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                                                                    EXHIBIT 10.1

            THIRD AMENDMENT TO AMENDED AND RESTATED MASTER AGREEMENT

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

                                    RECITALS

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

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

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

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

                                    AGREEMENT

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

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

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

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

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

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

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                  (ii)     April 1, 2004 Reduced Payment:     $359,833.00
                  (iii)    May 1, 2004 Reduced Payment:       $359,833.00
                  (iv)     June 1, 2004 Reduced Payment:      $359,833.00
                  (v)      July 1, 2004 Reduced Payment:      $359,833.00

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

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

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

         (c)      Upon the occurrence of a Contract Rate Event of Default and
                  until such Contract Rate Event of Default has been cured, the
                  Base Rent will be calculated at the

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

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

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

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

4.       SALES OF THE HOTELS.

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

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

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

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

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

         (b)      Anything in Article 10.6 of the Master Agreement to the
                  contrary notwithstanding, upon the closing of the sale of any
                  of the Hotels (herein, a "SALE CLOSING"), Lessor shall be paid
                  the following amounts, in the following manner: (a)
                  concurrently with each Sale Closing, the sale proceeds, after
                  payment of the Closing Costs (the "NET SALES PROCEEDS") and
                  (b) an amount equal to twenty-five and three-tenths percent
                  (25.3%) of the gross room revenues for such Hotel for the
                  12-month period prior ending on the last day of the month
                  immediately preceding the month in which the Sale Closing
                  occurs (the "ARLINGTON FEE AMOUNT"), payable as provided
                  below. As used herein "CLOSING COSTS" shall mean fees, broker
                  fees, commissions, title premiums, recording fees,

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT -- PAGE 3
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                  prepayment penalties on related debt of the Lessor, if any,
                  assumption fees, or any transfer tax or taxes levied by any
                  local or state taxing authority and shall not include real
                  estate taxes and any other operating costs and expenses
                  related to the Hotel that are prorated and payable by the
                  "seller" at the Sale Closing. Lessee shall be responsible for
                  the payment of all such prorated amounts and such amounts
                  shall not be deducted from the sales proceeds to determine the
                  Net Sales Proceeds. The following example will illustrate the
                  calculation of the Net Sales Proceeds:

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

                  The applicable Arlington Fee Amount will be paid to Lessor
                  within forty-five (45) days following each Sale Closing date
                  and shall be accompanied by a certification by Lessee of the
                  calculation of such amount, together with backup
                  documentation. Upon receipt by Lessor, the Arlington Fee
                  Amount will be applied by Lessor to reduce the principal
                  balance of the Deficit Note (as defined in the Proceeds
                  Deficits Loan Agreement (herein so called) between Arlington
                  and Lessor dated of even date herewith.

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

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT -- PAGE 4
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         (d)      The payment of the Proceeds Deficits shall become the absolute
                  and immediate obligation of Arlington pursuant to and subject
                  to the terms of the Proceeds Deficits Loan Agreement.

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

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

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

5.       CAPITAL EXPENDITURE RESERVE. Anything in the second sentence of Section
         10.8 to the contrary notwithstanding, upon any sale of a Hotel, 100% of
         the combined Capital Expenditure Reserve Account and the FF&E Reserve
         Account (collectively, the "RESERVES") for such Hotel shall be applied
         to such accounts for the remaining Hotels in such amounts as determined
         by Lessor in its reasonable discretion after taking into account the
         planned timing of remaining Hotel sales and the relative investment in
         each Hotel necessary to derive the greatest sales value; provided,
         however, that until the

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT -- PAGE 5
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         breakfast rooms for the Rochelle Hotel, the Wooster North Hotel and the
         Grand Rapids North Hotel are completed, the Reserves (inclusive of the
         Port Huron Reserves) shall be applied to the costs of completing these
         breakfast rooms. Lessee will use its reasonable efforts to utilize the
         Reserves for the Hotels prior to the sale of the Hotels for the
         purposes set forth in the Property Leases and as necessary to maintain
         the Hotels as required under the Property Leases. Any Reserves
         remaining at the time the last Hotel is sold will be applied to reduce
         the Proceeds Deficit, and if no Proceeds Deficit exists, released to
         Arlington.

