Document:

EXHIBIT 10.108

                                CREDIT AGREEMENT

     THIS  CREDIT  AGREEMENT  (the  "Agreement")  is  made  as of the 8th day of
September,  2000, by and between APPLE SUITES, INC., a Virginia corporation (the
"Company"),  and FIRST UNION NATIONAL BANK, a national banking  association (the
"Lender").

                              STATEMENT OF PURPOSE

     The  Company  has  requested  the Lender to extend to the Company a loan to
refinance  existing  debt and the  Lender  has  agreed to do so on the terms and
subject to the conditions set forth herein.  All capitalized terms not otherwise
defined herein are defined in Paragraph 10 hereof.

     Now,  therefore,  for good and  valuable  consideration,  the  receipt  and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

                                    AGREEMENT

     1. Credit Facility.

     1(a) Loan.  Subject to the conditions  set forth herein,  the Lender agrees
that it shall advance  $10,000,000.00 (the "Loan") to the Company at closing. No
amount repaid by the Company prior to the Maturity Date may be reborrowed by the
Company.

     1(b) Interest Rate.  The Loan shall bear interest at the  Applicable  Prime
Rate unless the Company  elects to have the Loan bear interest at the Applicable
LIBOR Rate as permitted herein.

     1(c) Payment of Interest.  The Company shall pay to the Lender  interest on
the Loan from the date hereof to but not including the date of payment. Interest
payable  while  the Loan is a Prime  Rate  Loan  shall be  payable  monthly,  in
arrears,  as provided in Paragraph  2(m) below,  and interest  payable while the
Loan is a LIBOR  Loan shall be  payable  at the end of the  applicable  Interest
Period.

     1(d) Interest Conversion and Continuation.

     (1) The Company may elect at the end of any then current Interest Period to
convert  the  Loan  from a LIBOR  Loan  to a Prime  Rate  Loan by  delivering  a
duly-executed,  irrevocable  Notice  of  Conversion  to the  Lender at least one
Business  Day prior to the  proposed  date of such  conversion.  The Company may
elect at any time to convert a Prime Rate Loan to a LIBOR Loan by  delivering  a
duly-executed, irrevocable Notice of Conversion to the Lender at least three (3)
LIBOR Business Days prior to the proposed date of such conversion.  The Loan may
not be converted from a Prime Rate Loan to a LIBOR Loan if an Event of

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Default or Potential Default has occurred and is continuing on the day occurring
three LIBOR Business Days prior to the date of the  conversion  requested by the
Company or on the date of conversion.

     (2) If the Loan is a LIBOR Loan,  then  Company  may elect to continue  the
Loan as a LIBOR Loan following the end of the applicable  Interest Period if the
Company  delivers a  duly-executed,  irrevocable  Notice of  Continuation to the
Lender at least three LIBOR  Business  Days prior to the  proposed  date of such
continuation;  provided, however, that a LIBOR Loan may not be continued as such
when any Event of Default or Potential Default has occurred and is continuing on
the day  occurring  three (3) LIBOR  Business Days prior to the proposed date of
such  continuation  or on the date of  conversion,  but  shall be  automatically
converted to a Prime Rate Loan at the end of the Interest Period, and the Lender
shall notify the Company promptly that such automatic  conversion will occur. If
the Company  shall fail to give notice as provided  above,  the Company shall be
deemed to have  elected  to  convert  the Loan from a LIBOR Loan to a Prime Rate
Loan at the end of the applicable Interest Period.

     1(e)  Funding.  The Lender shall be entitled to fund the Loan in any manner
it may determine in its sole  discretion,  but all calculations and transactions
hereunder  shall be  conducted  as though  the  Lender  actually  funds the Loan
through the purchase in London of offshore  dollar deposits in the amount of the
Loan.

     2. Miscellaneous Lending Provisions.

     2(a) Use of Proceeds. The proceeds of the Loan shall be used by the Company
solely for the purpose of refinancing existing debt.

     2(b)  Note.  The  obligations  of the  Company  to repay the Loan  shall be
evidenced  by a note  payable  to the order of the  Lender in the form  attached
hereto as Exhibit A (the "Note").

     2(c)  Repayment of Principal.  Subject to the  prepayment  requirements  of
Paragraph  2(k) below,  the Company shall pay the then  principal  amount of the
Loan and any accrued and unpaid interest on the Maturity Date.

     2(d)  Inability  to  Determine  Rate.  If  the  Lender   determines  (which
determination  shall be conclusive  and binding upon the Company,  provided such
determination  is made on a  reasonable  basis) that by reason of  circumstances
affecting the London interbank  eurodollar  market adequate and reasonable means
do not exist for ascertaining  the LIBOR Rate for any Interest Period,  then the
Lender shall forthwith give facsimile notice of such determination, confirmed in
writing,  to the Company.  If such notice is given: (1) and the Loan was to have
been converted to a LIBOR Loan shall, then, subject to the provisions

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hereof, the Loan shall be continued as a Prime Rate Loan; or (2) and the Loan is
a LIBOR  Loan,  then the Loan  shall  be  converted  on the last day of the then
current  Interest  Period to a Prime  Rate  Loan.  Until  such  notice  has been
withdrawn by the Lender, the Company shall not have the right to convert a Prime
Rate Loan to a LIBOR Loan or to continue a LIBOR Loan as such.  The Lender shall
withdraw such notice in the event that the circumstances  giving rise thereto no
longer obtain and that adequate and reasonable  means exist for ascertaining the
LIBOR Rate, and following  withdrawal of such notice by the Lender,  the Company
shall have the right to convert  the Loan from a Prime Rate Loan to a LIBOR Loan
or to  continue  the  Loan as a LIBOR  Loan in  accordance  with the  terms  and
conditions of this Agreement.

     2(e) Illegality.  Notwithstanding  any other provisions herein, if any law,
regulation,  treaty or directive or any change therein or in the  interpretation
or  application  thereof,  shall  make it  unlawful  for any  Lender  to make or
maintain the Loan as a LIBOR Loan as contemplated by this Agreement,  the Lender
shall  forthwith give facsimile  notice to the Company of such  illegality,  and
upon giving such notice,  if the Loan is then  outstanding as a LIBOR Loan, then
it shall  be  converted  automatically  to a Prime  Rate  Loan at the end of the
respective  Interest Period or within such earlier period as required by law. In
the event of a  conversion  of the Loan from a LIBOR  Loan to a Prime  Rate Loan
prior to the end of its applicable Interest Period, the Company hereby agrees to
promptly pay Lender,  upon demand,  the amounts  required  pursuant to Paragraph
2(h) below, it being agreed and understood that such conversion shall constitute
a prepayment for all purposes hereof. If subsequently Lender determines that the
cause of such illegality has ceased to exist,  Lender will notify the Company by
facsimile  notice,  and the Company may request  that the Loan be converted to a
LIBOR Loan as provided in Paragraph 1(d)(1) above.

