[EXECUTION COPY]








                                  $200,000,000


                                CREDIT AGREEMENT


                                      among


                         HOMESTEAD VILLAGE INCORPORATED,


                         THE LENDERS IDENTIFIED HEREIN,


                                       and


                        COMMERZBANK AG, NEW YORK BRANCH,
                                    as AGENT


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


                            Dated as of June 15, 1998

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


                                   Arranged By

                         COMMERZBANK AG, NEW YORK BRANCH










<PAGE>



     CREDIT  AGREEMENT,  dated  as of June 15,  1998,  among  HOMESTEAD  VILLAGE
INCORPORATED,  a corporation  organized and existing  under the laws of Maryland
(the  "Borrower"),  the  lenders  listed in  Schedule  I  (together  with  their
successors and permitted assigns, each a "Bank" and, collectively,  the "Banks")
and  COMMERZBANK AG, acting through its New York Branch in the manner and to the
extent  described in Section 10 (together  with its successors in such capacity,
the "Agent").

                              W I T N E S S E T H :

     WHEREAS, subject to and upon the terms and conditions herein set forth, the
Banks are willing to make  available to the  Borrower the bridge loans  provided
for herein;

                  NOW, THEREFORE, IT IS AGREED:

     SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.

     1.1 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):

     "Adjusted Eurodollar Rate" means, with respect to each Interest Period, the
rate obtained by dividing (a) the  Eurodollar  Rate for such Interest  Period by
(b) a percentage equal to one minus the actual rate (stated as a decimal) of all
reserves then actually  required to be  maintained  by any Bank  (provided  that
reasonable  evidence of the  imposition of such  requirement is furnished to the
Borrower)  against  "eurocurrency  liabilities" as specified in Regulation D (or
against any other category of liabilities that includes deposits by reference to
which the interest  rate on  Eurodollar  Loans is  determined or any category of
extensions of credit or other assets that includes loans by a non-United  States
office of any Bank to United States  residents) or by any other  Requirement  of
Law relating to reserve or capital adequacy requirements.

     "Affiliate" shall mean, with respect to any Person, any other Person (other
than an individual) directly or indirectly controlling,  controlled by, or under
direct or indirect common control with, such Person; provided, however, that for
purposes of Section 8.6, an Affiliate of the Borrower  shall  include any Person
that directly or indirectly owns more than 5% of the Borrower and any officer or
director of the Borrower or any such Person. A Person shall be deemed to control
another Person if such Person  possesses,  directly or indirectly,  the power to
direct or cause the  direction  of the  management  and  policies  of such other
Person,  whether  through the  ownership  of voting  securities,  by contract or
otherwise.

     "Agent"  shall have the  meaning  provided in the first  paragraph  of this
Agreement.

     "Agreement" shall mean this Credit Agreement, as modified,  supplemented or
amended from time to time.






<PAGE>



     "Applicable Lending Office" shall mean, with respect to each Bank, (a) such
Bank's Base Rate  Lending  Office in the case of a Base Rate Loan,  and (b) such
Bank's Eurodollar Lending Office in the case of a Eurodollar Rate Loan.

"Applicable Margin" shall mean, in respect of each Loan, for the period (a) from
the date such Loan is made until the six month anniversary  thereof,  so long as
such Loan is a (i) Base Rate Loan,  0.00% and (ii) Eurodollar  Rate Loan,  1.00%
and (b) from the date that is six  months  and one day  following  the date such
Loan is made  until  the  Expiry  Date,  so long as such Loan is a (i) Base Rate
Loan, 0.25% and (ii) Eurodollar Rate Loan, 1.25%.

     "Arranger" shall mean Commerzbank AG acting through its New York Branch.

     "Bank"  shall have the  meaning  provided  in the first  paragraph  of this
Agreement.

     "Bankruptcy Code" shall have the meaning provided in Section 9.5.

     "Base Rate" shall mean, as of any date of  determination,  a per annum rate
equal to the higher on such date of (a) the rate which is 1/2 of 1% in excess of
the Federal Funds Rate and (b) the Prime Lending Rate.

     "Base Rate  Lending  Office"  shall mean,  with  respect to each Bank,  the
office of such Bank  specified  as its "Base Rate Lending  Office"  opposite its
name on Schedule II or such other  office,  Subsidiary or Affiliate of such Bank
as such  Bank may from  time to time  specify  as such to the  Borrower  and the
Agent.

     "Base Rate Loan" shall mean any Loan  designated  or deemed  designated  as
such  by the  Borrower  at the  time of the  incurrence  thereof  or  conversion
thereto.

     "Borrower"  shall have the meaning  provided in the first paragraph of this
Agreement.

     "Borrowing"  shall  mean the  borrowing  of Loans of one Type  from all the
Banks on a given date (or the  conversion  of a Loan or Loans of a Bank or Banks
on a given date).

     "Business  Day"  shall mean (a) for all  purposes  other than as covered by
clause (b) below, any day except Saturday,  Sunday and any day which shall be in
New  York  City a legal  holiday  or a day on  which  banking  institutions  are
authorized or required by law or other  government  action to close and (b) with
respect to all notices and  determinations  in connection  with, and payments of
principal and interest on,  Eurodollar  Rate Loans,  any day which is a Business
Day  described  in clause  (a) above and which is also a day for  trading by and
between banks in the London interbank Eurodollar market.

     "Capital  Contribution"  shall have the  meaning  given to such term in the
Subscription Agreement.

     "Cash  Equivalents"  shall mean, as to any Person, (a) securities issued or
directly and fully  guaranteed  or insured by the United States or any agency or
instrumentality  thereof  (provided that the full faith and credit of the United
States is pledged in support  thereof)  having  maturities  of not more than six






                                        2

<PAGE>



months from the date ofacquisition  thereof,  (b) time deposits and certificates
of  deposit  of any  commercial  bank  incorporated  in  the  United  States  of
recognized  standing having capital and surplus in excess of  $500,000,000  with
maturities  of not more than six  months  from the date of  acquisition  by such
Person,  (c) repurchase  obligations with a term of not more than seven days for
underlying  securities  of the types  described in clause (a) above entered into
with any bank  meeting the  qualifications  specified  in clause (b) above,  (d)
commercial  paper  issued  by the  parent  corporation  of any  commercial  bank
(provided that the parent  corporation and the bank are both incorporated in the
United  States) of recognized  standing  having capital and surplus in excess of
$500,000,000  and  commercial  paper  issued by any Person  incorporated  in the
United States,  which  commercial  paper is rated at least A-1 or the equivalent
thereof by Standard & Poor's  Ratings  Service or at least P-1 or the equivalent
thereof by Moody's Investors Service and in each case maturing not more than six
months after the date of acquisition  thereof by such Person and (e) investments
in money market  funds  substantially  all the assets of which are  comprised of
securities of the types described in clauses (a) through (d) above.

     "Code" shall mean the Internal  Revenue Code of 1986,  as amended from time
to time, and the regulations promulgated and rulings issued thereunder.  Section
references  to the  Code  are to the  Code,  as in  effect  at the  date of this
Agreement  and  any  subsequent  provisions  of the  Code,  amendatory  thereof,
supplemental thereto or substituted therefor.

     "Collateral"  shall mean all  "Collateral"  as defined in Section 1.1(a) of
the Security Agreement.

     "Collateral  Agent" shall mean the Agent acting as collateral agent for the
Banks pursuant to the Security Documents.

     "Commitment"  shall mean for each Bank,  at any time,  the amount set forth
opposite  such Bank's name in Schedule I under the heading  "Commitment"  as the
same may be reduced or  terminated  from time to time  pursuant to Sections 3.2,
3.3 and 9.

     "Commitment Commission" shall have the meaning provided in Section 3.1(a).

     "Consolidated  EBIT" shall mean,  as to any Person and for any period,  the
consolidated  net income of such Person and its  Subsidiaries  for such  period,
before interest expense and provision for taxes and without giving effect to any
extraordinary  gains  and  gains  from  sales of  assets  (other  than  sales of
inventory in the ordinary course of business).

                  "Consolidated EBITDA" shall mean, as to any Person and for any
     period, the Consolidated EBIT of such Person and its Subsidiaries for such
period,  adjusted  by (a)  adding  thereto  the  amount of all  amortization  of
intangibles and depreciation that were deducted in arriving at such Consolidated
EBIT for such period and (b)  subtracting  therefrom  the amount of all non-cash
gains that were added in arriving at such Consolidated EBIT for such period.





                                        3

<PAGE>



     "Consolidated  Net Worth"  shall mean,  as to any Person,  the Net Worth of
such  Person and its  Subsidiaries  determined  on a  consolidated  basis  after
appropriate deduction for any minority interests in Subsidiaries.  "Consolidated
Subsidiaries"  shall mean,  as to any Person,  all  Subsidiaries  of such Person
which are  consolidated  with such Person for  financial  reporting  purposes in
accordance with generally accepted  accounting  principles in the United States.
"Contingent  Obligation"  shall mean, as to any Person,  any  obligation of such
Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends
or other obligations  ("primary  obligations") of any other Person (the "primary
obligor") in any manner,  whether  directly or  indirectly,  including,  without
limitation,  any obligation of such Person,  whether or not  contingent,  (a) to
purchase any such primary  obligation  or any  property  constituting  direct or
indirect security therefor,  (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary  obligor or otherwise to maintain the net worth or
solvency  of the  primary  obligor,  (c) to  purchase  property,  securities  or
services  primarily  for the purpose of assuring  the holder of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation  or (d)  otherwise  to assure  or hold  harmless  the  holder of such
primary obligation against loss in respect thereof; provided,  however, that the
term  Contingent  Obligation  shall not include  endorsements of instruments for
deposit or  collection  in the ordinary  course of  business.  The amount of any
Contingent  Obligation  shall be deemed to be an amount  equal to the  stated or
determinable  amount  of  the  primary  obligation  in  respect  of  which  such
Contingent  Obligation  is made or, if not stated or  determinable,  the maximum
reasonably  anticipated  liability in respect  thereof  (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.

     "Contractual  Obligation" means, as applied to any Person, any provision of
any Stock  issued  by that  Person or any  indenture,  mortgage,  deed of trust,
security agreement, pledge agreement, guaranty, contract, undertaking,  document
or other  agreement or instrument to which such Person is a party or by which it
or any of its  properties is bound,  or to which it or any of its  properties is
subject.

     "Credit  Documents" shall mean this Agreement,  each Note, the Subscription
Agreement, the Equity Sponsor's Acknowledgment and Estoppel, the Side Letter and
the Security Agreement.

     "Credit Event" shall mean the making of any Loan.

     "Debt  Service" shall mean for any Person and for any period the sum of (a)
all cash interest obligations required to be paid in respect of any Indebtedness
of such Person and its  Subsidiaries  during such  period,  (b) all  payments of
principal required to be made with respect to any Indebtedness of any Person and
for its  Subsidiaries  during  such  period,  other  than  balloon  payments  or
scheduled amortizing payments on senior Indebtedness, and (c) all other payments
required  to be made in  respect  of any  Indebtedness  of such  Person  and its
Subsidiaries.





                                        4

<PAGE>



     "Default" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.

     "Dollars" and the sign "$" shall each mean freely transferable lawful money
of the United States.

     "Effective Date" shall have the meaning provided in Section 11.13.

     "Equity  Sponsor"  shall  mean  Security  Capital  Group  Incorporated,   a
corporation organized and existing under the laws of Maryland.

     "Equity  Sponsor's  Acknowledgment  and  Estoppel"  shall have the  meaning
provided in Section 5.6.

     "Equity  Sponsor's  Commitment"  shall mean as of any date of determination
the maximum amount which the Borrower can demand of the Equity Sponsor under the
Subscription Agreement on such date.

     "ERISA" shall mean the Employee  Retirement Income Security Act of 1974, as
amended from time to time, and the  regulations  promulgated  and rulings issued
thereunder.  Section  references to ERISA are to ERISA, as in effect at the date
of  this  Agreement,  and to any  subsequent  provisions  of  ERISA,  amendatory
thereof, supplemental thereto or substituted therefor.

     "ERISA  Affiliate"  shall mean each person (as  defined in Section  3(9) of
ERISA) which together with the Borrower or a Subsidiary of the Borrower would be
deemed to be a "single  employer" within the meaning of Section 414(b) or (c) of
the Code (or for  purposes of Section 412 or 4971 of the Code and Section 302 of
ERISA, Section 414(b), (c), (m) or (o) of the Code).

     "Eurodollar  Lending  Office"  shall mean,  with respect to each Bank,  the
office of such Bank specified as its "Eurodollar  Lending  Office"  opposite its
name on Schedule II or such other  office,  Subsidiary or Affiliate of such Bank
as such  Bank may from  time to time  specify  as such to the  Borrower  and the
Agent.

     "Eurodollar  Rate"  shall  mean:  (a) the rate per annum  appearing  on the
Telerate  page 3750 (the  "Telerate  Screen") at or about  11:00 a.m.  (New York
time),  subject  to  corrections  (if any)  made on the  Telerate  service,  two
Business Days prior to the  commencement  of the Interest  Period for which such
Eurodollar  Rate will apply (the "Rate Fixing Day") for the offering of deposits
in  Dollars  for a period  comparable  to the  Interest  Period  for which  such
Eurodollar  Rate will  apply;  or (b) if (i) no  relevant  rate  appears  on the
Telerate Screen for the purposes of the foregoing  subparagraph (a), or (ii) the
Agent  determines  that no rate  for a period  of  comparable  duration  to that
Interest  Period  appears  on the  Telerate  Screen at the  relevant  time,  the
arithmetic mean (rounded  upwards,  if necessary,  to two decimal places) of the
respective  rates quoted by the Agent to leading  banks in the London  interbank
Eurodollar  market at or about 11:00 a.m. (New York time) on the Rate Fixing Day
for the offering of deposits in Dollars for a period  comparable to the Interest
Period for which such Eurodollar Rate will apply.




                                        5

<PAGE>




     "Eurodollar Rate Loan" shall mean any Loan designated or deemed  designated
as such by the  Borrower  at the time of the  incurrence  thereof or  conversion
thereto.

     "Event of Default" shall have the meaning provided in Section 9.

     "Expiry Date" shall mean February 23, 1999.

     "Federal Funds Rate" shall mean for any period, a fluctuating interest rate
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 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 Agent from three Federal  Funds  brokers of recognized  standing
selected by the Agent.

     "Fees" shall mean all amounts payable pursuant to or referred to in Section
3.1.

     "GAAP" shall mean generally accepted  accounting  principles set forth from
time to time in the opinions and  pronouncements  of the  Accounting  Principles
Board and the American  Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar  functions of  comparable  stature and authority  within the  accounting
profession),  or in such  other  statements  by such  other  entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.

     "Governmental  Authority"  shall  mean any  nation  and any  state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial,   regulatory,   or  administrative   functions  of  or  pertaining  to
government,  including,  but not  limited  to, the Federal  Reserve  Board,  any
Federal  Reserve Bank,  any other central  banking  authority,  or any agency or
subdivision thereof.

     "Gross Asset Value" shall mean, as of any date of determination,  the value
of all cash, Cash Equivalents and the value of all real property assets owned by
the Borrower on such date valued at one hundred percent (100%) of cost.

     "Indebtedness" shall mean, as to any Person,  without duplication,  (a) all
indebtedness  (including principal,  interest,  fees and charges) of such Person
for borrowed  money or for the deferred  purchase price of property or services,
(b) the face  amount of all  letters of credit  issued  for the  account of such
Person and all drafts drawn  thereunder,  provided  that, to the extent any such
letters  of  credit  have  been  cash  collateralized,  the  amount of such cash
collateral  shall be  subtracted  from the  amount  of  Indebtedness  calculated
pursuant  to this  clause (b),  (c) all  liabilities  secured by any Lien on any
property owned by such Person, whether or not such liabilities have been assumed
by such Person, (d) the aggregate amount required to be capitalized under leases
under which such Person is the lessee and (e) all Contingent Obligations of such
Person.





                                        6

<PAGE>



     "Initial Borrowing Date" shall mean the date on which the initial Borrowing
occurs or, for  purposes of Section 5, such earlier  date as the  Borrower,  the
Agent and the Banks may agree.

     "Interest  Period" shall mean a one month period,  provided  that:  (a) all
Eurodollar  Rate Loans  comprising a Borrowing  shall at all times have the same
Interest Period except as otherwise required by Section 2.10(b); (b) the initial
Interest  Period  for any  Eurodollar  Rate Loan shall  commence  on the date of
Borrowing of such Loan (including the date of any conversion thereof into a Loan
of a different Type) and each Interest Period occurring thereafter in respect of
such Loan shall commence on the day on which the next preceding  Interest Period
applicable thereto expires;  (c) if any Interest Period relating to a Eurodollar
Rate Loan begins on a day for which there is no numerically corresponding day in
the calendar  month at the end of such Interest  Period,  such  Interest  Period
shall end on the last Business Day of such calendar  month;  (d) if any Interest
Period  would  otherwise  expire  on a day  which is not a  Business  Day,  such
Interest Period shall expire on the next succeeding  Business Day, provided that
if any Interest Period for a Eurodollar  Rate Loan would  otherwise  expire on a
day which is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on the next
preceding  Business  Day; and (e) no Interest  Period  shall  extend  beyond the
Expiry Date.

     "Lien" shall mean any mortgage, pledge, hypothecation,  assignment, deposit
arrangement,  encumbrance,  lien (statutory or other),  preference,  priority or
other security  agreement of any kind or nature whatsoever  (including,  without
limitation,  any  conditional  sale or  other  title  retention  agreement,  any
financing  or  similar  statement  or  notice  filed  under the UCC or any other
similar recording or notice statute, and any lease having substantially the same
effect as any of the foregoing).

     "Loan" shall have the meaning provided in Section 2.1.

     "Margin Stock" shall have the meaning provided in Regulation U of the Board
of Governors of the Federal Reserve System.

     "Material  Adverse  Effect" shall mean a material  adverse  change in, or a
material adverse effect upon, any of (a) the operations, business, properties or
financial  condition of the Borrower or the Equity  Sponsor or their  respective
Subsidiaries  that is likely to impair the ability of the Borrower or the Equity
Sponsor,  as the case may be, to (i)  perform its  obligations  under the Credit
Documents  to  which  it is a party  and  (ii)  avoid a  Default  or an Event of
Default;  (b) the  rights or  remedies  of the Agent  and the Banks  under  this
Agreement and the other Credit Documents; or (c) the legality, validity, binding
effect or  enforceability  of any Credit  Document  against the  Borrower or the
Equity Sponsor, as the case may be.

