LOAN AGREEMENT

 

 

                                 LOAN AGREEMENT

 

 

     THIS LOAN AGREEMENT   ("Agreement")   is made and entered into as of the 13th

day of January,   2005,   by and   between   HUMPHREY   HOSPITALITY   TRUST,   INC.,   a

Virginia   corporation   (the   "Borrower"),   whose   address   for   purposes of this

Agreement is 309 North 5th Street,   Norfolk,   Nebraska 68702 (Attn: Don Heimes),

and GREAT WESTERN BANK, a Nebraska   corporation (the "Bank"),   whose address for

purposes of this Agreement is 6015 Northwest   Radial   Highway,   Omaha,   Nebraska

68104 (Attn: Kolleen Hoover).

 

 

                                    RECITALS

 

     WHEREAS,   Bank has agreed to make a Loan (as defined herein) to Borrower to

be   evidenced by the Loan   Documents   (as defined   herein),   which Loan is to be

secured by those   certain   hotels   described on Exhibit "A" attached   hereto and

incorporated   herein   by this   reference   (the   "Hotels"   or   individually,   the

"Hotel") (the term "Hotels"   also includes any   additional or substitute   Hotels

given to Bank as security for the Loan),   along with all tangible and intangible

personal property used in connection with the operation of said Hotels; and

 

     WHEREAS,   Borrower   owns 100% of the   capital   stock of E&P REIT   Trust,   a

Maryland real estate   investment trust ("E&P Trust"),   and Humphrey   Hospitality

REIT Trust, a Maryland real estate   investment trust ("Humphrey   Trust"),   which

are the   general   partners   of E&P   Financing   Limited   Partnership,   a Maryland

limited partnership ("E&P"),   and Humphrey   Hospitality Limited   Partnership,   a

Virginia limited partnership ("HHLP"), respectively. Humphrey Trust owns 100% of

the capital stock of TRS Leasing,   Inc., a Virginia corporation ("TRS Leasing").

E&P and HHLP (E&P and HHLP, and any other future owner of any of the Hotels,   or

any Hotel given as additional   Collateral or substituted   for an existing Hotel,

are   collectively   referred to as the "Hotel   Owners")   are the   respective   fee

owners of the Hotels,   as set forth on Exhibit   "A".   The Hotel Owners lease the

Hotels to TRS Leasing pursuant to that certain First Amended and Restated Master

Lease Agreement dated as of November 26, 2002 (the "Lease").   The Borrower,   the

Hotel Owners and TRS Leasing are referred to in this Agreement on a consolidated

basis as the "Humphrey Entities."

 

     WHEREAS,   in connection with its   obligations as lessee of the Hotels,   TRS

Leasing is the franchisee under those certain franchise   agreements with Super 8

Motels,   Inc. and Choice   Hotels   International,   Inc.,   which are   described on

Exhibit   "B"   attached   hereto   and    incorporated    herein   by   this   reference

(collectively, the "Franchise Agreements"); and

 

     WHEREAS,   the Loan is subject to the terms and conditions set forth in this

Agreement and in the other Loan   Documents and Borrower   knows and   acknowledges

that Bank is relying on this Agreement,   and the other Loan Documents, in making

the Loan.

 

     For good and valuable   consideration,   the receipt and sufficiency of which

are hereby acknowledged, the Borrower and the Bank hereby agree as follows:

 

                                    AGREEMENT

 

                                    ARTICLE I

                           AMOUNT AND TERM OF THE LOAN

 

     1.01.   The Loan. The Bank agrees,   on the terms and conditions   hereinafter

set forth,   to loan to the Borrower,   by means of one or more advances made from

time to time during the period of time from the date   hereof,   to and   including

the   earlier of   January   13,   2007 (the   "Maturity   Date"),   or the date of the

occurrence of an Event of Default (as   hereinafter   defined),   not to exceed the

lesser of the Borrowing   Base (as   hereinafter   defined) or the principal sum of

Twenty-Two Million and no/100ths Dollars   ($22,000,000) (the "Initial Loan Limit

Amount"),   which Initial Loan Limit Amount will be reduced to Twenty Million and

no/100ths Dollars ($20,000,000) (the "Step-Down Loan Limit Amount") on the first

day of the thirteenth full month after the date hereof (the "Step-Down Effective

Date") (the lesser of the Borrowing   Base,   the Initial Loan Limit Amount or the

Step-Down Loan Limit Amount, as applicable,   is collectively   referred to as the

"Loan").   The books and   records of the Bank   shall,   in the absence of manifest

error,   be prima   facie   evidence   in any court or other   proceeding   brought to

enforce the Note (as   hereinafter   defined) as to the   principal   balance of the

Loan outstanding at any time and the amount of accrued interest.

