Document:

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                                                                         Exh 4.1
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                              CORNING INCORPORATED

                                    AS ISSUER

                                       TO

                            THE CHASE MANHATTAN BANK

                                   AS TRUSTEE

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

                          FIRST SUPPLEMENTAL INDENTURE

                          Dated as of November 8, 2000

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

                       Zero Coupon Convertible Debentures
                             due November 8, 2015

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                                TABLE OF CONTENTS

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ARTICLE ONE           THE 2015 DEBENTURES

<S>                  <C>                                                                                         <C>
SECTION  101.         Designation of 2015 Debentures; Establishment of Form.......................................2
SECTION  102.         Amount......................................................................................2
SECTION  103.         Accrual of Original Issue Discount; Interest................................................3
SECTION  104.         Redemption..................................................................................3
SECTION  105.         Discharge of Liability on 2015 Debentures...................................................3
SECTION  106.         Conversion..................................................................................3
SECTION  107.         Maturity....................................................................................3
SECTION  108.         Repurchase..................................................................................4
SECTION  109.         Amount Due upon Event of Default............................................................4
SECTION  110.         Other Terms of 2015 Debentures..............................................................4

ARTICLE TWO           AMENDMENTS TO THE INDENTURE

SECTION  201.         Definitions and Other Provisions of General Application.....................................5
SECTION  202.         Registration, Registration of Transfer and Exchange.........................................8
SECTION  203.         Mutilated, Destroyed, Lost and Stolen Securities............................................8
SECTION  204.         Payment of Interest; Interest Rights Preserved..............................................8
SECTION  205.         Cancellation................................................................................9
SECTION  206.         Events of Default; Unconditional Right of Holders to Receive Principal,
                      Premium and Interest........................................................................9
SECTION  207.         The Trustee.................................................................................9
SECTION  208.         Covenants...................................................................................9
SECTION  209.         Redemption.................................................................................10
SECTION  210.         Conversion.................................................................................11
SECTION  211.         Repurchase at Option of Holder; Repurchase upon Change in Control; Tax
                      Events.....................................................................................21

ARTICLE THREE  MISCELLANEOUS PROVISIONS

SECTION  301.         Integral Part..............................................................................35
SECTION  302.         General Definitions........................................................................35
SECTION  303.         Adoption, Ratification and Confirmation....................................................35
SECTION  304.         Counterparts...............................................................................36
SECTION  305.         Governing Law..............................................................................36

ANNEX A - FORM OF 2015 DEBENTURE
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                              CORNING INCORPORATED
                          FIRST SUPPLEMENTAL INDENTURE

                  THIS FIRST SUPPLEMENTAL INDENTURE, dated as of November 8,
2000, between Corning Incorporated, a New York corporation (the "Company") and
The Chase Manhattan Bank (the "Trustee").

                               W I T N E S S E T H

                  WHEREAS, the Company has executed and delivered to the Trustee
an Indenture, of even date herewith (the "Indenture").

                  WHEREAS, the Indenture provides for the Company's issuance
from time to time of senior unsecured debt securities;

                  WHEREAS, no Securities have heretofore been issued under the
indenture and no securityholders currently exist thereunder;

                  WHEREAS, Article Nine of the Indenture provides that the
Company, when authorized by or pursuant to a Board Resolution, and the Trustee
may without the consent of any Securityholders enter into one or more indentures
supplemental to the Indenture to establish the form and terms of Securities of
any series, including redemption, conversion and repurchase terms and
procedures;

                  WHEREAS, the Company desires to issue a series of zero coupon
senior convertible debentures due November 8, 2015 under the Indenture, and has
duly authorized the creation and issuance of such debentures and the execution
and delivery of this Supplemental Indenture to modify the Indenture and provide
certain additional provisions as hereinafter described;

                  WHEREAS, the Company and the Trustee deem it advisable to
enter into this Supplemental Indenture for the purpose of establishing the terms
of such convertible subordinated debt securities and providing for the rights,
obligations and duties of the Trustee with respect to such debt securities;

                  WHEREAS, concurrent with the execution hereof, the Company has
caused its counsel to deliver to the Trustee an Opinion of Counsel or a reliance
letter upon an Opinion of Counsel to the effect that the execution of this
Supplemental Indenture is authorized or permitted by the Indenture;

                  WHEREAS, all conditions and requirements of the Indenture
necessary to make this Supplemental Indenture a valid, binding and legal
instrument in accordance with its terms have been performed and fulfilled by the
parties hereto.

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                  NOW THEREFORE:

                  In consideration of the premises provided for herein, the
Company and the Trustee mutually covenant and agree for the equal and
proportionate benefit of all Holders of the Securities as follows:

                                   ARTICLE ONE

                               THE 2015 DEBENTURES

SECTION  101.  DESIGNATION OF 2015 DEBENTURES; ESTABLISHMENT OF FORM.

                  There shall be a series of Securities designated "Zero Coupon
Convertible Debentures Due November 8, 2015" of the Company (the "2015
Debentures"), and the form thereof shall be substantially as set forth in Annex
A hereto, which is incorporated into and shall be deemed a part of this First
Supplemental Indenture, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
the Indenture, and which may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers of the Company executing
such 2015 Debentures, as evidenced by their execution of the 2015 Debentures.

                  The 2015 Debentures will initially be issued in permanent
global form, substantially in the form set forth in Annex A hereto (the "Global
Securities"), as a Book-Entry Security. Each Global Security shall represent
such of the Outstanding 2015 Debentures as shall be specified therein and shall
provide that it shall represent the aggregate amount of Outstanding 2015
Debentures from time to time endorsed thereon and that the aggregate amount of
Outstanding 2015 Debentures represented thereby may from time to time be reduced
to reflect exchanges conversions, repurchases and redemptions. Any endorsement
of a Global Security to reflect the amount, or any increase or decrease in the
amount, of Outstanding 2015 Debentures represented thereby shall be made by the
Trustee in accordance with written instructions or such other written form of
instructions as is customary for the Depositary, from the Depositary or its
nominee on behalf of any Person having the beneficial interest in the Global
Security.

                  The Company initially appoints The Depository Trust Company to
act as Depositary with respect to the Global Securities.

                  The Company initially appoints the Trustee to act as its
Paying Agent and its Conversion Agent, pursuant to Section 1002 of the
Indenture, with respect to the 2015 Debentures.

SECTION  102.  AMOUNT.

                  (a) The Trustee shall authenticate and deliver the 2015
Debentures for original issue in an aggregate Principal Amount at maturity of
up to $2,712,546,000 upon Company Order for the authentication and delivery of
2015 Debentures, without any further action by the Company. The

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aggregate Principal Amount of 2015 Debentures that may be authenticated and
delivered under the Indenture may not exceed the amount set forth in the
foregoing sentence, except for 2015 Debentures authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other 2015
Debentures pursuant to Section 304, 305, 306, 906, 1107, 1403 or 1511 of the
Indenture.

                  (b) The Company may not issue new 2015 Debentures to replace
2015 Debentures that it has paid or delivered to the Trustee for cancellation or
that any Holder has converted pursuant to Article Fourteen of the Indenture.

SECTION  103.  ACCRUAL OF ORIGINAL ISSUE DISCOUNT; INTEREST.

                  The 2015 Debentures shall be Original Issue Discount
Securities. Original Issue Discount shall accrue with respect to the 2015
Debentures at the rate set forth under the caption "Interest" in the 2015
Debentures, commencing on the Issue Date of the 2015 Debentures. Except as
provided under the caption "Tax Event" in the 2015 Debentures and in Article
Sixteen of the Indenture, there shall be no periodic payments of interest on the
2015 Debentures.

SECTION  104.  REDEMPTION.

                  (a) There shall be no sinking fund for the retirement of the
2015 Debentures.

                  (b) The Company, at its option, may redeem the 2015 Debentures
in accordance with the provisions of and at the Redemption Prices set forth
under the captions "Optional Redemption" and "Notice of Redemption" in the 2015
Debentures and in accordance with the provisions of the Indenture, including,
without limitation, Article Eleven of the Indenture.

SECTION  105.  DISCHARGE OF LIABILITY ON 2015 DEBENTURES.

                  Article Thirteen of the Indenture shall be applicable to the
2015 Debentures.

SECTION  106.  CONVERSION.

                  The 2015 Debentures shall be convertible in accordance with
the provisions and at the conversion price set forth under the caption
"Conversion" in the 2015 Debentures and in accordance with the provisions of the
Indenture, including, without limitation, Article Fourteen thereof.

SECTION  107.  MATURITY.

                  The date on which the principal of the 2015 Debentures is
payable pursuant to the Indenture, except as otherwise provided in the 2015
Debentures, shall be November 8, 2015. The Stated Maturity of the 2015
Debentures is November 8, 2015.

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SECTION  108.  REPURCHASE.

                  (a) The 2015 Debentures shall be repurchased by the Company in
accordance with the provisions and at the Repurchase Prices set forth under the
caption "Repurchase by the Company at the Option of the Holder" in the 2015
Debentures and in accordance with the provisions of the Indenture, including,
without limitation, Article Fifteen thereof.

                  (b) The Company, at the option of the Holders thereof, shall
repurchase the 2015 Debentures in accordance with the provisions of and at the
Change in Control Purchase Prices set forth under the caption "Purchase of
Securities at the Option of the Holder Upon a Change in Control" in the 2015
Debentures and in accordance with the provisions of the Indenture, including,
without limitation, Article Fifteen thereof.

SECTION  109.  AMOUNT DUE UPON EVENT OF DEFAULT.

                  If an Event of Default with respect to any 2015 Debentures
that are at the time Outstanding occurs and is continuing, then in accordance
with Section 502 of the Indenture, the Trustee or the Holders of not less than
25% in principal amount of the Outstanding 2015 Debentures may declare all
unpaid Issue Price plus accrued Original Issue Discount through the acceleration
date, if any (or, if the 2015 Debentures have been converted to interest-bearing
2015 Debentures pursuant to Section 1601 of the Indenture, the Restated
Principal Amount plus accrued and unpaid interest, if any, from the date of
conversion to the acceleration date), of all of the 2015 Debentures to be due
and payable immediately by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such specified
amount shall become immediately due and payable. If an Event of Default
described in clause (5) or (6) of Section 501 of the Indenture shall occur, such
specified amount of all Outstanding 2015 Debentures ipso facto shall become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder.

SECTION  110.  OTHER TERMS OF 2015 DEBENTURES.

                  Without limiting the foregoing provisions of this Article One,
the terms of the 2015 Debentures shall be as set forth in the form of 2015
Debentures set forth in Annex A hereto and as provided in the Indenture. In the
event of a conflict or inconsistency between the Indenture and this First
Supplement, this First Supplement will control.

                                   ARTICLE TWO

                           AMENDMENTS TO THE INDENTURE

                  The amendments contained herein shall apply to 2015 Debentures
only and not to any other series of Security issued under the Indenture and any
covenants provided herein are expressly being included solely for the benefit of
the 2015 Debentures. These amendments shall be effective for so long as any 2015
Debentures remain Outstanding.

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SECTION  201.  DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.

                  (a) Section 101 of the Indenture is amended by inserting,
amending or restating, as the case may be, in their appropriate alphabetical
position, the following definitions:

                  "Capital Stock" or "capital stock" of any Person means any and
         all shares, interests, partnership interests, participations, rights or
         other equivalents (however designated) of such Person's equity interest
         (however designated) issued by that Person.

                  "Change in Control" has the meaning specified in Section
        1501(b) of the Indenture.

                  "Change in Control Purchase Date" has the meaning specified in
         Section 1501(b) of the Indenture.

                  "Change in Control Purchase Notice" has the meaning specified
         in Section 1501(b) of the Indenture.

                  "Change in Control Purchase Price" has the meaning specified
         in Section 1501(b) of the Indenture.

                  "Common Stock" means any stock of any class of the Company
         which has no preference in respect of dividends or of amounts payable
         in the event of any voluntary or involuntary liquidation, dissolution
         or winding up of the Company and which is not subject to redemption by
         the Company. However, subject to the provisions of Section 1412, shares
         issuable on conversion of Securities shall include only shares of the
         class designated as Common Stock of the Company at the date hereof or
         shares of any class or classes resulting from any reclassification or
         reclassifications thereof and which have no preference in respect of
         dividends or of amounts payable in the event of any voluntary or
         involuntary liquidation, dissolution or winding up of the Company and
         which are not subject to redemption by the Company; provided that if at
         any time there shall be more than one such resulting class, the shares
         of each such class then so issuable shall be substantially in the
         proportion which the total number of shares of such class resulting
         from all such reclassifications bears to the total number of shares of
         all such classes resulting from all such reclassifications.

                  "Company Notice Date" has the meaning specified in Section
        1503 of the Indenture.

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                  "Conversion Agent" means the Person authorized by the Company
         to effect the conversion of the 2015 Debentures and shall initially be
         the agent specified in Section 101 of this Supplemental Indenture.

                  "Notional Conversion Price" means the price of a share of
         Common Stock calculated by FIRST, adding (i) the Issue Price to (ii)
         Original Issue Discount accrued to the measurement date and SECOND,
         dividing that sum by the quotient obtained by dividing (x) $1,000 by
         (y) the then-applicable conversion price under this Indenture.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
         amended, or any successor statute.

                  "Expiration Time" has the meaning specified in Section 1405.

                  "Global Securities" has the meaning specified in Section 101
        hereof.

                  "Holder Repurchase Notice" has the meaning specified in
         Section 1501(a) of the Indenture.

                  "Interest", when used with respect to an Original Issue
         Discount Security which by its terms bears interest only at Maturity or
         after a Tax Event, means interest payable at Maturity or after a Tax
         Event.

                  "Issue Date" of any 2015 Debenture means the date on which the
         2015 Debenture was originally issued or deemed issued as set forth on
         the face of the 2015 Debenture.

                  "Issue Price" of any 2015 Debenture means, in connection with
         the original issuance of such 2015 Debenture, the initial issue price
         at which the 2015 Debenture is sold to the public. The Issue Price per
         $1,000 Principal Amount is set forth on the face of the 2015 Debenture.

                  "Market Price" has the meaning specified in Section 1504 of
        the Indenture.

                  "Optional Repurchase Price" has the meaning specified in
         Section 1501(a) of the Indenture.

                  "Original Issue Discount" of any 2015 Debenture means the
         difference between the Principal Amount of the 2015 Debenture and its
         Issue Price.

                  "Principal Amount" of a 2015 Debenture means the Principal
         Amount as set forth on the face of the 2015 Debenture.

                  "Purchased Shares" has the meaning specified in 1405 of the
        Indenture.

                  "Repurchase Date" has the meaning specified in Section 1501 of
        the Indenture.

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                  "Repurchase Notice" means either the Change in Control
         Purchase Notice or the Holder Repurchase Notice, as the case may be.

                  "Repurchase Price" means either the Change in Control Purchase
         Price or the Optional Repurchase Price, as the case may be.

                  "Responsible Officer", when used with respect to the Trustee,
         means any officer assigned to administer corporate trust matters and
         also means, with respect to a particular corporate trust matter, any
         other officer to whom such matter is referred because of his or her
         knowledge of and familiarity with the particular subject.

                  "Restated Principal Amount" has the meaning specified in
        Section 1601 of the Indenture.

                  "Sale Price" has the meaning specified in Section 1504 of the
        Indenture.

