Document:

<PAGE>

                                                                   EXHIBIT 10.10

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                                CREDIT AGREEMENT

                                     among

                          EXTENDED STAY AMERICA, INC.,

                                 VARIOUS BANKS,

                      MORGAN STANLEY SENIOR FUNDING, INC.,
                   as SOLE BOOK RUNNER AND SOLE LEAD ARRANGER

                                      and

                     THE INDUSTRIAL BANK OF JAPAN, LIMITED
                            as ADMINISTRATIVE AGENT

                       __________________________________

                         Dated as of September 26, 1997
                                      and
                   Amended and Restated as of March 10, 1998
                                      and
                Further Amended and Restated as of June 7, 2000

                       __________________________________

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                               TABLE OF CONTENTS
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<TABLE>
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SECTION 1.  Amount and Terms of Credit........................................................       1

     1.01  The Commitments....................................................................       1
     1.02  Minimum Amount of Each Borrowing...................................................       4
     1.03  Notice of Borrowing................................................................       4
     1.04  Disbursement of Funds..............................................................       5
     1.05  Notes..............................................................................       6
     1.06  Conversions........................................................................       8
     1.07  Pro Rata Borrowings................................................................       8
     1.08  Interest...........................................................................       8
     1.09  Interest Periods...................................................................       9
     1.10  Increased Costs, Illegality, etc...................................................      10
     1.11  Compensation.......................................................................      13
     1.12  Change of Lending Office...........................................................      13
     1.13   Replacement of Banks..............................................................      13

SECTION 2.  Letters of Credit.................................................................      14

     2.01  Letters of Credit..................................................................      14
     2.02  Maximum Letter of Credit Outstandings; Final Maturities............................      15
     2.03  Letter of Credit Requests; Minimum Stated Amount...................................      15
     2.04  Letter of Credit Participation.....................................................      16
     2.05  Agreement to Repay Letter of Credit Drawings.......................................      18
     2.06  Increased Costs....................................................................      18

SECTION 3.  Fees; Reductions of Commitment....................................................      19

     3.01  Fees...............................................................................      19
     3.02  Voluntary Termination of Unutilized Commitments....................................      20
     3.03  Mandatory Reduction of Commitments.................................................      20

SECTION 4.  Prepayments; Payments; Taxes......................................................      21

     4.01  Voluntary Prepayments..............................................................      21
     4.02  Mandatory Repayments...............................................................      22
     4.03  Method and Place of Payment........................................................      26
     4.04  Net Payments; Taxes................................................................      26

SECTION 5.  Conditions Precedent to Restatement Effective Date................................      29

     5.01.  Execution of Agreement; Notes.....................................................      29
     5.02  Fees, etc..........................................................................      29
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     5.03  Opinion of Counsel.................................................................      29
     5.04  Corporate Documents; Proceedings; etc..............................................      29
     5.05  Employee Benefit Plans; Shareholders' Agreements; Management Agreements;
            Collective Bargaining Agreements; Existing Indebtedness Agreements; Tax Sharing
            Agreements; Material Leases.......................................................      30
     5.06  Pledge Agreement...................................................................      31
     5.07  Security Agreement.................................................................      32
     5.08  Subsidiary Credit Parties; etc.....................................................      32
     5.09  Adverse Change, etc................................................................      32
     5.10  Litigation.........................................................................      33
     5.11  Solvency Certificate; Environmental Assessments; Insurance Certificates............      33
     5.12  Projections........................................................................      33
     5.13  Subordinated Debt Compliance.......................................................      33

SECTION 6.  Conditions Precedent to All Credit Events.........................................      33

     6.01  No Default; Representations and Warranties.........................................      34
     6.02  Notice of Borrowing; Letter of Credit Request......................................      34

SECTION 7. Representations and Warranties.....................................................      34

     7.01  Corporate and Other Status.........................................................      35
     7.02  Corporate or Partnership Power and Authority.......................................      35
     7.03  No Violation.......................................................................      35
     7.04  Governmental Approvals.............................................................      35
     7.05  Financial Statements; Financial Condition; Undisclosed Liabilities; Projections;
            etc...............................................................................      35
     7.06  Litigation.........................................................................      37
     7.07  True and Complete Disclosure.......................................................      37
     7.08  Use of Proceeds; Margin Regulations................................................      37
     7.09  Tax Returns and Payments...........................................................      37
     7.10  Compliance with ERISA..............................................................      38
     7.11  The Security Documents.............................................................      39
     7.12  Manager Subordination Agreements...................................................      39
     7.13  Properties.........................................................................      40
     7.14  Capitalization.....................................................................      40
     7.15  Subsidiaries.......................................................................      40
     7.16  Compliance with Statutes, etc......................................................      40
     7.17  Investment Company Act.............................................................      40
     7.18  Public Utility Holding Company Act.................................................      40
     7.19  Environmental Matters..............................................................      40
     7.20  Labor Relations....................................................................      41
     7.21  Patents, Licenses, Franchises and Formulas.........................................      41
     7.22  Indebtedness.......................................................................      42
     7.23  Hotel Properties...................................................................      42
     7.24  Updated Security Agreement and Pledge Agreement Schedules..........................      42
</TABLE>

                                     (ii)
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SECTION 8.  Affirmative Covenants.............................................................      42

     8.01  Information Covenants..............................................................      42
     8.02  Books, Records and Inspections.....................................................      45
     8.03  Maintenance of Property; Insurance.................................................      45
     8.04  Corporate Franchises...............................................................      46
     8.05  Compliance with Statutes, etc......................................................      47
     8.06  Compliance with Environmental Laws.................................................      47
     8.07  ERISA..............................................................................      48
     8.08  End of Fiscal Years; Fiscal Quarters...............................................      49
     8.09  Performance of Obligations.........................................................      49
     8.10  Payment of Taxes...................................................................      49
     8.11  [INTENTIONALLY OMITTED]............................................................      49
     8.12  Additional Security; Further Assurances............................................      49
     8.13  Foreign Subsidiaries Security......................................................      50
     8.14  Hotel Property Management..........................................................      51
     8.15  Maintenance of Corporate Separateness..............................................      51

SECTION 9.  Negative Covenants................................................................      51

     9.01  Liens..............................................................................      52
     9.02  Consolidation, Merger, Purchase or Sale of Assets, etc.............................      54
     9.03  Dividends..........................................................................      56
     9.04  Indebtedness.......................................................................      56
     9.05  Advances, Investments and Loans....................................................      58
     9.06  Transactions with Affiliates.......................................................      59
     9.07  Capital Expenditures...............................................................      59
     9.08  Consolidated Interest Coverage Ratio...............................................      60
     9.09  Maximum Run Rate Leverage Ratio....................................................      60
     9.10  Maximum Senior Debt Leverage Ratio.................................................      60
     9.11  Maximum Debt to Capitalization Ratio...............................................      60
     9.12  Limitation on Payments of Certain Indebtedness; Modifications of Certain
             Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain
             Agreements; etc..................................................................      61
     9.13  Limitation on Certain Restrictions on Subsidiaries.................................      61
     9.14  Limitation on Issuance of Capital Stock............................................      61
     9.15  Business...........................................................................      62
     9.16  Limitation on Creation of Subsidiaries.............................................      62
     9.17  Representative.....................................................................      62

SECTION 10.  Events of Default................................................................      63

     10.01  Payments..........................................................................      63
     10.02  Representations, etc..............................................................      63
     10.03  Covenants.........................................................................      63
     10.04  Default Under Other Agreements....................................................      63
     10.05  Bankruptcy, etc...................................................................      63
</TABLE>

                                     (iii)
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<TABLE>
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     10.06  ERISA.............................................................................     64
     10.07  Security Documents................................................................     65
     10.08  Subsidiaries Guaranty.............................................................     65
     10.09  Judgments.........................................................................     65
     10.10  Manager Subordination Agreements ................................................      65
     10.11  Change of Control.................................................................     65

SECTION 11.  Definitions and Accounting Terms.................................................     66

     11.01  Defined Terms.....................................................................     66

SECTION 12.  The Agents.......................................................................     89

     12.01  Appointment.......................................................................     89
     12.02  Nature of Duties..................................................................     90
     12.03  Lack of Reliance on the Agents....................................................     90
     12.04  Certain Rights of the Agents......................................................     90
     12.05  Reliance..........................................................................     91
     12.06  Indemnification...................................................................     91
     12.07  Each Agent in Its Individual Capacity.............................................     91
     12.08  Holders...........................................................................     91
     12.09  Resignation by the Administrative Agent and the Sole Lead Arranger................     92

SECTION 13.  Miscellaneous....................................................................     92

     13.01  Payment of Expenses, etc..........................................................     92
     13.02  Right of Setoff...................................................................     93
     13.03  Notices...........................................................................     94
     13.04  Benefit of Agreement..............................................................     94
     13.05  No Waiver; Remedies Cumulative....................................................     96
     13.06  Payments Pro Rata.................................................................     96
     13.07  Calculations; Computations........................................................     96
     13.08  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL............     97
     13.09  Counterparts......................................................................     98
     13.10  Effectiveness.....................................................................     98
     13.11  Headings Descriptive..............................................................     99
     13.12  Amendment or Waiver; etc..........................................................     99
     13.13  Survival..........................................................................    100
     13.14  Domicile of Loans.................................................................    100
     13.15  Confidentiality...................................................................    100
     13.16  Register..........................................................................    101
     13.17  Limitation on Increased Costs.....................................................    101
     13.18  Acknowledgement and Agreement of Credit Parties...................................    102
</TABLE>

                                     (iv)
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                                                                            Page
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SCHEDULE I     Commitments
SCHEDULE II    Term Loans Outstanding on the Restatement Effective Date
SCHEDULE III   Bank Addresses
SCHEDULE IV    ERISA Matters
SCHEDULE V     Subsidiaries
SCHEDULE VI    Existing Indebtedness
SCHEDULE VII   Insurance
SCHEDULE VIII  Existing Liens

EXHIBIT A      Notice of Borrowing
EXHIBIT B-1    Tranche A Term Note
EXHIBIT B-2    Tranche B Term Note
EXHIBIT B-3    Tranche C Term Note
EXHIBIT B-4    Tranche D Term Note
EXHIBIT B-5    Revolving Note
EXHIBIT B-6    Swingline Note
EXHIBIT C      Letter of Credit Request
EXHIBIT D      Section 4.04(b)(ii) Certificate
EXHIBIT E      Opinion of Bell, Boyd & Lloyd
EXHIBIT F      Officers' Certificate
EXHIBIT G      Officer's Solvency Certificate
EXHIBIT H      Assignment and Assumption Agreement

                                      (v)
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          CREDIT AGREEMENT, dated as of September 26, 1997, and amended and
restated as of March 10, 1998, and further amended and restated as of June 7,
2000 among EXTENDED STAY AMERICA, INC., a Delaware corporation, (the
"Borrower"), the Banks party hereto from time to time, MORGAN STANLEY SENIOR
FUNDING, INC., as Sole Book Runner and Sole Lead Arranger, and THE INDUSTRIAL
BANK OF JAPAN, LIMITED, as Administrative Agent (all capitalized terms used
herein and defined in Section 11 are used herein as therein defined).

                                  WITNESSETH:
                                  ----------

          WHEREAS, the Borrower, the Original Banks, Morgan Stanley Senior
Funding, Inc., as Syndication Agent and Arranger, and The Industrial Bank of
Japan, Limited, as Administrative Agent, are parties to a Credit Agreement,
dated as of September 26, 1997 and amended and restated as of  March 10, 1998
(as the same has been amended, modified or supplemented to, but not including,
the Restatement Effective Date, the "Original Credit Agreement"); and

          WHEREAS, the parties hereto wish to amend and restate the Original
Credit Agreement in the form of this Agreement to make available to the Borrower
the respective facilities provided for herein;

          NOW, THEREFORE, the parties hereto agree that the Original Credit
Agreement shall be and is hereby amended and restated in its entirety as
follows:

          SECTION 1.  Amount and Terms of Credit.

          1.01  The Commitments.  (a)  Each Bank that holds a "Tranche A Term
                ---------------
Loan" under the Original Credit Agreement agrees that such Tranche A Term Loan
shall be continued as a Tranche A Term Loan under this Agreement (each a
"Tranche A Term Loan"), which Tranche A Term Loan, except as hereafter provided,
shall, at the option of the Borrower, be continued and maintained as, and/or
converted into, Base Rate Loans or Eurodollar Loans, provided that except as
otherwise specifically provided in Section 1.10(b), all Tranche A Term Loans
made as part of the same Borrowing shall at all times consist of Tranche A Term
Loans of the same Type.  Once repaid, Tranche A Term Loans may not be
reborrowed.  The aggregate principal amount of Tranche A Term Loans held by each
Bank on the Restatement Effective Date is set forth in Schedule II attached
hereto.

          (b)   Each Bank that holds a "Tranche B Term Loan" under the Original
Credit Agreement agrees that such Tranche B Term Loan shall be continued as a
Tranche B Term Loan under this Agreement (each a "Tranche B Term Loan"), which
Tranche B Term Loan, except as hereafter provided, shall, at the option of the
Borrower, be continued and maintained as, and/or converted into, Base Rate Loans
or Eurodollar Loans, provided that except as otherwise specifically provided in
Section 1.10(b), all Tranche B Term Loans made as part of the same Borrowing
shall at all times consist of Tranche B Term Loans of the same Type.  Once
repaid,
<PAGE>

Tranche B Term Loans may not be reborrowed. The aggregate principal amount of
Tranche B Term Loans held by each Bank on the Restatement Effective Date is set
forth in Schedule II attached hereto.

          (c)  Each Bank that holds a "Tranche C Term Loan" under the Original
Credit Agreement agrees that such Tranche C Term Loan shall be continued as a
Tranche C Term Loan under this Agreement (each a "Tranche C Term Loan"), which
Tranche C Term Loan, except as hereafter provided, shall, at the option of the
Borrower, be continued and maintained as, and/or converted into, Base Rate Loans
or Eurodollar Loans, provided that except as otherwise specifically provided in
Section 1.10(b), all Tranche C Term Loans made as part of the same Borrowing
shall at all times consist of Tranche C Term Loans of the same Type.  Once
repaid, Tranche C Term Loans may not be reborrowed.  The aggregate principal
amount of Tranche C Term Loans held by each Bank on the Restatement Effective
Date is set forth in Schedule II attached hereto.

          (d)  Subject to the terms and conditions set forth herein, each Bank
having a Tranche D Term Loan Commitment severally agrees to make on any Business
Day occurring on or after the Restatement Effective Date and prior to the fifth
Business Day following the Restatement Effective Date a term loan or term loans
(each, a "Tranche D Term Loan" and, collectively, the "Tranche D Terms Loans")
to the Borrower, which Tranche D Term Loans (i) shall be Base Rate Loans or
Eurodollar Loans, provided that, (A) except as otherwise specifically provided
                  --------
in Section 1.10(b), all Tranche D Term Loans comprising the same Borrowing shall
at all times be of the same Type and (ii) shall not exceed for any Bank that
amount which equals the Tranche D Term Loan Commitment of such Bank on the date
of borrowing.  Once repaid, Tranche D Term Loans incurred hereunder may not be
reborrowed.

          (e)  Subject to and upon the terms and conditions set forth herein,
each Bank with a Revolving Loan Commitment severally agrees, at any time and
from time to time on and after the Restatement Effective Date and prior to the
A/RF Maturity Date, to make a revolving loan or revolving loans (each, a
"Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower,
which Revolving Loans (i) shall, at the option of the Borrower, be Base Rate
Loans or Eurodollar Loans, provided that, except as otherwise specifically
                           --------
provided in Section 1.10(b), all Revolving Loans comprising the same Borrowing
shall at all times be of the same Type, (ii) may be repaid and reborrowed at any
time in accordance with the provisions hereof, (iii) shall not exceed for any
such Bank at any time outstanding that aggregate principal amount which, when
added to the product of (A) such Bank's Percentage and (B) the sum of (I) the
aggregate amount of all Letter of Credit Outstandings (exclusive of Unpaid
Drawings which are repaid with the proceeds of, and simultaneously with the
incurrence of, the respective incurrence of Revolving Loans) at such time and
(II) the aggregate principal amount of all Swingline Loans (exclusive of
Swingline Loans which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Revolving Loans) then
outstanding, equals the Revolving Loan Commitment of such Bank at such time and
(iv) shall not exceed for all Banks at any time outstanding that aggregate
principal amount which, when added to (I) the aggregate amount of all Letter of
Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the
proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving

                                      -2-
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Loans) at such time and (II) the aggregate principal amount of all Swingline
Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of Revolving
Loans) then outstanding, equals the Total Revolving Loan Commitment at such
time. On the Restatement Effective Date, all Original Revolving Loans shall for
all purposes constitute "Revolving Loans" hereunder.

          (f)  Subject to and upon the terms and conditions set forth herein,
the Swingline Bank agrees to make, at any time and from time to time on and
after the Restatement Effective Date and prior to the Swingline Expiry Date, a
revolving loan or revolving loans (each a "Swingline Loan" and, collectively,
the "Swingline Loans") to the Borrower, which Swingline Loans (i) shall be made
and maintained as Base Rate Loans, (ii) may be repaid and reborrowed in
accordance with the provisions hereof, (iii) shall not exceed in aggregate
principal amount at any time outstanding, when combined with the aggregate
principal amount of all Revolving Loans then outstanding and the Letter of
Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the
proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Swingline Loans) at such time, an amount equal to the Total
Revolving Loan Commitment at such time, and (iv) shall not exceed in aggregate
principal amount at any time outstanding the Maximum Swingline Amount.  The
Swingline Bank shall not be obligated to make any Swingline Loans at a time when
a Bank Default exists unless the Swingline Bank has entered into an arrangement
satisfactory to it and the Borrower, to eliminate the Swingline Bank's risk with
respect to the Bank which is the subject of such Bank Default, including by cash
collateralizing the Bank's Percentage of the outstanding Swingline Loans.
Notwithstanding anything to the contrary contained in this Section 1.01(f), the
Swingline Bank shall not make any Swingline Loan after it has received written
notice from the Borrower or the Required Banks stating that a Default or an
Event of Default exists and is continuing until such time as the Swingline Bank
shall have received written notice (i) of rescission of all such notices from
the party or parties originally delivering such notice, (ii) of the waiver of
such Default or Event of Default by the Required Banks or (iii) that the Agents
in good faith believe that such Default or Event of Default has ceased to exist.

          (g)  On any Business Day, the Swingline Bank may, in its sole
discretion, give notice to the Banks that its outstanding Swingline Loans shall
be funded with one or more Borrowings of Revolving Loans (provided that such
                                                          --------
notice shall be deemed to have been automatically given upon the occurrence of a
Default or an Event of Default under Section 10.05 or upon the exercise of any
of the remedies provided in the last paragraph of Section 10), in which case one
or more Borrowings of Revolving Loans constituting Base Rate Loans (each such
Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding
Business Day by all Banks pro rata based on each such Bank's Percentage
                          --- ----
(determined before giving effect to any termination of the Revolving Loan
Commitments pursuant to the last paragraph of Section 10) and the proceeds
thereof shall be applied directly by the Swingline Bank to repay the Swingline
Bank for such outstanding Swingline Loans.  Each such Bank hereby irrevocably
agrees to make Revolving Loans upon one Business Day's notice pursuant to each
Mandatory Borrowing in the amount and in the manner specified in the preceding
sentence and on the date specified in writing by the Swingline Bank
notwithstanding (i) the amount of the Mandatory Borrowing may not comply with
the Minimum Borrowing Amount otherwise

                                      -3-
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required hereunder, (ii) whether any conditions specified in Section 6 are then
satisfied, (iii) whether a Default or an Event of Default then exists, (iv) the
date of such Mandatory Borrowing and (v) the amount of the Total Revolving Loan
Commitment at such time. In the event that any Mandatory Borrowing cannot for
any reason be made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under the Bankruptcy
Code with respect to the Borrower), then each such Bank hereby agrees that it
shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise
have occurred, but adjusted for any payments received from the Borrower on or
after such date and prior to such purchase) from the Swingline Bank such
participations in the outstanding Swingline Loans as shall be necessary to cause
such Banks to share in such Swingline Loans ratably based upon their respective
Percentages (determined before giving effect to any termination of the Total
Revolving Loan Commitment pursuant to the last paragraph of Section 10),
provided that (x) all interest payable on the Swingline Loans shall be for the
--------
account of the Swingline Bank until the date as of which the respective
participation is required to be purchased and, to the extent attributable to the
purchased participation, shall be payable to the participant from and after such
date, (y) at the time any purchase of participations pursuant to this sentence
is actually made, the purchasing Bank shall be required to pay the Swingline
Bank interest on the principal amount of participation purchased for each day
from and including the day upon which the Mandatory Borrowing would otherwise
have occurred to but excluding the date of payment for such participation, at
the overnight Federal Funds Rate for the first three days and at the rate
otherwise applicable to Revolving Loans maintained as Base Rate Loans hereunder
for each day thereafter and (z) whenever the Swingline Bank receives a payment
in respect of a Swingline Loan in which such a participation has been purchased,
the Swingline Bank shall pay to the Banks which acquired such participation an
amount equal to such Banks' share in such Swingline Loan. On the Restatement
Effective Date, all Original Swingline Loans shall for all purposes constitute
"Swingline Loans" hereunder.

          1.02  Minimum Amount of Each Borrowing.  The aggregate principal
                --------------------------------
amount of each Borrowing of Loans shall not be less than the Minimum Borrowing
Amount applicable thereto.  More than one Borrowing may occur on the same date,
and at no time shall there be outstanding as Eurodollar Loans more than (a)
twenty Borrowings of Tranche A Term Loans and Revolving Loans, (b) four
Borrowings of Tranche B Term Loans, (c) four Borrowings of Tranche C Term Loans
and (d) four Borrowings of Tranche D Term Loans.

          1.03  Notice of Borrowing.  (a)  Whenever the Borrower desires to
                -------------------
incur a Borrowing of Loans (excluding Revolving Loans incurred pursuant to a
Mandatory Borrowing), the Borrower shall give the Administrative Agent at its
Notice Office at least one Business Day's prior written notice (or telephonic
notice promptly confirmed in writing) of each Base Rate Loan and at least three
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) of each Eurodollar 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
1:00 P.M. (New York time) on such day.  Each such written notice or written
confirmation of telephonic notice (each a "Notice of Borrowing"), except as
otherwise expressly provided in Section 1.10, shall be irrevocable and shall be
given by the Borrower in the form of Exhibit A, appropriately completed to
specify (i) the aggregate principal amount of the Loans to be incurred pursuant
to such Borrowing, (ii) the

                                      -4-
<PAGE>

date of such Borrowing (which shall be a Business Day) and (iii) whether the
Loans being made pursuant to such Borrowing shall constitute Tranche A Term
Loans, Tranche B Term Loans, Tranche C Term Loans, Tranche D Term Loans or
Revolving Loans and whether the Loans being incurred pursuant to such Borrowing
are to be initially maintained as Base Rate Loans or Eurodollar Loans and, if
Eurodollar Loans, the initial Interest Period to be applicable thereto. The
Administrative 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.

          (b)(i) Whenever the Borrower desires to incur Swingline Loans
hereunder, the Borrower shall give the Swingline Bank no later than 2:00 P.M.
(New York time) on the date that a Swingline Loan is to be incurred, written
notice or telephonic notice promptly confirmed in writing of each Swingline Loan
to be incurred hereunder.  Each such notice shall be irrevocable and specify in
each case (A) the date of Borrowing (which shall be a Business Day) and (B) the
aggregate principal amount of the Swingline Loans to be incurred pursuant to
such Borrowing.

          (ii)   Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(g), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of the Mandatory Borrowings as set forth in
Section 1.01(g).

          (c)    Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice of any Borrowing or prepayment of
Loans, the Administrative Agent or the Swingline Bank, as the case may be, may
act without liability upon the basis of telephonic notice of such Borrowing or
prepayment believed by the Administrative Agent or the Swingline Bank, as the
case may be, in good faith to be from an Authorized Officer of the Borrower
prior to receipt of written confirmation.  In each such case, the Borrower
hereby waives the right to dispute the Administrative Agent's or the Swingline
Bank's record of the terms of such telephonic notice of such Borrowing or
prepayment of Loans (absent manifest error).

          1.04   Disbursement of Funds.  No later than 1:00 P.M. (New York time)
                 ---------------------
on the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, no later than 3:00 P.M. (New York time) on the date specified
pursuant to Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, no
later than 12:00 Noon (New York time) on the date specified in Section 1.01(g)),
each Bank which has received the notice referred to in the last sentence of
Section 1.03(a) (or (x) in the case of Swingline Loans, Section 1.03(b)(i) or
(y) in the case of Mandatory Borrowings, Section 1.01(g)) will disburse its pro
                                                                            ---
rata portion of each Borrowing requested to be made on such date (or, in the
----
case of Swingline Loans, the Swingline Bank will make available the full amount
thereof).  All such amounts shall be disbursed in Dollars and in immediately
available funds at the Payment Office of the Administrative Agent, and the
Administrative Agent will promptly disburse to the Borrower at the Payment
Office, in Dollars and in immediately available funds, the aggregate of the
amounts so made available by the Banks (other than in respect of Mandatory
Borrowings).  Unless the Administrative Agent shall have been notified by any
Bank prior to the date of Borrowing that such Bank does not intend to

                                      -5-
<PAGE>

disburse to the Administrative Agent such Bank's portion of any Borrowing to be
made on such date, the Administrative Agent may assume that such Bank has
disbursed such amount to the Administrative Agent on such date of Borrowing and
the Administrative Agent may, in reliance upon such assumption, disburse to the
Borrower a corresponding amount. If such corresponding amount is not in fact
disbursed to the Administrative Agent by such Bank, the Administrative Agent
shall be entitled to recover such corresponding amount on demand from such Bank.
If such Bank does not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent shall promptly
notify the Borrower and the Borrower shall within three Business Days thereafter
pay such corresponding amount to the Administrative Agent. The Administrative
Agent shall also be entitled to recover (without duplication) 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
disbursed by the Administrative Agent to the Borrower until the date such
corresponding amount is recovered by the Administrative Agent, at a rate per
annum equal to (i) if recovered from such Bank, at the overnight Federal Funds
Rate and (ii) if recovered from the Borrower, the rate of interest applicable to
the respective Borrowing, as determined pursuant to Section 1.08. Nothing in
this Section 1.04 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.

          1.05  Notes.  (a)  The Borrower's obligation to pay the principal of,
                -----
and interest on, the Loans made by each Bank to the Borrower shall be evidenced
(i) if Tranche A Term Loans, by a promissory note duly executed and delivered by
the Borrower substantially in the form of Exhibit B-1 with blanks appropriately
completed in conformity herewith (each, a "Tranche A Term Note" and,
collectively, the "Tranche A Term Notes"), (ii) if Tranche B Term Loans, by a
promissory note duly executed and delivered by the Borrower substantially in the
form of Exhibit B-2 with blanks appropriately completed in conformity herewith
(each, a "Tranche B Term Note" and, collectively, the "Tranche B Term Notes"),
(iii) if Tranche C Term Loans, by a promissory note duly executed and delivered
by the Borrower substantially in the form of Exhibit B-3 with blanks
appropriately completed in conformity herewith (each, a "Tranche C Term Note"
and, collectively, the "Tranche C Term Notes"), (iv) if Tranche D Term Loans, by
a promissory note duly executed and delivered by the Borrower substantially in
the form of Exhibit B-4, with blanks appropriately completed in conformity
herewith (each, a "Tranche D Term Note", and collectively, the "Tranche D Term
Notes"), (v) if Revolving Loans, by a promissory note duly executed and
delivered by the Borrower substantially in the form of Exhibit B-5, with blanks
appropriately completed in conformity herewith (each, a "Revolving Note" and,
collectively, the "Revolving Notes") and (vi) if Swingline Loans, by a
promissory note duly executed and delivered by the Borrower substantially in the
form of Exhibit B-6, with blanks appropriately completed in conformity herewith
(the "Swingline Note").

          (b)   The Tranche A Term Note issued to each Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of such Bank or its
registered assigns and be dated the date of the issuance thereof, (iii) be in a
stated principal amount equal to the outstanding Tranche A Term Loans of such
Bank on such date of issuance and be payable in the principal amount of Tranche
A Term Loans evidenced thereby, (iv) mature on the A/RF Maturity Date, (v) bear

                                      -6-
<PAGE>

interest as provided in the appropriate clause of Section 1.08 in respect of the
Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby,
(vi) be subject to voluntary prepayment as provided in Section 4.01, and
mandatory repayment as provided in Section 4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.

          (c)  The Tranche B Term Note issued to each Bank shall (i) be executed
by the Borrower, (ii) be payable to the order of such Bank or its registered
assigns and be dated the date of the issuance thereof, (iii) be in a stated
principal amount equal to the outstanding Tranche B Term Loans of such Bank on
such date of issuance and be payable in the principal amount of Tranche B Term
Loans evidenced thereby, (iv) mature on the B Maturity Date, (v) bear interest
as provided in the appropriate clause of Section 1.08 in respect of the Base
Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be
subject to voluntary prepayment as provided in Section 4.01, and mandatory
repayment as provided in Section 4.02 and (vii) be entitled to the benefits of
this Agreement and the other Credit Documents.

          (d)  The Tranche C Term Note issued to each Bank shall (i) be executed
by the Borrower, (ii) be payable to the order of such Bank or its registered
assigns and be dated the date of the issuance thereof, (iii) be in a stated
principal amount equal to the outstanding Tranche C Term Loans of such Bank on
such date of issuance and be payable in the principal amount of Tranche C Term
Loans evidenced thereby, (iv) mature on the C Maturity Date, (v) bear interest
as provided in the appropriate clause of Section 1.08 in respect of the Base
Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be
subject to voluntary prepayment as provided in Section 4.01, and mandatory
repayment as provided in Section 4.02 and (vii) be entitled to the benefits of
this Agreement and the other Credit Documents.

          (e)  The Tranche D Term Note issued to each Bank shall (i) be executed
by the Borrower, (ii) be payable to the order of such Bank or its registered
assigns and be dated the Restatement Effective Date (or, if issued after the
Restatement Effective Date, be dated the date of the issuance thereof), (iii) be
in a stated principal amount equal to the Tranche D Term Loan Commitment of such
Bank on the Restatement Effective Date (or, if issued after the Restatement
Effective Date, equal to the outstanding Tranche D Term Loans of such Bank on
such date of issuance) and be payable in the principal amount of Tranche D Term
Loans evidenced thereby, (iv) mature on the D Maturity Date, (v) bear interest
as provided in the appropriate clause of Section 1.08 in respect of the Base
Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be
subject to voluntary prepayment as provided in Section 4.01, and mandatory
repayment as provided in Section 4.02 and (vii) be entitled to the benefits of
this Agreement and the other Credit Documents.

          (f)  The Revolving Note issued to each Bank shall (i) be executed by
the Borrower, (ii) be payable to such Bank or its registered assigns and be
dated the date of the issuance thereof, (iii) be in a stated principal amount
equal to the Revolving Loan Commitment of such Bank and be payable in the
outstanding principal amount of the Revolving Loans evidenced thereby, (iv)
mature on the A/RF Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment as provided in Section

                                      -7-
<PAGE>

4.01, and mandatory repayment as provided in Section 4.02 and (vii) be entitled
to the benefits of this Agreement and the other Credit Documents.

          (g)   The Swingline Note issued to the Swingline Bank shall (i) be
executed by the Borrower, (ii) be payable to the Swingline Bank or its
registered assigns and be dated the date of the issuance thereof, (iii) be in a
stated principal amount equal to the Maximum Swingline Amount and be payable in
the outstanding principal amount of the Swingline Loans evidenced thereby from
time to time, (iv) mature on the Swingline Expiry Date, (v) bear interest as
provided in the appropriate clause of Section 1.08 in respect of the Base Rate
Loans evidenced thereby, (vi) be subject to voluntary prepayment as provided in
Section 4.01, and mandatory repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.

          (h)   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
(or any error in such notation) shall not affect the Borrower's obligations in
respect of such Loans.

          1.06  Conversions.  The Borrower shall have the option to convert, on
                -----------
any Business Day occurring after the Restatement Effective Date, all or a
portion equal to at least the applicable Minimum Borrowing Amount of the
outstanding principal amount of Loans made to the Borrower into a Borrowing or
Borrowings (of the same Tranche) of another Type of Loan, provided that (i)
                                                          --------
except as otherwise provided in Section 1.10(b), Eurodollar Loans may be
converted into Base Rate Loans only on the last day of an Interest Period
applicable to the Loans being converted and no partial conversion of a Borrowing
of Eurodollar Loans shall reduce the outstanding principal amount of such
Eurodollar Loans made pursuant to a single Borrowing to less than the Minimum
Borrowing Amount applicable thereto, (ii) Base Rate Loans may only be converted
into Eurodollar Loans if no Default or Event of Default is in existence on the
date of the conversion, and (iii) no conversion pursuant to this Section 1.06
shall result in a greater number of Borrowings of Eurodollar Loans than is
permitted under Section 1.02.  Each such conversion shall be effected by the
Borrower by giving the Administrative Agent at its Notice Office prior to 1:00
P.M. (New York time) at least three Business Days' prior written notice (each a
"Notice of Conversion") specifying the Loans to be so converted, the
Borrowing(s) pursuant to which such Loans were made and, if to be converted into
Eurodollar Loans, the Interest Period to be initially applicable thereto.  The
Administrative 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 deemed to be applied directly on the day of such conversion to
prepay the outstanding principal amount of the Loans being converted.

          1.07  Pro Rata Borrowings.  All Borrowings of Term Loans under this
                -------------------
Agreement shall be incurred from the Banks pro rata on the basis of the
                                           --- ----
outstanding principal amount of outstanding Tranche A Term Loans, Tranche B Term
Loans, Tranche C Term Loans and Tranche D Term Loans (or, in the case of the
Tranche D Term Loans being incurred on the Restatement Effective Date, the
respective Tranche D Term Loan Commitments).  All

                                      -8-
<PAGE>

Borrowings of Revolving Loans under this Agreement shall be incurred from the
Banks pro rata on the basis of their respective Revolving Loan Commitments. It
      --------
is understood that no Bank shall be responsible for any default by any other
Bank of its obligation to make Tranche D Term Loans or Revolving Loans hereunder
and that each Bank shall be obligated to make the Tranche D Term Loans or the
Revolving Loans provided to be made by it hereunder, regardless of the failure
of any other Bank to make its Tranche D Term Loans or Revolving Loans hereunder.

          1.08  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 or from the date of any conversion to
a Base Rate Loan pursuant to Sections 1.06, 1.09 or 1.10, as applicable, until
the earlier of (i) the maturity (whether by acceleration or otherwise) of such
Base Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar
Loan pursuant to Section 1.06, at a rate per annum which shall be equal to the
sum of the Applicable Margin for the Tranche under which such Loans were
incurred, plus the Base Rate in effect from time to time.

          (b)   The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan from the date the proceeds thereof are
made available to the Borrower or from the date of any conversion to a
Eurodollar Loan pursuant to Section 1.06 until the earlier of (i) the maturity
(whether by acceleration or otherwise) of such Eurodollar Loan and (ii) the
conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06,
1.09 or 1.10, as applicable, at a rate per annum which shall, during each
Interest Period applicable thereto, be equal to the sum of the Applicable Margin
for the Tranche under which such Loans were incurred, plus the Eurodollar Rate
for such Interest Period.

          (c)   Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at a rate per annum equal to the greater of
(x) 2% per annum in excess of the rate otherwise applicable to Base Rate Loans
from time to time and (y) the rate which is 2% in excess of the rate otherwise
applicable to such Loans, in each case with such interest to be payable on
demand.

          (d)   Accrued (and theretofore unpaid) interest shall be payable (i)
in respect of each Base Rate Loan, quarterly in arrears on each Quarterly
Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iii) in respect of each Loan, on any
repayment or prepayment (on the amount repaid or prepaid), at maturity (whether
by acceleration or otherwise) and, after such maturity, on demand.