 

     1.02.   The Note.   The Loan made by Bank shall be   evidenced by a promissory

note (the   "Note")   of even date   herewith   payable   to the order of Bank in the

original principal amount set forth in Section 1.01 above.

 

     1.03. Use and Application of Loan Proceeds. The entire proceeds of the Loan

shall be used for the following purposes:

 

          (A)   Pay-off at closing of   existing   indebtedness   owed to U.S.   Bank

     National Association, a national banking association ("US Bank"), through a

     revolving credit facility and term loan.

 

           (B) Provide operating funds for Borrower.

 

          (C) Provide interim funding for the acquisition of hotel properties by

     Borrower.

 

Borrower agrees that the proceeds of the Loan shall be used as described in this

Section 1.03 and shall not be used for any other purpose.

 

     1.04. Advance of Funds.

 

          (A)   Manner   of Making   Advances.   If the   Borrower   is   eligible   for

     advances upon the Note and if, at the time of the advance,   all   conditions

     to making an advance of funds have been   satisfied,   funds will be advanced

     as   provided   in this   Section   1.04(A)   or as the   Borrower   and   Bank may

     otherwise agree from time to time.

 

               (1)   Advances   will be made from   time to time to the   Borrower's

           Operating Account (as defined in Section 4.01(E)) as necessary so that

          the Operating   Account will, at all times,   have an account balance of

          $100,000 in collected funds. In the event the balance in the Operating

          Account exceeds   $100,000 at the close of business on any Business Day

          (as defined in Section 1.10),   the excess amount over $100,000 in such

          Operating   Account shall be withdrawn   from the   Operating   Account by

          Bank and applied   toward   payment of the   principal   amount due on the

          Loan.

 

               (2) Advances will also be made from time to time upon the written

          request for an advance by Borrower to Bank.

 

          (B)   Limitations   on   Advances.    Notwithstanding    anything   in   this

     Agreement to the contrary,   no advance shall be made or permitted hereunder

     which would result in the unpaid principal   balance of the Note,   including

     any advances made under the Security Documents hereunder,   exceeding in the

     aggregate at any one time the lesser of: (i) the   Borrowing   Base,   or (ii)

     the   Initial   Loan Limit   Amount or the   Step-Down   Loan Limit   Amount,   as

     applicable. No advance shall be made upon the occurrence and continuance of

     any Event of Default described in Section 5.01 below. Any recordation of an

     advance   by the Bank on the   Note,   the   reverse   side of the   Note,   or on

     supplemental   sheets   attached   to the Note,   or   otherwise   on the   Bank's

     records,   made pursuant to this Agreement   shall be prima facie evidence in

     any court or other proceeding brought to enforce the Note that the Borrower

     has   authorized   the   Bank to make   such   advances   and   that   the Bank has

     effected such advances.   The advance will be deemed to be at the request of

     and for the benefit of Borrower when   credited to   Borrower's   account with

     Bank or when advanced in accordance with the   instructions of an authorized

     representative   of   Borrower.     Bank   may   establish   a   cut-off   time   for

     requesting   advances,   with   requests made after that time being treated as

     made the next Business Day of Bank.

 

     1.05. Repayment and Interest.

 

          (A) Interest Rate. The unpaid principal   balance of the Loan will bear

     interest from the date of execution of the Note at the national   prime rate

     of interest as published in the Wall Street Journal (base rate on corporate

     loans   posted by at least 75% of the nation's   thirty (30) largest   banks),

     which rate of interest   shall be adjusted daily as said national prime rate

     of   interest   changes.   (As   applicable   to the   interest   rate during such

     period,   the "Interest   Rate").   Such   adjustment in the Interest Rate will

     occur without prior notice to Borrower.   Changes in the Interest Rate shall

     be   effective   from the date of the changes and shall be applied to amounts

     outstanding on the Loan.

 

          (B)   Repayment.   Borrower shall repay the aggregate   unpaid   principal

     amount of the Loan plus interest accrued thereon as follows:

 

               (1)   Borrower   shall pay   interest   only on the unpaid   principal

          balance from time to time outstanding, with such payments beginning on

           the first   Business Day of the calendar   month   following the month in

          which closing   occurs and continuing on the first Business Day of each

          month thereafter until such time as the entire principal amount of the

          Loan has been paid in full.

