the entire  outstanding  principal  amount of, and all  accrued but unpaid
interest on, the Swingline Loans on the  Termination  Date (or such earlier date
as the  Swingline  Lender and the  Borrower  may agree in  writing).  In lieu of
demanding  repayment  of any  outstanding  Swingline  Loan from the  Borrower in
respect  of which the Agent has not either  (x)  received a Notice of  Borrowing
indicating that such Swingline Loan is to be repaid with the proceeds thereof or
(y) received  notice from the Borrower  that it intends to repay such  Swingline
Loan on a  specified  date  and,  in the  case of this  clause  (y)  only,  such
Swingline  Loan is not repaid by 11:30 a.m. on such date,  the Swingline  Lender
may, on behalf of the Borrower (which hereby  irrevocably  directs the Swingline
Lender to act on its  behalf),  request a borrowing  of  Revolving  Loans (which
shall be Base Rate Loans) from the Lenders in an amount  equal to the  principal
balance of such  Swingline  Loan. The  limitations of Section  3.5.(a) shall not
apply to any borrowing of Base Rate Loans made pursuant to this

                                      -27-
<PAGE>
subsection.  The  Swingline  Lender  shall give  notice to the Agent of any such
borrowing of Base Rate Loans not later than 12:00 noon on the  proposed  date of
such  borrowing,  and the Agent shall promptly give notice to the Lenders of any
such  borrowing of Base Rate Loans.  No later than 2:00 p.m. on such date,  each
Lender will make available to the Agent at the Principal  Office for the account
of Swingline  Lender,  in immediately  available funds, the proceeds of the Base
Rate Loan to be made by such  Lender.  The Agent shall pay the  proceeds of such
Base Rate Loans to the  Swingline  Lender,  which shall  apply such  proceeds to
repay such  Swingline  Loan.  If the Lenders are  prohibited  from making  Loans
required  to be made under this  subsection  for any reason,  including  without
limitation, the occurrence of any of the Events of Default described in Sections
10.1.(f) or 10.1.(g),  each Lender shall  purchase  from the  Swingline  Lender,
without  recourse or warranty,  an undivided  interest and  participation to the
extent  of such  Lender's  Commitment  Percentage  of such  Swingline  Loan,  by
directly  purchasing  a  participation  in such  Swingline  Loan in such  amount
(regardless  of whether the  conditions  precedent  thereto set forth in Section
5.2. are then  satisfied,  whether or not the Borrower has submitted a Notice of
Borrowing and whether or not the  Commitments  are then in effect,  any Event of
Default exists or all the Loans have been  accelerated)  and paying the proceeds
thereof to the Agent for the account of the  Swingline  Lender in Dollars and in
immediately available funds. If such amount is not in fact made available to the
Swingline  Lender by any  Lender,  the  Swingline  Lender  shall be  entitled to
recover such amount on demand from such Lender,  together with accrued  interest
thereon for each day from the date of demand thereof, at the Federal Funds Rate.
If such Lender does not pay such amount  forthwith  upon the Swingline  Lender's
demand therefor,  and until such time as such Lender makes the required payment,
the Swingline Lender shall be deemed to continue to have  outstanding  Swingline
Loans in the amount of such unpaid participation  obligation for all purposes of
the Loan Documents (other than those  provisions  requiring the other Lenders to
purchase a participation therein).  Further, such Lender shall be deemed to have
assigned any and all payments made of principal  and interest on its Loans,  and
any other amounts due to it hereunder, to the Swingline Lender to fund Swingline
Loans in the amount of the  participation  in  Swingline  Loans that such Lender
failed to purchase pursuant to this Section until such amount has been purchased
(as a result of such assignment or otherwise). A Lender's obligation to purchase
such a participation in a Swingline Loan shall be absolute and unconditional and
shall  not  be  affected  by  any  circumstance  whatsoever,  including  without
limitation, (i) any claim of setoff, counterclaim,  recoupment, defense or other
right which such Lender or any other Person may have or claim against the Agent,
the  Swingline  Lender or any other Person  whatsoever,  (ii) the  occurrence or
continuation of a Default or Event of Default (including without limitation, any
of the Defaults or Events of Default described in Sections 10.1.(f) or 10.1.(g))
or the termination of any Lender's  Commitment,  (iii) the existence (or alleged
existence)  of an event or  condition  which  has had or could  have a  Material
Adverse Effect, (iv) any breach of any Loan Document by the Agent, any Lender or
the  Borrower  or (v) any other  circumstance,  happening  or event  whatsoever,
whether or not similar to any of the foregoing.

Section 2.3.  Letters of Credit.

         (a)  Letters of Credit.  Subject  to the terms and  conditions  of this
Agreement,  the Agent, on behalf of the Lenders, agrees to issue for the account
of the Borrower  during the period from and including the Effective Date to, but
excluding, the date 30 days prior to the Termination Date one or more letters of
credit (each a "Letter of Credit") up to a maximum

                                      -28-
<PAGE>
aggregate  Stated  Amount  at any one time  outstanding  not to  exceed  the L/C
Commitment Amount.

         (b) Terms of Letters of Credit.  At the time of  issuance,  the amount,
form,  terms and  conditions  of each  Letter of  Credit,  and of any  drafts or
acceptances  thereunder,  shall be  subject  to  approval  by the  Agent and the
Borrower.  Notwithstanding the foregoing, in no event may the expiration date of
any Letter of Credit extend beyond the earlier of (i) the date one year from its
date of issuance or (ii) the Termination Date.

         (c) Requests for Issuance of Letters of Credit. The Borrower shall give
the Agent written notice (or telephonic notice promptly confirmed in writing) at
least 5 Business  Days prior to the  requested  date of  issuance of a Letter of
Credit,  such notice to describe in reasonable detail the proposed terms of such
Letter of Credit and the nature of the  transactions or obligations  proposed to
be  supported  by such  Letter of Credit,  and in any event shall set forth with
respect to such Letter of Credit (i) the proposed  initial Stated  Amount,  (ii)
the beneficiary or  beneficiaries,  and (iii) the proposed  expiration date. The
Borrower  shall  also  execute  and  deliver  such  customary  letter  of credit
application  forms as  requested  from time to time by the Agent.  Provided  the
Borrower  has  given  the  notice  prescribed  by the  first  sentence  of  this
subsection  and subject to Section 2.13.  and the other terms and  conditions of
this  Agreement,   including,   without  limitation,  the  satisfaction  of  any
applicable  conditions  precedent set forth in Article V., the Agent shall issue
the requested Letter of Credit on the requested date of issuance for the benefit
of the  stipulated  beneficiary  and will notify each Lender of the  issuance of
such Letter of Credit within a reasonable time after the issuance thereof.  Upon
the written  request of the Borrower,  the Agent shall deliver to the Borrower a
copy of each issued Letter of Credit within a reasonable  time after the date of
issuance  thereof.  To the  extent  any term of a Letter of Credit  Document  is
inconsistent  with a term of any Loan  Document,  the term of such Loan Document
shall control.

         (d)  Reimbursement  Obligations.  Upon  receipt  by the Agent  from the
beneficiary of a Letter of Credit of any demand for payment under such Letter of
Credit, the Agent shall promptly notify the Borrower of the amount to be paid by
the Agent as a result of such demand and the date on which payment is to be made
by the Agent to such beneficiary in respect of such demand;  provided,  however,
the Agent's failure to give, or delay in giving, such notice shall not discharge
the Borrower in any respect from the applicable  Reimbursement  Obligation.  The
Borrower hereby  unconditionally and irrevocably agrees to pay and reimburse the
Agent for the amount of each demand for  payment  under such Letter of Credit on
or  prior  to the  date on  which  payment  is to be made  by the  Agent  to the
beneficiary   thereunder,   without  presentment,   demand,   protest  or  other
formalities of any kind.  Upon receipt by the Agent of any payment in respect of
any Reimbursement  Obligation,  the Agent shall promptly pay to each Lender that
has  acquired  a  participation  therein  under the second  sentence  of Section
2.3.(i) such Lender's Commitment Percentage of such payment.

         (e) Manner of  Reimbursement.  Upon its receipt of a notice referred to
in the immediately preceding subsection (d), the Borrower shall advise the Agent
whether  or not  the  Borrower  intends  to  borrow  hereunder  to  finance  its
obligation  to  reimburse  the Agent for the  amount of the  related  demand for
payment.  If the Borrower fails to so advise the Agent, or if the

                                      -29-
<PAGE>
Borrower fails to reimburse the Agent for a demand for payment under a Letter of
Credit  by the  date of such  payment,  then  (i) if the  applicable  conditions
contained in Article V. would permit the making of Revolving Loans, the Borrower
shall be deemed to have requested a borrowing of Revolving Loans (which shall be
Base Rate Loans) in an amount equal to the unpaid  Reimbursement  Obligation and
the Agent shall give each Lender  prompt  notice  (which  shall be no later than
12:00  p.m.) of the amount of the  Revolving  Loan to be made  available  to the
Agent not later than 1:00 p.m. and (ii) if such conditions  would not permit the
making of Revolving  Loans,  the  provisions of  subsection  (j) of this Section
shall apply. The limitations of Section 3.5.(a) shall not apply to any borrowing
of Base Rate Loans under this subsection.

         (f) Effect of Letters of Credit on  Commitments.  Upon the  issuance by
the Agent of any  Letter of Credit and until  such  Letter of Credit  shall have
expired or been terminated,  the Commitment of each Lender shall be deemed to be
utilized for all purposes of this Agreement in an amount equal to the product of
(i) such  Lender's  Commitment  Percentage  and  (ii) the sum of (A) the  Stated
Amount of such Letter of Credit plus (B) any related  Reimbursement  Obligations
then outstanding.

         (g) Agent's Duties Regarding Letters of Credit; Unconditional Nature of
Reimbursement  Obligation.  In examining  documents presented in connection with
drawings  under  Letters  of Credit and making  payments  under such  Letters of
Credit against such documents,  the Agent shall only be required to use the same
standard of care as it uses in connection with examining  documents presented in
connection  with  drawings  under  letters  of  credit  in which it has not sold
participations  and making  payments under such letters of credit.  The Borrower
assumes  all risks of the acts and  omissions  of, or misuse of the  Letters  of
Credit  by,  the  respective   beneficiaries  of  such  Letters  of  Credit.  In
furtherance and not in limitation of the foregoing, neither the Agent nor any of
the  Lenders  shall be  responsible  for (i) the  form,  validity,  sufficiency,
accuracy, genuineness or legal effects of any document submitted by any party in
connection with the application for and issuance of or any drawing honored under
any  Letter  of  Credit  even if it  should  in fact  prove  to be in any or all
respects  invalid,  insufficient,  inaccurate,  fraudulent  or forged;  (ii) the
validity  or  sufficiency  of  any  instrument   transferring  or  assigning  or
purporting to transfer or assign any Letter of Credit, or the rights or benefits
thereunder  or  proceeds  thereof,  in whole or in part,  which  may prove to be
invalid or ineffective  for any reason;  (iii) failure of the beneficiary of any
Letter of Credit to comply fully with conditions  required in order to draw upon
such  Letter of  Credit;  (iv)  errors,  omissions,  interruptions  or delays in
transmission or delivery of any messages,  by mail,  cable,  telex,  telecopy or
otherwise,  whether or not they be in cipher;  (v) errors in  interpretation  of
technical terms;  (vi) any loss or delay in the transmission or otherwise of any
document  required in order to make a drawing under any Letter of Credit,  or of
the proceeds thereof;  (vii) the misapplication by the beneficiary of any Letter
of Credit,  or the proceeds of any drawing under any Letter of Credit; or (viii)
any  consequences  arising  from  causes  beyond the control of the Agent or the
Lenders. None of the above shall affect, impair or prevent the vesting of any of
the Agent's or any  Lender's  rights or powers  hereunder.  Any action  taken or
omitted  to be taken by the  Agent  under or in  connection  with any  Letter of
Credit,  if taken or  omitted  in the  absence  of gross  negligence  or willful
misconduct,  shall not create  against the Agent or any Lender any  liability to
the Borrower or any Lender.  In this connection,  the obligation of the Borrower
to reimburse  the Agent for any drawing made under any Letter of Credit shall be
absolute, unconditional and

                                      -30-
<PAGE>
irrevocable  and shall be paid  strictly  in  accordance  with the terms of this
Agreement under all circumstances whatsoever,  including without limitation, the
following  circumstances:  (A) any lack of  validity  or  enforceability  of any
Letter of Credit Document or any term or provisions  therein;  (B) any amendment
or waiver of or any consent to departure from all or any of the Letter of Credit
Documents;  (C) the existence of any claim, setoff, defense or other right which
the Borrower may have at any time against the Agent, any Lender, any beneficiary
of a Letter of  Credit or any other  Person,  whether  in  connection  with this
Agreement,  the  transactions  contemplated  hereby  or in the  Letter of Credit
Documents or any  unrelated  transaction;  (D) any breach of contract or dispute
between the Borrower, the Agent, any Lender or any other Person; (E) any demand,
statement or any other document presented under a Letter of Credit proving to be
forged,  fraudulent,  invalid or  insufficient  in any respect or any  statement
therein  or made in  connection  therewith  being  untrue or  inaccurate  in any
respect whatsoever; (F) any non-application or misapplication by the beneficiary
of a Letter of Credit or any other Person of the  proceeds of any drawing  under
such  Letter of  Credit;  (G)  payment  by the Agent  under any Letter of Credit
against  presentation  of a draft or certificate  which does not strictly comply
with the terms of such Letter of Credit; and (H) any other act, omission to act,
delay or  circumstance  whatsoever  that might,  but for the  provisions of this
Section,  constitute  a  legal  or  equitable  defense  to or  discharge  of the
Borrower's Reimbursement  Obligations.  Notwithstanding anything to the contrary
contained  in this  Section  or  Section  12.9.,  but not in  limitation  of the
Borrower's  unconditional obligation to reimburse the Agent for any drawing made
under a Letter of Credit as provided in this Section, the Borrower shall have no
obligation  to  indemnify  the Agent or any Lender in  respect of any  liability
incurred  by the Agent  arising  solely out of the gross  negligence  or willful
misconduct of the Agent in respect of a Letter of Credit as actually and finally
determined by a court of competent jurisdiction. Except as otherwise provided in
this  Section,  nothing in this Section shall affect any rights the Borrower may
have with respect to the Agent's  gross  negligence or willful  misconduct  with
respect to any Letter of Credit.

         (h)  Amendments,  Etc.  The  issuance  by the  Agent of any  amendment,
supplement or other modification to any Letter of Credit shall be subject to the
same conditions  applicable  under this Agreement to the issuance of new Letters
of Credit  (including,  without  limitation,  that the request  therefor be made
through the Agent),  and no such  amendment,  supplement  or other  modification
shall be issued  unless  either  (i) the  respective  Letter of Credit  affected
thereby would have complied with such  conditions had it originally  been issued
hereunder in such amended,  supplemented  or modified form or (ii) the Requisite
Lenders shall have consented  thereto.  In connection  with any such  amendment,
supplement  or other  modification,  the  Borrower  shall pay the Fees,  if any,
payable under the last sentence of Section 3.6.(b).

         (i) Lenders'  Participation in Letters of Credit.  Immediately upon the
issuance  by the Agent of any Letter of Credit  each  Lender  shall be deemed to
have  irrevocably  and  unconditionally  purchased  and received from the Agent,
without  recourse or warranty,  an undivided  interest and  participation to the
extent of such Lender's Commitment Percentage of the liability of the Agent with
respect  to such  Letter of Credit and each  Lender  thereby  shall  absolutely,
unconditionally  and irrevocably  assume,  as primary obligor and not as surety,
and shall be  unconditionally  obligated to the Agent to pay and discharge  when
due, such Lender's  Commitment  Percentage of the Agent's  liability  under such
Letter of Credit.  In  addition,  upon the making of each payment by a Lender to
the  Agent in  respect  of any  Letter  of Credit  pursuant

                                      -31-
<PAGE>
to the immediately  following  subsection (j), such Lender shall,  automatically
and without any further action on the part of the Agent or such Lender,  acquire
(i) a  participation  in an amount  equal to such  payment in the  Reimbursement
Obligation  owing to the Agent by the  Borrower  in  respect  of such  Letter of
Credit  and  (ii)  a  participation  in a  percentage  equal  to  such  Lender's
Commitment  Percentage in any interest or other amounts  payable by the Borrower
in respect of such Reimbursement  Obligation (other than the Fees payable to the
Agent pursuant to the second and last sentences of Section 3.6.(b)).

         (j) Payment Obligation of Lenders.  Each Lender severally agrees to pay
to the Agent on demand in immediately  available  funds in Dollars the amount of
such Lender's Commitment Percentage of each drawing paid by the Agent under each
Letter of Credit to the extent such  amount is not  reimbursed  by the  Borrower
pursuant to Section 2.3.(d). Each such Lender's obligation to make such payments
to the Agent under this  subsection,  and the Agent's right to receive the same,
shall be absolute,  irrevocable and  unconditional  and shall not be affected in
any way by any circumstance  whatsoever,  including without limitation,  (i) the
failure of any other Lender to make its payment under this subsection,  (ii) the
financial condition of the Borrower or any other Loan Party, (iii) the existence
of any Default or Event of Default,  including any Event of Default described in
Section  10.1.(f) or 10.1.(g) or (iv) the termination of the  Commitments.  Each
such  payment  to the  Agent  shall  be  made  without  any  offset,  abatement,
withholding or deduction whatsoever.

         (k) Information to Lenders. Upon the request of any Lender from time to
time, the Agent shall deliver to such Lender information reasonably requested by
such Lender with respect to each Letter of Credit then  outstanding.  Other than
as set forth in this  subsection,  the Agent  shall  have no duty to notify  the
Lenders  regarding  the issuance or other  matters  regarding  Letters of Credit
issued  hereunder.  The failure of the Agent to perform its  requirements  under
this subsection shall not relieve any Lender from its obligations  under Section
2.3.(j).

Section 2.4.  Rates and Payment of Interest on Loans.

         (a) Rates. The Borrower promises to pay to the Agent for the account of
each Lender  interest on the unpaid  principal  amount of each Loan made by such
Lender for the period from and  including the date of the making of such Loan to
but  excluding  the date such Loan shall be paid in full,  at the  following per
annum rates:

                  (i) during such  periods as such Loan is a Base Rate Loan,  at
         the Base Rate (as in  effect  from  time to time)  plus the  Applicable
         Margin; and

                  (ii) during such periods as such Loan is a LIBOR Loan,  at the
         Adjusted Eurodollar Rate for such Loan for the Interest Period therefor
         plus the Applicable Margin.

Notwithstanding  the foregoing,  during the  continuance of an Event of Default,
the Borrower  shall pay to the Agent for the account of each Lender  interest at
the  Post-Default  Rate on the outstanding  principal amount of any Loan made by
such Lender, on all Reimbursement Obligations and on any other amount payable by
the  Borrower  hereunder  or under the Notes  held

                                      -32-
<PAGE>
by  such  Lender  to or for  the  account  of  such  Lender  (including  without
limitation, accrued but unpaid interest to the extent permitted under Applicable
Law).

         (b) Payment of Interest. Accrued interest on each Loan shall be payable
(i) in the case of a Base Rate Loan, monthly in arrears on the first day of each
calendar  month,  (ii) in the  case of a LIBOR  Loan,  on the  last  day of each
Interest Period  therefor,  and (iii) in the case of any Loan, upon the payment,
prepayment or  Continuation  thereof or the Conversion of such Loan to a Loan of
another Type (but only on the principal  amount so paid,  prepaid,  Continued or
Converted). Interest payable at the Post-Default Rate shall be payable from time
to time on  demand.  Promptly  after  the  determination  of any  interest  rate
provided for herein or any change  therein,  the Agent shall give notice thereof
to the  Lenders  to which such  interest  is payable  and to the  Borrower.  All
determinations  by the Agent of an interest rate  hereunder  shall be conclusive
and binding on the Lenders and the Borrower for all  purposes,  absent  manifest
error.

         (c) Ratings Change.  If the Applicable  Margin shall change as a result
of a change in the  Borrower's  Credit  Rating and then  within a 90-day  period
change back to the  Applicable  Margin in effect at the beginning of such period
as a result of another  change in such  Credit  Rating,  and (i) if the  initial
change in the Applicable Margin were an increase, then the Borrower will receive
as a credit  against its  Obligations  any  incremental  interest  expense  with
respect  to the Loans  and the  Facility  Fee for the  period  during  which the
increase existed and (ii) if the initial change in the Applicable  Margin were a
decrease,  then the Borrower  shall promptly pay to the Agent for the benefit of
the  Lenders  additional  interest  with  respect  to the Loans  and  additional
Facility Fees for the period during which the decrease existed  determined as if
such decrease had not occurred.

Section 2.5.  Number of Interest Periods.

         There may be no more than 6 different  Interest Periods for LIBOR Loans
outstanding at the same time.

Section 2.6.  Repayment of Loans.

         The Borrower shall repay the entire  outstanding  principal  amount of,
and all  accrued  but unpaid  interest  on, the Loans,  together  with all other
amounts then outstanding under this Agreement, on the Termination Date.

Section 2.7.  Prepayments.

         (a) Optional. Subject to Section 4.4., the Borrower may prepay any Loan
at any time without  premium or penalty.  The  Borrower  shall give the Agent at
least one Business Day's prior written notice of the prepayment of any Revolving
Loan.

         (b)  Mandatory.  If at any time the aggregate  principal  amount of all
outstanding Revolving Loans, together with the aggregate amount of all Letter of
Credit  Liabilities  and  the  aggregate  principal  amount  of all  outstanding
Swingline  Loans,  exceeds the aggregate  amount of the Commitments in effect at
such time, the Borrower shall  immediately  pay to the Agent for the accounts of
the Lenders the amount of such excess.  Such payment shall be applied to pay all

                                      -33-
<PAGE>
amounts of principal outstanding on the Loans and any Reimbursement  Obligations
pro rata in  accordance  with  Section  3.2.  and if any  Letters  of Credit are
outstanding  at such time the  remainder,  if any,  shall be deposited  into the
Collateral  Account for  application to any  Reimbursement  Obligations.  If the
Borrower  is  required  to pay any  outstanding  LIBOR  Loans by  reason of this
Section  prior  to the  end of the  applicable  Interest  Period  therefor,  the
Borrower shall pay all amounts due under Section 4.4.

Section 2.8.  Continuation.

         So long as no Default or Event of Default  shall have  occurred  and be
continuing,  the  Borrower may on any  Business  Day,  with respect to any LIBOR
Loan,  elect to maintain such LIBOR Loan or any portion  thereof as a LIBOR Loan
by selecting a new Interest Period for such LIBOR Loan. Each new Interest Period
selected  under this Section shall  commence on the last day of the  immediately
preceding Interest Period. Each selection of a new Interest Period shall be made
by the  Borrower  giving to the Agent a Notice of  Continuation  not later  than
11:00 a.m. on the third Business Day prior to the date of any such Continuation.
Such notice by the Borrower of a Continuation shall be by telephone or telecopy,
confirmed  immediately  in writing if by  telephone,  in the form of a Notice of
Continuation,  specifying  (a) the proposed date of such  Continuation,  (b) the
LIBOR  Loans and  portions  thereof  subject  to such  Continuation  and (c) the
duration of the  selected  Interest  Period,  all of which shall be specified in
such manner as is necessary to comply with all limitations on Loans  outstanding
hereunder.  Each Notice of  Continuation  shall be irrevocable by and binding on
the Borrower once given. Promptly after receipt of a Notice of Continuation, the
Agent  shall  notify  each  Lender  by  telecopy,   or  other  similar  form  of
transmission, of the proposed Continuation. If the Borrower shall fail to select
in a timely manner a new Interest  Period for any LIBOR Loan in accordance  with
this  Section,  or if a Default or Event of Default  shall have  occurred and be
continuing,  such  Loan  will  automatically,  on the  last  day of the  current
Interest  Period  therefor,  Convert into a Base Rate Loan  notwithstanding  the
first sentence of Section 2.9. or the  Borrower's  failure to comply with any of
the terms of such Section.

Section 2.9.  Conversion.

         So long as no Default or Event of Default  shall have  occurred  and be
continuing,  the Borrower may on any Business Day, upon the Borrower's giving of
a Notice of Conversion  to the Agent,  Convert all or a portion of a Loan of one
Type into a Loan of another  Type.  Any  Conversion  of a LIBOR Loan into a Base
Rate Loan shall be made on, and only on, the last day of an Interest  Period for
such LIBOR Loan and, upon  Conversion of a Base Rate Loan into a LIBOR Loan, the
Borrower  shall pay accrued  interest to the date of Conversion on the principal
amount so  Converted.  Each such Notice of  Conversion  shall be given not later
than 11:00 a.m. on the Business Day prior to the date of any proposed Conversion
into Base Rate  Loans  and on the  third  Business  Day prior to the date of any
proposed  Conversion  into LIBOR Loans.  Promptly  after  receipt of a Notice of
Conversion,  the Agent shall  notify each Lender by telecopy,  or other  similar
form of transmission,  of the proposed  Conversion.  Subject to the restrictions
specified  above,  each Notice of  Conversion  shall be by telephone  (confirmed
immediately  in  writing)  or  telecopy  in the form of a Notice  of  Conversion
specifying (a) the requested date of such Conversion, (b) the Type of Loan to be
Converted, (c) the portion of such Type of Loan to be Converted, (d) the Type of
Loan  such Loan is to be  Converted  into and (e) if such  Conversion

                                      -34-
<PAGE>
is into a LIBOR Loan,  the  requested  duration of the  Interest  Period of such
Loan.  Each  Notice of  Conversion  shall be  irrevocable  by and binding on the
Borrower once given.

Section 2.10.  Notes.

         (a) Revolving  Note. The Revolving  Loans made by each Lender shall, in
addition  to this  Agreement,  also be  evidenced  by a  promissory  note of the
Borrower  substantially  in the form of  Exhibit  H (each a  "Revolving  Note"),
payable to the order of such Lender in a principal amount equal to the amount of
its Commitment as originally in effect and otherwise duly completed.

         (b) Records.  The date,  amount,  interest  rate,  Type and duration of
Interest  Periods  (if  applicable)  of each  Loan  made by each  Lender  to the
Borrower,  and each payment made on account of the principal  thereof,  shall be
recorded  by such Lender on its books and such  entries  shall be binding on the
Borrower absent manifest error.

         (c) Lost,  Stolen,  Destroyed or Mutilated  Notes.  Upon receipt by the
Borrower of (i) written notice from a Lender that a Note of such Lender has been
lost, stolen, destroyed or mutilated, and (ii) (A) in the case of loss, theft or
destruction,  an  unsecured  agreement  of  indemnity  from such  Lender in form
reasonably satisfactory to the Borrower, or (B) in the case of mutilation,  upon
surrender and  cancellation  of such Note, the Borrower shall at its own expense
execute  and  deliver  to such  Lender a new Note  dated the date of such  lost,
stolen, destroyed or mutilated Note.

Section 2.11.  Voluntary Reductions of the Commitment.

         The Borrower  shall have the right to terminate or reduce the aggregate
unused amount of the Commitments (for which purpose use of the Commitments shall
be deemed to include the aggregate  amount of Letter of Credit  Liabilities  and
the aggregate  principal amount of all outstanding  Swingline Loans) at any time
and from time to time without  penalty or premium upon not less than 15 Business
Days prior written  notice to the Agent of each such  termination  or reduction,
which notice shall specify the effective date thereof and the amount of any such
reduction and shall be irrevocable once given and effective only upon receipt by
the Agent.  The Agent will  promptly  transmit  such notice to each Lender.  The
Commitments may not be reduced below  $200,000,000  in the aggregate  unless the
Borrower  terminates the Commitments in their entirety,  and, once terminated or
reduced,  the Commitments  may not be increased or reinstated.  Any reduction in
the  aggregate  amount  of  the  Commitments  shall  result  in a  proportionate
reduction (rounded to the next lowest integral multiple of multiple of $100,000)
in the Swingline Commitment and the L/C Commitment Amount.

Section 2.12.  Expiration or Maturity Date of Letters of Credit Past Termination
               Date.

         If on the date (the "Facility  Termination  Date") the  Commitments are
terminated  (whether  voluntarily,  by reason of the  occurrence  of an Event of
Default or otherwise),  there are any Letters of Credit  outstanding  hereunder,
the Borrower shall, on the Facility Termination Date, pay to the Agent an amount
of money equal to the Stated Amount of such Letter(s) of Credit for deposit into
the  Collateral  Account.  If a drawing  pursuant  to any such  Letter of Credit

                                      -35-
<PAGE>
occurs on or prior to the expiration date of such Letter of Credit, the Borrower
authorizes the Agent to use the monies  deposited in the  Collateral  Account to
make payment to the  beneficiary  with respect to such drawing or the payee with
respect to such presentment.  If no drawing occurs on or prior to the expiration
date of such Letter of Credit,  the Agent shall withdraw the monies deposited in
the Collateral  Account with respect to such outstanding  Letter of Credit on or
before the date 15  Business  Days after the  expiration  date of such Letter of
Credit and apply such funds to the Obligations,  if any, then due and payable in
the order prescribed by Section 10.4.

Section 2.13.  Amount Limitations.

         Notwithstanding  any other  term of this  Agreement  or any other  Loan
Document,  at no time may the  aggregate  principal  amount  of all  outstanding
Revolving Loans, together with the aggregate principal amount of all outstanding
Swingline  Loans and the aggregate  amount of all Letter of Credit  Liabilities,
exceed the aggregate amount of the Commitments at such time.

Section 2.14.  Increase of Commitments.

         Subject to the approval of the Agent  (which shall not be  unreasonably
withheld or delayed),  the Borrower shall have the right to request increases in
the aggregate  amount of the  Commitments  (provided that there shall be no more
than  three  such  increases  in the  Commitments  and the  aggregate  amount of
increases  in  the  Commitments  pursuant  to  this  Section  shall  not  exceed
$350,000,000)  by providing  written notice to the Agent,  which notice shall be
irrevocable  once  given.  Each  such  increase  in the  Commitments  must be an
aggregate minimum amount of $35,000,000 and integral multiples of $10,000,000 in
excess thereof. The Agent shall promptly notify each Lender of any such request.
Each  existing  Lender  shall have the right to increase  its  Commitment  by an
amount so that such Lender's  Commitment  Percentage shall not be decreased as a
result of such requested  increase in the Commitments.  Each Lender shall notify
the Agent within 10 Business  Days after receipt of the Agent's  notice  whether
such Lender wishes to increase the amount of its  Commitment.  If a Lender fails
to deliver  any such  notice to the Agent  within  such time  period,  then such
Lender shall be deemed to have  declined to increase its  Commitment.  No Lender
shall be required to increase its  Commitment  and any new Lender(s)  becoming a
party to this Agreement in connection  with any such requested  increase must be
an  Eligible  Assignee.  In the event a new Lender or Lenders  become a party to
this  Agreement,  or if any existing  Lender agrees to increase its  Commitment,
such Lender shall on the date it becomes a Lender  hereunder  (or  increases its
Commitment,  in the case of an existing  Lender)  (and as a  condition  thereto)
purchase from the other Lenders its Commitment  Percentage (as determined  after
giving  effect to the  increase of  Commitments)  of any  outstanding  Revolving
Loans, by making available to the Agent for the account of such other Lenders at
the Principal  Office,  in same day funds, an amount equal to the sum of (A) the
portion  of the  outstanding  principal  amount  of such  Revolving  Loans to be
purchased by such Lender plus (B) the  aggregate  amount of payments  previously
made by the other Lenders under Sections  2.2.(e) or 2.3.(j) which have not been
repaid  plus (C)  interest  accrued  and  unpaid  to and as of such date on such
portion  of the  outstanding  principal  amount  of such  Revolving  Loans.  The
Borrower shall pay to the Lenders amounts payable, if any, to such Lenders under
Section  4.4. as a result of the  prepayment  of any such  Revolving  Loans.  No
increase of the  Commitments  may be effected under this Section if either (x) a
Default or Event of Default shall be in existence on

                                      -36-
<PAGE>
the effective date of such increase or (y) any  representation  or warranty made
or deemed made by the  Borrower or any other Loan Party in any Loan  Document to
which any such Loan Party is a party is not (or would not be) true or correct on
the effective date of such increase  (except for  representations  or warranties
which  expressly  relate  solely to an earlier  date).  In  connection  with any
increase in the aggregate amount of the Commitments pursuant to this subsection,
(a) any  Lender  becoming  a party  hereto  shall  execute  such  documents  and
agreements as the Agent may  reasonably  request and (b) the Borrower shall make
appropriate  arrangements  so that  each new  Lender,  and any  existing  Lender
increasing its Commitment,  receives a new or replacement  Note, as appropriate,
in the  amount  of  such  Lender's  Commitment  within  2  Business  Days of the
effectiveness of the applicable increase in the aggregate amount of Commitments.

Section 2.15.  Extension of Termination Date.

         The  Borrower  may request  that the Agent and the  Lenders  extend the
current Termination Date by one year by executing and delivering to the Agent at
least 30 days but not more than 90 days prior to the current Termination Date, a
written  request for such  extension.  The Agent shall  forward to each Lender a
copy of any such request  delivered to the Agent promptly upon receipt  thereof.
Subject to satisfaction of the following conditions,  the Termination Date shall
be extended for one year:  (a) no Default or Event of Default  shall exist as of
the date of the current Termination Date or would exist immediately after giving
effect to the requested  extension;  (b) the representations and warranties made
or deemed made by the Borrower  and each other Loan Party in the Loan  Documents
to which  any of them is a party  would be true and  correct  immediately  after
giving effect to the requested  extension of the Termination Date, except to the
extent that such  representations  and warranties  expressly relate solely to an
earlier date (in which case such  representations and warranties shall have been
true and  accurate  on and as of such  earlier  date) and except for  changes in
factual circumstances specifically and expressly permitted hereunder and (c) the
Borrower shall have paid the Fees payable under Section 3.6.(d). The Termination
Date may only be extended one time pursuant to this Section.

            ARTICLE III. PAYMENTS, FEES AND OTHER GENERAL PROVISIONS

Section 3.1.  Payments.

         Except  to the  extent  otherwise  provided  herein,  all  payments  of
principal,  interest  and other  amounts to be made by the  Borrower  under this
Agreement or any other Loan Document  shall be made in Dollars,  in  immediately
available funds, without deduction, set-off or counterclaim, to the Agent at its
Principal  Office,  not later than 2:00 p.m.  on the date on which such  payment
shall  become due (each such payment made after such time on such due date to be
deemed  to have been  made on the next  succeeding  Business  Day).  Subject  to
Sections 3.2. and 3.3.,  the Agent may (but shall not be obligated to) debit the
amount of any such  payment  which is not made by such time from any  special or
general  deposit  account of the  Borrower  with the Agent  (with  notice to the
Borrower).  The Borrower  shall,  at the time of making each payment  under this
Agreement or any Note,  specify to the Agent the amounts payable by the Borrower
hereunder to which such payment is to be applied.  Each payment  received by the
Agent for the account of a Lender under this Agreement or any Note shall be paid
to such  Lender at the  applicable  Lending  Office of such Lender no later than
5:00 p.m.  on the date of  receipt.  If the Agent  fails to pay such amount to a
Lender as provided in the  previous  sentence,  the Agent shall

                                      -37-
<PAGE>
pay  interest on such amount until paid at a rate per annum equal to the Federal
Funds Rate from time to time in  effect.  If the due date of any  payment  under
this Agreement or any other Loan Document would otherwise fall on a day which is
not a Business Day such date shall be extended to the next  succeeding  Business
Day and interest shall be payable for the period of such extension.

Section 3.2.  Pro Rata Treatment.

         Except to the extent otherwise provided herein: (a) each borrowing from
the Lenders under Section  2.1.(a) shall be made from the Lenders,  each payment
of the Fees under Section  3.6.(a),  the first  sentence of Section  3.6.(b) and
Sections 3.6.(c) and (d) shall be made for the account of the Lenders,  and each
termination  or reduction of the amount of the  Commitments  under Section 2.11.
shall  be  applied  to the  respective  Commitments  of the  Lenders,  pro  rata
according to the amounts of their  respective  Commitments;  (b) each payment or
prepayment of principal of Revolving Loans by the Borrower shall be made for the
account  of the  Lenders  pro  rata in  accordance  with the  respective  unpaid
principal  amounts  of the  Revolving  Loans  held  by  them,  provided  that if
immediately  prior to  giving  effect  to any such  payment  in  respect  of any
Revolving  Loans the outstanding  principal  amount of the Revolving Loans shall
not be  held by the  Lenders  pro  rata  in  accordance  with  their  respective
Commitments in effect at the time such Loans were made,  then such payment shall
be applied to the Revolving  Loans in such manner as shall result,  as nearly as
is practicable, in the outstanding principal amount of the Revolving Loans being
held by the Lenders pro rata in accordance  with their  respective  Commitments;
(c) each  payment of interest on Revolving  Loans by the Borrower  shall be made
for the  account  of the  Lenders  pro rata in  accordance  with the  amounts of
interest on such Loans then due and payable to the respective  Lenders;  (d) the
making,  Conversion and  Continuation  of Revolving  Loans of a particular  Type
(other than  Conversions  provided  for by Section  4.6.) shall be made pro rata
among the Lenders  according to the amounts of their respective  Commitments (in
the  case of  making  of  Loans)  or  their  respective  Loans  (in the  case of
Conversions and Continuations of Loans) and the then current Interest Period for
each Lender's  portion of each Loan of such Type shall be  coterminous;  (e) the
Lenders'  participation  in, and payment  obligations  in respect of, Letters of
Credit under Section 2.3., shall be pro rata in accordance with their respective
Commitments;  and (f) the Lenders'  participation in, and payment obligations in
respect of,  Swingline  Loans under  Section 2.2.,  shall be in accordance  with
their  respective  Commitments.  All payments of principal,  interest,  fees and
other amounts in respect of the Swingline  Loans shall be for the account of the
Swingline  Lender only  (except to the extent any Lender  shall have  acquired a
participating interest in any such Swingline Loan pursuant to Section 2.2.(e)).

Section 3.3.  Sharing of Payments, Etc.

         If a Lender shall obtain  payment of any  principal of, or interest on,
any Loan  made by it to the  Borrower  under  this  Agreement,  or shall  obtain
payment on any other  Obligation  owing by the Borrower or a Loan Party  through
the exercise of any right of set-off,  banker's lien or  counterclaim or similar
right or  otherwise  or through  voluntary  prepayments  directly to a Lender or
other payments made by the Borrower to a Lender not in accordance with the terms
of this Agreement and such payment should be distributed to the Lenders pro rata
in accordance  with Section 3.2. or Section 10.4.,  as  applicable,  such Lender
shall promptly purchase from the other

                                      -38-
<PAGE>
Lenders  participations  in (or, if and to the extent  specified by such Lender,
direct  interests in) the Loans made by the other  Lenders or other  Obligations
owed to such other Lenders in such amounts, and make such other adjustments from
time to time as shall be equitable,  to the end that all the Lenders shall share
the  benefit  of such  payment  (net of any  reasonable  expenses  which  may be
incurred by such Lender in obtaining  or  preserving  such  benefit) pro rata in
accordance with Section 3.2. or Section 10.4. To such end, all the Lenders shall
make appropriate  adjustments  among themselves (by the resale of participations
sold or otherwise)  if such payment is rescinded or must  otherwise be restored.
The Borrower  agrees that any Lender so  purchasing a  participation  (or direct
interest)  in the Loans or other  Obligations  owed to such  other  Lenders  may
exercise all rights of set-off,  banker's lien,  counterclaim  or similar rights
with  respect to such  participation  as fully as if such  Lender  were a direct
holder of Loans in the amount of such  participation.  Nothing  contained herein
shall require any Lender to exercise any such right or shall affect the right of
any Lender to exercise,  and retain the benefits of  exercising,  any such right
with respect to any other indebtedness or obligation of the Borrower.

Section 3.4.  Several Obligations.

         No Lender shall be  responsible  for the failure of any other Lender to
make a Loan or to perform any other  obligation  to be made or performed by such
other  Lender  hereunder,  and the  failure  of any  Lender to make a Loan or to
perform any other  obligation to be made or performed by it hereunder  shall not
relieve the  obligation  of any other  Lender to make any Loan or to perform any
other obligation to be made or performed by such other Lender.

Section 3.5.  Minimum Amounts.

         (a) Borrowings and Conversions. Each borrowing of Base Rate Loans shall
be in an  aggregate  minimum  amount of  $1,000,000  and  integral  multiples of
$500,000 in excess  thereof.  Each borrowing and each  Conversion of LIBOR Loans
shall be in an aggregate minimum amount of $1,000,000 and integral  multiples of
$1,000,000 in excess of that amount.

         (b) Prepayments.  Each voluntary prepayment of Revolving Loans shall be
in an aggregate minimum amount of $1,000,000 and integral  multiples of $500,000
in excess  thereof (or, if less,  the  aggregate  principal  amount of Revolving
Loans then outstanding).

         (c) Reductions of Commitments.  Each reduction of the Commitments under
Section  2.11.  shall be in an  aggregate  minimum  amount  of  $10,000,000  and
integral multiples of $5,000,000 in excess thereof.

         (d)  Letters of Credit.  The  initial  Stated  Amount of each Letter of
Credit shall be at least $500,000.

Section 3.6.  Fees.

         (a)  Facility  Fees.  The  Borrower  agrees to pay to the Agent for the
account of each Lender a facility  fee equal to the average  daily amount of the
Commitment of such Lender  (whether or not utilized)  times the Facility Fee for
the period from and including the Agreement  Date to but excluding the date such
Commitment is terminated or reduced to zero or the

                                      -39-
<PAGE>
Termination Date, such fee to be paid in arrears on (i) the last Business Day of
March,  June,  September  and  December  in each  year,  (ii)  the  date of each
reduction in the Commitments (but only on the amount of the reduction) and (iii)
on the Termination Date.

         (b) Letter of Credit Fees. The Borrower  agrees to pay to the Agent for
the  account of each  Lender a letter of credit fee at a rate per annum equal to
the  Applicable  Margin for LIBOR Loans times the daily average Stated Amount of
each Letter of Credit for the period from and  including the date of issuance of
such  Letter  of Credit  (x) to and  including  the date  such  Letter of Credit
expires or is  terminated or (y) to but excluding the date such Letter of Credit
is drawn in full. In addition,  the Borrower  shall pay to the Agent for its own
account  and not the account of any  Lender,  a fronting  fee in respect of each
Letter of Credit at the rate equal to  one-eighth  of one percent  (0.125%)  per
annum on the daily average Stated Amount of such Letter of Credit for the period
from and  including  the date of  issuance  of such  Letter of Credit (A) to and
including the date such Letter of Credit  expires or is terminated or (B) to but
excluding the date such Letter of Credit is drawn in full. The fees provided for
in the immediately preceding two sentences shall be nonrefundable and payable in
arrears (i) on the last Business Day of March,  June,  September and December in
each year, (ii) on the Termination  Date,  (iii) on the date the Commitments are
terminated or reduced to zero and (iv) thereafter from time to time on demand of
the Agent.  The  Borrower  shall pay  directly to the Agent from time to time on
demand all commissions,  charges,  costs and expenses in the amounts customarily
charged by the Agent from time to time in like circumstances with respect to the
issuance of each Letter of Credit,  drawings,  amendments and other transactions
relating thereto.

         (c)  Administrative  and Other  Fees.  The  Borrower  agrees to pay the
administrative  and other fees of the Agent as may be agreed to in writing  from
time to time.

         (d) Extension Fees. If, pursuant to Section 2.15., the Termination Date
is  extended,  the  Borrower  agrees to pay to the Agent for the account of each
Lender an extension fee equal to 0.35% of each such  Lender's  Commitment at the
time of such extension.  Payment of such fees shall be a condition  precedent to
the effectiveness of any such extension.

Section 3.7.  Computations.

         Unless  otherwise  expressly set forth herein,  any accrued interest on
any Loan, any Fees or any other  Obligations  due hereunder shall be computed on
the basis of a year of 360 days and the actual number of days elapsed.

Section 3.8.  Usury.

         In no event shall the amount of interest due or payable on the Loans or
other Obligations  exceed the maximum rate of interest allowed by Applicable Law
and, if any such payment is paid by the Borrower or received by any Lender, then
such excess sum shall be credited as a payment of principal, unless the Borrower
shall notify the respective  Lender in writing that the Borrower  elects to have
such  excess sum  returned  to it  forthwith.  It is the  express  intent of the
parties  hereto that the Borrower not pay and the Lenders not receive,  directly
or indirectly, in any manner whatsoever, interest in excess of that which may be
lawfully paid by the Borrower under Applicable Law.

                                      -40-
<PAGE>
Section 3.9.  Agreement Regarding Interest and Charges.

         The parties  hereto  hereby  agree and  stipulate  that the only charge
imposed upon the Borrower for the use of money in connection with this Agreement
is and shall be the interest  specifically  described in Section  2.4.(a)(i) and
(ii) and in Section 2.2.(c).  Notwithstanding the foregoing,  the parties hereto
further agree and stipulate  that all agency fees,  syndication  fees,  facility
fees,  closing fees, letter of credit fees,  underwriting fees, default charges,
late charges, funding or "breakage" charges, increased cost charges,  attorneys'
fees and reimbursement for costs and expenses paid by the Agent or any Lender to
third parties or for damages  incurred by the Agent or any Lender,  or any other
similar  amounts are charges made to compensate the Agent or any such Lender for
underwriting  or  administrative  services  and  costs or  losses  performed  or
incurred,  and to be  performed  or  incurred,  by the Agent and the  Lenders in
connection with this Agreement and shall under no  circumstances be deemed to be
charges  for the use of money.  All  charges  other than  charges for the use of
money shall be fully earned and nonrefundable when due.

Section 3.10.  Statements of Account.

         The Agent will  account to the  Borrower  monthly  with a statement  of
Loans,  Letters of Credit,  accrued interest and Fees, charges and payments made
pursuant  to this  Agreement  and the other  Loan  Documents,  and such  account
rendered by the Agent shall be deemed  conclusive  upon Borrower absent manifest
error.  The failure of the Agent to deliver such a statement  of accounts  shall
not relieve or discharge the Borrower from any of its obligations hereunder.

Section 3.11.  Defaulting Lenders.

         (a)  Generally.  If for any reason any Lender (a  "Defaulting  Lender")
shall fail or refuse to perform any of its  obligations  under this Agreement or
any other Loan Document to which it is a party within the time period  specified
for performance of such  obligation or, if no time period is specified,  if such
failure or refusal continues for a period of two Business Days after notice from
the Agent, then, in addition to the rights and remedies that may be available to
the  Agent  or the  Borrower  under  this  Agreement  or  Applicable  Law,  such
Defaulting  Lender's right to participate  in the  administration  of the Loans,
this Agreement and the other Loan Documents,  including without limitation,  any
right to vote in respect  of, to consent to or to direct any action or  inaction
of the Agent or to be taken into  account in the  calculation  of the  Requisite
Lenders, shall be suspended during the pendency of such failure or refusal. If a
Lender is a Defaulting  Lender  because it has failed to make timely  payment to
the Agent of any  amount  required  to be paid to the Agent  hereunder  (without
giving  effect to any notice or cure  periods),  in addition to other rights and
remedies  which  the  Agent or the  Borrower  may  have  under  the  immediately
preceding  provisions or  otherwise,  the Agent shall be entitled (i) to collect
interest from such Defaulting  Lender on such delinquent  payment for the period
from the date on which the  payment  was due until the date on which the payment
is made at the Federal  Funds  Rate,  (ii) to withhold or setoff and to apply in
satisfaction  of the  defaulted  payment and any related  interest,  any amounts
otherwise  payable to such  Defaulting  Lender under this Agreement or any other
Loan  Document  and  (iii) to bring an action or suit  against  such  Defaulting
Lender in a court of competent  jurisdiction to recover the defaulted amount and
any  related  interest.  Any

                                      -41-
<PAGE>
amounts  received by the Agent in respect of a Defaulting  Lender's  Loans shall
not be paid to such Defaulting  Lender and shall be held uninvested by the Agent
and either applied  against the purchase price of such Loans under the following
subsection (b) or paid to such  Defaulting  Lender upon the Defaulting  Lender's
curing of its default.

         (b) Purchase or Cancellation  of Defaulting  Lender's  Commitment.  Any
Lender  who is not a  Defaulting  Lender  shall  have  the  right,  but  not the
obligation,  in its sole  discretion,  to acquire all of a  Defaulting  Lender's
Commitment. Any Lender desiring to exercise such right shall give written notice
thereof to the Agent and the  Borrower  no sooner  than 2 Business  Days and not
later than 5 Business  Days after such  Defaulting  Lender  became a  Defaulting
Lender.  If more than one Lender  exercises  such right,  each such Lender shall
have the right to acquire an amount of such  Defaulting  Lender's  Commitment in
proportion to the  Commitments of the other Lenders  exercising  such right.  If
after such 5th Business Day, the Lenders have not elected to purchase all of the
Commitment of such Defaulting  Lender,  then the Borrower may, by giving written
notice  thereof  to the Agent,  such  Defaulting  Lender and the other  Lenders,
either (i) demand  that such  Defaulting  Lender  assign  its  Commitment  to an
Eligible  Assignee  subject to and in accordance  with the provisions of Section
12.5.(d)  for the  purchase  price  provided  for  below or (ii)  terminate  the
Commitment of such Defaulting Lender,  whereupon such Defaulting Lender shall no
longer be a party  hereto or have any rights or  obligations  hereunder or under
any of the other Loan Documents (except as expressly provided in this subsection
(b)). No party hereto shall have any obligation  whatsoever to initiate any such
replacement or to assist in finding an Eligible Assignee. Upon any such purchase
or  assignment,  the  Defaulting  Lender's  interest in the Loans and its rights
hereunder (but not its liability in respect  thereof or under the Loan Documents
or this  Agreement  to the  extent the same  relate to the  period  prior to the
effective date of the purchase) shall terminate on the date of purchase, and the
Defaulting Lender shall promptly execute all documents  reasonably  requested to
surrender  and transfer  such  interest to the  purchaser  or assignee  thereof,
including   an   appropriate    Assignment   and   Acceptance   Agreement   and,
notwithstanding  Section  12.5.(d),  shall pay to the Agent an assignment fee in
the amount of $7,000.  The  purchase  price for the  Commitment  of a Defaulting
Lender  shall be equal to the  amount  of the  principal  balance  of the  Loans
outstanding and owed by the Borrower to the Defaulting Lender.  Prior to payment
of such  purchase  price to a Defaulting  Lender,  the Agent shall apply against
such  purchase  price any  amounts  retained  by the Agent  pursuant to the last
sentence of the  immediately  preceding  subsection  (a). The Defaulting  Lender
shall be entitled to receive  amounts owed to it by the Borrower  under the Loan
Documents  which  accrued  prior to the date of the  default  by the  Defaulting
Lender,  to the extent the same are  received  by the Agent from or on behalf of
the Borrower. There shall be no recourse against any Lender or the Agent for the
payment of such sums except to the extent of the  receipt of  payments  from any
other party or in respect of the Loans.