     2(f)  Requirements  of Law;  Increased  Costs. In the event that any change
subsequent to the date hereof in any applicable law, order,  regulation,  treaty
or directive issued by any central bank or other Governmental  Authority,  or in
the  governmental  or  judicial   interpretation  or  application   thereof,  or
compliance  by any Lender with any request or  directive  (whether or not having
the force of law) by any central bank or other Governmental Authority:

     (1) subjects  Lender to any tax of any kind whatsoever with respect to this
Agreement  or the Loan made  hereunder,  or  change  the  basis of  taxation  of
payments to any Lender of principal,  fee,  interest or any other amount payable
hereunder  (except  for change in the rate of tax on the  overall  net income of
such Lender);

     (2) imposes, modifies or holds applicable any reserve, capital requirement,
special deposit, compulsory loan or similar requirements against assets held by,
or deposits or other liabilities in or for the account of, advances or loans by,
or other credit extended by, or any other acquisition of funds by, any office of
Lender which are not otherwise  included in the  determination of the LIBOR Rate
or the Prime Rate; or

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     (3) imposes on Lender any other condition;

and the  result of any of the  foregoing  is to  increase  the cost to Lender of
making,  renewing or maintaining the Loan or to reduce any amount  receivable in
respect thereof or to reduce the rate of return on the capital of such Lender or
any Person  controlling such Lender,  then, in any such case, the Company shall,
subject to the  provisions  hereof pay to the Lender within 15 days (the "15 day
period") of written demand made by the Lender,  any additional amounts necessary
to compensate  Lender for such additional cost or reduced amounts  receivable or
rate of return as  determined  by Lender with  respect to this  Agreement or the
Loan made hereunder.  If Lender becomes entitled to claim any additional amounts
pursuant to this  Paragraph  2(c), it shall  promptly  notify the Company of the
event by reason of which it has  become so  entitled.  A  certificate  as to any
additional  amounts payable  pursuant to the foregoing  sentence  containing the
calculation  thereof in  reasonable  detail  submitted  by Lender to the Company
shall be  conclusive in the absence of manifest  error.  The  provisions  hereof
shall survive the  termination of this Agreement and payment of the  outstanding
Loan and all other amounts payable hereunder.

     2(g)  Funding.  The Lender  shall be entitled to fund all or any portion of
the Loan in any manner it may determine in its sole discretion,.  If the Company
elects to have the Loan bear  interest at the  Applicable  LIBOR Rate,  then all
calculations and transactions hereunder shall be conducted as though such Lender
actually  funds  the Loan as a LIBOR  Loan  through  the  purchase  in London of
offshore dollar  deposits in the amount of the Loan in maturities  corresponding
to the applicable Interest Period.

     2(h)  Funding  Indemnification  --  Prepayment.  In  addition  to all other
payment  obligations  hereunder,  in the event  the Loan is a LIBOR  Loan and is
prepaid  prior  to the  last  day of the  applicable  Interest  Period,  whether
following a voluntary  prepayment or a mandatory  prepayment,  the Company shall
immediately pay to the Lender an amount equal to the excess,  if any, of (i) the
amount of interest which would have accrued on the principal  amount of the Loan
so prepaid to the last day of the applicable  Interest  Period at the applicable
rate of interest hereunder while the Loan is a LIBOR Loan over (ii) the interest
component of the amount the Lender would have bid in the London interbank market
for dollar  deposits of leading banks of amounts  comparable  to such  principal
amount repaid and maturities comparable to such period, as reasonably determined
by Lender, together with an additional amount compensating Lender for losses and
expenses  incurred  by Lender in  connection  with such  prepayment,  including,
without  limitation,  such as may arise out of a re-employment of funds obtained
by Lender and from fees payable to terminate  the deposits from which such funds
were obtained,  such losses, and expenses and the method of calculation  thereof
being set forth in reasonable detail and a statement delivered to the Company by
Lender.  Under no circumstances shall Lender have any obligation to remit monies
to the  Company  upon  prepayment  while  the Loan is a LIBOR  Loan  even  under
circumstances which do not result in the necessity of the payment by the Company
of any amount hereunder. The provisions hereof shall survive termination of this
Agreement and payment of the Loan and all amounts payable hereunder.

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     2(i) Funding  Indemnification -- Default or Failure to Continue or Convert.
In addition to all other payment obligations hereunder, in the event the Company
shall fail to continue or to make a conversion of the Loan to a LIBOR Loan after
the Company has given notice thereof as provided in Paragraph 1(d) above,  or if
the Lender is not obligated to do so due to the existence of an Event of Default
or Potential  Default,  then the Company shall  immediately pay to the Lender an
additional  amount  compensating the Lender for losses and expenses  incurred by
the Lender in connection  with such failure to continue or convert the Loan to a
LIBOR  Loan,  or the  occurrence  of an Event of  Default or  Potential  Default
including,  without limitation,  such as may arise out of re-employment of funds
obtained by the Lender and from fees  payable to  terminate  the  deposits  from
which such funds  were  obtained,  such  losses and  expenses  to be of the type
customarily  assessed  for  failures to convert or continue  the Loan to a LIBOR
Loan, and such losses and expenses and the method of  calculation  thereof being
set forth in  reasonable  detail in a statement  delivered to the Company by the
Lender.  The provisions  hereof shall survive  termination of this Agreement and
payment of the Loan and all other amounts payable hereunder.

     2(j) Computations.  All computations of interest and fees payable hereunder
shall be based upon a year of 360 days for the actual number of days elapsed.

     2(k) Prepayments.

     (1) The Company may  voluntarily  prepay the Loan  (including a LIBOR Loan,
subject to paragraph 2(h))in whole or in part at any time.

     (2) The Company shall make mandatory  prepayments of principal in an amount
equal to  seventy-five  percent  (75%) of all Equity  Proceeds  (the  "Mandatory
Equity Payments").  Mandatory Equity Payments shall be due and payable to Lender
no later than the next  business  day  following  the  Company's  receipt of any
Equity Proceeds.

     (3) The Company shall pay all interest accrued but unpaid concurrently with
the prepayment of any principal.

     2(l)  Commitment  Fees.  The Company shall pay the following  fees:  (i) an
initial fee of equal to  three-quarters  percent (.75%) of the Loan amount shall
be paid at closing  and (ii) a fee equal to  one-quarter  percent  (.25%) of the
then  outstanding  balance on the Mid-Term  Date shall be paid no later than the
second Business Day following the Mid-Term Date.

     2(m)  Interest and Fee Billing and Payment.  The Lender shall (1) while the
Loan is a Prime Rate Loan,  on or before the fifth  Business  Day of each month,
and (2)  while  the Loan is a LIBOR  Loan,  on the  last  day of the  applicable
Interest  Period,  deliver to the  Company an  interest  and fee billing for the
immediately  preceding  month or  Interest  Period,  as the  case may be,  which
billing  shall set  forth  interest  accrued  and  payable  on the Loan and fees
payable  hereunder for such period and which  billing  shall be payable,  in the
case of a billing  delivered  pursuant to subparagraph  (1) above, no later than
the second Business

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Day  following  receipt  thereof by the  Company  and,  in the case of a billing
delivered  pursuant to subparagraph (2) above, on the last day of the applicable
Interest Period.  In the  alternative,  the Company may, within one (1) Business
Day  following  receipt of such billing by the Company,  authorize the Lender by
telephone  (which   authorization  shall  be  promptly  followed  by  a  written
confirmation thereof) to debit the Company's accounts maintained with the Lender
for the amount of such accrued interest and fees payable.