                  "Securities" has the meaning stated in the first recital of
         this Indenture and more particularly means any Securities authenticated
         and delivered under this Indenture, including 2015 Debentures.

                  "Securities Act" means the Securities Act of 1933, as amended,
        or any successor statute.

                  "Tax Event" means that the Company shall have received an
         opinion from independent tax counsel experienced in such matters to the
         effect that, as a result of (a) any amendment to, or change (including
         any announced prospective change) in, the laws (or any regulations
         thereunder) of the United States or any political subdivision or taxing
         authority thereof or therein or (b) any amendment, change,
         interpretation or application of the laws or regulations by any
         legislative body, court, governmental agency or regulatory authority,
         there is more than an insubstantial risk that interest (including
         Original Issue Discount) payable on the 2015 Debentures either
         (i) would not be deductible on a current accrual basis or (ii)
         would not be deductible under any other method, in either case, in
         whole or in part, by the Company (by reason of deferral, disallowance
         or otherwise) for United States federal income tax purposes.

                  "Trading Day" means a day during which trading in securities
         generally occurs on the New York Stock Exchange or, if the Common Stock
         is not listed on the New York Stock Exchange, on the principal other
         national or regional securities exchange on which the Common Stock is
         then listed or, if the Common Stock is not listed on a national or
         regional securities exchange, on the Nasdaq National Market System or,
         if the Common Stock is not quoted on the Nasdaq National Market System,
         on the principal other market on which the Common Stock is then traded.

                  "2015 Debentures" means the Zero Coupon Convertible Debentures
         due November 8, 2015 of the Company authorized by resolution of the
         Board of Directors.

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                  "Voting Stock" means any class or classes of Capital Stock
         pursuant to which the holders thereof under ordinary circumstances have
         the power to vote in the election of the board of directors, managers
         or trustees of any Person (or other Persons performing similar
         functions), irrespective of whether or not, at the time, Capital Stock
         of any other class or classes shall have, or might have, voting power
         by reason of the happening of any contingency.

SECTION 202.   REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

                  Section 305 of the Indenture shall be amended by adding the
following paragraph immediately following the seventh paragraph thereof with the
following paragraph:

                  The Company shall not be required (i) to issue, register the
         transfer of or exchange the Securities of any series during a period
         beginning at the opening of business 15 days before the day of the
         mailing of a notice of redemption of Securities of that series selected
         for redemption and ending at the close of business on the day of such
         mailing, (ii) to register the transfer of or exchange any 2015
         Debenture so selected for redemption in whole or in part, except the
         unredeemed portion of any Security being redeemed in part, or (iii) to
         exchange or register a transfer of any 2015 Debenture or portions
         thereof in respect of which a Change in Control Purchase Notice or
         Holder Repurchase Notice has been delivered and not withdrawn by the
         Holder thereof (except, in the case of the purchase of a 2015 Debenture
         in part, the portion not to be purchased).

SECTION  203.  MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.

                  The Indenture shall be amended by replacing the third
paragraph of Section 306 with the following paragraph:

                  In case any such mutilated, destroyed, lost or stolen Security
         has or is about to become due and payable, or is about to be redeemed
         or purchased by the Company upon a Change in Control or purchased by
         the Company on a Repurchase Date, in each case pursuant to Article
         Fifteen, the Company in its discretion may, instead of issuing a new
         Security, pay such Security.

SECTION  204.  PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.

                  Section 307 of the Indenture is amended by adding the
following paragraph immediately following Clause (2) thereof:

                  In the case of any Security which is converted after any
         Regular Record Date and on or prior to the next succeeding Interest
         Payment Date (other than any Security whose Maturity is prior to such
         Interest Payment Date), interest whose Stated Maturity is on such
         Interest Payment Date shall be payable on such Interest Payment Date
         notwithstanding such conversion, and such interest (whether or not
         punctually paid or duly provided for) shall be paid to the Person in
         whose name that Security (or one or more Predecessor Securities) is
         registered at the close of business on such Regular Record Date. Except
         as otherwise expressly provided in the immediately

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         preceding sentence, in the case of any Security which is converted,
         interest whose Stated Maturity is after the date of conversion of such
         Security shall not be payable.

SECTION  205.  CANCELLATION.

                  The first sentence of Section 309 of the Indenture shall be
amended by inserting the word "conversion" in the first sentence thereof,
following the word "redemption".

SECTION  206.  EVENTS OF DEFAULT; UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
               PRINCIPAL, PREMIUM AND INTEREST.

                  (a) Clause (1) of Section 501 of the Indenture is amended to
read in its entirety as follows:

                  (1) default in the payment of any interest upon any Security,
         including default in the payment of any interest after the conversion
         of the 2015 Debentures to interest-bearing 2015 Debentures pursuant to
         Section 1601 upon any 2015 Debentures when such interest becomes due
         and payable and continuance of such default for a period of 30 days;

                  (b) Clause (2) of Section 501 of the Indenture is amended to
read in its entirety as follows:

                  (2) default in the payment of the Principal Amount at Maturity
         (or, if the 2015 Debentures have been converted to interest-bearing
         2015 Debentures pursuant to Section 1601, the Restated Principal
         Amount), the Redemption Price, the Optional Repurchase Price or the
         Change in Control Purchase Price when the same becomes due and payable
         upon redemption, upon declaration of acceleration, when due for
         repurchase by the Company or otherwise;

                  (c) Section 508 of the Indenture shall be amended by
replacing that section with the following:

         Section 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
                      PREMIUM AND INTEREST.

                  Notwithstanding any other provision in this Indenture, the
         Holder of any Security shall have the right, which is absolute and
         unconditional, to receive payment of the principal of (and premium, if
         any) and (subject to Section 307) interest on, if any, with respect to
         such Security on the Maturity or Maturities expressed in such Security
         (or in the case of redemption, to receive the Redemption Price on the
         Redemption Date, in the case of a repurchase, to receive the Optional
         Repurchase Price on the Repurchase Date, or in the case of a Change in
         Control, to receive the Change in Control Purchase Price on the Change
         in Control Purchase Date) and to institute suit for the enforcement of
         any such payment on or after such respective dates, and such rights
         shall not be impaired without the consent of such Holder.

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SECTION  207.  THE TRUSTEE.

                  Article Six of the Indenture shall be amended by inserting at
the end of Section 607 thereof the following paragraph:

                  The provisions of this Section 607 shall survive the
         resignation or removal of the Trustee and the termination of this
         Indenture.

SECTION  208.  COVENANTS.

                  Sections 1008 and 1009 of the Indenture shall not apply to the
2015 Debentures.

SECTION  209.  REDEMPTION.

                  Article Eleven of the Indenture shall be amended by

                  (a)      Inserting at the end of Clause (7) of Section 1104
"and", and inserting a new Clause (8), "(8) that there exists a conversion
privilege, if applicable.", and

                  (b)      inserting the following section in its entirety:

         Section 1108.     CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION

                  In connection with 2015 Debentures, the Company may arrange
         for the purchase and conversion of any 2015 Debentures called for
         redemption by an agreement with one or more investment bankers or other
         purchasers to purchase such 2015 Debentures by paying to a Paying Agent
         (other than the Company or any of its Affiliates) for the benefit of
         the Holders, on or before 11:00 A.M. New York City time on the
         Redemption Date, an amount that, together with any amounts deposited
         with such Paying Agent by the Company for the redemption of such 2015
         Debentures, is not less than the Redemption Price of such 2015
         Debentures. Notwithstanding anything to the contrary contained in this
         Article Eleven, the obligation of the Company to pay the Redemption
         Price of such 2015 Debentures, including interest, if any, shall be
         deemed to be satisfied and discharged to the extent such amount is so
         paid by such purchasers; provided, however, that nothing in this
         Section 1108 shall relieve the Company of its obligation to pay the
         Redemption Price on 2015 Debentures called for redemption. If such an
         agreement is entered into, any 2015 Debentures called for redemption
         and not surrendered for conversion by the Holders thereof prior to the
         relevant Redemption Date may, at the option of the Company upon written
         notice to the Trustee, be deemed, to the fullest extent permitted by
         law, acquired by such purchasers from such Holders and (notwithstanding
         anything to the contrary contained in Article Fourteen) surrendered by
         such purchasers for conversion, all as of 11:00 A.M. New York City time
         on the Redemption Date, subject to payment of the above amount as
         aforesaid. The Paying Agent shall hold and pay to the Holders whose
         2015 Debentures are selected for redemption any such amount paid to it
         for purchase in the same manner as it would money deposited with it by
         the Company for the redemption of 2015 Debentures. Without the Paying
         Agent's prior written consent, no arrangement between the Company and
         such purchasers for the purchase and

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         conversion of any 2015 Debentures shall increase or otherwise affect
         any of the powers, duties, responsibilities or obligations of the
         Paying Agent as set forth in this Indenture, and the Company agrees to
         indemnify the Paying Agent from, and hold it harmless against, any
         loss, liability or expense arising out of or in connection with any
         such arrangement for the purchase and conversion of any 2015 Debentures
         between the Company and such purchasers, including without limitation
         the costs and expenses incurred by the Paying Agent in the defense of
         any claim or liability reasonably incurred without negligence or bad
         faith on its part arising out of or in connection with the exercise or
         performance of any of its powers, duties, responsibilities or
         obligations under this Indenture, in accordance with the indemnity
         provisions applicable to the Trustee set forth herein.

SECTION  210.  CONVERSION.

                  The Indenture is amended by adding the following Article
Fourteen:

                                ARTICLE FOURTEEN
                            CONVERSION OF SECURITIES

         Section 1401.  APPLICABILITY OF ARTICLE.

                  Pursuant to Section 301, provision is hereby made for the
         conversion of the 2015 Debentures pursuant to this Article Fourteen.

         Section 1402. CONVERSION PRIVILEGE AND CONVERSION PRICE.

                  Subject to and upon compliance with the provisions of this
         Article, at the option of the Holder thereof, any Security or any
         portion of the principal amount at which is $1,000 or an integral
         multiple of $1,000 at Stated Maturity thereof may be converted based on
         the Principal Amount at Stated Maturity thereof, or of such portion
         thereof, into fully paid and nonassessable shares (calculated as to
         each conversion to the nearest 1/100 of a share) of Common Stock of the
         Company, at the conversion price, determined as hereinafter provided,
         in effect at the time of conversion. The ratio derived by dividing
         $1,000 by the then-applicable conversion price is referred to herein as
         the "conversion rate." Such conversion right shall commence on the date
         of issuance of the Securities and expire at the close of business on
         the date provided for in the Securities with respect to such
         Securities. In case a Security or portion thereof is called for
         redemption, such conversion right in respect of the Security or portion
         so called shall expire at the close of business on the Business Day
         prior to the Redemption Date, unless the Company defaults in making the
         payment due upon redemption.

                  The price at which shares of Common Stock shall be delivered
         upon conversion is herein referred to as the "conversion price". The
         initial conversion price shall be fixed in the Security. The conversion
         price shall be adjusted in certain instances as provided in Section
         1405.

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         Section 1403.  EXERCISE OF CONVERSION PRIVILEGE.

                  In order to exercise the conversion privilege, the Holder of
         any Security to be converted shall surrender such Security, duly
         endorsed or assigned to the Company or in blank, at any office or
         agency of the Company maintained for that purpose pursuant to Section
         1002, accompanied by written notice to the Company at such office or
         agency that the Holder elects to convert such Security or, if less than
         the entire principal amount thereof is to be converted, the portion
         thereof to be converted. On conversion of a 2015 Debenture, that
         portion of accrued Original Issue Discount (and interest, if the
         Company has exercised its option provided for in Section 1601)
         attributable to the period from the Issue Date (or, in the case of
         interest, if the Company has exercised the option provided for in
         Section 1601, the later of (x) the date of such exercise and (y) the
         date on which interest was last paid) of the 2015 Debenture through the
         conversion date with respect to the converted 2015 Debenture shall not
         be cancelled, extinguished or forfeited, but rather shall be deemed to
         be paid in full to the Holder thereof through delivery of the Common
         Stock (together with the cash payment, if any, in lieu of fractional
         shares) in exchange for the 2015 Debenture being converted pursuant to
         the provisions hereof; and the fair market value of such Common Stock
         (together with any such cash payment in lieu of fractional shares)
         shall be treated as issued, to the extent thereof, first in exchange
         for Original Issue Discount (and interest, if the Company has exercised
         its option provided for in Section 1601) accrued through the Conversion
         Date, and the balance, if any, of such fair market value of such Common
         Stock (and any such cash payment) shall be treated as issued in
         exchange for the Issue Price of the 2015 Debenture being converted
         pursuant to the provisions hereof. In the event that the Company has
         exercised its option under Section 1601, then any securities
         surrendered for conversion during the period from the close of business
         on any Regular Record Date next preceding any Interest Payment Date to
         the opening of business on such Interest Payment Date shall (except in
         the case of Securities or portions thereof which have been called for
         redemption on a Redemption Date within such period) be accompanied by
         payment in immediately available funds or other funds acceptable to the
         Company of an amount equal to the interest payable on such Interest
         Payment Date on the principal amount of Securities being surrendered
         for conversion. Except as provided in the preceding two sentences and
         subject to the third paragraph of Section 307, no other payment or
         other adjustment shall be made upon any conversion on account of any
         Original Issue Discount (and interest, if the Company has exercised
         its option provided for in Section 1601) accrued on the 2015
         Debentures surrendered for conversion or on account of any dividends
         on the Common Stock issued upon conversion.

                  Securities shall be deemed to have been converted immediately
         prior to the close of business on the day of surrender of such
         Securities for conversion in accordance with the foregoing provisions,
         and at such time the rights of the Holders of such Securities as
         Holders shall cease, and the Person or Persons entitled to receive the
         Common Stock issuable upon conversion shall be treated for all purposes
         as the record holder or holders of such Common Stock at such time. As
         promptly as practicable on or after the conversion date, the Company
         shall issue and shall deliver at such office or agency a certificate or
         certificates for the number of full shares of Common Stock issuable
         upon conversion, together with payment in lieu of any fraction of a
         share, as provided in Section 1404.

                                      -12-
<PAGE>

                  In the case of any Security which is converted in part only,
         upon such conversion the Company shall execute and the Trustee shall
         authenticate and deliver to the Holder thereof, at the expense of the
         Company, a new Security or Securities of authorized denominations in
         aggregate principal amount equal to the unconverted portion of the
         principal amount of such Security.

         Section 1404.  FRACTIONS OF SHARES.

                  No fractional shares of Common Stock shall be issued upon
         conversion of Securities. If more than one Security shall be
         surrendered for conversion at one time by the same Holder, the number
         of full shares which shall be issuable upon conversion thereof shall be
         computed on the basis of the aggregate principal amount of the
         Securities (or specified portions thereof) so surrendered. Instead of
         any fractional share of Common Stock which would otherwise be issuable
         upon conversion of any Security or Securities (or specified portions
         thereof), the Company shall pay a cash adjustment in respect of such
         fraction in an amount equal to the same fraction of the market price
         per share of Common Stock (as determined by the Board of Directors or
         in any manner prescribed by the Board of Directors) at the close of
         business on the trading day immediately prior to the day of conversion.

         Section 1405.  ADJUSTMENT OF CONVERSION PRICE.