Section 3.12.  Taxes.

         (a) Taxes Generally.  All payments by the Borrower of principal of, and
interest on, the Loans and all other Obligations shall be made free and clear of
and without  deduction for any present or future  excise,  stamp or other taxes,
fees,  duties,  levies,  imposts,  charges,  deductions,  withholdings  or other
charges of any nature whatsoever imposed by any taxing authority,  but excluding
(i) franchise taxes,  (ii) any taxes (other than  withholding  taxes) that would
not be  imposed  but for a  connection  between  the  Agent or a Lender  and the
jurisdiction  imposing  such

                                      -42-
<PAGE>
taxes (other than a connection arising solely by virtue of the activities of the
Agent or such Lender  pursuant to or in respect of this  Agreement  or any other
Loan Document),  (iii) any taxes imposed on or measured by any Lender's  assets,
net  income,  receipts  or  branch  profits,  (iv) any taxes  arising  after the
Agreement Date solely as a result of or  attributable  to a Lender  changing its
designated Lending Office after the date such Lender becomes a party hereto, and
(v) any taxes, fees, duties, levies, imposts, charges, deductions,  withholdings
or other  charges to the extent  imposed as a result of the failure of the Agent
or a Lender,  as applicable,  to provide and keep current (to the extent legally
able) any  certificates,  documents or other evidence required to qualify for an
exemption  from,  or  reduced  rate of,  any such taxes  fees,  duties,  levies,
imposts, charges,  deductions,  withholdings or other charges or required by the
immediately  following  subsection  (c) to be  furnished  by the  Agent  or such
Lender,  as  applicable  (such  non-excluded  items  being  collectively  called
"Taxes").  If any  withholding  or deduction  from any payment to be made by the
Borrower  hereunder  is  required  in  respect  of  any  Taxes  pursuant  to any
Applicable Law, then the Borrower will:

                  (i) pay directly to the relevant  Governmental  Authority  the
         full amount required to be so withheld or deducted;

                  (ii)  promptly  forward  to the Agent an  official  receipt or
         other  documentation  satisfactory to the Agent evidencing such payment
         to such Governmental Authority; and

                  (iii) pay to the Agent for its  account or the  account of the
         applicable  Lender,  as the  case may be,  such  additional  amount  or
         amounts as is necessary to ensure that the net amount actually received
         by the Agent or such  Lender  will equal the full amount that the Agent
         or such Lender would have received had no such withholding or deduction
         been required.

         (b) Tax  Indemnification.  If the Borrower  fails to pay any Taxes when
due to the  appropriate  Governmental  Authority or fails to remit to the Agent,
for its account or the account of the respective Lender, as the case may be, the
required  receipts or other required  documentary  evidence,  the Borrower shall
indemnify  the Agent and the  Lenders  for any  incremental  Taxes,  interest or
penalties  that may become payable by the Agent or any Lender as a result of any
such failure.  For purposes of this  Section,  a  distribution  hereunder by the
Agent or any  Lender  to or for the  account  of any  Lender  shall be  deemed a
payment by the Borrower.

         (c) Tax  Forms.  Prior  to the  date  that any  Lender  or  participant
organized under the laws of a jurisdiction  outside the United States of America
becomes a party hereto,  such Person shall deliver to the Borrower and the Agent
such  certificates,  documents  or other  evidence,  as required by the Internal
Revenue Code or Treasury Regulations issued pursuant thereto (including Internal
Revenue Service Forms W-8ECI and W-8BEN, as applicable, or appropriate successor
forms), properly completed, currently effective and duly executed by such Lender
or  participant  establishing  that payments to it hereunder and under the Notes
are (i) not subject to United States Federal backup  withholding tax or (ii) not
subject to United States Federal withholding tax under the Internal Revenue Code
because such payment is either  effectively  connected  with the conduct by such
Lender or  participant  of a trade or business  in the United  States or totally
exempt from United States Federal  withholding  tax by reason of the application

                                      -43-
<PAGE>
of the  provisions  of a treaty  to which the  United  States is a party or such
Lender is otherwise wholly exempt.  In addition,  any such Lender or participant
shall  deliver  to the  Borrower  and  the  Agent  further  copies  of any  such
certificate,  document  or other  evidence  on or before  the date that any such
certificate,  document or other evidence  expires or becomes  obsolete and after
the  occurrence  of any  event  requiring  a  change  in the  most  recent  form
previously  delivered  by it,  in each case  establishing  that  payments  to it
hereunder  and  under the Notes are (i) not  subject  to United  States  Federal
backup withholding tax or (ii) not subject to United States Federal  withholding
tax under the Internal  Revenue Code because such payment is either  effectively
connected  with the conduct by such Lender or participant of a trade or business
in the United States or totally  exempt from United States  Federal  withholding
tax by  reason of the  application  of the  provisions  of a treaty to which the
United  States  is a party or such  Lender or  participant,  as  applicable,  is
otherwise wholly exempt,  unless an event (including,  without  limitation,  any
change  in  Applicable  Law) has  occurred  prior to the date on which  any such
delivery  would  otherwise  be required  which  renders  all such  certificates,
documents and other  evidence  wholly  inapplicable  or which would prevent such
Lender or  participant,  as applicable,  from duly completing and delivering any
such certificates, documents or other evidence form with respect to it, and such
Lender or participant,  as applicable,  so advises the Borrower and the Agent in
writing.

                       ARTICLE IV. YIELD PROTECTION, ETC.

Section 4.1.  Additional Costs; Capital Adequacy.

         (a) Additional  Costs. The Borrower shall promptly pay to the Agent for
the  account  of a Lender  from time to time such  amounts  as such  Lender  may
determine to be necessary to  compensate  such Lender for any costs  incurred by
such Lender that it determines are  attributable to its making or maintaining of
any  LIBOR  Loans or its  obligation  to make any  LIBOR  Loans  hereunder,  any
reduction in any amount receivable by such Lender under this Agreement or any of
the other Loan  Documents in respect of any of such Loans or such  obligation or
the  maintenance  by such  Lender  of  capital  in  respect  of its Loans or its
Commitment  (such increases in costs and reductions in amounts  receivable being
herein called  "Additional  Costs"),  resulting from any Regulatory Change that:
(i) changes the basis of  taxation of any amounts  payable to such Lender  under
this  Agreement  or any of the other  Loan  Documents  in respect of any of such
Loans or its  Commitment  (other  than taxes,  fees,  duties,  levies,  imposts,
charges,  deductions,  withholdings or other charges which are excluded from the
definition of Taxes pursuant to the first sentence of Section 3.12.(a)); or (ii)
imposes or modifies any reserve,  special deposit or similar requirements (other
than  Regulation D of the Board of Governors  of the Federal  Reserve  System or
other reserve  requirement to the extent  utilized in the  determination  of the
Adjusted  Eurodollar Rate for such Loan) relating to any extensions of credit or
other assets of, or any deposits with or other  liabilities of, such Lender,  or
any commitment of such Lender (including, without limitation, the Commitments of
such Lender  hereunder);  or (iii) has or would have the effect of reducing  the
rate of return on capital of such Lender to a level below that which such Lender
could have achieved but for such  Regulatory  Change (taking into  consideration
such Lender's policies with respect to capital adequacy).

         (b) Lender's Suspension of LIBOR Loans.  Without limiting the effect of
the provisions of the immediately preceding subsection (a), if, by reason of any
Regulatory  Change,

                                      -44-
<PAGE>
any Lender either (i) incurs Additional Costs based on or measured by the excess
above a  specified  level of the  amount  of a  category  of  deposits  or other
liabilities  of such Lender that  includes  deposits by  reference  to which the
interest rate on LIBOR Loans is  determined  as provided in this  Agreement or a
category of  extensions  of credit or other assets of such Lender that  includes
LIBOR  Loans or (ii)  becomes  subject to  restrictions  on the amount of such a
category  of  liabilities  or assets that it may hold,  then,  if such Lender so
elects by notice to the Borrower  (with a copy to the Agent),  the obligation of
such  Lender to make or  Continue,  or to Convert  any other Type of Loans into,
LIBOR Loans hereunder shall be suspended until such Regulatory  Change ceases to
be in effect (in which case the provisions of Section 4.6. shall apply).

         (c) Additional Costs in Respect of Letters of Credit.  Without limiting
the obligations of the Borrower under the preceding  subsections of this Section
(but  without  duplication),  if as a result  of any  Regulatory  Change  or any
risk-based capital guideline or other requirement heretofore or hereafter issued
by any  Governmental  Authority  there  shall be  imposed,  modified  or  deemed
applicable  any tax,  reserve,  special  deposit,  capital  adequacy  or similar
requirement  against or with  respect to or measured by  reference to Letters of
Credit and the result  shall be to increase the cost to the Agent of issuing (or
any  Lender of  purchasing  participations  in) or  maintaining  its  obligation
hereunder  to issue  (or  purchase  participations  in) any  Letter of Credit or
reduce any amount  receivable by the Agent or any Lender hereunder in respect of
any  Letter of  Credit,  then,  upon  demand by the  Agent or such  Lender,  the
Borrower shall pay promptly,  and in any event within 3 Business Days of demand,
to the Agent for its account or the account of such Lender, as applicable,  from
time to time as specified by the Agent or a Lender,  such additional  amounts as
shall be sufficient to  compensate  the Agent or such Lender for such  increased
costs or reductions in amount.

         (d) Notification and  Determination  of Additional  Costs.  Each of the
Agent and each Lender agrees to notify the Borrower of any event occurring after
the Agreement Date entitling the Agent or such Lender to compensation  under any
of the  preceding  subsections  of this  Section  as  promptly  as  practicable;
provided,  however,  the  failure of the Agent or any Lender to give such notice
shall not release the Borrower from any of its obligations hereunder;  provided,
however,  that  notwithstanding  the foregoing  provisions of this Section,  the
Agent or a Lender, as the case may be, shall not be entitled to compensation for
any such amount  relating to any period ending more than six months prior to the
date that the Agent or such Lender,  as applicable,  first notifies the Borrower
in writing  thereof or for any amounts  resulting from a change by any Lender of
its Lending  Office (other than changes  required by Applicable  Law). The Agent
and or such Lender agrees to furnish to the Borrower a certificate setting forth
the  basis  and  amount  of  each  request  by the  Agent  or  such  Lender  for
compensation  under this Section.  Absent manifest error,  determinations by the
Agent or any Lender of the effect of any Regulatory  Change shall be conclusive,
provided  that such  determinations  are made on a reasonable  basis and in good
faith.

Section 4.2.  Suspension of LIBOR Loans.

         Anything herein to the contrary notwithstanding, if, on or prior to the
determination of any Adjusted Eurodollar Rate for any Interest Period:

                                      -45-
<PAGE>
                  (a) the Agent reasonably determines (which determination shall
         be conclusive) that by reason of  circumstances  affecting the relevant
         market, adequate and reasonable means do not exist for ascertaining the
         Adjusted Eurodollar Rate for such Interest Period, or

                  (b) the Agent reasonably determines (which determination shall
         be conclusive)  that the Adjusted  Eurodollar  Rate will not adequately
         and fairly  reflect  the cost to the  Lenders of making or  maintaining
         LIBOR Loans for such Interest Period;

then the Agent shall give the Borrower  and each Lender  prompt  notice  thereof
and, so long as such condition remains in effect,  the Lenders shall be under no
obligation to, and shall not, make additional LIBOR Loans,  Continue LIBOR Loans
or Convert  Loans into LIBOR Loans and the  Borrower  shall,  on the last day of
each current Interest Period for each outstanding  LIBOR Loan, either repay such
Loan or Convert such Loan into a Base Rate Loan.

Section 4.3.  Illegality.

         Notwithstanding  any other provision of this  Agreement,  if it becomes
unlawful for any Lender to honor its  obligation to make or maintain LIBOR Loans
hereunder,  then such Lender shall promptly notify the Borrower  thereof (with a
copy to the Agent)  and such  Lender's  obligation  to make or  Continue,  or to
Convert Loans of any other Type into,  LIBOR Loans shall be suspended until such
time as such Lender may again make and  maintain  LIBOR Loans (in which case the
provisions of Section 4.6. shall be applicable).

Section 4.4.  Compensation.

         The  Borrower  shall pay to the Agent for the  account of each  Lender,
upon the  request of such Lender  through  the Agent,  such amount or amounts as
shall be sufficient (in the reasonable  opinion of such Lender) to compensate it
for any loss, cost or expense that such Lender determines is attributable to:

                  (a) any payment or prepayment  (whether mandatory or optional)
         of a LIBOR Loan, or Conversion of a LIBOR Loan, made by such Lender for
         any reason  (including,  without  limitation,  acceleration)  on a date
         other than the last day of the Interest Period for such Loan; or

                  (b) any  failure by the  Borrower  for any reason  (including,
         without  limitation,  the failure of any of the  applicable  conditions
         precedent  specified in Article V. to be  satisfied)  to borrow a LIBOR
         Loan from such Lender on the date for such  borrowing,  or to Convert a
         Base  Rate  Loan  into a LIBOR  Loan or  Continue  a LIBOR  Loan on the
         requested date of such Conversion or Continuation.

Upon the  Borrower's  request,  any Lender  requesting  compensation  under this
Section shall provide the Borrower with a statement  setting forth the basis for
requesting such  compensation and the method for determining the amount thereof.
Absent manifest error,  determinations by any Lender in any such statement shall
be conclusive,  provided that such determinations are made on a reasonable basis
and in good faith.

                                      -46-
<PAGE>
Section 4.5.  Affected Lenders.

         If (a) a Lender  requests  compensation  pursuant to Section  3.12.  or
4.1.,  and the  Requisite  Lenders  are not  also  doing  the  same,  or (b) the
obligation of any Lender to make LIBOR Loans or to Continue,  or to Convert Base
Rate Loans into,  LIBOR Loans shall be suspended  pursuant to Section 4.1.(b) or
4.3. but the  obligation of the Requisite  Lenders shall not have been suspended
under such  Sections,  then, so long as there does not then exist any Default or
Event of  Default,  the  Borrower  may either (i) demand  that such  Lender (the
"Affected  Lender"),  and upon such demand the Affected  Lender shall  promptly,
assign its Commitments to an Eligible Assignee subject to and in accordance with
the  provisions of Section  12.5.(d) for a purchase price equal to the aggregate
principal  balance of Loans then owing to the  Affected  Lender plus any accrued
but unpaid  interest  thereon and accrued but unpaid fees owing to the  Affected
Lender,  or (ii) pay to the Affected Lender the aggregate  principal  balance of
Loans then owing to the  Affected  Lender plus any  accrued but unpaid  interest
thereon and accrued but unpaid fees owing to the Affected Lender,  whereupon the
Affected  Lender  shall  no  longer  be a party  hereto  or have any  rights  or
obligations  hereunder  or under any of the other  Loan  Documents.  Each of the
Agent and the Affected Lender shall  reasonably  cooperate in  effectuating  the
replacement of such Affected Lender under this Section, but at no time shall the
Agent,  such  Affected  Lender  nor any  other  Lender be  obligated  in any way
whatsoever to initiate any such  replacement or to assist in finding an Eligible
Assignee. The exercise by the Borrower of its rights under this Section shall be
at the Borrower's sole cost and expenses and at no cost or expense to the Agent,
the Affected Lender or any of the other Lenders. The terms of this Section shall
not in any way limit the  Borrower's  obligation  to pay to any Affected  Lender
compensation owing to such Affected Lender pursuant to Section 3.12. or 4.1.

Section 4.6.  Treatment of Affected Loans.

         If the obligation of any Lender to make LIBOR Loans or to Continue,  or
to Convert  Base Rate Loans into,  LIBOR Loans  shall be  suspended  pursuant to
Section  4.1.(b),  4.2.  or  4.3.,  then  such  Lender's  LIBOR  Loans  shall be
automatically  Converted  into  Base Rate  Loans on the last  day(s) of the then
current  Interest  Period(s)  for LIBOR Loans (or,  in the case of a  Conversion
required by Section  4.1.(b) or 4.3.,  on such  earlier  date as such Lender may
specify to the  Borrower  with a copy to the Agent)  and,  unless and until such
Lender  gives  notice as  provided  below that the  circumstances  specified  in
Section 4.1. or 4.3. that gave rise to such Conversion no longer exist:

                  (a) to the extent that such Lender's  LIBOR Loans have been so
         Converted,  all  payments  and  prepayments  of  principal  that  would
         otherwise  be applied to such  Lender's  LIBOR  Loans  shall be applied
         instead to its Base Rate Loans; and

                  (b) all Loans that would  otherwise  be made or  Continued  by
         such Lender as LIBOR Loans shall be made or  Continued  instead as Base
         Rate Loans, and all Base Rate Loans of such Lender that would otherwise
         be Converted into LIBOR Loans shall remain as Base Rate Loans.

                                      -47-
<PAGE>
If such Lender gives notice to the Borrower  (with a copy to the Agent) that the
circumstances specified in Section 4.1. or 4.3. that gave rise to the Conversion
of such  Lender's  LIBOR Loans  pursuant to this  Section no longer exist (which
such Lender agrees to do promptly upon such circumstances ceasing to exist) at a
time when LIBOR Loans made by other Lenders are outstanding,  then such Lender's
Base Rate Loans shall be  automatically  Converted,  on the first  day(s) of the
next  succeeding  Interest  Period(s) for such  outstanding  LIBOR Loans, to the
extent  necessary so that,  after giving effect  thereto,  all Loans held by the
Lenders  holding  LIBOR  Loans  and by such  Lender  are  held  pro  rata (as to
principal  amounts,  Types  and  Interest  Periods)  in  accordance  with  their
respective Commitments.

Section 4.7.  Change of Lending Office.

         Each Lender agrees that it will use reasonable  efforts to designate an
alternate  Lending  Office  with  respect  to any of its Loans  affected  by the
matters or circumstances described in Sections 3.12., 4.1. or 4.3. to reduce the
liability of the Borrower or avoid the results provided  thereunder,  so long as
such  designation  is not  disadvantageous  to such Lender as determined by such
Lender in its sole discretion,  except that such Lender shall have no obligation
to designate a Lending Office located in the United States of America.

Section 4.8.  Assumptions Concerning Funding of LIBOR Loans.

         Calculation  of all amounts  payable to a Lender under this Article IV.
shall be made as though such Lender had actually  funded LIBOR Loans through the
purchase  of  deposits  in the  relevant  market  bearing  interest  at the rate
applicable  to such  LIBOR  Loans in an amount  equal to the amount of the LIBOR
Loans  and  having  a  maturity  comparable  to the  relevant  Interest  Period;
provided,  however,  that each  Lender  may fund each of its LIBOR  Loans in any
manner  it  sees  fit and the  foregoing  assumption  shall  be  used  only  for
calculation of amounts payable under this Article IV.

                         ARTICLE V. CONDITIONS PRECEDENT

Section 5.1.  Initial Conditions Precedent.

         The obligation of the Lenders to effect or permit the occurrence of the
first Credit Event hereunder, whether as the making of a Loan or the issuance of
a Letter of Credit, is subject to the following conditions precedent:

         (a) The Agent shall have  received each of the  following,  in form and
substance satisfactory to the Agent:

                  (i)  Counterparts  of this  Agreement  executed by each of the
         parties hereto;

                  (ii) Revolving Notes executed by the Borrower, payable to each
         Lender and complying with the  applicable  provisions of Section 2.10.,
         and the Swingline Note executed by the Borrower;

                                      -48-
<PAGE>
                  (iii) The Guaranty  executed by each Guarantor  existing as of
         the Effective Date;

                  (iv) An opinion of  Sullivan & Worcester  LLP,  counsel to the
         Loan  Parties,  addressed to the Agent,  the Lenders and the  Swingline
         Lender,  substantially  in the form of  Exhibit  I-1,  and  opinion  of
         Ballard Spahr Andrews & Ingersoll, LLP, special Maryland counsel to the
         Loan  Parties,  addressed to the Agent,  the Lenders and the  Swingline
         Lender, substantially in the form of Exhibit I-2;

                  (v) The declaration of trust of the Borrower certified as of a
         recent date by the Department of Assessments  and Taxation of the State
         of Maryland;

                  (vi) A good standing  certificate with respect to the Borrower
         issued  as of a  recent  date  by the  Department  of  Assessments  and
         Taxation of the State of Maryland and  certificates of qualification to
         transact  business  or  other  comparable  certificates  issued  by the
         Secretary  of  State  (and  any  state   department  of  taxation,   as
         applicable)  of each state in which the  Borrower  is required to be so
         qualified and where the failure to be so qualified  would have, in each
         instance, a Material Adverse Effect;

                  (vii) A certificate  of incumbency  signed by the Secretary or
         Assistant  Secretary  of the  Borrower  with  respect  to  each  of the
         officers  of the  Borrower  authorized  to execute and deliver the Loan
         Documents  to which the  Borrower  is a party and the  officers  of the
         Borrower then  authorized to deliver  Notices of Borrowing,  Notices of
         Swingline Borrowings, Notices of Continuation and Notices of Conversion
         and to request the issuance of Letters of Credit;

                  (viii)  Copies,   certified  by  the  Secretary  or  Assistant
         Secretary of the  Borrower,  of all corporate  (or  comparable)  action
         taken  by  the  Borrower  to  authorize  the  execution,  delivery  and
         performance of the Loan Documents to which the Borrower is a party;

                  (ix) The Governing Documents of each Guarantor certified as of
         a recent date by the  Secretary  of State of the State of  formation of
         such Guarantor;

                  (x) A certificate  of good standing or  certificate of similar
         meaning  with respect to each  Guarantor  issued as of a recent date by
         the Secretary of State of the State of formation of each such Guarantor
         and  certificates  of  qualification  to  transact  business  or  other
         comparable  certificates  issued by each  Secretary  of State  (and any
         state  department of taxation,  as  applicable)  of each state in which
         such  Guarantor is required to be so qualified and where the failure to
         be so  qualified  would  have,  in each  instance,  a Material  Adverse
         Effect;

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

                                      -49-
<PAGE>
                  (xii) Copies certified by the Secretary or Assistant Secretary
         of each Guarantor (or other individual performing similar functions) of
         (i) the by-laws of such  Guarantor,  if a  corporation,  the  operating
         agreement,  if a limited liability company, the partnership  agreement,
         if a limited or general  partnership,  or other comparable  document in
         the case of any  other  form of legal  entity  and (ii) all  corporate,
         partnership,  member or other necessary  action taken by such Guarantor
         to  authorize  the  execution,  delivery  and  performance  of the Loan
         Documents to which it is a party;

                  (xiii) A copy of (x) each of the  documents,  instruments  and
         agreements  evidencing  any of the  Indebtedness  described on Schedule
         6.1.(g),  (y)  all  Leases,  all  Ancillary  Agreements,  the  Advisory
         Agreement,  and each other Material Contract, in each case certified as
         true,  correct  and  complete by the chief  operating  officer or chief
         financial  officer  of the  Borrower,  and  (z) a Lease  Abstract  with
         respect to each Lease for the Unencumbered Hotels;

                  (xiv) The Fees then due and payable under  Section  3.6.,  and
         any other Fees  payable to the Agent and the Lenders on or prior to the
         Effective Date;

                  (xv) A Compliance  Certificate  calculated  as of December 31,
         2001; and

                  (xvi) Such other documents,  agreements and instruments as the
         Agent on behalf of the Lenders may reasonably request; and

         (b) In the good faith judgment of the Agent and the Lenders:

                  (i) There shall not have occurred or become known to the Agent
         or any of the Lenders any event,  condition,  situation or status since
         the date of the  information  contained in the  financial  and business
         projections,  budgets,  pro forma  data and  forecasts  concerning  the
         Borrower  and its  Subsidiaries  delivered to the Agent and the Lenders
         prior  to the  Agreement  Date  that  has had or  could  reasonably  be
         expected to result in a Material Adverse Effect;

                  (ii) No  litigation,  action,  suit,  investigation  or  other
         arbitral,  administrative  or judicial  proceeding  shall be pending or
         threatened  which  could  reasonably  be  expected  to (1)  result in a
         Material  Adverse Effect or (2) restrain or enjoin,  impose  materially
         burdensome  conditions on, or otherwise materially and adversely affect
         the  ability of the  Borrower  or any other  Loan Party to fulfill  its
         obligations under the Loan Documents to which it is a party;

                  (iii) The Borrower and its  Subsidiaries  shall have  received
         all approvals,  consents and waivers,  and shall have made or given all
         necessary  filings and notices as shall be required to  consummate  the
         transactions  contemplated hereby without the occurrence of any default
         under,  conflict with or violation of (1) any Applicable Law or (2) any
         agreement,  document or  instrument  to which the Borrower or any other
         Loan  Party  is a party or by  which  any of them or  their  respective
         properties  is bound,  except for such  approvals,  consents,  waivers,
         filings and notices  the  receipt,  making or giving of

                                      -50-
<PAGE>
         which  would not  reasonably  be likely to (A) have a Material  Adverse
         Effect,  or  (B)  restrain  or  enjoin,  impose  materially  burdensome
         conditions on, or otherwise materially and adversely affect the ability
         of the  Borrower  or any other Loan Party to  fulfill  its  obligations
         under the Loan Documents to which it is a party; and

                  (iv) There shall not have occurred or exist any other material
         disruption  of financial or capital  markets that could  reasonably  be
         expected  to   materially   and  adversely   affect  the   transactions
         contemplated by the Loan Documents.

Section 5.2.  Conditions Precedent to All Loans and Letters of Credit.

         The obligations of the Lenders to make any Loans, of the Agent to issue
Letters of Credit,  and of the Swingline  Lender to make any Swingline  Loan are
all subject to the further condition  precedent that: (a) no Default or Event of
Default  shall have  occurred and be  continuing as of the date of the making of
such  Loan or  date of  issuance  of  such  Letter  of  Credit  or  would  exist
immediately after giving effect thereto;  (b) the representations and warranties
made or  deemed  made by the  Borrower  and each  other  Loan  Party in the Loan
Documents  to which any of them is a party,  shall be true and correct on and as
of the date of the  making of such Loan or date of  issuance  of such  Letter of
Credit  with the same force and effect as if made on and as of such date  except
to the extent that such  representations and warranties  expressly relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date) and except for changes in
factual circumstances  specifically and expressly permitted hereunder and (c) in
the case of the  borrowing of Revolving  Loans,  the Agent shall have received a
timely Notice of Borrowing.  Each Credit Event shall  constitute a certification
by the Borrower to the effect set forth in the  preceding  sentence  (both as of
the date of the giving of notice  relating to such Credit Event and,  unless the
Borrower otherwise notifies the Agent prior to the date of such Credit Event, as
of the date of the occurrence of such Credit Event). In addition, if such Credit
Event is the making of a Loan, the Borrower shall be deemed to have  represented
to the Agent and the Lender at the time such Loan is made that all conditions to
the making of such Loan contained in Article V. have been satisfied.

Section 5.3.  Conditions as Covenants.

         If the Lenders make any Loans,  or the Agent issues a Letter of Credit,
prior to the satisfaction of all conditions precedent set forth in Sections 5.1.
and 5.2., the Borrower shall  nevertheless cause such condition or conditions to
be satisfied  within 5 Business  Days after the date of the making of such Loans
or the  issuance  of such  Letter of Credit.  Unless set forth in writing to the
contrary,  the  making  of its  initial  Loan by a  Lender  shall  constitute  a
certification  by such  Lender  to the  Agent  and the  other  Lenders  that the
Borrower has satisfied the  conditions  precedent for initial Loans set forth in
Sections 5.1. and 5.2.

                                      -51-
<PAGE>
                   ARTICLE VI. REPRESENTATIONS AND WARRANTIES

Section 6.1.  Representations and Warranties.

         In order to  induce  the  Agent  and each  Lender  to enter  into  this
Agreement and to make Loans and issue Letters of Credit, the Borrower represents
and warrants to the Agent and each Lender as follows:

         (a) Organization;  Power;  Qualification.  Each of the Borrower and its
Subsidiaries is a corporation, partnership or other legal entity, duly organized
or formed,  validly  existing and in good standing under the jurisdiction of its
incorporation  or  formation,  has the power and  authority  to own or lease its
respective  properties and to carry on its respective  business as now being and
hereafter proposed to be conducted and is duly qualified and is in good standing
as a foreign  corporation,  partnership or other legal entity, and authorized to
do business,  in each  jurisdiction  in which the character of its properties or
the nature of its business  requires such  qualification  or  authorization  and
where the failure to be so qualified or authorized would have, in each instance,
a Material Adverse Effect.

         (b) Ownership  Structure.  As of the Agreement  Date Part I of Schedule
6.1.(b) is a complete  and  correct  list of all  Subsidiaries  of the  Borrower
setting forth for each such Subsidiary,  (i) the jurisdiction of organization of
such  Subsidiary,  (ii)  each  Person  holding  any  Equity  Interests  in  such
Subsidiary,  (iii) the nature of the Equity  Interests held by each such Person,
(iv) the percentage of ownership of such  Subsidiary  represented by such Equity
Interests  and (v) whether such  Subsidiary is a Material  Subsidiary  and/or an
Excluded Subsidiary.  Except as disclosed in such Schedule,  as of the Agreement
Date (i) each of the Borrower and its  Subsidiaries  owns, free and clear of all
Liens, and has the unencumbered  right to vote, all outstanding Equity Interests
in each Person shown to be held by it on such  Schedule,  (ii) all of the issued
and outstanding  capital stock of each such Person organized as a corporation is
validly issued,  fully paid and nonassessable and (iii) there are no outstanding
subscriptions,  options, warrants, commitments,  preemptive rights or agreements
of any kind (including,  without  limitation,  any stockholders' or voting trust
agreements)  for the issuance,  sale,  registration or voting of, or outstanding
securities  convertible  into,  any  additional  shares of capital  stock of any
class,  or  partnership  or other  ownership  interests of any type in, any such
Person.  As of the Agreement  Date Part II of Schedule  6.1.(b)  correctly  sets
forth all Unconsolidated Affiliates of the Borrower, including the correct legal
name of such Person, the type of legal entity which each such Person is, and all
Equity Interests in such Person held directly or indirectly by the Borrower.

         (c)  Authorization  of  Agreement,  Etc. The Borrower has the right and
power,  and has taken all necessary action to authorize it, to borrow and obtain
other extensions of credit hereunder. The Borrower and each other Loan Party has
the right and power,  and has taken all  necessary  action to  authorize  it, to
execute,  deliver and perform each of the Loan  Documents to which it is a party
in accordance  with their  respective  terms and to consummate the  transactions
contemplated hereby and thereby. The Loan Documents to which the Borrower or any
other Loan Party is a party have been duly  executed  and  delivered by the duly
authorized  officers  of such  Person  and each is a legal,  valid  and  binding
obligation of such Person enforceable against such Person in accordance with its
respective  terms except as the same may be limited by

                                      -52-
<PAGE>
bankruptcy, insolvency, and other similar laws affecting the rights of creditors
generally and the  availability  of equitable  remedies for the  enforcement  of
certain  obligations  (other than the payment of principal)  contained herein or
therein may be limited by equitable principles generally.

         (d)  Compliance  of Loan  Documents  with  Laws,  Etc.  The  execution,
delivery  and  performance  of this  Agreement,  the Notes  and the  other  Loan
Documents to which the Borrower or any other Loan Party is a party in accordance
with their  respective  terms and the borrowings and other  extensions of credit
hereunder do not and will not, by the passage of time, the giving of notice,  or
both:  (i) require any  Governmental  Approval  or violate  any  Applicable  Law
(including  all  Environmental  Laws) relating to the Borrower or any other Loan
Party;  (ii) conflict with,  result in a breach of or constitute a default under
the  organizational  documents of the  Borrower or any other Loan Party,  or any
indenture, agreement or other instrument to which the Borrower or any other Loan
Party  is a party  or by which  it or any of its  respective  properties  may be
bound; or (iii) result in or require the creation or imposition of any Lien upon
or with respect to any property now owned or hereafter  acquired by the Borrower
or any other Loan Party.

         (e) Compliance with Law;  Governmental  Approvals.  The Borrower,  each
Subsidiary  and each other Loan Party is in  compliance  with each  Governmental
Approval  applicable  to it and in  compliance  with all  other  Applicable  Law
(including without limitation,  Environmental Laws) relating to the Borrower,  a
Subsidiary  or such other  Loan  Party  except  for  noncompliances  which,  and
Governmental  Approvals the failure to possess which, would not, individually or
in the aggregate, cause a Default or Event of Default or have a Material Adverse
Effect.

         (f) Title to Properties;  Liens;  Title Insurance.  As of the Agreement
Date,  Part I of Schedule  6.1.(f) sets forth all of the real property  owned or
leased by the Borrower,  each other Loan Party and each other  Subsidiary.  Each
such  Person  has  good,  marketable  and legal  title to, or a valid  leasehold
interest in, its respective assets. As of the Agreement Date, there are no Liens
against  any  assets of the  Borrower,  any  Subsidiary  or any other Loan Party
except for Permitted  Liens. As to all or substantially  all of the Hotels,  the
Borrower or a Subsidiary is the named insured under a policy of title  insurance
issued by a title insurer licensed to do business in the jurisdiction where such
Hotel is located.  As to each such policy of title  insurance  (i) the  coverage
amount  equals or  exceeds  the  acquisition  cost of the  related  Hotel;  (ii)
exceptions  to title do not include any Liens,  except for  Permitted  Liens and
Liens that have been released prior to the Effective  Date;  (iii) no claims are
pending that, if adversely  determined,  could  reasonably be expected to have a
Material  Adverse  Effect;  and (iv) no title  insurer  has given  notice to the
insured  Person  that such  policy of title  insurance  is no longer in  effect.
Except for Permitted Liens, neither Borrower nor any Subsidiary has knowledge of
any  defect  in title  that  could,  individually  or in the  aggregate,  have a
Material Adverse Effect.

         (g)  Existing  Indebtedness.  Schedule  6.1.(g) is, as of December  31,
2001, a complete and correct listing of all Indebtedness of the Borrower and its
Subsidiaries,  including without limitation,  Guarantees of the Borrower and its
Subsidiaries,  and indicating whether such Indebtedness is Secured  Indebtedness
or  Unsecured  Indebtedness.  During the period from such date to the  Agreement
Date, neither the Borrower nor any Subsidiary incurred any material

                                      -53-
<PAGE>
Indebtedness  except  as set  forth  on  such  Schedule.  The  Borrower  and its
Subsidiaries  have performed and are in compliance with all of the terms of such
Indebtedness and all instruments and agreements relating thereto, and no default
or event of default,  or event or condition which with the giving of notice, the
lapse of time,  or both,  would  constitute  such a default or event of default,
exists with respect to any such Indebtedness.

         (h) Material  Contracts and Leases and Ancillary  Agreements.  Schedule
6.1.(h) is, as of the Agreement  Date, a true,  correct and complete  listing of
all Material Contracts,  Leases and Ancillary Agreements.  Each of the Borrower,
its  Subsidiaries  and the other Loan  Parties  that is a party to any  Material
Contract is in compliance with all of the terms of such Material  Contract,  and
no default or event of default,  or event or condition  which with the giving of
notice,  the lapse of time, or both, would constitute such a default or event of
default,  exists with respect to any such Material Contract. All Lease Abstracts
provided  by the  Borrower  to  the  Agent  accurately  summarize  the  relevant
provisions  of the  Leases  required  to be  described  therein,  and such Lease
Abstracts are correct in all material respects.

         (i) Litigation.  Except as set forth on Schedule 6.1.(i),  there are no
actions,  suits or  proceedings  pending (nor, to the knowledge of the Borrower,
are there any actions, suits or proceedings  threatened,  nor is there any basis
therefor)  against or in any other way relating  adversely  to or affecting  the
Borrower,  any  Subsidiary  or any  other  Loan  Party or any of its  respective
property in any court or before any  arbitrator  of any kind or before or by any
other  Governmental  Authority  which  could  reasonably  be  expected to have a
Material  Adverse Effect.  There are no strikes,  slow downs,  work stoppages or
walkouts or other labor  disputes  in  progress  or  threatened  relating to the
Borrower,  any  Subsidiary  or any other Loan Party  which could  reasonably  be
expected to have a Material Adverse Effect.

         (j) Taxes.  All federal,  state and other tax returns of the  Borrower,
any  Subsidiary or any other Loan Party  required by Applicable  Law to be filed
have been duly filed,  and all federal,  state and other taxes,  assessments and
other governmental charges or levies upon the Borrower,  any Subsidiary and each
other Loan Party and its respective properties, income, profits and assets which
are due and payable have been paid,  except any such nonpayment  which is at the
time permitted  under Section 7.6. As of the Agreement  Date, none of the United
States income tax returns of the Borrower,  its  Subsidiaries  or any other Loan
Party is under  audit.  All  charges,  accruals and reserves on the books of the
Borrower  and  each  of its  Subsidiaries  in  respect  of any  taxes  or  other
governmental charges are in accordance with GAAP.

         (k)  Financial  Statements.  The Borrower has  furnished to each Lender
copies  of the  audited  consolidated  balance  sheet  of the  Borrower  and its
consolidated  Subsidiaries for the fiscal year ending December 31, 2001, and the
related audited consolidated statements of income, shareholders' equity and cash
flow for the fiscal year ending on such date, with the opinion thereon of Arthur
Andersen  LLP.  Such  financial  statements  (including  in  each  case  related
schedules and notes) are complete and correct and present fairly,  in accordance
with GAAP consistently applied throughout the periods involved, the consolidated
financial position of the Borrower and its consolidated Subsidiaries as at their
respective  dates  and the  results  of  operations  and the cash  flow for such
periods.  Neither the Borrower nor any of its  Subsidiaries has on the Agreement
Date any material contingent  liabilities,  liabilities,  liabilities for taxes,

                                      -54-
<PAGE>
unusual or long-term  commitments  or unrealized or forward  anticipated  losses
from any unfavorable commitments, except as referred to or reflected or provided
for in said financial statements or except as set forth on Schedule 6.1.(k).

         (l) No Material Adverse Change. Since December 31, 2001, there has been
no material adverse change in the consolidated  financial condition,  results of
operations,   business  or  prospects  of  the  Borrower  and  its  consolidated
Subsidiaries  taken as a whole.  Each of the Borrower,  its Subsidiaries and the
other Loan Parties is Solvent.

         (m) ERISA.  Each  member of the ERISA Group is in  compliance  with its
obligations  under the  minimum  funding  standards  of ERISA  and the  Internal
Revenue Code with respect to each Plan and is in  compliance  with the presently
applicable  provisions  of ERISA and the  Internal  Revenue Code with respect to
each Plan, except in each case for noncompliances  which could not reasonably be
expected to have a Material Adverse Effect.  As of the Agreement Date, no member
of the ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal  Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in respect
of any  Benefit  Arrangement,  or made  any  amendment  to any  Plan or  Benefit
Arrangement,  which has resulted or could result in the  imposition of a Lien or
the posting of a bond or other security under ERISA or the Internal Revenue Code
or (iii)  incurred any liability  under Title IV of ERISA other than a liability
to the PBGC for premiums under Section 4007 of ERISA.

         (n) Not Plan Assets; No Prohibited  Transaction.  None of the assets of
the Borrower,  any Subsidiary or any other Loan Party  constitute  "plan assets"
within the  meaning  of ERISA,  the  Internal  Revenue  Code and the  respective
regulations promulgated thereunder.  The execution,  delivery and performance of
this Agreement and the other Loan Documents,  and the borrowing and repayment of
amounts  hereunder,  do not and will not  constitute  "prohibited  transactions"
under ERISA or the Internal Revenue Code.

         (o) Absence of Defaults.  Neither the Borrower,  any Subsidiary nor any
other Loan Party is in default under its Governing  Documents,  and no event has
occurred,  which has not been remedied, cured or waived: (i) which constitutes a
Default or an Event of  Default;  or (ii) which  constitutes,  or which with the
passage of time,  the giving of notice,  a  determination  of  materiality,  the
satisfaction  of any  condition,  or any  combination  of the  foregoing,  would
constitute, a default or event of default by the Borrower, any Subsidiary or any
other Loan Party under any  agreement  (other than this  Agreement) or judgment,
decree or order to which the Borrower or any Subsidiary or other Loan Party is a
party or by which the Borrower or any  Subsidiary  or other Loan Party or any of
their respective  properties may be bound where such default or event of default
could, individually or in the aggregate, have a Material Adverse Effect.

         (p) Environmental Laws. Each of the Borrower,  its Subsidiaries and the
other Loan Parties has obtained all  Governmental  Approvals  which are required
under  Environmental  Laws and is in compliance with all terms and conditions of
such Governmental  Approvals which the failure to obtain or to comply with could
reasonably be expected to have a

                                      -55-
<PAGE>
Material Adverse Effect.  Except for any of the following matters that could not
be reasonably  expected to have a Material  Adverse Effect,  (i) the Borrower is
not aware of,  and has not  received  notice of,  any past,  present,  or future
events, conditions, circumstances, activities, practices, incidents, actions, or
plans which, with respect to the Borrower,  its Subsidiaries and each other Loan
Party,  may interfere with or prevent  compliance or continued  compliance  with
Environmental  Laws, or may give rise to any common-law or legal  liability,  or
otherwise  form the  basis  of any  claim,  action,  demand,  suit,  proceeding,
hearing,  study,  or  investigation,  based on or  related  to the  manufacture,
processing,  distribution,  use, treatment,  storage,  disposal,  transport,  or
handling or the  emission,  discharge,  release or  threatened  release into the
environment, of any pollutant,  contaminant,  chemical, or industrial, toxic, or
other  Hazardous   Material;   and  (ii)  there  is  no  civil,   criminal,   or
administrative  action, suit, demand, claim, hearing,  notice, or demand letter,
notice of violation,  investigation, or proceeding pending or, to the Borrower's
knowledge after due inquiry, threatened,  against the Borrower, its Subsidiaries
and each other Loan Party relating in any way to Environmental Laws.

         (q) Investment  Company;  Public Utility Holding  Company.  Neither the
Borrower  nor any  Subsidiary  nor any other  Loan  Party is (i) an  "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, (ii) a "holding company" or a
"subsidiary  company" of a "holding  company",  or an  "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended,  or (iii) subject
to any other  Applicable  Law which purports to regulate or restrict its ability
to borrow money or to consummate the transactions contemplated by this Agreement
or to perform its obligations under any Loan Document to which it is a party.

         (r) Margin Stock.  Neither the Borrower,  any  Subsidiary nor any other
Loan Party is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose,  whether immediate,  incidental or
ultimate,  of buying or carrying "margin stock" within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System.

         (s)  Affiliate  Transactions.  Except as  permitted  by Section  9.10.,
neither the Borrower,  any  Subsidiary nor any other Loan Party is a party to or
bound by any  agreement or  arrangement  (whether  oral or written) to which any
Affiliate of the Borrower, any Subsidiary or any other Loan Party is a party.

         (t)  Intellectual  Property.  Each of the Borrower and each  Subsidiary
owns or has the right to use, under valid license  agreements or otherwise,  all
material patents,  licenses,  franchises,  trademarks,  trademark rights,  trade
names,   trade  name  rights,   trade  secrets  and  copyrights   (collectively,
"Intellectual  Property") used in the conduct of its businesses as now conducted
and as  contemplated  by the Loan  Documents,  without  known  conflict with any
patent, license,  franchise,  trademark, trade secret, trade name, copyright, or
other  proprietary  right of any  other  Person,  except  for such  Intellectual
Property,  the  absence  of which,  and for  conflicts  which,  would not have a
Material  Adverse  Effect.  The Borrower and each such Subsidiary have taken all
such steps as they deem reasonably  necessary to protect their respective rights
under and with respect to such Intellectual Property. No material claim has been
asserted by any Person with respect to the use of any  Intellectual  Property by
the Borrower or any  Subsidiary,  or challenging or questioning  the validity or
effectiveness  of  any  Intellectual  Property.  The  use of

                                      -56-
<PAGE>
such Intellectual Property by the Borrower,  its Subsidiaries and the other Loan
Parties,  does not infringe on the rights of any Person,  subject to such claims
and  infringements as do not, in the aggregate,  give rise to any liabilities on
the part of the Borrower and its Subsidiaries  that could reasonably be expected
to have a Material Adverse Effect.

         (u)  Business.   As  of  the  Agreement  Date,  the  Borrower  and  its
Subsidiaries  are engaged  substantially  in the  business  of the  acquisition,
financing, ownership, development and tenancy (through TRSs) of hotel properties
and other businesses activities incidental thereto.

         (v) Broker's  Fees. No broker's or finder's fee,  commission or similar
compensation  will be  payable  with  respect to the  transactions  contemplated
hereby.  No other similar fees or commissions  will be payable by any Loan Party
for any other  services  rendered  to the  Borrower  or any of its  Subsidiaries
ancillary to the transactions contemplated hereby.

         (w) Accuracy and Completeness of Information.  No written  information,
report  or other  papers  or data  (excluding  financial  projections  and other
forward looking  statements)  furnished to the Agent or any Lender by, on behalf
of, or at the direction of, the Borrower, any Subsidiary or any other Loan Party
in  connection  with or relating  in any way to this  Agreement,  contained  any
untrue statement of a fact material to the creditworthiness of the Borrower, any
Subsidiary or any other Loan Party or omitted to state a material fact necessary
in  order  to  make  such  statements   contained  therein,   in  light  of  the
circumstances  under  which  they  were  made,  not  misleading.  All  financial
statements  furnished  to the Agent or any  Lender  by, on behalf  of, or at the
direction of, the Borrower, any Subsidiary or any other Loan Party in connection
with or relating in any way to this  Agreement,  present  fairly,  in accordance
with GAAP consistently  applied  throughout the periods involved,  the financial
position  of the  Persons  involved  as at the date  thereof  and the results of
operations for such periods. All financial projections and other forward looking
statements prepared by or on behalf of the Borrower, any Subsidiary or any other
Loan Party that have been or may hereafter be made available to the Agent or any
Lender were or will be prepared in good faith based on  reasonable  assumptions.
No fact is known to the  Borrower  which has had,  or may in the future have (so
far as the Borrower can reasonably foresee), a Material Adverse Effect which has
not been set forth in the financial statements referred to in Section 6.1.(k) or
in such information,  reports or other papers or data or otherwise  disclosed in
writing to the Agent and the Lenders prior to the Effective Date.

         (x) REIT Status. The Borrower qualifies,  and has since 1995 qualified,
as a REIT and is in compliance  with all  requirements  and  conditions  imposed
under the Internal  Revenue Code to allow the Borrower to maintain its status as
a REIT.

         (y) Unencumbered  Assets. As of the Agreement Date, Schedule 6.1.(y) is
a correct and complete list of all Unencumbered Hotels and Unencumbered Mortgage
Notes.  Each of the Properties and promissory  notes included by the Borrower in
calculations  of  Unencumbered  Asset Value  satisfies  all of the  requirements
contained in the  definition of an  Unencumbered  Hotel,  Unencumbered  Mortgage
Note, or Other Acceptable Property, as applicable.

         (z) Insurance.  All Leases  require the Lessees  thereunder to maintain
with respect to the Hotels  commercially  reasonable  insurance with financially
sound and reputable insurance

                                      -57-
<PAGE>
companies. As of the Agreement Date, neither the Borrower nor any Subsidiary has
received  notice that any such  insurance  has been  cancelled,  nonrenewed,  or
impaired in any way.

         (aa)  Existing  Credit  Facility.  The Existing  Credit  Agreement  has
terminated and all amounts outstanding thereunder have been paid.

Section 6.2.  Survival of Representations and Warranties, Etc.

         All statements  contained in any  certificate,  financial  statement or
other  instrument  delivered by or on behalf of the Borrower,  any Subsidiary or
any other  Loan Party to the Agent or any Lender  pursuant  to or in  connection
with this  Agreement  or any of the other  Loan  Documents  (including,  but not
limited  to, any such  statement  made in or in  connection  with any  amendment
thereto or any statement  contained in any certificate,  financial  statement or
other  instrument  delivered  by or on  behalf  of  the  Borrower  prior  to the
Agreement  Date and  delivered  to the Agent or any  Lender in  connection  with
closing the transactions  contemplated hereby) shall constitute  representations
and warranties  made by the Borrower under this Agreement.  All  representations
and warranties  made under this Agreement and the other Loan Documents  shall be
deemed to be made at and as of the Agreement  Date,  the Effective  Date and the
date of the  occurrence  of any Credit  Event,  except to the  extent  that such
representations  and warranties  expressly  relate solely to an earlier date (in
which case such representations and warranties shall have been true and accurate
on and as of such earlier date) and except for changes in factual  circumstances
specifically permitted hereunder.  All such representations and warranties shall
survive the  effectiveness of this Agreement,  the execution and delivery of the
Loan  Documents  and the making of the Loans and the  issuance of the Letters of
Credit.

                       ARTICLE VII. AFFIRMATIVE COVENANTS

         For so  long as this  Agreement  is in  effect,  unless  the  Requisite
Lenders (or, if required  pursuant to Section  12.6.,  all of the Lenders) shall
otherwise  consent in the manner  provided  for in Section  12.6.,  the Borrower
shall comply with the following covenants:

Section 7.1.  Preservation of Existence and Similar Matters.

         Except as otherwise  permitted  under Section 9.7.,  the Borrower shall
preserve and maintain,  and cause each  Subsidiary  and each other Loan Party to
preserve and maintain, its respective existence,  rights,  franchises,  licenses
and privileges in the jurisdiction of its incorporation or formation and qualify
and remain qualified and authorized to do business in each jurisdiction in which
the  character of its  properties  or the nature of its business  requires  such
qualification  and  authorization  and where the failure to be so authorized and
qualified could reasonably be expected to have a Material Adverse Effect.