     2(n)  Nature and Place of  Payments.  All  payments  made on account of the
Obligations shall be made without set-off or counterclaim in lawful money of the
United States of America in immediately available same day funds, free and clear
of and  without  deduction  for any taxes,  fees or other  charges of any nature
whatsoever  imposed by any taxing  authority  upon the Lender and if received by
the Lender by 2:00 p.m.  (Charlotte,  North  Carolina time) such payment will be
credited on the Business Day received.  If a payment is received after 2:00 p.m.
(Charlotte, North Carolina time) by the Lender, such payment will be credited on
the next  succeeding  Business Day and interest  thereon shall be payable at the
then applicable rate until credited.  If any payment  required to be made by the
Company  hereunder  becomes due and payable on a day other than a Business  Day,
the due date thereof shall be extended to the next  succeeding  Business Day and
interest  thereon  shall be  payable at the then  applicable  rate  during  such
extension.

     2(o) Post-Maturity  Interest. Any Obligations not paid when due (whether at
stated  maturity,  upon  acceleration or otherwise) shall bear interest from the
date due until paid in full at a per annum rate equal to four percent (4%) above
the then applicable interest rate, or, if such Obligations do not otherwise bear
interest, four percent (4%) above the Applicable Prime Rate.

     3. Pledge Agreement; Guaranties; Additional Documents.

     3(a) Pledge Agreement and Financing Statements. Repayment of the Loan shall
be secured by a first priority  security  interest in the Collateral.  To effect
such  lien,  the  Company  shall  execute  and  deliver  to the  Lender a pledge
agreement  in the  form  of that  attached  hereto  as  Exhibit  B (the  "Pledge
Agreement"), pursuant to which the Company shall pledge, assign and grant to the
Lender a  perfected,  first  priority  security  interest  in and lien  upon the
Collateral.

     3(b) Intentionally Deleted.

     3(c) Further  Documents.  The Company  agrees to execute and deliver and to
cause  to be  executed  and  delivered  to the  Lender  from  time to time  such
confirmation and supplementary  security  agreements,  financing  statements and
other  documents,  instruments  and  agreements  as the  Lender  may  reasonably
require, which are in the Lender's judgment necessary or desirable to obtain for
the Lender the benefit of the Credit  Documents and the Collateral.  The Company
also hereby authorizes the Lender to execute and file, on behalf of the Company,
all  financing  statements  which  are in the  Lender's  judgment  necessary  or
desirable to obtain for the Lender the benefit of the Credit  Documents  and the
Collateral.

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     4. Conditions to Making of the Loan.

     As  conditions  precedent  to the  Lender's  obligation  to make  the  Loan
hereunder:

     4(a) The Company shall have delivered to the Lender,  in form and substance
satisfactory to the Lender and its counsel each of the following:

     (1) A duly executed copy of this Agreement;

     (2) A duly executed copy of the Note;

     (3) A duly executed copy of the Pledge Agreement;

     (4) The  originals  of all  documents  required to be  delivered  to Lender
pursuant to the Pledge Agreement;

     (5) Duly executed copies of all financing  statements and other  documents,
instruments and agreements,  properly executed,  deemed necessary or appropriate
by the  Lender,  in its  reasonable  discretion,  to  obtain  for the  Lender  a
perfected, first priority security interest in and lien upon the Collateral;

     (6) Such credit applications, financial statements, authorizations and such
information concerning the Company and its businesses, operations and conditions
(financial and otherwise) as the Lender may reasonably request;

     (7)  Certified  copies  of  resolutions  of the Board of  Directors  of the
Company  approving  the  execution  and  delivery of the Credit  Documents,  the
performance  of  the  Obligations   thereunder  and  the   consummation  of  the
transactions contemplated thereby;

     (8) A certificate of the Secretary or an Assistant Secretary of the Company
certifying  the  names  and  true  signatures  of the  officers  of the  Company
authorized to execute and deliver the Credit Documents;

     (9) A copy of the Articles of Incorporation of the Company certified by the
Secretary  or an  Assistant  Secretary  of the  Company  as of the  date of this
Agreement as being accurate and complete;

     (10) A copy of the Bylaws of the Company  certified by the  Secretary or an
Assistant  Secretary  of the Company as of the date of this  Agreement  as being
accurate and complete;

     (11) A  certificate  of the  Secretary  of State of the State of  Virginia,
certifying as of a recent date that the Company is in good standing;

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     (12) An opinion of counsel  for the  Company  substantially  in the form of
Exhibit C attached  hereto  and  covering  such other  matters as the Lender may
reasonably request; and

     (13) An estoppel or comfort letter (a "Comfort Letter") from any franchisor
with which the Company or any of its  Affiliates  has  entered  into a Franchise
Agreement  relating to hotels  operated by such Affiliates in form and substance
satisfactory to Lender.

     4(b) All acts and conditions (including,  without limitation, the obtaining
of any necessary  regulatory  approvals and the making of any required  filings,
recordings  or  registrations)  required  to be done and  performed  and to have
happened  precedent to the  execution,  delivery and  performance  of the Credit
Documents  and to  constitute  the same legal,  valid and  binding  obligations,
enforceable in accordance with their respective terms,  shall have been done and
performed  and  shall  have  happened  in due and  strict  compliance  with  all
applicable laws.

     4(c) All documentation,  including,  without limitation,  documentation for
corporate and legal proceedings in connection with the transactions contemplated
by the Credit  Documents  shall be  satisfactory  in form and  substance  to the
Lender and its counsel, and all legal and financial due diligence on the Company
and its operation and conditions shall be completed and shall be satisfactory to
Lender and its counsel.

     4(d) All fees required to be paid on or before the date hereof  pursuant to
Paragraph 2(l) above shall have been paid prior to (or will be paid concurrently
with) the making of the Loan hereunder.

     4(e) Each of the  following  real  estate-secured  loans (each,  a "Conduit
Loan"  and  collectively,  the  "Conduit  Loans"),  to be made by the  Lender to
Subsidiaries of the Company, shall have closed or shall close  contemporaneously
with the Loan:

     (1) Loan  Number  26-5330839,  to be secured by a hotel  property  known as
Homewood Suites located at 2233 Ulmerton Road, Clearwater, Florida 34622;

     (2) Loan  Number  26-5330840,  to be secured by a hotel  property  known as
Homewood Suites located at 450 Technology Parkway, Norcross, Georgia 30092;

     (3) Loan  Number  26-5330841,  to be secured by a hotel  property  known as
Homewood Suites located at 3200 Cobb Parkway SW, Atlanta, Georgia 30339;

     (4) Loan  Number  26-5330842,  to be secured by a hotel  property  known as
Homewood Suites located at 1181 Winterson Road, Linthicum, Maryland 21090;

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     (5) Loan  Number  26-5330843,  to be secured by a hotel  property  known as
Homewood Suites located at 30810 North Civic Center Boulevard,  Warren, Michigan
48093;

     (6) Loan  Number  26-5330844,  to be secured by a hotel  property  known as
Homewood Suites located at 893 Centre Street, Jackson, Mississippi 39157;

     (7) Loan  Number  26-5330845,  to be secured by a hotel  property  known as
Homewood Suites located at 4451 Beltline Boulevard, Addison, Texas 75001;

     (8) Loan  Number  26-5330846,  to be secured by a hotel  property  known as
Homewood Suites located at 4300 Wingren Drive, Irving, Texas 75001;

     (9) Loan  Number  26-5330847,  to be secured by a hotel  property  known as
Homewood Suites located at 4705 Old Shepard Place, Plano, Texas 75093;

     (10) Loan Number  26-5330848,  to be secured by a hotel  property  known as
Homewood Suites located at 844 East North Union Avenue, Midvale, Utah 84047; and

     (11) Loan Number  26-5330849,  to be secured by a hotel  property  known as
Homewood Suites located at 4100 Innslake Drive, Glen Allen, Virginia 23060.

