<PAGE>
 
                                               Exhibit (4)-23
                                               Commonwealth Edison Company
                                               Form 10-K  File No.  1-1839

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

                                 $500,000,000

                                    5-YEAR
                               CREDIT AGREEMENT

                          Dated as of October 8, 1998

                                     Among

                          COMMONWEALTH EDISON COMPANY
                                  as Borrower

                                      and

                            THE BANKS NAMED HEREIN
                                   as Banks

                                      and

                                CITIBANK, N.A.
                            as Administrative Agent

                                      and

                            BANK OF AMERICA NT & SA
                             THE BANK OF NEW YORK
                      THE FIRST NATIONAL BANK OF CHICAGO
                           THE CHASE MANHATTAN BANK
                   MORGAN GUARANTY TRUST COMPANY OF NEW YORK

                                 as Co-Agents

================================================================================
<PAGE>
  
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

SECTION                                                                          PAGE
<S>                                                                              <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01.  Certain Defined Terms............................................    1
SECTION 1.02.  Computation of Time Periods......................................   16
SECTION 1.03.  Computations of Outstandings.....................................   16
SECTION 1.04.  Accounting Terms.................................................   16

ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES

SECTION 2.01.  The A Advances...................................................   16
SECTION 2.02.  Making the A Advances............................................   17
SECTION 2.03.  The B Advances...................................................   18
SECTION 2.04.  Fees.............................................................   22
SECTION 2.05.  Reduction of the Commitments.....................................   22
SECTION 2.06.  Repayment of A Advances..........................................   23
SECTION 2.07.  Interest on A Advances...........................................   23
SECTION 2.08.  Additional Interest on Eurodollar Rate Advances..................   23
SECTION 2.09.  Interest Rate Determination......................................   24
SECTION 2.10.  Voluntary Conversion of A Advances...............................   26
SECTION 2.11.  Optional Prepayments of A Advances...............................   26
SECTION 2.12.  Mandatory Prepayments............................................   27
SECTION 2.13.  Increased Costs..................................................   27
SECTION 2.14.  Illegality.......................................................   28
SECTION 2.15.  Payments and Computations........................................   29
SECTION 2.16.  Taxes............................................................   30
SECTION 2.17.  Sharing of Payments, Etc.........................................   32
SECTION 2.18.  Extension of Termination Date....................................   32
SECTION 2.19.  Increase in Commitments..........................................   34

ARTICLE III
CONDITIONS OF LENDING

SECTION 3.01.  Conditions Precedent to Closing..................................   35
SECTION 3.02.  Conditions Precedent to Each A Borrowing.........................   37
SECTION 3.03.  Conditions Precedent to Each B Borrowing.........................   38
SECTION 3.04.  Conditions Precedent to Each Extension of the Termination Date...   38
SECTION 3.05.  Reliance on Certificates.........................................   39
 
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
</TABLE> 
<PAGE>
  
<TABLE> 
<S>                                                                                <C>
SECTION 4.01.  Representations and Warranties of the Borrower....................  40

ARTICLE V
COVENANTS OF THE BORROWER

SECTION 5.01.  Affirmative Covenants.............................................  42
SECTION 5.02.  Negative Covenants................................................  47

ARTICLE VI
EVENTS OF DEFAULT

SECTION 6.01.  Events of Default.................................................  50

ARTICLE VII
THE ADMINISTRATIVE AGENT

SECTION 7.01.  Authorization and Action..........................................  53
SECTION 7.02.  Administrative Agent's Reliance, Etc..............................  53
SECTION 7.03.  Citibank, N.A. and Affiliates.....................................  54
SECTION 7.04.  Lender Credit Decision............................................  54
SECTION 7.05.  Indemnification...................................................  54
SECTION 7.06.  Successor Administrative Agent....................................  55

ARTICLE VIII
MISCELLANEOUS

SECTION 8.01.  Amendments, Etc...................................................  55
SECTION 8.02.  Notices, Etc......................................................  56
SECTION 8.03.  No Waiver; Remedies...............................................  57
SECTION 8.04.  Costs, Expenses, Taxes and Indemnification........................  57
SECTION 8.05.  Right of Set-off..................................................  58
SECTION 8.06.  Binding Effect....................................................  59
SECTION 8.07.  Assignments and Participations....................................  59
SECTION 8.08.  Confidentiality...................................................  63
SECTION 8.09.  Waiver of Jury Trial..............................................  63
SECTION 8.10.  Consent...........................................................  64
SECTION 8.11.  Governing Law.....................................................  64
SECTION 8.12.  Relation of the Parties; No Beneficiary...........................  64
SECTION 8.13.  Execution in Counterparts.........................................  64
</TABLE>

                                      ii
<PAGE>
  
                                   SCHEDULES
                                   ---------

Schedule I:  Commitment Allocations
Schedule II: List of Fossil Plants to be Offered for Sale

                                    EXHIBITS
                                    --------

Exhibit 1.01A-1:         Form of A Note
Exhibit 1.01A-2:         Form of B Note
Exhibit 2.02(a):         Form of Notice of A Borrowing
Exhibit 2.03(a)(i):      Form of Notice of B Borrowing
Exhibit 2.10:            Form of Notice of Conversion
Exhibit 2.18(a):         Form of Request for Extension of the Termination Date
Exhibit 3.01(a)(vii)-1:  Form of Opinion of Counsel to the Borrower
Exhibit 3.01(a)(vii)-2:  Form of Opinion of Counsel to the Agent
Exhibit 8.07:            Form of Lender Assignment

                                      iii
<PAGE>
 
                                    5-YEAR
                               CREDIT AGREEMENT

                          Dated as of October 8, 1998


     THIS 5-YEAR CREDIT AGREEMENT (this "AGREEMENT") is made by and among:

     (i)   COMMONWEALTH EDISON COMPANY, an Illinois corporation (the
           "BORROWER"),

     (ii)  the banks (the "BANKS") listed on the signature pages hereof and the
           other Lenders (as hereinafter defined) from time to time party
           hereto, and

     (iii) CITIBANK, N.A., as agent (the "ADMINISTRATIVE AGENT") for the
           Lenders hereunder.


                                   ARTICLE I
                       DEFINITIONS AND ACCOUNTING TERMS

      SECTION 1.0  CERTAIN DEFINED TERMS.  As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

           "A ADVANCE" means an advance by a Lender to the Borrower as part of
     an A Borrowing and refers to a Base Rate Advance or a Eurodollar Rate
     Advance, each of which shall be a "TYPE" of A Advance.

           "A BORROWING" means a borrowing consisting of simultaneous A Advances
     of the same Type, having the same Interest Period and ratably made or
     Converted on the same day by each of the Lenders pursuant to Section 2.02
     or 2.10, as the case may be. All Advances of the same Type, having the same
     Interest Period and made or Converted on the same day shall be deemed a
     single Borrowing hereunder until repaid or next Converted.

           "A NOTE" means a promissory note of the Borrower payable to the order
     of any Lender, in substantially the form of Exhibit 1.01A-1 hereto,
     evidencing the aggregate indebtedness of the Borrower to such Lender
     resulting from the A Advances made by such Lender.
<PAGE>
 
                                                                               2

           "ADVANCE" means an A Advance or a B Advance.

           "AFFILIATE" means, with respect to any Person, any other Person
     directly or indirectly controlling (including but not limited to all
     directors and any officer who possesses the power described in the next
     sentence), controlled by, or under direct or indirect common control with
     such Person. A Person shall be deemed to control another entity if such
     Person possesses, directly or indirectly, the power to direct or cause the
     direction of the management and policies of such entity, whether through
     the ownership of voting securities, by contract, or otherwise.

           "ALTERNATE BASE RATE" means a fluctuating interest rate per annum as
     shall be in effect from time to time which rate per annum shall at all
     times be equal to the higher of:

               (a) the rate of interest announced publicly by Citibank, N.A. in
     New York, New York, from time to time, as Citibank, N.A.'s base rate; and

               (b) 1/2 of one percent per annum above the Federal Funds Rate.

     Each change in the Alternate Base Rate shall take effect concurrently with
     any change in such base rate or the Federal Funds Rate.

           "APPLICABLE LENDING OFFICE" means, with respect to each Lender, such
     Lender's Domestic Lending Office in the case of a Base Rate Advance and
     such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
     Advance and, in the case of a B Advance, the office of such Lender notified
     by such Lender to the Administrative Agent as its Applicable Lending Office
     with respect to such B Advance.

           "APPLICABLE MARGIN" means, on any date, for a Eurodollar Rate Advance
     or Base Rate Advance, the number of basis points set forth below in the
     columns identified as Level 1, Level 2, Level 3, Level 4 and Level 5, as
     determined by the respective ratings issued by S&P and Moody's for non-
     credit-enhanced long-term senior secured debt of the Borrower (the
     "REFERENCE RATINGS") and in effect on such date.

<TABLE> 
<CAPTION> 
     -------------------------------------------------------------------------------
                             LEVEL 1          LEVEL 2  LEVEL 3  LEVEL 4   LEVEL 5   
                             ------------     -------  -------  -------   -------   
     S&P                     A- OR BETTER     BBB+     BBB      BBB-      LOWER THAN
                             AND              AND      AND      AND       LEVEL 4 OR
     MOODY'                  A3 OR BETTER     BAA1     BAA2     BAA3      UNRATED   
     -------------------------------------------------------------------------------
     <S>                     <C>              <C>      <C>      <C>       <C>  
     Basis Points Per Annum                                                         
     ------------------------------------------------------------------------------- 
</TABLE> 
<PAGE>
 
                                                                               3

<TABLE> 
     -------------------------------------------------------------------------------
     <S>                                <C>      <C>      <C>      <C>       <C> 
     Eurodollar Rate Advance            20.0     22.5     27.5     38.0      75.0
     -------------------------------------------------------------------------------
     Base Rate Advance                  0        0        0        0         0
     -------------------------------------------------------------------------------
</TABLE>

     Any change in the Reference Ratings shall effect an immediate change in the
     Applicable Margin.

          "APPLICABLE RATE" means:

          (i)  in the case of each Base Rate Advance, a rate per annum equal at
     all times to the sum of the Alternate Base Rate in effect from time to time
     plus the Applicable Margin in effect from time to time; and

          (ii) in the case of each Eurodollar Rate Advance comprising part of
     the same A Borrowing, a rate per annum during each Interest Period equal at
     all times to the sum of the Eurodollar Rate for such Interest Period plus
     the Applicable Margin in effect from time to time during such Interest
     Period.

          "AVAILABLE COMMITMENT" means, for each Lender at any time on any day,
     the unused portion of such Lender's Commitment, computed after giving
     effect to all Extensions of Credit made or to be made on such day, the
     application of proceeds therefrom and all prepayments and repayments of
     Advances made on such day.

          "AVAILABLE COMMITMENTS" means the aggregate of the Lenders' Available
     Commitments hereunder.

          "B ADVANCE" means an advance by a Lender to the Borrower as part of a
     B Borrowing resulting from the auction bidding procedure described in
     Section 2.03.

          "B BORROWING" means a borrowing consisting of simultaneous B Advances
     from each of the Lenders whose offer to make one or more B Advances as part
     of such borrowing has been accepted by the Borrower under the auction
     bidding procedure described in Section 2.03.

          "B NOTE" means a promissory note of the Borrower payable to the order
     of any Lender, in substantially the form of Exhibit 1.01A-2 hereto,
     evidencing the aggregate indebtedness of the Borrower to such Lender
     resulting from a B Advance made by such Lender.
<PAGE>
 
                                                                               4

          "B REDUCTION" has the meaning assigned to that term in Section 2.01.

          "BASE RATE ADVANCE" means an A Advance that bears interest as provided
     in Section 2.07(a).

          "BORROWING" means an A Borrowing or a B Borrowing. Any A Borrowing
     consisting of A Advances of a particular Type may be referred to as being
     an A Borrowing of such "Type".

          "BUSINESS DAY" means a day of the year on which banks are not required
     or authorized to close in New York City or Chicago, Illinois, and, if the
     applicable Business Day relates to any Eurodollar Rate Advance, on which
     dealings are carried on in the London interbank market.

          "CAPITALIZED LEASE OBLIGATIONS" means obligations to pay rent or other
     amounts under any lease of (or other arrangement conveying the right to
     use) real and/or personal property which obligation is required to be
     classified and accounted for as a capital lease on a balance sheet prepared
     in accordance with GAAP, and for purposes hereof the amount of such
     obligations shall be the capitalized amount determined in accordance with
     GAAP.

          "CHANGE OF CONTROL" means the occurrence, after the date of this
     Agreement, of (i) any Person or two or more Persons acting in concert
     acquiring beneficial ownership (within the meaning of Rule 13d-3 of the
     Securities and Exchange Commission under the Securities Exchange Act of
     1934, as amended), directly or indirectly, of securities of the Borrower
     (or other securities convertible into such securities) representing 50% of
     more of the combined voting power of all securities of the Borrower
     entitled to vote in the election of directors; or (ii) commencing after the
     date of this Agreement, individuals who as of the date of this Agreement
     were directors ceasing for any reason to constitute a majority of the Board
     of Directors of the Borrower unless the Persons replacing such individuals
     were nominated by the stockholders or the Board of Directors of the
     Borrower in accordance with the Borrower's Bylaws; or (iii) any Person or
     two or more Persons acting in concert acquiring by contract or otherwise,
     or entering into a contract or arrangement which upon consummation will
     result in its or their acquisition of, or control over, securities of the
     Borrower (or other securities convertible into such securities)
     representing 50% or more of the combined voting power of all securities of
     the Borrower entitled to vote in the election of directors.
<PAGE>
 
                                                                               5

          "CLOSING" means the day upon which each of the applicable conditions
     precedent enumerated in Section 3.01 shall be fulfilled to the satisfaction
     of, or waived with the consent of, the Lenders, the Administrative Agent
     and the Borrower.  All transactions contemplated by the Closing shall take
     place on a Business Day on or prior to October 8, 1998, at the offices of
     King & Spalding, 1185 Avenue of the Americas, New York, New York  10036, at
     10:00 a.m., or such later Business Day as the parties hereto may mutually
     agree.

          "COMMITMENT" means, for each Lender, the obligation of such Lender to
     make Advances to the Borrower in an amount no greater than the amount set
     forth on Schedule I hereto or, if such Lender has entered into one or more
     Lender Assignments, set forth for such Lender in the Register maintained by
     the Administrative Agent pursuant to Section 8.07(c), in each such case as
     such amount may be reduced from time to time pursuant to Section 2.05.
     "COMMITMENTS" means the total of the Lenders' Commitments hereunder. The
     Commitments shall in no event exceed $500,000,000.

          "CONSOLIDATED CAPITAL" means, with respect to any Person, at any date
     of determination, the sum of (a) Consolidated Debt of such Person, (b)
     consolidated equity of the common stockholders of such Person and its
     Consolidated Subsidiaries, (c) consolidated equity of the preference
     stockholders of such Person and its Consolidated Subsidiaries, (d)
     consolidated equity of the preferred stockholders of such Person and its
     Consolidated Subsidiaries, in each case determined at such date in
     accordance with GAAP and (e) the aggregate principal amount of Subordinated
     Deferrable Interest Securities of such Person and its Consolidated
     Subsidiaries.

          "CONSOLIDATED DEBT" means, with respect to any Person, at any date of
     determination, the aggregate Debt of such Person and its Consolidated
     Subsidiaries determined on a consolidated basis in accordance with GAAP,
     but shall not include (i) Nonrecourse Debt of any Subsidiary of the
     Borrower, (ii) the aggregate principal amount of Subordinated Deferrable
     Interest Securities of such Person and its Consolidated Subsidiaries and
     (iii) the aggregate principal amount of Transitional Funding Instruments of
     such Person and its Consolidated Subsidiaries.

          "CONSOLIDATED SUBSIDIARY" means, with respect to any Person, any
     Subsidiary of such Person whose accounts are or are required to be
     consolidated with the accounts of such Person in accordance with generally
     accepted accounting principles.

          "CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion of
     Advances of one Type into Advances of another Type, or to the selection of
     a new, or the
<PAGE>
 
                                                                               6

     renewal of the same, Interest Period for Advances, as the case may be,
     pursuant to Section 2.09 or 2.10.

          "DEBT" means, for any Person, any and all indebtedness, liabilities
     and other monetary obligations of such Person (i) for borrowed money or
     evidenced by bonds, debentures, notes or other similar instruments, (ii) to
     pay the deferred purchase price of property or services (except trade
     accounts payable arising and repaid in the ordinary course of business),
     (iii) Capitalized Lease Obligations, (iv) under reimbursement or similar
     agreements with respect to letters of credit (other than trade letters of
     credit) issued to support indebtedness or obligations of such Person or of
     others of the kinds referred to in clauses (i) through (iii) above and
     clause (v) below, (v) reasonably quantifiable obligations under direct
     guaranties or indemnities, or under support agreements, in respect of, and
     reasonably quantifiable obligations (contingent or otherwise) to purchase
     or otherwise acquire, or otherwise to assure a creditor against loss in
     respect of, or to assure an obligee against failure to make payment in
     respect of, indebtedness or obligations of others of the kinds referred to
     in clauses (i) through (iv) above, and (vi) in respect of unfunded vested
     benefits under Plans. In determining Debt for any Person, (A) there shall
     be included accrued interest on the principal amount thereof to the extent
     such interest has accrued for more than six months and (B) in the cases of
     clauses (iv) and (v), such obligation shall be excluded to the extent that
     the primary obligation has been included under the preceding clauses.
     
          "DEFAULT RATE" means (i) with respect to the unpaid principal of or
     interest on any Advance, the greater of (A) 2% per annum above the
     Applicable Rate in effect from time to time for such Advance and (B) 2% per
     annum above the Applicable Rate in effect from time to time for Base Rate
     Advances and (ii) with respect to any other unpaid amount hereunder, 2% per
     annum above the Applicable Rate in effect from time to time for Base Rate
     Advances.

          "DOLLARS" and the sign "$" each means lawful money of the United
     States.

          "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the
     office or affiliate of such Lender specified as its "Domestic Lending
     Office" opposite its name on Schedule I hereto or in the Lender Assignment
     pursuant to which it became a Lender, or such other office or affiliate of
     such Lender as such Lender may from time to time specify in writing to the
     Borrower and the Administrative Agent.

