Document:

LOAN AND SECURITY AGREEMENT
                           ---------------------------

         This LOAN AND SECURITY  AGREEMENT  dated as of the 1st day of February,
2002 (the "Agreement"), is executed by and between ARLINGTON HOSPITALITY,  INC.,
a Delaware  corporation  (the  "Borrower"),  whose address is 2355 S.  Arlington
Heights  Road,  Arlington  Heights,  Illinois  60005,  and LASALLE BANK NATIONAL
ASSOCIATION,  a national banking association (the "Bank"),  whose address is 135
South La Salle Street, Chicago, Illinois 60603.

                                    RECITALS
                                    --------

         WHEREAS, Borrower has requested that Bank make a secured line of credit
available  to Borrower in the  principal  amount of Eight  Million  Five Hundred
Thousand and 00/100 Dollars  ($8,500,000.00) to be used primarily to support the
working  capital and letter of credit  needs of the Borrower and to fund certain
construction projects of the Borrower or one or more of its Subsidiaries;

         WHEREAS,  the Borrower provides management and other services to or for
the benefit of its Subsidiaries and from time to time funds various construction
projects for such Subsidiaries; and

         WHEREAS,  the  availability  of such  credit  facilities  will  benefit
Borrower and its Subsidiaries; and

         WHEREAS,  Bank has agreed to establish  the line of credit based on the
terms and conditions set forth in this Agreement, the Revolving Note (as defined
herein) and such other and further  documents  and action  contemplated  by this
Agreement that Bank in its sole discretion may require; and

         WHEREAS,  in  consideration  for the  extension  by Bank of the line of
credit and the agreements of the Borrower set forth herein, the Borrower and the
Bank hereby agree as follows:

1.       DEFINITIONS.
         -----------

         1.1 Defined Terms.  For the purposes of this  Agreement,  the following
capitalized words and phrases shall have the meanings set forth below.

                   "Add-On" shall be that percentage established for each fiscal
quarter by reference to the Total  Liabilities to Worth Ratio of the Borrower at
the  end of the  immediately  preceding  fiscal  quarter.  The  Add-On  for  any
outstanding Loans shall change on the first day of each fiscal quarter and shall
be determined as follows:

<PAGE>

<TABLE>

If the Total Liabilities to Worth Ratio        Then the Prime Rate       and     The LIBOR Add-On shall be:
as of the last day of the preceding            Add-On shall
fiscal quarter is:                             be:
---------------------------------------        ------------------                ------------------------
<S>                                                   <C>                         <C>
Less than or equal  to 2.0 to 1.0                       0%                        250 basis points (2.50%)
Less  than or equal  to 2.50 to 1.0,  but             0.25%                       275 basis points (2.75%)
greater than 2.0 to 1.0
Less  than or  equal  to 3.0 to 1.0,  but             0.50%                       300 basis points (3.0%)
greater than 2.51 to 1.0

</TABLE>

                  "Bankruptcy  Code"  shall  mean the United  States  Bankruptcy
Code, as now existing or hereafter amended.

                  "Business  Day"  shall  mean any day  other  than a  Saturday,
Sunday or a legal holiday on which banks are authorized or required to be closed
for the conduct of commercial banking business in Chicago, Illinois.

                  "Capital  Expenditures"  shall  mean  expenditures  (including
Capital  Lease  obligations  which  should be  capitalized  under  GAAP) for the
acquisition of fixed assets which are required to be capitalized under GAAP.

                  "Capital  Lease" shall mean, as to any Person,  a lease of any
interest in any kind of property or asset,  whether real,  personal or mixed, or
tangible  or  intangible,  by such  Person as lessee  that is, or should  be, in
accordance  with  Financial  Accounting  Standards  Board  Statement  No. 13, as
amended from time to time,  or, if such  Statement  is not then in effect,  such
statement  of GAAP as may be  applicable,  recorded as a "capital  lease" on the
balance sheet of the Borrower prepared in accordance with GAAP.

                  "Cendant" shall mean Cendant Finance  Holding  Corporation,  a
Delaware corporation.

                  "Cendant  Agreement"  shall mean that certain  Royalty Sharing
Agreement dated as of September 30, 2000 among  Borrower,  Cendant and AmeriHost
Franchise Systems, Inc. ("Franchisor").

                  "Closing  Date" shall mean February 1, 2002 or such later date
which Borrower and the Bank shall agree.

                  "Collateral" shall have the meaning set forth in Section 6. 1.

                  "Contingent  Liability"  and  "Contingent  Liabilities"  shall
mean, respectively,  each obligation and liability of the Borrower or any of its
Subsidiaries  and all such obligations and liabilities of the Borrower or any of
its Subsidiaries incurred pursuant to any agreement,  undertaking or arrangement
by which the Borrower or any of its  Subsidiaries:  (a) guarantees,  endorses or
otherwise  becomes  or is  contingently  liable  upon  (by  direct  or  indirect
agreement,  contingent  or otherwise,  to provide  funds for payment,  to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the indebtedness,  dividend,  obligation

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or other  liability of any other Person in any manner (other than by endorsement
of instruments in the course of collection),  including without limitation,  any
indebtedness,  dividend or other  obligation  which may be issued or incurred at
some future time; (b) guarantees the payment of dividends or other distributions
upon the shares or ownership  interest of any other  Person;  (c)  undertakes or
agrees (whether  contingently  or otherwise):  (i) to purchase,  repurchase,  or
otherwise acquire any indebtedness,  obligation or liability of any other Person
or any or any property or assets constituting security therefor, (ii) to advance
or provide funds for the payment or discharge of any indebtedness, obligation or
liability of any other  Person  (whether in the form of loans,  advances,  stock
purchases, capital contributions or otherwise), or to maintain solvency, assets,
level of income,  working  capital  or other  financial  condition  of any other
Person,  or (iii) to make  payment  to any  other  Person  other  than for value
received;  (d) agrees to lease property or to purchase  securities,  property or
services from such other Person with the purpose or intent of assuring the owner
of such  indebtedness  or obligation of the ability of such other Person to make
payment of the indebtedness or obligation;  (e) to induce the issuance of, or in
connection  with the  issuance  of, any letter of credit for the benefit of such
other Person; or (f) undertakes or agrees otherwise to assure a creditor against
loss.  The amount of any Contingent  Liability  shall (subject to any limitation
set forth herein) be deemed to be the outstanding  principal  amount (or maximum
permitted principal amount, if larger) of the indebtedness,  obligation or other
liability guaranteed or supported thereby.

                  "Debt Service Charges" shall mean, for any period, the sum of:
(a) all  interest,  charges and related  expenses  payable  with respect to that
fiscal  period to a lender in  connection  with  borrowed  money or the deferred
purchase  price of assets that are treated as interest in accordance  with GAAP,
plus (b) the aggregate amount of principal  payable on Indebtedness with respect
to that fiscal period, plus (c) the portion of rent payable with respect to that
fiscal  period  under  Capital  Leases  that  should be treated as  interest  in
accordance with GAAP, plus (d) all charges paid or payable (without duplication)
during that period with respect to any Interest Rate Agreements.

                  "Default  Rate" shall mean a per annum rate of interest  equal
to the Prime Rate plus five percent (5%) per annum.

                  "Depreciation"   shall  mean  the  total   amounts   added  to
depreciation,  amortization,  obsolescence, valuation and other proper reserves,
as  reflected  on the  consolidated  financial  statement  of  Borrower  and its
Subsidiaries and determined in accordance with GAAP.

                  "EBITDA" shall mean, for any period, the sum of the following:
(a) Net Income  (excluding  extraordinary  and unusual  items and income or loss
attributable to equity in any affiliated corporation or Subsidiary but including
net deferred  incentive fees due from Cendant pursuant to the Cendant Agreement)
for such period,  plus (b) Interest  Charges,  plus (c) income taxes  payable or
accrued,  plus (d)  Depreciation  for such period,  plus (e) all other  non-cash
charges,  minus (f) that portion of net income arising out of the sale of assets
outside  of the  ordinary  course of  business  (to the  extent  not  previously
excluded  under  clause  (a) of this  definition),  in each  case to the  extent
included in determining Net Income for such period.

                  "Employee  Plan" includes any pension,  stock bonus,  employee
stock ownership plan, retirement,  disability,  medical,  dental or other health
plan,  life  insurance or other death

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<PAGE>

benefit plan,  profit sharing,  deferred  compensation,  stock option,  bonus or
other incentive plan,  vacation  benefit plan,  severance plan or other employee
benefit plan or  arrangement,  including,  without  limitation,  those  pension,
profit-sharing   and  retirement  plans  of  the  Borrower  and/or  any  of  its
Subsidiaries  described  from time to time in the  financial  statements  of the
Borrower and any pension plan,  welfare plan,  defined benefit pension plans (as
defined in ERISA) or any multi-employer plan,  maintained or administered by the
Borrower  and/or any of its  Subsidiaries or to which the Borrower is a party or
may have any liability or by which the Borrower  and/or any of its  Subsidiaries
is bound.

                  "Environmental Laws" shall mean all federal,  state, district,
local and foreign laws,  rules,  regulations,  ordinances,  and consent  decrees
relating to health,  safety,  hazardous substances.  pollution and environmental
matters,  as now or at any time hereafter in effect,  applicable to the business
or  facilities  owned or  operated by the  Borrower or any of its  subsidiaries,
including  laws  relating  to  emissions,  discharges,  releases  or  threatened
releases  of  pollutants,  contamination,  chemicals,  or  hazardous,  toxic  or
dangerous substances, materials or wastes in the environment (including, without
limitation,  ambient air, surface water,  land surface or subsurface  strata) or
otherwise  relating to the generation,  manufacture,  processing,  distribution,
use, treatment. storage, disposal, transport or handling of Hazardous Materials.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.

                  "Event of Default"  shall mean any of the events or conditions
set forth in Section 11 hereof.

                  "GAAP" shall mean generally  accepted  accounting  principles,
using the  accrual  basis of  accounting  and  consistently  applied  with prior
periods,  provided,  however,  that GAAP with  respect to any interim  financial
statements or reports shall be deemed subject to fiscal yearend  adjustments and
footnotes made in accordance with GAAP.

                  "Hazardous  Materials"  shall  mean  any  hazardous,  toxic or
dangerous  substance,  materials  and  wastes,  including,  without  limitation,
hydrocarbons   (including   naturally   occurring  or  man-made   petroleum  and
hydrocarbons),  flammable explosives,  asbestos,  urea formaldehyde  insulation,
radioactive  materials,   biological  substances,   polychlorinated   biphenyls,
pesticides,  herbicides  and  any  other  kind  and/or  type  of  pollutants  or
contaminants (including,  without limitation,  materials which include hazardous
constituents),  sewage,  sludge,  industrial  slag,  solvents  and/or  any other
similar  substances,  materials or wastes that are or become regulated under any
Environmental  Law  (including  without  limitation,  any  that  are  or  become
classified as hazardous or toxic under any Environmental Law).

                  "Indebtedness"  shall mean at any time (a) all  Liabilities of
the Borrower or any of its  Subsidiaries,  (b) all Capital Lease  obligations of
the  Borrower  or any of its  Subsidiaries,  (c)  all  other  debt,  secured  or
unsecured,  created,  issued,  incurred or assumed by the Borrower or any of its
Subsidiaries for money borrowed or for the deferred  purchase price of any fixed
or capital  asset,  (d)  indebtedness  secured by any Lien  existing on property
owned by the Borrower or any of its Subsidiaries whether or not the Indebtedness
secured  thereby has been assumed,  and (e) all

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<PAGE>

Contingent Liabilities of the Borrower or any of its Subsidiaries whether or not
reflected on its balance sheet.

                  "Indemnified  Party" and  "Indemnified  Parties"  shall  mean,
respectively,  each  of  the  Bank  and  any  parent  corporations,   affiliated
corporations or subsidiaries of the Bank, and each of their respective officers,
directors,  employees,  attorneys  and  agents,  and  all of  such  parties  and
entities.

                   "Interest  Period" shall mean, with regard to any LIBOR Loan,
successive  one, two or three month periods as selected from time to time by the
Borrower by notice given to the Bank not less than three  Business Days prior to
the first day of each respective Interest Period;  provided,  however, that: (i)
each such Interest  Period  occurring  after the initial  Interest Period of any
LIBOR Loan shall commence on the day on which the preceding  Interest Period for
such LIBOR Loan expires, (ii) whenever the last day of any Interest Period would
otherwise  occur  on a day  other  than a  Business  Day,  the  last day of such
Interest Period shall be extended to occur on the next succeeding  Business Day,
provided,  however,  that if such  extension  would  cause  the last day of such
Interest Period to occur in the next following calendar month, then the last day
of such Interest Period shall occur on the immediately  preceding  Business Day;
(iii)  whenever the first day of any Interest  Period occurs on a day of a month
for which there is no  numerically  corresponding  day in the calendar  month in
which such Interest  Period  terminates,  such Interest  Period shall end on the
last Business Day of such calendar  month;  and (iv) the final  Interest  Period
must be such that its expiration occurs on or before the Maturity Date.

                  "Interest  Rate  Agreements"  shall  mean  any  interest  rate
protection   agreement,   interest  rate  swap  or  other  interest  rate  hedge
arrangement  (other than any  interest  rate cap or other  similar  agreement or
arrangement  pursuant to which the Borrower has no credit  exposure to the Bank)
to or under which the Borrower or any  Subsidiary  of the Borrower is a party or
beneficiary.

                  "Letter  of  Credit"  and  "Letters  of  Credit"  shall  mean,
respectively,  a letter of credit and all such  letters of credit  issued by the
Bank,  in its sole  discretion,  upon the execution and delivery by the Borrower
and the  acceptance  by the Bank of a Master  Letter of Credit  Agreement and an
application for Letter of Credit, as set forth in SECTION 2.5 of this Agreement.

                  "Letter of Credit  Obligations"  shall mean,  at any time,  an
amount equal to the  aggregate  of the  original  face amounts of all Letters of
Credit minus the sum of (i) the amount of any  reductions  in the original  face
amount of any Letter of Credit which did not result from a draw thereunder, (ii)
the amount of any payments made by the Bank with respect to any draws made under
a Letter of Credit for which the Borrower  has  reimbursed  the Bank,  (iii) the
amount of any  payments  made by the Bank with respect to any draws made under a
Letter of Credit which have been  converted to a Revolving  Loan as set forth in
SECTION  2.5,  and (iv) the portion of any issued but  expired  Letter of Credit
which  has not  been  drawn  by the  beneficiary  thereunder.  For  purposes  of
determining the outstanding Letter of Credit Obligations at any time, the Bank's
acceptance  of a draft drawn on the Bank  pursuant  to a Letter of Credit  shall
constitute  a draw  on the  applicable  Letter  of  Credit  at the  time of such
acceptance.

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<PAGE>

                  "Liabilities"  shall mean at all times all  liabilities of the
Borrower  or  any  of  its  Subsidiaries  that  would  be  shown  as  such  on a
consolidated  balance  sheet of the  Borrower and its  Subsidiaries  prepared in
accordance with GAAP.

                  "LIBOR"  shall mean a rate of interest  equal to the per annum
rate of interest at which United States dollar deposits in an amount  comparable
to the amount of the relevant  LIBOR Loan and for a period equal to the relevant
Interest Period are offered  generally to the Bank (rounded upward if necessary,
to the nearest 1/16 of 1.00%) in the London Interbank Eurodollar market at 11:00
a.m.  (London time) two Business Days prior to the commencement of each Interest
Period less the  maximum  reserve  percentages  for  determining  reserves to be
maintained  by member  banks of the  Federal  Reserve  System  for  Eurocurrency
liabilities,  or as LIBOR is  otherwise  determined  by the Bank in its sole and
absolute  discretion,  such rate to remain fixed for such Interest  Period.  The
Bank's determination of LIBOR shall be conclusive, absent manifest error.

                  "LIBOR Rate" shall mean a per annum rate of interest  equal to
LIBOR for the relevant  Interest  Period  (rounded  upward if necessary,  to the
nearest 1/16 of 1.00%), which LIBOR Rate shall remain fixed during such Interest
Period,  plus the applicable  Add-On;  provided,  however,  that the LIBOR Loans
shall never bear interests at less than five and 50/100ths  percent  (5.50%) per
annum.

                  "LIBOR  Loan" or "LIBOR  Loans" shall mean that  portion,  and
collectively those portions,  of the aggregate  outstanding principal balance of
the  Revolving  Loans that will bear interest at the LIBOR Rate, of which at any
time and from time to time,  the Borrower may identify no more than  advances of
the  Revolving  Loans which will bear  interest at the LIBOR Rate, of which each
particular  LIBOR Loan must be in the amount of Two Hundred  Fifty  Thousand and
00/100  Dollars  ($250,000.00)  or a higher  integral  multiple  of One  Hundred
Thousand and 00/100 Dollars ($100,000.00).

                  "Lien"  shall  mean  any  mortgage,   pledge,   hypothecation,
judgment lien or similar legal process.  title  retention lien, or other lien or
security interest, including, without limitation, the interest of a vendor under
any conditional  sale or other title  retention  agreement and the interest of a
lessor under a lease of any  interest in any kind of property or asset,  whether
real,  personal or mixed,  or tangible or  intangible,  by such Person as lessee
that is, or should be, a Capital Lease on the consolidated  balance sheet of the
Borrower and its Subsidiaries prepared in accordance with GAAP.

                  "Loans" shall mean, collectively, all Revolving Loans (whether
Prime Loans or LIBOR  Loans) made by the Bank to the  Borrower and all Letter of
Credit Obligations under and pursuant to this Agreement.

                  "Loan  Documents"  shall have the meaning set forth in Section
3.1.

                  "Loan-to-Value  Ratio"  shall  mean  (i)  in  respect  of  any
individual Mortgaged Premises,  the ratio of (a) Indebtedness of the Borrower or
any Subsidiary  secured by Lien on such  Mortgaged  Premises to (b) the value of
the Mortgaged  Premises  disclosed by the appraisal of such  Mortgaged  Premises
most recently  accepted by the Bank, and (ii) in respect of all of the

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Mortgaged  Premises  and Other  Property of the  Borrower  and all  Wholly-Owned
Subsidiaries,  the ratio of (a) the aggregate  consolidated  Indebtedness of the
Borrower and all  Wholly-Owned  Subsidiaries  secured by a Lien on any Mortgaged
Premises or Other Property to (b) the aggregate value of the Mortgaged  Premises
and Other Property as determined by the Bank, in its sole discretion.

                  "Maturity Date" shall be the first  anniversary of the Closing
Date,  unless  extended by the Bank pursuant to any  modification,  extension or
renewal  note  executed by the Borrower and accepted by the Bank in its sole and
absolute discretion in substitution for the Revolving Note.

                  "Maximum Letter of Credit Obligation" shall mean the Revolving
Loan Commitment less the aggregate amount of all Revolving Loans  outstanding at
any time.

                  "Mortgage"  shall mean  those  second or junior  mortgages  or
deeds of trust made by Borrower or any of its Subsidiaries in favor of the Bank,
or, in the case of the Ohio Mortgage,  made by the Ohio  Partnership in favor of
the Borrower and  collaterally  assigned to the Bank, on the Mortgaged  Premises
listed on Exhibit B attached hereto.

                  "Mortgaged   Premises"   shall   mean  the  real   estate  and
improvements  described  in Exhibit B  attached  hereto  and shall  include  any
Substitute Mortgaged Premises accepted by the Bank in substitution to any of the
Mortgaged  Premises  in  accordance  with  the  terms  of  Section  6.10 of this
Agreement.

                  "Net Real  Property  Equity"  shall  mean,  in  respect of any
Mortgaged Premises,  an amount equal to sixty percent (60%) of the value of such
Mortgaged  Premises  disclosed by the appraisal of such Mortgaged  Premises most
recently  accepted by the Bank minus the  aggregate  amount of any  Indebtedness
secured by a Lien on such Mortgaged Premises.

                  "Net  Income"  shall mean,  with  respect to any  period,  the
amount  shown  opposite  the caption  "Net  Income" or a similar  caption on the
financial statements of the Borrower, prepared in accordance with GAAP.

                  "Note" shall mean the  Revolving  Note  referred to in Section
4.1.

                  "Obligation"  shall mean the Loans,  as evidenced by the Note,
all interest  accrued  thereon,  any fees due the Bank  hereunder,  any expenses
incurred by the Bank hereunder and any and all other liabilities and obligations
of the  Borrower  (and of any  partnership  in which the Borrower is or may be a
partner) to the Bank,  howsoever  created,  arising or evidenced,  and howsoever
owned, held or acquired,  whether now or hereafter existing,  whether now due or
to become due, direct or indirect,  absolute or contingent, and whether several,
joint or joint and several,  including,  but not limited to, any  Interest  Rate
Agreements.

                  "Obligor" shall mean the Borrower,  any Subsidiary which makes
a Mortgage in favor of the Bank, any guarantor,  accommodation  endorser,  third
party pledgor, or any other party liable with respect to the Obligations.

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<PAGE>

                  "Ohio   Mortgage"  means  the  Open-End   Mortgage,   Security
Agreement, Financing Statement and Assignment of Rents and Leases dated June 30,
1997 made by the Ohio Partnership in favor of the Borrower.

                  "Ohio   Partnership"   shall  mean   Middletown   592  Limited
Partnership, an Ohio limited partnership.

                  "Other  Properties"  shall  mean  any  and all  real  property
heretofore  presently  or  hereafter,  owned  by  Borrower  or  any  Subsidiary,
excluding the Mortgaged  Premises,  and any interest of any kind in improvements
thereon.

                  "Person"  shall  mean  any  individual,  partnership,  limited
liability  company,  corporation,  trust,  joint  venture,  joint stock company,
association,  unincorporated  organization,  government  or agency or  political
subdivision thereof, or other entity.

                  "Prime  Loan" or "Prime  Loans" shall mean that  portion,  and
collectively,  those portions of the aggregate  outstanding principal balance of
the  Revolving  Loans  that  will  bear  interest  at the  Prime  Rate  plus the
applicable  Add-On;  provided,  however,  that the Prime  Loans shall never bear
interest at a rate less than five and 50/100ths percent (5.50%) per annum

                  "Prime  Rate"  shall  mean  the  floating  per  annum  rate of
interest  which at any  time,  and from  time to  time,  shall be most  recently
announced by the Bank as its Prime Rate,  which is not intended to be the Bank's
lowest or most favorable rate of interest at any one time. The effective date of
any  change in the Prime Rate  shall for  purposes  hereof be the date the Prime
Rate is changed by the Bank.  The Bank shall not be  obligated to give notice of
any change in the Prime Rate.

                  "Regulatory  Change"  shall mean the  introduction  of, or any
change in any applicable law,  treaty,  rule,  regulation or guideline or in the
interpretation  or administration  thereof by any governmental  authority or any
central bank or other fiscal,  monetary or other authority  having  jurisdiction
over the Bank or its lending office.

                  "Revolving  Interest Rate" shall mean the Borrower's from time
to time option of (i) the Prime Rate plus the  applicable  Add-On per annum,  or
(ii) the LIBOR Rate; provided,  however,  that the Revolving Interest Rate shall
never be less than five and 50/100ths percent (5.50%) per annum.

                  "Revolving   Loan"   and   "Revolving   Loans"   shall   mean,
respectively, each direct advance and the aggregate of all such direct advances,
from time to time in the form of either Prime Loans and/or LIBOR Loans,  made by
the Bank to the Borrower under and pursuant to this  Agreement,  as set forth in
SECTION 2.1 of this Agreement.

                  "Revolving  Loan  Availability"  shall  mean at any time,  the
Revolving Loan Commitment less the Letter of Credit Obligations.

                  "Revolving  Loan  Commitment"  shall mean Eight  Million  Five
Hundred  Thousand and 00/100  Dollars  ($8,500,000.00)  or, in the event (a) the
Borrower  requests the release of any  Mortgaged  Premises  from the Lien of the
Bank created by a Mortgage  without

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<PAGE>

satisfying the  requirements  of Section 6.10 or (b) the aggregate  value of the
Collateral,  as determined by the Bank pursuant to the terms of this  Agreement,
shall decline,  such lesser amount as the Bank shall  determine  after deducting
such reserves as the Bank determines in its sole discretion.

                  "Revolving  Note" shall have the meanings set forth in Section
4.1 hereof.

                  "Senior Mortgage  Indebtedness" shall mean the Indebtedness of
Borrower or any Subsidiary existing on the date hereof which is disclosed on the
financial  statements  referred to in Section 7 and secured by one of the Senior
Mortgages.