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

7.       SALES PROCESSES; APPROVALS.

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

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

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

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT -- PAGE 6
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                  submit the items described in subsections (i) and (ii) above
                  by overnight courier and they shall be deemed received upon
                  acknowledgment of receipt by Lessor.

         (d)      Lessor and Lessee hereby agree and acknowledge that (i) Lessor
                  has agreed to the sales of the Hotels listed on Schedule 2 at
                  the prices listed on Schedule 2 and (ii) that Lessee need not
                  seek further approvals for the sales of the Hotels listed on
                  Schedule 2 at such prices provided that (A) such sales occur
                  within six (6) months following the Effective Date, (B) Lessee
                  submits to Lessor the proposed contract of sale for such
                  Hotels prior to the execution thereof in accordance with
                  subparagraph (c) above and (C) Lessee thereafter sells such
                  Hotels pursuant to terms and conditions that are substantially
                  similar to those set forth in the Approved Sales Contract and
                  at prices substantially similar or greater than those set
                  forth in Schedule 2. Lessor and Lessee may mutually agree at
                  any time to substitute Hotels for those Hotels listed in
                  Schedule 2.

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

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

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

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

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

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

10.      CONFIDENTIALITY AGREEMENT; PRESS RELEASES. The Confidentiality
         Agreement dated February 19, 2004 and executed by the parties hereto is
         hereby terminated and of no further force and effect.  Lessee and
         Arlington agree, however, that any press release regarding the terms or
         the subject matter of this Third Amendment, the Master

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT -- PAGE 7
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         Agreement, the Property Leases, the Deficit Agreement or in any way
         relating to the relationship between Lessee, Arlington and Lessor shall
         be subject to the prior approval of Lessor prior to its release.
         Notwithstanding the foregoing, either Lessor or Lessee may make any
         such disclosures and press releases as are necessary to comply with
         applicable federal or state laws, codes or regulations.

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

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

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

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

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

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

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

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

                            [SIGNATURE PAGES FOLLOW]

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

                                     LESSOR:

                                     PMC COMMERCIAL TRUST

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

                                     PMCT SYCAMORE, L.P.

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

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

                                     PMCT MACOMB, L.P.

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

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

                                     PMCT PLAINFIELD, L.P.

                                     By:    PMCT AH, INC, its general partner

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

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

<PAGE>

                                     PMCT MARYSVILLE, L.P.

                                     By:    PMCT AH, INC, its general partner

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

                       [SIGNATURES CONTINUED ON NEXT PAGE]

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT -- SCHEDULE 3
<PAGE>

                                     LESSEE:

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

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

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

                                     ARLINGTON:

                                     ARLINGTON HOSPITALITY, INC.

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

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

THIRD AMENDMENT TO AMENDED AND
RESTATED MASTER AGREEMENT -- SCHEDULE 3<PAGE>
                                                                    EXHIBIT 10.2

                        PROCEEDS DEFICITS LOAN AGREEMENT

         THIS PROCEEDS DEFICITS LOAN AGREEMENT (this "AGREEMENT") is made and
entered this 4th day of October, 2004, to be effective as of October 1, 2004
(the "EFFECTIVE DATE"), by and among PMC COMMERCIAL TRUST and its subsidiaries,
PMCT Sycamore, L.P., PMCT Macomb, L.P., PMCT Marysville, L.P. and PMCT
Plainfield, L.P. (collectively, "PMC") and ARLINGTON HOSPITALITY, INC.
("ARLINGTON").