          "ELIGIBLE ASSIGNEE" means (a) a commercial bank or trust company
     organized under the laws of the United States, or any State thereof; (b) a
     commercial bank organized
<PAGE>
 
                                                                               7

     under the laws of any other country that is a member of the OECD, or a
     political subdivision of any such country, provided that such bank is
     acting through a branch or agency located in the United States; (c) the
     central bank of any country that is a member of the OECD; and (d) any other
     commercial bank or other financial institution engaged generally in the
     business of extending credit or purchasing debt instruments; provided,
     however, that (A) any such Person shall also (i) have outstanding unsecured
     long-term indebtedness that is rated A- or better by S&P or A3 or better by
     Moody's (or an equivalent rating by another nationally-recognized credit
     rating agency of similar standing if neither of such corporations is then
     in the business of rating unsecured indebtedness of entities engaged in
     such businesses) or (ii) have combined capital and surplus (as established
     in its most recent report of condition to its primary regulator) of not
     less than $250,000,000 (or its equivalent in foreign currency), (B) any
     Person described in clause (a), (b), (c) or (d) above, shall, on the date
     on which it is to become a Lender hereunder, (i) be entitled to receive
     payments hereunder without deduction or withholding of any United States
     Federal income taxes (as contemplated by Section 2.16) and (ii) not be
     incurring any losses, costs or expenses of the type for which such Person
     could demand payment under Section 2.13, and (C) any Person described in
     clause (a), (b), (c) or (d) above shall, in addition, be reasonably
     acceptable to the Administrative Agent and the Borrower.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
     amended from time to time, and the regulations promulgated and rulings
     issued thereunder.

          "ERISA AFFILIATE" means, with respect to any Person, any trade or
     business (whether or not incorporated) which is a member of a group of
     which such Person is a member and which is under common control within the
     meaning of the regulations under Section 414(b) or (c) of the Internal
     Revenue Code of 1986, as amended from time to time.

          "ERISA EVENT" means (i) the occurrence of a reportable event, within
     the meaning of Section 4043 of ERISA, unless the 30-day notice requirement
     with respect thereto has been waived by the PBGC; (ii) the provision by the
     administrator of any Plan of notice of intent to terminate such Plan,
     pursuant to Section 4041(a)(2) of ERISA (including any such notice with
     respect to a plan amendment referred to in Section 4041(e) of ERISA); (iii)
     except in connection with the sale of certain fossil-fired generating
     facilities listed on Schedule II hereto, the cessation of operations at a
     facility in the circumstances described in Section 4062(e) of ERISA; (iv)
     the withdrawal by the Borrower or an ERISA Affiliate of the Borrower from a
     Multiple Employer Plan during a plan year for which it was a "substantial
     employer", as defined in Section 4001(a)(2) of ERISA; (v) the failure by
     the
<PAGE>
 
                                                                               8

     Borrower or an ERISA Affiliate of the Borrower to make a payment to a Plan
     required under Section 302(f)(1) of ERISA, which failure results in the
     imposition of a lien for failure to make required payments; (vi) the
     adoption of an amendment to a Plan requiring the provision of security to
     such Plan, pursuant to Section 307 of ERISA; or (vii) the institution by
     the PBGC of proceedings to terminate a Plan, pursuant to Section 4042 of
     ERISA, or the occurrence of any event or condition which might reasonably
     be expected to constitute grounds under Section 4042 of ERISA for the
     termination of, or the appointment of a trustee to administer, a Plan.

          "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
     Regulation D of the Board of Governors of the Federal Reserve System, as in
     effect from time to time.

          "EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the
     office or affiliate of such Lender specified as its "Eurodollar Lending
     Office" opposite its name on Schedule I hereto or in the Lender Assignment
     pursuant to which it became a Lender (or, if no such office is specified,
     its Domestic Lending Office), or such other office or affiliate of such
     Lender as such Lender may from time to time specify in writing to the
     Borrower and the Administrative Agent.

          "EURODOLLAR RATE" means, for each Interest Period for each Eurodollar
     Rate Advance made as part of the same A Borrowing, an interest rate per
     annum equal to the average (rounded upward to the nearest whole multiple of
     1/16 of 1% per annum, if such average is not such a multiple) of the rate
     per annum at which deposits in Dollars are offered by the principal office
     of each of the Reference Banks in London, England to prime banks in the
     London interbank market at 11:00 a.m. (London time) two Business Days
     before the first day of such Interest Period in an amount substantially
     equal to such Reference Bank's Eurodollar Rate Advance made as part of such
     A Borrowing and for a period equal to such Interest Period.  The Eurodollar
     Rate for the Interest Period for each Eurodollar Rate Advance made as part
     of the same A Borrowing shall be determined by the Administrative Agent on
     the basis of applicable rates furnished to and received by the
     Administrative Agent from the Reference Banks two Business Days before the
     first day of such Interest Period, subject, however, to the provisions of
     Section 2.09.

          "EURODOLLAR RATE ADVANCE" means an A Advance that bears interest as
     provided in Section 2.07(b).

          "EURODOLLAR RESERVE PERCENTAGE" of any Lender for each Interest Period
     for each Eurodollar Rate Advance means the reserve percentage applicable to
     such Lender during such Interest Period (or if more than one such
     percentage shall be so applicable, the daily
<PAGE>
 
                                                                               9

     average of such percentages for those days in such Interest Period during
     which any such percentage shall be so applicable) under Regulation D or
     other regulations issued from time to time by the Board of Governors of the
     Federal Reserve System (or any successor) for determining the maximum
     reserve requirement (including, without limitation, any emergency,
     supplemental or other marginal reserve requirement) then applicable to such
     Lender with respect to liabilities or assets consisting of or including
     Eurocurrency Liabilities having a term equal to such Interest Period.

          "EVENTS OF DEFAULT" has the meaning assigned to that term in Section
     6.01.

          "EXISTING FACILITY" means the Credit Agreement, dated as of October 1,
     1991, among the Borrower, the Administrative Agent and certain lenders
     party thereto, as amended or modified as of the date hereof.

          "EXTENSION DATE" has the meaning assigned to that term in Section
     2.18(b).

          "EXTENSION OF CREDIT" means the making of a Borrowing.  For purposes
     of this Agreement, a Conversion shall not constitute an Extension of
     Credit.

          "FACILITY FEE" means a fee which shall be payable on the aggregate
     amount of the Commitments, irrespective of usage, to the Lenders pro rata
     on the amounts of their respective Commitments at the rate (expressed in
     basis points per annum) set forth below in the columns identified as Level
     1, Level 2, Level 3, Level 4 and Level 5, as determined by the respective
     ratings issued by S&P and Moody's for non-credit-enhanced long-term senior
     secured debt of the Borrower.

<TABLE>
<CAPTION>
          --------------------------------------------------------------------  
                            LEVEL 1     LEVEL 2  LEVEL 3  LEVEL 4    LEVEL 5   
          S&P             ------------  -------  -------  -------  ----------- 
                          A- OR         BBB+     BBB      BBB-     LOWER THAN  
          MOODY'S         BETTER        AND      AND      AND      LEVEL 4 OR 
                          AND           BAA1     BAA2     BAA3     UNRATED    
                          A3 OR BETTER                                         
          --------------------------------------------------------------------  
          <S>             <C>           <C>      <C>      <C>      <C>         
          Basis Points    10.0          12.5     15.0     17.0     25.0 
          -------------------------------------------------------------------- 
</TABLE>

     The Facility Fee will be based upon the level corresponding to the
     Reference Ratings at the time of determination.  Any change in the
     Reference Ratings shall effect an immediate change in the Facility Fee.

          "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
     rate per annum equal for each day during such period to the weighted
     average of the rates on overnight Federal funds transactions with members
     of the Federal Reserve System arranged by
<PAGE>
 
                                                                              10

     Federal funds brokers, as published for such day (or, if such day is not a
     Business Day, for the next preceding Business Day) by the Federal Reserve
     Bank of New York, or, if such rate is not so published for any day which is
     a Business Day, the average of the quotations for such day on such
     transactions received by the Administrative Agent from three Federal funds
     brokers of recognized standing selected by it.

          "GAAP" means generally accepted accounting principles in effect from
     time to time, consistent with the principles used in preparing the
     financial statements referred to in Section 4.01(g) hereof.

          "GOVERNMENTAL APPROVAL" means any authorization, consent, approval,
     license, franchise, lease, ruling, tariff, rate, permit, certificate,
     exemption of, or filing or registration with, any governmental authority or
     other legal or regulatory body.

          "HAZARDOUS SUBSTANCE" means any waste, substance, or material
     identified as hazardous, dangerous or toxic by any office, agency,
     department, commission, board, bureau, or instrumentality of the United
     States or of the State or locality in which the same is located having or
     exercising jurisdiction over such waste, substance or material.

          "INFORMATION MEMORANDUM" means the Confidential Information Memorandum
     dated August 1998 relating to this Agreement and the Other Credit Agreement
     delivered (or to be delivered) by Citicorp Securities, Inc. at the
     direction of the Borrower to the Lenders.

          "INTEREST PERIOD" means, for each A Advance made as part of the same A
     Borrowing, the period commencing on the date of such A Advance or the date
     of the Conversion of any A Advance into such an A Advance and ending on the
     last day of the period selected by the Borrower pursuant to the provisions
     below and, thereafter, each subsequent period commencing on the last day of
     the immediately preceding Interest Period and ending on the last day of the
     period selected by the Borrower pursuant to the provisions below.  The
     duration of each such Interest Period shall be 1, 2, 3 or 6 months in the
     case of a Eurodollar Rate Advance, in each case as the Borrower may, upon
     notice received by the Administrative Agent not later than 12:00 noon (New
     York City time) on the third Business Day prior to the first day of such
     Interest Period in the case of a Eurodollar Rate Advance, select; provided,
     however, that:

               (i)  the Borrower may not select any Interest Period that ends
          after the Termination Date;
<PAGE>
 
                                                                              11

               (ii)   Interest Periods commencing on the same date for A
          Advances comprising part of the same A Borrowing shall be of the same
          duration; and

               (iii)  whenever the last day of any Interest Period would
          otherwise occur on a day other than a Business Day, the last day of
          such Interest Period shall be extended to occur on the next succeeding
          Business Day, provided, in the case of any Interest Period for a
          Eurodollar Rate Advance, that if such extension would cause the last
          day of such Interest Period to occur in the next following calendar
          month, the last day of such Interest Period shall occur on the next
          preceding Business Day.

          "LENDERS" means the Banks listed on the signature pages hereof and
     each Eligible Assignee that shall become a party hereto pursuant to Section
     8.07.

          "LENDER ASSIGNMENT" means an assignment and acceptance agreement
     entered into by a Lender and an Eligible Assignee, and accepted by the
     Administrative Agent, in substantially the form of Exhibit 8.07.

          "LIEN" has the meaning assigned to that term in Section 5.02(a).

          "LOAN DOCUMENTS" means this Agreement, the Notes, the Fee Letter and
     all other agreements, instruments and documents now or hereafter executed
     and/or delivered pursuant hereto or thereto.

          "MAJORITY LENDERS" means, on any date of determination, Lenders that,
     collectively, on such date (i) hold greater than 50% of the then aggregate
     unpaid principal amount of the A Advances owing to Lenders and (ii) if no A
     Advances are then outstanding, have Percentages in the aggregate greater
     than 50%.  Any determination of those Lenders constituting the Majority
     Lenders shall be made by the Administrative Agent and shall be conclusive
     and binding on all parties absent manifest error.

          "MATERIAL ADVERSE EFFECT" means, relative to any occurrence of
     whatever nature (including, without limitation, any adverse determination
     in any litigation, arbitration or governmental investigation or
     proceedings), a material adverse effect on:

               (i)    the consolidated business, assets, revenues, financial
          condition, results of operations, operations or prospects of the
          Borrower and its Subsidiaries; or
<PAGE>
 
                                                                              12

               (ii)   the ability of the Borrower to make any payment when due
          under this Agreement or to perform any of its other obligations under
          the Loan Documents.

          "MOODY'S" means Moody's Investors Service, Inc. or any successor
     thereto.

          "MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section
     4001(a)(3) of ERISA, which is subject to Title IV of ERISA and to which the
     Borrower or any ERISA Affiliate of the Borrower is making or accruing an
     obligation to make contributions, or has within any of the preceding five
     plan years made or accrued an obligation to make contributions, such plan
     being maintained pursuant to one or more collective bargaining agreements.

          "MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in
     Section 4001(a)(15) of ERISA, which is subject to Title IV of ERISA and
     which (i) is maintained for employees of the Borrower or an ERISA Affiliate
     of the Borrower and at least one Person other than the Borrower and its
     ERISA Affiliates or (ii) was so maintained and in respect of which the
     Borrower or an ERISA Affiliate of the Borrower could have liability under
     Section 4064 or 4069 of ERISA in the event such plan has been or were to be
     terminated.

          "NONRECOURSE DEBT" means any Debt that finances the acquisition,
     development, ownership or operation of an asset in respect of which the
     Person to which such Debt is owed has no recourse whatsoever to the
     Borrower or any of its Affiliates other than:

          (i)    recourse to the named obligor with respect to such Debt (the
                 "DEBTOR") for amounts limited to the cash flow or net cash flow
                 (other than historic cash flow) from the asset; and

          (ii)   recourse to the Debtor for the purpose only of enabling amounts
                 to be claimed in respect of such Debt in an enforcement of any
                 security interest or lien given by the Debtor over the asset or
                 the income, cash flow or other proceeds deriving from the asset
                 (or given by any shareholder or the like in the Debtor over its
                 shares or like interest in the capital of the Debtor) to secure
                 the Debt, but only if:

                 (A)  the extent of the recourse to the Debtor is limited solely
                      to the amount of any recoveries made on any such
                      enforcement; and
<PAGE>
 
                                                                              13

               (B)  the Person to which such Debt is owed is not entitled, by
                    virtue of any right or claim arising out of or in connection
                    with such Debt, to commence proceedings for the winding up
                    or dissolution of the Debtor or to appoint or procure the
                    appointment of any receiver, trustee, or similar Person or
                    officer in respect of the Debtor or any of its assets (other
                    than the assets subject to the security interest or lien
                    referred to above); and

       (iii)   recourse to the Debtor generally or indirectly to any Affiliate
               of the Debtor, under any form of assurance, undertaking or
               support, which recourse is limited to a claim for damages (other
               than liquidated damages and damages required to be calculated in
               a specified way) for a breach of an obligation (other than a
               payment obligation or an obligation to comply or to procure
               compliance by another with any financial ratios or other tests of
               financial condition) by the Person against which such recourse is
               available.

       "NOTE" means an A Note or a B Note.

       "NOTICE OF A BORROWING" has the meaning assigned to that term in
   Section 2.02(a).

       "NOTICE OF B BORROWING" has the meaning assigned to that term in
   Section 2.03(a).

       "NOTICE OF CONVERSION" has the meaning assigned to that term in Section
   2.10.

       "OTHER CREDIT AGREEMENT" means the 364-Day Credit Agreement, dated as of
   October 8, 1998, among the Borrower, the lenders from time to time parties
   thereto and Citibank, N.A., as agent for such lenders.

       "PBGC" means the Pension Benefit Guaranty Corporation (or any successor
   entity) established under ERISA.

       "PERCENTAGE"  means, for any Lender on any date of determination, the
   percentage obtained by dividing such Lender's Commitment on such day by the
   total of the Commitments on such date, and multiplying the quotient so
   obtained by 100%.

       "PERSON" means an individual, partnership, corporation (including a
   business trust), limited liability company, joint stock company, trust,
   unincorporated association, 
<PAGE>
 
                                                                              14

joint venture or other entity, or a government or any political subdivision or
agency thereof.

          "PLAN" means a Single Employer Plan or a Multiple Employer Plan.

          "PUHCA" means the Public Utility Holding Company Act of 1935, as
     amended from time to time.

          "REFERENCE BANKS" means Citibank, N.A., and any additional or
     substitute Lenders as may be selected from time to time to act as Reference
     Banks hereunder by the Administrative Agent, the Majority Lenders and the
     Borrower.

          "REGISTER" has the meaning assigned to that term in Section 8.07(c).

          "S&P" means Standard & Poor's Ratings Services, a division of the
     McGraw-Hill Companies, Inc., or any successor thereto.

          "SENIOR FINANCIAL OFFICER" means the President, the Chief Executive
     Officer, the Chief Financial Officer or the Treasurer of the Borrower.

          "SIGNIFICANT SUBSIDIARY" means any direct or indirect Subsidiary of
     the Borrower that, on a consolidated basis with any of its Subsidiaries as
     of any date of determination, accounts for more than 20% of the
     consolidated assets (valued at book value) of the Borrower and its
     Subsidiaries; but shall not include any Subsidiary set up for the sole
     purpose of facilitating the issuance of Transitional Funding Instruments.

          "SINGLE EMPLOYER PLAN" means a single employer plan, as defined in
     Section 4001(a)(15) of ERISA, which is subject to Title IV of ERISA and
     which (i) is maintained for employees of the Borrower or an ERISA Affiliate
     of the Borrower and no Person other than the Borrower and its ERISA
     Affiliates, or (ii) was so maintained and in respect of which the Borrower
     or an ERISA Affiliate of the Borrower could have liability under Section
     4069 of ERISA in the event such plan has been or were to be terminated.

          "SUBORDINATED DEFERRABLE INTEREST SECURITIES" means all obligations of
     the Borrower and its Subsidiaries in respect of "ComEd-Obligated
     Mandatorily Redeemable Preferred Securities of Subsidiary Trusts", as set
     forth from time to time in the consolidated balance sheets of the Borrower
     and its Consolidated Subsidiaries delivered pursuant to Section 5.01(i).
<PAGE>
 
                                                                              15


          "SUBSIDIARY"  means, with respect to any Person, any corporation or
     unincorporated entity of which more than 50% of the outstanding capital
     stock (or comparable interest) having ordinary voting power (irrespective
     of whether at the time capital stock (or comparable interest) of any other
     class or classes of such corporation or entity shall or might have voting
     power upon the occurrence of any contingency) is at the time directly or
     indirectly owned by said Person (whether directly or through one of more
     other Subsidiaries). In the case of an unincorporated entity, a Person
     shall be deemed to have more than 50% of interests having ordinary voting
     power only if such Person's vote in respect of such interests comprises
     more than 50% of the total voting power of all such interests in the
     unincorporated entity.