 

               (2)   Borrower   shall   pay,   on   the   Step-Down    Effective   Date,

          sufficient principal to reduce the outstanding unpaid principal amount

          of the Loan to the   Step-Down   Loan   Limit   Amount if the   outstanding

          unpaid   principal   balance   exceeds the Step-Down Loan Limit Amount on

          the Step-Down Effective Date.

 

               (3) If at any time the unpaid principal balance on the Note shall

          exceed the maximum   principal   amount   allowed under the Loan and this

          Agreement,   Borrower shall pay to Bank, upon oral or written demand by

          Bank, an amount equal to the difference   between the then   outstanding

          principal balance of the Loan and the maximum principal amount allowed

          under the Loan.

 

               (4)   Payments   of the   unpaid   principal   shall be made   from the

          Borrower's Operating Account as provided in Section 1.04(A)(1).

 

               (5)   Borrower   shall   pay all   remaining   unpaid   principal,   all

          accrued and unpaid   interest,   any unpaid Non-Usage Fee (as defined in

          Section   1.06),   and all other   unpaid   fees and charges due under the

          Loan Documents on or before the Maturity Date.

 

     Bank   shall be   authorized   to   withdraw   funds from   Borrower's   Operating

     Account to make any of the payments   referred to above,   but the failure or

     refusal   of Bank to do so shall not   excuse or extend   the due date for any

     such payment.   Bank agrees that on each annual anniversary date of the date

     of this Agreement   during the term of this Loan, it will review the Loan to

     determine   if the Bank will   extend   the   Maturity   Date for an   additional

     twelve (12) month   period,   which   decision will be made at the Bank's sole

     discretion.   If the Bank so elects,   Bank will   notify   Borrower in writing

     that Bank has made such   election,   stating in such notice the new Maturity

     Date for repayment of all principal and interest. If Bank does not elect to

     extend such dates,   then the Maturity   Date will remain as provided in this

     Agreement or as previously extended by Bank, as applicable.   Failure of the

     Bank to give notice of any extension as provided   herein shall mean that an

     extension of the Maturity Date has not been granted.

 

          (C) Prepayment.   If Borrower repays this Loan in full prior to January

     13,   2007 and   requests   a release of all,   or   substantially   all,   of the

     Collateral   given   to   secure   the   Loan,   Borrower   shall   pay   to   Bank a

     prepayment fee of $100,000 (the "Prepayment   Fee"),   which will be added to

     the then   unpaid   principal   balance   as of the   payoff   date.   Other   than

     Borrower's   obligation   to pay any Non-Usage   Fee and the   Prepayment   Fee,

     Borrower may pay all or a portion of the amount owed earlier than it is due

     without   premium or penalty.   Early payments will not,   unless agreed to by

     Bank in writing,   relieve Borrower of Borrower's   obligation to continue to

     make payments as required in this   Agreement.   Borrower   agrees not to send

     Bank   payments   marked   "paid in   full,"   "without   recourse,"   or   similar

     language.   If   Borrower   sends such a   payment,   Bank may accept it without

     losing any of Bank's rights under the Note or this Agreement,   and Borrower

     will remain obligated to pay any further amount owed to Bank.

 

          (D)   Default   Rate.   On any   overdue   principal   amount   of the   Loan,

     Borrower   shall pay to the Bank interest on demand at the Default Rate from

     the date such   amount   becomes due to the date such amount is paid in full,

     but in no event shall the Default Rate exceed the highest rate permitted by

     applicable   law.   The   "Default   Rate" is a rate equal to four percent (4%)

     over the Interest Rate then in effect.

 

          (E) Usury.   It is the   intention of the Bank and the   Borrower   hereof

     that the   Note and this   Agreement   and all   provisions   hereof   and of all

     documents   securing the Note conform in all respects to   applicable   law so

     that no payment of interest   or other sum   construed   to be interest   shall

     exceed the highest   lawful rate   permissible.   In   determining   the rate of

     interest paid or payable under this Agreement and the Note or any documents

     securing the same, all funds paid or to be paid as interest or construed to

     be interest   shall be prorated,   allocated,   or spread as   permitted   under

      applicable law. If, through any circumstances, the contract of the Borrower

     and the Bank would result in exceeding   the highest   lawful   interest   rate

     applicable to this transaction, or if the Borrower pays any sum as interest

     or construed to be interest in excess of such rate,   then, ipso facto,   (i)