                                    RECITALS

         WHEREAS, PMC, Arlington and Arlington Inns, Inc. (formerly Amerihost
Inns, Inc.) (the "LESSEE") entered into an Amended and Restated Master Agreement
dated January 24, 2001 (the "ORIGINAL MASTER AGREEMENT"), to set forth their
agreement to amend and restate provisions of the Master Agreements (as therein
defined) and other matters set forth therein; and

         WHEREAS, PMC, Arlington and Lessee have previously amended the Original
Master Agreement by (a) that certain First Amendment to Amended and Restated
Master Agreement dated as of May 25, 2001 and (b) that certain Second Amendment
to Amended and Restated Master Agreement dated as of June 4, 2003; and

         WHEREAS, PMC, Arlington and Lessee are concurrently executing a Third
Amendment to the Original Master Agreement (the "THIRD AMENDMENT") (the Original
Master Agreement as amended by the amendments described in these recitals herein
called the "MASTER AGREEMENT") pursuant to which, among other things, PMC has
agreed to defer the payment of certain amounts otherwise payable to it in
connection with the sales of the Hotels (as defined in the Master Agreement) and
loan to Arlington the amounts so deferred, provided that Arlington agree to pay
such amounts pursuant to the terms hereof.

AGREEMENT

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

1.       DEFINITIONS. Capitalized terms used but not defined herein shall have
the meanings set forth in the Master Agreement (inclusive of the Third
Amendment).

2.       PROCEEDS DEFICITS LOAN. PMC agrees to make a loan to Arlington in an
amount equal to the aggregate amount of all Proceeds Deficits arising under the
Master Agreement (the "PROCEEDS DEFICITS LOAN"). The Proceeds Deficits Loan will
be evidenced by a promissory note in substantially the form of Exhibit "A-1"
hereto (each such note and all extensions, renewals, and modifications thereof
and all substitutions therefore herein called a "DEFICIT NOTE"). Prior to the
Effective Date, a Sale Closing occurred with respect to Port Huron, Michigan
Hotel. Notwithstanding the foregoing, the parties hereto acknowledge and confirm
that (i) a Proceeds Deficit existed in connection with such sale and (ii)
Arlington executed, as maker, a promissory note to PMC in an amount equal to
such Proceeds Deficit (the "PORT HURON NOTE"). As contemplated in the Third
Amendment, concurrently herewith Arlington shall execute, as Maker, a Deficit
Note in the amount specified in the Third Amendment. This Deficit Note shall
replace the Port Huron Note and upon PMC's receipt of the Deficit Note, PMC
shall return the original Port Huron Note to Arlington. Hereinafter, upon each
Sale Closing, PMC shall

<PAGE>

record on Schedule 1 to the Deficit Note, the then current amount of principal
under the Proceeds Deficit Loan and shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of Arlington to PMC
under this Agreement, including the amounts of principal and interest payable
and paid to PMC from time to time hereunder (i.e., increases in the principal
balance if additional Proceeds Deficits exist or reductions in the principal
balance if a Proceeds Excess exists). The entries made by PMC pursuant to the
preceding sentence shall be prima facie evidence of the existence and amounts of
the obligations recorded therein; provided that the failure of PMC to maintain
such information or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Proceeds Deficits Loan in accordance
with the terms of this Agreement. Notwithstanding the foregoing, at the request
of PMC at any time during the term hereof, Arlington shall execute a new Deficit
Note, which Deficit Note shall be in the amount of the then outstanding
aggregate Proceeds Deficits as determined in accordance with the Master
Agreement, which Deficit Note shall be issued in substitution and replacement of
the existing Deficit Note. Upon the receipt by PMC of any such replacement
Deficit Note, PMC will return the Deficit Note so replaced to Arlington.

3.       PAYMENT OF THE PROCEEDS DEFICITS LOAN. Arlington hereby promises to pay
to PMC the principal amount of the Proceeds Deficits Loan, together with
interest thereon, in accordance with the following terms and conditions:

         (a)      Applicable Rate. The principal amount of the Proceeds Deficits
         Loan outstanding from time to time will bear interest until paid in
         full at the following rates (the rate in effect from time to time
         herein called the "APPLICABLE RATE"): (i) from the date hereof until
         the Payment Commencement Date (as hereinafter defined), at the annual
         rate of eight and one-half percent (8.5%) and (ii) beginning on the
         Payment Commencement Date, at the annual rate equal to the greater of
         (A) the Treasury Rate plus four and one-half percent (4.5%) or (B)
         eight and one-half percent (8.5%), but in no event in excess of the
         maximum interest rate permitted by applicable law. As used herein,
         "TREASURY RATE" shall mean the asking yield (Ask Yld.) in effect as of
         the first (1st) day of the month prior to the Payment Commencement Date
         on U.S. Treasury Bonds maturing three (3) years following the end of
         such Payment Commencement Date, as reported in the issue of the Wall
         Street Journal published on the first (1st) day of the month prior to
         the Payment Commencement Date in the Govt Bonds & Notes portion of the
         Treasury Bonds, Notes & Bills Tables)