                  (1) In case at any time after the date of the issuance of the
         applicable Securities, the Company shall pay or make a dividend or
         other distribution on any class of capital stock of the Company in
         Common Stock, the conversion price in effect at the opening of business
         on the day following the date fixed for the determination of
         stockholders entitled to receive such dividend or other distribution
         shall be reduced by multiplying such conversion price by a fraction of
         which the numerator shall be the number of shares of Common Stock
         outstanding at the close of business on the date fixed for such
         determination and the denominator shall be the sum of such number of
         shares and the total number of shares constituting such dividend or
         other distribution, such reduction to become effective immediately
         after the opening of business on the day following the date fixed for
         such determination. For the purposes of this paragraph (1), the number
         of shares of Common Stock at any time outstanding shall not include
         shares held in the treasury of the Company but shall include shares
         issuable in respect of scrip certificates issued in lieu of fractions
         of shares of Common Stock. The Company will not pay any dividend or
         make any distribution on shares of Common Stock held in the treasury of
         the Company.

                  (2) In case at any time after the date of the issuance of the
         applicable Securities, the Company shall issue rights or warrants to
         all holders of its Common Stock (not being available on an equivalent
         basis to Holders of the Securities upon conversion) entitling them to
         subscribe for or purchase shares of Common Stock at a price per share
         less than the current market price per share (determined as provided in
         paragraph (8) of this Section) of the Common Stock on the date fixed
         for the determination of stockholders entitled to receive such rights,
         options or warrants (other than pursuant to a dividend reinvestment
         plan), the conversion price in effect at the opening of business on the
         day following the date fixed for such determination shall be reduced by
         multiplying such conversion price by a fraction of which the numerator
         shall be the number of shares of Common Stock outstanding at the close
         of business on the date fixed for such

                                      -13-
<PAGE>

         determination plus the number of shares of Common Stock which the
         aggregate of the offering price of the total number of shares of Common
         Stock so offered for subscription or purchase would purchase at such
         current market price and the denominator shall be the number of shares
         of Common Stock outstanding at the close of business on the date fixed
         for such determination plus the number of shares of Common Stock so
         offered for subscription or purchase, such reduction to become
         effective immediately after the opening of business on the day
         following the date fixed for such determination. For the purposes of
         this paragraph (2), the number of shares of Common Stock at any time
         outstanding shall not include shares held in the treasury of the
         Company but shall include shares issuable in respect of scrip
         certificates issued in lieu of fractions of shares of Common Stock. The
         Company will not issue any rights or warrants in respect of shares of
         Common Stock held in the treasury of the Company.

                  (3) In case at any time after the date of the issuance of the
         applicable Securities, outstanding shares of Common Stock shall be
         subdivided into a greater number of shares of Common Stock, the
         conversion price in effect at the opening of business on the day
         following the day upon which such subdivision becomes effective shall
         be proportionately reduced, and, conversely, in case outstanding shares
         of Common Stock shall each be combined into a smaller number of shares
         of Common Stock, the conversion price in effect at the opening of
         business on the day following the day upon which such combination
         becomes effective shall be proportionately increased, such reduction or
         increase, as the case may be, to become effective immediately after the
         opening of business on the day following the day upon which such
         subdivision or combination becomes effective.

                  (4) In case at any time after the date of the issuance of the
         applicable Securities, the Company shall, by dividend or otherwise,
         distribute to all holders of its Common Stock evidences of its
         indebtedness or assets (including securities, but excluding any rights
         or warrants referred to in paragraph (2) of this Section, any dividend
         or distribution paid in cash out of the retained earnings of the
         Company and any dividend or distribution referred to in paragraph (1)
         of this Section), the conversion price shall be adjusted so that the
         same shall equal the price determined by multiplying the conversion
         price in effect immediately prior to the close of business on the date
         fixed for the determination of stockholders entitled to receive such
         distribution by a fraction of which the numerator shall be the current
         market price per share (determined as provided in paragraph (8) of this
         Section) of the Common Stock on the date fixed for such determination
         less the then fair market value (as determined by the Board of
         Directors, whose determination shall be conclusive and described in a
         Board Resolution filed with the Trustee) of the portion of the assets
         or evidences of indebtedness so distributed applicable to one share of
         Common Stock and the denominator shall be such current market price per
         share of the Common Stock, such adjustment to become effective
         immediately prior to the opening of business on the day following the
         date fixed for the determination of stockholders entitled to receive
         such distribution.

                  (5) In case at any time after the date of the issuance of the
         applicable Securities, the Company shall, by dividend or otherwise,
         distribute to all holders of its Common Stock cash (excluding any cash
         that is distributed upon a merger or consolidation to which Section
         1412 applies or as part of a distribution referred to in paragraph (4)
         of this Section) in an aggregate amount that, combined together with:

                                      -14-
<PAGE>

                           (A) the aggregate amount of any other such all-cash
                  distributions made to all holders of its Common Stock within
                  the 12 months preceding the date of payment of such
                  distribution and in respect of which no adjustment pursuant to
                  this paragraph (5) has been made, and

                           (B) the aggregate of any cash plus the fair market
                  value (as determined by the Board of Directors, whose
                  determination shall be conclusive and described in a Board
                  Resolution) of any other consideration payable in respect of
                  any tender offer by the Company or any of its subsidiaries for
                  all or any portion of the Common Stock concluded within the 12
                  months preceding the date of payment of such distribution and
                  in respect of which no adjustment pursuant to paragraph (6) of
                  this Section has been made, the amount of such cash
                  distribution together with the amounts described in clauses
                  (A) and (B) above being referred to herein as the "Aggregate
                  Cash Distribution Amount") exceeds 10% of the product of (I)
                  the current market price per share of the Common Stock on the
                  date for the determination of holders of shares of Common
                  Stock entitled to receive such distribution, times (II) the
                  number of shares of Common Stock outstanding on such date (the
                  amount by which the Aggregate Cash Distribution Amount exceeds
                  10% of the product of the amounts described in clauses (I) and
                  (II) above being referred to herein as the "Excess Amount"),
                  then, and in each such case, immediately after the close of
                  business on such date for determination, the conversion price
                  shall be decreased in accordance with the following formula:

                                    M - (EA/O)
                           AC = CP x----------
                                       M

                  Where:

                      AC   = the adjusted conversion price.

                      CP   = the conversion price in effect immediately prior to
                           the close of business on the date fixed for
                           determination of the stockholders entitled to receive
                           the distribution.

                       M   = the current market price per share (determined as
                           provided in paragraph (8) of this Section) of the
                           Common Stock on the date fixed for determination of
                           the stockholders entitled to receive the
                           distribution.

                      EA   = the Excess Amount.

                       O   = the number of shares of Common Stock outstanding on
                           the date fixed for determination of the stockholders
                           entitled to receive the distribution.

                  (6) In case at any time after the date of the issuance of the
applicable Securities, a tender offer made by the Company or any Subsidiary for
all or any portion of the Common Stock

                                      -15-
<PAGE>

shall expire and such tender offer (as amended upon the expiration thereof)
shall require the payment to stockholders (based on the acceptance (up to any
maximum specified in the terms of the tender offer) of Purchased Shares (as
defined below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) that combined together with:

                           (A) the aggregate of the cash plus the fair market
                  value (as determined by the Board of Directors, whose
                  determination shall be conclusive and described in a Board
                  Resolution), as of the expiration of such tender offer, of
                  consideration payable in respect of any other tender offer, by
                  the Company or any Subsidiary for all or any portion of the
                  Common Stock expiring within the 12 months preceding the
                  expiration of such tender offer and in respect of which no
                  adjustment pursuant to this paragraph (6) has been made, and

                           (B) the aggregate amount of any all-cash
                  distributions referred to in paragraph (5) of this Section
                  1405 made to all holders of the Company's Common Stock within
                  12 months preceding the expiration of such tender offer and in
                  respect of which no adjustment pursuant to paragraph (5) of
                  this Section has been made, exceeds 10% of the product of (I)
                  the current market price per share of the Common Stock
                  (determined as provided in paragraph (8) of this Section) as
                  of the last time (the "Expiration Time") tenders could have
                  been made pursuant to such tender offer (as it may be
                  amended), times (II) the number of shares of Common Stock
                  outstanding (including any tendered shares) on the Expiration
                  Time, then, and in each such case, immediately prior to the
                  opening of business on the day after the date of the
                  Expiration Time, the conversion price shall be adjusted in
                  accordance with the following formula:

                                (M x O) - C
                    AC = CP x -----------------
                                 M x (O - TS)

         Where:

              AC        = the adjusted conversion price.

              CP        = the conversion price immediately prior to close of
                        business on the date of the Expiration Time.

              M         = the current market price per share of the Common Stock
                        (determined as provided in paragraph (8) of this
                        Section) on the date of the Expiration Time.

              O         = the number of shares of Common Stock outstanding
                        (including any tendered shares) on the Expiration Time.

              C         = the amount of cash plus the fair market value (as
                        determined by the Board of Directors, whose
                        determination shall be conclusive and described in a
                        Board Resolution)

                                      -16-
<PAGE>

                        of the aggregate consideration payable
                        to stockholders based on the acceptance (up to any
                        maximum specified in the terms of the tender offer) of
                        Purchased Shares (as defined below).

              TS     =  the number of all shares validly tendered and not
                        withdrawn as of the Expiration Time (the shares deemed
                        so accepted up to any such maximum, being referred to as
                        the "Purchased Shares").

                  (7) The reclassification of Common Stock into securities other
         than Common Stock (other than any reclassification upon a
         consolidation or merger to which Section 1412 applies) shall be
         deemed to involve (a) a distribution of such securities to all holders
         of Common Stock (and the effective date of such reclassification shall
         be deemed to be "the date fixed for the determination of stockholders
         entitled to receive such distribution" and "the date fixed for such
         determination" within the meaning of paragraph (4) of this Section),
         and (b) a subdivision or combination, as the case may be, of the
         number of shares of Common Stock outstanding immediately prior to
         such reclassification into the number of shares of Common Stock
         outstanding immediately thereafter (and the effective date of such
         reclassification shall be deemed to be "the day upon which such
         subdivision becomes effective" or "the day upon which such
         combination becomes effective", as the case may be, and "the day
         upon which such subdivision or combination becomes effective" within
         the meaning of paragraph (3) of this Section).

                  (8) For the purpose of any computation under paragraphs (2),
         (4), (5) and (6) of this Section, the current market price per share of
         Common Stock on any date shall be deemed to be the average of the daily
         closing prices for the five consecutive Trading Days selected by the
         Company commencing not more than 20 Trading Days before, and ending not
         later than the earlier of the day in question and the day before the
         "ex" date with respect to the issuance or distribution requiring such
         computation. The closing price for each day shall be the last reported
         sales price regular way or, in case no such reported sale takes place
         on such day, the average of the reported closing bid and asked prices
         regular way, in either case on the New York Stock Exchange or, if the
         Common Stock is not listed or admitted to trading on such Exchange, on
         the principal national securities exchange on which the Common Stock is
         listed or admitted to trading or, if not listed or admitted to trading
         on any national securities exchange, on the Nasdaq National Market or,
         if the Common Stock is not listed or admitted to trading on any
         national securities exchange or quoted on the Nasdaq National Market,
         the average of the closing bid and asked prices in the over-the-counter
         market as furnished by any New York Stock Exchange member firm selected
         from time to time by the Company for that purpose. For purposes of this
         paragraph, the term "'ex' date", when used with respect to any issuance
         or distribution, means the first date on which the Common Stock trades
         regular way on such exchange or in such market without the right to
         receive such issuance or distribution.

                  (9) No adjustment in the conversion price shall be required
         unless such adjustment (plus any adjustments not previously made by
         reason of this paragraph (9)) would require an increase or decrease of
         at least 1% in such price; provided, however, that any adjustments
         which by reason of this paragraph (9) are not required to be made shall
         be carried forward and taken

                                      -17-
<PAGE>

         into account in any subsequent adjustment. All calculations under this
         paragraph (9) shall be made to the nearest cent.

                  (10) The Company may make such reductions in the conversion
         price, in addition to those required by this Section, as it considers
         to be advisable in order to avoid or diminish any income tax to any
         holders of shares of Common Stock resulting from any dividend or
         distribution of stock or issuance of rights or warrants to purchase or
         subscribe for stock or from any event treated as such for income tax
         purposes or for any other reasons. The Company from time to time may
         reduce the conversion price by any amount for any period of time if the
         period is at least twenty (20) business days, the reduction is
         irrevocable during the period, and the Board of Directors of the
         Company shall have made a determination that such reduction would be in
         the best interest of the Company, which determination shall be
         conclusive. Whenever the conversion price is reduced pursuant to the
         preceding sentence, the Company shall mail to holders of record of the
         Securities a notice of the reduction at least fifteen (15) days prior
         to the date the reduced conversion price takes effect, and such notice
         shall state the reduced conversion price and the period it will be in
         effect. The Company shall have the power to resolve any ambiguity or
         correct any error in this paragraph (10) and its actions in so doing
         shall be final and conclusive.

         Section 1406.  NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.

                  Whenever the conversion price is adjusted as herein provided:

                           (a) the Company shall compute the adjusted conversion
                  price in accordance with Section 1405 and shall prepare an
                  Officers' Certificate, one of the signatories of which shall
                  be the Treasurer of the Company, setting forth the adjusted
                  conversion price and the adjusted conversion rate and showing
                  in reasonable detail the facts upon which such adjustment is
                  based, and such certificate shall forthwith be filed at each
                  office or agency maintained for the purpose of conversion of
                  Securities pursuant to Section 1002; and

                           (b) a notice stating that the conversion price has
                  been adjusted and setting forth the adjusted conversion price
                  shall forthwith be required, and as soon as practicable after
                  it is required, such notice shall be mailed by the Company to
                  all Holders at their last addresses as they shall appear in
                  the Security Register.

         Section 1407.  NOTICE OF CERTAIN CORPORATE ACTION.

                  In case at any time after the date hereof:

                           (a) the Company shall declare a dividend (or any
                  other distribution) on its Common Stock payable otherwise than
                  in cash out of its retained earnings; or

                           (b) the Company shall authorize the granting to the
                  holders of its Common Stock of rights or warrants to subscribe
                  for or purchase any shares of capital stock of any class or of
                  any other rights; or

                                      -18-
<PAGE>

                           (c) the Company shall effect any reclassification of
                  the Common Stock of the Company (other than a subdivision or
                  combination of its outstanding shares of Common Stock), or of
                  any consolidation or merger to which the Company is a party
                  and for which approval of any stockholders of the Company is
                  required, or of the sale or transfer of all or substantially
                  all of the assets of the Company; or

                           (d) the occurrence of the voluntary or involuntary
                  dissolution, liquidation or winding up of the Company;

         then the Company shall cause to be filed at each office or agency
         maintained for the purpose of conversion of Securities pursuant to
         Section 1002, and shall cause to be mailed to all Holders at their last
         addresses as they shall appear in the Security Register, at least 20
         days (or 10 days in any case specified in clause (a) or (b) above)
         prior to the applicable record or effective date hereinafter specified,
         a notice stating (x) the date on which a record is to be taken for the
         purpose of such dividend, distribution, rights or warrants, or, if a
         record is not to be taken, the date as of which the holders of Common
         Stock of record to be entitled to such dividend, distribution, rights
         or warrants are to be determined, or (y) the date on which such
         reclassification, consolidation, merger, share exchange, sale,
         transfer, dissolution, liquidation or winding up is expected to become
         effective, and the date as of which it is expected that holders of
         Common Stock of record shall be entitled to exchange their shares of
         Common Stock for securities, cash or other property deliverable upon
         such reclassification, consolidation, merger, share exchange, sale,
         transfer, dissolution, liquidation or winding up. Neither the failure
         to give such notice nor any defect therein shall affect the legality or
         validity of the proceedings described in clauses (a) through (d) of
         this Section 1407. If at the time the Trustee shall not be the
         Conversion Agent, a copy of such notice shall also forthwith be filed
         by the Company with the Trustee.