5.   Representations and Warranties of the Company.

     The Company represents and warrants to the Lender that:

     5(a) Corporate  Existence;  Compliance  with Law. The Company:  (1) is duly
organized, validly existing and in good standing as a corporation under the laws
of Virginia and is qualified to do business in each other jurisdiction where its
ownership of property or conduct of business  requires  such  qualification  and
where failure to qualify could have a material  adverse effect on the Company or
its  property or business or on the ability of the Company to pay or perform the
Obligations,  (2) has the  corporate  power and authority and the legal right to
own and operate its property  and to conduct  business in the manner in which it
does and proposes so to do, and (3) is in compliance  with all  Requirements  of
Law and Contractual  Obligations,  the failure to comply with which could have a
material  adverse  effect on the  business,  operations,  assets or financial or
other condition of the Company.

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     5(b) Corporate Power;  Authorization;  Enforceable  Obligations The Company
has the corporate  power and  authority and the legal right to execute,  deliver
and perform the Credit Documents and has taken all necessary corporate action to
authorize the execution,  delivery and performance of the Credit Documents.  The
Credit  Documents have been duly executed and delivered on behalf of the Company
and constitute legal, valid and binding  obligations of the Company  enforceable
against the Company in accordance with their  respective  terms,  subject to the
effect of applicable  bankruptcy  and other similar laws affecting the rights of
creditors generally and the effect of equitable principles whether applied in an
action at law or a suit in equity.

     5(c)  Financial  Condition.   The  financial  statements  which  have  been
furnished  to the Lender,  are  complete  and correct and have been  prepared to
present fairly, in accordance with GAAP, the financial  condition of the Pledgor
at such  dates and the  results  of its  operations  and  changes  in  financial
position for the fiscal periods then ended.

     5(d) Ownership of Collateral.  Pledgor is and will be the sole lawful owner
of all  Collateral.  Pledgor has full right and title in and to the  Collateral,
free and clear of any lien, security interest,  pledge, mortgage,  adverse claim
or right, charge or encumberance.

     5(e)  Contrary  Agreements.  Pledgor has not made,  nor will it at any time
without obtaining the prior written consent of Pledgee make, any agreement which
prohibits or restricts the pledging or creation of liens upon the Collateral, or
which  creates a lien on the  Collateral  prior to the  Pledge  interest  herein
provided in favor of Pledgee.

     5(f) No Legal Bar. The  execution,  delivery and  performance of the Credit
Documents, the borrowing hereunder and the use of the proceeds thereof, will not
violate any Requirement of Law or any Contractual  Obligation of the Pledgor the
violation  of which  could  have a  material  adverse  effect  on the  business,
operations,  assets or  financial  or other  condition  of the Pledgor or on the
Collateral.

     5(g)   Consents,   etc.  No  consent,   approval,   authorization   of,  or
registration, declaration or filing with, any Governmental Authority is required
on the part of the Pledgor in connection  with the execution and delivery of the
Credit Documents (other than filings to perfect the security  interests  granted
by it) or the  performance  of or  compliance  with the  terms,  provisions  and
conditions hereof or thereof.

     5(h) Investment  Companies Act. The Company is not an "investment  company"
or a company  "controlled" by an "investment  company" within the meaning of the
Investment Company Act of 1940, as amended.

     5(i) Federal  Reserve Board  Regulations.  The Company is not engaged,  and
will not  engage,  principally  or as one of its  important  activities,  in the
business of extending  credit for the purpose of  "purchasing" or "carrying" any
"margin stock" within

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the  respective  meanings  of  such  terms  under  Regulation  U. No part of the
proceeds of the Loan issued hereunder will be used, directly or indirectly,  for
"purchasing" or "carrying" "margin stock" as so defined or for any purpose which
violates, or which would be inconsistent with, the provisions of the Regulations
of the Board of Governors of the Federal Reserve System.

     5(j)  Subsidiaries.  The attached  Schedule II is a complete listing of any
and all Subsidiaries of the Company.

     5(k) Franchise  Agreements.  To the extent of the Company's  actual control
and knowledge,  the Company shall,  or shall cause its Affiliates to (i) operate
its or their hotels in accordance with the terms of any Franchise  Agreements in
effect as of the date hereof (each, a "Franchise  Agreement"  and  collectively,
the "Franchise  Agreements");  (ii) promptly perform and observe (or cause to be
performed  or  observed)  all of the  covenants  required  to be  performed  and
observed  by it or  them  under  the  Franchise  Agreements  and do  all  things
necessary to preserve and to keep  unimpaired  its material  rights  thereunder;
(iii)  promptly  notify the Lender of any event of default  under the  Franchise
Agreements of which it or they are aware;  (iv) promptly deliver to the Lender a
copy of each financial  statement,  business plan,  capital  expenditures  plan,
notice,  report  and  estimate  received  by  it or  them  under  the  Franchise
Agreements;  and (v) promptly  enforce the  performance and observance of all of
the covenants  required to be performed and observed by the franchisor under the
Franchise  Agreements.  To  the  extent  of the  Company's  actual  control  and
knowledge,  without Lender's prior consent,  the Company shall not and shall not
permit the lessee under any  percentage  lease or any manager to: (i) surrender,
terminate  or cancel  any  Franchise  Agreement;  (ii)  reduce or consent to the
reduction of the term of any Franchise  Agreement;  (iii) increase or consent to
the increase of the amount of any charges  under any Franchise  Agreement;  (iv)
otherwise modify, change, supplement, alter or amend, or waive or release any of
its rights and remedies under,  any Franchise  Agreement or (v) suffer or permit
the occurrence of continuance a default beyond any applicable  cure period under
any Franchise  Agreement (or any successor  franchise  agreement with a national
hotel chain  approved by the Lender) if such default  permits the  franchiser to
terminate  or  cancel  any  Franchise  Agreement  (or  any  successor  franchise
agreement with a national hotel chain approved by the Lender).

     6. Affirmative Covenants.  The Company hereby covenants and agrees with the
Lender that, as long as any Obligations remain unpaid, the Company shall:

     6(a)  Payment  of  Indebtedness.  Pay or  otherwise  satisfy  at or  before
maturity or before it becomes delinquent or accelerated, as the case may be, all
its Indebtedness  (including taxes), except Indebtedness being contested in good
faith  by  appropriate  proceedings  and  for  which  provision  is  made to the
satisfaction  of the Lender for the payment  thereof in the event any Company is
found to be  obligated  to pay  such  Indebtedness  and  which  Indebtedness  is
thereupon promptly paid by such Company.

                                       11
<PAGE>

     6(b)  Maintenance  of Existence  and  Properties.  Maintain  its  corporate
existence and obtain and maintain all rights, privileges,  licenses,  approvals,
franchises,  properties and assets  necessary or desirable in the normal conduct
of its business.

     6(c) Inspection of Property; Books and Records; Audits.

     (1) Keep proper books of record and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities; and

     (2) Permit: (i) representatives of the Lender, to (A) visit and inspect any
of its  properties  and  examine  and make  abstracts  from any of its books and
records at any reasonable  time and as often as may reasonably be desired by the
Lender, (but, prior to the occurrence of an Event of Default, only upon not less
than two Business Days' prior notice), and (B) discuss the business, operations,
properties  and financial  and other  condition of the Company with officers and
employees of the Company, and with the independent  certified public accountants
of the  Company,  and (ii)  representatives  of the Lender to  conduct  periodic
operational audits of the Company's business and operations of the Company.