         (b)      Payment of Interest. Arlington shall pay to PMC on the first
         day of each calendar month after the date hereof to and including the
         Maturity Date (hereinafter defined), interest on the Proceeds Deficits
         Loan from time to time outstanding, at the Applicable Rate, for the
         immediately preceding calendar month. Interest shall be calculated and
         applied on the basis of a 365-day year and the actual number of days
         elapsed in any month (or partial month) during which the Proceeds
         Deficits Loan is outstanding.

         (c)      Payment of Principal. Commencing on the earlier of October 1,
         2008 or the closing date of the sale of the final Hotel (the "PAYMENT
         COMMENCEMENT DATE"), Arlington shall pay to PMC during each Loan Year
         thereafter, principal payments in the aggregate amount equal to
         one-third (1/3) of the principal balance of the Proceeds Deficits Loan
         outstanding as of the Payment Commencement Date (the "MINIMUM ANNUAL
         PRINCIPAL REDUCTION"). Such payments may be made at such times during
         the applicable Loan Year as Arlington may elect, provided they total,
         in the aggregate, the

                                       2
<PAGE>

         minimum Annual Principal Reduction for such Loan Year. The full amount
         of the Proceeds Deficits Loan and all accrued and unpaid interest
         thereon shall be fully due and payable on the date that is three (3)
         years following the Payment Commencement Date (the "MATURITY DATE"),
         unless accelerated pursuant to the terms hereof. As used herein, "LOAN
         YEAR" shall mean each consecutive 12-month period beginning on the
         Payment Commencement Date.

         (e)      Special Mandatory Principal Prepayments. Anything herein to
         the contrary notwithstanding, Arlington shall be required to make the
         following payments of principal in addition to those described in
         subsection (c) above:

                  (i)      If at any time during the term of this Agreement,
         Arlington's net worth (as determined in accordance with generally
         accepted accounting principles applied to Arlington's annual, audited
         statements or quarterly financial statements issued in public filings
         of Arlington (the "GAAP NET WORTH")), exceeds $15,000,000, as adjusted
         and detailed herein (the "NET WORTH BASE"), Arlington will reduce (or
         pay off) to the extent of the funds available to do so the Proceeds
         Deficits Loan by an amount equal to the excess of the GAAP Net Worth as
         recorded on Arlington's financial statement over the Net Worth Base,
         provided, that if the funds are not available to pay such amount, the
         Proceeds Deficit Loan will thereafter bear interest at the greater of
         the Contract Rate or the Treasury Rate plus four and one-half percent
         (4.5%) per annum until such amount is paid. Such principal payment
         shall be made on or before the first (1st) day of the month following
         the month in which such calculation is made. Arlington's Net Worth Base
         shall be increased by (A) any sales of common or preferred stock of
         Arlington, (B) deferred gains included as liabilities on Arlington's
         financial statement dated as of March 31, 2004, which are recognized as
         income by Arlington after March 31, 2004 pertaining to the (x) original
         sales of the Hotels to PMC and (y) the total amount of all incremental
         fees from Cendant Corporation or its affiliates that are deferred as of
         such date and (C) the amount of payments made previously pursuant to
         this Section 3(d)(i).

                  (ii)     If at any time during the term of this Agreement, the
         balance of the Proceeds Deficits Loan exceeds Four Million and No/100
         Dollars ($4,000,000.00), Arlington will immediately make a payment to
         PMC in an amount necessary to reduce the balance of the Proceeds
         Deficits Loan to $4,000,000.00 or less.