Section 7.2.  Compliance with Applicable Law and Material Contracts.

         The Borrower  shall comply,  and cause each  Subsidiary  and each other
Loan Party to comply,  with (a) all Applicable  Law,  including the obtaining of
all Governmental Approvals, the

                                      -58-
<PAGE>
failure  with which to comply  could  reasonably  be expected to have a Material
Adverse  Effect,  and (b) all  material  terms and  conditions  of all  Material
Contracts to which it is a party.

Section 7.3.  Maintenance of Property.

         In addition to the requirements of any of the other Loan Documents, the
Borrower  shall,  and shall cause each  Subsidiary  and other Loan Party to, (a)
protect and preserve all of its material properties or cause to be protected and
preserved,  and maintain or cause to be maintained in good repair, working order
and condition all tangible properties,  ordinary wear and tear excepted, and (b)
make  or  cause  to be  made  all  needed  and  appropriate  repairs,  renewals,
replacements and additions to such  properties,  so that the business carried on
in  connection  therewith  may be properly and  advantageously  conducted at all
times.

Section 7.4.  Conduct of Business.

         The  Borrower  shall at all times carry on, and cause its  Subsidiaries
and the other Loan Parties to carry on, its  respective  businesses as described
in Section 6.1.(u).

Section 7.5.  Insurance.

         In addition to the requirements of any of the other Loan Documents, the
Borrower  shall,  and shall  cause  each  Subsidiary  and other  Loan  Party to,
maintain  or cause  to be  maintained  commercially  reasonable  insurance  with
financially  sound  and  reputable  insurance  companies,  and from time to time
deliver to the Agent or any Lender  upon its request a detailed  list,  together
with copies of all policies of the insurance  then in effect,  stating the names
of the insurance companies, the amounts and rates of the insurance, the dates of
the expiration thereof and the properties and risks covered thereby.

Section 7.6.  Payment of Taxes and Claims.

         The  Borrower  shall,  and shall cause each  Subsidiary  and other Loan
Party to, pay and discharge or cause to be paid and discharged  when due (a) all
taxes,  assessments and  governmental  charges or levies imposed upon it or upon
its income or profits or upon any properties belonging to it, and (b) all lawful
claims of  materialmen,  mechanics,  carriers,  warehousemen  and  landlords for
labor, materials,  supplies and rentals which, if unpaid, might become a Lien on
any properties of such Person;  provided,  however,  that this Section shall not
require the payment or discharge of any such tax,  assessment,  charge,  levy or
claim which is being  contested in good faith by appropriate  proceedings  which
operate to suspend the collection  thereof and for which adequate  reserves have
been  established  on the books of the Borrower,  such  Subsidiary or such other
Loan Party, as applicable, in accordance with GAAP.

Section 7.7.  Visits and Inspections.

         The  Borrower  shall,  and shall cause each  Subsidiary  and other Loan
Party to, permit representatives or agents of any Lender or the Agent, from time
to time  after  reasonable  prior  notice  if no  Event of  Default  shall be in
existence,  as often as may be  reasonably  requested,  but only  during  normal
business  hours and at the expense of such Lender or the Agent (unless a

                                      -59-
<PAGE>
Default or Event of Default shall be  continuing,  in which case the exercise by
the Agent or such  Lender  of its  rights  under  this  Section  shall be at the
expense of the  Borrower),  as the case may be, to:  (a) visit and  inspect  all
properties of the Borrower or such  Subsidiary or other Loan Party to the extent
any such right to visit or inspect is within  the  control of such  Person;  (b)
inspect and make extracts from their respective books and records, including but
not limited to management letters prepared by independent  accountants;  and (c)
discuss  with its  principal  officers,  and its  independent  accountants,  its
business, properties,  condition (financial or otherwise), results of operations
and  performance.  If requested  by the Agent,  the  Borrower  shall  execute an
authorization  letter addressed to its accountants  authorizing the Agent or any
Lender to discuss the  financial  affairs of the Borrower and any  Subsidiary or
any other Loan Party with its accountants.

Section 7.8.  Use of Proceeds; Letters of Credit.

         The  Borrower  shall use the  proceeds  of all Loans and all Letters of
Credit for general business purposes only. The Borrower shall not, and shall not
permit any  Subsidiary  or other Loan Party to, use any part of such proceeds or
Letters of Credit to purchase or carry,  or to reduce or retire or refinance any
credit  incurred to purchase or carry,  any margin stock  (within the meaning of
Regulation  U of the Board of  Governors  of the Federal  Reserve  System) or to
extend  credit to others for the  purpose of  purchasing  or  carrying  any such
margin stock.

Section 7.9.  Environmental Matters.

         The Borrower  shall,  and shall cause all of its  Subsidiaries  and the
other Loan Parties to, comply or cause to be complied  with,  all  Environmental
Laws the failure  with which to comply  could  reasonably  be expected to have a
Material Adverse Effect. If the Borrower, any Subsidiary or any other Loan Party
shall (a) receive  notice that any violation of any  Environmental  Law may have
been  committed or is about to be committed by such Person,  (b) receive  notice
that any  administrative  or  judicial  complaint  or order has been filed or is
about to be filed against the Borrower,  any  Subsidiary or any other Loan Party
alleging  violations of any  Environmental  Law or requiring  the Borrower,  any
Subsidiary  or any other Loan Party to take any  action in  connection  with the
release of  Hazardous  Materials  or (c) receive any notice from a  Governmental
Authority or private party  alleging that the  Borrower,  any  Subsidiary or any
other  Loan  Party may be  liable or  responsible  for costs  associated  with a
response to or cleanup of a release of Hazardous Materials or any damages caused
thereby, and such notices, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, the Borrower shall provide the Agent
and each  Lender  with a copy of such  notice  within 30 days after the  receipt
thereof by the Borrower,  any  Subsidiary or any other Loan Party.  The Borrower
shall,  and shall cause its  Subsidiaries and the other Loan Parties to, take or
cause to be taken  promptly all actions  necessary to prevent the  imposition of
any Liens on any of their respective properties arising out of or related to any
Environmental Laws.

Section 7.10.  Books and Records.

         The Borrower shall,  and shall cause each of its  Subsidiaries  and the
other Loan Parties to,  maintain books and records  pertaining to its respective
business  operations in such detail,  form and scope as is consistent  with good
business practice and in accordance with GAAP.

                                      -60-
<PAGE>
Section 7.11.  Further Assurances.

         The Borrower shall, at the Borrower's cost and expense and upon request
of the Agent, execute and deliver or cause to be executed and delivered,  to the
Agent such further instruments,  documents and certificates, and do and cause to
be done such further acts that may be  reasonably  necessary or advisable in the
reasonable opinion of the Agent to carry out more effectively the provisions and
purposes of this Agreement and the other Loan Documents.

Section 7.12.  New Subsidiaries/Guarantors.

         (a)  Requirement  to Become  Guarantor.  Within  30 days of any  Person
(other than an Excluded  Subsidiary)  becoming a Material  Subsidiary  after the
Effective  Date,  the Borrower  shall deliver to the Agent each of the following
items,  each in form and substance  satisfactory to the Agent:  (a) an Accession
Agreement executed by such Material Subsidiary and (b) the items that would have
been delivered under Sections 5.1.(a)(v) and (x) through (xiii) if such Material
Subsidiary had been one on the Effective Date; provided,  however, promptly (and
in any event within 5 Business Days) upon any Excluded  Subsidiary ceasing to be
subject to the  restriction  which  prevented  it from  delivering  an Accession
Agreement  pursuant  to this  Section,  such  Subsidiary  shall  comply with the
provisions of this  Section.  The Agent shall send to each Lender copies of each
of the  foregoing  items once the Agent has received all such items with respect
to a Material Subsidiary.

         (b) Release of a  Guarantor.  The  Borrower may request in writing that
the Agent  release,  and upon  receipt of such  request the Agent shall  release
(subject to the terms of the  Guaranty),  a Guarantor  from the Guaranty so long
as: (i) such Guarantor meets, or will meet  simultaneously with its release from
the  Guaranty,  all of the  provisions of the  definition of the term  "Excluded
Subsidiary"  or has ceased to be, or  simultaneously  with its release  from the
Guaranty  will cease to be, a Material  Subsidiary;  (ii) such  Guarantor is not
otherwise required to be a party to the Guaranty under the immediately preceding
subsection  (a); (iii) no Default or Event of Default shall then be in existence
or would occur as a result of such  release,  including  without  limitation,  a
Default or Event of Default  resulting  from a violation of any of the covenants
contained in Section  9.1.;  and (iv) the Agent shall have received such written
request  at least 10  Business  Days  prior to the  requested  date of  release.
Delivery by the  Borrower to the Agent of any such  request  shall  constitute a
representation  by the  Borrower  that the  matters  set forth in the  preceding
sentence  (both as of the date of the giving of such  request and as of the date
of the  effectiveness of such request) are true and correct with respect to such
request.

Section 7.13.  REIT Status.

         The Borrower shall at all times maintain its status as a REIT.

Section 7.14.  Exchange Listing.

         The Borrower  shall maintain at least one class of common shares of the
Borrower  having  trading  privileges  on the New  York  Stock  Exchange  or the
American  Stock  Exchange  or which

                                      -61-
<PAGE>
is the subject of price quotations in the over-the-counter market as reported by
the National Association of Securities Dealers Automated Quotation System.

                            ARTICLE VIII. INFORMATION

         For so  long as this  Agreement  is in  effect,  unless  the  Requisite
Lenders (or, if required  pursuant to Section  12.6.,  all of the Lenders) shall
otherwise  consent in the manner set forth in Section 12.6.,  the Borrower shall
furnish to each  Lender (or to the Agent if so  provided  below) at its  Lending
Office:

Section 8.1.  Quarterly Financial Statements.

         As soon as available and in any event within 45 days after the close of
each of the  first,  second  and third  fiscal  quarters  of the  Borrower,  the
unaudited  consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such  period and the related  unaudited  consolidated  statements  of
income, shareholders' equity and cash flows of the Borrower and its Subsidiaries
for such period,  setting forth in each case in comparative  form the figures as
of the end of and for the corresponding periods of the previous fiscal year, all
of which shall be certified by the chief financial  officer of the Borrower,  in
his or her  opinion,  to  present  fairly,  in  accordance  with GAAP as then in
effect, the consolidated financial position of the Borrower and its Subsidiaries
as at the date thereof and the results of operations for such period (subject to
normal year-end audit adjustments). Together with such financial statements, the
Borrower shall deliver  reports,  in form and detail  satisfactory to the Agent,
setting forth (a) a statement of Funds From  Operations  for the fiscal  quarter
then ending;  (b) to the extent such  information is obtained from Lessees,  all
capital   expenditures  made  during  the  fiscal  quarter  then  ended;  (c)  a
description of all Properties acquired during such fiscal quarter, including the
minimum rent or expected minimum return of each such Property, acquisition costs
and related  mortgage debt, (d) to the extent such  information is obtained from
Lessees,  the  underlying  occupancy,   average  daily  revenues,  revenues  per
available  room, and Hotel Net Cash Flow for each Hotel Pool and each Hotel that
is not in a Hotel Pool, and (e) such other information as the Agent may request.

Section 8.2.  Year-End Statements.

         Within 90 days after the end of each fiscal year of the  Borrower,  the
audited  consolidated  balance sheet of the Borrower and its  Subsidiaries as at
the end of such fiscal year and the related audited  consolidated  statements of
income, shareholders' equity and cash flows of the Borrower and its Subsidiaries
for such fiscal year,  setting forth in  comparative  form the figures as at the
end of and for the previous  fiscal year, all of which shall be certified by (a)
the chief financial officer of the Borrower,  in his or her opinion,  to present
fairly,  in accordance with GAAP as then in effect,  the consolidated  financial
position of the  Borrower  and its  Subsidiaries  as at the date thereof and the
results of  operations  for such  period and (b)  independent  certified  public
accountants  of recognized  national  standing  acceptable  to the Agent,  whose
certificate shall be unqualified and in scope and substance  satisfactory to the
Requisite  Lenders and who shall have  authorized  the  Borrower to deliver such
financial  statements  and  certification  thereof to the Agent and the  Lenders
pursuant  to this  Agreement.  Together  with  such  financial  statements,  the
Borrower shall deliver a report, in form and detail  reasonably  satisfactory to
the Agent,  setting forth the  underlying  occupancy,  average  daily  revenues,
revenues  per  available  room,  and Hotel Net

                                      -62-
<PAGE>
Cash Flow for each  Hotel  Pool and each  Hotel  that is not in a Hotel Pool for
such fiscal year to the extent such information is obtained from Lessees.

Section 8.3.  Compliance Certificate.

         At the time  financial  statements  are furnished  pursuant to Sections
8.1. and 8.2.,  and within 10 Business Days of the Agent's  request with respect
to any other fiscal period, a certificate substantially in the form of Exhibit J
(a  "Compliance  Certificate")  executed by the chief  financial  officer of the
Borrower: (a) setting forth in reasonable detail as at the end of such quarterly
accounting period,  fiscal year, or other fiscal period, as the case may be, the
calculations required to establish whether or not the Borrower was in compliance
with the  covenants  contained in Sections 9.1.  through 9.3. and 9.6.,  and (b)
stating that, to the best of his or her knowledge,  information and belief after
due inquiry, no Default or Event of Default exists, or, if such is not the case,
specifying  such  Default or Event of Default and its nature,  when it occurred,
whether it is continuing  and the steps being taken by the Borrower with respect
to such event, condition or failure. With each Compliance Certificate,  Borrower
shall also deliver a certificate (an "Unencumbered Asset Certificate")  executed
by the chief  financial  officer of the Borrower  that: (i) sets forth a list of
all Unencumbered  Hotels (with a listing of all Excluded Properties in any Hotel
Pool included in Unencumbered Hotels,  together with a certification of the book
value  of  such  Excluded  Properties  and  the  EBITDA  attributable  thereto),
Unencumbered  Mortgage Notes  (including a listing of all promissory  notes that
are secured by Excluded  Properties,  together with a certification  of the book
value of the Excluded Properties and the EBITDA attributable thereto), and Other
Acceptable   Property;   and  (ii)  certifies  that  all  Unencumbered   Hotels,
Unencumbered  Mortgage  Notes,  and Other  Acceptable  Property so listed  fully
qualify as such under the  applicable  criteria for inclusion as a  Unencumbered
Hotel, Unencumbered Mortgage Note, or Other Acceptable Property.

Section 8.4.  Other Information.

         (a) Management  Reports.  Promptly upon receipt thereof,  copies of all
management  reports,  if any, submitted to the Borrower or its Board of Trustees
by its independent public accountants;

         (b) Securities  Filings.  Within 5 Business Days of the filing thereof,
copies of all  registration  statements  (excluding the exhibits thereto (unless
requested  by the  Agent)  and any  registration  statements  on Form S-8 or its
equivalent),  reports on Forms 10-K, 10-Q and 8-K (or their equivalents) and all
other  periodic  reports  which the Borrower,  any  Subsidiary or any other Loan
Party  shall  file  with  the  Securities   and  Exchange   Commission  (or  any
Governmental   Authority   substituted  therefor)  or  any  national  securities
exchange;

         (c) Shareholder  Information.  Promptly upon the mailing thereof to the
shareholders  of the Borrower  generally,  copies of all  financial  statements,
reports and proxy  statements so mailed and promptly  upon the issuance  thereof
copies of all press releases issued by the Borrower, any Subsidiary or any other
Loan Party;

         (d) ERISA.  If and when any  member of the ERISA  Group (i) gives or is
required  to give  notice to the PBGC of any  "reportable  event" (as defined in
Section 4043 of ERISA) with

                                      -63-
<PAGE>
respect to any Plan which might  constitute  grounds for a  termination  of such
Plan under Title IV of ERISA, or knows that the plan  administrator  of any Plan
has given or is required to give notice of any such reportable  event, a copy of
the notice of such  reportable  event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal  liability under Title IV
of  ERISA  or  notice  that  any  Multiemployer  Plan is in  reorganization,  is
insolvent or has been terminated,  a copy of such notice;  (iii) receives notice
from  the  PBGC  under  Title IV of ERISA  of an  intent  to  terminate,  impose
liability  (other than for premiums  under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies
for a waiver of the minimum  funding  standard under Section 412 of the Internal
Revenue  Code,  a copy of such  application;  (v)  gives  notice  of  intent  to
terminate  any Plan under  Section  4041(c) of ERISA,  a copy of such notice and
other  information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or in respect
of any  Benefit  Arrangement  or makes  any  amendment  to any  Plan or  Benefit
Arrangement  which has resulted or could result in the  imposition  of a Lien or
the posting of a bond or other  security,  a certificate of the chief  financial
officer of the Borrower  setting  forth  details as to such  occurrence  and the
action,  if any,  which the Borrower or applicable  member of the ERISA Group is
required or proposes to take;

         (e)  Litigation.  To the extent the Borrower or any Subsidiary is aware
of  the  same,   prompt  notice  of  the   commencement  of  any  proceeding  or
investigation  by or  before  any  Governmental  Authority  and  any  action  or
proceeding in any court or other tribunal or before any arbitrator against or in
any other way relating adversely to, or adversely affecting, the Borrower or any
Subsidiary or any of their  respective  properties,  assets or businesses  which
could  reasonably  be expected  to have a Material  Adverse  Effect,  and prompt
notice of the receipt of notice that any United States income tax returns of the
Borrower or any of its Subsidiaries are being audited;

         (f) Modification of Governing  Documents.  A copy of any amendment to a
Governing Document of the Borrower or any other Loan Party promptly upon, and in
any event within 15 Business Days of, the effectiveness thereof;

         (g) Change of Management or Financial  Condition.  Prompt notice of any
change in the senior  management  of the Borrower,  any  Subsidiary or any other
Loan  Party  and any  change in the  business,  assets,  liabilities,  financial
condition,  results of  operations or business  prospects of the  Borrower,  any
Subsidiary or any other Loan Party which has had or could reasonably be expected
to have Material Adverse Effect;

         (h) Default.  Notice of the occurrence of any of the following promptly
upon a Responsible Officer obtaining knowledge thereof: (i) any Default or Event
of  Default or (ii) any event  which  constitutes  or which with the  passage of
time, the giving of notice, or otherwise, would constitute a default or event of
default by the  Borrower,  any  Subsidiary  or any other  Loan  Party  under any
Material  Contract,  or  any  Lease  or  Ancillary  Agreement  relating  to  any
Unencumbered Hotel or Other Acceptable  Property,  to which any such Person is a
party or by which any such  Person or any of its  respective  properties  may be
bound;

                                      -64-
<PAGE>
         (i) Judgments. Prompt notice of any order, judgment or decree in excess
of $5,000,000  having been entered  against the Borrower,  any Subsidiary or any
other Loan Party or any of their respective properties or assets;

         (j) Notice of  Violations of Law.  Prompt  notice if the Borrower,  any
Subsidiary  or any other Loan Party  shall  receive  any  notification  from any
Governmental Authority alleging a violation of any Applicable Law or any inquiry
which could reasonably be expected to have a Material Adverse Effect;

         (k)  Material  Subsidiary.  Prompt  notice  of any  Person  becoming  a
Material Subsidiary;

         (l) Material Asset Sales.  Prompt notice of the sale, transfer or other
disposition of any material assets of the Borrower,  any Subsidiary or any other
Loan Party to any Person other than the  Borrower,  any  Subsidiary or any other
Loan Party;

         (m) Material  Contracts.  Promptly  upon (i) entering into any Material
Contract  after  the  Agreement  Date,  a copy to the  Agent  of  such  Material
Contract,  together  with a copy of all related or ancillary  documentation  and
(ii) the giving or receipt  thereof by the  Borrower or any  Subsidiary,  notice
alleging that any party to any Material Contract, Unencumbered Mortgage Note, or
any Lease or  Ancillary  Agreement  relating to an  Unencumbered  Hotel or Other
Acceptable Property, is in default of its obligations thereunder;

         (n)  Financial  Information   Regarding  Lessees  and  Mortgagors.   If
requested  by the Agent and  available to the  Borrower or any  Subsidiary  on a
nonconfidential  basis, the Borrower shall deliver to the Agent the same reports
and information with respect to each mortgagor under any  Unencumbered  Mortgage
Note and with  respect to each Lessee as is required by Sections  8.1.  and 8.2.
with respect to the Borrower,  except that: (i) every  reference to the Borrower
and its  Subsidiaries  shall be deemed to refer to such  material  mortgagor  or
Lessee;  and (ii) the time periods  within which the Borrower shall deliver such
reports as to material  mortgagors and Lessees shall each be 30 days longer than
the time periods set forth in Sections 8.1. and 8.2.;

         (o)  Additions  to  Unencumbered  Assets.  In order to add any Hotel or
Hotel Pool to  Unencumbered  Hotels or add any promissory  note to  Unencumbered
Mortgage  Notes,  the Borrower must deliver to the Agent an  Unencumbered  Asset
Certificate  reflecting  such  addition,  together  with a statement of: (i) the
acquisition  cost of such Hotel,  Hotel Pool, or promissory  note;  and (ii) the
same  information that the Borrower would be required to include in a Compliance
Certificate. The Borrower shall provide the Agent with Due Diligence Reports for
any  Hotel or Hotel  Pool  added to  Unencumbered  Hotels  within 20 days of its
delivery  to the Agent of the  Unencumbered  Asset  Certificate  that added such
Hotel or Hotel Pool to Unencumbered Hotels;

         (p) Removals from  Unencumbered  Assets.  Within 10 Business Days after
any Loan Party's disposition of any Unencumbered Asset or after any Unencumbered
Asset ceases to qualify as an Unencumbered Hotel,  Unencumbered Mortgage Note or
Other  Acceptable

                                      -65-
<PAGE>
Property,  the  Borrower  shall  deliver  to the  Agent  an  Unencumbered  Asset
Certificate  reflecting  such  removal  or  disqualification,  together  with  a
statement of: (i) the identity of the  Unencumbered  Asset being  disposed of or
disqualified,  and  (ii)  the  Unencumbered  Asset  Value  attributable  to such
Unencumbered  Asset.  The Borrower also may voluntarily  remove (i) any Hotel or
Hotel Pool from Unencumbered  Hotels, (ii) any promissory note from Unencumbered
Mortgage  Notes,  and (iii) any Property  from Other  Acceptable  Properties  by
delivering  to the  Agent an  Unencumbered  Asset  Certificate  reflecting  such
removal,  together with a statement (a) that no Default or Event of Default then
exists or would,  upon the occurrence of such event or with the passage of time,
result from such removal,  and (b) of (i) the identity of the Unencumbered Asset
being  removed,  and (ii) the  Unencumbered  Asset  Value  attributable  to such
Unencumbered Asset; and

         (q)  Other  Information.  From  time to time  and  promptly  upon  each
request,  such data,  certificates,  reports,  statements,  opinions of counsel,
documents or further information  regarding the business,  assets,  liabilities,
financial condition, results of operations or business prospects of the Borrower
or any of its Subsidiaries as the Agent or any Lender may reasonably request.

                         ARTICLE IX. NEGATIVE COVENANTS

         For so  long as this  Agreement  is in  effect,  unless  the  Requisite
Lenders (or, if required  pursuant to Section  12.6.,  all of the Lenders) shall
otherwise  consent in the manner set forth in Section 12.6.,  the Borrower shall
comply with the following covenants:

Section 9.1.  Financial Covenants.

         The Borrower shall not permit:

         (a) Leverage Ratio.  The ratio of (i) Total  Indebtedness to (ii) Total
Asset Value, to exceed 0.50 to 1.00 at any time.

         (b) Interest  Coverage  Ratio.  The ratio of (i) Adjusted EBITDA of the
Borrower and its Subsidiaries  determined on a consolidated basis for the fiscal
quarter of the Borrower  most recently  ending to (ii)  Interest  Expense of the
Borrower  and its  Subsidiaries  determined  on a  consolidated  basis  for such
period, to be less than 2.50 to 1.00 at any time.

         (c) Funded Debt Ratio.  The ratio of (i) the  average  daily  amount of
Total  Indebtedness  outstanding  during the fiscal quarter of the Borrower most
recently  ending to (ii)  Adjusted  EBITDA of the Borrower and its  Subsidiaries
determined on a consolidated  basis for such fiscal quarter,  to be greater than
5.0 to 1.0 at any time.

         (d) Minimum  Fixed  Charge  Coverage  Ratio.  The ratio of (i) Adjusted
EBITDA of the Borrower and its Subsidiaries  determined on a consolidated  basis
for the fiscal  quarter  most  recently  ending to (ii) Fixed  Charges  for such
period, to be less than 2.0 to 1.0 at any time.

         (e) Secured  Indebtedness.  The ratio of (i)(x) Secured Indebtedness of
the Borrower and its  Subsidiaries  to (y) Total Asset Value, to be greater than
0.20  to  1.00  at any  time;  and

                                      -66-
<PAGE>
(ii)(x)  Secured  Indebtedness  (other  than  Nonrecourse  Indebtedness)  of the
Borrower and its  Subsidiaries to (y) Total Asset Value, to be greater than 0.10
to 1.00 at any time.

         (f) Unencumbered  Leverage Ratio.  The ratio of (i) Unencumbered  Asset
Value to (ii) Unsecured Indebtedness, to be less than 2.0 to 1.0 at any time.

         (g) Unencumbered Interest Coverage Ratio. The ratio of (i) Unencumbered
EBITDA to (ii)  Unsecured  Debt Service for the  Borrower's  fiscal quarter most
recently ending, to be less than 2.50 to 1.00 at any time.

         (h) Minimum  Tangible  Net Worth.  Tangible Net Worth at any time to be
less than (i)  $1,000,000,000  plus (ii) 75% of the Net  Proceeds  of all Equity
Issuances  effected  by  the  Borrower  or any  Subsidiary  (other  than  Equity
Issuances to the Borrower or any Subsidiary) after the Agreement Date.

         (i)  Floating  Rate  Debt.  The  aggregate   principal  amount  of  all
outstanding Floating Rate Debt to exceed 20% of Total Asset Value at any time.

         (j) Total Assets Owned by Borrower and Guarantors.  The amount of Total
Asset Value  directly  owned by the Borrower and the  Guarantors to be less than
95.0% of Total Asset Value  (excluding the amount of Total Asset Value,  if any,
then attributable to Excluded Subsidiaries).

Section 9.2.  Indebtedness.

         The  Borrower  shall not,  and shall not permit any  Subsidiary  or any
other Loan Party to, create,  incur,  assume,  or permit or suffer to exist, any
Indebtedness other than the following:

         (a)      the Obligations;

         (b)      Indebtedness set forth on Schedule 6.1.(g);

         (c) intercompany  Indebtedness  among the Borrower and its Wholly Owned
Subsidiaries;  provided,  however, that the obligations of the Borrower and each
Guarantor in respect of such intercompany  Indebtedness  shall be subordinate to
the Obligations; and

         (d) any  other  Indebtedness  of a type  not  described  above  in this
Section and created,  incurred or assumed  after the  Agreement  Date so long as
immediately  prior  to  the  creation,  incurring  or  assumption  thereof,  and
immediately  thereafter and after giving effect thereto,  no Default or Event of
Default is or would be in existence,  including without limitation, a Default or
Event of Default resulting from a violation of any of the covenants contained in
Section 9.1.

Section 9.3. Certain Permitted Investments.

         The  Borrower  shall not,  and shall not permit any  Subsidiary  or any
other  Loan  Party  to,  make any  Investment  in or  otherwise  own or hold the
following  items which would cause the

                                      -67-
<PAGE>
aggregate value of such holdings of the Borrower and such other  Subsidiaries to
exceed 20.0% of Total Asset Value at any time:

                  (a)  Investments  in  Persons  which  are  not   Subsidiaries,
         including  without  limitation  Unencumbered  Mortgage  Notes and other
         Indebtedness owed to the Borrower or any Subsidiary and secured by real
         property;

                  (b)  Assets  Under  Development   measured  by  the  aggregate
         Construction Budget for all such Assets Under Development. For purposes
         of this subsection,  (i) "Construction Budget" means the fully-budgeted
         costs for the  acquisition  and  construction  of a given piece of real
         property  (including  without  limitation,  the cost of acquiring  such
         piece  of  real  property,   reserves  for  construction  interest  and
         operating  deficits,  tenant  improvements,  leasing  commissions,  and
         infrastructure  costs) as reasonably determined by the Borrower in good
         faith and (ii) real  property  under  construction  to be (but not yet)
         acquired  by  the  Borrower  or  a  Subsidiary   upon   completion   of
         construction  pursuant  to a contract  in which the seller of such real
         property  is  required  to  complete  construction  prior to,  and as a
         condition  precedent  to,  such  acquisition,  shall be subject to this
         subsection;

                  (c) Real property  leased by the Borrower or any Subsidiary as
         lessee pursuant to a ground lease, including any Ground Lease; and

                  (d) Owning or leasing as lessee real  property  not located in
         any state of the United States of America or the District of Columbia.

Section 9.4.  Investments Generally.

         The Borrower  shall not, and shall not permit any  Subsidiary  or other
Loan Party to, directly or indirectly, acquire, make or purchase any Investment,
or permit  any  Investment  of such  Person to be  outstanding  on and after the
Agreement Date, other than the following:

         (a)  Investments in Subsidiaries in existence on the Agreement Date and
disclosed on Part I of Schedule 6.1.(b);

         (b)  Investments  to acquire  Equity  Interests of a Subsidiary  or any
other Person who after giving effect to such acquisition  would be a Subsidiary,
so long as in each  case (i)  immediately  prior to such  Investment,  and after
giving  effect  thereto,  no  Default  or  Event  of  Default  is or would be in
existence  and  (ii) if such  Subsidiary  is (or  after  giving  effect  to such
Investment  would  become)  a  Material   Subsidiary  and  is  not  an  Excluded
Subsidiary, the terms and conditions set forth in Section 7.12. are satisfied;

         (c) Investments permitted under Section 9.3.;

         (d) Investments in Cash Equivalents;

         (e) intercompany  Indebtedness  among the Borrower and its Wholly Owned
Subsidiaries  provided  that  such  Indebtedness  is  permitted  by the terms of
Section 9.2.;

                                      -68-
<PAGE>
         (f)  loans  and  advances  to  officers  and   employees   for  moving,
entertainment,  travel and other  similar  expenses  in the  ordinary  course of
business consistent with past practices; and

         (g) any other  Investment so long as  immediately  prior to making such
Investment,  and  immediately  thereafter  and after giving effect  thereto,  no
Default  or Event of  Default  is or would be in  existence,  including  without
limitation,  a Default or Event of Default resulting from a violation of Section
7.4.

Section 9.5.  Liens; Negative Pledges; Other Matters.

         (a) The  Borrower  shall not,  and shall not permit any  Subsidiary  or
other Loan Party to,  create,  assume,  or incur any Lien (other than  Permitted
Liens) upon any of its  properties,  assets,  income or profits of any character
whether now owned or hereafter  acquired if  immediately  prior to the creation,
assumption or incurring of such Lien, or  immediately  thereafter,  a Default or
Event of Default is or would be in existence,  including without  limitation,  a
Default or Event of Default  resulting  from a violation of any of the covenants
contained in Section 9.1.;

         (b) The  Borrower  shall not,  and shall not permit any  Subsidiary  or
other Loan Party to,  enter into,  assume or  otherwise be bound by any Negative
Pledge except for a Negative  Pledge  contained in any agreement (i)  evidencing
Indebtedness which the Borrower or such Subsidiary may create, incur, assume, or
permit or suffer to exist under Section 9.2.; (ii) which Indebtedness is secured
by a Lien permitted to exist and (iii) which prohibits the creation of any other
Lien on only  the  property  securing  such  Indebtedness  as of the  date  such
agreement was entered into;

         (c) The  Borrower  shall not,  and shall not permit any  Subsidiary  or
other  Loan  Party to,  create or  otherwise  cause or suffer to exist or become
effective any  consensual  encumbrance or restriction of any kind on the ability
of any Subsidiary  (other than an Excluded  Subsidiary) to: (i) pay dividends or
make any other  distribution on any of such Subsidiary's  capital stock or other
equity  interests  owned  by  the  Borrower  or any  Subsidiary;  (ii)  pay  any
Indebtedness  owed to the  Borrower  or any  Subsidiary;  (iii)  make  loans  or
advances to the Borrower or any Subsidiary; or (iv) transfer any of its property
or assets to the Borrower or any Subsidiary.

Section 9.6.  Restricted Payments.

         The Borrower  shall not, and shall not permit any  Subsidiary  or other
Loan Party to, declare or make any Restricted Payment; provided, however, that:

         (a)  the  Borrower  may  declare  or  make  cash  distributions  to its
shareholders  during any fiscal  year in an  aggregate  amount not to exceed the
greater of (i) the sum of (x) 90.0% of Funds From Operations of the Borrower for
such period plus (y) 25.0% of the cash Net Proceeds of Equity Issuances effected
by the  Borrower  or any  Subsidiary  during  such  period  (other  than  Equity
Issuances  to the  Borrower  or any  Subsidiary),  or (ii)  the  minimum  amount
necessary for the Borrower to remain in compliance with Section 7.13.;

                                      -69-
<PAGE>
         (b) the Borrower may make cash  distributions  to its  shareholders  of
capital  gains  resulting  from gains  from  certain  asset  sales to the extent
necessary to avoid payment of taxes on such asset sales  imposed under  Sections
857(b)(3) and 4981 of the Internal Revenue Code;

         (c) the  Borrower  may make cash  payments  to  repurchase  outstanding
shares of (i) any of its Preferred  Stock, and (ii) up to $200,000,000 of common
stock or other similar common Equity Interests; and

         (d)  Subsidiaries  may pay  Restricted  Payments to the Borrower or any
other Subsidiary.

Notwithstanding  the  foregoing,  but subject to the  following  sentence,  if a
Default or Event of Default shall have occurred and be continuing,  the Borrower
may only  declare  or make cash  distributions  to its  shareholders  during any
fiscal year in an aggregate  amount not to exceed the minimum  amount  necessary
for the  Borrower to remain in  compliance  with Section  7.13.  If a Default or
Event of Default  specified  in Section  10.1.(a),  Section  10.1.(f) or Section
10.1.(g)  shall  have  occurred  and be  continuing,  or if as a  result  of the
occurrence of any other Event of Default the Obligations  have been  accelerated
pursuant to Section  10.2.(a),  the Borrower shall not, and shall not permit any
Subsidiary  or other Loan Party to, make any  Restricted  Payments to any Person
whatsoever other than to the Borrower or any Subsidiary.

Section 9.7.  Merger, Consolidation, Sales of Assets and Other Arrangements.

         The Borrower  shall not, and shall not permit any  Subsidiary  or other
Loan Party to: (i) enter into any transaction of merger or  consolidation;  (ii)
liquidate,   wind  up  or  dissolve   itself  (or  suffer  any   liquidation  or
dissolution);  or (iii) convey,  sell,  lease,  sublease,  transfer or otherwise
dispose  of,  in  one  transaction  or a  series  of  transactions,  all  or any
substantial  part of its  business  or assets,  whether  now owned or  hereafter
acquired; provided, however, that:

         (a) any of the actions  described in the immediately  preceding clauses
(i) through (iii) may be taken with respect to any  Subsidiary or any other Loan
Party (other than the  Borrower) so long as  immediately  prior to the taking of
such action,  and  immediately  thereafter and after giving effect  thereto,  no
Default or Event of Default is or would be in existence;

         (b) the Borrower, its Subsidiaries and the other Loan Parties may lease
and sublease their  respective  assets,  as lessor or sublessor (as the case may
be), in the ordinary course of their business;

         (c) a Person  may merge with and into the  Borrower  so long as (i) the
Borrower is the survivor of such merger,  (ii) immediately prior to such merger,
and immediately  thereafter and after giving effect thereto, no Default or Event
of Default is or would be in existence;  and (iii) the Borrower shall have given
the Agent and the Lenders at least 10 Business  Days'  prior  written  notice of
such merger  (except that such prior notice shall not be required in the case of
the merger of a Subsidiary with and into the Borrower); and

         (d) the Borrower and each  Subsidiary may sell,  transfer or dispose of
assets among themselves.

                                      -70-
<PAGE>
Section 9.8.  Fiscal Year.

         The Borrower shall not change its fiscal year from that in effect as of
the Agreement Date.

Section 9.9.  Modifications to Advisory Agreement and Other Material Contracts.

         The  Borrower  shall  not  default  in  any  material  respect  in  the
performance of any of its obligations under the Advisory Agreement or permit the
Advisory  Agreement to be canceled or terminated  prior to its stated  maturity.
The Borrower shall not enter into any material amendment, modification or waiver
of or with  respect to any of the terms of the  Advisory  Agreement,  except for
extensions  thereof.  With respect to Material Contracts other than the Advisory
Agreement,  the Borrower shall not, and shall not permit any Subsidiary or other
Loan Party to, enter into any  amendment or  modification  to any such  Material
Contract which could  reasonably be expected to have a Material  Adverse Effect.
With respect to any Lease or Ancillary  Agreement  relating to any  Unencumbered
Hotel or Other Acceptable Property, the Borrower shall not, and shall not permit
any Subsidiary or other Loan Party to, enter into any amendment or  modification
to any such agreement if (a) such amendment or modification  could reasonably be
expected to have a Material  Adverse Effect or (b) after giving pro forma effect
to such  amendment  or  modification,  a  Default  or  Event  of  Default  could
reasonably  be expected to occur,  including  without  limitation,  a Default or
Event of Default resulting from a violation of any of the covenants contained in
Section 9.1. In connection  with any amendment or  modification  to any Lease or
Ancillary  Agreement  relating  to any  Unencumbered  Hotel or Other  Acceptable
Property,  the Borrower shall deliver to the Agent,  within 10 Business Days' of
the Agent's request,  a Compliance  Certificate  calculated on a pro forma basis
giving effect to such amendment or modification.

Section 9.10.  Transactions with Affiliates.

         The Borrower shall not, and shall not permit any of its Subsidiaries or
any  other  Loan  Party  to,  permit  to exist or enter  into,  any  transaction
(including  the  purchase,  sale,  lease  or  exchange  of any  property  or the
rendering  of any  service)  with  any  Affiliate,  except  transactions  in the
ordinary  course of and pursuant to the reasonable  requirements of the business
of the Borrower or any of its  Subsidiaries  and upon fair and reasonable  terms
which are no less  favorable  to the Borrower or such  Subsidiary  than would be
obtained in a comparable  arm's length  transaction with a Person that is not an
Affiliate.

Section 9.11.  ERISA Exemptions.

         The Borrower  shall not, and shall not permit any Subsidiary to, permit
any of its  respective  assets to become or be deemed to be "plan assets" within
the meaning of ERISA, the Internal  Revenue Code and the respective  regulations
promulgated thereunder.

                                      -71-
<PAGE>
                               ARTICLE X. DEFAULT

Section 10.1.  Events of Default.

         Each of the following  shall  constitute an Event of Default,  whatever
the reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of Applicable  Law or pursuant to any judgment or order of
any Governmental Authority:

         (a) Default in Payment of  Principal.  The  Borrower  shall fail to pay
when due  (whether  upon  demand,  at  maturity,  by reason of  acceleration  or
otherwise) the principal of any of the Loans, or any Reimbursement Obligation.

         (b) Default in Payment of Interest and Other Obligations.  The Borrower
shall fail to pay when due any  interest on any of the Loans or any of the other
payment Obligations owing by the Borrower under this Agreement or any other Loan
Document,  or any  other  Loan  Party  shall  fail to pay when  due any  payment
Obligation owing by such other Loan Party under any Loan Document to which it is
a party, and such failure shall continue for a period of 5 Business Days.

         (c) Default in  Performance.  (i) The Borrower shall fail to perform or
observe any term, covenant,  condition or agreement contained in Section 8.4.(h)
or in Article  IX. or (ii) the  Borrower  or any other Loan Party  shall fail to
perform or observe any term, covenant,  condition or agreement contained in this
Agreement  or any other Loan  Document to which it is a party and not  otherwise
mentioned  in this Section and such  failure  shall  continue for a period of 30
days after the earlier of (x) the date upon which a  Responsible  Officer of the
Borrower or such Loan Party  obtains  knowledge  of such failure or (y) the date
upon which the  Borrower has  received  written  notice of such failure from the
Agent.

         (d)  Misrepresentations.   Any  written  statement,  representation  or
warranty  made or deemed made by or on behalf of the  Borrower or any other Loan
Party under this  Agreement or under any other Loan  Document,  or any amendment
hereto or thereto, or in any other writing or statement at any time furnished or
made or deemed  made by or on behalf of the  Borrower or any other Loan Party to
the  Agent or any  Lender,  shall at any time  prove to have been  incorrect  or
misleading,  in light of the  circumstances in which made or deemed made, in any
material respect when furnished or made or deemed made.

         (e)      Indebtedness Cross-Default.

                  (i) The Borrower, any Subsidiary or any other Loan Party shall
         fail to pay when due and payable the  principal of, or interest on, any
         Indebtedness   (other  than  the   Obligations)   having  an  aggregate
         outstanding  principal  amount greater than or equal to (A) $25,000,000
         in the case of Indebtedness that is not Nonrecourse Indebtedness or (B)
         $50,000,000   in  the  case  of   Indebtedness   that  is   Nonrecourse
         Indebtedness (all such Indebtedness being "Material Indebtedness"); or

                  (ii) (x) The maturity of any Material  Indebtedness shall have
         been  accelerated  in accordance  with the provisions of any indenture,
         contract or  instrument  evidencing,  providing  for the creation of or
         otherwise  concerning  such Material  Indebtedness  or

                                      -72-
<PAGE>
         (y) any Material Indebtedness shall have been required to be prepaid or
         repurchased prior to the stated maturity thereof; or

                  (iii) Any other event shall have  occurred  and be  continuing
         which,  with or without the passage of time,  the giving of notice,  or
         both, would permit any holder or holders of Material Indebtedness,  any
         trustee  or agent  acting on behalf of such  holder or  holders  or any
         other  Person,   to  accelerate  the  maturity  of  any  such  Material
         Indebtedness or require any such Material Indebtedness to be prepaid or
         repurchased prior to its stated maturity.

         (f) Voluntary Bankruptcy Proceeding. The Borrower, any other Loan Party
or any  Subsidiary  (other than (x) a Guarantor  that,  together  with all other
Guarantors  then  subject to a  bankruptcy  proceeding  or other  proceeding  or
condition described in this subsection or the immediately  following subsection,
does not  account  for more than  $25,000,000  of Total  Asset  Value,  or (y) a
Subsidiary  that,  together  with  all  other  Subsidiaries  then  subject  to a
bankruptcy  proceeding  or  other  proceeding  or  condition  described  in this
subsection or the immediately  following  subsection,  does not account for more
than  $50,000,000  of Total Asset Value)  shall:  (i) commence a voluntary  case
under the Bankruptcy Code of 1978, as amended,  or other federal bankruptcy laws
(as now or hereafter in effect);  (ii) file a petition seeking to take advantage
of any other  Applicable  Laws,  domestic  or foreign,  relating to  bankruptcy,
insolvency,  reorganization,  winding-up, or composition or adjustment of debts;
(iii)  consent to, or fail to contest in a timely and  appropriate  manner,  any
petition filed against it in an involuntary  case under such  bankruptcy laws or
other  Applicable  Laws or consent to any proceeding or action  described in the
immediately  following  subsection;  (iv)  apply for or  consent  to, or fail to
contest in a timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver,  custodian,  trustee, or liquidator of itself or of a
substantial part of its property,  domestic or foreign; (v) admit in writing its
inability  to pay its debts as they become due;  (vi) make a general  assignment
for the benefit of creditors; (vii) make a conveyance fraudulent as to creditors
under any Applicable Law; or (viii) take any corporate or partnership action for
the purpose of effecting any of the foregoing.

         (g) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be commenced against the Borrower, any other Loan Party or any Subsidiary (other
than (x) a Guarantor that,  together with all other Guarantors then subject to a
bankruptcy  proceeding  or  other  proceeding  or  condition  described  in this
subsection or the immediately  preceding  subsection,  does not account for more
than $25,000,000 of Total Asset Value, or (y) a Subsidiary  that,  together with
all  other  Subsidiaries  then  subject  to a  bankruptcy  proceeding  or  other
proceeding  or  condition  described  in  this  subsection  or  the  immediately
preceding subsection,  does not account for more than $50,000,000 of Total Asset
Value) in any court of  competent  jurisdiction  seeking:  (i) relief  under the
Bankruptcy Code of 1978, as amended, or other federal bankruptcy laws (as now or
hereafter in effect) or under any other  Applicable  Laws,  domestic or foreign,
relating to bankruptcy, insolvency,  reorganization,  winding-up, or composition
or  adjustment  of  debts;  or (ii)  the  appointment  of a  trustee,  receiver,
custodian,  liquidator or the like of such Person,  or of all or any substantial
part of the  assets,  domestic  or  foreign,  of such  Person,  and such case or
proceeding shall continue undismissed or unstayed for a period of 60 consecutive
calendar days, or an order granting the remedy or other relief requested in such

                                      -73-
<PAGE>
case or  proceeding  against the  Borrower,  such  Subsidiary or such other Loan
Party (including,  but not limited to, an order for relief under such Bankruptcy
Code or such other federal bankruptcy laws) shall be entered.

         (h)  Litigation;  Enforceability.  The Borrower or any other Loan Party
shall  disavow,  revoke or terminate (or attempt to terminate) any Loan Document
to which it is a party or shall  otherwise  challenge  or contest in any action,
suit or  proceeding  in any  court or  before  any  Governmental  Authority  the
validity  or  enforceability  of this  Agreement,  any  Note or any  other  Loan
Document or this  Agreement,  any Note,  the Guaranty or any other Loan Document
shall  cease to be in full force and effect  (except as a result of the  express
terms thereof).

         (i)  Judgment.  A judgment  or order for the payment of money or for an
injunction  shall be entered  against the Borrower,  any Subsidiary or any other
Loan Party,  by any court or other tribunal and (i) such judgment or order shall
continue for a period of 30 days without being paid, stayed or dismissed through
appropriate  appellate  proceedings  and  (ii)  either  (A) the  amount  of such
judgment or order for which  insurance has not been  acknowledged  in writing by
the  applicable  insurance  carrier  (or the amount as to which the  insurer has
denied  liability)  exceeds,  individually  or  together  with  all  other  such
outstanding  judgments  or  orders  entered  against  (1)  the  Borrower  or any
Guarantor,  $25,000,000,  or (2) any other Subsidiaries,  $50,000,000, or (B) in
the case of an injunction or other  non-monetary  judgment,  such judgment could
reasonably be expected to have a Material Adverse Effect.

         (j)  Attachment.  A warrant,  writ of attachment,  execution or similar
process shall be issued against any property of the Borrower,  any Subsidiary or
any other Loan Party which exceeds, individually or together with all other such
warrants,  writs,  executions  and  processes,  (1)  for  the  Borrower  or  any
Guarantor, $25,000,000, or (2) for any other Subsidiaries, $50,000,000, and such
warrant, writ, execution or process shall not be discharged,  vacated, stayed or
bonded  for a period  of 30  days;  provided,  however,  that if a bond has been
issued in favor of the claimant or other Person  obtaining  such warrant,  writ,
execution  or  process,  the  issuer  of such  bond  shall  execute  a waiver or
subordination agreement in form and substance satisfactory to the Agent pursuant
to which  the  issuer  of such bond  subordinates  its  right of  reimbursement,
contribution or subrogation to the  Obligations  and waives or subordinates  any
Lien it may have on the assets of any Loan Party.

         (k) ERISA.  Any member of the ERISA Group shall fail to pay when due an
amount or  amounts  aggregating  in excess of  $10,000,000  which it shall  have
become liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material  Plan shall be filed under Title IV of ERISA by any member of the ERISA
Group, any plan  administrator or any combination of the foregoing;  or the PBGC
shall  institute  proceedings  under Title IV of ERISA to  terminate,  to impose
liability  (other than for premiums  under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to  administer,  any Material  Plan;  or a
condition  shall exist by reason of which the PBGC would be entitled to obtain a
decree  adjudicating  that any Material Plan must be terminated;  or there shall
occur a complete or partial withdrawal from, or a default, within the meaning of
Section  4219(c)(5) of ERISA, with respect to, one or more  Multiemployer  Plans
which  could  cause one or more  members  of the ERISA  Group to incur a current
payment obligation in excess of $10,000,000.

                                      -74-
<PAGE>
         (l) Loan  Documents.  An Event of Default  (as defined  therein)  shall
occur under any of the other Loan Documents.

         (m) Change of Control.

                  (i) any  "person"  or  "group"  (as  such  terms  are  used in
         Sections  13(d) and 14(d) of the  Securities  Exchange Act of 1934,  as
         amended (the "Exchange Act")) is or becomes the "beneficial  owner" (as
         defined in Rules 13d-3 and 13d-5 under the Exchange Act,  except that a
         Person will be deemed to have "beneficial  ownership" of all securities
         that  such  Person  has the right to  acquire,  whether  such  right is
         exercisable immediately or only after the passage of time), directly or
         indirectly,  of more  than 15% of the  total  voting  power of the then
         outstanding voting stock of the Borrower; or

                  (ii) during any period of 12  consecutive  months ending after
         the  Agreement  Date,  individuals  who at the  beginning  of any  such
         12-month  period  constituted  the Board of  Trustees  of the  Borrower
         (together with any new directors  whose election by such Board or whose
         nomination  for  election  by  the  shareholders  of the  Borrower  was
         approved by a vote of a majority of the directors  then still in office
         who were  either  directors  at the  beginning  of such period or whose
         election or nomination for election was  previously so approved)  cease
         for any reason to  constitute  a majority of the Board of  Directors of
         the Borrower then in office;

                  (iii)  RMR  shall  cease  for any  reason  to act as the  sole
         investment advisor to the Borrower; or

                  (iv) any two of Barry M.  Portnoy,  Gerard M. Martin,  John G.
         Murray, or Thomas M. O'Brien (or a substitute  elected by the directors
         or  trustees of RMR or the  Borrower,  as the case may be, and which is
         reasonably  satisfactory to the Requisite Lenders) shall cease to serve
         as an  officer,  director  or  trustee  of  RMR or  the  Borrower  in a
         position,  in the case of an officer,  of equal or greater seniority to
         the respective offices each holds with RMR or the Borrower, as the case
         may be as of the Agreement Date.