          (e)   Upon each Interest Determination Date, the Administrative Agent
shall determine the Eurodollar Rate for the Interest Period applicable to the
Eurodollar Loans related thereto 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.

                                      -9-
<PAGE>

          1.09  Interest Periods.  At the time the Borrower gives any Notice of
                ----------------
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, any Eurodollar Loan (in the case of the initial Interest Period applicable
thereto) or on the third Business Day prior to the expiration of an Interest
Period applicable to such Eurodollar Loan (in the case of any subsequent
Interest Period), the Borrower shall have the right to elect, by giving the
Administrative Agent notice thereof, the interest period (each an "Interest
Period") applicable to such Eurodollar Loan, which Interest Period shall, at the
option of the Borrower, be a one, two, three or six-month period, provided that:
                                                                  --------

          (i)   all Eurodollar Loans comprising a Borrowing shall at all times
     have the same Interest Period;

          (ii)  the initial Interest Period for any Eurodollar Loan shall
     commence on the date of Borrowing of such Eurodollar Loan (including the
     date of any conversion thereto from a Loan of a different Type) and each
     Interest Period occurring thereafter in respect of such Eurodollar Loan
     shall commence on the day on which the next preceding Interest Period
     applicable thereto expires;

          (iii) if any Interest Period relating to a Eurodollar 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;

          (iv)  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, however, that if any Interest Period for
                              --------  -------
     a Eurodollar 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;

          (v)   no Interest Period may be selected at any time when a Default or
     an Event of Default is then in existence;

          (vi)  no Interest Period in respect of any Borrowing of any Tranche of
     Loans shall be selected which extends beyond the respective Maturity Date
     for such Tranche of Loans; and

          (vii) no Interest Period in respect of any Borrowing of Tranche B
     Term Loans, Tranche C Term Loans or Tranche D Term Loans, as the case may
     be, shall be selected which extends beyond any date upon which a mandatory
     repayment of such Tranche of Term Loans will be required to be made under
     Section 4.02(b) if the aggregate principal amount of Tranche B Term Loans,
     Tranche C Term Loans or Tranche D Term Loans, as the case may be, which
     have Interest Periods which will expire after such date will be in excess
     of the aggregate principal amount of Tranche B Term Loans, Tranche C Term
     Loans or Tranche D Term Loans, as the case may be, then outstanding less
     the aggregate amount of such required prepayment.

                                      -10-
<PAGE>

          If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to such Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to convert
such Eurodollar Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.

          1.10  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 Administrative Agent):

          (i)   on any Interest Determination Date that, by reason of any
     changes arising after the Restatement Effective Date affecting the
     interbank Eurodollar market, adequate and fair means 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 Loan because of (x) any change since the Restatement
     Effective Date in any applicable law or governmental rule, regulation,
     order, guideline 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, guideline or
     request, such as, for example, but not limited to:  (A) a change in the
     basis of taxation of payment to any Bank of the principal of or interest on
     such Eurodollar Loan or any other amounts payable hereunder (except for
     changes in the rate of tax on, or determined by reference to, the net
     income or net profits of such Bank, or any franchise tax based on the net
     income or net profits of a Bank, in either case pursuant to the laws of the
     jurisdiction in which such Bank is organized or in which such Bank's
     principal office or applicable lending office is located or any subdivision
     thereof or therein), 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 since the Restatement Effective Date 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
     Loan has been made (x) unlawful by any law or governmental rule, regulation
     or order, (y) impossible by compliance by any Bank in good faith with any
     governmental request (whether or not having force of law) or (z)
     impracticable as a result of a contingency occurring after the Restatement
     Effective Date which materially and adversely affects the interbank
     Eurodollar market;

then, and in any such event, such Bank (or the Administrative 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
Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Banks).  Thereafter (x) in
the case of clause (i) above, Eurodollar Loans shall no longer be available
until such time as the Administrative Agent

                                      -11-
<PAGE>

notifies the Borrower and the Banks that the circumstances giving rise to such
notice by the Administrative Agent no longer exist, and any Notice of Borrowing
or Notice of Conversion given by the Borrower with respect to Eurodollar 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, subject to the provisions of Section 13.17 (to the extent
applicable), 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 in good faith shall,
absent manifest error, be final and conclusive and binding on all the parties
hereto) and (z) in the case of clause (iii) above, the Borrower shall take one
of the actions specified in Section 1.10(b) as promptly as possible and, in any
event, within the time period required by law. Each of the Administrative Agent
and each Bank agrees that if it gives notice to the Borrower of any of the
events described in clause (i) or (iii) above, it shall promptly notify the
Borrower and, in the case of any such Bank, the Administrative Agent, if such
event ceases to exist. If any such event described in clause (iii) above ceases
to exist as to a Bank, the obligations of such Bank to make Eurodollar Loans and
to convert Base Rate Loans into Eurodollar Loans on the terms and conditions
contained herein shall be reinstated. In addition, if the Administrative Agent
gives notice to the Borrower that the events described in clause (i) above cease
to exist, then the obligations of the Banks to make Eurodollar Loans and to
convert Base Rate Loans into Eurodollar Loans on the terms and conditions
contained herein (but subject to clause (iii) above) shall also be reinstated.

          (b)  At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected by the circumstances described in
Section 1.10(a)(iii) the Borrower shall) either (x) if the affected Eurodollar
Loan is then being made initially or pursuant to a conversion, cancel the
respective Borrowing by giving the Administrative Agent telephonic notice
(confirmed in writing) on the same date that the Borrower was notified by the
affected Bank or the Administrative Agent pursuant to Section 1.10(a)(ii) or
(iii) or (y) if the affected Eurodollar Loan is then outstanding, upon at least
three Business Days' written notice to the Administrative Agent, require the
affected Bank to convert such Eurodollar Loan into a Base Rate Loan, 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 1.10(b).

          (c)  If at any time any Bank determines that, after the Restatement
Effective Date, the introduction of or any change in any applicable law or
governmental rule, regulation, order, guideline, directive or request (whether
or not having the force of law and including, without limitation, those
announced or published prior to the Restatement Effective Date) concerning
capital adequacy, or any change in interpretation or administration thereof by
the NAIC or 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 or any corporation controlling such Bank based on the
existence of such Bank's Commitments hereunder or its obligations hereunder,
then the Borrower shall, subject to the provisions of Section 13.17 (to the
extent applicable), pay to such Bank, upon its written demand therefor, such
additional amounts as shall be required to compensate such Bank or such other
corporation

                                      -12-
<PAGE>

for the increased cost to such Bank or such other corporation or the reduction
in the rate of return to such Bank or such other corporation 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 reasonable good faith
                      --------
determination of compensation owing under this Section 1.10(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 1.10(c), will give prompt written notice thereof to the
Borrower, which notice shall show the basis for calculation of such additional
amounts. In addition, each such Bank, upon determining that the circumstances
giving rise to the payment of additional amounts pursuant to this Section
1.10(c) cease to exist, will give prompt written notice thereof to the Borrower.

          1.11  Compensation.  The Borrower shall compensate each Bank, upon its
                ------------
written request (which request shall set forth the basis for requesting such
compensation), 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 Loans but excluding any loss of anticipated profit) which
such Bank may sustain:  (i) if for any reason (other than a default by such Bank
or the Administrative Agent) a Borrowing of, or conversion from or into,
Eurodollar 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 withdrawn pursuant to Section 1.10(a)); (ii) if any repayment (including
any repayment made pursuant to Section 4.01 or 4.02 or as a result of an
acceleration of the Loans pursuant to Section 10) or conversion of any of the
Borrower's Eurodollar Loans occurs on a date which is not the last day of an
Interest Period with respect thereto; (iii) if any prepayment of any of the
Borrower's Eurodollar Loans is not made on any date specified in a notice of
prepayment given by the Borrower; or (iv) as a consequence of (x) any other
default by the Borrower to repay its Loans when required by the terms of this
Agreement or the Note held by such Bank or (y) any election made pursuant to
Section 1.10(b).

          1.12  Change of Lending Office.  Each Bank agrees that on the
                ------------------------
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 2.06 or Section 4.04 with respect to such Bank,
it will, if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Bank) to designate another lending office
for any Loans and/or Letters of Credit affected by such event, provided that
                                                               --------
such designation is made on such terms that such Bank and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequence of the event giving rise to the operation of such
Section.  Nothing in this Section 1.12 shall affect or postpone any of the
obligations of the Borrower or the right of any Bank provided in Sections 1.10,
2.06 and 4.04.

          1.13  Replacement of Banks.  (a) (x) If any Bank (i) becomes a
                --------------------
Defaulting Bank or otherwise defaults in its obligations to make Loans or fund
Unpaid Drawings or (ii) refuses to consent to certain proposed changes, waivers,
discharges or terminations with respect to this Agreement which have been
approved by the Required Banks as provided in Section 13.12(b) or (y) upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 2.06 or Section 4.04 with respect to any Bank
which results in such Bank

                                      -13-
<PAGE>

Bank charging to the Borrower increased costs in excess of those being generally
charged by the other Banks, the Borrower shall have the right, in accordance
with the requirements of Section 13.04(b), if no Default or Event of Default
will exist after giving effect to such replacement, to replace such Bank (the
"Replaced Bank") with one or more other Eligible Transferee or Transferees, none
of whom shall constitute a Defaulting Bank at the time of such replacement
(collectively, the "Replacement Bank"), reasonably acceptable to the
Administrative Agent, provided that (i) at the time of any replacement pursuant
                      --------
to this Section 1.13, the Replaced Bank and the Replacement Bank shall enter
into one or more Assignment and Assumption Agreements pursuant to Section
13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be paid
by the Replacement Bank) pursuant to which the Replacement Bank shall acquire
all of the Commitments and all of the outstanding Loans of the Replaced Bank
and, in connection therewith, shall pay to the Replaced Bank in respect thereof
an amount equal to the sum of (1) an amount equal to the principal of, and all
accrued interest on, all outstanding Loans of the Replaced Bank together with
all then unpaid interest with respect thereto at such time, (2) an amount equal
to all Unpaid Drawings that have been funded by (and not reimbursed to) such
Replaced Bank, together with all then unpaid interest with respect thereto at
such time and (3) an amount equal to all accrued, but theretofore unpaid, Fees
owing to the Replaced Bank pursuant to Section 3.01 and (ii) all obligations of
the Borrower owing to the Replaced Bank (other than those specifically described
in clause (i) above in respect of which the assignment purchase price has been,
or is concurrently being, paid) shall be paid in full to such Replaced Bank
concurrently with such replacement.

          (b)  Upon the execution of the respective Assignment and Assumption
Agreements, the payment of amounts referred to in clauses (i) and (ii) of
Section 1.13(a) and, if so requested by the Replacement Bank, delivery to the
Replacement Bank of the appropriate Note executed by the Borrower, the
Replacement Bank shall become a Bank hereunder and the Replaced Bank shall cease
to constitute a Bank hereunder, except with respect to indemnification
provisions under this Agreement (including, without limitation, Sections 1.10,
1.11, 2.06, 4.04, 13.01 and 13.06), which shall survive as to such Replaced
Bank.

          SECTION 2.  Letters of Credit.

          2.01 Letters of Credit.  (a) Subject to and upon the terms and
               -----------------
conditions set forth herein, the Borrower may request that any Issuing Bank
issue, at any time and from time to time on and after the Restatement Effective
Date and prior to the 30th day prior to the A/RF Maturity Date, (x) for the
account of the Borrower and for the benefit of any holder (or any trustee, agent
or other similar representative for any such holders) of L/C Supportable
Obligations of the Borrower or any of its Subsidiaries, an irrevocable standby
letter of credit, in a form customarily used by such Issuing Bank or in such
other form as has been approved by such Issuing Bank (each such standby letter
of credit, a "Standby Letter of Credit") in support of such L/C Supportable
Obligations and (y) for the account of the Borrower and for the benefit of
sellers of goods and materials used in the ordinary course of business of the
Borrower or any of its Subsidiaries an irrevocable sight commercial letter of
credit in a form customarily used by such Issuing Bank or in such other form as
has been approved by such Issuing Bank (each such commercial letter of credit, a
"Trade Letter of Credit", and each such Trade Letter of Credit and

                                      -14-
<PAGE>

each Standby Letter of Credit, a "Letter of Credit") in support of commercial
transactions of the Borrower and its Subsidiaries. All Letters of Credit shall
be denominated in Dollars. On the Restatement Effective Date, all Original
Letters of Credit shall be deemed to have been issued under this Agreement and
shall for all purposes constitute "Letters of Credit" hereunder.

          (b)  Subject to and upon the terms and conditions set forth herein,
each Issuing Bank hereby agrees that it will, at any time and from time to time
on and after the Restatement Effective Date and prior to the 30th day prior to
the A/RF Maturity Date, following its receipt of the respective Letter of Credit
Request, issue for the account of the Borrower, one or more Letters of Credit
(x) in the case of Standby Letters of Credit, in support of such L/C Supportable
Obligations of the Borrower or any of its Subsidiaries or as are permitted to
remain outstanding without giving rise to a Default or an Event of Default and
(y) in the case of Trade Letters of Credit, in support of sellers of goods or
materials used in the ordinary course of business of the Borrower or any of its
Subsidiaries as referenced in Section 2.01(a), provided that the respective
                                               --------
Issuing Bank shall be under no obligation to issue any Letter of Credit of the
types described above if at the time of such issuance:

          (i)  any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing Bank
from issuing such Letter of Credit or any requirement of law applicable to such
Issuing Bank or any request or directive (whether or not having the force of
law) from any governmental authority with jurisdiction over such Issuing Bank
shall prohibit, or request that such Issuing Bank refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon such Issuing Bank with respect to such Letter of Credit any
restriction or reserve or capital requirement (for which such Issuing Bank is
not otherwise compensated) not in effect on the date hereof, or any unreimbursed
loss, cost or expense which was not applicable, in effect or known to such
Issuing Bank as of the date hereof and which such Issuing Bank reasonably and in
good faith deems material to it; or

          (ii) such Issuing Bank shall have received notice from the Required
Banks prior to the issuance of such Letter of Credit of the type described in
the penultimate sentence of Section 2.03(b).

          2.02 Maximum Letter of Credit Outstandings; Final Maturities.
               -------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, (i) no
Letter of Credit shall be issued the initial Stated Amount of which, when added
to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are
repaid on the date of, and prior to the issuance of, the respective Letter of
Credit) at such time would exceed either (x) $25,000,000 or (y) when added to
the aggregate principal amount of all Revolving Loans then outstanding and the
aggregate principal amount of all Swingline Loans then outstanding, an amount
equal to the Total Revolving Loan Commitment at such time and (ii) each Letter
of Credit shall by its terms terminate on or before (A) in the case of Standby
Letters of Credit, the earlier of (x) the date which occurs 12 months after the
date of the issuance thereof (although any such Standby Letter of Credit may be
extendable for successive periods of up to 12 months, but not beyond the third
Business Day prior to the A/RF Maturity Date, on terms acceptable to the Issuing
Bank thereof) and (y) the

                                      -15-
<PAGE>

third Business Day prior to the A/RF Maturity Date and (B) in the case of Trade
Letters of Credit, the earlier of (x) the date which occurs 360 days after the
date of issuance thereof and (y) 30 days prior to the A/RF Maturity Date.

          2.03  Letter of Credit Requests; Minimum Stated Amount.  (a)  Whenever
                ------------------------------------------------
the Borrower desires that a Letter of Credit be issued for its account, the
Borrower shall give the Administrative Agent and the respective Issuing Bank at
least five Business Days' (or such shorter period as is acceptable to the
respective Issuing Bank) written notice thereof.  Each notice shall be in the
form of Exhibit C (each a "Letter of Credit Request").  The Administrative Agent
shall promptly transmit copies of each Letter of Credit Request to each Bank.

          (b)   The making of each Letter of Credit Request shall be deemed to
be a representation and warranty by the Borrower that such Letter of Credit may
be issued in accordance with, and will not violate the requirements of, Section
2.02. Unless the respective Issuing Bank has received notice from the Required
Banks before it issues a Letter of Credit that one or more of the conditions
specified in Section 5 are not satisfied on the Restatement Effective Date or
Section 6 are not then satisfied, or that the issuance of such Letter of Credit
would violate Section 2.02, then such Issuing Bank may issue the requested
Letter of Credit for the account of the Borrower in accordance with such Issuing
Bank's usual and customary practices. Upon the issuance of or amendment or
modification to a Letter of Credit, the respective Issuing Bank shall promptly
notify the Borrower and the Administrative Agent of such issuance, amendment or
modification and such notification shall be accompanied by a copy of the issued
Letter of Credit or amendment or modification.

          (c)   The initial Stated Amount of each Letter of Credit shall not be
less than $10,000 or such lesser amount as is acceptable to the respective
Issuing Bank.

          2.04  Letter of Credit Participation.  (a)  Immediately upon the
                ------------------------------
issuance by the respective Issuing Bank of any Letter of Credit, such Issuing
Bank shall be deemed to have sold and transferred to each Bank, other than such
Issuing Bank (each such Bank, in its capacity under this Section 2.04, a
"Participant"), and each such Participant shall be deemed irrevocably and
unconditionally to have purchased and received from such Issuing Bank, without
recourse or warranty, an undivided interest and participation, to the extent of
such Participant's Percentage in such Letter of Credit, each drawing or payment
made thereunder and the obligations of the Borrower under this Agreement with
respect thereto, and any security therefor or guaranty pertaining thereto.  Upon
any change in the Revolving Loan Commitments of the Banks pursuant to Section
1.13 or 13.04, it is hereby agreed that, with respect to all outstanding Letters
of Credit and Unpaid Drawings, there shall be an automatic adjustment to the
participations pursuant to this Section 2.04 to reflect the new Percentages of
the assignor and assignee Bank, as the case may be.

          (b)   In determining whether to pay under any Letter of Credit, the
respective Issuing Bank shall have no obligation relative to the other Banks
other than to confirm that any documents required to be delivered under such
Letter of Credit appear to have been delivered and that they appear to
substantially comply on their face with the requirements of such Letter of

                                      -16-
<PAGE>

Credit.  Any action taken or omitted to be taken by any Issuing Bank under or in
connection with any Letter of Credit if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for such Issuing Bank any
resulting liability to the Borrower, any other Credit Party, any Bank or any
other Person.

          (c)   In the event that any Issuing Bank makes any payment under any
Letter of Credit and the Borrower shall not have reimbursed such amount in full
to such Issuing Bank pursuant to Section 2.05(a), such Issuing Bank shall
promptly notify the Administrative Agent, which shall promptly notify each
Participant of such failure, and each Participant shall promptly and
unconditionally pay to such Issuing Bank the amount of such Participant's
Percentage of such unreimbursed payment in Dollars and in same day funds.  If
the Administrative Agent so notifies, prior to 11:00 A.M. (New York time) on any
Business Day, any Participant required to fund a payment under a Letter of
Credit, such Participant shall make available to such Issuing Bank in Dollars
such Participant's Percentage of the amount of such payment on such Business Day
in same day funds.  If and to the extent such Participant shall not have so made
its Percentage of the amount of such payment available to such Issuing Bank,
such Participant agrees to pay to such Issuing Bank, forthwith on demand such
amount, together with interest thereon, for each day from such date until the
date such amount is paid to such Issuing Bank at the overnight Federal Funds
Rate for the first three days and at the interest rate applicable to Revolving
Loans maintained as Base Rate Loans for each day thereafter.  The failure of any
Participant to make available to such Issuing Bank its Percentage of any payment
under any Letter of Credit shall not relieve any other Participant of its
obligation hereunder to make available to such Issuing Bank its Percentage of
any Letter of Credit on the date required, as specified above, but no
Participant shall be responsible for the failure of any other Participant to
make available to such Issuing Bank such other Participant's Percentage of any
such payment.

          (d)   Whenever any Issuing Bank receives a payment of a reimbursement
obligation as to which it has received any payments from the Participants
pursuant to clause (c) above, such Issuing Bank shall pay to each Participant
which has paid its Percentage thereof, in Dollars and in same day funds, an
amount equal to such Participant's share (based upon the proportionate aggregate
amount originally funded by such Participant to the aggregate amount funded by
all Participants) of the principal amount of such reimbursement obligation and
interest thereon accruing after the purchase of the respective participations.

          (e)   Upon the request of any Participant, each Issuing Bank shall
furnish to such Participant copies of any Letter of Credit issued by it and such
other documentation relating thereto as may reasonably be requested by such
Participant.

          (f)   The obligations of the Participants to make payments to each
Issuing Bank with respect to Letters of Credit issued by it shall be irrevocable
and not subject to any qualification or exception whatsoever and shall be made
in accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:

                                      -17-
<PAGE>

          (i)   any lack of validity or enforceability of this Agreement or any
     of the other Credit Documents;

          (ii)  the existence of any claim, setoff, defense or other right which
     the Borrower or any of its Subsidiaries may have at any time against a
     beneficiary named in a Letter of Credit, any transferee of any Letter of
     Credit (or any Person for whom any such transferee may be acting), the
     Administrative Agent, any Participant, or any other Person, whether in
     connection with this Agreement, any Letter of Credit, the transactions
     contemplated herein or any unrelated transactions (including any underlying
     transaction between the Borrower or any Subsidiary of the Borrower and the
     beneficiary named in any such Letter of Credit);

          (iii) any draft, certificate or any other document presented under
     any Letter of Credit proving to be forged, fraudulent, invalid or
     insufficient in any respect or any statement therein being untrue or
     inaccurate in any respect;

          (iv)  the surrender or impairment of any security for the performance
     or observance of any of the terms of any of the Credit Documents; or

          (v)   the occurrence of any Default or Event of Default.

          2.05  Agreement to Repay Letter of Credit Drawings.  (a)  The Borrower
                --------------------------------------------
hereby agrees to reimburse the respective Issuing Bank, by making payment to the
Administrative Agent in immediately available funds at the Payment Office, for
any payment or disbursement made by such Issuing Bank under any Letter of Credit
issued by it (each such amount, so paid until reimbursed, an "Unpaid Drawing"),
immediately after, and in any event on the date of, such payment or
disbursement, with interest on the amount so paid or disbursed by such Issuing
Bank, to the extent not reimbursed prior to 3:00 P.M. (New York time) on the
date of such payment or disbursement, from and including the date paid or
disbursed to but excluding the date such Issuing Bank was reimbursed by the
Borrower therefor at a rate per annum which shall be the Base Rate in effect
from time to time plus the Applicable Margin for Revolving Loans maintained as
Base Rate Loans; provided, however, to the extent such amounts are not
                 --------  -------
reimbursed prior to 3:00 P.M. (New York time) on the third Business Day
following the receipt by the Borrower of notice of such payment or disbursement
or following the occurrence of a Default or an Event of Default under Section
10.05, interest shall thereafter accrue on the amounts so paid or disbursed by
such Issuing Bank (and until reimbursed by the Borrower) at a rate per annum
which shall be the Base Rate in effect from time to time plus the Applicable
Margin for Revolving Loans maintained as Base Rate Loans plus 2%, in each such
case, with interest to be payable on demand.  The respective Issuing Bank shall
give the Borrower prompt written notice of each Drawing under any Letter of
Credit, provided that the failure to give any such notice shall in no way
        --------
affect, impair or diminish the Borrower's obligations hereunder.

          (b)   The obligations of the Borrower under this Section 2.05 to
reimburse the respective Issuing Bank with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had

                                      -18-
<PAGE>

against any Bank (including in its capacity as issuer of the Letter of Credit or
as Participant), including, without limitation, any defense based upon the
failure of any drawing under a Letter of Credit (each a "Drawing") to conform to
the terms of the Letter of Credit or any nonapplication or misapplication by the
beneficiary of the proceeds of such Drawing; provided, however, that the
                                             --------  -------
Borrower shall not be obligated to reimburse any Issuing Bank for any wrongful
payment made by such Issuing Bank under a Letter of Credit as a result of acts
or omissions constituting willful misconduct or gross negligence on the part of
such Issuing Bank.

          2.06  Increased Costs.  If at any time after the Restatement Effective
                ---------------
Date, the introduction of or any change in any applicable law, rule, regulation,
order, guideline or request or in the interpretation or administration thereof
by the NAIC or any governmental authority charged with the interpretation or
administration thereof, or compliance by any Issuing Bank or any Participant
with any request or directive by any such authority (whether or not having the
force of law), shall either (i) impose, modify or make applicable any reserve,
deposit, capital adequacy or similar requirement against letters of credit
issued by any Issuing Bank or participated in by any Participant, or (ii) impose
on any Issuing Bank or any Participant any other conditions relating, directly
or indirectly, to this Agreement; and the result of any of the foregoing is to
increase the cost to any Issuing Bank or any Participant of issuing, maintaining
or participating in any Letter of Credit, or reduce the amount of any sum
received or receivable by any Issuing Bank or any Participant hereunder or
reduce the rate of return on its capital with respect to Letters of Credit
(except for changes in the rate of tax on, or determined by reference to, the
net income or profits of such Issuing Bank or such Participant pursuant to the
laws of the jurisdiction in which it is organized or in which its principal
office or applicable lending office is located or any subdivision thereof or
therein), then, upon the delivery of the certificate referred to below to the
Borrower by such Issuing Bank or any Participant, the Borrower shall, subject to
the provisions of Section 13.17 (to the extent applicable), pay to such Issuing
Bank or such Participant such additional amount or amounts as will compensate
such Bank for such increased cost or reduction in the amount receivable or
reduction on the rate of return on its capital.  Any Issuing Bank or any
Participant, upon determining that any additional amounts will be payable
pursuant to this Section 2.06, will give prompt written notice thereof to the
Borrower, which notice shall include a certificate submitted to the Borrower by
such Issuing Bank or such Participant (a copy of which certificate shall be sent
by such Issuing Bank or such Participant to the Administrative Agent), setting
forth in reasonable detail the basis for the calculation of such additional
amount or amounts necessary to compensate such Issuing Bank or such Participant.
In determining such additional amounts, each Issuing Bank and each Participant
will act reasonably and in good faith, provided that the certificate required to
be delivered pursuant to this Section 2.06 shall, absent manifest error, be
final and conclusive and binding on the Borrower.

          SECTION 3.  Fees; Reductions of Commitment.

          3.01  Fees.  (a)  The Borrower agrees to pay to the Administrative
                ----
Agent for distribution to each Non-Defaulting Bank a commitment commission (the
"Revolving Loan Commitment Commission") for the period from the Restatement
Effective Date to but not including the A/RF Maturity Date (or to but not
including such earlier date as the Total Revolving Loan Commitment shall have
been terminated), computed at a rate per annum for

                                      -19-
<PAGE>

each day equal to the Applicable Commitment Commission Percentage on the
Unutilized Revolving Loan Commitment of such Non-Defaulting Bank on such day.
Accrued Revolving Loan Commitment Commission shall be due and payable quarterly
in arrears on each Quarterly Payment Date and on the A/RF Maturity Date or such
earlier date upon which the Total Revolving Loan Commitment is terminated.

          (b)   The Borrower agrees to pay to the Administrative Agent for
distribution to each Non-Defaulting Bank (based on each such Bank's respective
Percentage) a fee in respect of each Letter of Credit issued hereunder (the
"Letter of Credit Fee"), for the period from and including the date of issuance
of such Letter of Credit to and including the date of termination or expiration
of such Letter of Credit, computed at a rate per annum equal to the Applicable
Margin for Revolving Loans maintained as Eurodollar Loans on the daily Stated
Amount of such Letter of Credit.  Accrued Letter of Credit Fees payable with
respect to Standby Letters of Credit shall be due and payable quarterly in
arrears on each Quarterly Payment Date and on the first day after the
termination of the Total Revolving Loan Commitment upon which no Standby Letters
of Credit remain outstanding.

          (c)   The Borrower agrees to pay to each Issuing Bank, for its own
account, a facing fee in respect of each Letter of Credit issued by such Issuing
Bank (the "Facing Fee"), (x) in the case of each Standby Letter of Credit, for
the period from and including the date of issuance of such Standby Letter of
Credit to and including the date of the termination of such Standby Letter of
Credit, computed at a rate equal to 1/4 of 1% per annum (or such lesser rate as
is agreed on by the Borrower and the respective Issuing Bank) of the daily
Stated Amount of such Standby Letter of Credit and (y) in the case of each Trade
Letter of Credit, in an amount equal to 1/4 of 1% (or such lesser rate as is
agreed on by the Borrower and the respective Issuing Bank) of the Stated Amount
of such Trade Letter of Credit as of the date of issuance thereof.  Accrued
Facing Fees payable with respect to Standby Letters of Credit shall be due and
payable quarterly in arrears on each Quarterly Payment Date and upon the first
day after the termination of the Total Revolving Loan Commitment upon which no
Standby Letters of Credit remain outstanding and all Facing Fees payable with
respect to each Trade Letter of Credit shall be due and payable on the date of
issuance of such Trade Letter of Credit.

          (d)   The Borrower agrees to pay, upon each drawing under, issuance
of, or amendment to, any Letter of Credit, such amount as shall at the time of
such event be the administrative charge and the reasonable expenses which the
applicable Issuing Bank is generally imposing in connection with such occurrence
with respect to letters of credit.

          (e)   The Borrower agrees to pay to the Agents, for their own account,
such other fees as have been agreed to in writing by the Borrower with the
Agents.

          3.02  Voluntary Termination of Unutilized Commitments. (a)  Upon at
                -----------------------------------------------
least one Business Days' prior written notice to the Administrative Agent at its
Notice Office (which notice the Administrative Agent shall promptly transmit to
each of the Banks), the Borrower shall have the right, at any time or from time
to time, without premium or penalty, to terminate or partially reduce the Total
Unutilized Revolving Loan Commitment, in integral multiples of

                                      -20-
<PAGE>

$1,000,000; provided that each such reduction shall apply proportionately to
            --------
permanently reduce the Revolving Loan Commitment of each Bank.

          (b)   In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
13.12(b), the Borrower may, subject to the requirements of said Section 13.12(b)
and upon five Business Days' written notice to the Administrative Agent at its
Notice Office (which notice the Administrative Agent shall promptly transmit to
each of the Banks) terminate the entire Commitment of such Bank so long as all
Loans, together with accrued and unpaid interest, Fees and all other amounts
owing to such Bank are repaid concurrently with the effectiveness of such
termination pursuant to this Section 3.02(b) (at which time Schedule I shall be
deemed modified to reflect such changed amounts), and at such time, such Bank
shall no longer constitute a "Bank" for purposes of this Agreement, except with
respect to indemnifications under this Agreement (including, without limitation,
Sections 1.10, 1.11, 2.06, 4.04, 13.01 and 13.06), which shall survive as to
such repaid Bank.

          3.03  Mandatory Reduction of Commitments.  (a)  The Tranche D Term
                ----------------------------------
Loan Commitment of each Bank with such a Commitment shall terminate in their
entirety on June 30, 2000, and the Original Credit Agreement (including, without
limitation, the Revolving Loan Commitment of each Bank thereunder) shall
continue in effect unless the Restatement Effective Date shall have occurred on
or prior to such date.

          (b)   In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Tranche D Term Loan Commitment (and the
Tranche D Term Loan Commitment of each Bank with such a Commitment) shall
terminate in its entirety on the date the Tranche D Term Loans are incurred
(after giving effect to the making of Tranche D Term Loans on such date).

          (c)   In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment of each Bank with such a Commitment) shall terminate
in its entirety on the A/RF Maturity Date.

          (d)   In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date after the Restatement Effective Date
upon which the Total Revolving Loan Commitment is required to be reduced
pursuant to Section 4.02(h), the Total Revolving Loan Commitment shall be
permanently reduced by the amount required to be applied pursuant to said
Section.

          (e)   Each reduction to the Tranche D Term Loan Commitment or the
Total Revolving Loan Commitment pursuant to this Section 3.03 shall be applied
proportionately to reduce the Tranche D Term Loan Commitment or the Revolving
Loan Commitment, respectively, of each Bank with such a Commitment.

          SECTION 4.  Prepayments; Payments; Taxes.

                                      -21-
<PAGE>

          4.01  Voluntary Prepayments.  (a) The Borrower shall have the right to
                ---------------------
prepay the Loans, without premium or penalty, in whole or in part at any time
and from time to time on the following terms and conditions:  (i) the Borrower
shall give the Administrative Agent prior to 2:00 P.M. (New York time) at its
Notice Office (x) at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of the Borrower's intent to
prepay Base Rate Loans and (y) at least three Business Days' prior written
notice (or telephonic notice promptly confirmed in writing) of the Borrower's
intent to prepay Eurodollar Loans, whether Term Loans, Revolving Loans or
Swingline Loans shall be prepaid, the amount of such prepayment and the Types of
Loans to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing
or Borrowings pursuant to which made, which notice the Administrative Agent
shall promptly transmit to each of the Banks; (ii) each prepayment of Loans
shall be in an aggregate principal amount of at least $500,000 (or $100,000 in
the case of Swingline Loans), provided that if any partial prepayment of
                              --------
Eurodollar Loans made pursuant to any Borrowing shall reduce the outstanding
Eurodollar Loans made pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount applicable thereto, then such Borrowing may not be
continued as a Borrowing of Eurodollar Loans and any election of an Interest
Period with respect thereto given by the Borrower shall have no force or effect;
(iii) at the time of any prepayment of Eurodollar Loans pursuant to this Section
4.01 on any date other than the last day of the Interest Period applicable
thereto, the Borrower shall pay the amounts required pursuant to Section 1.11;
(vi) each voluntary prepayment of Term Loans pursuant to this Section 4.01
(except pursuant to clause (b) below) shall be applied to the Tranche A Term
Loans, the Tranche B Term Loans, the Tranche C Term Loans and the Tranche D Term
Loans on a pro rata basis (based upon the then outstanding principal amount of
           --- ----
Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans and Tranche D
Term Loans); and (v) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied pro rata among such Loans, provided that at the
                           --- ----                   --------
Borrower's election in connection with any prepayment of Revolving Loans, such
prepayment shall not be applied to the prepayment of Revolving Loans of a
Defaulting Bank.  Each prepayment of principal of any Tranche B Term Loans,
Tranche C Term Loans or Tranche D Term Loans pursuant to this Section 4.01 shall
be applied to reduce the then remaining Scheduled Repayments of such respective
Tranche of Term Loans pro rata based upon the then remaining principal amounts
                      --- ----
of the Scheduled Repayments of such Tranche after giving effect to all prior
reductions thereto.

          (b)   In the event of a refusal by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
13.12(b), the Borrower may, upon five Business Days' prior written notice to the
Administrative Agent at its Notice Office (which notice the Administrative Agent
shall promptly transmit to each of the Banks) repay all Loans, together with
accrued and unpaid interest, Fees, and all other amounts owing to such Bank in
accordance with said Section 13.12(b) so long as (A) in the case of the
repayment of any Loans of any Bank pursuant to this Section 4.01(b) the
Commitments of such Bank are terminated concurrently with such repayment
pursuant to Section 3.02(b) (at which time Schedule I shall be deemed modified
to reflect the changed Commitments) and (B) the consents required by Section
13.12(b) in connection with the repayment pursuant to this Section 4.01(b) have
been obtained.

                                      -22-
<PAGE>

          4.02  Mandatory Repayments.  (a)  On any day on which the aggregate
                --------------------
outstanding principal amount of Revolving Loans, Swingline Loans and the Letter
of Credit Outstandings exceeds the Total Revolving Loan Commitment as then in
effect, the Borrower shall prepay on such day principal of Swingline Loans and,
after all Swingline Loans have been repaid in full, Revolving Loans in an amount
equal to such excess.  If, after giving effect to the prepayment of all
outstanding Swingline Loans and Revolving Loans, the aggregate amount of the
Letter of Credit Outstandings exceeds the Total Revolving Loan Commitment as
then in effect, the Borrower shall pay to the Administrative Agent at the
Payment Office on such day an amount of cash or Cash Equivalents equal to the
amount of such excess (up to a maximum amount equal to the Letter of Credit
Outstandings at such time), such cash or Cash Equivalents to be held as security
for all obligations of the Borrower hereunder in a cash collateral account to be
established by the Administrative Agent.