                  "Senior   Mortgages"  shall  mean  those  (i)  first  priority
mortgages on the Mortgaged  Premises  listed on Exhibit B attached hereto or any
first priority  mortgage on any Substitute  Mortgaged  Premises  accepted by the
Bank in substitution for any Mortgaged  Premises in accordance with the terms of
Section 6.10 of this Agreement or (ii) any other Indebtedness of Borrower or any
Subsidiary  existing  on the date hereof  which is  disclosed  on the  financial
statements referred to in Section 7 and secured by a Lien on any Other Property.

                  "Subordinated Debt" shall mean that portion of the Liabilities
of the Borrower or any Subsidiary  which is subordinated to the Obligations in a
manner satisfactory to the Bank,  including,  but not limited to, right and time
of payment of principal and interest.

                  "Subsidiary" and "Subsidiaries" shall mean, respectively, each
and all such corporations, partnerships, limited partnerships, limited liability
companies, limited liability partnerships or other entities of which or in which
the Borrower owns directly or indirectly  fifty percent  (50.00%) or more of (i)
the combined  voting power of all classes of stock having  general  voting power
under  ordinary  circumstances  to elect a majority of the board of directors of
such entity if a corporation, (ii) the management authority and capital interest
or profits  interest of such  entity,  if a  partnership,  limited  partnership,
limited  liability  company,  limited  liability  partnership,  joint venture or
similar  entity,  or (iii) the beneficial  interest of such entity,  if a trust,
association or other unincorporated organization.

                  "Tangible Assets" shall mean the total of all assets appearing
on a consolidated balance sheet of the Borrower and its Subsidiaries prepared in
accordance  with  GAAP  (with  Inventory  being  valued  at the lower of cost or
market),   after   deducting  all  proper  reserves   (including   reserves  for
Depreciation,  obsolescence  and  amortization)  less  the sum of (i)  goodwill,
patents,  trademarks,  prepaid  expenses,  deposits held as security deposits on
lease contracts,  franchise fees and other similar assets,  deferred charges and
other personal property which is classified as intangible property in accordance
with GAAP, and (ii) any amounts due from shareholders,  affiliates,  officers or
employees of the Borrower or any Subsidiary.

                  "Tangible  Net  Worth"  shall  mean at any time  the  total of
Tangible Assets less Liabilities plus Subordinated Debt.

                  "Total  Liabilities  to Worth Ratio" shall mean a ratio of (a)
consolidated  Liabilities minus deferred income to (b) consolidated Tangible Net
Worth  plus the sum of (i)  deferred  taxes,  (ii)  deferred  income,  including
deferred  loan  costs and  deferred  lease  costs,  and (iii)  deposits

                                       9
<PAGE>

held as security  deposits on lease contracts,  franchise fees and other similar
assets, in each case of Borrower and its Subsidiaries.

                  "UCC"  shall  mean the  Uniform  Commercial  Code in effect in
Illinois from time to time.

                  "Wholly-Owned  Subsidiary"  shall mean any Subsidiary of which
or in which the Borrower owns  directly or  indirectly  100% of (i) the combined
voting power of all classes of stock having  general voting power under ordinary
circumstances  to elect a majority of the board of directors of such Person,  if
it is a  corporation,  (ii) the  capital  interest  or profits  interest of such
Persons,  if it is a partnership,  joint venture or similar entity, or (iii) the
beneficial  interest of such  Persons,  if it is a trust,  association  or other
unincorporated organization.

         1.2 Accounting Terms. Any accounting terms used in this Agreement which
are not specifically  defined herein shall have the meanings  customarily  given
them in accordance with GAAP.  Calculations and  determinations of financial and
accounting terms used and not otherwise  specifically  defined hereunder and the
preparation of financial  statements to be furnished to the Bank pursuant hereto
shall be made and prepared, both as to classification of items and as to amount,
in accordance with GAAP as used in the  preparation of the financial  statements
of the  Borrower on the date of this  Agreement.  If any  changes in  accounting
principles  or practices  from those used in the  preparation  of the  financial
statements are hereafter  occasioned by the promulgation of rules,  regulations,
pronouncements and opinions by or required by the Financial Accounting Standards
Board  or the  American  Institute  of  Certified  Public  Accountants  (or  any
successor  thereto or  agencies  with  similar  functions),  which  results in a
material change in the method of accounting in the financial statements required
to be  furnished  to the  Bank  hereunder  or in the  calculation  of  financial
covenants,  standards or terms contained in this  Agreement,  the parties hereto
agree to enter  into good faith  negotiations  to amend  such  provisions  so as
equitably to reflect  such  changes to the end that the criteria for  evaluating
the financial  condition and  performance of the Borrower will be the same after
such changes as they were before such changes;  and if the parties fail to agree
on the  amendment  of such  provisions,  the  Borrower  will  furnish  financial
statements in accordance  with such changes but shall provide  calculations  for
all financial  covenants,  perform all financial covenants and otherwise observe
all  financial  standards  and terms in accordance  with  applicable  accounting
principles  and  practices  in  effect   immediately   prior  to  such  changes.
Calculations  with  respect  to  financial  covenants  required  to be stated in
accordance  with  applicable  accounting  principles  and  practices  in  effect
immediately  prior  to such  changes  shall be  reviewed  and  certified  by the
Borrower's accountants.

         1.3 Other Terms Defined in UCC. All other capitalized words and phrases
used herein and not otherwise  specifically  defined  shall have the  respective
meanings assigned to such terms in the UCC, as amended from time to time, to the
extent the same are used or defined therein.

         1.4 Other Definitional Provisions;  Construction.  Whenever the context
so requires,  the neuter gender includes the masculine and feminine,  the single
number  includes  the  plural,  and  vice  versa,  and in  particular  the  word
"Borrower" shall be so construed.  The words "hereof',  "herein" and "hereunder"
and words of similar  import  when used in this  Agreement  shall  refer to this
Agreement as a whole and not to any particular provision of this Agreement,  and
references

                                       10
<PAGE>

to Article, Section,  Subsection,  Annex, Schedule,  Exhibit and like
references are references to this Agreement unless otherwise specified. An Event
of Default shall  "continue" or be "continuing"  until such Event of Default has
been waived in accordance with SECTION 13.3 hereof. References in this Agreement
to any party shall  include  such  party's  successors  and  permitted  assigns.
References  to any  "Section"  shall  be a  reference  to such  Section  of this
Agreement  unless otherwise  stated.  To the extent any of the provisions of the
other Loan Documents are inconsistent with the terms of this Loan Agreement, the
provisions of this Loan Agreement shall govern.

2.       COMMITMENT OF THE BANK.
         ----------------------

         2.1 Revolving Loans.

                  (a)  Revolving  Loan  Commitment.  Subject  to the  terms  and
         conditions  of this  Agreement  and the other  Loan  Documents,  and in
         reliance upon the  representations  and  warranties of the Borrower set
         forth herein and in the other Loan  Documents,  the Bank agrees to make
         such  Revolving  Loans at such times as the  Borrower  may from time to
         time request until,  but not including,  the Maturity Date, and in such
         amounts  as the  Borrower  may  from  time to time  request,  provided,
         however,  that the aggregate  principal  balance of all Revolving Loans
         outstanding   at  any  time  shall  not  exceed  the   Revolving   Loan
         Availability.  Borrower  acknowledges  that the amount of the Revolving
         Loan Commitment was determined by the Bank based on the Bank's analysis
         of the value of the Collateral as of Closing, including but not limited
         to the aggregate  Net Real Property  Equity in respect of the Mortgaged
         Premises which, due to the nature of such Collateral,  may be difficult
         to establish and/or highly variable.  Accordingly,  notwithstanding any
         other term or provision hereof to the contrary, Bank has the right from
         time to time to periodically determine and redetermine the value of the
         Collateral,  to establish (based on advance percentages and eligibility
         criteria established by the Bank and communicated to Borrower from time
         to time)  borrowing  base formulas in respect of Accounts and Equipment
         (as defined in the UCC) and to establish reserves, to require borrowing
         base  certificates  and to require  such  other  actions on the part of
         Borrower as Bank in its discretion  may deem necessary or  appropriate,
         including  but not limited to  establishing  reserves in the event that
         Net Real  Property  Equity in respect of the Mortgaged  Premises  falls
         below  $5,500,000 at any time.  Revolving Loans made by the Bank may be
         repaid and, subject to the terms and conditions hereof,  borrowed again
         up to, but not including  the Maturity Date unless the Revolving  Loans
         are otherwise terminated or extended as provided in this Agreement. The
         Revolving  Loans  shall  be used by the  Borrower  for the  purpose  of
         supporting  the  working  capital  needs  of the  Borrower  and to fund
         certain construction projects of its Subsidiaries.

                  (b) Revolving Loan Interest and Payments.  Except as otherwise
         provided in this SECTION 2.1(B),  the principal amount of the Revolving
         Loans  outstanding  from  time  to  time  shall  bear  interest  at the
         Revolving  Interest  Rate.  Accrued  and unpaid  interest on the unpaid
         principal  balance of all Revolving Loans outstanding from time to time
         which are Prime Loans,  shall be due and payable  monthly,  in arrears,
         commencing  on [March 1], 2002 and  continuing on the first day of each
         calendar month thereafter, and on the Maturity Date. Accrued and unpaid
         interest  on  the  unpaid  principal  balance  of all

                                       11
<PAGE>

         Revolving  Loans  outstanding  from time to time which are LIBOR  Loans
         shall be  payable on the last  Business  Day of each  Interest  Period,
         commencing  on the first such date to occur after the date  hereof,  on
         the date of any principal repayment of a LIBOR Loan and on the Maturity
         Date. Any amount of principal or interest on the Revolving  Loans which
         is not paid when due,  whether at stated  maturity,  by acceleration or
         otherwise, shall bear interest payable on demand at the Default Rate.

                  (c) Revolving Loan Principal Repayments.

                        (i) Mandatory Principal Prepayments. All Revolving Loans
                  hereunder  shall be repaid  by the  Borrower  on the  Maturity
                  Date, unless payable sooner pursuant to the provisions of this
                  Agreement.  In the event the aggregate  outstanding  principal
                  balance   of  all   Revolving   Loans  and  Letter  of  Credit
                  Obligations  hereunder exceed the Revolving Loan Availability,
                  the  Borrower  shall,  without  notice  or demand of any kind,
                  immediately  make such  repayments of the  Revolving  Loans or
                  take such other  actions as shall be  necessary  to  eliminate
                  such excess.  Also, if the Borrower chooses not to convert any
                  Revolving  Loan  which  is a LIBOR  Loan  to a  Prime  Loan as
                  provided  in SECTION  2.3(B)  and  SECTION  2.3(C),  then such
                  Revolving  Loan shall be  immediately  due and  payable on the
                  last Business Day of the then existing  Interest  Period or on
                  such  earlier  date as  required by law,  all without  further
                  demand,  presentment,  protest  or notice of any kind,  all of
                  which are hereby waived by the Borrower.

                        (ii) Optional Prepayments. The Borrower may from time to
                  time  prepay the  Revolving  Loans which are Prime  Loans,  in
                  whole or in part, without any prepayment  penalty  whatsoever,
                  subject  to  the  following   conditions:   (i)  each  partial
                  prepayment  shall be in an  amount  equal to  $10,000.00  or a
                  higher integral multiple of $5,000; and (ii) any prepayment of
                  the entire principal  balance of the Prime Loans shall include
                  accrued  interest  on such  Prime  Loans  to the  date of such
                  prepayment and payment in full of all other Obligations (other
                  than the LIBOR Loans), then due and payable.

         2.2 [INTENTIONALLY OMITTED]

         2.3 Additional LIBOR Loan Provisions.

                  (a) LIBOR Loan  Prepayments.  Notwithstanding  anything to the
         contrary  contained herein, the principal balance of any LIBOR Loan may
         not be prepaid in whole or in part at any time.  If, for any reason,  a
         LIBOR  Loan is paid  prior to the  last  Business  Day of any  Interest
         Period,  the  Borrower  agrees to  indemnify  the Bank against any loss
         (including  any loss on  redeployment  of the  funds  repaid),  cost or
         expense incurred by the Bank as a result of such prepayment.

                  (b) LIBOR Unavailability. If the Bank determines in good faith
         (which determination shall be conclusive,  absent manifest error) prior
         to the  commencement  of any  Interest  Period  that (i) United  States
         dollar deposits of sufficient amount and maturity

                                       12
<PAGE>

         for funding any LIBOR Loan are not  available to the Bank in the London
         Interbank Eurodollar market in the ordinary course of business, or (ii)
         by reason of circumstances  affecting the London  Interbank  Eurodollar
         market,  adequate and fair means do not exist for ascertaining the rate
         of interest to be applicable to the relevant LIBOR Loan, the Bank shall
         promptly  notify the  Borrower  thereof  and, so long as the  foregoing
         conditions  continue,  Revolving  Loans may not be  advanced as a LIBOR
         Loan thereafter.  In addition,  at the Borrower's option, each existing
         LIBOR Loan shall be  immediately  (i)  converted to a Prime Loan on the
         last Business Day of the then existing Interest Period, or (ii) due and
         payable on the last Business Day of the then existing  Interest Period,
         without further demand, presentment, protest or notice of any kind, all
         of which are hereby waived by the Borrower.

                  (c) Regulatory Change. In addition, if, after the date hereof,
         a Regulatory Change shall, in the reasonable determination of the Bank,
         make it unlawful for the Bank to make or maintain the LIBOR Loans, then
         the Bank shall promptly notify the Borrower and Revolving Loans may not
         be advanced as a LIBOR Loan thereafter.  In addition, at the Borrower's
         option,  each existing LIBOR Loan shall be immediately (i) converted to
         a Prime Loan on the last  Business  Day of the then  existing  Interest
         Period or on such  earlier  date as  required  by law,  or (ii) due and
         payable on the last Business Day of the then existing  Interest  Period
         or on such earlier date as required by law, all without further demand,
         presentment,  protest  or notice of any kind,  all of which are  hereby
         waived by the Borrower.

                  (d) LIBOR Loan Indemnity. If any Regulatory Change (whether or
         not  having  the  force  of  law)  shall  (a)  impose,  modify  or deem
         applicable  any  assessment,   reserve,   special  deposit  or  similar
         requirement  against  assets held by, or deposits in or for the account
         of or loans by, or any other  acquisition of funds or disbursements by,
         the Bank;  (b)  subject  the Bank or any LIBOR  Loan to any tax,  duty,
         charge, stamp tax or fee or change the basis of taxation of payments to
         the Bank of  principal  or interest  due from the  Borrower to the Bank
         hereunder  (other  than a change in the  taxation  of the  overall  net
         income of the  Bank);  or (e)  impose  on the Bank any other  condition
         regarding such LIBOR Loan or the Bank's funding  thereof,  and the Bank
         shall  determine  (which  determination  shall  be  conclusive,  absent
         manifest  error) that the result of the  foregoing  is to increase  the
         cost to the Bank of making or maintaining  such LIBOR Loan or to reduce
         the amount of  principal  or interest  received by the Bank  hereunder,
         then the Borrower  shall pay to the Bank,  on demand,  such  additional
         amounts as the Bank shall, from time to time,  determine are sufficient
         to compensate and indemnify the Bank for such increased cost or reduced
         amount.

         2.4  Interest  and Fee  Computation;  Collection  of  Funds.  Except as
otherwise  set forth  herein,  all interest and fees shall be  calculated on the
basis of a year  consisting  of 360 days and shall be paid for the actual number
of days elapsed. Principal payments submitted in funds not immediately available
shall  continue to bear interest until  collected.  If any payment to be made by
the Borrower  hereunder or under the Note shall become due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in computing any interest in respect of
such payment.

                                       13
<PAGE>

         2.5  Letters of Credit.  Subject  to the terms and  conditions  of this
Agreement and upon the execution by the Borrower and the Bank of a Master Letter
of Credit  Agreement  and, upon the execution and delivery by the Borrower,  and
the  acceptance  by the  Bank,  in  its  sole  and  absolute  discretion,  of an
application  for letter of credit,  the Bank  agrees to issue for the account of
the Borrower out of the Revolving Loan  Availability,  such Letters of Credit in
the standard form of the Bank and otherwise  inform and substance  acceptable to
the Bank from time to time during the term of this Agreement,  provided that the
Letter of Credit  Obligations  may not at any time exceed the Maximum  Letter of
Credit Obligation and provided,  further, that no Letter of Credit shall have an
expiration date later than the Maturity Date. The amount of any payments made by
the Bank with  respect to draws made by a  beneficiary  under a Letter of Credit
for which the Borrower has failed to reimburse  the Bank upon the earlier of (i)
the  Bank's  demand for  repayment,  or (ii) five (5) days from the date of such
payment to such  beneficiary by the Bank, shall be deemed to have been converted
to a  Revolving  Loan as of the date such  payment  was made by the Bank to such
beneficiary.  Upon the  occurrence of an Event of a Default and at the option of
the Bank,  all Letter of Credit  Obligations  shall be converted to Prime Loans,
all without demand, presentment, protest or notice of any kind, all of which are
hereby waived by the Borrower.

3.       CONDITIONS OF BORROWING.
         -----------------------

         Notwithstanding  any other provision of this Agreement,  the Bank shall
not be  required  to  disburse or make all or any portion of the Loans if any of
the following conditions shall have occurred.

         3.1 Loan  Documents.  The  Borrower  shall have  failed to execute  and
deliver to the Bank any of the following Loan Documents (collectively, the "Loan
Documents"),  all of which  must be  satisfactory  to the  Bank  and the  Bank's
counsel in form, substance and execution:

                  (a)  Loan  Agreement.  This  Agreement  duly  executed  by the
         Borrower.

                  (b)  Revolving  Note.  A Revolving  Note duly  executed by the
         Borrower, in the form attached hereto as Exhibit "A".

                  (c)  Mortgages.  The  Mortgages  to and for the benefit of the
         Bank on each of the  Mortgaged  Premises,  executed  by Borrower or the
         Subsidiary of Borrower  which is the record fee owner of such Mortgaged
         Premises,  constituting a valid and perfected second lien on fee simple
         title to such  Mortgaged  Premises and the fixtures and other  personal
         property described in the Mortgages,  in form and substance  acceptable
         to the Bank.

                  (d) Appraisals.  Appraisals of each of the Mortgaged  Premises
         prepared by an appraiser  acceptable to Bank, which appraisals shall be
         in amounts and in form and content acceptable to the Bank.

                  (e) Title Insurance Commitments/Policies.  (i) Title insurance
         commitments  issued by First  American  Title  Company or another title
         insurance  company  acceptable  to the Bank  (collectively,  the "Title
         Insurance Company"),  indicating that no judgments,  tax or other liens
         (other than the Liens permitted under Section 8.2 and Liens in favor of

                                       14
<PAGE>

         the  Bank) are of record or on file  encumbering  any  portion  of such
         Mortgaged Premises, and (ii) as of the Closing Date, for each mortgaged
         Premises having a "Net Real Property Equity" in excess of $450,000,  an
         ALTA Permanent Loan Policy-1992 issued on the Closing Date by the Title
         Insurance  Company  to the Bank in an  amount  acceptable  to the Bank,
         insuring such  Mortgage(s)  to be valid second liens upon the fee title
         to such Mortgaged Property subject only to permitted  exceptions and to
         customary  exceptions  for pending  disbursements  of the Loan  ("Title
         Insurance Policy"). The Title Insurance Policy must specifically insure
         the Bank for claims and questions  related to (i) claims for mechanics'
         or materialmen's  liens;  (ii) zoning (by means of the ALTA Endorsement
         Form 3.1 endorsement  which must  specifically  state that the intended
         use of the Mortgaged  Property is a "permitted use" under the governing
         zoning  ordinance and the  improvements and parking lots thereon comply
         with  applicable  zoning  ordinances);  (iii) the location of the land;
         (iv) usury and  violations of consumer  credit laws; and (v) such other
         matters as Bank may require. The Title Insurance Company will commit to
         provide  that the Title  Insurance  Policy when issued will include its
         ALTA Zoning  Endorsement  Form 3.1 (including  compliance  with parking
         requirements),  a creditors' rights endorsement, an access endorsement,
         a variable rate endorsement,  a usury endorsement and its unconditional
         Comprehensive  Endorsement  No.  1,  or  its  customary  form  of  like
         "conformity"  endorsement.  If the  Land  consists  of  more  than  one
         subparcel,   the  Title  Insurance  Policy  must  affirmatively  insure
         contiguity.

                  (f) Consents.  Consents satisfactory to the Bank from (i) each
         mortgagee having a Senior Mortgage on a Mortgaged Premises,  consenting
         to the  creation of a second  mortgage on such  Mortgaged  Premises and
         (ii) certain ground  lessors and other third parties  determined by the
         Bank.

                  (g) Subordination  Agreement.  A Subordination  Agreement,  in
         form and substance  acceptable to the Bank,  pursuant to which Borrower
         subordinates  the Senior Mortgage  Indebtedness  and Lien of the Senior
         Mortgage on the Mortgaged Premises owned by the Ohio Partnership to the
         prior payment in full of the Obligations.

                  (h) Environment  Audits.  Copies of Phase I environment audits
         of each  Mortgaged  Premises,  the  results  of which  reports  must be
         acceptable to Bank.

                  (i)  Environmental   Indemnity  Agreement.   An  Environmental
         Indemnity Agreement acceptable to the Bank made by Borrower in favor of
         Bank.

                  (j) Financing  Statements.  Uniform  Commercial Code Financing
         Statements  as  required  by Bank to  perfect  all  security  interests
         created hereunder or under the Mortgages.

                  (k) Collateral  Assignment of Cendant Agreement.  A Collateral
         Assignment  and Security  Agreement,  assigning  and granting to Bank a
         security    interest    in   the    Cendant    Agreement,    with   the
         consent/acknowledgement  of  Cendant  to such  assignment,  in form and
         substance acceptable to the Bank.

                                       15
<PAGE>

                  (l)  Collateral  Assignment  of Notes,  Mortgage and Liens.  A
         Collateral  Assignment  of Notes,  Mortgage  and Liens,  assigning  and
         granting to Bank a security  interest in that certain  Mortgage Note of
         the Ohio Partnership dated as of February 1, 2002,  payable to Borrower
         in the aggregate principal amount of $3,000,000 and the Ohio Mortgage.

                  (m)  Insurance   Policies.   Insurance  policies  (or  binders
         acceptable  to the Bank) with  premiums  prepaid in  companies,  forms,
         amounts and coverage satisfactory to the Bank,  identifying the Bank as
         lender's  loss payee or  mortgagee's  loss  payee and as an  additional
         insured and containing  waiver of subrogation  and mortgage  clauses in
         favor of the Bank.  Without  limiting the  generality of the foregoing,
         such policies shall include all insurance required to be carried by the
         Borrower under the Mortgages.  The Borrower will also provide  casualty
         insurance  against  loss and  damage by all risks of  physical  loss or
         damage,  including fire, windstorm,  flood,  earthquake and other risks
         covered by the so-called  extended coverage  endorsement in amounts not
         less than the full  insurable  replacement  value of all  improvements,
         fixtures  and  equipment  from  time to time on the land and  bearing a
         replacement cost agreed amount endorsement.

                  (n) Constitutive Documents. Certified copies of Borrower's and
         each Obligor's articles of organization and by-laws.

                  (o)  Resolutions.   Certified  resolutions  of  the  board  of
         directors  and/or   shareholders  of  the  Borrower  and  each  Obligor
         authorizing  the execution,  delivery and performance of this Agreement
         and/or the Loan Documents to which each is a party.

                  (p) Borrower's  Attorney's  Opinion.  An opinion of counsel to
         the Borrower and each Obligor in form and  substance  acceptable to the
         Bank.

                  (q) Additional Documents.  Such other certificates,  financial
         statements,  schedules,  resolutions,  opinions of  counsel,  notes and
         other  documents  which are  provided  for  hereunder or which the Bank
         shall require.

         3.2 Event of Default.  Any Event of Default,  or any event which,  with
notice or lapse of time or both would constitute an Event of Default, shall have
occurred and be continuing.

         3.3  Adverse  Changes.  A  material  adverse  change  in the  financial
condition  or affairs of the  Borrower,  as  determined  in the Bank's  sole and
complete discretion, shall have occurred.

         3.4 Litigation.  Any litigation or governmental  proceeding  shall have
been  instituted  against the  Borrower or any of its  officers or  shareholders
which in the discretion of the Bank, reasonably exercised,  materially adversely
affects the financial condition or continued operation of the Borrower.

         3.5 Representations  and Warranties.  Any representation or warranty of
the  Borrower  contained  herein  or in any Loan  Document  shall be  untrue  or
incorrect  in any material way as of the date of any Loan as though made on such
date, except to the extent such  representation or warranty expressly relates to
an earlier date.

                                       16
<PAGE>

         3.6 Commitment Fee. The Borrower shall have failed to pay to the Bank a
commitment  fee in  the  amount  of  Twenty-Five  Thousand  and  00/100  Dollars
($25,000.00), on or before the execution of this Agreement by the Bank.