     the amount   contracted   for shall be   automatically   reduced to the highest

     lawful rate authorized for this transaction,   and (ii) the amount of excess

     interest paid shall be applied to the reduction of the principal balance of

     the Note,   if any, and if the   principal   balance has been fully paid,   the

     excess   interest   shall be refunded to the Borrower and Borrower   agrees to

     accept such refund. Thereupon, the Bank shall not be subject to any penalty

     provided for the   contracting   for,   charging,   or receiving of interest in

     excess of such highest lawful rate, regardless of when or the circumstances

     under which such refund or application was made.

 

     1.06   Non-Usage   Fee.   Beginning on January 14, 2006 and   continuing to and

including the Maturity   Date,   Borrower will incur a fee at the rate of .25% per

annum   computed   on the   average   of the   unused   portion   of the   Loan   for the

preceding   three (3) months (the   "Non-Usage   Fee").   The Non-Usage Fee shall be

paid on April 1,   2006,   on the   first   Business   Day of each   calendar   quarter

thereafter and on the Maturity Date.

 

     1.07 Borrowing Base. At no time shall the unpaid   principal   balance of the

Note   exceed the lesser   of: (i) an amount   equal to 60% of the total   appraised

value of the   Hotels,   or (ii) an amount that would   result in a Revolving   Loan

Debt Service   Coverage Ratio (as defined in Section 4.01(G)) of less than 1.5 to

1 (the   "Borrowing   Base").   For purposes of determining the Borrowing Base, the

Bank shall utilize the appraisals prepared in connection with this Loan, or such

appraisals   as may be obtained by Bank from time to time during the term of this

Loan.   If, at any   time,   the then   outstanding   principal   balance   of the Note

exceeds the Borrowing Base,   Borrower will pay to Bank the amount of such excess

upon demand by the Bank.

 

     1.08. Costs of Loan.   Borrower shall pay to Bank all costs of recording any

of the Security Documents herein mentioned, all title insurance policy premiums,

the reasonable   attorney's   fees Bank has incurred in connection   with the Loan,

the cost of obtaining any   appraisal,   survey,   assessment,   report,   statement,

legal opinion or other document required to be furnished by Borrower pursuant to

this Agreement,   and all other reasonable and ordinary expenses   associated with

this Loan.

 

     1.09. Payments and Computations. Borrower shall make each payment hereunder

and under the Note not later than 1:00 p.m.   (Central   time) on the Business Day

when due in lawful   money of the   United   States of   America   to the Bank at its

address set forth above in same day funds.   Borrower hereby authorizes the Bank,

if and to the extent   payment is not made when due hereunder and under the Note,

to charge   any   amount   so due from   time to time   against   any   account   of the

Borrower with the Bank.   All   computations   of interest   hereunder and under the

Note shall be made by the Bank on the basis of a year of 360 days for the actual

number of days (including the first day but excluding the last day) elapsed.

 

     1.10.   Payment   on   Non-Business   Days.   Whenever   any   payment   to be made

hereunder or under the Note shall be stated to be due on a Saturday, Sunday or a

public or bank   holiday   in Omaha,   Nebraska   (any   other day being a   "Business

Day"),   such payment may be made on the next   succeeding   Business Day, and such

extension of time shall in such case be included in the   computation   of payment

of interest.

 

     1.11 Substitution and Addition to Collateral.   Subject to the prior written

approval   of the   Bank,   which   approval   shall   not be   unreasonably   withheld,

Borrower may substitute Hotels,   obtain the release of Hotels, and add Hotels to

maintain   compliance with, or cure any noncompliance   with, any of the covenants

set forth in Article IV of this Agreement. At the time of making any request for

approval, the Borrower shall satisfy the conditions precedent in Article II with

respect to any   substituted or added Hotels.   In the event the proposed added or

substituted   Hotel   was   acquired   more than two   years   before   the date of the

proposed   addition or   substitution,   Borrower will provide to Bank, at the time