          (b)   (i)  In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, the Borrower shall be required to
repay all then outstanding Tranche A Term Loans on the A/RF Maturity Date.

          (ii)  In addition to any mandatory repayments or commitment reductions
pursuant to this Section 4.02, the Borrower shall be required to repay on each
date set forth below the principal amount of Tranche B Term Loans, to the extent
outstanding, set forth opposite such date (each such repayment as the same may
be reduced as provided in Sections 4.01 and 4.02(h) and (i), a "Tranche B Term
Loan Scheduled Repayment"):

<TABLE>
<CAPTION>
     Tranche B Scheduled Repayment Date                              Amount
     ----------------------------------                              ------
     <S>                                                             <C>
     Each December 31 commencing December 31, 1999                   An amount equal to 1% of the
     through and including                                           aggregate principal amount of
     December 31, 2002                                               Tranche B Term Loans
                                                                     outstanding on September 1,
                                                                     1998

     Each of March 31, 2003,                                          An amount equal to 24% of
     June 30, 2003, September 30, 2003 and the B Maturity             the aggregate principal amount of
     Date                                                             Tranche B Term Loans outstanding on
                                                                      September 1, 1998
</TABLE>

          (iii)  In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, the Borrower shall be required to
repay on each date set forth below the principal amount of the Tranche C Term
Loans, to the extent outstanding, set forth opposite such date (each such
repayment as the same may be reduced as provided in Section 4.01 and 4.02(h) and
(i), a "Tranche C Term Loan Scheduled Repayment"):

<TABLE>
<CAPTION>
     Tranche C Scheduled Repayment Date                               Amount
     ----------------------------------                               ------
     <S>                                                              <C>
     Each December 31 commencing December 31,                         An amount equal to 1% of the
</TABLE>

                                      -23-
<PAGE>

<TABLE>
     <S>                                                              <C>
     2000  through and including December 31, 2003                    aggregate principal amount of
                                                                      Tranche C Term Loans outstanding
                                                                      on April 15, 1999

     Each March 31, 2004, June 30, 2004,                              An amount equal to 24% of the
     September 30, 2004 and the C Maturity Date                       aggregate principal amount of
                                                                      Tranche C Term Loans outstanding
                                                                      on April 15, 1999
 </TABLE>

         (iv)  In addition to any mandatory repayments or commitment reductions
pursuant to this Section 4.02, the Borrower shall be required to repay on each
date set forth below the principal amount of Tranche D Term Loans, to the extent
outstanding, set forth opposite such date (each such repayment as the same may
be reduced as provided in Sections 4.01 and 4.02(h) and (i), a "Tranche D Term
Loan Scheduled Repayment"):

<TABLE>
<CAPTION>
     Tranche D Scheduled Repayment Date                               Amount
     ----------------------------------                               ------
     <S>                                                              <C>
     Each December 31 commencing December 31, 2001                    An amount equal to 1% of the
     through and including                                            aggregate principal amount of
     December 31, 2005                                                Tranche D Term Loans
                                                                      outstanding on the Restatement
                                                                      Effective Date

     Each of September 30, 2006, December 31, 2006,                   An amount equal to 23.75% of
     March 31, 2007 and the D Maturity Date                           the aggregate principal amount
                                                                      of Tranche D Term Loans
                                                                      outstanding on the Restatement
                                                                      Effective Date
</TABLE>

          (c)  In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Original
Effective Date upon which the Borrower or any of its Subsidiaries receives any
cash proceeds from any sale or issuance of its equity (excluding (i) cash
proceeds received from capital contributions to, or equity investments in, any
Wholly-Owned Subsidiary of the Borrower or any Subsidiary Guarantor to the
extent made by the Borrower or any Subsidiary of the Borrower and (ii) cash
proceeds received from sales or issuances of equity to directors or employees of
the Borrower or any of its Subsidiaries pursuant to any stock option or other
similar incentive plan), an amount equal to 100% of the Net Equity Proceeds of
the respective sale or issuance shall be applied as a mandatory repayment of
Revolving Loans to the extent outstanding at such time in accordance with the
requirements of Section 4.02(i).

          (d)  In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Original
Effective Date upon which the Borrower or any of its Subsidiaries receives any
cash proceeds from any incurrence by the Borrower or any of its Subsidiaries of
Indebtedness for borrowed money (excluding Indebtedness for borrowed money
permitted to be incurred pursuant to Section 9.04), an amount equal to 100% of
the Net Debt Proceeds of the respective incurrence of Indebtedness shall be
applied as a

                                      -24-
<PAGE>

mandatory repayment (or commitment reduction, as the case may be) of outstanding
Loans (or Commitments) in accordance with the requirements of Section 4.02(h)
and (i).

          (e)  In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date after the Original
Effective Date upon which the Borrower or any of its Subsidiaries receives
proceeds from any sale or other disposition of assets (including capital stock
and securities held thereby, but excluding (i) sales or transfers of assets
permitted by Sections 9.02(ii), (v), (ix) and (x), (ii) sales or transfers of
assets with a fair market value less than (A) $10,000,000 per such sale or
disposition (or in a series of related sales or dispositions) and (B)
$25,000,000 in the aggregate for all such transfers in any fiscal year and (iii)
so long as no Default or Event of Default then exists, sales or transfers of
assets the Net Sale Proceeds of which do not exceed $35,000,000 in any fiscal
year of the Borrower provided that such Net Sale Proceeds are used to purchase
similar assets within two years following the receipt of such Net Sale Proceeds
and (x) the Borrower delivers a certificate to the Agents on or prior to such
date of receipt stating that such Net Sale Proceeds shall be used to purchase
similar assets within two years following the date of the receipt of such Net
Sale Proceeds (which certificate shall set forth the estimates of the proceeds
to be so expended) and (y) within 360 days following the date of such receipt of
Net Sale Proceeds, the Borrower or the applicable Subsidiary has purchased such
similar assets or entered into a binding commitment to purchase such similar
assets), an amount equal to 100% of the Net Sale Proceeds therefrom shall be
applied as a mandatory repayment (or commitment reduction, as the case may be)
of outstanding Loans (or Commitments) in accordance with the requirements of
Section 4.02(h) and (i).  To the extent Net Sale Proceeds are not required to be
applied pursuant to this Section 4.02(e) as a result of clause (iii) contained
in the parenthetical appearing in the first sentence of this Section 4.02(e) and
all or any portion of such Net Sale Proceeds are not so reinvested in like
assets within such two-year period (or committed to be so reinvested within such
360-day period), then the remaining portion of such Net Sale Proceeds shall be
applied on the last day of such applicable period as otherwise required by this
Section 4.02(e) (determined without regard to clause (iii) contained in the
parenthetical appearing in the first sentence of this Section 4.02(e)).

          (f)  In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each Excess Cash Payment Date, so
long as Excess Cash Flow for the relevant Excess Cash Payment Period exceeds
$1,000,000, an amount equal to 50% of the Excess Cash Flow for such relevant
Excess Cash Payment Period shall be applied as a mandatory repayment (or
commitment reduction, as the case may be) of outstanding Loans (or Commitments)
in accordance with the requirements of Section 4.02(h) and (i).

          (g)  In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within 10 days following each date
after the Original Effective Date on which the Borrower or any of its
Subsidiaries receives any proceeds in excess of $500,000 from any Recovery
Event, an amount equal to 100% of the Net Insurance Proceeds (and not just the
portion in excess of $500,000) shall be applied as a mandatory repayment (or
commitment reduction, as the case may be) of outstanding Loans (or Commitments)
in accordance with Section 4.02(h) and (i), provided that so long as no Default
                                            --------
or Event of Default then exists, such Net Insurance Proceeds shall not be
required to be so applied on such date of

                                      -25-
<PAGE>

receipt to the extent that the Borrower has delivered a certificate to the
Agents on or prior to such date stating that such proceeds shall be used or
shall be committed to be used to replace or restore any properties or assets in
respect of which such proceeds were paid within one year following the date of
receipt of such proceeds (which certificate shall set forth the estimates of the
proceeds to be so expended) and provided further, that if all or any portion of
                                ----------------
such Net Insurance Proceeds not required to be applied to the repayment of Loans
pursuant to the preceding proviso are either (A) not so used or committed to be
so used within one year after the date of receipt of such proceeds or (B) if
committed to be used within one year after the date of receipt of such Net
Insurance Proceeds and not so used within two years after the date of receipt of
such proceeds then, in either such case, such remaining portion not used or
committed to be used in the case of preceding clause (A) and not used in the
case of preceding clause (B) shall be applied on the date which is the first
anniversary of the date of receipt of such proceeds in the case of clause (A)
above or the date occurring two years after the date of receipt of such proceeds
in the case of clause (B) above as a mandatory repayment (or commitment
reduction, as the case may be,) of outstanding Term Loans (or Term Loan
Commitments) in accordance with Section 4.02(h) and (i).

          (h)  Each amount required to be applied to repay Loans (or to reduce
Commitments) pursuant to Sections 4.02(d), (e), (f) and (g) shall be applied
first, pro rata, to the reduction of the Term Loan Facilities as set forth below
-----  --- ----
and second after all Term Loan Commitments have been reduced to zero and all
Term Loans shall have been repaid, to the reduction of the Total Revolving Loan
Commitment.  Each required reduction of Term Loan Facilities shall be applied

pro rata to each Tranche of Term Loans based upon the then remaining Commitments
--- ----
and principal amounts outstanding under the respective Tranche (with each
Tranche to be allocated that percentage of the amount to be applied as is equal
to a fraction (expressed as a percentage) the numerator of which is the sum of
the then outstanding principal amount of the remaining Term Loan Commitments and
Term Loans outstanding under such Tranche, and the denominator of which is equal
to the then remaining Term Loan Commitments and outstanding principal amount of
all Term Loans under all Tranches of Term Loan Facilities.  Each amount required
to be applied to a respective Term Loan Facility shall be applied first to
                                                                  -----
reduce the Commitment under such Term Loan Facility and second to repay the
                                                        ------
outstanding principal amount of Term Loans under such Term Loan Facility.  The
amount of each principal repayment of Term Loans made as required by Sections
4.02(d), (e), (f), and (g) shall be applied to reduce the then remaining
Scheduled Repayments of the respective Tranche pro rata based upon the then
                                               --- ----
remaining principal amounts of the Scheduled Repayments of the respective
Tranche after giving effect to all prior reductions thereto.

          (i)  With respect to each repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans of the respective Tranche
which are to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings pursuant to which made, provided that:  (i) repayments
                                                --------
of Eurodollar Loans pursuant to this Section 4.02 shall be made on the last day
of an Interest Period applicable thereto unless all Eurodollar Loans with
Interest Periods ending on such date of required repayment and all Base Rate
Loans have been paid in full; (ii) if any repayment of Eurodollar Loans made
pursuant to a single Borrowing shall reduce the outstanding Eurodollar Loans
made pursuant to such Borrowing to an amount less

                                      -26-
<PAGE>

than the Minimum Borrowing Amount applicable thereto, such Borrowing shall be
converted at the end of the then current Interest Period into a Borrowing of
Base Rate Loans; and (iii) each repayment of Loans made pursuant to a Borrowing
shall be applied pro rata among such Loans of all Banks. In the absence of a
                 --- ----
designation by the Borrower as described in the preceding sentence, the
Administrative Agent shall, subject to the above, make such designation in its
sole discretion.

          (j)  Notwithstanding anything to the contrary contained elsewhere in
the Agreement, (i) all then outstanding Tranche A Term Loans and Revolving Loans
shall be repaid in full on the A/RF Maturity Date, (ii) all then outstanding
Tranche B Term Loans shall be repaid in full on the B Maturity Date, (iii) all
then outstanding Tranche C Term Loans shall be repaid in full on the C Maturity
Date, (iv) all then outstanding Tranche D Term Loans shall be repaid in full on
the D Maturity Date and (v) all then outstanding Swingline Loans shall be repaid
in full on the Swingline Expiry Date.

          4.03 Method and Place of Payment.  Except as otherwise specifically
               ---------------------------
provided herein, all payments under this Agreement or any Note shall be made to
the Administrative Agent for the account of the Bank or Banks entitled thereto
not later than 2:00 P.M. (New York time) on the date when due and shall be made
in Dollars in immediately available funds at the Payment Office of the
Administrative 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.

          4.04 Net Payments; Taxes.  (a)  All payments made by any Credit Party
               -------------------
hereunder or under any Note will be made without setoff, counterclaim or other
defense.  Except as provided in Section 4.04(b), 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 with respect to such payments
(but excluding, except as provided in the second succeeding sentence, any tax
imposed on or measured by the net income or net profits of a Bank, or any
franchise tax based on the net income or net profits of a Bank, in either case
pursuant to the laws of the jurisdiction in which it is organized or the
jurisdiction in which the principal office or applicable lending office of such
Bank is located or any subdivision thereof or therein) and all interest,
penalties or similar liabilities with respect to such non-excluded taxes,
levies, imposts, duties, fees or other charges (all such non-excluded taxes,
levies, imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes").  Subject to Section 4.04(b), 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 under this Agreement 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.  If any amounts are payable in respect of Taxes pursuant to the
preceding sentence, the Borrower agrees to reimburse each Bank, promptly after
the written request of such Bank, for taxes imposed on or measured by the net
income or net profits of such Bank, or any franchise tax based on the net income
or net profits of a Bank, in

                                      -27-
<PAGE>

either case pursuant to the laws of the jurisdiction in which such Bank is
organized or in which the principal office or applicable lending office of such
Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which such Bank is organized or in which
the principal office or applicable lending office of such Bank is located and
for any withholding of income or similar taxes imposed by the United States of
America as such Bank shall determine are payable by, or withheld from, such Bank
in respect of such amounts so paid to or on behalf of such Bank pursuant to the
preceding sentence and in respect of any amounts paid to or on behalf of such
Bank pursuant to this sentence. The Borrower will furnish to the Administrative
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 agrees to 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. All amounts payable pursuant to this
Section 4.04(a) shall be subject to the provisions of Section 13.17 (to the
extent applicable).

          (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 Administrative Agent on or prior to the Original Effective Date (or the
Restatement Effective Date in the case of such Banks that first become party
hereto on the Restatement Effective Date), or in the case of a Bank that is an
assignee or transferee of an interest under this Agreement pursuant to Section
1.13 or 13.04 (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 D (any such certificate, a "Section
4.04(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
Restatement Effective Date, when a lapse in time or change in circumstances
renders the previous certification obsolete or inaccurate in any material
respect, such Bank will deliver to the Borrower and the Administrative Agent two
new accurate and complete original signed copies of Internal Revenue Service
Form 4224 or 1001, or Form W-8 and a Section 4.04(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
Administrative Agent of its inability to deliver any such Form or Certificate,
in which case such Bank should not be required to deliver any such Form or
Certificate pursuant to this Section 4.04(b).  Notwithstanding anything to the
contrary contained in Section 4.04(a), but subject to Section 13.04(b) and the
immediately succeeding sentence, (x) 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

                                      -28-
<PAGE>

taxing authority thereof or therein) from interest, Fees or other amounts
payable hereunder for the account of any Bank which is not a United States
person (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 (y) the Borrower shall not be obligated
pursuant to Section 4.04(a) 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 4.04(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 4.04 and except as set forth in Section
13.04(b), the Borrower agrees to pay additional amounts and to indemnify each
Bank in the manner set forth in Section 4.04(a) (without regard to the identity
of the jurisdiction requiring the deduction or withholding) in respect of any
Taxes deducted or withheld by it as described in the immediately preceding
sentence as a result of any changes after the Restatement 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 such
Taxes.

          (c)  If the Borrower pays any additional amount under this Section
4.04 to a Bank and such Bank determines in its sole discretion that it has
actually received or realized in connection therewith any refund or any
reduction of, or credit against, its Tax liabilities in or with respect to the
taxable year in which the additional amount is paid (a "Tax Benefit"), such Bank
shall pay to the Borrower an amount that the Bank shall, in its sole discretion,
determine is equal to the net benefit, after tax, which was obtained by the Bank
in such year as a consequence of such Tax Benefit; provided, however, that (i)
any Taxes that are imposed on a Bank as a result of a disallowance or reduction
(including through the expiration of any tax credit carryover or carryback of
such Bank that otherwise would not have expired) of any Tax Benefit with respect
to which such Bank has made a payment to the Borrower pursuant to this Section
4.04(c) shall be treated as a Tax for which the Borrower is obligated to
indemnify such Bank pursuant to this Section 4.04 without any exclusions or
defenses; and (ii) nothing in this Section 4.04(c) shall require the Bank to
disclose any confidential information to the Borrower (including, without
limitation, its tax returns).

          SECTION 5.  Conditions Precedent to Restatement Effective Date.  The
                      --------------------------------------------------
occurrence of the Restatement Effective Date, and the obligation of each Bank to
continue, convert and/or make Loans, and the obligation of each Issuing Bank to
issue Letters of Credit, on the Restatement Effective Date, is subject at the
time of the occurrence of the Restatement Effective Date to the satisfaction of
the following conditions:

          5.01. Execution of Agreement; Notes.  (i)  On or prior to the
                -----------------------------
Restatement Effective Date (i) this Agreement shall have been executed and
delivered as provided in Section 13.10 and (ii) there shall have been delivered
to the Administrative Agent for the account of each of the Banks with a Tranche
D Term Loan Commitment the appropriate Tranche D Term Note executed by the
Borrower, in each case in the amount, maturity and as otherwise provided herein.

                                      -29-
<PAGE>

          5.02  Fees, etc.  On or prior to the Restatement Effective Date, the
                ----------
Borrower shall have paid to the Agents and the Banks all reasonable costs, fees
and expenses (including, without limitation, reasonable legal fees and expenses)
payable to the respective Agents and the Banks to the extent then due.

          5.03  Opinion of Counsel.  On the Restatement Effective Date, the
                ------------------
Administrative Agent shall have received from Bell, Boyd & Lloyd, counsel to the
Borrower and the Subsidiary Guarantors, an opinion addressed to each of the
Agents and each of the Banks and dated the Restatement Effective Date covering
the matters set forth in Exhibit E and such other matters incident to the
transactions contemplated herein as either Agent may reasonably request.

          5.04  Corporate Documents; Proceedings; etc.  (a)  On the Restatement
                --------------------------------------
Effective Date, the Administrative Agent shall have received a certificate,
dated the Restatement Effective Date, signed by the chairman of the board, the
president, any vice president or the treasurer of the Borrower and each
Subsidiary of the Borrower which is to become a Credit Party on the Restatement
Effective Date (excluding any such Person which was a Credit Party on the
effective date of Tranche C under the Original Credit Agreement), and attested
to by the secretary or any assistant secretary of the respective such Person, in
the form of Exhibit F with appropriate insertions, together with copies of the
certificate of incorporation and by-laws of the respective such Person, and the
resolutions of the respective such Person referred to in such certificate, and
the foregoing shall be reasonably acceptable to the Agents.

          (b)   On the Restatement Effective Date, the Administrative Agent
shall have received certificates of all Credit Parties (other than the Credit
Parties delivering certificates pursuant to preceding clause (a)) (x) certifying
that there were no changes, or providing the text of any changes, to the
certificate of incorporation and by-laws of such Credit Parties as delivered
pursuant to the Original Credit Agreement, (y) to the effect that each such
Credit Party is in good standing in its respective state of incorporation and in
those states where each such Credit Party conducts business and (z) providing
the resolutions adopted by each such Credit Party with respect to the actions
contemplated in this Agreement (including without limitation with respect to the
amendment and restatement of this Agreement, and the obligations of such Credit
Party with respect to the increased extensions of credit pursuant hereto), and
the foregoing shall be reasonably acceptable to the Agents in their reasonable
discretion.

          (c)   On or prior to the Restatement Effective Date, all corporate and
legal proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Credit Documents shall
be reasonably satisfactory in form and substance to the Agents and the Required
Banks, and the Agents shall have received all information and copies of all
documents and papers, including records of corporate and partnership
proceedings, governmental approvals, good standing certificates and bring-down
telegrams, if any, which any Agent may have reasonably requested in connection
therewith, such documents and papers where appropriate to be certified by proper
corporate, or governmental authorities.

                                      -30-
<PAGE>

          5.05  Employee Benefit Plans; Shareholders' Agreements; Management
                ------------------------------------------------------------
Agreements; Collective Bargaining Agreements; Existing Indebtedness Agreements;
-------------------------------------------------------------------------------
Tax Sharing Agreements; Material Leases.  (a)  On or prior to the Restatement
---------------------------------------
Effective Date, there shall have been delivered to the Agents true and correct
copies of the following documents (in each case except to the extent already
delivered to the Agents and the Banks on or prior to the effective date of
Tranche C under the Original Credit Agreement), in each case as same will be in
effect on the Restatement Effective Date:

          (i)   all Plans (and for each Plan that is required to file an annual
     report on Internal Revenue Service Form 5500-series, a copy of the most
     recent such report (including, to the extent required, the related
     financial and actuarial statements and opinions and other supporting
     statements, certifications, schedules and information), and for each Plan
     that is a "single-employer plan," as defined in Section 4001(a)(15) of
     ERISA, the most recently prepared actuarial valuation therefor) and any
     other "employee benefit plans," as defined in Section 3(3) of ERISA, and
     any other material agreements, plans or arrangements, with or for the
     benefit of current or former employees of the Borrower or any of its
     Subsidiaries or any ERISA Affiliate (provided that the foregoing shall
                                          --------
     apply in the case of any multiemployer plan, as defined in 4001(a)(3) of
     ERISA, only to the extent that any document described therein is in the
     possession of the Borrower or any Subsidiary of the Borrower or any ERISA
     Affiliate or reasonably available thereto from the sponsor or trustee of
     any such plan) (collectively, together with any agreements, plans or
     arrangements referred to in Section 5.05(i) of the Original Credit
     Agreement, and any amendments thereto referred in Section 5.05(b), the
     "Employee Benefit Plans");

          (ii)  all material agreements entered into by the Borrower or any of
     its Subsidiaries governing the terms and relative rights of its capital
     stock and any agreements entered into by shareholders relating to any such
     entity with respect to its capital stock (collectively, together with any
     agreements referred to in Section 5.05(ii) of the Original Credit
     Agreement, and any amendments thereto referred in Section 5.05(b), the
     "Shareholders' Agreements");

          (iii) all material agreements with members of, or with respect to,
     the senior management and management of the Borrower or any of its
     Subsidiaries (collectively, together with any agreements referred to in
     Section 5.05(iii) of the Original Credit Agreement, and any amendments
     thereto referred in Section 5.05(b), the "Management Agreements");

          (iv)  all collective bargaining agreements applying or relating to any
     employee of the Borrower or any of its Subsidiaries (collectively, together
     with any agreements referred to in Section 5.05(iv) of the Original Credit
     Agreement, and any amendments thereto referred in Section 5.05(b), the
     "Collective Bargaining Agreements");

          (v)   all agreements evidencing or relating to Indebtedness of the
     Borrower or any of its Subsidiaries which is to remain outstanding after
     giving effect to the

                                      -31-
<PAGE>

     Restatement Effective Date to the extent such Indebtedness exceeds (or upon
     the utilization of any unused commitments may exceed) $10,000,000
     (collectively, together with any agreements referred to in Section 5.05(v)
     of the Original Credit Agreement, and any amendments thereto referred in
     Section 5.05(b), the "Existing Indebtedness Agreements");

          (vi)  all tax sharing, tax allocation and other similar agreements
     entered into by the Borrower or any of its Subsidiaries (collectively,
     together with any agreements referred to in Section 5.05(vi) of the
     Original Credit Agreement and any amendments thereto referred to in Section
     5.05(b), the "Tax Sharing Agreements"); and

          (vii) all material leases under which the Borrower or any of its
     Subsidiaries lease (as lessee) any Hotel Property (collectively, together
     with any agreements referred to in Section 5.05(vi) of the Original Credit
     Agreement and any amendments thereto referred to in Section 5.05(b), the
     "Material Leases");

all of which Employee Benefit Plans, Shareholders' Agreements, Management
Agreements, Collective Bargaining Agreements, Existing Indebtedness Agreements,
Tax Sharing Agreements and Material Leases shall be in full force and effect on
the Restatement Effective Date.

          (b)   On or prior to the Restatement Effective Date, the
Administrative Agent shall have received (i) a certification from the chairman
of the board, the president, any vice president or the treasurer of the Borrower
that all agreements and plans referenced in Section 5.05 of the Original Credit
Agreement, previously delivered to the Administrative Agent by each Credit
Party, remain in full force and effect (or specifying which of such agreements
and plans do not remain in full force and effect) and (ii) any amendments
thereto or additional such agreements.

          5.06  Pledge Agreement.  On or prior to the Restatement Effective
                ----------------
Date, the Credit Parties shall furnish to the Administrative Agent true and
correct updates, as necessary, to the schedules to the Pledge Agreement (as
prepared as of the Restatement Effective Date and after giving effect thereto)
and each Credit Party shall deliver to the Collateral Agent, as Pledgee, all of
the Pledged Securities, if any, referred to therein that are owned by such
Credit Party (to the extent not already delivered pursuant to the Pledge
Agreement) (x) endorsed in blank in the case of promissory notes constituting
Pledged Securities and (y) together with executed and undated stock powers, in
the case of capital stock constituting Pledged Securities.

          5.07  Security Agreement.  On or prior to the Restatement Effective
                ------------------
Date, the Credit Parties shall furnish to the Administrative Agent true and
correct updates, as necessary, to the schedules to the Security Agreement (as
prepared as of the Restatement Effective Date and after giving effect thereto).
In addition, each Subsidiary of the Borrower which becomes party to the Security
Agreement on the Restatement Effective Date shall, in addition to executing
counterparts of the Security Agreement as required above, deliver the following:

          (a)   proper Financing Statements (Form UCC-1) fully executed for
     filing under the UCC or other appropriate filing offices of each
     jurisdiction as may be necessary or, in

                                      -32-
<PAGE>

     the reasonable opinion of the Collateral Agent, desirable to perfect the
     security interests purported to be created by the Security Agreement, as
     the case may be;

          (b)   certified copies of Requests for Information or Copies (Form
     UCC-11), or equivalent reports, listing all effective financing statements
     that name such Credit Party as debtor and that are filed in the
     jurisdictions referred to in clause (a) above, together with copies of such
     other financing statements that name any such Credit Party as debtor (none
     of which shall cover the Collateral except to the extent evidencing
     Permitted Liens or in respect of which the Collateral Agent shall have
     received termination statements (Form UCC-3 or such other termination
     statements as shall be required by local law) fully executed for filing);
     and

          (c)   evidence that all other actions reasonably necessary (including
     the amending of any existing financing statements) or, in the reasonable
     opinion of the Collateral Agent, desirable to perfect and protect (or
     maintain the perfection of) the security interests purported to be created
     (or maintained) by the Security Agreement have been taken.

          5.08  Subsidiary Credit Parties; etc.  (a)  Each Subsidiary Guarantor
                -------------------------------
shall have executed and delivered a counterpart of this Agreement, pursuant to
which it makes the acknowledgments in the form appearing before the signature
pages of the Subsidiary Guarantors at the end of this Agreement.

          (b)   Each Subsidiary Guarantor which was not a Subsidiary Guarantor
immediately before giving effect to the Restatement Effective Date, shall have
duly authorized, executed and delivered counterparts of the Subsidiaries
Guaranty, the Security Agreement and the Pledge Agreement, thereby becoming
parties thereto.

          5.09  Adverse Change, etc.  (a)  On the Restatement Effective Date,
                --------------------
nothing shall have occurred (and the Banks shall have become aware of no facts,
conditions or other information not previously known) which any Agent or the
Required Banks believe would reasonably be expected to have a material adverse
effect (i) on the rights or remedies of the Agents or the Banks, or on the
ability of any Credit Party to perform its respective obligations to the Agents
and the Banks or (ii) on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole.

          (b)   On or prior to the Restatement Effective Date, all necessary
governmental (domestic and foreign) and third party approvals and/or consents
(if any) in connection with the making of the Loans and the transactions
contemplated by the Credit Documents and otherwise referred to herein or therein
shall have been obtained and remain in effect, and all applicable waiting
periods shall have expired without any action being taken by any competent
authority which restrains, prevents or imposes materially adverse conditions
upon the making of the Loans and the transactions contemplated by the Credit
Documents or otherwise referred to herein or therein.  Additionally, there shall
not exist any judgment, order, injunction or other restraint issued or filed or
a hearing seeking injunctive relief or other restraint pending or notified

                                      -33-
<PAGE>

prohibiting or imposing materially adverse conditions upon the making of the
Loans or the transactions contemplated by the Credit Documents.

          5.10  Litigation.  On the Restatement Effective Date, no litigation by
                ----------
any entity (private or governmental) shall be pending or, to the best of the
Borrower's knowledge, threatened with respect to the making of the Loans or the
Credit Documents or any documentation executed in connection therewith or the
transactions contemplated thereby.

          5.11  Solvency Certificate; Environmental Assessments; Insurance
                ----------------------------------------------------------
Certificates.  On or prior to the Restatement Effective Date, there shall have
------------
been delivered to the Agents:

          (a)   a solvency certificate in the form of Exhibit G, addressed to
each of the Agents and each of the Banks and dated the Restatement Effective
Date from the Chief Financial Officer of the Borrower providing the opinion of
such Chief Financial Officer as to the solvency of the Borrower and the
Borrower's Subsidiaries;

          (b)   such environmental updates as may be reasonably requested by the
Agents; and

          (c)   certificates of insurance complying with the requirements of
Section 8.03 for the business and properties of the Borrower and its
Subsidiaries, in scope, form and substance reasonably satisfactory to the
Administrative Agent and naming the Collateral Agent as an additional insured
and/or loss payee (as its respective interest may appear), and stating that such
insurance shall not be cancelled or materially changed without at least 30 days'
prior written notice by the respective insurer to the Collateral Agent.

          5.12  Projections.  On or prior to the Restatement Effective Date, the
                -----------
Agents shall have received copies of the financial statements and Projections
referred to in Sections 7.05(a) and (d).

          5.13  Subordinated Debt Compliance.  On the Restatement Effective
                ----------------------------
Date, the Borrower shall deliver to the Agent a certificate (i) dated the
Restatement Effective Date and (ii) certifying that the incurrence of the
Tranche D Loans is in compliance with Section 4.03 of the 9.15% Senior
Subordinated Note Indenture and showing the calculations thereof.

          SECTION 6.  Conditions Precedent to All Credit Events.  The obligation
                      -----------------------------------------
of each Bank to make Loans (including any Loans made on the Restatement
Effective Date), and the obligation of each Issuing Bank to issue Letters of
Credit (including any Letters of Credit issued on the Restatement Effective
Date), is subject, at the time of each such Credit Event (except as hereinafter
indicated), to the satisfaction of the following conditions:

          6.01  No Default; Representations and Warranties.  At the time of each
                ------------------------------------------
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (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

                                      -34-
<PAGE>

representations and warranties had been made on the date of the making of such
Credit Event (it being understood and agreed that any representation or warranty
which by its terms is made as of a specified date shall be required to be true
and correct in all material respects only as of such specified date).

          6.02  Notice of Borrowing; Letter of Credit Request.  (a)  Prior to
                ---------------------------------------------
the making of each Loan (other than a Swingline Loan or a Revolving Loan made
pursuant to a Mandatory Borrowing), the Administrative Agent shall have received
a Notice of Borrowing meeting the requirements of Section 1.03(a).  Prior to the
making of each Swingline Loan, the Swingline Bank shall have received the notice
referred to in Section 1.03(b)(i).

          (b)   Prior to the issuance of each Letter of Credit, the
Administrative Agent and the respective Issuing Bank shall have received a
Letter of Credit Request meeting the requirements of Section 2.03.

          The occurrence of the Restatement Effective Date and the acceptance of
the proceeds of each Loan and the making of each Letter of Credit Request shall
constitute a representation and warranty by the Borrower to each of the Agents
and each of the Banks that all the conditions specified in Section 5 (with
respect to Credit Events on the Restatement Effective Date) and in this Section
6 (with respect to Credit Events on and after the Restatement Effective Date)
and applicable to the Restatement Effective Date and/or such Credit Event, as
the case may be, exist as of that time.  All of the Notes, certificates, legal
opinions and other documents and papers referred to in Section 5 and in this
Section 6, unless otherwise specified, shall be delivered to the Administrative
Agent at the 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 in form
and substance reasonably satisfactory to the Agents and the Required Banks.

          SECTION 7.  Representations and Warranties.  In order to induce the
                      ------------------------------
Banks to enter into this Agreement and to make the Loans and issue (or
participate in) the Letters of Credit as provided herein, the Borrower makes the
following representations, warranties and agreements, all of which shall survive
the execution and delivery of this Agreement and the Notes and the making of the
Loans and issuance of the Letters of Credit, with the occurrence of the
Restatement Effective Date and the occurrence of each Credit Event on or after
the Restatement Effective Date being deemed to constitute a representation and
warranty that the matters specified in this Section 7 are true and correct on
and as of the Restatement Effective Date and on the date of each such Credit
Event (it being understood and agreed that any representation or warranty which
by its terms is made as of a specified date shall be required to be true and
correct in all material respects only as of such specified date).

          7.01  Corporate and Other Status.  The Borrower and each of its
                --------------------------
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its organization, (ii) has the
corporate power and authority to own its property and assets and to transact the
business in which it is engaged and presently proposes to engage and (iii) is
duly qualified and is authorized to do business and is in good standing in each
jurisdiction where the conduct of its business requires such qualifications
except for failures to be so

                                      -35-
<PAGE>

qualified which, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole.

          7.02  Corporate or Partnership Power and Authority.  Each Credit Party
                --------------------------------------------
has the corporate power and authority, to execute, deliver and perform the terms
and provisions of each of the Credit Documents to which it is a party and has
taken all necessary corporate action to authorize the execution, delivery and
performance by it of each of such Credit Documents.  Each Credit Party has duly
executed and delivered each of the Credit Documents to which it is a party, and
each of such Credit Documents constitutes the legal, valid and binding
obligation of such Credit Party enforceable in accordance with its terms, except
to the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).

          7.03  No Violation.  Neither the execution, delivery or performance by
                ------------
any Credit Party of the Credit Documents to which it is a party, nor compliance
by it with the terms and provisions thereof, nor the consummation of the
transactions contemplated therein, (i) will contravene any provision of any
applicable law, statute, rule or regulation or any applicable order, writ,
injunction or decree of any court or governmental instrumentality, (ii) will
conflict with or result in any breach of any of the terms, covenants, conditions
or provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien (except pursuant
to the Security Documents) upon any of the properties or assets of the Borrower
or any of its Subsidiaries pursuant to the terms of any indenture, mortgage,
deed of trust, credit agreement or loan agreement, or any other material
agreement, contract or instrument, to which the Borrower or any of its
Subsidiaries is a party or by which it or any of its property or assets is bound
or to which it may be subject or (iii) will violate any provision of the
certificate of incorporation, or by-laws of the Borrower or any of its
Subsidiaries.

          7.04  Governmental Approvals.  No order, consent, approval, license,
                ----------------------
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made and which remain in full force and
effect), or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection
with, (i) the execution, delivery and performance of any Credit Document or (ii)
the legality, validity, binding effect or enforceability of any such Credit
Document.

          7.05  Financial Statements; Financial Condition; Undisclosed
                ------------------------------------------------------
Liabilities; Projections; etc.  (a) The consolidated balance sheet of the
------------------------------
Borrower and its Subsidiaries at December 31, 1998 and December 31, 1999 and the
related consolidated statements of operations, cash flows and shareholders'
equity of the Borrower and its Subsidiaries for the fiscal years ended on such
dates, as the case may be, copies of which have been furnished to the Banks
prior to the Restatement Effective Date, present fairly the financial position
of the Borrower and its Subsidiaries at the date of such balance sheets and the
results of the operations of the Borrower and its Subsidiaries for the periods
covered thereby.  All such financial statements

                                      -36-
<PAGE>

have been prepared in accordance with generally accepted accounting principles
consistently applied. Since December 31, 1999, there has been no material
adverse change in the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.