     "Mortgaged  Properties"  shall have the  meaning  given to such term in the
Working Capital Facilities.

     "Multiemployer  Plan"  shall  mean any  multiemployer  plan as  defined  in
Section  4001(a)(3) of ERISA which is contributed to by (or to which there is an
obligation to contribute of) the Borrower or any of its Subsidiaries or an ERISA
Affiliate and each such plan for the five year period immediately  following the
latest  date on which  the  Borrower,  any such  Subsidiary  or ERISA  Affiliate
contributed to or had an obligation to contribute to such plan.





                                        7

<PAGE>




     "Net Worth"  shall mean,  as to any Person,  the sum of its capital  stock,
capital  in  excess  of par or stated  value of  shares  of its  capital  stock,
retained  earnings and any other account  which,  in accordance  with  generally
accepted  principles  in the United  States,  constitutes  stockholders  equity,
excluding any treasury stock.

     "1997 Suburban Working Capital  Facility" shall mean the Credit  Agreement,
dated as of May 6, 1997,  among the  Borrower,  the  lenders  named  therein and
Commerzbank  AG,  acting  though its New York  Branch,  as agent for the lenders
named therein,  together with all amendments,  restatements,  modifications  and
waivers thereof.

     "1998 Urban  Working  Capital  Facility"  shall mean the Credit  Agreement,
dated as of April 24, 1998,  among the  Borrower,  the lenders named therein and
Commerzbank  AG,  acting  though its New York  Branch,  as agent for the lenders
named therein,  together with all amendments,  restatements,  modifications  and
waivers thereof.

     "Note" shall have the meaning provided in Section 2.5.

     "Notice of Borrowing" shall have the meaning provided in Section 2.3.

     "Notice of Conversion" shall have the meaning provided in Section 2.6.

     "Notice  Office"  shall  mean the  office of the Agent  located  at 2 World
Financial  Center,  New York,  New York  10281-1050,  attention:  David Schwarz,
telephone: (212) 266- 7632, facsimile:  (212) 266-7530 and attention:  Christine
Finkel,  telephone:  (212)  266-7375,  facsimile:  (212)  266-7530 or such other
office as the Agent may  hereafter  designate  in  writing  as such to the other
parties hereto.

     "Obligations"  shall  mean  all  amounts  owing  to the  Agent  or any Bank
pursuant to the terms of this Agreement or any other Credit Document.

     "Payment  Office"  shall  mean the  office of the Agent  located at 2 World
Financial Center, New York, NY 10281-1050, or such other office as the Agent may
hereafter designate in writing as such to the other parties hereto.

     "PBGC"  shall mean the Pension  Benefit  Guaranty  Corporation  established
pursuant to Section 4002 of ERISA or any successor thereto.

     "Person" shall mean any individual, partnership, limited liability company,
joint venture, firm, corporation,  association, trust or other enterprise or any
government or political subdivision or any agency, department or instrumentality
thereof.

     "Plan"  shall mean any  pension  plan as  defined in Section  3(2) of ERISA
which is subject to Title IV of ERISA (other than a Multiemployer  Plan),  which
is  maintained  or  contributed  to by (or to which  there is an  obligation  to
contribute  of)  the  Borrower  or a  Subsidiary  of the  Borrower  or an  ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which the  Borrower,  or a Subsidiary of the Borrower or an ERISA
Affiliate maintained,  contributed to or had an obligation to contribute to such
plan.




                                        8

<PAGE>





     "Prime  Lending  Rate" shall mean the rate which  Commerzbank  AG announces
from time to time at is New York  Branch as its prime  lending  rate,  the Prime
Lending Rate to change when and as such prime  lending rate  changes.  The Prime
Lending Rate is a reference rate and does not  necessarily  represent the lowest
or  best  rate  actually  charged  to any  customer.  Commerzbank  AG  may  make
commercial  loans or other  loans at rates of  interest  at,  above or below the
Prime Lending Rate.

     "Rate  Fixing  Day" shall have the meaning  provided  in the  defined  term
"Eurodollar Rate."

     "Register" shall have the meaning provided in Section 11.5.

     "Regulation  D" shall mean  Regulation  D of the Board of  Governors of the
Federal  Reserve  System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.

     "Remaining Property" shall have the meaning provided in Section 8.1.

     "Reportable  Event"  shall mean an event  described  in Section  4043(c) of
ERISA with  respect  to a Plan  other  than those  events as to which the 30-day
notice period is waived under subsection .22, .23, .25 or .28 of PBGC Regulation
Section 4043.

     "Required  Banks" shall mean,  at any time,  Banks holding more than 50% of
the then aggregate unpaid principal amount of the Notes or, if no such principal
amount is then outstanding, Banks holding more than 50% of the Total Commitment.

     "Requirement  of Law" shall mean,  as to any  Person,  the  certificate  or
articles  of   incorporation   and  by-laws,   certificate  of  partnership  and
partnership  agreement or other  organizational  or governing  documents of such
Person,  and any  law,  treaty,  rule,  or  regulation  or  determination  of an
arbitrator or a court or other Governmental  Authority,  in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

     "SEC" shall have the meaning provided in Section 7.1(a).

     "Section 4.4(b)(ii) Certificate" shall have the meaning provided in Section
4.4(b).

     "Securities Offering" shall mean any sale, transfer or other disposition by
the Borrower of a security of the Borrower for consideration, whether registered
under the Securities Act of 1933, as amended, or unregistered, and shall include
the making by the Equity Sponsor of a Capital Contribution.

     "Side Letter" shall have the meaning provided in Section 5.8.




                                        9

<PAGE>




     "Security Agreement" shall have the meaning provided in Section 5.7.

     "Security  Documents" shall mean the Security  Agreement,  the Subscription
Agreement and the Equity Sponsor's Acknowledgment and Estoppel.

     "Subscription Agreement" shall have the meaning provided in Section 5.6.

     "Subsidiary"  shall mean, as to any Person,  (a) any corporation  more than
50% of whose stock of any class or classes having by the terms thereof  ordinary
voting  power  to  elect  a  majority  of  the  directors  of  such  corporation
(irrespective  of  whether  or not at the time  stock of any class or classes of
such  corporation  shall  have or  might  have  voting  power by  reason  of the
happening of any  contingency) is at the time owned by such Person and/or one or
more  Subsidiaries  of such Person and (b) any  partnership,  limited  liability
company, association,  joint venture or other entity in which such Person and/or
one or more  Subsidiaries  of such Person has more than a 50% equity interest at
the time.

     "Taxes" shall have the meaning provided in Section 4.4(a).

     "Total  Commitment"  shall mean, at any time, the sum of the Commitments of
each of the Banks.

     "Total Costs" shall have the meaning given to such term in the 1998 Working
Capital Facility.

     "Type" shall mean any type of Loan  determined with respect to the interest
option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Rate Loan.

     "UCC" shall mean the Uniform Commercial Code as from time to time in effect
in the relevant jurisdiction.

     "Unfunded Current Liability" of any Plan means the amount, if any, by which
the actuarial  present value of the accumulated  plan benefits under the Plan as
of the close of its most recent plan year  exceeds the fair market  value of the
assets  allocable  thereto,  each  determined  in accordance  with  Statement of
Financial Accounting Standards No. 87, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan.

     "United States" and "U.S." shall each mean the United States of America.

     "Unutilized  Commitment"  shall  mean,  for  any  Bank,  at any  time,  the
Commitment of such Bank at such time less the aggregate  principal amount of all
Loans made by such Bank and then outstanding.

     "Unutilized  Total  Commitment"  shall  mean  the  sum  of  the  Unutilized
Commitments of each of the Banks.

     "Wholly-Owned Subsidiary" shall mean, as to any Person, (a) any corporation
100% of whose  capital  stock is at the time owned by such Person  and/or one or
more Wholly-Owned  Subsidiaries of such Person and (b) any partnership,  limited
liability  company,  association,  joint  venture or other  entity in which such
Person and/or one or more  Wholly-Owned  Subsidiaries  of such Person has a 100%
equity interest at such time.




                                       10

<PAGE>





     "Working  Capital  Facility"  shall mean the 1997 Suburban  Working Capital
Facility,  the 1998 Urban Working Capital  Facility or the 1997 Suburban Working
Capital Facility and the 1998 Urban Working Capital Facility, as the context may
require or allow.

     1.2  Principles of  Construction.  The  following  rules shall apply to the
construction of this Agreement  unless the context requires  otherwise:  (a) the
singular includes the plural,  and the plural the singular;  (b) words importing
any gender  include all other  genders;  (c)  references  to statutes  are to be
construed as including all statutory provisions  consolidating and amending, and
all  regulations  promulgated  pursuant to, such  statutes;  (d)  references  to
"writing" include printing,  photocopy,  typing,  lithography and other means of
reproducing  words  in a  tangible  visible  form;  (e) the  words  "including",
"includes"  and "include"  shall be deemed to be followed by the words  "without
limitation";  (f) references to the introductory paragraph,  recitals,  sections
(or clauses or  subdivisions  of  sections),  exhibits,  appendices,  annexes or
schedules  are to  those  of this  Agreement  unless  otherwise  indicated;  (g)
references to agreements and other  contractual  instruments  shall be deemed to
include all subsequent  amendments and other  modifications to such instruments,
but  only to the  extent  that  such  amendments  and  other  modifications  are
permitted or not prohibited by the terms of this Agreement; (h) section headings
in this  Agreement are included  herein for  convenience  of reference  only and
shall  not  constitute  a part of this  Agreement  for any  other  purpose;  (i)
references to Persons include their respective permitted successors and assigns;
and (j) in the  computation of a period of time from a specified date to a later
specified  date,  the word "from" means "from and  including" and the words "to"
and "until" each means "to but excluding". Although this Agreement and the other
Credit Documents may use several different limitations, tests or measurements to
regulate  the  same  or  similar  matters,  all  such  limitations,   tests  and
measurements are cumulative and shall each be performed in accordance with their
terms.  This  Agreement  and  the  other  Credit  Documents  are the  result  of
negotiations  among and have been reviewed by counsel to the Agent, the Borrower
and the other parties,  and are the products of all parties.  Accordingly,  they
shall not be  construed  against  the Agent or any Bank  merely  because  of the
Agent's or any Bank's involvement in their preparation. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.

     SECTION 2. AMOUNT AND TERMS OF CREDIT.

     2.1 The  Loans.  Subject  to and upon the  terms and  conditions  set forth
herein,  each Bank severally  agrees, at any time and from time to time prior to
the  Expiry  Date,  to make  loans (any loan made by any Bank a "Loan" and Loans
made by any Bank or by all the Banks, as the context  requires,  the "Loans") to
the Borrower, which Loans (a) shall, at the option of the Borrower, be Base Rate
Loans or Eurodollar Rate Loans, provided that, except as otherwise  specifically
provided in Section  2.10(b),  all Loans  comprising the same Borrowing shall at
all  times be of the same Type and (b) may be  prepaid  in  accordance  with the
provisions hereof;  provided,  however,  that the aggregate  principal amount of
Loans (i)  outstanding  from any Bank shall at no time exceed the  Commitment of
such Bank at such time and (ii)  comprising a Borrowing shall not, when added to
the  aggregate  principal  amount of Loans then  outstanding,  exceed the Equity
Sponsor's  Commitment  in  effect  on the date  such  Borrowing.  More  than one
Borrowing may occur on the same date, but Eurodollar Rate Loans  comprising more
than ten Borrowings  shall not be outstanding  under this Agreement at any time,
provided that Eurodollar Rate  Loans  resulting from  a  conversion  pursuant to




                                       11

<PAGE>




Section  conversion  pursuant  to  Section  2.10(b)  shall not be deemed to be a
Borrowing for this purpose.  Loans once repaid or prepaid may not be reborrowed.
On the Expiry Date the Unutilized Commitment of each Bank shall terminate and no
Bank shall have any further obligation to lend hereunder.

     2.2 Minimum Amount of Each  Borrowing.  The aggregate  principal  amount of
each  Borrowing  hereunder  shall  be not  less  than  $5,000,000  and  integral
multiples  of  $1,000,000  in excess  thereof,  except as  required  by  Section
2.10(b).

     2.3 Notice of Borrowing.  Whenever the Borrower desires to make a Borrowing
hereunder,  it shall give the Agent at its Notice  Office at least one  Business
Day's  prior  notice of each Base Rate Loan and at least  three  Business  Days'
prior notice of each Eurodollar  Rate Loan to be made  hereunder,  provided that
any such  notice  shall be deemed to have  been  given on a certain  day only if
given  before  12:00 Noon (New York time) on such day.  Each such notice (each a
"Notice  of  Borrowing")  shall  be in the  form  of  Exhibit  A,  appropriately
completed  to specify  the  aggregate  principal  amount of the Loans to be made
pursuant  to such  Borrowing,  the  date of such  Borrowing  (which  shall  be a
Business Day), whether the Loans being made pursuant to such Borrowing are to be
maintained  initially  as Base Rate  Loans or  Eurodollar  Rate  Loans  and,  if
Eurodollar Rate Loans, the initial Interest Period to be applicable thereto. The
Agent shall promptly give each Bank notice of such proposed  Borrowing,  of such
Bank's  proportionate  share  thereof and of the other  matters  required by the
immediately preceding sentence to be specified in the Notice of Borrowing.

     2.4  Disbursement of Funds. No later than 12:00 Noon (New York time) on the
date  specified  in each  Notice of  Borrowing,  each Bank will make  available,
through  such Bank's  Applicable  Lending  Office,  its pro rata portion of each
Borrowing  requested  to be made on such  date,  in Dollars  and in  immediately
available  funds at the  Payment  Office of the  Agent,  and the Agent will make
available to the Borrower at its Payment  Office the aggregate of the amounts so
made  available by the Banks.  Unless the Agent shall have been  notified by any
Bank  prior to the date of  Borrowing  that such  Bank  does not  intend to make
available to the Agent such Bank's  portion of any  Borrowing to be made on such
date, the Agent may assume that such Bank has made such amount  available to the
Agent on such  date of  Borrowing  and the  Agent  may,  in  reliance  upon such
assumption,  make  available to the  Borrower a  corresponding  amount.  If such
corresponding  amount is not in fact made  available  to the Agent by such Bank,
the Agent shall be entitled to recover such corresponding  amount from such Bank
on demand.  If such Bank does not pay such  corresponding  amount forthwith upon
the Agent's demand  therefor,  the Agent shall promptly  notify the Borrower and
the Borrower shall immediately pay such  corresponding  amount to the Agent. The
Agent  shall  also be  entitled  to  recover  on  demand  from  such Bank or the
Borrower,  as the case may be, interest on such corresponding  amount in respect
of each day from the date such  corresponding  amount was made  available by the
Agent to the Borrower until the date such  corresponding  amount is recovered by
the Agent,  at a rate per annum equal to (a) if  recovered  from such Bank,  the
Federal Funds Rate and (b) if recovered from the Borrower,  the then  applicable
rate for Base Rate Loans or Eurodollar  Rate Loans,  as the case may be. Nothing
in this Section 2.4 shall be deemed to relieve any Bank from its  obligation  to
make Loans  hereunder  or to  prejudice  any rights  which the Borrower may have
against  any  Bank  as a  result  of any  failure  by such  Bank  to make  Loans
hereunder.




                                       12

<PAGE>



     2.5 Notes. The Borrower's  obligation to pay the principal of, and interest
on, all the Loans made by each Bank shall be evidenced by a promissory note duly
executed and  delivered by the Borrower  substantially  in the form of Exhibit B
with blanks  appropriately  completed in conformity herewith (each a "Note" and,
collectively, the "Notes"). The Note issued to each Bank shall (a) be payable to
the order of such  Bank and be dated the  Initial  Borrowing  Date,  (b) be in a
stated  principal  amount equal to the Commitment of such Bank and be payable in
the principal amount of the Loans evidenced thereby, (c) mature, with respect to
each Loan evidenced  thereby,  on the Expiry Date, (d) bear interest as provided
in the  appropriate  clause of Section 2.8 in respect of the Base Rate Loans and
Eurodollar Rate Loans, as the case may be, evidenced thereby and (e) be entitled
to the benefits of this Agreement and the other Credit Documents. Each Bank will
note on its internal records the amount of each Loan made by it and each payment
in respect  thereof and will prior to any  transfer  of its Note  endorse on the
reverse  side  thereof  the  outstanding  principal  amount  of Loans  evidenced
thereby.  Failure to make any such  notation  shall not  affect  the  Borrower's
obligations in respect of such Loans.

     2.6  Conversions.  The  Borrower  shall  have the  option to convert on any
Business Day all or a portion  equal to  $5,000,000  and  integral  multiples of
$1,000,000 in excess thereof of the  outstanding  principal  amount of the Loans
made  pursuant  to one or more  Borrowings  of one or more  Types of Loan into a
Borrowing  of  another  Type of Loan,  provided  that (a)  except  as  otherwise
provided in Section  2.10(b),  Eurodollar  Rate Loans may be converted into Base
Rate  Loans  only on the  last  day of the  Interest  Period  applicable  to the
Eurodollar  Rate  Loans  being  converted  and no  such  partial  conversion  of
Eurodollar  Rate  Loans  shall  reduce  the  outstanding   principal  amount  of
Eurodollar  Rate  Loans  made  pursuant  to a  single  Borrowing  to  less  than
$5,000,000, (b) Base Rate Loans may only be converted into Eurodollar Rate Loans
if no Default or Event of Default is in existence on the date of the  conversion
and (c) no  conversion  pursuant to this  Section 2.6 shall  result in a greater
number of Borrowings  than is permitted  under Section 2.1. Each such conversion
shall be effected by the Borrower by giving the Agent at its Notice Office prior
to 12:00 Noon (New York time) at least three Business Days' prior notice (each a
"Notice of  Conversion")  specifying  the Loans to be so converted and, if to be
converted  into  Eurodollar  Rate Loans,  the  Interest  Period to be  initially
applicable  thereto.  The Agent shall give each Bank  prompt  notice of any such
proposed  conversion  affecting any of its Loans.  Upon any such  conversion the
proceeds  thereof  will be applied  directly  on the day of such  conversion  to
prepay the outstanding principal amount of the Loans being converted.

     2.7 Pro Rata Borrowings. All Borrowings of Loans under this Agreement shall
be  incurred  from the Banks pro rata on the basis of their  Commitments.  It is
understood  that no Bank shall be responsible  for any default by any other Bank
of its obligation to make Loans  hereunder and that each Bank shall be obligated
to make the Loans provided to be made by it hereunder  regardless of the failure
of any other Bank to make its Loans hereunder.