Section 10.2.  Remedies Upon Event of Default.

         Upon the  occurrence  of an Event of Default the  following  provisions
shall apply:

         (a)      Acceleration; Termination of Facilities.

                  (i)  Automatic.  Upon the  occurrence  of an Event of  Default
         specified in Sections  10.1.(f) or 10.1.(g),  (A)(i) the  principal of,
         and all  accrued  interest  on,  the  Loans  and the  Notes at the time
         outstanding,  (ii) an amount equal to the Stated  Amount of all Letters
         of Credit outstanding as of the date of the occurrence of such Event of
         Default  and  (iii)  all  of the  other  Obligations  of the  Borrower,
         including,  but not limited to, the other  amounts owed to the Lenders,
         the Swingline  Lender and the Agent under this Agreement,  the Notes or
         any  of  the  other  Loan  Documents   shall  become   immediately  and

                                      -75-
<PAGE>
         automatically  due and  payable by the  Borrower  without  presentment,
         demand,  protest,  or  other  notice  of any  kind,  all of  which  are
         expressly  waived by the Borrower and (B) all of the  Commitments,  the
         obligation  of the  Lenders  to make  Revolving  Loans,  the  Swingline
         Commitment,  the  obligation of the Swingline  Lender to make Swingline
         Loans,  and the  obligation  of the  Agent to issue  Letters  of Credit
         hereunder, shall all immediately and automatically terminate.

                  (ii)  Optional.  If any  other  Event of  Default  shall  have
         occurred and be  continuing,  the Agent shall,  at the direction of the
         Requisite  Lenders:  (A)  declare  (1) the  principal  of, and  accrued
         interest  on, the Loans and the Notes at the time  outstanding,  (2) an
         amount equal to the Stated Amount of all Letters of Credit  outstanding
         as of the date of the occurrence of such other Event of Default and (3)
         all of the other Obligations,  including, but not limited to, the other
         amounts  owed to the Lenders and the Agent  under this  Agreement,  the
         Notes  or any of the  other  Loan  Documents  to be  forthwith  due and
         payable,  whereupon the same shall  immediately  become due and payable
         without presentment,  demand,  protest or other notice of any kind, all
         of which are  expressly  waived by the Borrower and (B)  terminate  the
         Commitments  and the obligation of the Lenders to make Loans  hereunder
         and the  obligation of the Agent to issue Letters of Credit  hereunder.
         Further,  if the Agent has exercised any of the rights  provided  under
         the preceding  sentence,  the Swingline  Lender shall:  (x) declare the
         principal  of, and accrued  interest  on, the  Swingline  Loans and the
         Swingline  Note  at  the  time  outstanding,   and  all  of  the  other
         Obligations  owing to the  Swingline  Lender,  to be forthwith  due and
         payable,  whereupon the same shall  immediately  become due and payable
         without presentment,  demand,  protest or other notice of any kind, all
         of which are  expressly  waived by the Borrower and (y)  terminate  the
         Swingline Commitment and the obligation of the Swingline Lender to make
         Swingline Loans.

         (b) Loan Documents.  The Requisite Lenders may direct the Agent to, and
the Agent if so directed shall, exercise any and all of its rights under any and
all of the other Loan Documents.

         (c) Applicable Law. The Requisite  Lenders may direct the Agent to, and
the Agent if so directed  shall,  exercise  all other rights and remedies it may
have under any Applicable Law.

         (d) Appointment of Receiver. To the extent permitted by Applicable Law,
the Agent and the Lenders shall be entitled to the appointment of a receiver for
the assets and properties of the Borrower and its  Subsidiaries,  without notice
of any kind  whatsoever  and without  regard to the adequacy of any security for
the  Obligations  or the  solvency of any party bound for its  payment,  to take
possession of all or any portion of the business  operations of the Borrower and
its  Subsidiaries and to exercise such power as the court shall confer upon such
receiver.

Section 10.3.  Remedies Upon Default.

         Upon the  occurrence  of a Default  specified  in Sections  10.1.(f) or
10.1.(g), the Commitments shall immediately and automatically terminate.

                                      -76-
<PAGE>
Section 10.4.  Allocation of Proceeds.

         If an Event of  Default  shall  have  occurred  and be  continuing  and
maturity of any of the Obligations has been  accelerated,  all payments received
by the Agent under any of the Loan Documents,  in respect of any principal of or
interest  on the  Obligations  or any  other  amounts  payable  by the  Borrower
hereunder or thereunder, shall be applied in the following order and priority:

                  (a)  amounts  due to the Agent and the  Lenders  in respect of
         fees and expenses due under Section 12.2.;

                  (b) payments of interest on Swingline Loans;

                  (c) payments of interest on all other Loans and  Reimbursement
         Obligations, to be applied for the ratable benefit of the Lenders;

                  (d) payments of principal of Swingline Loans;

                  (e) payments of principal of all other Loans and Reimbursement
         Obligations, to be applied for the ratable benefit of the Lenders;

                  (f) amounts to be  deposited  into the  Collateral  Account in
         respect of Letters of Credit;

                  (g) amounts due the Agent and the Lenders pursuant to Sections
         11.7. and 12.9.;

                  (h)  payments  of all  other  amounts  due  and  owing  by the
         Borrower under any of the Loan Documents, if any, to be applied for the
         ratable benefit of the Lenders; and

                  (i) any amount remaining after  application as provided above,
         shall be paid to the Borrower or whomever else may be legally  entitled
         thereto.

Section 10.5.  Collateral Account.

         (a) As collateral  security for the prompt  payment in full when due of
all Letter of Credit Liabilities and the other Obligations,  the Borrower hereby
pledges and grants to the Agent, for the benefit of the Agent and the Lenders as
provided herein, a security interest in all of its right,  title and interest in
and to the  Collateral  Account  and  the  balances  from  time  to  time in the
Collateral Account (including the investments and reinvestments therein provided
for below).  The balances from time to time in the Collateral  Account shall not
constitute  payment of any  Letter of Credit  Liabilities  until  applied by the
Agent  as  provided   herein.   Anything  in  this  Agreement  to  the  contrary
notwithstanding,  funds  held in the  Collateral  Account  shall be  subject  to
withdrawal only as provided in this Section and in Section 2.12.

         (b) Amounts on deposit in the Collateral  Account shall be invested and
reinvested by the Agent in such Cash Equivalents as the Agent shall determine in
its sole discretion. All such

                                      -77-
<PAGE>
investments and reinvestments shall be held in the name of and be under the sole
dominion and control of the Agent.  The Agent shall exercise  reasonable care in
the custody and  preservation  of any funds held in the  Collateral  Account and
shall be deemed to have exercised such care if such funds are accorded treatment
substantially  equivalent to that which the Agent accords other funds  deposited
with  the  Agent,  it  being  understood  that  the  Agent  shall  not  have any
responsibility  for taking any necessary  steps to preserve  rights  against any
parties with respect to any funds held in the Collateral Account.

         (c) If an Event of Default shall have occurred and be  continuing,  the
Requisite Lenders may, in their  discretion,  at any time and from time to time,
instruct the Agent to  liquidate  any such  investments  and  reinvestments  and
credit the proceeds  thereof to the Collateral  Account and apply or cause to be
applied such proceeds and any other  balances in the  Collateral  Account to the
payment of any of the Letter of Credit Liabilities due and payable.

         (d)  If (i)  no  Default  or  Event  of  Default  has  occurred  and is
continuing  and (ii) all of the Letter of Credit  Liabilities  have been paid in
full,  the Agent  shall,  from time to time,  at the  request  of the  Borrower,
deliver to the Borrower,  against receipt but without any recourse,  warranty or
representation  whatsoever,  such of the balances in the  Collateral  Account as
exceed the aggregate amount of Letter of Credit Liabilities at such time.

         (e) The Borrower  shall pay to the Agent from time to time such fees as
the Agent normally  charges for similar  services in connection with the Agent's
administration  of the Collateral  Account and investments and  reinvestments of
funds therein.

Section 10.6.  Performance by Agent.

         If the Borrower  shall fail to perform any covenant,  duty or agreement
contained  in any of the Loan  Documents,  the Agent may  perform  or attempt to
perform such  covenant,  duty or  agreement on behalf of the Borrower  after the
expiration  of any cure or grace periods set forth  herein.  In such event,  the
Borrower shall, at the request of the Agent,  promptly pay any amount reasonably
expended by the Agent in such performance or attempted performance to the Agent,
together with interest thereon at the applicable Post-Default Rate from the date
of such expenditure until paid. Notwithstanding the foregoing, neither the Agent
nor any Lender shall have any  liability or  responsibility  whatsoever  for the
performance  of any obligation of the Borrower under this Agreement or any other
Loan Document.

Section 10.7.  Rights Cumulative.

         The  rights  and  remedies  of the Agent  and the  Lenders  under  this
Agreement  and each of the other  Loan  Documents  shall be  cumulative  and not
exclusive of any rights or remedies  which any of them may otherwise  have under
Applicable Law. In exercising their respective rights and remedies the Agent and
the Lenders may be selective  and no failure or delay by the Agent or any of the
Lenders in  exercising  any right shall operate as a waiver of it, nor shall any
single or partial  exercise of any power or right  preclude its other or further
exercise or the exercise of any other power or right.

                                      -78-
<PAGE>
                              ARTICLE XI. THE AGENT

Section 11.1.  Authorization and Action.

         Each  Lender  hereby  appoints  and  authorizes  the Agent to take such
action as  contractual  representative  on such Lender's  behalf and to exercise
such  powers  under  this   Agreement  and  the  other  Loan  Documents  as  are
specifically  delegated to the Agent by the terms  hereof and thereof,  together
with such powers as are reasonably  incidental thereto. Not in limitation of the
foregoing,  each Lender  authorizes and directs the Agent to enter into the Loan
Documents for the benefit of the Lenders. Each Lender hereby agrees that, except
as otherwise  set forth  herein,  any action taken by the  Requisite  Lenders in
accordance with the provisions of this Agreement or the Loan Documents,  and the
exercise  by the  Requisite  Lenders of the powers set forth  herein or therein,
together with such other powers as are reasonably  incidental thereto,  shall be
authorized  and  binding  upon  all of the  Lenders.  Nothing  herein  shall  be
construed to deem the Agent a trustee or fiduciary  for any Lender nor to impose
on the Agent  duties or  obligations  other than those  expressly  provided  for
herein. At the request of a Lender, the Agent will forward to such Lender copies
or,  where  appropriate,  originals  of the  documents  delivered  to the  Agent
pursuant  to this  Agreement  or the other Loan  Documents.  The Agent will also
furnish  to any  Lender,  upon  the  request  of  such  Lender,  a  copy  of any
certificate or notice furnished to the Agent by the Borrower,  any Loan Party or
any other  Affiliate of the  Borrower,  pursuant to this  Agreement or any other
Loan Document not already delivered to such Lender pursuant to the terms of this
Agreement  or any such other Loan  Document.  As to any  matters  not  expressly
provided for by the Loan Documents (including,  without limitation,  enforcement
or  collection  of any of the  Obligations),  the Agent shall not be required to
exercise any  discretion or take any action,  but shall be required to act or to
refrain  from acting (and shall be fully  protected  in so acting or  refraining
from  acting)  upon the  instructions  of the  Requisite  Lenders (or all of the
Lenders if explicitly required under any other provision of this Agreement), and
such  instructions  shall be binding  upon all Lenders and all holders of any of
the  Obligations;  provided,  however,  that,  notwithstanding  anything in this
Agreement  to the  contrary,  the Agent shall not be required to take any action
which  exposes  the Agent to  personal  liability  or which is  contrary to this
Agreement or any other Loan Document or Applicable Law. Not in limitation of the
foregoing,  the Agent shall not  exercise  any right or remedy it or the Lenders
may have under any Loan Document upon the occurrence of a Default or an Event of
Default unless the Requisite Lenders have so directed the Agent to exercise such
right or remedy.

Section 11.2.  Agent's Reliance, Etc.

         Notwithstanding  any other  provisions  of this  Agreement or any other
Loan Documents,  neither the Agent nor any of its directors,  officers,  agents,
employees or counsel shall be liable for any action taken or omitted to be taken
by it or them  under or in  connection  with this  Agreement,  except for its or
their  own  gross  negligence  or  willful  misconduct.   Without  limiting  the
generality of the foregoing,  the Agent:  (a) may treat the payee of any Note as
the holder thereof until the Agent receives  written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent; (b)
may consult  with legal  counsel  (including  its own counsel or counsel for the
Borrower or any other Loan  Party),  independent  public  accountants  and other
experts  selected by it and shall not be liable for any action  taken or omitted
to be taken in good faith by it in  accordance  with the advice of such counsel,
accountants

                                      -79-
<PAGE>
or experts;  (c) makes no warranty or  representation to any Lender or any other
Person and shall not be  responsible  to any Lender or any other  Person for any
statements, warranties or representations made by any Person in or in connection
with this Agreement or any other Loan  Document;  (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions  of any of this  Agreement or any other Loan Document or
the  satisfaction  of any conditions  precedent under this Agreement or any Loan
Document on the part of the Borrower or other  Persons or inspect the  property,
books  or  records  of the  Borrower  or any  other  Person;  (e)  shall  not be
responsible   to  any  Lender  for  the  due  execution,   legality,   validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document,  any other instrument or document  furnished  pursuant thereto or
any  collateral  covered  thereby or the  perfection  or priority of any Lien in
favor of the Agent on  behalf of the  Lenders  in any such  collateral;  and (f)
shall incur no liability under or in respect of this Agreement or any other Loan
Document by acting upon any notice, consent,  certificate or other instrument or
writing (which may be by telephone or telecopy) believed by it to be genuine and
signed, sent or given by the proper party or parties.

Section 11.3.  Notice of Defaults.

         The  Agent  shall  not be  deemed  to have  knowledge  or notice of the
occurrence of a Default or Event of Default unless the Agent has received notice
from a Lender or the  Borrower  referring  to this  Agreement,  describing  with
reasonable  specificity  such  Default or Event of Default and stating that such
notice is a "notice of  default." If any Lender  (excluding  the Lender which is
also serving as the Agent) becomes aware of any Default or Event of Default,  it
shall  promptly  send to the Agent such a "notice of default."  Further,  if the
Agent  receives  such a "notice of default",  the Agent shall give prompt notice
thereof to the Lenders.

Section 11.4.  First Union as Lender.

         First Union,  as a Lender,  shall have the same rights and powers under
this  Agreement and any other Loan Document as any other Lender and may exercise
the same as though it were not the Agent;  and the term  "Lender"  or  "Lenders"
shall, unless otherwise expressly indicated, include First Union in each case in
its individual capacity. First Union and its affiliates may each accept deposits
from, maintain deposits or credit balances for, invest in, lend money to, act as
trustee under indentures of, serve as financial advisor to, and generally engage
in any kind of business  with,  the Borrower,  any other Loan Party or any other
affiliate  thereof as if it were any other bank and  without any duty to account
therefor to the other Lenders.  Further,  the Agent and any affiliate may accept
fees and other  consideration  from the Borrower for services in connection with
this Agreement and otherwise without having to account for the same to the other
Lenders.

Section 11.5.  Approvals of Lenders.

         All  communications  from  the  Agent  to any  Lender  requesting  such
Lender's determination,  consent,  approval or disapproval (a) shall be given in
the form of a written  notice to such  Lender,  (b)  shall be  accompanied  by a
description  of the  matter or issue as to which such  determination,  approval,
consent  or  disapproval  is  requested,  or  shall  advise  such  Lender  where
information,  if any, regarding such matter or issue may be inspected,  or shall
otherwise  describe

                                      -80-
<PAGE>
the matter or issue to be resolved,  (c) shall include, if reasonably  requested
by such Lender and to the extent not previously provided to such Lender, written
materials  and a summary of all oral  information  provided  to the Agent by the
Borrower in respect of the matter or issue to be resolved, and (d) shall include
the Agent's  recommended  course of action or  determination in respect thereof.
Each Lender shall reply  promptly,  but in any event within 10 Business Days (or
such lesser or greater  period as may be  specifically  required  under the Loan
Documents)  of receipt of such  communication.  Except as otherwise  provided in
this Agreement and except with respect to items requiring the unanimous  consent
or approval of the  Lenders  under  Section  12.6.,  unless a Lender  shall give
written notice to the Agent that it specifically  objects to the  recommendation
or  determination  of the  Agent  (together  with a written  explanation  of the
reasons behind such objection) within the applicable time period for reply, such
Lender  shall be deemed to have  conclusively  approved of or  consented to such
recommendation or determination.

Section 11.6.  Lender Credit Decision, Etc.

         Each Lender  expressly  acknowledges  and agrees that neither the Agent
nor   any   of   its   officers,   directors,    employees,   agents,   counsel,
attorneys-in-fact or other affiliates has made any representations or warranties
as to the financial condition, operations,  creditworthiness,  solvency or other
information  concerning the business or affairs of the Borrower,  any other Loan
Party,  any Subsidiary or any other Person to such Lender and that no act by the
Agent  hereafter  taken,  including  any review of the affairs of the  Borrower,
shall be deemed to constitute any such  representation  or warranty by the Agent
to any Lender. Each Lender  acknowledges that it has,  independently and without
reliance  upon the Agent,  any other  Lender or counsel to the Agent,  or any of
their respective  officers,  directors,  employees and agents,  and based on the
financial  statements of the Borrower,  the  Subsidiaries or any other Affiliate
thereof,  and inquiries of such Persons,  its  independent  due diligence of the
business and affairs of the Borrower,  the Loan Parties,  the  Subsidiaries  and
other Persons, its review of the Loan Documents,  the legal opinions required to
be  delivered  to it  hereunder,  the advice of its own  counsel  and such other
documents and information as it has deemed appropriate,  made its own credit and
legal  analysis and decision to enter into this  Agreement  and the  transaction
contemplated  hereby. Each Lender also acknowledges that it will,  independently
and without reliance upon the Agent, any other Lender or counsel to the Agent or
any of their respective officers, directors,  employees and agents, and based on
such review,  advice,  documents and information as it shall deem appropriate at
the time,  continue  to make its own  decisions  in taking or not taking  action
under the Loan  Documents.  Except for notices,  reports and other documents and
information expressly required to be furnished to the Lenders by the Agent under
this Agreement or any of the other Loan Documents,  the Agent shall have no duty
or  responsibility  to provide any Lender  with any credit or other  information
concerning the business, operations,  property, financial and other condition or
creditworthiness  of the Borrower,  any other Loan Party or any other  Affiliate
thereof  which may come  into  possession  of the Agent or any of its  officers,
directors, employees, agents, attorneys-in-fact or other Affiliates. Each Lender
acknowledges  that the Agent's legal counsel in connection with the transactions
contemplated by this Agreement is only acting as counsel to the Agent and is not
acting as counsel to such Lender.

                                      -81-
<PAGE>
Section 11.7.  Indemnification of Agent.

         Each Lender agrees to indemnify the Agent (to the extent not reimbursed
by the Borrower and without  limiting the  obligation  of the Borrower to do so)
pro rata in accordance with such Lender's respective Commitment Percentage, from
and against any and all liabilities,  obligations,  losses, damages,  penalties,
actions,  judgments,  suits,  costs,  expenses or  disbursements  of any kind or
nature  whatsoever which may at any time be imposed on, incurred by, or asserted
against  the Agent  (in its  capacity  as Agent but not as a Lender)  in any way
relating to or arising out of the Loan Documents,  any transaction  contemplated
hereby or  thereby or any  action  taken or omitted by the Agent  under the Loan
Documents (collectively,  "Indemnifiable Amounts");  provided,  however, that no
Lender  shall be liable  for any  portion of such  Indemnifiable  Amounts to the
extent resulting from the Agent's gross  negligence or willful  misconduct or if
the Agent fails to follow the written  direction of the Requisite Lenders unless
such  failure  is  pursuant  to the  reasonable  advice of  counsel of which the
Lenders have received  notice.  Without limiting the generality of the foregoing
but subject to the preceding proviso,  each Lender agrees to reimburse the Agent
(to  the  extent  not  reimbursed  by the  Borrower  and  without  limiting  the
obligation  of the Borrower to do so) promptly upon demand for its ratable share
of  any  out-of-pocket  expenses  (including  reasonable  counsel  fees  of  the
counsel(s) of the Agent's own choosing) incurred by the Agent in connection with
the preparation, negotiation, execution, or enforcement of, or legal advice with
respect  to the  rights  or  responsibilities  of the  parties  under,  the Loan
Documents,  any suit or action  brought by the Agent to enforce the terms of the
Loan Documents  and/or collect any Obligations,  any "lender  liability" suit or
claim  brought  against  the Agent  and/or  the  Lenders,  and any claim or suit
brought  against the Agent and/or the Lenders  arising  under any  Environmental
Laws. Such out-of-pocket  expenses (including counsel fees) shall be advanced by
the Lenders on the request of the Agent  notwithstanding  any claim or assertion
that the Agent is not entitled to  indemnification  hereunder upon receipt of an
undertaking  by the Agent that the Agent  will  reimburse  the  Lenders if it is
actually and finally  determined by a court of competent  jurisdiction  that the
Agent is not so entitled to  indemnification.  The  agreements  in this  Section
shall survive the payment of the Loans and all other amounts  payable  hereunder
or under the other Loan Documents and the termination of this Agreement.  If the
Borrower  shall  reimburse  the Agent  for any  Indemnifiable  Amount  following
payment  by any  Lender to the Agent in  respect  of such  Indemnifiable  Amount
pursuant to this Section,  the Agent shall share such reimbursement on a ratable
basis with each Lender making any such payment.

Section 11.8.  Successor Agent.

         The Agent may resign at any time as Agent under the Loan  Documents  by
giving written notice thereof to the Lenders and the Borrower.  The Agent may be
removed as Agent under the Loan  Documents  for good cause by the  Supermajority
Lenders upon 30 days' prior notice.  Upon any such  resignation or removal,  the
Requisite  Lenders  (other than the Lender then acting as Agent,  in the case of
the removal of the Agent under the  immediately  preceding  sentence) shall have
the right to appoint a successor  Agent  which  appointment  shall,  provided no
Default or Event of Default shall have occurred and be continuing, be subject to
the Borrower's  approval,  which approval shall not be unreasonably  withheld or
delayed  (except  that the  Borrower  shall,  in all  events,  be deemed to have
approved each Lender and its affiliates as a successor  Agent).  If no successor
Agent shall have been so appointed in accordance with the immediately  preceding

                                      -82-
<PAGE>
sentence,  and shall have  accepted such  appointment,  within 30 days after the
resigning Agent's giving of notice of resignation or the Lenders' removal of the
resigning  Agent,  then the  resigning  or removed  Agent may,  on behalf of the
Lenders, appoint a successor Agent, which shall be a Lender, if any Lender shall
be willing to serve,  and  otherwise  shall be a  commercial  bank having  total
combined  assets  of at  least  $50,000,000,000.  Upon  the  acceptance  of  any
appointment as Agent hereunder by a successor Agent,  such successor Agent shall
thereupon succeed to and become vested with all the rights,  powers,  privileges
and duties of the retiring  Agent,  and the retiring  Agent shall be  discharged
from its duties and  obligations  under the Loan  Documents.  After any  Agent's
resignation  or removal  hereunder as Agent,  the provisions of this Article XI.
shall  continue to inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under the Loan Documents.

Section 11.9.  Titled Agents.

         Each of the Titled Agents in each such respective capacity,  assumes no
responsibility or obligations  hereunder,  including,  without  limitation,  for
servicing  enforcement  or collection of any of the Loans,  nor any duties as an
agent  hereunder  for the  Lenders.  The  titles  of "Lead  Arranger",  "Co-Lead
Arranger",  "Syndication  Agent" and "Documentation  Agent" are solely honorific
and imply no fiduciary  responsibility  on the part of the Titled  Agents to the
Agent,  the Borrower or any Lender and the use of such titles does not impose on
the  Titled  Agents any duties or  obligations  greater  than those of any other
Lender or entitle the Titled  Agents to any rights other than those to which any
other Lender is entitled.

                           ARTICLE XII. MISCELLANEOUS

Section 12.1.  Notices.

         Unless otherwise provided herein, communications provided for hereunder
shall be in writing and shall be mailed, telecopied or delivered as follows:

         If to the Borrower:

                  Hospitality Properties Trust
                  400 Centre Street
                  Newton, Massachusetts  02458
                  Attention:  Thomas M. O'Brien
                  Telecopy Number:         (617) 796-8156
                  Telephone Number:        (617) 964-8389

         If to the Agent:

                  First Union National Bank
                  One First Union Center, NC0172
                  Charlotte, North Carolina 28288
                  Attention: Rex E. Rudy
                  Telecopy Number:         (704) 383-6205
                  Telephone Number:        (704) 383-6506

                                      -83-
<PAGE>
         If to a Lender:

                  To such Lender's  address or telecopy  number,  as applicable,
                  set forth on its  signature  page hereto or in the  applicable
                  Assignment and Acceptance Agreement.

or, as to each party at such other  address as shall be designated by such party
in a written  notice to the other  parties  delivered  in  compliance  with this
Section.  All such notices and other  communications  shall be effective  (i) if
mailed, when received;  (ii) if telecopied,  when transmitted;  or (iii) if hand
delivered,  when delivered.  Notwithstanding the immediately preceding sentence,
all notices or communications to the Agent or any Lender under Article II. shall
be effective only when actually received. Neither the Agent nor any Lender shall
incur any  liability to the Borrower (nor shall the Agent incur any liability to
the Lenders) for acting upon any telephonic notice referred to in this Agreement
which the Agent or such  Lender,  as the case may be,  believes in good faith to
have been given by a Person  authorized  to deliver such notice or for otherwise
acting in good faith hereunder.

Section 12.2.  Expenses.

         The Borrower  agrees (a) to pay or  reimburse  the Agent for all of its
reasonable  out-of-pocket  costs and expenses  incurred in  connection  with the
preparation,  negotiation  and  execution of, and any  amendment,  supplement or
modification to, any of the Loan Documents (including due diligence expenses and
travel expenses  relating to closing),  and the consummation of the transactions
contemplated thereby, including the reasonable fees and disbursements of counsel
to the Agent,  (b) to pay or  reimburse  the Agent and the Lenders for all their
costs and expenses  incurred in connection  with the enforcement or preservation
of any  rights  under the Loan  Documents,  including  the  reasonable  fees and
disbursements  of their  respective  counsel  (including  the allocated fees and
expenses of in-house counsel) and any payments in  indemnification  or otherwise
payable by the Lenders to the Agent pursuant to the Loan Documents,  (c) to pay,
and  indemnify  and hold  harmless the Agent and the Lenders  from,  any and all
recording  and  filing  fees and any and all  liabilities  with  respect  to, or
resulting from any failure to pay or delay in paying, documentary, stamp, excise
and other  similar  taxes,  if any,  which may be  payable or  determined  to be
payable  in  connection  with  the  execution  and  delivery  of any of the Loan
Documents,  or consummation of any amendment,  supplement or modification of, or
any waiver or consent  under or in respect of, any Loan  Document and (d) to the
extent  not  already  covered  by any of the  preceding  subsections,  to pay or
reimburse the Agent and the Lenders for all their costs and expenses incurred in
connection  with any  bankruptcy or other  proceeding  of the type  described in
Sections  10.1.(f) or 10.1.(g),  including the reasonable fees and disbursements
of counsel  to the Agent and any  Lender,  whether  such fees and  expenses  are
incurred prior to, during or after the  commencement  of such  proceeding or the
confirmation or conclusion of any such proceeding. If the Borrower shall fail to
pay any amounts  required to be paid by it pursuant to this  Section,  the Agent
and/or the Lenders  may pay such  amounts on behalf of the  Borrower  and either
deem the same to be Loans outstanding  hereunder or otherwise  Obligations owing
hereunder.

                                      -84-
<PAGE>
Section 12.3.  Setoff.

         Subject to Section  3.3. and in addition to any rights now or hereafter
granted  under  Applicable  Law and not by way of limitation of any such rights,
the  Agent,  each  Lender  and each  Participant  is  hereby  authorized  by the
Borrower, at any time or from time to time during the continuance of an Event of
Default,  without prior notice to the Borrower or to any other Person,  any such
notice being hereby expressly waived, but in the case of a Lender or Participant
subject to receipt of the prior  written  consent of the Agent  exercised in its
sole discretion, to set off and to appropriate and to apply any and all deposits
(general or special,  including,  but not limited to, indebtedness  evidenced by
certificates   of  deposit,   whether   matured  or  unmatured)  and  any  other
indebtedness  at any  time  held or  owing  by the  Agent,  such  Lender  or any
affiliate  of the Agent or such  Lender,  to or for the credit or the account of
the Borrower against and on account of any of the  Obligations,  irrespective of
whether  or not any or all of the  Loans  and all  other  Obligations  have been
declared  to be, or have  otherwise  become,  due and  payable as  permitted  by
Section 10.2., and although such  obligations  shall be contingent or unmatured.
Promptly  following any such set-off the Agent shall notify the Borrower thereof
and of the  application of such set-off,  provided that the failure to give such
notice shall not invalidate such set-off.

Section 12.4.  Litigation; Jurisdiction; Other Matters; Waivers.

         (a) EACH PARTY  HERETO  ACKNOWLEDGES  THAT ANY  DISPUTE OR  CONTROVERSY
BETWEEN OR AMONG THE BORROWER, THE AGENT OR ANY OF THE LENDERS WOULD BE BASED ON
DIFFICULT  AND  COMPLEX  ISSUES  OF LAW AND FACT AND  WOULD  RESULT IN DELAY AND
EXPENSE TO THE PARTIES.  ACCORDINGLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE  LENDERS,  THE AGENT AND THE BORROWER  HEREBY  WAIVES ITS RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR  PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR
TRIBUNAL  IN WHICH AN ACTION MAY BE  COMMENCED  BY OR AGAINST  ANY PARTY  HERETO
ARISING  OUT OF THIS  AGREEMENT,  THE NOTES,  OR ANY OTHER LOAN  DOCUMENT  OR BY
REASON OF ANY OTHER SUIT, CAUSE OF ACTION OR DISPUTE WHATSOEVER BETWEEN OR AMONG
THE BORROWER, THE AGENT OR ANY OF THE LENDERS OF ANY KIND OR NATURE.

         (b) EACH OF THE BORROWER,  THE AGENT AND EACH LENDER HEREBY AGREES THAT
THE  FEDERAL  DISTRICT  COURT OF THE  SOUTHERN  DISTRICT  OF NEW YORK OR, AT THE
OPTION OF THE AGENT,  ANY STATE COURT LOCATED IN NEW YORK, NEW YORK,  SHALL HAVE
JURISDICTION  TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES  BETWEEN OR AMONG THE
BORROWER, THE AGENT OR ANY OF THE LENDERS,  PERTAINING DIRECTLY OR INDIRECTLY TO
THIS  AGREEMENT,  THE LOANS AND  LETTERS OF CREDIT,  THE NOTES OR ANY OTHER LOAN
DOCUMENT OR TO ANY MATTER ARISING  HEREFROM OR THEREFROM.  THE BORROWER AND EACH
OF THE LENDERS EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS. EACH PARTY FURTHER WAIVES ANY
OBJECTION  THAT IT MAY NOW OR HEREAFTER  HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH

                                      -85-
<PAGE>
ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND EACH AGREES NOT TO
PLEAD OR CLAIM THE SAME. THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT
BE DEEMED TO PRECLUDE  THE  BRINGING OF ANY ACTION BY THE AGENT OR ANY LENDER OR
THE  ENFORCEMENT  BY THE AGENT OR ANY LENDER OF ANY  JUDGMENT  OBTAINED  IN SUCH
FORUM IN ANY OTHER APPROPRIATE JURISDICTION.

         (c) THE  PROVISIONS OF THIS SECTION HAVE BEEN  CONSIDERED BY EACH PARTY
WITH  THE  ADVICE  OF  COUNSEL  AND  WITH A  FULL  UNDERSTANDING  OF  THE  LEGAL
CONSEQUENCES  THEREOF,  AND SHALL SURVIVE THE PAYMENT OF THE LOANS AND ALL OTHER
AMOUNTS PAYABLE HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS,  THE TERMINATION OR
EXPIRATION OF ALL LETTERS OF CREDIT AND THE TERMINATION OF THIS AGREEMENT.

Section 12.5.  Successors and Assigns.

         (a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective  successors and permitted
assigns,  except that the Borrower  may not assign or otherwise  transfer any of
its rights or obligations under this Agreement without the prior written consent
of all Lenders  and any such  assignment  or other  transfer to which all of the
Lenders have not so consented shall be null and void.

         (b) Any  Lender  may make,  carry or  transfer  Loans at, to or for the
account of any of its  branch  offices  or the  office of an  affiliate  of such
Lender except to the extent such transfer would result in increased costs to the
Borrower.

         (c) Any  Lender  may at any time  grant  to one or more  banks or other
financial  institutions  (each a "Participant")  participating  interests in its
Commitment or the Obligations owing to such Lender;  provided,  however, (i) any
such participating  interest must be for a constant and not a varying percentage
interest,  (ii) no Lender may grant a participating  interest in its Commitment,
or if the Commitments have been terminated,  the aggregate outstanding principal
balance of Notes held by it, in an amount less than  $5,000,000  and (iii) after
giving  effect  to  any  such  participation  by a  Lender,  the  amount  of its
Commitment,   or  if  the  Commitments  have  been  terminated,   the  aggregate
outstanding  principal  balance of Notes held by it, in which it has not granted
any participating  interests must be equal to $5,000,000 and integral  multiples
of $1,000,000 in excess thereof.  Except as otherwise provided in Section 12.3.,
no  Participant  shall have any rights or benefits  under this  Agreement or any
other  Loan  Document.  In  the  event  of  any  such  grant  by a  Lender  of a
participating  interest to a Participant,  such Lender shall remain  responsible
for the performance of its obligations hereunder, and the Borrower and the Agent
shall  continue to deal solely and directly with such Lender in connection  with
such  Lender's  rights and  obligations  under  this  Agreement.  Any  agreement
pursuant  to which any  Lender  may grant such a  participating  interest  shall
provide  that such  Lender  shall  retain the sole right and  responsibility  to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment,  modification  or waiver of any provision of
this Agreement;  provided,  however,  such Lender may agree with the Participant
that it will not, without the consent of the Participant, agree to

                                      -86-
<PAGE>
(i) increase, or extend the term or extend the time or waive any requirement for
the reduction or termination of, such Lender's Commitment,  (ii) extend the date
fixed for the  payment of  principal  of or  interest  on the Loans or  portions
thereof  owing to such  Lender,  (iii)  reduce the amount of any such payment of
principal,  (iv)  reduce the rate at which  interest  is payable  thereon or (v)
release any Guarantor (except as otherwise permitted under Section 7.12.(b)). An
assignment or other  transfer  which is not  permitted by subsection  (d) or (e)
below shall be given effect for purposes of this Agreement only to the extent of
a  participating  interest  granted in accordance  with this subsection (c). The
selling  Lender  shall  notify  the  Agent and the  Borrower  of the sale of any
participation  hereunder  and, if requested  by the Agent,  certify to the Agent
that such participation is permitted hereunder.

         (d) Any Lender may with the prior written  consent of the Agent and, so
long as no Default or Event of Default  shall have  occurred and be  continuing,
the Borrower (which consent, in each case, shall not be unreasonably withheld or
delayed), assign to one or more Eligible Assignees (each an "Assignee") all or a
portion  of its  Commitment  and its other  rights  and  obligations  under this
Agreement and the Notes; provided,  however, (i) no such consent by the Borrower
shall be  required  in the  case of any  assignment  to  another  Lender  or any
affiliate  of such  Lender or another  Lender  and no such  consent by the Agent
shall be required in the case of any  assignment by a Lender to any affiliate of
such Lender; (ii) any partial assignment shall be in an amount at least equal to
$5,000,000  and integral  multiples of  $1,000,000  in excess  thereof and after
giving effect to such assignment the assigning  Lender retains a Commitment,  or
if the  Commitments  have been  terminated,  holds  Notes  having  an  aggregate
outstanding  principal balance, of at least $5,000,000 and integral multiples of
$1,000,000 in excess thereof;  and (iii) each such assignment  shall be effected
by means of an Assignment and Acceptance Agreement.  Upon execution and delivery
of such instrument and payment by such Assignee to such transferor  Lender of an
amount equal to the purchase  price agreed  between such  transferor  Lender and
such  Assignee,  such  Assignee  shall be  deemed  to be a Lender  party to this
Agreement as of the effective date of the  Assignment  and Acceptance  Agreement
and shall have all the rights and  obligations  of a Lender with a Commitment as
set forth in such Assignment and Acceptance Agreement, and the transferor Lender
shall be released from its obligations  hereunder to a corresponding extent, and
no  further  consent  or  action  by any  party  shall  be  required.  Upon  the
consummation  of any assignment  pursuant to this subsection (d), the transferor
Lender,  the Agent and the Borrower shall make appropriate  arrangements so that
new Notes are issued to the Assignee and such transferor Lender, as appropriate.
In connection with any such assignment,  the transferor  Lender shall pay to the
Agent an  administrative  fee for  processing  such  assignment in the amount of
$3,500.

         (e) The Agent  shall  maintain at the  Principal  Office a copy of each
Assignment  and  Acceptance  Agreement  delivered  to and  accepted  by it and a
register for the  recordation  of the names and addresses of the Lenders and the
Commitment  of each Lender from time to time (the  "Register").  The Agent shall
give each Lender and the Borrower  notice of the assignment by any Lender of its
rights as contemplated by this Section. The Borrower,  the Agent and the Lenders
may treat  each  Person  whose  name is  recorded  in the  Register  as a Lender
hereunder  for all purposes of this  Agreement.  The Register and copies of each
Assignment  and  Acceptance  Agreement  shall be available for inspection by the
Borrower  or any  Lender  at any  reasonable  time  and from  time to time  upon
reasonable  prior  notice to the Agent.  Upon its receipt of an

                                      -87-
<PAGE>
Assignment and Acceptance  Agreement  executed by an assigning Lender,  together
with each Note subject to such  assignment,  the Agent shall, if such Assignment
and  Acceptance  Agreement  has been  completed  and if the Agent  receives  the
processing and recording fee described in subsection (d) above,  (i) accept such
Assignment  and  Acceptance  Agreement,  (ii) record the  information  contained
therein in the Register and (iii) give prompt notice thereof to the Borrower.

         (f) In addition to the assignments and  participations  permitted under
the foregoing  provisions of this Section,  any Lender may assign and pledge all
or any  portion  of its  Loans  and its  Notes to any  Federal  Reserve  Bank as
collateral  security pursuant to Regulation A and any Operating  Circular issued
by such  Federal  Reserve  Bank,  and  such  Loans  and  Notes  shall  be  fully
transferable as provided therein. No such assignment shall release the assigning
Lender from its obligations hereunder.

         (g) A Lender may furnish any information  concerning the Borrower,  any
other Loan Party or any of their  respective  Subsidiaries  or Affiliates in the
possession  of such  Lender  from  time to time to  Assignees  and  Participants
(including  prospective  Assignees and Participants)  subject to compliance with
Section 12.8.

         (h) Anything in this Section to the contrary notwithstanding, no Lender
may assign or  participate  any interest in any Loan held by it hereunder to the
Borrower,  any  other  Loan  Party  or any of  their  respective  Affiliates  or
Subsidiaries.

         (i) Each Lender agrees that,  without the prior written  consent of the
Borrower and the Agent, it will not make any assignment  hereunder in any manner
or under any circumstances that would require  registration or qualification of,
or filings in respect of, any Loan or Note under the Securities Act or any other
securities laws of the United States of America or of any other jurisdiction.

Section 12.6.  Amendments.

         Except as otherwise  expressly provided in this Agreement,  any consent
or approval  required or permitted by this  Agreement or any other Loan Document
to be given by the Lenders may be given,  and any term of this  Agreement  or of
any other Loan Document may be amended, and the performance or observance by the
Borrower  or any  other  Loan  Party  or any  Subsidiary  of any  terms  of this
Agreement or such other Loan Document or the continuance of any Default or Event
of Default may be waived  (either  generally  or in a  particular  instance  and
either  retroactively or prospectively) with, but only with, the written consent
of the Requisite Lenders (and, in the case of an amendment to any Loan Document,
the  written  consent  of  the  Borrower).  Notwithstanding  the  foregoing,  no
amendment,  waiver or consent shall, unless in writing, and signed by all of the
Lenders (or the Agent at the written  direction of the  Lenders),  do any of the
following:  (i) increase the  Commitments of the Lenders (except as contemplated
by Section  2.14.) or subject the Lenders to any  additional  obligations;  (ii)
reduce the  principal  of, or interest  rates that have  accrued or that will be
charged  on the  outstanding  principal  amount  of,  any Loans or Fees or other
Obligations;  (iii)  reduce  the  amount  of any Fees  payable  hereunder;  (iv)
postpone any date fixed for any payment of any principal of, or interest on, any
Loans or any other  Obligations,  or extend the expiration date of any Letter of
Credit  beyond the  Termination

                                      -88-
<PAGE>
Date; (v) change the Commitment  Percentages (except as a result of any increase
in the  aggregate  amount of the  Commitments  contemplated  by  Section  2.14.,
3.11.(b) or 4.5.) or amend or otherwise  modify the  provisions of Section 3.2.;
(vi)  modify the  definition  of the term  "Requisite  Lenders",  "Supermajority
Lenders",  or,  except as  otherwise  provided in clauses (a) through (c) of the
immediately  following  sentence,  modify  in any  other  manner  the  number or
percentage  of the  Lenders  required  to make any  determinations  or waive any
rights  hereunder  or  to  modify  any  provision   hereof,   including  without
limitation,  any  modification of this Section if such  modification  would have
such effect; (vii) release any Guarantor from its obligations under the Guaranty
(except as otherwise  permitted  under Section  7.12.(b));  (viii) amend Section
9.1.(f)  or waive  any  Default  or Event of  Default  occurring  under  Section
10.1.(c)  resulting from a violation of such Section;  (ix) amend the definition
of "Unencumbered Asset Value" (or any of the definitions used in such definition
for purposes of the use thereof in such definition,  or the percentages or rates
used  in the  calculation  thereof);  or  (x)  amend  or  otherwise  modify  the
provisions of Section 2.13.. In addition, no amendment, waiver or consent shall,
unless in writing, and signed by the Supermajority  Lenders (or the Agent at the
written direction of the Supermajority  Lenders),  do any of the following:  (a)
amend or  otherwise  modify  the  provisions  of, or waive any Event of  Default
occurring  under,  Section  10.1.(m);  or (b) amend Section 9.1.(g) or waive any
Default or Event of Default  occurring under Section  10.1.(c)  resulting from a
violation of such Section.  Further,  no amendment,  waiver or consent unless in
writing and signed by the Agent, in addition to the Lenders required hereinabove
to take such  action,  shall affect the rights or duties of the Agent under this
Agreement or any of the other Loan Documents.  Any amendment,  waiver or consent
relating to Section 2.2. or the  obligations of the Swingline  Lender under this
Agreement or any other Loan Document shall, in addition to the Lenders  required
hereinabove  to take such action,  require the written  consent of the Swingline
Lender.  No waiver shall extend to or affect any obligation not expressly waived
or impair any right  consequent  thereon  and any  amendment,  waiver or consent
shall be effective  only in the specific  instance and for the specific  purpose
set forth therein.  No course of dealing or delay or omission on the part of the
Agent or any Lender in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial  thereto.  Except as otherwise  explicitly provided for
herein or in any other Loan  Document,  no notice to or demand upon the Borrower
shall  entitle the Borrower to any other or further  notice or demand in similar
or other circumstances.

Section 12.7.  Nonliability of Agent and Lenders.

         The  relationship  between the  Borrower  and the Lenders and the Agent
shall be solely  that of borrower  and lender.  Neither the Agent nor any Lender
shall have any  fiduciary  responsibilities  to the Borrower and no provision in
this Agreement or in any of the other Loan  Documents,  and no course of dealing
between  or among any of the  parties  hereto,  shall be  deemed  to create  any
fiduciary duty owing by the Agent or any Lender to any Lender, the Borrower, any
Subsidiary or any other Loan Party.  Neither the Agent nor any Lender undertakes
any  responsibility  to the  Borrower  to review or inform the  Borrower  of any
matter in connection with any phase of the Borrower's business or operations.

Section 12.8.  Confidentiality.

         Except as  otherwise  provided by  Applicable  Law,  the Agent and each
Lender  shall  utilize  all  non-public  information  obtained  pursuant  to the
requirements  of this Agreement  which has

                                      -89-
<PAGE>
been  identified as  confidential  or  proprietary by the Borrower in accordance
with its  customary  procedure  for handling  confidential  information  of this
nature and in accordance with safe and sound banking  practices but in any event
may make disclosure:  (a) to any of their respective  affiliates  (provided they
shall agree to keep such  information  confidential in accordance with the terms
of this  Section);  (b) as  reasonably  requested  by any  bona  fide  Assignee,
Participant or other transferee in connection with the contemplated  transfer of
any Commitment or participations  therein as permitted  hereunder (provided they
shall agree to keep such  information  confidential in accordance with the terms
of this Section);  (c) as required or requested by any Governmental Authority or
representative  thereof or pursuant to legal process or in  connection  with any
legal proceedings;  (d) to the Agent's or such Lender's independent auditors and
other professional advisors (provided they shall be notified of the confidential
nature of the  information);  (e) after the happening and during the continuance
of an Event of Default,  to any other Person, in connection with the exercise by
the Agent or the  Lenders  of rights  hereunder  or under any of the other  Loan
Documents; and (f) to the extent such information (x) becomes publicly available
other than as a result of a breach of this  Section or (y) becomes  available to
the Agent or any Lender on a nonconfidential  basis from a source other than the
Borrower or any Affiliate.

Section 12.9.  Indemnification.

         (a) The Borrower shall and hereby agrees to indemnify,  defend and hold
harmless the Agent, any affiliate of the Agent and each of the Lenders and their
respective  directors,  officers,  shareholders,  agents,  employees and counsel
(each referred to herein as an "Indemnified Party") from and against any and all
losses, costs, claims, damages, liabilities, deficiencies, judgments or expenses
of  every  kind and  nature  (including,  without  limitation,  amounts  paid in
settlement,  court costs and the fees and  disbursements  of counsel incurred in
connection with any litigation, investigation, claim or proceeding or any advice
rendered in connection therewith,  but excluding losses, costs, claims, damages,
liabilities,  deficiencies,  judgments or expenses indemnification in respect of
which is  specifically  covered by Section 3.12.  or 4.1. or expressly  excluded
from  the  coverage  of such  Sections)  incurred  by an  Indemnified  Party  in
connection  with,  arising  out of, or by reason of, any suit,  cause of action,
claim,  arbitration,  investigation  or  settlement,  consent  decree  or  other
proceeding (the foregoing referred to herein as an "Indemnity Proceeding") which
is in any way related directly or indirectly to: (i) this Agreement or any other
Loan Document or the transactions  contemplated  thereby; (ii) the making of any
Loans or issuance of Letters of Credit  hereunder;  (iii) any actual or proposed
use by the Borrower of the proceeds of the Loans or Letters of Credit;  (iv) the
Agent's or any  Lender's  entering  into this  Agreement;  (v) the fact that the
Agent and the Lenders have  established the credit facility  evidenced hereby in
favor of the  Borrower;  (vi)  the  fact  that the  Agent  and the  Lenders  are
creditors of the Borrower and have or are alleged to have information  regarding
the financial condition,  strategic plans or business operations of the Borrower
and the Subsidiaries; (vii) the fact that the Agent and the Lenders are material
creditors of the Borrower  and are alleged to influence  directly or  indirectly
the business  decisions or affairs of the Borrower and the Subsidiaries or their
financial condition; (viii) the exercise of any right or remedy the Agent or the
Lenders may have under this  Agreement  or the other Loan  Documents;  provided,
however,  that the Borrower shall not be obligated to indemnify any  Indemnified
Party for any acts or omissions of such  Indemnified  Party in  connection  with
matters  described in this clause  (viii) that  constitute  gross  negligence or
willful  misconduct;  or (ix) any violation or non-compliance by the Borrower or
any  Subsidiary

                                      -90-
<PAGE>
of any  Applicable  Law (including any  Environmental  Law)  including,  but not
limited to, any  Indemnity  Proceeding  commenced  by (A) the  Internal  Revenue
Service or state  taxing  authority or (B) any  Governmental  Authority or other
Person under any Environmental Law, including any Indemnity Proceeding commenced
by a Governmental  Authority or other Person seeking remedial or other action to
cause the Borrower or its  Subsidiaries  (or its respective  properties) (or the
Agent and/or the Lenders as successors to the Borrower) to be in compliance with
such Environmental Laws.

         (b) The Borrower's indemnification obligations under this Section shall
apply to all Indemnity  Proceedings arising out of, or related to, the foregoing
whether  or  not an  Indemnified  Party  is a  named  party  in  such  Indemnity
Proceeding.  In this connection,  this indemnification shall cover all costs and
expenses of any  Indemnified  Party in  connection  with any  deposition  of any
Indemnified  Party or  compliance  with any  subpoena  (including  any  subpoena
requesting the production of documents). This indemnification shall, among other
things,  apply to any Indemnity  Proceeding  commenced by other creditors of the
Borrower or any  Subsidiary,  any  shareholder of the Borrower or any Subsidiary
(whether such shareholder(s) are prosecuting such Indemnity  Proceeding in their
individual  capacity or  derivatively  on behalf of the  Borrower),  any account
debtor of the Borrower or any Subsidiary or by any Governmental Authority.

         (c)  This  indemnification  shall  apply  to any  Indemnity  Proceeding
arising during the pendency of any bankruptcy proceeding filed by or against the
Borrower and/or any Subsidiary.

         (d) All  out-of-pocket  fees and  expenses  of, and all amounts paid to
third-persons  by, an Indemnified Party shall be advanced by the Borrower at the
request of such Indemnified Party  notwithstanding any claim or assertion by the
Borrower  that  such  Indemnified  Party  is  not  entitled  to  indemnification
hereunder  upon receipt of an undertaking  by such  Indemnified  Party that such
Indemnified  Party will  reimburse  the  Borrower if it is actually  and finally
determined by a court of competent  jurisdiction  that such Indemnified Party is
not so entitled to indemnification hereunder.