          (b)   (i) On and as of the Restatement Effective Date and after giving
effect to the transaction contemplated hereby and to all Indebtedness (including
the Loans) being incurred or assumed and Liens created by the Credit Parties in
connection therewith, (a) the sum of the assets, at a fair valuation, of each of
the Borrower on a stand alone basis and of the Borrower and its Subsidiaries
taken as a whole will exceed its debts; (b) each of the Borrower on a stand
alone basis and the Borrower and its Subsidiaries taken as a whole has not
incurred and does not intend to incur, and does not believe that they will
incur, debts beyond their ability to pay such debts as such debts mature; and
(c) each of the Borrower on a stand alone basis and the Borrower and its
Subsidiaries taken as a whole will have sufficient capital with which to conduct
its business.  For purposes of this Section 7.05(b), "debt" means any liability
on a claim, and "claim" means (i) right to payment, whether or not such a right
is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.  The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.

          (c)   Except as fully disclosed in the financial statements delivered
pursuant to Section 7.05(a), there were as of the Restatement Effective Date no
liabilities or obligations (other than the Obligations under, and as defined in,
the Original Credit Agreement) 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 reasonably be expected to be material to the Borrower and its Subsidiaries
taken as a whole.  As of the Restatement Effective Date, the Borrower does not
know of any basis for the assertion against it or any of its Subsidiaries of any
liability or obligation of any nature whatsoever that is not fully disclosed in
the financial statements delivered pursuant to Section 7.05(a) which, either
individually or in the aggregate, would reasonably be expected to be material to
the Borrower and its Subsidiaries taken as a whole.

          (d)   On and as of the Restatement Effective Date, the Projections
delivered to the Agents and the Banks prior to the Restatement Effective Date
have been prepared in good faith and are based on reasonable assumptions, and
there are no statements or conclusions in the Projections which are based upon
or include information known to the Borrower to be misleading in any material
respect or which fail to take into account material information known to the
Borrower regarding the matters reported therein.  On the Restatement Effective
Date, the Borrower believes that the Projections are reasonable, it being
understood that the Projections include assumptions as to future events that are
not to be viewed as facts and there can be no assurance that such assumptions,
statements, estimates and Projections will be realized and that

                                      -37-
<PAGE>

actual results may differ from the projected results and such differences may be
material and adverse.

          7.06  Litigation.  There are no actions, suits or proceedings pending
                ----------
or, to the Borrower's knowledge, threatened (i) with respect to any Credit
Document or (ii) that would reasonably be expected to materially and adversely
affect the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries taken
as a whole.

          7.07  True and Complete Disclosure.  To the best knowledge of the
                ----------------------------
Borrower, all factual information (taken as a whole) regarding the Borrower or
any of its Subsidiaries furnished by or on behalf of the Borrower or any of its
Subsidiaries in writing to any Agent or any Bank (including, without limitation,
all information contained in the Credit Documents) for purposes of or in
connection with this Agreement, the other Credit Documents or any transaction
contemplated herein or therein is, and all other such factual information (taken
as a whole) hereafter furnished by or on behalf of the Borrower or any of its
Subsidiaries in writing to any 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 fact necessary to make
such information (taken as a whole) not misleading in any material respect at
such time in light of the circumstances under which such information was
provided.  It is understood that the Projections do not constitute factual
information for purposes of this Section 7.07.

          7.08  Use of Proceeds; Margin Regulations.  (a)  The proceeds of all
                -----------------------------------
Loans shall be used by the Borrower (i) for its general corporate purposes,
including, without limitation, the construction or acquisition of Hotel
Properties and for such other purposes as are not prohibited hereby and (ii) to
pay fees and expenses incurred in connection with the Credit Documents, provided
that the proceeds of the Tranche D Term Loans shall be used to repay outstanding
Revolving Loans (without any reduction to the Revolving Loan Commitment of any
Bank).

          (b)   No part of any Credit Event (or the proceeds thereof) will be
used to purchase or carry any Margin Stock or to extend credit for the purpose
of purchasing or carrying any Margin Stock.  Neither the making of any Loan nor
the use of the proceeds thereof nor the occurrence of any other Credit Event
will violate or be inconsistent with the provisions of Regulation T, U or X of
the Board of Governors of the Federal Reserve System.

          7.09  Tax Returns and Payments.  Each of the Borrower and each of its
                ------------------------
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, except for
those contested in good faith and adequately disclosed and fully provided for on
the financial statements of the Borrower and its Subsidiaries in accordance with
generally accepted accounting principles.  The Borrower and each of its
Subsidiaries have at all times paid, or have provided adequate reserves (in the
good faith judgment of the management of the Borrower) for the payment of, all
federal, state and foreign income taxes applicable for all prior fiscal years
and for the current fiscal year to date.  There is no material (with respect to
the Borrower and its Subsidiaries taken as a whole) action, suit, proceeding,

                                      -38-
<PAGE>

investigation, audit, or claim now pending or, to the knowledge of the Borrower,
threatened by any authority regarding any taxes relating to the Borrower or any
of its Subsidiaries.  Neither the Borrower nor any of its Subsidiaries has
entered into an agreement or waiver or been requested to enter into an agreement
or waiver extending any statute of limitations relating to the payment or
collection of taxes of the Borrower or any of its Subsidiaries, or is aware of
any circumstances that would cause the taxable years or other taxable periods of
the Borrower or any of its Subsidiaries not to be subject to the normally
applicable statute of limitations.

          7.10  Compliance with ERISA.  (i) Schedule IV sets forth each Plan;
                ---------------------
each Plan (and each related trust, insurance contract or fund) is in substantial
compliance with its terms and with all applicable laws, including without
limitation ERISA and the Code; each Plan (and each related trust, if any) 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 Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred; no Plan which is a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has an Unfunded
Current Liability; 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 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
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any
such liability under any of the foregoing sections with respect to any Plan; 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 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 which is subject to Title IV of ERISA; no action, suit,
proceeding, hearing, audit or investigation with respect to the administration,
operation or the investment of assets of any Plan (other than routine claims for
benefits) is pending, expected or 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 Plans which are multiemployer plans (as defined in Section
4001(a)(3) of ERISA) 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 $200,000; 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 material compliance with the provisions of Part 6 of subtitle B of
Title I of ERISA and Section 4980B of the Code; 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; and the
Borrower and its Subsidiaries may cease contributions to or terminate any
employee benefit plan maintained by any of them without incurring any material
liability.

                                      -39-
<PAGE>

          (ii)  Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities.  All
contributions required to be made with respect to a Foreign Pension Plan have
been timely made.  Neither the Borrower nor any of its Subsidiaries has incurred
any obligation in connection with the termination of or withdrawal from any
Foreign Pension Plan.  The present value of the accrued benefit liabilities
(whether or not vested) under each Foreign Pension Plan, determined as of the
end of the Borrower's most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.

          7.11  The Security Documents.  (a)  On and after the Restatement
                ----------------------
Effective Date, the provisions of the Security Agreement are effective to create
in favor of the Collateral Agent for the benefit of the Secured Creditors a
legal, valid and enforceable security interest in all right, title and interest
of the Credit Parties in the Security Agreement Collateral described therein,
and the Security Agreement, upon the filing of Form UCC-1 financing statements
or the appropriate equivalent (which filings have been made), create a fully
perfected first lien on, and security interest in, all right, title and interest
in all of the Security Agreement Collateral described therein, to the extent
that a security interest may be perfected therein by filing a financing
statement under the UCC, subject to no other Liens other than Permitted Liens.
The recordation of the Assignment of Security Interest in U.S. Patents and
Trademarks in the form attached to the Security Agreement in the United States
Patent and Trademark Office together with filings on Form UCC-1 made pursuant to
the Security Agreement will be effective, under applicable law, to perfect the
security interest granted to the Collateral Agent in the trademarks and patents
covered by the Security Agreement.  Each of the Credit Parties party to the
Security Agreement has good and valid title to all Security Agreement Collateral
owned by such Credit Party described therein, free and clear of all Liens.
Except for filings made pursuant to Section 5.07 on or prior to the Restatement
Effective Date, no additional filings with respect to the Security Agreement are
required at the time of, or in connection with the occurrence of, the
Restatement Effective Date.

          (b)   On and after the Restatement Effective Date and assuming the
continued possession by the Collateral Agent of the Pledged Securities, the
security interests created in favor of the Collateral Agent, as Pledgee, for the
benefit of the Secured Creditors under the Pledge Agreement constitute first
priority perfected security interests in the Pledged Securities described in the
Pledge Agreement, subject to no security interests of any other Person.
Assuming the continued possession by the Collateral Agent of the Pledged
Securities, no filings or recordings are required in order to perfect (or
maintain the perfection or priority of) the security interests created in the
Pledged Securities and the proceeds thereof under the Pledge Agreement.

          7.12  Manager Subordination Agreements.  To the extent required to be
                --------------------------------
executed and delivered pursuant to Section 8.14, each Manager Subordination
Agreement is in full force and effect and all Obligations hereunder and under
the other Credit Documents are within the definition of "senior debt" or any
substantially similar definition contained in the subordination provisions of
each Manager Subordination Agreement.

                                      -40-
<PAGE>

          7.13  Properties.  The Borrower and each of its Subsidiaries have good
                ----------
and marketable title to all properties owned by them, including all property
reflected in the consolidated balance sheets of the Borrower referred to in
Section 7.05(a) (except as sold or otherwise disposed of since the date of such
balance sheets in the ordinary course of business), free and clear of all Liens,
other than Permitted Liens.

          7.14  Capitalization.  On the Restatement Effective Date, the
                --------------
authorized capital stock of the Borrower shall consist of (i) 500,000,000 shares
of common stock, $.01 par value per share and (ii) 10,000,000 shares of
preferred stock, $.01 par value per share, none of which preferred stock is
issued and outstanding.  All outstanding shares of such capital stock have been
duly and validly issued, are fully paid and nonassessable and are free of
preemptive rights.  Except for certain options issued pursuant to employee and
director stock option plans (including any assumed plans), the Borrower does not
have outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.

          7.15  Subsidiaries.  The Borrower has no Subsidiaries other than (i)
                ------------
those Subsidiaries listed on Schedule V and (ii) new Subsidiaries created in
compliance with Section 9.16.  Schedule V correctly sets forth, as of the
Restatement Effective Date, the percentage ownership (direct or indirect) of the
Borrower in each class of capital stock or other equity of each of its
Subsidiaries and also identifies the direct owner thereof.

          7.16  Compliance with Statutes, etc.  The Borrower and each of its
                ------------------------------
Subsidiaries are in compliance with all applicable statutes, regulations and
orders of all governmental bodies, domestic or foreign, in respect of the
conduct of its business and the ownership of its property (including applicable
Environmental Laws) except such noncompliances as would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole.

          7.17  Investment Company Act.  Neither the Borrower nor any of its
                ----------------------
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.

          7.18  Public Utility Holding Company Act.  Neither the Borrower nor
                ----------------------------------
any of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.

          7.19  Environmental Matters.  (a)  The Borrower and each of its
                ---------------------
Subsidiaries have complied with all applicable Environmental Laws and the
requirements of any permits issued under such Environmental Laws.  There are no
pending or, to the Borrower's knowledge, threatened Environmental Claims against
the Borrower or any of its Subsidiaries or any Real Property owned or operated
by the Borrower or any of its Subsidiaries.  There are no facts, circumstances,
conditions or occurrences on any Real Property owned or operated by the

                                      -41-
<PAGE>

Borrower or any of its Subsidiaries or, to the Borrower's knowledge, on any
property adjoining or in the vicinity of any such Real Property that would
reasonably be expected (i) to form the basis of an Environmental Claim against
the Borrower or any of its Subsidiaries or any such Real Property or (ii) to
cause any such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property by the Borrower or any
of its Subsidiaries under any applicable Environmental Law.

          (b)   Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, or Released on or from, any
Real Property owned or operated by the Borrower or any of its Subsidiaries
except in compliance with all applicable Environmental Laws.

          (c)   Notwithstanding anything to the contrary in this Section 7.19,
the representations made in this Section 7.19 shall only be untrue if the
aggregate effect of all failures, noncompliance, activities, facts,
circumstances, conditions and occurrences of the types described above would
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.

          7.20  Labor Relations.  Neither the Borrower nor any of its
                ---------------
Subsidiaries nor any Facility Manager is engaged in any unfair labor practice
that could reasonably be expected to have a material adverse effect on the
Borrower and its Subsidiaries taken as a whole.  There is (i) no unfair labor
practice complaint pending against the Borrower or any of its Subsidiaries or
any Facility Manager or, to the best knowledge of the Borrower, threatened
against any of them, before the National Labor Relations Board, and no grievance
or arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Borrower or any of its Subsidiaries or any
Facility Manager or, to the best knowledge of the Borrower, threatened against
any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against
the Borrower or any of its Subsidiaries or any Facility Manager or, to the best
knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries and (iii) no union representation question exists with respect to
the employees of the Borrower or any of its Subsidiaries or any Facility
Manager, except (with respect to any matter specified in clause (i), (ii) or
(iii) above, either individually or in the aggregate) such as would not
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.

          7.21  Patents, Licenses, Franchises and Formulas.  Each of the
                ------------------------------------------
Borrower and each of its Subsidiaries owns all the patents, trademarks, permits,
service marks, trade names, copyrights, licenses, franchises, proprietary
information (including but not limited to rights in computer programs and
databases) 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 reasonably be expected to result in a material adverse

                                      -42-
<PAGE>

effect on the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries taken
as a whole.

          7.22  Indebtedness.  (a) Schedule VI sets forth a true and complete
                ------------
list of all Indebtedness of the Borrower and its Subsidiaries as of the
Restatement Effective Date (excluding the Loans and the Letters of Credit, the
"Existing Indebtedness"), in each case showing the aggregate principal amount
thereof and the name of the respective borrower and any other entity which
directly or indirectly guaranteed such Indebtedness.

          (b)   At all times after the issuance of any New Subordinated Notes,
all Obligations of the Borrower hereunder and under the other Credit Documents
will be within the definition of "senior debt" or any similar definition
contained in such New Subordinated Notes.

          7.23  Hotel Properties.  The Borrower owns no Hotel Properties
                ----------------
directly and (i) on the Restatement Effective Date, each Hotel Property is owned
by a Wholly-Owned Subsidiary of the Borrower and (ii) after the Restatement
Effective Date, each Hotel Property is owned by a Wholly-Owned Subsidiary of the
Borrower which is a Foreign Subsidiary or a Subsidiary of the Borrower which is
a Subsidiary Guarantor.  Each Hotel Property which is located in the United
States is owned by a Subsidiary Guarantor which is organized under the laws of a
state in the United States.

          7.24  Updated Security Agreement and Pledge Agreement Schedules.  The
                ---------------------------------------------------------
updated schedules to the Pledge Agreement and Security Agreement furnished
pursuant to Sections 5.06 and 5.07 are true and correct, in all material
respects, as of the Restatement Effective Date, and accurately present all
information which was originally required to be scheduled pursuant to the Pledge
Agreement and Security Agreement on the Original Effective Date, but modified to
reflect the additional Credit Parties on the Restatement Effective Date and any
changes which occurred between the Original Effective Date and the Restatement
Effective Date.

          SECTION 8.  Affirmative Covenants.  The Borrower hereby covenants and
                      ---------------------
agrees that on and after the Restatement Effective Date and until the Total
Commitments and all Letters of Credit have terminated and the Loans, Notes and
Unpaid Drawings, together with interest, Fees and all other obligations incurred
hereunder and thereunder, are paid in full:

          8.01  Information Covenants.  The Borrower will furnish to the
                ---------------------
Administrative Agent (with sufficient copies for each of the Banks, and the
Administrative Agent will promptly forward to each of the Banks):

          (a)   Quarterly Financial Statements.  Within 55 days after the close
                ------------------------------
     of the first three quarterly accounting periods in each fiscal year of the
     Borrower, (i) the consolidated balance sheet of the Borrower and its
     Subsidiaries as at the end of such quarterly accounting period and the
     related consolidated statements of income and retained earnings and
     statement of cash flows for such quarterly accounting period and for the
     elapsed portion of the fiscal year ended with the last day of such
     quarterly accounting period, in each case setting forth comparative figures
     for the related periods in the prior

                                      -43-
<PAGE>

     fiscal year, all of which shall be certified by the Chief Financial Officer
     of the Borrower, subject to normal recurring adjustments and (ii)
     management's discussion and analysis of the important operational and
     financial developments during the quarterly and year-to-date periods, it
     being understood that the delivery by the Borrower of its Form 10-Q as
     filed with the SEC shall satisfy the requirements of this Section 8.01(a).

          (b)   Annual Financial Statements.  (A) Within 100 days after the
                ---------------------------
     close of each fiscal year of the Borrower, (i) the consolidated balance
     sheet of the Borrower and its Subsidiaries as at the end of such fiscal
     year and the related consolidated statements of income and retained
     earnings and of cash flows for such fiscal year setting forth comparative
     figures for the preceding fiscal year and certified by Pricewaterhouse
     Coopers LLP, any other "Big Five" independent certified public accountants
     or such other independent certified public accountants of recognized
     national standing reasonably acceptable to the Administrative Agent and
     (ii) management's discussion and analysis of the important operational and
     financial developments during the respective fiscal year, it being
     understood that the delivery by the Borrower of its Form 10-K as filed with
     the SEC shall satisfy the requirements of this Section 8.01(b).

          (B)   At the time of the delivery of the annual financial statements
     pursuant to clause (A) above, a report of the applicable accounting firm
     stating that in the course of its regular audit of the financial statements
     of the Borrower and its Subsidiaries, which audit was conducted in
     accordance with generally accepted auditing standards, such accounting firm
     obtained no knowledge of any Default or Event of Default which has occurred
     and is continuing under Section 9.08, 9.09, 9.10 or 9.11 or, if in the
     opinion of such accounting firm such a Default or an Event of Default has
     occurred and is continuing, a statement as to the nature thereof.

          (c)   Budgets.  No later than the 30th day of each fiscal year of the
                -------
     Borrower, a budget in form reasonably satisfactory to the Agents
     (including, in any event, budgeted statements of income and sources and
     uses of cash and balance sheets of cash flow and budgeted debt and cash
     balances) for such fiscal year prepared by the Borrower in reasonable
     detail and accompanied by a statement of the Chief Financial Officer of the
     Borrower to the effect that, to the best of such officer's knowledge, the
     budget is a reasonable estimate of the period covered thereby.

          (d)   Officer's Certificates.  At the time of the delivery of the
                ----------------------
     financial statements provided for in Sections 8.01(a) and (b), a
     certificate of the Chief Financial Officer of the Borrower to the effect
     that, to the best of such officer's 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 (x) set forth the calculations required to
     establish whether the Borrower and its Subsidiaries were in compliance with
     the provisions of Sections 4.02(d), 4.02(e) (to the extent delivered with
     the financial statements required by Section 8.01(b)), 9.02, 9.04, 9.05,
     9.07 and 9.08 through 9.11, inclusive, at the end of such fiscal quarter or
     year, as the case may be and (y) if delivered with the financial statements
     required by

                                      -44-
<PAGE>

     Section 8.01(b), set forth the amount of (and the calculations required to
     establish) Excess Cash Flow for the respective Excess Cash Payment Period.

          (e)   Management Letters.  Promptly after the Borrower's or any of its
                ------------------
     Subsidiaries' receipt thereof, a copy of any "management letter" received
     from its certified public accountants.

          (f)   Notice of Default or Litigation.  Promptly, and in any event
                -------------------------------
     within five Business Days after any officer of any Credit Party obtains
     knowledge thereof, notice of (i) the occurrence of any event which
     constitutes a Default or an Event of Default and (ii) any litigation or
     governmental investigation or proceeding pending or threatened (x) against
     the Borrower or any of its Subsidiaries which would reasonably be expected
     to materially and adversely affect the business, operations, property,
     assets, liabilities, condition (financial or otherwise) or prospects of the
     Borrower and its Subsidiaries taken as a whole or (y) with respect to the
     transaction contemplated hereby or any Credit Document.

          (g)   Other Reports and Filings.  Promptly after the filing or
                -------------------------
     delivery thereof, copies of all financial information, proxy materials and
     other information and reports with respect to the Borrower or any of its
     Subsidiaries, if any, which the Borrower or any of its Subsidiaries shall
     file with or furnish to the Securities and Exchange Commission or any
     successor thereto (the "SEC") and copies of all material notices and
     reports which the Borrower or its Subsidiaries shall deliver to holders of
     its Indebtedness pursuant to the terms of the documentation governing such
     Indebtedness (or any trustee, agent or other representative therefor).

          (h)   Environmental Matters.  Promptly upon, and in any event within
                ---------------------
     fifteen Business Days after, any senior or executive officer of any Credit
     Party obtaining knowledge thereof, notice of one or more of the following
     environmental matters, unless such environmental matters would not,
     individually or when aggregated with all other such environmental matters,
     be reasonably expected to materially and adversely affect the business,
     operations, property, assets, liabilities, condition (financial or
     otherwise) or prospects of the Borrower and its Subsidiaries taken as a
     whole:

                (i)  any pending or threatened material Environmental Claim
          against the Borrower or any of its Subsidiaries or any Real Property
          owned or operated by the Borrower or any of its Subsidiaries;

                (ii) any condition or occurrence on or arising from any Real
          Property owned or operated by the Borrower or any of its Subsidiaries
          that (a) results in non-compliance by the Borrower or any of its
          Subsidiaries with any applicable Environmental Law or (b) could
          reasonably be expected to form the basis of a material Environmental
          Claim against the Borrower or any of its Subsidiaries or any such Real
          Property;

                                      -45-
<PAGE>

                (iii) any condition or occurrence on any Real Property owned or
          operated by the Borrower or any of its Subsidiaries that could
          reasonably be expected to cause such Real Property to be subject to
          any restrictions on the ownership, occupancy, use or transferability
          by it or any of its Subsidiaries of such Real Property under any
          Environmental Law; and

                (iv)  the taking of any removal or remedial action in response
          to the actual or alleged presence of any Hazardous Material on any
          Real Property owned or operated by the Borrower or any of its
          Subsidiaries as required by any Environmental Law or any governmental
          or other administrative agency, provided that in any event the
                                          --------
          Borrower shall deliver to each Bank all notices received by the
          Borrower or any of its Subsidiaries from any government or
          governmental agency under, or pursuant to, CERCLA which identify the
          Borrower or any of its Subsidiaries as potentially responsible parties
          for remediation costs or which otherwise notify the Borrower or any of
          its Subsidiaries of potential liability under CERCLA.

          All such notices shall describe in reasonable detail the nature of the
          claim, investigation, condition, occurrence or removal or remedial
          action and the Borrower's or such Subsidiary's response or proposed
          response thereto.  In addition, the Borrower and any of its
          Subsidiaries will provide the Banks with copies of all material
          communications with any governmental agency or other third Person that
          is adverse to the Borrower or such Subsidiary relating to material
          Environmental Claims, and such detailed reports of any material
          Environmental Claim as may reasonably be requested by any Agent or any
          Bank.

          (i)   Other Information.  From time to time, such other information or
                -----------------
     documents (financial or otherwise) with respect to the Borrower or its
     Subsidiaries as any Agent may reasonably request.

          8.02  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 generally accepted
accounting principles and all requirements of law shall be made of all dealings
and transactions in relation to its business and activities.  Upon reasonable
notice, the Borrower will, and will cause each of its Subsidiaries to, permit
officers and designated representatives of any Agents or any Bank (at the
expense of such Agent or Bank) to visit and inspect, under guidance of officers
of its or such Subsidiary, any of the properties of the Borrower or any of its
Subsidiaries, and to examine the books of account of the Borrower and any of its
Subsidiaries and discuss the affairs, finances and accounts of the Borrower and
any of its Subsidiaries with, and be advised as to the same by, its and their
officers and independent accountants, all at such reasonable times and intervals
and to such reasonable extent as such Agent or such Bank may reasonably request
(provided that the Borrower shall have the right to take part in any discussions
with its independent accountants).

                                      -46-
<PAGE>

          8.03  Maintenance of Property; Insurance.  (a) Schedule VII sets forth
                ----------------------------------
a true and complete listing of all insurance maintained by, or on behalf of, the
Borrower and its Subsidiaries as of the Restatement Effective Date.  The
Borrower will, and will cause each of its Subsidiaries and Facility Managers to,
(i) keep all property necessary to the business of the Borrower and its
Subsidiaries in good working order and condition, ordinary wear and tear
excepted, (ii) maintain insurance on all its property in at least such amounts
and against at least such risks as is consistent and in accordance with industry
practice and (iii) furnish to the Administrative Agent, upon written request,
full information as to the insurance carried.  The Borrower will at all times
cause insurance to be maintained at levels which are consistent and in
accordance with industry practice for a company similarly situated.

          (b)   The Borrower will, and will cause each of its Subsidiaries and
Facility Managers to, at all times keep its property insured in favor of the
Collateral Agent, and all policies or certificates with respect to such
insurance (and any other insurance maintained by, or on behalf of, the Borrower
or any Subsidiary of the Borrower) (i) shall be endorsed to the Collateral
Agent's satisfaction for the benefit of the Collateral Agent (including, without
limitation, by naming the Collateral Agent as loss payee and/or additional
insured), (ii) shall state that such insurance policies shall not be cancelled
without at least 30 days' prior written notice thereof by the respective insurer
to the Collateral Agent (or such shorter period of time as a particular
insurance company policy generally provides), (iii) shall provide that the
respective insurers irrevocably waive any and all rights of subrogation with
respect to the Collateral Agent and the Secured Creditors, (iv) shall contain
the standard non-contributory mortgage clause endorsement in favor of the
Collateral Agent with respect to hazard insurance coverage, (v) shall, except in
the case of public liability insurance, provide that any losses shall be payable
notwithstanding (A) any act or neglect of the Borrower or any Subsidiary of the
Borrower, (B) the occupation or use of the properties for purposes more
hazardous than those permitted by the terms of the respective policy if such
coverage is obtainable at commercially reasonable rates and is of the kind from
time to time customarily insured against by Persons owning or using similar
property and in such amounts as are customary, (C) any foreclosure or other
proceeding relating to the insured properties or (D) any change in the title to
or ownership or possession of the insured properties and (vi) shall be deposited
with the Collateral Agent.

          (c)   If the Borrower or any of its Subsidiaries or any Facility
Manager shall fail to insure its property in accordance with this Section 8.03,
or if the Borrower or any of its Subsidiaries or any Facility Manager shall fail
to so endorse and deposit all policies or certificates with respect thereto, the
Collateral Agent shall have the right (but shall be under no obligation), after
giving the Borrower at least five Business Days' prior written notice, to
procure such insurance and the Borrower agrees to reimburse the Collateral Agent
for all reasonable costs and expenses of procuring such insurance.

          8.04  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 8.04 shall prevent (i) any of the transactions permitted in accordance
with Section 9.02 or (ii) the withdrawal by the Borrower or any of its
Subsidiaries of its

                                      -47-
<PAGE>

qualification as a foreign corporation in any jurisdiction where such withdrawal
would not reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole.

          8.05  Compliance with Statutes, etc.  The Borrower will, and will
                ------------------------------
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property
(including applicable Environmental Laws), except such noncompliances as would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.

          8.06  Compliance with Environmental Laws.  (a)  The Borrower will
                ----------------------------------
comply, and will cause each of its Subsidiaries to comply, with all
Environmental Laws applicable to the ownership or use of its Real Property now
or hereafter owned or operated by the Borrower or any of its Subsidiaries
(except such noncompliances as would not, individually or in the aggregate,
reasonably be expected to have the material adverse effect on the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole), will promptly
pay or cause to be paid all costs and expenses incurred in connection with such
compliance, and will keep or cause to be kept all such Real Property free and
clear of any Liens imposed pursuant to such Environmental Laws except for
Permitted Liens.  Neither the Borrower nor any of its Subsidiaries will
generate, use, treat, store, Release or dispose of, or knowingly permit the
generation, use, treatment, storage, Release or disposal of Hazardous Materials
on any Real Property now or hereafter owned or operated by the Borrower or any
of its Subsidiaries, or transport or permit the transportation of Hazardous
Materials to or from any such Real Property except for Hazardous Materials
generated, used, treated, stored, released or disposed of at any such Real
Properties in compliance with all applicable Environmental Laws (except such
noncompliances as would not, individually or in the aggregate, reasonably be
expected to have the material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole), and reasonably required
in connection with the operation, use and maintenance of the business or
operations of the Borrower or any of its Subsidiaries.

          (b)   To the extent any Credit Party delivers notice of the occurrence
of the environmental matters as described in Section 8.01(i), the Borrower will
provide, upon the written request of the Agents or the Required Banks, which
request shall specify in reasonable detail the basis therefor, at its sole cost
and expense, an environmental site assessment report concerning the relevant
Real Property now or hereafter owned or operated by such Credit Party, prepared
by an environmental consulting firm reasonably approved by the Agents,
indicating the presence or absence of Hazardous Materials and the potential cost
of any removal or remedial action in connection with any Hazardous Materials on
such Real Property.  If the Borrower fails to provide the same within 90 days
after such request was made, the Agents may order the same, and the Borrower
shall grant and hereby grants, to the Agents and the Banks and their agents
access to such Real Property and specifically grants, the Agents and the Banks
an irrevocable

                                      -48-
<PAGE>

non-exclusive license, subject to the rights of tenants, to undertake such an
assessment, all at the Borrower's reasonable expense.

          8.07  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 the Administrative Agent 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 participant or the Plan
administrator with respect thereto:  that a Reportable Event has occurred
(except to the extent that the Borrower has previously delivered to the Banks a
certificate and notices (if any) concerning such event pursuant to the next
clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13)
of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance
reporting requirement 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 Foreign
Pension Plan has not been timely made; that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current Liability; that proceedings may be or
have been instituted to terminate or appoint a trustee to administer a Plan
which is subject to Title IV of ERISA; that a proceeding has been instituted
pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan;
that the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or
may incur any material 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, 4069, 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) 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 required by Section
601 of ERISA) or any Plan or any Foreign Pension Plan.  The Borrower will
deliver to each of the Banks (i) 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 and (ii) copies of any records,
documents or other information that must be furnished to the PBGC with respect
to any Plan pursuant to Section 4010 of ERISA.  In addition to any certificates
or notices delivered to the Banks pursuant to the first sentence hereof, copies
of annual reports and any records, documents or other information required to be
furnished to the

                                      -49-
<PAGE>

PBGC, and any material notices received by the Borrower, any Subsidiary of the
Borrower or any ERISA Affiliate with respect to any Plan or Foreign Pension Plan
shall be delivered to the Banks no later than ten (10) days after the date such
annual report has been filed with the Internal Revenue Service or 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.

          8.08  End of Fiscal Years; Fiscal Quarters.  The Borrower will cause
                ------------------------------------
(i) each of its, and each of its Subsidiaries', fiscal years to end on December
31 and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end
on March 31, June 30, September 30 and December 31, provided any such fiscal
                                                    --------
year or fiscal quarter, as the case may be, may be modified so long as (i) no
Default or Event of Default then exists or would result therefrom, (ii) the
Borrower shall have given the Agents at least 10 Business Days' prior written
notice thereof and (iii) at the time of such modification, the Borrower and the
Required Banks shall have entered into certain technical amendments and
modifications to this Agreement to preserve the intent of the parties with
respect to the covenants and agreements set forth in Sections 9.08 through 9.11,
inclusive, the definitions of Applicable Commitment Percentage and Applicable
Margin and any other provisions of this Agreement deemed appropriate by the
Agents and the Borrower.

          8.09  Performance of Obligations.  The Borrower will, and will cause
                --------------------------
each of its Subsidiaries to, perform all of its obligations under the terms of
each mortgage, deed of trust, indenture, security agreement, loan agreement or
credit agreement and each other material agreement, contract or instrument by
which it or any Real Property is bound, except such non-performances as would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.

          8.10  Payment of Taxes.  The Borrower will pay and discharge, and will
                ----------------
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims for sums that have become due and payable which,
if unpaid, might become a Lien not otherwise permitted under Section 9.01(i);
provided, that neither the Borrower nor any of its Subsidiaries shall be
--------
required to pay any such tax, assessment, charge, levy or claim which is being
contested in good faith and by proper proceedings if it has maintained adequate
reserves with respect thereto in accordance with GAAP.

          8.11  [INTENTIONALLY OMITTED]

          8.12  Additional Security; Further Assurances.  (a)  On the
                ---------------------------------------
Restatement Effective Date and thereafter, at the reasonable request from time
to time by the Administrative Agent, the Borrower will, and will cause each of
the Subsidiary Guarantors to, grant to the Collateral Agent security interests
in such assets and properties (other than Real Property) of the Borrower and
such Subsidiary Guarantors, which assets and property are of the kind that are
the subject of the Pledge Agreement and/or the Security Agreement and which are
not covered by the original

                                      -50-
<PAGE>

Security Documents (collectively, the "Additional Security Documents"). All such
security interests shall be granted pursuant to documentation reasonably
satisfactory in form and substance to the Agents and shall constitute valid and
enforceable perfected security interests superior to and prior to the rights of
all third Persons and subject to no other Liens except for Permitted Liens. The
Additional Security Documents or instruments related thereto shall have been
duly recorded or filed in such manner and in such places as are required by law
to establish, perfect, preserve and protect the Liens in favor of the Collateral
Agent required to be granted pursuant to the Additional Security Documents and
all taxes, fees and other charges payable in connection therewith shall have
been paid in full.

          (b)   On the Restatement Effective Date and thereafter, the Borrower
will, and will cause each of the Subsidiary Guarantors to, at the expense of the
Borrower, take such further reasonable steps relating to the collateral covered
by any of the Security Documents as the Collateral Agent may reasonably require
which are necessary to maintain the liens and security interest pursuant to the
Security Documents.  Furthermore, the Borrower will cause to be delivered to the
Collateral Agent such opinions of counsel and other related documents as may be
reasonably requested by the Agents to assure itself that this Section 8.12 has
been complied with.

          (c)   The Borrower agrees that each action required above by this
Section 8.12 shall be completed within 90 days after such action is either
requested to be taken by the Agents or the Required Banks or required to be
taken by the Borrower and the Subsidiary Guarantors pursuant to the terms of
this Section 8.12; provided that (x) in no event will the Borrower be required
                   --------
to take any action, other than using its best efforts, to obtain consents from
third parties with respect to its compliance with this Section 8.12 and (y) the
Borrower shall not be deemed to be in default under its obligations under this
clause (c) to the extent that any action is not completed within the time
required hereunder solely by reason of the failure of a third Person to take
such actions provided that the Borrower has utilized, and continues to utilize,
its best efforts to cause such third Person to take such action.