4.       NOTES EVIDENCING LOANS.
         ----------------------

         4.1  Revolving  Note.  The  Revolving  Loans  and the  Letter of Credit
Obligations shall be evidenced by a single Revolving Note (together with any and
all  renewal,  extension,  modification  or  replacement  notes  executed by the
Borrower  and  delivered  to the Bank and given in  substitution  therefor,  the
"Revolving  Note") in the form of Exhibit "A" attached hereto,  duly executed by
the  Borrower  and payable to the order of the Bank.  At the time of the initial
disbursement  of a Revolving Loan and at each time an additional  Revolving Loan
shall be requested hereunder or a repayment made in whole or in part thereon, an
appropriate notation thereof shall be made on the books and records of the Bank.
All amounts recorded shall be, absent demonstrable error, conclusive and binding
evidence of (i) the principal  amount of the Revolving Loans advanced  hereunder
and the amount of all  Letter of Credit  Obligations,  (ii) any unpaid  interest
owing on the  Revolving  Loans,  and (iii) all amounts  repaid on the  Revolving
Loans or the Letter of Credit Obligations. The failure to record any such amount
or any error in recording  such amounts shall not,  however,  limit or otherwise
affect the  obligations  of the Borrower  under the Revolving  Note to repay the
principal  amount of the Revolving  Loans,  together with all interest  accruing
thereon.

5.       MANNER OF BORROWING.
         -------------------

         Each Loan shall be made  available  to the  Borrower  upon its request,
from any Person  whose  authority to so act has not been revoked by the Borrower
in writing previously  received by the Bank. Each Revolving Loan may be advanced
either as a Prime Loan or a LIBOR Loan, provided,  however, that at any time and
from time to time,  the Borrower  may  identify no more than five (5)  Revolving
Loans which may be LIBOR  Loans.  A request for a Prime Loan must be received by
no later than 11:00 a.m. Chicago,  Illinois time, on the day it is to be funded.
A request  for a LIBOR  Loan must be (i)  received  by no later  than 11:00 a.m.
Chicago,  Illinois time, three days before the day it is to be funded,  and (ii)
in  an  amount  equal  to  Two  Hundred  Fifty   Thousand  and  00/100   Dollars
($250,000.00)  or a higher integral  multiple of One Hundred Thousand and 00/100
Dollars  ($100,000.00).  If for any  reason  the  Borrower  shall fail to select
timely an Interest Period for an existing LIBOR Loan, then such LIBOR Loan shall
be  immediately  converted to a Prime Loan on the last  Business Day of the then
existing Interest Period, all without demand, presentment,  protest or notice of
any kind,  all of which are hereby waived by the Borrower.  The proceeds of each
Prime Loan or LIBOR Loan  shall be made  available  at the office of the Bank by
credit  to the  account  of the  Borrower  or by other  means  requested  by the
Borrower and acceptable to the Bank.

         Each Letter of Credit shall be issued by the Bank upon the execution of
the Bank's  standard  Master Letter of Credit  Agreement by the Borrower and the
Bank,  and the execution and delivery by the Borrower and the  acceptance by the
Bank, in its sole discretion,  of the Bank's standard  application for Letter of
Credit and the payment by the Borrower of the Bank's fees charged in  connection
therewith.  In addition to all other  applicable  fees,  charges and/or interest
payable by the  Borrower  pursuant to the Master  Letter of Credit  Agreement or

                                       17
<PAGE>

otherwise  payable in accordance  with the Bank's  standard letter of credit fee
schedule,  all  standby  Letters of Credit  issued  under and  pursuant  to this
Agreement shall bear an annual fee equal to one and one-quarter  percent (1.25%)
of the face amount of such standby Letter of Credit,  payable by the Borrower on
or before  the  issuance  of such  Letter  of  Credit  by the Bank and  annually
thereafter  on the same date  unless  and until  (i) such  Letter of Credit  has
expired  or has  been  returned  to the  Bank,  or (ii)  the  Bank  has paid the
beneficiary  thereunder  the full face  amount of such  Letter  of  Credit.  All
Letters of Credit  other than  standby  Letters of Credit  shall bear such fees,
costs and interest as charged by the Bank and shall  contain such other terms as
set forth in the  Master  Letter of Credit  Agreement  and the  Bank's  standard
letter of credit fee schedule.

         The Bank is  authorized  to rely on any  written,  verbal,  electronic,
telephonic or telecopy  loan requests  which the Bank believes in its good faith
judgment to emanate from a properly  authorized  representative of the Borrower,
whether or not that is in fact the case.  The Borrower  does hereby  irrevocably
confirm,  ratify  and  approve  all such  advances  by the Bank and does  hereby
indemnify  the  Bank  against  losses  and  expenses   (including  court  costs,
attorneys' and  paralegals'  fees) and shall hold the Bank harmless with respect
thereto.

6.       SECURITY FOR THE OBLIGATIONS.
         ----------------------------

         6.1  Security  for  Obligations.  As  security  for the  payment of the
Obligations,  the Borrower does hereby pledge,  assign,  transfer and deliver to
the Bank and does  hereby  grant  to the  Bank a  continuing  and  unconditional
security interest in and to any and all property of the Borrower, of any kind or
description,  tangible or intangible,  whether now existing or hereafter arising
or  acquired,  including,  but not  limited  to,  the  following  (all of  which
property,  along with the products and proceeds  therefrom,  and the  additional
collateral  referred to in Section 6.2 below,  are individually and collectively
referred to as the "Collateral"):

                  (a) all  property  of, or for the account of, the Borrower now
         or hereafter  coming into the possession,  control or custody of, or in
         transit to, the Bank or any agent or bailee for the Bank or any parent,
         affiliate or subsidiary of the Bank or any participant with the Bank in
         the Loans  (whether  for  safekeeping,  deposit,  collection,  custody,
         pledge, transmission or otherwise),  including all earnings, dividends,
         interest,  or other rights in connection therewith and the products and
         proceeds therefrom, including the proceeds of insurance thereon; and

                  (b) the  additional  property  of the  Borrower,  whether  now
         existing  or  hereafter  arising  or  acquired,  and  wherever  now  or
         hereafter located,  together with all additions and accessions thereto,
         substitutions for, and replacements,  products and proceeds  therefrom,
         and all of the Borrower's  books and records and recorded data relating
         thereto  (regardless  of the medium of recording or storage),  together
         with all of the  Borrower's  right,  title and  interest  in and to all
         computer software required to utilize, create, maintain and process any
         such records or data on electronic  media,  identified and set forth as
         follows:

                        (i) All  Accounts  and all Goods  whose  sale,  lease or
                  other  disposition  by the Borrower has given rise to Accounts
                  and have  been

                                       18
<PAGE>

                  returned  to, or  repossessed  or stopped  in transit  by, the
                  Borrower, or rejected or refused by an Account Debtor;

                        (ii) All Inventory,  including,  without limitation, raw
                  materials, work-in-process and finished goods;

                        (iii)  All  Goods  (other  than  Inventory),  including,
                  without limitation,  embedded software,  Equipment,  vehicles,
                  furniture and Fixtures;

                        (iv) All Software and computer programs;

                        (v)  All  Securities,   Investment  Property,  Financial
                  Assets and Deposit Accounts;

                        (vi)  All  Chattel  Paper,   Electronic  Chattel  Paper,
                  Instruments,  Documents, Letter of Credit Rights, all proceeds
                  of letters  of  credit,  Health  care  insurance  Receivables,
                  Supporting   Obligations,   notes   secured  by  real  estate,
                  Commercial  Tort  Claims and  General  Intangibles,  including
                  Payment Intangibles; and

                        (vii) All insurance  policies and proceeds  insuring the
                  foregoing  property or any part  thereof,  including  unearned
                  premiums.

         6.2  Additional  Collateral.  In  addition,  the  Obligations  are also
secured by the Mortgages.

         6.3 [INTENTIONALLY OMITTED]

         6.4 Possession  and Transfer of  Collateral.  Until an Event of Default
has occurred  hereunder,  the Borrower shall be entitled to possession or use of
the  Collateral.  The  cancellation  or surrender  of the Note,  upon payment or
otherwise,  shall not affect the right of the Bank to retain the  Collateral for
any other of the Obligations.  The Borrower shall not sell, assign (by operation
of law or  otherwise),  license,  lease or  otherwise  dispose  of, or grant any
option with respect to any of the  Collateral,  except that (a) the Borrower may
sell  Inventory  in the  ordinary  course of  business  and (b)  Borrower or any
Subsidiary  may  sell  one or more  hotel  properties  in  accordance  with  the
provisions of Section 6.11 hereof.

         6.5 Financing Statements. The Borrower shall, at the Bank's request, at
any time and from time to time,  execute and deliver to the Bank such  financing
statements,  amendments  and other  documents and do such acts as the Bank deems
necessary in order to establish and maintain valid, attached and perfected first
security interests in the Collateral in favor of the Bank, free and clear of all
Liens and claims and rights of third  parties  whatsoever  (except as  otherwise
specifically  set forth in Section 8 hereof).  The Borrower  hereby  irrevocably
authorizes  the  Bank  at any  time,  and  from  time  to  time,  to file in any
jurisdiction any initial  financing  statements and amendments  thereto that (a)
indicate  the  Collateral  (i) as all assets of the Borrower or words of similar
effect,  regardless of whether any particular  asset comprised in the Collateral
falls  within  the scope of  Article  9 of the  Uniform  Commercial  Code of the
jurisdiction  wherein such financing statement or amendment is filed, or (ii) as
being of an equal or lesser scope or within

                                       19
<PAGE>

greater detail,  and (b) contain any other information  required by Section 5 of
Article  9 of the  Uniform  Commercial  Code of the  jurisdiction  wherein  such
financing  statement or amendment is filed  regarding the  sufficiency or filing
office acceptance of any financing statement or amendment, including (i) whether
the Borrower is an  organization,  the type of organization and any organization
identification  number  issued  to the  Borrower,  and  (ii)  in the  case  of a
financing  statement  filed as a fixture  filing  or  indicating  Collateral  as
as-extracted  collateral or timber to be cut, a sufficient  description  of real
property to which the  Collateral  relates.  The Borrower  agrees to furnish any
such  information  to the Bank  promptly  upon  request.  The  Borrower  further
ratifies  and affirms its  authorization  for any  financing  statements  and/or
amendments thereto,  executed and filed by the Bank in any jurisdiction prior to
the date of this Agreement.

         6.6  Additional  Collateral.  The  Borrower  shall  deliver to the Bank
immediately  upon its demand,  following the  occurrence of an Event of Default,
such  other  collateral  as the Bank may from time to time  request,  should the
value of the Collateral,  in the Bank's sole and absolute  discretion,  decline,
deteriorate,  depreciate or become impaired, and does hereby grant to the Bank a
continuing  security  interest in such other  collateral,  which,  when pledged,
assigned and transferred to the Bank shall be and become part of the Collateral.
The Bank's  security  interests  in each of the  foregoing  Collateral  shall be
valid, complete and perfected whether or not covered by a specific assignment.

         6.7  Preservation of the Collateral.  The Bank may, but is not required
to, take such action from time to time as the Bank deems appropriate to maintain
or protect the Collateral.  The Bank shall have exercised reasonable care in the
custody  and  preservation  of the  Collateral  if it takes  such  action as the
Borrower  shall  reasonably  request in writing;  provided,  however,  that such
request shall not be inconsistent with the Bank's status as a secured party, and
the  failure of the Bank to comply with any such  request  shall not be deemed a
failure to exercise  reasonable  care.  In addition,  any failure of the Bank to
preserve or protect any rights with respect to the  Collateral  against prior or
third parties,  or to do any act with respect to preservation of the Collateral,
not so  requested  by the  Borrower,  shall not be deemed a failure to  exercise
reasonable care in the custody or  preservation of the Collateral.  The Borrower
shall have the sole  responsibility  for taking such action as may be necessary,
from time to time,  to preserve  all rights of the  Borrower and the Bank in the
Collateral  against prior or third parties.  Without  limiting the generality of
the foregoing,  where Collateral consists in whole or in part of securities, the
Borrower  represents to, and covenants with, the Bank that the Borrower has made
arrangements for keeping informed of changes or potential  changes affecting the
securities  (including,  but not  limited  to,  rights to convert or  subscribe,
payment of  dividends,  reorganization  or other  exchanges,  tender  offers and
voting   rights),   and  the  Borrower  agrees  that  the  Bank  shall  have  no
responsibility  or  liability  for  informing  the Borrower of any such or other
changes or  potential  changes or for taking any action or  omitting to take any
action with respect thereto.

         6.8 Other Actions as to any and all  Collateral.  The Borrower  further
agrees to take any other action  reasonably  requested by the Bank to insure the
attachment,  perfection  and first  priority  of, and the ability of the Bank to
enforce,  the  Bank's  security  interest  in any  and  all  of  the  Collateral
including, without limitation, (a) executing, delivering and, where appropriate,
filing  financing  statements and amendments  relating thereto under the Uniform
Commercial Code, to the extent, if any, that the Borrower's signature thereon is
required  therefor,  (b) causing the Bank's name to be noted as secured party on
any  certificate  of title for a titled good if such

                                       20
<PAGE>

notation is a condition to attachment,  perfection or priority of, or ability of
the bank to  enforce,  the Bank's  security  interest  in such  Collateral,  (c)
complying with any provision of any statute,  regulation or treaty of the United
States as to any Collateral if compliance  with such provision is a condition to
attachment,  perfection  or priority of, or ability of the Bank to enforce,  the
Bank's security  interest in such  Collateral,  (d) obtaining  governmental  and
other third party  consents and  approvals,  including  without  limitation  any
consent of any licensor,  lessor or other Person  obligated on  Collateral,  (e)
obtaining   waivers  from   mortgagees  and  landlords  in  form  and  substance
satisfactory  to the Bank,  and (f) taking all  actions  required  by the UCC in
effect  from time to time or by other law, as  applicable  in any  relevant  UCC
jurisdiction, or by other law as applicable in any foreign jurisdiction.

         6.9 Collateral in the Possession of a Warehouseman or Bailee. If any of
the Collateral at any time is in the possession of a warehouseman or bailee, the
Borrower shall promptly  notify the Bank thereof,  and if requested by the Bank,
shall promptly obtain an  acknowledgement  from the  warehouseman or bailee,  in
form and substance  satisfactory  to the Bank,  that the  warehouseman or bailee
holds  such  Collateral  for the  benefit  of the  Bank and  shall  act upon the
instructions of the Bank, without the further consent of the Borrower.

         6.10 Partial Release of Mortgaged Premises. Upon the written request of
the  Borrower  at any time and from time to time,  the Bank  shall  execute  and
deliver to Borrower a release of the Mortgage on any of the  Mortgaged  Premises
so long as no Event of Default shall have  occurred and be  continuing  and upon
satisfaction of the following conditions:

                  (a)  Borrower  or one of its  Subsidiaries  shall  execute and
         deliver a mortgage for the benefit of the Bank,  in form and  substance
         acceptable to the Bank,  on a substitute  hotel  property  owned by the
         Borrower  or  such   Subsidiary   satisfactory  to  the  Bank  (each  a
         "Substitute Mortgaged Premises");

                  (b)  Borrower  shall  deliver to the Bank an appraisal of such
         Substitute  Mortgaged  Premises prepared by an appraiser  acceptable to
         the Bank which discloses a Net Real Property Equity for such Substitute
         Mortgaged  Premises  that is  substantially  equivalent to the Net Real
         Property Equity for the Mortgaged Premises it replaces;

                  (c)  Upon  giving  effect  to  the  proposed  release  of  the
         Mortgaged  Premises  and  substitution  of  the  Substitute   Mortgaged
         Premises,  the aggregate  Loan-to-Value  Ratio for all hotel properties
         owned by Borrower or its  Wholly-Owned  Subsidiaries  shall comply with
         the requirements of Section 10.4 hereof; and

                  (d)  Borrower  shall pay the Bank a fee of One  Thousand  Five
         Hundred and 00/100 Dollars  ($1,500.00)  for each release  executed and
         delivered to Borrower pursuant to the terms of this Section 6.10.

         In the event that Borrower  fails to satisfy the foregoing  conditions,
the Bank may, in its sole discretion,  establish a reserve against the Revolving
Loan Commitment in such amount as the Bank shall determine,  taking into account
the aggregate Net Real Property Equity and the value of other Collateral, all as
of such date.

                                       21
<PAGE>

         6.11 Sale of Hotel  Properties.  Without  limiting  the  provisions  of
Section 6.10 above,  and so long as no Event of Default  shall have occurred and
be continuing  or, after giving effect to the proposed sale,  would occur,  with
the giving of notice or lapse of time or both,  Borrower or any  Subsidiary  may
sell one or more hotel  properties in the ordinary course of business subject to
satisfaction of the following conditions:

                  (a)  Borrower  shall  give the Bank no less than  thirty  (30)
         days' prior written notice of each such sale;

                  (b) Each notice of  proposed  sale of a hotel  property  shall
         include (i) the location and a description  of the property being sold,
         (ii) the  sales  price  for the  property  in  question,  and (iii) the
         identity of the buyer; and

                  (c) Upon the  written  request  of the  Bank,  Borrower  shall
         provide such additional  information  concerning the transaction as the
         Bank may thereafter request.

7.       REPRESENTATIONS AND WARRANTIES.
         ------------------------------

         To induce the Bank to make the Revolving  Loans, the Borrower makes the
following  representations  and  warranties to the Bank,  each of which shall be
true and correct as of the date of the execution and delivery of this Agreement,
and which shall survive the execution and delivery of this Agreement:

         7.1 Borrower Organization and Name. The Borrower and each Subsidiary is
a corporation  duly  organized,  existing and in good standing under the laws of
its state of incorporation,  with full and adequate  corporate power to carry on
and  conduct  its  business  as  presently  conducted.  The  Borrower  and  each
Subsidiary  is duly licensed or qualified in all foreign  jurisdictions  wherein
the nature of its activities require such qualification or licensing.  The exact
legal  name of the  Borrower  is as set  forth in the  first  paragraph  of this
Agreement,  and the Borrower  currently does not conduct,  nor has it during the
last five (5) years  conducted,  business  under any other  name or trade  name,
except for the names "AmeriHost  Properties,  Inc.," "AmeriHost Inn," "AmeriHost
Inn and Suites,"  "AmeriHost Hotel" and "AmeriHost Suites." The Borrower's state
issued organizational identification number is 204441.

         7.2 Authorization;  Validity. The Borrower and each Subsidiary which is
a party to any of the Loan  Documents  has full right,  power and  authority  to
enter into this Agreement  and/or each Loan Document to which it is a party,  to
make the  borrowings  and execute and  deliver  the Loan  Documents  as provided
herein and to perform all of its duties and obligations under this Agreement and
each Loan  Document to which it is a party.  The  execution and delivery of this
Agreement  and/or  the Loan  Documents  will  not,  nor will the  observance  or
performance  of any of the  matters  and  things  herein or  therein  set forth,
violate or contravene  any provision of law or of the articles of  incorporation
or  bylaws  of the  Borrower  or any  Subsidiary  which  is a party  to any Loan
Document.  All necessary and appropriate  corporate action has been taken on the
part of the Borrower and each  Subsidiary  which is a party to any Loan Document
to  authorize  the  execution  and  delivery of this  Agreement  and/or the Loan
Documents to which it is a party. This Agreement and the Loan Documents to which
it is a party are valid and binding agreements and

                                       22
<PAGE>

contracts  of the  Borrower  and  each  Subsidiary  which is a party to any Loan
Document in accordance with their respective terms.

         7.3 Compliance With Laws. To the best knowledge of Borrower, the nature
and  transaction of the business and operations of Borrower and each  Subsidiary
and the use of  their  respective  properties  and  assets,  including,  but not
limited to, the  Collateral or any real estate owned or occupied by any of them,
do not and during the term of the Loans shall not,  violate or conflict with any
applicable law,  statute,  ordinance,  rule,  regulation or order of any kind or
nature,  including,  without  limitation,  the  provisions  of  the  Fair  Labor
Standards Act or any zoning, land use, building,  noise abatement,  occupational
health and safety or other laws, any building  permit or any  condition,  grant,
easement, covenant, condition or restriction, whether recorded or not.

         7.4  Environmental   Laws  and  Hazardous   Substances.   The  Borrower
represents,  warrants and agrees with the Bank that (i) to the best knowledge of
Borrower,  neither the Borrower nor any Subsidiary has generated,  used, stored,
treated,  transported,  manufactured,  handled,  produced  or  disposed  of  any
Hazardous  Materials,  on or off any of the premises of the Borrower (whether or
not owned by it) or  Subsidiary  in any manner  which at any time  violates  any
Environmental  Law or any  license,  permit,  certificate,  approval  or similar
authorization thereunder, (ii) to the best knowledge of Borrower, the operations
of the Borrower and each  Subsidiary  comply in all material  respects  with all
Environmental Laws and all licenses, permits certificates, approvals and similar
authorizations  thereunder,  (iii) there has been no investigation,  proceeding,
complaint,  order,  directive,  claim,  citation  or notice by any  governmental
authority  or any  other  Person,  nor is any  pending  or,  to the  best of the
Borrower's knowledge,  threatened, and the Borrower shall immediately notify the
Bank  upon  becoming  aware of any such  investigation,  proceeding,  complaint,
order,  directive,  claim,  citation  or  notice,  and  shall  take  prompt  and
appropriate actions to respond thereto, with respect to any non-compliance with,
or violation of, the  requirements of any  Environmental  Law by the Borrower or
any Subsidiary or the release, spill or discharge,  threatened or actual, of any
Hazardous Material or the generation, use, storage,  treatment,  transportation,
manufacture,  handling,  production or disposal of any Hazardous Material or any
other environmental,  health or safety matter, which affects the Borrower or its
business,  operations  or assets or any  properties at which the Borrower or any
Subsidiary has transported,  stored or disposed of any Hazardous Materials, (iv)
to the best  knowledge of Borrower,  neither the Borrower nor any Subsidiary has
any material liability,  contingent or otherwise,  in connection with a release,
spill or  discharge,  threatened or actual,  of any  Hazardous  Materials or the
generation,  use, storage,  treatment,  transportation,  manufacture,  handling,
production or disposal of any Hazardous  Material;  and (v) without limiting the
generality of the foregoing,  the Borrower shall, following determination by the
Bank that there is non-compliance, or any condition which requires any action by
or on  behalf  of  the  Borrower  or  any  Subsidiary  in  order  to  avoid  any
non-compliance,  with any  Environmental  Law, at the  Borrower's  sole expense,
cause an independent  environmental  engineer  acceptable to the Bank to conduct
such tests of the relevant  site as are  appropriate,  and prepare and deliver a
report setting forth the result of such tests,  a proposed plan for  remediation
and an estimate of the costs thereof.

         7.5 Absence of Breach. The execution,  delivery and performance of this
Agreement,  the Loan  Documents  and any other  documents or  instruments  to be
executed and delivered by

                                       23
<PAGE>

the  Borrower or any  Subsidiary  in  connection  with the Loans shall not:  (i)
violate  any  provisions  of law  or any  applicable  regulation,  order,  writ,
injunction or decree of any court or  governmental  authority,  or (ii) conflict
with,  be  inconsistent  with,  or result in any breach or default of any of the
terms, covenants,  conditions, or provisions of any indenture, mortgage, deed of
trust,  instrument,  document,  agreement  or  contract of any kind to which the
Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary
or any of their respective property or assets may be bound.

         7.6  Collateral  Representations.  The  Borrower or, in the case of the
Mortgaged Premises, a Subsidiary, is the sole owner of the Collateral, free from
any Lien of any kind, other than the Lien of the Bank and the Liens permitted by
Section 8.2 of this Agreement.

         7.7 Financial  Statements.  All financial  statements  submitted to the
Bank have been prepared in accordance with GAAP on a basis,  except as otherwise
noted therein, consistent with the previous fiscal year and truly and accurately
reflect  the   consolidated   financial   condition  of  the  Borrower  and  its
Subsidiaries and the consolidated results of the operations for the Borrower and
its Subsidiaries as of such date and for the periods  indicated.  Since the date
of the most recent  financial  statement  submitted by the Borrower to the Bank,
there has been no material  adverse change in the financial  condition or in the
consolidated assets or liabilities of the Borrower and its Subsidiaries,  or any
chances except those occurring in the ordinary course of business.