          "TERMINATION DATE" means the earliest to occur of (i) October 8, 2003
     or such later date to which the Termination Date is extended in accordance
     with Section 2.18, (ii) the expiration by its terms of the authorization
     referred to in Section 4.01(c) hereof and (iii) the date of termination or
     reduction in whole of the Commitments pursuant to Section 2.05 or 6.01.

          "TRANSITIONAL FUNDING INSTRUMENTS" means any instruments, pass-through
     certificates, notes, debentures, certificates of participation, bonds,
     certificates of beneficial interest or other evidences of indebtedness or
     instruments evidencing a beneficial interest which (i) are issued pursuant
     to a "transitional funding order" (as such term is defined in Section 18-
     102 of the Illinois Public Utilities Act, as amended) issued by the
     Illinois Commerce Commission at the request of an electric utility and (ii)
     are secured by or otherwise payable from non-bypassable cent per kilowatt
     hour charges authorized pursuant to such order to be applied and invoiced
     to customers of such utility.  The instrument funding charges so applied
     and invoiced must be deducted and stated separately from the other charges
     invoiced by such utility against its customers.
 
          "TYPE" has the meaning assigned to that term (i) in the definition of
     "A ADVANCE" when used in such context and (ii) in the definition of
     "BORROWING" when used in such context.

          "UNMATURED DEFAULT" means an event that, with the giving of notice or
     lapse of time, or both, would constitute an Event of Default.

          "YEAR 2000 ISSUES" means, in respect of a person or entity,
     anticipated costs, problems and uncertainties associated with the inability
     of certain computer applications to effectively handle data including dates
     on and after January 1, 2000, as such inability affects the business,
     operations and financial condition of such person or entity.
<PAGE>
 
                                                                              16

          "YEAR 2000 PROGRAM" means, in respect of a person or entity, a program
     for remediating on a timely basis any Year 2000 Issues of or relating to
     such person or entity that if not remediated on a timely basis, could
     reasonably be expected to result in a Material Adverse Effect on such
     person or entity.

      SECTION 1.02.  COMPUTATION OF TIME PERIODS.  Unless otherwise indicated,
each reference in this Agreement to a specific time of day is a reference to New
York City time.  In the computation of periods of time under this Agreement, any
period of a specified number of days or months shall be computed by including
the first day or month occurring during such period and excluding the last such
day or month.  In the case of a period of time "from" a specified date "to" or
"until" a later specified date, the word "from" means "from and including" and
the words "to" and "until" each means "to but excluding".

      SECTION 1.03.  COMPUTATIONS OF OUTSTANDINGS. Whenever reference is made in
this Agreement to the "principal amount outstanding" on any date under this
Agreement, such reference shall refer to the aggregate principal amount of all
Advances outstanding on such date after giving effect to all Extensions of
Credit to be made on such date and the application of the proceeds thereof.

      SECTION 1.04.  ACCOUNTING TERMS.  Except as otherwise provided herein, all
accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles.


                                  ARTICLE II

                       AMOUNTS AND TERMS OF THE ADVANCES

      SECTION 2.01.  THE A ADVANCES.  (a)  Each Lender severally agrees, on the
terms and conditions hereinafter set forth, to make A Advances to the Borrower
from time to time on any Business Day during the period from the Closing until
the Termination Date in an aggregate outstanding amount not to exceed at any
time such Lender's Available Commitment, provided that the aggregate amount of
the Commitments of the Lenders shall be deemed used from time to time to the
extent of the aggregate amount of the B Advances then outstanding and such
deemed use of the aggregate amount of the Commitments shall be applied to the
Lenders ratably according to their respective Percentages (such deemed use of
the aggregate amount of the Commitments being a "B REDUCTION").  Each A
Borrowing shall be in an aggregate amount not less than $10,000,000 (or, if
lower, the amount of the Available Commitments) or an integral multiple of
$1,000,000 in excess thereof and shall consist of A Advances of the same Type
made on the same day by the Lenders ratably according to their respective
Percentages.  Within the limits of each Lender's
<PAGE>
 
                                                                              17

Commitment and as hereinabove and hereinafter provided, the Borrower may request
Extensions of Credit hereunder, and repay or prepay Advances pursuant to Section
2.11 and utilize the resulting increase in the Available Commitments for further
Extensions of Credit in accordance with the terms hereof.

      (b) In no event shall the Borrower be entitled to request or receive any
Extensions of Credit that would cause the principal amount outstanding hereunder
to exceed the Commitments.

      SECTION 2.02.  MAKING THE A ADVANCES.  (a)  Each A Borrowing shall be made
on notice, given not later than 12:00 noon (i) on the third Business Day prior
to the date of the proposed A Borrowing, in the case of an A Borrowing comprised
of Eurodollar Rate Advances, and (ii) on the date of the proposed A Borrowing,
in the case of an A Borrowing comprised of Base Rate Advances, in each case by
the Borrower to the Administrative Agent, which shall give to each Lender prompt
notice thereof by telecopier, telex or cable.  Each such notice of an A
Borrowing (a "NOTICE OF A BORROWING") shall be by telecopier, telex or cable, in
substantially the form of Exhibit 2.02(a) hereto, specifying therein the
requested  (A) date of such A Borrowing, (B) Type of A Advances comprising such
A Borrowing, (C) aggregate amount of such A Borrowing and (D) in the case of an
A Borrowing comprised of Eurodollar Rate Advances, initial Interest Period for
each such A Advance.  Each Lender shall, before (x) 12:00 noon on the date of
such A Borrowing, in the case of an A Borrowing comprised of Eurodollar Rate
Advances, and (y) 1:00 p.m. on the date of such A Borrowing, in the case of an A
Borrowing comprised of Base Rate Advances, make available for the account of its
Applicable Lending Office to the Administrative Agent at its address referred to
in Section 8.02, in same day funds, such Lender's ratable portion of such A
Borrowing. After the Administrative Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the
Administrative Agent will promptly make such funds available to the Borrower at
the Administrative Agent's aforesaid address.

      (b) Each Notice of A Borrowing shall be irrevocable and binding on the
Borrower. In the case of any A Borrowing which the related Notice of A Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill on or before the date specified in such
Notice of A Borrowing for such A Borrowing the applicable conditions set forth
in Article III, including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund the A Advance to be made by such Lender as part
of such A Borrowing when such A Advance, as a result of such failure, is not
made on such date.
<PAGE>
 
                                                                              18

     (c) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any A Borrowing that such Lender will not make
available to the Administrative Agent such Lender's A Advance as part of such A
Borrowing, the Administrative Agent may assume that such Lender has made such A
Advance available to the Administrative Agent on the date of such A Borrowing in
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount.  If and to the extent that such Lender shall not
have so made such A Advance available to the Administrative Agent, such Lender
and the Borrower severally agree to repay to the Administrative Agent forthwith
on demand such corresponding amount, together with interest thereon, for each
day from the date such amount is made available to the Borrower until the date
such amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, the interest rate applicable at the time to A Advances comprising such
A Borrowing and (ii) in the case of such Lender, the Federal Funds Rate.  If
such Lender shall repay to the Administrative Agent such corresponding amount,
such amount so repaid shall constitute such Lender's A Advance as part of such A
Borrowing for purposes of this Agreement.

     (d) The failure of any Lender to make the A Advance to be made by it as
part of any A Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its A Advance on the date of such A Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the A
Advance to be made by such other Lender on the date of any A Borrowing.

     SECTION 2.03.  THE B ADVANCES.  (a) Each Lender severally agrees that the
Borrower may request B Borrowings under this Section 2.03 from time to time on
any Business Day during the period from the date hereof until the date occurring
30 days prior to the Termination Date in the manner, and subject to the terms
and conditions, set forth below. The rates of interest offered by the Lenders
and accepted by the Borrower for each B Borrowing shall be fixed rates per annum
or LIBOR based bids.

         (i)   The Borrower may request a B Borrowing under this Section 2.03
     by delivering to the Administrative Agent, by telecopier, telex or cable, a
     notice of a B Borrowing (a "NOTICE OF B BORROWING"), in substantially the
     form of Exhibit 2.03(a)(i) hereto, specifying the date and aggregate amount
     of the proposed B Borrowing, the maturity date for repayment of each B
     Advance to be made as part of such B Borrowing (which maturity date may not
     be earlier than the date occurring 30 days after the date of such B
     Borrowing nor later than the earlier to occur of the then-scheduled
     Termination Date and the date occurring 180 days following the date of such
     B Borrowing), the interest payment date or dates relating thereto, the
     interest rate basis to be used by the Lenders and any other terms to be
     applicable to such B Borrowing, not later than 3:00 p.m. at least one
<PAGE>
 
                                                                              19

     Business Day prior to the date of the proposed B Borrowing for fixed rate
     bids and not later than 3:00 p.m. at least four Business Days prior to the
     date of the proposed B Borrowing for LIBOR based bids. The Administrative
     Agent shall in turn promptly notify each Lender of each request for a B
     Borrowing received by it from the Borrower by sending such Lender a copy of
     the related Notice of B Borrowing.

          (ii)  Each Lender may, if, in its sole discretion, it elects to do so,
     irrevocably offer to make one or more B Advances to the Borrower as part of
     such proposed B Borrowing at a rate or rates of interest specified by such
     Lender in its sole discretion, by notifying the Administrative Agent (which
     shall give prompt notice thereof to the Borrower), before 11:00 a.m., on
     the date of such proposed B Borrowing, of the minimum amount and maximum
     amount of each B Advance which such Lender would be willing to make as part
     of such proposed B Borrowing (which amounts may, subject to the limitation
     contained in subsection (d) below, exceed such Lender's Commitment), the
     rate or rates of interest therefor and such Lender's Applicable Lending
     Office with respect to such B Advance; provided that if the Administrative
     Agent in its capacity as a Lender shall, in its sole discretion, elect to
     make any such offer, it shall notify the Borrower of such offer before
     10:30 a.m. on the date on which notice of such election is to be given to
     the Administrative Agent by the other Lenders.  If any Lender shall elect
     not to make such an offer, such Lender shall so notify the Administrative
     Agent before 11:00 a.m. on the date on which notice of such election is to
     be given to the Administrative Agent by the other Lenders, and such Lender
     shall not be obligated to, and shall not, make any B Advance as part of
     such B Borrowing; provided that the failure by any Lender to give such
     notice shall not cause such Lender to be obligated to make any B Advance as
     part of such proposed B Borrowing.

          (iii) The Borrower shall, in turn, before 12:00 noon on the date of
     such proposed B Borrowing either

                (x) cancel such B Borrowing by either giving the Administrative
          Agent notice to that effect or failing to accept one or more offers as
          provided in clause (y) below, or

                (y) accept one or more of the offers, in its sole discretion,
          made by any Lender or Lenders pursuant to paragraph (ii) above, in
          order of the lowest to the highest rates of interest, with pro rata
          allocation of any matching rates of interest, by giving written notice
          to the Administrative Agent of the amount of each B Advance (which
          amount shall be equal to or greater than the minimum amount, and equal
          to or less than the maximum amount, notified to the Borrower by the
<PAGE>
 
                                                                              20

          Administrative Agent on behalf of such Lender for such B Advance
          pursuant to paragraph (ii) above) to be made by each Lender as part of
          such B Borrowing, and reject any remaining offers made by Lenders
          pursuant to paragraph (ii) above, by giving the Administrative Agent
          written notice to that effect.

          (iv)  If the Borrower cancels such B Borrowing pursuant to paragraph
     (iii)(x) above, the Administrative Agent shall give prompt notice thereof
     to the Lenders and such B Borrowing shall not be made.

           (v)  If the Borrower accepts one or more of the offers made by any
     Lender or Lenders pursuant to paragraph (iii)(y) above, such acceptance
     shall be irrevocable and binding on the Borrower and, subject to the
     satisfaction of the applicable conditions set forth in Article III, on such
     Lender or Lenders.  The Borrower shall indemnify each such Lender against
     any loss, cost or expense incurred by such Lender as a result of any
     failure to fulfill, on or before the date specified in the notice provided
     pursuant to paragraph (vii)(A) below, the applicable conditions set forth
     in Article III, including, without limitation, any loss, cost or expense
     incurred by reason of the liquidation or reemployment of deposits or other
     funds acquired by such Lender to fund the B Advance to be made by such
     Lender as part of such B Borrowing when such B Advance, as a result of such
     failure, is not made on such date.

           (vi) Unless the Administrative Agent shall have received notice from
     a Lender prior to the date of any B Borrowing in which such Lender is
     required to participate that such Lender will not make available to the
     Administrative Agent such Lender's B Advance as part of such B Borrowing,
     the Administrative Agent may assume that such Lender has made such B
     Advance available to the Administrative Agent on the date of such B
     Borrowing in accordance with paragraph (vii) below, and the Administrative
     Agent may, in reliance upon such assumption, make available to the Borrower
     on such date a corresponding amount. If and to the extent that such Lender
     shall not have so made such B Advance available to the Administrative
     Agent, such Lender and the Borrower severally agree to repay to the
     Administrative Agent forthwith on demand such corresponding amount together
     with interest thereon, for each day from the date such amount is made
     available to the Borrower until the date such amount is repaid to the
     Administrative Agent, at (i) in the case of the Borrower, the interest rate
     applicable to such B Advance and (ii) in the case of such Lender, the
     Federal Funds Rate. If such Lender shall repay to the Administrative Agent
     such corresponding amount, such amount so repaid shall constitute such
     Lender's B Advance as part of such B Borrowing for purposes of this
     Agreement.
<PAGE>
 
                                                                              21

         (vii)  If the Borrower accepts one or more of the offers made by any
     Lender or Lenders pursuant to paragraph (iii)(y) above, the Administrative
     Agent shall in turn promptly notify (A) each Lender that has made an offer
     as described in paragraph (ii) above, of the date and aggregate amount of
     such B Borrowing and whether or not any offer or offers made by such Lender
     pursuant to paragraph (ii) above, have been accepted by the Borrower, (B)
     each Lender that is to make a B Advance as part of such B Borrowing of the
     amount of the B Advance to be made by such Lender as part of such B
     Borrowing and (C) each Lender that is to make a B Advance as part of such B
     Borrowing, upon receipt, that the Administrative Agent has received forms
     of documents appearing to fulfill the applicable conditions set forth in
     Article III. Each Lender that is to make a B Advance as part of such B
     Borrowing shall, before 1:00 p.m. on the date of such B Borrowing specified
     in the notice received from the Administrative Agent pursuant to clause (A)
     of the preceding sentence or any later time when such Lender shall have
     received notice from the Administrative Agent pursuant to clause (C) of the
     preceding sentence, make available for the account of its Applicable
     Lending Office to the Administrative Agent at its address referred to in
     Section 8.02 such Lender's B Advance, in same day funds. Upon fulfillment
     of the applicable conditions set forth in Article III and after receipt by
     the Administrative Agent of such funds, the Administrative Agent will
     promptly make such funds available to the Borrower at the Administrative
     Agent's aforesaid address. Promptly after each B Borrowing the
     Administrative Agent will notify each Lender of the amount of the B
     Borrowing, the consequent B Reduction and the dates upon which such B
     Reduction commenced and will terminate.

     (b) Each B Borrowing shall be in an aggregate amount not less than
$10,000,000 or an integral multiple of $1,000,000 in excess thereof.

     (c) Within the limits and on the conditions set forth in this Section 2.03,
the Borrower may from time to time borrow under this Section 2.03, repay
pursuant to subsection (e) below and reborrow under this Section 2.03, provided
that a B Borrowing shall not be made within three Business Days of the date of
any other B Borrowing.

     (d) In no event shall the Borrower be entitled to request or receive any B
Advances that would cause the principal amount outstanding hereunder to exceed
the Commitments.

     (e) The Borrower shall repay to the Administrative Agent for the account of
each Lender which has made a B Advance, or each other holder of a B Note, on the
maturity date of each B Advance (such maturity date being that specified by the
Borrower for repayment of such B Advance in the related Notice of B Borrowing
delivered pursuant to subsection (a)(i) above, and
<PAGE>
 
                                                                              22

provided in the B Note evidencing such B Advance), the then unpaid principal
amount of such B Advance.

     (f) The Borrower shall pay interest on the unpaid principal amount of each
B Advance from the date of such B Advance to the date the principal amount of
such B Advance is repaid in full, at the rate of interest for such B Advance
specified by the Lender making such B Advance in its notice with respect thereto
delivered pursuant to subsection (a)(ii) above, payable on the interest payment
date or dates specified by the Borrower for such B Advance in the related Notice
of B Borrowing delivered pursuant to subsection (a)(i) above, as provided in the
B Note evidencing such B Advance, provided, however, that upon the occurrence
and during the continuance of any Event of Default, each B Advance shall bear
interest at the Default Rate.

     (g) The indebtedness of the Borrower resulting from each B Advance made to
the Borrower as part of a B Borrowing shall be evidenced by a separate B Note of
the Borrower payable to the order of the Lender making such B Advance.

     SECTION 2.04.  FEES.  (a) The Borrower agrees to pay to the Administrative
Agent for the account of each Lender the Facility Fee from the date hereof, in
the case of each Bank, and from the effective date specified in the Lender
Assignment pursuant to which it became a Lender, in the case of each other
Lender, until the Termination Date, payable quarterly in arrears on the last day
of each December, March, June and September during the term of such Lender's
Commitment, commencing December 31, 1998, and on the Termination Date.

     (b) In addition to the fee provided for in subsection (a) above, the
Borrower shall pay to the Administrative Agent, for the account of the
Administrative Agent, such fees as are provided for in the Fee Letter.

      SECTION 2.05.  REDUCTION OF THE COMMITMENTS.  (a) The Borrower shall have
the right, upon at least three Business Days' notice to the Administrative
Agent, to terminate in whole or reduce ratably in part the unused portions of
the respective Commitments of the Lenders; provided that the aggregate amount of
the Commitments of the Lenders shall not be reduced to an amount which is less
than the aggregate principal amount of the A and B Advances then outstanding;
and provided, further, that each partial reduction shall be in a minimum amount
of $10,000,000 or any whole multiple of $1,000,000 in excess thereof.  Any
termination or reduction of the Commitments shall be irrevocable, and the
Commitments shall not thereafter be reinstated.

     (b) On the Termination Date, and upon the occurrence of a Change of
Control, the Commitments of the Lenders shall be reduced to zero.
<PAGE>
 
                                                                              23

      SECTION 2.06.  REPAYMENT OF A ADVANCES.  The Borrower shall repay the
principal amount of each A Advance made by each Lender in accordance with the A
Note to the order of such Lender.