Borrower   requests   the   addition or   substitution,   an   appraisal of the Hotel,

prepared by a duly licensed appraiser reasonably acceptable to Bank and which is

not more than two (2) years   old,   showing   the fair   market   value of the Hotel

proposed   for   addition   or   substitution.   The Bank shall have thirty (30) days

after the   request   for   approval   by the   Borrower   to   determine   if the Hotel

proposed to be   substituted or added is of   appropriate   character,   quality and

value.   Any request to add Hotels to cure any   noncompliance   with any covenants

set forth in Article IV shall be made within the thirty (30) day period provided

herein to cure any   noncompliance   with this   Agreement.   Once Bank approves any

substituted or added Hotel,   Borrower shall have thirty (30) days   thereafter to

comply with the   requirements of Article IV with respect   thereto.   Any proposed

substituted   or   added   Hotel   shall   not   be   included   in the   Borrowing   Base

computation or used in determining   compliance   with the covenants in Article IV

until such time as Bank agrees to accept such Hotel as additional or substituted

Collateral.   The time limits stated herein for adding or substituting   Hotels as

Collateral shall not extend the time for cure of Events of Default by Borrower.

 

                                   ARTICLE II

                              CONDITIONS PRECEDENT

 

     2.01. Condition Precedent to Advances Under the Loan. The obligation of the

Bank to close this Loan and to make any advance under the Loan is subject to the

Bank having received all of the following,   in form satisfactory to Bank and the

following conditions precedent being performed to the reasonable satisfaction of

Bank, at the time of closing and at the time Borrower requests each advance,   as

applicable:

 

          (A) Borrower   shall have duly   executed and delivered to Bank the Note

     evidencing the Loan payable to the order of the Bank.

 

          (B) Deeds of trust, mortgages, and assignments of rents, duly executed

     and acknowledged,   from the respective Hotel Owners as set forth on Exhibit

     "A" to and in favor of Bank,   which   encumber each of the Hotels and secure

     the Note together with all other   obligations   of Borrower to Bank pursuant

     to the terms of this   Agreement.   Said deeds of trust and   mortgages   shall

     create first liens and encumbrances on the Hotels,   subject only to current

     non-delinquent   real estate taxes as to each Hotel. Such deeds of trust and

     mortgages   shall include any easement   rights in favor of the Hotel Owners.

     Bank shall determine,   in its discretion,   as to whether a deed of trust or

     mortgage will be utilized as to any Hotel.

 

          (C) Security   agreements and UCC-1   financing   statements,   including,

     where required by Bank,   fixture   filings for each Hotel,   duly executed by

     Borrower,   TRS Leasing and by each Hotel Owner of record,   granting to Bank

     under the Uniform Commercial Code (the "UCC"), a first security interest in

     all tangible and intangible personal property and fixtures of Borrower, TRS

     Leasing and the Hotel Owners   located at the Hotels or used   exclusively in

     connection therewith,   including but not limited to, inventory,   equipment,

     fixtures, accounts and general intangibles of Borrower, TRS Leasing and the

     Hotel Owners, and in the Operating Account,   whether now owned or hereafter

     acquired, and in the proceeds of the same (all such property and the Hotels

     are   collectively    referred   to   as   the   "Collateral").    Such   financing

     statements   shall be   prepared in a manner   that   allows   recording   in the

     appropriate   governmental   recording   offices to create such first security

     interest in the Collateral.

 

          (D)   Agreements   concerning   the   Franchise   Agreements   with estoppel

     certifications,   described on Exhibit "B", duly executed by TRS Leasing and

     the franchisor of each Hotel,   to and in favor of Bank,   among other things

     assigning to Bank all of TRS Leasing's right,   title and interest in and to

     the Franchise Agreements.

 

          (E) Letter Agreement among Royal Host   Management,   Inc., Bank and TRS

     Leasing    pertaining   to   the   Management    Agreement   between   Royal   Host

     Management,   Inc.   and TRS   Leasing,   dated   August 1,   2004,   ("Management

     Agreement")   granting   to Bank   certain   rights   regarding   the   Management

     Agreement, and containing estoppel certifications.

 

          (F)   Environmental   indemnity   agreement   duly   executed by Bank,   TRS

     Leasing and by each Hotel   Owner,   in form and   substance   satisfactory   to

     Bank, agreeing to indemnify Bank from any loss or damage arising out of the

     environmental conditions specified in such agreement.

 

          (G)   Subordination,    nondisturbance   and   attornment   agreement   duly

     executed   by TRS   Leasing,   Borrower   and   each   Hotel   Owner   in form   and

     substance satisfactory to Bank.

 

          (H) Estoppel   certificate   duly   executed by TRS Leasing,   in form and

     substance satisfactory to Bank, pertaining to the Lease.

 

          (I) Non-foreign   mortgager   (FIRPTA)   certificate   for Borrower,   E&P,

     HHLP, and TRS Leasing.