         7.8  Litigation  and Taxes.  There is no  litigation,  demand,  charge,
claim,  petition or governmental  investigation or proceeding pending, or to the
best  knowledge of the  Borrower,  threatened,  against the Borrower  and/or any
Subsidiary, which, if adversely determined, would result in any material adverse
change in the financial  condition or properties,  business or operations of the
Borrower or  Subsidiary.  The Borrower and each  Subsidiary  have duly filed all
applicable  income or other tax returns and to the best  knowledge  of Borrower,
have  paid all  income  or other  taxes  when due.  There is no  controversy  or
objection  pending,  or to the best  knowledge of the  Borrower,  threatened  in
respect of any tax returns of the Borrower or any Subsidiary.

         7.9  Event  of  Default.  No  Event  of  Default  has  occurred  and is
continuing, and no event has occurred and is continuing which, with the lapse of
time, the giving of notice,  or both,  would constitute such an Event of Default
under this  Agreement or any of the Loan  Documents and neither the Borrower nor
any Subsidiary is in default (without regard to grace or cure periods) under any
contract or agreement to which it is a party.

         7.10 ERISA  Obligations.  All  Employee  Plans of the  Borrower and its
Subsidiaries  meet the minimum  funding  standards of Section 302 of ERISA where
applicable  and each such Employee Plan that is intended to be qualified  within
the meaning of Section 401 of the Internal Revenue Code of 1986 is qualified. No
withdrawal  liability  has been incurred  under any such  Employee  Plans and no
"Reportable  Event" or  "Prohibited  Transaction"  (as such terms are defined in
ERISA), has occurred with respect to any such Employee Plans, unless approved by
the  appropriate  governmental  agencies.  The Borrower and each Subsidiary have
promptly paid and discharged all obligations  and liabilities  arising under the
Employee  Retirement  Income

                                       24
<PAGE>

Security  Act of 1974  ("ERISA") of a character  which if unpaid or  unperformed
might  result in the  imposition  of a Lien  against  any of its  properties  or
assets.

         7.11 Adverse  Circumstances.  To the best  knowledge  of  Borrower,  no
condition,  circumstance,  event, agreement, document, instrument,  restriction,
litigation  or  proceeding  (or  threatened  litigation  or  proceeding or basis
therefor)  exists which (a) could  adversely  affect the validity or priority of
the Liens  granted to the Bank under the Loan  Documents,  (b) could  materially
adversely  affect the ability of the Borrower to perform its  obligations  under
the Loan  Documents,  (c)  would  constitute  a  default  under  any of the Loan
Documents,  or (d) would  constitute such a default with the giving of notice or
lapse of time or both.

         7.12 Lending  Relationship.  The Borrower  acknowledges and agrees that
the  relationship  hereby  created with the Bank is and has been conducted on an
open and arm's length basis in which no fiduciary  relationship  exists and that
the  Borrower  has  not  relied  and  is  not  relying  on  any  such  fiduciary
relationship in executing this Agreement and in consummating the Loans. The Bank
represents  that it will  receive the Note payable to its order as evidence of a
bank loan.

         7.13  Business  Loan.  The Loans,  including  interest  rate,  fees and
charges as contemplated hereby, (i) are business loans within the purview of 815
ILCS 205/4(l)(c), as amended from time to time, (ii) are an exempted transaction
under the Truth In Lending Act, 12 .S.C.  1601 et seq.,  as amended from time to
time, and (iii) do not, and when disbursed shall not,  violate the provisions of
the Illinois usury laws, any consumer credit laws or the usury laws of any state
which may have jurisdiction over this transaction,  the Borrower or any property
securing the Loans.

         7.14  Compliance  with  Regulation U. No portion of the proceeds of the
Loans shall be used by the Borrower,  or any affiliates of the Borrower,  either
directly or  indirectly,  for the purpose of  purchasing  or carrying any margin
stock,  within the meaning of  Regulation U as adopted by the Board of Governors
of the Federal Reserve System.

         7.15  Governmental  Regulation.  The Borrower and its  Subsidiaries are
not, or after  giving  effect to any loan,  will not be,  subject to  regulation
under the Public Utility  Holding  Company Act of 1935, the Federal Power Act or
the  Investment  Company  Act of 1940 or to any  federal  or  state  statute  or
regulation limiting its ability to incur indebtedness for borrowed money.

         7.16 Bank  Accounts.  The account  numbers and locations of all Deposit
accounts   and  other  bank   accounts   of  the   Borrower   are  as   follows:

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

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

         7.17 Place of Business. The principal place of business of the Borrower
is 2355 S. Arlington  Heights Road,  Arlington  Heights,  Illinois 60005 and the
Borrower  shall  promptly  notify the Bank of any change in such  location.  The
Borrower  will not  remove or permit  the  Collateral  to be  removed  from such
location  without the prior  written  consent of the Bank,  except for Inventory
sold in the usual and ordinary course of the Borrower's business.

                                       25
<PAGE>

         7.18 Complete Information. This Agreement and all financial statements,
schedules,  certificates,   confirmations,   agreements,  contracts,  and  other
materials  submitted to the Bank in connection  with or in  furtherance  of this
Agreement  by or on behalf of the  Borrower  fully and fairly  state the matters
with which they purport to deal,  and neither  misstate  any material  fact nor,
separately or in the  aggregate,  fail to state any material  fact  necessary to
make the statements made not misleading.

8.       NEGATIVE COVENANTS.
         ------------------

         8.1  Indebtedness.  The Borrower shall not, and shall cause each of its
Subsidiaries  to not, either directly or indirectly,  create,  assume,  incur or
have outstanding any Indebtedness  (including purchase money  indebtedness),  or
become liable, whether as endorser, guarantor, surety or otherwise, for any debt
or obligation of any other Person, except:

                  (a) the Obligations;

                  (b)  endorsement  for  collection or deposit of any commercial
         paper secured in the ordinary course of business;

                  (c) obligations of the Borrower or any of its Subsidiaries for
         taxes, assessments, municipal or other governmental charges;

                  (d) obligations of the Borrower or any of its Subsidiaries for
         accounts  payable,  other  than for  money  borrowed,  incurred  in the
         ordinary course of business; and

                  (e) obligations,  including the Senior Mortgage  Indebtedness,
         existing  on the date  hereof  which  are  disclosed  on the  financial
         statements referred to in Section 7;

                  (f) obligations in respect of Indebtedness issued to refinance
         the   Senior   Mortgage    Indebtedness   (the   "Senior    Refinancing
         Indebtedness");  provided,  however,  that the  issuance of such Senior
         Refinancing  Indebtedness  shall not cause or result in a violation  of
         any covenant set forth in Section 10;

                  (g) obligations in respect of  Indebtedness  secured by a Lien
         on any Other Property developed by Borrower or any Subsidiary after the
         date of this Agreement; provided that the issuance of such Indebtedness
         shall not cause or result in a violation  of any  covenant set forth in
         Section 10;

                  (h)  obligations  arising  under  Capital  Leases for property
         acquired  (or  deemed to be  acquired)  by the  Borrower  or any of its
         Subsidiaries  or claims  arising from the use or loss of, or damage to,
         such property; and

                  (i)  Indebtedness  for  Capital  Expenditures   (exclusive  of
         Indebtedness  as  incurred  by a Lien on any Other  Property  permitted
         under Section  8.1(g) above)  incurred after the date of this Agreement
         not to exceed One Million  and 00/100  Dollars  ($1,000,000.00)  in the
         aggregate in any one calendar year.

                                       26
<PAGE>

         8.2  Encumbrances.  The Borrower shall not, and shall cause each of its
Subsidiaries  to not, either directly or indirectly,  create,  assume,  incur or
suffer or permit to exist any Lien or charge of any kind or  character  upon any
asset of the  Borrower or any  Subsidiary,  whether  owned at the date hereof or
hereafter acquired except:

                  (a) Liens for taxes, assessments or other governmental charges
         not yet due or which are being  contested in good faith by  appropriate
         proceedings in such a manner as not to make the property forfeitable;

                  (b) Liens or charges incidental to the conduct of its business
         or the  ownership of its property and assets which were not incurred in
         connection  with the  borrowing of money or the obtaining of an advance
         or credit,  and which do not in the aggregate  materially  detract from
         the  value of its  property  or  assets or  materially  impair  the use
         thereof in the operation of its business;

                  (c) Liens  arising  out of  judgments  or awards  against  the
         Borrower  with  respect  to which it shall  concurrently  therewith  be
         prosecuting a timely  appeal or proceeding  for review and with respect
         to which it shall have secured a stay of execution  pending such appeal
         or proceedings for review;

                  (d) pledges or deposits to secure  obligations  under worker's
         compensation
         laws or similar legislation;

                  (e) good faith deposits in connection  with lending  contracts
         or leases to which the Borrower is a party;

                  (f) deposits to secure public or statutory  obligations of the
         Borrower;

                  (g) Liens,  including  the Senior  Mortgages,  existing on the
         date hereof and  disclosed on the financial  statements  referred to in
         Section 7;

                  (h) Liens securing obligations permitted under Section 8.1(f),
         Section 8.1(g) and/or Section 8.1(h); and

                  (i) Liens granted to the Bank hereunder.

         Without  limiting the generality of the foregoing,  Borrower shall not,
and  shall  cause  each  Subsidiary  not  to,  mortgage  or  otherwise  encumber
Borrower's  or such  Subsidiary's  fee or  leasehold  interest in any  Mortgaged
Premises or Other Property, except as expressly permitted pursuant to (g) or (h)
above or as consented to by the Bank in writing.

         8.3  Investments.   The  Borrower  shall  not,  and  shall  cause  each
Subsidiary to not, either directly or indirectly,  make or have  outstanding any
new investments  (whether through purchase of stocks,  obligations or otherwise)
in, or loans or advances to, any other Person, or acquire all or any substantial
part of the assets, business, stock or other evidence of beneficial ownership of
any other Person except:

                  (a) investments in direct obligations of the United States;

                                       27
<PAGE>

                  (b)  investments in certificates of deposit issued by the Bank
         or any bank  with  assets  greater  than One  Hundred  Million  Dollars
         ($100,000,000.00); or

                  (c)  investments  in  Prime  Commercial  Paper  (for  purposes
         hereof,   Prime  Commercial  Paper  shall  mean  short-term   unsecured
         promissory  notes  sold by large  corporations  and  rated  A-I/P-1  by
         Standard & Poor's Ratings  Group, a division of McGraw Hill,  Inc., and
         Moody's Investment Service, Inc.); or

                  (d) deposits  held by the Bank or by any affiliate of ABN AMRO
         Incorporated.

         8.4  Transfer;  Merger.  The  Borrower  shall not, and shall cause each
Subsidiary to not,  either  directly or indirectly,  merge,  consolidate,  sell,
transfer,  license,  lease,  encumber or otherwise dispose of all or any part of
its property or business or all or any substantial  part of its assets,  or sell
or discount  (with or without  recourse) any of its  Promissory  Notes,  Chattel
Paper,  Payment Intangibles or Accounts,  except that Borrower or any Subsidiary
may sell one or more hotel  properties  in  accordance  with the  provisions  of
Section 6.11.

         8.5  Distributions.  Except for  purchases  of  Borrower's  stock in an
amount not to exceed One Million Dollars  ($1,000,000.00)  in any fiscal year of
Borrower, none of which,  individually or in the aggregate would cause or result
in the  occurrence  of an Event of  Default,  the  Borrower  shall  not,  either
directly or  indirectly,  purchase or redeem any shares of its stock or,  except
with the prior written consent of the Bank,  declare or pay any dividends (other
than stock dividends),  whether in cash or otherwise, or set aside any funds for
any such purpose or make any distribution to its shareholders.

         8.6 Use of Proceeds.  Neither the Borrower nor any of its  Subsidiaries
or  affiliates  shall use any  portion  of the  proceeds  of the  Loans,  either
directly  or   indirectly,   for  the  purpose  of  purchasing   any  securities
underwritten by ABN AMRO Incorporated, an affiliate of the Bank.

         8.7 Bank  Accounts.  The  Borrower  shall  not,  and shall  cause  each
Subsidiary to not,  establish any new Deposit  accounts or other bank  accounts,
other  than bank  accounts  established  at or with the Bank  without  the prior
written consent of the Bank.

         8.8 Change of Legal  Status.  Neither the Borrower  nor any  Subsidiary
which  is a party  to any of the Loan  Documents  shall  change  its  name,  its
organizational  identification  number, if it has one, its type of organization,
its  jurisdiction of  organization  or other legal  structure  without the prior
written consent of the Bank.

9.       AFFIRMATIVE COVENANTS.
         ---------------------

         9.1 Compliance  with Bank Regulatory  Requirements.  Upon demand by the
Bank,  the Borrower  shall  reimburse the Bank for the Bank's  additional  costs
and/or  reductions in the amount of principal or interest received or receivable
by the Bank if at any time after the date of this  Agreement any law,  treaty or
regulation or any change in any law, treaty or regulation or the  interpretation
thereof by any governmental authority charged with the administration thereof or
any  central  bank  or  other  fiscal,   monetary  or  other  authority   having
jurisdiction over the Bank or the Loans, whether or not having the force of law,
shall impose, modify or deem applicable any

                                       28
<PAGE>

reserve  (except  reserve  requirements  taken into account in  calculating  the
Revolving  Interest  Rate)  and/or  special  deposit  requirement  against or in
respect of assets  held by or deposits in or for the account of the Loans by the
Bank or impose on the Bank any other condition with respect to this Agreement or
the  Loans,  the result of which is to either  increase  the cost to the Bank of
making or maintaining the Loans or to reduce the amount of principal or interest
received or receivable by the Bank with respect to such Loans.  Said  additional
costs and/or  reductions will be those which directly result from the imposition
of such requirement or condition on the making or maintaining of such Loans. All
Loans  shall be  deemed  to be  match  funded  for the  purposes  of the  Bank's
determination  in the previous  sentence.  Notwithstanding  the  foregoing,  the
Borrower shall not be required to pay any such  additional  costs which could be
avoided by the Bank with the exercise of reasonable conduct and diligence.

         9.2  Corporate  Existence.  The  Borrower  shall,  and shall cause each
Subsidiary  to, at all times  preserve  and maintain  its  corporate  existence,
rights,  franchises and  privileges,  and shall at all times continue as a going
concern in the  business  which the  Borrower or such  Subsidiary  is  presently
conducting.  If the Borrower does not have a state issued  identification number
and later  obtains  one,  the Borrower  shall  promptly  notify the Bank of such
organizational identification number.

         9.3  Maintain  Property.  The  Borrower  shall,  and shall  cause  each
Subsidiary to, at all times  maintain,  preserve and keep its plant,  properties
and Equipment,  including,  but not limited to, any Collateral,  in good repair,
working  order and  condition,  and shall from time to time make all needful and
proper repairs,  renewals,  replacements,  and additions  thereto so that at all
times the  efficiency  thereof  shall be fully  preserved  and  maintained.  The
Borrower  shall,  and shall cause each Subsidiary to, permit the Bank to examine
and inspect such plant, properties and Equipment, including, but not limited to,
any Collateral, at all reasonable times.

         9.4  Maintain  Insurance.  The  Borrower  shall,  and shall  cause each
Subsidiary  to, at all times  insure  and keep  insured in  insurance  companies
acceptable  to the  Bank,  all  insurable  property  owned  by it  which is of a
character  usually  insured by companies  similarly  situated and operating like
properties,  against loss or damage from fire and such other hazards or risks as
are customarily  insured against by companies  similarly  situated and operating
like properties; and shall similarly insure employers',  public and professional
liability risks. Prior to the date of the funding of the Note the Borrower shall
deliver to the Bank a  certificate  setting forth in summary form the nature and
extent of the insurance maintained by the Borrower and its Subsidiaries pursuant
to this SECTION 9. All such policies of insurance  must be  satisfactory  to the
Bank in relation to the amount and term of the Obligations and type and value of
the  Collateral and assets of the Borrower and each  Subsidiary,  shall identify
the Bank as lender's loss payee or mortgagee and as an  additional  insured.  In
the event the  Borrower  either  fails to provide the Bank with  evidence of the
insurance  coverage required by this Section or at any time hereafter shall fall
to obtain or maintain any of the policies of insurance required above, or to pay
any premium in whole or in part relating thereto, then the Bank, without waiving
or releasing  any  obligation or default by the Borrower  hereunder,  may at any
time (but shall be under no  obligation  to so act),  obtain and  maintain  such
policies  of  insurance  and pay such  premium  and take any other  action  with
respect  thereto,  which the Bank deems advisable.  This insurance  coverage (i)
may, but need not, protect the Borrower's and each Subsidiary's  interest in the
such property,  including,  but not limited to the Collateral,  and (ii) may not
pay any claim made by, or against,  the

                                       29
<PAGE>

Borrower or any Subsidiary in connection with such property,  including, but not
limited to the  Collateral.  The Borrower  may later  cancel any such  insurance
purchased by the Bank, but only after  providing the Bank with evidence that the
Borrower has obtained the insurance coverage required by this Section. The costs
of such insurance obtained by the Bank, through and including the effective date
such  insurance  coverage is canceled or expires,  shall be payable on demand by
the  Borrower to the Bank,  together  with  interest at the Default Rate on such
amounts until repaid and any other  charges by the Bank in  connection  with the
placement of such insurance.  The costs of such insurance,  which may be greater
than the cost of insurance  which the Borrower may be able to obtain on its own,
together with interest  thereon at the Default Rate and any other charges by the
Bank in  connection  with the  placement of such  insurance  may be added to the
total Obligations due and owing.

         9.5  Tax  Liabilities.   The  Borrower  shall,  and  shall  cause  each
Subsidiary  to, at all times pay and  discharge  all  property  and other taxes,
assessments and governmental  charges upon, and all claims (including claims for
labor,  materials and supplies)  against the Borrower and each Subsidiary or any
of its  properties,  Equipment  or  Inventory,  before  the  same  shall  become
delinquent and before  penalties  accrue thereon,  unless and to the extent that
the same are being  contested in good faith by appropriate  proceedings  and are
insured against or bonded over to the satisfaction of the Bank.

         9.6 ERISA  Liabilities;  Employee Plans.  The Borrower shall, and shall
cause each Subsidiary to, (i) keep in full force and effect any and all Employee
Plans which are  presently  in existence  or may,  from time to time,  come into
existence  under ERISA,  and not withdraw from any such Employee  Plans,  unless
such withdrawal can be effected or such Employee Plans can be terminated without
liability to the Borrower or any Subsidiary;  (ii) make  contributions to all of
such Employee Plans in a timely manner and in a sufficient amount to comply with
the standards of ERISA;  including the minimum funding standards of ERISA; (iii)
comply with all material  requirements  of ERISA which  relate to such  Employee
Plans;  (iv) notify the Bank  immediately  upon  receipt by the  Borrower or any
Subsidiary of any notice  concerning the imposition of any withdrawal  liability
or of the  institution of any proceeding or other action which may result in the
termination  of any such  Employee  Plans or the  appointment  of a  trustee  to
administer such Employee  Plans;  (v) promptly advise the Bank of the occurrence
of any "Reportable Event" or "Prohibited Transaction" (as such terms are defined
in ERISA),  with respect to any such Employee Plans; and (vi) amend any Employee
Plan that is intended to be  qualified  within the meaning of Section 401 of the
Internal  Revenue Code of 1986 to the extent necessary to keep the Employee Plan
qualified,  and to cause the Employee Plan to be administered  and operated in a
manner that does not cause the Employee Plan to lose its qualified status.

         9.7  Financial  Statements.  The Borrower  shall,  and shall cause each
Subsidiary to, at all times maintain a standard and modern system of accounting,
on the accrual basis of accounting and in all respects in accordance  with GAAP,
and shall furnish to the Bank or its authorized representatives such information
regarding  the  business  affairs,  operations  and  financial  condition of the
Borrower and its Subsidiaries, including, but not limited to:

                  (a) as soon as available, and in any event, within ninety (90)
         days after the close of each of its fiscal years,  a copy of the annual
         audited  consolidated  financial

                                       30
<PAGE>

         statements  of the Borrower  and its  Subsidiaries,  including  balance
         sheet,  statement  of income and retained  earnings,  statement of cash
         flows  for the  fiscal  year  then  ended  and such  other  information
         (including  nonfinancial  information)  as the  Bank  may  request,  in
         reasonable detail,  prepared and certified by an independent  certified
         public  accountant  acceptable to the Bank,  containing an  unqualified
         opinion; and

                  (b) as soon as available,  and in any event, within forty five
         (45)  days  following  the end of each  fiscal  quarter,  a copy of the
         consolidated  financial statements of the Borrower and its Subsidiaries
         regarding such fiscal quarter,  including  balance sheet,  statement of
         income and  retained  earnings,  statement of cash flows for the fiscal
         quarter then ended and such other information  (including  nonfinancial
         information) as the Bank may request,  in reasonable  detail,  prepared
         and certified as accurate by the Borrower.

         No change with respect to such accounting  principles  shall be made by
the  Borrower  without  giving  prior  notification  to the Bank.  The  Borrower
represents and warrants to the Bank that the financial  statements  delivered to
the Bank at or prior to the execution  and delivery of this  Agreement and to be
delivered at all times thereafter accurately reflect and will accurately reflect
the consolidated  financial condition of the Borrower and its Subsidiaries.  The
Bank  shall have the right at all times  during  business  hours to inspect  the
books and records of the  Borrower  and make  extracts  therefrom.  The Borrower
agrees to advise the Bank  immediately  of any adverse  change in the  financial
condition, the operations or any other status of the Borrower.

         9.8 Supplemental  Financial Statements.  The Borrower shall immediately
upon  receipt  thereof,  provide to the Bank copies of interim and  supplemental
reports  if  any,  submitted  to the  Borrower  by  independent  accountants  in
connection  with any interim audit or review of the books of the Borrower or any
Subsidiary.

         9.9 Covenant  Compliance Report. The Borrower shall, within thirty (30)
days after the end of each fiscal quarter, deliver to the Bank (a) a computation
in such detail as the Bank shall  specify,  showing  compliance  by the Borrower
with the covenants  set forth in SECTION 10, and (b) a certificate  that neither
the  Borrower  nor any  Subsidiary  is in  default  under  the  terms  of or has
otherwise  breached  the terms of any of the Senior  Mortgages  or received  any
notice(s) with respect to a default or breach of any of the  foregoing,  in each
case certified as accurate by the Borrower.

         9.10 Field Audits. The Borrower shall allow the Bank, at the Borrower's
sole  expense,  to conduct an annual  field  examination  of the Accounts of the
Borrower and its Subsidiaries,  the results of which must be satisfactory to the
Bank in the Bank's sole and absolute discretion.

         9.11 Other Reports.  The Borrower shall,  within such period of time as
the Bank may specify deliver to the Bank such other schedules and reports as the
Bank may require.

         9.12  Collateral  Records.  Borrower shall keep full and accurate books
and records  relating to the Collateral and shall mark such books and records to
indicate the Bank's Lien in the Collateral.

                                       31
<PAGE>

         9.13 Notice of  Proceedings.  The  Borrower  shall,  immediately  after
knowledge  thereof  shall  have  come to the  attention  of any  officer  of the
Borrower,  give written notice to the Bank of all threatened or pending actions,
suits, and proceedings before any court or governmental department,  commission,
board or other  administrative  agency  which may have a material  effect on the
business, property or operations of the Borrower or any Subsidiary.

         9.14 Notice of  Default.  The  Borrower  shall,  immediately  after the
commencement thereof, give notice to the Bank in writing of the occurrence of an
Event of Default or of any event  which,  with the lapse of time,  the giving of
notice or both, would constitute an Event of Default hereunder.

         9.15 Banking  Relationship.  The Borrower  covenants and agrees, at all
times during the term of this Agreement, to utilize the Bank as its primary bank
of account and  depository for all financial  services,  including all receipts,
disbursements,  cash  management  and  related  service,  of  Borrower  and  its
Subsidiaries.

         9.16  Unused  Line  Fee.  The  Borrower  agrees  to pay  to the  Bank a
non-utilization  fee equal to one-fourth (.0.25%) of one percent of the total of
(a) the Revolving Loan Commitment,  less (b) the sum of (i) the daily average of
the aggregate principal amount of all Revolving Loans outstanding, plus (ii) the
daily average of the aggregate amount of the Letter of Credit Obligations, which
non-utilization fee shall be (A) calculated on the basis of a year consisting of
360 days,  (B) paid for the  actual  number  of days  elapsed,  and (C)  payable
quarterly  in  arrears  on the  last  day of each  March,  June,  September  and
December, commencing on March 31, 2002, and on the Maturity Date.

10.      FINANCIAL COVENANTS.
         -------------------

         10.1 Tangible Net Worth. As of the end of each of its fiscal  quarters,
the Borrower and its Subsidiaries shall maintain consolidated Tangible Net Worth
in an amount not less than Ten Million Five Hundred  Thousand and 00/100 Dollars
($10,500,000.00).