     (3) Prepare and deliver to Lender, for each calendar month,  beginning with
the calendar month in which closing occurs, on or before the tenth (10th) day of
the following month, monthly unaudited balance sheets,  certified to be true and
correct by the Chief Financial Officer of the Company.

     6(d) Notices. Promptly give written notice to the Lender of:

     (1) The  occurrence of any  Potential  Default or Event of Default known to
responsible  management personnel of the Company and the proposed method of cure
thereof;

     (2) Any  litigation or proceeding  affecting the Company which could have a
material adverse effect on the business,  operations,  property, or financial or
other condition of the Company;

     (3) A material adverse change known to responsible  management personnel of
the  Company  in the  business,  operations,  property  or  financial  or  other
condition of any Company;

     (4) A default under the terms of any Indebtedness to which the Company is a
party  (whether  or not such  default  gives  rise to the right of the  affected
lender to accelerate such Indebtedness); and

     (6) Any violation of any Requirements of Law or Contractual  Obligations to
which the Company may be subject or a party.

                                       12
<PAGE>

     6(e)  Expenses.  Pay  all  reasonable   out-of-pocket  costs  and  expenses
(including fees and disbursements of legal counsel):  (1) of the Lender incident
to the  preparation,  negotiation and  administration  of the Credit  Documents,
including with respect to or in connection with any waiver or amendment  thereof
or thereto,  (2) of the Lender  associated  with any periodic  audits  conducted
pursuant to Paragraph  6(c)(2)(ii)  above, and (3) of the Lender incident to the
enforcement of payment of the  Obligations,  whether by judicial  proceedings or
otherwise,   including,  without  limitation,  in  connection  with  bankruptcy,
insolvency,  liquidations reorganization moratorium or other similar proceedings
involving the Company or a "workout" of the Obligations.  The obligations of the
Company  under  this  Paragraph   6(e)  shall  survive   payment  of  all  other
Obligations.

     6(f) Credit Documents.  Comply with and observe all terms and conditions of
the Credit Documents.

     6(g) Insurance. Obtain and maintain insurance with responsible companies in
such  amounts and  against  such risks as are  usually  carried by  corporations
engaged in similar businesses similarly situated, including, without limitation,
errors and  omissions  coverage  and  fidelity  coverage  in form and  substance
acceptable to the Lender,  and furnish the Lender on request full information as
to all such  insurance,  and to  provide  within  five (5) days  after  receipt,
certificates or other documents evidencing the renewal of each such policy.

     6(h)  Distributions  During  Default.  Upon the  occurrence of any Event of
Default,  and for so long as any such Event of Default in  ongoing,  the Company
shall make no dividends or distributions to any equity holder.

     7.  Negative  Covenants.  The Company  hereby  agrees that,  as long as any
Obligations  remain  unpaid,  the  Company  shall not at any time,  directly  or
indirectly:

     7(a) Consolidation and Merger; Change of Business. Liquidate or dissolve or
enter  into any  consolidation  or merger or enter into any  partnership,  joint
venture,  syndicate or other combination or make any change in the nature of its
business as presently conducted.

     7(b) Sale of Assets. Sell, lease, assign,  transfer or otherwise dispose of
any of its assets (other than obsolete or worn out property),  whether now owned
or  hereafter  acquired,  other  than in the  ordinary  course  of  business  as
currently  conducted and at fair market value. In no event,  however,  shall the
Company dispose of any asset or assets with a fair market value, individually or
in the  aggregate,  equal to or greater  than  $1,000,000.00,  without the prior
written consent of Lender.

     7(c) Additional Indebtedness.  Incur any additional Indebtedness other than
trade payables incurred in the ordinary course of business.

                                       13
<PAGE>

     8. Events of Default.  Upon the  occurrence of any of the following  events
(an "Event of Default"):

     8(a) The Company shall fail to pay principal or interest on the Loan or any
fee payable pursuant to Paragraph 2(l) above when due; or

     8(b) Any  representation  or warranty made or deemed made by the Company in
any  Credit  Document  or in  connection  with  any  Credit  Document  shall  be
inaccurate or  incomplete  in any material  respect on or as of the date made or
deemed made; or

     8(c) The Company  shall fail to maintain its  corporate  existence or shall
default in the observance or performance of any covenant or agreement  contained
in Paragraphs 6 and 7; or

     8(d)  Glade M.  Knight is no longer  serving as  Chairman  of the Board and
President of the Company; or

     8(e) The  Company  shall  fail to  observe  or  perform  any other  term or
provision  contained in the Credit Documents and such failure shall continue for
thirty (30) days; or

     8(f) The Company  shall  default in any payment of principal of or interest
on any  Indebtedness in the aggregate  principal amount of $100,000 or more (and
without  regard for the dollar  amount of the defaulted  payment),  or any other
event  shall  occur,  the effect of which is to permit such  Indebtedness  to be
declared or otherwise to become due prior to its stated maturity; or

     8(g) (1) The Company  shall  commence any case,  proceeding or other action
(i) relating to  bankruptcy,  insolvency,  reorganization  or relief of debtors,
seeking to have an order for relief  entered  with  respect to the  Company,  or
seeking  to  adjudicate  the  Company  a  bankrupt  or  insolvent,   or  seeking
reorganization,  arrangement, adjustment, winding-up, liquidation,  dissolution,
composition  or other relief with  respect to the Company or its debts,  or (ii)
seeking appointment of a receiver,  trustee, custodian or other similar official
for the Company or for all or any substantial part of the assets of the Company,
or the Company shall make a general assignment for the benefit of its creditors;
or (2) there shall be  commenced  against the  Company any case,  proceeding  or
other  action of a nature  referred  to in clause (1) above which (i) results in
the entry of an order for relief or any such  adjudication  or  appointment,  or
(ii) remains  undismissed,  undischarged  or unbonded for a period of sixty (60)
days; or (3) there shall be commenced  against the Company any case,  proceeding
or  other  action  seeking  issuance  of a  warrant  of  attachment,  execution,
distraint or similar process against all or  substantially  all of the assets of
either of them which  results in the entry of an order for any such relief which
shall not have been vacated,  discharged,  stayed,  satisfied or bonded  pending
appeal within sixty (60) days from the entry  thereof;  or (4) the Company shall
take any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in (other than in connection with a final  settlement),  any of the
acts set forth

                                       14
<PAGE>

in clauses (1), (2) or (3) above;  or (5) the Company  shall  generally  not, or
shall be unable to, or shall admit in writing its  inability to pay its debts as
they become due;

     8(h) One or more  judgments or decrees in an aggregate  amount in excess of
$100,000 shall be entered  against the Company and all such judgments or decrees
shall not have been vacated,  discharged,  stayed,  satisfied or bonded  pending
appeal within sixty (60) days from the entry thereof; or

     8(i) The borrowers under the Conduit Loans shall fail to observe or perform
any term or provision  with respect to any Conduit Loan or shall  default in any
payment of principal of or interest on any Conduit Loan or any other event shall
occur,  the effect of which is to permit any such Conduit Loan to be declared or
otherwise to become due prior to its stated maturity;

                                      THEN:

     (1)  Automatically  upon  the  occurrence  of an  Event  of  Default  under
Paragraph 8(g) above; and

     (2) In all other cases, at the option of the Lender;

the  principal  balance of  outstanding  Loan and  interest  accrued  but unpaid
thereon  shall  become  immediately  due and  payable,  without  demand  upon or
presentment to the Company, which are expressly waived by the Company.