         Section 1408.  COMPANY TO RESERVE COMMON STOCK.

                  The Company shall at all times reserve and keep available,
         free from preemptive rights, out of its authorized but unissued Common
         Stock, for the purpose of effecting the conversion of Securities, the
         full number of shares of Common Stock then issuable upon the conversion
         of all outstanding Securities.

         Section 1409.  TAXES ON CONVERSIONS.

                  The Company will pay any documentary, stamp or similar issue
         or transfer tax due on such issue or delivery of shares of Common Stock
         on conversion of Securities pursuant hereto.

                  The Company shall not, however, be required to pay any tax
         which may be payable in respect of any transfer involved in the issue
         and delivery of shares of Common Stock in a name other than that of the
         Holder of the Security or Securities to be converted, and no such issue
         or delivery shall be made unless and until the Person requesting such
         issue has paid to the Company the amount of any such tax, or has
         established to the satisfaction of the Company that such tax has been
         paid.

                                      -19-
<PAGE>

         Section 1410.  COVENANT AS TO COMMON STOCK.

                  The Company covenants that all shares of Common Stock which
         may be issued upon conversion of Securities will upon issue be fully
         paid and nonassessable and, except as provided in Section 1409, the
         Company will pay all taxes, liens and charges with respect to the issue
         thereof.

         Section 1411.  CANCELLATION OF CONVERTED SECURITIES.

                  All Securities delivered for conversion shall be delivered to
         the Trustee to be cancelled by or at the direction of the Trustee,
         which shall dispose of the same as provided in Section 309.

         Section 1412.  PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE OF
                        ASSETS.

                  In case of any consolidation of the Company with, or merger of
         the Company into, any other Person, any merger of another Person into
         the Company (other than a merger which does not result in any
         reclassification, conversion, exchange or cancellation of outstanding
         shares of Common Stock of the Company) or any sale or transfer of all
         or substantially all of the assets of the Company, the Person formed by
         such consolidation or resulting from such merger or which acquires such
         assets, as the case may be, shall execute and deliver to the Trustee a
         supplemental indenture providing that the Holder of each Security then
         outstanding shall have the right thereafter, during the period such
         Security shall be convertible as specified in Section 1402, to convert
         such Security only into the kind and amount of securities, cash and
         other property receivable upon such consolidation, merger, sale or
         transfer by a holder of the number of shares of Common Stock of the
         Company into which such Security might have been converted immediately
         prior to such consolidation, merger, sale or transfer, assuming such
         holder of Common Stock of the Company (i) is not a Person with which
         the Company consolidated or into which the Company merged or which
         merged into the Company or to which such sale or transfer was made, as
         the case may be ("Constituent Person"), or an Affiliate of a
         Constituent Person and (ii) failed to exercise his rights of election,
         if any, as to the kind or amount of securities, cash and other property
         receivable upon such consolidation, merger, sale or transfer (provided
         that if the kind or amount of securities, cash and other property
         receivable upon such consolidation, merger, sale or transfer is not the
         same for each share of Common Stock of the Company held immediately
         prior to such consolidation, merger, sale or transfer by other than a
         Constituent Person or an Affiliate thereof and in respect of which such
         rights of election shall not have been exercised ("non-electing
         share"), then for the purpose of this Section the kind and amount of
         securities, cash and other property receivable upon such consolidation,
         merger, sale or transfer by each non-electing share shall be deemed to
         be the kind and amount so receivable per share by a plurality of the
         non-electing shares), and assuming, if such consolidation, merger, sale
         or transfer is prior to the date upon which the Securities first become
         convertible, that the Securities were convertible at the time of such
         consolidation, merger, sale or transfer at the initial conversion price
         specified in Section 1402 as adjusted from the date of the issuance of
         the applicable Securities to such time pursuant to Section 1405. Such
         supplemental indenture shall provide for adjustments which, for events
         subsequent to the effective date of such supplemental indenture, shall
         be as nearly equivalent as may be practicable to the adjustments
         provided for in this Article. The above

                                      -20-
<PAGE>

         provisions of this Section shall similarly apply to successive
         consolidations, mergers, sales or transfers.

SECTION 1413.  RESPONSIBILITY OF TRUSTEE FOR CONVERSION PROVISIONS.

                  Neither the Trustee nor any Conversion Agent shall at any
time be under any duty or responsibility to any holder to determine whether
any facts exist which may require any adjustment of the conversion price, or
with respect to the nature or extent of any such adjustment when made, or
with respect to the method employed, herein or in any supplemental indenture
provided to be employed, in making the same. Neither the Trustee nor any
Conversion Agent shall be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock or of any securities or
property or cash which may at any time be issued or delivered upon the
conversion of any 2015 Debenture; and neither the Trustee nor any Conversion
Agent makes any representation with respect thereto. Neither the Trustee nor
any Conversion Agent shall be responsible for any failure of the Company to
make any cash payment or to issue, transfer or deliver any shares of Common
Stock or stock certificates or other securities or property upon the
surrender of any 2015 Debenture for the purpose of conversion, or, subject to
Section 601 of the Indenture, to comply with any of the covenants of the
Company contained in this Article Fourteen.

SECTION  211.  REPURCHASE AT OPTION OF HOLDER; REPURCHASE UPON CHANGE IN
               CONTROL; TAX EVENTS.

         The Indenture is amended by inserting the following new Articles 15 and
16:

                                 ARTICLE FIFTEEN
                REPURCHASE OF SECURITIES AT OPTION OF HOLDER AND
                  AT OPTION OF HOLDER UPON A CHANGE OF CONTROL

         Section 1501.  GENERAL.

                  The Company may be required to repurchase 2015 Debentures in
accordance with their terms and in accordance with this Article.

                  (a)      REPURCHASE AT OPTION OF HOLDER

                  The 2015 Debentures shall be purchased by the Company under
         the paragraph "Repurchase by the Company at the Option of the Holder"
         of the 2015 Debentures on November 8, 2005 and November 8, 2010
         (each, a "Repurchase Date"), at the repurchase price specified therein
         (each, a "Optional Repurchase Price"), at the option of the Holder
         thereof, upon:

                           (1) delivery to the Paying Agent, by the Holder of a
                  written notice of purchase (a "Holder Repurchase Notice") at
                  any time from the opening of business on the date that is 20
                  Business Days prior to a Repurchase Date until the close of
                  business on the last Business Day prior to such Repurchase
                  Date stating:

                                    (A) the certificate number of the 2015
                           Debenture which the Holder will deliver to be
                           repurchased,

                                    (B) the portion of the Principal Amount of
                           the 2015 Debenture which the Holder will deliver to
                           be repurchased, which portion must be $1,000 or an
                           integral multiple thereof,

                                    (C) that such 2015 Debenture shall be
                           purchased as of the Repurchase Date pursuant to the
                           terms and conditions specified under the paragraph
                           "Repurchase by the Company at the Option of the
                           Holder" of the 2015 Debentures and in this Indenture,

                                    (D) in the event that the Company elects,
                           pursuant to Section 1502 hereof, to pay the Optional
                           Repurchase Price to be paid as of such Repurchase
                           Date, in whole or in part, in Common Stock but such
                           portion of the Optional

                                      -21-
<PAGE>

                           Repurchase Price shall ultimately be payable to such
                           Holder entirely in cash because any of the conditions
                           to payment of the Optional Repurchase Price in Common
                           Stock is not satisfied prior to the close of business
                           on such Repurchase Date, as set forth in Section 1504
                           hereof, whether such Holder elects (i) to withdraw
                           such Holder Repurchase Notice as to some or all of
                           the 2015 Debentures to which such Holder Repurchase
                           Notice relates (stating the Principal Amount and
                           certificate numbers of the 2015 Debentures as to
                           which such withdrawal shall relate), or (ii) to
                           receive cash in respect of the entire Optional
                           Repurchase Price for all 2015 Debentures (or portions
                           thereof) to which such Optional Repurchase Price
                           relates, and

                           (2) delivery of such 2015 Debenture to the Paying
                  Agent prior to, on or after the Repurchase Date (together with
                  all necessary endorsements) at the offices of the Paying
                  Agent, such delivery being a condition to receipt by the
                  Holder of the Optional Repurchase Price therefor; provided,
                  however, that such Optional Repurchase Price shall be so paid
                  pursuant to this Article Fifteen only if the 2015 Debenture so
                  delivered to the Paying Agent shall conform in all respects to
                  the description thereof in the related Repurchase Notice.

                  If a Holder, in such Holder Repurchase Notice or in any
         written notice of withdrawal delivered by such Holder pursuant to the
         terms of Section 1509 hereof, fails to indicate such Holder's choice
         with respect to the election set forth in clause (D) of Section
         1501(a)(1), such Holder shall be deemed to have elected to receive cash
         in respect of the Optional Repurchase Price for all 2015 Debentures
         subject to the Holder Repurchase Notice in the circumstances set forth
         in such clause (D).

                  The Company shall purchase from the Holder thereof, pursuant
         to this Article Fifteen, a portion of a 2015 Debenture only if the
         Principal Amount of such portion is $1,000 or an integral multiple of
         $1,000. Provisions of this Indenture that apply to the purchase of all
         of a 2015 Debenture also apply to the purchase of such portion of such
         2015 Debenture.

                  Any purchase by the Company contemplated pursuant to the
         provisions of this Article Fifteen shall be consummated by the delivery
         of the consideration to be received by the Holder promptly following
         the later of the Repurchase Date and the time of delivery of the
         Security to the Paying Agent.

                  Notwithstanding anything herein to the contrary, any Holder
         delivering to the Paying Agent the Holder Repurchase Notice
         contemplated by this Section 1501 shall have the right to withdraw such
         Holder Repurchase Notice at any time prior to the close of business on
         the Business Day prior to the Repurchase Date by delivery of a written
         notice of withdrawal to the Paying Agent in accordance with Section
         1509.

                  The Paying Agent shall promptly notify the Company of the
         receipt by it of any Holder Repurchase Notice or written notice of
         withdrawal thereof.

                                      -22-
<PAGE>

                  Anything herein to the contrary notwithstanding, in the case
         of Global Securities, any Repurchase Notice may be delivered or
         withdrawn and such 2015 Debentures may be surrendered or delivered for
         purchase in accordance with the applicable procedures of the Depositary
         as in effect from time to time.

                  (b)      PURCHASE OF SECURITIES UPON CHANGE IN CONTROL

                  (1) If at any time that 2015 Debentures remain Outstanding
         there shall occur a Change in Control, 2015 Debentures shall be
         purchased by the Company at the option of the Holders thereof as of the
         date that is 35 Business Days after the occurrence of the Change in
         Control (the "Change in Control Purchase Date") at a purchase price
         equal to the Issue Price plus accrued Original Issue Discount through
         the Change in Control Purchase Date (or, if the option under Section
         1601 has been exercised, the Restated Principal Amount plus accrued and
         unpaid interest from the Option Exercise Date to the Change in Control
         Purchase Date) (the "Change in Control Purchase Price"), subject to
         satisfaction by or on behalf of any Holder of the requirements set
         forth in subsection (3) of this Section 1501(b).

                  A "Change in Control" shall be deemed to have occurred at the
         time, after the original issuance of the Securities, of:

                           (A) the acquisition by any person or group of
                  beneficial ownership, directly or indirectly, through a
                  purchase, merger or other acquisition transaction or series of
                  transactions, of shares of capital stock of the Company
                  entitling such person to exercise 50% or more of the total
                  voting power of all shares of capital stock of the Company
                  entitled to vote generally in the elections of directors (any
                  shares of voting stock of which such person or group is the
                  beneficial owner that are not then outstanding being deemed
                  outstanding for purposes of calculating such percentage),
                  other than any such acquisition by the Company, any Subsidiary
                  of the Company or any employee benefit plan of the Company
                  existing on the date of this Indenture; or

                           (B) any consolidation or merger of the Company with
                  or into any other person, or any merger of another person with
                  or into the Company, or any conveyance, transfer, sale, lease
                  or similar disposition of all or substantially all of the
                  Company's assets to another person (other than any such
                  transaction (x) that does not result in any reclassification,
                  conversion, exchange or cancellation of outstanding shares of
                  Common Stock, (y) pursuant to which holders of Common Stock
                  immediately prior to such transaction have the entitlement to
                  exercise, directly or indirectly, 50% or more of the total
                  voting power of all shares of capital stock entitled to vote
                  generally in the election of directors of the continuing or
                  surviving person immediately after such transaction or (z)
                  that is effected solely to change the jurisdiction of
                  incorporation of the Company and results in a
                  reclassification, conversion or exchange of outstanding shares
                  of Common Stock into solely shares of common stock);

                                      -23-
<PAGE>

                  PROVIDED, HOWEVER, that a Change in Control shall not be
                  deemed to have occurred if:

                           (X) the Sale Price on any five Trading Days within
                  the period of 10 consecutive Trading Days ending immediately
                  after the later of the date of the Change in Control or the
                  date of the public announcement of the Change in Control (in
                  the case of a Change in Control under clause (A) above) or the
                  period of 10 consecutive Trading Days ending immediately prior
                  to the date of the Change in Control (in the case of a Change
                  in Control under clause (B) above) shall equal or exceed 105%
                  of the Notional Conversion Price of the Securities in effect
                  on each such Trading Day; or

                           (Y) all of the consideration, excluding cash payments
                  for fractional shares and cash payments made pursuant to
                  dissenters' appraisal rights, in a merger or consolidation
                  otherwise constituting a Change in Control consists of shares
                  of Common Stock traded on a national securities exchange or
                  quoted on the Nasdaq National Market, or will be so traded or
                  quoted immediately following such merger or consolidation, and
                  as a result of such merger or consolidation the Securities
                  become convertible solely into such common stock.

                  For the purpose of the definition of "Change in Control", (i)
         "person" and "group" have the meanings given such terms under Sections
         13(d) and 14(d) of the Exchange Act or any successor provision to
         either of the foregoing, and the term "group" includes any group acting
         for the purpose of acquiring, holding or disposing of securities within
         the meaning of Rule 3d-5(b)(1) under the Exchange Act (or any
         successor provision thereto), (ii) a "beneficial owner" shall be
         determined in accordance with Rule 13d-3 under the Exchange Act,
         except that the number of shares of Voting Stock of the Company
         shall be deemed to include, in addition to all outstanding shares of
         Voting Stock of the Company and Unissued Shares deemed to be held
         by the "person" or "group" (as such terms are defined above) or other
         person with respect to which the Change in Control determination is
         being made, all Unissued Shares deemed to be held by all other
         persons, and (iii) the terms "beneficially owned" and "beneficially
         own" shall have meanings correlative to that of "beneficial owner".
         The term "Unissued Shares" means shares of Voting Stock not
         outstanding that are subject to options, warrants, rights to
         purchase or conversion privileges exercisable within 60 days of the
         date of determination of a Change in Control.