         (e) An Indemnified  Party may conduct its own investigation and defense
of,  and may  formulate  its own  strategy  with  respect  to,  any  Indemnified
Proceeding  covered  by this  Section  and,  as  provided  above,  all costs and
expenses incurred by such Indemnified Party shall be reimbursed by the Borrower.
No action taken by legal counsel chosen by an Indemnified Party in investigating
or defending against any such Indemnified Proceeding shall vitiate or in any way
impair the  obligations  and duties of the Borrower  hereunder to indemnify  and
hold harmless each such Indemnified Party;  provided,  however,  that (i) if the
Borrower is required to indemnify an Indemnified  Party pursuant hereto and (ii)
the Borrower has provided evidence  reasonably  satisfactory to such Indemnified
Party  that  the  Borrower  has the  financial  wherewithal  to  reimburse  such
Indemnified  Party for any amount paid by such Indemnified Party with respect to
such  Indemnified  Proceeding,  such  Indemnified  Party  shall  not  settle  or
compromise any such Indemnified  Proceeding without the prior written consent of
the Borrower (which consent shall not be unreasonably withheld or delayed).

                                      -91-
<PAGE>
         (f) If and to the extent that the obligations of the Borrower hereunder
are unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution  to the  payment  and  satisfaction  of such  obligations  which is
permissible under Applicable Law.

         (g) The Borrower's  obligations hereunder shall survive any termination
of this  Agreement and the other Loan  Documents and the payment in full in cash
of the  Obligations,  and are in addition  to, and not in  substitution  of, any
other  of their  obligations  set  forth in this  Agreement  or any  other  Loan
Document to which it is a party.

Section 12.10.  Termination; Survival.

         At such time as (a) all of the Commitments  have been  terminated,  (b)
all Letters of Credit have terminated, (c) none of the Lenders nor the Swingline
Lender is obligated  any longer  under this  Agreement to make any Loans and (d)
all  Obligations  (other  than  obligations  which  survive as  provided  in the
following  sentence) have been paid and satisfied in full,  this Agreement shall
terminate.  The  indemnities  to which the Agent,  the Lenders and the Swingline
Lender are entitled under the provisions of Sections 3.12.,  4.1., 4.4.,  11.7.,
12.2.  and 12.9.  and any other  provision of this  Agreement and the other Loan
Documents, and the provisions of Section 12.4., shall continue in full force and
effect and shall  protect the Agent,  the Lenders and the  Swingline  Lender (i)
notwithstanding  any  termination  of  this  Agreement,  or of  the  other  Loan
Documents,  against events arising after such  termination as well as before and
(ii) at all times  after any such party  ceases to be a party to this  Agreement
with  respect to all  matters  and events  existing on or prior to the date such
party ceased to be a party to this Agreement.

Section 12.11.  Severability of Provisions.

         Any provision of this Agreement which is prohibited or unenforceable in
any  jurisdiction  shall, as to such  jurisdiction,  be ineffective  only to the
extent  of  such  prohibition  or  unenforceability   without  invalidating  the
remainder  of such  provision  or the  remaining  provisions  or  affecting  the
validity or enforceability of such provision in any other jurisdiction.

Section 12.12.  GOVERNING LAW.

         THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,
THE LAWS OF THE STATE OF NEW YORK  APPLICABLE TO CONTRACTS  EXECUTED,  AND TO BE
FULLY PERFORMED, IN SUCH STATE.

Section 12.13.  Counterparts.

         This Agreement and any amendments, waivers, consents or supplements may
be executed in any number of  counterparts  and by different  parties  hereto in
separate  counterparts,  each of which when so executed and  delivered  shall be
deemed an original,  but all of which counterparts together shall constitute but
one and the same instrument.

                                      -92-
<PAGE>
Section 12.14.  Obligations with Respect to Loan Parties.

         The  obligations  of the  Borrower to direct or prohibit  the taking of
certain actions by the other Loan Parties as specified  herein shall be absolute
and not subject to any defense the Borrower may have that the Borrower  does not
control such Loan Parties.

Section 12.15.  Limitation of Liability.

         Neither the Agent nor any Lender, nor any affiliate, officer, director,
employee, attorney, or agent of the Agent or any Lender shall have any liability
with respect to, and the Borrower hereby waives, releases, and agrees not to sue
any  of  them  upon,  any  claim  for  any  special,  indirect,  incidental,  or
consequential  damages  suffered or incurred by the Borrower in connection with,
arising out of, or in any way related  to,  this  Agreement  or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents.  The Borrower hereby waives,  releases,  and agrees
not to sue  the  Agent  or any  Lender  or any of the  Agent's  or any  Lender's
affiliates,  officers, directors,  employees,  attorneys, or agents for punitive
damages in respect of any claim in  connection  with,  arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or financed hereby.

Section 12.16.  Entire Agreement.

         This  Agreement,  the Notes,  and the other Loan Documents  referred to
herein embody the final, entire agreement among the parties hereto and supersede
any and all prior commitments, agreements,  representations, and understandings,
whether  written or oral,  relating to the subject matter hereof and thereof and
may not be  contradicted  or varied by  evidence of prior,  contemporaneous,  or
subsequent oral  agreements or discussions of the parties  hereto.  There are no
oral agreements among the parties hereto.

Section 12.17.  Construction.

         The Agent,  the Borrower and each Lender  acknowledge that each of them
has had the benefit of legal  counsel of its own choice and has been afforded an
opportunity to review this Agreement and the other Loan Documents with its legal
counsel and that this Agreement and the other Loan Documents  shall be construed
as if jointly drafted by the Agent, the Borrower and each Lender.

Section 12.18.  LIABILITY OF TRUSTEES, ETC.

         THE PARTIES HERETO ACKNOWLEDGE AND AGREE AS FOLLOWS:

         THE  AMENDED  AND  RESTATED   DECLARATION  OF  TRUST  ESTABLISHING  THE
BORROWER,  DATED AUGUST 21, 1995, A COPY OF WHICH,  TOGETHER WITH ALL AMENDMENTS
THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE STATE DEPARTMENT
OF  ASSESSMENTS  AND TAXATION OF MARYLAND,  PROVIDES THAT THE NAME  "HOSPITALITY
PROPERTIES  TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION  COLLECTIVELY AS

                                      -93-
<PAGE>

TRUSTEES,  BUT NOT  INDIVIDUALLY  OR PERSONALLY,  AND THAT NO TRUSTEE,  OFFICER,
SHAREHOLDER,  EMPLOYEE OR AGENT OF THE  BORROWER  SHALL BE HELD TO ANY  PERSONAL
LIABILITY,  JOINTLY OR SEVERALLY,  FOR ANY OBLIGATION OF, OR CLAIM AGAINST,  THE
BORROWER.  ALL PERSONS DEALING WITH THE BORROWER, IN ANY WAY, SHALL LOOK ONLY TO
THE ASSETS OF THE BORROWER FOR THE PAYMENT OF ANY SUM OR THE  PERFORMANCE OF ANY
OBLIGATION.  THE  PROVISIONS OF THIS SECTION SHALL NOT LIMIT ANY  OBLIGATIONS OF
ANY LOAN PARTY OTHER THAN THE BORROWER.

                         [Signatures on Following Pages]

                                      -94-
<PAGE>

         IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Credit
Agreement to be executed by their authorized officers all as of the day and year
first above written.

                                    Borrower:

                                    Hospitality Properties Trust

                                    By: /s/ Thomas M. O'Brien
                                         Name:  Thomas M. O'Brien
                                         Title:  Treasurer

                                    Attest: /s/ John G. Murray
                                         Name:  John G. Murray
                                         Title: President

                       [Signatures Continued on Next Page]

                                      -95-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
                March 26, 2002 with Hospitality Properties Trust]

                                    First Union National Bank, as Agent,
                                      as a Lender and as Swingline Lender

                                    By: /s/ Rex E. Rudy
                                         Name:  Rex E. Rudy
                                         Title:  Director

                                    Commitment Amount:

                                    $45,000,000

                                    Lending Office (all Types of Loans):

                                    First Union National Bank
                                    REIT Banking Group
                                    One First Union Center, NC5604
                                    301 South College Street
                                    Charlotte, North Carolina  28288
                                    Attn:  Rex E. Rudy
                                    Telecopier:       (704) 383-6205
                                    Telephone:        (704) 383-6506

                       [Signatures Continued on Next Page]

                                      -96-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
                March 26, 2002 with Hospitality Properties Trust]

                                    DRESDNER BANK AG, NEW YORK AND GRAND
                                       CAYMAN BRANCHES

                                    By: /s/ Michael A. Seton
                                         Name:  Michael A. Seton
                                         Title: Director

                                    By: /s/ David Sarner
                                         Name: David Sarner
                                         Title: Associate

                                    Commitment Amount:

                                    $45,000,000

                                    Lending Office (all Types of Loans):

                                    Dresdner Bank AG, New York and Grand Cayman
                                      Branches
                                    75 Wall Street, 25th Floor
                                    New York, New York  10005
                                    Attn: Michael Seton
                                    Telecopier:       (212) 429-2129
                                    Telephone:        (212) 429-3277

                       [Signatures Continued on Next Page]

                                      -97-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
                March 26, 2002 with Hospitality Properties Trust]

                                    ING CAPITAL LLC

                                    By: /s/ David J. Lattimer
                                         Name:  David J. Lattimer
                                         Title: Vice President

                                    Commitment Amount:

                                    $40,000,000

                                    Lending Office (all Types of Loans):

                                    ING Capital LLC
                                    1325 Avenue of the Americas, 7th Floor
                                    New York, New York 10019
                                    Attn: David J. Lattimer
                                    Telecopier:       (646) 424-6210
                                    Telephone:        (646) 424-6209

                       [Signatures Continued on Next Page]

                                      -98-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
                March 26, 2002 with Hospitality Properties Trust]

                                    CIBC INC.

                                    By: /s/ Dean J. Decker
                                        Name: Dean J. Decker
                                        Title: Managing Director
                                               CIBC World Markets Corp. AS AGENT

                                    Commitment Amount:

                                    $32,500,000

                                    Lending Office (all Types of Loans):

                                    CIBC World Markets Corp.
                                    10880 Wilshire Blvd.
                                    Suite 1700
                                    Los Angeles, California  90024
                                    Attn:  Leo Fernandez
                                    Telecopier:       (310) 446-3549
                                    Telephone:        (310) 446-3610

                       [Signatures Continued on Next Page]

                                      -99-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
                March 26, 2002 with Hospitality Properties Trust]

                                    SOCIETE GENERALE

                                    By: /s/ Thomas K. Day
                                         Name: Thomas K. Day
                                         Title: Managing Director

                                    Commitment Amount:

                                    $32,500,000

                                    Lending Office (all Types of Loans):

                                    Societe Generale
                                    2001 Ross Avenue
                                    Suite 4900
                                    Dallas, Texas  75201
                                    Attn:  Thomas K. Day
                                    Telecopier:       (214) 979-2777
                                    Telephone:        (214) 979-2774

                       [Signatures Continued on Next Page]

                                     -100-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
                March 26, 2002 with Hospitality Properties Trust]

                         PNC BANK, NATIONAL ASSOCIATION

                                    By: /s/ James A. Colella
                                         Name: James A. Colella
                                         Title: Vice President

                                    Commitment Amount:

                                    $30,000,000

                                    Lending Office (all Types of Loans):

                                    PNC Bank, National Association
                                    One PNC Plaza
                                    249 Fifth Avenue
                                    Mail Stop P1-POPP-19-2
                                    Pittsburgh, Pennsylvania  15222
                                    Attn:  Jim Colella
                                    Telecopier:       (412) 762-6500
                                    Telephone:        (412) 762-2260

                       [Signatures Continued on Next Page]

                                     -101-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
                March 26, 2002 with Hospitality Properties Trust]

                             WELLS FARGO BANK, NATIONAL ASSOCIATION

                             By: /s/ Douglas S. Novitch
                                  Name: Douglas S. Novitch
                                  Title: Authorized Officer

                             Commitment Amount:

                             $30,000,000

                             Lending Office (all Types of Loans):

                             Wells Fargo Bank, National Association
                             2120 East Park Place St., 100
                             El Segundo, California  90245
                             Attn:  Joel Padilla
                             Telecopier:       (310) 615-1014
                             Telephone:        (310) 335-9460

                             Address for Notices:

                             Wells Fargo Bank, National Association
                             Real Estate Group
                             121 High Street, 6th Floor
                             Boston, Massachusetts  02110
                             Attn:  Keta N. Marsman, Loan Administration Officer
                             Telecopier:       (617) 772-9337
                             Telephone:        (617) 574-6313

                                with a copy to:

                             Wells Fargo Bank, National Association
                             Real Estate Group
                             420 Montgomery Street, Sixth Floor
                             San Francisco, California  94111
                             Attn:  Chief Credit Officer, Real Estate Group
                             Telecopier:       415-781-8324
                             Telephone:        415-394-4078

                       [Signatures Continued on Next Page]

                                     -102-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
                March 26, 2002 with Hospitality Properties Trust]

                         CREDIT LYONNAIS NEW YORK BRANCH

                                    By: /s/ David Bowers
                                         Name:  David Bowers
                                         Title: Vice President

                                    Commitment Amount:

                                    $30,000,000

                                    Lending Office (all Types of Loans):

                                    Credit Lyonnais New York Branch
                                    1301 Avenue of the Americas
                                    New York, New York 10019
                                    Attn: David Bowers
                                    Telecopier:       (212) 261-7532
                                    Telephone:        (212) 261-7831

                       [Signatures Continued on Next Page]

                                     -103-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
                March 26, 2002 with Hospitality Properties Trust]

                                    AMSOUTH BANK

                                    By: /s/ David G. Ellis
                                         Name:  David G. Ellis
                                         Title: Officer

                                    Commitment Amount:

                                    $25,000,000

                                    Lending Office (all Types of Loans):

                                    AmSouth Bank
                                    1900 5th Avenue North
                                    AST-9
                                    Birmingham, Alabama  35203
                                    Attn: Dave Ellis
                                    Telecopier:       (205) 326-4075
                                    Telephone:        (205) 581-7646

                       [Signatures Continued on Next Page]

                                     -104-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
                March 26, 2002 with Hospitality Properties Trust]

                                    BANK OF MONTREAL

                                    By: /s/ Eduardo Mendoza
                                         Name:  Eduardo Mendoza
                                         Title: Vice President

                                    Commitment Amount:

                                    $20,000,000

                                    Lending Office (all Types of Loans):

                                    Bank of Montreal
                                    115 S. LaSalle St., 5C
                                    Chicago, Illinois  60603
                                    Attn:  Eduardo Mendoza
                                    Telecopier:       (312) 293-5852
                                    Telephone:        (312) 461-7521

                       [Signatures Continued on Next Page]

                                     -105-
<PAGE>

                 [Signature Page to Credit Agreement dated as of
                March 26, 2002 with Hospitality Properties Trust]

                                    ALLIED IRISH BANKS, P.L.C.

                                    By: /s/ Hillary Patterson
                                         Name: Hillary Patterson
                                         Title:___________________

                                    By: /s/ Tony O'Reilly
                                         Name:  Tony O'Reilly
                                         Title: Vice President

                                    Commitment Amount:

                                    $20,000,000

                                    Lending Office (all Types of Loans):

                                    AIB Corporate Banking NY,
                                    Allied Irish Banks, p.l.c.
                                    405 Park Avenue, Suite 1005
                                    New York, New York 10022
                                    Attn: Tony O'Reilly
                                    Telecopier:       (212) 339-8325
                                    Telephone:        (212) 515-6847

                                     -106-

<PAGE>
                                SCHEDULE 1.1.(a)
<TABLE>
<CAPTION>
                                Applicable Margin

------------------------------------------------------------------------------------------------------
                Borrower's Credit Rating             Applicable Margin            Applicable Margin
    Level         (S&P/Moody's (other))               for LIBOR Loans             for Base Rate Loans
------------------------------------------------------------------------------------------------------
<S>          <C>                                         <C>                           <C>
      1       BBB+/Baa1 (or equivalent)                   1.00%                         0.0%
------------------------------------------------------------------------------------------------------
      2       BBB/Baa2 (or equivalent)                    1.15%                         0.0%
------------------------------------------------------------------------------------------------------
      3       BBB-/Baa3 (or equivalent)                   1.35%                         0.15%
------------------------------------------------------------------------------------------------------
      4       <  BBB-/Baa3 (or equivalent)                1.65%                         0.50 %
------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

                                SCHEDULE 1.1.(b)

                                  Facility Fee

                      --------------------------------------
                           Level             Facility Fee
                      --------------------------------------
                             1                   0.20%
                      --------------------------------------
                             2                   0.25%
                      --------------------------------------
                             3                   0.30%
                      --------------------------------------
                             4                   0.35%
                      --------------------------------------

<PAGE>
                                  SCHEDULES TO

                          HOSPITALITY PROPERTIES TRUST

                                CREDIT AGREEMENT

                           dated as of March 26, 2002

<PAGE>

                                 Schedule 1.1(a)

                 List of All Loan Parties and State of Formation

[This  schedule  includes a list of the Borrower  and all Material  Subsidiaries
indicating their respective states of formation.]

<PAGE>
                                 Schedule 6.1(b)

                               Ownership Structure

[This  schedule  contains  an  organizational  chart  of the  Borrower  and  its
subsidiaries.]

<PAGE>

                                 Schedule 6.1(f)

[Part I of this schedule  cross  references  the list of properties  attached to
Exhibit 6.1(y).]

[Part II of this schedule lists Permitted Liens of which there are none.]

<PAGE>

                                 Schedule 6.1(g)

   Indebtedness (excluding Indebtedness under Leases and Ancillary Documents)

[This schedule  contains a list of the  Indebtedness of the Borrower,  excluding
Indebtedness under Leases and Ancillary Documents.]

<PAGE>
                                 Schedule 6.1(h)

                               Material Contracts

[Part I of this  schedule  lists all Material  Contracts  (excluding  leases and
ancillary documents).]

[Part II of this schedule lists lease documents and ancillary documents.]

<PAGE>

                                 Schedule 6.1(i)

                                   Litigation

                                      None

<PAGE>
                                 Schedule 6.1(k)

            Certain Liabilities not disclosed on Financial Statements

                                      None

<PAGE>
                                 Schedule 6.1(y)

                           List of Unencumbered Assets

[This schedule contains a list of the properties owned by the Borrower.]
<PAGE>

                                    EXHIBIT A

                   FORM OF ASSIGNMENT AND Acceptance AGREEMENT

         THIS ASSIGNMENT AND Acceptance AGREEMENT dated as of ___________,  200_
(the  "Agreement")  by and  among  _________________________  (the  "Assignor"),
_________________________  (the  "Assignee"),  and First Union National Bank, as
Agent (the "Agent").

         WHEREAS,  the Assignor is a Lender under that certain Credit  Agreement
dated as of March ___,  2002 (as amended,  restated,  supplemented  or otherwise
modified from time to time, the "Credit  Agreement"),  by and among  Hospitality
Properties Trust (the "Borrower"),  the financial institutions party thereto and
their assignees under Section 12.5 thereof (the  "Lenders"),  the Agent, and the
other parties thereto;

         WHEREAS,  the Assignor  desires to assign to the Assignee,  among other
things,  all  or a  portion  of  the  Assignor's  Commitment  under  the  Credit
Agreement, all on the terms and conditions set forth herein; and

         WHEREAS,  the  Agent  consents  to such  assignment  on the  terms  and
conditions set forth herein;

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which hereby are acknowledged by the parties hereto,  the parties
hereto hereby agree as follows:

         Section 1.  Assignment.

         (a)  Subject  to the  terms and  conditions  of this  Agreement  and in
consideration of the payment to be made by the Assignee to the Assignor pursuant
to  Section  2 of  this  Agreement,  effective  as of  ____________,  200_  (the
"Assignment Date"), the Assignor hereby irrevocably sells, transfers and assigns
to the Assignee,  without recourse,  a $__________ interest (such interest being
the "Assigned  Commitment")  in and to the Assignor's  Commitment and all of the
other rights and  obligations of the Assignor under the Credit  Agreement,  such
Assignor's Revolving Note and the other Loan Documents  (representing ______% in
respect of the aggregate amount of all Lenders' Commitments),  including without
limitation,   a  principal  amount  of  outstanding  Revolving  Loans  equal  to
$_________  and all voting rights of the Assignor  associated  with the Assigned
Commitment, all rights to receive interest on such amount of Revolving Loans and
all commitment and other Fees with respect to the Assigned  Commitment and other
rights of the Assignor  under the Credit  Agreement and the other Loan Documents
with respect to the Assigned Commitment, all as if the Assignee were an original
Lender under and signatory to the Credit  Agreement having a Commitment equal to
the amount of the Assigned  Commitment.  The Assignee,  subject to the terms and
conditions  hereof,  hereby assumes all obligations of the Assignor with respect
to the Assigned  Commitment as if the Assignee were an original Lender under and
signatory  to the Credit  Agreement  having a  Commitment  equal to the Assigned
Commitment,  which obligations  shall include,  but shall not

                                      A-1
<PAGE>
be limited to, the  obligation  of the Assignor to make  Revolving  Loans to the
Borrower  with respect to the Assigned  Commitment,  the  obligation  to pay the
Agent amounts due in respect of draws under Letters of Credit as required  under
Section 2.3 of the Credit Agreement and the obligation to indemnify the Agent as
provided therein (the foregoing enumerated obligations,  together with all other
similar  obligations more particularly set forth in the Credit Agreement and the
other Loan  Documents,  shall be referred to hereinafter,  collectively,  as the
"Assigned   Obligations").   The  Assignor  shall  have  no  further  duties  or
obligations with respect to, and shall have no further interest in, the Assigned
Obligations or the Assigned Commitment from and after the Assignment Date.

         (b) The assignment by the Assignor to the Assignee hereunder is without
recourse to the  Assignor.  The Assignee  makes and  confirms to the Agent,  the
Assignor,  and the other  Lenders  all of the  representations,  warranties  and
covenants  of a  Lender  under  Article  XI.  of the  Credit  Agreement.  Not in
limitation of the foregoing,  the Assignee  acknowledges and agrees that, except
as set forth in Section 4 below,  the Assignor is making no  representations  or
warranties  with respect to, and the Assignee hereby releases and discharges the
Assignor  for any  responsibility  or  liability  for: (i) the present or future
solvency or financial  condition of the  Borrower,  any  Subsidiary or any other
Loan Party, (ii) any representations, warranties, statements or information made
or  furnished  by the  Borrower,  any  Subsidiary  or any  other  Loan  Party in
connection with the Credit Agreement or otherwise, (iii) the validity, efficacy,
sufficiency,  or enforceability of the Credit Agreement, any other Loan Document
or any other  document or instrument  executed in connection  therewith,  or the
collectibility  of the Assigned  Obligations,  (iv) the perfection,  priority or
validity of any Lien with  respect to any  collateral  at any time  securing the
Obligations or the Assigned  Obligations under the Notes or the Credit Agreement
and (v) the  performance or failure to perform by the Borrower or any other Loan
Party of any obligation under the Credit Agreement or any other Loan Document to
which  it  is  a  party.   Further,  the  Assignee  acknowledges  that  it  has,
independently  and  without  reliance  upon the Agent,  or on any  affiliate  or
subsidiary thereof,  the Assignor or any other Lender and based on the financial
statements  supplied by the Borrower and such other documents and information as
it has deemed appropriate, made its own credit analysis and decision to become a
Lender under the Credit Agreement.  The Assignee also acknowledges that it will,
independently  and without  reliance  upon the Agent,  the Assignor or any other
Lender and based on such documents and information as it shall deem  appropriate
at the time,  continue to make its own credit  decisions in taking or not taking
action under the Credit Agreement or any other Loan Documents or pursuant to any
other  obligation.  Except as expressly  provided in the Credit  Agreement,  the
Agent shall have no duty or responsibility whatsoever,  either initially or on a
continuing  basis, to provide the Assignee with any credit or other  information
with  respect to the  Borrower or any other Loan Party or to notify the Assignee
of any Default or Event of Default.  The Assignee has not relied on the Agent as
to any legal or factual matter in connection therewith or in connection with the
transactions contemplated thereunder.

         Section 2. Payment by Assignee. In consideration of the assignment made
pursuant  to  Section 1 of this  Agreement,  the  Assignee  agrees to pay to the
Assignor on the Assignment Date, an amount equal to $_________  representing (i)
the aggregate  principal  amount  outstanding of the Loans owing to the Assignor
under the Credit  Agreement and the other Loan Documents

                                      A-2
<PAGE>
being assigned hereby plus (ii) the aggregate amount of payments previously made
by Assignor  under Section  2.3(j) of the Credit  Agreement  which have not been
repaid and which are being assigned hereby.

         Section 3.  Payments by  Assignor.  The  Assignor  agrees to pay to the
Agent on the Assignment Date the  administration  fee, if any, payable under the
applicable provisions of the Credit Agreement.

         Section 4.  Representations  and  Warranties of Assignor.  The Assignor
hereby  represents  and warrants to the Assignee  that (a) as of the  Assignment
Date (i) the Assignor is a Lender under the Credit Agreement having a Commitment
under the Credit Agreement (without  reduction by any assignments  thereof which
have not yet become effective),  equal to $____________ and that the Assignor is
not in  default of its  obligations  under the  Credit  Agreement;  and (ii) the
outstanding  balance of Revolving Loans owing to the Assignor (without reduction
by  any   assignments   thereof   which  have  not  yet  become   effective)  is
$____________;  and (b) it is the legal  and  beneficial  owner of the  Assigned
Commitment which is free and clear of any adverse claim created by the Assignor.

         Section 5. Representations,  Warranties and Agreements of Assignee. The
Assignee (a) represents and warrants that it is (i) legally  authorized to enter
into this  Agreement,  (ii) an  "accredited  investor"  (as such term is used in
Regulation D of the Securities Act) and (iii) an Eligible Assignee; (b) confirms
that it has received a copy of the Credit Agreement, together with copies of the
most  recent  financial  statements  delivered  pursuant  thereto and such other
documents and information  (including  without limitation the Loan Documents) as
it has deemed  appropriate to make its own credit analysis and decision to enter
into this  Agreement;  (c) appoints and authorizes the Agent to take such action
as  contractual  representative  on its behalf and to exercise such powers under
the Loan  Documents as are delegated to the Agent by the terms thereof  together
with such powers as are reasonably  incidental  thereto;  and (d) agrees that it
will become a party to and shall be bound by the Credit  Agreement and the other
Loan Documents to which the other Lenders are a party on the Assignment Date and
will perform in accordance  therewith all of the obligations  which are required
to be performed by it as a Lender.

         Section 6.  Recording and  Acknowledgment  by the Agent.  Following the
execution of this  Agreement,  the Assignor will deliver to the Agent (a) a duly
executed copy of this  Agreement for  acknowledgment  and recording by the Agent
and (b) the Assignor's  Revolving Note. Upon such  acknowledgment and recording,
from and after the Assignment Date, the Agent shall make all payments in respect
of the interest assigned hereby (including payments of principal, interest, Fees
and other  amounts) to the  Assignee.  The Assignor and Assignee  shall make all
appropriate adjustments in payments under the Credit Agreement for periods prior
to the Assignment Date directly between themselves.

         Section 7. Addresses. The Assignee specifies as its address for notices
and its Lending Office for all Loans, the offices set forth below:

                                      A-3
<PAGE>

         Notice Address:
                                            ------------------------------------
                                            Telephone No.:
                                                          ----------------------
                                            Telecopy No.:
                                                         -----------------------

         Lending Office:
                                            ------------------------------------
                                            Telephone No.:
                                                          ----------------------
                                            Telecopy No.:
                                                         -----------------------

         Section  8.  Payment  Instructions.  All  payments  to be  made  to the
Assignee  under this  Agreement by the Assignor,  and all payments to be made to
the Assignee under the Credit Agreement, shall be made as provided in the Credit
Agreement in accordance with the following instructions:

               -----------------------------
               -----------------------------

         Section  9.  Effectiveness  of  Assignment.  This  Agreement,  and  the
assignment and assumption  contemplated herein, shall not be effective until (a)
this Agreement is executed and delivered by each of the Assignor,  the Assignee,
the Agent, and if required under Section 12.5.(d) of the Credit  Agreement,  the
Borrower,  and (b) the payment to the Assignor of the amounts,  if any, owing by
the  Assignee  pursuant  to Section 2 hereof and (c) the payment to the Agent of
the amounts,  if any, owing by the Assignor  pursuant to Section 3 hereof.  Upon
recording and  acknowledgment of this Agreement by the Agent, from and after the
Assignment  Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this  Agreement,  have the rights and obligations of a
Lender  thereunder and (ii) the Assignor  shall,  to the extent provided in this
Agreement,  relinquish its rights (except as otherwise provided in Section 12.10
of the Credit  Agreement) and be released from its obligations  under the Credit
Agreement;  provided,  however,  that if the Assignor does not assign its entire
interest under the Loan  Documents,  it shall remain a Lender entitled to all of
the benefits and subject to all of the  obligations  thereunder  with respect to
its Commitment.

         Section 10.  Governing  Law. THIS  AGREEMENT  SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK  APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

         Section 11. Counterparts.  This Agreement may be executed in any number
of counterparts each of which, when taken together, shall constitute one and the
same agreement.

         Section 12.  Headings.  Section  headings have been inserted herein for
convenience only and shall not be construed to be a part hereof.

                                      A-4
<PAGE>
         Section 13.  Amendments;  Waivers.  This  Agreement may not be amended,
changed, waived or modified except by a writing executed by the Assignee and the
Assignor; provided, however, any amendment, waiver or consent which shall affect
the rights or duties of the Agent under this  Agreement  shall not be  effective
unless signed by the Agent.

         Section  14.  Entire  Agreement.  This  Agreement  embodies  the entire
agreement  between the  Assignor  and the  Assignee  with respect to the subject
matter hereof and supersedes  all other prior  arrangements  and  understandings
relating to the subject matter hereof.

         Section 15. Binding  Effect.  This Agreement  shall be binding upon and
inure to the benefit of the parties hereto and their  respective  successors and
permitted assigns.

         Section 16.  Definitions.  Terms not otherwise  defined herein are used
herein with the respective meanings given them in the Credit Agreement.

         [Include  this Section  only if  Borrower's  consent is required  under
Section  12.5.(d)  Section 17.  Agreements of the Borrower.  The Borrower hereby
agrees that the Assignee shall be a Lender under the Credit  Agreement  having a
Commitment  equal to the  Assigned  Commitment.  The  Borrower  agrees  that the
Assignee  shall have all of the rights and remedies of a Lender under the Credit
Agreement  and the other Loan  Documents  as if the  Assignee  were an  original
Lender under and signatory to the Credit Agreement,  including,  but not limited
to, the right of a Lender to receive  payments of principal  and  interest  with
respect to the  Assigned  Obligations,  and to the  Revolving  Loans made by the
Lenders  after the date  hereof and to  receive  the  commitment  and other Fees
payable  to the  Lenders  as  provided  in the Credit  Agreement.  Further,  the
Assignee shall be entitled to the  indemnification  provisions from the Borrower
in favor of the Lenders as provided in the Credit  Agreement  and the other Loan
Documents.  The Borrower further agrees, upon the execution and delivery of this
Agreement,  to execute in favor of the  Assignee  Notes as  required  by Section
12.5(d) of the Credit Agreement. Upon receipt by the Assignor of the amounts due
the Assignor  under Section 2, the Assignor  agrees to surrender to the Borrower
such Assignor's Notes.]

                         [Signatures on Following Pages]

                                      A-5
<PAGE>

         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Assignment and Acceptance Agreement as of the date and year first written above.

                                            ASSIGNOR:

                                            [Name of Assignor]

                                            By:
                                               --------------------------------
                                                 Name:
                                                      -------------------------
                                                 Title:
                                                       ------------------------

                                            ASSIGNEE:

                                            [Name of Assignee]

                                            By:
                                               --------------------------------
                                                 Name:
                                                      -------------------------
                                                 Title:
                                                       ------------------------

[Include signature of the Borrower only if
   required under Section 12.5.(d) of the Credit
   Agreement]
Agreed and consented to as of the date first written above.

BORROWER:

HOSPITALITY PROPERTIES TRUST

By:
    ----------------------------------------
     Name:
          ----------------------------------
     Title:
           ---------------------------------

                    [Signatures Continued on Following Page]

                                      A-6
<PAGE>

Accepted as of the date first written above.

AGENT:

First Union National Bank, as Agent

By:
   -----------------------------------------
      Name:
           ---------------------------------
      Title:
            --------------------------------

                                      A-7
<PAGE>
                                    EXHIBIT B

                                FORM OF GUARANTY

         THIS GUARANTY  dated as of March ___,  2002,  executed and delivered by
each of the  undersigned  and the other  Persons  from time to time party hereto
pursuant to the execution and delivery of an Accession  Agreement in the form of
Annex I hereto (all of the undersigned,  together with such other Persons each a
"Guarantor"  and  collectively,  the  "Guarantors")  in favor of (a) FIRST UNION
NATIONAL BANK, in its capacity as Agent (the "Agent") for the Lenders under that
certain that certain Credit  Agreement  dated as of March ___, 2002 (as amended,
restated,  supplemented  or otherwise  modified  from time to time,  the "Credit
Agreement"),  by and among Hospitality  Properties Trust (the  "Borrower"),  the
financial  institutions  party  thereto and their  assignees  under Section 12.5
thereof (the "Lenders"),  the Agent, and the other parties thereto,  and (b) the
Lenders and the Swingline Lender.

         WHEREAS,  pursuant to the Credit Agreement,  the Agent, the Lenders and
the  Swingline  Lender have agreed to make  available  to the  Borrower  certain
financial  accommodations  on the terms and  conditions  set forth in the Credit
Agreement;

         WHEREAS, the Borrower owns, directly or indirectly, at least a majority
of the issued and outstanding Equity Interests in each Guarantor;

         WHEREAS, the Borrower and each of the Guarantors, though separate legal
entities,  are  mutually  dependent  on  each  other  in the  conduct  of  their
respective businesses as an integrated operation and have determined it to be in
their mutual best interests to obtain  financing from the Agent, the Lenders and
the Swingline Lender through their collective efforts;

         WHEREAS,  each Guarantor  acknowledges  that it will receive direct and
indirect  benefits from the Agent,  the Lenders and the Swingline  Lender making
such  financial  accommodations  available  to the  Borrower  under  the  Credit
Agreement  and,  accordingly,   each  Guarantor  is  willing  to  guarantee  the
Borrower's obligations to the Agent, the Lenders and the Swingline Lender on the
terms and conditions contained herein; and

         WHEREAS,  each Guarantor's execution and delivery of this Guaranty is a
condition to the Agent and the Lenders  making,  and  continuing  to make,  such
financial accommodations to the Borrower.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which are hereby  acknowledged by each Guarantor,  each Guarantor
agrees as follows:

         Section 1. Guaranty. Each Guarantor hereby absolutely,  irrevocably and
unconditionally  guaranties the due and punctual  payment and  performance  when
due,  whether at stated  maturity,  by acceleration or otherwise,  of all of the
following  (collectively referred to as the "Guarantied  Obligations"):  (a) all
indebtedness and obligations owing by the Borrower to any Lender,  the Swingline
Lender or the Agent under or in  connection  with the Credit  Agreement  and any
other

                                      B-1
<PAGE>
Loan Document,  including without limitation,  the repayment of all principal of
the Revolving Loans, Swingline Loans and the Reimbursement Obligations,  and the
payment  of all  interest,  Fees,  charges,  attorneys'  fees and other  amounts
payable to any Lender or the Agent  thereunder or in connection  therewith;  (b)
any and all extensions, renewals, modifications,  amendments or substitutions of
the  foregoing;  (c) all expenses,  including,  without  limitation,  reasonable
attorneys'  fees and  disbursements,  that are  incurred  by the Lenders and the
Agent in the  enforcement  of any of the  foregoing  or any  obligation  of such
Guarantor hereunder; and (d) all other Obligations.

         Section 2. Guaranty of Payment and Not of Collection.  This Guaranty is
a guaranty of payment,  and not of collection,  and a debt of each Guarantor for
its own account.  Accordingly,  none of the Lenders, the Swingline Lender or the
Agent shall be obligated or required before  enforcing this Guaranty against any
Guarantor:  (a) to pursue any right or remedy any of them may have  against  the
Borrower,  any other Guarantor or any other Person or commence any suit or other
proceeding against the Borrower,  any other Guarantor or any other Person in any
court or other tribunal; (b) to make any claim in a liquidation or bankruptcy of
the Borrower,  any other Guarantor or any other Person; or (c) to make demand of
the Borrower,  any other  Guarantor or any other Person or to enforce or seek to
enforce  or  realize  upon any  collateral  security  held by the  Lenders,  the
Swingline   Lender  or  the  Agent  which  may  secure  any  of  the  Guarantied
Obligations.

         Section  3.  Guaranty  Absolute.  Each  Guarantor  guarantees  that the
Guarantied Obligations will be paid strictly in accordance with the terms of the
documents evidencing the same, regardless of any Applicable Law now or hereafter
in effect in any  jurisdiction  affecting any of such terms or the rights of the
Agent, the Lenders or the Swingline  Lender with respect thereto.  The liability
of each  Guarantor  under  this  Guaranty  shall be  absolute,  irrevocable  and
unconditional  in  accordance  with its terms and shall remain in full force and
effect  without  regard to, and shall not be  released,  suspended,  discharged,
terminated or otherwise affected by, any circumstance or occurrence  whatsoever,
including  without  limitation,  the  following  (whether or not such  Guarantor
consents thereto or has notice thereof):

         (a) (i) any change in the  amount,  interest  rate or due date or other
term of any of the Guarantied Obligations, (ii) any change in the time, place or
manner of payment of all or any portion of the Guarantied Obligations, (iii) any
amendment  or waiver of, or consent to the  departure  from or other  indulgence
with respect to, the Credit  Agreement,  any other Loan  Document,  or any other
document or instrument evidencing or relating to any Guarantied Obligations,  or
(iv) any waiver,  renewal,  extension,  addition,  or supplement to, or deletion
from,  or any other  action or  inaction  under or in  respect  of,  the  Credit
Agreement, any of the other Loan Documents, or any other documents,  instruments
or agreements relating to the Guarantied  Obligations or any other instrument or
agreement  referred to therein or evidencing any  Guarantied  Obligations or any
assignment or transfer of any of the foregoing;

         (b) any lack of validity or enforceability of the Credit Agreement, any
of the other Loan  Documents,  or any other  document,  instrument  or agreement
referred to therein or evidencing any  Guarantied  Obligations or any assignment
or transfer of any of the foregoing;

                                      B-2
<PAGE>
         (c) any furnishing to the Agent, the Lenders or the Swingline Lender of
any security for the Guarantied Obligations,  or any sale, exchange,  release or
surrender of, or realization on, any collateral securing any of the Obligations;

         (d) any settlement or compromise of any of the Guarantied  Obligations,
any security  therefor,  or any liability of any other party with respect to the
Guarantied  Obligations,  or any  subordination of the payment of the Guarantied
Obligations  to the payment of any other  liability of the Borrower or any other
Loan Party;

         (e)   any   bankruptcy,   insolvency,   reorganization,    composition,
adjustment,  dissolution,  liquidation or other like proceeding relating to such
Guarantor, the Borrower, any other Loan Party or any other Person, or any action
taken with respect to this Guaranty by any trustee or receiver, or by any court,
in any such proceeding;

         (f) any act or failure to act by the Borrower,  any other Loan Party or
any other Person which may adversely affect such Guarantor's subrogation rights,
if any, against the Borrower to recover payments made under this Guaranty;

         (g) any  nonperfection or impairment of any security  interest or other
Lien on any collateral, if any, securing in any way any of the Obligations;

         (h) any  application of sums paid by the Borrower,  any other Guarantor
or any other  Person  with  respect to the  liabilities  of the  Borrower to the
Agent,  the Lenders or the Swingline  Lender,  regardless of what liabilities of
the Borrower remain unpaid;

         (i) any defect,  limitation or insufficiency in the borrowing powers of
the Borrower or in the exercise thereof; or

         (j) any other circumstance  which might otherwise  constitute a defense
available to, or a discharge of, a Guarantor  hereunder (other than indefeasible
payment in full).

         Section 4. Action with Respect to Guarantied  Obligations.  The Lenders
and the Agent may, at any time and from time to time, without the consent of, or
notice to,  any  Guarantor,  and  without  discharging  any  Guarantor  from its
obligations  hereunder,  take any and all actions described in Section 3 and may
otherwise:  (a)  amend,  modify,  alter or  supplement  the  terms of any of the
Guarantied Obligations,  including,  but not limited to, extending or shortening
the  time of  payment  of any of the  Guarantied  Obligations  or  changing  the
interest rate that may accrue on any of the Guarantied  Obligations;  (b) amend,
modify, alter or supplement the Credit Agreement or any other Loan Document; (c)
sell,  exchange,  release  or  otherwise  deal  with all,  or any  part,  of any
collateral securing any of the Obligations;  (d) release any other Loan Party or
other  Person  liable  in any  manner  for  the  payment  or  collection  of the
Guarantied  Obligations;  (e) exercise,  or refrain from exercising,  any rights
against the Borrower, any other Guarantor or any other Person; and (f) apply any
sum, by whomsoever paid or however  realized,  to the Guarantied  Obligations in
such order as the Lenders shall elect.

                                      B-3
<PAGE>
         Section 5. Representations and Warranties.  Each Guarantor hereby makes
to the Agent,  the Lenders and the Swingline  Lender all of the  representations
and  warranties  made by the Borrower  with respect to or in any way relating to
such Guarantor in the Credit  Agreement and the other Loan Documents,  as if the
same were set forth herein in full.

         Section 6.  Covenants.  Each  Guarantor  will comply with all covenants
which the Borrower is to cause such  Guarantor to comply with under the terms of
the Credit Agreement or any of the other Loan Documents.

         Section 7. Waiver.  Each Guarantor,  to the fullest extent permitted by
Applicable  Law, hereby waives notice of acceptance  hereof or any  presentment,
demand,  protest or notice of any kind, and any other act or thing,  or omission
or delay to do any  other  act or thing,  which in any  manner or to any  extent
might  vary the risk of such  Guarantor  or which  otherwise  might  operate  to
discharge such Guarantor from its obligations hereunder.

         Section 8.  Inability to Accelerate  Loan. If the Agent,  the Swingline
Lender and/or the Lenders are prevented  under  Applicable Law or otherwise from
demanding or accelerating payment of any of the Guarantied Obligations by reason
of any automatic stay or otherwise,  the Agent,  the Swingline Lender and/or the
Lenders shall be entitled to receive from each Guarantor,  upon demand therefor,
the sums which  otherwise  would have been due had such  demand or  acceleration
occurred.

         Section 9.  Reinstatement of Guarantied  Obligations.  If claim is ever
made on the Agent,  any Lender or the Swingline Lender for repayment or recovery
of any  amount or  amounts  received  in  payment  or on  account  of any of the
Guarantied  Obligations,  and the Agent,  such  Lender or the  Swingline  Lender
repays all or part of said amount by reason of (a) any judgment, decree or order
of any  court  or  administrative  body of  competent  jurisdiction,  or (b) any
settlement or compromise of any such claim effected by the Agent, such Lender or
the Swingline Lender with any such claimant (including the Borrower or a trustee
in bankruptcy  for the Borrower),  then and in such event each Guarantor  agrees
that any such judgment, decree, order, settlement or compromise shall be binding
on it,  notwithstanding  any revocation  hereof,  any release  herefrom,  or the
cancellation of the Credit  Agreement,  any of the other Loan Documents,  or any
other  instrument  evidencing any liability of the Borrower,  and such Guarantor
shall be and remain liable to the Agent, such Lender or the Swingline Lender for
the  amounts so repaid or  recovered  to the same  extent as if such  amount had
never originally been paid to the Agent, such Lender or the Swingline Lender.

         Section  10.  Subrogation.  Upon the  making  by any  Guarantor  of any
payment  hereunder  for the account of the  Borrower,  such  Guarantor  shall be
subrogated to the rights of the payee against the Borrower;  provided,  however,
that such Guarantor shall not enforce any right or receive any payment by way of
subrogation  or otherwise take any action in respect of any other claim or cause
of action such Guarantor may have against the Borrower  arising by reason of any
payment or performance by such Guarantor  pursuant to this Guaranty,  unless and
until  all of  the  Guarantied  Obligations  have  been  indefeasibly  paid  and
performed in full.  If any amount shall

                                      B-4
<PAGE>
be paid to such Guarantor on account of or in respect of such subrogation rights
or other claims or causes of action,  such  Guarantor  shall hold such amount in
trust for the benefit of the Agent,  the Lenders  and the  Swingline  Lender and
shall  forthwith pay such amount to the Agent to be credited and applied against
the Guarantied Obligations, whether matured or unmatured, in accordance with the
terms of the Credit Agreement or to be held by the Agent as collateral  security
for any Guarantied Obligations existing.

         Section 11. Payments Free and Clear. All sums payable by each Guarantor
hereunder,   whether  of  principal,   interest,  Fees,  expenses,  premiums  or
otherwise,  shall  be paid in  full,  without  set-off  or  counterclaim  or any
deduction or withholding  whatsoever (including any Taxes), and if any Guarantor
is required by Applicable  Law or by a  Governmental  Authority to make any such
deduction or withholding, such Guarantor shall pay to the Agent, the Lenders and
the Swingline Lender such additional amount as will result in the receipt by the
Agent, the Lenders and the Swingline Lender of the full amount payable hereunder
had such deduction or withholding not occurred or been required.

         Section 12. Set-off. In addition to any rights now or hereafter granted
under  any of the  other  Loan  Documents  or  Applicable  Law and not by way of
limitation of any such rights,  each Guarantor  hereby  authorizes the Agent and
each Lender, at any time during the continuance of an Event of Default,  without
any prior notice to such Guarantor or to any other Person, any such notice being
hereby expressly  waived,  but in the case of a Lender subject to receipt of the
prior written consent of the Agent exercised in its sole discretion,  to set off
and to  appropriate  and to apply  any and all  deposits  (general  or  special,
including,  but not  limited  to,  indebtedness  evidenced  by  certificates  of
deposit,  whether  matured or unmatured) and any other  indebtedness at any time
held or owing by the Agent,  such Lender,  or any affiliate of the Agent or such
Lender,  to or for the credit or the  account of such  Guarantor  against and on
account of any of the Guarantied Obligations, although such obligations shall be
contingent or unmatured.  Each Guarantor agrees, to the fullest extent permitted
by  Applicable  Law,  that any  Participant  may  exercise  rights  of setoff or
counterclaim  and other rights with respect to its  participation as fully as if
such  Participant were a direct creditor of such Guarantor in the amount of such
participation.

         Section 13.  Subordination.  Each Guarantor hereby expressly  covenants
and agrees for the benefit of the Agent,  the Lenders and the  Swingline  Lender
that all  obligations  and  liabilities  of the  Borrower to such  Guarantor  of
whatever description, including without limitation, all intercompany receivables
of such Guarantor from the Borrower (collectively, the "Junior Claims") shall be
subordinate and junior in right of payment to all Guarantied Obligations.  If an
Event of Default shall have occurred and be continuing,  then no Guarantor shall
accept any direct or indirect  payment  (in cash,  property  or  securities,  by
setoff or otherwise) from the Borrower on account of or in any manner in respect
of  any  Junior  Claim  until  all  of  the  Guarantied  Obligations  have  been
indefeasibly paid in full.

         Section 14. Avoidance  Provisions.  It is the intent of each Guarantor,
the Agent,  the Lenders and the Swingline  Lender that in any  Proceeding,  such
Guarantor's  maximum  obligation  hereunder  shall  equal,  but not exceed,  the
maximum amount which would not otherwise cause the obligations of such Guarantor
hereunder (or any other  obligations of such Guarantor to the

                                      B-5
<PAGE>
Agent,  the Lenders and the Swingline  Lender) to be avoidable or  unenforceable
against  such  Guarantor  in such  Proceeding  as a result  of  Applicable  Law,
including without limitation, (a) Section 548 of the Bankruptcy Code of 1978, as
amended  (the  "Bankruptcy  Code")  and (b) any  state  fraudulent  transfer  or
fraudulent  conveyance  act or statute  applied in such  Proceeding,  whether by
virtue of Section 544 of the Bankruptcy  Code or otherwise.  The Applicable Laws
under which the possible  avoidance or  unenforceability  of the  obligations of
such  Guarantor  hereunder (or any other  obligations  of such  Guarantor to the
Agent,  the Lenders and the  Swingline  Lender)  shall be determined in any such
Proceeding are referred to as the "Avoidance  Provisions".  Accordingly,  to the
extent that the  obligations  of any  Guarantor  hereunder  would  otherwise  be
subject to avoidance  under the  Avoidance  Provisions,  the maximum  Guarantied
Obligations for which such Guarantor shall be liable  hereunder shall be reduced
to that  amount  which,  as of the time any of the  Guarantied  Obligations  are
deemed to have been incurred under the Avoidance Provisions, would not cause the
obligations  of such  Guarantor  hereunder  (or any  other  obligations  of such
Guarantor to the Agent, the Lenders and the Swingline Lender),  to be subject to
avoidance  under the Avoidance  Provisions.  This Section is intended  solely to
preserve the rights of the Agent, the Lenders and the Swingline Lender hereunder
to the maximum  extent  that would not cause the  obligations  of any  Guarantor
hereunder  to be subject to avoidance  under the  Avoidance  Provisions,  and no
Guarantor  or any other  Person shall have any right or claim under this Section
as against  the Agent,  the  Lenders  and the  Swingline  Lender  that would not
otherwise be available to such Person under the Avoidance Provisions.

         Section 15. Information.  Each Guarantor assumes all responsibility for
being and keeping itself informed of the financial condition of the Borrower and
the other Guarantors,  and of all other  circumstances  bearing upon the risk of
nonpayment of any of the Guarantied Obligations and the nature, scope and extent
of the risks that such Guarantor assumes and incurs  hereunder,  and agrees that
none of the Agent,  the  Lenders  or the  Swingline  Lender  shall have any duty
whatsoever to advise any Guarantor of information  regarding such  circumstances
or risks.

         Section 16.  Governing  Law. THIS  AGREEMENT  SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK  APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

         Section 17.  Waiver of jury trial.