4.       LOCATION AND MEDIUM OF PAYMENTS. The sums payable under this Agreement
shall be paid to PMC by a federal wire transfer of immediately available funds,
or if not available, to PMC in immediately available funds, at 17950 Preston
Road, Dallas, Texas 75252 or at such other place as PMC may from time to time
hereafter designate to Arlington in writing, in legal tender of the United
States of America.

5.       ACCELERATION; DEFAULT INTEREST. The occurrence of any one or more of
the following events shall each be an "EVENT OF DEFAULT" hereunder: (i) the
occurrence of a default in the payment of any amount due hereunder or (ii) the
occurrence of Default Rate Event of Default. After an Event of Default shall
have occurred and be continuing, (A) at the option of PMC, which may be
exercised at any time, the whole of the Proceeds Deficits Loan then outstanding,
together with all interest, and other charges due hereunder shall immediately
become due and payable In full and (B) the amount of the Proceeds Deficits Loan
outstanding will thereafter bear interest at the annual rate of fifteen percent
(15%) (the "DEFAULT RATE") until all amounts due hereunder are paid in full.

                                       3

<PAGE>

6.       ATTORNEY FEES. Arlington, upon demand, shall pay PMC for all costs and
expenses, including without limitation attorneys' fees, paid or incurred by PMC
in connection with the collection of any sum due hereunder, or in connection
with enforcement of any of PMC's rights or Arlington's obligations under this
Agreement, together with interest thereon at the Default Rate.

7.       NO ORAL CHANGES; WAIVERS. This Agreement may not be changed orally, but
only by an agreement in writing signed by the party against whom enforcement of
a change is sought.

8.       BIND AND INURE. This Agreement shall bind and inure to the benefit of
the parties hereto and their respective legal representatives, heirs, successors
and assigns.

9.       APPLICABLE LAW. The provisions of this Agreement shall be construed and
enforceable in accordance with the laws of the State of Texas without giving
effect to any principles of conflicts of laws.

10.      NOTICE. Any notice, request, demand, statement or consent made
hereunder shall be in writing signed by the party giving such notice, request,
demand, statement or consent, and shall be deemed to have been properly given
when either delivered personally, delivered to a reputable overnight delivery
service providing a receipt or deposited in the United States Mail, postage
prepaid and registered or certified return receipt requested, at the address set
forth below, or at such other address within the continental United States of
America as may have theretofore been designated in writing by such party in
accordance with the terms of this Section 10. The effective date of any notice
given as aforesaid shall be the date of personal service, one (1) business day
after delivery to such overnight delivery service, or three (3) business days
after being deposited in the United States mail, which ever is applicable. For
purposes hereof, the addresses are as follows:

If to PMC:                 PMC Commercial Trust
                           17950 Preston Road, Suite 600
                           Dallas, Texas  75252
                           Attn: Jan Salit

with a copy to:            Locke Liddell & Sapp LLP
                           220 Ross Avenue, Suite 2200
                           Dallas, Texas 75201
                           Attn:  Kenneth Betts

If to Arlington:           Arlington Hospitality, Inc.
                           2355 South Arlington Heights Road
                           Suite 400
                           Arlington Heights, Illinois 60005
                           Attention:  Jerry H. Herman, President

with a copy to:            Squire, Sanders & Dempsey, LLP
                           Two Renaissance Square, Suite 2700
                           40 North Central Avenue
                           Phoenix, Arizona 85004
                           Attn:  Richard E. Ross

                                       4
<PAGE>

         IN WITNESS WHEREOF, Arlington and PMC have duly executed this Agreement
as a sealed instrument as of the day and year first above written.

                                     ARLINGTON:

                                     ARLINGTON HOSPITALITY, INC.

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

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

                       [SIGNATURES CONTINUED ON NEXT PAGE]

                                       5
<PAGE>

                                     PMC:

                                     PMC COMMERCIAL TRUST

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

                                     PMCT SYCAMORE, L.P.

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

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

                                     PMCT MACOMB, L.P.

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

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

                                     PMCT PLAINFIELD, L.P.

                                     By:    PMCT AH, INC, its general partner

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

                                     PMCT MARYSVILLE, L.P.

                                     By:    PMCT AH, INC, its general partner

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

                                       6

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