          8.13  Foreign Subsidiaries Security.  If following a change in the
                -----------------------------
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower reasonably acceptable to the Agents does not within 30 days after a
request from the Agents or the Required Banks deliver evidence, in form and
substance mutually satisfactory to the Agents and the Borrower, with respect to
any Foreign Subsidiary of the Borrower which has not already had all of its
stock pledged pursuant to the Pledge Agreement that (i) a pledge of 66-2/3% or
more of the total combined voting power of all classes of capital stock of such
Foreign Subsidiary entitled to vote, (ii) the entering into by such Foreign
Subsidiary of a security agreement in substantially the form of the Security
Agreement and (iii) the entering into by such Foreign Subsidiary of a guaranty
in substantially the form of the Subsidiaries Guaranty, in any such case would
cause the undistributed earnings of such Foreign Subsidiary as determined for
Federal income tax purposes to be treated as a deemed dividend to such Foreign
Subsidiary's United States parent for Federal income tax purposes, then in the
case of a failure to deliver the evidence described in clause (i) above, that
portion of such Foreign Subsidiary's outstanding capital stock not theretofore
pledged pursuant to the Pledge

                                      -51-
<PAGE>

Agreement shall be pledged to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement
in substantially similar form, if needed), and in the case of a failure to
deliver the evidence described in clause (ii) above, such Foreign Subsidiary (to
the extent that same is a Wholly-Owned Foreign Subsidiary) will execute and
deliver the Security Agreement (or another security agreement in substantially
similar form, if needed), granting the Secured Creditors a security interest in
all of such Foreign Subsidiary's assets and securing the Obligations of the
Borrower under the Credit Documents and under any Interest Rate Protection
Agreement or Other Hedging Agreement and, in the event the Subsidiaries Guaranty
shall have been executed by such Foreign Subsidiary, the obligations of such
Foreign Subsidiary thereunder, and in the case of a failure to deliver the
evidence described in clause (iii) above, such Foreign Subsidiary (to the extent
that same is a Wholly-Owned Foreign Subsidiary) will execute and deliver the
Subsidiaries Guaranty (or another guaranty in substantially similar form, if
needed), guaranteeing the Obligations of the Borrower under the Credit Documents
and under any Interest Rate Protection Agreement or Other Hedging Agreement, in
each case to the extent that the entering into such Security Agreement or
Subsidiaries Guaranty is permitted by the laws of the respective foreign
jurisdiction and with all documents delivered pursuant to this Section 8.13 to
be in form and substance reasonably satisfactory to the Agents.

          8.14  Hotel Property Management.  The Borrower will take, and will
                -------------------------
cause each of its Subsidiaries to take, all action necessary so that each Hotel
Property owned or leased by a Subsidiary of the Borrower is managed by either
the Subsidiary Guarantor owning such Hotel Property or another Wholly-Owned
Subsidiary of the Borrower, provided that such Hotel Property may be managed by
a Person other than such owner or such Wholly-Owned Subsidiary of the Borrower
so long as (i) such manager is a Permitted Facility Manager, (ii) such Permitted
Facility Manager executes and delivers a Hotel Property Management Agreement and
Manager Subordination Agreement.

          8.15  Maintenance of Corporate Separateness.  (a)  The Borrower will,
                -------------------------------------
and will cause each of its Unrestricted Subsidiaries to, satisfy customary
corporate formalities, including the holding of regular board of directors' and
shareholders' meetings or action by directors or shareholders without a meeting
and the maintenance of corporate offices and records.  Neither the Borrower nor
any of its Subsidiaries will make any payment to a creditor of any Unrestricted
Subsidiary in respect of any liability of any Unrestricted Subsidiary, and no
bank account of any Unrestricted Subsidiary shall be commingled with any bank
account of the Borrower or any of its Subsidiaries.  Any financial statements
distributed to any creditors of any Unrestricted Subsidiary shall clearly
establish or indicate the corporate separateness of such Unrestricted Subsidiary
from the Borrower and its Subsidiaries.  Finally, neither the Borrower nor any
of its Subsidiaries shall take any action, or conduct its affairs in a manner,
which is likely to result in the corporate existence of the Borrower or any of
its Subsidiaries or Unrestricted Subsidiaries being ignored, or in the assets
and liabilities of the Borrower or any of its Subsidiaries being substantively
consolidated with those of any other such Person or any Unrestricted Subsidiary
in a bankruptcy, reorganization or other insolvency proceeding.

                                      -52-
<PAGE>

          (b)   All Hotel Properties owned by a Subsidiary shall be owned by a
Wholly-Owned Subsidiary of the Borrower which is a Foreign Subsidiary or by a
Subsidiary Guarantor.  The Borrower shall not directly own any Hotel Property.
All Hotel Properties owned by a Subsidiary which are located in the United
States will be owned by a Subsidiary Guarantor which is organized under the laws
of a state in the United States.

          SECTION 9.  Negative Covenants.  The Borrower covenants and agrees
                      ------------------
that on and after the Restatement Effective Date and until the Total Commitments
and all Letters of Credit have terminated and the Loans, Notes and Unpaid
Drawings, together with interest, Fees and all other Obligations incurred
hereunder and thereunder, are paid in full:

          9.01  Liens.  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, whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets
(including sales of accounts receivable with recourse to the Borrower or any
Subsidiary of the Borrower), or assign any right to receive income or permit the
filing of any financing statement under the UCC or any other similar notice of
Lien under any similar recording or notice statute, provided that the provisions
                                                    --------
of this Section 9.01 shall not prevent the creation, incurrence, assumption or
existence of the following Liens (collectively, "Permitted Liens"):

          (i)   inchoate Liens for taxes, assessments or governmental charges or
     levies not yet due and payable or Liens for taxes, assessments or
     governmental charges or levies being contested in good faith and by
     appropriate proceedings for which adequate reserves have been established
     in accordance with generally accepted accounting principles;

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

          (iii) Liens in existence on the Restatement Effective Date which are
     listed, and the property subject thereto described, in Schedule VIII, but
     only to the respective date, if any, set forth in such Schedule VIII for
     the removal and termination of any such Liens, but no renewals or
     extensions of such Liens shall be permitted;

          (iv)  Permitted Encumbrances;

          (v)   Liens created pursuant to the Security Documents;

                                      -53-
<PAGE>

          (vi)   leases or subleases granted to other Persons not materially
     interfering with the conduct of the business of the Borrower or any of its
     Subsidiaries or the interest of a ground lessor arising by operation of law
     in real property interests located on the property subject to such ground
     lease;

          (vii)  Liens upon assets subject to Capitalized Lease Obligations to
     the extent such Capitalized Lease Obligations are permitted by Section
     9.04(iii), provided that (x) such Liens only serve to secure the payment of
                --------
     Indebtedness arising under such Capitalized Lease Obligation and (y) the
     Lien encumbering the asset giving rise to the Capitalized Lease Obligation
     does not encumber any other asset of the Borrower or any of the Borrower's
     Subsidiaries;

          (viii) Liens placed upon equipment or machinery used in the ordinary
     course of business of the Borrower or any of its Subsidiaries at the time
     of acquisition thereof by the Borrower or any such Subsidiary or within 90
     days thereafter to secure Indebtedness incurred to pay all or a portion of
     the purchase price thereof, provided that (x) the aggregate outstanding
                                 --------
     principal amount of all Indebtedness secured by Liens permitted by this
     clause (viii) shall not at any time exceed $15,000,000 and (y) in all
     events, the Lien encumbering the equipment or machinery so acquired does
     not encumber any other asset of the Borrower or such Subsidiary;

          (ix)   easements, rights-of-way, restrictions, encroachments and other
     similar charges or encumbrances, and minor title deficiencies, in each case
     not securing Indebtedness and not materially interfering with the conduct
     of the business of the Borrower or any of its Subsidiaries;

          (x)    Liens arising from precautionary UCC financing statement
     filings in respect of operating leases;

          (xi)   statutory and common law landlords' liens under leases to which
     the Borrower or any of its Subsidiaries is a party;

          (xii)  Liens (other than Liens created or imposed under ERISA)
     incurred in the ordinary course of business in connection with workers'
     compensation, unemployment insurance and other types of social security, or
     to secure the performance of tenders, statutory obligations, surety bonds,
     bids, government contracts, performance and return-of-money bonds and other
     similar obligations incurred in the ordinary course of business (exclusive
     of obligations in respect of the payment for borrowed money), provided that
                                                                   --------
     the aggregate outstanding amount of obligations secured by Liens permitted
     by this clause (xii) (and the value of all cash and property encumbered by
     Liens permitted pursuant to this clause (xii)) shall not at any time exceed
     $10,000,000;

          (xiii) Liens arising out of judgments or awards in respect of which
     the Borrower or any of the Borrower's Subsidiaries shall in good faith be
     prosecuting an appeal or proceedings for review in respect of which there
     shall have been secured a subsisting stay

                                      -54-
<PAGE>

     of execution pending such appeal or proceedings, provided that the
                                                      --------
     aggregate amount of all such judgments or awards does not exceed
     $10,000,000 at any time outstanding;

          (xiv)  Liens on Escrowed Securities, for the benefit of the holders of
     the New Subordinated Notes, to secure payments on or with respect to the
     New Subordinated Notes or interest thereon, provided that such Liens are
     established in connection with the issuance of such New Subordinated Notes
     and such Escrowed Securities and the proceeds thereof are used solely to
     make payments in respect of the related New Subordinated Notes;

          (xv)   Liens on property or assets acquired pursuant to a Hotel
     Property acquisition effected pursuant to Section 9.02(viii), or on
     property or assets of a Subsidiary of the Borrower in existence at the time
     such property or assets are acquired pursuant to such Hotel Property
     acquisition, provided that (i) any Indebtedness that is secured by such
                  --------
     Liens is permitted to exist under Section 9.04(ix) and (ii) such Liens are
     not incurred in connection with or in anticipation of such Hotel Property
     acquisition and do not attach to any other asset of the Borrower or any of
     its Subsidiaries;

          (xvi)  Liens upon cash and Cash Equivalents not exceeding $15,000,000
     at any one time to secure Indebtedness in respect of any letters of credit
     issued pursuant to Section 9.04(x); and

          (xvii) additional Liens incurred by the Borrower and its Subsidiaries
     so long as the aggregate amount of the Indebtedness and other obligations
     secured thereby do not exceed $1,000,000.

          9.02   Consolidation, Merger, Purchase or Sale of Assets, etc.  The
                 -------------------------------------------------------
Borrower will not, and will not permit any of the Borrower's Subsidiaries to,
wind up, liquidate or dissolve its affairs or enter into any transaction of
merger or consolidation, or convey, sell, lease or otherwise dispose of (or
agree to do any of the foregoing at any future time) all or any part of its
property or assets, or enter into any sale-leaseback transactions, or purchase
or otherwise acquire (in one or a series of related transactions) any part of
the property or assets (other than purchases or other acquisitions of inventory,
materials and equipment in the ordinary course of business) of any Person,
except that:

          (i)    Capital Expenditures by the Borrower and its Subsidiaries shall
     be permitted to the extent not in violation of Section 9.07;

          (ii)   the Borrower and each of its Subsidiaries may in the ordinary
     course of business, sell or otherwise dispose of equipment and materials
     which, in the reasonable opinion of such Person, are obsolete, uneconomic
     or no longer useful in the conduct of such Person's business;

          (iii)  Investments may be made to the extent permitted by Section
     9.05;

                                      -55-
<PAGE>

          (iv)   the Borrower and each of its Subsidiaries may lease (as lessee)
     real or personal property in the ordinary course of business (so long as
     any such lease does not create a Capitalized Lease Obligation unless
     permitted by Section 9.04(iii));

          (v)    the Borrower and each of its Subsidiaries may make sales of
     inventory in the ordinary course of business;

          (vi)   each of the Borrower and its Subsidiaries may sell other assets
     (other than less than all of the capital stock of any Subsidiary held by
     the Borrower and its Subsidiaries) so long as (i) no Default or Event of
     Default then exists or would result therefrom, (ii) each such sale is in an
     arm's-length transaction and the Borrower or the respective Subsidiary
     receives at least fair market value (as determined in good faith by the
     Borrower or such Subsidiary, as the case may be), (iii) at least 75% of the
     total consideration received by the Borrower or such Subsidiary is cash and
     is received at the time of the consummation of such sale and (iv) the
     amount of the proceeds received from the assets sold pursuant to this
     clause (vi) shall not exceed (A) $10,000,000 per such sale (or in a series
     of related sales) and (B) $25,000,000 in the aggregate for all such sales
     in any fiscal year of the Borrower;

          (vii)  each of the Borrower and its Subsidiaries may sell other assets
     (other than less than all of the capital stock of any Subsidiary held by
     the Borrower and its Subsidiaries) so long as (i) no Default or Event of
     Default then exists or would result therefrom, (ii) each such sale is in an
     arm's-length transaction and the Borrower or the respective Subsidiary
     receives at least fair market value (as determined in good faith by the
     Borrower or such Subsidiary, as the case may be), (iii) at least 75% of the
     total consideration received by the Borrower or such Subsidiary is cash and
     is received at the time of the consummation of such sale, (iv) the
     aggregate amount of the proceeds received from all assets sold pursuant to
     this clause (vii) shall not exceed $35,000,000 in any fiscal year of the
     Borrower and (v) the Net Sale Proceeds therefrom are either applied as
     provided in Section 4.02(e) or reinvested in assets to the extent permitted
     by Section 4.02(e);

          (viii) any of the Borrower's Subsidiaries may acquire or construct
     Hotel Properties (including by purchasing the capital stock or partnership
     interests of the Person or Persons that own such Hotel Properties);

          (ix)   the Borrower may transfer assets to a Subsidiary Guarantor, and
     any Wholly-Owned Subsidiary of the Borrower may merge with and into any
     Subsidiary Guarantor which is a Wholly-Owned Subsidiary, in each case so
     long as the respective Subsidiary Guarantor is the surviving corporation of
     any such merger;

          (x)    each of the Borrower and its Subsidiaries may grant leases or
     subleases to other Persons not materially interfering with the conduct of
     the business of the Borrower or any of its Subsidiaries; and

                                      -56-
<PAGE>

          (xi)   each of the Borrower and its Subsidiaries may, in the ordinary
     course of business, license, as licensor or licensee, patents, trademarks,
     copyrights and know-how to third Persons and to one another so long as any
     such license by the Borrower or any other Credit Party in its capacity as
     licensor is permitted to be assigned pursuant to the Security Agreement (to
     the extent that the security interest in such patents, trademarks,
     copyrights and know-how is granted thereunder) and does not otherwise
     prohibit the granting of a Lien by the Borrower or any other Credit Party
     pursuant to the Security Agreement in the intellectual property covered by
     such license.

To the extent the Required Banks or all of the Banks, as the case may be, waive
the provisions of this Section 9.02 with respect to the sale of any Collateral,
or any Collateral is sold or otherwise disposed of as permitted by this Section
9.02, such Collateral shall be sold or otherwise disposed of free and clear of
the Liens created by the Security Documents, and the Administrative Agent and
the Collateral Agent shall be authorized to take any actions deemed appropriate
in order to effect the foregoing.

          9.03   Dividends.  The Borrower will not, and will not permit any of
                 ---------
its Subsidiaries to, authorize, declare or pay any Dividends with respect to the
Borrower or any of its Subsidiaries, except that:

          (i)    any Subsidiary of the Borrower may pay cash Dividends to the
     Borrower or to a Wholly-Owned Subsidiary of the Borrower,

          (ii)   so long as there shall exist no Default under Section 10.01 or
     Event of Default (both before and after giving effect to the payment
     thereof) any non-Wholly-Owned Subsidiary of the Borrower may pay cash
     Dividends to its shareholders or partners generally so long as the Borrower
     or its respective Subsidiary which owns the equity interest or interests in
     the Subsidiary paying such Dividends receives at least its proportionate
     share thereof (based upon its relative holdings of equity interests in the
     Subsidiary paying such Dividends and taking into account the relative
     preferences, if any, of the various classes of equity interests in such
     Subsidiary),

          (iii)  so long as there shall exist no Default or Event of Default
     (both before and after giving effect to the payment thereof), the Borrower
     may pay Dividends so long as the aggregate amount of Dividends paid by the
     Borrower pursuant to this clause (iii) shall not exceed $10,000,000 in any
     fiscal year of the Borrower and

          (iv)   so long as there exist no Default or Event of Default (both
     before and after giving effect to the payment thereof), the Borrower may
     pay Dividends to repurchase shares of the Borrower's capital stock so long
     as the aggregate amount of Dividends paid by the Borrower pursuant to this
     clause (iv), together with any amounts paid in cash to make Permitted
     Redemptions, shall not exceed in the aggregate $75,000,000.

For purposes of this Section 9.03, (a) the amount of any non-cash Dividends
shall be deemed to be the greater of the book value or the fair market value
thereof at the time of the declaration thereof, and (b) in the event that a
Dividend made by Borrower meets the criteria of more than one of the permitted
Dividends described in the above clauses, then Borrower, in its sole

                                      -57-
<PAGE>

discretion, shall only be required to include the amount and type of such
Dividend in only one of such clauses.

          9.04   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:

          (i)    Indebtedness incurred pursuant to this Agreement and the other
     Credit Documents;

          (ii)   Existing Indebtedness to the extent the same is listed on
     Schedule VI, but no refinancings or renewals thereof;

          (iii)  Indebtedness of the Borrower and its Subsidiaries evidenced by
     Capitalized Lease Obligations to the extent permitted pursuant to Section
     9.07, provided that in no event shall the aggregate principal amount of
           --------
     Capitalized Lease Obligations permitted by this clause (iii) exceed
     $15,000,000 at any time outstanding;

          (iv)   Indebtedness of the Borrower and its Subsidiaries subject to
     Liens permitted under Section 9.01(viii) or to the extent that such
     Indebtedness does not constitute Indebtedness of a type described in clause
     (i), (ii), (iii), (iv) or (v) of the definition of Indebtedness, Liens
     permitted under Section 9.01(xii) or (xiii);

          (v)    intercompany Indebtedness among the Borrower and Subsidiaries
     of the Borrower to the extent permitted by Section 9.05(iv);

          (vi)   Indebtedness of the Borrower under Interest Rate Protection
     Agreements;

          (vii)  Indebtedness under Other Hedging Agreements providing
     protection against fluctuations in currency values in connection with the
     Borrower's or any of its Subsidiaries' ordinary course of business
     operations so long as management of the Borrower or such Subsidiary, as the
     case may be, has determined in good faith that the entering into of such
     Other Hedging Agreements are bona fide hedging activities;

          (viii) unsecured subordinated Indebtedness of the Borrower (the "New
     Subordinated Notes") including the 9.15% Senior Subordinated Notes and any
     Qualified Convertible Subordinated Notes, so long as (w) the aggregate
     initial principal amount thereof (exclusive of any initial Escrowed Amount
     in respect thereof) does not exceed the Aggregate Permitted Amount, (x)
     except in the case of the 9.15% Senior Subordinated Notes, at least 10 days
     prior to the issuance thereof, the Borrower shall have delivered to each of
     the Banks substantially final drafts of the documents pursuant to which the
     New Subordinated Notes are to be issued and with any changes thereto made
     after the initial delivery of such documents to be delivered to the Agents
     and with any significant changes thereto made after such initial delivery
     to be delivered to each of the Banks at least three days prior to the
     issuance of such New Subordinated Notes, (y) except in the case of the
     9.15% Senior Subordinated Notes, all terms and conditions of the New
     Subordinated Notes and the documentation with respect thereto (including,
     without

                                      -58-
<PAGE>

     limitation, the maturity thereof, the interest rate applicable thereto, the
     required repayments with respect thereto, the covenants, events of default
     and ranking provisions with respect thereto) shall be in form and substance
     reasonably satisfactory to each Agent, and (z) no Default or Event of
     Default then exists or would result therefrom;

          (ix)  Indebtedness of a Subsidiary acquired pursuant to a Hotel
     Property acquisition, provided that (i) such Indebtedness was not incurred
                           --------
     in connection with or in anticipation of such Hotel Property acquisition,
     (ii) such Indebtedness does not constitute Indebtedness for borrowed money,
     it being understood and agreed that Capitalized Lease Obligations and
     purchase money Indebtedness shall not constitute Indebtedness for borrowed
     money for purposes of this clause (ix), and (iii) at the time of such Hotel
     Property acquisition such Indebtedness does not exceed 10% of the total
     value of the assets of the Subsidiary so acquired; and

          (x)   additional Indebtedness of the Borrower and its Subsidiaries not
     to exceed $15,000,000 in aggregate principal amount at any time
     outstanding.

          9.05  Advances, Investments and Loans.  The Borrower will not, and
                -------------------------------
will not permit any of its Subsidiaries to, directly or indirectly, 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, or purchase or own a futures contract or
otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, or hold any
cash or Cash Equivalents (each of the foregoing an "Investment" and,
collectively, "Investments"), except that the following shall be permitted:

          (i)   the Borrower and its Subsidiaries may acquire and hold accounts
     receivables owing to any of them, if created or acquired in the ordinary
     course of business and payable or dischargeable in accordance with
     customary terms, and the Borrower and its Subsidiaries may own Investments
     received in connection with the bankruptcy or reorganization of suppliers
     and customers and in settlement of delinquent obligations of, and other
     disputes with, customers and suppliers arising in the ordinary course of
     business;

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

          (iii) the Borrower may enter into Interest Rate Protection
     Agreements;

          (iv)  the Borrower and its Subsidiaries may hold and to the extent
     permitted by Section 9.16 acquire Investments in Subsidiaries of the
     Borrower and may make additional Investments in such Subsidiaries so long
     as (i) no more than $10,000,000 in aggregate principal amount of
     Investments may be outstanding at any one time to Subsidiaries that are not
     Subsidiary Guarantors (determined without regard to any write-downs or
     write-offs thereof), (ii) each intercompany loan or advance, the principal
     amount of which exceeds $500,000, shall be evidenced by a note that is
     pledged to the

                                      -59-
<PAGE>

     Collateral Agent pursuant to (and to the extent required by) the Pledge
     Agreement and (iii) to the extent required by Section 9.16 the capital
     stock of the Subsidiary in which such Investments are made is pledged to
     the Collateral Agent pursuant to (and to the extent required by) the Pledge
     Agreement;

          (v)    the Borrower and its Subsidiaries may make loans and advances
     in the ordinary course of business to their respective employees so long as
     the aggregate principal amount thereof at any time outstanding (determined
     without regard to any write-downs or write-offs of such loans and advances)
     shall not exceed $5,000,000;

          (vi)   the Borrower and its Subsidiaries may enter into Other Hedging
     Agreements to the extent permitted by Section 9.04(vii);

          (vii) the Borrower and its Subsidiaries may receive non-cash
     consideration in connection with any asset sale permitted by Sections
     9.02(vi) and (vii) but only to the extent set forth in such Sections
     9.02(vi) and (vii);

          (viii) the Borrower may purchase securities (the "Escrowed
     Securities") with the proceeds of the Escrowed Amount at such time;

          (ix)   the Borrower and its Subsidiaries may acquire Hotel Properties
     which may consist in whole or in part of stock acquisitions (and otherwise
     in compliance with this Agreement); and

          (x)    the Borrower and its Subsidiaries may make Investments in
     Unrestricted Subsidiaries effected through the issuance of the Borrower's
     common stock; and

          (xi)   in addition to Investments permitted by clauses (i) through (x)
     above, the Borrower and its Wholly-Owned Subsidiaries may make Investments
     in Unrestricted Subsidiaries so long as the aggregate amount invested
     pursuant to this clause (xi) does not exceed $25,000,000 in the aggregate.
     The Investments permitted under clause (x) above shall not be counted
     against the limit set forth in this clause (xi).

          9.06   Transactions with Affiliates.  The Borrower will not, and will
                 ----------------------------
not permit any of its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
(x) any Affiliate of the Borrower or any of its Subsidiaries or (y) any
Unrestricted Subsidiary, other than in the ordinary course of business and on
terms and conditions substantially as favorable to the Borrower or such
Subsidiary as would reasonably be obtained by the Borrower or such Subsidiary at
that time in a comparable arm's-length transaction with a Person other than an
Affiliate, except that notwithstanding the foregoing:

          (i)    Dividends may be paid to the extent provided in Section 9.03;

          (ii)   loans may be made and other transactions may be entered into by
     and among the Borrower and the Borrower's Subsidiaries to the extent
     permitted by Section 9.02, 9.04 or 9.05;

                                      -60-
<PAGE>

          (iii)  customary fees may be paid to non-officer directors of the
     Borrower; and

          (iv)   Subsidiaries of the Borrower may pay management and similar
     fees to the Borrower or any Wholly-Owned Subsidiary of the Borrower.

          9.07   Capital Expenditures.  (a)  The Borrower will not, and will not
                 --------------------
permit any of its Subsidiaries to make any Capital Expenditures (other than such
Capital Expenditures of the type permitted by clauses (b), (c) and (d) hereof),
except that the Borrower and its Subsidiaries may make Capital Expenditures in
an aggregate amount not to exceed the Permitted CapEx Amount at the time of such
Capital Expenditure.

          (b)    In addition to the foregoing, the Borrower and its Subsidiaries
may effect construction and acquisitions of Hotel Properties.

          (c)    In addition to the Capital Expenditures permitted pursuant to
preceding clauses (a) and (b) the Borrower and its Subsidiaries may make
additional Capital Expenditures consisting of the reinvestment of proceeds of
Recovery Events not required to be applied as a mandatory repayment pursuant to
Section 4.02(g).

          (d)    In addition to the Capital Expenditures permitted pursuant to
preceding clauses (a), (b) and (c) the Borrower and its Subsidiaries may make
additional Capital Expenditures in an aggregate amount not to exceed the CapEx
Cumulative Basket at the time of such Capital Expenditure.

          (e)    For purposes of determining compliance with Sections 9.07(a)
and (d), the amount of Capital Expenditures shall be first applied to the amount
permitted under Section 9.07(a) at the time of such Capital Expenditures to the
extent permitted thereby and thereafter to the amount permitted under Section
9.07(d).

          9.08   Consolidated Interest Coverage Ratio.  The Borrower will not
                 ------------------------------------
permit the Consolidated Interest Coverage Ratio for any Test Period ending
during a fiscal quarter of the Borrower set forth below to be less than the
ratio set forth opposite such fiscal quarter below:

     =============================================================
               Fiscal Quarter Ended in                 Ratio
               -----------------------                 -----

     -------------------------------------------------------------
        June 2000                                     2.00:1.00
     -------------------------------------------------------------
        September 2000                                2.00:1.00
     -------------------------------------------------------------
        December 2000                                 2.00:1.00
     -------------------------------------------------------------
        March 2001                                    2.25:1.00
        and each fiscal quarter thereafter
     =============================================================

          9.09   Maximum Run Rate Leverage Ratio.  The Borrower will not permit
                 -------------------------------
the Run Rate Leverage Ratio at any time during a fiscal quarter of the Borrower
set forth below to be greater than the ratio set forth opposite such fiscal
quarter below:

                                      -61-
<PAGE>

     =============================================================
         Fiscal Quarter Ended in                      Ratio
         -----------------------                      -----

     -------------------------------------------------------------
         June 2000                                   5.75:1.00
         and each fiscal quarter thereafter
     =============================================================

          9.10  Maximum Senior Debt Leverage Ratio.  The Borrower will not
                ----------------------------------
permit the Senior Debt Leverage Ratio at any time during a fiscal quarter of the
Borrower set forth below to be greater than the ratio set forth opposite such
fiscal quarter below:

     =============================================================
            Fiscal Quarter Ended in                      Ratio
            -----------------------                      -----
        June 2000                                      4.25:1.00
     -------------------------------------------------------------
        September 2000                                 4.25:1.00
     -------------------------------------------------------------
        December 2000                                  4.25:1.00
     -------------------------------------------------------------
        March 2001                                     4.25:1.00
     -------------------------------------------------------------
        June 2001                                      4.25:1.00
     -------------------------------------------------------------
        September 2001                                 4.25:1.00
     -------------------------------------------------------------
        December 2001                                  4.00:1.00
        and each fiscal quarter thereafter
     =============================================================

          9.11  Maximum Debt to Capitalization Ratio.  The Borrower will not
                ------------------------------------
permit Consolidated Debt at any time to be more than 55% of Consolidated
Capitalization at such time.

          9.12  Limitation on Payments of Certain Indebtedness; Modifications of
                ----------------------------------------------------------------
Certain Indebtedness; Modifications of Certificate of Incorporation, By-Laws and
--------------------------------------------------------------------------------
Certain Agreements; etc.  The Borrower will not, and will not permit any of the
------------------------
Borrower's Subsidiaries to, (i) except for Permitted Redemptions, make (or give
any notice in respect of) any voluntary or optional payment or prepayment on or
redemption or acquisition for value of, or any prepayment or redemption as a
result of any change of control or similar event of, including, in each case
without limitation, by way of depositing with the trustee with respect thereto
money or securities before due for the purpose of paying when due, any New
Subordinated Notes, (ii) amend or modify, or permit the amendment or
modification of, any provision of the New Subordinated Notes or any agreement
(including, without limitation, any purchase agreement, indenture or loan
agreement) related thereto other than amendments not adverse to the interests of
the Banks in any material respect provided that a copy of such amendment is
delivered to the Agents at least 10 Business Days prior to the execution thereof
by the Borrower, (iii) amend or modify, or permit the amendment or modification
of, any provision of any Hotel Property Management Agreement between the
Borrower and a Person other than a Subsidiary Guarantor (other than any
amendment or modification thereto which would not violate or be inconsistent
with any of the terms or provisions of this Agreement and the other Credit
Documents and could not be adverse to the interests of the Banks in any respect)
or enter into any new management agreement (other than Hotel Property Management
Agreements, if applicable, entered into in connection with the acquisition or
construction of new Hotel Properties), or (iv) amend, modify or change its
certificate of incorporation (including, without limitation, by the filing or
modification of any

                                      -62-
<PAGE>

certificate of designation) or by-laws, or any agreement entered into by it,
with respect to its capital stock, or enter into any new agreement with respect
to its capital stock, other than any amendments, modifications or changes
pursuant to this clause (iv) or any such new agreements which are not adverse in
any respect to the interests of the Banks.

          9.13  Limitation on Certain Restrictions on Subsidiaries.  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 Subsidiary of the Borrower 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 of
its Subsidiaries, or pay any Indebtedness owed to the Borrower or any Subsidiary
of the Borrower, (b) make loans or advances to the Borrower or any Subsidiary of
the Borrower or (c) transfer any of its properties or assets to the Borrower or
any Subsidiary of the Borrower, except in each case for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) this
Agreement and the other Credit Documents, (iii) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of the
Borrower or any Subsidiary of the Borrower, (iv) customary provisions
restricting assignment of any licensing agreement entered into by the Borrower
or any Subsidiary of the Borrower in the ordinary course of business and (v)
customary provisions restricting the transfer of assets subject to Liens
permitted under Section 9.01(vii) or (viii).

          9.14  Limitation on Issuance of Capital Stock.  (a)  The Borrower will
                ---------------------------------------
not issue (i) any preferred stock other than Qualified Preferred Stock or (ii)
any redeemable common stock.

          (b)   The Borrower will 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
(i) for transfers and replacements of then outstanding shares of capital stock,
(ii) for stock splits, stock dividends and similar or additional issuances which
do not decrease the percentage ownership of the Borrower or any of the
Borrower's Subsidiaries in any class of the capital stock of such Subsidiary,
(iii) to qualify directors to the extent required by applicable law, (iv) for
issuances by newly created or acquired Subsidiaries in accordance with the terms
of this Agreement or (v) issuances of capital stock to the Borrower or a Wholly-
Owned Subsidiary provided that such capital stock is pledged to the Collateral
Agent pursuant to the Security Documents.

          9.15  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 the Borrower and its Subsidiaries are engaged on the
Restatement Effective Date and reasonable extensions thereof and reasonably
related thereto.

          9.16  Limitation on Creation of Subsidiaries.  Notwithstanding
                --------------------------------------
anything to the contrary contained in this Agreement, the Borrower will not, and
will not permit any of its Subsidiaries to establish, create or acquire after
the Restatement Effective Date any Subsidiary, provided that the Borrower and
                                               --------
its Wholly-Owned Subsidiaries shall be permitted to (i) establish or create one
or more Wholly-Owned Subsidiaries so long as within a reasonable time from such

                                      -63-
<PAGE>

establishment or creation (x) the capital stock of such new Wholly-Owned
Subsidiary that is owned by any Credit Party is pledged pursuant to, and to the
extent required by, the Pledge Agreement and the certificates representing such
stock, together with stock powers duly executed in blank, are delivered to the
Collateral Agent for the benefit of the Secured Creditors, (y) such new Wholly-
Owned Subsidiary (other than a Wholly-Owned Foreign Subsidiary, except to the
extent otherwise required pursuant to Section 8.13) executes a counterpart of
the Subsidiaries Guaranty, the Pledge Agreement and the Security Agreement, and
(z) such new Wholly-Owned Subsidiary, to the extent requested by the Agents or
the Required Banks, takes all actions required pursuant to Section 8.12 and (ii)
acquire a Person which immediately upon such acquisition will constitute a
Subsidiary of the Borrower in connection with the acquisition of a Hotel
Property so long as within a reasonable time from such acquisition (x) the
capital stock of such Subsidiary that is owned by any Credit Party is pledged
pursuant to, and to the extent required by, the Pledge Agreement and the
certificates representing such stock, together with stock powers duly executed
in blank, are delivered to the Collateral Agent for the benefit of the Secured
Creditors, (y) such Subsidiary (including any such Subsidiary which is a Foreign
Subsidiary) executes a counterpart of the Subsidiaries Guaranty, the Pledge
Agreement and the Security Agreement, and (z) such Subsidiary, to the extent
requested by the Agents or the Required Banks, takes all actions required
pursuant to Section 8.12.  In addition, each such Subsidiary shall execute and
deliver, or cause to be executed and delivered, all other relevant documentation
of the type described in Section 5 as such Subsidiary would have had to deliver
if such new Wholly-Owned Subsidiary were a Credit Party on the Restatement
Effective Date.

          9.17   Representative.  The Borrower will not, and will not permit any
                 --------------
of its Subsidiaries to, designate any holder of Indebtedness, other than the
Banks or their representative, to deliver blockage notices which the holders of
senior debt are permitted to provide under the New Subordinated Notes.