      SECTION 2.07.  INTEREST ON A ADVANCES.  The Borrower shall pay interest on
the unpaid principal amount of each A Advance owing to each Lender from the date
of such A Advance until such principal amount shall be paid in full, at the
Applicable Rate for such A Advance (except as otherwise provided in this Section
2.07), payable as follows:

          (a) Base Rate Advances.  If such A Advance is a Base Rate Advance,
     interest thereon shall be payable quarterly in arrears on the last day of
     each March, June, September and December, on the date of any Conversion of
     such Base Rate Advance and on the date such Base Rate Advance shall become
     due and payable or shall otherwise be paid in full; provided that at any
     time an Event of Default shall have occurred and be continuing, thereafter
     each Base Rate Advance shall bear interest payable on demand, at a rate per
     annum equal at all times to the Default Rate.

          (b) Eurodollar Rate Advances.  If such A Advance is a Eurodollar Rate
     Advance, interest thereon shall be payable on the last day of such Interest
     Period and, if the Interest Period for such A Advance has a duration of
     more than three months, on that day of each third month during such
     Interest Period that corresponds to the first day of such Interest Period
     (or, if any such month does not have a corresponding day, then on the last
     day of such month); provided that at any time an Event of Default shall
     have occurred and be continuing, thereafter each Eurodollar Rate Advance
     shall bear interest payable on demand, at a rate per annum equal at all
     times to the Default Rate.

     SECTION 2.08.  ADDITIONAL INTEREST ON EURODOLLAR RATE ADVANCES.  The
Borrower shall pay to Administrative Agent for the account of each Lender any
costs actually incurred by such Lender with respect to Eurodollar Rate Advances
which are attributable to such Lender's compliance with regulations of the Board
of Governors of the Federal Reserve System requiring the maintenance of reserves
with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities.  Such costs shall be paid to the Administrative Agent for the
account of such Lender in the form of additional interest on the unpaid
principal amount of each Eurodollar Rate Advance of such Lender, from the date
of such A Advance until such principal amount is paid in full, at an interest
rate per annum equal at all times to the remainder obtained by subtracting (i)
the Eurodollar Rate for the Interest Period for such A Advance from (ii) the
rate obtained by dividing such Eurodollar Rate by a percentage equal to 100%
minus the Eurodollar Reserve Percentage of such Lender for such Interest Period,
payable on each date on which interest is payable on such A Advance.  Such
additional interest shall be determined by such
<PAGE>
 
                                                                              24

Lender and notified to the Borrower through the Administrative Agent.  A
certificate as to the amount of such additional interest, submitted to the
Borrower and the Administrative Agent by such Lender, shall be conclusive and
binding for all purposes, absent manifest error, provided that the determination
thereof shall have been made by such Lender in good faith.

     SECTION 2.09.  INTEREST RATE DETERMINATION. (a) Each Reference Bank agrees
to furnish to the Administrative Agent timely information for the purpose of
determining each Eurodollar Rate. If any one or more of the Reference Banks
shall not furnish such timely information to the Administrative Agent for the
purpose of determining any such interest rate, the Administrative Agent shall
determine such interest rate on the basis of timely information furnished by the
remaining Reference Banks.

     (b) The Administrative Agent shall give prompt notice to the Borrower and
the Lenders of the applicable interest rate determined by the Administrative
Agent for purposes of Section 2.07(a) or (b), and the applicable rate, if any,
furnished by each Reference Bank for the purpose of determining the applicable
interest rate under Section 2.07(b).

     (c) If fewer than two Reference Banks furnish timely information to the
Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate
Advances, due to the unavailability of funds to such Reference Banks in the
relevant financial markets:

         (i)   the Administrative Agent shall forthwith notify the Borrower and
     the Lenders that the interest rate cannot be determined for such Eurodollar
     Rate Advances;

         (ii)  each such Advance will automatically, on the last day of the then
     existing Interest Period therefor, Convert into a Base Rate Advance (or if
     such Advance is then a Base Rate Advance, will continue as a Base Rate
     Advance); and

         (iii) the obligation of the Lenders to make, or to Convert A Advances
     into, Eurodollar Rate Advances shall be suspended until the Administrative
     Agent shall notify the Borrower and the Lenders that the circumstances
     causing such suspension no longer exist.

     (d) If, with respect to any Eurodollar Rate Advances, the Majority Lenders
notify the Administrative Agent that the Eurodollar Rate for any Interest Period
for such Advances will not adequately reflect the cost to such Majority Lenders
of making, funding or maintaining their respective Eurodollar Rate Advances for
such Interest Period, the Administrative Agent shall forthwith so notify the
Borrower and the Lenders, whereupon:
<PAGE>
 
                                                                              25

          (i)   each Eurodollar Rate Advance will automatically, on the last day
     of the then existing Interest Period therefor, Convert into a Base Rate
     Advance; and

          (ii)  the obligation of the Lenders to make, or to Convert A Advances
     into, Eurodollar Rate Advances shall be suspended until the Administrative
     Agent shall notify the Borrower and the Lenders that the circumstances
     causing such suspension no longer exist.

     (e) If the Borrower shall fail to (i) select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "INTEREST PERIOD" in Section 1.01, (ii) provide a
Notice of Conversion with respect to any Eurodollar Rate Advances on or prior to
12:00 noon on the third Business Day prior to the last day of the Interest
Period applicable thereto, in the case of a Conversion to or in respect of
Eurodollar Rate Advances, or (iii) satisfy the applicable conditions precedent
set forth in Section 3.02 with respect to the Conversion to or in respect of any
Eurodollar Rate Advances, the Administrative Agent will forthwith so notify the
Borrower and the Lenders and such Advances will automatically, on the last day
of the then existing Interest Period therefor, Convert into Base Rate Advances;
provided, however, that if, in the case of any failure by the Borrower pursuant
to clause (iii) above, the Majority Lenders do not notify the Borrower within 30
days after such Conversion into Base Rate Advances that they have agreed to
waive, or have decided not to waive, the applicable conditions precedent set
forth in Section 3.02 that the Borrower failed to satisfy, the Majority Lenders
shall be deemed to have waived such conditions precedent solely with respect to
the Advances so Converted, and the Borrower shall, at any time after such 30-day
period, be permitted to Convert such Advances into Eurodollar Rate Advances; and
provided further, however, that such deemed waiver shall be of no further force
or effect if, at any time after such 30-day period, the Majority Lenders notify
the Borrower that they no longer agree to waive such conditions precedent, in
which case any such Advances so Converted into Eurodollar Rate Advances shall
automatically Convert into Base Rate Advances on the last day of the then
existing Interest Period therefor.

     (f) On the date on which the aggregate unpaid principal amount of A
Advances comprising any A Borrowing shall be reduced, by payment or prepayment
or otherwise, to less than the product of  (i) $1,000,000 and (ii) the number of
Lenders on such date, such A Advances shall, if they are Advances of a Type
other than Base Rate Advances, automatically Convert into Base Rate Advances,
and on and after such date the right of the Borrower to Convert such A Advances
into Advances of a Type other than Base Rate Advances shall terminate; provided,
however, that if and so long as each such A Advance shall be of the same Type
and have the same Interest Period as A Advances comprising another A Borrowing
or other A Borrowings, and the aggregate unpaid principal amount of all such A
Advances shall equal or exceed the product of
<PAGE>
 
                                                                              26

(i) $1,000,000 and (ii) the number of Lenders on such date, the Borrower shall
have the right to continue all such A Advances as, or to Convert all such A
Advances into, Advances of such Type having such Interest Period.

     (g) Upon the occurrence and during the continuance of any Event of Default,
each outstanding Eurodollar Rate Advance shall automatically Convert to a Base
Rate Advance at the end of the Interest Period then in effect for such
Eurodollar Rate Advance.

      SECTION 2.10.  VOLUNTARY CONVERSION OF A ADVANCES.  Subject to the
applicable conditions set forth in Section 3.02, the Borrower may on any
Business Day, by delivering a notice of Conversion (a "NOTICE OF CONVERSION") to
the Administrative Agent not later than 12:00 noon (i) on the third Business Day
prior to the date of the proposed Conversion, in the case of a Conversion to or
in respect of Eurodollar Rate Advances and (ii) on the date of the proposed
Conversion, in the case of a Conversion to or in respect of Base Rate Advances,
and subject to the provisions of Sections 2.09 and 2.13, Convert all A Advances
of one Type comprising the same A Borrowing into Advances of another Type;
provided, however, that, in the case of any Conversion of any Eurodollar Rate
Advances into Advances of another Type on a day other than the last day of an
Interest Period for such Eurodollar Rate Advances, the Borrower shall be
obligated to reimburse the Lenders in respect thereof pursuant to Section
8.04(b).  Each such Notice of Conversion shall be in substantially the form of
Exhibit 2.10 and shall, within the restrictions specified above, specify (A) the
date of such Conversion, (B) the A Advances to be Converted, (C) if such
Conversion is into Eurodollar Rate Advances, the duration of the Interest Period
for each such A Advance, and (D) the aggregate amount of A Advances proposed to
be Converted.

      SECTION 2.11.  OPTIONAL PREPAYMENTS OF A ADVANCES.  The Borrower may, upon
at least three Business Days notice to the Administrative Agent stating the
proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding principal amounts of
the A Advances comprising part of the same Borrowing in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
principal amount prepaid; provided, however, that each partial prepayment shall
be in an aggregate principal amount not less than $10,000,000 (or, if lower, the
principal amount outstanding hereunder on the date of such prepayment) or an
integral multiple of $1,000,000 in excess thereof.  In the case of any such
prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to
reimburse the Lender(s) in respect thereof pursuant to Section 8.04(b).  Except
as provided in this Section 2.11, the Borrower shall have no right to prepay any
principal amount of any Advances. The Borrower shall have no right to optionally
prepay any principal amount of any B Advances.
<PAGE>
 
                                                                              27

      SECTION 2.12.  MANDATORY PREPAYMENTS. (a) On the date of any termination
or reduction of the Commitments pursuant to Section 2.05, the Borrower shall pay
or prepay for the ratable accounts of the Lenders so much of the principal
amount outstanding under this Agreement as shall be necessary in order that the
principal amount outstanding (after giving effect to such prepayment) will not
exceed the amount of Commitments following such termination or reduction,
together with (A) accrued interest to the date of such prepayment on the
principal amount repaid or prepaid and (B) in the case of prepayments of
Eurodollar Rate Advances or B Advances, any amount payable to the Lenders
pursuant to Section 8.04(b).

      (b) The Borrower shall pay or prepay for the ratable account of the
Lenders the aggregate principal amount outstanding hereunder such that, for a
period of at least one day during any 364-day period, the principal amount
outstanding hereunder shall be zero.

      (c) All prepayments required to be made pursuant to this Section 2.12
shall be applied by the Administrative Agent as follows:

          (i)   first, to the prepayment of the A Advances (without reference to
     minimum dollar requirements), applied to outstanding Base Rate Advances up
     to the full amount thereof before they are applied to the ratable
     prepayment of Eurodollar Rate Advances; and

          (ii)  second, to the prepayment of the B Advances (without reference
     to minimum dollar requirements), applied ratably among all the Lenders
     holding B Advances.

      SECTION 2.13.  INCREASED COSTS. (a) If, due to either (i) the introduction
of or any change (other than any change by way of imposition or increase of
reserve requirements included in the Eurodollar Rate Reserve Percentage) in or
in the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to any Lender of agreeing to make or making, funding or maintaining
Eurodollar Rate Advances, then the Borrower shall from time to time, upon demand
by such Lender (with a copy of such demand to the Administrative Agent), pay to
the Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate as
to the amount of such increased cost, submitted to the Borrower and the
Administrative Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error, provided that the determination thereof shall
have been made by such Lender in good faith.

     (b) If any Lender determines that compliance with any law or regulation or
any guideline or request from any central bank or other governmental authority
(whether or not having
<PAGE>
 
                                                                              28

the force of law) affects or would affect the amount of capital required or
expected to be maintained by such Lender or any corporation controlling such
Lender and that the amount of such capital is increased by or based upon the
existence of such Lender's commitment to lend hereunder and other commitments of
this type, then, upon demand by such Lender (with a copy of such demand to the
Administrative Agent), the Borrower shall immediately pay to the Administrative
Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's Commitment.  A certificate as to such amounts submitted to the
Borrower and the Administrative Agent by such Lender, describing in reasonable
detail the manner in which such amounts have been calculated, shall be
conclusive and binding for all purposes, absent manifest error, provided that
the determination and allocation thereof shall have been made by such Lender in
good faith.

     (c) Notwithstanding the provisions of subsection (a) or (b) to the
contrary, no Lender shall be entitled to demand compensation or be compensated
hereunder to the extent that such compensation relates to any period of time
more than 180 days prior to the date upon which such Lender first notified the
Borrower of the occurrence of the event entitling such Lender to such
compensation (unless, and to the extent that, any such compensation so demanded
shall relate to the retroactive application of any event so notified to the
Borrower).

      SECTION 2.14.  ILLEGALITY.  Notwithstanding any other provision of this
Agreement to the contrary, if any Lender (the "AFFECTED LENDER") shall notify
the Administrative Agent and the Borrower that the introduction of or any change
in or in the interpretation of any law or regulation makes it unlawful, or any
central bank or other governmental authority asserts that it is unlawful, for
the Affected Lender or its Eurodollar Lending Office to perform its obligations
hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar
Rate Advances hereunder, (i) all Eurodollar Rate Advances of the Affected Lender
shall, on the fifth Business Day following such notice from the Affected Lender,
automatically be Converted into a like number of Base Rate Advances, each in the
amount of the corresponding Eurodollar Rate Advance of the Affected Lender being
so Converted (each such Advance, as so Converted, being an "AFFECTED LENDER
ADVANCE"), and the obligation of the Affected Lender to make, maintain, or
Convert A Advances into Eurodollar Rate Advances shall thereupon be suspended
until the Administrative Agent shall notify the Borrower and the Lenders that
the circumstances causing such suspension no longer exist, or the Affected
Lender has been replaced pursuant to Section 8.07(g), and (ii) in the event
that, on the last day of each of the then-current Interest Periods for each
Eurodollar Rate Advance (each such Advance being an "UNAFFECTED LENDER ADVANCE")
of each of the other Lenders (each such Lender being an "UNAFFECTED LENDER"),
the Administrative Agent shall have yet to notify the Borrower and the Lenders
that the circumstances causing such suspension of the Affected
<PAGE>
 
                                                                              29

Lender's obligations as aforesaid no longer exist, or the Affected Lender has
not yet been replaced pursuant to Section 8.07(g), such Unaffected Lender
Advance shall be Converted by the Borrower in accordance with Section 2.10 into
an Advance of another Type (or, in the event that the Borrower shall fail to
duly deliver a Notice of Conversion with respect thereto, into a Base Rate
Advance), and the obligation of such Unaffected Lender to make, maintain, or
Convert A Advances into Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall so notify the Borrower and the Lenders, or the
Affected Lender shall be so replaced.  For purposes of any prepayment under this
Agreement, each Affected Lender Advance shall be deemed to continue to be part
of the same Borrowing as the Unaffected Lender Advance to which it corresponded
at the time of the Conversion of such Affected Lender Advance pursuant to clause
(i) above.

      SECTION 2.15.  PAYMENTS AND COMPUTATIONS. (a) The Borrower shall make each
payment hereunder and under the Notes not later than 1:00 p.m. on the day when
due in Dollars to the Administrative Agent at its address referred to in Section
8.02 in same day funds. The Administrative Agent will promptly thereafter cause
to be distributed like funds relating to the payment of principal or interest or
fees ratably (other than amounts payable pursuant to Section 2.03, 2.08,
2.12(b)(iii), 2.16 or 8.04(b)) to the Lenders for the account of their
respective Applicable Lending Offices, and like funds relating to the payment of
any other amount payable to any Lender to such Lender for the account of its
Applicable Lending Office, in each case to be applied in accordance with the
terms of this Agreement. Upon its acceptance of a Lender Assignment and
recording of the information contained therein in the Register pursuant to
Section 8.07(d), from and after the effective date specified in such Lender
Assignment, the Administrative Agent shall make all payments hereunder and under
the Notes in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Lender Assignment shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves.

      (b) The Borrower hereby authorizes each Lender, if and to the extent
payment owed to such Lender is not made when due hereunder or under any Note
held by such Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.

      (c) All computations of interest based on the Alternate Base Rate and the
Federal Funds Rate and of fees shall be made by the Administrative Agent on the
basis of a year of 365 or 366 days, as the case may be, and all computations of
interest based on the Eurodollar Rate shall be made by the Administrative Agent,
and all computations of interest pursuant to Section 2.09 shall be made by a
Lender, on the basis of a year of 360 days, in each case for the actual number
of days (including the first day but excluding the last day) occurring in the
period for
<PAGE>
 
                                                                              30

which such interest or fees are payable. Each determination by the
Administrative Agent (or, in the case of Section 2.09, by a Lender) of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.

     (d) Whenever any payment hereunder or under the Notes shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be;
provided, however, that if such extension would cause payment of interest on or
principal of Eurodollar Rate Advances to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.

     (e) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender.  If and to the extent that the
Borrower shall not have so made such payment in full to the Administrative
Agent, each Lender shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Lender together with interest thereon, for each
day from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Administrative Agent, at the Federal Funds
Rate.

      SECTION 2.16.  TAXES.  (a) Any and all payments by the Borrower hereunder
and under the other Loan Documents shall be made, in accordance with Section
2.15, free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto, excluding, in the case of each Lender and the
Administrative Agent, taxes imposed on its overall net income and franchise
taxes imposed on it by the jurisdiction under the laws of which such Lender or
the Administrative Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes imposed on its
overall net income and franchise taxes imposed on it by the jurisdiction of such
Lender's Applicable Lending Office or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "TAXES"); provided, however, that,
notwithstanding the foregoing, Taxes shall not include any taxes otherwise
required to be deducted by the Borrower pursuant to this subsection (a) as a
result of activities of any Lender or the Administrative Agent in the State of
Iowa (other than as a result, or in respect, of this Agreement).  If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any other Loan Document to any Lender or the
Administrative Agent, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums
<PAGE>
 
                                                                              31

payable under this Section 2.16) such Lender or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.

     (b) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under any other Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "OTHER TAXES").