                                       13

<PAGE>



     2.8 Interest.

     (a) The Borrower agrees to pay interest in respect of the unpaid  principal
amount  of each  Base Rate  Loan  from the date the  proceeds  thereof  are made
available to the Borrower until the maturity thereof (whether by acceleration or
otherwise)  at a rate per annum  equal to the Base  Rate in effect  from time to
time plus the Applicable Margin.

     (b) The Borrower agrees to pay interest in respect of the unpaid  principal
amount of each Eurodollar Rate Loan from the date the proceeds  thereof are made
available to the Borrower until the maturity thereof (whether by acceleration or
otherwise)  at a rate  per  annum  which  shall,  during  each  Interest  Period
applicable  thereto,  be equal to the Adjusted Eurodollar Rate for such Interest
Period plus the Applicable Margin.

     (c) Overdue principal and, to the extent permitted by law, overdue interest
in respect of each Loan and any other  overdue  amount  payable by the  Borrower
hereunder  shall  bear  interest  at a rate per  annum  equal to 2% per annum in
excess of the Base Rate in effect from time to time; provided,  however, that no
Loan  shall bear  interest  after  maturity  at a rate per annum less than 2% in
excess of the rate of interest applicable thereto at maturity.

     (d)  Accrued  (and  theretofore  unpaid)  interest  shall be payable (i) in
respect of each Base Rate Loan,  monthly in arrears on the first Business Day of
each calendar  month,  (ii) in respect of each Eurodollar Rate Loan, on the last
day of each  Interest  Period  applicable  thereto  and (iii) in respect of each
Loan,  on any  prepayment  (on the amount  prepaid),  at  maturity  (whether  by
acceleration or otherwise) and, after such maturity, on demand.

     (e) On each Rate Fixing Day, the Agent shall  determine  the interest  rate
for the  Eurodollar  Rate Loans for which such  determination  is being made and
shall  promptly   notify  the  Borrower  and  the  Banks   thereof.   Each  such
determination  shall, absent manifest error, be final and conclusive and binding
on all parties hereto.

     2.9 Interest Periods.  On the third Business Day prior to the expiration of
an Interest Period applicable to a Eurodollar Rate Loan, the Borrower shall have
the right to elect,  by  giving  the Agent  notice  thereof,  to  continue  such
Eurodollar  Rate Loan as a Eurodollar  Rate Loan. If upon the  expiration of any
Interest Period applicable to a Eurodollar Rate Loan, the Borrower has failed to
elect to continue  such Loan as a Eurodollar  Rate Loan as provided  above,  the
Borrower  shall be deemed to have  elected to convert such Loan into a Base Rate
Loan effective as of the expiration date of such current Interest Period.

     2.10 Increased Costs, Illegality, etc.

     (a) In the event that any Bank shall have determined  (which  determination
shall,  absent  manifest  error,  be final and  conclusive  and binding upon all
parties  hereto but,  with respect to clause (i) below,  may be made only by the
Agent):

          (i) on any Rate  Fixing  Day that,  by reason of any  changes  arising
     after the date of this Agreement affecting the interbank  Eurodollar market
     adequate and fair means




                                       14

<PAGE>



     do not exist for  ascertaining  the  applicable  interest rate on the basis
     provided for in the definition of Eurodollar Rate; or

          (ii) at any time,  that  such  Bank  shall  incur  increased  costs or
     reductions in the amounts received or receivable  hereunder with respect to
     any  Eurodollar  Rate Loan because of (x) any change since the date of this
     Agreement in any applicable law or governmental rule, regulation,  order or
     request (whether or not having the force of law) (or in the  interpretation
     or administration  thereof and including the introduction of any new law or
     governmental rule, regulation, order or request), such as, for example, but
     not  limited  to, (A) a change in the basis of  taxation of payments to any
     Bank or its  Applicable  Lending  Office of the principal of or interest on
     the Notes or any other amounts payable hereunder (except for changes in the
     rate of tax on, or determined by reference to, the net income or profits of
     such Bank or its Applicable  Lending Office imposed by the  jurisdiction in
     which its principal office or Applicable  Lending Office is located) or (B)
     a change in official reserve  requirements,  but, in all events,  excluding
     reserves  required  under  Regulation  D to  the  extent  included  in  the
     computation  of  the  Eurodollar  Rate,  and/or  (y)  other   circumstances
     affecting such Bank or the interbank  Eurodollar  market or the position of
     such Bank in such market; or

          (iii) at any time,  that the making or  continuance  of any Eurodollar
     Rate  Loan has been  made (x)  unlawful  by any law or  governmental  rule,
     regulation  or order,  (y)  impossible  by compliance by such Bank with any
     governmental   request  (whether  or  not  having  force  of  law)  or  (z)
     impracticable as a result of a contingency occurring after the date of this
     Agreement which materially and adversely  affects the interbank  Eurodollar
     market;

then, and in any such event,  such Bank (or the Agent, in the case of clause (i)
above) shall  promptly  give notice (by  telephone  confirmed in writing) to the
Borrower  and,  except in the case of  clause  (i)  above,  to the Agent of such
determination  (which  notice the Agent shall  promptly  transmit to each of the
other Banks).  Thereafter (x) in the case of clause (i) above,  Eurodollar  Rate
Loans shall no longer be  available  until such time as the Agent  notifies  the
Borrower and the Banks that the circumstances  giving rise to such notice by the
Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given
by the Borrower  with respect to  Eurodollar  Rate Loans which have not yet been
incurred  (including  by way of  conversion)  shall be deemed  rescinded  by the
Borrower,  (y) in the case of clause (ii) above,  the Borrower shall pay to such
Bank, upon written demand therefor,  such additional  amounts (in the form of an
increased rate of, or a different  method of calculating,  interest or otherwise
as such Bank in its sole  discretion  shall  determine)  as shall be required to
compensate such Bank for such increased costs or reductions in amounts  received
or receivable  hereunder (a written notice as to the additional  amounts owed to
such Bank,  showing  the basis for the  calculation  thereof,  submitted  to the
Borrower by such Bank shall,  absent manifest error, be final and conclusive and
binding on all the parties  hereto) and (z) in the case of clause  (iii)  above,
take one of the  actions  specified  in Section  2.10(b) as promptly as possible
and, in any event, within the time period required by law.

     (b)  At  any  time  that  any  Eurodollar  Rate  Loan  is  affected  by the
circumstances  described in Section  2.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Rate Loan affected by the circumstances described in
Section  2.10(a)(iii)  shall) either (i) if the affected Eurodollar Rate Loan is
then being made initially or pursuant to a conversion, cancel said Borrowing  by




                                       15

<PAGE>



giving the Agent notice by telephone  (confirmed in writing) of the cancellation
on the same  date  that  the  Borrower  was  notified  by the Bank or the  Agent
pursuant to Section 2.10(a)(ii) or (iii) or (ii) if the affected Eurodollar Rate
Loan is then  outstanding,  upon at least three Business Days' written notice to
the Agent, require the affected Bank to convert such Eurodollar Rate Loan into a
Base Rate Loan or Loans, provided that, if more than one Bank is affected at any
time,  then all affected Banks must be treated the same pursuant to this Section
2.10(b).

     (c) If  any  Bank  determines  at  any  time  that  any  applicable  law or
governmental rule, regulation, order or request (whether or not having the force
of  law)  concerning  capital  adequacy,  or any  change  in  interpretation  or
administration thereof by any governmental authority, central bank or comparable
agency,  will have the effect of  increasing  the amount of capital  required or
expected to be  maintained  by such Bank based on the  existence  of such Bank's
Commitment hereunder or its obligations  hereunder,  then the Borrower shall pay
to such Bank, upon its written demand therefor, such additional amounts as shall
be required to  compensate  such Bank for the  increased  cost to such Bank as a
result of such increase of capital. In determining such additional amounts, each
Bank  will  act  reasonably  and in  good  faith  and  will  use  averaging  and
attribution   methods   which  are   reasonable,   provided   that  such  Bank's
determination  of compensation  owing under this Section  2.10(c) shall,  absent
manifest  error,  be final and conclusive and binding on all the parties hereto.
Each Bank, upon determining that any additional amounts will be payable pursuant
to this  Section  2.10(c),  will  give  prompt  written  notice  thereof  to the
Borrower,  which notice shall show the basis for  calculation of such additional
amounts,  although  the  failure to give any such  notice  shall not  release or
diminish any of the Borrower's obligations to pay additional amounts pursuant to
this Section 2.10(c).

     2.11  Compensation.  The  Borrower  shall  compensate  each Bank,  upon its
written  request (which  request shall set forth the basis for  requesting  such
compensation  and shall,  absent  manifest  error,  be final and  conclusive and
binding on all the parties  hereto),  for all  reasonable  losses,  expenses and
liabilities  (including,  without  limitation,  any loss,  expense or  liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Bank to fund its  Eurodollar  Rate  Loans)  which such Bank may
sustain:  (a) if for any reason (other than a default by such Bank or the Agent)
a Borrowing of, or conversion from or into, Eurodollar Rate Loans does not occur
on a date  specified  therefor in a Notice of Borrowing or Notice of  Conversion
(whether  or not  withdrawn  by the  Borrower  or deemed  rescinded  pursuant to
Section 2.10(a));  (b) if any repayment  (including any prepayment made pursuant
to Section 4) or conversion of any of its Eurodollar Rate Loans occurs on a date
which is not the last day of an Interest Period with respect thereto; (c) if any
prepayment of any of its Eurodollar Rate Loans is not made on any date specified
in a notice of prepayment given by the Borrower;  or (d) as a consequence of (i)
any other  default by the Borrower to repay its Loans when required by the terms
of this  Agreement or the Note of such Bank or (ii) any action taken pursuant to
Section 2.10(b).





                                       16

<PAGE>



     SECTION 3. COMMITMENT COMMISSION, FEES; REDUCTIONS OF COMMITMENT.

     3.1 Fees.

     (a) The Borrower agrees to pay to the Agent for distribution to each Bank a
commitment  commission  (the  "Commitment  Commission")  for the period from the
Effective  Date  until  the  Expiry  Date (or  such  earlier  date as the  Total
Commitment  shall have been  terminated)  computed at a rate equal to 0.25 of 1%
per annum on the daily  average  Unutilized  Commitment  of such  Bank.  Accrued
Commitment  Commission shall be due and payable quarterly in arrears on the last
Business  Day of each June 30,  September  30,  December 31 and March 31 of each
year and on the Expiry Date or upon such  earlier  date as the Total  Commitment
shall be terminated.

     (b) The  Borrower  shall pay to the Agent and the  Arranger,  for their own
account,  the fees set forth in that certain  letter  agreement,  dated June 15,
1998, among the Borrower, the Agent and the Arranger.

     3.2 Voluntary  Termination of Unutilized  Total  Commitment.  Upon at least
five Business Days' prior notice to the Agent at its Notice Office (which notice
the Agent shall promptly transmit to each of the Banks), the Borrower shall have
the right,  without  premium or  penalty,  to  terminate  the  Unutilized  Total
Commitment in whole or in part, in integral  multiples of  $5,000,000,  provided
that any such termination shall apply  proportionately  to reduce the Commitment
of each Bank.

     3.3 Mandatory Reduction of Total Commitment. The Commitment of a Bank shall
be reduced  automatically  at the time of, and by the principal  amount of, each
Loan made by such Bank. The Total Commitment shall be reduced automatically upon
each date on which the Borrower  receives,  and by the amount by which,  the net
proceeds of any  Securities  Offering made after the Effective  Date exceeds the
unpaid principal balance of all outstanding Loans.

     SECTION 4. PREPAYMENTS: PAYMENTS.

     4.1 Voluntary Prepayments.  The Borrower shall have the right to prepay the
Loans,  without premium or penalty, in whole or in part from time to time on the
following  terms and  conditions:  (a) the Borrower  shall give the Agent at its
Notice Office at least three Business Days' prior notice of its intent to prepay
the Loans,  the amount of such  prepayment  and the Types of Loans to be prepaid
and, in the case of Eurodollar Rate Loans, the specific  Borrowing or Borrowings
pursuant to which made,  which notice the Agent shall promptly  transmit to each
of the Banks; (b) each prepayment  shall be in an aggregate  principal amount of
at least  $5,000,000,  provided that no partial  prepayment  of Eurodollar  Rate
Loans made pursuant to any  Borrowing  shall reduce the  outstanding  Loans made
pursuant to such Borrowing to an amount less than $5,000,000; (c) prepayments of
Eurodollar  Rate Loans made pursuant to this Section 4.1 may only be made on the
last day of an Interest Period  applicable  thereto;  and (d) each prepayment in
respect of any Loans made  pursuant  to a  Borrowing  shall be applied  pro rata
among such Loans.





                                       17

<PAGE>



     4.2 Mandatory Prepayments.

     (a) On any day on which the aggregate  outstanding  principal amount of the
Loans exceeds the Total Commitment as then in effect,  the Borrower shall prepay
the principal of the Loans in an amount equal to such excess.

     (b)  Within  five  Business  Days of its  receipt  of the  proceeds  of any
Securities  Offering,  the Borrower shall apply 100% of the net cash proceeds of
such Securities Offering first to prepay outstanding Loans and second, (i) if no
Loans are then  outstanding  and such  proceeds  are derived  from a  Securities
Offering  other than the  issuance of  subordinated  debentures  pursuant to the
Subscription  Agreement,  first, to prepay credit  extensions  under the Working
Capital Facilities,  pro rata based upon the aggregate outstanding amount of all
credit   extensions   thereunder  and,  second,  to  complete  the  acquisition,
construction and development of the Mortgaged Properties or (ii) if no Loans are
then outstanding and such proceeds are derived from the issuance of subordinated
debentures pursuant to the Subscription  Agreement, to complete the acquisition,
construction and development of the Mortgaged Properties. The provisions of this
clause (b) shall survive the termination of this Agreement and the lenders under
the  Working   Capital   Facilities  are  hereby  declared  to  be  third  party
beneficiaries of this clause (b).

     (c) With respect to each  prepayment of Loans required by this Section 4.2,
the  Borrower may  designate  the Types of Loans which are to be prepaid and, in
the case of Eurodollar Rate Loans, the specific Borrowing or Borrowings pursuant
to which  such  Eurodollar  Rate  Loans were  made,  provided  that:  (i) if any
prepayment of Eurodollar  Rate Loans made pursuant to a single  Borrowing  shall
reduce the  outstanding  Loans made pursuant to such Borrowing to an amount less
than $5,000,000, such outstanding Loans shall immediately be converted into Base
Rate Loans;  and (ii) each  prepayment of any Loans made pursuant to a Borrowing
shall be applied pro rata among such Loans.  In the absence of a designation  by
the Borrower as described in the preceding sentence, the Agent shall, subject to
the above, make such designation in its sole discretion.

     4.3 Method and Place of Payment.  Except as otherwise specifically provided
herein, all payments under this Agreement or any Note shall be made to the Agent
for the account of the Bank or Banks entitled  thereto not later than 12:00 Noon
(New York time) on the date when due and shall be made in Dollars in immediately
available  funds at the Payment Office of the Agent.  Whenever any payment to be
made hereunder or under any Note shall be stated to be due on a day which is not
a Business  Day, the due date thereof  shall be extended to the next  succeeding
Business  Day and,  with  respect to payments of  principal,  interest  shall be
payable at the applicable rate during such extension.

     4.4 Net Payments.

     (a) All payments  made by the Borrower  hereunder or under any Note will be
made without setoff,  counterclaim  or other defense.  All such payments will be
made free and clear of, and without deduction or withholding for, any present or
future taxes, levies,  imposts,  duties,  fees,  assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing  authority  thereof or therein (but  excluding,  except as
provided  below,  any tax  imposed  on or  measured  by the net income of a Bank
pursuant to the laws of the jurisdiction (or any political subdivision or taxing





00001WWP.WP5
                                       18

<PAGE>



authority  thereof  or  therein)  in which the  principal  office or  Applicable
Lending  Office of such Bank is located) and all interest,  penalties or similar
liabilities  with respect thereto  (collectively,  "Taxes").  The Borrower shall
also  reimburse  each Bank,  upon the  written  request of such Bank,  for taxes
imposed on or  measured  by the net income of such Bank  pursuant to the laws of
the  jurisdiction (or any political  subdivision or taxing authority  thereof or
therein) in which the principal office or Applicable Lending Office of such Bank
is located as such Bank shall  determine  are payable by such Bank in respect of
amounts paid to or on behalf of such Bank pursuant to the preceding sentence. If
any Taxes are so levied or imposed,  the Borrower  agrees to pay the full amount
of such  Taxes and such  additional  amounts as may be  necessary  so that every
payment of all amounts due  hereunder or under any Note,  after  withholding  or
deduction  for or on  account  of any  Taxes,  will not be less than the  amount
provided  for herein or in such Note.  The  Borrower  will  furnish to the Agent
within  45 days  after the date the  payment  of any  Taxes is due  pursuant  to
applicable law certified  copies of tax receipts  evidencing such payment by the
Borrower. The Borrower will indemnify and hold harmless each Bank, and reimburse
such Bank upon its  written  request,  for the  amount of any Taxes so levied or
imposed and paid by such Bank.