     9. Miscellaneous Provisions.

     9(a) Assignment. The Company may not assign its rights or obligations under
this Agreement  without the prior written consent of the Lender.  Subject to the
foregoing,  all  provisions  contained  in this  Agreement  or any  document  or
agreement  referred to herein or relating  hereto  shall inure to the benefit of
the  Lender,  and its  successors  and  assigns,  and shall be binding  upon the
Company, and its successors and assigns.

     9(b)  Amendment.  Neither  this  Agreement  nor  any  of the  other  Credit
Documents may be amended or terms or provisions  hereof or thereof waived unless
such amendment or waiver is in writing and signed by the Lender and the Company.

     9(c) Cumulative Rights; No Waiver.  The rights,  powers and remedies of the
Lender under the Credit  Documents are cumulative and in addition to all rights,
powers and remedies  provided under any and all agreements among the Company and
the Lender relating hereto, at law, in equity or otherwise. Any delay or failure
by the Lender to exercise  any right,  power or remedy  shall not  constitute  a
waiver thereof by the Lender, and no single or partial exercise by the Lender of
any right,  power or remedy shall preclude other or further  exercise thereof or
any exercise of any other rights, powers or remedies.

                                       15
<PAGE>

     9(d) Entire  Agreement.  This  Agreement and the  documents and  agreements
referred to herein  embody the entire  agreement and  understanding  between the
parties hereto and supersede all prior agreements and understandings relating to
the subject matter hereof and thereof.

     9(e) Survival. All representations, warranties, covenants and agreements on
the part of the Company  contained  in the Credit  Documents  shall  survive the
termination of this Agreement and shall be effective  until the  Obligations are
paid and performed in full or longer as expressly provided herein.

     9(f) Notices. All notices given by any party to the others under the Credit
Documents shall be in writing unless  otherwise  provided for herein,  delivered
personally or by depositing the same in the United States mail, registered, with
postage  prepaid,  addressed to the party at the address set forth on Schedule I
attached  hereto.  Any party may change the  address to which  notices are to be
sent by notice of such change to each other party given as provided herein. Such
notices  shall be  effective on the date  received  or, if mailed,  on the third
Business Day following the date mailed.

     9(g) Governing  Law/Waiver of Jury Trial.  This Agreement shall be governed
by and construed in accordance with the laws of the State of North Carolina.  TO
THE EXTENT  PERMITTED  BY LAW, THE COMPANY  HEREBY  KNOWINGLY,  VOLUNTARILY  AND
INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION  BASED  HEREON,  OR ARISING OUT OF, UNDER OR IN  CONNECTION  WITH THE
CREDIT  DOCUMENTS.  THIS  PROVISION  IS A  MATERIAL  INDUCEMENT  FOR THE  LENDER
ENTERING INTO THE CREDIT DOCUMENTS.

     9(h)  Counterparts.  This  Agreement and the other Credit  Documents may be
executed in any number of  counterparts,  all of which together shall constitute
one agreement.

     9(i) Binding  Arbitration.  Upon demand of any party  hereto,  whether made
before or after institution of any judicial  proceeding,  any dispute,  claim or
controversy  arising out of, connected with or relating to the Note or any other
Credit Document ("Disputes"),  between or among parties to the Note or any other
Credit  Document shall be resolved by binding  arbitration  as provided  herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaim,  claims brought as class actions, claims arising from
Credit Documents  executed in the future, or claims concerning any aspect of the
past,  present or future  relationships  arising  out of or  connected  with the
Credit  Documents.  Arbitration  shall be  conducted  under and  governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American  Arbitration  Association and Title 9 of the U.S. Code. All arbitration
hearings  shall  be  conducted  in  Charlotte,  North  Carolina.  The  expedited
procedures  set  forth in Rule 51, et seq.  of the  Arbitration  Rules  shall be
applicable  to  claims of less  than  $1,000,000.  All  applicable  statutes  of
limitation shall apply to any

                                       16
<PAGE>

Dispute.  A  judgment  upon  the  award  may  be  entered  in any  court  having
jurisdiction.  The  panel  from  which all  arbitrators  are  selected  shall be
comprised of licensed  attorneys.  The single arbitrator  selected for expedited
procedure   shall  be  a  retired  judge  from  the  highest  court  of  general
jurisdiction,  state  or  federal,  of the  state  where  the  hearing  will  be
conducted.  Notwithstanding the foregoing, this paragraph shall not apply to any
hedging arrangement that is a Credit Document.

     10. Definitions.  For purposes of this Agreement, the terms set forth below
shall have the following meanings:

     "Affiliate"  shall mean,  as to any Person,  any other  Person  directly or
indirectly controlling, controlled by or under direct or indirect common control
with,  such  Person.  "Control"  as used  herein  means the power to direct  the
management and policies of such Person.

     "Agreement" shall mean this Agreement, as the same may be amended, extended
or replaced from time to time.

     "Applicable  LIBOR Rate" shall mean, with respect to a LIBOR Loan, the rate
per annum (rounded upward, if necessary,  to the next higher 1/32 of one percent
(.03125%)) calculated in accordance with the following formula:

     Applicable LIBOR Rate  =          LR    +    LIBOR Spread
                                     -----
                                     1-LRP

     where:

          LR = LIBOR Rate; and

          LRP = LIBOR Reserve Percentage.

     "Applicable  Prime  Rate"  shall  mean the Prime  Rate plus the Prime  Rate
Spread.

     "Business Day" shall mean any day other than a Saturday,  a Sunday or a day
on which banks in Charlotte, North Carolina are authorized or obligated to close
their regular banking business.

     "Collateral"  shall  have  the  meaning  given  such  term  in  the  Pledge
Agreement.

     "Company"  shall have the  meanings  given  such terms in the  introductory
paragraph hereof.

     "Contractual  Obligation"  as to any Person shall mean any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.

                                       17
<PAGE>

     "Credit  Documents"  shall  mean  this  Agreement,  the  Note,  the  Pledge
Agreement,  the  Guaranties  and each other  document,  instrument and agreement
executed  by the  Company  in  connection  herewith,  as any of the  same may be
amended, extended or replaced from time to time.

     "Equity  Proceeds"  shall  mean any and all sums  invested  in the  Company
(including  dividend  reinvestment) on or after the date hereof in the nature of
equity including, without limitation, common and preferred stock (whether or nor
convertible  into  common  stock),  options or warrants  to acquire  stock,  and
subordinated debt (whether or not convertible into stock).

     "Event of Default" shall have the meaning set forth in Paragraph 8 above.

     "Franchise  Agreement"  shall have the  meaning  set forth in  Paragraph  5
above.

     "GAAP" shall mean generally  accepted  accounting  principles in the United
States of America in effect from time to time.

     "Governmental Authority" shall mean any nation or government,  any state or
other  political  subdivision  thereof,  or  any  entity  exercising  executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government.

     "Indebtedness" of any Person shall mean all items of indebtedness which, in
accordance  with GAAP and practices  thereof,  would be included in  determining
liabilities  as shown on the liability  side of a statement of condition of such
Person as of the date as of which  indebtedness is to be determined,  including:
without  limitation,  all obligations for money borrowed,  all amounts for which
such Person may be obligated under gestation or other repurchase facilities, and
shall  also  include  all  indebtedness  and  liabilities  of others  assumed or
guaranteed by such Person or in respect of which such Person is  secondarily  or
contingently  liable (other than by  endorsement of instruments in the course of
collection)  whether by reason of any agreement to acquire such  indebtedness or
to supply or advance sums or otherwise.