     (c) The Borrower will indemnify each Lender and the Administrative Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.16) paid by such Lender or the Administrative Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted.  This indemnification shall be made within 30
days from the date such Lender or the Administrative Agent (as the case may be)
makes written demand therefor.  Nothing herein shall preclude the right of the
Borrower to contest any such Taxes or Other Taxes so paid, and the Lenders in
question or the Administrative Agent (as the case may be) will, following notice
from, and at the expense of, the Borrower, reasonably cooperate with the
Borrower to preserve the Borrower's rights to contest such Taxes or Other Taxes.

     (d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Administrative Agent, at its address referred to in Section
8.02, the original or a certified copy of a receipt evidencing payment thereof.

     (e) Each Lender agrees that, on or prior to the date upon which it shall
become a party hereto, and upon the reasonable request from time to time of the
Borrower or the Administrative Agent, such Lender will deliver to the Borrower
and the Administrative Agent either (i) a statement that it is organized under
the laws of a jurisdiction within the United States or (ii) duly completed
copies of such form or forms as may from time to time be prescribed by the
United States Internal Revenue Service indicating that such Lender is entitled
to receive payments without deduction or withholding of any United States
federal income taxes, as permitted by the Internal Revenue Code of 1986, as
amended from time to time.  Each Lender that delivers to the Borrower and the
Administrative Agent the form or forms referred to in the preceding sentence
further undertakes to deliver to the Borrower and the Administrative Agent
further copies of such form or forms, or successor applicable form or forms, as
the case may be, as and when any previous form filed by it hereunder shall
expire or shall become incomplete or inaccurate in any respect.
<PAGE>
 
                                                                              32

Each Lender represents and warrants that each such form supplied by it to the
Administrative Agent and the Borrower pursuant to this subsection (e), and not
superseded by another form supplied by it, is or will be, as the case may be,
complete and accurate.

     (f) Any Lender claiming any additional amounts payable pursuant to this
Section 2.16 shall use its best efforts (consistent with its internal policy and
legal and regulatory restrictions) to change the jurisdiction of its Applicable
Lending Office if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.

     (g) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.16 shall survive the payment in full of principal and interest
hereunder and under the Notes.

      SECTION 2.17.  SHARING OF PAYMENTS, ETC.  If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the A Advances made by it (other than
pursuant to Section 2.08, 2.13, 2.16 or 8.04(b)) in excess of its ratable share
of payments on account of the A Advances obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
the Advances made by them as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each of them; provided, however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery, together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered.  The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.17
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.

      SECTION 2.18.  EXTENSION OF TERMINATION DATE. (a) At least 45 days but not
more than 60 days prior to the then-current Termination Date, the Borrower may
request that the Lenders, by written notice to the Administrative Agent (in
substantially the form attached hereto as Exhibit 2.18(a)), consent to a one-
year extension of the Termination Date. Each Lender shall, in its sole
discretion, determine whether to consent to such request and shall notify the
Administrative Agent of its determination at least 20 days but not more than 30
days prior to the then-current
<PAGE>
 
                                                                              33

Termination Date.  The failure to respond by any Lender within such time period
shall be deemed a denial of such request.  The Administrative Agent shall
deliver a notice to the Borrower and the Lenders at least 15 days prior to the
then-current Termination Date of the identity of the Lenders that have consented
to such extension and the Lenders that have declined such consent (the
"DECLINING LENDERS").  If Lenders holding in the aggregate more than 50% of the
Commitments have not consented to the requested extension, the Termination Date
shall not be extended, and the Commitments of all Lenders shall terminate on the
then-current Termination Date.

      (b) If Lenders holding in the aggregate more than 50% of the Commitments
have consented to the requested extension, the Termination Date shall be
extended as to such consenting Lenders only (and not as to any Declining Lender)
for a period of one year from the then-current Termination Date (for purposes of
this Section 2.18, the "EXTENSION DATE"), and the Commitments of any Declining
Lenders shall terminate on the Extension Date (as theretofore in effect) and all
Advances of such Declining Lenders shall be repaid to them on such date.  If the
Borrower so requests, each Lender consenting to such request shall be given the
opportunity at least seven days but not more than 15 days prior to the Extension
Date, in each Lender's sole discretion, to commit to increase its Commitment by
submission of a written notice setting forth the desired increase in such
Lender's Commitment to the Administrative Agent in amounts such that the
aggregate Commitments hereunder after giving effect to any such extension and
increase in the Commitments shall not exceed the aggregate Commitment
immediately prior to the Extension Date.  If the Administrative Agent receives
Commitments to increase the Commitments from the Lenders, which, when aggregated
with the existing Commitments, (A) are less than or equal to the Commitments
immediately prior to the Extension Date, the Administrative Agent shall accept
all such Commitments, (B) are greater than the Commitments on the date hereof,
the Administrative Agent may determine, in its reasonable discretion, which
Commitments to accept and the amounts by which each submitting Lender's
Commitments shall be increased so that the aggregate Commitments after such
Extension Date shall equal the aggregate Commitments immediately prior to such
Extension Date (any Lender whose commitment to increase its Commitment hereunder
is accepted by the Administrative Agent, an "INCREASING COMMITMENT LENDER").  If
Lenders do not consent to increase the aggregate Commitments to an amount equal
to the Commitments immediately prior to such Extension Date, the Borrower may,
at least two days but not more than seven days prior to such Extension Date,
request that the Administrative Agent, in its sole discretion, accept the
Commitment or Commitments of an Eligible Assignee or Eligible Assignees such
that the aggregate Commitments hereunder after such Extension Date shall not be
greater than Commitments hereunder immediately prior to such Extension Date.  If
the Administrative Agent shall accept the Commitment of any Increasing
Commitment Lender or Eligible Assignee, the Commitments of the Declining Lenders
shall terminate on such Extension Date, and any Advances made by such Declining
Lenders shall be repaid on such date in accordance with this Agreement.
<PAGE>
 
                                                                              34

      (c) Each such accepted Eligible Assignee and each Increasing Commitment
Lender shall deliver a signature page hereto indicating that it is bound by the
terms hereof and setting forth its aggregate Commitment hereunder.  Such new
signature page shall constitute a part hereof upon acceptance by the
Administrative Agent and, in the case of any signature page submitted by any
Increasing Commitment Lender, shall replace such Increasing Commitment Lender's
previously delivered signature page.  Any such extension shall become effective
upon the satisfaction of the conditions set forth in Section 3.04 hereof.  Upon
satisfaction of such conditions and the effectiveness of such extension, each
new Lender and Increasing Commitment Lender shall make A Advances to the
Borrower (1) in the case of each new Lender, equal to such Lender's ratable
portion of the A Advances outstanding immediately prior to such Extension Date
and (2) in the case of each Increasing Commitment Lender, equal to such portion
of such Lender's ratable portion of the A Advances (assuming that such Lender's
Commitment consists only of the increased portion thereof) outstanding
immediately prior to such Extension Date, in each case, without giving effect to
any repayment of A Advances to Declining Lenders made on such Extension Date.

      SECTION 2.19.  INCREASE IN COMMITMENTS.  (a) If at any time the
Commitments shall be less than $500,000,000, the Borrower may, by written
request to the Administrative Agent, request that the Lenders increase the
Commitments hereunder in such amount that, when added together with the then-
outstanding Commitments, shall not exceed $500,000,000, which amount shall be an
integral multiple of $10,000,000; provided that, on and as of the Increase Date
(as defined below), (i) if the aggregate commitments under the Other Credit
Agreement are less than $500,000,000, then such aggregate commitments shall be
increased accordingly to preserve the ratio of the aggregate commitments under
the Other Credit Agreement to the sum of (A) the Commitments hereunder plus (B)
the aggregate commitments under the Other Credit Agreement, and (ii) no Event of
Default or Unmatured Default has occurred and is continuing.  Such increase
shall be effective as of a date which shall be any Business Day occurring not
less than 25 days (unless otherwise agreed to by the Borrower and the
Administrative Agent) nor more than 30 days from the date of such written
request (such date herein referred to as the "INCREASE DATE").  Upon receipt of
written notice of such request from the Administrative Agent, each Lender shall
have the opportunity, in its sole discretion, no later than 20 days after the
date on which the Borrower's request shall have been received by the
Administrative Agent, to commit to increase its Commitment by written notice to
the Administrative Agent setting forth the amount by which such Lender proposes
to increase its Commitment (each such Lender an "EXISTING LENDER"). To the
extent that the aggregate amount of the proposed increases is less than the
aggregate amount of the increase requested by the Borrower, the Borrower may
either (x) request the Administrative Agent to solicit the Lenders for further
increases in their respective Commitments, (y) amend the original request by
reducing the amount by which the Commitments are requested to be increased to an
amount equal to the aggregate amount of the proposed increases of the
Commitments or (z)
<PAGE>
 
                                                                              35

request that the Administrative Agent, in its reasonable discretion, accept the
participation in the proposed increase of one or more additional financial
institutions (each an "ADDITIONAL LENDER"), provided that the minimum commitment
of each such Additional Lender equals or exceeds $10,000,000. If the
Administrative Agent shall accept the proposed increases of the Existing Lenders
and the Additional Lenders, the Commitments shall be increased by the aggregate
amount of the proposed increases on and as of the Increase Date.  The
Administrative Agent shall allocate the increased amount  pro rata among the
Existing Lenders and the Additional Lenders in accordance with their respective
Commitments.

     (b) Upon the effectiveness of the increase in Commitments hereunder, (i)
each Existing Lender and each Additional Lender shall deliver a signature page
hereto indicating that it is bound by the terms hereof, such new signature page
constituting a part hereof and, in the case of any such signature page submitted
by any Existing Lender, replacing such Existing Lender's previously delivered
signature page, (ii) Schedule I shall be amended by the Borrower and the
Administrative Agent to reflect the increase in the Commitment of such Existing
Lenders and such Additional Lenders and (iii) such Additional Lenders shall be
and become Lenders hereunder for all purposes hereof.  In connection with any
such increase, the Borrower shall execute and deliver new Notes to reflect such
new Commitments, and the Lenders party hereto (including any Additional Lenders)
shall effect such purchases and sales among themselves of portions of the
outstanding A Advances as shall be necessary to reflect such new Commitments, as
specified by the Administrative Agent.

                                  ARTICLE III

                             CONDITIONS OF LENDING

      SECTION 3.01.  CONDITIONS PRECEDENT TO CLOSING.  The Commitments of the
Lenders shall not become effective unless the following conditions precedent
shall have been fulfilled on or prior to October 8, 1998 (or such later Business
Day as the parties hereto may mutually agree):

          (a) The Administrative Agent shall have received the following, each
     dated the date of the Closing, in form and substance satisfactory to the
     Lenders and (except for the Notes) in sufficient copies for each Lender:

              (i)   this Agreement, duly executed by the Borrower, each Bank and
          the Administrative Agent;

              (ii)  the A Notes payable to the order of the Lenders,
          respectively, duly completed and executed by the Borrower;
<PAGE>
 
                                                                              36

              (iii)  certified copies of the resolutions of the Board of
          Directors of the Borrower approving this Agreement, the Notes and the
          other Loan Documents to which it is, or is to be, a party, and of all
          documents evidencing other necessary corporate action with respect to
          this Agreement, the Notes and such Loan Documents;

              (iv)   a certificate of the Secretary or an Assistant Secretary of
          the Borrower certifying the names, true signatures and incumbency of
          the officers of the Borrower authorized to sign this Agreement, the
          Notes and the other Loan Documents to which it is, or is to be, a
          party;

              (v)    copies of the Restated Articles of Incorporation (or
          comparable charter document) and by-laws of the Borrower, together
          with all amendments thereto, certified by the Secretary or an
          Assistant Secretary of the Borrower;

              (vi)   certified copies of all Governmental Approvals, if any,
          required in connection with the execution, delivery and performance of
          this Agreement and the other Loan Documents;

              (vii)  favorable opinions of:

                     (A) Sidley & Austin, counsel for the Borrower, in
              substantially the form of Exhibit 3.01(a)(vii)-1 and as to such
              other matters as the Majority Lenders, through the Administrative
              Agent, may reasonably request;

                     (B) King & Spalding, counsel to the Administrative Agent,
              in substantially the form of Exhibit 3.01(a)(vii)-2 and as to such
              other matters as the Majority Lenders, through the Administrative
              Agent, may reasonably request; and

              (viii) such other approvals, opinions and documents as any Lender,
          through the Administrative Agent, may reasonably request.

          (b) The following statements shall be true and correct and the
          Administrative Agent shall have received a certificate of a duly
          authorized officer of the Borrower, dated the date of the Closing and
          in sufficient copies for each Lender, stating that:
<PAGE>
 
                                                                              37

               (i)   the representations and warranties set forth in Section
          4.01 of this Agreement are true and correct on and as of the date of
          the Closing as though made on and as of such date, and

               (ii)  no event has occurred and is continuing that constitutes an
          Unmatured Default or an Event of Default.

          (c)  The Borrower shall have paid (i) all fees under or referenced in
     Section 2.04 hereof, to the extent then due and payable, and (ii) all costs
     and expenses of the Administrative Agent (including counsel fees and
     disbursements) incurred through (and for which statements have been
     provided prior to) the Closing.

          (d)  The Borrower shall have paid in full all debt outstanding under
     the Existing Facility, and the commitments of all the lenders thereunder
     shall have been terminated.

          (e)  The Borrower shall have executed and delivered the Other Credit
     Agreement and the "Loan Documents" referred to therein, and all conditions
     precedent set forth in Section 3.01 thereof shall have been satisfied.

     SECTION 3.02.  CONDITIONS PRECEDENT TO EACH A BORROWING.  The obligation of
each Lender to make an A Advance on the occasion of each A Borrowing (including
the initial A Borrowing) shall be subject to the conditions precedent that, on
the date of such A Borrowing,

          (a)  the following statements shall be true and correct (and each of
     the giving of the applicable Notice of A Borrowing and the acceptance by
     the Borrower of the proceeds therefrom shall constitute a representation
     and warranty by the Borrower that, on the date of such A Borrowing, such
     statements are true and correct):

               (i)   the representations and warranties contained in Section
          4.01 are true and correct in all material respects on and as of the
          date of such A Borrowing, before and after giving effect to the
          application of the proceeds therefrom, as though made on and as of
          such date; and

               (ii)  no event has occurred and is continuing, or would result
          from such A Borrowing or from the application of the proceeds
          therefrom, which constitutes an Event of Default or an Unmatured
          Default; and

          (b)  the Administrative Agent shall have received such other 
     approvals, opinions, or documents as the Administrative Agent, or the
     Majority Lenders through the
<PAGE>
 
                                                                              38

     Administrative Agent, may reasonably request, and such approvals, opinions,
     and documents shall be satisfactory in form and substance to the
     Administrative Agent.

     SECTION 3.03. CONDITIONS PRECEDENT TO EACH B BORROWING.  The obligation of
each Lender to make a B Advance on the occasion of a B Borrowing (including the
initial B Borrowing) shall be subject to the conditions precedent that (a) the
Administrative Agent shall have received the written confirmatory Notice of B
Borrowing with respect thereto; (b) on or before the date of such B Borrowing,
but prior to such B Borrowing, the Administrative Agent shall have received a B
Note payable to the order of such Lender for each of the one or more B Advances
to be made by such Lender as part of such B Borrowing, in a principal amount
equal to the principal amount of the B Advance to be evidenced thereby and
otherwise on such terms as were agreed to for such B Advance in accordance with
Section 2.03; (c) on the date of such B Borrowing the following statements shall
be true and correct (and each of the giving of the applicable Notice of B
Borrowing and the acceptance by the Borrower of the proceeds therefrom shall
constitute a representation and warranty by the Borrower that, on the date of
such B Borrowing, such statements are true and correct):

               (i)   the representations and warranties contained in Section
     4.01 are true and correct in all material respects on and as of the date of
     such B Borrowing, before and after giving effect to such B Borrowing and to
     the application of the proceeds therefrom, as though made on and as of such
     date; and

               (ii)   no event has occurred and is continuing, or would result
     from such B Borrowing or from the application of the proceeds therefrom,
     which constitutes an Event of Default or an Unmatured Default; and

     (d)  the Administrative Agent shall have received such other approvals,
opinions, or documents as the Administrative Agent, or the Majority Lenders
through the Administrative Agent, may reasonably request, and such approvals,
opinions, and documents shall be satisfactory in form and substance to the
Administrative Agent.

      SECTION 3.04.  CONDITIONS PRECEDENT TO EACH EXTENSION OF THE TERMINATION
DATE. In the event that the Borrower shall request an extension of the
Termination Date pursuant to Section 2.18, such extension shall take effect only
upon the satisfaction of the following conditions precedent, together with such
other conditions precedent as the extending Lenders may require in connection
with such extension:

          (a)  The Administrative Agent shall have prepared and delivered to the
     Borrower and each Lender (including each new bank and other financial
     institution to
<PAGE>
 
                                                                              39

     which a non-extending Lender's Commitment has been assigned pursuant to
     Section 8.07 hereof) a revised Schedule I which reflects the Commitments,
     as applicable, of each Lender.

          (b) The Borrower shall have paid all fees under or referenced in
     Section 2.04 hereof, to the extent then due and payable.

          (c) The Administrative Agent shall have received such other documents
     and legal opinions in respect of any aspect or consequence of the
     transactions contemplated by Section 2.18 as the Administrative Agent shall
     reasonably request, including, without limitation, copies of the
     resolutions, in form and substance satisfactory to the Administrative
     Agent, of the Board of Directors of the Borrower authorizing the extension
     of the then-current Termination Date.

          (d)  The following statements shall be true on and as of the Extension
     Date:

              (i)   The representations and warranties contained in Section 4.01
          are correct, provided that the representation and warranty contained
          in Section 4.01(g) shall be true and correct in all material respects
          with respect to the financial statements most recently delivered to
          the Banks; and

              (ii)  No event has occurred and is continuing, or would result
          from such extension of the then-current Termination Date, that
          constitutes an Event of Default or an Unmatured Default.