 

          (J) Duly certified corporate resolutions, consents, authorizations and

     powers of attorney of Borrower   evidencing the authority of the officers of

     Borrower to execute and deliver on behalf of Borrower this   Agreement,   the

     Note, any of the Security Documents and other Loan Documents to be executed

     by Borrower and to execute and deliver any of the other documents   required

     to be executed by Borrower   under this   Agreement or otherwise as a part of

     this Loan.

 

          (K) Duly certified resolutions, consents, authorizations and powers of

     attorney or other showing of authority satisfactory to Bank, evidencing the

     authority   of the   officers   of each Hotel   Owner to execute and deliver on

     behalf of the Hotel   Owners any of the   Security   Documents   and other Loan

     Documents to be executed by such Hotel   Owners,   and to execute and deliver

     any of the other   documents   required to be   executed by such Hotel   Owners

     under this Agreement or otherwise as a part of this Loan.

 

          (L) Duly certified resolutions, consents, authorizations and powers of

     attorney or other showing of authority   satisfactory to Bank evidencing the

     authority   of the   officers of TRS Leasing to execute and deliver on behalf

     of TRS Leasing any of the Security Documents to be executed by TRS Leasing,

     and to execute and deliver any of the other documents to be executed by TRS

     Leasing under this Agreement or otherwise as a part of this Loan.

 

          (M)   Certified   articles of   incorporation   and bylaws of Borrower and

      certificate of good standing   (issued within two months of the date of this

     Agreement) from the State of Virginia.

 

          (N)   Certified    certificate   of   limited    partnership    and   limited

     partnership   agreement for HHLP and   certificate   of good standing   (issued

     within   two   months   of the   date of this   Agreement)   from   the   State   of

     Virginia.

 

          (O)   Certified    certificate   of   limited    partnership    and   limited

     partnership   agreement for E&P and   certificate   of good   standing   (issued

     within   two   months   of the   date of this   Agreement)   from   the   State   of

     Maryland.

 

          (P) Certified   articles of incorporation and bylaws of TRS Leasing and

     certificate of good standing   (issued within two months of the date of this

     Agreement) from the State of Virginia.

 

          (Q)   Organizational   documents of any other subsidiary or affiliate of

     Borrower   and/or   consents,   resolutions,    authorizations   and   powers   of

     attorney   of such   subsidiaries   or   affiliates   showing the   authority   of

     officers,   general   partners,   limited partners or members (as the case may

     be) to execute   and   deliver   any of the Loan   Documents   on behalf of such

     entity, as required by the Bank to properly   authorize the Loan transaction

     described herein or as required by any title company in connection with the

     title insurance policies contemplated herein.

 

          (R)    Complete    copies    of    Phase    I    Environmental    Assessments

     ("Assessments") for each Hotel, prepared by environmental   assessment firms

     satisfactory   to Bank,   together   with a   letter   from   each   environmental

     assessment firm preparing such   Assessment   stating that Bank can rely upon

      such Assessment in connection with the Loan. Bank may obtain   environmental

     data reports   ("EDR")   updating such   Assessments to the current date. Such

     Assessments   and EDRs   shall   show that   none of the   Hotels   contains   any

     hazardous   materials,   underground   storage   tanks or other   conditions   or

     operations that may create future environmental liability.

 

          (S) An ALTA survey of the real   property for each Hotel,   satisfactory

     to Bank, prepared by a registered land surveyor,   certified to Bank and the

     title   company   issuing   the   title   insurance   for the Hotel   (the   "Title

     Company"),   or for which Bank and the Title   Company has   received a letter

     from the surveyor   preparing the survey or, if such original surveyor is no

     longer   in   business,    another    registered    land    surveyor    reasonably

     satisfactory   to Bank, that entitles the Bank and the Title Company to rely

     thereon.   Such survey   shall verify all legal   descriptions   of the Hotels,

     show all lot lines, set-back lines, all improvements, all utility lines and

     facilities,   all   easements,   all adjacent   public rights of way and access

     thereto,   current property zoning,   and any other   restrictions or physical

      matters on the site or reflected in the public   records with respect to the

     Hotels.   In the event Bank elects to rely on an existing survey of a Hotel,

     Borrower   shall obtain a letter from each surveying firm that prepared such

     survey,   or another   registered   land surveyor   reasonably   satisfactory to

     Bank,   stating that Bank can rely upon such Survey in   connection   with the

     Loan,   and   shall   provide   to Bank   and the   Title   Company   a   Borrower's

     certificate   that no material changes have occurred to the real property or

     improvements   constituting   the   Hotel in   question   since the   survey   was

     prepared.