     (b) Each Bank that is not a United  States  person (as such term is defined
in Section  7701(a)(30)  of the Code)  agrees to deliver to the Borrower and the
Agent on or prior to the  Effective  Date,  or in the case of a Bank  that is an
assignee or transferee of an interest under this  Agreement  pursuant to Section
11.4 (unless the respective Bank was already a Bank hereunder  immediately prior
to such  assignment or transfer),  on the date of such assignment or transfer to
such Bank,  (i) two  accurate and complete  original  signed  copies of Internal
Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Bank's
entitlement  to a complete  exemption  from United States  withholding  tax with
respect to payments to be made under this  Agreement and under any Note, or (ii)
if the Bank is not a "bank"  within the meaning of Section  881(c)(3)(A)  of the
Code and  cannot  deliver  either  Internal  Revenue  Service  Form 1001 or 4224
pursuant to clause (i) above,  (x) a  certificate  substantially  in the form of
Exhibit C (any such certificate, a "Section 4.4(b)(ii) Certificate") and (y) two
accurate and complete  original  signed copies of Internal  Revenue Service Form
W-8 (or  successor  form)  certifying to such Bank's  entitlement  to a complete
exemption  from  United  States  withholding  tax with  respect to  payments  of
interest to be made under this  Agreement and under any Note. In addition,  each
Bank agrees  that from time to time after the  Effective  Date,  when a lapse in
time or change in circumstances renders the previous  certification  obsolete or
inaccurate  in any  material  respect,  it will  deliver to the Borrower and the
Agent two new accurate and complete  original signed copies of Internal  Revenue
Service Form 4224 or 1001, or Form W-8 and a Section 4.4(b)(ii) Certificate,  as
the case may be, and such other  forms as may be required in order to confirm or
establish  the  entitlement  of  such  Bank  to a  continued  exemption  from or
reduction in United States  withholding  tax with respect to payments under this
Agreement  and any Note,  or it shall  immediately  notify the  Borrower and the
Agent of its inability to deliver any such Form or Certificate.  Notwithstanding
anything to the  contrary  contained in Section  4.4(a),  but subject to Section
11.4(b) and the  immediately  succeeding  sentence,  (A) the  Borrower  shall be
entitled,  to the extent it is  required  to do so by law, to deduct or withhold
income  or  similar  taxes  imposed  by the  United  States  (or  any  political
subdivision or taxing authority thereof or therein) from interest, fees or other
amounts payable hereunder for the account  of any Bank  which  is  not a  United




                                       19

<PAGE>



Statesperson  (as such term is defined in Section  7701(a)(30)  of the Code) for
U.S.  Federal  income tax purposes to the extent that such Bank has not provided
to the Borrower U.S.  Internal  Revenue  Service Forms that establish a complete
exemption from such  deduction or withholding  and (B) the Borrower shall not be
obligated pursuant to Section 4.4(a) hereof to gross-up payments to be made to a
Bank in respect of income or similar  taxes  imposed by the United States if (I)
such Bank has not provided to the Borrower the Internal  Revenue  Service  Forms
required to be provided to the Borrower  pursuant to this Section 4.4(b) or (II)
in the case of a payment,  other than  interest,  to a Bank  described in clause
(ii) above, to the extent that such Forms do not establish a complete  exemption
from  withholding  of  such  taxes.  Notwithstanding  anything  to the  contrary
contained in the preceding  sentence or elsewhere in this Section 4.4 and except
as set forth in Section 11.4(b),  the Borrower agrees to pay additional  amounts
and to indemnify  each Bank in the manner set forth in Section  4.4(a)  (without
regard  to  the  identity  of  the  jurisdiction   requiring  the  deduction  or
withholding)  in respect of any amounts  deducted or withheld by it as described
in the  immediately  preceding  sentence  as a result of any  changes  after the
Effective Date in any applicable law,  treaty,  governmental  rule,  regulation,
guideline or order, or in the interpretation thereof,  relating to the deducting
or withholding of income or similar Taxes.

     SECTION 5. CONDITIONS PRECEDENT.

     The  obligation  of each Bank to make any Loan is  subject,  at the time of
each Credit Event (except as hereinafter indicated),  to the satisfaction of the
following conditions:

     5.1 Execution of Agreement;  Notes.  On the Initial  Borrowing Date (i) the
Effective  Date shall have occurred and (ii) there shall have been  delivered to
the Agent for the account of each of the Banks the appropriate  Note executed by
the Borrower in the amount, maturity and as otherwise provided herein.

     5.2 No Default; Representations and Warranties; Absence of Material Adverse
Effect.  At the time of each Credit Event and also after giving  effect  thereto
(i) there shall exist no Default or Event of Default;  (ii) all  representations
and warranties  contained herein and in the other Credit Documents shall be true
and  correct  in all  material  respects  with the same  effect as  though  such
representations  and  warranties  had  been  made on and as of the  date of such
Credit Event; and (iii) no Material Adverse Effect shall exist.

     5.3 Notice of Borrowing.  Prior to each Credit Event,  the Agent shall have
received a Notice of Borrowing with respect thereto meeting the  requirements of
Section 2.3.

     5.4 Opinions of Counsel.  On the Initial  Borrowing  Date,  the Agent shall
have received from Mayer, Brown & Platt,  counsel to the Borrower and the Equity
Sponsor,  an opinion addressed to the Agent on behalf of the Banks and dated the
Initial  Borrowing  Date  covering  the  matters set forth in Exhibit D and such
other matters incident to the transactions  contemplated  herein as any Bank may
reasonably request.





                                       20

<PAGE>



     5.5 Corporate Documents; Proceedings.

     (a) On the  Initial  Borrowing  Date,  the  Agent  shall  have  received  a
certificate,  dated the Initial  Borrowing  Date,  signed by the President,  any
Senior Vice President, any Vice President or the Controller of the Borrower, and
attested to by the Secretary or any Assistant Secretary of the Borrower,  in the
form of Exhibit E-1 with  appropriate  insertions,  together  with copies of the
certificate of incorporation  and by-laws of the Borrower and the resolutions of
the Borrower referred to in such certificate.

     (b) On the  Initial  Borrowing  Date,  the  Agent  shall  have  received  a
certificate,  dated the Initial  Borrowing  Date,  signed by the President,  any
Senior  Vice  President,  any Vice  President  or the  Controller  of the Equity
Sponsor,  and  attested to by the  Secretary or any  Assistant  Secretary of the
Equity Sponsor, in the form of Exhibit E-2 with appropriate insertions, together
with  copies of the  certificate  of  incorporation  and  by-laws  of the Equity
Sponsor  and  the  resolutions  of  the  Equity  Sponsor  referred  to  in  such
certificate.

     (c) All corporate and legal  proceedings and all instruments and agreements
in connection with the transactions contemplated in this Agreement and the other
Credit  Documents shall be satisfactory in form and substance to the Banks,  and
the Agent shall have  received all  information  and copies of all documents and
papers,  including records of corporate proceedings and governmental  approvals,
if any, which any Bank  reasonably  may have requested in connection  therewith,
such documents and papers where  appropriate to be certified by proper corporate
or governmental authorities.

     5.6  Subscription   Agreement  and  Equity  Sponsor's   Acknowledgment  and
Estoppel.  On the Initial  Borrowing  Date,  the Equity  Sponsor shall have duly
authorized,  executed and delivered (a) a subscription  agreement in the form of
Exhibit F (as executed, modified, supplemented or amended from time to time, the
"Subscription  Agreement") and (b) an acknowledgment and estoppel in the form of
Exhibit G (as executed, modified, supplemented or amended from time to time, the
"Equity Sponsor's Acknowledgment and Estoppel").

     5.7 Security Agreement.  The Borrower shall have duly authorized,  executed
and  delivered  a  security  agreement  in the form of  Exhibit H (as  executed,
modified,  supplemented or amended from time to time, the "Security Agreement"),
together with:

     (a) an acknowledgment  copy of a UCC-1 financing statement duly filed under
the UCC of the State of Georgia and each other  jurisdiction as may be necessary
or, in the opinion of the  Collateral  Agent,  desirable to perfect the security
interests purported to be created by the Security Agreement;

     (b) evidence of the  completion of all other  recordings and filings of, or
with respect to, the Security  Agreement as may be necessary  or, in the opinion
of the Collateral Agent,  desirable to perfect the security interests  purported
to be created by the Security Agreement; and





                                       21

<PAGE>



     (c) evidence  that all other  actions  necessary  or, in the opinion of the
Collateral  Agent,  desirable  to perfect  and protect  the  security  interests
purported to be created by the Security Agreement have been taken.

     5.8 Payment of Fees.  The Agent and the  Arranger  shall have  received all
amounts  required  to paid to them by the  Borrower  on or  before  the  Initial
Borrowing Date pursuant to Section 3.1(b).

     5.9  Amendments to Working  Capital  Facilities.  On the Initial  Borrowing
Date, the Borrower shall have delivered to the Banks a fully executed  amendment
to each Working Capital Facility, which amendments shall permit the transactions
contemplated  by the Credit  Documents to be performed  and  consummated  by the
Borrower  without  resulting in a breach of covenant  and/or  default  under the
terms of either Working  Capital  Facility and shall be in form  satisfactory to
the Banks.

     5.10 Equity  Sponsor  Side  Letter.  On the  Initial  Borrowing  Date,  the
Borrower  shall have delivered to the Banks a fully executed side letter between
the  Borrower  and the  Equity  Sponsor  regarding  actions to be taken to avoid
defaults under the Working Capital  Facilities  (the "Side Letter"),  which side
letter shall be in form and substance satisfactory to the Bank.

     The  acceptance  of the  benefits of each Credit  Event shall  constitute a
representation  and  warranty by the  Borrower to each of the Banks that all the
conditions  specified  in  Section  5.2 exist as of that  time.  All the  Notes,
certificates,  legal opinions and other documents and papers referred to in this
Section 5, unless  otherwise  specified,  shall be delivered to the Agent at the
Agent's  Notice Office for the account of each of the Banks and,  except for the
Notes,  in  sufficient   counterparts  for  each  of  the  Banks  and  shall  be
satisfactory in form and substance to the Banks.

     SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

     In order to induce the Banks to enter into this  Agreement  and to make the
Loans,  the  Borrower  makes  the  following  representations,   warranties  and
agreements  as of the  Effective  Date,  which shall  survive the  execution and
delivery of this Agreement and the Notes and the making of the Loans:

     6.1 Corporate  Existence  and Power.  The Borrower (a) is a duly formed and
validly  existing  corporation  in good standing  under the laws of the State of
Maryland,  (b) has all  requisite  power and  authority to execute,  deliver and
perform its obligations  under this Agreement and the other Credit  Documents to
which it is a party,  (c) is duly qualified and is authorized to do business and
is in good  standing  in each  other  jurisdiction  in which the  conduct of its
business  requires  it to be so  qualified  or be  authorized  except  where the
failure to be so  qualified  or  authorized  would not have a  Material  Adverse
Effect and (d) has all requisite  power and authority to own its  properties and
to carry on its business as now conducted.

     6.2 Corporate Authorization; No Contravention.  The execution, delivery and
performance by the Borrower of this Agreement and the other Credit  Documents to
which it is a party are within the Borrower's  corporate powers, have been  duly




                                       22

<PAGE>



authorized  by all  necessary  corporate  action,  and do not and  will  not (a)
contravene  the terms of the  certificate  of  incorporation  or  by-laws of the
Borrower,  (b)  conflict  with or result in any breach or  contravention  of, or
constitute  a default  under,  or result in the creation of any Lien upon any of
the  property or assets of the  Borrower  under,  any  document  evidencing  any
Contractual  Obligation  to  which  the  Borrower  is  a  party  or  any  order,
injunction,  writ or decree of any Governmental  Authority to which the Borrower
or its property is subject; or (c) violate any material Requirement of Law.

     6.3   Governmental   Authorization.   No  approval,   consent,   exemption,
authorization,   or  other  action  by,  or  notice  to,  or  filing  with,  any
Governmental  Authority  is  necessary  or required in  connection  with (a) the
execution,  delivery or performance by, or enforcement  against, the Borrower of
this  Agreement or the other Credit  Documents to which it is a party or (b) the
legality,  validity,  binding effect or  enforceability of this Agreement or the
other Credit Documents to which it is a party.

     6.4 Binding  Effect.  The Borrower has duly  executed  and  delivered  this
Agreement,  and this Agreement constitutes,  and other Credit Documents to which
it is a party when executed and delivered by the Borrower will each  constitute,
the legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with their terms, except as enforceability may be limited
by applicable bankruptcy,  insolvency, or similar laws affecting the enforcement
of  creditors'  rights  generally  or  by  equitable   principles   relating  to
enforceability.

     6.5 Financial  Statements;  Financial Condition;  Undisclosed  Liabilities;
etc.

     (a) The  consolidated  balance sheets of the Borrower and its  Consolidated
Subsidiaries  at  December  31,  1997  and  March  31,  1998,  and  the  related
consolidated  statements  of  income,  retained  earnings  and cash flows of the
Borrower and its  Consolidated  Subsidiaries  for the fiscal year or three-month
period,  as the case may be, ended on such date and heretofore  furnished to the
Agent and Banks  present  fairly the  consolidated  financial  condition  of the
Borrower and its  Consolidated  Subsidiaries  at the date of such balance sheets
and  the  consolidated  results  of the  operations  of  the  Borrower  and  its
Consolidated  Subsidiaries  for such fiscal year or three-month  period,  as the
case may be. All such financial statements have been prepared in accordance with
GAAP except for, with respect to the financial  statements  for the  three-month
period ended on March 31, 1998,  the omission of footnotes  and normal  year-end
audit  adjustments.  Since December 31, 1997, there has been no Material Adverse
Effect.

     (b) Except (i) as fully  reflected in the  financial  statements  delivered
pursuant to Section  6.5(a),  (ii) for the  execution  and  delivery of the 1998
Urban Working Capital Facility,  (iii) for the increase in the commitments under
the  1997  Suburban  Working  Capital  Facility  and  (iv)  for  liabilities  or
obligations  with respect to the Borrower or any of its  Subsidiaries  that have
been incurred in the ordinary course of business,  there are as of the Effective
Date no liabilities  or  obligations  with respect to the Borrower or any of its
Subsidiaries of any nature whatsoever (whether absolute,  accrued, contingent or
otherwise and whether or not due) which,  either  individually  or in aggregate,
would be material to the Borrower or to the Borrower and its Subsidiaries  taken
as a whole. As of the Effective Date the Borrower  does not know of any    basis




                                       23

<PAGE>



for  the  assertion  against  the  Borrower  or any of its  Subsidiaries  of any
liability or obligation of any nature  whatsoever that is not fully reflected in
the financial  statements  delivered  pursuant to Section  6.5(a) which,  either
individually  or in the  aggregate,  could be material to the Borrower or to the
Borrower and its Subsidiaries taken as a whole.

     6.6  Litigation.  There  are no  actions,  suits,  proceedings,  claims  or
disputes  pending,  or to the best  knowledge  of the  Borrower,  threatened  or
contemplated,  at law,  in equity,  in  arbitration  or before any  Governmental
Authority,  against the Borrower  which (a) purport to affect or pertain to this
Agreement,  the  other  Credit  Documents  to  which it is a party or any of the
transactions  contemplated hereby or thereby or (b) would reasonably be expected
to have a Material Adverse Effect. No injunction,  writ,  temporary  restraining
order  or any  order  of any  nature  has  been  issued  by any  court  or other
Governmental Authority purporting to enjoin or restrain the execution,  delivery
and performance of this Agreement or the other Credit Documents to which it is a
party, or directing that the transactions  provided for herein or therein not be
consummated as herein or therein provided.

     6.7 Tax Returns and Payments. Each of the Borrower and its Subsidiaries has
filed all tax returns  required to be filed by it and has paid all income  taxes
payable by it which have  become due  pursuant to such tax returns and all other
taxes and assessments  payable by it which have become due, other than those not
yet  delinquent  and  except  for those  contested  in good  faith and for which
adequate  reserves have been  established in accordance  with GAAP.  Each of the
Borrower and its  Subsidiaries  has paid, or has provided  adequate  reserves in
accordance  with  GAAP (in the good  faith  judgment  of the  management  of the
Borrower) for the payment of, all federal and state income taxes  applicable for
all prior fiscal years and for the current fiscal year to the date hereof.

     6.8 Compliance with ERISA. Each Plan is in substantial  compliance with its
terms and with all applicable laws,  including without  limitation ERISA and the
Code;  each Plan which is intended to be qualified  under Section  401(a) of the
Code has received a  determination  letter from the Internal  Revenue Service to
the effect  that it meets the  requirements  of Section  401(a) of the Code;  no
Reportable  Event has  occurred;  the Borrower has not received  notice that any
Multiemployer  Plan is insolvent or in  reorganization;  no Plan has an Unfunded
Current  Liability which, when added to the aggregate amount of Unfunded Current
Liabilities with respect to all other Plans,  exceeds $2,000,000;  no Plan which
is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated
funding deficiency, within the meaning of such sections of the Code or ERISA, or
has applied for or received a waiver of an accumulated  funding deficiency or an
extension of any amortization  period,  within the meaning of Section 412 of the
Code or Section 303 or 304 of ERISA; all contributions  required to be made with
respect to a Plan or  Multiemployer  Plan have been  timely  made;  neither  the
Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred
any  material  liability  (including  any  indirect,   contingent  or  secondary
liability) to or on account of a Plan pursuant to Sections 409, 502(i),  502(l),
4062,  4063,  4064 or 4069 of ERISA or Section  401(a)(29),  4971 or 4975 of the
Code or to or on account of a Multiemployer Plan pursuant to Sections 515, 4201,
4204 or 4212 of ERISA or  expects to incur any such  liability  under any of the
foregoing  sections  with  respect  to  any  Plan  or  Multiemployer   Plan,  as
applicable;  no condition  exists which presents a material risk to the Borrower
or any  Subsidiary  of the  Borrower  or any  ERISA  Affiliate  of  incurring  a
liability  to or on  account of a Plan or  Multiemployer  Plan,  as  applicable,





                                       24

<PAGE>



pursuant to the foregoing  provisions of ERISA and the Code; no proceedings have
been  instituted  to terminate or appoint a trustee to  administer  any Plan; no
action, suit,  proceeding,  hearing,  audit or investigation with respect to the
administration,  operation or the  investment of assets of or payments under any
Plan (other than routine  claims for  benefits) is pending,  expected or, to the
Borrower's  knowledge,  threatened;  using actuarial assumptions and computation
methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate
liabilities of the Borrower and its Subsidiaries and its ERISA Affiliates to all
Multiemployer Plans in the event of a complete withdrawal  therefrom,  as of the
close of the most  recent  fiscal year of each such Plan ended prior to the date
of the most recent Credit Event, would not exceed $2,000,000;  each group health
plan (as defined in Section 607(1) of ERISA or Section  4980B(g)(2) of the Code)
which covers or has covered  employees or former employees of the Borrower,  any
Subsidiary  of the  Borrower,  or any  ERISA  Affiliate  has at all  times  been
operated in compliance with the provisions of Part 6 of subtitle B of Title I of
ERISA and Section 4980B of the Code other than any noncompliance  that would not
reasonably be expected to result in a material  liability of the  Borrower,  its
Subsidiaries or any ERISA Affiliate;  no lien imposed under the Code or ERISA on
the  assets of the  Borrower  or any  Subsidiary  of the  Borrower  or any ERISA
Affiliate  exists or is likely to arise on account of any Plan or  Multiemployer
Plan; and the Borrower and its Subsidiaries do not maintain or contribute to any
employee  welfare  benefit  plan (as  defined  in Section  3(1) of ERISA)  which
provides  benefits to retired or other former  employees (other than as required
by Section 601 of ERISA) or any pension plan other than any Plan the obligations
with respect to which would  reasonably  be expected to have a Material  Adverse
Effect.

     6.9 No Default.  No Default or Event of Default exists or would result from
the incurring of any Obligations by the Borrower.