         (a) EACH PARTY  HERETO  ACKNOWLEDGES  THAT ANY  DISPUTE OR  CONTROVERSY
BETWEEN OR AMONG ANY  GUARANTOR,  THE AGENT OR ANY OF THE LENDERS WOULD BE BASED
ON  DIFFICULT  AND COMPLEX  ISSUES OF LAW AND FACT AND WOULD RESULT IN DELAY AND
EXPENSE TO THE PARTIES.  ACCORDINGLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE LENDERS,  THE AGENT AND EACH GUARANTOR  HEREBY WAIVES ITS RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR  PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR
TRIBUNAL  IN WHICH AN ACTION MAY BE  COMMENCED  BY OR AGAINST  ANY PARTY  HERETO
ARISING  OUT OF THIS  AGREEMENT  OR ANY

                                      B-6
<PAGE>
OTHER LOAN  DOCUMENT OR BY REASON OF ANY OTHER SUIT,  CAUSE OF ACTION OR DISPUTE
WHATSOEVER BETWEEN OR AMONG THE BORROWER, THE AGENT OR ANY OF THE LENDERS OF ANY
KIND OR NATURE.

         (b) EACH OF THE  GUARANTORS,  THE AGENT AND EACH LENDER  HEREBY  AGREES
THAT THE FEDERAL DISTRICT COURT OF THE SOUTHERN  DISTRICT OF NEW YORK OR, AT THE
OPTION OF THE AGENT,  ANY STATE COURT LOCATED IN NEW YORK, NEW YORK,  SHALL HAVE
JURISDICTION  TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES  BETWEEN OR AMONG ANY
GUARANTOR, THE AGENT OR ANY OF THE LENDERS, PERTAINING DIRECTLY OR INDIRECTLY TO
THIS AGREEMENT,  THE LOANS,  THE LETTERS OF CREDIT,  THE NOTES OR ANY OTHER LOAN
DOCUMENT OR TO ANY MATTER ARISING HEREFROM OR THEREFROM. EACH GUARANTOR AND EACH
OF THE LENDERS EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS. EACH PARTY FURTHER WAIVES ANY
OBJECTION  THAT IT MAY NOW OR HEREAFTER  HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT FORUM AND EACH AGREES NOT TO PLEAD OR CLAIM THE SAME. THE CHOICE OF
FORUM SET FORTH IN THIS SECTION  SHALL NOT BE DEEMED TO PRECLUDE THE BRINGING OF
ANY  ACTION BY THE AGENT OR ANY  LENDER OR THE  ENFORCEMENT  BY THE AGENT OR ANY
LENDER  OF  ANY  JUDGMENT  OBTAINED  IN  SUCH  FORUM  IN ANY  OTHER  APPROPRIATE
JURISDICTION.

         (c) THE  PROVISIONS OF THIS SECTION HAVE BEEN  CONSIDERED BY EACH PARTY
WITH  THE  ADVICE  OF  COUNSEL  AND  WITH A  FULL  UNDERSTANDING  OF  THE  LEGAL
CONSEQUENCES  THEREOF,  AND SHALL SURVIVE THE PAYMENT OF THE LOANS AND ALL OTHER
AMOUNTS PAYABLE  HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS AND THE TERMINATION
OF THIS GUARANTY.

         Section 18. Loan  Accounts.  The Agent,  each Lender and the  Swingline
Lender may maintain  books and accounts  setting forth the amounts of principal,
interest  and  other  sums  paid and  payable  with  respect  to the  Guarantied
Obligations,  and in the case of any dispute  relating to any of the outstanding
amount,  payment or receipt of any of the  Guarantied  Obligations or otherwise,
the entries in such books and accounts  shall be deemed prima facie  evidence of
the amounts and other  matters set forth herein.  The failure of the Agent,  any
Lender or the Swingline  Lender to maintain such books and accounts shall not in
any way relieve or discharge any Guarantor of any of its obligations hereunder.

         Section 19. Waiver of Remedies.  No delay or failure on the part of the
Agent, any Lender or the Swingline Lender in the exercise of any right or remedy
it may have against any  Guarantor  hereunder or  otherwise  shall  operate as a
waiver thereof,  and no single or partial  exercise by the Agent,  any Lender or
the  Swingline  Lender of any such right or remedy  shall  preclude any other or
further exercise thereof or the exercise of any other such right or remedy.

                                      B-7
<PAGE>
         Section 20.  Termination.  This Guaranty shall remain in full force and
effect until indefeasible payment in full of the Guarantied  Obligations and the
other Obligations and the termination or cancellation of the Credit Agreement in
accordance with its terms.

         Section 21. Successors and Assigns.  Each reference herein to the Agent
or the Lenders  shall be deemed to include such Person's  respective  successors
and  assigns  (including,  but not  limited  to,  any  holder of the  Guarantied
Obligations)  in whose favor the  provisions  of this Guaranty also shall inure,
and each  reference  herein to each  Guarantor  shall be deemed to include  such
Guarantor's  successors  and  assigns,  upon whom this  Guaranty  also  shall be
binding.  The Lenders and the  Swingline  Lender  may,  in  accordance  with the
applicable  provisions  of the Credit  Agreement,  assign,  transfer or sell any
Guarantied  Obligation,  or  grant  or  sell  participations  in any  Guarantied
Obligations,  to any Person  without the consent of, or notice to, any Guarantor
and without  releasing,  discharging  or modifying any  Guarantor's  obligations
hereunder.  Each Guarantor  hereby  consents to the delivery by the Agent or any
Lender  to  any  Assignee  or  Participant  (or  any  prospective   Assignee  or
Participant) of any financial or other information regarding the Borrower or any
Guarantor.  No Guarantor may assign or transfer its obligations hereunder to any
Person without the prior written  consent of all Lenders and any such assignment
or other  transfer to which all of the Lenders  have not so  consented  shall be
null and void.

         Section  22.  Joint and Several  Obligations.  the  obligationS  of the
Guarantors HEREUNDER SHALL BE joint and several, and ACCORDINGLY, each Guarantor
CONFIRMS THAT IT is liable for the full amount of the  "GUARANTiED  Obligations"
AND ALL OF THE  OBLIGATIONS  AND  LIABILITIES  OF EACH OF THE  OTHER  gUARANTORS
HEREUNDER.

         Section 23.  Amendments.  This  Guaranty  may not be amended  except in
writing signed by the Requisite Lenders (or all of the Lenders if required under
the terms of the Credit Agreement), the Agent and each Guarantor.

         Section 24. Payments. All payments to be made by any Guarantor pursuant
to this Guaranty shall be made in Dollars, in immediately available funds to the
Agent at the  Principal  Office,  not later than 2:00 p.m. on the date of demand
therefor.

         Section 25.  Notices.  All notices,  requests and other  communications
hereunder  shall be in  writing  (including  facsimile  transmission  or similar
writing) and shall be given (a) to each Guarantor at its address set forth below
its signature  hereto,  (b) to the Agent,  any Lender or the Swingline Lender at
its respective address for notices provided for in the Credit Agreement,  or (c)
as to each such party at such other  address as such party shall  designate in a
written  notice  to the  other  parties.  Each  such  notice,  request  or other
communication  shall  be  effective  (i)  if  mailed,  when  received;  (ii)  if
telecopied,  when  transmitted;  or (iii)  if hand  delivered,  when  delivered;
provided,  however, that any notice of a change of address for notices shall not
be effective until received.

                                      B-8
<PAGE>

         Section 26. Severability.  In case any provision of this Guaranty shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining  provisions shall not in any way be affected
or impaired thereby.

         Section 27.  Headings.  Section  headings used in this Guaranty are for
convenience only and shall not affect the construction of this Guaranty.

         Section 28.  Trustees, Etc. Not Liable.

         IN THE CASE OF ANY  GUARANTOR  THAT IS A TRUST,  NO  TRUSTEE,  OFFICER,
SHAREHOLDER,  EMPLOYEE OR AGENT OF SUCH GUARANTOR  SHALL BE HELD TO ANY PERSONAL
LIABILITY,  JOINTLY OR SEVERALLY,  FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SUCH
GUARANTOR.  ALL PERSONS DEALING WITH SUCH GUARANTOR, IN ANY WAY, SHALL LOOK ONLY
TO THE ASSETS OF SUCH GUARANTOR FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION OWING BY SUCH GUARANTOR HEREUNDER. THE PROVISIONS OF THIS SECTION
SHALL NOT LIMIT ANY OBLIGATIONS OF ANY LOAN PARTY.

         Section 29.  Limitation of Liability.

         Neither the Agent nor any Lender, nor any affiliate, officer, director,
employee,  attorney,  or  agent  of the  Agent  or any  Lender,  shall  have any
liability  with respect to, and each  Guarantor  hereby  waives,  releases,  and
agrees  not to sue any of them  upon,  any  claim  for  any  special,  indirect,
incidental,  or  consequential  damages  suffered or incurred by a Guarantor  in
connection with,  arising out of, or in any way related to, this Guaranty or any
of the other Loan  Documents,  or any of the  transactions  contemplated by this
Guaranty,  the  Credit  Agreement  or any  of the  other  Loan  Documents.  Each
Guarantor hereby waives, releases, and agrees not to sue the Agent or any Lender
or  any  of  the  Agent's  or  any  Lender's  affiliates,  officers,  directors,
employees,  attorneys, or agents for punitive damages in respect of any claim in
connection  with,  arising out of, or in any way related to, this Guaranty,  the
Credit Agreement or any of the other Loan Documents,  or any of the transactions
contemplated by Credit Agreement or financed thereby.

         Section 30.  Definitions.  (a) For the purposes of this Guaranty:

         "Proceeding" means any of the following: (i) a voluntary or involuntary
case  concerning any Guarantor  shall be commenced  under the Bankruptcy Code of
1978, as amended;  (ii) a custodian (as defined in such  Bankruptcy  Code or any
other  applicable  bankruptcy laws) is appointed for, or takes charge of, all or
any  substantial  part  of  the  property  of any  Guarantor;  (iii)  any  other
proceeding  under  any  Applicable  Law,   domestic  or  foreign,   relating  to
bankruptcy, insolvency, reorganization, winding-up or composition for adjustment
of debts,  whether now or  hereafter  in effect,  is  commenced  relating to any
Guarantor;  (iv) any  Guarantor is  adjudicated  insolvent or bankrupt;  (v) any
order of relief or other order  approving any such case or proceeding is entered
by a court  of  competent  jurisdiction;  (vi)  any  Guarantor  makes a  general
assignment for the benefit of creditors;  (vii) any Guarantor shall fail to pay,
or shall  state that it is

                                      B-9
<PAGE>
unable to pay,  or shall be unable to pay,  its debts  generally  as they become
due;  (viii) any Guarantor  shall call a meeting of its creditors with a view to
arranging a composition or adjustment of its debts;  (ix) any Guarantor shall by
any act or failure to act indicate its consent to,  approval of or  acquiescence
in any of the  foregoing;  or (x) any  corporate  action  shall  be taken by any
Guarantor for the purpose of effecting any of the foregoing.

         (b)  Terms  not  otherwise  defined  herein  are used  herein  with the
respective meanings given them in the Credit Agreement.

                            [Signature on Next Page]

                                      B-10
<PAGE>

         IN WITNESS WHEREOF, each Guarantor has duly executed and delivered this
Guaranty as of the date and year first written above.

                             [signed by Guarantors]

                                      B-11
<PAGE>
                                     ANNEX I

                           FORM OF ACCESSION AGREEMENT

         THIS ACCESSION  AGREEMENT dated as of ____________,  ____, executed and
delivered by ______________________,  a _____________ (the "New Subsidiary"), in
favor of (a) FIRST UNION  NATIONAL  BANK, in its capacity as Agent (the "Agent")
for the Lenders under that certain Credit  Agreement dated as of March ___, 2002
(as amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement"), by and among Hospitality Properties Trust (the "Borrower"),
the financial  institutions party thereto and their assignees under Section 12.5
thereof (the "Lenders"),  the Agent, and the other parties thereto,  and (b) the
Lenders and the Swingline Lender.

         WHEREAS,  pursuant to the Credit Agreement,  the Agent, the Lenders and
the  Swingline  Lender have agreed to make  available  to the  Borrower  certain
financial  accommodations  on the terms and  conditions  set forth in the Credit
Agreement;

         WHEREAS, the Borrower owns, directly or indirectly, at least a majority
of the issued and outstanding Equity Interests in the New Subsidiary;

         WHEREAS, the Borrower, the New Subsidiary, and the existing Guarantors,
though  separate  legal  entities,  are mutually  dependent on each other in the
conduct of their  respective  businesses  as an  integrated  operation  and have
determined it to be in their mutual best interests to obtain  financing from the
Agent, the Lenders and the Swingline Lender through their collective efforts;

         WHEREAS,  the New Subsidiary  acknowledges  that it will receive direct
and  indirect  benefits  from the Agent,  the Lenders and the  Swingline  Lender
making such financial  accommodations available to the Borrower under the Credit
Agreement  and,  accordingly,  the New  Subsidiary  is willing to guarantee  the
Borrower's obligations to the Agent, the Lenders and the Swingline Lender on the
terms and conditions contained herein; and

         WHEREAS, the New Subsidiary's  execution and delivery of this Agreement
is a condition to the Agent, the Lenders and the Swingline Lender  continuing to
make such financial accommodations to the Borrower.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency  of which are hereby  acknowledged  by the New  Subsidiary,  the New
Subsidiary agrees as follows:

         Section 1. Accession to Guaranty. The New Subsidiary hereby agrees that
it is a "Guarantor"  under that certain Guaranty dated as of March ___, 2002 (as
amended,  supplemented,  restated or otherwise  modified from time to time,  the
"Guaranty"), made by each Subsidiary of the Borrower a party thereto in favor of
the Agent, the Lenders and the Swingline Lender and assumes all obligations of a
"Guarantor"  thereunder,  all as if the New  Subsidiary  had

                                      B-12
<PAGE>
been an original  signatory to the Guaranty.  Without limiting the generality of
the foregoing, the New Subsidiary hereby:

         (a)  irrevocably  and  unconditionally  guarantees the due and punctual
payment and performance when due, whether at stated maturity, by acceleration or
otherwise, of all Guarantied Obligations (as defined in the Guaranty);

         (b) makes to the Agent,  the Lenders and the Swingline Lender as of the
date hereof each of the representations and warranties contained in Section 5 of
the  Guaranty  and  agrees  to be bound by each of the  covenants  contained  in
Section 6 of the Guaranty; and

         (c) consents and agrees to each provision set forth in the Guaranty.

         SECTION 2.  GOVERNING  LAW.  THIS  AGREEMENT  SHALL BE GOVERNED BY, AND
CONSTRUED  AND ENFORCED IN  ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

         Section 3. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have their  respective  defined  meanings given them in the
Credit Agreement.

                            [Signatures on Next Page]

                                      B-13
<PAGE>

         IN  WITNESS  WHEREOF,  the New  Subsidiary  has caused  this  Accession
Agreement to be duly  executed and delivered  under seal by its duly  authorized
officers as of the date first written above.

                                            [NEW SUBSIDIARY]

                                            By:_______________________________
                                                 Name:________________________
                                                 Title:_______________________

                                            Address for Notices:
                                            c/o Hospitality Properties Trust
                                            400 Centre Street
                                            Newton, Massachusetts  02458
                                            Attention:_______________________
                                            Telecopy Number:(___) ___-____
                                            Telephone Number:(617) 332-3990

Accepted:

FIRST UNION NATIONAL BANK,
   as Agent

By:_______________________________
     Name:________________________
     Title:_______________________

                                      B-14
<PAGE>
                                    EXHIBIT C

                           FORM OF NOTICE OF BORROWING

                               ____________, 200_

First Union  National Bank, as Agent One First Union Center,  NC0172  Charlotte,
North Carolina 28288 Attention: __________________

Ladies and Gentlemen:

         Reference is made to that certain  Credit  Agreement  dated as of March
___, 2002 (as amended, restated, supplemented or otherwise modified from time to
time, the "Credit  Agreement"),  by and among Hospitality  Properties Trust (the
"Borrower"),  the financial institutions party thereto and their assignees under
Section 12.5 thereof (the  "Lenders"),  First Union National Bank, as Agent (the
"Agent"), and the other parties thereto.  Capitalized terms used herein, and not
otherwise  defined  herein,  have their  respective  meanings  given them in the
Credit Agreement.

         1.       Pursuant  to  Section  2.1.(b) of the  Credit  Agreement,  the
                  Borrower hereby requests that the Lenders make Revolving Loans
                  to   the   Borrower   in  an   aggregate   amount   equal   to
                  $-------------------.

         2.       The  Borrower  requests  that  such  Revolving  Loans  be made
                  available to the Borrower on ____________, 200_.

         3.       The Borrower  hereby  requests  that the  requested  Revolving
                  Loans all be of the following Type:

                  [Check one box only]

                        / /  Base Rate Loans
                        / /  LIBOR Loans,  each with an initial Interest Period
for a duration of:

                         [Check one box only]     / /    7 days
                                                  / /   30 days
                                                  / /   60 days
                                                  / /   90 days

                                      C-1
<PAGE>

         4.       The proceeds of this borrowing of Revolving Loans will be used
                  for  the  following  purpose:  -------------------------------
                  ------------------------------------------------------------.

         5.       The Borrower  requests that the proceeds of this  borrowing of
                  Revolving   Loans  be  made   available  to  the  Borrower  by
                  ____________________________.

         The Borrower  hereby  certifies to the Agent and the Lenders that as of
the date  hereof  and as of the date of the  making of the  requested  Revolving
Loans and after giving effect thereto, (a) no Default or Event of Default has or
shall  have  occurred  and  be  continuing,  and  (b)  the  representations  and
warranties  made or deemed made by the Borrower and each other Loan Party in the
Loan Documents to which any of them is a party are and shall be true and correct
in all material  respects,  except to the extent that such  representations  and
warranties  expressly  relate  solely to an  earlier  date (in  which  case such
representations  and warranties were true and accurate on and as of such earlier
date) and except for changes in factual circumstances specifically and expressly
permitted under the Credit Agreement. In addition, the Borrower certifies to the
Agent  and the  Lenders  that all  conditions  to the  making  of the  requested
Revolving Loans  contained in Article V. of the Credit  Agreement will have been
satisfied at the time such Revolving Loans are made.

         If notice of the requested  borrowing of Revolving Loans was previously
given by telephone,  this notice is to be considered the written confirmation of
such telephone notice required by Section 2.1.(b) of the Credit Agreement.

         IN WITNESS  WHEREOF,  the  undersigned  has duly executed and delivered
this Notice of Borrowing as of the date first written above.

                                           HOSPITALITY PROPERTIES TRUST

                                           By:
                                               --------------------------------
                                                Name:
                                                     --------------------------
                                                Title:
                                                      -------------------------

                                      C-2

<PAGE>
                                    EXHIBIT D

                         FORM OF NOTICE OF CONTINUATION

                               ____________, 200_

First Union  National Bank, as Agent
One First Union Center,  NC0172
Charlotte, North Carolina 28288
Attention: __________________

Ladies and Gentlemen:

         Reference is made to that certain  Credit  Agreement  dated as of March
___, 2002 (as amended, restated, supplemented or otherwise modified from time to
time, the "Credit  Agreement"),  by and among Hospitality  Properties Trust (the
"Borrower"),  the financial institutions party thereto and their assignees under
Section 12.5 thereof (the  "Lenders"),  First Union National Bank, as Agent (the
"Agent"), and the other parties thereto.  Capitalized terms used herein, and not
otherwise  defined  herein,  have their  respective  meanings  given them in the
Credit Agreement.

         Pursuant to Section 2.8. of the Credit  Agreement,  the Borrower hereby
requests a Continuation of a borrowing of Loans under the Credit Agreement,  and
in  that  connection   sets  forth  below  the  information   relating  to  such
Continuation as required by such Section of the Credit Agreement:

         1.       The proposed date of such Continuation is ____________, _____.

         2.       The  aggregate  principal  amount  of  Loans  subject  to  the
                  requested  Continuation is  $________________________  and was
                  originally borrowed by the Borrower on ____________, 200_.

         3.       The  portion  of  such   principal   amount  subject  to  such
                  Continuation is $--------------------------.

         4.       The current  Interest  Period for each of the Loans subject to
                  such Continuation ends on ________________, 200_.

                                      D-1
<PAGE>

         5.       The duration of the new Interest Period for each of such Loans
                  or portion thereof subject to such Continuation is:

                  [Check one box only]         / /      7 days
                                               / /     30 days
                                               / /     60 days
                                               / /     90 days

         The Borrower  hereby  certifies to the Agent and the Lenders that as of
the date hereof,  as of the proposed  date of the  requested  Continuation,  and
after giving effect to such Continuation,  no Default or Event of Default has or
shall have occurred and be continuing.

         If  notice  of the  requested  Continuation  was  given  previously  by
telephone,  this notice is to be  considered  the written  confirmation  of such
telephone notice required by Section 2.8. of the Credit Agreement.

         IN WITNESS  WHEREOF,  the  undersigned  has duly executed and delivered
this Notice of Continuation as of the date first written above.

                                           HOSPITALITY PROPERTIES TRUST

                                           By:
                                               --------------------------------
                                                Name:
                                                     --------------------------
                                                Title:
                                                      -------------------------

                                      D-2

<PAGE>
                                    EXHIBIT E

                          FORM OF NOTICE OF CONVERSION

                               ____________, 200_

First Union  National Bank, as Agent
One First Union Center,  NC0172
Charlotte, North Carolina 28288
Attention: __________________

Ladies and Gentlemen:

         Reference is made to that certain  Credit  Agreement  dated as of March
___, 2002 (as amended, restated, supplemented or otherwise modified from time to
time, the "Credit  Agreement"),  by and among Hospitality  Properties Trust (the
"Borrower"),  the financial institutions party thereto and their assignees under
Section 12.5 thereof (the  "Lenders"),  First Union National Bank, as Agent (the
"Agent"), and the other parties thereto.  Capitalized terms used herein, and not
otherwise  defined  herein,  have their  respective  meanings  given them in the
Credit Agreement.

         Pursuant to Section 2.9. of the Credit  Agreement,  the Borrower hereby
requests a Conversion  of a borrowing of Loans of one Type into Loans of another
Type under the Credit  Agreement,  and in that  connection  sets forth below the
information  relating to such  Conversion  as  required  by such  Section of the
Credit Agreement:

         1.       The proposed date of such Conversion is ______________, 200_.

         2.       The Loans to be Converted pursuant hereto are currently:

                  [Check one box only]    / /    Base Rate Loans
                                          / /    LIBOR Loans

         3.       The  aggregate  principal  amount  of  Loans  subject  to  the
                  requested   Conversion  is   $_____________________   and  was
                  originally borrowed by the Borrower on ____________, 200_.

         4.       The  portion  of  such   principal   amount  subject  to  such
                  Conversion is $___________________.

                                      E-1
<PAGE>

         5.       The amount of such Loans to be so Converted is to be converted
                  into Loans of the following Type:

                  [Check one box only]

                       / / Base Rate Loans
                       / / LIBOR Loans,  each with an initial Interest Period
                           for a duration of:

                         [Check one box only]    / /          7 days
                                                 / /         30 days
                                                 / /         60 days
                                                 / /         90 days

         The Borrower  hereby  certifies to the Agent and the Lenders that as of
the date hereof and as of the date of the requested  Conversion and after giving
effect  thereto,  (a) no Default or Event of Default has or shall have  occurred
and be continuing,  and (b) the  representations  and warranties  made or deemed
made by the  Borrower  and each other Loan Party in the Loan  Documents to which
any of them is a party  are and  shall  be  true  and  correct  in all  material
respects,  except  to  the  extent  that  such  representations  and  warranties
expressly  relate solely to an earlier date (in which case such  representations
and warranties were true and accurate on and as of such earlier date) and except
for changes in factual circumstances  specifically and expressly permitted under
the Credit Agreement.

         If  notice  of  the  requested   Conversion  was  given  previously  by
telephone,  this notice is to be  considered  the written  confirmation  of such
telephone notice required by Section 2.9. of the Credit Agreement.

         IN WITNESS  WHEREOF,  the  undersigned  has duly executed and delivered
this Notice of Conversion as of the date first written above.

                                      HOSPITALITY PROPERTIES TRUST

                                      By:
                                          -------------------------------------
                                           Name:
                                                -------------------------------
                                           Title:
                                                 ------------------------------

                                      E-2

<PAGE>
                                    EXHIBIT F

                      FORM OF NOTICE OF SWINGLINE BORROWING

                               ------------, -----

First Union  National Bank, as Agent
One First Union Center,  NC0172
Charlotte, North Carolina 28288
Attention: __________________

Ladies and Gentlemen:

         Reference is made to that certain  Credit  Agreement  dated as of March
___, 2002 (as amended, restated, supplemented or otherwise modified from time to
time, the "Credit  Agreement"),  by and among Hospitality  Properties Trust (the
"Borrower"),  the financial institutions party thereto and their assignees under
Section 12.5 thereof (the  "Lenders"),  First Union National Bank, as Agent (the
"Agent"), and the other parties thereto.  Capitalized terms used herein, and not
otherwise  defined  herein,  have their  respective  meanings  given them in the
Credit Agreement.

         1.       Pursuant  to  Section  2.2.(b) of the  Credit  Agreement,  the
                  Borrower  hereby  requests  that the  Swingline  Lender make a
                  Swingline   Loan  to  the  Borrower  in  an  amount  equal  to
                  $-------------------.

         2.       The  Borrower  requests  that  such  Swingline  Loan  be  made
                  available to the Borrower on ____________, 200_.

         3.       The  proceeds  of this  Swingline  Loan  will be used  for the
                  following        purpose:        -----------------------------
                  -----------------------------------------------------------.

         4.       The Borrower requests that the proceeds of such Swingline Loan
                  be     made      available      to     the     Borrower     by
                  ______________________________.

         The Borrower hereby  certifies to the Agent,  the Swingline  Lender and
the  Lenders  that as of the date  hereof,  as of the date of the  making of the
requested  Swingline  Loan, and after making such Swingline Loan, (a) no Default
or Event of Default has or shall have  occurred and be  continuing,  and (b) the
representations  and  warranties  made or deemed made by the  Borrower  and each
other Loan Party in the Loan  Documents  to which any of them is a party are and
shall be true and correct in all  material  respects,  except to the extent that
such  representations and warranties  expressly relate solely to an earlier date
(in which case such representations and warranties were true and accurate on and
as of such  earlier  date) and  except  for  changes  in  factual  circumstances
specifically and expressly  permitted under the Credit  Agreement.  In addition,
the Borrower  certifies to the Agent and the Lenders that all  conditions to the
making of the  requested

                                      F-1
<PAGE>

Swingline  Loan  contained in Article V. of the Credit  Agreement will have been
satisfied at the time such Swingline Loan is made.

         If  notice  of the  requested  borrowing  of this  Swingline  Loan  was
previously  given by  telephone,  this  notice is to be  considered  the written
confirmation of such telephone  notice required by Section 2.2.(b) of the Credit
Agreement.

         IN WITNESS  WHEREOF,  the  undersigned  has duly executed and delivered
this Notice of Swingline Borrowing as of the date first written above.

                                          HOSPITALITY PROPERTIES TRUST

                                          By:
                                              ----------------------------------
                                               Name:
                                                    ----------------------------
                                               Title:
                                                     ---------------------------

                                      F-2

<PAGE>
                                    EXHIBIT G

                             FORM OF SWINGLINE NOTE

$25,000,000.00                                                   March ___, 2002

         FOR VALUE RECEIVED,  the undersigned,  HOSPITALITY  PROPERTIES TRUST, a
Maryland real estate investment trust (the  "Borrower"),  hereby promises to pay
to the order of FIRST  UNION  NATIONAL  BANK  (the  "Swingline  Lender")  to its
address at One First Union Center, NC0172,  Charlotte,  North Carolina 28288, or
at such other address as may be specified in writing by the Swingline  Lender to
the  Borrower,  the  principal  sum of  TWENTY-FIVE  MILLION AND NO/100  DOLLARS
($25,000,000.00)  (or such  lesser  amount as shall equal the  aggregate  unpaid
principal amount of Swingline Loans made by the Swingline Lender to the Borrower
under the Credit Agreement),  on the dates and in the principal amounts provided
in the Credit  Agreement,  and to pay  interest on the unpaid  principal  amount
owing hereunder, at the rates and on the dates provided in the Credit Agreement.

         The date,  amount of each  Swingline  Loan,  and each  payment  made on
account of the principal  thereof,  shall be recorded by the Swingline Lender on
its books and,  prior to any  transfer of this Note,  endorsed by the  Swingline
Lender on the schedule  attached hereto or any  continuation  thereof,  provided
that the  failure  of the  Swingline  Lender  to make any  such  recordation  or
endorsement  shall not affect the  obligations of the Borrower to make a payment
when due of any amount owing under the Credit  Agreement or hereunder in respect
of the Swingline Loans.

         This Note is the  Swingline  Note  referred to in the Credit  Agreement
dated as of March ___,  2002 (as amended,  restated,  supplemented  or otherwise
modified from time to time, the "Credit Agreement"),  by and among the Borrower,
the financial  institutions party thereto and their assignees under Section 12.5
thereof (the  "Lenders"),  First Union  National  Bank, as Agent,  and the other
parties thereto,  and evidences Swingline Loans made to the Borrower thereunder.
Terms used but not otherwise  defined in this Note have the respective  meanings
assigned to them in the Credit Agreement.

         The Credit  Agreement  provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Swingline
Loans upon the terms and conditions specified therein.

         THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,  THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED,  AND TO BE FULLY
PERFORMED, IN SUCH STATE.

         The Borrower hereby waives presentment for payment,  demand,  notice of
demand, notice of non-payment,  protest, notice of protest and all other similar
notices.

                                      G-1
<PAGE>

         Time is of the essence for this Note.

         IN WITNESS  WHEREOF,  the  undersigned  has executed and delivered this
Swingline Note under seal as of the date first written above.

                                   HOSPITALITY PROPERTIES TRUST

                                   By:
                                       ---------------------------------------
                                        Name:
                                             ---------------------------------
                                        Title:
                                              --------------------------------

                                   Attest:
                                          ------------------------------------
                                           Name:
                                                ------------------------------
                                           Title:
                                                 -----------------------------

                                   [CORPORATE SEAL]

                                      G-2

<PAGE>

                           SCHEDULE OF SWINGLINE LOANS

         This Note  evidences  Swingline  Loans made under the  within-described
Credit Agreement to the Borrower,  on the dates and in the principal amounts set
forth  below,  subject to the payments and  prepayments  of principal  set forth
below:

                    Principal                       Unpaid
                    Amount of      Amount Paid     Principal       Notation
 Date of Loan         Loan          or Prepaid      Amount          Made By
 ------------         ----          ----------      ------          -------

                                      G-3
<PAGE>

                                    EXHIBIT H

               FORM OF INVESTMENT MANAGER SUBORDINATION AGREEMENT

                                      H-1
<PAGE>

                                    EXHIBIT I

                             FORM OF REVOLVING NOTE

$____________________                                      _______________, 200_

         FOR VALUE RECEIVED,  the undersigned,  HOSPITALITY  PROPERTIES TRUST, a
Maryland real estate investment trust (the  "Borrower"),  hereby promises to pay
to the order of  ____________________  (the  "Lender"),  in care of First  Union
National  Bank, as Agent (the "Agent") to First Union  National  Bank, One First
Union Center, 301 South College Street,  Charlotte,  North Carolina 28288, or at
such other  address as may be specified in writing by the Agent to the Borrower,
the principal sum of ________________  AND ____/100 DOLLARS  ($____________) (or
such  lesser  amount as shall equal the  aggregate  unpaid  principal  amount of
Revolving  Loans made by the Lender to the Borrower  under the Credit  Agreement
(as herein defined)),  on the dates and in the principal amounts provided in the
Credit  Agreement,  and to pay  interest on the unpaid  principal  amount  owing
hereunder, at the rates and on the dates provided in the Credit Agreement.

         The date,  amount  of each  Revolving  Loan  made by the  Lender to the
Borrower,  and each payment made on account of the principal  thereof,  shall be
recorded  by the Lender on its books and,  prior to any  transfer  of this Note,
endorsed  by the  Lender on the  schedule  attached  hereto or any  continuation
thereof, provided that the failure of the Lender to make any such recordation or
endorsement  shall not affect the  obligations of the Borrower to make a payment
when due of any amount owing under the Credit  Agreement or hereunder in respect
of the Revolving Loans made by the Lender.

         This  Note is one of the  Revolving  Notes  referred  to in the  Credit
Agreement  dated as of March ___, 2002 (as amended,  restated,  supplemented  or
otherwise modified from time to time, the "Credit Agreement"),  by and among the
Borrower,  the financial  institutions  party thereto and their  assignees under
Section 12.5 thereof (the "Lenders"),  the Agent, and the other parties thereto.
Capitalized  terms used herein,  and not otherwise  defined  herein,  have their
respective meanings given them in the Credit Agreement.

         The Credit  Agreement  provides for the acceleration of the maturity of
this Note upon the  occurrence of certain  events and for  prepayments  of Loans
upon the terms and conditions specified therein.

         Except as permitted by Section 12.5.(d) of the Credit  Agreement,  this
Note may not be assigned by the Lender to any other Person.

                                      I-1
<PAGE>

         This Note shall be governed by, and construed in accordance  with,  the
laws of the State of NEW YORK APPLICABLE TO CONTRACTS EXECUTED,  AND TO BE FULLY
PERFORMED, IN SUCH STATE.

         The Borrower hereby waives presentment for payment,  demand,  notice of
demand, notice of non-payment,  protest, notice of protest and all other similar
notices.

         Time is of the essence for this Note.

         IN WITNESS  WHEREOF,  the  undersigned  has executed and delivered this
Revolving Note under seal as of the date first written above.

                                     HOSPITALITY PROPERTIES TRUST

                                     By:
                                         --------------------------------------
                                          Name:
                                               --------------------------------
                                          Title:
                                                -------------------------------

                                     Attest:
                                            -----------------------------------
                                             Name:
                                                  -----------------------------
                                             Title:
                                                   ----------------------------

                                     [CORPORATE SEAL]

                                      I-2

<PAGE>

                                   EXHIBIT J-1

                           FORM OF OPINION OF COUNSEL

[Opinion letter to be substantially  the same as the legal opinion  delivered in
connection with HRPT Properties Trust credit agreement]

                                     J-1-1

<PAGE>

                                   EXHIBIT J-2

                       FORM OF OPINION OF SPECIAL COUNSEL

[Opinion letter to be substantially  the same as the legal opinion  delivered in
connection with HRPT Properties Trust credit agreement]

                                      J-2-1

<PAGE>
                                    EXHIBIT K

                         FORM OF COMPLIANCE CERTIFICATE

                              _______________, 200_

First  Union  National  Bank
One First Union  Center,  NC0172
Charlotte,  North Carolina 28288
Attention: ____________

Each  of  the  Lenders  Party  to  the  Credit   Agreement
   referred to below

Ladies and Gentlemen:

         Reference is made to that certain  Credit  Agreement  dated as of March
___, 2002 (as amended, restated, supplemented or otherwise modified from time to
time, the "Credit  Agreement"),  by and among Hospitality  Properties Trust (the
"Borrower"),  the financial institutions party thereto and their assignees under
Section 12.5 thereof (the  "Lenders"),  First Union National Bank, as Agent (the
"Agent") and the other parties thereto.  Capitalized terms used herein,  and not
otherwise  defined  herein,  have their  respective  meanings  given them in the
Credit Agreement.

         Pursuant  to Section  8.3.  of the Credit  Agreement,  the  undersigned
hereby certifies to the Agent and the Lenders as follows:

         (1) The undersigned is the chief financial officer of the Borrower.

         (2) The  undersigned has examined the books and records of the Borrower
and has conducted such other  examinations and  investigations as are reasonably
necessary to provide this Compliance Certificate.

         (3) No  Default  or Event of  Default  exists [if such is not the case,
specify  such  Default or Event of Default and its nature,  when it occurred and
whether it is continuing  and the steps being taken by the Borrower with respect
to such event, condition or failure].

         (4) The  representations  and  warranties  made or  deemed  made by the
Borrower  and the other  Loan  Parties in the Loan  Documents  to which any is a
party,  are true and  correct  in all  material  respects  on and as of the date
hereof except to the extent that such  representations and warranties  expressly
relate  solely to an  earlier  date (in  which  case  such  representations  and
warranties shall have been true and accurate on and as of such earlier date) and
except for changes in factual circumstances specifically and expressly permitted
under the Credit Agreement.

                                      K-1
<PAGE>

         (5) Attached hereto as Schedule 1 are reasonably detailed  calculations
establishing whether or not the Borrower and its Subsidiaries were in compliance
with the  covenants  contained in Sections 9.1 through 9.3 and 9.6 of the Credit
Agreement.

         IN WITNESS WHEREOF, the undersigned has executed this certificate as of
the date first above written.

                                    -----------------------------------------
                                    Name:
                                          -----------------------------------
                                    Title:
                                          -----------------------------------

                                      K-2
<PAGE>

                                   Schedule 1

                          [Calculations to be Attached]

                                      K-3Exhibit 10.1

                             DEL LABORATORIES, INC.
                             EMPLOYEES PENSION PLAN

                            AMENDMENT AND RESTATEMENT
                         EFFECTIVE AS OF JANUARY 1, 1997
              (with certain other effective dates as noted herein)

<PAGE>

                             DEL LABORATORIES, INC.
                             EMPLOYEES PENSION PLAN

                            AMENDMENT AND RESTATEMENT
                         EFFECTIVE AS OF JANUARY 1, 1997
              (with certain other effective dates as noted herein)

                                TABLE OF CONTENTS

                                    ARTICLE 1
                                   DEFINITIONS

1.1      ACCRUED BENEFIT......................................................1
         ---------------
1.2      ACTUARIAL EQUIVALENT OR EQUIVALENT ACTUARIAL VALUE...................4
         --------------------------------------------------
1.3      ADMINISTRATOR (OR PLAN ADMINISTRATOR)................................4
         -------------------------------------
1.4      AFFILIATED COMPANY...................................................4
         ---------- -------
1.5      ANNUITY STARTING DATE................................................4
         ---------------------
1.6      AVERAGE MONTHLY COMPENSATION.........................................4
         ----------------------------
1.7      BENEFICIARY..........................................................4
         -----------
1.8      BOARD OF DIRECTORS...................................................4
         ------------------
1.9      BREAK IN SERVICE.....................................................5
         ----------------
1.10     CODE.................................................................5
         ----
1.11     COMPENSATION.........................................................5
         ------------
1.12     EARLY RETIREMENT DATE................................................5
         ---------------------
1.13     EFFECTIVE DATE.......................................................5
         --------------
1.14     ELIGIBLE EMPLOYEE....................................................5
         -----------------
1.15     EMPLOYEE.............................................................6
         --------
1.16     EMPLOYER.............................................................6
         --------
1.17     ENTRY DATE...........................................................6
         ----------
1.18     ERISA................................................................6
         -----
1.19     FROZEN ACCRUED BENEFIT ..............................................6
         -----------------------
1.20     HIGHLY COMPENSATED EMPLOYEE..........................................7
         ---------------------------
1.21     HOUR OF SERVICE......................................................8
         ---------------
1.22     LIMITATION YEAR......................................................8
         ---------------
1.23     NON-HIGHLY COMPENSATED EMPLOYEE......................................8
         -------------------------------
1.24     NORMAL RETIREMENT AGE................................................9
         ---------------------
1.25     NORMAL RETIREMENT DATE...............................................9
         ----------------------
1.26     PARTICIPANT..........................................................9
         -----------
1.27     PLAN.................................................................9
         ----
1.28     TRUST................................................................9
         -----
1.29     TRUST FUND...........................................................9
         ----------
1.30     TRUSTEE..............................................................9
         -------
1.31     YEAR OF SERVICE......................................................9
         ---------------

                                        i

<PAGE>

                                    ARTICLE 2
                          ELIGIBILITY FOR PARTICIPATION

2.1      INITIAL ELIGIBILITY.................................................12
         -------------------
2.2      SUBSEQUENT ELIGIBILITY..............................................12
         ----------------------
2.3      REHIRED PARTICIPANTS................................................12
         --------------------

                                    ARTICLE 3
                               RETIREMENT BENEFITS

3.1      NORMAL RETIREMENT BENEFITS..........................................12
         --------------------------
3.2      LATE RETIREMENT BENEFITS............................................13
         ------------------------
3.3      EARLY RETIREMENT BENEFITS...........................................13
         -------------------------
3.4      FORMS OF BENEFITS...................................................14
         -----------------
3.5      PAYMENTS TO MINORS AND INCOMPETENTS.................................15
         -----------------------------------
3.6      DISABILITY BENEFITS.................................................15
         -------------------
3.7      CASH-OUT BY ADMINISTRATOR...........................................15
         -------------------------
3.8      MAXIMUM LIMITATION ON BENEFITS......................................16
         ------------------------------
3.9      STANDARD BENEFIT PROVISIONS.........................................16
         ---------------------------
3.10     DISTRIBUTION REQUIREMENTS...........................................20
         -------------------------
3.11     DIRECT ROLLOVERS....................................................21
         ----------------
3.12     MILITARY SERVICE BENEFITS...........................................22
         -------------------------

                                    ARTICLE 4
                                 DEATH BENEFITS

4.1      DEATH AFTER RETIREMENT BUT BEFORE BENEFITS BEGIN....................22
         ------------------------------------------------
4.2      DEATH AFTER BENEFITS BEGIN..........................................22
         --------------------------

                                    ARTICLE 5
                            TERMINATION OF EMPLOYMENT

5.1      DEFERRED PENSION BENEFITS...........................................22
         -------------------------
5.2      EARLY DEFERRED PENSION BENEFITS.....................................22
         -------------------------------

                                    ARTICLE 6
                                  CONTRIBUTIONS

6.1      EMPLOYER CONTRIBUTIONS..............................................23
         ----------------------
6.2      EMPLOYER'S RIGHT TO SUSPEND OR REDUCE CONTRIBUTIONS.................23
         ---------------------------------------------------
6.3      DEDUCTIBILITY OF CONTRIBUTIONS......................................23
         ------------------------------

                                       ii

<PAGE>

                                    ARTICLE 7
                            AMENDMENT AND TERMINATION

7.1      EMPLOYER'S RIGHT TO AMEND...........................................23
         -------------------------
7.2      AMENDMENT PROCEDURE.................................................24
         -------------------
7.3      TERMINATION OF THE PLAN.............................................24
         -----------------------
7.4      TERMINATION PROCEDURE...............................................25
         ---------------------
7.5      RELEASE AND DISCHARGE OF ADMINISTRATOR..............................25
         --------------------------------------

                                    ARTICLE 8
                                 ADMINISTRATION

8.1      ADMINISTRATION......................................................25
         --------------

                                    ARTICLE 9
                                THE ADMINISTRATOR

9.1      MEMBERS.............................................................26
         -------
9.2      PROCEDURE...........................................................26
         ---------
9.3      POWERS AND RESPONSIBILITIES.........................................26
         ---------------------------
9.4      CERTIFICATIONS AND INVESTIGATIONS...................................27
         ---------------------------------
9.5      CLAIMS PROCEDURE....................................................27
         ----------------
9.6      ADVICE..............................................................28
         ------
9.7      DELEGATION..........................................................28
         ----------
9.8      LIABILITY; INDEMNIFICATION..........................................29
         --------------------------
9.9      INSURANCE...........................................................29
         ---------
9.10     BONDING.............................................................29
         -------
9.11     COMPENSATION........................................................30
         ------------
9.12     PLAN RECORDS........................................................30
         ------------
9.13     INSTRUCTIONS TO TRUSTEES............................................30
         ------------------------
9.14     INVESTMENT MANAGERS.................................................30
         -------------------

                                   ARTICLE 10
                                TRUST AND TRUSTEE

10.1     TRUST FUND..........................................................30
         ----------
10.2     TRUSTEE CONTROL.....................................................30
         ---------------

                                       iii

<PAGE>

                                   ARTICLE 11
                           MERGERS AND CONSOLIDATIONS

11.1     MERGER, CONSOLIDATION OR TRANSFER OF ASSETS OF THE
         EMPLOYER............................................................31
         --------
11.2     MERGER, CONSOLIDATION OR TRANSFER OF ASSETS OF THE PLAN
         -------------------------------------------------------
          ...................................................................31

                                   ARTICLE 12
                      PROVISIONS TO PREVENT DISCRIMINATION

12.1     NOSS.401(A) DISCRIMINATION..........................................31
         --------------------------
12.2     UNIFORM TREATMENT...................................................31
         -----------------

                                   ARTICLE 13
                              TOP HEAVY PROVISIONS

13.1     TOP HEAVY REQUIREMENTS..............................................31
         ----------------------
13.2     TOP HEAVY PLAN DEFINITIONS..........................................33
         --------------------------

                                   ARTICLE 14
                                  MISCELLANEOUS

14.1     NO RIGHT TO EMPLOYMENT..............................................36
         ----------------------
14.2     HEADINGS; CONSTRUCTION..............................................36
         ----------------------
14.3     COUNTERPARTS........................................................36
         ------------
14.4     GOVERNING LAW.......................................................36
         -------------
14.5     RULES AND REGULATIONS...............................................36
         ---------------------
14.6     LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN......................36
         ----------------------------------------------
14.7     NO ASSIGNMENT OF BENEFITS...........................................37
         -------------------------
14.8     EXCLUSIVE BENEFIT...................................................37
         -----------------
14.9     BENEFITS FOR RESTRICTED PARTICIPANTS................................38
         ------------------------------------
14.10    STATUTE OF LIMITATIONS..............................................41
         ----------------------

EXHIBIT A....................................................................42

                                       iv

<PAGE>

                             DEL LABORATORIES, INC.
                             EMPLOYEES PENSION PLAN

                            AMENDMENT AND RESTATEMENT
                         EFFECTIVE AS OF JANUARY 1, 1997
              (with certain other effective dates as noted herein)

         This amended and restated plan, the Del Laboratories, Inc. Employees
Pension Plan (the "Plan"), is adopted, generally effective as of January 1,
1997, by Del Laboratories, Inc. (the "Plan Sponsor"). This amended and restated
Plan is designed to afford eligible employees an opportunity to increase their
security at retirement through participation in a pension plan during their
periods of active employment while this Plan remains in effect.

         Accordingly, the Plan Sponsor wishes to adopt this amended and restated
Plan, generally effective as of January 1, 1997, subject, however, to such
amendments as may be required by the Internal Revenue Service in order that the
Plan may qualify as a tax-qualified defined benefit pension plan and conditioned
on such qualification.

         Except as is otherwise provided in the Plan or by applicable law, the
terms of the Plan, as amended and restated, shall apply only with respect to
Plan Years (or other applicable twelve (12) month periods, as the case may be)
commencing on or after January 1, 1997. Except as is otherwise provided in the
Plan or by applicable law, the terms of the Plan, as amended and restated, shall
apply only with respect to individuals who are employees of the Employer on or
after January 1, 1997, and the rights, benefits and interests of any employee
who died, retired or otherwise terminated his employment with the Employer prior
to January 1, 1997 shall be determined under the provisions of the Plan as in
effect on the date such former employee died, retired or otherwise terminated
his employment with the Employer.

         Effective as of January 1, 2002, except as otherwise provided, this
amendment and restatement of the Plan is intended to reflect certain provisions
of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA").
This amended and restated Plan is intended as good faith compliance with the
requirements of EGTRRA and is to be construed in accordance with EGTRRA and
guidance issued thereunder.

                                    ARTICLE 1
                                   DEFINITIONS

         The following terms, when used in this Plan, shall have the meanings
set forth below, unless different meanings are clearly required by the context:

         1.1 ACCRUED BENEFIT means the normal monthly retirement benefit to
which a Participant would be entitled at Normal Retirement Age, based on Average
Monthly Compensation as of the date such Accrued Benefit is being determined as
set forth in the formula in Section 3.1, multiplied by a fraction, the numerator
of which is the number of Years of Service for benefit accrual purposes the
Participant has completed as of the date of determination and the denominator

                                      -1-
<PAGE>

of which is the number of Years of Service for benefit accrual purposes the
Participant would have completed if the Participant remained in the employ of
the Employer to Normal Retirement Date.

         Notwithstanding anything in the Plan to the contrary, the Accrued
Benefit of any Participant with at least one (1) Hour of Service in the Plan
Year beginning after December 31, 1988 shall be equal to the greater of (a) or
(b):

                  (a) the Participant's Accrued Benefit calculated above based
on the normal retirement benefit formula provided in Section 3.1; or

                  (b) the sum of (i) the Participant's Frozen Accrued Benefit,
and (ii) the Participant's Accrued Benefit calculated with respect to Years of
Service for benefit accrual purposes beginning after December 31, 1988).

         Notwithstanding anything in the Plan to the contrary, the Accrued
Benefit of any Participant with at least one (1) Hour of Service in the Plan
Year beginning after December 31, 1994 shall be equal to the greater of (a) or
(b):

                  (a) the Participant's Accrued Benefit calculated above based
on the normal retirement benefit formula provided in Section 3.1; or

                  (b) the sum of (i) the Participant's Frozen Accrued Benefit,
and (ii) the Participant's Accrued Benefit calculated with respect to Years of
Service for benefit accrual purposes beginning after December 31, 1994).

         Unless otherwise provided under the Plan, the Accrued Benefit under the
Plan of any Employee whose current Accrued Benefit as of a date on or after the
first day of the first Plan Year beginning on or after January 1, 1989, is based
on Compensation for a year beginning prior to the first day of the first Plan
Year beginning on or after January 1, 1989, that exceeded two hundred thousand
dollars ($200,000) will be the greater of the Accrued Benefit determined for the
Employee under (a) or (b) below:

                  (a) the Employee's Accrued Benefit determined with respect to
the benefit formula applicable for the Plan Year beginning on or after January
1, 1989, as applied to the Employee's total Years of Service taken into account
under the Plan for the purposes of benefit accruals, or

                  (b) the sum of:

                           (i) the Employee's Accrued Benefit as of the last day
of the last Plan Year beginning before January 1, 1989, frozen in accordance
with Treasury Regulation ss. 1.401(a)(4)-13, and

                           (ii) the Employee's Accrued Benefit determined under
the benefit formula applicable for the Plan Year beginning on or after January
1, 1989, as applied to the Employee's Years of Service credited to the Employee
for Plan Years beginning on or after January 1, 1989, for purposes of benefit
accruals.