         10.2 Total  Liabilities  to Worth.  As of the end of each of its fiscal
quarters,  the Borrower and its Subsidiaries  shall maintain a Total Liabilities
to Worth Ratio of not greater than 3.0 to 1.0.

         10.3 Debt Service  Coverage  Ratio. As of the end of each of its fiscal
quarters,  the  Borrower  and its  Subsidiaries  shall  maintain  a ratio of (a)
consolidated  EBITDA to (b)  consolidated  Debt Service Charges of not less than
1.50 to 1.0.

         10.4  Aggregate  Loan-to-Value  Ratio.  The Bank may from  time to time
order reappraisals on any of the Mortgaged  Premises and/or appraisals,  in form
and  substance  acceptable  to  the  Bank,  on  any  one or  more  of the  Other
Properties.  At all times, the Borrower and its  Subsidiaries  shall maintain an
aggregate  Loan-to-Value  Ratio  for the  Mortgaged  Properties  and  the  Other
Properties,  as determined by the Bank, not exceeding  sixty-five  percent (65%)
and shall maintain Net Real Property Equity of no less than $5,500,000.

         10.5 Aggregate Revenue Per Room. As of the end of each month, aggregate
gross room  receipts for all hotel  properties  owned solely by any Wholly Owned
Subsidiary  shall not

                                       32
<PAGE>

have declined as of two  consecutive  months' end by more than five percent (5%)
from the aggregate  gross room receipts  attributable to the same hotel rooms as
of the end of the two (2) immediately preceding fiscal months' end.

11.      EVENTS OF DEFAULT.
         -----------------

         The Borrower, without notice or demand of any kind, shall be in default
under this Agreement upon the occurrence of any of the following events (each an
"Event of Default").

         11.1 Nonpayment of Obligations. Any amount due and owing on the Note or
any of the Obligations, whether by its terms or as otherwise provided herein, is
not paid  within ten (10) days after  notice  from the Bank that such amount was
not paid when due.

         11.2 Misrepresentation.  Any oral or written warranty,  representation,
certificate  or statement  in this  Agreement,  the Loan  Documents or any other
agreement with the Bank shall be false when made or at any time.

         11.3  Nonperformance.   Any  failure  to  perform  or  default  in  the
performance of any covenant,  condition or agreement contained in this Agreement
and,  if  capable  of being  cured,  such  failure  to  perform  or  default  in
performance  continues  for a period of  thirty  (30)  days  after the  Borrower
receives  notice or  knowledge  from any  source of such  failure  to perform or
default in performance.

         11.4 Default under Loan Documents. A default by Borrower or any Obligor
under any of the other Loan  Documents,  which  continues  beyond any applicable
grace  or  cure  period,  all of  which  covenants,  conditions  and  agreements
contained  therein  are  hereby   incorporated  in  this  Agreement  by  express
reference,  shall be and constitute an Event of Default under this Agreement and
any other of the Obligations.

         11.5  Default  under  Other  Agreements.  Any default in the payment of
principal,  interest or any other sum for any other obligation beyond any period
of grace provided with respect  thereto or in the performance of any other term,
condition or covenant contained in any agreement (including,  but not limited to
any capital or operating  lease or any agreement in connection with the deferred
purchase  price of property)  under which any such  obligation  is created,  the
effect of which default is to cause or permit the holder of such  obligation (or
the other party to such other  agreement) to cause such obligation to become due
prior to its stated maturity or terminate such other agreement.

         11.6 Assignment for Creditors.  Any Obligor makes an assignment for the
benefit of  creditors,  fails to pay, or admits in writing its  inability to pay
its debts as they mature;  or if a trustee of any substantial part of the assets
of any  Obligor is applied  for or  appointed,  and in the case of such  trustee
being appointed in a proceeding  brought against such Obligor,  the Obligor,  by
any  action  or  failure  to act  indicates  its  approval  of,  consent  to, or
acquiescence in such appointment and such appointment is not vacated,  stayed on
appeal or otherwise  shall not have ceased to continue in effect  within  thirty
(30) days after the date of such appointment.

         11.7 Bankruptcy.  Any proceeding involving any Obligor, is commenced by
or against  such  Obligor  under any  bankruptcy,  reorganization,  arrangement,
insolvency,  readjustment of

                                       33
<PAGE>

debt, dissolution or liquidation law or statute of the federal government or any
state  government,  and in the  case of any  such  proceeding  being  instituted
against  such  Obligor,  (i) such  Obligor,  by any  action  or  failure  to act
indicates its approval of, consent to or acquiescence  therein, or (ii) an order
shall be entered  approving the petition in such  proceedings  and such order is
not vacated,  stayed on appeal or otherwise shall not have ceased to continue in
effect within thirty (30) days after the entry thereof.

         11.8 Judgments.  The entry of any judgment,  decree, levy,  attachment,
garnishment  or other  process,  or the filing of any Lien  against  any Obligor
which is not fully  covered by  insurance,  and such  judgment or other  process
shall not have been, within thirty (30) days from the entry thereof,  (i) bonded
over to the  satisfaction  of the  Bank and  appealed,  (ii)  vacated,  or (iii)
discharged.

         11.9  Change in  Control.  Subject to Section  6.11  hereof,  any sale,
conveyance,  assignment  or  other  transfer,  directly  or  indirectly,  of any
ownership interest of the Borrower in any Subsidiary.

         11.10  Collateral  Impairment.  (a) The entry of any judgment,  decree,
levy,  attachment,  garnishment  or other  process,  or the  filing  of any Lien
against,  any of the  Collateral  or any  collateral  under a separate  security
agreement  securing any of the  Obligations  and such  judgment or other process
shall not have been, within thirty (30) days from the entry thereof,  (i) bonded
over to the  satisfaction  of the  Bank and  appealed,  (ii)  vacated,  or (iii)
discharged, or (b) the loss, theft,  destruction,  seizure or forfeiture, or the
occurrence of any deterioration or impairment of any of the Collateral or any of
the collateral under any security agreement securing any of the Obligations,  or
any decline or depreciation in the value or market price thereof (whether actual
or reasonably anticipated),  which causes the Collateral, in the sole opinion of
the  Bank  acting  in good  faith,  to  become  unsatisfactory  as to  value  or
character,  or which causes the Bank to  reasonably  believe that it is insecure
and that the  likelihood  for  repayment of the  Obligations  is or will soon be
impaired,  time  being  of the  essence,  which  loss,  deterioration,  decline,
depreciation, or other source of insecurity or impairment continues for a period
of thirty (30) days after the Borrower  receives  written  notice from the Bank.
The cause of such  deterioration,  impairment,  decline  or  depreciation  shall
include, but is not limited to, the failure by the Borrower to do any act deemed
necessary by the Bank to preserve and maintain the value and  collectability  of
the Collateral.

12.      REMEDIES.
         --------

         Upon the  occurrence  of an Event of  Default,  the Bank shall have all
rights,  powers and  remedies  set forth in the Loan  Documents,  in any written
agreement  or  instrument  (other  than this  Agreement  or the Loan  Documents)
relating to any of the  Obligations  or any security  therefor,  or as otherwise
provided at law or in equity.  Without limiting the generality of the foregoing,
the Bank may, at its option upon the occurrence of an Event of Default,  declare
its  commitments  to the Borrower to be  terminated  and all  Obligations  to be
immediately due and payable,  provided,  however, that upon the occurrence of an
Event of Default  under either  Section 11.6,  "Assignment  for  Creditors",  or
Section 11.7,  "Bankruptcy",  all  commitments of the Bank to the Borrower shall
immediately  terminate  and  all  Obligations  shall  be  automatically  due and
payable,  all without  demand,  notice or further action of any kind required on
the part of the

                                       34
<PAGE>

Bank.  The Borrower  hereby waives any and all  presentment,  demand,  notice of
dishonor,  protest,  and all other  notices and demands in  connection  with the
enforcement of Bank's rights under the Loan  Documents,  and hereby consents to,
and waives notice of release, with or without consideration,  of any Collateral,
notwithstanding  anything  contained  herein  or in the  Loan  Documents  to the
contrary. In addition to the foregoing:

         12.1  Possession  and  Assembly of  Collateral.  The Bank may,  without
notice,  demand or legal process of any kind,  take  possession of any or all of
the  Collateral  (in  addition  to  Collateral  of which  the Bank  already  has
possession),  wherever it may be found, and for that purpose may pursue the same
wherever  it may be found,  and may enter  into any of the  Borrower's  premises
where any of the  Collateral  may be or is supposed to be, and search for,  take
possession of, remove, keep and store any of the Collateral until the same shall
be sold or otherwise  disposed of and the Bank shall have the right to store the
same in any of the Borrower's  premises  without cost to the Bank. At the Bank's
request,  the  Borrower  will,  at the  Borrower's  sole  expense,  assemble the
Collateral  and  make  it  available  to the  Bank at a place  or  places  to be
designated  by the  Bank  which  is  reasonably  convenient  to the Bank and the
Borrower.

         12.2 Sale of Collateral. The Bank may sell any or all of the Collateral
at public or private sale,  upon such terms and  conditions as the Bank may deem
proper, and the Bank may purchase any or all of the Collateral at any such sale.
The Bank may  apply the net  proceeds,  after  deducting  all  costs,  expenses,
attorneys' and paralegals'  fees incurred or paid at any time in the collection,
protection and sale of the Collateral and the Obligations, to the payment of the
Note and/or any of the other Obligations, returning the excess proceeds, if any,
to the  Borrower.  The  Borrower  shall remain  liable for any amount  remaining
unpaid after such  application,  with  interest.  Any  notification  of intended
disposition  of the  Collateral  required  by law shall be  conclusively  deemed
reasonably  and  properly  given if given by the Bank at least five (5) calendar
days before the date of such disposition. The Borrower hereby confirms, approves
and ratifies all acts and deeds of the Bank relating to the foregoing,  and each
part thereof.

         12.3 Standards for Exercising  Remedies.  To the extent that applicable
law imposes duties on the Bank to exercise remedies in a commercially reasonable
manner,  the  Borrower  acknowledges  and  agrees  that  it is not  commercially
unreasonable  for the  Bank  (a) to fail to  incur  expenses  reasonably  deemed
significant by the Bank to prepare  Collateral  for  disposition or otherwise to
complete raw material or  work-in-process  into finished goods or other finished
products for disposition.  (b) to fail to obtain third party consents for access
to  Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain  governmental  or third party  consents for the  collection or
disposition  of  Collateral  to be  collected  or  disposed  of,  (c) to fail to
exercise  collection remedies against Account Debtors or other Persons obligated
on  Collateral  or to remove  liens or  encumbrances  on or any  adverse  claims
against Collateral,  (d) to exercise collection remedies against Account Debtors
and other  Persons  obligated  on  Collateral  directly  or  through  the use of
collection  agencies  and  other  collection   specialists,   (e)  to  advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized  nature,  (f) to contact other
Persons, whether or not in the same business as the Borrower, for expressions of
interest in acquiring all or any portion of the  Collateral,  (g) to hire one or
more  professional  auctioneers  to assist  in the  disposition  of  Collateral,
whether or not the  collateral  is of a  specialized  nature,  (h) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the  Collateral

                                       35
<PAGE>

or that have the  reasonable  capability  of doing so, or that match  buyers and
sellers of assets,  (i) to dispose of assets in  wholesale  rather  than  retail
markets, (j) to disclaim disposition warranties,  including, without limitation,
any warranties of title,  (k) to purchase  insurance or credit  enhancements  to
insure the Bank against risks of loss,  collection or  disposition of Collateral
or to provide to the Bank a guaranteed return from the collection or disposition
of  Collateral,  or (1) to the extent deemed  appropriate by the Bank, to obtain
the  services  of other  brokers,  investment  bankers,  consultants  and  other
professionals  to assist the Bank in the collection or disposition of any of the
Collateral.  The  Borrower  acknowledges  that the purpose of this Section is to
provide  non-exhaustive  indications  of what  actions or  omissions by the Bank
would not be  commercially  unreasonable  in the  Bank's  exercise  of  remedies
against the Collateral and that other actions or omissions by the Bank shall not
be deemed commercially  unreasonable solely on account of not being indicated in
this Section.  Without limitation upon the foregoing,  nothing contained in this
Section  shall be construed to grant any rights to the Borrower or to impose any
duties on the Bank that would not have been granted or imposed by this Agreement
or by applicable law in the absence of this Section.

         12.4 UCC and Offset Rights.  The Bank may exercise,  from time to time,
any and all rights and remedies available to it under the UCC or under any other
applicable  law in  addition  to, and not in lieu of,  any  rights and  remedies
expressly  granted in this  Agreement  or in any other  agreements  between  any
Obligor and the Bank, and may, without demand or notice of any kind, appropriate
and apply  toward the  payment of such of the  Obligations,  whether  matured or
unmatured,  including costs of collection and attorneys' and  paralegals'  fees,
and in such order of application as the Bank may, from time to time,  elect, any
indebtedness of the Bank to any Obligor, however created or arising,  including,
but not  limited to,  balances,  credits,  deposits,  accounts or moneys of such
Obligor in the possession, control or custody of, or in transit to the Bank. The
Borrower, on behalf of itself and each Obligor, hereby waives the benefit of any
law that  would  otherwise  restrict  or limit the Bank in the  exercise  of its
right,  which is hereby  acknowledged,  to appropriate at any time hereafter any
such indebtedness owing from the Bank to any Obligor.

         12.5 Additional Remedies. The Bank shall have the right and power to:

                  (a) instruct the Borrower,  at its own expense,  to notify any
         parties obligated on any of the Collateral,  including, but not limited
         to, any Account  Debtors,  to make payment  directly to the Bank of any
         amounts  due or to  become  due  thereunder,  or the Bank may  directly
         notify such  obligors of the security  interest of the Bank,  and/or of
         the  assignment to the Bank of the  Collateral and direct such obligors
         to make  payment to the Bank of any  amounts  due or to become due with
         respect  thereto,  and thereafter,  collect any such amounts due on the
         Collateral directly from such Persons obligated thereon;

                  (b) enforce  collection of any of the  Collateral,  including,
         but not limited to, any  Accounts,  by suit or  otherwise,  or make any
         compromise  or  settlement  with respect to any of the  Collateral,  or
         surrender,  release or exchange all or any part thereof, or compromise,
         extend or renew for any period (whether or not longer than the original
         period) any indebtedness thereunder;

                                       36
<PAGE>

                  (c) take possession or control of any proceeds and products of
         any of the Collateral, including the proceeds of insurance thereon;

                  (d) extend,  renew or modify for one or more periods  (whether
         or not longer  than the  original  period)  the Note,  any other of the
         Obligations,  any  obligation  of any nature of any other  obligor with
         respect to the Note or any of the Obligations;

                  (e) grant releases, compromises or indulgences with respect to
         the Note,  any of the  Obligations,  any extension or renewal of any of
         the Obligations,  any security  therefor,  or to any other obligor with
         respect to the Note or any of the Obligations;

                  (f)  transfer  the whole or any part of  securities  which may
         constitute  Collateral  into the name of the Bank or the Bank's nominee
         without  disclosing,  if the Bank so desires,  that such  securities so
         transferred  are subject to the security  interest of the Bank, and any
         corporation,  association,  or any of the  managers  or trustees of any
         trust issuing any of said securities,  or any transfer agent, shall not
         be bound to inquire,  in the event that the Bank or said nominee  makes
         any further transfer of said securities,  or any portion thereof, as to
         whether  the Bank or such  nominee  has the right to make such  further
         transfer, and shall not be liable for transferring the same;

                  (g) vote the Collateral;

                  (h) make an  election  with  respect to the  Collateral  under
         Section 1111 of the Bankruptcy Code or take action under Section 364 or
         any other section of the Bankruptcy Code; provided,  however,  that any
         such  action of the Bank as set forth  herein  shall not, in any manner
         whatsoever,  impair or affect the liability of the Borrower  hereunder,
         nor prejudice,  waive, nor be construed to impair, affect, prejudice or
         waive the Bank's  rights and  remedies at law, in equity or by statute,
         nor release,  discharge,  nor be construed to release or discharge, the
         Borrower,  any  guarantor  or other  Person  liable to the Bank for the
         Obligations; and

                  (i) at any time, and from time to time,  accept  additions to,
         releases,  reductions,  exchanges or  substitution  of the  Collateral,
         without in any way altering,  impairing,  diminishing  or affecting the
         provisions of this Agreement,  the Loan Documents,  or any of the other
         Obligations,  or the Bank's rights  hereunder,  under the Note or under
         any of the other Obligations.

         The Borrower hereby ratifies and confirms whatever the Bank may do with
respect to the  Collateral  and agrees that the Bank shall not be liable for any
error of judgment or  mistakes of fact or law with  respect to actions  taken in
connection with the Collateral.

         12.6   Attorney-in-Fact.   The  Borrower  hereby   irrevocably   makes,
constitutes  and  appoints  the Bank (and any  officer of the Bank or any Person
designated by the Bank for that purpose) as the Borrower's true and lawful proxy
and  attorney-in-fact  (and  agent-in-fact)  in the Borrower's  name,  place and
stead,  with  full  power of  substitution,  to (i)  take  such  actions  as are
permitted in this  Agreement,  (ii) execute such financing  statements and other
documents  and to do such  other acts as the Bank may  require  to  perfect  and
preserve the Bank's  security  interest in, and to enforce such interests in the
Collateral,  and (iii)  carry out any  remedy  provided  for in this

                                       37
<PAGE>

Agreement,  including,  without  limitation,  endorsing the  Borrower's  name to
checks,  drafts,  instruments  and other items of payment,  and  proceeds of the
Collateral,  executing change of address forms with the postmaster of the United
States Post Office serving the address of the Borrower,  changing the address of
the  Borrower  to that of the  Bank,  opening  all  envelopes  addressed  to the
Borrower and applying any payments  contained  therein to the  Obligations.  The
Borrower hereby acknowledges that the constitution and appointment of such proxy
and  attorney-in-fact  are coupled  with an interest  and are  irrevocable.  The
Borrower hereby ratifies and confirms all that said  attorney-in-fact  may do or
cause to be done by virtue of any provision of this Agreement.

         12.7 No  Marshaling.  The Bank shall not be  required  to  marshal  any
present  or  future  collateral  security  (including  but not  limited  to this
Agreement  and the  Collateral)  for,  or other  assurances  of payment  of, the
Obligations  or any of them or to resort to such  collateral  security  or other
assurances of payment in any  particular  order.  To the extent that it lawfully
may, the Borrower  hereby agrees that it will not invoke any law relating to the
marshaling of collateral which might cause delay in or impede the enforcement of
the Bank's rights under this Agreement or under any other instrument creating or
evidencing  any of the  Obligations  or under  which any of the  Obligations  is
outstanding or by which any of the  Obligations is secured or payment thereof is
otherwise assured,  and, to the extent that it lawfully may, the Borrower hereby
irrevocably waives the benefits of all such laws.

         12.8  Application of Proceeds.  The Bank will within three (3) business
days after  receipt  of cash or  solvent  credits  from  collection  of items of
payment, proceeds of Collateral or any other source, apply the whole or any part
thereof against the Obligations  secured hereby. The Bank shall further have the
exclusive right to determine how, when and what application of such payments and
such credits shall be made on the Obligations,  and such determination  shall be
conclusive upon the Borrower. Any proceeds of any disposition by the Bank of all
or any part of the Collateral may be first applied by the Bank to the payment of
expenses  incurred  by the Bank in  connection  with the  Collateral,  including
attorneys' fees and legal expenses as provided for in SECTION 13 hereof.

         12.9 No Waiver.  No Event of Default shall be waived by the Bank except
in writing. No failure or delay on the part of the Bank in exercising any right,
power or remedy  hereunder shall operate as a waiver of the exercise of the same
or any other right at any other time;  nor shall any single or partial  exercise
of any such  right,  power or  remedy  preclude  any other or  further  exercise
thereof or the exercise of any other  right,  power or remedy  hereunder.  There
shall be no obligation on the part of the Bank to exercise any remedy  available
to the Bank in any order.  The remedies  provided for herein are  cumulative and
not exclusive of any remedies provided at law or in equity.  The Borrower agrees
that in the event that the Borrower  fails to perform,  observe or discharge any
of its Obligations or liabilities  under this Agreement or any other  agreements
with the Bank, no remedy of law will provide  adequate  relief to the Bank,  and
further  agrees  that the Bank shall be  entitled  to  temporary  and  permanent
injunctive  relief in any such case  without  the  necessity  of proving  actual
damages.

                                       38
<PAGE>

13.      MISCELLANEOUS.
         -------------

         13.1  Obligations  Absolute.  None of the  following  shall  affect the
Obligations  of the  Borrower  to the Bank  under this  Agreement  or the Bank's
rights with respect to the Collateral:

                  (a)  acceptance or retention by the Bank of other  property or
         any interest in property as security for the Obligations;

                  (b)  release by the Bank of all or any part of the  Collateral
         or of any party liable with respect to the Obligations;

                  (c) release, extension,  renewal, modification or substitution
         by the Bank of the Note, or any note evidencing any of the Obligations,
         or the compromise of the liability of the Obligations; or

                  (d) failure of the Bank to resort to any other  security or to
         pursue  the  Borrower  or  any  other  obligor  liable  for  any of the
         Obligations before resorting to remedies against the Collateral.

         13.2  Entire  Agreement.  This  Agreement  (i) is  valid,  binding  and
enforceable  against the Borrower and the Bank in accordance with its provisions
and no conditions  exist as to its legal  effectiveness;  (ii)  constitutes  the
entire agreement  between the parties;  and (iii) is the final expression of the
intentions  of the  Borrower  and the Bank.  No  promises,  either  expressed or
implied,  exist between the Borrower and the Bank, unless contained herein. This
Agreement supersedes all negotiations, representations, warranties, commitments,
offers,  contracts (of any kind or nature,  whether oral or written) prior to or
contemporaneous with the execution hereof.

         13.3  Amendments;  Waivers.  No amendment,  modification,  termination,
discharge or waiver of any provision of this Agreement or of the Loan Documents,
or consent to any  departure  by the Borrower  therefrom,  shall in any event be
effective  unless the same shall be in writing and signed by the Bank,  and then
such waiver or consent  shall be  effective  only for the  specific  purpose for
which given.

         13.4  WAIVER OF  DEFENSES.  THE  BORROWER,  ON BEHALF OF ITSELF AND ANY
GUARANTORS OF ANY OF THE  OBLIGATIONS,  WAIVES EVERY PRESENT AND FUTURE DEFENSE,
CAUSE OF  ACTION,  COUNTERCLAIM  OR SETOFF  WHICH THE  BORROWER  MAY NOW HAVE OR
HEREAFTER MAY HAVE TO ANY ACTION BY THE BANK IN ENFORCING  THIS  AGREEMENT.  THE
BORROWER  WAIVES ANY IMPLIED  COVENANT OF GOOD FAITH AND  RATIFIES  AND CONFIRMS
WHATEVER THE BANK MAY DO PURSUANT TO THE TERMS OF THIS AGREEMENT. THIS PROVISION
IS A MATERIAL  INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL  ACCOMMODATION  TO
THE BORROWER.

         13.5 WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER,  AFTER CONSULTING
OR  HAVING  HAD  THE  OPPORTUNITY  TO  CONSULT  WITH  COUNSEL,  EACH  KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH
RESPECT TO ANY LEGAL  PROCEEDING  BASED  HEREON,  OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS

                                       39
<PAGE>

AGREEMENT,  THE NOTE OR ANY OF THE OTHER  OBLIGATIONS,  THE  COLLATERAL,  OR ANY
OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS
AGREEMENT,  OR ANY  COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BANK AND
THE BORROWER ARE ADVERSE  PARTIES.  THIS PROVISION IS A MATERIAL  INDUCEMENT FOR
THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWER.

         13.6  LITIGATION.  TO INDUCE THE BANK TO MAKE THE LOANS,  THE  BORROWER
IRREVOCABLY AGREES THAT ALL ACTIONS ARISING, DIRECTLY OR INDIRECTLY, AS A RESULT
OR CONSEQUENCE OF THIS AGREEMENT, THE NOTE[S], ANY OTHER AGREEMENT WITH THE BANK
OR THE COLLATERAL, SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING THEIR
SITUS IN THE CITY OF CHICAGO,  ILLINOIS.  THE  BORROWER  HEREBY  CONSENTS TO THE
EXCLUSIVE  JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT HAVING ITS SITUS
IN SAID CITY,  AND  WAIVES  ANY  OBJECTION  BASED ON FORUM NON  CONVENIENS.  THE
BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND CONSENTS THAT
ALL SUCH  SERVICE OF  PROCESS  MAY BE MADE BY  CERTIFIED  MAIL,  RETURN  RECEIPT
REQUESTED,  DIRECTED TO THE BORROWER AS SET FORTH HEREIN IN THE MANNER  PROVIDED
BY APPLICABLE STATUTE, LAW, RULE OF COURT OR OTHERWISE.