                           (2) Within 15 Business Days after the occurrence of a
         Change in Control, the Company shall mail a written notice of the
         Change in Control to the Trustee and to each Holder. The notice shall
         include the form of a Change in Control Purchase Notice to be completed
         by the Holder, which shall include the information required pursuant to
         Section 1501(b)(3), and shall state:

                           (A) the date of such Change in Control and, briefly,
                  the events causing such Change in Control;

                           (B) the date by which the Change in Control Purchase
                  Notice pursuant to this Section 1501 must be given;

                                      -24-
<PAGE>

                           (C) the Change in Control Purchase Date;

                           (D) the Change in Control Purchase Price;

                           (E) briefly, the conversion rights of the 2015
                               Debentures;

                           (F) the name and address of each Paying Agent and
                               Conversion Agent;

                           (G) the conversion price and any adjustments thereto;

                           (H) that 2015 Debentures as to which a Change in
                  Control Purchase Notice has been given may be converted into
                  Common Stock pursuant to Article Fourteen only to the extent
                  that the Change in Control Purchase Notice has been withdrawn
                  in accordance with the terms of this Indenture;

                           (I) the procedures that the Holder must follow to
                  exercise rights under this Section 1501;

                           (J) the procedures for withdrawing a Change in
                  Control Purchase Notice, including a form of notice of
                  withdrawal; and

                           (K) that the Holder must satisfy the requirements set
                  forth in the 2015 Debentures in order to convert the
                  Securities.

                  If any of the 2015 Debentures is in the form of a Global
         Security, then the Company shall modify such notice to the extent
         necessary to accord with the procedures of the Depositary applicable to
         the repurchase of Global Securities.

                           (3) A Holder may exercise its rights specified in
         subsection (1) of this Section 1501(b) upon delivery of a written
         notice of the exercise of such rights (a "Change in Control Purchase
         Notice") to any Paying Agent at any time prior to the close of business
         on the Business Day next preceding the Change in Control Purchase Date
         stating:

                           (A) the certificate number of the 2015 Debenture
                  which the Holder will deliver to be repurchased,

                           (B) the portion of the Principal Amount of the 2015
                  Debenture which the Holder will deliver to be repurchased,
                  which portion must be $1,000 or an integral multiple thereof,

                           (C) that such 2015 Debenture shall be purchased as of
                  the Change in Control Date pursuant to the terms and
                  conditions specified under the paragraph "Purchase of
                  Securities at the Option of the Holder Upon a Change in
                  Control" of the 2015 Debentures and in this Indenture,

                                      -25-
<PAGE>

                           (D) in the event that the Company elects, pursuant to
                  Section 1502 hereof, to pay the Change in Control Purchase
                  Price to be paid as of such Change in Control Purchase Date,
                  in whole or in part, in Common Stock but such portion of the
                  Change in Control Purchase Price shall ultimately be payable
                  to such Holder entirely in cash because any of the conditions
                  to payment of the Change in Control Purchase Price in Common
                  Stock is not satisfied prior to the close of business on such
                  Change in Control Purchase Date, as set forth in Section 1504
                  hereof, whether such Holder elects (i) to withdraw such Change
                  in Control Purchase Notice as to some or all of the 2015
                  Debentures to which such Change in Control Purchase Notice
                  relates (stating the Principal Amount and certificate numbers
                  of the 2015 Debentures as to which such withdrawal shall
                  relate), or (ii) to receive cash in respect of the entire
                  Change in Control Purchase Price for all 2015 Debentures (or
                  portions thereof) to which such Change in Control Purchase
                  Price relates, and

                           (4) The delivery of such 2015 Debenture to any Paying
         Agent (together with all necessary endorsements) at the office of such
         Paying Agent shall be a condition to the receipt by the Holder of the
         Change in Control Purchase Price therefor.

                  If a Holder, in such Holder Repurchase Notice or in any
         written notice of withdrawal delivered by such Holder pursuant to the
         terms of Section 1509 hereof, fails to indicate such Holder's choice
         with respect to the election set forth in clause (D) of Section
         1501(b)(3), such Holder shall be deemed to have elected to receive cash
         in respect of the Optional Repurchase Price for all 2015 Debentures
         subject to the Holder Repurchase Notice in the circumstances set forth
         in such clause (D).

                  The Company shall purchase from the Holder thereof, pursuant
         to this Section 1501, a portion of a 2015 Debenture only if the
         Principal Amount of such portion is $1,000 or an integral multiple of
         $1,000. Provisions of this Indenture that apply to the purchase of all
         of a 2015 Debenture pursuant to Sections 1502 through 1510 also apply
         to the purchase of such portion of such 2015 Debenture.

                  Notwithstanding anything herein to the contrary, any Holder
         delivering to a Paying Agent the Change in Control Purchase Notice
         contemplated by this subsection (3) shall have the right to withdraw
         such Change in Control Purchase Notice in whole or in a portion thereof
         that is a Principal Amount of $1,000 or in an integral multiple thereof
         at any time prior to the close of business on the Business Day next
         preceding the Change in Control Purchase Date by delivery of a written
         notice of withdrawal to the Paying Agent in accordance with Section
         1509.

                  A Paying Agent shall promptly notify the Company of the
         receipt by it of any Change in Control Purchase Notice or written
         withdrawal thereof.

                  Anything herein to the contrary notwithstanding, in the case
         of Global Securities, any Change in Control Purchase Notice may be
         delivered or withdrawn and such 2015 Debentures may be surrendered or
         delivered for purchase in accordance with the applicable procedures of
         the Depositary as in effect from time to time.

                                      -26-
<PAGE>

         Section 1502.  THE COMPANY'S RIGHT TO ELECT MANNER OF PAYMENT OF
                        REPURCHASE PRICE.

                  The Repurchase Price of 2015 Debentures in respect of which a
         Repurchase Notice pursuant to Section 1501 has been given, or a
         specified percentage thereof, will be paid by the Company, at the
         election of the Company, with cash or Common Stock or in any
         combination of cash and Common Stock, subject to the conditions set
         forth in Section 1503, 1504 and 1505 hereof. The Company shall
         designate, in the Company Notice delivered pursuant to Section 1505
         hereof, whether the Company will purchase the 2015 Debentures for cash
         or Common Stock, or, if a combination thereof, the percentages of 2015
         Debentures in respect of which it will pay in cash and Common Stock;
         provided that the Company will pay cash for fractional interests in
         Common Stock. For purposes of determining the existence of potential
         fractional interests, all 2015 Debentures subject to purchase by the
         Company held by a Holder shall be considered together (no matter how
         many separate certificates are to be presented). Each Holder whose 2015
         Debentures are purchased pursuant to this Article Fifteen shall receive
         the same percentage of cash or Common Stock in payment of the
         Repurchase Price for such 2015 Debentures, except (i) as provided in
         Section 1504 with regard to the payment of cash in lieu of fractional
         Common Stock and (ii) in the event that the Company is unable to
         purchase the 2015 Debentures of a Holder or Holders for Common Stock
         because any necessary qualifications or registrations of the Common
         Stock under applicable state securities laws cannot be obtained, the
         Company may purchase the 2015 Debentures of such Holder or Holders for
         cash. The Company may not change its election with respect to the
         consideration (or components or percentages of components thereof) to
         be paid once the Company has given its Company Notice to Holders except
         pursuant to this Section 1502 or pursuant to Section 1504 in the event
         of a failure to satisfy, prior to the close of business on the
         Repurchase Date, any condition to the payment of the Repurchase Price,
         in whole or in part, in Common Stock.

                  At least three Business Days before the Company Notice Date,
         the Company shall deliver an Officers' Certificate to the Trustee
         specifying:

                           (i)   the manner of payment selected by the Company,

                           (ii)  the information required by Section 1505,

                           (iii) if the Company elects to pay the Repurchase
                  Price, or a specified percentage thereof, in Common Stock,
                  that the conditions to such manner of payment set forth in
                  Section 1504 have been or will be complied with, and

                           (iv)  whether the Company desires the Trustee to give
                  the Company Notice required by Section 1505.

         Section 1503.  PURCHASE WITH CASH.

                  On each Repurchase Date, at the option of the Company, the
         Repurchase Price of 2015 Debentures in respect of which a Repurchase
         Notice pursuant to Section 1501 has been given, or a specified
         percentage thereof, may be paid by the Company with cash equal to the
         aggregate

                                      -27-
<PAGE>

         Repurchase Price of such 2015 Debentures. If the Company elects to
         purchase 2015 Debentures with cash, the Company Notice, as provided in
         Section 1505, shall be sent to Holders (and to beneficial owners as
         required by applicable law) not less than 20 Business Days prior to
         such Repurchase Date (the "Company Notice Date").

         Section 1504.  PAYMENT BY ISSUANCE OF COMMON STOCK.

                  On each Repurchase Date, at the option of the Company, the
         Repurchase Price of 2015 Debentures in respect of which a Repurchase
         Notice pursuant to Section 1501 has been given, or a specified
         percentage thereof, may be paid by the Company by the issuance of a
         number of shares of Common Stock equal to the quotient obtained by
         dividing (i) the amount of cash to which the Holders would have been
         entitled had the Company elected to pay all or such specified
         percentage, as the case may be, of the Repurchase Price of such 2015
         Debentures in cash by (ii) either (A) the Market Price of a share of
         Common Stock in the event of an Optional Repurchase or (B) 95% of the
         Market Price of a share of Common Stock in the event of a Change of
         Control Purchase, subject to the next succeeding paragraph.

                  The Company will not issue a fractional share of Common Stock
         in payment of the Repurchase Price. Instead the Company will pay cash
         for the current market value of the fractional share. The current
         market value of a fraction of a share of Common Stock shall be
         determined by multiplying the Market Price by such fraction and
         rounding the product to the nearest whole cent with one half cent being
         rounded upwards. It is understood that if a Holder elects to have more
         than one 2015 Debenture repurchased, the number of shares of Common
         Stock shall be based on the aggregate amount of 2015 Debentures to be
         repurchased. If the Company elects to purchase the 2015 Debentures by
         the issuance of Common Stock, the Company Notice, as provided in
         Section 1505, shall be sent to the Holders (and to beneficial owners as
         required by applicable law) not later than the Company Notice Date.

                  The Company's right to exercise its election to purchase the
         2015 Debentures pursuant to this Article Fifteen through the issuance
         of Common Stock shall be conditioned upon:

                           (i) the Company not having given its Company Notice
                  of an election to pay entirely in cash and its giving of
                  timely Company Notice of election to purchase all or a
                  specified percentage of the 2015 Debentures with Common Stock
                  as provided herein;

                           (ii) the registration of the Common Stock to be
                  issued in respect of the payment of the Repurchase Price under
                  the Securities Act or the Exchange Act, in each case, if
                  required for the initial issuance thereof;

                           (iii) any necessary qualification or registration
                  under applicable state securities laws or the availability of
                  an exemption from such qualification and registration; and

                           (iv) the receipt by the Trustee of an Officers'
                  Certificate and an Opinion of Counsel each stating that (A)
                  the terms of the issuance of the Common Stock are in

                                      -28-
<PAGE>

                  conformity with this Indenture and (B) the Common Stock to be
                  issued by the Company in payment of the Repurchase Price in
                  respect of 2015 Debentures has been duly authorized and, when
                  issued and delivered pursuant to the terms of this Indenture
                  in payment of the Repurchase Price in respect of the 2015
                  Debentures, will be validly issued, fully paid and
                  non-assessable and, to the best of such counsel's knowledge,
                  free from preemptive rights, and, in the case of such
                  Officer's Certificate, stating that conditions (i), (ii) and
                  (iii) above and the condition set forth in the second sentence
                  of the following paragraph have been satisfied and, in the
                  case of such Opinion of Counsel, stating that conditions (ii)
                  and (iii) above have been satisfied.

                  Such Officers' Certificate shall also set forth the number of
         shares of Common Stock to be issued for each $1,000 Principal Amount of
         2015 Debentures and the Sale Price of a share of Common Stock on each
         trading day during the period commencing on the first trading day of
         the period during which the Market Price is calculated and ending three
         Business Days prior to the applicable Repurchase Date. The Company may
         pay the Repurchase Price (or any portion thereof) in Common Stock only
         if the information necessary to calculate the Market Price is published
         in The Wall Street Journal or another daily newspaper of national
         circulation. If the foregoing conditions are not satisfied with respect
         to a Holder or Holders prior to the close of business on the Repurchase
         Date and the Company has elected to repurchase the 2015 Debentures
         pursuant to this Article Fifteen in whole or in part through the
         issuance of Common Stock, the Company shall pay, without further
         notice, the entire Repurchase Price of the 2015 Debentures of such
         Holder or Holders in cash. The "Market Price" means the average of the
         Sale Prices of the Common Stock for the five trading day period ending
         on (if the third Business Day prior to the applicable Repurchase Date
         is a trading day, or if not, then on the last trading day prior to) the
         third Business Day prior to the applicable Repurchase Date
         appropriately adjusted to take into account the occurrence of any event
         described in Section 1405, during the period commencing on the first of
         such trading days during such five trading day period and ending on
         such Repurchase Date.

                  The "Sale Price" of the Common Stock on any date means the
         closing per share sale price (or, if no closing sale price is reported,
         the average of the bid and ask prices or, if more than one in either
         case, the average of the average bid and average ask prices) on such
         date as reported in the composite transactions for the principal United
         States securities exchange on which the Common Stock is traded or, if
         the Common Stock is not listed on a United States national or regional
         securities exchange, as reported by the Nasdaq National Market System
         or its successors.

         Section 1505.  NOTICE OF ELECTION.

                  The Company's notice of election to repurchase with cash or
         Common Stock or any combination thereof shall be sent to the Holders in
         the manner provided in Section 104 at the time specified in Section
         1503 or 1504, as applicable (the "Company Notice"). Such Company Notice
         shall state the manner of payment elected and shall contain the
         following information:

                                      -29-
<PAGE>

                  In the event the Company has elected to pay the Repurchase
         Price (or a specified percentage thereof) with Common Stock, the
         Company Notice shall:

                        (1) state that each Holder will receive Common Stock
                  with a value, based on the calculation in the first paragraph
                  of Section 1504, equal to such specified percentage of the
                  Repurchase Price of the 2015 Debentures held by such Holder
                  (except any cash amount to be paid in lieu of fractional
                  shares);

                        (2) set forth the method of calculating the Market Price
                  of the Common Stock; and

                        (3) state that because the Market Price of Common Stock
                  will be determined prior to the Repurchase Date, Holders will
                  bear the market risk with respect to the value of the Common
                  Stock to be received from the date such Market Price is
                  determined to the Repurchase Date.