                                      -2-
<PAGE>

         Unless otherwise provided under the Plan, the Accrued Benefit under the
Plan for any Employee whose current Accrued Benefit as of a date on or after the
first day of the first Plan Year beginning on or after January 1, 1994, is based
on Compensation for a year beginning prior to the first day of the first Plan
Year beginning on or after January 1, 1994, that exceeded one hundred fifty
thousand dollars ($150,000) will be the greater of the Accrued Benefit
determined for the Employee under (a) or (b) below:

                  (a) the Employee's Accrued Benefit determined with respect to
the benefit formula applicable for the Plan Year beginning on or after January
1, 1994, as applied to the Employee's total Years of Service taken into account
under the Plan for the purposes of benefit accruals, or

                  (b) the sum of:

                           (i) the Employee's Accrued Benefit as of the last day
of the last Plan Year beginning before January 1, 1994, frozen in accordance
with Treasury Regulation ss. 1.401(a)(4)-13, and

                           (ii) the Employee's Accrued Benefit determined under
the benefit formula applicable for the Plan Year beginning on or after January
1, 1994, as applied to the Employee's Years of Service credited to the Employee
for Plan Years beginning on or after January 1, 1994, for purposes of benefit
accruals.

         Notwithstanding anything in the Plan to the contrary, for Plan Years
beginning after December 31, 1989, if this is a Plan that would otherwise fail
to meet the requirements of Code ss.401(a)(26), 410(b)(1) or 410(b)(2)(A)(i)
because a sufficient number or percentage of Participants for a Plan Year have
not accrued a benefit, then the following rules shall apply:

                  (a) The group of Participants eligible to accrue a benefit for
the Plan Year shall be expanded to include the minimum number of Participants
who would not otherwise be eligible as are necessary to satisfy the applicable
test specified above. The specific Participants who shall become eligible under
the terms of this paragraph shall be those who are actively employed on the last
day of the Plan Year and, when compared to similarly situation Participants,
have completed the greatest number of Hours of Service in the Plan Year.

                  (b) If after application of paragraph (a) above, the
applicable test is still not satisfied, then the group of Participants eligible
to accrue a benefit for the Plan Year shall be further expanded to include the
minimum number of Participants who are not actively employed on the last day of
the Plan Year as are necessary to satisfy the applicable test. The specific
Participants who shall become eligible to accrue a benefit shall be those
Participants, when compared to similarly situated Participants, who have
completed the greatest number of Hours of Service in the Plan Year before
terminating employment.

                                      -3-
<PAGE>

                  (c) In the event a Participant who is not a member of the
group of Participants eligible to accrue a benefit becomes a member of such
group, such Participant shall receive an accrual for such year which bears the
same ratio to a full accrual as the number of Hours of Service the Participant
actually completes bears to one thousand (1,000). Such Participant's benefit for
such partial year shall be based upon the Compensation that Participant would
have earned if the Participant had completed one thousand (1,000) Hours of
Service.

                  (d) Nothing in this Section shall permit the reduction of a
Participant's Accrued Benefit. Therefore, any amounts that have previously been
accrued by Participants may not be reduced. Any adjustment to Accrued Benefits
pursuant to this paragraph shall be considered a retroactive amendment adopted
by the last day of the Plan Year.

         1.2 ACTUARIAL EQUIVALENT OR EQUIVALENT ACTUARIAL VALUE means the dollar
value of any benefit on a specified date, computed as provided on Exhibit A.

         1.3 ADMINISTRATOR (OR PLAN ADMINISTRATOR) means the Plan administrator
provided for in Article 9 of this Plan.

         1.4 AFFILIATED COMPANY means any corporation, trade or business during
any period in which it is, along with the Plan Sponsor, a member of a controlled
group of corporations, a group of trades or businesses under common control or
an affiliated service group, as described in Code ss.414(b), 414(c), 414(m) or
414(o).

         1.5 ANNUITY STARTING DATE means the first day of the first period for
which an amount is paid as an annuity, or in the case of a benefit not payable
in the form of an annuity, the first day on which all events have occurred which
entitle the Participant to such benefit.

         1.6 AVERAGE MONTHLY COMPENSATION means the monthly Compensation of a
Participant averaged over the five (5) consecutive Plan Years which produce the
highest monthly average within the last ten (10) completed years of
participation. If a Participant has less than five (5) consecutive Years of
Service from his date of participation to his date of termination, the
Participant's Average Monthly Compensation shall be based on his monthly
Compensation during his months of service from date of employment to date of
termination from service with the Employer. Compensation earned while in an
ineligible employee class shall not be considered in determining Average Monthly
Compensation.

         1.7 BENEFICIARY means, except as otherwise provided in Section 3.10,
the person or persons designated by the Participant on his designation form as
being entitled to receive the Participant's Accrued Benefit upon the
Participant's death. If there is no designated Beneficiary, a Participant's
Beneficiary shall be his surviving spouse, or if he has no surviving spouse, his
estate.

                                      -4-
<PAGE>

         1.8 BOARD OF DIRECTORS means the board of directors of Del
Laboratories, Inc.

         1.9 BREAK IN SERVICE means a Plan Year during which an Employee is not
credited with more than five hundred (500) Hours of Service.

         1.10 CODE means the Internal Revenue Code of 1986 and the regulations
promulgated thereunder, as amended from time to time.

         1.11 COMPENSATION means the amount of wages as defined in Code
ss.3401(a) and all other payments of compensation by the Employer to the
Participant (in the course of the Employer's trade or business) for a Plan Year
for which the Employer is required to furnish the Participant a written
statement under Code ss.ss.6041(d), 6051(a)(3) and 6052. Compensation must be
determined without regard to any rules under Code ss.3401(a) that limit
remuneration included in wages based on the nature or location of the employer
or services performed. Compensation shall not include amounts reportable on Form
W-2 as a result of the exercise of stock options or the forgiveness of loans, or
other extraordinary remuneration provided by the Employer, but Compensation
shall include "elective contributions" which are not includible in gross income
under Code ss.125, 402(e)(3), 402(h)(1)(B), 403(b) or (as of January 1, 2001)
132(f)(4), plus deferrals under an eligible deferred compensation plan within
the meaning of Code ss.457(b) and plus employer "pick-up" contributions (under
governmental plans) within the meaning of Code ss.414(h)(2). Notwithstanding any
other provision of this Plan, the Compensation of any Participant taken into
account under the Plan for any year may not exceed the dollar limit under Code
ss.401(a)(17). The Code ss.401(a)(17) dollar limit is ($200,000) for 2002. To
the extent permitted under the Economic Growth and Tax Relief Reconciliation Act
of 2001, in determining benefit accruals in Plan Years beginning after December
31, 2001, the $200,000 annual compensation limit described in the preceding
sentence shall apply for determination periods beginning before January 1, 2002.
This dollar limit shall be adjusted for cost-of-living increases in accordance
with Code ss.401(a)(17)(B). For Plan Years beginning prior to January 1, 1997,
in determining the Compensation of a Participant for purposes of this dollar
limit, the rules in Code ss.414(q)(6) (applicable to five percent (5%) owners
and the ten (10) most highly paid Highly Compensated Employees) shall apply,
except in applying such rules, the term "family" shall include only the spouse
of the Participant and any lineal descendants of the Participant who have not
attained age nineteen (19) before the close of the Plan Year.

         1.12 EARLY RETIREMENT DATE means the first day of any month that
precedes the Participant's Normal Retirement Date and that coincides with or
follows the Participant's (a) attainment of age fifty-five (55), and (b)
completion of five (5) Years of Service for vesting purposes.

         1.13 EFFECTIVE DATE means January 1, 1997, the effective date of this
amendment and restatement of the Plan. The initial effective date of the Plan
was January 1, 1976.

         1.14 ELIGIBLE EMPLOYEE means each Employee of the Employer , except the
term Eligible Employee shall not include any person or group of persons
classified by the Employer as not eligible to participate in the Plan for the
period during which the person is so classified by the Employer regardless of
the later determination by a court or any regulatory agency of the status of
such person or group of such persons. Furthermore, the following Employees shall
be ineligible to participate under the Plan: (a) Employees whose employment is
covered by a collective bargaining agreement if retirement benefits were the
subject of good faith bargaining between the parties; and (b) nonresident aliens
(within the meaning of Code ss.7701(b)(1)(B)) who receive no earned income from
the Employer which constitutes income from sources within the United States.

                                      -5-
<PAGE>

         1.15 EMPLOYEE means a common law employee of the Employer or an
Affiliated Company.

         1.16 EMPLOYER means the Plan Sponsor, and any Affiliated Company or
other entity which, with the consent of its governing body and the Board of
Directors, adopts this Plan for the benefit of its eligible Employees, and any
successor or successors thereto.

         1.17 ENTRY DATE means the first day of the Plan Year coinciding with or
next following the date the individual satisfies the Plan's eligibility
requirements.

         1.18 ERISA means the Employee Retirement Income Security Act of 1974
and the regulations promulgated thereunder, as amended from time to time.

         1.19 FROZEN ACCRUED BENEFIT means a Participant's accrued benefit under
the Plan determined as of the latest "Fresh-Start Date" (as defined below) as if
the Participant terminated employment with the Employer on that date and without
regard to any amendment to the Plan adopted after that date, other than
amendments recognized as effective as of or before that date under Code
ss.401(b) or Regulation 1.401(a)(4)-11(g).

                  If, as of the latest Fresh-Start Date, the amount of a
Participant's Frozen Accrued Benefit was limited by the application of Code
ss.415, the Participant's Frozen Accrued Benefit will be increased for years
after the latest Fresh-Start Date to the extent permitted under Code
ss.415(d)(1). In addition, the Frozen Accrued Benefit of a Participant whose
Frozen Accrued Benefit includes the top-heavy minimum benefits provided in
Section 13.1 will be increased to the extent necessary to comply with the
average compensation requirement of Code ss.416(c)(1)(D)(i).

                  If: (a) the Plan's normal form of benefit in effect on the
latest Fresh-Start Date is not the same as the normal form of benefit under the
Plan after the latest Fresh-Start Date; and/or (b) the Normal Retirement Age for
any Participant on that date was greater than the Normal Retirement Age for that
Participant under the Plan after the latest Fresh-Start Date, the stated Frozen
Accrued Benefit will be expressed as the actuarially equivalent benefit in the
normal form under the Plan after the latest Fresh-Start Date, commencing at the
Participant's Normal Retirement Age under the Plan in effect after the latest
Fresh-Start Date.

                  For purposes of this Section, "Fresh-Start Date" means the
last day of the Plan Year preceding a Plan Year for which any amendment of the
Plan that directly or indirectly affects the amount of a Participant's benefit
determined under the current benefit formula, is made effective.

                                      -6-
<PAGE>

         1.20 HIGHLY COMPENSATED EMPLOYEE. The term Highly Compensated Employee
includes active Highly Compensated Employees and former Highly Compensated
Employees, as described inss.414(q), which currently provides as follows:

                  An active Highly Compensated Employee includes any Employee
who performs service for the Employer during the "determination year" and who
(i) was a five percent (5%) owner as defined in Code ss.416(i)(1) at any time
during the "look-back year" or determination year or (ii) during the look-back
year, received compensation (as defined below) from the Employer in excess of
eighty thousand dollars ($80,000) (as adjusted pursuant to ss.415(d) of the
Code).

                  For this purpose, the determination year shall be the Plan
Year. The look-back year shall be the twelve (12) month period immediately
preceding the determination year.

                  A former Highly Compensated Employee includes any Employee who
separated from service (or was deemed to have separated from service) prior to
the determination year, performs no service for the Employer during the
determination year, and was an active Highly Compensated Employee for either the
separation year or any determination year ending on or after the Employee's
fifty-fifth (55th) birthday.

                  The determination of who is a Highly Compensated Employee will
be made in accordance with ss.414(q) of the Code.

                  In determining whether an individual is a Highly Compensated
Employee, the term "compensation" means compensation using the definition
selected by the Administrator which is permitted under Code ss.415(c)(3), which
is received by the individual from the Employer during the determination year or
from the Employer during the look-back year, as applicable, including (i) for
Plan Years beginning prior to January 1, 1998, elective or salary reduction
contributions to a cafeteria plan under ss.125 of the Code, a cash or deferred
arrangement under ss.401(k) of the Code, or a simplified employee pension under
ss.402(h) of the Code, or a tax-sheltered annuity under ss.403(b) of the Code
and (ii) for Plan Years beginning after December 31, 1997, elective salary
reduction contributions to a cafeteria plan under ss.125 of the Code, a cash or
deferred arrangement under ss.401(k) of the Code, a simplified employee pension
under ss.408(k) of the Code, a simple plan under ss.408(q) of the Code, or a
plan under ss.457 of the Code or (as of January 1, 2001) a qualified
transportation fringe benefit plan under ss.132(f)(4) of the Code.

                  Notwithstanding the preceding, in determining whether an
individual is a Highly Compensated Employee, the Employer may elect to apply the
"alternative definition" to determine whether an Employee who separated from
service before January 1, 1987 is a former Highly Compensated Employee. The
election, once made, cannot be changed without the consent of the Commissioner
of the Internal Revenue Service. Under the alternative definition, a former
Highly Compensated Employee includes any former Employee who separated from
service with the Employer prior to January 1, 1987, and was described in any one
or more of the following groups during either the Employee's separation year (as
defined in Treasury Regulations under ss.414(q) of the Code) (or the year
preceding such separation year) or any year ending on or after such Employee's
fifty-fifth (55th) birthday (or the last year ending before such Employee's
fifty-fifth

                                      -7-
<PAGE>

(55th) birthday): (i) the Employee was a five percent (5%) owner of the Employer
at any time during the year; (ii) the Employee received compensation from the
Employer in excess of fifty thousand dollars ($50,000) during the year. The
determinations provided for in this alternative definition may be made on the
basis of the calendar year, the Plan Year, or any other twelve (12) month period
selected by the Employer and applied on a reasonable and consistent basis.

         1.21 HOUR OF SERVICE means each hour for which an Employee is directly
or indirectly compensated by the Employer for the performance of duties for the
Employer, or for reasons other than the performance of such duties (irrespective
of whether the employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty, military duty or
leave of absence, and each hour for which back pay is either awarded or granted
to such Employee by the Employer, regardless of mitigation of damages. In
computing and crediting Hours of Service for periods during which the Employee
does not perform duties for the Employer, no more than five hundred one (501)
Hours of Service shall be credited for any single continuous period of
nonperformance of duties for the Employer, and the rules set forth in
ss.ss.2530.200b-2(b) and (c) of Department of Labor Regulations shall apply, and
those rules are incorporated herein by reference. Furthermore, an hour for which
an employee is directly or indirectly paid, or entitled to payment, on account
of a period during which no duties are performed is not required to be credited
to the Employee if such payment is made or due under a plan maintained solely
for the purpose of complying with applicable worker's compensation, or
unemployment compensation or disability insurance laws. Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee. Solely for
purposes of determining whether a Break in Service has occurred, an Employee who
is absent for maternity or paternity reasons will receive credit for up to five
hundred one (501) Hours of Service for the Hours of Service which would
otherwise have been credited to the Employee had the Employee not been absent,
or if those Hours of Service cannot be determined, eight (8) Hours of Service
for each day of absence. The Hours of Service credited for a maternity or a
paternity absence shall be credited in the year the absence begins if necessary
to prevent a Break in Service for that year or, in any other case, in the
immediately following year. An absence for maternity or paternity reasons means
an absence (a) because of the individual's pregnancy, (b) because of the birth
of the individual's child, (c) because of the individual's adoption of a child,
or (d) for purposes of caring for the individual's child beginning immediately
following the child's birth or placement with the individual. Furthermore,
solely for the purpose of determining whether a Participant has incurred a Break
in Service, Hours of Service shall be recognized for an "Authorized Leave of
Absence" (defined as "an unpaid, temporary cessation from active employment with
the Employer pursuant to an established nondiscriminatory policy, whether
occasioned by illness, military service or any other reason").

         1.22 LIMITATION YEAR means, for purposes of the application of the
provisions of Codess.415, the Plan Year.

         1.23 NON-HIGHLY COMPENSATED EMPLOYEE means an Employee who is not a
Highly Compensated Employee.

                                      -8-
<PAGE>

         1.24 NORMAL RETIREMENT AGE means a Participant's sixty-fifth (65th)
birthday. A Participant shall be fully vested in his Accrued Benefits upon
attaining Normal Retirement Age.

         1.25 NORMAL RETIREMENT DATE means the first day of the month coinciding
with or next following a Participant's attainment of Normal Retirement Age.

         1.26 PARTICIPANT means any Employee who participates in the Plan as
provided in Article 2. A Participant shall continue to be a Participant as long
as he is entitled to receive or is receiving a Plan benefit.

         1.27 PLAN means the Del Laboratories, Inc. Employees Pension Plan as
set forth in this document and as amended from time to time.

         1.28 TRUST means the trust established under this Plan or under a
separate trust agreement which forms a part of this Plan. If a separate trust
agreement is adopted which forms a part of this Plan, the trust provisions
contained within this document shall be inoperative and the provisions of the
separate trust agreement shall control.

         1.29 TRUST FUND means the assets of the Trust.

         1.30 TRUSTEE means the trustee of the Trust serving as such from time
to time.

         1.31 YEAR OF SERVICE

                  (a) FOR ELIGIBILITY PURPOSES. Each period commencing on the
date the Employee first performs an Hours of Service and ending on the six (6)
month anniversary thereof, provided, however, that service prior to the
Employee's last Break in Service shall be excluded, subject to the provisions
set forth in (d), below.

                  (b) FOR BENEFIT ACCRUAL PURPOSES. A Plan Year during which an
Employee is credited with one thousand (1,000) or more Hours of Service, subject
to the provisions set forth in (d), below. Years of Service for benefit accrual
purposes shall be limited to service performed on and after January 1, 1966.

                  (c) FOR VESTING PURPOSES. Each Plan Year in which the Employee
is credited with at least one thousand (1,000) Hours of Service, provided,
however, that Years of Service prior to the Employee's last Break in Service
shall be excluded, subject to the provisions set forth in (d), below.

                  (d) OTHER RULES. In determining an Employee's Years of
Service, the following rules shall apply:

                           (i) If an Employee is transferred to a class of
employment ineligible for participation in this Plan, but remains employed by
the Employer, except as otherwise provided under the Plan or any Exhibit
thereto, the Employee shall no longer accrue Years of Service for

                                      -9-
<PAGE>

benefit accrual purposes under this Plan, but shall continue to earn Years of
Service for vesting and eligibility purposes with respect to the benefit earned
to the Employee's date of transfer.

                           (ii) If an Employee is transferred from an ineligible
class to an eligible class of employment for participation in this Plan, except
as otherwise provided under the Plan or any Exhibit hereto, the Employee shall
not receive Years of Service for any of the Employee's prior service (except
with respect to any service rendered while a prior Participant of this Plan in
accordance with the provisions of this Plan at that time) with the Employer for
benefit accrual purposes under this Plan, but the Employee shall receive Years
of Service credit (determined under the above rules) for the Employee's prior
service with the Employer for vesting and eligibility purposes.

                           (iii) If an Employee incurs a Break in Service and
thereafter is reemployed, the Employee shall be credited with all Years of
Service earned prior to the Employee's Break in Service if, when the Employee
left employment, he had been eligible for a vested pension hereunder, or if the
number of his consecutive one (1) year Breaks in Service was less than the
greater of five (5) or his prior Years of Service.

                  If an Employee incurs a Break in Service, the Employee's Years
of Service before the Break in Service will be taken into account only if the
Employee subsequently becomes an Employee and completes one (1) Year of Service.

                           (iv) An Employee whose employment has been
interrupted by a Break in Service and who later is reemployed and receives
credit for service under subparagraph (d)(iii) shall be deemed to be a
Participant as of the date of the Employee's reemployment. An Employee who
terminates employment and is rehired prior to incurring a Break in Service shall
be deemed to be a Participant as of the date of the Employee's reemployment. For
purposes of this subparagraph (c), a person's date of reemployment shall be the
first date following the person's reemployment on which he first receives credit
for an Hour of Service because of the performance of duties for the Employer.

                           (v) In all other cases, upon the reemployment of a
former Participant, the former Participant shall be regarded for all purposes as
a new Employee and shall be eligible to participate after he meets the
eligibility requirements of Article 2.

                           (vi) Notwithstanding the foregoing subparagraphs
(d)(iii), (d)(iv) and (d)(v), if a Participant who had terminated employment
with a vested benefit is reemployed, and the Participant has received, is
receiving or is eligible to receive benefits under the Plan when he is
reemployed, the benefits (if any) to which the Participant was entitled under
the Plan prior to such reemployment shall be suspended until the earlier of the
Participant's (1) subsequent retirement, (2) termination of employment, (3)
death, or (4) required distribution date determined under the Plan. Upon the
subsequent commencement of benefit payments to the Participant following such
suspension, the monthly amount of the Participant's benefit payable shall be
determined by taking into account the Participant's reemployment; provided,
however, that for benefit accrual purposes, any Years of Service for which the
Participant has received a "cash-out

                                      -10-
<PAGE>

distribution" shall be disregarded (unless the cash-out distribution is repaid
as provided below) and any benefits payable with respect to the Participant's
reemployment will be reduced or offset as and to the extent permitted by
applicable law by any benefits previously paid to the Participant and/or by any
actuarial adjustments provided hereunder due to the Participant's suspension of
benefits; provided, however, that if the Participant receives the notice
specified in Department of Labor Regulations ss.2530.203-3, no actuarial
adjustment will be made due to the Participant's suspension of benefits.
Notwithstanding the preceding, a Participant's benefits shall not be suspended
during any month during which he is credited with less than forty (40) Hours of
Service.

                           In the event of the retirement or the termination of
employment of such a Participant following such suspension, the monthly amount
of the Participant's pension payable following such retirement or termination of
employment shall be no less than the monthly benefits previously being provided
under the form of benefit chosen by the Participant at his initial retirement.
If a Participant dies during the period of such a suspension and prior to such a
subsequent retirement or termination of employment, the Participant's
Beneficiary shall be entitled to the benefit, if any, provided under the form of
benefit chosen by the Participant at his initial retirement and to any other
death benefit provided under the Plan.

                           (vii) Anything in this Plan to the contrary
notwithstanding, Years of Service for benefit accrual purposes shall not be
granted for service for which the Participant had previously received a
distribution of his entire benefit under the Plan.

                           (viii) If the Employer is a member of a controlled
group of employers, a group of entities under common control or an affiliated
service group, within the meaning of Code ss.414(b), (c), (m) or (o), Years of
Service for vesting and eligibility purposes (but not for benefit accrual
purposes) shall be determined as if all members of the group were a single
employer, excluding, however, employment during periods when the Employer was
not a member of the controlled group, except as otherwise provided under the
Plan or any Exhibit thereto.

                           (ix) Any Participant who has received a cash-out
distribution of his vested Plan benefit which was less than the Participant's
total Accrued Benefit shall be entitled to make a repayment to the Plan to
restore the Participant's benefit accrual Years of Service which otherwise would
be disregarded, subject to the following:

                                    (A) All repayments must be made no later
than the earlier of the date that is five (5) years after the Participant's date
of reemployment or the date that the Participant incurs a period of five (5)
consecutive Breaks in Service commencing after the distribution;

                                    (B) The repayment must be made in cash; and

                                    (C) The amount of the repayment must equal
the full amount of the cash-out distribution plus interest through the date of
repayment at the rate determined under Code ss.411(c)(2)(C).

                                      -11-
<PAGE>

                           (x) An Employee who is absent from service with the
Employer or an Affiliated Company solely by reason of military service under
circumstances by which such Employee is afforded reemployment rights under any
applicable Federal or State statute or regulation, such Employee shall be deemed
not to have quit or have been absent from service with the Employer or an
Affiliated Company if such Employee returns to service with the Employer or an
Affiliated Company before the expiration of such reemployment rights; provided,
however, in the event such Employee fails to return to service with the Employer
or an Affiliated Company before the expiration of such reemployment rights, such
Employee shall be deemed to have quit on the first day on which such Employee
was first absent from service with the Employer or an Affiliated Company by
reason of such military service.

                                    ARTICLE 2
                          ELIGIBILITY FOR PARTICIPATION

         2.1 INITIAL ELIGIBILITY. Each person who is an Eligible Employee on the
Effective Date (and who is not in an ineligible employment classification as
described in Section 1.13) will become, or continue as, a Participant in the
Plan on the Effective Date.

         2.2 SUBSEQUENT ELIGIBILITY. Each Eligible Employee who first is
credited with at least one (1) Year of Service for eligibility purposes after
the Effective Date will become a Participant on the Entry Date coincident with
or next following the date on which the Eligible Employee first is credited with
at least one (1) Year of Service for eligibility purposes, provided the Employee
is an Eligible Employee on the Entry Date.

         2.3 REHIRED PARTICIPANTS. A Participant whose employment with the
Employer terminates and who is rehired will be eligible to participate in this
Plan on the first day he is reemployed by the Employer; provided, however, that
if the Employee's Years of Service are disregarded pursuant to Section 1.31, the
Employee shall participate in this Plan only as provided in Section 2.2.

                                    ARTICLE 3
                               RETIREMENT BENEFITS

         3.1 NORMAL RETIREMENT BENEFITS. Subject to any limitations provided
under the Plan, each Participant who is an Eligible Employee on his Normal
Retirement Age shall be one hundred percent (100%) vested in his Plan benefit
and shall be entitled to receive a monthly pension under this Plan, which shall
commence at the later of the Participant's Normal Retirement Date or the first
day of the month coincident with or next following the date of the Participant's
actual retirement and continuing for the life of the Participant. The amount of
the monthly pension will be based on the Participant's Frozen Accrued Benefit
and a formula equal to thirty-six percent (36%) of the Participant's Average
Monthly Compensation, (reduced by one-thirtieth (1/30th) for each Year of
Service under Section 1.31(b) that the Participant's Years of Service under
Section 1.31(b) is less than thirty (30), computed to the nearest cent.

                                      -12-
<PAGE>

         3.2 LATE RETIREMENT BENEFITS. Subject to the requirements of Section
3.10, if a Participant continues employment with the Employer after the
Participant's Normal Retirement Date, the Participant's retirement benefits
under the Plan shall not commence until the first day of the month coincident
with or next following the date of the Participant's actual retirement.
Notwithstanding the preceding, a Participant's benefits shall not be deferred
during any month during which the Participant is credited with less than forty
(40) Hours of Service.

                  If a Participant does not accrue at least one Hour of Service
on or after the first day of the Plan Year beginning on or after January 1,
1988, and the Participant retires after his Normal Retirement Date, the
retirement benefit provided for the Participant at the date of his actual
retirement will equal the retirement benefit to which the Participant was
entitled at his Normal Retirement Date; provided, however, that if the
Participant does not receive the notice specified in Department of Labor
regulations ss.2530.203-3, the Participant's late retirement benefit will be
increased to the Actuarial Equivalent Value of the Participant's Accrued Benefit
as of his Normal Retirement Date, to reflect the later commencement of payment.

                  If a Participant accrues at least one Hour of Service on or
after the first day of the Plan Year beginning on or after January 1, 1988, and
the Participant retires after his Normal Retirement Date, the retirement benefit
provided for the Participant at his actual retirement will equal the greater of
(a) the Participant's retirement benefit at his actual retirement taking into
account service and compensation after his Normal Retirement Date, or (b) the
retirement benefit to which the Participant was entitled at his Normal
Retirement Date, increased to the Actuarial Equivalent Value of the
Participant's Accrued Benefit as of his Normal Retirement Date, to reflect the
later commencement of payment and the Participant's attained age at the time of
actual retirement; provided, however, that if the Participant receives the
notice specified in Department of Labor regulations ss.2530.203-3, the
Participant's late retirement benefit will be the amount determined in (a), and
the amount determined by the actuarial increase in (b) will be disregarded.
Notwithstanding the preceding, effective for Plan Years beginning on or after
January 1, 1988 (or such later date required by applicable law), any benefit
that accrues after the later of a Participant's Normal Retirement Date will be
offset (but not below zero) by the Actuarial Equivalent of any distributions
made to the Participant after the Participant's Normal Retirement Date.

         3.3 EARLY RETIREMENT BENEFITS. If a Participant shall, for any reason
except death, retire on or after his Early Retirement Date and before his Normal
Retirement Date, the Participant's retirement shall be considered as Early
Retirement. Subject to the requirements of Section 3.10, such Participant may
elect to receive an Early Retirement benefit (payable in accordance with the
provisions of Section 3.4 which shall commence on the Participant's Normal
Retirement Date or, at the election of the Participant, may commence on the
first day of any month following his Early Retirement Date and on or before his
Normal Retirement Date (such commencement date to be determined by the
Participant by notice to the Committee in accordance with the rules adopted by
the Committee). If a Participant's Early Retirement benefit commences prior to
the Participant's Normal Retirement Date, such benefit shall be the greater of
(a) the pension benefit as computed in Section 3.1 reduced by one-fifteenth
(1/15th) for each of the first five (5) years and one-thirtieth (1/30th) for
each of the next five (5) years and reduced actuarially

                                      -13-
<PAGE>

for each additional year by which the commencement date precedes the vested
terminated Participant's Normal Retirement Date, or (b) the Actuarial Equivalent
of the Participant's Accrued Benefit if such benefit is distributed in a form
other than a nondecreasing life annuity payable for period not less than the
life of the Participant.

         3.4      FORMS OF BENEFITS.

                  (a) NORMAL FORM OF BENEFIT. Subject to the requirements of
Section 3.7 and Section 3.9, a Participant's monthly pension benefit, as
computed in Section 3.1 above, shall be paid for the Participant's lifetime.
Upon the Participant's death, all payments shall cease.

                  (b) ACTUARIAL EQUIVALENT VALUE OPTIONS. Subject to the
requirements of Section 3.9, in lieu of receiving the monthly pension benefit
provided in Section 3.4(a) above, a Participant may elect (as provided in (c),
below) to receive his pension benefit payable in accordance with one of the
following options, which options are of Actuarial Equivalent Value to the
benefit to which the Participant was entitled under Section 3.4(a). The options
available to a Participant are:

                           (i) A lump sum (this option is unavailable with
respect to lump sum payments greater than or equal to $20,000 and must be
offered no sooner than November of the year following termination of employment
unless the Participant is eligible for Normal, Early or Late retirement);

                           (ii) A life annuity with ten (10) years certain (a
life annuity with ten (10) year certain is defined as a reduced monthly pension
payable to, and during the lifetime of the retired Participant with the
provision that, after the Participant's death, a pension of 100% of his reduced
pension shall then be paid, during the remainder of ten (10) years, to the
Participant's Beneficiary); and

                           (iii) A Joint and 50%, 662/3% or 100% Survivor Spouse
Annuity (as defined below);

                  (c) ELECTION OF OPTIONS. An election of an optional benefit
form under Section 3.4(b) above must be in writing (on a form provided by the
Administrator) filed with the Administrator prior to the commencement of
retirement benefit payments. If no election is made, then the normal form of
benefit in Section 3.4(a) or the form of benefit specified in Section 3.9, as
applicable, will be deemed to have been elected by the Participant. Once an
election of an optional benefit form has been made and filed with the
Administrator or has been deemed to have been made, and unless it is rescinded
or changed before the commencement of benefit payments or before the purchase of
an annuity that will pay the Participant's benefits, it cannot be rescinded or
changed by the Participant.

         3.5 PAYMENTS TO MINORS AND INCOMPETENTS. If the Administrator shall
receive evidence satisfactory to it (a) that a Participant or Beneficiary
entitled to receive any benefit under this Plan is, at the time when such
benefit becomes payable, a minor, or is physically

                                      -14-
<PAGE>

or mentally incompetent to receive such benefit and to give a valid release
therefor, (b) that another person or an institution is then maintaining or has
custody of such Participant or Beneficiary, and (c) that no guardian, committee
or other representative of the estate of such Participant or Beneficiary has
been duly appointed, the Administrator may authorize the Trustee to make payment
of the benefit otherwise payable to such Participant or Beneficiary to such
other person or institution, including a custodian under a Uniform Gifts to
Minors Act or corresponding legislation (who shall be an adult, a guardian of
the minor or a trust company), and the release given by such other person or
institution shall be a valid and complete discharge for the payment of such
benefit.

         3.6 DISABILITY BENEFITS. Subject to the requirements of Section 3.9, if
a Participant incurs, before his retirement or separation from service, a
disability and such condition continues for a period of six (6) consecutive
months and by reason thereof such Participant's status or an Employee ceases,
the Participant shall be entitled to receive the Actuarial Equivalent of his
Accrued Benefit as though he had retired, determined as of the December 31st
subsequent to the Participant's termination of employment due to disability and
commencing on or as soon as practicable following such December 31st. Subject to
the requirements of Section 3.11, if a Participant incurs, after his separation
from service, a disability, the Participant shall be entitled to receive the
Actuarial Equivalent of his vested Accrued Benefit as though the Participant had
retired.

                  A Participant shall be considered disabled if he establishes
to the satisfaction of the Administrator that he is unable to engage in any
substantial gainful activity because of a medically determinable physical or
mental impairment which can be expected to result in death or to be of a long
and indefinite duration and which constitutes total disability for purposes of
Social Security benefits. Evidence of disability shall include the certificate
of a competent licensed physician selected by the Participant and approved by
the Administrator which confirms that the Participant is disabled as defined
herein.

         3.7 CASH-OUT BY ADMINISTRATOR. Notwithstanding any other provision of
the Plan to the contrary, if, upon termination of employment, the Actuarial
Equivalent Value of the vested Accrued Benefit of a Participant equals or is
less than three thousand five hundred dollars ($3,500) (five thousand dollars
($5,000) for Plan Years beginning on or after January 1, 2000), such
Participant's vested Accrued Benefit will be distributed in a lump sum as soon
as practicable following his termination of employment. For purposes of this
determination, if at the time of any distribution the Equivalent Actuarial Value
of the vested Accrued Benefit of the Participant exceeds three thousand five
hundred dollars ($3,500) (five thousand dollars ($5,000) for Plan Years
beginning on or after January 1, 2000), then the Equivalent Actuarial Value of
the vested Accrued Benefit of the Participant at any subsequent time shall be
deemed to exceed three thousand five hundred dollars ($3,500) (five thousand
dollars ($5,000) for Plan Years beginning on or after January 1, 2000).
Notwithstanding the preceding sentence, the "look-back" rule of the cash-out
threshold (as described in the preceding sentence) shall have no effect with
respect to distributions made on or after October 17, 2000 to employees who are
not, as of October 17, 2000, in pay-status. Such payment shall represent the
full and final payment from the Plan and shall completely discharge the Plan's
obligation to pay such benefit. Any Participant who is zero

                                      -15-
<PAGE>

percent (0%) vested upon termination of employment will be deemed to have
received a cash-out distribution upon his termination of employment, provided,
however, that if such Participant is reemployed by the Employer before incurring
five (5) consecutive Breaks in Service, the Participant will be deemed to have
repaid the deemed distribution.

         3.8 MAXIMUM LIMITATION ON BENEFITS. In no event shall any benefit be
payable from this Plan if such benefit would cause the Plan or any other plan
maintained by the Employer to violate the limitations of ss.415 of the Code and
the regulations thereunder. For limitation years commencing before January 1,
2000, if the combined fraction of ss.415(e) of the Code applicable to the Plan
would exceed 1.0, the Participant's benefit hereunder shall be reduced to the
extent necessary to reduce such fraction to 1.0, any such reduction being made
in accordance with ss.415 of the Code and the regulations thereunder.

         3.9      STANDARD BENEFIT PROVISIONS.

                  (a) EFFECT OF SECTION. This Section shall take precedence over
any conflicting provision in this Plan and, except as specifically provided
herein, shall apply only in the case of Participants who are credited with at
least one (1) Hour of Service with the Employer on or after August 23, 1984.

                  (b)      JOINT AND 50% SURVIVOR SPOUSE ANNUITY.

                           (i) Unless a vested Participant who retires under the
Plan makes a qualified election (as defined below) of a different form of
benefit within the qualified election period (as defined below), such a
Participant's retirement allowance will be paid in the form of a Joint and 50%
Survivor Spouse Annuity. However, the Participant may elect to receive a smaller
annuity benefit with a continuation of payments to his spouse at a rate of
sixty-six and two- thirds percent (662/3%) or one hundred percent (100%) of the
rate payable to a Participant during his lifetime, which alternative joint and
survivor spouse annuity shall be Actuarial Equivalent of the Joint and 50%
Survivor Spouse Annuity.

                           (ii) Notwithstanding the foregoing, if the Actuarial
Equivalent Value of the Joint and 50% Survivor Spouse Annuity to which a
Participant becomes entitled hereunder is three thousand five hundred dollars
($3,500) (five thousand dollars ($5,000) for Plan Years beginning on or after
January 1, 2001) or less, the Employer shall, at any time prior to the Annuity
Starting Date (or at any time thereafter, if consented to, in writing, within
ninety (90) days prior to the proposed lump sum payment, by the Participant and
the Participant's spouse, or the survivor of them), direct the Trustee to pay to
the Participant or to the Participant's spouse, as applicable, in lieu of the
Joint and 50% Survivor Spouse Annuity, the principal sum that amounts to the
Actuarial Equivalent of such benefit as of the date of payment, and, if such
payment is made, it will fully discharge the Plan's obligations to the
Participant and the Participant's spouse.

                                      -16-
<PAGE>

                  (c)      QUALIFIED PRERETIREMENT SURVIVOR ANNUITY.

                           (i) If a vested Participant who is married dies after
the earliest retirement age (as defined below) but before his Annuity Starting
Date, the Participant's surviving spouse will receive the same benefit that
would have been payable if the Participant had retired with an immediate Joint
and 50% Survivor Spouse Annuity on the day before his death.

                           (ii) If a vested Participant who is married dies on
or before the earliest retirement age, but before his Annuity Starting Date, the
Participant's surviving spouse will receive the same benefit that would have
been payable if the Participant had:

                                    (A) separated from service on the date of
death (except that if the Participant separated from service prior to his date
of death, the date of separation from service will be used in this calculation),

                                    (B) survived to his earliest retirement age
(or such later date elected by the surviving spouse as the benefit commencement
date as provided in (iii) below),

                                    (C) begun to receive an immediate Joint and
50% Survivor Spouse Annuity at his earliest retirement age (or such later date
elected by the surviving spouse as the benefit commencement date), and

                                    (D) died on the day after benefits began.

                           (iii) For purposes of the foregoing, a surviving
spouse will begin to receive payments at the Participant's earliest retirement
age unless the surviving spouse elects to begin payments at a later date which
is no later than the date that would have been the Participant's Normal
Retirement Date or any later date as is permitted under Code ss.401(a)(9) and
the regulations issued thereunder. If a Participant covered by (c)(i) or (ii)
above dies after the Participant's Normal Retirement Date, the surviving spouse
will begin to receive payments immediately and may not elect to begin payments
at a later date.

                           (iv) Notwithstanding the foregoing, if the Actuarial
Equivalent Value of the Qualified Preretirement Survivor Annuity to which a
surviving spouse becomes entitled hereunder is three thousand five hundred
dollars ($3,500) (five thousand dollars ($5,000) for Plan Years beginning on or
after January 1, 2000) or less, the Employer shall, at any time prior to the
Annuity Starting Date (or at any time thereafter, if consented to, in writing,
within ninety (90) days prior to the proposed lump sum payment, by the surviving
spouse), direct the Trustee to pay to the spouse, in lieu of the Qualified
Preretirement Survivor Annuity, the principal sum that amounts to the Actuarial
Equivalent of such benefit as of the date of payment, and, if such payment is
made, it will fully discharge the Plan's obligations to the spouse.

                                      -17-
<PAGE>

                  (d)      DEFINITIONS.

                           (i) EARLIEST RETIREMENT AGE: The earliest date on
which the Participant could elect to receive a retirement allowance under the
Plan.

                           (ii) QUALIFIED ELECTION: A Participant's written
waiver of the Joint and Survivor Spouse Annuity and election to receive benefits
in the Plan's normal form of benefit or in one of the optional forms permitted
under the Plan. With respect to benefits not in pay status on January 1, 1985
(regardless of the general effective date of this Section and regardless of
whether or not the Participant had elected a benefit form or any Beneficiary
prior to that date), a Participant's spouse must consent in writing to the
waiver (including consent to the Beneficiary or Beneficiaries who will receive
benefits payable on the death of the Participant), and the spouse's consent must
be notarized or witnessed by a Plan representative. The spouse's consent must
acknowledge the effect of the waiver, election and consent and may be limited to
consent to the specific form of benefit elected and to the payment of the
benefit to the specific Beneficiary designated in the election. A Participant
who has elected an alternate form of benefit and/or designation of Beneficiary
with spousal consent may not change that alternate form of benefit and/or
designation of Beneficiary without his spouse's consent, given in the manner
specified above, unless the previous spousal consent (i) expressly permitted the
Participant to make future designations of benefit forms and/or Beneficiaries
without any requirement of further spousal consent and (ii) acknowledged and
expressly relinquished the right to limit the consent to an election of a
specific benefit and a designation of a specific Beneficiary. If a Participant
establishes to the satisfaction of the Administrator that he is not married,
that his spouse's written consent cannot be obtained because the spouse cannot
be located, that the Participant is legally separated or the Participant has
been abandoned (within the meaning of local law) and the Participant has a court
order to such effect, or that such other circumstances exist as are specified
under applicable Internal Revenue Service regulations, a waiver by the
Participant alone will be a qualified election (unless a qualified domestic
relations order as described in 414(p) of the Code provides otherwise). Any
consent necessary under this provision will be valid only with respect to the
spouse who signs the consent. If the spouse is legally incompetent to give
consent, the spouse's legal guardian, even if the guardian is the Participant,
may give consent. A Participant may revoke a previous waiver without the consent
of his spouse at any time before benefits begin. A spouse may not revoke his
written consent. A qualified election must be made within the qualified election
period as defined below.

                           (iii) SPOUSE (SURVIVING SPOUSE): For purposes of
Section 3.9(b), the spouse or surviving spouse of a Participant provided that
the Participant and the Participant's spouse are married to each other on the
Annuity Starting Date, and further provided that a former spouse will be treated
as a spouse or surviving spouse to the extent provided under a qualified
domestic relations order as described in ss.414(p) of the Code. For purposes of
Section 3.9(c), the spouse or surviving spouse of a Participant provided that
the Participant and the Participant's spouse were married to each other on the
date of the Participant's death, and further provided that a former spouse will
be treated as a spouse or surviving spouse to the extent provided under a
qualified domestic relations order as described in ss.414(p) of the Code.

                                      -18-
<PAGE>

                           (iv) JOINT AND SURVIVOR SPOUSE ANNUITY. A reduced
retirement allowance commencing on Normal Retirement Date, or, with the consent
of the Participant, commencing on the earliest retirement age, of Actuarially
Equivalent value to the benefit payable under Section 3.4(a), payable during the
retired Participant's life, with the provision that, after his death, a monthly
benefit equal to one half (or sixty-six and two-thirds percent (662/3%) or one
hundred (100%), as elected by the Participant) of the monthly benefit payable
during the Participant's life shall be continued during the life of and paid to
his surviving spouse, with payments ceasing with the retired Participant's death
if his spouse does not survive the retired Participant. A Joint and Survivor
Spouse Annuity for a single Participant is a monthly benefit payable to the
Participant during his life with payments ceasing upon the Participant's death.

                           (v) QUALIFIED ELECTION PERIOD. The period which
begins on the date the Participant receives the notice required below and ends
on the Annuity Starting Date (such election period shall be no more than ninety
(90) days and no less than thirty (30) days).

                           Notwithstanding the preceding, if the Plan provides
the notice required below after the Annuity Starting Date, the qualified
election period shall not end before the thirtieth (30th) day after the date on
which such notice is provided.

                  (e)      NOTICE REQUIREMENTS.

                           (i) Within ninety (90) days but not less than thirty
(30) days prior to the Annuity Starting Date, the Administrator shall provide to
each Participant (other than Participants who receive an automatic cash-out
distribution under Section 3.7) a written explanation of: (i) the terms and
conditions of a Joint and Survivor Spouse Annuity; (ii) the Participant's right
to waive the Joint and Survivor Spouse Annuity form of a benefit and the effect
of such a waiver; (iii) the rights of a Participant's spouse under this Section;
and (iv) the Participant's right to revoke a previous waiver of the Joint and
Survivor Spouse Annuity and the effect of revoking such a waiver. Effective as
of the first day of the Plan Year beginning on or after January 1, 1989, a
Participant must be furnished a general description of the eligibility
conditions and sufficient additional information to explain the relative values
of the optional forms of benefit available under the Plan (e.g., the extent to
which optional forms are subsidized relative to the normal form of benefit or
the interest rates used to calculate the optional forms).

                           (ii) In the case of any distribution (other than an
automatic cash-out of three thousand five hundred dollars ($3,500) (five
thousand dollars ($5,000) for Plan Years beginning on or after January 1, 2000)
or less) which is to commence prior to the Participant's attainment of Normal
Retirement Age, the Administrator shall notify the Participant of the
Participant's right to defer the commencement of the distribution until the
Participant's attainment of Normal Retirement Age.

                           (iii) Notwithstanding the foregoing, the
Participant's Annuity Starting Date may precede or may be fewer than thirty (30)
days after the explanation described in this Section is provided if (A) the
Participant is given notice of his right to a thirty (30) day period in which to
consider whether to (1) waive the Joint and Survivor Spouse Annuity form of
benefit and

                                      -19-
<PAGE>

elect an optional form and (2) to the extent applicable, consent to the
distribution, (B) the Participant affirmatively elects a distribution and a form
of benefit and the spouse, if necessary, consents to the form of benefit
elected, (C) the Participant is permitted to revoke his affirmative election at
any time prior to his Annuity Starting Date or, if later, the expiration of a
seven (7) day period beginning on the day after the explanation described in
this Section is provided to the Participant, (D) the Annuity Starting Date is
after the date the Administrator receives written notice of the Participant's
intent to begin receiving benefits, and (E) distribution to the Participant does
not commence before the expiration of the seven (7) day period described in (C)
above.

         3.10     DISTRIBUTION REQUIREMENTS.

                  (a) GENERAL RULE. This Section is included in the Plan to
comply with Code ss.401(a)(9) and the Regulations thereunder. To the extent that
there is any conflict between the provisions of Code ss.401(a)(9) and any other
provision in the Plan, the provisions of Code ss.401(a)(9), including Treasury
Regulation ss.ss.1.401(a)(9)-1 through 1.401(a)(9)-8, will control.

                           With respect to distributions under the Plan made in
calendar years beginning on or after January 1, 2001, the Plan will apply the
minimum distribution requirements of Code ss.401(a)(9) in accordance with the
Regulations under Code ss.401(a)(9) that were proposed in January 2001,
notwithstanding any provision of the Plan to the contrary. This application
shall continue in effect until the end of the last calendar year beginning
before the effective date of Final Regulations under Code ss.401(a)(9) or such
other date specified in guidance published by the Internal Revenue Service, at
which time the Final Regulations under Code ss.401(a)(9) shall control.

                  (b) COMMENCEMENT OF BENEFITS. The distribution of benefits to
a Participant who continues employment with the Employer beyond the
Participant's Normal Retirement Date must commence by the first day of April of
the calendar year following the calendar year in which the Participant attains
age seventy and one-half (70 1/2) (effective as of January 1, 2001, the later of
the calendar year in which the Participant terminates employment with the
Employer or the calendar year in which the Participant attains age seventy and
one-half (70 1/2)). Notwithstanding the preceding, (i) if the Participant is a
five percent (5%) owner of the Employer (as defined in Code ss.416(i)) with
respect to the Plan Year in which the Participant attains age seventy and one-
half (70 1/2), the required distribution commencement date is the first day of
April of the calendar year following the calendar year in which the Participant
attains age seventy and one-half (70 1/2) (even if the Participant's employment
with the Employer has not yet terminated) and (ii) effective as of January 1,
2001, a Participant other than a five percent (5%) owner (as defined in Code
ss.416(i)) who attains age seventy and one-half (70 1/2) but whose employment
with the Employer has not yet terminated shall be permitted, but shall not be
required, to elect to commence the receipt of distributions by the first day of
April of the calendar year following the calendar year in which the Participant
attains age seventy and one-half (70 1/2).

                  Participants whose distributions from the Plan were required
to commence prior to January 1, 2001 because of attainment of age seventy and
one-half (70 1/2) may elect to cease receiving distributions until otherwise
required under the Plan, in which case the date on which distributions
recommence shall be considered a new Annuity Starting Date.

                                      -20-
<PAGE>

                  In the case of a Participant other than a five percent (5%)
owner (as defined in Code Section 416(i)) whose distributions commence or
recommence later than the first day of April of the calendar year following the
calendar year in which such Participant attains age seventy and one-half (70
1/2), such Participant's Accrued Benefit shall be adjusted actuarially (in
accordance with Section 1.2) to take into account the period after age seventy
and one-half (70 1/2) during which such Participant was not receiving any
distributions hereunder.

                  (c)      DEATH DISTRIBUTION PROVISIONS

                           (i) DEATH AFTER DISTRIBUTION. If the Participant dies
after distribution of his interest has commenced, the remaining portion of such
interest, if any, will be distributed pursuant to the form in which the
Participant's interest was being paid prior to the Participant's death.

                           (ii) DEATH BEFORE DISTRIBUTION. If the Participant
dies before distribution of his interest commences, any benefits payable because
of the Participant's death will be distributed pursuant to the provisions of
Section 3.9 and Article 4. If the Participant's spouse is not the beneficiary,
the method of distribution must satisfy the incidental death benefit
requirements specified in ss.401(a)(9)(G) of the Code.