     "Interest  Period"  shall mean with respect to the Loan while it is a LIBOR
Loan, the period commencing on the date hereof and ending one month, two months,
or three months  thereafter,  as designated in the Company's  written request to
the  Lender;  provided,  however,  that  (a) any  Interest  Period  which  would
otherwise  end on a day which is not a LIBOR  Business  Day shall be extended to
the next succeeding LIBOR Business Day unless by such extension it would fall in
another  calendar  month,  in which case such  Interest  Period shall end on the
immediately  preceding LIBOR Business Day; (b) any Interest Period applicable to
the Loan while it is a LIBOR Loan  which  begins on a day for which  there is no
numerically  corresponding  day in the calendar month during which such Interest
Period is to end shall,  subject to the provisions of clause (a) hereof,  end on
the last day of such  calendar  month;  and (c) no such  Interest  Period  shall
extend beyond either the Mid-Term Date or the Maturity Date.

     "Lender"  shall  have  the  meaning  given  such  term in the  introductory
paragraph hereof.

                                       18
<PAGE>

     "LIBOR Business Day" shall mean a Business Day upon which  commercial banks
in  London,   England  and  New  York,  New  York  are  open  for  domestic  and
international business (including dealings in United States dollars).

     "LIBOR Loan" shall mean the Loan at such time as it is bearing  interest at
the Applicable LIBOR Rate.

     "LIBOR Rate" shall mean, with respect to a LIBOR Loan, the rate obtained on
page 3750 of the  Telerate as being the rate at which  deposits  in  immediately
available U.S. dollars having a maturity equal to the applicable Interest Period
for such LIBOR Loan are offered to or by reference banks in the London interbank
market,  as determined by the Lender at the opening of business on a two (2) day
forward commitment basis.

     "LIBOR  Reserve  Percentage"  shall  mean  for  any  day,  that  percentage
expressed  as a decimal,  which is in effect on such day,  as  specified  by the
Board  of  Governors  of the  Federal  Reserve  System  (or any  successor)  for
determining  the maximum  aggregate  reserve  requirement  (including all basis,
supplemental,  marginal  and other  reserves)  which is imposed on  eurocurrency
liabilities.

     "LIBOR Spread" shall mean: (a) from the date hereof and up to and including
the  Mid-Term  Date,  two  percent  (2.00%)  and (b)  from  the day  immediately
following the Mid-Term Date and up to and including the Maturity Date, three and
one-half percent (3.50%).

     "Lien" shall mean any security interest,  mortgage,  pledge, lien, claim on
property,  charge or encumbrance  (including any conditional sale or other title
retention  agreement),  any lease in the  nature  thereof,  and the filing of or
agreement to give any financing  statement under the Uniform  Commercial Code of
any jurisdiction.

     "Loan" shall have the meaning given such term in Paragraph 1(a) above.

     "Maturity Date" shall mean March 8, 2001, as such date may be extended from
time to time in writing by the Lender, in its sole discretion.

     "Mid-Term  Date" shall mean the ninetieth  (90th) day following the date of
this Agreement.

     "Note"  shall  mean have the  meaning  given  such term in  Paragraph  2(b)
hereof.

     "Notice of Continuation" shall mean a notice identical in form in substance
to Exhibit D hereto.

     "Notice of Conversion"  shall mean a notice  identical in form in substance
to Exhibit E hereto.

     "Obligations" shall mean any and all debts,  obligations and liabilities of
the Company to the Lender (whether now existing or hereafter arising,  voluntary
or involuntary, whether or not

                                       19
<PAGE>

jointly owed with others, direct or indirect, absolute or contingent, liquidated
or unliquidated,  and whether or not from time to time decreased or extinguished
and later  increased,  created or  incurred),  arising  out of or related to the
Credit Documents.

     "Person" shall mean any corporation,  natural person,  firm, joint venture,
partnerships, trust, unincorporated organization or Governmental Authority.

     "Potential  Default" shall mean an event which but for the lapse of time or
the giving of notice, or both, would constitute an Event of Default.

     "Prime Rate" shall mean a rate per annum equal to the rate  announced  from
time to time by the  Lender  to be its  "Prime  Rate" as such  "Prime  Rate" may
change  from time to time,  said  changes  to occur on the first date the "Prime
Rate" changes;  it being  understood that the "Prime Rate" is the rate announced
by the Lender from time to time as its "Prime Rate" and is not  necessarily  the
lowest interest rate charged by the Lender to its customers.

     "Prime  Rate  Loan"  shall  mean  the  Loan at such  time as it is  bearing
interest at the Applicable Prime Rate.

     "Prime  Rate  Spread"  shall  mean:  (a) from the date hereof and up to and
including the Mid-Term Date,  one-quarter  percent  (0.25%) and (b) from the day
immediately  following  the Mid-Term  Date and up to and  including the Maturity
Date, one percent (1.00%).

     "Requirements  of Law"  shall  mean,  as to any  Person,  the  Articles  or
Certificate of  Incorporation  and Bylaws or other  organizational  or governing
documents of such Person,  and any law, treaty,  rule or regulation,  or a final
and binding  determination  of an  arbitrator or a  determination  of a court or
other  Governmental  Authority,  in each case applicable to or binding upon such
Person or any of its  property or to which such Person or any of its property is
subject.

     "Subsidiary" shall mean any corporation,  partnership or joint venture more
than  fifty  percent  (50%) of the stock or other  ownership  interest  of which
having  by the  terms  thereof  ordinary  voting  power  to elect  the  board of
directors,  managers  or  trustees  of such  corporation,  partnership  or joint
venture  (irrespective of whether or not at the time stock of any other class or
classes of such  corporation,  partnership  or joint venture shall have or might
have voting power by reason of the happening of any  contingency)  shall, at the
time as of which any  determination is being made, be owned,  either directly or
through Subsidiaries.

            [THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

                                       20
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed and sealed as of the day and year first above written.

                                     APPLE SUITES, INC., a Virginia corporation

                                     By:  /s/ Glade M. Knight
                                         -------------------------------
                                     Name:    Glade M. Knight
                                           -----------------------------
                                     Title    Chief Executive Officer
                                           -----------------------------

                                     FIRST UNION NATIONAL BANK, a national
                                     banking association

                                     By:  /s/ John A. Schissal
                                         -------------------------------
                                     Name:  John A. Schissal
                                           -----------------------------
                                     Title: Director
                                           -----------------------------

                                       21
<PAGE>

                         LIST OF SCHEDULES AND EXHIBITS

Schedule I              Addresses

Schedule II             Subsidiaries

Exhibit A               Form of Promissory Note

Exhibit B               Form of Pledge Agreement

Exhibit C               Form of Opinion

Exhibit D               Form of Notice of Continuation

Exhibit E               Form of Notice of Conversion

<PAGE>

                                   SCHEDULE I

                                    ADDRESSES

LENDER                                        COMPANY

First Union National Bank                     Apple Suites, Inc.
One First Union Center, NC-0166               306 East Main Street
301 South College Street                      Richmond, Virginia 23219
Charlotte, North Carolina 28288-0166          Attention:       S.J. Olander, Jr.
Attention:        John Schissel               Telephone No.: (804) 643-1761
Telephone No.: (704) 383-1967                 Telecopy No.: (804) 782-9302
Telecopy No.:  (704) 383-6205

<PAGE>

                                   SCHEDULE II

                       SUBSIDIARIES OF APPLE SUITES, INC.