     6.10 True and  Complete  Disclosure.  All factual  information  (taken as a
whole) heretofore or contemporaneously  furnished by or on behalf of Borrower or
the Equity  Sponsor in  writing to the Agent or any Bank for  purposes  of or in
connection  with this Agreement or any transaction  contemplated  herein is, and
all other such factual  information (taken as a whole) hereafter furnished by or
on behalf of any such  Persons in writing to the Agent or any Bank will be, true
and accurate in all material  respects on the date as of which such  information
is dated or certified and not  incomplete by omitting to state any material fact
necessary to make such  information  (taken as a whole) not  misleading  at such
time in light of the circumstances under which such information was provided.

     6.11 Compliance. The Borrower is in compliance with all Requirements of Law
and  Contractual   Obligations,   except  such   non-compliance  as  would  not,
individually or in the aggregate, have a Material Adverse Effect.

     6.12 Margin Regulations.  Neither the making of any Loan hereunder, nor the
use of the proceeds thereof, will violate the provisions of Regulation T, U or X
of the Board of Governors of the Federal Reserve System.

     6.13 Investment Company. The Borrower is not an "investment company," or an
"affiliated  person" of, or a  "promoter"  or  "principal  underwriter"  for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.





                                       25

<PAGE>



     6.14 Labor  Relations.  Neither the Borrower nor any of its Subsidiaries is
engaged in any unfair labor practice that would have a Material  Adverse Effect.
There is (a) no significant  unfair labor practice complaint pending against the
Borrower or any of its  Subsidiaries  or, to the best knowledge of the Borrower,
threatened  against any of them,  before the National Labor Relations Board, and
no significant grievance or significant arbitration proceeding arising out of or
under any collective  bargaining agreement is so pending against the Borrower or
any of its  Subsidiaries  or, to the best knowledge of the Borrower,  threatened
against any of them,  (b) no  significant  strike,  labor  dispute,  slowdown or
stoppage pending against the Borrower or any of its Subsidiaries or, to the best
knowledge  of  the  Borrower,  threatened  against  the  Borrower  or any of its
Subsidiaries  and  (c)  to  the  best  knowledge  of  the  Borrower,   no  union
representation  question  existing with respect to the employees of the Borrower
or any of its Subsidiaries and, to the best knowledge of the Borrower,  no union
organizing  activities  are taking  place,  except  (with  respect to any matter
specified  in  clause  (a),  (b) or (c)  above,  either  individually  or in the
aggregate) such as would not have a Material Adverse Effect.

     6.15 Patents,  Licenses,  Franchises and Formulas. Each of the Borrower and
its Subsidiaries owns all the patents, trademarks, permits, service marks, trade
names, copyrights,  licenses, franchises and formulas, or rights with respect to
the  foregoing,  and has obtained  assignments of all leases and other rights of
whatever nature, necessary for the present conduct of its business,  without any
known conflict with the rights of others which,  or the failure to obtain which,
as the case may be, would result in a Material Adverse Effect.

     6.16 Nature of Business.  Neither the Borrower nor any of its  Subsidiaries
is engaged in any business other than the ownership, construction,  development,
operation  and  management of extended stay  facilities  (other than  businesses
incidental  to the  development,  operation  and  management  of  extended  stay
facilities).

     6.17 Solvency.  Within the meaning of Section 548 of the  Bankruptcy  Code,
the Uniform Fraudulent Transfer Act and the Uniform Fraudulent Conveyance Act as
in effect in any relevant  jurisdiction,  and any similar laws or statutes,  and
after  giving  effect  to the  transactions  contemplated  hereby:  (a) the fair
saleable value of the Borrower's assets exceeds and will,  immediately following
the making of each Loan,  exceed the  Borrower's  total  liabilities  including,
without  limitation,   subordinated,   unliquidated,   disputed  and  contingent
liabilities;  (b) the fair saleable value of the Borrower's  assets is and will,
immediately  following the making of each Loan,  be greater than the  Borrower's
probable liabilities, including the maximum amount of its contingent liabilities
on its debts as such debts  become  absolute  and  matured;  (c) the  Borrower's
assets do not and,  immediately  following  the making of each  Loan,  will not,
constitute  unreasonably small capital to carry out its business as conducted or
as proposed to be  conducted;  and (d) the Borrower does not intend to, and does
not  believe  that it will,  incur  debts  and  liabilities  (including  without
limitation  contingent  liabilities and other commitments) beyond its ability to
pay such debts as they  mature  (taking  into  account the timing and amounts of
cash to be  received  by the  Borrower  and the  amounts  to be payable on or in
respect of obligations of the Borrower).

     6.18 Drawing Under Subscription  Agreement.  Unless the Borrower shall have
received  proceeds of  Securities  Offerings  sufficient to repay all Loans that
will become due and payable on the Expiry Date, the Borrower shall, on or before
the eighth day preceding the Expiry Date,  demand payment under the Subscription
Agreement  from the Equity  Sponsor of the amount  needed to repay such Loans in
full on the Expiry Date.





                                       26

<PAGE>




     SECTION 7. AFFIRMATIVE COVENANTS.

     The Borrower  covenants and agrees that on and after the Effective Date and
until the Total Commitment has terminated and the Loans and the Notes,  together
with interest, Fees and all other obligations incurred hereunder and thereunder,
are paid in full:

     7.1 Information Covenants. The Borrower will furnish to each Bank:

     (a) Quarterly Financial  Statements.  As soon as available and in any event
within 45 days after the close of each quarterly  accounting  period (other than
the last fiscal  quarter of a fiscal  year) in each fiscal year of the  Borrower
(unless  the  filing  requirements  have been  extended  by the  Securities  and
Exchange Commission  (together with any successor to the functions thereof,  the
"SEC"),  in which case the 45-day  reference  shall be changed to such  extended
date granted by the SEC), the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such quarterly period and the related
consolidated  statements  of income,  retained  earnings  and cash flow for such
quarterly  period and for the elapsed  portion of the fiscal year ended with the
last day of such  quarterly  period,  in each  case  setting  forth  comparative
figures for the related  periods in the prior fiscal year, all of which shall be
certified by the chief financial  officer or controller of the Borrower as being
true and correct and that fairly present the consolidated financial condition as
at the end of such fiscal quarter,  and the  consolidated  results of operations
and  changes  in cash flow for such  fiscal  quarter,  of the  Borrower  and its
Consolidated  Subsidiaries in accordance  with GAAP,  subject to the omission of
footnotes and normal year-end audit adjustments.

     (b) Annual  Financial  Statements.  As soon as  available  and in any event
within 90 days after the close of each fiscal year of the  Borrower  (unless the
filing  requirements  have been  extended  by the SEC,  in which case the 90-day
reference  shall be  changed to such  extended  date  granted  by the SEC),  the
consolidated balance sheet of the Borrower and its Consolidated  Subsidiaries as
at the end of such  fiscal  year  and the  related  consolidated  statements  of
income,  retained  earnings  and cash flow for such  fiscal  year,  in each case
setting  forth  comparative  figures  for  the  preceding  fiscal  year,  all in
reasonable  detail and accompanied by a report thereon of Arthur Andersen LLP or
other independent  certified public accountants of recognized  national standing
reasonably  acceptable to the Required Banks,  which report shall be unqualified
as to scope of audit and shall state that such consolidated financial statements
present fairly the consolidated financial condition as at the end of such fiscal
year,  and the  consolidated  results of operations and changes in cash flow for
such  fiscal  year,  of  the  Borrower  and  its  Consolidated  Subsidiaries  in
accordance with GAAP.

     (c)  Officer's  Certificates.  At the time of the delivery of the financial
statements  provided for in Section  7.1(a) and (b), a certificate  of the chief
financial  officer or controller of the Borrower to the effect that, to the best
of his or her  knowledge,  no Default or Event of Default  has  occurred  and is
continuing  or,  if  any  Default  or  Event  of  Default  has  occurred  and is
continuing, specifying the nature and extent thereof, which certificate    shall




                                       27

<PAGE>



set forth the  calculations  required to  establish  whether the Borrower was in
compliance  with the provisions of Sections 8.7 through 8.9,  inclusive,  at the
end of such  fiscal  quarter  or year,  as the  case may be.  At the time of the
delivery  of  the  financial  statements  provided  for  in  Section  7.1(a),  a
certificate  of the  chief  financial  officer  or  controller  of the  Borrower
demonstrating the Borrower's compliance with Section 8.16 for the fiscal quarter
to which such certificate relates.

     (d) Notice of  Default or  Litigation.  Promptly,  and in any event  within
three Business Days after an officer of the Borrower obtains knowledge  thereof,
notice of (i) the  occurrence of any event which  constitutes a Default or Event
of Default,  (ii) any litigation or governmental  proceeding pending (x) against
the Borrower or any of its  Subsidiaries  which could  reasonably be expected to
result in a Material  Adverse Effect or (y) with respect to any Credit  Document
and  (iii) any  other  event  (including,  without  limitation,  threat of suit,
proceeding or  investigation)  which could reasonably be expected to result in a
Material Adverse Effect.

     (e)  Other  Reports  and  Filings.   Promptly,   copies  of  all  financial
information,  proxy materials and other  information and reports,  if any, which
the Borrower  shall file with the SEC or any national  securities  exchange upon
which any  security  of the  Borrower  is listed or  quoted,  or  provide to its
security holders or other lenders.

     (f)  Other  Information.  From  time to time,  such  other  information  or
documents (financial or otherwise) as any Bank may reasonably request.

     7.2 Books, Records and Inspections.  The Borrower will, and will cause each
of its  Subsidiaries  to, keep proper books of record and account in which full,
true and correct  entries in conformity  with GAAP and all  Requirements  of Law
shall be made of all dealings and  transactions  in relation to its business and
activities.  The  Borrower  will,  and will cause each of its  Subsidiaries  to,
permit officers and designated representatives of the Agent or any Bank to visit
and inspect, under guidance of officers of the Borrower or such Subsidiary,  any
of the  properties of the Borrower or such  Subsidiary,  and to examine and make
abstracts of the books of record and account of the Borrower or such  Subsidiary
and to discuss during regular business hours the affairs,  finances and accounts
of the Borrower or such  Subsidiary  with, and be advised as to the same by, its
and their  officers  and  independent  certified  public  accounts,  all at such
reasonable  times and  intervals and to such  reasonable  extent as the Agent or
such Bank may request,  provided that, in the case of any  discussions  with any
independent  certified  public  accountants,  the Borrower  shall, so long as no
Event of Default has  occurred and is  continuing,  have the right to be present
during any such discussions.

     7.3 Maintenance of Property,  Insurance.  The Borrower will, and will cause
each of its  Subsidiaries  to, (i) keep all property useful and necessary in its
business in good working  order and  condition,  normal wear and tear  accepted,
(ii) maintain with financially sound and reputable insurance companies insurance
on all its  property in at least such amounts and against at least such risks as
are  currently  insured  against and (iii)  furnish to each Bank,  upon  written
request, full information as to the insurance carried.





                                       28

<PAGE>



     7.4 Corporate  Franchises.  The Borrower  will,  and will cause each of its
Subsidiaries  to, do or cause to be done,  all things  necessary to preserve and
keep in full force and effect its existence and its material rights, franchises,
licenses and patents; provided,  however, that nothing in this Section 7.4 shall
prevent  the  withdrawal  by the  Borrower  or any  of its  Subsidiaries  of its
qualification as a foreign corporation in any jurisdiction where such withdrawal
would not have a Material Adverse Effect.

     7.5 Compliance  with Statutes,  etc. The Borrower will, and will cause each
of its  Subsidiaries  to, comply with all applicable  statutes,  regulations and
orders  of,  and  all  applicable  restrictions  imposed  by,  all  Governmental
Authorities  in respect of the conduct of its business and the  ownership of its
property (including  applicable statutes,  regulations,  orders and restrictions
relating to environmental standards and controls), except such noncompliances as
would not, individually or in the aggregate, have a Material Adverse Effect.

     7.6 ERISA.  As soon as  possible  and,  in any event,  within ten (10) days
after the Borrower,  any Subsidiary of the Borrower or any ERISA Affiliate knows
or has reason to know of the  occurrence of any of the  following,  the Borrower
will deliver to each of the Banks a certificate of the chief  financial  officer
of the Borrower  setting  forth the full details as to such  occurrence  and the
action,  if any, that the Borrower,  such  Subsidiary or such ERISA Affiliate is
required or proposes to take,  together with any notices required or proposed to
be  given  to or  filed  with or by the  Borrower,  the  Subsidiary,  the  ERISA
Affiliate,  the PBGC, a Plan or Plan participant or the Plan  administrator with
respect  thereto:  that a Reportable  Event has  occurred;  that a  contributing
sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan is subject to the
advance  reporting  requirements  of PBGC Regulation  Section  4043.61  (without
regard to  subparagraph  (b)(1)  thereof),  and an event described in subsection
 .62,  .63,  .64,  .65,  .66,  .67 or .68 of  PBGC  Regulation  Section  4043  is
reasonably  expected to occur with respect to such Plan within the  following 30
days; that an accumulated funding deficiency,  within the meaning of Section 412
of the Code or Section 302 of ERISA,  has been incurred or an application may be
or has been made for a waiver or modification  of the minimum  funding  standard
(including   any  required   installment   payments)  or  an  extension  of  any
amortization period under Section 412 of the Code or Section 303 or 304 of ERISA
with respect to a Plan; that any  contribution  required to be made with respect
to a Plan  or  Multiemployer  Plan  has not  been  timely  made;  that a Plan or
Multiemployer  Plan has been or may  reasonably  be expected  to be  terminated,
reorganized,  partitioned or declared  insolvent under Title IV of ERISA; that a
Plan has an Unfunded Current Liability which, when added to the aggregate amount
of Unfunded  Current  Liabilities  with  respect to all other Plans  exceeds the
aggregate  amount of such  Unfunded  Current  Liabilities  that  existed  on the
Initial  Borrowing  Date by  $2,000,000;  that  proceedings  may be or have been
instituted  under  Section  4042 of ERISA to  terminate  or appoint a trustee to
administer a Plan; that a proceeding has been instituted pursuant to Section 515
of ERISA to collect a delinquent  contribution to a Plan or Multiemployer  Plan;
that the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or
may incur any  liability  (including  any  indirect,  contingent,  or  secondary
liability)  to or on account of the  termination  of or  withdrawal  from a Plan
under  Section  4062,  4063,  4064  or  4069  of  ERISA  or  with  respect  to a
Multiemployer  Plan under Section 4201, 4204 or 4212 of ERISA or with respect to
a Plan under Section  401(a)(29),  4971, 4975 or 4980 of the Code or Section 409
or 502(i) or 502(l) of ERISA or with  respect to a group health plan (as defined
in  Section  607(1) of ERISA or  Section  4980B(g)(2)  of the Code) or  material
excise  tax  under  Section  4980B  of the  Code;  or that the  Borrower  or any
Subsidiary  of the  Borrower may incur any  material  liability  pursuant to any
employee  welfare  benefit  plan (as  defined  in  Section  3(1) of ERISA)  that
provides benefits to retired employees or other former employees (other  than as




                                       29

<PAGE>




required by Section 601 of ERISA) or any Plan that would  reasonably be expected
to interfere with the Borrower's  obligations  under this Agreement or the other
Credit  Documents.  Upon request by any Bank,  the Borrower will also deliver to
such Bank a complete copy of the annual report (on Internal Revenue Service Form
5500-series)  of each Plan  (including,  to the  extent  required,  the  related
financial and actuarial statements and opinions and other supporting statements,
certifications,  schedules  and  information)  required  to be  filed  with  the
Internal Revenue Service.  In addition to any certificates or notices  delivered
to the Banks  pursuant  to the first  sentence  hereof,  copies of any  records,
documents or other information  required to be furnished to the PBGC (other than
with respect to timely  routine  premium  payments),  and any  material  notices
received by the Borrower,  any Subsidiary of the Borrower or any ERISA Affiliate
with respect to any Plan or  Multiemployer  Plan shall be delivered to the Banks
no later  than ten (10)  days  after  the date such  records,  documents  and/or
information  has been  furnished to the PBGC or such notice has been received by
the Borrower, the Subsidiary or the ERISA Affiliate as applicable.

     7.7 End of Fiscal Years; Fiscal Quarters. The Borrower shall cause (a) each
of its, and each of its Subsidiary's, fiscal years to end on December 31 and (b)
each of its, and each of its  Subsidiary's,  fiscal quarters to end on March 31,
June 30, September 30 and December 31.

     7.8 Performance of Obligations.  The Borrower shall comply with and perform
all of its obligations under the Working Capital Facilities. The Borrower shall,
and  shall  cause  each of its  Subsidiaries  to,  perform  all its  Contractual
Obligations  (other than those covered by the preceding  sentence),  except such
non-performances as would not in the aggregate have a Material Adverse Effect.

     7.9 Payment of Taxes and Claims,  Etc. The Borrower shall,  and shall cause
each of its  Subsidiaries  to, pay (a) all taxes,  assessments and  governmental
charges imposed upon it or upon its property, unless the failure to so pay would
not reasonably be expected to constitute or result in a Material  Adverse Effect
and (b) all  taxes,  assessments  and  governmental  charges  imposed  upon  any
property,  and all  claims  (including,  without  limitation,  claims for labor,
materials,  supplies, or services) which might, if unpaid, become a Lien thereon
unless,  in each case, the validity or amount thereof is being contested in good
faith by appropriate  proceedings and the Borrower or the applicable  Subsidiary
has, if required to do so under GAAP,  maintained adequate reserves with respect
thereto.

     SECTION 8. NEGATIVE COVENANTS.

     The Borrower  covenants and agrees that on and after the Effective Date and
until the Total Commitment has terminated and the Loans and the Notes,  together
with interest, Fees and all other obligations incurred hereunder and thereunder,
are paid in full:

     8.1 Liens.  Except for the Lien created by the Security Agreement and Liens
for taxes not yet due, the Borrower will not create,  incur, assume or suffer to
exist any Lien upon or with respect to the  Collateral  or any portion  thereof.
Except for Liens permitted under the Working Capital  Facilities,  the  Borrower




                                       30

<PAGE>



will not, and will not permit any of its Subsidiaries to, create,  incur, assume
or suffer to exist any Lien upon or with respect to any Mortgaged Property.  The
Borrower  will not,  and will not permit  any of its  Subsidiaries  to,  create,
incur,  assume or suffer to exist any Lien upon or with  respect to any property
or assets (real or personal,  tangible or  intangible) of the Borrower or any of
its Subsidiaries other than the Collateral and the Mortgaged Properties, whether
now owned or hereafter acquired (collectively,  "Remaining Property"),  provided
that such restrictions shall not prevent the creation, incurrence, assumption or
existence of:

     (a) Liens for taxes not yet due, or Liens for taxes being contested in good
faith and by  appropriate  proceedings  for which  adequate  reserves  have been
established;

     (b) Liens in  respect of  Remaining  Property  imposed  by law,  which were
incurred in the ordinary course of business,  such as carriers',  warehousemen's
and mechanics'  liens and other similar Liens arising in the ordinary  course of
business and (i) which do not in the aggregate materially detract from the value
of such Remaining Property or materially impair the use thereof in the operation
of the  business of the  Borrower or any of its  Subsidiaries  or (ii) which are
being contested in good faith by appropriate proceedings, which proceedings have
the  effect of  preventing  the  forfeiture  or sale of the  Remaining  Property
subject to any such Lien; and

     (c)  pledges  or  deposits  in  connection   with  worker's   compensation,
unemployment insurance and other social security legislation.