         3.11 DIRECT ROLLOVERS. Notwithstanding any other provision of the Plan
to the contrary, any Distributee who is to receive an Eligible Rollover
Distribution may elect the direct trustee-to-trustee rollover of the
distribution to an Eligible Retirement Plan. A direct rollover election must be
made pursuant to the procedures established by the Plan Administrator and must
specify the Eligible Retirement Plan to which the direct rollover is to be made.
If the Distributee elects a direct rollover as permitted hereunder, the Plan
Administrator shall make the rollover as elected. For purposes of this Section,
the term "Eligible Rollover Distribution" has the meaning given such term in
Code ss.401(a)(31)(C) and currently means any distribution on or after January
1, 1993 of all or any portion of the balance to the credit of the Distributee,
except (i) any distribution that is one of a series of substantially equal
periodic payments (not less frequent than annual) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint life expectancies)
of the Distributee and the Distributee's designated beneficiary, or for a
specified period of ten (10) years or more, (ii) any distribution to the extent
such distribution is required under Code ss.401(a)(9), and (iii) the portion of
any distribution that is not includable in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to employer
securities). For purposes of this Section, the term Eligible Retirement Plan has
the meaning given such term in Code ss.401(a)(31)(D) and currently means (i) an
individual retirement account described in Code ss.408(a), (ii) an individual
retirement annuity described in Code ss.408(b) (other than an endowment
contract), (iii) an annuity plan described in Code ss.403(a), and (iv) a
qualified trust that is a defined contribution plan described in Code ss.401(a),
the terms of which permit the acceptance of direct rollovers. However, in the
case of an Eligible Rollover Distribution to a Participant's surviving spouse,
an Eligible Retirement Plan is limited to the plans described in (i) and (ii) in
the preceding sentence. For purposes of this Section, the term Distributee
includes the Participant and the Participant's surviving spouse. In addition,
Distributee includes the Participant's spouse or former spouse who is the
alternate payee under a Qualified Domestic Relations Order, as defined in Code
ss.414(p), with respect to the payee's interest under the Plan.

                                      -21-
<PAGE>

         Effective for distributions made after December 31, 2001, an "Eligible
Rollover Plan" shall also mean an annuity contract described in Code ss.403(b)
and an eligible plan described in Code ss.457(b) which is maintained by a state,
political subdivision of a state, or any agency or instrumentality of a state or
political subdivision of a state and which agrees to separately account for
amounts transferred into such plan from this Plan. The definition of "Eligible
Retirement Plan" shall also apply, effective for Plan Years following December
31, 2001, in the case of a distribution to a surviving spouse, or to a spouse or
former spouse who is the alternate payee under a qualified domestic relations
order, as defined in Code ss.414(p). Also effective for Plan Years beginning
after December 31, 2001, any amount that is distributed on account of hardship
shall not be an "Eligible Rollover Distribution" and the distributee may not
elect to have any portion of such a distribution paid directly to an "Eligible
Retirement Plan".

         3.12 MILITARY SERVICE BENEFITS. Notwithstanding any provision of this
Plan to the contrary, effective the later of the Effective Date or December 12,
1994, contributions, benefits and service credit with respect to qualified
military service will be provided in accordance with ss.414(u) of the Code.

                                    ARTICLE 4
                                 DEATH BENEFITS

         4.1 DEATH AFTER RETIREMENT BUT BEFORE BENEFITS BEGIN. Except as
provided in Section 3.9, no death benefits are payable on account of a
Participant who dies before the payments of his benefits under the Plan begin.

         4.2 DEATH AFTER BENEFITS BEGIN. The death benefits of a Participant who
dies after his benefits under the Plan begin are those specified, if any, under
the form in which the Participant's benefits were being paid.

                                    ARTICLE 5
                            TERMINATION OF EMPLOYMENT

         5.1 DEFERRED PENSION BENEFITS. If the employment of a Participant with
five (5) or more Years of Service for vesting purposes terminates for any reason
other than the Participant's Normal Retirement, Early Retirement, disability or
death, the Participant shall be entitled to receive a deferred pension benefit
commencing at the Participant's Normal Retirement Date and equal to the amount
of pension benefit the Participant is entitled to receive in accordance with
Section 3.1.

         5.2 EARLY DEFERRED PENSION BENEFITS. In lieu of a deferred vested
pension benefit beginning at Normal Retirement Date, a terminated Participant
who has at least five (5) Years of Service for vesting purposes may elect to
have his benefit commence on the first day of any month following the
Participant's fifty-fifth (55th) birthday (such commencement date to be

                                      -22-
<PAGE>

determined by the Participant by notice to the Administrator in accordance with
rules adopted by the Administrator). If such benefit commences prior to the
Participant's Normal Retirement Date, the benefit shall be the greater of (a)
the pension benefit as computed in Section 3.1 reduced by one-fifteenth (1/15th)
for each of the first five (5) years and one-thirtieth (1/30th) for each of the
next five (5) years and reduced actuarially for each additional year by which
the commencement date precedes the vested terminated Participant's Normal
Retirement Date, or (b) the Actuarial Equivalent of the Participant's Accrued
Benefit if such benefit is distributed in a form other than a nondecreasing life
annuity payable for a period not less than the life of the Participant.

                                    ARTICLE 6
                                  CONTRIBUTIONS

         6.1 EMPLOYER CONTRIBUTIONS. The Employer shall make all necessary
contributions to meet the minimum funding requirements. No contributions toward
the cost of such benefits shall be required of any of the Participants. The
Employer's contributions shall be payable at such intervals and in such amounts
as may be determined by the actuaries for the Plan.

         6.2      EMPLOYER'S RIGHT TO SUSPEND OR REDUCE CONTRIBUTIONS.  It is
the intention of the Employer to continue the Plan and make regular
contributions to the Fund, but the Employer reserves the right to suspend or
reduce contributions to the Plan.

         6.3 DEDUCTIBILITY OF CONTRIBUTIONS. Employer contributions for a Plan
Year shall not exceed an amount which, when combined with all other
contributions under the Plan for the Plan Year, equals the maximum contribution
which would be deductible by the Employer under Code ss.404 (including
carryovers) for the applicable fiscal year of the Employer.

                                    ARTICLE 7
                            AMENDMENT AND TERMINATION

         7.1 EMPLOYER'S RIGHT TO AMEND. The Plan Sponsor shall have the right to
amend this Plan in any and all respects at any time and from time to time,
including the right to reduce or suspend contributions; provided, however:

                  (a) that no amendment shall increase the duties or liabilities
of the Administrator or the Trustee without its consent;

                  (b) that no amendment shall deprive any Participant of any
benefit protected under Codess.411(d)(6), except as permitted under
Codess.411(d)(6);

                  (c) that no amendment shall provide for the use of the Trust
Fund other than for the benefit of Participants and Beneficiaries, except as
provided in Section 7.3; and

                                      -23-
<PAGE>

                  (d) that no amendment shall deprive any Participant of any
vested interest in his Accrued Benefit. If the Plan's vesting schedule is
amended, any Participant having not less than three (3) Years of Service shall
be permitted to elect, in writing, to the Administrator, to have his Vested
Percentage computed under the Plan without regard to such amendment, provided
such Participant's Vested Percentage at some point under the amended schedule
may be less than such Participant's Vested Percentage at some point under the
prior vesting schedule.

                           The period during which the vesting schedule election
must be made by the Participant shall begin no later than the date the Plan
amendment is adopted and end no later than the latest of the following dates:

                           (i) The date which is sixty (60) days after the day
the amendment is adopted;

                           (ii) The date which is sixty (60) days after the day
the amendment becomes effective;

                           (iii) The date which is sixty (60) days after the day
the Participant is issued written notice of the amendment by the Employer or
Administrator.

         7.2 AMENDMENT PROCEDURE. An amendment made under this Article shall be
valid only if it is approved by the Board of Directors at a duly called meeting
at which a quorum thereof is present or by written consent of the members of the
Board of Directors executed in accordance with applicable State law.

         7.3      TERMINATION OF THE PLAN.

                  (a) The Plan Sponsor reserves the right to terminate all or
any portion of the Plan or to terminate or limit the participation of any
Employer in the Plan at any time. Such termination shall be by a resolution of
the Board of Directors, and a copy of this resolution shall be delivered to the
Trustee and to the Administrator.

                  (b) In the event of a termination or partial termination, as
determined under applicable Internal Revenue Service regulations and rulings, of
the Plan, all affected Participants on the date of the termination or partial
termination, to the extent required by law, shall have a nonforfeitable right to
benefits under this Plan accrued on the date of the termination or partial
termination to the extent the same are funded as of such date.

                  (c) Upon termination or partial termination of the Plan as
described above, the Administrator, to the extent necessary, shall make
provision for any expenses of the Plan and the Administrator shall allocate the
assets of the Fund, as appropriate. Upon such allocation of assets, the
Administrator shall have the authority to direct the liquidation and
distribution of the Fund.

                  (d) The allocation of Plan assets upon Plan termination will
be in the manner provided in ss.4044 of ERISA. If, after following the order of
allocations in ss.4044 of ERISA, there are any Plan assets remaining, then such
amount shall be returned to the Employer.

                                      -24-
<PAGE>

         7.4 TERMINATION PROCEDURE. A termination or discontinuance made under
this Article shall be valid only if it is approved by the Board of Directors at
a duly called meeting at which a quorum thereof is present or by written consent
of the members of the Board of Directors executed in accordance with applicable
State law.

         7.5      RELEASE AND DISCHARGE OF ADMINISTRATOR.  Notwithstanding the
above, in case the Plan is terminated in whole or in part as authorized by
ss.4041 (or by the Pension Benefit Guaranty Corporation pursuant to ss.4042) of
ERISA (or corresponding provisions of any subsequent applicable law in effect at
the time), the Administrator (or the trustee appointed upon the application of
the Pension Benefit Guaranty Corporation), to the extent permitted under
applicable law, shall distribute the assets in the Fund. To the extent permitted
by ERISA, when the assets in the Fund shall have been so applied or distributed
and the accounts of the Fund shall have been so settled, the Administrator shall
be released and discharged from all further accountability or liability
respecting the Plan and the Fund (or that part of the Fund so applied or
distributed if the Plan is terminated only in part) and shall not be responsible
in any way for the further disposition of the Fund (or that part of the Fund so
applied or distributed, if the Plan is terminated only in part) or any part
thereof so applied or distributed.

                                    ARTICLE 8
                                 ADMINISTRATION

         8.1 ADMINISTRATION. The administration of this Plan shall be the
responsibility of the following named fiduciaries, who are designated as such
for purposes of ERISA:

                  (a) The Trustee with respect to the management, control and
investment of the Trust (except to the extent the Trustee is subject to the
direction of the Administrator or an investment manager) and the payment of
benefits to Participants and their Beneficiaries;

                  (b) The Administrator or other person or persons designated by
the Administrator for purposes of determining appeals with respect to denied
claims for benefits; and

                  (c) The Administrator with respect to controlling and managing
the administration and operation of the Plan as hereinafter set forth. The
Administrator may, through a written instrument, designate other persons to
carry out some or all of its fiduciary responsibility.

                  The authority of each named fiduciary in its designated area
of responsibility as aforesaid shall be exclusive, and no named fiduciary shall
have either authority or responsibility to exercise any discretion or control
other than as specifically delegated to the named fiduciary hereunder. Any
person or group of persons or entity may serve in more than one fiduciary
capacity with respect to the Plan.

                                      -25-
<PAGE>

                                    ARTICLE 9
                                THE ADMINISTRATOR

         9.1 MEMBERS. The Administrator shall be designated by the Plan Sponsor
and may be the Employer or a committee of one or more individuals (which
individuals may, but need not, be Participants in the Plan).

         9.2      PROCEDURE.

                  (a) The Administrator may elect from among its membership, by
a majority vote for each, a chairperson and a secretary and such other officers
as the Administrator may deem expedient. The Administrator shall meet as often
as its chairperson deems necessary to carry out its functions. Any other two (2)
members of the Administrator may call a meeting at any time by giving due notice
thereof to the chairperson and the other Administrator members.

                  (b) Action by the Administrator on any matter of substance or
on any matter that requires the exercise of discretion by the Administrator
shall be taken at a meeting of the Administrator by a majority vote or by
unanimous written consent without a meeting. Action on purely administrative
matters may be taken by any member designated by a majority of the entire
Administrator to act upon such administrative matter. However, no member of the
Administrator who is a Participant shall vote or act on any question concerning
only his rights or his beneficiaries' rights under the Plan.

         9.3 POWERS AND RESPONSIBILITIES. The Administrator shall have the
following powers and responsibilities:

                  (a) Construing the Plan, and remedying any ambiguities,
inconsistencies or omissions.

                  (b) Determining all questions relative to the eligibility of
Employees to be Participants and the benefits of Participants or Beneficiaries.

                  (c) Establishing reasonable rules for the administration of
the Plan.

                  (d) Maintaining appropriate records relating to Participants
and their Beneficiaries.

                  (e) Communicating the funding policy to the Trustee and to any
investment managers whose duties are to determine the investment policy of the
Fund.

                  (f) Preparing and filing such reports and returns with respect
to the Plan as are required by law.

                  (g) Appointing such investment managers with respect to all or
any designated part of the Fund as it shall deem appropriate.

                                      -26-
<PAGE>

                  (h) Performing other duties necessary for the administration
of this Plan which appear to the Administrator to be necessary or appropriate in
order properly to administer and operate the Plan.

                  The Administrator shall discharge its duties for the exclusive
purpose of providing benefits hereunder and defraying the reasonable expenses of
operating the Plan and with the skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of a
like character and with like aims.

                  In carrying out its duties herein, the Administrator shall
have discretionary authority to exercise all powers and to make all
determinations, consistent with the terms of the Plan, in all matters entrusted
to it, and its determinations shall be given deference and shall be final and
binding on all interested parties.

         9.4      CERTIFICATIONS AND INVESTIGATIONS.

                  (a) Whenever in the administration of the Plan a certification
by the Employer is required to be given to the Administrator, or if the
Administrator shall deem it necessary that a matter be proved by certification
of the Employer prior to taking or omitting any action hereunder, such
certification shall be duly made, and the matter shall be deemed proved, by an
instrument delivered to the Administrator, signed in the name of the Employer by
its duly authorized representative. The Administrator shall be empowered to act,
and shall be protected in acting, upon such instrument. Further, the
Administrator shall be empowered to act, and shall be protected in acting, upon
any notice, resolution, order, offer, telegram, letter or other document
believed by the Administrator to be genuine and to have been signed by the
proper party or parties.

                  (b) The Administrator shall not be required to make any
investigation to determine the identity or mailing address of any person
entitled to benefits under this Plan and shall be entitled to withhold the
payment of benefits until the identity and mailing addresses of persons entitled
to benefits are certified to it by the Employer or by such person.

         9.5 CLAIMS PROCEDURE. Any person claiming a benefit under the Plan (a
"Claimant") shall present the claim, in writing, to the Administrator, and the
Administrator shall respond in writing. If the claim is denied, the written
notice of denial shall state, in a manner calculated to be understood by the
Claimant:

                  (a) The specific reason or reasons for denial, with specific
references to the Plan provisions on which the denial is based;

                  (b) A description of any additional material or information
necessary for the Claimant to perfect his claim and an explanation of why such
material or information is necessary; and

                                      -27-
<PAGE>

                  (c)      An explanation of the Plan's claims review procedure.

                  The written notice denying or granting the Claimant's claim
shall be provided to the Claimant within ninety (90) days after the
Administrator's receipt of the claim, unless special circumstances require an
extension of time for processing the claim. If such an extension is required,
written notice of the extension shall be furnished by the Administrator to the
Claimant within the initial ninety (90) day period and in no event shall such an
extension exceed a period of ninety (90) days from the end of the initial ninety
(90) day period. Any extension notice shall indicate the special circumstances
requiring the extension and the date on which the Administrator expects to
render a decision on the claim. Any claim not granted or denied within the
period noted above shall be deemed to have been denied.

                  Any Claimant whose claim is denied, or deemed to be denied
under the preceding sentence, (or such Claimant's authorized representative)
may, within sixty (60) days after the Claimant's receipt of notice of the
denial, or after the date of the deemed denial, request a review of the denial
by notice given, in writing, to the Administrator. Upon such a request for
review, the claim shall be reviewed by the Administrator (or its designated
representative) which may, but shall not be required to, grant the Claimant a
hearing. In connection with the review, the Claimant may have representation,
may examine pertinent documents, and may submit issues and comments in writing.

                  The decision on review normally shall be made within sixty
(60) days of the Administrator's receipt of the request for review. If an
extension of time is required due to special circumstances, the Claimant shall
be notified, in writing, by the Administrator, and the time limit for the
decision on review shall be extended to one hundred twenty (120) days. The
decision on review shall be in writing and shall state, in a manner calculated
to be understood by the Claimant, the specific reasons for the decision and
shall include references to the relevant Plan provisions on which the decision
is based. The written decision on review shall be given to the Claimant within
the sixty (60) day (or, if applicable, the one hundred twenty (120) day) time
limit discussed above. If the decision on review is not communicated to the
Claimant within the sixty (60) day (or, if applicable, the one hundred twenty
(120) day) period discussed above, the claim shall be deemed to have been denied
upon review. All decisions on review shall be final and binding with respect to
all concerned parties.

         9.6 ADVICE. The Administrator may secure specialized advice or
assistance as it deems necessary or desirable in connection with the
administration and operation of the Plan and shall be entitled to rely
conclusively upon, and shall be fully protected in any action or omission taken
by it in good faith reliance upon, any advice or opinion so obtained.

         9.7 DELEGATION. The Administrator shall have the power and authority to
delegate from time to time by written instrument all or any part of its duties,
powers or responsibilities under the Plan, both ministerial and discretionary,
as it deems appropriate, to any person, and in the same manner to revoke any
such delegation of duties, powers or responsibilities. Any action of such person
in the exercise of duties, powers or responsibilities delegated to such person
shall have the same force and effect for all purposes hereunder as if such
action had been taken by the

                                      -28-
<PAGE>

Administrator. Further, the Administrator may authorize one or more persons to
execute any certificate or document on behalf of the Administrator, in which
event any person notified by the Administrator of such authorization shall be
entitled to accept and conclusively rely upon any such certificate or document
executed by such person as representing action by the Administrator until such
third person shall have been notified of the revocation of such authority.
Except to the extent required by ERISA, the Administrator shall not be liable
for any act or omission of any person to whom the Administrator's duties, powers
or responsibilities have been delegated, nor shall any person to whom any
duties, powers or responsibilities have been delegated have any liabilities with
respect to any duties, powers or responsibilities not delegated to such person,
except to the extent required by ERISA.

         9.8 LIABILITY; INDEMNIFICATION. Except to the extent required by ERISA,
no member of the Administrator shall incur any liability: (i) by virtue of any
contract, agreement, bond or other instrument made or executed by the member or
on the member's behalf as a member of the Administrator, (ii) for any act or
failure to act, or any mistake or judgment made by the member, with respect to
the business of the Plan, unless resulting from the member's gross negligence or
willful misconduct, or (iii) for the neglect, omission or wrongdoing of any
other member of the Administrator or of any person employed or retained by the
Administrator. The Employer shall indemnify and hold harmless each member of the
Administrator from the effects and consequences of the member's acts, omissions
and conduct with respect to the Plan, except to the extent that such effects and
consequences shall result from the member's own willful misconduct or gross
negligence. The foregoing right to indemnification shall be in addition to such
other rights as the Administrator may enjoy as a matter of law or by reason of
insurance coverage of any kind. Rights granted hereunder shall be in addition to
and not in lieu of any rights to indemnification to which the Administrator may
be entitled pursuant to the by-laws of the Employer, and, if the Administrator
is an Employee, service as the Administrator shall be deemed in partial
fulfillment of the member's employment function. In all computations, the
Administrator shall be entitled to rely fully upon data furnished by the
Employer and upon information furnished it by or on behalf of an Employee or
Employees.

         9.9 INSURANCE. The Plan may purchase, as an expense of the Plan,
liability insurance for the Plan and/or for its fiduciaries to cover liability
or losses occurring by reason of an act or omission by a fiduciary; provided,
that such insurance permits recourse by the insurer against the fiduciary in the
case of a breach of a fiduciary obligation by such fiduciary. In addition, any
fiduciary may purchase, from and for the fiduciary's own account, insurance to
protect the fiduciary in the event of a breach of fiduciary duty, and the
Employer may also purchase insurance to cover the potential liability of one or
more persons who serve in a fiduciary capacity with regard to the Plan.

         9.10 BONDING. The Administrator shall arrange for such bonding as is
required by law. Bonding in excess of the amount required by law shall not be
considered required, but shall be permitted, by this Plan. The costs for such
bonding shall be paid by the Employer or, if the Employer elects, from the
Trust.

                                      -29-
<PAGE>

         9.11 COMPENSATION. The Administrator shall serve without compensation,
but all expenses of the Administrator incurred in the performance of duties
hereunder shall be proper charges to the Trust and shall be paid therefrom
unless the Employer, in its discretion, chooses to pay such expenses.

         9.12 PLAN RECORDS. The Administrator, or the Secretary of the
Administrator shall keep or cause to be kept records reflecting administration
of the Plan, which records shall be subject to audit by the Employer. A
Participant may examine only those records pertaining directly to the
Participant.

         9.13 INSTRUCTIONS TO TRUSTEES. The Administrator shall provide
appropriate written instructions to the Trustee signed by an authorized member
or members of the Administrator to enable it to make the distributions provided
for in the Plan. The Trustee shall be entitled to rely upon any written notice,
instruction, direction, certificate or other communication reasonably believed
by it to be genuine and to be signed by an authorized member of the
Administrator or an officer of the Employer, and the Trustee shall be under no
duty to make investigation or inquiry as to the truth or accuracy of any
statement contained therein, unless it knows that the direction or instruction
constitutes a breach of the Administrator's or an Employer's fiduciary
responsibility with respect to the Plan.

         9.14 INVESTMENT MANAGERS. The Employer's power to retain the services
of an investment manager(s) for the management of (including the power to
acquire and dispose of) all or any part of the Fund's assets, shall be limited
to the retention of such persons or firms that are registered as investment
managers under the Investment Advisers Act of 1940, as amended, as Banks (as
defined in that Act), or which are insurance companies qualified to manage,
acquire or dispose of the Fund's assets under the laws of more than one state,
and provided that each of such persons or firms has acknowledged to the
Administrator and the Trustee in writing that he is a fiduciary with respect to
the Plan. In such event, the Trustee shall not be liable for the acts or
omissions of such investment manager or managers, nor shall it be under any
obligation to invest or otherwise manage any assets which are subject to the
management of such investment manager or managers.

                                   ARTICLE 10
                                TRUST AND TRUSTEE

         10.1 TRUST FUND. The Trust Fund shall consist of all contributions made
by the Employer or transferred to the Trust Fund as provided herein, and the
investments and reinvestments thereof and the income thereon which shall be
accumulated and added to principal.

         10.2 TRUSTEE CONTROL. The Trustee shall be appointed by the Plan
Sponsor. The Trustee shall hold and invest the funds and assets received by the
Trustee under this Plan subject to the terms of this Plan and the Trust
Agreement and for the purposes herein set forth. The Trustee will have exclusive
authority and discretion to manage and control the assets of the Trust except as
otherwise provided under the Plan or under a separate Trust Agreement. The
Trustee shall be responsible only for such funds and assets as shall actually be
received by the Trustee as Trustee hereunder.

                                      -30-
<PAGE>

                  So long as a Trustee is acting, title to any of the assets of
the Trust Fund may be held or registered in the name of a nominee of the Trustee
for ease of dealing with the same, provided that the books of the Trust reflect
actual ownership. The Trustee shall be liable for the acts of its nominees. The
assets so held or registered shall at all times remain in the possession or
under the control of the Trustee.

                                   ARTICLE 11
                           MERGERS AND CONSOLIDATIONS

         11.1     MERGER, CONSOLIDATION OR TRANSFER OF ASSETS OF THE
EMPLOYER. In the event of merger or consolidation of the Employer, or transfer
of all or substantially all of its assets to any corporation or other business,
provisions may be made by any successor organization for the continuance of this
Plan, and said successor shall in such event be substituted in place of the
Employer by an appropriate instrument confirming such substitution and adopting
this Plan. Notice of such substitution delivered to the Trustee shall be
authority to the Trustee to recognize such successor in place of the Employer.
The continuation of this Plan shall be by a separate plan and trust, to which
the Trustee shall transfer the Plan Accounts of Employees of that Employer.

         11.2 MERGER, CONSOLIDATION OR TRANSFER OF ASSETS OF THE PLAN. In the
event of the merger, consolidation or transfer of the assets of the Plan with
any other pension or profit sharing plan, such action shall be on terms
providing that each Participant in this Plan would (if the transferee plan then
terminated) receive a benefit immediately after the merger, consolidation or
transfer which is not less than the benefit the Participant would have been
entitled to receive immediately before such action (if the Plan had then
terminated).

                                   ARTICLE 12
                      PROVISIONS TO PREVENT DISCRIMINATION

         12.1 NO SS.401(A) DISCRIMINATION. No contributions made to the Trust
Fund by the Employer, nor benefits received from the Trust Fund by the
Participants or their beneficiaries, shall be discriminatory within the meaning
of Code ss.401.

         12.2 UNIFORM TREATMENT. This Plan shall be administered and construed
in a uniform and non-discriminatory manner, treating similarly situated
Participants alike.

                                   ARTICLE 13
                              TOP HEAVY PROVISIONS

         13.1 TOP HEAVY REQUIREMENTS. Notwithstanding anything contained herein
to the contrary, if the Plan is a Top Heavy Plan for any Plan Year, then the
Plan shall meet the following requirements for such Plan Year:

                                      -31-
<PAGE>

                  (a) MINIMUM VESTING REQUIREMENTS. Vesting shall be determined
in accordance with one of the following schedules as designated by the
Administrator by written resolution, except that if the vesting schedule then in
effect is more favorable in all respects to Participants than either of the
following schedules, the vesting schedule then in effect shall continue to
apply:

                           (i) A Participant will have a fully vested interest
in his Accrued Benefit under the Plan upon completion of not more than three (3)
Years of Service for vesting purposes; or

                           (ii) A Participant's vested interest in his Accrued
Benefit under the Plan will be determined under a schedule which is not less
favorable to the Participant than the following:

   YEARS OF SERVICE                                VESTED INTEREST
======================================== =======================================
     Less than 2                                       0%
  2 but less than 3                                    20%
  3 but less than 4                                    40%
  4 but less than 5                                    60%
  5 but less than 6                                    80%
      6 or more                                       100%
======================================== =======================================

                           If the Administrator fails to designate one of the
preceding schedules, Schedule (ii) shall be deemed to have been designated.

                           If this Plan is found to be a Top Heavy Plan and
subsequently ceases to be a Top Heavy Plan, then the vested interest of a
Participant with fewer than three (3) Years of Service on the date on which the
Plan ceases to be a Top Heavy Plan in benefits accrued with respect to Plan
Years after the Plan ceases to be a Top Heavy Plan shall be determined without
regard to the preceding schedules; the vested interest of a Participant with
more than three (3) Years of Service on that date shall in that event, upon the
Participant's election, continue to be determined by the preceding schedules.

                  (b) MINIMUM BENEFIT REQUIREMENT. The Plan shall provide a
minimum benefit for each Participant who is a Non-Key Employee which, when
expressed as an annual retirement benefit payable in the form of a single life
annuity beginning at normal retirement age (as defined in Code ss.411(a)), shall
not be less than the Participant's average compensation for years in the Testing
Period multiplied by the lesser of:

                           (i) Two percent (2%) times the Participant's Years of
Service; or

                           (ii) Twenty percent (20%).

                                      -32-
<PAGE>

                           For purposes of this subsection, years of service
shall be determined under the rules of paragraphs (4), (5) and (6) of Code
ss.411(a) but shall exclude any year of service if the plan was not a Top Heavy
Plan for the Plan Year ending during such year of service or if such year of
service was completed in a Plan Year beginning before January 1, 1984. A
Participant's Testing Period for purposes of determining his average
compensation under this subsection is the five (5) consecutive calendar years
during which the Participant had the greatest aggregate compensation from the
Employer, excluding calendar years ending in a Plan Year beginning before
January 1, 1984 and calendar years beginning after the close of the last year in
which the Plan is a Top Heavy Plan.

                           For limitation years commencing before January 1,
2000, the minimum benefit shall be increased to three percent (3%) of average
compensation per year of service, but not more than thirty percent (30%) of
average compensation, if such increase is necessary to avoid the application of
Code ss.416(h)(1), relating to special adjustments to Code ss.415 limits for Top
Heavy Plans, and if the adjusted limitations of Code ss.416(h)(1) would
otherwise be exceeded if such minimum benefit were not so increased.

                           No minimum benefit will be required for a Participant
under this Plan if the Employer maintains another qualified plan under which a
minimum benefit or contribution is being funded or made for such year for the
Participant in accordance with Code ss.416(c).

                           For purposes of this subsection, the term
"compensation" shall have the meaning given in Codess.415.

         Effective for Plan Years beginning after December 31, 2001, for
purposes of satisfying the minimum benefit requirements of Code ss.416(c)(1) and
the Plan, in determining years of service with the Employer, any service with
the Employer shall be disregarded to the extent that such service occurs during
a Plan Year when the Plan benefits (within the meaning of Code ss.410(b)) no Key
Employee or former Key Employee.

                  (c) MAXIMUM COMPENSATION LIMITATION. Effective for Plan Years
beginning before January 1, 1989, the annual Compensation of each Participant
recognized under the Plan for such Plan Year shall not exceed the first two
hundred thousand dollars ($200,000) of such Participant's compensation;
provided, however, that such dollar limitation shall be adjusted to take into
account any adjustments made by the Secretary of the Treasury pursuant to Code
ss.416(d)(2).

                  (d) ADDITIONAL SUPER TOP HEAVY REQUIREMENT. If the Plan is a
Super Top Heavy Plan for any Plan Year, the limitations on benefits contained in
Code ss.415 shall be adjusted pursuant to ss.416(h) of the Code and ss.235(g)(3)
of the Tax Equity and Fiscal Responsibility Act of 1982.

         13.2 TOP HEAVY PLAN DEFINITIONS. For purposes of this Article, the
following terms shall have the meanings provided below:

                                      -33-
<PAGE>

                  (a) A plan is a "TOP HEAVY PLAN" if, as of the Determination
Date, the aggregate of the accounts of Key Employees under a defined
contribution plan exceeds sixty percent (60%) of the aggregate of the accounts
of all employees under such plan or, in the case of a defined benefit plan, the
present value of the cumulative Accrued Benefits under the plan for Key
Employees exceeds sixty percent (60%) of the present value of the cumulative
Accrued Benefits under the plan for all employees, all as adjusted by and
determined in accordance with the provisions of Code ss.416(g). The
determination of whether a plan is Top Heavy shall be made after aggregating
each Plan of the sponsoring Employer in which at least one Key Employee
participates and each other plan of the sponsoring Employer which enables any
plan in which at least one Key Employee participates to meet the requirements of
Code ss.ss.401(a)(4) or 410, and after aggregating any plan not required to be
aggregated by the foregoing if such aggregated group of plans, taking such plan
into account, continues to meet the requirements of Code ss.ss.401(a)(4) and
410. A plan is a "SUPER TOP HEAVY PLAN" if, as of the Determination Date, the
plan would meet the test specified above for being a Top Heavy Plan if ninety
percent (90%) were substituted for sixty percent (60%) in each place it appears
in this subsection.

                           Solely for the purpose of determining if the Plan, or
any other plan included in a required aggregation group of which this Plan is a
part, is Top Heavy (within the meaning of ss.416(g) of the Code) the Accrued
Benefit of an Employee other than a Key Employee (within the meaning of
ss.416(i)(1) of the Code) shall be determined under (a) the method, if any, that
uniformly applies for accrual purposes under all plans maintained by the
Affiliated Employers, or (b) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under the
fractional accrual rate of ss.411(b)(1)(C) of the Code.

                  Notwithstanding anything in the Plan to the contrary, for Plan
Years beginning after December 31, 2001, this paragraph shall apply for purposes
of determining the present values of accrued benefits and the amount of account
balances of employees as of the Determination Date. The present values of
accrued benefits and the amounts of account balances of an Employee as of the
Determination Date shall be increased by the distributions made with respect to
the Employee under the Plan and any plan aggregated with the Plan under Code
ss.416(g)(2) during the one (1) year period ending on the Determination Date.
The preceding sentence shall also apply to distributions under a terminated plan
which, had it not been terminated, would have been aggregated with the Plan
under Code ss.416(g)(2)(A)(i). In the case of a distribution made for a reason
other than separation from service, death, or disability, this provision shall
be applied by substituting "five (5) year period" for "one (1) year period". The
accrued benefits and accounts of any individual who has not performed service
for the Employer during the one (1) year period ending on the Determination Date
shall not be taken into account.

                  (b) The "DETERMINATION DATE" for purposes of determining
whether a plan is Top Heavy for a particular plan year is the last day of the
preceding plan year (or, in the case of the first plan year of a plan, the last
day of the first plan year).

                  (c) A "KEY EMPLOYEE" is any employee or former employee
(including a beneficiary of such employee or former employee) who at any time
during the plan year or any of the four (4) preceding plan years is:

                                      -34-
<PAGE>

                           (i) An officer of the plan sponsor or any corporation
required to be aggregated with the plan sponsor under Code ss.414(b), (c), (m)
or (o) who has annual compensation (as defined below) from the plan sponsor or
any corporation required to be aggregated with the plan sponsor under Code
ss.414(b), (c), (m) or (o) of more than fifty percent (50%) of the amount in
effect under Code ss.415(b)(1)(A) for the plan year (but in no event shall the
number of officers taken into account as Key Employees exceed the lesser of (i)
fifty (50) or, (ii) the greater of three (3) or ten percent (10%) of all
employees).

                           (ii) One (1) of the ten (10) Employees owning (or
considered as owning within the meaning of Code ss.318) both more than a
one-half percent (1/2%) ownership interest and the largest percentage ownership
interests in the Employer, and (ii) as annual compensation (as defined below) of
more than the amount in effect under Code ss.415(c)(1)(A). For purposes of this
Section, if two (2) Employees have the same interests in the Employer, the
Employee having greater annual compensation (as defined below) from the Employer
shall be treated as having a larger interest;

                           (iii) A person owning (or considered as owning within
the meaning of Code ss.318) more than five percent (5%) of the outstanding stock
of the plan sponsor or stock possessing more than five percent (5%) of the total
combined voting power of all stock of the plan sponsor; or

                           (iv) A person who has an annual compensation (as
defined below) from the plan sponsor (or any corporation required to be
aggregated with the plan sponsor under Code ss.414(b), (c), (m) or (o)) of more
than one hundred fifty thousand dollars ($150,000) and who would be described in
subparagraph (iii) hereof if one percent (1%) were substituted for five percent
(5%).

                           For purposes of applying Codess.318 to the provisions
of this subsection, subparagraph (C) of Code ss.318(a)(2) shall be applied by
substituting five percent (5%) for fifty percent (50%). In addition, the rules
of subsections (b), (c) and (m) of Code ss.414 shall not apply for purposes of
determining ownership of the plan sponsor under this subsection.

                           For purposes of determining whether an Employee is a
Key Employee, annual compensation means compensation as defined in Code
ss.415(c)(3), but including amounts contributed by the Employer pursuant to a
salary reduction agreement which are excludible from the Employee's gross income
under Code ss.125, 402(e)(3), 402(h) or 403(b).

                  Notwithstanding the preceding, for Plan Years beginning after
December 31, 2001, "Key Employee" means any employee or former employer
(including any deceased employee) who at any time during the Plan Year that
includes the determination date was an officer of the Employer having annual
compensation greater than one hundred and thirty-thousand dollars ($130,000) (as
adjusted under Code ss.416(i)(1) for Plan Years beginning after December 31,
2002), a five percent (5%) owner of the Employer, or a one percent (1%) owner of
the Employer having an annual compensation of more than one hundred and fifty
thousand dollars ($150,000). For this purpose "annual compensation" means
compensation within the meaning of Code ss.415(c)(3). The determination of who
is a Key Employee will be made in accordance with Code ss.416(i)(1) and the
applicable Regulations and other guidance of general applicability issued
thereunder.

                                      -35-
<PAGE>

                  (d) A "NON-KEY EMPLOYEE" is any participant in a plan
(including a beneficiary of such participant) who is not a Key Employee.

                  (e) Effective as of January 1, 2001, the term "compensation"
includes elective amounts that are not includible in gross income of the
employee by reason of ss.132(f)(4) of the Code (relating to qualified
transportation fringe benefits).

                                   ARTICLE 14
                                  MISCELLANEOUS

         14.1 NO RIGHT TO EMPLOYMENT. Participation in this Plan shall not give
any person the right to be retained in the employ of the Employer, or any right
or interest in this Plan other than as herein provided.

         14.2 HEADINGS; CONSTRUCTION. The headings and sub-headings in this
instrument are inserted for convenience of reference only and are not to be
considered in construing the provisions hereof. Unless otherwise required by the
context, the use of the masculine pronoun shall include the feminine and the use
of the singular number shall include the plural, and vice versa.

         14.3 COUNTERPARTS. This instrument may be executed in any number of
counterparts, each of which shall be deemed an original, and said counterparts
shall constitute but one and the same instrument, which may be sufficiently
evidenced by any one counterpart.

         14.4 GOVERNING LAW. This Plan shall be construed, administered and
governed in all respects under and by the laws of the State of New York, except
to the extent pre-empted by Federal law.

         14.5 RULES AND REGULATIONS. By becoming a Participant, every
Participant shall thereby be deemed to have agreed to abide by the rules and
regulations of the Administrator made in accordance with this Plan, and to sign
all papers necessary for the compliance therewith.

         14.6 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN. In the event that
all, or any portion, of the distribution payable to a Participant or a
Beneficiary shall remain unpaid solely because the Administrator cannot
ascertain the whereabouts of the Participant or Beneficiary, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, the amount so distributable shall be treated as a
forfeiture and used to reduce the contribution for that Plan Year. However, the
dollar amount, unadjusted for gains or losses in the interim, shall be
reinstated if a claim for the benefit is made by the Participant or Beneficiary
to whom it was payable. If a benefit payable to an unlocated Participant or

                                      -36-
<PAGE>

Beneficiary is subject to escheat pursuant to applicable state law, neither the
Trustee nor the Employer shall be liable to any person for any payment made in
accordance with such law.

         14.7 NO ASSIGNMENT OF BENEFITS. Except as expressly provided herein or
in connection with a judgment or settlement entered into on or after August 5,
1997, involving the Plan pursuant to the requirements of Code ss.401(a)(13)(C)
or as otherwise required by law, no benefits under the Plan may be assigned or
alienated, and the Trustee shall pay all amounts payable hereunder, and shall
distribute all assets distributable hereunder, to any person, into the hands of
such person and not unto any other person or corporation whatsoever, whether
claiming by his authority or otherwise; nor may said payments be anticipated.
Except as expressly provided herein, the interest of any Participant hereunder
may not be assigned or encumbered, nor shall it be subject to attachment or
other judicial process. However, deposit to the credit of the account of any
person in a bank or trust company designated by such person in writing shall be
deemed to be the equivalent of payment into the hands of such person.
Notwithstanding the foregoing, amounts held for the benefit of a Participant may
be paid in accordance with a "qualified domestic relations order" as defined in
Code ss.414(p) (or a domestic relations order entered before January 1, 1985
which, in the judgment of the Administrator, is entitled to be treated as a
qualified domestic relations order), so long as the payment complies with Code
ss.414(p). Notwithstanding the foregoing, a Participant's benefits under the
Plan may be offset if the offset is permitted under the provisions of ERISA
ss.206 or under the provisions of Code ss.401(a)(13).

         14.8 EXCLUSIVE BENEFIT. The Trust Fund shall be held by the Trustee for
the exclusive purpose of providing benefits to Participants and their
beneficiaries and defraying reasonable expenses of administering the Plan. No
part of the Trust shall ever inure to the benefit of the Employer prior to the
satisfaction of all liabilities to all Participants and their beneficiaries,
except that:

                  (a) Any contribution made to the Trust Fund by the Employer
which is attributable to a mistake of fact may be returned to the Employer
within one year after such contribution was made;

                  (b) All contributions shall be conditioned on their
deductibility under Code ss.404, and any nondeductible contribution will be
returned to the Employer within one year after the date of disallowance of such
deduction.

                  (c) If a return of contributions pursuant to the foregoing is
due to a good faith mistake of fact or a good faith mistake in determining the
deductibility of the contribution:

                           (i) The amount which may be returned to the Employer
is the excess of the amount contributed over the amount that would have been
contributed had there not occurred a mistake of fact or a mistake in determining
the deduction; and

                           (ii) Earnings attributable to such excess
contribution may not be withdrawn, but losses attributable thereto must reduce
the amount to be returned.

                                      -37-
<PAGE>

                  (d) In the case of the termination of the Plan, any residual
assets of the Plan shall be distributed to the Employer at the direction of the
Administrator (or of a trustee appointed upon the application of the Pension
Benefit Guaranty Corporation) if all liabilities of the Plan to Participants and
their Beneficiaries have been satisfied and the distribution does not contravene
any provision of law.

         14.9     BENEFITS FOR RESTRICTED PARTICIPANTS.

                  (a) If full current costs of the Plan have been met at the end
of ten (10) years from such date(s) specified in ss.1.401-4(c) of the
regulations under the Code, this Section shall become null and void. In the
event that the full current costs have not then been met, this Section shall
remain in full force and effect until the first time when the full current costs
are met, and at that time shall become null and void.

                  (b) For purposes of this Section, the following terms shall
have the following meanings unless the context requires otherwise.

                           (i) "Full current costs" shall mean the amount
actuarially determined to be a required contribution of the Employer in each
year to maintain the Plan.

                           (ii) "Annual Compensation" shall mean an Employee's
average regular annual compensation, or his average compensation if it is
reasonably similar to his average regular annual compensation over the five (5)
preceding years.

                           (iii) "Benefits" shall mean any income, withdrawal
values payable to a living Employee, and the cost of any death benefits which
may be payable after retirement on behalf of an Employee, but does not include
the cost of death benefits with respect to an Employee before retirement nor the
amount of any death benefits payable upon the death of an Employee regardless of
the time at which the death occurs.

                           (iv) "Restricted Participant" shall mean any
Participant who was among the twenty-five (25) highest paid Employees of the
Employer on such applicable date and whose expected annual pension at his Normal
Retirement Date will exceed one thousand five hundred dollars ($1,500).

                           (v) "Unrestricted Participant" shall mean any
Participant who is not a Restricted Participant.

                  (c) The Employer contributions which may be used for the
benefit of a Restricted Participant during the time when this Section shall be
in effect shall be limited to the greater of:

                           (i) Twenty thousand dollars ($20,000) or

                                      -38-
<PAGE>

                           (ii) The Employer contributions (or funds
attributable thereto) which would have been applied to provide the benefits for
the Participant if the Plan in effect at the applicable date had been continued
without change, or

                           (iii) The sum of (i) the Employer contributions (or
funds attributable thereto) which would have been applied to provide benefits
for the Employee under this Plan if it has been terminated the day before the
effective date of change, and (ii) an amount computed by multiplying the number
of years for which the full current costs of the Plan after that date are met by
(a) twenty percent (20%) of his annual compensation, or (b) ten thousand dollars
($10,000), whichever is smaller.

                  (d) In the event of termination of the Plan while this Section
shall be in effect, amounts in excess of those payable under Section 14.9(c)
above shall first be applied in a non- discriminatory manner to Plan liabilities
which may be outstanding with respect to the Restricted Participants.

                  (e) The conditions of this Section shall not restrict the
current payment of full retirement benefits called for by this Plan for any
retired Participant while this Plan is in full effect and its full current costs
have been met; provided, however, that a lump sum representing the retired
Participant's entire interest in the Plan may not be paid to him unless there is
adequate provision and security for repayment of any part of the distribution
representing the restricted portion in the event of a termination of the Plan or
a failure to meet full current costs during the restricted period. If a lump sum
distribution is made to any "Restricted Participant," the distributee shall
deposit with the Administrator security of one hundred twenty-five percent
(125%) of the fair market value of the distribution representing the restricted
portion, and further the distributee agrees that if the fair market value of the
security falls below one hundred ten percent (110%) of the distribution, the
distributee would deposit additional security to bring the value of the deposit
up to one hundred twenty-five percent (125%).

                  (f) Notwithstanding the above conditions, at any time during
the 10-year periods described above, Employer contributions which may be used
for the benefit of a Restricted Participant described in this Section who is
also a substantial owner (as defined in ss.4022(b)(5) of ERISA) shall not exceed
the greater of the dollar limits set forth above or a dollar amount which equals
the present value of the benefit guaranteed for such a Participant under ss.4022
of ERISA, or if the Plan has not terminated, the present value of the benefit
that would be guaranteed if the Plan terminated on the date the benefit
commences, determined in accordance with regulations of the Pension Benefit
Guaranty Corporation. Employer contributions which may be used for the benefit
of a Restricted Participant (other than a Participant who is a substantial owner
as defined in ss.4022(b)(5) of ERISA) shall not exceed the greater of the dollar
limits set forth above or a dollar amount which equals the present value of the
maximum benefit described in ss.4022(b)(3)(B) of ERISA (determined on the date
that the Plan terminates or on the date benefits commence, whichever is earlier,
and determined in accordance with regulations of the Pension Benefit Guaranty
Corporation) without regard to any other limitation in ss.4022 of ERISA.

                                      -39-
<PAGE>

                  (g) With respect to an Employer which may adopt and join this
Plan, subsequent to its establishment, or in the event of any substantial change
in benefits or contributions under the Plan, the ten year period referred to in
this Section shall commence with the effective date such Employer adopts and
joins in this Plan or the effective date of such amendment, as the case may be.

                  (h) With respect to distributions made on or after January 1,
1992 or such other date as provided by regulation, ruling or other determination
by the Internal Revenue Service, the above provisions of this Section shall be
modified as set forth in this subsection. Any distribution previously restricted
under the preceding provisions of this Section may be released from restriction
to the extent provided under the modified restrictions set forth below.

                           (i) "Restricted Participant" means all Highly
Compensated Employees; provided, however, that in any one Plan Year, the maximum
number of Restricted Participants shall be twenty five (25), which twenty five
(25) Restricted Participants shall be the Highly Compensated Employees with the
greatest compensation in the current or any prior Plan Year.

                           (ii) "Benefit" means, among other benefits, loans in
excess of the amounts set forth in ss.72(p)(2)(A) of the Code, any periodic
income, any withdrawal values payable to a living Employee, and any death
benefits not provided for by insurance on the Employee's life.

                           (iii) In the event of Plan termination, the benefit
payable under the Plan to any Highly Compensated Employee is limited to a
benefit that is nondiscriminatory under ss.401(a)(4) of the Code.

                           (iv) The annual payments to a Restricted Participant
are restricted to an amount equal in each year to the payments that would be
made on behalf of the Restricted Participant under a straight life annuity that
is the Actuarial Equivalent of the Participant's Pension Benefit and any other
benefits to which Participant is entitled in the Plan (other than a social
security supplement), and the amount of the payments that the Participant is
entitled to receive under the Plan as a social security supplement. These
restrictions, however, shall not apply if any one of the following requirements
is satisfied:

                                    (A) After payment to a Restricted
Participant of all benefits payable to the Participant under the Plan, the value
of Plan assets equals or exceeds one hundred ten percent (110%) of the value of
the Plan's current liabilities (as defined in ss.412(1)(7) of the Code);

                                    (B) The value of benefits payable to the
Restricted Participant is less than one percent (1%) of the value of the Plan's
current liabilities before the distribution; or

                                    (C) The value of the benefits payable to the
Restricted Participant does not exceed the amount described inss.411(a)(11)(A)
of the Code (three thousand five hundred dollars ($3,500) for Plan Years
beginning prior to January 1, 2000 and five thousand dollars ($5,000) for Plan
Years beginning on or after January 1, 2000).

                                      -40-
<PAGE>

                           (v) The Plan's current liabilities may be the value
of current liabilities as reported on Schedule B of the Plan's most recent,
timely filed Form 5500 or may be the current liabilities determined as of a
later date. The value of the Plan assets and the value of current liabilities
for purposes of this subsection must be determined as of the same date.

                           (i) In the event that it should be determined by
statute or regulation, or by ruling or other determination by the Internal
Revenue Service, that the provisions of this Section are no longer necessary to
qualify the Plan for Federal income tax purposes, in whole or in part, this
Section shall to such extent be ineffective without amendment to the Plan.

         14.10 STATUTE OF LIMITATIONS. No legal action (including, without
limitation, any claim for benefits under Section 9.5) may be commenced or
maintained to recover benefits under this Plan more than twelve (12) months
after the final review/appeal decision by the Plan Administrator has been
rendered (or deemed rendered).

         IN WITNESS WHEREOF, as evidence of its adoption of this Plan, the
Employer has caused this Plan to be executed, generally effective as of January
1, 1997.

ATTEST/WITNESS:                      DEL LABORATORIES, INC.

/S/ GENE WEXLER                      By:  /s/ ENZO  J. VIALARDI
------------------------             -------------------------------------------

Print Name: Gene Wexler              Title: Executive Vice President
------------------------             -------------------------------------------

                                     Print Name: Enzo J. Vialardi
                                     -------------------------------------------

                                     Date: November 29, 2001
                                     -------------------------------------------

                                      -41-
<PAGE>

                                    EXHIBIT A

                                       TO

                             DEL LABORATORIES, INC.
                             EMPLOYEES PENSION PLAN

                              ACTUARIAL INFORMATION

         LUMP SUM DISTRIBUTIONS AND 415 ADJUSTMENTS

         For lump sum distributions paid after 1996, each lump sum distribution
under the Plan shall be calculated using an interest rate of six percent (6%)
and the 1971 Group Annuity Mortality Table (Male), set back one year (-1), or
the following interest rate and mortality table, whichever yields the larger
lump sum:

                  (a) the annual rate of interest on thirty (30) year Treasury
securities for the third calendar month preceding the first day of the Plan Year
which contains the Participant's Annuity Starting Date; and

                  (b) the mortality table prescribed by the Secretary of the
Treasury based on the "prevailing commissioner's standard table" used to
determine reserves for group annuity contracts issued on the date as of which
the present value of the distribution is determined.

         The above-specified mortality table shall also be used for adjustments
under Section 3.10 of the Plan and the above-specified interest rate shall also
be used for purposes of adjusting the benefit on limitation under Code
ss.415(b)(2)(B)or (C) of any form of benefit subject to Code ss.417(e)(3).

         OPTIONAL FORMS OF BENEFIT

         For purposes of determining optional forms of benefits and for
calculating the Actuarial Equivalent benefit under Section 5.2, the 1971 Group
Annuity Mortality Table (Male), -1 at six percent (6%) interest rate shall be
used.

                                      -42-
<PAGE>

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