         13.7  Assignability.  The Bank may at any time assign the Bank's rights
in this Agreement,  the Note, the Obligations,  or any part thereof and transfer
the Bank's rights in any or all of the Collateral, and the Bank thereafter shall
be relieved from all liability with respect to such Collateral. In addition, the
Bank may at any time sell one or more  participations in the Loans. The Borrower
may not sell or assign this  Agreement,  or any other agreement with the Bank or
any portion  thereof,  either  voluntarily  or by operation of law,  without the
prior written consent of the Bank. This Agreement shall be binding upon the Bank
and the Borrower and their respective legal representatives and successors.  All
references  herein to the  Borrower  shall be deemed to include any  successors,
whether immediate or remote. In the case of a joint venture or partnership,  the
term  "Borrower"  shall be deemed to include  all joint  venturers  or  partners
thereof, who shall be jointly and severally liable hereunder.

         13.8  Confidentiality.  The  Borrower  and the Bank  hereby  agree  and
acknowledge  that any and all information  relating to the Borrower which is (i)
furnished  by the Borrower to the Bank (or to any  affiliate  of the Bank),  and
(ii)  non-public,   confidential  or  proprietary  in  nature,   shall  be  kept
confidential  by the Bank or such affiliate in accordance  with  applicable law,
provided,  however,  that such information and other credit information relating
to the Borrower may be  distributed  by the Bank or such affiliate to the Bank's
or such  affiliate's  directors,  officers.  employees,  attorneys,  affiliates,
auditors  and  regulators,  and upon the order of a court or other  governmental
agency having jurisdiction over the Bank or such affiliate,  to any other party.
The Borrower and the Bank further  agree that this  provision  shall survive the
termination of this Agreement.

         13.9  Binding  Effect.  This  Agreement  shall  become  effective  upon
execution  by the  Borrower  and the  Bank.  If this  Agreement  is not dated or
contains  any  blanks  when  executed  by  the  Borrower,  the  Bank  is  hereby
authorized,  without  notice to the Borrower,  to date this

                                       40
<PAGE>

Agreement as of the date when it was executed by the  Borrower,  and to complete
any such blanks according to the terms upon which this Agreement is executed.

         13.10 Governing Law. This Agreement, the Loan Documents and the Note[S]
shall be  delivered  and  accepted in and shall be deemed to be  contracts  made
under and  governed by the  internal  laws of the State of Illinois  (but giving
effect to federal laws applicable to national banks), and for all purposes shall
be construed in accordance with the laws of such State, without giving effect to
the choice of law provisions of such State.

         13.11  Enforceability.   Wherever  possible,  each  provision  of  this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable  law, but if any provision of this Agreement  shall be prohibited by,
unenforceable or invalid under any jurisdiction, such provision shall as to such
jurisdiction,  be severable and be ineffective to the extent of such prohibition
or invalidity,  without  invalidating the remaining provisions of this Agreement
or  affecting  the  validity or  enforceability  of such  provision in any other
jurisdiction.

         13.12 Survival of Borrower Representations.  All covenants, agreements,
representations   and   warranties   made   by  the   Borrower   herein   shall,
notwithstanding  any  investigation  by the Bank, be deemed  material and relied
upon by the Bank and shall  survive the making and  execution of this  Agreement
and the Loan  Documents and the issuance of the Note[S],  and shall be deemed to
be continuing representations and warranties until such time as the Borrower has
fulfilled  all of its  Obligations  to the  Bank,  and the Bank has been paid in
full.  The Bank,  in extending  financial  accommodations  to the  Borrower,  is
expressly acting and relying on the aforesaid representations and warranties.

         13.13  Extensions of Bank's  Commitment and Note.  This Agreement shall
secure  and  govern  the  terms of any  extensions  or  renewals  of the  Bank's
commitment hereunder and the Note pursuant to the execution of any modification,
extension or renewal  note  executed by the Borrower and accepted by the Bank in
its sole and absolute discretion in substitution for the Note.

         13.14 Time of Essence. Time is of the essence in making payments of all
amounts due the Bank under this Agreement and in the  performance and observance
by the  Borrower  of  each  covenant,  agreement,  provision  and  term  of this
Agreement.

         13.15  Counterparts.  This  Agreement  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 to be an original and all
of which taken together shall constitute one and the same instrument.

         13.16 Facsimile Signatures.  The Bank is hereby authorized to rely upon
and accept as an original  any Loan  Documents or other  communication  which is
sent to the Bank by  facsimile,  telegraphic  or other  electronic  transmission
(each, a "Communication")  which the Bank in good faith believes has been signed
by  Borrower  and  has  been  delivered  to the  Bank by a  properly  authorized
representative  of the  Borrower,  whether  or not  that  is in fact  the  case.
Notwithstanding  the  foregoing,  the Bank shall not be  obligated to accept any
such

                                       41
<PAGE>

Communication  as an original and may in any  instance  require that an original
document  be  submitted  to the Bank in lieu of,  or in  addition  to,  any such
Communication.

         13.17 Notices. Except as otherwise provided herein, the Borrower waives
all notices and demands in connection  with the enforcement of the Bank's rights
hereunder. All notices,  requests, demands and other communications provided for
hereunder  shall be in writing,  sent by certified or registered  mail,  postage
prepaid,  by  facsimile,  telegram or  delivered  in person,  and  addressed  as
follows:

                  If to the Borrower:          Arlington Hospitality, Inc.
                                               2355 South Arlington Heights Road
                                               Arlington Heights, Illinois 60005
                                               Attention: Legal Department

                  If to the Bank:              LaSalle Bank National Association
                                               2355 South Arlington Heights Road
                                               Arlington Heights, Illinois 60005
                                               Attention: Alan L. Clark
                                                          First Vice President

or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party  complying as to delivery with the terms
of this  subsection.  No notice to or demand on the  Borrower  in any case shall
entitle  the  Borrower  to any other or  further  notice or demand in similar or
other circumstances.

         13.18  Indemnification.  The Borrower  agrees to defend  (with  counsel
satisfactory to the Bank), protect, indemnify and hold harmless each Indemnified
Party from and against any and all liabilities,  obligations,  losses,  damages,
penalties,  actions, judgments, suits, claims, costs, expenses and distributions
of any kind or nature (including,  without limitation, the disbursements and the
reasonable fees of counsel for each Indemnified Party thereto,  which shall also
include,  without limitation,  attorneys' fees and time charges of attorneys who
may be employees of the Bank, any parent  corporation or affiliated  corporation
of the Bank),  which may be imposed on,  incurred by, or asserted  against,  any
Indemnified  Party (whether direct,  indirect or consequential and whether based
on  any  federal,  state  or  local  laws  or  regulations,  including,  without
limitation, securities,  Environmental Laws and commercial laws and regulations,
under common law or in equity,  or based on contract or otherwise) in any manner
relating to or arising out of this  Agreement or any of the Loan  Documents,  or
any act, event or transaction  related or attendant  thereto,  the  preparation,
execution and delivery of this Agreement and the Loan Documents,  including, but
not limited to, the making or issuance and  management of the Loans,  the use or
intended use of the proceeds of the Loans,  the enforcement of the Bank's rights
and remedies under this Agreement,  the Loan Documents,  the Note[S],  any other
instruments  and documents  delivered  hereunder,  or under any other  agreement
between the Borrower and the Bank;  provided,  however,  that the Borrower shall
not have any  obligations  hereunder  to any  Indemnified  Party with respect to
matters caused by or resulting from the willful  misconduct or gross  negligence
of such  Indemnified  Party. To the extent that the undertaking to indemnify set
forth in the preceding sentence may be unenforceable because it violates any law
or public  policy,  the Borrower  shall satisfy such  undertaking to the maximum
extent  permitted by

                                       42
<PAGE>

applicable  law. Any  liability,  obligation,  loss,  damage,  penalty,  cost or
expense  covered by this indemnity  shall be paid to each  Indemnified  Party on
demand,  and, failing prompt payment,  shall,  together with interest thereon at
the Default Rate from the date incurred by each Indemnified  Party until paid by
the Borrower,  be added to the Obligations of the Borrower and be secured by the
Collateral.  The provisions of this SECTION 13.18 shall survive the satisfaction
and payment of the other Obligations and the termination of this Agreement.

         IN WITNESS  WHEREOF,  the Borrower and the Bank have executed this Loan
and Security Agreement as of the date first above written.

                                         ARLINGTON HOSPITALITY, INC., a Delaware
                                         corporation
ATTEST:

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

                                         Agreed and accepted:

                                         LASALLE BANK NATIONAL ASSOCIATION,
                                         a national banking association

                                         By:
                                         Name:
                                         Title:

                                       43
<PAGE>

                                    EXHIBIT A
                                    ---------

                                 REVOLVING NOTE
                                 --------------

                                                        Chicago, Illinois
$8,500,000.00                                           Dated:  February 1, 2002
                                                        Due:  January 31, 2003

                  FOR VALUE RECEIVED,  ARLINGTON  HOSPITALITY,  INC., a Delaware
corporation (together with its respective  successors and assigns,  individually
and collectively, the "Borrower"),  promises to pay to the order of LASALLE BANK
NATIONAL ASSOCIATION, a national banking association (the "Bank"), the principal
sum of EIGHT MILLION FIVE HUNDRED  THOUSAND AND 00/100 DOLLARS  ($8,500,000.00),
or, if less, the aggregate  unpaid  principal amount of all advances made by the
Bank to the Borrower hereunder, on January 31, 2003.

                  This Note  constitutes the Revolving Note issued pursuant to a
Loan and Security  Agreement dated as of February 1, 2002 (the "Loan Agreement")
by and between the Borrower and the Bank, to which Loan  Agreement  reference is
hereby  made for a  statement  of the  terms  and  conditions  under  which  the
Revolving Loans evidenced  hereby may be made and a description of the terms and
conditions  upon which this Note may be prepaid in whole or in part.  In case an
Event of Default,  as defined in the Loan  Agreement,  shall  occur,  the entire
unpaid principal and accrued  interest may be  automatically  due and payable or
may be declared due and payable as provided in the Loan Agreement.

                  The unpaid  principal shall bear interest from the date hereof
until  paid as set forth in the Loan  Agreement.  Interest  shall be  payable in
accordance with the terms of the Loan Agreement.

                  This Note is subject to optional and  mandatory  prepayment in
certain circumstances, all as set forth in the Loan Agreement.

                  In the event  that any  installment  of the  principal  of, or
interest  on, this Note,  is not paid when due (whether at stated  maturity,  by
acceleration or otherwise),  the entire principal amount  outstanding shall bear
interest  at an annual  rate  equal to the Prime  Rate (as  defined  in the Loan
Agreement) plus five percent (5%) per annum, from the due date until all overdue
amounts have been paid in full.

                  Payments  of both  principal  and  interest  are to be made in
lawful  money of the United  States of America at the offices of the Bank at 135
South LaSalle  Street,  Chicago,  Illinois  60603, or at such other place as the
holder shall designate in writing to the maker.

                  This Note is secured by a security  interest in Collateral (as
defined in the Loan Agreement) and by those certain Mortgages (as defined in the
Loan  Agreement)  dated of even date  herewith,  each made by a  Subsidiary  (as
defined in the Loan Agreement) for the benefit of the Bank.

<PAGE>

                  The maker and all endorsers hereby severally waive presentment
for payment,  protest and demand, notice of protest,  demand and of dishonor and
nonpayment of this Note.  Borrower  hereby agrees to pay all reasonable fees and
expenses incurred by the Bank or any subsequent holder, including the reasonable
fees of counsel,  in connection with protection and enforcement of the rights of
the Bank or any subsequent holder under this Note,  including without limitation
the  collection  of any  amounts  due  under  this Note and the  protection  and
enforcement  of such  rights in any  bankruptcy,  reorganization  or  insolvency
proceeding involving the Borrower.

                  This Note is binding  upon  Borrower  and its  successors  and
assigns  and  shall  inure to the  benefit  of the Bank and its  successors  and
assigns.  This  Note is made  under  and  governed  by the laws of the  State of
Illinois, without regard to conflicts of laws principles.

                  IN WITNESS WHEREOF,  Borrower has executed this Note as of the
day and year first above written.

                                                   ARLINGTON HOSPITALITY, INC.
                                                   a Delaware corporation

                                                   By:
                                                   Its:

<PAGE>

                 FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

         THIS FIRST AMENDMENT TO LOAN AND SECURITY  AGREEMENT (this "Amendment")
is made and entered into  effective  as of this ____ day of August,  2002 by and
between  LASALLE  BANK  NATIONAL  ASSOCIATION,  a national  banking  association
("Bank") and ARLINGTON HOSPITALITY, INC., a Delaware corporation ("Borrower").

                                    RECITALS
                                    --------

         A. Bank and  Borrower  are parties to that  certain  Loan and  Security
Agreement  dated as of February  1, 2002,  as amended,  modified,  restated  and
supplemented from time to time,  including by the amendment agreements described
below (hereinafter collectively referred to herein as the "Loan Agreement").

         B.  Borrower  and Bank have agreed to modify the Total  Liabilities  to
Worth covenant set forth in Article 10 of the Loan Agreement.

         C.  Borrower  has also  requested  that  Bank  waive  Borrower's  prior
non-compliance with certain covenant requirements as more specifically described
in Section 4 below.

         D. Borrower and Bank are agreeable to such amendments and waiver on the
terms set forth herein.

         NOW THEREFORE, in consideration of the premises set forth above and the
mutual  covenants and promises  contained in this Amendment,  and for other good
and  valuable  consideration,  the  receipt and  sufficiency  of which is hereby
acknowledged, Borrower and Bank hereby agree as follows:

SECTION 1.        AMENDMENT TO LOAN AGREEMENT
                  ---------------------------
         Effective as of the date hereof and subject to the conditions set forth
herein, Bank and Borrower agree to amend the Loan Agreement as follows:

         1.1.  FINANCIAL  COVENANTS.  Article 10 of the Loan Agreement is hereby
amended by deleting  Section 10.2 in its entirety and  inserting in lieu thereof
the following:

                  10.2 TOTAL  LIABILITIES TO WORTH. As of the end of each of its
                  fiscal  quarters,  the  Borrower  and its  Subsidiaries  shall
                  maintain a Total  Liabilities  to Worth  Ratio of not  greater
                  than the following:

                  Fiscal Quarter Ended                Total Liabilities to Worth
                  --------------------                --------------------------

                  September 30, 2002                          3.50 to 1.0

                  December 31, 2002                           3.20 to 1.0

<PAGE>

                  In the event that an  extension  of the  Maturity  Date by the
                  Bank beyond the first  anniversary  of the Closing  Date,  the
                  maximum  ratio  of Total  Liabilities  to Net  Worth  for each
                  fiscal quarter thereafter shall be 3.0 to 1.0.

SECTION 2.        REPRESENTATIONS AND WARRANTIES
                  ------------------------------

         To  induce  Bank to amend the Loan  Agreement  and to  consider  making
future  loans  thereunder  and  to  provide  the  requested  waivers,   Borrower
represents and warrants to Bank that:

         2.1 COMPLIANCE WITH LOAN AGREEMENT.  On the date hereof, Borrower is in
compliance with all of the terms and provisions set forth in the Loan Agreement,
as amended hereby, and no Default or Event of Default has occurred which has not
been waived.

         2.2   REPRESENTATIONS   AND  WARRANTIES.   On  the  date  hereof,   the
representations  and  warranties  set forth in the Loan  Agreement  are true and
correct with the same effect as though such  representations  and warranties had
been made on the date hereof, except to the extent that such representations and
warranties expressly relate to an earlier date.

         2.3  AUTHORITY  OF BORROWER.  Borrower has full power and  authority to
enter into this  Amendment,  to make the borrowings  under the Loan Agreement as
amended by this Amendment, and to incur and perform the obligations provided for
under the Loan Agreement and this Amendment.  No consent of any public authority
or  regulatory  body or any other person or entity is required as a condition to
the validity or enforceability of this Amendment.

         2.4 AMENDMENT AS BINDING  AGREEMENT.  This  Amendment  constitutes  the
valid and legally  binding  obligation of Borrower,  fully  enforceable  against
Borrower, in accordance with its terms.

         2.5  NO  CONFLICTING  AGREEMENTS.  The  execution  and  performance  by
Borrower  of this  Amendment  and the  borrowings  by  Borrower  under  the Loan
Agreement  will not (i) violate any  provision of law, any order of any court or
other agency of government, or (ii) violate any indenture,  contract,  agreement
or other  instrument to which  Borrower is a party,  or by which its property is
bound,  or be in conflict  with,  result in a breach of or constitute  (with due
notice  and/or lapse of time) a default  under,  any such  indenture,  contract,
agreement or other  instrument  or result in the creation or  imposition  of any
lien, charge or encumbrance of any nature whatsoever upon any of the property or
assets of Borrower.

SECTION 3.        CONDITIONS PRECEDENT
                  --------------------

         The agreement by Bank to amend the Loan Agreement pursuant to the terms
of this  Amendment is subject to the condition  that Borrower shall have paid to
Bank a waiver fee in the amount of Ten Thousand and 00/100 Dollars ($10,000.00).

SECTION 4.        WAIVER AND FOREBEARANCE.
                  -----------------------

         4.1 Bank hereby waives Borrower's  failure as of June 30, 2002 to be in
compliance with its covenant regarding maximum ratio of Total Liabilities to Net
Worth as  previously  set forth in Section  10.2 of the Loan  Agreement  and any
Event of Default created thereby solely as

<PAGE>

of such date.  This shall be a limited  waiver and shall not constitute a waiver
of any subsequent covenant violations whether of a different or like nature, nor
shall it  constitute  a course of conduct or  dealing.  Additionally,  except as
expressly  provided herein,  this Amendment shall not constitute a waiver of any
other defaults of Borrower,  and Bank expressly  reserves and retains all of its
rights and remedies under the Loan Agreement.

SECTION 5.        GENERAL PROVISIONS
                  ------------------

         5.1 Except as amended by this  Amendment,  the terms and  provisions of
the Loan Agreement shall remain unchanged and are in all other respects ratified
and confirmed and remain in full force and effect.

         5.2 Borrower hereby agrees to pay all  out-of-pocket  expenses incurred
by Bank in connection with the preparation, negotiation and consummation of this
Amendment,  and  all  other  documents  related  thereto  (whether  or  not  any
borrowings under the Loan Agreement as amended shall be consummated), including,
without limitation, the fees and expenses of Bank's counsel, and any filing fees
and  recordation  tax required in  connection  with the filing of any  documents
necessary to consummate the provisions of this Amendment.

         5.3 This Amendment  shall be construed in accordance  with and governed
by the laws of the State of Illinois, and the obligations of Borrower under this
Amendment are arising and shall arise  absolutely and  unconditionally  upon the
execution and delivery of this Amendment.

         5.4 This Amendment may be executed in any number of counterparts and by
the different  parties  hereto in separate  counterparts,  each of which when so
executed and delivered  shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.

         5.5 On or after the effective  date hereof,  each reference in the Loan
Agreement to this "Agreement",  "hereof", or words of like import, shall, unless
the context  otherwise  requires,  be deemed to refer to the Loan  Agreement  as
amended hereby.

         5.6 The recitals to this  Amendment  are  incorporated  herein in their
entirety by this reference  thereto and deemed to be a part hereof.  Capitalized
terms used herein,  unless  otherwise  defined  herein,  shall have the meanings
provided in the Loan Agreement.

<PAGE>

         IN WITNESS  WHEREOF,  Borrower  has caused  this  Amendment  to be duly
executed by its duly  authorized  officers and Bank has caused this Amendment to
be executed  by its duly  authorized  officer,  all as of the day and year first
above written.

                               BORROWER:    ARLINGTON HOSPITALITY, INC.
                                            By:
                                            Title:
                                            ATTEST:

                               BANK:        LASALLE BANK NATIONAL ASSOCIATION
                                            By:

                                            Title:

<PAGE>

                 SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

         THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment")
is made and entered into effective as of this 10th day of December,  2002 by and
between  LASALLE  BANK  NATIONAL  ASSOCIATION,  a national  banking  association
("Bank") and ARLINGTON HOSPITALITY, INC., a Delaware corporation ("Borrower").

                                    RECITALS
                                    --------

         A. Bank and  Borrower  are parties to that  certain  Loan and  Security
Agreement  dated as of  February  1,  2002  (the  "Original  Agreement"),  which
Original  Agreement  was amended by that  certain  First  Amendment  to Loan and
Security  Agreement  dated as of August 9, 2002  (the  "First  Amendment")  (the
Original  Agreement,  as  amended  by the  First  Amendment,  as the same may be
amended, modified, restated and supplemented from time to time, including by the
amendments  described  below is  collectively  referred  to  herein as the "Loan
Agreement".

         B. Borrower and Bank do desire to further amend the Loan  Agreement for
the purpose of extending  the maturity of the  Revolving  Loan and  establishing
certain reserves.

         C. Borrower and Bank are agreeable to such  amendments on the terms set
forth herein.

         NOW THEREFORE, in consideration of the premises set forth above and the
mutual  covenants and promises  contained in this Amendment,  and for other good
and  valuable  consideration,  the  receipt and  sufficiency  of which is hereby
acknowledged, Borrower and Bank hereby agree as follows:

SECTION 1.        AMENDMENT TO LOAN AGREEMENT
                  ---------------------------

         Effective as of the date hereof and subject to the conditions set forth
herein, Bank and Borrower agree to amend the Loan Agreement as follows:

         1.1.  SECTION  1.1.  The  definition  of  "Maturity  Date" set forth in
Section  1.1 of the Loan  Agreement  shall be  deleted in its  entirety  and the
following definition inserted in substitution therefore:

                  "Maturity  Date" shall be April 30, 2003,  unless  extended by
         the Bank  pursuant  to any  modification,  extension  or  renewal  note
         executed by Borrower  and accepted by the Bank in its sole and absolute
         discretion in substitution for the Revolving Note.

         1.2 SECTION 2.1(A).  There shall be added to Section 2.1(a) of the Loan
Agreement the following new sentence:

         Notwithstanding  any other provision hereof to the contrary and without
         prejudice to the Bank's right to establish  additional  reserves,  upon
         written  notice  to  Borrower  stating  the  amount of the  reserve  so
         established, in connection with the sale by Borrower of other Mortgaged

<PAGE>

         Premises or  otherwise  from time to time  hereafter,  (i) Borrower has
         notified the Bank of the pending  sales of certain  Mortgaged  Premises
         located in Middleton,  Ohio and Vicksburg,  Mississippi,  (ii) Borrower
         and the  Bank  acknowledge  and  agree  that the  Bank  will  establish
         reserves in the amounts of $1,200,000  and $843,859,  respectively,  by
         reason of the decline(s) in Net Real Property Equity in connection with
         the  sales  of  such  Mortgaged   Premises  and  (iii)  Revolving  Loan
         Availability will be reduced by the amount of reserves from the date(s)
         of such sale(s)  through the Maturity Date unless  otherwise  agreed by
         the Bank, in its sole and absolute discretion.

SECTION 2.        REPRESENTATIONS AND WARRANTIES
                  ------------------------------

         To induce Bank to amend the Loan  Agreement,  Borrower  represents  and
warrants to Bank that:

         2.1 COMPLIANCE WITH LOAN AGREEMENT.  On the date hereof, Borrower is in
compliance with all of the terms and provisions set forth in the Loan Agreement,
as amended hereby, and no Default or Event of Default has occurred which has not
been waived.

         2.2   REPRESENTATIONS   AND  WARRANTIES.   On  the  date  hereof,   the
representations  and  warranties  set forth in the Loan  Agreement  are true and
correct with the same effect as though such  representations  and warranties had
been made on the date hereof, except to the extent that such representations and
warranties expressly relate to an earlier date.

         2.3  AUTHORITY  OF BORROWER.  Borrower has full power and  authority to
enter into this  Amendment,  to make the borrowings  under the Loan Agreement as
amended by this Amendment, and to incur and perform the obligations provided for
under the Loan Agreement and this Amendment.  No consent of any public authority
or  regulatory  body or any other person or entity is required as a condition to
the validity or enforceability of this Amendment.

         2.4 AMENDMENT AS BINDING  AGREEMENT.  This  Amendment  constitutes  the
valid and legally  binding  obligation of Borrower,  fully  enforceable  against
Borrower, in accordance with its terms.