     8.2 Consolidation,  Merger,  Sale of Assets, etc. The Borrower will not (a)
merge  into or  consolidate  with any other  Person;  (b) sell,  assign,  lease,
transfer,  convey or  otherwise  dispose of (in one  transaction  or a series of
transactions) all or substantially all of the Borrower's assets to any Person or
group (as such term is used in Section  13(d)(3) of the Securities  Exchange Act
of 1934,  as amended);  or (c) liquidate or dissolve or permit the adoption of a
plan  by the  stockholders  of the  Borrower  relating  to  the  dissolution  or
liquidation of the Borrower.

     8.3 Dividends.

     (a) The  Borrower  will not  declare  or pay any  dividends,  or return any
capital,  to its  stockholders  or  authorize  or make any  other  distribution,
payment or delivery of property or cash to its  stockholders as such, or redeem,
retire,   purchase  or  otherwise  acquire,   directly  or  indirectly,   for  a
consideration,  any shares of any class of its  capital  stock now or  hereafter
outstanding  (or any options or warrants  issued by the Borrower with respect to
its capital stock), or set aside any funds for any of the foregoing purposes, or
permit  any  of  its  Subsidiaries  to  purchase  or  otherwise  acquire  for  a
consideration  any shares of any class of the capital  stock of the Borrower now
or hereafter outstanding (or any options or warrants issued by the Borrower with
respect to its capital stock).

     (b) The Borrower will not permit any of its  Subsidiaries to declare or pay
any dividends,  or return any capital,  to its stockholders or authorize or make
any  other  distribution,  payment  or  delivery  of  property  or  cash  to its
stockholders as such, or redeem, retire, purchase or otherwise acquire, directly




                                       31

<PAGE>



or indirectly, for a consideration, any shares of any class of its capital stock
now or  hereafter  outstanding  (or  any  options  or  warrants  issued  by such
Subsidiary with respect to its capital stock), or set aside any funds for any of
the  foregoing  purposes,  or permit  any of its  Subsidiaries  to  purchase  or
otherwise  acquire  for a  consideration  any shares of any class of the capital
stock  of such  Subsidiary  now or  hereafter  outstanding  (or any  options  or
warrants issued by such  Subsidiary  with respect to its capital stock),  except
that any  Subsidiary  may pay  dividends  to the  Borrower  or any  Wholly-Owned
Subsidiary of the Borrower.

     8.4  Indebtedness.  The  Borrower  will not, and will not permit any of its
Subsidiaries  to,  contract,  create,  incur,  assume  or  suffer  to exist  any
Indebtedness,  except (a) Indebtedness of the Borrower incurred under the Credit
Documents, (b) Indebtedness permitted (whether by waiver or otherwise) under the
Working Capital  Facilities and (c) Indebtedness  comprised of letters of credit
which are fully cash collateralized.

     8.5 Advances,  Investments  and Loans.  The Borrower will not, and will not
permit any of its  Subsidiaries to, lend money or credit or make advances to any
Person,  or purchase or acquire any stock,  obligations or securities of, or any
other interest in, or make any capital contribution to, any other Person, except
that the following shall be permitted:

     (a) the  Borrower  and its  Subsidiaries  may acquire and hold  receivables
owing to it, if created or  acquired  in the  ordinary  course of  business  and
payable or dischargeable in accordance with customary trade terms;

     (b)  the  Borrower  and  its   Subsidiaries   may  acquire  and  hold  Cash
Equivalents;

     (c) the  Borrower  may make  equity  contributions  to the  capital  of its
Wholly-Owned  Subsidiaries and the Wholly-Owned Subsidiaries of the Borrower may
make  equity  contributions  to the  capital  of their  respective  Wholly-Owned
Subsidiaries; and

     (d)  the  Borrower  may  make  loans  and  advances  to  its   Wholly-Owned
Subsidiaries.

     8.6 Transactions with Affiliates. The Borrower will not purchase,  acquire,
lease any property from, or sell, transfer, or lease any property to, or lend or
advance any money to, or borrow any money from, or guarantee any  obligation of,
or acquire any stock,  obligations or securities of, or enter into any merger or
consolidation  agreement,  or any  management  or similar  agreement  with,  any
Affiliate,  or enter  into any  other  transaction  or  arrangement  or make any
payments to (including,  without limitation,  on account of any management fees,
service fees, office charges, consulting fees, technical service charges, or tax
sharing  charges) or otherwise deal with, in the ordinary  course of business or
otherwise,   any  Affiliate  on  terms  other  than  arm's-length   commercially
reasonable  terms (other than (a) those  transactions in effect on the Effective
Date and previously disclosed in writing to the Banks, (b) any such transactions
between the Borrower and any of its  Subsidiaries  and between  Subsidiaries  of
Borrower and (c) the Subscription Agreement).

     8.7 Debt Service Coverage Ratio. The Borrower will not permit the ratio of




                                       32

<PAGE>



its  Consolidated  EBITDA to its Debt  Service for any fiscal  quarter set forth
below to be less than the ratio set forth below opposite such fiscal quarter:

          Fiscal Quarter Ended                    Ratio

          September 30, 1998                      1.4:1.0
          December 31, 1998                       1.4:1.0
          March 31, 1999                          1.5:1.0.

     8.8 Total Debt.  The Borrower will not permit the  aggregate  amount of its
Indebtedness  at any time to exceed an amount equal to fifty-five  percent (55%)
of Gross  Asset  Value at such  time,  or  permit  the  aggregate  amount of its
Indebtedness  secured  by a Lien at any time to exceed an amount  equal to fifty
percent (50%) of Gross Asset Value at such time.

     8.9  Consolidated  Net Worth. The Borrower will not permit its Consolidated
Net Worth at any time to be less than $325,000,000.

     8.10  Limitation  on  Modification  of  Certificate  of  Incorporation  and
By-Laws.  The Borrower will not, and will not permit any of its Subsidiaries to,
amend,  modify or change its certificate of  incorporation  (including,  without
limitation,  by the filing or modification of any certificate of designation) or
by-laws if such  amendment,  modification or change would (a) create a new class
of securities or (b) would have a Material Adverse Effect or (c) would otherwise
result in a Default hereunder.

     8.11 Limitation on Modification of Subscription  Agreement and Side Letter.
The Borrower shall not consent to the amendment,  modification, waiver, release,
cancellation  or termination of any provision of the  Subscription  Agreement or
the  Side  Letter  and will not  take  any  action,  or omit to take any  action
necessary, if such failure or omission could reasonably be expected to impair in
any manner (a) the  Borrower's  right to demand  payment under the  Subscription
Agreement  from  the  Equity  Sponsor  or (b) the  rights  and  remedies  of the
Collateral Agent and the Banks in respect of the  Subscription  Agreement or the
Side Letter.

     8.12  Limitation  on   Restrictions  on  Subsidiary   Dividends  and  Other
Distributions.   The  Borrower  will  not,  and  will  not  permit  any  of  its
Subsidiaries to, directly or indirectly,  create or otherwise cause or suffer to
exist or become  effective any  encumbrance or restriction on the ability of any
such  Subsidiary  to (a) pay  dividends or make any other  distributions  on its
capital stock or any other interest or participation in its profits owned by the
Borrower or any Subsidiary of the Borrower,  or pay any Indebtedness owed to the
Borrower  or a  Subsidiary  of the  Borrower,  (b) make loans or advances to the
Borrower or (c) transfer any of its properties or assets to the Borrower, except
for  such  encumbrances  or  restrictions  existing  under or by  reason  of (i)
applicable  law, (ii) this  Agreement and (z) customary  provisions  restricting
subletting  or  assignment  of any lease  governing a leasehold  interest of the
Borrower or a Subsidiary of the Borrower.

     8.13 Limitation on Issuance of Capital Stock by Subsidiaries.  The Borrower
shall not permit any of its  Subsidiaries to issue any capital stock  (including
by way of sales of treasury  stock) or any options or warrants to  purchase,  or
securities  convertible  into,  capital  stock,  except  for (a)  transfers  and
replacements of then outstanding shares of capital  stock, (b)   stock   splits,




                                       33

<PAGE>



stock  dividends  and similar  issuances  which do not decrease  the  percentage
ownership of the Borrower or any of its Subsidiaries in any class of the capital
stock of such Subsidiary and (c) stock issuances (1) to the Borrower from any of
its  Wholly-Owned  Subsidiaries  or (2) to any  Wholly-Owned  Subsidiary  of the
Borrower from any of its respective Wholly-Owned  Subsidiaries,  in each case in
consideration of an equity contribution permitted under Section 8.5(c).

     8.14  Business.  The  Borrower  will not,  and will not  permit  any of its
Subsidiaries  to, engage (directly or indirectly) in any business other than the
business  in  which  it is  engaged  on the  Effective  Date  and  any  business
reasonably ancillary thereto.

     8.15 Use of Proceeds. The Borrower will not use any part of the proceeds of
any Loan to  purchase  or carry any  Margin  Stock or to extend  credit  for the
purpose of purchasing  or carrying any Margin  Stock.  The Borrower will use the
proceeds of each Loan to fund the  acquisition of land, to construct and develop
extended  stay  facilities  on such land and,  so long as no Default of Event of
Default has occurred and is continuing, for other general corporate purposes.

     8.16 Total Costs.  The Borrower has not and will not undertake any activity
that will create a funding need in excess of the sum of (a) the aggregate amount
available  from  internally  generated  excess  cash,  (b)  the  maximum  amount
available  to be  borrowed  under the  Working  Capital  Facilities  and (c) the
maximum amount available to be borrowed under this Agreement, including any need
for any and all of the costs of the development and/or operation of the Borrower
and its business.

     SECTION 9. EVENTS OF DEFAULT.

     Upon the  occurrence  of any of the  following  specified  events  (each an
"Event of Default"):

     9.1 Payments. The Borrower shall (i) default in the payment when due of any
principal  of any  Loan or any Note or (ii)  default,  and  such  default  shall
continue  unremedied  for three or more  days,  in the  payment  when due of any
interest  on any  Loan  or any  Note  or any  Fees or any  other  amounts  owing
hereunder or under any Note; or

     9.2 Representations, etc. Any representation, warranty or statement made by
or on behalf of the Borrower or the Equity Sponsor herein or in any other Credit
Document or in any certificate  delivered pursuant hereto or thereto shall prove
to be  untrue in any  material  respect  on the date as of which  made or deemed
made; or

     9.3  Covenants.  The Borrower  shall (i) default in the due  performance or
observance  by it of any  term,  covenant  or  agreement  contained  in  Section
7.1(d)(i),  7.7 or 8 or (ii) default in the due  performance or observance by it
of any term, covenant or agreement (other than those referred to in Sections 9.1
and 9.2 and clause (i) of this Section 9.3) contained in this Agreement and such
default shall  continue  unremedied for a period of 15 days after written notice
to the Borrower by either the Agent or any Bank; or




                                       34

<PAGE>




     9.4 Default Under Other Agreements.

     (a) The Borrower shall (i) default in any payment of any Indebtedness under
the Working Capital  Facilities  beyond the period of grace, if any, provided in
the Working Capital  Facilities or (ii) default in the observance or performance
of any  agreement or condition  relating to any  Indebtedness  under the Working
Capital  Facilities  or contained  in any  instrument  or agreement  evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the  effect of which  default or other  event or  condition  is to cause,  or to
permit  the  holder  or  holders  of  Indebtedness  under  the  Working  Capital
Facilities  to cause  (determined  without  regard  to  whether  any  notice  is
required), any such Indebtedness to become due prior to its stated maturity;

     (b) the Equity Sponsor shall (i) default in any payment of any Indebtedness
(other than  non-recourse  Indebtedness)  in an  aggregate  principal  amount of
$25,000,000  or more  beyond  the  period  of  grace,  if any,  provided  in the
instrument  or  agreement  under  which such  Indebtedness  was  created or (ii)
default in the observance or performance of any agreement or condition  relating
to any  Indebtedness  (other than  non-recourse  Indebtedness)  in an  aggregate
principal  amount of  $25,000,000  or more or  contained  in any  instrument  or
agreement  evidencing,  securing or relating  thereto,  or any other event shall
occur or  condition  exist,  the  effect  of  which  default  or other  event or
condition is to cause, or to permit the holder or holders of Indebtedness  (or a
trustee  or agent on behalf  of such  holder or  holders)  to cause  (determined
without  regard to whether any notice is  required),  any such  Indebtedness  to
become due prior to its stated maturity;

     (c) the  Borrower  shall (i)  default in any  payment  of any  Indebtedness
(other  than the  Notes or  Indebtedness  incurred  under  the  Working  Capital
Facilities)  in an aggregate  principal  amount of $5,000,000 or more beyond the
period of grace,  if any,  provided in the  instrument or agreement  under which
such  Indebtedness  was created or (ii) default in the observance or performance
of any agreement or condition relating to any Indebtedness (other than the Notes
or Indebtedness  incurred under the Working Capital  Facilities) in an aggregate
principal  amount  of  $5,000,000  or more or  contained  in any  instrument  or
agreement  evidencing,  securing or relating  thereto,  or any other event shall
occur or  condition  exist,  the  effect  of  which  default  or other  event or
condition is to cause,  or to permit the holder or holders of such  Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause (determined
without  regard to whether any notice is  required),  any such  Indebtedness  to
become due prior to its stated maturity; or

     (d) any  Indebtedness  of the  Borrower  or the Equity  Sponsor of the type
described  in  paragraphs  (a), (b) or (c) above shall be declared to be due and
payable,  or required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or

     9.5  Bankruptcy,  etc. The Borrower or the Equity  Sponsor shall commence a
voluntary  case  concerning  itself  under  Title 11 of the United  States  Code
entitled  "Bankruptcy," as now or hereafter in effect,  or any successor thereto
(the  "Bankruptcy  Code");  or an  involuntary  case is  commenced  against  the
Borrower or the Equity  Sponsor and the petition is not  controverted  within 10
days, or is not dismissed within 90 days, after commencement of the case;   or a




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<PAGE>



custodian (as defined in the Bankruptcy  Code) is appointed for, or takes charge
of, all or  substantially  all of the  property  of the  Borrower  or the Equity
Sponsor,  or the Borrower or the Equity Sponsor  commences any other  proceeding
under any  reorganization,  arrangement,  adjustment of debt, relief of debtors,
dissolution,  insolvency  or  liquidation  or  similar  law of any  jurisdiction
whether  now or  hereafter  in effect  relating  to the  Borrower  or the Equity
Sponsor,  or there is commenced  against the Borrower or the Equity  Sponsor any
such  proceeding  which  remains  undismissed  for a period  of 90 days,  or the
Borrower or the Equity  Sponsor is  adjudicated  insolvent or  bankrupt;  or any
order of relief or other order approving any such case or proceeding is entered;
or the Borrower or the Equity Sponsor  suffers any  appointment of any custodian
or  the  like  for it or any  substantial  part  of  its  property  to  continue
undischarged  or unstayed for a period of 90 days; or the Borrower or the Equity
Sponsor  makes  a  general  assignment  for the  benefit  of  creditors;  or any
corporate  action is taken by the Borrower or the Equity Sponsor for the purpose
of effecting any of the foregoing; or

     9.6 ERISA.  (a) Any Plan shall fail to satisfy the minimum funding standard
required  for any plan year or part  thereof  under  Section  412 of the Code or
Section  302  of  ERISA  or a  waiver  of  such  standard  or  extension  of any
amortization  period is  sought  or  granted  under  Section  412 of the Code or
Section  303 or 304  of  ERISA,  a  Reportable  Event  shall  have  occurred,  a
contributing  sponsor  (as  defined in Section  4001(a)(13)  of ERISA) of a Plan
shall be  subject  to the  advance  reporting  requirements  of PBGC  Regulation
Section 4043.61  (without  regard to  subparagraph  (b)(1) thereof) and an event
described in subsection  .62, .63, .64, .65, .66, .67 or .68 of PBGC  Regulation
Section  4043 shall be  reasonably  expected to occur with  respect to such Plan
within the following 30 days, any Plan or  Multiemployer  Plan shall have had or
is likely to have a trustee appointed to administer such plan, or is, shall have
been  or  is  likely  to be  terminated  or to be  the  subject  of  termination
proceedings under Section 4042 of ERISA, any Plan shall have an Unfunded Current
Liability,  a  contribution  required  to be made  with  respect  to a Plan or a
Multiemployer  Plan has not been timely made,  the Borrower or any Subsidiary of
the  Borrower  or any ERISA  Affiliate  has  incurred  or is likely to incur any
liability to or on account of a Plan under Section 409,  502(i),  502(l),  4062,
4063, 4064 or 4069 of ERISA or Section  401(a)(29),  4971 or 4975 of the Code or
to or on account of a Multiemployer  Plan under Sections 515, 4201, 4204 or 4212
of ERISA or on account of a group  health plan (as defined in Section  607(1) of
ERISA or Section  4980B(g)(2)  of the Code) under  Section 4980B of the Code, or
the  Borrower or any  Subsidiary  of the  Borrower  has incurred or is likely to
incur  liabilities  pursuant to one or more employee  welfare  benefit plans (as
defined in Section 3(1) of ERISA) that provide benefits to retired  employees or
other former  employees  (other than as required by Section 601 of ERISA) or any
pension  plan other than a Plan;  (b) there shall  result from any such event or
events the  imposition  of a lien,  the  granting of a security  interest,  or a
liability  or a  material  risk of  incurring  a  liability;  and (c) such lien,
security interest or liability,  individually,  and/or in the aggregate,  in the
opinion of the Required Banks, has had, or could reasonably be expected to have,
a Material Adverse Effect; or

     9.7 Security  Agreement.  The Security  Agreement or any material provision
thereof  shall cease to be in full force and effect,  or shall cease to give the
Collateral  Agent the Liens,  rights,  powers  and  privileges  purported  to be
created  thereby,  or the  Borrower  shall  default  in the due  performance  or
observance  of any  material  term,  covenant  or  agreement  on its  part to be
performed or observed pursuant to the Security Agreement; or