 

          (T) One or more ALTA lender's   policies of title   insurance for all of

     the Hotels, with Bank as the insured, insuring the liens of Bank's deeds of

     trust and mortgages as being first liens on each Hotel, subject only to the

     lien of any unpaid   current real estate taxes.   All standard   exceptions to

     such   policies   shall   be   deleted,   and the   policies   shall   contain   the

     following   endorsements:   Comp 100; Zoning 3.1; Access;   Survey;   Location;

     Contiguity   (if   multiple   lots or   parcels);   Subdivision   Control Act and

     Creditor's   Rights. At Closing,   Bank will receive a "mark-up" of the title

     insurance   commitment for such insurance   showing that (i) all requirements

     for issuance of the policies have been satisfied;   (ii) the Bank's deeds of

     trust and   mortgages   are first   liens on each   Hotel;   (iii) the   standard

     exceptions   to coverage will be deleted from the final   policies;   and (iv)

     the final policy will contain the requested endorsements.

 

          (U) Independent   written appraisals of the value of each Hotel in form

     and substance satisfactory to Bank, prepared by qualified and licensed real

     estate appraisers.

 

          (V) Satisfactory   evidence of hazard insurance coverage on each of the

     Hotels as required by the deeds of trust and   mortgages,   and   satisfactory

     evidence of   maintenance   of general   liability,   auto   liability,   workers

     compensation   insurance,   and other   insurance as may be required by any of

     the Loan Documents.

 

          (W) Current   certificates   of   occupancy   for each Hotel issued by the

     governmental jurisdiction with authority to issue such certificates for the

     Hotels,   or,   if   the   Hotel   is in a   jurisdiction   that   does   not   issue

     certificates of occupancy, a Borrower's certificate signed by an authorized

     officer of the Borrower to that effect.   If the certificate of occupancy is

     lost or   misplaced,   Borrower   shall obtain a copy thereof from the issuing

     authority.

 

          (X)   Certified   copies of requests   for   information   or copies   (Form

     UCC-11) or equivalent reports, of all effective financing   statements which

     name   Borrower   or any Hotel   Owner or TRS   Leasing as debtor and which are

     filed in the respective   States of organization   of such entities   together

     with   copies of such   financing   statements   (none of which shall cover the

     property   purported   to be covered by the Loan   Documents),   together   with

     releases   and/or   termination   of any security   interest in the   Collateral

     reflected in such request for information.

 

          (Y) The   Company   shall   have paid to the Bank the   documentation   fee

     previously agreed upon by the parties in the commitment letter for the Loan

     and shall have   reimbursed   Bank for all third party costs incurred by Bank

     in connection with this Loan as provided in Section 6.05 hereof.

 

          (Z) The favorable opinion of Borrower's   counsel, or local counsel, as

     applicable,   in form satisfactory to Bank and such counsel, dated as of the

     date of closing, that, subject to customary assumptions, qualifications and

     exceptions,   (i) this   Agreement,   the Note and all   other   Loan   Documents

     executed by Borrower   have been duly executed and delivered by the Borrower

     and   constitute   the legal,   valid and binding   obligation of the Borrower,

     enforceable in accordance with their   respective   terms,   (ii) the Security

     Documents   (as   defined   in this   Section   2.01),   when duly   executed   and

     delivered by the entities   obligated to execute such documents   (other than

     Borrower), will constitute the legal, valid and binding obligations of such

     parties   thereto,   enforceable in accordance with their   respective   terms,

     (iii) no   approval   or other   action by any other   person,   entity or court

     shall be required for the due and proper execution and delivery of the Loan

     Agreement,   the Note, the Security   Documents and the other Loan Documents,

     (iv) that the deeds of trust, mortgages and other Security Documents are in

     proper form for recording in appropriate public offices,   (v) that the Loan

     is not   usurious   under   applicable   law,   and (vi) the   priority of future

     advances.

 

          (AA) Such   documents,   duly executed by one or more of the appropriate

     Humphrey Entities, as are necessary to establish the Operating Account, the

     sweep   authorization   from the local bank   accounts   for each Hotel and the

     advances to, and   repayments   from,   the   Operating   Account of Borrower as

     provided in Section 1.04(A)(1) and 4.01(E) hereof.