         2.5  NO  CONFLICTING  AGREEMENTS.  The  execution  and  performance  by
Borrower  of this  Amendment  and the  borrowings  by  Borrower  under  the Loan
Agreement  will not (i) violate any  provision of law, any order of any court or
other agency of government, or (ii) violate any indenture,  contract,  agreement
or other  instrument to which  Borrower is a party,  or by which its property is
bound,  or be in conflict  with,  result in a breach of or constitute  (with due
notice  and/or lapse of time) a default  under,  any such  indenture,  contract,
agreement or other  instrument  or result in the creation or  imposition  of any
lien, charge or encumbrance of any nature whatsoever upon any of the property or
assets of Borrower.

SECTION 3.        EFFECTIVENESS
                  -------------

         This Amendment shall be effective as of the date hereof,  but only when
the Borrower shall have received each of the following:

         (a) An original of this Amendment which has been signed by Borrower and
the Bank;

<PAGE>

         (b) A duly executed Substitute Revolving Note in the form of Exhibit A;

         (c)  Certified  copies  of  resolutions  of the Board of  Directors  of
Borrower,  authorizing the execution, delivery and performance of this Amendment
and the Substitute Revolving Note;

         (d) A certificate of the Secretary of Borrower  certifying the names of
the officer(s) of Borrower  authorized to sign this Amendment and the Substitute
Revolving Note; and

         (e) The sum of Ten Thousand Dollars ($10,000.00) as Bank's fee for such
extension.

SECTION 4.        GENERAL PROVISIONS
                  ------------------

         4.1 Except as amended by this  Amendment,  the terms and  provisions of
the Loan Agreement shall remain unchanged and are in all other respects ratified
and confirmed and remain in full force and effect.

         4.2 Borrower hereby agrees to pay all  out-of-pocket  expenses incurred
by Bank in connection with the preparation, negotiation and consummation of this
Amendment,  and  all  other  documents  related  thereto  (whether  or  not  any
borrowings under the Loan Agreement as amended shall be consummated), including,
without limitation, the fees and expenses of Bank's counsel, and any filing fees
and  recordation  tax required in  connection  with the filing of any  documents
necessary to consummate the provisions of this Amendment.

         4.3 This Amendment  shall be construed in accordance  with and governed
by the laws of the State of Illinois, and the obligations of Borrower under this
Amendment are arising and shall arise  absolutely and  unconditionally  upon the
execution and delivery of this Amendment.

         4.4 This Amendment may be executed in any number of counterparts and by
the different  parties  hereto in separate  counterparts,  each of which when so
executed and delivered  shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.

         4.5 On or after the effective  date hereof,  each reference in the Loan
Agreement to this "Agreement",  "hereof", or words of like import, shall, unless
the context  otherwise  requires,  be deemed to refer to the Loan  Agreement  as
amended hereby.

         4.6 The recitals to this  Amendment  are  incorporated  herein in their
entirety by this reference  thereto and deemed to be a part hereof.  Capitalized
terms used herein,  unless  otherwise  defined  herein,  shall have the meanings
provided in the Loan Agreement.

<PAGE>

         IN WITNESS  WHEREOF,  Borrower  has caused  this  Amendment  to be duly
executed by its duly  authorized  officers and Bank has caused this Amendment to
be executed  by its duly  authorized  officer,  all as of the day and year first
above written.

                               BORROWER:      ARLINGTON HOSPITALITY, INC.
                                       By:
                                              Title:
                                              ATTEST:

                               BANK:          LASALLE BANK NATIONAL ASSOCIATION
                                       By:

                                              Title:

<PAGE>

                                    EXHIBIT A

                            SUBSTITUTE REVOLVING NOTE
                            -------------------------

                                                       Chicago, Illinois
$8,500,000.00                                          Dated:  December 10, 2002
                                                       Due:  April 30, 2003

                  FOR VALUE RECEIVED,  ARLINGTON  HOSPITALITY,  INC., a Delaware
corporation (together with its respective  successors and assigns,  individually
and collectively, the "Borrower"),  promises to pay to the order of LASALLE BANK
NATIONAL ASSOCIATION, a national banking association (the "Bank"), the principal
sum of EIGHT MILLION FIVE HUNDRED  THOUSAND AND 00/100 DOLLARS  ($8,500,000.00),
or, if less, the aggregate  unpaid  principal amount of all advances made by the
Bank to the Borrower hereunder, on April 30, 2003.

                  This  Substitute  Revolving  Note  constitutes  the Substitute
Revolving  Note  issued  pursuant  to a Second  Amendment  to Loan and  Security
Agreement  dated as of December  10, 2002,  which  amended that certain Loan and
Security  Agreement  dated as of February 1, 2002, as amended by a certain First
Amendment  to  Loan  and  Security   Agreement   dated  as  of  August  9,  2002
(collectively,  the "Loan Agreement"), by and between the Borrower and the Bank,
to which Loan  Agreement  reference  is hereby made for a statement of the terms
and conditions  under which the Revolving Loans evidenced hereby may be made and
a description of the terms and conditions upon which this Note may be prepaid in
whole or in part, but shall not  constitute  payment of the Revolving Note dated
as of February 1, 2002 or  constitute  a novation  thereof.  In case an Event of
Default,  as defined  in the Loan  Agreement,  shall  occur,  the entire  unpaid
principal and accrued  interest may be  automatically  due and payable or may be
declared due and payable as provided in the Loan Agreement.

                  The unpaid  principal shall bear interest from the date hereof
until  paid as set forth in the Loan  Agreement.  Interest  shall be  payable in
accordance with the terms of the Loan Agreement.

                  This  Substitute  Revolving  Note is subject to  optional  and
mandatory  prepayment  in  certain  circumstances,  all as set forth in the Loan
Agreement.

                  In the event  that any  installment  of the  principal  of, or
interest  on, this  Substitute  Revolving  Note is not paid when due (whether at
stated  maturity,  by acceleration or otherwise),  the entire  principal  amount
outstanding  shall bear  interest  at an annual rate equal to the Prime Rate (as
defined in the Loan  Agreement)  plus five percent (5%) per annum,  from the due
date until all overdue amounts have been paid in full.

                  Payments  of both  principal  and  interest  are to be made in
lawful  money of the United  States of America at the offices of the Bank at 135
South LaSalle  Street,  Chicago,  Illinois  60603, or at such other place as the
holder shall designate in writing to the maker.

<PAGE>

                  This Note is secured by a security  interest in Collateral (as
defined in the Loan Agreement) and by those certain Mortgages (as defined in the
Loan  Agreement)  dated of even date  herewith,  each made by a  Subsidiary  (as
defined in the Loan Agreement) for the benefit of the Bank.

                  The maker and all endorsers hereby severally waive presentment
for payment,  protest and demand, notice of protest,  demand and of dishonor and
nonpayment of this Note.  Borrower  hereby agrees to pay all reasonable fees and
expenses incurred by the Bank or any subsequent holder, including the reasonable
fees of counsel,  in connection with protection and enforcement of the rights of
the Bank or any subsequent holder under this Note,  including without limitation
the  collection  of any  amounts  due  under  this Note and the  protection  and
enforcement  of such  rights in any  bankruptcy,  reorganization  or  insolvency
proceeding involving the Borrower.

                  This  Substitute  Revolving  Note is binding upon Borrower and
its  successors  and  assigns and shall inure to the benefit of the Bank and its
successors  and  assigns.  This  Substitute  Revolving  Note is made  under  and
governed by the laws of the State of  Illinois,  without  regard to conflicts of
laws principles.

                  IN WITNESS WHEREOF,  Borrower has executed this Note as of the
day and year first above written.

                                                     ARLINGTON HOSPITALITY, INC.
                                                     a Delaware corporation

                                                     By:
                                                     Its:

<PAGE>

                            SUBSTITUTE REVOLVING NOTE

                                                       Chicago, Illinois
$8,500,000.00                                          Dated:  December 10, 2002
                                                       Due:  April 30, 2003

                  FOR VALUE RECEIVED,  ARLINGTON  HOSPITALITY,  INC., a Delaware
corporation (together with its respective  successors and assigns,  individually
and collectively, the "Borrower"),  promises to pay to the order of LASALLE BANK
NATIONAL ASSOCIATION, a national banking association (the "Bank"), the principal
sum of EIGHT MILLION FIVE HUNDRED  THOUSAND AND 00/100 DOLLARS  ($8,500,000.00),
or, if less, the aggregate  unpaid  principal amount of all advances made by the
Bank to the Borrower hereunder, on April 30, 2003.

                  This  Substitute  Revolving  Note  constitutes  the Substitute
Revolving  Note  issued  pursuant  to a Second  Amendment  to Loan and  Security
Agreement  dated as of December  10, 2002,  which  amended that certain Loan and
Security  Agreement  dated as of February 1, 2002, as amended by a certain First
Amendment  to  Loan  and  Security   Agreement   dated  as  of  August  9,  2002
(collectively,  the "Loan Agreement"), by and between the Borrower and the Bank,
to which Loan  Agreement  reference  is hereby made for a statement of the terms
and conditions  under which the Revolving Loans evidenced hereby may be made and
a description of the terms and conditions upon which this Note may be prepaid in
whole or in part, but shall not  constitute  payment of the Revolving Note dated
as of February 1, 2002 or  constitute  a novation  thereof.  In case an Event of
Default,  as defined  in the Loan  Agreement,  shall  occur,  the entire  unpaid
principal and accrued  interest may be  automatically  due and payable or may be
declared due and payable as provided in the Loan Agreement.

                  The unpaid  principal shall bear interest from the date hereof
until  paid as set forth in the Loan  Agreement.  Interest  shall be  payable in
accordance with the terms of the Loan Agreement.

                  This  Substitute  Revolving  Note is subject to  optional  and
mandatory  prepayment  in  certain  circumstances,  all as set forth in the Loan
Agreement.

                  In the event  that any  installment  of the  principal  of, or
interest  on, this  Substitute  Revolving  Note is not paid when due (whether at
stated  maturity,  by acceleration or otherwise),  the entire  principal  amount
outstanding  shall bear  interest  at an annual rate equal to the Prime Rate (as
defined in the Loan  Agreement)  plus five percent (5%) per annum,  from the due
date until all overdue amounts have been paid in full.

                  Payments  of both  principal  and  interest  are to be made in
lawful  money of the United  States of America at the offices of the Bank at 135
South LaSalle  Street,  Chicago,  Illinois  60603, or at such other place as the
holder shall designate in writing to the maker.

<PAGE>

                  This Note is secured by a security  interest in Collateral (as
defined in the Loan Agreement) and by those certain Mortgages (as defined in the
Loan  Agreement)  dated of even date  herewith,  each made by a  Subsidiary  (as
defined in the Loan Agreement) for the benefit of the Bank.

                  The maker and all endorsers hereby severally waive presentment
for payment,  protest and demand, notice of protest,  demand and of dishonor and
nonpayment of this Note.  Borrower  hereby agrees to pay all reasonable fees and
expenses incurred by the Bank or any subsequent holder, including the reasonable
fees of counsel,  in connection with protection and enforcement of the rights of
the Bank or any subsequent holder under this Note,  including without limitation
the  collection  of any  amounts  due  under  this Note and the  protection  and
enforcement  of such  rights in any  bankruptcy,  reorganization  or  insolvency
proceeding involving the Borrower.

                  This  Substitute  Revolving  Note is binding upon Borrower and
its  successors  and  assigns and shall inure to the benefit of the Bank and its
successors  and  assigns.  This  Substitute  Revolving  Note is made  under  and
governed by the laws of the State of  Illinois,  without  regard to conflicts of
laws principles.

                  IN WITNESS WHEREOF,  Borrower has executed this Note as of the
day and year first above written.

                                                     ARLINGTON HOSPITALITY, INC.
                                                     a Delaware corporation

                                                     By:
                                                          ----------------------
                                                     Its:
                                                          ----------------------<PAGE>

                                                                   Exhibit 10.64

================================================================================

                                Amendment No.1 To
                             Participation Agreement

                          Dated as of December 19, 2002

                                      among

                       Old Dominion Electric Cooperative,

                      State Street Bank and Trust Company,
                      not in its individual capacity except
                        as expressly provided herein, but
                            solely as Owner Trustee,

                      Wachovia Bank, National Association,

                          Utrecht-America Finance Co.,

                                       And

                         Cedar Hill International Corp.

                        Clover Unit 1 Generating Facility
                                       and
                                Common Facilities

================================================================================

<PAGE>

                    AMENDMENT NO.1 TO PARTICIPATION AGREEMENT

     This AMENDMENT NO.1 TO PARTICIPATION AGREEMENT, dated as of December 19,
2002 (this "Amendment"), among (i) OLD DOMINION ELECTRIC COOPERATIVE, a utility
aggregation cooperative organized under the laws of the Commonwealth of Virginia
(herein together with its successors and assigns, called "Old Dominion"), (ii)
STATE STREET BANK AND TRUST COMPANY, a state-chartered trust company organized
and existing under the laws of the Commonwealth of Massachusetts, not in its
individual capacity, except as expressly provided herein, but solely as trustee
under the Trust Agreement (as hereinafter defined) (herein in such capacity,
together with its successors and assigns, called the "Owner Trustee" and herein
in its individual capacity, together with its successors and assigns, called the
"Trust Company"), (iii) WACHOVIA BANK, NATIONAL ASSOCIATION (formerly known as
First Union National Bank, successor-in-interest to First Union National Bank of
Florida), a national banking association organized under the laws of the United
States, as Owner Participant (herein in such capacity, together with its
successors and assigns, called the "Owner Participant"), (iv) UTRECHT-AMERICA
FINANCE CO., a Delaware corporation, as the Series A Lender (herein in such
capacity, together with its successors and assigns, called the "Series A
Lender") and as Agent for the Lenders (herein in such capacity, together with
its successors and assigns, called the "Agent"), and (v) CEDAR HILL
INTERNATIONAL CORP., a corporation organized under the laws of the State of
Delaware, as Series B Lender (herein in such capacity, together with its
successors and assigns, called the "Series B Lender").

                                   WITNESSETH:

     WHEREAS, Old Dominion, the Owner Trustee, the Owner Participant,
Utrecht-America Finance Co., as the Original Lender and the Agent, entered into
the Participation Agreement, dated as of February 29, 1996 (the "Participation
Agreement"), relating to the lease of the Equipment Interest and the Foundation
Interest from Old Dominion to the Owner Trustee under the Equipment Head Lease
and the Foundation Head Lease, respectively, and concurrently therewith the
lease of the Equipment Interest and the Foundation Interest to Old Dominion
under the Equipment Operating Lease and the Foundation Operating Lease,
respectively;

     WHEREAS, the Holder of the Series B Loan Certificate exercised its rights
to cause the Series B Loan Certificate to be repaid pursuant to Section 10.2 of
the Participation Agreement;

     WHEREAS, in connection with the mandatory prepayment of the Series B Loan
Certificate on the date hereof, (i) the Loan Agreement will be amended and
restated, (ii) the Owner Trustee will issue new Loan Certificates to the Lenders
and the Loan Certificates previously issued by the Owner Trustee will be
cancelled, (iii) the Equipment Operating Lease and the Foundation Operating
Lease each will be amended, (iv) the Deposit Agreement and the Deposit Pledge
Agreement will be terminated and a substitute deposit agreement and deposit
pledge agreement will be entered into by Old Dominion and the Owner Trustee, and
(v) the Payment Undertaking Agreement will be amended (such documents and
amendments entered into in connection with such mandatory prepayment, together
with this Amendment, collectively are called the "Loan Refinancing Documents"
and the transactions contemplated hereby and thereby are called the "Loan
Refinancing"); and

<PAGE>

     WHEREAS, in connection with the execution and delivery of the Loan
Refinancing Documents, the parties hereto desire to amend the Participation
Agreement as set forth herein;

     NOW, THEREFORE, in consideration of the mutual agreements herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:

SECTION 1. DEFINED TERMS; GENERAL PROVISIONS

     The capitalized terms used in this Amendment (including the recitals) and
not otherwise defined herein shall have the respective meanings specified in
Appendix A to the Participation Agreement, as amended hereby. All references to
sections, schedules and exhibits herein are to sections, schedules and exhibits
of this Amendment unless otherwise indicated and the words "herein", "hereof"
and "hereunder" and other words of similar import refer to this Amendment as a
whole and not to any particular section or other subdivision. The general
provisions of Appendix A to the Participation Agreement, as amended hereby, also
shall apply to this Amendment.

SECTION 2. LOAN REFINANCING

     Section 2.1 The parties hereto hereby waive the obligation of Old Dominion
to deliver a request and authorization to issue additional Loan Certificates in
accordance with Section 2.11(b) of the Loan Agreement in connection with the
issuance of the Series 2002 Loan Certificates and the consummation of the Loan
Refinancing.

     Section 2.2 The Owner Participant agrees that the execution and delivery of
this Amendment shall constitute, without further act, authorization and
direction by the Owner Participant to the Owner Trustee to execute and deliver
each Loan Refinancing Document to which it is a party.

SECTION 3. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS

     Section 3.1 Representations and Warranties of the Owner Trustee and the
Trust Company. Except as set forth in the last sentence of this Section 3.1, the
Trust Company, in its individual capacity, represents and warrants that, as of
the date hereof:

     (a) the Trust Company is a state-chartered trust company duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts, has the corporate power and authority, as Owner Trustee and/or in
its individual capacity to the extent expressly provided herein or in the Trust
Agreement, to enter into and, assuming due authorization, execution and delivery
of the Trust Agreement by the Owner Participant, perform its obligations under
the Loan Refinancing Documents and the other Operative Documents to which it is
a party;

     (b) (i) the Loan Refinancing Documents and the other Operative Documents to
which the Trust Company, in its individual capacity or as Owner Trustee, is a
party (other than the Loan Certificates dated as of the date hereof) have been
duly authorized, executed and delivered by the Trust Company, in its individual
capacity or as Owner Trustee, as the case may be, and

                                                                               2

<PAGE>

(ii) assuming the due authorization, execution and delivery of the Loan
Refinancing Documents and the other Operative Documents by each party thereto
other than the Trust Company or the Owner Trustee, as the case may be, and
assuming the due, authorization, execution and delivery of the Trust Agreement
by the Owner Participant, the Loan Refinancing Documents and the other Operative
Documents (other than the Loan Certificates dated as of the date hereof) to
which the Trust Company or the Owner Trustee, as the case may be, is a party
constitute a legal, valid and binding obligation of the Trust Company or the
Owner Trustee, as the case may be, enforceable against it in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles of equity;

     (c) upon the execution and delivery of the Loan Certificates dated as of
the date hereof by the Owner Trustee in accordance with the Loan Agreement and
payment therefor, and assuming the due authorization, execution and delivery of
the Trust Agreement by the Owner Participant, such Loan Certificates will
constitute the legal, valid and binding obligations of the Owner Trustee,
enforceable against the Owner Trustee in accordance with their terms, except as
the same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or affecting
the rights of creditors generally and by general principles of equity;

     (d) the execution and delivery by the Trust Company, in its individual
capacity or as Owner Trustee, as the case may be, of the Loan Refinancing
Documents and the other Operative Documents to which it is a party, the
consummation by the Trust Company, in its individual capacity or as Owner
Trustee, as the case may be, of the transactions contemplated thereby, and the
compliance by the Trust Company, in its individual capacity or as Owner Trustee,
as the case may be, with the terms and provisions thereof, do not and will not
contravene any Applicable Law of the United States of America or the
Commonwealth of Massachusetts governing the Trust Company or the banking or
trust powers of the Trust Company, or the Trust Agreement, or its organizational
documents or by-laws, or contravene the provisions of, or constitute a default
by the Trust Company under, or result in the creation of any Lessor's Lien upon
the Trust Estate under, any indenture, mortgage or other material contract,
agreement or instrument to which the Trust Company is a party or by which the
Trust Company or its property is bound;

     (e) no authorization or approval or other action by, and no notice to or
filing with, any Governmental Entity governing the Trust Company's banking or
trust powers is required for the due execution, delivery or performance by the
Trust Company, in its individual capacity or as Owner Trustee, of the Loan
Refinancing Documents or the other Operative Documents to which it is a party,
other than any such authorization or approval or other action or notice or
filing as has been duly obtained, taken or given;

     (f) there is no pending or, to the knowledge of the Trust Company,
threatened action, suit, investigation or proceeding against the Trust Company
either in its individual capacity or as Owner Trustee, before any Governmental
Entity which, if determined adversely to it, would materially adversely affect
the ability of the Trust Company, in its individual capacity or as Owner
Trustee, as the case may be, to perform its obligations under the Loan
Refinancing Documents or the other Operative Documents to which it is a party;
and

                                                                               3

<PAGE>

     (g) the Owner Trustee's right, title and interest in and to the Trust
Estate is free of any Lessor's Liens attributable to the Trust Company in its
individual capacity.

Notwithstanding anything to the contrary contained herein, the representations
and warranties (or portion thereof as indicated) contained in clauses (b)(ii)
and (c) of this Section 3.1 (to the extent they relate to the Owner Trustee) are
made by the Owner Trustee in its trust capacity.

     Section 3.2 Representations and Warranties of the Owner Participant. The
Owner Participant represents and warrants that, as of the date hereof:

     (a) the Owner Participant is a national banking association duly organized,
validly existing and in good standing under the laws of the United States of
America and has the corporate power and authority to enter into and perform its
obligations under the Loan Refinancing Documents and the other Operative
Documents to which it is a party;

     (b) the Loan Refinancing Documents and the other Operative Documents to
which it is a party have been duly authorized, executed and delivered by the
Owner Participant and assuming the due authorization, execution and delivery by
each other party thereto, constitute the legal, valid and binding obligations of
the Owner Participant, enforceable against the Owner Participant in accordance
with their respective terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or
other laws relating to or affecting the rights of creditors generally and by
general principles of equity;

     (c) the execution and delivery by the Owner Participant of the Loan
Refinancing Documents and the other Operative Documents to which it is a party,
the consummation by the Owner Participant of the transactions contemplated
thereby, and compliance by the Owner Participant with the terms and provisions
thereof, do not and will not contravene any federal or state Applicable Law
binding on the Owner Participant, or its articles of incorporation or by-laws,
or contravene the provisions of, or constitute a default under, or result in the
creation of any Lien (other than any Lien created under any Loan Refinancing
Document or any other Operative Document) upon the Trust Estate under any
indenture, mortgage or other material contract, agreement or instrument to which
the Owner Participant is a party or by which the Owner Participant or its
property is bound (it being understood that no representation or warranty is
being made as to any Applicable Laws relating to Clover Unit 1 or the Clover
Real Estate);

     (d) no authorization or approval or other action by, and no notice to or
filing with, any federal or state Governmental Entity is required for the due
execution, delivery or performance by the Owner Participant of the Loan
Refinancing Documents or the other Operative Documents to which it is a party,
other than any authorization or approval or other action or notice or filing as
has been duly obtained, taken or given (it being understood that no
representation or warranty is being made as to any Applicable Laws relating to
Clover Unit 1 or the Clover Real Estate);

     (e) there is no pending or, to the knowledge of the Owner Participant,
threatened action, suit, investigation or proceedings against the Owner
Participant before any Governmental Entity which, if determined adversely to it,
would materially adversely affect the Owner

                                                                               4

<PAGE>

Participant's ability to perform its obligations under the Loan Refinancing
Documents or the other Operative Documents to which it is a party; and

     (f) the Trust Estate is free of any Owner Participant's Liens.