                 In any case, each Company Notice shall include a form of
         Repurchase Notice to be completed by a Holder and shall state:

                        (A) the Repurchase Price and the conversion price;

                        (B) the name and address of the Paying Agent and the
                 Conversion Agent;

                        (C) that the 2015 Debentures as to which a
                  Repurchase Notice has been given may be converted pursuant to
                  Article Fourteen hereof only if the applicable Repurchase
                  Notice has been withdrawn in accordance with the terms of this
                  Indenture;

                        (D) that 2015 Debentures must be surrendered to the
                  Paying Agent to collect payment;

                        (E) that the Repurchase Price for any 2015
                  Debenture as to which a Holder Repurchase Notice has been
                  given and not withdrawn will be paid promptly following the
                  later of the Repurchase Date and the time of surrender of such
                  2015 Debenture as described in (D);

                        (F) the procedures the Holder must follow to
                  exercise repurchase rights under this Article Fifteen and a
                  brief description of those rights;

                        (G) briefly, the conversion rights of the 2015
                  Debentures; and

                        (H) the procedures for withdrawing a
                  Repurchase Notice (including, without limitation, for a
                  conditional withdrawal pursuant to the terms of Section 1501
                  or 1509).

                                      -30-
<PAGE>

                           At the Company's request, the Trustee shall give such
         Company Notice in the Company's name and at the Company's expense;
         provided, however, that, in all cases, the text of such Company Notice
         shall be prepared by the Company.

         Section 1506.  COVENANTS OF THE COMPANY.

                  All Common Stock delivered upon purchase of the 2015
         Debentures shall be newly issued shares or treasury shares, shall be
         duly authorized, validly issued, fully paid and nonassessable and shall
         be free from preemptive rights and free of any lien or adverse claim.
         The Company shall use its reasonable efforts to list or cause to have
         quoted any Common Stock to be issued to purchase 2015 Debentures on the
         principal national securities exchange or over-the-counter or other
         domestic market on which the Common Stock is then listed or quoted.

         Section 1507.  PROCEDURE UPON REPURCHASE.

                  The Company shall deposit cash (in respect of a cash purchase
         under Section 1503 or for fractional shares of Common Stock, as
         applicable) or Common Stock, or a combination thereof, as applicable,
         at the time and in the manner as provided in Section 1510, sufficient
         to pay the aggregate Repurchase Price of all 2015 Debentures to be
         purchased on the applicable Repurchase Date pursuant to this Article
         Fifteen.

                  As soon as practicable after the Repurchase Date, the Company
         shall deliver to each Holder entitled to receive Common Stock through
         the Paying Agent, a certificate for the number of full shares of Common
         Stock issuable in payment of the Repurchase Price and cash in lieu of
         any fractional shares of Common Stock. The Person in whose name the
         certificate for Common Stock is registered shall be treated as a holder
         of record of Common Stock on the Business Day following the Repurchase
         Date. Subject to Section 1504, no payment or adjustment will be made
         for dividends on the Common Stock the record date for which occurred on
         or prior to the Repurchase Date.

         Section 1508.  TAXES.

                  If a Holder of a 2015 Debenture is paid in Common Stock, the
         Company shall pay any documentary, stamp or similar issue or transfer
         tax or charge due on such issue of Common Stock. However, the Holder
         shall pay any such tax or charge which is due because the Holder
         requests the Common Stock to be issued in a name other than the
         Holder's name. The Paying Agent may refuse to deliver the certificates
         representing the Common Stock being issued in a name other than the
         Holder's name until the Paying Agent receives a sum sufficient to pay
         any tax or charge which will be due because the shares of Common Stock
         are to be issued in a name other than the Holder's name.

         Section 1509.  EFFECT OF REPURCHASE NOTICE.

                  Upon receipt by the Paying Agent of the Repurchase Notice, the
         Holder of the 2015 Debenture in respect of which such Repurchase

                                      -31-
<PAGE>

         Notice was given shall (unless such Repurchase Notice is withdrawn as
         specified in the following two paragraphs) thereafter be entitled to
         receive solely the Repurchase Price with respect to such 2015
         Debenture. Such Repurchase Price shall be paid to such Holder, subject
         to receipt of funds and/or Common Stock by the Paying Agent, promptly
         following the later of (x) the Repurchase Date with respect to such
         2015 Debenture (provided the conditions in Section 1501 have been
         satisfied) and (y) the time of delivery of such 2015 Debenture to the
         Paying Agent by the Holder thereof in the manner required by Section
         1501. Any 2015 Debentures in respect of which a Repurchase Notice has
         been given may not be converted pursuant to Article Fourteen hereof on
         or after the date of the delivery of such Repurchase Notice unless such
         Repurchase Notice has first been validly withdrawn as specified in the
         following two paragraphs.

                  A Repurchase Notice may be withdrawn by means of a written
         notice of withdrawal delivered to the office of the Paying Agent in
         accordance with the Repurchase Notice at any time prior to the close of
         business on the last Business Day prior to the applicable Repurchase
         Date specifying:

                           (1) the certificate number of the 2015 Debenture in
                  respect of which such notice of withdrawal is being submitted;

                           (2) the Principal Amount of the 2015 Debenture with
                  respect to which such notice of withdrawal is being submitted;
                  and

                           (3) the Principal Amount, if any, of such 2015
                  Debenture which remains subject to the original Repurchase
                  Notice and which has been or will be delivered for purchase by
                  the Company.

                  A written notice of withdrawal of a Repurchase Notice may be
         in the form set forth in the preceding paragraph or may be in the form
         of (i) a conditional withdrawal contained in a Repurchase Notice
         pursuant to the terms of Section 1501(a)(1)(D) or 1501(b)(3)(D) or (ii)
         a conditional withdrawal containing the information set forth in
         Section 1501(a)(1)(D) or 1501(b)(3)(D) and the preceding paragraph and
         contained in a written notice of withdrawal delivered to the Paying
         Agent as set forth in the preceding paragraph.

                  There shall be no purchase of any 2015 Debentures pursuant to
         this Article Fifteen (other than through the issuance of Common Stock
         in payment of the Repurchase Price, including cash in lieu of
         fractional shares) if there has occurred (prior to, on or after, as the
         case may be, the giving, by the Holders of such 2015 Debentures, of the
         required Repurchase Notice) and is continuing an Event of Default
         (other than a default in the payment of the Repurchase Price with
         respect to such 2015 Debentures). The Paying Agent will promptly return
         to the respective Holders thereof any (x) 2015 Debentures with respect
         to which a Repurchase Notice has been withdrawn in compliance with this
         Indenture, or (y) except to the extent such 2015 Debentures are being
         paid in shares of Common Stock, any 2015 Debentures held by it during
         the continuance of an Event of Default (other than a default in the
         payment of the Repurchase Price with respect to such 2015 Debentures),
         in which case, upon such return, the Repurchase Notice with respect
         thereto shall be deemed to have been withdrawn.

                                      -32-
<PAGE>

         Section 1510.  DEPOSIT OF REPURCHASE PRICE.

                  Prior to 11:00 a.m. (New York City time) on the Repurchase
         Date, the Company shall deposit with the Paying Agent an amount of
         money (in immediately available funds) and/or Common Stock, if
         permitted hereunder, sufficient to pay the aggregate Repurchase Price
         of all of the 2015 Debentures or portions thereof which are to be
         purchased as of the Repurchase Date. If a Paying Agent holds, in
         accordance with the terms hereof, money, and/or shares of Common Stock
         sufficient to pay the Repurchase Price of any 2015 Debenture for which
         a Repurchase Notice has been tendered and not withdrawn in accordance
         with this Indenture then, on the Repurchase Date, such 2015 Debenture
         will cease to be Outstanding and the rights of the Holder in respect
         thereof shall terminate (other than the right to receive the Repurchase
         Price as aforesaid).

                  The manner in which the deposit required by this Section 1510
         is made by the Company shall be at the option of the Company, provided
         that such deposit shall be made in a manner such that a Paying Agent
         shall have immediately available funds and/or shares of Common Stock by
         11:00 a.m. (New York City time) on the Repurchase Date.

         Section 1511.  SECURITIES REPURCHASED IN PART.

                  Any 2015 Debenture which is to be purchased only in part shall
         be surrendered at the office of the Paying Agent (with, if the Company
         or Trustee so requires, due endorsement by, or a written instrument of
         transfer in form satisfactory to the Company or Trustee duly executed
         by, the Holder thereof or such Holder's attorney duly authorized in
         writing) and the Company shall execute and the Trustee shall
         authenticate and deliver to the Holder of such 2015 Debenture, without
         service charge, a new 2015 Debenture or 2015 Debentures, of any
         authorized denomination as requested by such Holder in aggregate
         Principal Amount equal to, and in exchange for, the portion of the
         Principal Amount of the 2015 Debenture so surrendered which is not
         purchased.

         Section 1512.  COMPLY WITH SECURITIES LAWS UPON PURCHASE OF SECURITIES.

                  Unless the staff of the SEC shall issue a letter stating that
         it will take no action against the Company if it does not comply, in
         connection with any offer to purchase or purchase of 2015 Debentures
         under this Article Fifteen (if such offer or purchase constitutes an
         "issuer tender offer" for purposes of Rule 13e-4 (which term, as used
         herein, includes any successor provision thereto) under the Exchange
         Act at the time of such offer or purchase), the Company shall (i)
         comply with Rule 13e-4 under the Exchange Act, (ii) file the related
         Schedule TO (or any successor schedule, form or report) under the
         Exchange Act, and (iii) otherwise comply with all Federal and state
         securities laws so as to permit the rights and obligations under
         Article Fifteen to be exercised in the time and in the manner specified
         in this Article Fifteen.

                                      -33-
<PAGE>

         Section 1513.  REPAYMENT TO THE COMPANY.

                  The Paying Agent shall return to the Company any cash or
         Common Stock that remain unclaimed for two years, subject to applicable
         unclaimed property law, together with interest or dividends, if any,
         thereon held by them for the payment of the Repurchase Price; provided,
         however, that to the extent that the aggregate amount of cash or Common
         Stock deposited by the Company pursuant to Section 1510 exceeds the
         aggregate Repurchase Price of the 2015 Debentures or portions thereof
         which the Company is obligated to purchase as of the Repurchase Date,
         then promptly after the Business Day following the Repurchase Date the
         Paying Agent shall return any such excess to the Company together with
         interest or dividends, if any, thereon. After that, Holders entitled to
         money must look to the Company for payment as general creditors, unless
         an applicable abandoned property law designates another Person.

         Section 1514.  CONVERSION ARRANGEMENT ON REPURCHASE.

                  Any Securities required to be repurchased under this Article
         Fifteen, unless surrendered for conversion before the close of business
         on the Business Day prior to the Repurchase Date, may be deemed to be
         purchased from the Holders of such Securities for an amount in cash not
         less than the Repurchase Price, by one or more investment bankers or
         other purchasers who may agree with the Company to purchase such
         Securities from the Holders, to convert them into Common Stock of the
         Company and to make payment for such Securities to the Trustee in trust
         for such Holders. The Paying Agent shall hold and pay to the Holders
         whose 2015 Debentures are repurchased any such amount paid to it for
         purchase in the same manner as it would money deposited with it by the
         Company for the repurchase of 2015 Debentures. Without the Paying
         Agent's prior written consent, no arrangement between the Company and
         such purchasers for the purchase and conversion of any 2015 Debentures
         shall increase or otherwise affect any of the powers, duties,
         responsibilities or obligations of the Paying Agent as set forth in
         this Indenture, and the Company agrees to indemnify the Paying Agent
         from, and hold it harmless against, any loss, liability or expense
         arising out of or in connection with any such arrangement for the
         purchase and conversion of any 2015 Debentures between the Company and
         such purchasers, including the costs and expenses incurred by the
         Paying Agent in the defense of any claim or liability reasonably
         incurred without negligence or bad faith on its part arising out of or
         in connection with the exercise or performance of any of its powers,
         duties, responsibilities or obligations under this Indenture, in
         accordance with the indemnity provisions applicable to the Trustee set
         forth herein.

                                 ARTICLE SIXTEEN
                          SPECIAL TAX EVENT CONVERSION

         Section 1601.  OPTIONAL CONVERSION TO INTEREST-BEARING SECURITIES
                        UPON TAX EVENT.

                  From and after (i) the date (the "Tax Event Date") of the
         occurrence of a Tax Event and (ii) the date the Company exercises such
         option, whichever is later (the "Option Exercise Date"), at the option
         of the Company with respect to its 2015 Debentures only, interest in
         lieu of future

                                      -34-
<PAGE>

         Original Issue Discount shall accrue at the rate of 2.00%
         per annum on a restated principal amount per $1,000 original Principal
         Amount (the "Restated Principal Amount") equal to the Issue Price plus
         Original Issue Discount accrued to the Option Exercise Date and shall
         be payable semi-annually on each Interest Payment Date to holders of
         record at the close of business on each Regular Record Date immediately
         preceding such Interest Payment Date. Interest will be computed on the
         basis of a 360 day year comprised of twelve 30 day months and will
         accrue from the most recent date on which interest has been paid or, if
         no interest has been paid, from the Option Exercise Date. Within 15
         Business Days of the occurrence of a Tax Event, the Company shall mail
         a written notice of such Tax Event by first-class mail to the Trustee
         and within 15 days of its exercise of such option the Company shall
         mail a written notice of the Option Exercise Date by first-class mail
         to the Trustee and Holders of the 2015 Debentures. From and after the
         Option Exercise Date, (i) the Company shall be obligated to pay at the
         Stated Maturity of the 2015 Debentures, in lieu of the Principal Amount
         of a Security, the Restated Principal Amount thereof and (ii) "Issue
         Price and accrued Original Issue Discount," "Issue Price plus Original
         Issue Discount" or similar words, as used herein, shall mean Restated
         Principal Amount plus accrued and unpaid interest with respect to any
         2015 Debenture. The 2015 Debentures authenticated and delivered after
         the Option Exercise Date may, at the option of the Company, bear a
         notation in a form as to the conversion of the 2015 Debentures to
         interest-bearing 2015 Debentures.

                                  ARTICLE THREE

                            MISCELLANEOUS PROVISIONS

SECTION  301.  INTEGRAL PART.

                  This First Supplemental Indenture constitutes an integral part
of the Indenture.

SECTION  302.  GENERAL DEFINITIONS.

                  For all purposes of this First Supplemental Indenture:

                  (a) capitalized terms used herein without definition shall
         have the meanings specified in the Indenture; and

                  (b) the terms "herein", "hereof", "hereunder" and other words
         of similar import refer to this First Supplemental Indenture.

SECTION  303.  ADOPTION, RATIFICATION AND CONFIRMATION.

                  The Indenture, as supplemented and amended by this First
Supplemental Indenture, is in all respects hereby adopted, ratified and
confirmed.

                                      -35-
<PAGE>

SECTION  304.  COUNTERPARTS.

                  This First Supplemental Indenture may be executed in any
number of counterparts, each of which when so executed shall be deemed an
original; and all such counterparts shall together constitute but one and the
same instrument.

SECTION  305.  GOVERNING LAW.

                  THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                  IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto fixed and attested as of the day and year first written above.

                                   CORNING INCORPORATED

                                   By:
                                      -----------------------------------------
                                         Name:
                                         Title:

STATE OF NEW YORK

COUNTY OF
          --------------------------

                  On the ____ day of November, 2000, before me personally came
______________, to me known, who, being by me duly sworn, did depose and say
that he is ____________________ of CORNING INCORPORATED, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board Directors of said
corporation, and that he signed his name thereto by like authority.

                                               --------------------
                                                     Notary

                                      -36-
<PAGE>

                                   THE CHASE MANHATTAN BANK

                                   By:
                                      -----------------------------------------
                                         Name:
                                         Title:

STATE OF NEW YORK

COUNTY OF NEW YORK

                  On the ____ day of November, 2000, before me personally came
______________, to me known, who, being by me duly sworn, did depose and say
that such person is an authorized officer of THE CHASE MANHATTAN BANK, one of
the entities described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by authority of the Board
Directors of said corporation, and that such person signed his or her name
thereto by like authority.