                                       36

<PAGE>



     9.8  Subscription  Agreement.   The  Subscription  Agreement,   the  Equity
Sponsor's  Acknowledgment  and Estoppel or any material  provision thereof shall
cease to be in full  force or  effect  (whether  as a result  of a change in law
after the date of this  Agreement or  otherwise),  or the Equity  Sponsor or any
Person acting by or on behalf of the Equity  Sponsor shall deny or disaffirm the
Equity  Sponsor's  obligations  under the  Subscription  Agreement or the Equity
Sponsor's  Acknowledgment  and Estoppel,  or the Equity Sponsor shall default in
the due performance or observance of any material term, covenant or agreement on
its part to be performed or observed  pursuant to the Subscription  Agreement or
the Equity Sponsor's Acknowledgment and Estoppel; or

     9.9 Change of Control.  (a) The acquisition by any Person or group (as such
term is used in Section  13(d)(3) of the  Securities  Exchange  Act of 1934,  as
amended),  except for the Equity Sponsor or Affiliates  thereof,  of a direct or
indirect  majority  interest  (more than 50%) of the voting power of the capital
stock of the Borrower by way of purchase,  merger or consolidation or otherwise;
or (b)  during  any  period of two  consecutive  years,  individuals  who at the
beginning  of such period  constituted  the Board of  Directors  of the Borrower
(which  includes any new directors  whose election by such Board of Directors or
whose  nomination for election by the  stockholders of the Borrower was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
were either  directors  at the  beginning  of such  period or whose  election or
nomination  for election  was  previously  so approved)  cease for any reason to
constitute a majority of the Board of Directors of the Borrower; or

     9.10 Judgments.

     (a) One or more judgments or decrees shall be entered  against the Borrower
involving in the aggregate a liability  (not paid or fully covered by insurance)
of  $5,000,000  or more,  and all such  judgments or decrees shall not have been
vacated,  discharged or stayed or bonded pending appeal within 60 days after the
entry thereof; or

     (b) One or more  judgments or decrees  shall be entered  against the Equity
Sponsor  involving in the  aggregate a liability  (not paid or fully  covered by
insurance)  in an amount  equal to or greater  than 10% of the Equity  Sponsor's
Consolidated Net Worth (determined by reference to the most recent balance sheet
of the Equity Sponsor delivered to the Banks), and all such judgments or decrees
shall not have been vacated,  discharged or stayed or bonded  pending  appeal by
the tenth day preceding the date on which assets of the Equity Sponsor can first
be sold to satisfy such judgment or decree;

then, and in any such event, and at any time thereafter, if any Event of Default
shall then be  continuing,  the Agent may and,  upon the written  request of the
Required Banks, shall by written notice to the Borrower,  take any or all of the
following actions, without prejudice to the rights of the Agent, any Bank or the
holder of any Note to enforce its claims against the Borrower  (provided,  that,
if an Event of Default  specified in Section 9.5 shall occur with respect to the
Borrower,  the result which would occur upon the giving of written notice by the
Agent to the  Borrower  as  specified  in clauses (i) and (ii) below shall occur
automatically  without  the giving of any such  notice):  (i)  declare the Total
Commitment  terminated,  whereupon the  Commitment of each Bank shall  forthwith
terminate  immediately and any Commitment  Commission shall forthwith become due
and payable without any other notice of any kind; (ii) declare the principal




                                       37

<PAGE>



of and any  accrued  interest  in  respect  of all  Loans  and the Notes and all
obligations  owing  hereunder  and  thereunder  to be,  whereupon the same shall
become, forthwith due and payable without presentment,  demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; (iii) demand
payment  in full from the  Equity  Sponsor  under the terms of the  Subscription
Agreement or (iv) exercise all remedies  available to the Collateral Agent under
the Security Documents.

     SECTION 10. THE AGENT.

     The  provisions  of this Section 10 are solely for the benefit of the Agent
and the Banks,  and neither the Borrower nor the Equity  Sponsor  shall have any
rights as a third party  beneficiary  or otherwise  under the provisions of this
Section 10, except that the Borrower shall have the right to approve a successor
Agent as provided in Section 10.10.

     10.1 Appointment. Each Bank  hereby  irrevocably  designates  and  appoints
Commerzbank  AG as Agent of such Bank (such term to include for purposes of this
Section  10,  Commerzbank  AG acting as  Collateral  Agent) to act as  specified
herein and in the other Credit Documents,  and each such Bank hereby irrevocably
authorizes  Commerzbank  AG as the Agent to take such action on its behalf under
the provisions of this Agreement and the other Credit  Documents and to exercise
such powers and perform such duties as are  expressly  delegated to the Agent by
the terms of this Agreement and the other Credit  Documents,  together with such
other powers as are reasonably  incidental  thereto.  The Agent agrees to act as
such upon the express conditions  contained in this Section 10.  Notwithstanding
any provision to the contrary elsewhere in this Agreement or in any other Credit
Document, the Agent shall not have any duties or responsibilities,  except those
expressly  set forth herein or in the other Credit  Documents,  or any fiduciary
relationship with any Bank or the holder of any Note, and no implied  covenants,
functions,  responsibilities,  duties,  obligations or liabilities shall be read
into this  Agreement or otherwise  exist against the Agent.  In  performing  its
functions and duties under this  Agreement,  the Agent shall act solely as agent
of the  Banks  and the  Agent  does not  assume  and shall not be deemed to have
assumed  any  obligation  or  relationship  of agency  or trust  with or for the
Borrower, the Equity Sponsor or any of their Subsidiaries.

     10.2  Delegation  of Duties.  The Agent may execute any of its duties under
this   Agreement  or  any  other  Credit   Document  by  or  through  agents  or
attorneys-in-fact  and shall be  entitled  to advice of counsel  concerning  all
matters  pertaining to such duties.  The Agent shall not be responsible  for the
negligence or misconduct of any agents or attorneys-in-fact  selected by it with
reasonable care except to the extent otherwise required by Section 10.3.

     10.3  Exculpatory  Provisions.  Neither the Agent nor any of its  officers,
directors,  employees,  agents,  attorneys-in-fact  or  affiliates  shall be (a)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or the other Credit Documents (except
for its or such  Person's own gross  negligence  or willful  misconduct)  or (b)
responsible  in any  manner to any of the Banks  for any  recitals,  statements,
representations  or warranties made by the Borrower or the Equity Sponsor or any
of their  respective  officers  contained in this  Agreement or the other Credit
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection  with,  this
Agreement or any other Credit  Document or for any failure of the Borrower,  the
Equity Sponsor or any of their Subsidiaries or any of their respective  officers




                                       38

<PAGE>



to perform its obligations hereunder or thereunder. The Agent shall not be under
any  obligation  to any Bank to ascertain or to inquire as to the  observance or
performance  of any of the  agreements  contained  in, or  conditions  of,  this
Agreement or the other Credit Documents, or to inspect the properties,  books or
records of the Borrower,  the Equity Sponsor or any of their  Subsidiaries.  The
Agent shall not be responsible to any Bank for the  effectiveness,  genuineness,
validity, enforceability, collectability or sufficiency of this Agreement or any
other  Credit  Document  or for any  representations,  warranties,  recitals  or
statements made herein or therein or made in any written or oral statement or in
any financial or other  statements,  instruments,  reports,  certificates or any
other  documents in  connection  herewith or therewith  furnished or made by the
Agent to the Banks or by or on behalf of the  Borrower or the Equity  Sponsor or
any of their  Subsidiaries  to the Agent or any Bank or be required to ascertain
or inquire as to the performance or observance of any of the terms,  conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or of the  existence  or possible  existence of any
Default or Event of Default.

     10.4 Reliance by Agent.  The Agent shall be entitled to rely,  and shall be
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate,   affidavit,  letter,  cablegram,  telegram,  facsimile,  telex  or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and  statements of legal  counsel  (including,
without limitation,  counsel to the Borrower, the Equity Sponsor or any of their
Subsidiaries),  independent accountants and other experts selected by the Agent.
The Agent  shall be fully  justified  in failing or  refusing to take any action
under this Agreement or any other Credit  Document unless it shall first receive
such advice or concurrence  of the Required Banks as it deems  appropriate or it
shall first be indemnified to its  satisfaction by the Banks against any and all
liability  and  expense  which  may be  incurred  by it by  reason  of taking or
continuing  to take any  such  action.  The  Agent  shall in all  cases be fully
protected in acting, or in refraining from acting,  under this Agreement and the
other Credit  Documents in accordance with a request of the Required Banks,  and
such request and any action taken or failure to act  pursuant  thereto  shall be
binding upon all the Banks.

     10.5 Notice of Default.  The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the
Agent has  actually  received  notice  from a Bank,  the  Borrower or the Equity
Sponsor referring to this Agreement, describing such Default or Event of Default
and  stating  that such notice is a "notice of  default."  In the event that the
Agent receives such a notice,  the Agent shall give prompt notice thereof to the
Banks. The Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Banks;  provided,  that,
unless and until the Agent shall have  received such  directions,  the Agent may
(but shall not be obligated  to) take such  action,  or refrain from taking such
action,  with  respect  to such  Default  or Event of  Default  as it shall deem
advisable in the best interests of the Banks.

     10.6   Non-Reliance  on  Agent,  and  Other  Banks.   Each  Bank  expressly
acknowledges  that  neither  the  Agent  nor  any  of its  respective  officers,
directors,  employees,  agents,  attorneys-in-fact  or affiliates  have made any
representations  or  warranties  to it and that no act by the Agent  hereinafter
taken, including any review of the affairs of the Borrower, the Equity   Sponsor




                                       39

<PAGE>



or any of their  Subsidiaries,  shall be deemed to constitute any representation
or warranty by the Agent to any Bank.  Each Bank represents to the Agent that it
has,  independently  and without  reliance upon the Agent or any other Bank, and
based on such documents and information as it has deemed  appropriate,  made its
own  appraisal  of and  investigation  into the  business,  assets,  operations,
property,  financial and other condition,  prospects and creditworthiness of the
Borrower, the Equity Sponsor and their Subsidiaries and made its own decision to
make its  Loans  hereunder  and  enter  into  this  Agreement.  Each  Bank  also
represents that it will,  independently  and without  reliance upon the Agent or
any other Bank,  and based on such  documents and  information  as it shall deem
appropriate at the time,  continue to make its own credit  analysis,  appraisals
and decisions in taking or not taking action under this  Agreement,  and to make
such  investigation  as it deems  necessary to inform itself as to the business,
assets,  operations,  property,  financial  and other  condition,  prospects and
creditworthiness of the Borrower, the Equity Sponsor and their Subsidiaries. The
Agent  shall not have any duty or  responsibility  to provide  any Bank with any
credit  or  other  information  concerning  the  business,  operations,  assets,
property,  financial and other condition,  prospects or  creditworthiness of the
Borrower,  the Equity Sponsor or any of their  Subsidiaries  which may come into
the  possession  of the  Agent  or any of its  officers,  directors,  employees,
agents, attorneys-in-fact or affiliates.

     10.7  Indemnification.  The  Banks  agree  to  indemnify  the  Agent in its
capacity as such ratably according to their respective  "percentages" as used in
determining  the  Required  Banks at such  time,  from and  against  any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  reasonable expenses or disbursements of any kind whatsoever which may at
any time (including,  without  limitation,  at any time following the payment of
the Obligations) be imposed on, incurred by or asserted against the Agent in its
capacity as such in any way relating to or arising out of this  Agreement or any
other Credit Document, or any documents contemplated by or referred to herein or
the transactions  contemplated hereby or any action taken or omitted to be taken
by the Agent under or in connection  with any of the foregoing,  but only to the
extent  that any of the  foregoing  is not paid by the  Borrower  or the  Equity
Sponsor;  provided, that no Bank shall be liable to the Agent for the payment of
any  portion  of such  liabilities,  obligations,  losses,  damages,  penalties,
actions,  judgments, suits, costs, expenses or disbursements resulting primarily
from the gross  negligence or willful  misconduct of the Agent. If any indemnity
furnished  to the Agent for any  purpose  shall,  in the opinion of the Agent be
insufficient or become impaired, the Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against until such additional
indemnity is  furnished.  The  agreements in this Section 10.7 shall survive the
payment of all Obligations.

     10.8 Agent in its  Individual  Capacity.  The Agent and its  affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with the Borrower, the Equity Sponsor and their Subsidiaries as though the Agent
were not the Agent  hereunder.  With  respect  to the  Loans  made by it and all
Obligations  owing to it, the Agent shall have the same rights and powers  under
this  Agreement  as any Bank and may exercise the same as though it were not the
Agent and the terms "Bank" and "Banks" shall include the Agent in its individual
capacity.

     10.9  Holders.  The  Agent  may deem and treat the payee of any Note as the
owner thereof for all purposes  hereof unless and until a written  notice of the
assignment, transfer or endorsement thereof, as the case may be, shall have been
filed with the Agent. Any request, authority  or consent of any Person or entity




                                       40

<PAGE>



who, at the time of making such request or giving such authority or consent,  is
the holder of any Note shall be conclusive and binding on any subsequent holder,
transferee,  assignee  or  indorsee,  as the case may be, of such Note or of any
Note or Notes issued in exchange therefor.

     10.10  Resignation of the Agent;  Successor  Agent. The Agent may resign as
the Agent upon 20 days' notice to the Banks.  Upon the resignation of the Agent,
the Required Banks shall appoint from among the Banks a successor Agent which is
a bank or a trust company for the Banks  subject,  to the extent that no payment
Default  or Event of  Default  has  occurred  and is then  continuing,  to prior
approval by the  Borrower  (such  approval  not to be  unreasonably  withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers and
duties of the Agent,  and the term "Agent"  shall include such  successor  agent
effective upon its  appointment,  and the resigning  Agent's rights,  powers and
duties as the Agent  shall be  terminated,  without  any other or further act or
deed on the part of such former  Agent or any of the parties to this  Agreement.
If a successor Agent shall not have been so appointed  within such 20 day period
after the date such notice of  resignation  was given by the Agent,  the Agent's
resignation  shall become effective and the Banks shall  thereafter  perform all
duties of the Agent hereunder and/or under any other Credit Documents until such
time, if any, as the Required Banks appoint a successor Agent as provided above.
After the resignation of the Agent hereunder,  the provisions of this Section 10
shall inure to its benefit as to any actions  taken or omitted to be taken by it
while it was Agent under this Agreement.

     10.11  Arranger.  As Arranger,  Commerzbank AG shall have no right,  power,
obligation,  liability,  responsibility  or duty under this  Agreement.  Without
limiting the  foregoing,  the  Arranger  shall not have or be deemed to have any
fiduciary  relationship  with any Bank. Each Bank  acknowledges  that it has not
relied,  and will not rely,  on the  Arranger  in  deciding  to enter  into this
Agreement or in taking or not taking action hereunder.

     SECTION 11. MISCELLANEOUS.

     11.1 Payment of Expenses,  etc. The Borrower shall:  (a) whether or not the
transactions   herein   contemplated   are   consummated,   pay  all  reasonable
out-of-pocket   costs  and  expenses  (i)  of  the  Agent  (including,   without
limitation,  the  reasonable  fees and  disbursements  of  White & Case  LLP) in
connection  with the  preparation,  execution and delivery of this Agreement and
the other Credit Documents and the documents and instruments  referred to herein
and therein and any amendment,  waiver or consent relating hereto or thereto and
in  connection  with  the  Agent's  syndication  efforts  with  respect  to this
Agreement  and (ii) of the Agent and each of the  Banks in  connection  with the
enforcement of this  Agreement and the other Credit  Documents and the documents
and  instruments  referred to herein and therein and,  after an Event of Default
shall have occurred and be continuing, the protection of the rights of the Agent
and each of the Banks thereunder (including,  without limitation, the reasonable
fees and disburse- ments of counsel  (including  in-house counsel) for the Agent
and for each of the Banks); (b) pay and hold each of the Banks harmless from and
against  any and all  present  and  future  stamp and other  similar  taxes with
respect to the  foregoing  matters and save each of the Banks  harmless from and
against any and all  liabilities  with respect to or resulting from any delay or
omission (other than to the extent attributable to such Bank) to pay such taxes;
and (c) indemnify the Agent,  the Collateral  Agent and each Bank, its officers,
directors,  employees,  representatives  and  agents  from and hold each of them
harmless  against  any  and  all  liabilities,   obligations,  losses,  damages,
penalties,  claims, actions, judgments, suits, costs, expenses and disbursements





                                       41

<PAGE>



incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation,  litigation or other proceeding (whether
or not the Agent or any Bank is a party  thereto)  related to the entering  into
and/or  performance of this Agreement or any other Credit Document or the use of
the proceeds of any Loans  hereunder  or the  consummation  of any  transactions
contemplated  herein  or  in  any  other  Credit  Document,  including,  without
limitation,  the  reasonable  fees and  disbursements  of  counsel  incurred  in
connection  with any such  investigation,  litigation or other  proceeding  (but
excluding  any  such  liabilities,  obligations,  losses,  etc.,  to the  extent
incurred by reason of the gross  negligence or willful  misconduct of the Person
to be indemnified).

     11.2 Right of Setoff.  In addition to any rights now or  hereafter  granted
under  applicable  law or  otherwise,  and not by way of  limitation of any such
rights,  upon the  occurrence  of an  Event  of  Default,  each  Bank is  hereby
authorized  at any  time or from  time to  time,  without  presentment,  demand,
protest or other notice of any kind to the Borrower or to any other Person,  any
such notice being hereby  expressly  waived,  to set off and to appropriate  and
apply any and all deposits  (general or special) and any other  Indebtedness  at
any time held or owing by such Bank  (including  without  limitation by branches
and agencies of such Bank wherever  located) to or for the credit or the account
of the Borrower against and on account of the Obligations and liabilities of the
Borrower  to such Bank under  this  Agreement  or under any of the other  Credit
Documents, including, without limitation, all interests in Obligations purchased
by such Bank pursuant to Section 11.6(b),  and all other claims of any nature or
description  arising out of or connected with this Agreement or any other Credit
Document,  irrespective  of  whether or not such Bank shall have made any demand
hereunder and although said Obligations,  liabilities or claims, or any of them,
shall be contingent or unmatured.