     Section 3.3 Representations and Warranties of Old Dominion. Old Dominion
represents and warrants that, as of the date hereof:

     (a) Old Dominion is a utility aggregation cooperative duly organized,
validly existing, and in good standing under the laws of the Commonwealth of
Virginia, is duly licensed or qualified and in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its financial condition, business or operations or its ability to
enter into and perform its obligations under the Loan Refinancing Documents and
the other Operative Documents to which it is a party, and has the corporate
power and authority to carry on its business as now conducted and to enter into
and perform its obligations thereunder;

     (b) the Loan Refinancing Documents and the other Operative Documents to
which it is a party have been duly authorized, executed and delivered by Old
Dominion and, assuming the due authorization, execution and delivery by each
other party hereto and thereto, constitutes the legal, valid and binding
obligations of Old Dominion, enforceable against Old Dominion in accordance with
their respective terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or
other laws relating to or affecting the rights of creditors generally and by
general principles of equity;

     (c) the execution, delivery and performance by Old Dominion of the Loan
Refinancing Documents and the other Operative Documents to which it is a party,
the consummation by Old Dominion of the transactions contemplated thereby and
thereby, and compliance by Old Dominion with the terms and provisions thereof,
do not and will not contravene any Applicable Law binding on Old Dominion or its
property, or its certificate of incorporation or by-laws, or contravene the
provisions of, or constitute a default by Old Dominion under, or result in the
creation of any Lien (except for Permitted Liens) upon the property of Old
Dominion or any indenture, mortgage or other material contract, agreement or
instrument to which Old Dominion is a party (including, without limitation, the
Clover Agreements, the Old Dominion Indenture, the Pollution Control Assets
Lease and the Conveyance and Security Agreement, dated as of December 15, 1994,
between the Pollution Control Assets Lessor and Old Dominion) or by which Old
Dominion or any of its property is bound;

     (d) no authorization or approval or other action by, and no notice to or
filing with, any Governmental Entity is required (A) for the due execution,
delivery or performance by Old Dominion of the Loan Refinancing Documents or the
other Operative Documents to which it is a party or (B) to be obtained by Old
Dominion, the Owner Trustee, or the Owner Participant with respect to the
participation by Owner Trustee or the Owner Participant in the transactions
contemplated by the Loan Refinancing Documents or the other Operative Documents,
other than those which have already been duly obtained and other than (i) as may
be required in connection with any refinancing of the Loan Certificates or the
issuance of Additional Loan Certificates, (ii) as may be required under
Applicable Law providing for the supervision or regulation of the

                                                                               5

<PAGE>

Owner Participant or the Owner Trustee, (iii) as may be required with respect to
the Owner Participant or the Owner Trustee as a result of investing, lending or
other commercial activity in which the Owner Trustee or the Owner Participant is
or may be engaged other than the transactions contemplated by the Loan
Refinancing Documents or the other Operative Documents, (iv) as may be required
under existing Applicable Laws to be obtained, given, accomplished or renewed
from time to time in connection with the maintenance or operation of Clover Unit
1 and which are routine in nature or which cannot be obtained, or are not
normally applied for, prior to the time they are required, and which Old
Dominion has no reason to believe will not be timely obtained, or (v) as may be
required under any Applicable Law enacted or adopted after the date hereof;

     (e) no approval or consent of Virginia Power (except as have been
obtained), the Pollution Control Assets Lessor, the Indenture Trustee or any
holders of Old Dominion's Bonds is required in connection with the transactions
contemplated by the Loan Refinancing Documents or the other Operative Documents;

     (f) there is no pending or, to the knowledge of Old Dominion, threatened
action, suit, investigation or proceeding against Old Dominion before any
Governmental Entity which, if determined adversely to it, would materially
adversely affect Old Dominion's financial condition, business or operations or
its ability to perform its obligations under the Loan Refinancing Documents or
the other Operative Documents to which it is a party;

     (g) no Event of Default, Event of Loss or event that with the passage of
time or giving of notice or both would constitute an Event of Default or Event
of Loss has occurred and is continuing;

     (h) the insurance (including all related endorsements) required by Section
11 of the Equipment Operating Lease and the Foundation Operating Lease is in
full force and effect and all premiums thereon are current;

     (i) no event of default or event of loss has occurred and is continuing
under the Pollution Control Assets Lease;

     (j) no event of default has occurred and is continuing under the Old
Dominion Indenture;

     (k) Old Dominion is not an "investment company" or an "affiliated person"
of an "investment company" within the meaning of the Investment Company Act of
1940;

     (l) Old Dominion is not in default in any respect, and no condition exists
that with notice or lapse of time or both would constitute a default in any
respect, under the Clover Agreements or any mortgage, indenture or other
material contract, agreement or instrument to which Old Dominion is a party or
by which Old Dominion or its property is bound, in any such case where any such
default, individually or in the aggregate, could reasonably be expected to have
a material adverse effect on (i) its financial condition, business or operations
or (ii) its ability to enter into and perform its obligations under the Loan
Refinancing Documents or the other Operative Documents to which it is a party;

                                                                               6

<PAGE>

     (m) Old Dominion has (i) good and valid title, as a tenant-in-common with
Virginia Power to the Retained Assets free and clear of all Liens other than
Permitted Liens, (ii) a valid leasehold interest, to the extent of a 50%
undivided interest, in the Pollution Control Assets free and clear of all Liens
other than Permitted Liens, and (iii) good and marketable title as a
tenant-in-common with Virginia Power in the Clover Real Estate;

     (n) the Equipment Head Lease and the Foundation Head Lease create valid
leasehold interests in favor of the Owner Trustee in the Equipment Interest and
the Foundation Interest, respectively, under the laws of the Commonwealth of
Virginia;

     (o) assuming that the Owner Trustee maintains possession and control over
the Deposit in accordance with the provisions of the Deposit Agreement, the
Deposit Pledge Agreement creates a valid and enforceable pledge of the Deposit
as contemplated thereby;

     (p) assuming that the Owner Trustee maintains possession and control over
the Collateral (as defined in the Pledge Agreement) in accordance with the
applicable provisions of the Uniform Commercial Code, the Pledge Agreement
creates a valid and perfected security interest in such Collateral as
contemplated thereby, subject to the provisions of Section 9-315 of the Uniform
Commercial Code;

     (q) assuming that the Loan Agreement has been duly authorized, executed and
delivered by each party thereto, the Loan Agreement creates a valid (subject to
the rights of quiet enjoyment of Old Dominion under Section 9 of the
Participation Agreement and Section 4.2 of the Equipment Operating Lease)
security interest in favor of the Agent in the Equipment Interest. No filing,
recording, registration or notice with any federal or state Governmental Entity
is necessary to establish or, except for such filings and recordings as have
been made prior to the date hereof and for the performance of the terms of the
Loan Agreement, to perfect the Agent's security interest in the Equipment
Interest;

     (r) assuming that the Leasehold Mortgage has been duly authorized, executed
and delivered by each of the parties thereto, the Leasehold Mortgage creates a
valid (subject to the rights of quiet enjoyment of Old Dominion under Section 9
of the Participation Agreement and Section 4.2 of the Foundation Operating
Lease) lien in favor of the Agent for the benefit of the Lenders in the
Foundation Interest. No filing, recording, registration or notice with any
federal or state Governmental Entity is necessary to establish or, except for
such filings and recordings as have been made pursuant to Section 4.20 of the
Participation Agreement and for the performance of the terms of the Leasehold
Mortgage, to perfect the Agent's security interest in the Foundation Interest;

     (s) Old Dominion's audited financial statements for the fiscal year ended
December 31, 2001, including the footnotes thereto, present fairly the
consolidated financial position, results of operations and cash flow for Old
Dominion as of and for the periods stated and have been prepared in conformity
with GAAP on a consistent basis; and since December 31, 2001 no material adverse
change has occurred in the financial condition, business or operations of Old
Dominion and no event has occurred since December 31, 2001 which would
materially adversely affect the ability of Old Dominion to perform its
obligations under the Loan Refinancing Documents or the other Operative Document
to which it is a party;

                                                                               7

<PAGE>

     (t) Old Dominion owns or possesses or has obtained all material
governmental franchises, licenses and permits necessary to lease or own, as the
case may be, and to operate, its properties and to carry on its business as
presently conducted where its ownership or lease of substantial properties or
the conduct of its business requires such franchises, licenses or permits and
where the failure to do so would materially adversely affect its financial
condition, business or operations;

     (u) Old Dominion has filed all federal, state and local tax returns which
are required to be filed by it and has paid (prior to their delinquency dates)
any taxes which have become due pursuant to such returns or pursuant to any
assessment received by it (other than taxes and assessments the payment of which
is being contested in good faith by Old Dominion, with adequate reserves, in the
aggregate, for the payment of which having been set aside on the books of Old
Dominion), and Old Dominion has no Actual Knowledge of any actual or proposed
deficiency or additional assessment in connection therewith which, either in any
case or in the aggregate, would materially adversely affect Old Dominion's
financial condition, business or operations; and any charges, accruals and
reserves on the books of Old Dominion with respect to federal, state and local
taxes for all open years, and for the current fiscal year, make adequate
provision for any unpaid tax liabilities for such periods;

     (v) the qualification of any of the Agent, the Lenders, the Owner Trustee,
the Trust Company or the Owner Participant for admission to do business under
the laws of the Commonwealth of Virginia or any political subdivision thereof is
not required in connection with the execution and delivery of the Loan
Refinancing Documents or the other Operative Documents, the making of the Loans
or the performance by the Agent, any Lender, the Owner Trustee or the Owner
Participant of the Loan Refinancing Documents or the other Operative Documents
to which it is a party;

     (w) Old Dominion has validly submitted to the jurisdiction of the Supreme
Court of the State of New York, New York County and the United States District
Court for the Southern District of New York;

     (x) the choice by Old Dominion of the laws of the State of New York to
govern the Loan Refinancing Documents and the other Operative Documents to which
Old Dominion is a party and which are expressed to be governed by the laws of
the State of New York is valid and binding under the Applicable Laws of the
Commonwealth of Virginia, and a court in the Commonwealth of Virginia would
uphold such choice of law in a legal proceeding to enforce the Loan Refinancing
Documents and the other Operative Documents to which Old Dominion is a party
brought in such court, subject to the enforceability of security documents being
subject to the laws applicable to or affecting the collateral provided in
respect thereof;

     (y) the use by Old Dominion of the proceeds of the Loan Certificates will
not violate or result in a violation of Section 7 of the Exchange Act, or any
regulations issued pursuant thereto, including, without limitation, Regulations
G, T, U and X of the regulations of the Federal Reserve System;

     (z) performance by any of the Agent, any Lender, the Owner Trustee, or the
Owner Participant of any action required under the Loan Refinancing Documents or
the other Operative

                                                                               8

<PAGE>

Documents will not violate any Applicable Law of the Commonwealth of Virginia or
any political subdivision thereof;

     (aa) Old Dominion is an "electric utility company," but is not a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding company" within the meaning of the Holding Company Act; and

     (bb) the terms of the Series 2002 Loan Certificates are in compliance with
Section 2.11 of the Loan Agreement and Section 10.2 of the Participation
Agreement.

     Section 3.4 Representations, Warranties and Agreements of each Lender.

     (a) Each Lender represents and warrants that, as of the date hereof:

          (i) no part of the funds to be used by such Lender to make its Loan
     and acquire its Loan Certificate pursuant to the Loan Agreement constitutes
     or is deemed to constitute assets (within the meaning of ERISA and any
     applicable rules or regulations thereunder) of any Plan; and

          (ii) such Lender is making the Loans and acquiring the Loan
     Certificates for investment and not with a view towards any resale or
     distribution thereof, and neither it nor anyone authorized by it to act on
     its behalf has directly or indirectly offered any Loan Certificate or any
     interest in the Trust Estate, the Collateral, or any similar security for
     sale to, or solicited any offer to acquire any of the same from, anyone, it
     being understood that such Lender makes no representations as to actions
     taken by the Owner Participant, the Owner Trustee or Old Dominion or anyone
     acting on behalf of such Persons.

     (b) Each Lender represents, warrants and agrees that it will not transfer
the Loan Certificates it holds except in a transaction constituting an exempt
transaction under the Securities Act.

     Section 3.5 Representations and Warranties of the Agent. The Agent
represents and warrants that, as of the date hereof:

     (a) the Agent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has the corporate power and
authority to enter into and perform its obligations, as Agent, under the Loan
Refinancing Documents and the other Operative Documents to which it is a party;

     (b) the Loan Refinancing Documents and the other Operative Documents to
which it is a party has been duly authorized, executed and delivered by the
Agent and assuming the due authorization, execution and delivery by each other
party thereto, constitute the legal, valid and binding obligations of the Agent
enforceable against the Agent in accordance with their respective terms, except
as the same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or affecting
the rights of creditors generally and by general principles of equity; and

                                                                               9

<PAGE>

     (c) the execution, delivery and performance by the Agent of the Loan
Refinancing Documents and the other Operative Documents to which it is a party,
the consummation by the Agent of the transactions contemplated hereby or
thereby, and compliance by the Agent with the provisions hereof and thereof do
not contravene any Applicable Laws binding on the Agent or its organizational
documents or by-laws, or contravene the provisions of, or constitute a default
by the Agent under any indenture, mortgage or other material contract, agreement
or instrument to which the Agent is a party or by which the Agent or its
property is bound.

SECTION 4. AMENDMENTS

     Section 4.1 Amendment to Section 10.1 of the Participation Agreement. The
words "(including the Certificate of Deposit)" in Section 10.1 of the
Participation Agreement are deleted and the words ", the First Control
Agreement, the Second Control Agreement" are substituted in lieu thereof.

     Section 4.2 Amendment to Section 10.2(a) of the Participation Agreement.
Section 10.2(a) of the Participation Agreement is deleted in its entirety and
the following is inserted in lieu thereof:

          (a) The Holders of the Series B Loan Certificates shall have the right
     to cause the Series B Loan Certificates to be prepaid on any Permitted
     Prepayment Date, provided that the Agent, the Owner Trustee, the Owner
     Participant and Old Dominion shall have received a written notice of such
     prepayment from all Holders of the Series B Loan Certificates at least 365
     days prior to the Permitted Prepayment Date specified in such notice. The
     Holders of the Series B Loan Certificates shall have the right to revoke
     any such notice delivered pursuant to this Section 10.2(a) by written
     notice to the Agent, the Owner Trustee, the Owner Participant and Old
     Dominion on or prior to the date which is 365 days prior to the Permitted
     Prepayment Date on which the Series B Loan Certificate is to be repaid.

     Section 4.3 Amendment to Section 10.3 of the Participation Agreement.

     (a) The heading of Section 10.3 of the Participation Agreement is deleted
and the words "Optional Refinancing; Required Refinancing" are substituted in
lieu thereof.

     (b) Section 10.3(a) of the Participation Agreement is amended to delete the
words "at the request of Old Dominion" in the first paragraph thereof and the
words "at the request of Old Dominion with the consent of the Holders of the
Series B Loan Certificates" are substituted in lieu thereof.

     (c) The Participation Agreement is amended to include the following as
Section 10.3(b):

          (b) The Owner Trustee shall issue Additional Loan Certificates (i) on
     or before the Permitted Prepayment Date then in effect if the Series B Loan
     Certificates are required to be prepaid or amended pursuant to Section
     2.12(b) of the Loan Agreement on such Permitted Prepayment Date, or (ii) on
     the date of

                                                                              10

<PAGE>

     any withdrawal of the Deposit from the Deposit Account as a result of the
     occurrence of a Depositary Credit Event. The obligations of the Owner
     Trustee to issue such Additional Loan Certificates pursuant to this Section
     10.3(b) and the taking of any action pursuant to Section 2.12(b) of the
     Loan Agreement shall be subject to satisfaction of all conditions of
     Section 10.2(b) hereof and Section 2.11 of the Loan Agreement to the
     issuance of Additional Loan Certificates.

     Section 4.4 Amendment to Section 12.12(c) of the Participation Agreement.
The second reference to "Participation Agreement" in Section 12.12(c) of the
Participation Agreement is deleted and the words "Trust Agreement" are
substituted in lieu thereof.

     Section 4.5 Amendment to Appendix A to the Participation Agreement.

     (a) The definition of "Certificate of Deposit" in Appendix A to the
Participation Agreement is deleted in its entirety.

     (b) The definition of "Debt Rate" in Appendix A to the Participation
Agreement is deleted in its entirety and the following is substituted in lieu
thereof:

          "Debt Rate" shall mean 4.55 percent (4.55%) per annum.

     (c) The following definition of "Deposit Account" is included in Appendix A
to the Participation Agreement in appropriate alphabetical order:

          "Deposit Account" shall mean the "Account" as defined in the First
          Control Agreement.

     (d) The definition of "Deposit Agreement" in Appendix A to the
Participation Agreement is deleted in its entirety and the following is
substituted in lieu thereof:

          "Deposit Agreement" shall mean the Deposit Agreement, dated as of
          December 19, 2002, between Old Dominion and the Depositary.

     (e) The definition of "Deposit Pledge Agreement" in Appendix A to the
Participation Agreement is deleted in its entirety and the following is
substituted in lieu thereof:

          "Deposit Pledge Agreement" shall mean the Deposit Pledge Agreement,
          dated as of December 19, 2002, between Old Dominion, as pledgor, and
          the Owner Trustee, as pledgee.

     (f) The following definition of "Depositary Credit Event" is included in
Appendix A to the Participation Agreement in appropriate alphabetical order:

          "Depositary Credit Event" shall have the meaning assigned to such term
          in Section 3.2 of the Deposit Agreement.

                                                                              11

<PAGE>

     (g) The following definition of "First Control Agreement" is included in
Appendix A to the Participation Agreement in appropriate alphabetical order:

          "First Control Agreement" shall mean the First Blocked Account Control
          Agreement, dated as of December 19, 2002, between Old Dominion, the
          Owner Trustee and the Depositary.

     (h) The amount "$18,049,884" in the definition of "Foundation Purchase
Option Price" in Appendix A to the Participation Agreement is deleted and
"$18,038,741.27" is substituted in lieu thereof.

     (i) The definition of "Issuer" in Appendix A to the Participation Agreement
is deleted in its entirety and the following is substituted in lieu thereof in
appropriate alphabetical order:

          "Depositary" shall mean JPMorgan Chase Bank, in its capacity as the
          depositary under the Deposit Agreement, together with its successors
          and permitted assigns.

     (j) The definition of "Loan Agreement" in Appendix A to the Participation
Agreement is deleted in its entirety and the following is substituted in lieu
thereof:

          "Loan Agreement" shall mean the Amended and Restated Loan and Security
          Agreement, dated as of December 19, 2002, among the Owner Trustee,
          Utrecht-America, as Series A Lender and Agent, and Cedar Hill
          International Corp., as Series B Lender.

     (k) The definition of "Mandatory Prepayment Date" in Appendix A to the
Participation Agreement is deleted in its entirety and the following is
substituted in lieu thereof:

          "Mandatory Prepayment Date" shall mean a Permitted Prepayment Date
          with respect to which the notice of required by Section 10.2(a) of the
          Participation Agreement has become irrevocable.

     (l) The words "Certificate of Deposit" in the definition of "Operative
Documents" in Appendix A to the Participation Agreement is deleted and the words
"First Control Agreement, Second Control Agreement" are substituted in lieu
thereof.

     (m) The definition of "Owner Participant" in Appendix A to the
Participation Agreement is deleted in its entirety and the following is
substituted in lieu thereof:

          "Owner Participant" shall mean Wachovia Bank, National Association, a
          national banking association.

     (n) The following definition of "Permitted Prepayment Date" is included in
Appendix A to the Participation Agreement in appropriate alphabetical order:

          "Permitted Prepayment Date" shall mean January 5, 2008 and each

                                                                              12

<PAGE>

          January 5th thereafter designated by the Holders of the Series B Loan
          Certificates pursuant to Section 2.12(b) of the Loan Agreement as a
          "Permitted Prepayment Date".

     (o) The amount "$412,685,984" in the definition of "Purchase Option Price"
in Appendix A to the Participation Agreement is deleted in its entirety and
"$412,431,220.88" is substituted in lieu thereof.

     (p) The definition of "Required Lenders" in Appendix A to the Participation
Agreement is deleted in its entirety and the following is substituted in lieu
thereof:

          "Required Lenders" shall mean all of the Lenders.

     (q) The following definition of "Second Control Agreement" is included in
Appendix A to the Participation Agreement in appropriate alphabetical order:

          "Second Control Agreement" shall mean the Second Blocked Account
          Control Agreement, dated as of December 19, 2002, between Old
          Dominion, the Owner Trustee, the Agent and the Depositary.

     (r) The definition of "Series A Loan Certificates" in Appendix A to the
Participation Agreement is deleted in its entirety and the following is
substituted in lieu thereof:

          "Series A Loan Certificates" shall mean Series A Loan Certificates, in
          substantially the form of Exhibit A to the Loan Agreement, issued by
          the Owner Trustee to the Series A Lender pursuant to the Loan
          Agreement.

     (s) The definition of "Series B Loan Certificates" in Appendix A to the
Participation Agreement is deleted in its entirety and the following is
substituted in lieu thereof:

          "Series B Loan Certificates" shall mean Series B Loan Certificates, in
          substantially the form of Exhibit B to the Loan Agreement, issued by
          the Owner Trustee to the Series B Lender pursuant to the Loan
          Agreement.

     (t) The definition of "Series 1996 Loan Certificates" in Appendix A to the
Participation Agreement is deleted in its entirety and the following is
substituted in lieu thereof:

          "Series 1996 Loan Certificates" shall mean the 1996 Series A Loan
          Certificate and the 1996 Series B Loan Certificate, each as defined in
          the Loan Agreement.

     (u) The following definition of "Series 2002 Loan Certificates" is included
in Appendix A to the Participation Agreement in appropriate alphabetical order:

          "Series 2002 Loan Certificates" shall mean the Series A Loan
          Certificate and Series B Loan Certificate each dated December 19,
          2002, issued by the Owner Trust to the Series A Lender and the Series
          B Lender, respectively.

                                                                              13

<PAGE>

     Section 4.6 References to Lender. Any reference in the Participation
Agreement to the Lender in singular form shall mean both the Series A Lender and
the Series B Lender.

SECTION 5. MISCELLANEOUS

     Section 5.1 Amendments and Waivers. No term, covenant, agreement or
condition of this Amendment may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.

     Section 5.2 Notices. Unless otherwise expressly specified or permitted by
the terms hereof, all communications and notices provided for herein shall
comply with Section 12.4 of the Participation Agreement and be addressed to Old
Dominion, the Owner Trustee, the Owner Participant, the Series A Lender or the
Agent at its address set forth in the Participation Agreement or, in the case of
the Series B Lender, set forth below, or at such other address as such party may
from time to time designate by written notice to the other parties hereto:

If to the Series B Lender:

     Cedar Hill International Corp.
     c/o JPMorgan Chase Bank
     270 Park Avenue, 48th Floor
     New York, New York 10017

     Facsimile No.: (212) 270-9665
     Telephone No.: (212) 270-9800
     Attention: Michael Mak

If to the Owner Participant:

     Wachovia Securities
     One Wachovia Center
     Mail Code NC0738
     Charlotte, North Carolina 28288-0738

     Facsimile No.: (704) 383-3713
     Telephone No.: (704) 383-1572
     Attention: Carrie L. Messer

     Courier Address:
     Wachovia Securities
     301 South College Street, 18th Floor
     Charlotte, North Carolina 28202

     Section 5.3 Successors and Assigns. This Amendment shall be binding upon
and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof. Except as

                                                                              14

<PAGE>

expressly provided herein or in the Operative Documents, no party hereto may
assign its interests herein without the consent of the other parties hereto.

     Section 5.4 Governing Law. This Amendment shall be in all respects governed
by and construed in accordance with the laws of the State of New York including
all matters of construction, validity and performance.

     Section 5.5 Severability. Whenever possible, each provision of this
Amendment shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Amendment shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Amendment.

     Section 5.6 Counterparts. This Amendment may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together only one Agreement.

     Section 5.7 Headings. The headings of the sections of this Amendment are
inserted for purposes of convenience only and shall not be construed to affect
the meaning or construction of any of the provisions hereof.

     Section 5.8 Limitations of Liability. It is understood and agreed that (i)
(except as expressly provided herein) this Amendment is executed and delivered
by the Trust Company, not in its individual capacity but solely as trustee under
the Trust Agreement in the exercise of the power and authority conferred and
vested in it as such trustee, (ii) each of the undertakings and agreements made
herein by the Owner Trustee are not personal representations, undertakings and
agreements of the Trust Company, but are binding only on the Owner Trustee, as
trustee.

     Section 5.9 Further Assurances. Each party hereto will promptly and duly
execute and deliver such further documents to make such further assurances for
and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Amendment and the Loan Refinancing
Documents.

                        [Signatures Follow on Next Page]

                                                                              15

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective officers thereunto duly authorized as
of the day and year first above written.

                                            OLD DOMINION ELECTRIC COOPERATIVE

                                            By: /s/ Daniel M. Walker
                                                --------------------------------
                                            Name:  Daniel M. Walker
                                            Title: Senior Vice President
                                                   Accounting and Finance

                                            STATE STREET BANK AND TRUST COMPANY,
                                            not in its individual capacity
                                            except as expressly provided herein,
                                            but solely as Owner Trustee under
                                            the Trust Agreement

                                            By: /s/ Patrick E. Thebado
                                                --------------------------------
                                            Name:  Patrick E. Thebado
                                            Title: Vice President

                                            WACHOVIA BANK, NATIONAL ASSOCIATION
                                            as Owner Participant

                                            By: /s/ Matthew B. Hamilton
                                                --------------------------------
                                            Name:  Matthew B. Hamilton
                                            Title: Director

                                            UTRECHT-AMERICA FINANCE CO.,
                                            as Series A Lender and as Agent

                                            By: /s/ Joseph A. Insings
                                                --------------------------------
                                            Name:  Joseph A. Insings
                                            Title: Vice President

                                            CEDAR HILL INTERNATIONAL CORP.,
                                            as Series B Lender

                                            By: /s/ Steven C. Joszef
                                                --------------------------------
                                            Name:  Steven C. Joszef
                                            Title: Managing Director

                                                                              16

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