          SECTION 3.05.  RELIANCE ON CERTIFICATES.  The Lenders and the
Administrative Agent shall be entitled to rely conclusively upon the
certificates delivered from time to time by officers of the Borrower as to the
names, incumbency, authority and signatures of the respective Persons named
therein until such time as the Administrative Agent may receive a replacement
certificate, in form acceptable to the Administrative Agent, from an officer of
such Person identified to the Administrative Agent as having authority to
deliver such certificate, setting forth the names and true signatures of the
officers and other representatives of such Person thereafter authorized to act
on behalf of such Person.
<PAGE>
 
                                                                              40

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

          SECTION 4.01.  REPRESENTATIONS AND WARRANTIES OF THE BORROWER.  The
Borrower represents and warrants as follows:

          (a) The Borrower and each of its Significant Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and is duly qualified to do business
in, and is in good standing in, all other jurisdictions where the nature of its
business or the nature of property owned or used by it makes such qualification
necessary (except where the failure to so qualify would not have a material
adverse affect on the business, financial condition, operations, results of
operations or prospects of the Borrower and its Subsidiaries, taken as a whole).

          (b) The execution, delivery and performance by the Borrower of this
Agreement, the Notes and the other Loan Documents to which it is or will be a
party are within the Borrower's corporate powers, have been duly authorized by
all necessary corporate action, and do not and will not contravene (i) the
Borrower's Restated Articles of Incorporation or by-laws, (ii) law, or (iii) any
legal or contractual restriction binding on or affecting the Borrower; and such
execution, delivery and performance do not and will not result in or require the
creation of any Lien upon or with respect to any of its properties.

          (c) No Governmental Approval is required in connection with the
execution, delivery or performance of any Loan Document, except for the
authorization issued by the Federal Energy Regulatory Commission to the Borrower
dated November 18, 1996, which authorization is in full force and effect and not
the subject of any pending or threatened appeal, stay or other challenge, but
which authorization shall timely and appropriately be extended, renewed or
replaced in order to permit the Borrower to incur indebtedness under this
Agreement beyond December 31, 1999.  The Borrower will have obtained and made,
on or before each date on which this representation shall be made or reaffirmed,
all necessary notices to or filings with the Federal Energy Regulatory
Commission with respect to the transactions contemplated by this Agreement and
the other Loan Documents, and all such notices and filings will have been duly
made, and will be in full force and effect.

          (d) There is no pending or threatened action or proceeding affecting
the Borrower or any of its Subsidiaries or properties before any court,
governmental agency or arbitrator, that might reasonably be expected to
materially adversely affect (i) the business, condition (financial or otherwise)
or results of operations of the Borrower and its Subsidiaries,
<PAGE>
 
                                                                              41

taken as a whole, or (ii) the ability of the Borrower to perform its obligations
under this Agreement or any other Loan Document to which the Borrower is or is
to be a party.

          (e) Since June 30, 1998 or, in connection with any extension of the
then-current Termination Date, the June 30 for which financial statements have
been delivered to the Lenders in the same calendar year as an Extension Date,
there has been no material adverse change in the business, condition (financial
or otherwise) or results of operations of the Borrower and its Subsidiaries,
taken as a whole, or in the Borrower's ability to perform its obligations under
this Agreement or any other Loan Document to which it is or will be a party.

          (f) Neither this Agreement nor any other document, certificate or
statement furnished to the Administrative Agent by the Borrower in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein, under the circumstances in which they were made, not misleading.

          (g) The consolidated balance sheets of the Borrower and its
Consolidated Subsidiaries as at June 30, 1998, and the related consolidated
statements of operations of the Borrower and its Consolidated Subsidiaries for
the three months, six months and twelve months then ended, copies of each of
which have been furnished to each Bank, fairly present (subject to year-end
adjustments) the consolidated financial condition of the Borrower and its
Consolidated Subsidiaries as at such dates and the consolidated results of
operations of the Borrower and its Consolidated Subsidiaries for the periods
ended on such date, all in accordance, in all material respects, with generally
accepted accounting principles consistently applied (except for changes in such
principles required by generally accepted accounting principles and noted in
such financial statements).

          (h) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan of the Borrower or any of its ERISA Affiliates which
would result in a liability of $25,000,000 or more to the Borrower.  Since the
most recent June 30 for which financial statements have been delivered to the
Lenders in accordance with Section 5.01(i) hereof, there has been no material
adverse change in the funding status of the Plans and no "prohibited
transaction" has occurred with respect thereto which is in either event
reasonably expected to result in a liability of $25,000,000 or more to the
Borrower.  Neither the Borrower nor any of its ERISA Affiliates has incurred nor
reasonably expects to incur any material withdrawal liability under ERISA to any
Multiemployer Plan.

          (i) The Borrower has filed all tax returns (Federal, state and local)
required to be filed and paid all taxes shown thereon to be due, including
interest and penalties, or, to the
<PAGE>
 
                                                                              42

extent the Borrower is contesting in good faith an assertion of liability based
on such returns, has provided adequate reserves for payment thereof in
accordance with generally accepted accounting principles.

          (j) This Agreement is, and each other Loan Document to which the
Borrower will be a party when executed and delivered hereunder will be, legal,
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with their respective terms, subject to the qualifications,
however, that the enforcement of the rights and remedies herein and therein is
subject to bankruptcy and other similar laws of general application affecting
rights and remedies of creditors and that the remedy of specific performance or
of injunctive relief is subject to the discretion of the court before which any
proceedings therefor may be brought.

          (k) Following application of the proceeds of each Advance, not more
than 25 percent of the value of the assets of the Borrower and its Subsidiaries
on a consolidated basis will be margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System).

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

          (m) The Borrower is a "holding company" within the meaning of PUHCA,
but the Borrower and its Subsidiaries are exempt from the provisions of that
Act, except Section 9(a)(2) thereof, by virtue of an order issued by the
Securities and Exchange Commission on June 30, 1948.  Such exemption is in full
force and effect and the Borrower is not aware of any existing or proposed
proceedings contemplating the revocation or modification of such exemption.

          (n) The Borrower has made a reasonable assessment of its Year 2000
Issues and has a realistic and achievable Year 2000 Program.  Based on such
assessment and on its Year 2000 Program, the Borrower does not reasonably
anticipate that Year 2000 Issues will have a Material Adverse Effect.


                                   ARTICLE V
                           COVENANTS OF THE BORROWER

          SECTION 5.01.  AFFIRMATIVE COVENANTS. So long as any amount in respect
of any Note shall remain unpaid or any Lender shall have any Commitment, the
Borrower will, unless the Majority Lenders shall otherwise consent in writing:
<PAGE>
 
                                                                              43

          (a) Preservation of Existence, Etc.  Preserve and maintain, and cause
each of its Significant Subsidiaries to preserve and maintain, its corporate
existence, material rights (statutory and otherwise) and franchises; provided,
however, that neither the Borrower nor any of its Significant Subsidiaries shall
be required to preserve and maintain any such right or franchise, and no such
Significant Subsidiary shall be required to preserve and maintain its corporate
existence, unless the failure to do so would have a material adverse effect on
the business, condition (financial or otherwise) or results of operations of the
Borrower and its Subsidiaries, taken as a whole, or on the Borrower's ability to
perform its obligations under this Agreement or any other Loan Document to which
it is or will be a party.

          (b) Compliance with Laws, Etc.  Comply, and cause each of its
Subsidiaries to comply, with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority, including without
limitation any such laws, rules, regulations and orders relating to zoning,
environmental protection, use and disposal of Hazardous Substances, land use,
ERISA, construction and building restrictions, and employee safety and health
matters relating to business operations, the non-compliance with which would
have a material adverse effect on the business, condition (financial or
otherwise) or results of operations of the Borrower and its Subsidiaries, taken
as a whole, or on the Borrower's ability to perform its obligations under this
Agreement or any other Loan Document to which it is or will be a party.

          (c) Payment of Taxes, Etc.  Pay and discharge, and cause each of its
Significant Subsidiaries to pay and discharge, before the same shall become
delinquent, all taxes, assessments and governmental charges, royalties or levies
imposed upon it or upon its property, except to the extent the Borrower or such
Significant Subsidiary is contesting the same in good faith and by appropriate
proceedings and has set aside adequate reserves for the payment thereof in
accordance with generally accepted accounting principles.

          (d) Payment of Material Obligations.  Pay, and cause each Significant
Subsidiary to pay, promptly as the same shall become due each material
obligation of the Borrower or such Significant Subsidiary, except to the extent
that the Borrower or such Significant Subsidiary is contesting the same in good
faith and by appropriate proceedings and has set aside adequate reserves for the
payment thereof in accordance with generally accepted accounting principles.

          (e) Inspection Rights.  At any reasonable time and from time to time
upon reasonable notice, permit or arrange for the Administrative Agent, the
Lenders and their respective agents and representatives to examine and make
copies of and abstracts from the records and books of account of, and, to the
extent permitted by applicable law, permit an examination of the properties of,
the Borrower and each of its Subsidiaries, and to discuss the
<PAGE>
 
                                                                              44

affairs, finances and accounts of the Borrower and its Subsidiaries with the
Borrower and its Subsidiaries and their respective officers and directors and,
following the occurrence and during the continuance of an Event of Default,
their respective accountants; provided, however, that, prior to the disclosure
of any information or materials of the Borrower or its Subsidiaries relating to
wholesale transactions, customers, pricing methods or formulae, transmission and
distribution system utilization or pricing, or proprietary methods or processes,
the Borrower may require the Lender seeking to inspect the same to enter into a
confidentiality and nondisclosure agreement with respect to the use and
disclosure of such information or materials in form and substance reasonably
satisfactory to the Borrower and such Lender and otherwise containing customary
terms.

          (f) Keeping of Books.  Keep, and cause its Subsidiaries to keep,
proper records and books of account, in which full and correct entries shall be
made of all financial transactions of the Borrower and its Subsidiaries and the
assets and business of the Borrower and its Subsidiaries, in accordance with
generally accepted accounting principles.

          (g) Maintenance of Properties, Etc.  Maintain, and cause each of its
Subsidiaries to maintain, good and marketable title to, and preserve, maintain,
develop, and operate in substantial conformity with all laws and material
contractual obligations, all of its properties which are used or useful in the
conduct of its business in good working order and condition, ordinary wear and
tear excepted, except where the failure to do so would not have a material
adverse effect on the business, condition (financial or otherwise) or results of
operations of the Borrower and its Subsidiaries, taken as a whole, or on the
Borrower's ability to perform its obligations under this Agreement or any other
Loan Document to which it is or will be a party.

          (h) Maintenance of Insurance.  Maintain, or cause to be maintained,
insurance covering the Borrower and each of its Subsidiaries and their
respective properties in effect at all times as may be required by law and such
other insurance in such amounts and covering such risks as is usually carried by
companies similarly situated.

          (i) Reporting Requirements.  Furnish to each Lender:

              (i) as soon as possible and in any event within five Business
     Days after the occurrence of each Unmatured Default or Event of Default
     continuing on the date of such statement, a statement of a Senior Financial
     Officer setting forth details of such Unmatured Default or Event of Default
     and the action that the Borrower proposes to take with respect thereto;
<PAGE>
 
                                                                              45

          (ii)   as soon as available and in any event within 60 days after the
     end of each of the first three quarters of each fiscal year of the
     Borrower, a consolidated balance sheet of the Borrower and its Consolidated
     Subsidiaries as at the end of such quarter and statements of income,
     consolidated operations, consolidated retained earnings and consolidated
     cash flows of the Borrower and its Consolidated Subsidiaries for the period
     commencing at the end of the previous fiscal year and ending with the end
     of such quarter, all in reasonable detail and duly certified (subject to
     year-end audit adjustments) by a Senior Financial Officer as having been
     prepared in accordance (in all material respects) with generally accepted
     accounting principles together with a certificate of said officer stating
     that no Unmatured Default or Event of Default has occurred and is
     continuing or, if an Unmatured Default or Event of Default has occurred and
     is continuing, a statement as to the nature thereof and the action that the
     Borrower proposes to take with respect thereto; provided that delivery of a
     copy of the Borrower's Quarterly Report on Form 10-Q for such quarter shall
     be deemed to satisfy such financial statement delivery requirements;

          (iii)  as soon as available and in any event within 120 days after
     the end of each fiscal year of the Borrower, a copy of the consolidated
     balance sheet of the Borrower and its Consolidated Subsidiaries as at the
     end of such fiscal year and statements of consolidated operations,
     consolidated retained earnings and consolidated cash flows of the Borrower
     and its Consolidated Subsidiaries for such fiscal year, in each case in
     reasonable detail and duly certified by a Senior Financial Officer as
     having been prepared in accordance (in all material respects) with
     generally accepted accounting principles, together with a certificate of a
     Senior Financial Officer stating that no Unmatured Default or Event of
     Default has occurred and is continuing or, if an Unmatured Default or Event
     of Default has occurred and is continuing, a statement as to the nature
     thereof and the action that the Borrower proposes to take with respect
     thereto; provided that delivery of a copy of the Borrower's Annual Report
     on Form 10-K (containing such statements) or Current Report on Form 8-K
     (containing such statements) for such year shall be deemed to satisfy such
     financial statement delivery requirements;

          (iv)   as soon as possible and in any event (A) within 30 days
     after any ERISA Event described in clause (i) of the definition of ERISA
     Event with respect to any Plan of the Borrower or any ERISA Affiliate of
     the Borrower has occurred and (B) within 10 days after any other ERISA
     Event with respect to any Plan of the Borrower or any ERISA Affiliate of
     the Borrower has occurred, a statement of a Senior Financial Officer
     describing such ERISA Event and the action, if any, which the Borrower or
     such ERISA Affiliate proposes to take with respect thereto;
<PAGE>
 
                                                                              46

          (v)    promptly after receipt thereof by the Borrower or any of its
     ERISA Affiliates from the PBGC copies of each notice received by the
     Borrower or such ERISA Affiliate of the PBGC's intention to terminate any
     Plan of the Borrower or such ERISA Affiliate or to have a trustee appointed
     to administer any such Plan;

          (vi)   promptly after receipt thereof by the Borrower or any ERISA
     Affiliate of the Borrower from a Multiemployer Plan sponsor, a copy of each
     notice received by the Borrower or such ERISA Affiliate concerning the
     imposition or amount of withdrawal liability in an aggregate principal
     amount of at least $25,000,000 pursuant to Section 4202 of ERISA in respect
     of which the Borrower or such ERISA Affiliate is reasonably expected to be
     liable;

          (vii)  promptly after the Borrower becomes aware of the occurrence 
     thereof, notice of all actions, suits, proceedings or other events of (A)
     of the type described in Section 4.01(d) or (B) for which the
     Administrative Agent, the Lenders will be entitled to indemnity under
     Section 8.04(c);

          (viii) promptly after the sending or filing thereof, copies of all
     such information statements, financial statements, and reports which the
     Borrower sends to its public security holders (if any), and copies of all
     regular, periodic and special reports, and all registration statements and
     periodic or special reports, if any, which the Borrower files with the
     Securities and Exchange Commission or any governmental authority which may
     be substituted therefor, or with any national securities exchange;

          (ix)   such information concerning the Borrower's Year 2000 Programs
     as the Administrative Agent may reasonably request; and

          (x)    promptly after requested, such other information respecting the
     business, properties, results of operations, prospects, revenues, condition
     or operations, financial or otherwise, of the Borrower or any of its
     Subsidiaries (including, but not limited to, copies of each Schedule B
     (Actuarial Information) to the annual report (Form 5500 Series) filed with
     the Internal Revenue Service) as the Administrative Agent or any Lender
     through the Administrative Agent may from time to time reasonably request.

          (j)    Use of Proceeds.  Use the proceeds of the initial Advances and
any other Advances hereunder solely for the Borrower's general corporate
purposes.

          (k)    Debt to Capitalization.  Maintain at all times a ratio of
Consolidated Debt to Consolidated Capital of not more than 65%.
<PAGE>
 
                                                                              47

          (l)    Further Assurances.  At the expense of the Borrower, promptly
execute and deliver, or cause to be promptly executed and delivered, all further
instruments and documents, and take and cause to be taken all further actions,
that may be necessary or that the Majority Lenders through the Administrative
Agent may reasonably request to enable the Lenders and the Administrative Agent
to enforce the terms and provisions of this Agreement and to exercise their
rights and remedies hereunder or under any other Loan Document.  In addition,
the Borrower will use all reasonable efforts to duly obtain Governmental
Approvals required in connection with the Loan Documents from time to time on or
prior to such date as the same may become legally required, and thereafter to
maintain all such Governmental Approvals in full force and effect.

          (m)    Year 2000. Take all such actions as are reasonably necessary to
successfully implement its Year 2000 Program and to assure that Year 2000 Issues
will not have a Material Adverse Effect. At the request of the Administrative
Agent, the Borrower will provide a description of its Year 2000 Program,
together with any updates or progress reports with respect thereto.