          SECTION 10.  Events of Default.  Upon the occurrence of any of the
                       -----------------
following specified events (each an "Event of Default"):

          10.01  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 Business Days, in the payment when
due of any interest on any Loan or Note, any Unpaid Drawing or any Fees or any
other amounts owing hereunder or under any other Credit Document; or

          10.02  Representations, etc.  Any representation or warranty made by
                 ---------------------
any Credit Party herein or in any other Credit Document or in any certificate
delivered to any Agent or any Bank pursuant hereto or thereto shall prove to be
untrue in any material respect on the date as of which made or deemed made; or

          10.03  Covenants.  Any Credit Party shall (i) default in the due
                 ---------
performance or observance by it of any term, covenant or agreement contained in
Section 9 or (ii) default in the due performance or observance by it of any
other term, covenant or agreement contained in this Agreement or any other
Credit Document (other than as provided in Sections 10.01 and 10.02)

                                      -64-
<PAGE>

and such default shall continue unremedied for a period of 45 days after written
notice to the Borrower by the Administrative Agent or the Required Banks; or

          10.04  Default Under Other Agreements.  (i)  The Borrower or any of
                 ------------------------------
its Subsidiaries shall (x) default in any payment of any Indebtedness (other
than the Obligations) beyond the period of grace or cure, if any, provided in
the instrument or agreement under which such Indebtedness was created or (y)
default in the observance or performance of any agreement or condition relating
to any Indebtedness (other than the Obligations) 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 (ii) any Indebtedness (other than
the Obligations) of the Borrower or any of its Subsidiaries shall be declared to
be (or shall become) due and payable, or required to be prepaid other than by a
regularly scheduled required prepayment (including, without limitation, by
reason of the occurrence of a change of control or other similar event), prior
to the stated maturity thereof, provided that it shall not be a Default or an
                                --------
Event of Default under clauses (i) or (ii) of this Section 10.04 unless the
aggregate outstanding principal amount of all Indebtedness as described in such
clauses (i) and (ii) is at least $15,000,000; or

          10.05  Bankruptcy, etc.  The Borrower or any of its Subsidiaries
                 ----------------
(other than an Immaterial Subsidiary) 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 any of its Subsidiaries
(other than an Immaterial Subsidiary) and the petition is not controverted
within 15 days, or is not dismissed within 60 days, after commencement of the
case; or a 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 any
of its Subsidiaries (other than an Immaterial Subsidiary) or the Borrower or any
of its Subsidiaries (other than an Immaterial Subsidiary) 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 any
of its Subsidiaries (other than an Immaterial Subsidiary), or there is commenced
against the Borrower or any of its Subsidiaries (other than an Immaterial
Subsidiary) any such proceeding which remains undismissed for a period of 60
days, or the Borrower or any of its Subsidiaries (other than an Immaterial
Subsidiary) 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
any of its Subsidiaries (other than an Immaterial Subsidiary) 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 60 days; or the
Borrower or any of its Subsidiaries (other than an Immaterial Subsidiary) makes
a general assignment for the benefit of creditors; or any corporate action is
taken by the Borrower or any of its Subsidiaries (other than an Immaterial
Subsidiary) for the purpose of effecting any of the foregoing; or

                                      -65-
<PAGE>

          10.06  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
subject to Title IV of ERISA shall be subject to the advance reporting
requirement 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 which is
subject to Title IV of ERISA shall have had or is likely to have a trustee
appointed to administer such Plan, any Plan which is subject to Title IV of
ERISA is, shall have been or is likely to be terminated or to be the subject of
termination proceedings under ERISA, any Plan shall have an Unfunded Current
Liability, a contribution required to be made with respect to a Plan or a
Foreign Pension 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), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971
or 4975 of the Code 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 Plans or Foreign Pension Plans; (b) there shall result from any such
event or events the imposition of a lien on, the granting of a security interest
by, or a liability or a material risk of incurring a liability by, the Borrower,
a Subsidiary of the Borrower or an ERISA Affiliate; 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 upon the business, operations, condition (financial or otherwise)
or prospects of the Borrower or any Subsidiary of the Borrower; or

          10.07  Security Documents.  At any time after the execution and
                 ------------------
delivery thereof, any of the Security Documents shall cease to be in full force
and effect, or shall cease to give the Collateral Agent for the benefit of the
Secured Creditors the Liens, rights, powers and privileges purported to be
created thereby (including, without limitation, a perfected security interest
in, and Lien on, all of the Collateral in favor of the Collateral Agent,
superior to and prior to the rights of all third Persons (except as permitted by
Section 9.01), and subject to no other Liens (except as permitted by Section
9.01), provided that it shall not be a Default or Event of Default under this
Section 10.07 unless the value of the Collateral adversely affected thereby
exceeds $500,000 in the aggregate; or

          10.08  Subsidiaries Guaranty.  At any time after the execution and
                 ---------------------
delivery thereof, the Subsidiaries Guaranty or any provision thereof shall cease
to be in full force or effect as to any Subsidiary Guarantor (other than a
Subsidiary Guarantor which is an Immaterial Subsidiary), or any Subsidiary
Guarantor (other than a Subsidiary Guarantor which is an Immaterial Subsidiary)
or any Person acting by or on behalf of such Subsidiary Guarantor shall deny or
disaffirm such Subsidiary Guarantor's obligations under the Subsidiaries
Guaranty or

                                      -66-
<PAGE>

any Subsidiary Guarantor 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 Subsidiaries Guaranty; or

          10.09  Judgments.  One or more judgments or decrees shall be entered
                 ---------
against the Borrower or any of its Subsidiaries involving in the aggregate for
the Borrower and its Subsidiaries a liability (not paid or not fully covered by
a reputable and solvent insurance company) and such judgments and decrees either
shall be final and non-appealable or shall not be vacated, discharged or stayed
or bonded pending appeal for any period of 30 consecutive days, and the
aggregate amount of all such judgments exceeds $15,000,000; or

          10.10  Manager Subordination Agreements.  Any Manager Subordination
                 --------------------------------
Agreement (to the extent required pursuant to Section 8.14) or any provision
thereof shall cease to be a legal, valid and binding obligation enforceable
against any party to such Manager Subordination Agreement, or any party to a
Manager Subordination Agreement (other than the Administrative Agent) or any
Person acting by or on behalf of any such party shall deny or disaffirm such
party's obligations under any such Manager Subordination Agreement, or any such
party shall default in the due performance of any term, covenant or agreement on
its part to be performed or observed pursuant to any such Manager Subordination
Agreement, in each case so long as such event, act or condition would either
individually or in the aggregate have a material adverse effect in the interests
of the Banks; or

          10.11  Change of Control.  A Change of Control shall occur;
                 -----------------
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent, 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 any Agent, any Bank or
the holder of any Note to enforce its claims against any Credit Party (provided,
                                                                       --------
that, if an Event of Default specified in Section 10.05 shall occur with respect
to the Borrower, the result which would occur upon the giving of written notice
by the Administrative 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 Commitments terminated, whereupon all of the Commitments 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 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
each Credit Party; (iii) terminate any Letter of Credit which may be terminated
in accordance with its terms; (iv) direct the Borrower to pay (and the Borrower
agrees that upon receipt of such notice, or upon the occurrence of an Event of
Default specified in Section 10.05 with respect to the Borrower, it will pay) to
the Collateral Agent at the Payment Office such additional amount of cash, to be
held as security by the Collateral Agent, as is equal to the aggregate Stated
Amount of all Letters of Credit issued for the account of the Borrower and then
outstanding; (v) enforce, as Collateral Agent, all of the Liens and security
interests created pursuant to the Security Documents; and (vi) apply any cash
collateral held by the Administrative Agent pursuant to Section 4.02 to the
repayment of the Obligations.

                                      -67-
<PAGE>

          SECTION 11.  Definitions and Accounting Terms.
                       --------------------------------

          11.01  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):

          "9.15% Senior Subordinated Notes" shall mean the New Subordinated
Notes consisting of the Borrower's 9.15% Senior Subordinated Notes due 2008
issued pursuant to the 9.15% Senior Subordinated Note Indenture.

          "9.15% Senior Subordinated Note Indenture" shall mean the Indenture
dated as of March 10, 1998 by and between the Borrower, as Issuer, and
Manufacturers and Traders Trust Company, as Trustee.

          "Additional Security Documents" shall have the meaning provided in
Section 8.12(a).

          "Adjusted Consolidated Net Income" shall mean for any period
Consolidated Net Income of the Borrower and its Subsidiaries for such period
plus, without duplication, the sum of the amount of all net non-cash charges
(including, without limitation, depreciation, amortization, deferred tax
expense, non-cash interest expense) and net non-cash losses which were included
in arriving at Consolidated Net Income for such period less the sum of the
amount of all net non-cash gains and gains from the sale of assets (other than
sales of inventory in the ordinary course of business) which were included in
arriving at Consolidated Net Income for such period.

          "Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom all cash and Cash
Equivalents) less Consolidated Current Liabilities at such time.

          "Administrative Agent" shall mean IBJ in its capacity as
Administrative Agent (including in its capacity as Collateral Agent) for the
Banks hereunder, and shall include any successor to the Administrative Agent
appointed pursuant to Section 12.09.

          "Affiliate" shall mean, with respect to any Person, any other Person
(i) directly or indirectly controlling (including, but not limited to, all
directors, officers and partners of such Person) controlled by, or under direct
or indirect common control with, such Person or (ii) that directly or indirectly
owns more than 5% of any class of the voting securities or capital stock of or
equity interests in 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 mean the Administrative Agent and the Sole Lead
Arranger.

          "Aggregate Permitted Amount" shall mean, on any date of determination,
an amount equal to $500,000,000 plus (i) 50% of the Net Equity Proceeds received
by the Borrower

                                      -68-
<PAGE>

from issuances of its common equity after July 21, 1997 and on or prior to such
date, plus (ii) 33% of the Net Debt Proceeds received by the Borrower from any
issuance by it on or prior to such date of Qualified Convertible Subordinated
Notes.

          "Agreement" shall mean this Credit Agreement, as modified,
supplemented, amended, restated, extended, renewed, refinanced or replaced from
time to time.

          "Applicable A/RF Margin" shall mean a percentage per annum equal to in
the case of Tranche A Term Loans and Revolving Loans maintained as (x)  Base
Rate Loans, 1.00% and (y) Eurodollar Loans, 2.00%.

          "Applicable B Margin" shall mean in the case of Tranche B Term Loans
maintained as (x) Base Rate Loans, 1.75% and (y) Eurodollar Loans, 2.75%.

          "Applicable C Margin" shall mean in the case of Tranche C Term Loans
maintained as (x) Base Rate Loans, 2.50% and (y) Eurodollar Loans, 3.50%.

          "Applicable D Margin" shall mean in the case of Tranche D Term Loans
maintained as (x) Base Rate Loans, 2.50% and (y) Eurodollar Loans, 3.50%.

          "Applicable Commitment Commission Percentage" shall mean 0.50% per
annum.

          "Applicable Margin" shall mean each of the Applicable A/RF Margin,
Applicable B Margin, Applicable C Margin and the Applicable D Margin.

          "A/RF Maturity Date" shall mean December 31, 2002.

          "Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit H (appropriately
completed).

          "Authorized Officer" of any Credit Party shall mean any of the
President, the Chief Financial Officer or any Vice-President of such Credit
Party or any other officer of such Credit Party which is designated in writing
to the Administrative Agent by any of the foregoing officers of such Credit
Party as being authorized to give such notices under this Agreement.

          "B Maturity Date" shall mean December 31, 2003.

          "Bank" shall mean each financial institution listed on Schedule I or
Schedule II, as well as any Person which becomes a "Bank" hereunder pursuant to
Section 1.13, 13.04(b) or 13.04(c).

          "Bank Default" shall mean (i) the refusal (which has not been
retracted) or the failure of a Bank to make available its portion of any
Borrowing (including any Mandatory Borrowing) or to fund its portion of any
unreimbursed payment under Section 2.04(c) or (ii) a Bank having notified in
writing the Borrower and/or the Administrative Agent that it does not intend to
comply with its obligations under Section 1.01(a), (b), (c), (d), (e), (f) or
(g) or Section 2, in case of either clause (i) or (ii) as a result of any
takeover or control (including, without

                                      -69-
<PAGE>

limitation, as a result of the occurrence of any event of the type described in
Section 10.05 with respect to such Bank) of such Bank by any regulatory
authority or agency.

          "Bankruptcy Code" shall have the meaning provided in Section 10.05.

          "Base Rate" at any time shall mean the higher of (i) the rate which is
1/2 of 1% in excess of the Federal Funds Rate and (ii) the Prime Lending Rate.

          "Base Rate Loan" shall mean (i) each Swingline Loan and (ii) each
other 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 one Type of Loan from all the
Banks (or from the Swingline Bank in the case of Swingline Loans) on a given
date (or resulting from a conversion or conversions on such date) having in the
case of Eurodollar Loans the same Interest Period, provided that (x) Base Rate
                                                   --------
Loans incurred pursuant to Section 1.10(b) shall be considered part of the
related Borrowing of Eurodollar Loans and (y) each Borrowing applicable to each
of the Loans outstanding on the Restatement Effective Date shall continue to be
applicable thereto as if the Original Credit Agreement had not been amended and
restated as herein provided.

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

          "C Maturity Date" shall mean December 31, 2004.

          "CapEx Cumulative Basket" shall mean at any time an amount equal to
(x) $10,000,000 plus $5,000,000 for each January 1 which has occurred since
January 2, 1998 and prior to such time less (y) the amount theretofore expended
by the Borrower and its Subsidiaries to make Capital Expenditures pursuant to
Section 9.07(d) during the period commencing on October 1, 1997 and ending at
such time.

          "CapEx Test Period" shall mean on any date of determination the period
of eight consecutive fiscal quarters or 24 consecutive fiscal months, as the
case may be, ended on the last day of the then most recently ended Test Period.

          "Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person (other than with respect to any Investment) which
should be capitalized in

                                      -70-
<PAGE>

accordance with generally accepted accounting principles, and, without
duplication, the amount of Capitalized Lease Obligations incurred by such
Person, provided that Capital Expenditures shall not include financing costs
        --------
required to be capitalized.

          "Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under generally accepted accounting principles, are or will
be required to be capitalized on the books of such Person, in each case taken at
the amount thereof accounted for as indebtedness in accordance with such
principles.

          "Cash Equivalents" shall mean, as to any Person, (i) 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 months from the date of acquisition, (ii) Dollar denominated time deposits
and certificates of deposit of any commercial bank having, or which is the
principal banking subsidiary of a bank holding company having, a long-term
unsecured debt rating of at least "A" or the equivalent thereof from S&P or "A2"
or the equivalent thereof from Moody's with maturities of not more than six
months from the date of acquisition by such Person, (iii) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (iv) commercial paper issued by
any Person incorporated in the United States rated at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's
and in each case maturing not more than six months after the date of acquisition
by such Person, (v) other Dollar denominated securities issued by any Person
incorporated in the United States rated at least "A-" or the equivalent by S&P
or at least "A3" or the equivalent by Moody's and in each case either (x)
maturing not more than 90 days after the date of acquisition by such Person or
(y) which are subject to a repricing arrangement (such as a Dutch auction) not
more than 90 days after the date of acquisition by such Person which such Person
believes in good faith will permit such Person to sell such security at par in
connection with such repricing mechanism and (vi) investments in money market
funds substantially all of whose assets are comprised of securities of the types
described in clauses (i) through (iv) above.

          "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time to
time, 42 U.S.C.A. (S) 9601 et seq.
                           -- ----

          "Change of Control" shall mean (i) any Person or "group" (within the
meaning of Rules 13d-3 or 13d-5 under the Securities Exchange Act (as in effect
on the Restatement Effective Date)), other than the Permitted Holders, shall (A)
have acquired beneficial ownership of 35% or more on a fully diluted basis of
the voting and/or economic interest in the Borrower's capital stock or (B) have
obtained the power (whether or not exercised) to elect a majority of the
Borrowers' directors or (ii) the Board of Directors of the Borrower shall cease
to consist of a majority of Continuing Directors.

          "Claims" shall have the meaning provided in the definition of
"Environmental Claims."

                                      -71-
<PAGE>

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

          "Collateral" shall mean all property with respect to which any
security interests have been granted (or purported to be granted) pursuant to
any Security Document, including, without limitation, all Pledge Agreement
Collateral and all Security Agreement Collateral.

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

          "Collective Bargaining Agreements" shall have the meaning provided in
Section 5.05.

          "Commitment" shall mean any of the commitments of any Bank, i.e.,
                                                                      ----
whether the Tranche A Term Loan Commitment, Tranche B Term Loan Commitment,
Tranche C Term Loan Commitment, Tranche D Term Loan Commitment or Revolving Loan
Commitment.

          "Consolidated Capitalization" shall mean, at any time, the sum of (x)
Consolidated Debt, (y) Consolidated Net Worth and (z) the aggregate amount
expended pursuant to Section 9.03(iv), each at such time or, in the case of
clause (z), at and prior to such time.

          "Consolidated Current Assets" shall mean, at any time, the amounts
that would be classified as consolidated current assets of the Borrower and its
Subsidiaries in accordance with GAAP in a classified balance sheet.

          "Consolidated Current Liabilities" shall mean, at any time, the
amounts that would be classified as consolidated current liabilities of the
Borrower and its Subsidiaries at such time in accordance with GAAP in a
classified balance sheet, but excluding the current portion of any Indebtedness
under this Agreement and any other long-term Indebtedness which would otherwise
be included therein.

          "Consolidated Debt" shall mean, at any time, the principal amount of
all Indebtedness of the Borrower and its Subsidiaries at such time (including
any Indebtedness incurred at such time); provided that to the extent that a Net
                                         --------
Escrowed Amount exists at such time, the aggregate principal amount of
Indebtedness in respect of the New Subordinated Notes shall equal the Net
Subordinated Notes Amount at such time.

          "Consolidated EBIT" shall mean, for any period, Consolidated Net
Income of the Borrower and its Subsidiaries before Consolidated Interest Expense
and provision for taxes for such period and without giving effect (x) to any
extraordinary gains or losses and (y) to any gains or losses from sales of
assets other than from sales of inventory sold in the ordinary course of
business.

                                      -72-
<PAGE>

          "Consolidated EBITDA" shall mean, for any period, Consolidated EBIT
for such period, adjusted by adding thereto the amount of all amortization of
intangibles and depreciation that were deducted in arriving at Consolidated EBIT
for such period.

          "Consolidated Interest Coverage Ratio" shall mean, for any period, the
ratio of Consolidated EBITDA to Consolidated Interest Expense for such period.

          "Consolidated Interest Expense" shall mean, for any period, the total
consolidated cash interest expense reduced by cash interest income (including,
without limitation, investment income on the Escrowed Amount) and other
investment earnings earned on Cash Equivalents of the Borrower and its
Subsidiaries, in each case, for such period (calculated without regard to any
limitations on the payment thereof) plus, without duplication, that portion of
Capitalized Lease Obligations of the Borrower and its Subsidiaries representing
the interest factor for such period, but excluding the amortization of any
deferred financing costs.

          "Consolidated Leverage Ratio" shall mean, at any time the ratio of
Consolidated Debt at such time to Consolidated EBITDA for the then most recently
ended Test Period.

          "Consolidated Net Income" shall mean, for any Person and period, the
net income (or loss) of such Person and its Subsidiaries for such period,
determined on a consolidated basis, provided that (i) in determining
Consolidated Net Income of the Borrower, the net income of any other Person
which is not a Subsidiary of the Borrower or a Subsidiary thereof or is
accounted for by the Borrower or a Subsidiary thereof by the equity method of
accounting shall be included only to the extent of the payment of dividends or
distributions by such other Person to the Borrower or a Subsidiary thereof
during such period, (ii) the net income (or loss) of any other Person (other
than Studio Plus Hotels, Inc.) acquired by such specified Person or a Subsidiary
of such Person in a pooling of interests transaction for any period prior to the
date of such acquisition shall be excluded and (iii) to the extent Consolidated
Net Income reflects amounts attributable to minority interests in Subsidiaries
that are not Wholly-Owned Subsidiaries of the Borrower, Consolidated Net Income
shall be reduced by the amounts attributable to such minority interests.

          "Consolidated Net Worth" shall mean, at any time, the consolidated net
worth of the Borrower and its Subsidiaries at such time, provided that to the
extent Consolidated Net Worth reflects amounts attributable to minority
interests in Subsidiaries that are not Wholly-Owned Subsidiaries of the
Borrower, Consolidated Net Worth shall be reduced by the amount attributable to
such minority interests.

          "Consolidated Senior Debt" at any time shall mean Consolidated Debt on
such date, adjusted by excluding therefrom the amount of New Subordinated Notes
reflected in Consolidated Debt on such date.

          "Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee (including, without
limitation, as a result of such Person being a general partner of the other
Person, unless the underlying obligation is expressly made non-recourse as to
such general partner) any Indebtedness, leases, dividends or other

                                      -73-
<PAGE>

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, (i) to purchase any
such primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of any
such primary obligation or (y) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) 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.

          "Continuing Directors" shall mean the directors of the Borrower on the
Restatement Effective Date and each other director if such other director's
nomination for election or appointment to the Board of Directors of the Borrower
is recommended or approved by a majority of the then Continuing Directors or is
recommended or approved by a committee of the Board of Directors a majority of
which is composed of the then Continuing Directors.

          "Credit Documents" shall mean this Agreement and, after the execution
and delivery thereof pursuant to the terms of this Agreement, each Note, the
Subsidiary Guaranty, each Security Document and each Manager Subordination
Agreement.

          "Credit Event" shall mean the making of any Loan or the issuance of
any Letter of Credit but shall not include the commencement of a new Interest
Period applicable to a Borrowing of Eurodollar Loans upon the expiration of the
Interest Period applicable thereto or the conversion of Loans of one Type into
Loans of the other Type, provided that, in any such case, the aggregate
outstanding principal amount of Loans is not increased as a result thereof.

          "Credit Party" shall mean the Borrower and each Subsidiary Guarantor.

          "D Maturity Date" shall mean June 30, 2007.

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

          "Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.

          "Dividends" with respect to any Person shall mean that such Person has
declared or paid a dividend or returned any equity capital to its stockholders
or partners or authorized or made any other distribution, payment or delivery of
property (other than common stock of such

                                      -74-
<PAGE>

Person and, in the case of the Borrower, other than additional shares of
Qualified Preferred Stock) or cash to its stockholders or partners as such, or
redeemed, retired, purchased or otherwise acquired, directly or indirectly, for
a consideration any shares of any class of its capital stock or any partnership
interests outstanding on or after September 26, 1997 (or any options or warrants
issued by such Person with respect to its capital stock or partnership
interest), or set aside any funds for any of the foregoing purposes, or shall
have permitted any of its Subsidiaries to purchase or otherwise acquire for a
consideration any shares of any class of the capital stock or any partnership
interests of such Person outstanding on or after September 26, 1997 (or any
options or warrants issued by such Person with respect to its capital stock or
partnership interest). Without limiting the foregoing, "Dividends" with respect
to any Person shall also include all payments (other than as excluded above)
made or required to be made by such Person with respect to any stock
appreciation rights, plans, equity incentive or achievement plans or any similar
plans or setting aside of any funds for the foregoing purposes.

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

          "Domestic Subsidiary" shall mean each Subsidiary of the Borrower
incorporated or organized in the United States or any State or territory
thereof.

          "Drawing" shall have the meaning provided in Section 2.05(b).

          "Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in Regulation D
of the Securities Act).

          "Employee Benefit Plans" shall have the meaning provided in Section
5.05.

          "Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, formal demands, demand letters, claims,
liens, notices of non-compliance or violation, investigations or proceedings
relating in any way to any Environmental Law or any permit issued, or any
approval given, under any such law (hereafter "Claims"), including, without
limitation, (a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all Claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief in connection with alleged injury or threat of
injury to health, safety or the environment due to the presence of Hazardous
Materials.

          "Environmental Law" shall mean any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code, written guideline,
written policy and rule of common law now or hereafter in effect and in each
case as amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment
relating to the environment, employee health and safety or Hazardous Materials,
including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control
Act, 33 U.S.C.A. (S) 2601 et seq., the Toxic Substances Control Act, 15 U.S.C.
                          -- ----
(S) 2601 et seq.; the Clean Air Act, 42 U.S.C.A. (S) 7401 et seq.; the Safe
         -- ----                                          -- ----
Drinking Water Act, 42 U.S.C.A. (S) 3803 et
                                         --

                                      -75-
<PAGE>

seq.; the Oil Pollution Act of 1990, 33 U.S.C.A. (S) 2701 et seq.; the Emergency
----                                                      -- ---
Planning and the Community Right-to-Know Act of 1986, 42 U.S.C.A. (S) 11001 et
                                                                            --
seq., the Hazardous Material Transportation Act, 49 U.S.C.A. (S) 1801 et seq.
----
and the Occupational Safety and Health Act, 29 U.S.C.A. (S) 651 et seq.; and any
                                                                -- ----
state and local or foreign counterparts or equivalents, in each case as amended
from time to time.

          "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 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" (i) within the meaning of Section 414(b),
(c), (m) or (o) of the Code or (ii) as a result of the Borrower or a Subsidiary
of the Borrower being or having been a general partner of such person.

          "Escrowed Amount" shall mean the portion of the proceeds of the New
Subordinated Notes which is deposited in an escrow account in accordance with
the terms of the documentation in respect of the New Subordinated Notes and is
used to make payments of principal or interest in respect of the New
Subordinated Notes and  any cash investment income earned thereon to the extent
actually received.

          "Escrowed Securities" shall have the meaning provided in Section
9.05(viii).

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

          "Eurodollar Rate" shall mean for any Interest Determination Date with
respect to an Interest Period for a Eurodollar Loan, the rate per annum obtained
by dividing (i)(a) per annum rate for deposits in Dollars for a period
   --------
corresponding to the duration of the relevant Interest Period which appears on
Telerate Page 3750 at approximately 11:00 a.m. (London time) on such Interest
Determination Date or (b) if such rate does not appear on Telerate Page 3750 on
such Interest Determination Date, per annum rate (rounded upward to the nearest
1/16 of one percent) at which deposits in Dollars are offered by Administrative
Agent to first-class banks in the London interbank market, in the approximate
amount of Administrative Agent's relevant Eurodollar Loan and having a maturity
approximately equal to such Interest Period, at approximately 11:00 a.m. (London
time) on such Interest Determination Date by (ii) a percentage equal to 100%
                                          --
minus the then stated maximum rate of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves required by applicable law) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency funding or liabilities as
defined in Regulation D (or any successor category of liabilities under
Regulation D).  The Eurodollar Rate shall be rounded to the next higher multiple
of 1/100 of 1% if the rate is not such a multiple.  The reference to Telerate
Page 3750 in this definition shall be construed to be a reference to the
relevant page or any other page

                                      -76-
<PAGE>

that may replace such page on the Telerate service or any other service that may
be nominated by the British Bankers' Association as the information vendor for
the purpose of displaying British Bankers' Association Interest Settlement Rates
for deposits in Dollars.

          "Event of Default" shall have the meaning provided in Section 10.

          "Excess Cash Flow" shall mean, for any period, the remainder of (i)
the sum of (a) Adjusted Consolidated Net Income for such period and (b) the
decrease, if any, in Adjusted Consolidated Working Capital from the first day to
the last day of such period, minus (ii) the sum of (a) the amount of all Capital
Expenditures made by the Borrower and its Subsidiaries pursuant to Sections
9.07(a), (b) and (d) during such period, (b) the aggregate principal amount of
permanent principal payments of Indebtedness for borrowed money of the Borrower
and its Subsidiaries (other than repayments of Loans, provided that repayments
                                                      --------
of Loans shall be deducted in determining Excess Cash Flow if such repayments
were (x) required as a result of a Scheduled Repayment under Section 4.02(b) or
(y) made as a voluntary prepayment with internally generated funds (but in the
case of a voluntary prepayment of Revolving Loans or Swingline Loans, only to
the extent accompanied by a voluntary reduction to the Total Revolving Loan
Commitment in an equal amount)) during such period and (c) the increase, if any,
in Adjusted Consolidated Working Capital from the first day to the last day of
such period.

          "Excess Cash Payment Date" shall mean the date occurring 100 days
after the last day of each fiscal year of the Borrower (beginning with its
fiscal year ending December 31, 1998).

          "Excess Cash Payment Period" shall mean, with respect to the repayment
required on each Excess Cash Payment Date, the immediately preceding fiscal year
of the Borrower.

          "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

          "Existing Indebtedness" shall have the meaning provided in Section
7.22.

          "Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.05.

          "Facility Manager" shall mean each manager under a Hotel Property
Management Agreement of a Hotel Property owned or leased by the Borrower or any
Subsidiary Guarantor.

          "Facing Fee" shall have the meaning provided in Section 3.01(c).

          "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

                                      -77-
<PAGE>

by the Administrative Agent from three Federal Funds brokers of recognized
standing selected by the Administrative Agent.

          "Fees" shall mean all amounts payable pursuant to or referred to in
Section 3.01.

          "Foreign Pension Plan" means any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by the Borrower or any one or
more of its Subsidiaries primarily for the benefit of employees of the Borrower
or such Subsidiaries residing outside the United States of America, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.

          "Foreign Subsidiary" shall mean each Subsidiary of the Borrower other
than a Domestic Subsidiary.

          "GAAP" shall have the meaning provided in Section 13.07(a).

          "Hazardous Materials" shall mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is friable, urea
formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"restricted hazardous materials," "extremely hazardous wastes," "restrictive
hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or
"pollutants," or words of similar meaning and regulatory effect under any
applicable Environmental Law; and (c) any other chemical, material or substance,
the Release of which is prohibited, limited or regulated by any governmental
authority.

          "Hotel Property" shall mean each hotel owned or leased directly by the
Borrower or any of its Subsidiaries (including the furniture, fixture and
equipment thereon), provided that the term "Hotel Property" shall not include
                    --------
any casino or gaming hotel or any hotel owned or leased by an Unrestricted
Subsidiary.

          "Hotel Property Management Agreement" shall mean an agreement, in form
and substance reasonably satisfactory to the Agents, with respect to the
management of a Hotel Property.

          "IBJ" shall mean The Industrial Bank of Japan, Limited, in its
individual capacity.

          "Immaterial Subsidiary" shall mean any Subsidiary of the Borrower that
does not have assets with a fair market value or book value in excess of
$1,000,000 and has not had revenues in excess of $1,000,000 for the Test Period
then most recently ended and whose obligations are non-recourse to the Borrower
or any other Subsidiary of the Borrower that is not an Immaterial Subsidiary,
provided that (x) a Subsidiary shall not be considered to be an Immaterial
Subsidiary for purposes of Sections 10.05 and 10.08 if more than 15 other

                                      -78-
<PAGE>

Subsidiaries are affected by the events, acts or conditions described in
Sections 10.05 and 10.08 and (y) the net income of Hotel Properties of
Immaterial Subsidiaries affected by the events, acts or conditions described in
Sections 10.05 and 10.08 shall not be included in the determination of
Consolidated Net Income.

          "Indebtedness" shall mean, as to any Person, without duplication, (i)
all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) the maximum amount available to be drawn under all letters of
credit issued for the account of such Person and all unpaid drawings in respect
of such letters of credit, (iii) all Indebtedness of the types described in
clause (i), (ii), (iv), (v), (vi) or (vii) of this definition secured by any
Lien on any property owned by such Person, whether or not such Indebtedness has
been assumed by such Person (provided that, if the Person has not assumed or
                             --------
otherwise become liable in respect of such Indebtedness, such Indebtedness shall
be deemed to be in an amount equal to the fair market value of the property to
which such Lien relates as determined in good faith by such Person), (iv) the
aggregate amount required to be capitalized under leases under which such Person
is the lessee, (v) all obligations of such person to pay a specified purchase
price for goods or services, whether or not delivered or accepted, i.e., take-
                                                                   ----
or-pay and similar obligations, (vi) all Contingent Obligations of such Person,
and (vii) all obligations under any Interest Rate Protection Agreement or Other
Hedging Agreement or under any similar type of agreement or arrangement.
Notwithstanding the foregoing, Indebtedness shall not include obligations under
(or in respect of) construction contracts (to the extent such obligations do not
constitute Indebtedness for borrowed money), trade payables and accrued expenses
incurred by any Person in accordance with its customary practices and in the
ordinary course of business of such Person.

          "Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.

          "Interest Period" shall have the meaning provided in Section 1.09.

          "Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement, interest rate floor agreement or other similar agreement
or arrangement.

          "Investment" shall have the meaning provided in Section 9.05.

          "Issuing Bank" shall mean IBJ and any other Bank which at the request
of the Borrower and with the consent of the Administrative Agent (which consent
shall not be unreasonably withheld) agrees, in such Bank's sole discretion, to
become an Issuing Bank for the purpose of issuing Letters of Credit pursuant to
Section 2.  The only Issuing Bank on the Restatement Effective Date is IBJ.

          "Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under any lease or
license of land, improvements and/or fixtures.

                                      -79-
<PAGE>

          "L/C Supportable Obligations" shall mean (i) obligations of the
Borrower or any of its Subsidiaries incurred in the ordinary course of business
with respect to workers compensation, surety bonds and other similar statutory
obligations and (ii) such other obligations of the Borrower or any of its
Subsidiaries as are otherwise permitted to exist pursuant to (or otherwise not
restricted by) the terms of this Agreement.

          "Letter of Credit" shall have the meaning provided in Section 2.01(a).

          "Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).

          "Letter of Credit Outstandings" shall mean, at any time, the sum of
(i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii)
the amount of all Unpaid Drawings.

          "Letter of Credit Request" shall have the meaning provided in Section
2.03(a).

          "Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other) or other security
agreement or preferential arrangement 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 mean each Tranche A Term Loan, each Tranche B Term Loan,
each Tranche C Term Loan, each Tranche D Term Loan, each Revolving Loan and each
Swingline Loan.

          "Management Agreements" shall have the meaning provided in Section
5.05.

          "Manager Subordination Agreement" shall mean an agreement, in form and
substance reasonably satisfactory to the Agents, in respect of a Hotel Property
whereby, inter alia, the manager thereof subordinates certain of the
         ----- ----
obligations, owed to it under the respective Hotel Property Management
Agreement, to the payment of the Obligations hereunder.

          "Mandatory Borrowing" shall have the meaning provided in Section
1.01(g).

          "Margin Stock" shall have the meaning provided in Regulation U.

          "Material Leases" shall have the meaning provided in Section 5.05.

          "Maturity Date" shall mean, with respect to any Tranche of Loans, the
A/RF Maturity Date, the B Maturity Date, the C Maturity Date, the D Maturity
Date or the Swingline Expiry Date, as the case may be.

          "Maximum Swingline Amount" shall mean $10,000,000.

                                      -80-
<PAGE>

          "Minimum Borrowing Amount" shall mean (i) for Swingline Loans,
$250,000 and (ii) for all other Loans, $2,500,000.

          "Moody's" shall mean Moody's Investors Service, Inc.

          "MSSF" shall mean Morgan Stanley Senior Funding, Inc., in its
individual capacity.

          "NAIC" shall mean the National Association of Insurance Commissioners.

          "Net Debt Proceeds" shall mean, with respect to each incurrence of
Indebtedness for borrowed money by any Person, the cash proceeds (net of
underwriting discounts and commissions and other reasonable costs associated
therewith) received by such Person from the respective incurrence of such
Indebtedness for borrowed money.

          "Net Equity Proceeds" shall mean, with respect to each issuance or
sale of any equity by any Person or any capital contribution to such Person, the
cash proceeds (net of underwriting discounts and commissions and other
reasonable costs associated therewith) received by such Person from the
respective sale or issuance of its equity or from the respective capital
contribution.

          "Net Escrowed Amount" shall mean the Escrowed Amount less any amounts
that are released from time to time from the relevant escrow account in order to
make payments on or in respect of the New Subordinated Notes.

          "Net Insurance Proceeds" shall mean, with respect to any Recovery
Event, the cash proceeds (net of reasonable costs and taxes incurred in
connection with such Recovery Event) received by the respective Person in
connection with the respective Recovery Event.

          "Net Sale Proceeds" shall mean, for any asset sale, the gross cash
proceeds (including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received)
received from such sale of assets, net of the reasonable costs of such sale
(including fees and commissions, payments of unassumed liabilities relating to
the assets sold and required payments of any Indebtedness (other than
Indebtedness under the Credit Documents or any Indebtedness owned to the
Borrower or a Subsidiary thereof) which is secured by the respective assets
which were sold), and the incremental taxes paid or payable as a result of such
asset sale.

          "Net Subordinated Notes Amount" shall mean the aggregate principal
amount originally issued pursuant to the New Subordinated Notes less the Net
Escrowed Amount.

          "New Bank" shall mean each of the Persons listed on Schedule I that is
not an Original Bank.

          "New Subordinated Notes" shall have the meaning provided in Section
9.04(viii).

                                      -81-
<PAGE>

          "Non-Defaulting Bank" shall mean and include each Bank other than a
Defaulting Bank.

          "Note" shall mean each Tranche A Term Note, each Tranche B Term Note,
each Tranche C Term Note, each Tranche D Term Note, each Revolving Note and the
Swingline Note.

          "Notice of Borrowing" shall have the meaning provided in Section
1.03(a).

          "Notice of Conversion" shall have the meaning provided in Section
1.06.

          "Notice Office" shall mean the office of the Administrative Agent
located at 1251 Avenue of the Americas, New York, NY 10020-1104 Attention:
Chris Droussiotis, with a copy to IBJ Agent Services, One State Street, New
York, NY  10004  Attention: Kevin Miles, or such other office as the
Administrative Agent may hereafter designate in writing as such to the other
parties hereto.

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

          "Original Banks" shall mean each Person which is a Bank under, and as
defined in, the Original Credit Agreement on the Restatement Effective Date.

          "Original Credit Agreement" shall have the meaning provided in the
first WHEREAS clause to this Agreement.

          "Original Effective Date" shall mean September 26, 1997.

          "Original Letters of Credit" shall mean the letters of credit
previously issued under the Original Credit Agreement.

          "Original Revolving Loans" shall mean the revolving loans under the
Original Credit Agreement.

          "Original Swingline Loans" shall mean the swingline loans under the
Original Credit Agreement.

          "Other Hedging Agreements" shall mean any foreign exchange contracts,
currency swap agreements, commodity agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency values.

          "Participant" shall have the meaning provided in Section 2.04(a).