                                               --------------------
                                                     Notary

                                      -37-
<PAGE>

                                                                         ANNEX A

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

                                 GLOBAL SECURITY

                   FORM OF ZERO COUPON CONVERTIBLE DEBENTURES
                              DUE NOVEMBER 8, 2015

                              CORNING INCORPORATED

Issue Date:  November 8, 2000                     Maturity:  November 8, 2015

Principal Amount: $                               CUSIP:  219350AJ4

Original Issue Discount:  $258.077                Issue Price:  $741.923
(per $1,000 Principal Amount)                     (per $1,000 Principal Amount)

Registered:  No. R-

                  Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) to the issuer or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
such other name as requested by an authorized representative of The Depository
Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since
the registered owner hereof, Cede & Co., has an interest herein.

                  Unless and until it is exchanged in whole or in part for the
individual Securities represented hereby, this Global Security may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.

                  Corning Incorporated, a New York corporation (herein called
the "Company", which term includes any successor corporation under the indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co., or registered assigns, the principal sum of ($_________) on

                                      -38-
<PAGE>

November 8, 2015. The principal of this Security shall not bear interest,
except in the case of default in payment of principal upon acceleration,
redemption or maturity or as specified on the other side of this Security.
Original Issue Discount will accrue as specified on the other side of this
Security. This Security is convertible as specified on the other side of this
Security.

                  Payment of the principal of and interest, if any, on this
Security will be made at the office or agency of the Company maintained for that
purpose in The City of New York, in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company, payment of
interest, if any, may be made by check mailed to the address of the Paying
Agent or the Person entitled thereto as such address shall appear in the
Security Register; and provided, further, payment may be made pursuant to the
Applicable Procedures of the Depositary as permitted in the Indenture.

                  Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.

                  Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.

Dated:  November 8, 2000

                                    CORNING INCORPORATED

                                    By:
                                         ------------------------------
                                           Name:
                                           Title:

---------------------
Corporate Secretary

                                      -39-
<PAGE>

                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

                  This is one of the Securities of the series designated therein
referred to in the within- mentioned Indenture.

                                                 THE CHASE MANHATTAN BANK,
                                                 as Trustee

                                                 -------------------------
                                                 Authorized Signature

                                      -40-
<PAGE>

                       [FORM OF REVERSE SIDE OF SECURITY]

                              CORNING INCORPORATED

               ZERO COUPON CONVERTIBLE DEBENTURE DUE NOVEMBER 2015

                  This Security is one of a duly authorized issue of senior
unsecured securities of the Company (herein called the "Securities"), issued and
to be issued in one or more series under an Indenture, dated as of November 8,
2000, as amended by the First Supplemental Indenture thereto, dated as of
November 8, 2000 (as so amended, herein called the "Indenture"), between the
Company and The Chase Manhattan Bank, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof,
limited in aggregate principal amount at Stated Maturity to
$2,712,546,000.

INTEREST

                  This Security shall not bear interest, except as specified in
this paragraph or as described under "Tax Event". If the Principal Amount hereof
or any portion of such Principal Amount is not paid when due (whether upon
acceleration pursuant to Section 502 of the Indenture, upon the date set for
payment of the Redemption Price as described below under "Optional
Redemption", upon the date set for payment of the Change in Control Purchase
Price pursuant to "Purchase of Securities at the Option of the Holder Upon a
Change in Control" described below, upon the date set for payment of the
Optional Repurchase Price under "Repurchase by the Company at the Option of
the Holder" described below or upon the Stated Maturity of this Security) or
if interest due hereon, if any, (or any portion of such interest) is not paid
when due, then in each such case the overdue amount shall, to the extent
permitted by law, bear interest at the rate of 2.00% per annum, compounded
semi-annually, which interest shall accrue from the date such overdue amount
was originally due to the date payment of such amount, including interest
thereon, has been made or duly provided for. All such interest shall be
payable as set forth in the Indenture. The accrual of such interest on
overdue amounts shall be in lieu of, and not in addition to, the continued
accrual of Original Issue Discount. Original Issue Discount (the difference
between the Issue Price and the Principal Amount of the Security), in the
period during which a Security remains outstanding, shall accrue at 2.00% per
annum, on a semiannual bond equivalent basis using a 360-day year composed of
twelve 30-day months, from the Issue Date of this Security.

METHOD OF PAYMENT

                  Subject to the terms and conditions of the Indenture, cash
payments in respect of principal, Original Issue Discount and interest, if
any, on the Securities shall be made by the Company in immediately available
funds or by check to the Payment Agent who collects such payments in respect
of the Securities or pursuant to the Applicable Procedures of the Depositary
as permitted in the Indenture. Payments may be made in stock in certain
circumstances as set forth in the Indenture.

                                      -41-
<PAGE>

OPTIONAL REDEMPTION

                  No sinking fund is provided for the Securities. The Securities
are redeemable as a whole, or from time to time in part, at any time at the
option of the Company at the Redemption Price set forth below, on or after
November 8, 2005.

                  The table below shows Redemption Prices of a Security per
$1,000 Principal Amount at Stated Maturity on the dates shown below, which
prices reflect accrued Original Issue Discount calculated through each such
date. The Redemption Price of a Security redeemed between such dates shall
include an additional amount reflecting the additional Original Issue Discount
accrued since the immediately preceding date in the table.

<TABLE>
<CAPTION>

                                                                         (2)
                                           (1)                         ACCRUED                         (3)
                                        DEBENTURE                  ORIGINAL ISSUE                  REDEMPTION
       REDEMPTION DATE                 ISSUE PRICE                    DISCOUNT                    PRICE (1)+(2)
       ---------------                 -----------                    --------                    -------------

<S>                                    <C>                           <C>                          <C>
November 8, 2005                       $741.923                      $ 77.622                      $ 819.544
November 8, 2006                        741.923                        94.094                        836.017
November 8, 2007                        741.923                       110.898                        852.821
November 8, 2008                        741.923                       128.040                        869.963
November 8, 2009                        741.923                       145.526                        887.449
November 8, 2010                        741.923                       163.364                        905.287
November 8, 2011                        741.923                       181.560                        923.483
November 8, 2012                        741.923                       200.122                        942.045
November 8, 2013                        741.923                       219.057                        960.980
November 8, 2014                        741.923                       238.373                        980.296
November 8, 2015                        741.923                       258.077                      1,000.000
</TABLE>

                  If converted to an interest-bearing debenture following the
occurrence of a Tax Event, this Security will be redeemable at the Restated
Principal Amount plus accrued and unpaid interest from the date of such
conversion to the Redemption Date; but in no event will this Security be
redeemable before November 8, 2005.

                  If the Company redeems less than all of the outstanding
Securities, the Trustee will select the Securities to be redeemed (i) by lot;
(ii) pro rata or (iii) by another method the Trustee considers fair and
appropriate. If the Trustee selects a portion of a Holder's Securities for
partial redemption and the

                                      -42-
<PAGE>

Holder converts a portion of the same Securities, the converted portion will be
deemed to be from the portion selected for redemption.

NOTICE OF OPTIONAL REDEMPTION BY THE COMPANY

                  Notice of optional redemption by the Company will be mailed by
first-class mail at least 15 days but not more than 60 days before the
Redemption Date to each Holder of Securities to be redeemed at its registered
address. Securities in denominations larger than $1,000 Principal Amount may be
redeemed in part, but only in whole multiples of $1,000. On and after the
Redemption Date, subject to the deposit with the Paying Agent of funds
sufficient to pay the Redemption Price, Original Issue Discount (or interest, if
the Security is converted to an interest-bearing debenture) ceases to accrue on
Securities or portions thereof called for redemption.

CONVERSION

                  A Holder of a Security may convert the Security into Common
Stock at any time until the close of business on the Business Day prior to the
Stated Maturity; provided, however, that if the Security is called for
redemption, the conversion right will terminate at the close of business on the
Business Day immediately preceding the Redemption Date for such Security or such
earlier date as the Holder presents such Security for redemption (unless the
Company shall default in making the redemption payment when due, in which case
the conversion right shall terminate at the close of business on the date such
default is cured and such Security is redeemed). A Security in respect of which
a Holder has delivered a Repurchase Notice exercising the option of such Holder
to require the Company to purchase such Security may be converted only if such
notice of exercise is withdrawn in accordance with the terms of the Indenture.
The initial conversion price is $89.0625 per share of Common Stock, subject to
adjustment in certain events described in the Indenture. This is equivalent to a
conversion rate of 8.3304 shares of Common Stock per $1,000 Principal Amount
of Securities at Stated Maturity. The Company will deliver cash or a check in
lieu of any fractional Common Stock.

                  In the event the Company exercises its option pursuant to
Section 1601 of the Indenture to have interest in lieu of Original Issue
Discount accrue on the Security following a Tax Event, the Holder will be
entitled on conversion to receive the same number of Common Stock such Holder
would have received if the Company had not exercised such option. If the Company
exercises such option, Securities surrendered for conversion during the period
from the close of business on any Regular Record Date immediately preceding any
Interest Payment Date to the opening of business of such Interest Payment Date
(except Securities or portions of Securities to be redeemed on a Redemption Date
occurring during the period from the close of business on a Regular Record Date
and ending on the opening of business on the first Business Day after the next
Interest Payment Date, or if this Interest Payment Date is not a Business Day,
the second Business Day after the Interest Payment Date) must be accompanied by
payment from the Holder of an amount equal to the interest thereon that the
registered Holder is to receive from the Company on such Interest Payment Date.
Except where Securities surrendered for conversion must be accompanied by
payment as described above, no interest on converted Securities will be payable
by the Company on any Interest Payment Date subsequent to the date of
conversion.

                                      -43-
<PAGE>

                  A Holder may convert a portion of a Security if the Principal
Amount of such portion is $1,000 or an integral multiple of $1,000. No payment
or adjustment will be made for dividends on the Common Stock except as provided
in the Indenture. On conversion of a Security, that portion of accrued Original
Issue Discount (and interest if the Security is converted to an interest-bearing
debenture) attributable to the period from the Issue Date (or, in the case of
interest, if the Company has exercised the option referred to in "Tax Event",
from the later of (x) the date of such exercise and (y) the date on which
interest was last paid) through the Conversion Date with respect to the
converted Security shall not be cancelled, extinguished or forfeited, but rather
shall be deemed to be paid in full to the Holder thereof through the delivery of
the Common Stock (together with the cash payment, if any, in lieu of fractional
shares) in exchange for the Security being converted pursuant to the terms
hereof; and the fair market value of such Common Stock (together with any such
cash payment in lieu of fractional shares) shall be treated as issued, to the
extent thereof, first in exchange for Original Issue Discount (and interest, if
the Company has exercised its option provided for in "Tax Event") accrued
through the Conversion Date, and the balance, if any, of such fair market value
of such Common Stock (and any such cash payment) shall be treated as issued in
exchange for the Issue Price of the Security being converted pursuant to the
provisions hereof.

                  No fractional shares will be issued upon conversion; in lieu
thereof, an amount will be paid in cash based upon the closing price of the
Common Stock on the Trading Day immediately prior to the Conversion Date.

                  To convert a Security, a Holder must (a) complete and manually
sign the conversion notice set forth below and deliver such notice to a
Conversion Agent, (b) surrender the Security to the Conversion Agent, (c)
furnish appropriate endorsements and transfer documents (including any
certification that may be required under applicable law) if required by the
Conversion Agent, and (d) pay any transfer or similar tax, if required.

PURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER UPON A CHANGE IN CONTROL

                  At the option of the Holder and subject to the terms and
conditions of the Indenture, the Company shall become obligated to purchase all
or any part specified by the Holder (so long as the Principal Amount of such
part is $1,000 or an integral multiple of $1,000 in excess thereof) of the
Securities held by such Holder on the date that is 35 Business Days after the
occurrence of a Change in Control, at a Change in Control Purchase Price equal
to the Issue Price plus accrued Original Issue Discount through the Change in
Control Purchase Date. The Change in Control Purchase Price may be paid, at the
option of the Company, in cash or by the issuance of Common Stock as provided in
Article Fifteen of the Indenture, or in any combination thereof. The Holder
shall have the right to withdraw any Change in Control Purchase Notice (in whole
or in a portion thereof that is $1,000 Principal Amount or an integral multiple
of $1,000 in excess thereof) at any time prior to the close of business on the
Business Day prior to the Change in Control Purchase Date by delivering a
written notice of withdrawal to the Paying Agent in accordance with the terms of
the Indenture.

                  If prior to a Change in Control Purchase Date this Security
has been converted to an interest-bearing debenture following the occurrence of
a Tax Event, the Change in Control Purchase

                                      -44-
<PAGE>

Price shall be equal to the Restated Principal Amount plus accrued and unpaid
interest from the date of conversion to the Change in Control Purchase Date.

REPURCHASE BY THE COMPANY AT THE OPTION OF THE HOLDER

                  Subject to the terms and conditions of the Indenture, the
Company shall become obligated to purchase, at the option of the Holder, the
Securities held by such Holder on the following Repurchase Dates and at the
following Repurchase Prices per $1,000 Principal Amount, upon delivery by
the Holder of a Repurchase Notice containing the information set forth in the
Indenture, at any time from the opening of business on the date that is 20
Business Days prior to such Repurchase Date until the close of business on the
last Business Day prior to such Repurchase Date and upon delivery of the
Securities to the Paying Agent by the Holder as set forth in the Indenture.

          REPURCHASE DATE                             REPURCHASE PRICE
          ---------------                             ----------------

     November 8, 2005                                 $819.544

     November 8, 2010                                  905.287

                  The Repurchase Price (equal to the Issue Price plus accrued
Original Issue Discount through the Repurchase Date) may be paid, at the option
of the Company, in cash or by the issuance of Common Stock as provided in
Article Fifteen of the Indenture, or in any combination thereof.

                  If prior to a Repurchase Date this Security has been converted
to an interest-bearing debenture following the occurrence of a Tax Event, the
Repurchase Price will be equal to the Restated Principal Amount plus accrued and
unpaid interest from the date of conversion to the Repurchase Date.

                  Holders have the right to withdraw any Repurchase Notice by
delivering to the Paying Agent a written notice of withdrawal prior to the close
of business on the last Business Day prior to the Repurchase Date in accordance
with the provisions of the Indenture.

                  If cash or Common Stock sufficient to pay the Repurchase Price
of all Securities or portions thereof to be purchased as of the Repurchase Date
is deposited with the Paying Agent by 11:00 a.m. New York City time on the
Repurchase Date, Original Issue Discount ceases to accrue on such Securities (or
portions thereof) immediately after such Repurchase Date, and the Holder thereof
shall have no other rights as such (other than the right to receive the
Repurchase Price upon surrender of such Security).

                                      -45-
<PAGE>

TAX EVENT

                  From and after (i) the date (the "Tax Event Date") of the
occurrence of a Tax Event and (ii) the date the Company exercises such option,
whichever is later (the "Option Exercise Date"), at the option of the Company,
interest in lieu of future Original Issue Discount shall accrue at the rate of
2.00% per annum on a Principal Amount per Security (the "Restated Principal
Amount") equal to the Issue Price plus Original Issue Discount accrued through
the Option Exercise Date and shall be payable semiannually on May 15 and
November 15, of each year (each an "Interest Payment Date") to holders of record
at the close of business on May 1 or November 1 (each a "Regular Record Date")
immediately preceding such Interest Payment Date. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months and will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the Option Exercise Date.