      SECTION 5.02.  NEGATIVE COVENANTS. So long as any amount in respect of any
Note shall remain unpaid or any Lender shall have any Commitment, the Borrower
will not, without the written consent of the Majority Lenders:

          (a)    Liens, Etc.  Create, incur, assume, or suffer to exist, or
permit any of its Significant Subsidiaries to create, incur, assume, or suffer
to exist, any lien, security interest, or other charge or encumbrance (including
the lien or retained security title of a conditional vendor) of any kind, or any
other type of arrangement intended or having the effect of conferring upon a
creditor a preferential interest upon or with respect to any of its properties
of any character, in each case to secure or provide for the payment of any Debt
of any Person (any of the foregoing being referred to herein as a "LIEN"),
excluding, however, from the operation of the foregoing restrictions the Liens
created under the Loan Documents and the following:

          (i)    Liens for taxes, assessments or governmental charges or levies
     to the extent not past due or contested in good faith by appropriate
     proceedings, with adequate reserves set aside for the payment thereof in
     accordance with generally accepted accounting principles;

          (ii)   Liens imposed by law, such as materialmen's, mechanics',
     carriers', workmen's, repairmen's, warehousemen's and landlord's liens and
     other similar Liens arising in the ordinary course of business securing
     obligations which are not overdue or which are being contested in good
     faith by appropriate proceedings, with adequate reserves
<PAGE>
 
                                                                              48

     set aside for the payment thereof in accordance with generally accepted
     accounting principles;

          (iii)  pledges or deposits to secure obligations under workmen's
     compensation laws or similar legislation, to secure obligations
     individually or in the aggregate equal to or less than $25,000,000 referred
     to in clause (vi) of the definition of Debt, to secure public or statutory
     obligations of the Borrower or such Significant Subsidiary, or to secure
     the utility obligations of the Borrower or any such Significant Subsidiary
     incurred in the ordinary course of business;

          (iv)   (A) purchase money Liens upon or in property now owned or
     hereafter acquired by the Borrower or any of its Significant Subsidiaries
     in the ordinary course of business (consistent with present practices) to
     secure (1) the purchase price of such property or (2) Debt incurred solely
     for the purpose of financing the acquisition, construction or improvement
     of any such property to be subject to such Liens, or (B) Liens existing on
     any such property at the time of acquisition, or extensions, renewals or
     replacements of any of the foregoing for the same or a lesser amount,
     provided that no such Lien shall extend to or cover any property other than
     the property being acquired, constructed or improved and replacements,
     modifications and proceeds of such property, and no such extension, renewal
     or replacement shall extend to or cover any property not theretofore
     subject to the Lien being extended, renewed or replaced;

          (v)    attachment, judgment or other similar Liens arising in
     connection with court proceedings, provided that, with respect to any Lien
     involving an amount of $25,000,000 or more, the execution or other
     enforcement of such Liens is effectively stayed and the claims secured
     thereby are being actively contested in good faith by appropriate
     proceedings or the payment of which is covered in full (subject to
     customary deductible amounts) by insurance maintained with responsible
     insurance companies and the applicable insurance company has acknowledged
     its liability therefor in writing;

          (vi)   Liens arising under the Mortgage dated July 1, 1923, as
     supplemented and amended by a Supplemental Indenture dated August 1, 1944
     and other supplemental indentures, from the Borrower, as mortgagor, to
     Harris Trust and Savings Bank and D.G. Donovan, as trustees, pursuant to
     which the Borrower has issued, and may hereafter issue, its mortgage bonds;

          (vii)  Liens, if any, arising in connection with (A) the sale or
     sale/leaseback of nuclear fuel to the extent permitted in clause (w) of the
     proviso to Section 5.02(d) hereof, but only to the extent that the Liens so
     arising are placed upon the nuclear fuel so sold or
<PAGE>
 
                                                                              49

     sold/leased back, or (B) the sale, pledge or other disposition of accounts
     receivable to the extent permitted by clause (y) of the proviso of Section
     5.02(d) hereof, but only to the extent that the Liens so arising are placed
     upon the accounts receivable so sold, pledged or otherwise disposed of;

          (viii)  Liens, if any, arising in connection with Capitalized Lease
     Obligations, but only on the equipment or property subject to such
     Capitalized Lease Obligations;

          (ix)    Liens on the capital stock of or any other equity interest in
     any of the Borrower's Subsidiaries (which are not Significant Subsidiaries)
     or any such Subsidiary's assets to secure the payment and performance of
     Debt obligations in connection with any project financing for such
     Subsidiary (provided that the obligee of such obligations shall have no
     recourse to the Borrower to satisfy such obligations, other than pursuant
     to any such Liens on the Borrower's equity interests in such Subsidiary);

          (x)     Liens on the assets and/or rights to receive income of any
     Person that exist at the time that such Person becomes a Significant
     Subsidiary and the continuation of such Liens in connection with any
     refinancing or restructuring of the obligations secured by such Liens; and

          (xi)    other Liens which, taken together with the Liens arising
     pursuant to the foregoing clauses or individually, do not have a Material
     Adverse Effect.

          (b)     Compliance with ERISA.  (i) Permit to exist any "accumulated
funding deficiency" (as defined in Section 412(a) of the Internal Revenue Code
of 1986, as amended from time to time) (unless such deficiency exists with
respect to a Multiple Employer Plan or Multiemployer Plan and the Borrower has
no control over the reduction or elimination of such deficiency), (ii)
terminate, or permit any ERISA Affiliate of the Borrower to terminate, any Plan
of the Borrower or such ERISA Affiliate so as to result in a liability of
$25,000,000 or more of the Borrower to the PBGC, or (iii) permit to exist any
occurrence of any Reportable Event (as defined in Title IV of ERISA), other than
a Reportable Event for which the 30-day notice requirement with respect thereto
has been waived by the PBGC or any other event or condition, which presents a
material (in the reasonable opinion of the Majority Lenders) risk of such a
termination by the PBGC of any Plan of the Borrower or such ERISA Affiliate and
such a liability to the Borrower.

          (c)     Transactions with Affiliates. Enter into, or permit any of its
Subsidiaries to enter into, any transaction with an Affiliate of the Borrower,
unless (i) such transaction is on terms no less favorable to the Borrower or
such Subsidiary, as the case may be, than if the 
<PAGE>
 
                                                                              50

transaction had been negotiated in good faith on an arm's length basis with a
Person which was not an Affiliate of the Borrower or (ii) such transaction is
conducted pursuant to the Affiliated Interests Agreement dated as of December 4,
1995 among the Borrower, Unicom Corporation and the other entities named
therein, as it may be amended or modified from time to time.

          (d)  Mergers, Etc.  Merge or consolidate with or into any Person, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions, and whether in a sale/leaseback transaction or
otherwise) more than 10% of its assets (whether now owned or hereafter
acquired), unless, in the case of a merger, immediately after giving effect
thereto, (i) no event shall occur and be continuing that constitutes an
Unmatured Default or an Event of Default, (ii) the Borrower is the surviving
corporation, and (iii) the Borrower shall not be liable with respect to any Debt
or allow its property to be subject to any Lien which it could not become liable
with respect to or allow its property to become subject to under this Agreement
on the date of such transaction; provided, however, that so long as no Unmatured
Default or Event of Default has occurred and is continuing or would result from
such transaction, (w) the Borrower may engage in sale or sale/leaseback
transactions with respect to nuclear fuel, (x) the Borrower may sell, pledge or
otherwise dispose of its accounts receivable, (y) the Borrower may engage in
transactions involving the issuance of Transitional Funding Instruments, and (z)
the Borrower may sell its electric generating assets in one or a series of arms-
length transactions for not less than the fair market value of such assets.

          (e)  Maintenance of Ownership of Significant Subsidiaries.  Sell,
assign, transfer, pledge or otherwise dispose of any shares of capital stock of
any of its Significant Subsidiaries or any warrants, rights or options to
acquire such capital stock, or permit any of its Significant Subsidiaries to
issue, sell or otherwise dispose of any shares of such Significant Subsidiary's
capital stock, except (and only to the extent) as may be necessary to give
effect to a transaction permitted by subsection (d) above.


                                   ARTICLE VI

                               EVENTS OF DEFAULT

      SECTION 6.01.  EVENTS OF DEFAULT.  If any of the following events (each an
"EVENT OF DEFAULT") shall occur and be continuing after the applicable grace
period and notice requirement (if any):

          (a)  The Borrower shall fail to pay any principal of any Note when the
same becomes due and payable; or
<PAGE>
 
                                                                              51

          (b)  The Borrower shall fail to pay any interest on any Note or any
other amount due under this Agreement for three Business Days after the same
becomes due; or

          (c)  The Borrower or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Debt of the Borrower that is
outstanding in a principal amount of $25,000,000 or more in the aggregate (but
excluding Debt evidenced by the Notes) when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such Debt; or

          (d)  The Borrower or any of its Subsidiaries shall fail to observe any
term or covenant on its part to be performed or observed and the effect of such
failure is to accelerate or permit acceleration of any Debt of the Borrower that
is outstanding in a principal amount of $25,000,000 or more in the aggregate
(but excluding Debt evidenced by the Notes); or

          (e)  Any representation or warranty made by or on behalf of the
Borrower in any Loan Document or in any certificate or other writing delivered
pursuant thereto shall prove to have been incorrect in any material respect when
made or deemed made; or

          (f)  The Borrower shall fail to perform or observe any term or
covenant on its part to be performed or observed contained in Section 5.01(k) or
5.02 (other than subsection (c) thereof); or

          (g)  The Borrower shall fail to perform or observe any other term or
covenant on its part to be performed or observed contained in Section 5.01 or in
any other Loan Document, and any such failure shall remain unremedied, after
written notice thereof shall have been given to the Borrower by the
Administrative Agent, for a period of 30 days; or

          (h)  Any judgment or order for the payment of money in excess of
$25,000,000 shall be rendered against the Borrower or any of its Subsidiaries
and either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be any period of ten consecutive
Business Days during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; or

          (i)  The Borrower shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make an assignment for the benefit of creditors; or any proceeding
shall be instituted by or against the Borrower seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of its debts under
any law relating to
<PAGE>
 
                                                                              52

bankruptcy, insolvency, or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and, in the
case of a proceeding instituted against the Borrower, either such proceeding
shall remain undismissed or unstayed for a period of 60 days or any of the
actions sought in such proceeding (including without limitation the entry of an
order for relief against the Borrower or the appointment of a receiver, trustee,
custodian or other similar official for the Borrower or any of its property)
shall occur; or the Borrower shall take any corporate or other action to
authorize any of the actions set forth above in this subsection (i); or

          (j)  Any Governmental Approval required in connection with the
execution, delivery and performance of the Loan Documents shall be rescinded,
revoked, otherwise terminated, or amended or modified in any manner which is
materially adverse to the interests of the Lenders and the Administrative Agent;
or

          (k)  Any ERISA Event shall have occurred with respect to a Plan which
could reasonably be expected to result in a liability of $25,000,000 or more to
the Borrower, and, 30 days after notice thereof shall have been given to the
Borrower by the Administrative Agent or any Lender, such ERISA Event shall still
exist; or

          (l)  An "event of default" (as defined therein) shall occur and be
continuing under the Other Credit Agreement;

then, and in any such event, the Administrative Agent  (i) shall at the request,
or may with the consent, of the Majority Lenders or, if no A Advances are then
outstanding, Banks having greater than 50% of the Commitments (without giving
effect to any B Reduction), by notice to the Borrower, declare the obligation of
each Lender to make Advances to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
the Majority Lenders or, if no A Advances are then outstanding, Lenders having
greater than 50% of the Commitments, by notice to the Borrower, declare the
Notes (if any), all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Notes, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
event of an actual or deemed entry of an order for relief with respect to the
Borrower under the Federal Bankruptcy Code, (A) the Commitments and the
obligation of each Lender to make Advances shall automatically be terminated and
(B) the Notes, all such interest and all such amounts shall automatically become
and be due and payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the Borrower.
<PAGE>
 
                                                                              53


                                  ARTICLE VII

                            THE ADMINISTRATIVE AGENT

      SECTION 7.01.  AUTHORIZATION AND ACTION.  Each Lender hereby appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto.  As to any matters not expressly provided for by
this Agreement or any other Loan Document (including, without limitation,
enforcement or collection of the Notes), the Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to personal liability or which
is contrary to this Agreement or applicable law.  The Administrative Agent
agrees to give to each Lender prompt notice of each notice given to it by the
Borrower pursuant to the terms of this Agreement.  The Administrative Agent
shall be deemed to have exercised reasonable care in the administration and
enforcement of this Agreement and the other Loan Documents if it undertakes such
administration and enforcement in a manner substantially equal to that which the
Administrative Agent accords credit facilities similar to the credit facility
hereunder for which it is the sole lender.

      SECTION 7.02.  ADMINISTRATIVE AGENT'S RELIANCE, ETC.  Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or any other Loan Document, except for its
or their own gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, the Administrative Agent: (i) may treat the payee
of any Note as the holder thereof until the Administrative Agent receives and
accepts a Lender Assignment entered into by the Lender which is the payee of
such Note, as assignor, and an Eligible Assignee, as assignee, as provided in
Section 8.07; (ii) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (iii)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations (whether written
or oral) made in or in connection with this Agreement or any other Loan
Document; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or any other Loan Document on the part of the Borrower or to inspect
the property (including the books and records) of the Borrower; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, any other
Loan
<PAGE>
 
                                                                              54

Document or any other instrument or document furnished pursuant hereto or
thereto; and (vi) shall incur no liability under or in respect of this Agreement
or any other Loan Document by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopier, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party or
parties.

      SECTION 7.03.  CITIBANK, N.A. AND AFFILIATES.  With respect to its
Commitment, the Advances made by it and the Notes issued to it, Citibank, N.A.
shall have the same rights and powers under this Agreement as any other Lender
and may exercise the same as though it were not the Administrative Agent; and
the term "Bank" or "Banks" and "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include Citibank, N.A. in its individual capacity.
Citibank, N.A. and its Affiliates may accept deposits from, lend money to, act
as trustee under indentures of, and generally engage in any kind of business
with, the Borrower, any of its Subsidiaries or Affiliates and any Person who may
do business with or own securities of the Borrower or any such Subsidiary or
Affiliate, all as if Citibank, N.A. were not the Administrative Agent and
without any duty to account therefor to the Lenders.

      SECTION 7.04.  LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement.

      SECTION 7.05.  INDEMNIFICATION.  The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed by the Borrower), ratably
according to (a) on or before the Termination Date, the respective principal
amounts of the A Notes then held by each of them (or if no A Notes are at the
time outstanding or if any A Notes are held by Persons which are not Lenders,
ratably according to the respective Percentages of the Lenders), or (b) after
the Termination Date, the respective principal amounts of the Notes then held by
each of them (or if no Notes are at the time outstanding or if any Notes are
held by Persons which are not Lenders, ratably according to the respective
unpaid principal amounts of the Advances made by each Lender), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of this Agreement or
any action taken or omitted by the Administrative Agent under this Agreement,
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or
<PAGE>
 
                                                                              55

disbursements resulting from the Administrative Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse the Administrative Agent promptly upon demand for its ratable share of
any out-of-pocket expenses (including counsel fees) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, to the extent that the
Administrative Agent is not reimbursed for such expenses by the Borrower.

      SECTION 7.06.  SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent
may resign at any time by giving written notice thereof to the Lenders and the
Borrower and may be removed at any time with or without cause by the Majority
Lenders, with any such resignation or removal to become effective only upon the
appointment of a successor Administrative Agent pursuant to this Section 7.06.
Upon any such resignation or removal, the Majority Lenders shall have the right
to appoint a successor Administrative Agent, which shall be a Lender or shall be
another commercial bank or trust company reasonably acceptable to the Borrower
organized under the laws of the United States or of any State thereof. If no
successor Administrative Agent shall have been so appointed by the Majority
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a Lender or shall be another commercial
bank or trust company organized under the laws of the United States of any State
thereof reasonably acceptable to the Borrower. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.


                                  ARTICLE VII
                                 MISCELLANEOUS

      SECTION 8.01.  AMENDMENTS, ETC. No amendment or waiver of any provision of
any Loan Document, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Majority Lenders and, in the case of any amendment, the Borrower, and then such
waiver or consent shall be effective only in the
<PAGE>
 
                                                                              56

specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following:  (a) waive, modify or
eliminate any of the conditions specified in Section 3.01 or 3.02, (b) increase
the Commitments of the Lenders (except as provided in Section 2.19), change or
extend the Termination Date (except as provided in Section 2.18) or subject the
Lenders to any additional obligations, (c) reduce the principal of, or interest
on, the A Notes, any Applicable Margin or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the A Notes or any fees or other amounts payable hereunder, (e)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the A Notes, or the number of Lenders, which shall be required for the
Lenders or any of them to take any action hereunder or (f) amend this Section
8.01; and provided, further, that no amendment, waiver or consent shall, unless
in writing and signed by the Lenders making or maintaining such B Advances, do
any of the following: (a) waive, modify or eliminate any of the conditions to
any B Advance specified in Section 3.03,  (b) reduce the principal of, or
interest on, any B Note or other amounts payable in respect thereof, (c)
postpone any date fixed for any payment of principal of, or interest on, any B
Note or any other amounts payable in respect thereof; and provided, further,
that no amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above to take such
action, affect the rights or duties of the Administrative Agent under this
Agreement or any Note.

      SECTION 8.02.  NOTICES, ETC. All notices and other communications provided
for hereunder and under the other Loan Documents shall be in writing (including
telecopier, telegraphic, telex or cable communication) and mailed, telecopied,
telegraphed, telexed, cabled or delivered, if to the Borrower, at its address at
One First National Plaza - 37th Floor, 10 South Dearborn Street, Chicago,
Illinois 60603 (or P.O. Box 767, Chicago, Illinois 60690-0767, if mailed),
Attention: Treasurer (telephone: 312-394-3149; and telecopier: 312-394-3110),
with a copy to the same address, attention: Associate General Counsel-Corporate
and Commercial (telephone: 312-394-3179; and telecopier: 312-394-3950); if to
any Bank, at its Domestic Lending Office specified opposite its name on Schedule
I hereto; if to any other Lender, at its Domestic Lending Office specified in
the Lender Assignment pursuant to which it became a Lender; and if to the
Administrative Agent, at its address at Two Pennsway, Ste. 200, New Castle,
Delaware 19720, Attention: Bank Loan Syndications; or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other parties. All such notices and communications shall, when mailed,
telecopied, telegraphed, telexed or cabled, be effective five days after being
deposited in the mails, or when delivered to the telegraph company, telecopied,
confirmed by telex answerback or delivered to the cable company, respectively,
except that notices and communications to the Administrative Agent pursuant to
Article II or VII shall not be effective until received by the Administrative
Agent.
<PAGE>
 
                                                                              57

      SECTION 8.03.  NO WAIVER; REMEDIES. No failure on the part of any Lender
or the Administrative Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

      SECTION 8.04.  COSTS, EXPENSES, TAXES AND INDEMNIFICATION. (a) The
Borrower agrees to pay on demand all costs and expenses of the Administrative
Agent in connection with the preparation (including, without limitation,
printing costs), negotiation, execution, delivery, modification and amendment of
this Agreement and the other Loan Documents, and the other documents and
instruments to be delivered hereunder and thereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Administrative Agent with respect thereto and with respect to the administration
of, and advising the Administrative Agent as to its rights and responsibilities
under, this Agreement and the other Loan Documents. The Borrower further agrees
to pay on demand all costs and expenses, if any (including, without limitation,
reasonable counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Agreement
and the other Loan Documents and the other documents and instruments to be
delivered hereunder and thereunder, including, without limitation, reasonable
counsel fees and expenses in connection with the enforcement of rights under
this Section 8.04(a). In addition, the Borrower shall pay any and all stamp and
other taxes payable or determined to be payable in connection with the execution
and delivery of this Agreement and the other Loan Documents, and the other
documents and instruments to be delivered hereunder and thereunder, and agrees
to save the Administrative Agent and each Lender harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.

          (b) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance or B Advance is made other than on the last day of the Interest
Period for such A Advance or other than on the maturity date of such B Advance,
as a result of a payment or Conversion pursuant to Section 2.10, 2.11, 2.12 or
2.14 or acceleration of the maturity of the Notes pursuant to Section 6.01 or
for any other reason, the Borrower shall, upon demand by any Lender (with a copy
of such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender any amounts required to compensate such Lender for
any additional losses, costs or expenses which it may reasonably incur as a
result of such payment or Conversion, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Lender to fund or maintain such Advance.