1.  Apple Suites General, Inc. (Wholly-Owned)

2.  Apple Suites LP, Inc. (Wholly-Owned)

3.  Apple Suites SPE I, Inc. (Wholly-Owned)

4.  Apple Suites SPE II, Inc. (Wholly-Owned)

5.  Apple Suites Pennsylvania Business Trust (Apple Suites, Inc. is sole Trustee
    and sole Beneficiary)

6.  Apple Suites REIT Limited Partnership (Indirect Wholly-Owned Subsidiary)

<PAGE>

                                    EXHIBIT A

                          [Included in Exhibit 10.109]

<PAGE>

                                    EXHIBIT B

                          [Included in Exhibit 10.110]

<PAGE>

                                    EXHIBIT C

                            [ LEGAL OPINION OMITTED ]

<PAGE>

                                    EXHIBIT D

                         FORM OF NOTICE OF CONTINUATION

                                                                    [Date](1)

First Union National Bank, as Lender to
the Credit Agreement referred to below,
One First Union Center, NC1066
Charlotte, North Carolina 28288

Attention: Greg Ponder

Ladies and Gentlemen:

     The  undersigned,   APPLE  SUITES,   INC.,  a  Virginia   corporation  (the
"Company"),  refers to the Credit Agreement,  dated as of  ______________,  2000
(the  "Credit  Agreement"),  among the Company and First  Union  National  Bank.
Capitalized  terms used herein and not otherwise  defined  herein shall have the
meanings assigned to such terms in the Credit Agreement.  The undersigned hereby
gives you notice  pursuant to Section  1(d)(2) of the Credit  Agreement  that it
requests to maintain the Loan as a LIBOR Loan under the Credit Agreement, and in
that  connection  sets  forth  below the  terms on which  such  continuation  is
requested to be made:

      Date of proposed continuation(1)
      (which is a Business Day)           _________________________

      Interest Period                 __________________________

_______________________

(1) The notice of continuation must be received by Lender,  by hand,  telecopier
or telex not later than 11:00  a.m.  (Charlotte,  North  Carolina  time),  three
Business Days prior to a proposed continuation.

<PAGE>

     Upon acceptance by Company of the  continuation of the LIBOR Loan requested
in this  notice,  the  undersigned  shall  be  deemed  to have  represented  and
warranted that no Event of Default has occurred and is continuing.

                                             APPLE SUITES, INC.,
                                             a Virginia corporation

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

<PAGE>

                                    EXHIBIT E

                          FORM OF NOTICE OF CONVERSION

                                                                   [Date](1)

First Union National Bank, as Lender to
  the Credit Agreement referred to below,
One First Union Center, NC1066
Charlotte, North Carolina 28288

Attention:  Greg Ponder

Ladies and Gentlemen

     The  undersigned,   APPLE  SUITES,   INC.,  a  Virginia   corporation  (the
"Company"),  refers to the Credit Agreement,  dated as of _______________,  2000
(the  "Credit  Agreement"),  among the Company and First  Union  National  Bank.
Capitalized  terms used herein and not otherwise  defined  herein shall have the
meanings assigned to such terms in the Credit Agreement.  The undersigned hereby
gives you notice  pursuant to Section  1(d)(1) of the Credit  Agreement  that it
requests  a  conversion  of the Loan  under the  Credit  Agreement,  and in that
connection  sets forth below the terms on which such  conversion is requested to
be made:

(i)      Date of proposed conversion(1)
         (which is a Business Day)           ________________________________

(ii)     Type of Loan being converted(2)     ________________________________

(iv)     Type of Loan outstanding(2)
         Loan is being converted into        ________________________________

(v)      Interest Period                     ________________________________

_________________________
(1) The notice of conversion must be received by the Lender (i) in the case of a
proposed  conversion to consist of LIBOR Loan, by hand,  telecopier or telex not
later than 11:00 a.m.  (Charlotte,  North Carolina  time),  three LIBOR Business
Days  prior  to a  proposed  conversion  and  (ii)  in the  case  of a  proposed
conversion to consist of Prime Rate Loan, by hand, telecopier or telex not later
than 11:00 a.m.  (Charlotte,  North  Carolina  time),  on the first Business Day
prior to the date of a proposed conversion.
(2) LIBOR Loan or Prime Rate Loan.

<PAGE>

     Upon  acceptance by the Company of the  conversion of the Loan requested in
this notice,  the undersigned  shall be deemed to have represented and warranted
that no Event of Default has occurred and is continuing.

                                    APPLE SUITES, INC.,
                                    a Virginia corporation

                                    By:
                                       --------------------------------
                                    Name:
                                         ------------------------------
                                    Title:
                                          -----------------------------EXHIBIT 10.109

                                 PROMISSORY NOTE

                                                               September 8, 2000

         FOR VALUE  RECEIVED,  APPLE SUITES,  INC., a Virginia  corporation  the
"Company")  hereby  unconditionally  promises to pay to the order of FIRST UNION
NATIONAL BANK, a national banking  association (the "Lender"),  at the office of
FIRST UNION NATIONAL BANK, located at One First Union Center, NC-0166, 301 South
College Street,  Charlotte,  North Carolina  28288-0166,  in lawful money of the
United States and in immediately  available  funds,  on the dates required under
that certain Credit  Agreement  dated as of September 8, 2000 by and between the
Company  and the Lender (as the same may be amended,  extended or replaced  from
time to time,  the  "Agreement"  and with the  capitalized  terms not  otherwise
defined  herein used with the meanings given such terms in the  Agreement),  the
sum  of  $10,000,000.00,  the  principal  amount  of the  Loan  made  under  the
Agreement.

         The Company  further  agrees to pay interest in like money and funds at
the office of the Lender  referred  to above,  on the unpaid  principal  balance
hereof  from  the  date  advanced  until  paid in full on the  dates  and at the
applicable  rates set forth in the Agreement.  The holder of this Note is hereby
authorized  to record  the date and  amount of each  payment  of  principal  and
interest,  and  applicable  interest  rates and other  information  with respect
thereto, on the schedules annexed to and constituting a part of this Note (or by
any analogous  method the holder hereof may elect  consistent with its customary
practices) and any such  recordation  shall,  absent manifest error,  constitute
prima facie evidence of the accuracy of the  information so recorded;  provided,
however,  that the failure to make a notation or the  inaccuracy of any notation
shall not limit or otherwise  affect the  obligations  of the Company  under the
Credit Documents.

         This  Note is the  Note  referred  to in,  and is  entitled  to all the
benefits of, the Agreement. Reference is hereby made to the Agreement for rights
and obligations of payment and  prepayment,  Events of Default and the rights of
acceleration of the maturity hereof upon the occurrence of an Event of Default.

         This Note shall be governed by, and construed in accordance  with,  the
laws  of the  State  of  North  Carolina,  and is  being  executed  by the  duly
authorized officers of the Company as of the day and year first above written.

                                                  APPLE SUITES, INC.,
                                                  a Virginia corporation

                                                  By: /s/ Glade M. Knight
                                                      --------------------------
                                                  Name:  Glade M. Knight
                                                         -----------------------
                                                  Title: Chief Executive Officer
                                                         -----------------------

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