 

          (AB) Such other certificates,   approvals, opinions or documents as the

     Bank or the Title Company may reasonably require.

 

     All of the   documents   referred   to above   and all   other   documents   to be

     delivered   by the   Borrower   to the Bank   pursuant   to this   Agreement   are

     hereinafter collectively referred to as the "Loan Documents". The documents

     referred to in subparagraphs (B), (C), (D) and (E) of this Section 2.01 are

     collectively referred to as the "Security Documents".

 

     2.02.   Closing. It is contemplated by the parties that closing of this Loan

shall occur on or before January 13, 2005.

 

     2.03   Post-Closing   Advances.   Any   advance   made to or for the   benefit of

Borrower   shall be deemed a   reaffirmation   by the   Borrower   at the time of the

advance,   that (i) the   representations and warranties of the Borrower contained

in this Agreement are correct as of such date,   (ii) Borrower,   each Hotel Owner

and TRS Leasing are in compliance with the covenants contained in this Agreement

as of such date and   (iii) no event has   occurred   and is   continuing,   or would

occur as a result of such   advance,   which   constitutes   an Event of Default (as

defined herein) or would   constitute an Event of Default but for any requirement

that notice be given or time elapse or both.

 

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

 

     3.01.    Representations   and   Warranties   of   the   Borrower.   The   Borrower

represents and warrants as follows:

 

          (A)   Existence   and Good   Standing   of   Borrower.   The   Borrower   is a

     corporation   duly   organized   and   existing   under the laws of the State of

      Virginia   and is in good   standing   as of the   date   hereof.   Borrower   has

     corporate   power and authority to own, lease and operate its properties and

     carry on its business as now conducted.   The Borrower is duly qualified and

     authorized to execute this   Agreement   and the other Loan   Documents and to

     perform the obligations thereof.   Borrower's principal office is located in

     Nebraska.

 

          (B)   Existence   and Good   Standing   of TRS   Leasing.   TRS Leasing is a

     corporation   duly   organized   and   existing   under the laws of the State of

     Virginia   and is in good   standing as of the date   hereof.   TRS Leasing has

     corporate   power and authority to own, lease and operate its properties and

     carry on its business as now conducted.   TRS Leasing's   principal office is

     located in Nebraska.

 

          (C)   Existence   and   Good   Standing   of   E & P.   E & P   is   a   limited

     partnership   duly   organized   and   existing   under the laws of the State of

     Maryland and is in good   standing as of the date   hereof.   E&P Trust is the

     general   partner   of E & P and   is a   real   estate   investment   trust   duly

     organized and existing   under the laws of the State of Maryland,   and is in

     good standing as of the date hereof.   E & P has limited   partnership   power

     and   authority to own,   lease and operate its   properties   and carry on its

     business as now conducted. E & P's principal office is located in Nebraska.

 

          (D) Existence and Good Standing of HHLP. HHLP is a limited partnership

     duly   organized   and   existing   under   the laws of the   State of   Virginia.

     Humphrey   Trust   is the   general   partner   of   HHLP   and   is a real   estate

     investment trust duly organized and existing under the laws of the State of

     Maryland,   and is in good standing as of the date hereof.   HHLP has limited

     partnership   power and authority to own,   lease and operate its   properties

     and carry on its   business as now   conducted.   HHLP's   principal   office is

     located in Nebraska.

 

          (E) No Conflict for Borrower. The execution,   delivery and performance

     by   Borrower   of this   Agreement,   the other Loan   Documents   and all other

     documents,   to which   Borrower   is a   party,   and the   consummation   of the

     transactions   contemplated   thereby are within the powers of   Borrower   and

     have been duly   authorized by all necessary   action,   does not and will not

     contravene (i) the articles,   bylaws or other   organizational   documents of

     Borrower;   or (ii)   any   law,   rule,   regulation,   order,   writ,   judgment,

     injunction,   decree or any contractual   provision restriction binding on or

     affecting   the   Borrower;   or (iii)   result in or require   the   creation or

     imposition of any lien,   security   interest or other charge or   encumbrance

     (other than pursuant   hereto) upon or with respect to any of the properties

     of the Borrower.

 

          (F)   No   Conflict   for   Hotel   Owners.   The   execution,   delivery   and

     performance by Hotel Owners of the Loan Documents and all other   documents,

     to which Hotel Owners are a party, and the consummation of the transactions

     contemplated   thereby   are w