          (c) The Borrower hereby agrees to indemnify and hold each Lender, the
Administrative Agent and their respective officers, directors, employees,
professional advisors
<PAGE>
 
                                                                              58

and affiliates (each, an "INDEMNIFIED PERSON") harmless from and against any and
all claims, damages, losses, liabilities, costs or expenses (including
reasonable attorney's fees and expenses, whether or not such Indemnified Person
is named as a party to any proceeding or is otherwise subjected to judicial or
legal process arising from any such proceeding) which any of them may incur or
which may be claimed against any of them by any Person (except for such claims,
damages, losses, liabilities, costs and expenses resulting from such Indemnified
Person's gross negligence or willful misconduct):

          (i)   by reason of or in connection with the execution, delivery or
     performance of any of the Loan Documents or any transaction contemplated
     thereby, or the use by the Borrower of the proceeds of any Extension of
     Credit;

          (ii)  in connection with any documentary taxes, assessments or charges
     made by any governmental authority by reason of the execution and delivery
     of any of the Loan Documents; or

          (iii) in connection with or resulting from the utilization, storage,
     disposal, treatment, generation, transportation, release or ownership of
     any Hazardous Substance (i) at, upon, or under any property of the Borrower
     or any of its Affiliates or (ii) by or on behalf of the Borrower or any of
     its Affiliates at any time and in any place.

          (d)   The Borrower's obligations under this Section 8.04 shall survive
the repayment of all amounts owing to the Lenders under the Notes and the
termination of the Commitments.  If and to the extent that the obligations of
the Borrower under this Section 8.04 are unenforceable for any reason, the
Borrower agrees to make the maximum contribution to the payment and satisfaction
thereof which is permissible under applicable law.

      SECTION 8.05.  RIGHT OF SET-OFF.   (a) Upon (i) the occurrence and during
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent by the Majority Lenders specified by Section 6.01 to
authorize the Administrative Agent to declare the Notes due and payable pursuant
to the provisions of Section 6.01, each Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Lender
to or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under any Loan Document
and any Note held by such Lender, irrespective of whether or not such Lender
shall have made any demand under such Loan Document or such Note and although
such obligations may be unmatured.  Each Lender agrees promptly to notify the
Borrower after any such set-off and application made by such Lender, provided
that the failure
<PAGE>
 
                                                                              59

to give such notice shall not affect the validity of such set-off and
application.  The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of set-
off) which such Lender may have.

          (b) The Borrower agrees that it shall have no right of set-off,
deduction or counterclaim in respect of its obligations hereunder, and that the
obligations of the Lenders hereunder are several and not joint.  Nothing
contained herein shall constitute a relinquishment or waiver of the Borrower's
rights to any independent claim that the Borrower may have against the
Administrative Agent or any Lender for the Administrative Agent's or such
Lender's, as the case may be, gross negligence or wilful misconduct, but no
Lender shall be liable for the conduct of the Administrative Agent or any other
Lender, and the Administrative Agent shall not be liable for the conduct of any
Lender.

      SECTION 8.06. BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Borrower and the Administrative Agent and
when the Administrative Agent shall have been notified in writing by each Bank
that such Bank has executed it and thereafter shall be binding upon and inure to
the benefit of the Borrower, the Administrative Agent and each Lender and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lenders.

      SECTION 8.07. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may upon the
written consent of the Administrative Agent and the Borrower (such consent not
to be unreasonably withheld), assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and the
Note or Notes held by it); provided, however, that (i) each such assignment
shall be of a constant, and not a varying, percentage of all of the assigning
Lender's rights and obligations under this Agreement, (ii) the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Lender Assignment with respect to
such assignment) shall in no event be less than the lesser of the amount of such
Lender's then remaining Commitment and $15,000,000 (except in the case of
assignments between Lenders at the time already parties hereto), and (iii) the
parties to each such assignment shall execute and deliver to the Administrative
Agent, for its acceptance and recording in the Register, a Lender Assignment,
together with any Note or Notes subject to such assignment and a processing and
recordation fee of $3,000. Promptly following its receipt of such Lender
Assignment, Note or Notes and fee, the Administrative Agent shall accept and
record such Lender Assignment in the Register. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Lender Assignment, (x) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
<PAGE>
 
                                                                              60

pursuant to such Lender Assignment, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Lender Assignment, relinquish its rights and be released from its obligations
under this Agreement (and, in the case of a Lender Assignment covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).  Notwithstanding
anything to the contrary contained in this Agreement, any Lender may at any time
assign all or any portion of the Advances owing to it to any Affiliate of such
Lender.  No such assignment, other than to an Eligible Assignee, shall release
the assigning Lender from its obligations hereunder.

          (b) By executing and delivering a Lender Assignment, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Lender Assignment, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with any Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document or any other instrument or document furnished
pursuant thereto; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of each Loan Document, together with such documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Lender Assignment; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, such assigning Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents; (v) such assignee confirms that it is an
Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such powers
under the Loan Documents as are delegated to the Administrative Agent by the
terms thereof, together with such powers as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.

          (c) The Administrative Agent shall maintain at its address referred to
in Section 8.02 a copy of each Lender Assignment delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders and
the Commitment of, and principal amount of the Advances owing to, each Lender
from time to time (the "REGISTER").  The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is
<PAGE>
 
                                                                              61

recorded in the Register as a Lender hereunder for all purposes of this
Agreement.  The Register shall be available for inspection by the Borrower or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.

          (d) Upon its receipt of a Lender Assignment executed by an assigning
Lender and an assignee representing that it is an Eligible Assignee, together
with any Note or Notes subject to such assignment, the Administrative Agent
shall, with the consent of the Borrower (such consent not to be unreasonably
withheld), and provided that such Lender Assignment has been completed and is in
substantially the form of Exhibit 8.07 hereto, (i) accept such Lender
Assignment, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower.  Within 10 Business Days after
its receipt of such notice, the Borrower, at its own expense, shall execute and
deliver to the Administrative Agent in exchange for the surrendered Note or
Notes a new Note to the order of such Eligible Assignee in an amount equal to
the Commitment assumed by it pursuant to such Lender Assignment and, if the
assigning Lender has retained a Commitment hereunder, a new Note to the order of
the assigning Lender in an amount equal to the Commitment retained by it
hereunder.  Such new Note or Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note or Notes, shall
be dated the effective date of such Lender Assignment and shall otherwise be in
substantially the form of Exhibit 1.01A-1 hereto.

          (e) Each Lender may sell participations to one or more banks,
financial institutions or other entities in all or a portion of its rights and
obligations under the Loan Documents (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and the Note or Notes held
by it); provided, however, that (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, and (iv) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement.

          (f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 8.07, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree, in accordance with
the terms of Section 8.08, to preserve the confidentiality of any Confidential
Information relating to the Borrower received by it from such Lender.
<PAGE>
 
                                                                              62

          (g) If any Lender (or any bank, financial institution, or other entity
to which such Lender has sold a participation) shall (i) make any demand for
payment under Section 2.08, 2.13 or 2.16, (ii) give notice to the Administrative
Agent pursuant to Section 2.14, (iii) either (A) not have outstanding unsecured
long-term indebtedness rated at or above "investment grade" by each of Moody's
and S&P, or (B) not have outstanding short-term unsecured indebtedness rated at
or above A-2 or P-2 by each of Moody's and S&P or (iv) determine not to extend
the Termination Date in response to any request by the Borrower pursuant to
Section 2.18, then (1) in the case of any demand made under clause (i) above, or
the occurrence of the event described in clause (ii) above, within 30 days after
any such demand or occurrence (if, but only if, in the case of any demanded
payment described in clause (i), such demanded payment has been made by the
Borrower), and (2) in the case of the occurrence of the event described in
clause (iii) or (iv) above, at any time prior to the then-scheduled Termination
Date, the Borrower may, with the approval of the Administrative Agent (which
approval shall not be unreasonably withheld), and provided that no Event of
Default or Unmatured Default shall then have occurred and be continuing, demand
that such Lender assign in accordance with this Section 8.07 to one or more
Eligible Assignees designated by the Borrower all (but not less than all) of
such Lender's Commitment and the Advances owing to it within the period ending
on the latest to occur of (x) the last day in the period described in clause (1)
or (2) above, as applicable, (y) the last day of the longest of the then current
Interest Periods for such Advances, and (z) the latest maturity date of any B
Advances owing to such Lender.  If any such Eligible Assignee designated by the
Borrower shall fail to consummate such assignment on terms acceptable to such
Lender, or if the Borrower shall fail to designate any such Eligible Assignees
for all or part of such Lender's Commitment or Advances, then such demand by the
Borrower shall become ineffective; it being understood for purposes of this
subsection (g) that such assignment shall be conclusively deemed to be on terms
acceptable to such Lender, and such Lender shall be compelled to consummate such
assignment to an Eligible Assignee designated by the Borrower, if such Eligible
Assignee (x) shall agree to such assignment by entering into a Lender Assignment
with such Lender and (y) shall offer compensation to such Lender in an amount
equal to all amounts then owing by the Borrower to such Lender hereunder and
under the Note made by the Borrower to such Lender, whether for principal,
interest, fees, costs or expenses (other than the demanded payment referred to
above and payable by the Borrower as a condition to the Borrower's right to
demand such assignment), or otherwise.

          (h) Anything in this Section 8.07 to the contrary notwithstanding, any
Lender may assign and pledge all or any portion of its Commitment and the
Advances owing to it (i) with notice to the Borrower and the Agent, to any of
its affiliates and (ii) without the consent of the Borrower or the Agent, to any
Federal Reserve Bank (and its transferees) as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve System and any
<PAGE>
 
                                                                              63

Operating Circular issued by such Federal Reserve Bank.  No such assignment
shall release the assigning Lender from its obligations hereunder.

      SECTION 8.08. CONFIDENTIALITY.  In connection with the negotiation and
administration of this Agreement and the other Loan Documents, the Borrower has
furnished and will from time to time furnish to the Administrative Agent and the
Lenders (each, a "RECIPIENT") written information which is identified to the
Recipient in writing when delivered as confidential (such information, other
than any such information which (i) is publicly available, or otherwise known to
the Recipient, at the time of disclosure, (ii) subsequently becomes publicly
available other than through any act or omission by the Recipient or (iii)
otherwise subsequently becomes known to the Recipient other than through a
Person whom the Recipient knows to be acting in violation of his or its
obligations to the Borrower, being hereinafter referred to as "CONFIDENTIAL
INFORMATION"). The Recipient will maintain the confidentiality of any
Confidential Information in accordance with such procedures as the Recipient
applies generally to information of that nature. It is understood, however, that
the foregoing will not restrict the Recipient's ability to freely exchange such
Confidential Information with current or prospective participants in or
assignees of the Recipient's position herein, but the Recipient's ability to so
exchange Confidential Information shall be conditioned upon any such prospective
participant's or assignee's entering into an understanding as to confidentiality
similar to this provision. It is further understood that the foregoing will not
prohibit the disclosure of any or all Confidential Information if and to the
extent that such disclosure may be required (i) by a regulatory agency or
otherwise in connection with an examination of the Recipient's records by
appropriate authorities, (ii) pursuant to court order, subpoena or other legal
process or in connection with any pending or threatened litigation, (iii)
otherwise as required by law, or (iv) in order to protect its interests or its
rights or remedies hereunder or under the other Loan Documents; in the event of
any required disclosure under clause (ii) or (iii) above, the Recipient agrees
to use reasonable efforts to inform the Borrower as promptly as practicable.

      SECTION 8.09. WAIVER OF JURY TRIAL. THE ADMINISTRATIVE AGENT, THE LENDERS
AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE ADMINISTRATIVE AGENT, SUCH
LENDERS OR THE BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
ADMINISTRATIVE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT.
<PAGE>
 
                                                                              64

      SECTION 8.10.  CONSENT. Unless otherwise specified as being within the
sole discretion of the Administrative Agent, the Lenders, the Majority Lenders
or the Borrower, whenever the consent or approval of the Administrative Agent,
the Lenders, the Majority Lenders or the Borrower, respectively, is required
herein, such consent or approval shall not be unreasonably withheld or delayed.

      SECTION 8.11.  GOVERNING LAW.  This Agreement and the other Loan Documents
shall be governed by, and construed in accordance with, the laws of the State of
New York.  The Borrower, each Lender, and the Administrative Agent (i)
irrevocably submits to the non-exclusive jurisdiction of any New York State
court or Federal court sitting in New York City in any action arising out of any
Loan Document, (ii) agrees that all claims in such action may be decided in such
court, (iii) waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum and (iv) consents to the service of process by mail.  A
final judgment in any such action shall be conclusive and may be enforced in
other jurisdictions.  Nothing herein shall affect the right of any party to
serve legal process in any manner permitted by law or affect its right to bring
any action in any other court.

      SECTION 8.12.  RELATION OF THE PARTIES; NO BENEFICIARY. No term, provision
or requirement, whether express or implied, of any Loan Document, or actions
taken or to be taken by any party thereunder, shall be construed to create a
partnership, association, or joint venture between such parties or any of them.
No term or provision of the Loan Documents shall be construed to confer a
benefit upon, or grant a right or privilege to, any Person other than the
parties thereto.

      SECTION 8.13.  EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
<PAGE>
 
                                                                           S - 1

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.


                    COMMONWEALTH EDISON COMPANY


                    By /s/ RuthAnn M. Gill
                      ------------------------------
                        Treasurer

                    SIGNATURE PAGE TO THE CREDIT AGREEMENT
<PAGE>
 
                                                                           S - 2

                    ADMINISTRATIVE AGENT
                    --------------------

                    CITIBANK, N.A.,
                    as Administrative Agent and as Bank


                    By /s/ Anita J. Brickell
                      --------------------------------
                       Managing Partner


                    CO-AGENTS
                    ---------

                    BANK OF AMERICA NT & SA


                    By /s/ Robert M. Eaton
                      --------------------------------
                        Vice President


                    THE BANK OF NEW YORK


                    By /s/ Nathan S. Howard
                      --------------------------------
                        Vice President


                    THE FIRST NATIONAL BANK OF CHICAGO


                    By /s/ Robert Bussa
                      --------------------------------
                        1st Vice President

                    SIGNATURE PAGE TO THE CREDIT AGREEMENT
<PAGE>
 
                                                                           S - 3

                    THE CHASE MANHATTAN BANK


                    By /s/ Thomas L. Casey
                      --------------------------------
                        Vice President


                    MORGAN GUARANTY TRUST COMPANY
                      OF NEW YORK


                    By /s/ Kathryn Sayko-Yanes
                      --------------------------------
                        Vice President

                    SIGNATURE PAGE TO THE CREDIT AGREEMENT
<PAGE>
 
                                                                           S - 4

                         BANKS
                         -----

                         ABN AMRO BANK N.V.


                         By /s/ Kevin S. McFadden
                           ---------------------------
                             Vice President

                         By /s/ Robert E. Lee IV
                           ---------------------------
                             Assistant Vice President


                         BANK OF MONTREAL


                         By /s/ Howard H. Turner
                           ---------------------------
                             Director


                         THE NORTHERN TRUST COMPANY


                         By /s/ Joseph A. Wemhoff
                           ---------------------------
                             Vice President

                    SIGNATURE PAGE TO THE CREDIT AGREEMENT
<PAGE>
 
                                                                           S - 5

                         CREDIT SUISSE FIRST BOSTON


                         By /s/ James P. Moran     /s/ Douglas E. Maher
                           ---------------------------------------------
                           Director                Vice President

                    SIGNATURE PAGE TO THE CREDIT AGREEMENT
<PAGE>
 
                                   SCHEDULE I

                          COMMONWEALTH EDISON COMPANY

          5-Year Credit Agreement, dated as of October 8, 1998, among
  Commonwealth Edison Company, the Banks named therein and Citibank, N.A., as
                              Administrative Agent


<TABLE>
<CAPTION>
Name of Bank                       Commitment   Domestic Lending Office               Eurodollar Lending Office
------------                       -----------  -----------------------               -------------------------------
<S>                                <C>          <C>                                   <C>

Citibank, N.A.                     $62,500,000  Two Pennsway, Ste. 200,               Same as Domestic Lending Office
                                                New Castle, Delaware 19720
                                                Attention: Bank Loan Syndications

Bank of America NT & SA            $62,500,000  Account Administration # 4976         Same as Domestic Lending Office
                                                200 West Jackson Boulevard
                                                Dept. 4976
                                                Chicago, Illinois 60606

The Bank of New York               $62,500,000  One Wall Street, 19th Floor           Same as Domestic Lending Office
                                                New York, New York 10286

The First National Bank of         $62,500,000  One First National Plaza, Ste. 0363   Same as Domestic Lending Office
 Chicago                                        Chicago, Illinois 60670
 
The Chase Manhattan Bank           $62,500,000  One Chase Manhattan Plaza, 8th Floor  Same as Domestic Lending Office
                                                New York, New York 10080

Morgan Guaranty Trust              $62,500,000  60 Wall Street                        Nassau Bahamas Office
 Company                                        New York, New York 10260-0060         c/o J. P. Morgan Services, Inc.
                                                                                      Euro-Loan Servicing Unit
                                                                                      500 Stanton Christiana Road
                                                                                      Newark, Delaware 19713
 
ABN AMRO Bank N.V.                 $37,500,000  135 South LaSalle Street, Suite 2805  Same as Domestic Lending Office
                                                Chicago, Illinois 60603
                                                Attention: Loan Administration

Bank of Montreal                   $37,500,000  115 South LaSalle, Floor 12W          Same as Domestic Lending Office
                                                Chicago, Illinois 60603

Credit Suisse First Boston         $25,000,000  11 Madison Avenue                     Same as Domestic Lending Office
                                                New York, New York 10010

The Northern Trust Company         $25,000,000  50 South LaSalle Street               Same as Domestic Lending Office
                                                Chicago, Illinois 60675
</TABLE>
<PAGE>
 
                                  SCHEDULE II

                       Fossil-Fired Generating Facilities


                    Collins Station, Morris, Illinois
                    Crawford Station, Chicago, Illinois
                    Fisk Station, Chicago, Illinois
                    Joliet Station, Joliet, Illinois
                    Powerton Station, Pekin, Illinois
                    Waukegan Station, Waukegan, Illinois
                    Will County Station, Lockport, Illinois