          "Payment Office" shall mean the office of the Administrative Agent
located at One State Street, New York, NY 10004, or such other office as the
Administrative Agent may hereafter designate in writing as such to the other
parties hereto.

                                      -82-
<PAGE>

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

          "Percentage" of any Bank at any time shall mean a fraction (expressed
as a percentage) the numerator of which is the Revolving Loan Commitment of such
Bank at such time and the denominator of which is the Total Revolving Loan
Commitment at such time, provided that if the Percentage of any Bank is to be
                         --------
determined after the Total Revolving Loan Commitment has been terminated, then
the Percentages of the Banks shall be determined immediately prior (and without
giving effect) to such termination.

          "Permitted CapEx Amount" shall mean on any date of the determination
thereof an amount equal to (i) 5% of the aggregate gross revenues from Hotel
Properties owned or leased by the Borrower or any of its Wholly-Owned
Subsidiaries for the CapEx Test Period last ended less (ii) the amount
theretofore expended by the Borrower and its Subsidiaries to make Capital
Expenditures pursuant to Section 9.07(a) during the period commencing on the
later of October 1, 1997 or the first day of such CapEx Test Period and ending
on such date of determination.

          "Permitted Encumbrances" shall mean, with respect to any Real
Property, such exceptions to title (i) which, individually or in the aggregate,
do not materially detract from the value of such Real Property or (ii) are
otherwise acceptable to the Agents in their reasonable discretion.

          "Permitted Facility Manager" shall mean, with respect to each Hotel
Property owned or leased by a Subsidiary of Borrower, a Wholly-Owned Subsidiary
of the Borrower or another hotel management company in good standing.

          "Permitted Holders" shall mean the directors of the Borrower on the
Restatement Effective Date, their spouses and any one or more of their lineal
descendants and their spouses or any trust which has been created solely for the
benefit of any such Person or any corporation, partnership or other entity
controlled by any such Person.

          "Permitted Liens" shall have the meaning provided in Section 9.01.

          "Permitted Redemption" shall mean the redemption or repurchase of New
Subordinated Notes so long as the amount expended for all such repurchases or
redemptions does not exceed the lesser of (a) $75,000,000 minus all Dividends
paid pursuant to Section 9.03(iv) or (b) $25,000,000.

          "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 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

                                      -83-
<PAGE>

Borrower or an ERISA Affiliate maintained, contributed to or had an obligation
to contribute to such plan.

          "Pledge Agreement" shall mean the Pledge Agreement, dated as of
September 26, 1997, executed and delivered pursuant to the Original Credit
Agreement, as same may from time to time be amended, modified or supplemented
(including by the addition of certain additional Credit Parties as parties
thereto as required by Section 5.08 hereof) in accordance with the terms
thereof.

          "Pledge Agreement Collateral" shall mean all "Collateral" as defined
in the Pledge Agreement.

          "Pledged Securities" shall have the meaning provided in the Pledge
Agreement.

          "Pledged Stock" shall have the meaning provided in the Pledge
Agreement.

          "Prime Lending Rate" shall mean the rate which the Administrative
Agent announces from time to time 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.  The Administrative Agent may make
commercial loans or other loans at rates of interest at, above or below the
Prime Lending Rate.

          "Projections" mean the financial assumptions and projections prepared
by the Borrower, dated May, 2000 and delivered to Agents and the Banks prior to
the Restatement Effective Date.

          "Qualified Convertible Subordinated Notes" shall mean New Subordinated
Notes issued by the Borrower which (i) are convertible into common equity of the
Borrower, (ii) bear interest (after giving effect to any original issue
discount) at a rate per annum not to exceed 7.50% and (iii) mature not less than
one year after the latest Maturity Date.

          "Qualified Preferred Stock" shall mean any preferred stock of the
Borrower so long as the terms of any such preferred stock (i) do not contain any
mandatory put, redemption, repayment, sinking fund or other similar provision
occurring before December 31, 2007, (ii) do not require the cash payment of
dividends prior to December 31, 2007 (provided that the terms of Qualified
Preferred Stock shall provide that the payment of such Dividends are otherwise
subject to the provisions set forth in this Agreement, as same may be amended,
modified, replaced or refinanced from time to time), (iii) do not contain any
covenants that are more restrictive in any material respect than those covenants
contained in any indenture in respect of the New Subordinated Notes, (iv) do not
grant the holders thereof any voting rights except for (x) voting rights
required to be granted to such holders under applicable law and (y) limited
customary voting rights on fundamental matters such as mergers, consolidations,
sales of all or substantially all of the assets of the Borrower, liquidations
involving the Borrower or amendments to any of the covenants set forth therein,
and (v) are otherwise reasonably satisfactory to the Agents.

                                      -84-
<PAGE>

          "Quarterly Payment Date" shall mean the last Business day of each
March, June, September and December occurring after the Original Effective Date.

          "RCRA" shall mean the Resource Conservation and Recovery Act, as the
same may be amended from time to time, 42 U.S.C. (S) 6901 et seq.
                                                          -- ----

          "Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.

          "Recovery Event" shall mean the receipt by the Borrower or any of its
Subsidiaries of any cash insurance proceeds or condemnation awards payable (i)
by reason of theft, loss, physical destruction or damage or any other similar
event with respect to any property or assets of the Borrower or any of its
Subsidiaries and (ii) under any policy of insurance required to be maintained
under Section 8.03.

          "Register" shall have the meaning provided in Section 13.16.

          "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.

          "Regulation T" shall mean Regulation T 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.

          "Regulation U" shall mean Regulation U 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.

          "Regulation X" shall mean Regulation X 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.

          "Related Business" shall mean the business of developing, owning and
operating lodging facilities, conducted by the Borrower and its Subsidiaries
(or, if the reference is to an Unrestricted Subsidiary, by such Unrestricted
Subsidiary) and any and all related businesses in support of and ancillary to or
reasonably related to such business of developing, owning and operating lodging
facilities.

          "Related Fund" shall mean, with respect to any Bank that is a fund
that invests in commercial loans, any other fund that invests in commercial
loans and is managed or advised by the same investment advisor as such Bank or
by an Affiliate of such investment advisor.

          "Release" shall have the meaning provided such term in CERCLA.

          "Replaced Bank" shall have the meaning provided in Section 1.13.

          "Replacement Bank" shall have the meaning provided in Section 1.13.

                                      -85-
<PAGE>

          "Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
 .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.

          "Required Banks" shall mean Non-Defaulting Banks, the sum of whose
outstanding Term Loans (and Term Loan Commitments, if any) and Revolving Loan
Commitments (or after the termination of the Revolving Loan Commitments,
outstanding Revolving Loans and Percentage of Swingline Loans and Letter of
Credit Outstandings) represent an amount greater than 50% of the sum of all
outstanding Term Loans (or Term Loan Commitments, if any) of Non-Defaulting
Banks and the Total Revolving Loan Commitment (or after the termination of the
Total Revolving Loan Commitment, the sum of the then total outstanding Revolving
Loans of Non-Defaulting Banks and the aggregate Percentages of all Non-
Defaulting Banks of the total outstanding Swingline Loans and Letter of Credit
Outstandings at such time).

          "Restatement Effective Date" shall have the meaning provided in
Section 13.10.

          "Revolving Loan" shall have the meaning provided in Section 1.01(e).

          "Revolving Loan Commitment" shall mean, for each Bank, the amount set
forth opposite such Bank's name in Schedule I directly below the column entitled
"Revolving Loan Commitment," as same may be (x) reduced from time to time
pursuant to Sections 3.02, 3.03 and/or 10 or (y) adjusted from time to time as a
result of assignments to or from such Bank pursuant to Section 1.13 or 13.04(b).

          "Revolving Loan Commitment Commission" shall have the meaning provided
in Section 3.01(a)(iii).

          "Revolving Note" shall have the meaning provided in Section 1.05(a).

          "Run Rate Leverage Ratio" shall mean, at any time, the ratio of
Consolidated Debt at such time to Consolidated EBITDA for the most recently
ended Test Period.

          "S&P" shall mean Standard & Poor's Ratings Services.

          "Schedule Repayments" shall mean Tranche B Term Loan Scheduled
Repayments, Tranche C Term Loan Scheduled Repayments and Tranche D Term Loan
Scheduled Repayments.

          "SEC" shall have the meaning provided in Section 8.01(g).

          "Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b).

          "Secured Creditors" shall have the meaning provided in the respective
Security Documents.

                                      -86-
<PAGE>

          "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.

          "Security Agreement" shall mean the Security Agreement, dated as of
September 26, 1997, executed and delivered pursuant to the Original Credit
Agreement, as same may from time to time be amended, modified or supplemented
(including by the addition of certain additional Credit Parties as parties
thereto as required by Section 5.08 hereof) in accordance with the terms
thereof.

          "Security Agreement Collateral" shall mean all "Collateral" as defined
in the Security Agreement.

          "Security Documents" shall mean the Pledge Agreement and the Security
Agreement.

          "Senior Debt Leverage Ratio" shall mean on any date a ratio calculated
as provided in the definition of Run Rate Leverage Ratio contained herein,
provided that the term "Consolidated Senior Debt" be deemed inserted in lieu of
the term "Consolidated Debt" appearing therein.

          "Shareholders' Agreements" shall have the meaning provided in Section
5.05.

          "Sole Lead Arranger" shall mean MSSF in its capacity as Sole Lead
Arranger for the Banks hereunder.

          "Standby Letter of Credit" shall have the meaning provided in Section
2.01(a).

          "Stated Amount" of each Letter of Credit shall mean, at any time, the
maximum amount available to be drawn thereunder (in each case determined without
regard to whether any conditions to drawing could then be met).

          "Subsidiary" shall mean, as to any Person, (i) 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 (ii) 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.  Notwithstanding the foregoing (and except for purposes of the
definition of Unrestricted Subsidiary contained herein) an Unrestricted
Subsidiary shall be deemed not to be a Subsidiary of the Borrower or any of its
other Subsidiaries for purposes of this Agreement.

          "Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
designated as a "Subsidiary Guarantor" on Schedule V hereto or which executes a
guarantee after the Restatement Effective Date pursuant to Section 9.16.

                                      -87-
<PAGE>

          "Subsidiaries Guaranty" shall mean the Subsidiaries Guaranty, dated as
of September 26, 1997, executed and delivered pursuant to the Original Credit
Agreement, as same may from time to time be amended, modified or supplemented
(including by the addition of certain additional Credit Parties as parties
thereto as required by Section 5.08 hereof) in accordance with the terms
thereof.

          "Swingline Bank" shall mean IBJ and its successors and assigns.

          "Swingline Expiry Date" shall mean the date which is five Business
Days prior to the A/RF Maturity Date.

          "Swingline Loan" shall have the meaning provided in Section 1.01(f).

          "Swingline Note" shall have the meaning provided in Section 1.05(a).

          "Tax Benefit" shall have the meaning provided in Section 4.04(c).

          "Tax Sharing Agreements" shall have the meaning provided in Section
5.05.

          "Taxes" shall have the meaning provided in Section 4.04(a).

          "Term Loan" shall mean each Tranche A Term Loan, Tranche B Term Loan,
Tranche C Term Loan and Tranche D Term Loan.

          "Term Loan Facility" shall mean each of the Tranche A Term Loan
Facility, the Tranche B Term Loan Facility, the Tranche C Term Loan Facility and
the Tranche D Term Loan Facility.

          "Test Period" shall mean in respect of any date, the period of four
consecutive fiscal quarters of the Borrower last ended prior to such date for
which financial statements have been delivered (or should have been delivered on
or before such date) to the Administrative Agent pursuant to Section 8.01(a) or
(b), as the case may be, in each case taken as one accounting period.

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

          "Total Revolving Loan Commitment" shall mean, at any time, the sum of
the Revolving Loan Commitments of each of the Banks, it being understood that on
the Restatement Effective Date, the Total Revolving Loan Commitment shall equal
$350,000,000.

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

          "Total Unutilized Revolving Loan Commitment" shall mean, at any time,
an amount equal to the remainder of (x) the Total Revolving Loan Commitment then
in effect less

                                      -88-
<PAGE>

(y) the sum of the aggregate principal amount of Revolving Loans and Swingline
Loans then outstanding plus the then aggregate amount of Letter of Credit
Outstandings.

          "Trade Letter of Credit" shall have the meaning provided in Section
2.01(a).

          "Tranche" shall mean the respective facility and commitments utilized
in making Loans hereunder, with there being five separate Tranches, i.e.,
                                                                    ----
Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans, Tranche D Term
Loans, Revolving Loans and Swingline Loans.

          "Tranche A Term Loan" shall have the meaning provided in Section
1.01(a).

          "Tranche A Term Loan Facility" shall mean the credit facility
evidenced by the Tranche A Term Loans.

          "Tranche A Term Note" shall have the meaning provided in Section
1.05(a).

          "Tranche B Term Loan" shall have the meaning provided in Section
1.01(b).

          "Tranche B Term Loan Facility" shall mean the credit facility
evidenced by the Tranche B Term Loans.

          "Tranche B Term Loan Scheduled Repayment" shall have the meaning
provided in Section 4.02(b)(ii).

          "Tranche B Term Note" shall have the meaning provided in Section
1.05(a).

          "Tranche C Term Loan" shall have the meaning provided in Section
1.01(c).

          "Tranche C Term Loan Facility" shall mean a credit facility evidenced
by the Tranche C Term Loans.

          "Tranche C Term Loan Scheduled Repayment" shall have the meaning
provided in Section 4.02(b)(iii).

          "Tranche C Term Note" shall have the meaning provided in Section
1.05(a).

          "Tranche D Term Loan Commitment" shall mean for each Bank, the amount
set forth opposite such Bank's name in Schedule I hereto directly below the
column entitled "Tranche D Term Loan Commitment," as same may be (x) reduced
from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y)
adjusted from time to time as a result of assignments to or from such Bank
pursuant to Sections 1.03 and 13.04(b).

          "Tranche D Term Loan Facility" shall mean the credit facility
evidenced by the Tranche D Term Loans.

                                      -89-
<PAGE>

          "Tranche D Term Loan Scheduled Repayment" shall have the meaning
provided in Section 4.02(b)(iv).

          "Tranche D Term Note" shall have the meaning provided in Section
1.05(a).

          "Type" shall mean the type of Loan determined with regard to the
interest option applicable thereto, i.e., whether a Base Rate Loan or a
                                    ----
Eurodollar 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 shall mean 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, determined in accordance
with actuarial assumptions at such time consistent with Statement of Financial
Accounting Standards No. 87, exceeds the market value of the assets allocable
thereto.

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

          "Unpaid Drawing" shall have the meaning provided for in Section
2.05(a).

          "Unrestricted Subsidiary" shall mean any Subsidiary of the Borrower
that, at the time of determination, shall be an Unrestricted Subsidiary (as
designated by the Borrower, as provided below) provided that such Subsidiary
does not and shall not engage, to any substantial extent, in any line or lines
of business activity other than a Related Business.  The Borrower may designate
any Person acquired after the Restatement Effective Date to be an Unrestricted
Subsidiary so long as (a) no Default or Event of Default is existing or will
occur as a consequence thereof, and (b) such Subsidiary does not own any equity
interests in, or hold any Lien on any property of, the Borrower or any other
Subsidiary (excluding other Unrestricted Subsidiaries).  Any such designation
shall also be deemed to constitute an investment pursuant to Sections 9.05(x) or
(xi), as the case may be, in an amount equal to the Borrower's and its
Subsidiaries' percentage ownership interest of such Unrestricted Subsidiary of
the sum of the net assets (with assets other than cash and Cash Equivalents
valued at fair market value) of such Subsidiary at the time of the designation
(which investment must be permitted to be made in accordance with the
requirements of Sections 9.05(x) or (xi), as the case may be).  The Borrower may
designate any Unrestricted Subsidiary to be a Subsidiary, provided that no
Default or Event of Default is existing or will occur as a consequence thereof
and the provisions of Section 9.16 are complied with for such Subsidiary at the
time of such designation.  Each such designation shall be evidenced by filing
with the Administrative Agent a certified copy of the resolution giving effect
to such designation and an officers' certificate of an Authorized Officer of the
Borrower certifying that such designation complied with the foregoing
conditions.

          "Unutilized Revolving Loan Commitment" with respect to any Bank at any
time shall mean such Bank's Revolving Loan Commitment at such time, if any, less
the sum of (i) the aggregate outstanding principal amount of Revolving Loans
made by such Bank and (ii) such Bank's Percentage of the Letter of Credit
Outstandings.

                                      -90-
<PAGE>

          "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) 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.

          SECTION 12.  The Agents.
                       ----------

          12.01  Appointment.  The Banks hereby designate IBJ as Administrative
                 -----------
Agent (for purposes of this Section 12, the term "Administrative Agent" shall
include IBJ in its capacity as Collateral Agent pursuant to the Security
Documents) to act as specified herein and in the other Credit Documents.  The
Banks hereby designate MSSF as Sole Lead Arranger (for purposes of this Section
12, the term "Sole Lead Arranger" also shall include MSSF in its capacity as
Sole Book Runner) to act as specified herein and in the other Credit Documents.
Each Bank hereby irrevocably authorizes, and each holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, any Agent to
take such action on its behalf under the provisions of this Agreement, the other
Credit Documents and any other instruments and agreements referred to herein or
therein and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of such Agent by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto.  Each Agent may perform any of its duties hereunder by or through its
respective officers, directors, agents, employees or affiliates.

          12.02  Nature of Duties.  No Agent shall have any duties or
                 ----------------
responsibilities except those expressly set forth in this Agreement and in the
other Credit Documents.  Neither any Agent nor any of its respective officers,
directors, agents, employees or affiliates shall be liable for any action taken
or omitted by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, unless caused by its or their gross negligence
or willful misconduct.  The duties of each Agent shall be mechanical and
administrative in nature; no Agent shall have by reason of this Agreement or any
other Credit Document a fiduciary relationship in respect of any Bank or the
holder of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose upon
any Agent any obligations in respect of this Agreement or any other Credit
Document except as expressly set forth herein or therein.

          12.03  Lack of Reliance on the Agents.  Independently and without
                 ------------------------------
reliance upon any Agent, each Bank and the holder of each Note, to the extent it
deems appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Borrower and each of
its Subsidiaries in connection with the making and the continuance of the Loans
and the taking or not taking of any action in connection herewith and (ii) its
own appraisal of the creditworthiness of the Borrower and each of its
Subsidiaries and, except as expressly provided in this Agreement, no Agent shall
have any duty or responsibility, either initially or on a continuing basis, to
provide any Bank or the holder of any Note with any credit or other information
with respect thereto, whether coming into its possession before the

                                      -91-
<PAGE>

making of the Loans or at any time or times thereafter. No Agent shall be
responsible to any Bank or the holder of any Note for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith or for the
execution, effectiveness, genuineness, validity, enforceability, perfection,
collectability, priority or sufficiency of this Agreement or any other Credit
Document or the financial condition of the Borrower or any of its Subsidiaries
or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement or
any other Credit Document, or the financial condition of the Borrower or any of
its Subsidiaries or the existence or possible existence of any Default or Event
of Default.

          12.04  Certain Rights of the Agents.  If any Agent shall request
                 ----------------------------
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, such Agent shall be entitled to refrain from such act or taking such
action unless and until such Agent shall have received instructions from the
Required Banks; and such Agent shall not incur liability to any Person by reason
of so refraining.  Without limiting the foregoing, no Bank or the holder of any
Note shall have any right of action whatsoever against any Agent as a result of
such Agent acting or refraining from acting hereunder or under any other Credit
Document in accordance with the instructions of the Required Banks.

          12.05  Reliance.  Each Agent shall be entitled to rely, and shall be
                 --------
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that such Agent believed to be the proper Person, and, with respect
to all legal matters pertaining to this Agreement and any other Credit Document
and its duties hereunder and thereunder, upon advice of counsel selected by such
Agent.

          12.06  Indemnification.  To the extent any Agent is not reimbursed and
                 ---------------
indemnified by the Borrower, the Banks will reimburse and indemnify such Agent,
in proportion to their respective "percentages" as used in determining the
Required Banks, for and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, costs, expenses or disbursements
of whatsoever kind or nature which may be imposed on, asserted against or
incurred by such Agent in performing its respective duties hereunder or under
any other Credit Document, in any way relating to or arising out of this
Agreement or any other Credit Document; provided that to the extent that any
                                        --------
Agent is reimbursed by the Borrower for amounts paid by the Banks pursuant to
this Section 12.06, such Agent shall reimburse the Banks for such amounts;

provided further that no Bank shall be liable for any portion of such
----------------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct.

          12.07  Each Agent in Its Individual Capacity.  With respect to its
                 -------------------------------------
obligation to make Loans, or issue or participate in Letters of Credit, under
this Agreement, each Agent shall have the rights and powers specified herein for
a "Bank" and may exercise the same rights and powers as though it were not
performing the duties specified herein; and the term "Banks," "Required Banks,"
"holders of Notes" or any similar terms shall, unless the context clearly

                                      -92-
<PAGE>

otherwise indicates, include each Agent in its individual capacity.  Each Agent
may accept deposits from, lend money to, and generally engage in any kind of
banking, investment banking, trust or other business with, or provide debt
financing, equity capital or other services (including financial advisory
services) to, any Credit Party or any Affiliate of any Credit Party (or any
Person engaged in a similar business with any Credit Party or any Affiliate
thereof) as if they were not performing the duties specified herein, and may
accept fees and other consideration from the Borrower or any other Credit Party
or any Affiliate of any Credit Party for services in connection with this
Agreement and otherwise without having to account for the same to the Banks.

          12.08  Holders.  Each 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 such Agent.  Any request, authority or consent of any
Person 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.

          12.09  Resignation by the Administrative Agent and the Sole Lead
                 ------------------------------------------------
Arranger.  (a)  The Administrative Agent and/or the Sole Lead Arranger may
resign from the performance of all their respective functions and duties
hereunder and/or under the other Credit Documents at any time by giving 15
Business Days' prior written notice to the Banks and the Borrower (provided that
no such notice shall be required to be given to the Borrower if a Default or an
Event of Default of the type described in Section 10.05 exists with respect to
the Borrower).  Such resignation, in the case of the Administrative Agent, shall
take effect upon the appointment of a successor Administrative Agent pursuant to
clauses (b) and (c) below or as otherwise provided below, and such resignation,
in the case of the Sole Lead Arranger, shall take effect immediately.

          (b)    Upon any such notice of resignation by the Administrative
Agent, the Required Banks shall appoint a successor Administrative Agent
hereunder or thereunder who shall be a commercial bank or trust company
reasonably acceptable to the Borrower (it being understood and agreed that (i)
so long as no Default or Event of Default exists at such time such successor
Administrative Agent shall be required to be reasonably satisfactory to the
Borrower and (ii) at all other times any Non-Defaulting Bank is deemed to be
acceptable to the Borrower).

          (c)    If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent with the
consent of the Borrower (which consent shall not be unreasonably withheld or
delayed), shall then appoint a successor Administrative Agent who shall serve as
Administrative Agent hereunder or thereunder until such time, if any, as the
Required Banks appoint a successor Administrative Agent as provided above.

          (d)    If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 30th Business Day after the date such
notice of resignation was given by the Administrative Agent, Administrative
Agent's resignation shall become effective and the

                                      -93-
<PAGE>

Required Banks shall thereafter perform all the duties of the Administrative
Agent hereunder and/or under any other Credit Document until such time, if any,
as the Required Banks appoint a successor Administrative Agent as provided
above.

          SECTION 13.  Miscellaneous.
                       -------------

          13.01  Payment of Expenses, etc.  The Borrower agrees that it shall:
                 -------------------------
(i) whether or not the transactions contemplated herein are consummated, pay all
reasonable out-of-pocket costs and expenses of the Agents (including, without
limitation, the reasonable fees and disbursements of White & Case LLP), in
connection with the preparation, execution, delivery and performance of this
Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein, any amendment, waiver or consent relating hereto
or thereto, of the Agents in connection with its syndication efforts with
respect to this Agreement and, upon the occurrence and during the continuance of
an Event of Default, the reasonable costs and expenses of each of the Agents 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 (including, without limitation, the reasonable fees and disbursements of
counsel for the Agents and, following an Event of Default, for each of the
Banks), provided that the Borrower's obligation to reimburse the Agents for the
        --------
reasonable fees and disbursements of White & Case LLP incurred in connection
with the preparation, execution and delivery of this Agreement shall be subject
to the letter dated May 10, 2000 from the Sole Lead Arranger to the Borrower;
(ii) pay and hold each of the Banks harmless from and against any and all
present and future stamp, excise and other similar documentary 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 (iii) indemnify each Agent and each Bank, and each of their respective
officers, directors, employees, representatives and agents from and hold each of
them harmless against any and all liabilities, obligations (including removal or
remedial actions), losses, damages, penalties, claims, actions, judgments,
suits, costs, expenses and disbursements (including reasonable attorneys' and
consultants' fees and disbursements) incurred by, imposed on or assessed against
any of them as a result of, or arising out of, or in any way related to, or by
reason of, (a) any investigation, litigation or other proceeding (whether or not
any 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 any
Letter of Credit or the proceeds of any Loans hereunder or the consummation of
any transactions contemplated herein or in any other Credit Document or the
exercise of any of their rights or remedies provided herein or in the other
Credit Documents, or (b) the actual or alleged presence of Hazardous Materials
in the air, surface water or groundwater or on the surface or subsurface of any
Real Property owned or at any time operated by any Credit Party or any of its
Subsidiaries, the Release, generation, storage, transportation, handling or
disposal of Hazardous Materials at any location, whether or not owned or
operated by any Credit Party or any of its Subsidiaries, the non-compliance of
any Real Property with foreign, federal, state and local laws, regulations, and
ordinances (including applicable permits thereunder) applicable to any Real
Property, or any Environmental Claim asserted against any Credit Party, any of
its Subsidiaries or any Real Property owned or at any time operated by any
Credit Party or any of its Subsidiaries, including, in each case, without
limitation, the reasonable

                                      -94-
<PAGE>

fees and disbursements of counsel and other consultants incurred in connection
with any such investigation, litigation or other proceeding (but excluding any
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified). To the extent that the undertaking to indemnify, pay or hold
harmless any Agent or any Bank set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrower
shall make the maximum contribution to the payment and satisfaction of each of
the indemnified liabilities which is permissible under applicable law.

          13.02  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 and during the continuance 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 any Credit Party against and on account of
the Obligations and liabilities of such Credit Party 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 13.06(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.

          13.03  Notices.  Except as otherwise expressly provided herein, all
                 -------
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered:  if to any Credit Party,
at the address specified opposite its signature below or in the other relevant
Credit Documents; if to any Bank, at its address specified on Schedule II; if to
the Sole Lead Arranger, at the address specified on Schedule II; and if to the
Administrative Agent, at its Notice Office; or, as to any Credit Party or any
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 Bank, at such other address
as shall be designated by such Bank in a written notice to the Borrower and the
Administrative Agent.  All such notices and communications shall, when mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be
effective when deposited in the mails, delivered to the telegraph company, cable
company or overnight courier, as the case may be, or sent by telex or
telecopier, except that notices and communications to any Agent or any Credit
Party shall not be effective until received by such Agent or such Credit Party.

          13.04  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 the Banks and,
provided further, that, although any Bank may transfer, assign or grant
----------------
participations

                                      -95-
<PAGE>

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 13.04(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, Note or
Letter of Credit (unless such Letter of Credit is not extended beyond the A/RF
Maturity Date) 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 Commitments 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.

          (b)  Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its Revolving
Loan Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans (or, if not theretofore terminated, Term Loan Commitment)
to (i) one or more Banks, (ii) any Related Fund that is an Eligible Transferee
or (iii) its parent company, or any Affiliate of such Bank which is an Eligible
Transferee and which is at least 50% owned by such Bank or its parent company or
(y) assign all, or if less than all, a portion equal to at least $1,000,000 in
the aggregate for the assigning Bank or assigning Banks, of such Revolving Loan
Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans (or, if not theretofore terminated, Term Loan Commitment)
to one or more Eligible Transferees (treating any fund that invests in
commercial loans and any other fund that invests in commercial loans and is
managed by the same investment advisor of such fund or by an Affiliate of such
investment advisor as a single assignee), each of which assignees shall become a
party to this Agreement as a Bank by execution of an Assignment and Assumption
Agreement, provided that (i) at such time Schedule I shall be deemed modified to
           --------
reflect the Commitments (and/or outstanding Loans, as the case may be) of such
new Bank and of the existing Banks, (ii) upon surrender of the old Notes (or,
upon such assigning Bank's indemnifying the Borrower for any lost Note pursuant
to a customary indemnification agreement), new Notes will be issued, at the
Borrower's expense, to such new Bank and to the assigning Bank upon the request
of such new Bank or assigning Bank, such new Notes to be in conformity with the
requirements of Section 1.05 (with appropriate

                                      -96-
<PAGE>

modifications) to the extent needed to reflect the revised Commitments (and/or
outstanding Loans, as the case may be), (iii) the consent (which shall not be
unreasonably withheld or delayed) of each Agent shall be required in connection
with any such assignment pursuant to clause (y) above, (iv) so long as no
Default or Event of Default exists, the consent of the Borrower shall be
required in connection with any assignment to an Eligible Transferee pursuant to
clause (y) above (which consent shall not be unreasonably withheld or delayed),
and (v) the Administrative Agent shall receive at the time of each such
assignment (other than in connection with an assignment by a Bank to an
Affiliate of such Bank or to a Related Fund of any Bank), from the assigning or
assignee Bank, the payment of a non-refundable assignment fee of $1,500 or in
the case of an assignment to an assignee which is not a Bank, the payment of a
nontransferable assignment fee of $3,000 (except that in the case of assignments
on the same day by a Bank to more than one fund managed or advised by the same
investment advisor or by an Affiliate of such investment advisor (which funds
are not then Banks hereunder), only a single $3,000 assignment fee shall be
payable for all such assignments by such Bank to such funds) and, provided
                                                                  --------
further, that such transfer or assignment will not be effective until recorded
-------
by the Administrative Agent on the Register pursuant to Section 13.16. To the
extent of any assignment pursuant to this Section 13.04(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 13.04(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 Administrative Agent the appropriate Internal Revenue Service Forms
(and, if applicable a Section 4.04(b)(ii) Certificate) described in Section
4.04(b). To the extent that an assignment of all or any portion of a Bank's
Commitments and related outstanding Obligations pursuant to Section 1.13 or this
Section 13.04(b) would, at the time of such assignment, result in increased
costs under Section 1.10, 1.11, 2.06 or 4.04 from those being charged by the
respective assigning Bank prior to such assignment, then the Borrower shall not
be obligated to pay or reimburse such increased costs (although the Borrower
shall be obligated to pay any other increased costs of the type described above
resulting from changes after the date of the respective assignment).

          (c)   Notwithstanding any other provision set forth in this Agreement,
any Bank may, without the consent of the Borrower, the Administrative Agent or
the Sole Lead Arranger, pledge its Loans and Notes hereunder to a Federal
Reserve Bank in support of borrowings made by such Bank from such Federal
Reserve Bank or to any trustee for, or any other representative of, holders of
obligations owed or securities issued, by such Bank, as security for such
obligations or securities; provided that any foreclosure or similar action by
                           --------
such trustee or representative shall be subject to the provisions of this
Section 13.04 concerning assignments.

          13.05 No Waiver; Remedies Cumulative.  No failure or delay on the
                ------------------------------
part of any Agent or any Bank or any holder of any Note in exercising any right,
power or privilege hereunder or under any other Credit Document and no course of
dealing between any Borrower or any other Credit Party and any 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

                                      -97-
<PAGE>

herein or in any other Credit Document expressly provided are cumulative and not
exclusive of any rights, powers or remedies which any Agent or any Bank or the
holder of any Note would otherwise have. No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the rights
of any Agent or any Bank or the holder of any Note to any other or further
action in any circumstances without notice or demand.

          13.06  Payments Pro Rata.  (a)  Except as otherwise provided in this
                 -----------------
Agreement, the Administrative Agent agrees that promptly after its receipt of
each payment from or on behalf of the Borrower in respect of any Obligations
hereunder, it shall distribute such payment to the Banks (other than any Bank
that has consented in writing to waive its pro rata share of any such payment)
                                           --- ----
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 setoff 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, Unpaid Drawings, Commitment Commission or Letter of Credit Fees,
of a sum which with respect to the related sum or sums received by other Banks
is in a greater proportion than the total of such Obligation then owed and due
to such Bank bears to the total of such Obligation then owed and due to all of
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 respective Credit Party to
such Banks in such amount as shall result in a proportional participation by all
the Banks in such amount; provided 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.

          13.07  Calculations; Computations.  (a)  The financial statements to
                 --------------------------
be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved (except as set forth in the
notes thereto or as otherwise disclosed in writing by the Borrower to the Banks)
("GAAP"); provided that, (i) except as otherwise specifically provided herein,
          --------
all computations of Excess Cash Flow and all computations determining compliance
with Sections 9.08 through 9.11, inclusive, and the determination of the
Applicable Margin and Applicable Commitment Commission Percentage shall utilize
accounting principles and policies in conformity with those used to prepare the
annual financial statements first delivered to the Banks pursuant to Section
7.05(a) and (ii) for purposes of calculating financial terms, all covenants and
related definitions, all such calculations based on the operations of the
Borrower and its Subsidiaries on a consolidated basis shall be made without
giving effect to the operations of any Unrestricted Subsidiaries.

          (b)    All computations of interest, Commitment Commission, and other
Fees hereunder shall be made on the basis of a year of 360 days for the actual
number of days

                                      -98-
<PAGE>

(including the first day but excluding the last day) occurring in the period for
which such interest, Commitment Commission or other Fees are payable.

          13.08  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
                 -----------------------------------------------------------
JURY TRIAL.  (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 OF THE STATE OF NEW YORK.  ANY LEGAL
ACTION OR PROCEEDING 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 NON-EXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS.  THE BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM
THAT ANY SUCH COURTS LACK JURISDICTION OVER THE BORROWER, AND AGREES NOT TO
PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER CREDIT DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY
SUCH COURT LACKS JURISDICTION OVER THE BORROWER.  THE BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS
SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS
AFTER SUCH MAILING.  THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO
SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER
CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY AGENT, ANY BANK OR THE HOLDER OF
ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER
JURISDICTION.

          (b)    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.

                                      -99-
<PAGE>

          (c)    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.

          13.09  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
Administrative Agent.

          13.10  Effectiveness.  (a)  This Agreement shall become effective on
                 -------------
the date (the "Restatement Effective Date") on which (i) each of the Borrower,
each Subsidiary Guarantor, each New Bank, the Required Banks (determined
immediately before the occurrence of the Restatement Effective Date) shall have
signed a counterpart hereof (whether the same or different counterparts) and
shall have delivered the same to the Administrative Agent at its Notice Office
or, in the case of the Banks, shall have given to the Administrative Agent
telephonic (confirmed in writing), written or telex notice (actually received)
at such office that the same has been signed and mailed to it and (ii) the
conditions contained in Sections 5 and 6 are met to the reasonable satisfaction
of the Administrative Agent and the Required Banks (determined immediately after
the occurrence of the Restatement Effective Date.  Unless the Agents received
actual notice from any Bank that the conditions described in clause (ii) of the
preceding sentence have not been met to its satisfaction, upon the satisfaction
of the condition described in clause (i) of the immediately preceding sentence
and upon the Agents' good faith determination that the conditions described in
clause (ii) of the immediately preceding sentence have been met, then the
Restatement Effective Date shall have deemed to have occurred, regardless of any
subsequent determination that one or more of the conditions thereto had not been
met.  The Administrative Agent will give the Borrower, the Sole Lead Arranger
and each Bank prompt written notice of the occurrence of the Restatement
Effective Date.