     11.3 Notices.  Except as otherwise  expressly  provided herein, all notices
and other  communications  provided for hereunder shall be in writing (including
telegraphic,  telex, facsimile or cable communication) and mailed,  telegraphed,
telexed, telecopied, cabled or delivered: if to the Borrower, to:

               Homestead Village Incorporated
               2100 RiverEdge Parkway, 9th Floor
               Atlanta, Georgia 30328
               Attention:     Robert C. Aldworth
                              Senior Vice President and Chief Financial Officer
               Telephone:  (770) 303-2218
               Facsimile:  (770) 859-1674;

with a copy to:     
               Security Capital Group Incorporated
               125 Lincoln Avenue
               Santa Fe, New Mexico  87501
               Attention:  Jeffrey A. Klopf
               Telephone:  (505) 820-8223
               Facsimile:  (505) 988-8920





                                       42

<PAGE>



         and a copy to:             Security Capital Group Incorporated
                                    7777 Market Center Avenue
                                    El Paso, Texas  79910-8412
                                    Attention:  Paul Szurek
                                    Telephone:  (915) 877-6390
                                    Facsimile:  (915) 877-3301

if to any Bank, at its Base Rate Lending Office  specified  opposite its name on
Schedule I; and if to the Agent, at its Notice Office; or, as to the Borrower or
the Agent,  at such  other  address  as shall be  designated  by such party in a
written notice to the other parties hereto and, as to each other party,  at such
other address as shall be  designated  by such party in a written  notice to the
Borrower  and the Agent.  All such notices and  communications  shall be mailed,
telegraphed,  telexed,  telecopied,  or cabled or sent by overnight  courier and
shall be effective when received.

     11.4 Benefit of Agreement.

     (a) This Agreement shall be binding upon and inure to the benefit of and be
enforceable  by the  respective  successors  and assigns of the parties  hereto;
provided,  however,  the  Borrower may not assign or transfer any of its rights,
obligations or interest hereunder or under any other Credit Document without the
prior written consent of all of the Banks and, provided further,  that, although
any Bank may transfer,  assign or grant  participations in its rights hereunder,
such Bank shall remain a "Bank" for all purposes hereunder (and may not transfer
or assign all or any portion of its Commitments  hereunder except as provided in
Section  11.4(b)) and the transferee,  assignee or participant,  as the case may
be, shall not constitute a "Bank" hereunder and, provided further,  that no Bank
shall transfer or grant any participation under which the participant shall have
rights to approve  any  amendment  to or waiver of this  Agreement  or any other
Credit  Document  except to the extent such amendment or waiver would (i) extend
the final  scheduled  maturity of any Loan or Note in which such  participant is
participating,  or reduce the rate or extend the time of payment of  interest or
Fees  thereon  (except  in  connection  with a waiver  of  applicability  of any
post-default increase in interest rates) or reduce the principal amount thereof,
or  increase  the  amount of the  participant's  participation  over the  amount
thereof  then in effect  (it being  understood  that a waiver of any  Default or
Event of Default or of a mandatory  reduction in the Total  Commitment shall not
constitute a change in the terms of such participation,  and that an increase in
any Commitment or Loan shall be permitted without the consent of any participant
if the participant's  participation is not increased as a result thereof),  (ii)
consent to the  assignment  or transfer by the Borrower of any of its rights and
obligations  under this Agreement or (iii) release all or  substantially  all of
the Collateral under all of the Security Documents (except as expressly provided
in  the  Credit  Documents)   supporting  the  Loans  hereunder  in  which  such
participant  is  participating.  In the  case  of any  such  participation,  the
participant  shall not have any rights under this  Agreement or any of the other
Credit Documents (the participant's  rights against such Bank in respect of such
participation  to be those set forth in the  agreement  executed by such Bank in
favor of the  participant  relating  thereto)  and all  amounts  payable  by the
Borrower  hereunder  shall be  determined  as if such  Bank  had not  sold  such
participation,  except that the participant shall be entitled to the benefits of
Sections 2.10, 2.11 and 4.4 of this Agreement to the extent that such Bank would
be entitled  to such  benefits if the  participation  had not been  transferred,
granted or assigned.





                                       43

<PAGE>



     (b) Notwithstanding the foregoing,  any Bank (or any Bank together with one
or more other  Banks) may (i)  assign  all or a portion of its  Commitment  (and
related  outstanding  Obligations  hereunder) to its parent  company  and/or any
Affiliate  of such Bank  which is at least 50% owned by such Bank or its  parent
company  or to one or more  Banks or (ii)  assign  all,  or if less than all,  a
portion equal to at least $10,000,000 in the aggregate for the assigning Bank or
assigning Banks, of such Commitment to one or more commercial  banks,  financial
institutions or "accredited  investors" (as such term is defined in Regulation D
of the Securities Act of 1933, as amended), each of which assignees shall become
a party to this Agreement as a Bank by execution of an Assignment and Assumption
Agreement  in the  form of  Exhibit  I (with  blanks  appropriately  completed),
provided  that (A) at such time  Schedule I shall be deemed  modified to reflect
the Commitment of such new Bank and of the existing Banks, (B) upon surrender of
the old Notes, new Notes will be issued, at the Borrower's  expense, to such new
Bank and to the  assigning  Bank,  such new Notes to be in  conformity  with the
requirements  of  Section  2.5 (with  appropriate  modifications)  to the extent
needed to reflect the revised Commitments,  (C) the consent of the Agent and, so
long as no Event of Default has occurred and is  continuing,  the Borrower shall
be required in connection  with any such  assignment  pursuant to clause (ii) of
this  Section  11.4(b)  (which  consent  shall not be  unreasonably  withheld or
delayed)  and (D) the Agent shall  receive at the time of each such  assignment,
from the assigning or assignee Bank, the payment of a non-refundable  assignment
fee of $2,500 and, provided  further,  that such transfer or assignment will not
be effective  until  recorded by the Agent on the  Register  pursuant to Section
11.5 hereof.  To the extent of any assignment  pursuant to this Section 11.4(b),
the assigning Bank shall be relieved of its  obligations  hereunder with respect
to its assigned  Commitments.  At the time of each  assignment  pursuant to this
Section  11.4(b) to a Person which is not already a Bank  hereunder and which is
not a United  States person (as such term is defined in Section  7701(a)(30)  of
the Code) for Federal income tax purposes,  the  respective  assignee Bank shall
provide to the Borrower and the Agent the appropriate  Internal  Revenue Service
Forms (and, if applicable a Section 4.4(b)(ii) Certificate) described in Section
4.4(b).

     (c)  Nothing in this  Agreement  shall  prevent or  prohibit  any Bank from
pledging its Loans and Notes  hereunder to a Federal  Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.

     11.5  Register.  The Borrower  hereby  designates the Agent to serve as the
Borrower's  agent,  solely for  purposes  of this  Section  11.5,  to maintain a
register (the  "Register") on which it will record the  Commitment  from time to
time of each of the  Banks,  the  Loans  made  by  each of the  Banks  and  each
repayment in respect of the principal amount of the Loans of each Bank.  Failure
to make any such recordation,  or any error in such recordation shall not affect
the Borrower's  obligations in respect of such Loans.  With respect to any Bank,
the transfer of the  Commitment of such Bank and the rights to the principal of,
and  interest  on,  any Loan  made  pursuant  to such  Commitments  shall not be
effective  until such  transfer is recorded on the  Register  maintained  by the
Agent with respect to ownership of such  Commitment  and Loans and prior to such
recordation  all amounts owing to the transferor with respect to such Commitment
and Loans shall remain owing to the transferor.  The  registration of assignment
or transfer of all or part of any  Commitment and Loans shall be recorded by the
Agent on the  Register  only  upon the  acceptance  by the  Agent of a  properly
executed and delivered  Assignment and Assumption  Agreement pursuant to Section
11.4(b).  Coincident  with the  delivery of such an  Assignment  and  Assumption
Agreement to the Agent for acceptance and registration of assignment or transfer




                                       44

<PAGE>



of all or part of a Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Note evidencing such Loan, and thereupon one
or more new Notes in the same aggregate  principal amount shall be issued to the
assigning  or  transferor  Bank  and/or  the new Bank.  The  Borrower  agrees to
indemnify  the Agent from and against any and all  losses,  claims,  damages and
liabilities of whatsoever  nature which may be imposed on,  asserted  against or
incurred by the Agent in performing its duties under this Section 11.5.

     11.6 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Agent or any Bank or the holder of any Note in  exercising  any right,  power or
privilege  hereunder or under any other Credit Document and no course of dealing
between the  Borrower  and the Agent or any Bank or the holder of any Note shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right, power or privilege  hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right,  power
or privilege hereunder or thereunder.  The rights, powers and remedies herein or
in any other Credit Document expressly provided are cumulative and not exclusive
of any rights,  powers or remedies  which the Agent or any Bank or the holder of
any Note would  otherwise  have.  No notice to or demand on the  Borrower in any
case shall  entitle  the  Borrower  to any other or further  notice or demand in
similar or other circumstances or constitute a waiver of the rights of the Agent
or any Bank or the  holder  of any Note to any  other or  further  action in any
circumstances without notice or demand.

     11.7 Payments Pro Rata.

     (a) The Agent agrees that  promptly  after its receipt of each payment from
or on behalf of the  Borrower  in respect  of any  Obligations  of the  Borrower
hereunder,  it shall  distribute  such  payment to the Banks pro rata based upon
their respective  shares,  if any, of the Obligations with respect to which such
payment was received.

     (b)  Each of the  Banks  agrees  that,  if it  should  receive  any  amount
hereunder  (whether by voluntary payment,  by realization upon security,  by the
exercise  of the right of set-off or banker's  lien,  by  counterclaim  or cross
action,  by  the  enforcement  of any  right  under  the  Credit  Documents,  or
otherwise),  which is applicable to the payment of the principal of, or interest
on,  the Loans or  Commitment  Commission,  of a sum which  with  respect to the
related sum or sums received by other Banks is in a greater  proportion than the
total  amount of such  Obligation  then  owed and due to such Bank  bears to the
total amount of such Obligation  then owed and due to all the Banks  immediately
prior to such  receipt,  then such Bank  receiving  such  excess  payment  shall
purchase for cash without  recourse or warranty from the other Banks an interest
in the  Obligations of the Borrower to such Banks in such amount as shall result
in a  proportional  participation  by all the  Banks in such  amount;  provided,
however,  that  if all or any  portion  of  such  excess  amount  is  thereafter
recovered  from such Bank,  such  purchase  shall be rescinded  and the purchase
price restored to the extent of such recovery, but without interest.

     11.8 Computations. All computations of interest, Commitment Commissions and
Fees  hereunder  shall be made on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest, Commitment Commissions or Fees are payable.





                                       45

<PAGE>



     11.9 Governing Law; Submission to Jurisdiction; Venue.

     (a) THIS  AGREEMENT  AND THE OTHER  CREDIT  DOCUMENTS  AND THE  RIGHTS  AND
OBLIGATIONS  OF THE PARTIES  HEREUNDER  AND  THEREUNDER  SHALL BE  CONSTRUED  IN
ACCORDANCE  WITH  AND BE  GOVERNED  BY THE LAW  (WITHOUT  GIVING  EFFECT  TO THE
CONFLICT  OF LAWS  PRINCIPLES  THEREOF)  OF THE  STATE  OF NEW  YORK  EXCEPT  AS
OTHERWISE  SPECIFICALLY  PROVIDED IN THE CREDIT  DOCUMENTS  WITH  RESPECT TO THE
PERFECTION, PRIORITY AND ENFORCEMENT OF LIENS UPON COLLATERAL NOT LOCATED IN THE
STATE OF NEW YORK.

     (b) Any legal action or  proceeding  against the  Borrower  with respect to
this Agreement or any other Credit  Document may be brought in the courts of the
State of New York or of the United States for the Southern District of New York,
and,  by  execution  and  delivery  of  this  Agreement,   the  Borrower  hereby
irrevocably  accepts for itself and in respect of its  property,  generally  and
unconditionally, the jurisdiction of the aforesaid courts.

     (c) The Borrower hereby  irrevocably  waives any objection which it may now
or  hereafter  have to the  laying of venue of any of the  aforesaid  actions or
proceedings  arising out of or in  connection  with this  Agreement or any other
Credit Document brought in the courts referred to in clause (a) above and hereby
further  irrevocably  waives  and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.

     11.10 Waiver of Jury Trial.  TO THE EXTENT  PERMITTED  BY LAW,  EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY
IN ANY ACTION,  PROCEEDING  OR  COUNTERCLAIM  ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.

     11.11  Obligation  to Make  Payments  in  Dollars.  The  obligation  of the
Borrower  to make  payment in Dollars of the  principal  of and  interest on the
Notes and any other amounts due hereunder or under any other Credit  Document to
the  Payment  Office  of the  Agent as  provided  in  Section  4.3  shall not be
discharged or satisfied by any tender, or any recovery pursuant to any judgment,
which is expressed in or converted into any currency other than Dollars,  except
to the extent such tender or recovery  shall result in the actual receipt by the
Agent at its  Payment  Office on behalf of the Banks or  holders of the Notes of
the full amount of Dollars  expressed to be payable in respect of the  principal
of and  interest on the Notes and all other  amounts due  hereunder or under any
other  Credit  Document.  The  obligation  of the  Borrower to make  payments in
Dollars as aforesaid shall be enforceable as an alternative or additional  cause
of action for the purpose of recovery in Dollars of the amount, if any, by which
such actual receipt shall fall short of the full amount of Dollars  expressed to
be  payable in respect of the  principal  of and  interest  on the Notes and any
other amounts due under any other Credit Document,  and shall not be affected by
judgment being obtained for any other sums due under this Agreement or under any
other Credit Document.





                                       46

<PAGE>



     11.12  Counterparts.  This  Agreement  may be  executed  in any  number  of
counterparts and by the different parties hereto on separate counterparts,  each
of which when so executed and delivered  shall be an original,  but all of which
shall together  constitute one and the same  instrument.  A set of  counterparts
executed by all the parties  hereto  shall be lodged with the  Borrower  and the
Agent.

     11.13 Effectiveness. This Agreement shall become effective on the date (the
"Effective  Date") on which the Borrower and each of the Banks shall have signed
a copy hereof  (whether the same or different  copies) and shall have  delivered
the same to the Agent at its Notice  Office or, in the case of the Banks,  shall
have  given to the Agent  telephone  (confirmed  in  writing),  written or telex
notice  (actually  received)  at such  office  that the same has been signed and
mailed to it.  The Agent will give the  Borrower  and each Bank  prompt  written
notice of the occurrence of the Effective Date.

     11.14  Amendment  or Waiver.  Neither this  Agreement  nor any other Credit
Document nor any terms  hereof  (other than the  provisions  of Section 10 other
than the second  sentence of Section  10.10) or thereof may be changed,  waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrower,  the Required Banks and the Agent;  provided,
however,  that no such change,  waiver,  discharge or termination shall, without
the consent of each Bank,  (a) extend the final maturity of any Loan or Note, or
reduce the rate or extend the time of payment of  interest or Fees  thereon,  or
reduce the principal amount thereof, or increase the Commitment of any Bank over
the  amount  thereof  then in effect (it being  understood  that a waiver of any
Default or Event of Default or of a mandatory  reduction in the Total Commitment
shall not constitute a change in the terms of any  Commitment of any Bank),  (b)
release any Collateral under any Security  Document except as shall be otherwise
provided  in any  Credit  Document,  (c)  release  the Equity  Sponsor  from its
obligations under the Subscription Agreement or Equity Sponsor's  Acknowledgment
and Estoppel,  (d) amend, modify or waive any provision of this Section 11.14 or
Section  10.6,  11.1,  11.2,  11.4,  11.7 or 11.8,  (e)  reduce  the  percentage
specified in the  definition of Required  Banks or (e) consent to the assignment
or transfer  by the  Borrower  of any of its rights and  obligations  under this
Agreement. The terms of Section 10 hereof may be changed, waived,  discharged or
terminated  so long as such  change,  waiver,  discharge  or  termination  is in
writing signed by the Required Banks and the Agent.

     11.15 Confidentiality.

     (a) Each of the  Banks  agrees  that it will use its  best  efforts  not to
disclose without the prior consent of the Borrower (other than to its employees,
auditors,  counsel or other professional  advisors,  to Affiliates or to another
Bank if the Bank or such Bank's holding or parent company in its sole discretion
determines  that any such party  should  have  access to such  information)  any
information  with respect to the  Borrower,  the Equity  Sponsor or any of their
Subsidiaries which is furnished pursuant to this Agreement;  provided,  that any
Bank may disclose any such information (a) as has become generally  available to
the public or has become available to such Bank on a non-confidential basis, (b)
as may  be  required  or  appropriate  in any  report,  statement  or  testimony
submitted to any municipal,  state or Federal regulatory body having or claiming
to have  jurisdiction  over such  Bank or to the  Federal  Reserve  Board or the
Federal Deposit Insurance Corporation or similar  organizations  (whether in the
United  States or  elsewhere)  or their  successors,  (c) as may be  required or
appropriate  in response to any  summons or subpoena or in  connection  with any
litigation, (d) in order to comply  with any law, order, regulation  or   ruling




                                       47

<PAGE>



applicable  to such Bank,  and (e) to any  prospective  transferee in connection
with any  contemplated  transfer of any of the Notes or any interest  therein by
such Bank; provided, that such prospective transferee executes an agreement with
such Bank containing  provisions  substantially  identical to those contained in
this Section.

     (b) The Borrower  hereby  acknowledges  and agrees that each Bank may share
with any of its Affiliates any information  related to the Borrower,  the Equity
Sponsor  or  any of  their  Subsidiaries  (including,  without  limitation,  any
nonpublic customer  information  regarding the creditworthiness of the Borrower,
the Equity Sponsor and their  Subsidiaries,  provided that such Persons shall be
subject  to the  provisions  of this  Section  11.15 to the same  extent as such
Bank).

     11.16  Survival.  All  indemnities  set  forth  herein  including,  without
limitation,  in Sections 2.10,  2.11, 4.4, 10.6, 11.1 and 11.5 shall survive the
execution  and  delivery  of this  Agreement  and the Notes and the  making  and
repayment of the Loans.

     11.17 Domicile of Loans. Each Bank may transfer and carry its
Loans at, to or for the account of any office,  Subsidiary  or Affiliate of such
Bank.



                            [Signatures Pages Follow]




                                       48

<PAGE>



     IN WITNESS  WHEREOF,  the parties hereto have caused their duly  authorized
officers  to execute  and  deliver  this  Agreement  as of the date first  above
written.


                                           HOMESTEAD VILLAGE INCORPORATED



                                           By____________________________
                                             Title:


                                           COMMERZBANK AG, NEW YORK BRANCH,
                                             as Agent



                                           By____________________________
                                             Title:



                                           By____________________________
                                             Title:


                                           COMMERZBANK AG, LOS ANGELES BRANCH,
                                             as a Bank



                                           By____________________________
                                             Title:



                                           By____________________________
                                             Title:




                                       49