          (b)    Notwithstanding anything to the contrary contained in this
Agreement or in any Note, interest and fees which have accrued under the
Original Credit Agreement prior to the Restatement Effective Date but which
remain unpaid on such date shall be payable at the times otherwise provided for
in this Agreement (but calculated at the respective rates provided in the
Original Credit Agreement prior to the Restatement Effective Date) for the
interest and fees involved.  In addition, any Eurodollar Loan that has an
Interest Period which began prior to the Restatement Effective Date shall
continue to bear interest at the Eurodollar Rate established for such Interest
Period prior to the commencement of such Interest Period plus for any period
prior to the Restatement Effective Date, the Applicable Margin established under
the Original Credit Agreement for such Loans and for the period commencing on
(and including) the Restatement Effective Date, the Applicable Margin
established under this Agreement.

                                     -100-
<PAGE>

          13.11  Headings Descriptive.  The headings of the several sections and
                 --------------------
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.

          13.12  Amendment or Waiver; etc.  (a)  Neither this Agreement nor any
                 -------------------------
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, provided that no such change, waiver, discharge or termination
                --------
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected in the case of following clause (i)), (i)
extend the final scheduled maturity of any Loan or Note, or extend the stated
expiration date of any Letter of Credit beyond the A/RF Maturity Date, or reduce
the rate or extend the time of payment of interest or Fees thereon, or reduce
the principal amount thereof (except to the extent repaid in cash) (it being
understood that any amendment or modification to the financial definitions in
this Agreement or to Section 13.07(a) shall not constitute a reduction in the
rate of interest or any Fees for purposes of this clause (i)), (ii) release all
or substantially all of the Collateral (except as expressly provided in the
Credit Documents) under all the Security Documents, (iii) amend, modify or waive
any provision of this Section 13.12, (iv) reduce the percentage specified in the
definition of Required Banks (it being understood that, with the consent of the
Required Banks, additional extensions of credit pursuant to this Agreement may
be included in the determination of the Required Banks on substantially the same
basis as the extensions of Loans and Commitments are included on the Original
Effective Date) or (v) consent to the assignment or transfer by the Borrower of
any of its rights and obligations under this Agreement; provided further, that
                                                        ----------------
no such change, waiver, discharge or termination shall (w) increase the
Commitment of any Bank over the amount thereof then in effect without the
consent of such Bank (it being understood that waivers or modifications of
conditions precedent, covenants, Defaults or Events of Default or of a mandatory
reduction in the Total Commitments shall not constitute an increase of the
Commitment of any Bank, and that an increase in the available portion of any
Commitment of any Bank shall not constitute an increase in the Commitment of
such Bank), (x) without the consent of each Issuing Bank, amend, modify or waive
any provision of Section 2 or alter its rights or obligations with respect to
Letters of Credit, (y) without the consent of each Agent affected thereby,
amend, modify or waive any provision of Section 12 as same applies to such Agent
or any other provision as same relates to the rights or obligations of such
Agent or (z) without the consent of the Collateral Agent, amend, modify or waive
any provision relating to the rights or obligations of the Collateral Agent.

          (b)    If, in connection with any proposed change, waiver, discharge
or termination with respect to any of the provisions of this Agreement as
contemplated by clauses (i) through (v), inclusive, of the first proviso to
Section 13.12(a), the consent of the Required Banks is obtained but the consent
of one or more of such other Banks whose consent is required is not obtained,
then the Borrower shall have the right, so long as all non-consenting Banks
whose individual consent is required are treated as described in either clause
(A) or (B) below, to either (A) replace each such non-consenting Bank or Banks
with one or more Replacement Banks pursuant to Section 1.13 so long as at the
time of such replacement, each such Replacement Bank consents to the proposed
change, waiver, discharge or termination or (B) terminate such non-

                                     -101-
<PAGE>

consenting Bank's Commitments in accordance with Sections 3.02(b) and/or
4.01(b), provided that, unless the Commitments are terminated, and Loans repaid,
pursuant to preceding clause (B) are immediately replaced in full at such time
through the addition of new Banks or the increase of the Commitments and/or
outstanding Loans of existing Banks (who in each case must specifically consent
thereto), then in the case of any action pursuant to preceding clause (B) the
Required Banks (determined before giving effect to the proposed action) shall
specifically consent thereto, provided further, that in any event the Borrower
                              ----------------
shall not have the right to replace a Bank, terminate any of its Commitments or
repay its Loans solely as a result of the exercise of such Bank's rights (and
the withholding of any required consent by such Bank) pursuant to the second
proviso to Section 13.12(a).

          13.13  Survival.  All indemnities set forth herein including, without
                 --------
limitation, in Sections 1.10, 1.11, 2.06, 4.04, 13.01 and 13.06 shall survive
the execution, delivery and termination of this Agreement and the Notes and the
making and repayment of the Obligations.

          13.14  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.
Notwithstanding anything to the contrary contained herein, to the extent that a
transfer of Loans pursuant to this Section 13.14 would, at the time of such
transfer, result in increased costs under Section 1.10, 1.11, 2.06 or 4.04 from
those being charged by the respective Bank prior to such transfer, then the
Borrower shall not be obligated to pay such increased costs (although the
Borrower shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
transfer).

          13.15  Confidentiality.  (a)  Subject to the provisions of clause (b)
                 ---------------
of this Section 13.15, each Bank agrees that it will use its reasonable efforts
not to disclose without the prior written consent of the Borrower (other than to
its directors, employees, auditors, advisors or counsel 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, provided
such Persons shall be subject to the provisions of this Section 13.15 to the
same extent as such Bank) any information with respect to any Credit Party or
any of its Subsidiaries which is now or in the future furnished pursuant to this
Agreement or any other Credit Document and which is designated by any Credit
Party to the Banks in writing as confidential, provided that any Bank may
                                               --------
disclose any such information (a) as has become generally available to the
public other than by virtue of a breach of this Section 13.15(a), (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, the Federal Deposit
Insurance Corporation or the NAIC or similar organizations (whether in the
United States or elsewhere) or their successors, (c) as may be required or
appropriate in respect to any summons or subpoena or in connection with any
litigation, (d) in order to comply with any law, order, regulation or ruling
applicable to such Bank, (e) to any Agent or the Collateral Agent, (f) to any
prospective or actual transferee or participant in connection with any
contemplated transfer or participation of any of the Notes or Commitments or any
interest therein by such Bank, provided, that such prospective transferee agrees
                               --------
in writing with such Bank for the benefit of the Borrower to be subject to the
provisions of this Section 13.15(a) and (g) to any direct or

                                     -102-
<PAGE>

indirect contractual counterparty in any swap, hedge or similar agreement (or to
any such contractual counterparty's professional advisor, so long as such
contractual counterparty (or such professional advisor) agrees to be bound by
the provisions of this Section 13.15(a).

          (b)    The Borrower hereby acknowledges and agrees that each Bank may
share with any of its affiliates any information related to Credit Parties or
any of their respective Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of the Credit
Parties and their respective Subsidiaries, provided such Persons shall be
subject to the provisions of this Section 13.15 to the same extent as such
Bank), it being understood that for purposes of this Section 13.15(b) the term
"affiliate" shall mean any direct or indirect holding company of a Bank as well
as any direct or indirect Subsidiary of such holding company.

          13.16  Register.  The Borrower hereby designates the Administrative
                 --------
Agent to serve as the Borrower's agent, solely for purposes of this Section
13.16, to maintain a register (the "Register") on which it will record the
Commitments 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 Commitments 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 Administrative Agent with respect to ownership of
such Commitments and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitments and Loans shall remain owing to
the transferor.  Upon receipt of a properly executed and delivered Assignment
and Assumption Agreement pursuant to Section 13.04(b), the Administrative Agent
shall record on the Register the assignment or transfer of all or part of any
Commitments and Loans set forth in such Assignment and Assumption Agreement.
Coincident with the delivery of such an Assignment and Assumption Agreement to
the Administrative Agent for acceptance and registration of assignment or
transfer 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 Administrative 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 13.16.

          13.17  Limitation on Increased Costs.  Notwithstanding anything to the
                 -----------------------------
contrary contained in Section 1.10, 1.11, 2.06 or 4.04, unless a Bank gives
notice to the Borrower that it is obligated to pay an amount under any such
Section within 180 days after the later of (x) the date such Bank incurs the
respective increased costs, Taxes, loss, expense or liability, or reduction in
amounts received or receivable or reduction in return on capital or (y) the date
such Bank has actual knowledge of its incurrence of the respective increased
costs, Taxes, loss, expense or liability, or reductions in amounts received or
receivable or reduction in return on capital, then such Bank shall only be
entitled to be compensated for such amount by the Borrower pursuant to

                                     -103-
<PAGE>

said Section 1.10, 1.11, 2.06 or 4.04, as the case may be, to the extent the
costs, Taxes, loss, expense or liability, or reduction in amounts received or
receivable or reduction in return on capital are incurred or suffered on or
after the date which occurs 180 days prior to such Bank giving notice to the
Borrower that it is obligated to pay the respective amounts pursuant to said
Section 1.10, 1.11, 2.06 or 4.04, as the case may be. This Section 13.17 shall
have no applicability to any Section of this Agreement or any other Credit
Document other than said Sections 1.10, 1.11, 2.06 and 4.04.

          13.18  Acknowledgment and Agreement of Credit Parties.  Each of the
                 ----------------------------------------------
Credit Parties, by executing and delivering a counterpart of this Agreement,
hereby consents to the increased extensions of credit pursuant to this Agreement
which will be made available as a result of the amendment and restatement hereof
on the Restatement Effective Date.  All such extensions of credit, as well as
the extensions of credit pursuant to the Original Credit Agreement shall be
entitled to all benefits of (and shall be fully guaranteed pursuant to) each of
the Guaranties and shall be fully secured pursuant to, and in accordance with
the terms of, the various Security Documents.

                                *      *      *

                                     -104-
<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.

Address:
-------

450 East Las Olas Boulevard             EXTENDED STAY AMERICA, INC.
Suite 1100
Ft. Lauderdale, FL  33301
Telephone No.:  (954) 713-1600
Telecopier No.: (954) 713-1650
Attention:  Gregory R. Moxley           By: /s/ Gregory R. Moxley
                                           ------------------------------
                                        Title: Chief Financial Officer

                                        MORGAN STANLEY SENIOR FUNDING, INC.,
                                        Individually, as Sole Book Runner and
                                        as Sole Lead Arranger

                                        By: /s/ Todd Vannucci
                                           -----------------------------
                                        Title: Vice President

                                        THE INDUSTRIAL BANK OF JAPAN, LIMITED,
                                        Individually and as Administrative Agent

                                        By: /s/ Takuya Honjo
                                           -----------------------------
                                        Title: Deputy General Manager

                                     -105-
<PAGE>

                              ARCHIMEDES FUNDING II, LTD.

                              By: ING Capital Advisors LLC, as Collateral
                              Manager

                              By: /s/ Wade T. Winter
                                 ------------------
                               Title:  Vice President

                              ARCHIMEDES FUNDING III, LTD.

                              By: ING Capital Advisors LLC, as Collateral
                              Manager

                              By: /s/ Wade T. Winter
                                 ------------------------------------
                               Title:  Vice President

                              BANK ONE

                              By: /s/ Bradley W. Lehl
                                 ------------------------------------
                               Title:  Assistant Vice President

                              BAVARIA TRR CORPORATION

                              By: /s/ Frank B. Bilotta
                                 ------------------------------------
                               Title:  Vice President

                              BHF (USA) CAPITAL CORP.

                              By: /s/ Nicholas Nouvel
                                 ------------------------------------
                               Title:  Vice President

                              By: /s/ Matthew Blesso
                                 ------------------------------------
                               Title:  Associate

                              CANADIAN IMPERIAL BANK OF COMMERCE

                              By: /s/ Karen Volk
                                 ------------------------------------
                               Title:  Authorized Signatory

                                     -106-
<PAGE>

                              CARILLON HOLDING LIMITED

                              By: /s/ Steven R. Sutermeister
                                 ------------------------------------
                               Title: Director

                              CHEVY CHASE BANK

                              By: /s/ Robert L. Smith
                                 ------------------------------------
                               Title: Vice President

                              CREDIT INDUSTRIEL ET COMMERCIAL

                              By: /s/ Marcus Edward
                                 ------------------------------------
                               Title: Vice President

                              By: /s/ Sean Mounier
                                 ------------------------------------
                               Title: First Vice President

                              ELF FUNDING TRUST I

                              By: /s/ James Dondero, CFA, CPA
                                 ------------------------------------
                               Title: President

                              ERSTE BANK

                              By: /s/ Paul Judicke
                                 ------------------------------------
                               Title: Vice President

                              By: /s/ John Runnion
                                 ------------------------------------
                               Title: First Vice President

                              FIRST COMMERCIAL BANK
                              (INCORPORATED IN TAIWAN R.O.C.)
                              LOS ANGELES BRANCH

                              By: /s/ June Shiong Lu
                                 ------------------------------------
                               Title: S.V.P. & General Manager

                                     -107-
<PAGE>

                              FIRST DOMINION FUNDING II

                              By: /s/ Andrew H. Marshak
                                 ------------------------------------
                               Title: Managing Director

                              FIRST DOMINION FUNDING III

                              By: /s/ Andrew H. Marshak
                                 ------------------------------------
                               Title: Managing Director

                              FLEET NATIONAL BANK

                              By: /s/ Renee Ross Nadler
                                 ------------------------------------
                               Title: Managing Director

                              GENERAL ELECTRIC CAPITAL CORPORATION

                              By: /s/ William E. Magee
                                 ------------------------------------
                               Title: Duly Authorized Signatory

                              HELLER FINANCIAL, INC.

                              By: /s/ K. Craig Gallehugh
                                 ------------------------------------
                               Title: Vice President

                              HIGHLAND LEGACY LIMITED

                              By: Highland Capital Management, L.P. as
                              Collateral
                              Manager

                              By: /s/ James Dondero, CFA, CPA
                                 ------------------------------------
                               Title: President

                              IMPERIAL BANK

                              By: /s/ Ray Vadalma
                                 ------------------------------------
                               Title: Senior Managing Director

                                     -108-
<PAGE>

                              KZH III LLC

                              By: /s/ Peter Chin
                                 ------------------------------------
                               Title: Authorized Agent

                              KZH HIGHLAND-2 LLC

                              By: /s/ Peter Chin
                                 ------------------------------------
                               Title: Authorized Agent

                              KZH ING-1 LLC

                              By: /s/ Peter Chin
                                 ------------------------------------
                               Title: Authorized Agent

                              KZH ING-2 LLC

                              By: /s/ Peter Chin
                                 ------------------------------------
                               Title: Authorized Agent

                              KZH ING-3 LLC

                              By: /s/ Peter Chin
                                 ------------------------------------
                               Title: Authorized Agent

                              KZH LANGDALE LLC

                              By: /s/ Peter Chin
                                 ------------------------------------
                               Title: Authorized Agent

                              KZH PAMCO LLC

                              By: /s/ Peter Chin
                                 ------------------------------------
                               Title: Authorized Agent

                              KZH PONDVIEW LLC

                              By: /s/ Peter Chin
                                 ------------------------------------
                               Title: Authorized Agent

                                     -109-
<PAGE>

                              KZH STERLING LLC

                              By: /s/ Peter Chin
                                 ------------------------------------
                               Title: Authorized Agent

                              LAND BANK OF TAIWAN,
                              LOS ANGELES BRANCH

                              By: /s/ Mayer Chen
                                 ------------------------------------
                               Title: SVP & General Manager

                              MANUFACTURERS AND TRADERS TRUST
                              COMPANY

                              By: /s/ Kevin B. Quinn
                                 ------------------------------------
                               Title: Assistant Vice President

                              ML CLO XII PILGRIM AMERICA
                              (CAYMAN), LTD.

                              By: Pilgrim Investments, Inc. as its investment
                              manager

                              By: /s/ Jason T. Groom
                                 ------------------------------------
                               Title: Assistant Vice President

                              ML CLO XX PILGRIM AMERICA
                              (CAYMAN), LTD.

                              By: Pilgrim Investments, Inc. as its investment
                              manager

                              By: /s/ Jason T. Groom
                                 ------------------------------------
                               Title: Assistant Vice President

                                     -110-
<PAGE>

                              ML CLO XIX PILGRIM AMERICA
                              (CAYMAN), LTD.

                              By: Sterling Asset Manager, L.L.C., as its
                              Investment
                              Advisor

                              By: /s/ Louis A. Pistecchia
                                 ------------------------------------
                               Title: Executive Vice President

                              MOUNTAIN CAPITAL CLO I LTD.

                              By: /s/ Darren P. Riley
                                 ------------------------------------
                               Title: Director

                              MUIRFIELD TRADING LLC

                              By: /s/ Ashley R. Hamilton
                                 ------------------------------------
                               Title: Assistant Vice President

                              OLYMPIC FUNDING TRUST, SERIES 1999-1

                              By: /s/ Ashley R. Hamilton
                                 ------------------------------------
                               Title: Authorized Agent

                              OPPENHEIMER SENIOR FLOATING RATE
                              FUND

                              By: /s/ David Foxhoven
                                 ------------------------------------
                               Title: AVP

                              ORIX USA CORPORATION

                              By: /s/ Hiroyuki Miyauchi
                                 ------------------------------------
                               Title: Executive Vice President

                                     -111-
<PAGE>

                              OSPREY INVESTMENT PORTFOLIO

                              By: Citibank N.A., as Managers

                              By: /s/ Mike Regan
                                 ------------------------------------
                               Title: Vice President

                              PAM CAPITAL FUNDING, L.P.

                              By: Highland Capital Management, L.P. as
                              Collateral
                              Manager

                              By: /s/ James Dondero, CFA, CPA
                                 ------------------------------------
                               Title: President

                              PAMCO CAYMAN, LTD.

                              By: Highland Capital Management, L.P. as
                              Collateral
                              Manager

                              By: /s/ James Dondero, CFA, CPA
                                 ------------------------------------
                               Title: President

                              PILGRIM AMERICA HIGH INCOME
                              INVESTMENTS, LTD.

                              By: Pilgrim Investments, Inc. as its investment
                              manager

                              By: /s/ Jason T. Groom
                                 ------------------------------------
                               Title: Assistant Vice President

                              PILGRIM CLO 1999-1 LTD.

                              By: Pilgrim Investments, Inc. as its investment
                              manager

                              By: /s/ Jason T. Groom
                                 ------------------------------------
                               Title: Assistant Vice President

                                     -112-
<PAGE>

                              PILGRIM PRIME RATE TRUST

                              By: Pilgrim Investments, Inc. as its investment
                              manager

                              By: /s/ Jason T. Groom
                                 ------------------------------------
                               Title: Assistant Vice President

                              RZB FINANCE LLC

                              By: /s/ Dieter Beintrexler
                                 ------------------------------------
                               Title: President

                              By: /s/ Christoph Hoedl
                                 ------------------------------------
                               Title: Assistant Vice President

                              SEQUILS-ING 1 (HBDGM), LTD.

                              By: ING Capital Advisors LLC, as Collateral
                              Manager

                              By: /s/ Wade T. Winter
                                 ------------------------------------
                               Title: Vice President

                              SEQUILS - PILGRIM I, LTD.

                              By: Pilgrim Investments, Inc. as its investment
                              manager

                              By: /s/ Jason T. Groom
                                 ------------------------------------
                               Title: Assistant Vice President

                              SKM-LIBERTY VIEW CBO, LTD.

                              By: /s/ Kenneth C. Klegar
                                 ------------------------------------
                               Title: Authorized Signatory

                              SRV-HIGHLAND, INC.

                              By: /s/ Ashley R. Hamilton
                                 ------------------------------------
                               Title: Assistant Vice President

                                     -113-
<PAGE>

                              STANFIELD CLO LTD.

                              By: Stanfield Capital Partners LLC as its
                              Collateral
                              Manager

                              By: /s/ Gregory L. Smith
                                 ------------------------------------
                               Title: Partner

                              STANFIELD/RMF TRANSATLANTIC CDO LTD.

                              By: Stanfield Capital Partners LLC as its
                              Collateral
                              Manager

                              By: /s/ Gregory L. Smith
                                 ------------------------------------
                               Title: Partner

                              SUMMIT BANK

                              By: /s/ Gregory Egli
                                 ------------------------------------
                               Title: Regional Vice President

                              TORONTO DOMINION (NEW YORK), INC.

                              By: /s/ David G. Parker
                                 ------------------------------------
                               Title: Vice President

                              TRANSAMERICA BUSINESS CREDIT
                              CORPORATION

                              By: /s/ Perry Vavoules
                                 ------------------------------------
                               Title: Senior Vice President

                              TYLER TRADING, INC.

                              By: /s/ Johnny E. Graves
                                 ------------------------------------
                               Title: President

                                     -114-
<PAGE>

                         ACKNOWLEDGEMENT AND AGREEMENT
                         -----------------------------

          Each of the undersigned, each being a Subsidiary Guarantor on the
Restatement Effective Date (including each Subsidiary of the Borrower which was
a Subsidiary Guarantor immediately before the Restatement Effective Date and
each Subsidiary of the Borrower which becomes a Subsidiary Guarantor on the
Restatement Effective Date) hereby acknowledges and agrees to the provisions of
the foregoing amended and restated Agreement, and hereby agrees for the benefit
of the Banks that (i) all extensions of credit pursuant thereto (including the
increased extensions of credit made as a result of the occurrence of the
Restatement Effective Date and all other obligations pursuant to this
Agreement), shall be fully entitled to the benefits of (and shall be fully
guaranteed and secured pursuant to the provisions of) all Subsidiaries
Guaranties and Security Documents and (ii) all references in the Credit
Documents to the "Credit Agreement" shall be deemed to be a reference to this
Agreement.

                    ESA 0102, Inc.
                    ESA 0106, Inc.
                    ESA 0121, Inc.
                    ESA 0123, Inc.
                    ESA 0124, Inc.
                    ESA 0125, Inc.
                    ESA 0127, Inc.
                    ESA 0153, Inc.
                    ESA 0155, Inc.
                    ESA 0161, Inc.
                    ESA 0163, Inc.
                    ESA 0174, Inc.
                    ESA 0186, Inc.
                    ESA 0201, Inc.
                    ESA 0206, Inc.
                    ESA 0231, Inc.
                    ESA 0232, Inc.
                    ESA 0280, Inc.
                    ESA 0302, Inc.
                    ESA 0303, Inc.
                    ESA 0305, Inc.
                    ESA 0311, Inc.
                    ESA 0315, Inc.
                    ESA 0328, Inc.
                    ESA 0370, Inc.
                    ESA 0371, Inc.
                    ESA 0373, Inc.
                    ESA 0381, Inc.
                    ESA 0382, Inc.
                    ESA 0417, Inc.
                    ESA 0450, Inc.
                    ESA 0454, Inc.
                    ESA 0455, Inc.

                                     -115-
<PAGE>

                    ESA 0479, Inc.
                    ESA 0510, Inc.
                    ESA 0525, Inc.
                    ESA 0527, Inc.
                    ESA 0530, Inc.
                    ESA 0532, Inc.
                    ESA 0541, Inc.
                    ESA 0552, Inc.
                    ESA 0600, Inc.
                    ESA 0640, Inc.
                    ESA 0646, Inc.
                    ESA 0660, Inc.
                    ESA 0670, Inc.
                    ESA 0675, Inc.
                    ESA 0677, Inc.
                    ESA 0680, Inc.
                    ESA 0733, Inc.
                    ESA 0734, Inc.
                    ESA 0737, Inc.
                    ESA 0745, Inc.
                    ESA 0752, Inc.
                    ESA 0753, Inc.
                    ESA 0780, Inc.
                    ESA 0788, Inc.
                    ESA 0789, Inc.
                    ESA 0858, Inc.
                    ESA 0859, Inc.
                    ESA 0860, Inc.
                    ESA 0861, Inc.
                    ESA 0869, Inc.
                    ESA 0884, Inc.
                    ESA 0885, Inc.
                    ESA 0901, Inc.
                    ESA 0990, Inc.
                    ESA 0991, Inc.
                    ESA 0992, Inc.
                    ESA 0993, Inc.
                    ESA 0994, Inc.
                    ESA 0996, Inc.
                    ESA 1500, Inc.
                    ESA 1501, Inc.
                    ESA 1502, Inc.
                    ESA 1510, Inc.
                    ESA 1514, Inc.
                    ESA 1546, Inc.
                    ESA 1550, Inc.
                    ESA 1591, Inc.
                    ESA 1594, Inc.

                                     -116-
<PAGE>

                    ESA 1596, Inc.
                    ESA 1634, Inc.
                    ESA 2509, Inc.
                    ESA 2522, Inc.
                    ESA 3504, Inc.
                    ESA 4012, Inc.
                    ESA 4013, Inc.
                    ESA 4016, Inc.
                    ESA 4019, Inc.
                    ESA 4023, Inc.
                    ESA 7502, Inc.
                    ESA 7508, Inc.
                    ESA 7513, Inc.
                    ESA Arizona, Inc.
                    ESA Arkansas, Inc.
                    ESA COL, Inc.
                    ESA Connecticut, Inc.
                    ESA Florida, Inc.
                    ESA Georgia, Inc.
                    ESA Idaho, Inc.
                    ESA Illinois, Inc.
                    ESA Indiana, Inc.
                    ESA Iowa, Inc.
                    ESA Kansas, Inc.
                    ESA Kentucky, Inc.
                    ESA Louisiana, Inc.
                    ESA Maryland, Inc.
                    ESA Michigan, Inc.
                    ESA Minnesota, Inc.
                    ESA Mississippi, Inc.
                    ESA Missouri, Inc.
                    ESA New Jersey, Inc.
                    ESA New Mexico, Inc.
                    ESA New York, Inc.
                    ESA Ohio, Inc.
                    ESA Oklahoma, Inc.
                    ESA Oregon, Inc.
                    ESA South Carolina, Inc.
                    ESA Tejas, Inc.
                    ESA Tennessee, Inc.
                    ESA Utah, Inc.
                    ESA Virginia, Inc.
                    ESA Washington, Inc.
                    ESA Wisconsin, Inc.
                    Extended Stay 0453, Inc.
                    Extended Stay 0463, Inc.
                    Extended Stay 0507, Inc.
                    Extended Stay 0547, Inc.

                                     -117-
<PAGE>

                    Extended Stay 2506, Inc.
                    Extended Stay 2511, Inc.
                    Extended Stay America Redevelopment Corp.
                    Extended Stay CA, Inc.
                    Extended Stay MA, Inc.
                    ESA Services, Inc.
                    ESA Management, Inc.
                    ESA West, Inc.
                    ESA International, Inc.
                    Studio Plus Hotels, Inc.
                    Studio Plus Properties, Inc.

                                     -118-
<PAGE>

                                 By: /s/ Gregory R. Moxley
                                     -----------------------------------
                                     Title:  Vice President - Finance

                         On behalf of each Subsidiary Guarantor listed above

                                     -119-<PAGE>

                                                                    Exhibit 10.1

             SIXTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND
                          AMENDMENT OF DEFAULT LETTER

This Sixth Amendment to Credit And Security Agreement and Amendment of Default
Letter, dated as of July 28, 2000, is made by and between P. G. DESIGN
ELECTRONICS, INC., a Delaware corporation (the "Borrower"), and WELLS FARGO
BUSINESS CREDIT, INC., a Minnesota corporation formerly known as Norwest
Business Credit, Inc. (the "Lender").

                                R E C I T A L S:

The Borrower and the Lender have entered into a Credit and Security Agreement
dated as of December 31, 1998, as amended (the "Credit Agreement"). Capitalized
terms used in these recitals have the meanings given to them in the Credit
Agreement unless otherwise specified.

Pursuant to a letter dated January 27, 2000 (the "Default Letter"), the Lender
demanded payment of the Obligations by no later than May 1, 2000, which date was
extended to August 1, 2000, pursuant to the terms of that certain Fourth
Amendment to Credit and Security Agreement and Amendment of Default Letter dated
April 21, 2000 (the "Fourth Amendment"). The Borrower has requested that the
Lender agree to a further extension of the time for payment of the Obligations
in full, which the Lender is willing to do pursuant to the terms and conditions
set forth herein.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:

1.  Defined Terms.  Capitalized terms used in this Amendment which are defined
    --------------
in the Credit Agreement shall have the same meanings as defined therein, unless
otherwise defined herein. In addition, Section 1.1 of the Credit Agreement is
amended by amending the following definition:

          "Borrowing Base" means, at any time the lesser of:
               (a)    the Maximum Line; or
               (b)    subject to change from time to time in the Lender's
discretion, the sum of:

                     (i)  the lesser of (A) 85% of Eligible Accounts, which
percentage shall be reduced on the last Banking Day of each week by 1% per week
commencing on September 8, 2000 or (B) $10,500,000; plus

         (iii) (ii)  the lesser of (A) 4.0% of Eligible Inventory, which shall
continue to be reduced (1) on August 1, 2000, by 1%, (2) on 15, 2000, by
<PAGE>

                          HEARTLAND TECHNOLOGY, INC.
                                JUNE 30, 2000

2.5% and on September 1, 2000 to 0%, or (B) 600,000, which amount shall continue
to be reduced on August 15, 2000, by $100,000.

2.   Amendment to Section 2.3.  Section 2.3 of the Credit Agreement is amended
     -------------------------
to  read as follows:

     Section 2.3.  Payment of Term Note.  The outstanding principal balance
of the Term Note shall be due and payable as follows:

              (a)  Be ginning on May 8, 2000, and on the first Banking Day of
each week thereafter through July 31, 2000, in equal weekly installments of
Twenty Five Thousand Dollars ($25,000) each; and

(b)  Beginning on August 7, 2000, and on the first Banking Day of each week
thereafter, in equal weekly installments of Thirty Five Thousand Dollars
($35,000) each, and

(c)  On the Termination Date, the entire unpaid principal balance of the Term
unpaid interest accrued thereon, shall in any event be due and payable.

3.   Extension of Final Date for Payment.  Notwithstanding the terms of the
     ------------------------------------
Default Letter and the Fourth Amendment, the Lender hereby agrees to extend
the time for payment in full of the Obligations to November 30, 2000.

4.   No Other Changes.  Except as explicitly amended by this Amendment, all the
     ----------------
terms and conditions of both the Credit Agreement and the Default Letter shall
remain in full force and effect and shall apply to any Advance or Letter of
Credit thereunder.

5.   Conditions Precedent.  This Amendment shall be effective when the Lender
     ---------------------
shall have received an executed original hereof, together with each of the
following, each in substance and form acceptable to the Lender in its sole
discretion:

(a)  The Acknowledgment and Agreement of Guarantors set forth at the end of this
Amendment, duly executed by each Guarantor.

     (c)  Such other matters as the Lender may require.

6.   Representations and Warranties.  The Borrower hereby represents and
     -------------------------------
warrants to the Lender as follows:

     (a)  The Borrower has all requisite power and authority to execute this
Amendment and to perform all of its obligations hereunder, and this Amendment
has been duly executed and delivered by the Borrower and constitutes the legal,
valid and binding obligation of the Borrower, enforceable in accordance with its
terms.

     (b)  The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate action and do not
(i) require any
                                       2
<PAGE>

                          HEARTLAND TECHNOLOGY, INC.
                                JUNE 30, 2000

authorization, consent or approval by any governmental commission, board,
bureau, agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation or of any order, writ, injunction or
decree presently in effect, having applicability to the Borrower, or the
articles of incorporation or by-laws of the Borrower, or (iii) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Borrower is a
party or by which it or its properties may be bound or affected.

(c)  All of the representations and warranties contained in Article V of the
Credit Agreement are correct on and as of the date hereof as though made on and
as of such date, except to the extent that such representations and warranties
relate solely to an earlier date.

7.   References.  All references in the Credit Agreement to "this Agreement"
     ----------
shall be deemed to refer to the Credit Agreement as amended hereby; and any and
all references in the Security Documents to the Credit Agreement shall be
deemed to refer to the Credit Agreement as amended hereby.

8.   No Waiver.  The execution of this Amendment and acceptance of any
     ----------
documents related hereto shall not be deemed to be a waiver of any Default or
Event of Default under the Credit Agreement or breach, default or event of
default under any Security Document or other document held by the Lender,
whether or not known to the Lender and whether or not existing on the date of
this Amendment.

9.   Release. The Borrower, and each Guarantor by signing the Acknowledgment and
     --------
Agreement of Guarantors set forth below, each hereby absolutely and
unconditionally releases and forever discharges the Lender, and any and all
participants, parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents and employees of
any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which the
Borrower or such Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.

10.  Costs and Expenses. The Borrower hereby reaffirms its agreement under the
     -------------------
Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the

                                       3
<PAGE>

                          HEARTLAND TECHNOLOGY, INC.
                                JUNE 30, 2000

preparation of this Amendment and the documents and instruments incidental
hereto. The Borrower hereby agrees that the Lender may, at any time or from time
to time in its sole discretion and without further authorization by the
Borrower, make a loan to the Borrower under the Credit Agreement, or apply the
proceeds of any loan, for the purpose of paying any such fees, disbursements,
costs and expenses.

11.  Miscellaneous.  This Amendment and the Acknowledgment and Agreement of
     --------------
Guarantors may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment to
Credit and Security Agreement and Amendment of Default Letter to be duly
executed as of the date first written above.

WELLS FARGO BUSINESS CREDIT, INC. P. G. DESIGN ELECTRONICS, INC.

By:  /s/ Thomas J. Zak                       By:  /s/ Edwin Jacobson
     ---------------------                        ------------------
Its: V.P.                                    ts:  President & CEO
     ---------------------                        ------------------

                                       4

<PAGE>

                   ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS

     The undersigned, each a guarantor of the indebtedness of P. G. Design
Electronics, Inc. (the "Borrower") to Wells Fargo Business Credit, Inc., known
as Norwest Business Credit, Inc. (the "Lender"), pursuant to a separate Guaranty
each dated as of December 31, 1998 (each, a "Guaranty"), hereby (i) acknowledges
receipt of the foregoing Amendment; (ii) consents to the terms (including,
without limitation, the release set forth in Paragraph 9 of the Amendment) and
execution thereof; (iii) reaffirms its obligations to the Lender pursuant to the
terms of its Guaranty; and (iv) acknowledges that the Lender may amend, restate,
extend, renew or otherwise modify the Credit Agreement and any indebtedness or
agreement of the Borrower, or enter into any agreement or extend additional or
other credit accommodations, without notifying or obtaining the consent of the
undersigned and without impairing the liability of the undersigned under its
Guaranty for all of the Borrower's present and future indebtedness to the
Lender.

                                                      HEARTLAND TECHNOLOGY, INC.

                                                By:  /s/ Richard P. Brandstatter
                                                     ---------------------------
                                                Its: Vice President
                                                     ---------------------------

                                                HTI Z CORP., formerly known as
                                                ZECAL CORP.

                                                By:  /s/ Edwin Jacobson
                                                     ---------------------------
                                                Its:  President & CEO
                                                      --------------------------
<PAGE>

                   ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR

     The undersigned, a guarantor of certain indebtedness of P. G. Design
Electronics, Inc. (the "Borrower") to Wells Fargo Business Credit, Inc.,
formerly known as Norwest Business Credit, Inc. (the "Lender"), pursuant to a
Guaranty dated as of May 5, 2000 (the "Guaranty"), hereby (i) acknowledges
receipt of the foregoing Amendment; (ii) consents to the terms (including,
without limitation, the release set forth in Paragraph 9 of the Amendment) and
execution thereof; (iii) reaffirms its obligations to the Lender pursuant to the
terms of its Guaranty; and (iv) acknowledges that the Lender may amend, restate,
extend, renew or otherwise modify the Credit Agreement and any indebtedness or
agreement of the Borrower, or enter into any agreement or extend additional or
other credit accommodations, without notifying or obtaining the consent of the
undersigned and without impairing the liability of the undersigned under its
Guaranty for all of the Borrower's present and future indebtedness to the
Lender.

                                                           ZECAL TECHNOLOGY, LLC

                                                         By:  /s/ Edwin Jacobson
                                                              ------------------
                                                         Its:  Chairman
                                                               -----------------

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