                  Interest on any Security that is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
person in whose name that Security is registered at the close of business on the
Regular Record Date for such interest at the office or agency of the Company
maintained for such purpose. Each installment of interest on any Security shall
be paid in same-day funds by transfer to an account maintained by the payee
located inside the United States.

                  Except as otherwise specified with respect to the Securities,
any Defaulted Interest on any Security shall forthwith cease to be payable to
the registered Holder thereof on the relevant Regular Record Date by virtue of
having been such Holder, and such Defaulted Interest may be paid by the Company
as provided for in Section 307 of the Indenture.

CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION

                  Any Securities called for redemption, or as to which a
Repurchase Notice has been given but not withdrawn, unless surrendered for
conversion before the close of business on the Redemption Date, may be deemed to
be purchased from the Holders of such Securities at an amount not less than the
Redemption Price, by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Securities from the Holders, to convert
them into Common Stock of the Company and to make payment for such Securities to
the Paying Agent in trust for such Holders.

TRANSFER

                  As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration or
transfer at the office or agency in a Place of Payment for Securities of this
series, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities of this series, of any authorized denominations and for
the same aggregate principal amount, executed by the Company and authenticated
and delivered by the Trustee, will be issued to the designated transferee or
transferees.

                                      -46-
<PAGE>

                  The Securities of this series are issuable only in registered
form without coupons in denominations of $1,000 and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations set
forth therein and on the face of this Security, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of this series
of a different authorized denomination as requested by the Holder surrendering
the same.

                  No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

                  Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee or any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

AMENDMENT, SUPPLEMENT AND WAIVER

                  The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in principal amount of
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive
compliance by the Company with certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.

SUCCESSOR CORPORATION

                  When a successor corporation assumes all the obligations of
its predecessor under the Securities and the Indenture in accordance with the
terms and conditions of the Indenture, the predecessor corporation will (except
in certain circumstances specified in the Indenture) be released from those
obligations.

DEFAULTS AND REMEDIES

                  If an Event of Default with respect to Securities of this
series shall occur and be continuing, all unpaid Issue Price plus accrued
Original Issue Discount through the acceleration date (or, if the Security has
been converted to an interest bearing debenture, the Restated Principal Amount
plus accrued and unpaid interest from the date of conversion to the acceleration
date) of the Securities of this series may be declared due and payable in the
manner and with the effect provided in the Indenture.

                                      -47-
<PAGE>

NO RECOURSE AGAINST OTHERS

                  No recourse shall be had for the payment of the principal of
or the interest, if any, on this Security, for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture or any
indenture supplemental thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Company or of any
successor corporation, whether by virtue of any constitution, statute or rule of
law or by the enforcement of any assessment of penalty or otherwise, all such
liability being, by acceptance hereof and as part of the consideration for the
issue hereof, expressly waived and released.

AUTHENTICATION

                  This Security shall not be valid until the Trustee or an
authenticating agent manually signs the certificate of authentication on the
other side of this Security.

INDENTURE TO CONTROL; GOVERNING LAW

                  In the case of any conflict between the provisions of this
Security and the Indenture, the provisions of the Indenture shall control.

THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

ABBREVIATIONS AND DEFINITIONS

                  Customary abbreviations may be used in the name of the Holder
or an assignee, such as:

                  TEN COM (= tenants in common), TEN ENT (= tenants by the
         entireties), JT TEN (= joint tenants with right of survivorship and not
         as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts
         to Minors Act).

                  All terms defined in the Indenture and used in this Security
but not specifically defined herein are defined in the Indenture and are used
herein as so defined.

CONVERSION NOTICE

                  To convert this Security into Common Stock of the Company,
check the box: [ ]

                  To convert only part of this Security, state the Principal
Amount to be converted (must be $1,000 or a multiple of $1,000):
$______________.

                                      -48-
<PAGE>

                  If you want the stock certificate made out in another person's
name, fill in the form below:

--------------------------------------------------------------------------------
                (Insert other person's soc. sec. or tax I.D. no.)

--------------------------------------------------------------------------------
            (Print or type other person's name, address and zip code)

Your Signature:                           Date:
                 ----------------------      -----------------------------------

     (Sign exactly as your name appears on the other side of this Security)

*Signature guaranteed by:
                           -----------------------------------------------------

By:
     ---------------------------------------

                  *The signature must be guaranteed by an institution which is a
                  member of one of the following recognized signature guaranty
                  programs: (i) the Securities Transfer Agent Medallion Program
                  (STAMP); (ii) the New York Stock Exchange Medallion Program
                  (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or
                  (iv) such other guaranty program acceptable to the Trustee.

                                      -49-ASSET PURCHASE AGREEMENT

                                  BY AND AMONG

                               CENDANT CORPORATION

                       CENDANT FINANCE HOLDING CORPORATION

                           AMERIHOST PROPERTIES, INC.

                         AMERIHOST INN FRANCHISING, INC.

                           AMERIHOST MANAGEMENT, INC.

                                       AND

                           AMERIHOST DEVELOPMENT, INC.

                           DATED AS OF AUGUST 17, 2000

CONFIDENTIAL  TREATMENT  REQUESTED FOR PORTIONS OF THIS  DOCUMENT.  PORTIONS FOR
WHICH  CONFIDENTIAL  TREATMENT  IS  REQUESTED  ARE  DENOTED BY  [ECONOMIC  TERMS
OMITTED].  MATERIAL  OMITTED HAS BEEN FILED  SEPARATELY  WITH THE SECURITIES AND
EXCHANGE COMMISSION.

<PAGE>

                            ASSET PURCHASE AGREEMENT

         This ASSET PURCHASE  AGREEMENT  (this  "Agreement")  is entered into on
this 17th day of August, 2000 by and among CENDANT FINANCE HOLDING  CORPORATION,
a  Delaware  corporation  (the  "Buyer"),   CENDANT   CORPORATION,   a  Delaware
corporation ("Cendant"), AMERIHOST PROPERTIES, INC., a Delaware corporation (the
"Parent"),  AMERIHOST INN FRANCHISING,  INC., a Delaware  corporation  ("AIFI"),
AMERIHOST   MANAGEMENT,   INC.,  an  Illinois  corporation  ("AMI"),   AMERIHOST
DEVELOPMENT,  INC., an Illinois  corporation  ("ADI",  together with the Parent,
AIFI and AMI, the "Seller").

         WHEREAS,  the Seller is engaged in, among other things, the business of
franchising  a hotel  system  under  the  AmeriHost  Inn(R),  AmeriHost  Inn and
SuitesSM, AmeriHost HotelSM, AmeriHost SuitesSM and any other proprietary brands
of the Parent or any of its subsidiaries brands (the "Business"); and

         WHEREAS,  the Buyer is a wholly owned subsidiary of Cendant and desires
to purchase and assume from the Seller,  and the Seller desire to sell,  convey,
assign,  and  transfer  to the  Buyer,  certain of the  assets  relating  to the
Business,  together with certain  obligations and liabilities  relating thereto,
all in the manner and subject to the terms and conditions set forth herein.

         NOW,  THEREFORE,  in  consideration  of the  foregoing  and the  mutual
representations,  warranties, covenants and agreements contained herein, and for
other good and valuable  consideration,  the receipt and sufficiency of which is
hereby acknowledged, and subject to the terms and conditions hereof, the parties
intending to be legally bound, hereby agree as follows:

                                    ARTICLE I
                                    ---------
                                 SALE OF ASSETS
                                 --------------

         Section 1.1.  Acquired Assets.  Subject to the terms of this Agreement,
the Seller agrees to sell,  assign,  transfer,  convey and deliver to the Buyer,
and the Buyer agrees to purchase and acquire from the Seller,  free and clear of
any liens, pledges,  charges,  claims,  security interests or other encumbrances
(collectively, "Liens"), all of the Seller's right, title and interest in and to
all assets  primarily  held for use or used in,  arising  from or related to the
Business, including the following (collectively, the "Acquired Assets"):

         (a)  all  of (i)  the  registered  trademarks,  service  marks,  unique
identifying   characteristics  and  derivatives  of  the  AmeriHost  Inn(R)  and
AmeriHost  Inn and SuitesSM  brands  (collectively,  the  "Brands") and (ii) the
unregistered trademarks,  service marks, unique identifying  characteristics and
derivatives of the Brands (the "Trademarks");

<PAGE>

         (b) all (i) Assigned Existing  Contracts set forth on attached Schedule
2.7(a) and (ii) all franchise  agreements  relating to all Owned  Facilities (as
defined in Section 2.6 below)  entered  into  pursuant to Section  4.1(d)(ii)(B)
below (collectively, the "Assigned Contracts").

         (c) all prepaid  royalties  and fees of the Seller on the Closing  Date
relating  to  the  operation  or  conduct  of  the  Business  including  without
limitation  the cash  balance,  as of the Closing  Date,  in the  Marketing  and
Reservation Fund (as defined in Section 2.6 below) (the "Prepaids");

         (d) the domain name, "www.amerihostinn.com" and content and information
contained  thereon and all other  domain  names,  web-sites,  including  without
limitation all content and information contained thereon,  relating primarily to
the Business (collectively, the "Web Site Materials");

         (e) all certificates, licenses, permits, authorizations,  registrations
and  approvals  issued or  granted to the Seller by  Governmental  Entities  (as
defined  below) that are used,  held for use or intended to be used primarily in
the  operation  or  conduct  of the  Business,  to the  extent  assignable  (the
"Assigned Permits");

         (f) all building  plans and prototypes  utilized in the  development of
hotels under the Brands (the "Plans");

         (g) all slogans, designs, printed works, graphic art, photographs, CDs,
audio and video tapes relating to any of the Trademarks or used primarily in the
conduct of the Business  (together with the Trademarks,  the Web Site Materials,
the Plans and all Intellectual Property (as defined in Section 2.5 below) listed
on attached Schedule 2.5(a), the "Assigned Intellectual Property");

         (h)  all  rights  to  all  toll  free  reservation  telephone  numbers,
including without limitation 1-800-434-5800;

         (i) all operating systems,  manuals,  marketing,  sales and promotional
literature,  books,  records,  files,  documents,  operating manuals,  personnel
records, customer, supplier and franchise lists and files, preprinted materials,
copyrighted and  copyrightable  materials owned by the Seller and used primarily
in the  operation of the Business or otherwise  related to the  licensing of the
Brands;

         (j) all financial  records and  accounting,  internal and audit records
used exclusively in the operation of the Business;

         (k) all other rights of the Seller to use the Brands or the Trademarks;
and

         (l) all  goodwill  associated  with the  Business,  the  Trademarks  or
otherwise relating to the Acquired Assets.

                                       2
<PAGE>

         Section 1.2. Retained Assets. Notwithstanding anything contained herein
to the  contrary,  the Seller shall not sell,  transfer,  convey or deliver,  or
cause to be sold,  transferred,  conveyed or  delivered,  to the Buyer,  and the
Buyer shall not purchase from the Seller any assets,  properties,  interests and
rights of the  Seller  not used  primarily  in the  operation  or conduct of the
Business, including, without limitation, the following (the "Retained Assets"):

         (a) all  cash  and  cash  equivalents  of the  Seller  (other  than the
Prepaids);

         (b) all right,  title and interest in and to all real property owned or
leased by the Seller,  including  without  limitation  all real property used or
intended to be used in the operation of any hotel under any of the Brands or any
other hotel, motel or resort brands;

         (c) all rights in and to all  contracts,  agreements  and  arrangements
between  the  Seller or any of its  subsidiaries  or  affiliates  with any other
person with respect to the ownership or operation of any hotel, motel or resort,
including without  limitation the amendments to the management  agreements to be
entered  into  prior to the  Closing  pursuant  to Section  4.1(d)(ii)(C)  below
(collectively, the "Management Agreements").

         (d) all accounts  receivable  of the Seller on the Closing Date arising
out of the operation or conduct of the Business; and

         (e) all minute  books,  stock ledgers and other books and records which
pertain to the Seller's  corporate  matters  separate  from the operation of the
Business.

         Section 1.3.  Assumption of  Liabilities.  Subject to the terms of this
Agreement  and excluding  the Excluded  Liabilities,  the Buyer hereby agrees to
assume,   pay,  perform  and  discharge  when  due  solely  those   liabilities,
obligations  and  commitments of the Seller under the Assigned  Contracts to the
extent such liabilities,  obligations and commitments  relate to the period from
and after the  Closing  (collectively,  the  "Assumed  Liabilities").  The Buyer
agrees to pay the  transfer,  documentary,  registration  and value  added taxes
(excluding any penalties,  interest and additions to tax) incurred in connection
with this  Agreement and the  transactions  contemplated  hereby (the  "Transfer
Taxes").

         Section 1.4. Retained Liabilities.  Notwithstanding  anything set forth
in this Agreement to the contrary and regardless of any disclosure to the Buyer,
all  liabilities,  obligations  and  commitments of the Seller (other than those
specifically  enumerated as Assumed  Liabilities) shall be the responsibility of
the Seller and shall be referred to herein as the "Excluded Liabilities" and the
Buyer  shall not assume  any  Excluded  Liability.  Excluded  Liabilities  shall
include, without limitation:

         (a) any  liability,  obligation or  commitment  of the Seller,  whether
express or implied,  liquidated,  absolute, accrued, contingent or otherwise, or
known or  unknown,  arising  primarily  out of the  operation  or conduct by the
Seller or any of its affiliates of any business other than the Business;

                                       3
<PAGE>

         (b) any  liability,  obligation or commitment of the Seller arising out
of the  operation  and  ownership of any hotel,  motel or other  facility  owned
either  directly  or  indirectly  by the  Seller or any of its  subsidiaries  or
affiliates or through any joint venture of the Seller or any of its subsidiaries
or affiliates with any third party,  including without limitation arising out of
or relating to any Management Contract;

         (c) any  liability,  obligation or commitment of the Seller (A) arising
out of any actual or alleged breach by the Seller of, or  nonperformance  by the
Seller under,  any Assigned  Contracts prior to the Closing,  (B) accruing under
any  Assigned  Contract  with  respect to any period prior to the Closing or (C)
arising under any contract,  agreement or arrangement  either (x) required to be
listed in Schedule  2.7(a) and not so listed or (y) entered into in violation of
this Agreement;

         (d) any  liability,  obligation or commitment of the Seller arising out
of (A)  any  suit,  action  or  proceeding  ("Proceeding")  pending  or,  to the
knowledge of the Seller,  threatened as of the Closing Date or (B) any actual or
alleged  violation by the Seller or any of its  affiliates of any Applicable Law
(as defined in Section 2.3) prior to the Closing;

         (e) any liability,  obligation or commitment of the Seller that relates
primarily  to, or that arises  primarily  out of, any  Retained  Asset,  or that
arises out of the  distribution  to, or ownership by, the Seller of the Retained
Assets or associated with the realization of the benefits of any Retained Asset;
and

         Section 1.5.      Purchase Price.
                           --------------

         (a) Subject to the terms of this  Agreement,  in  consideration  of the
aforesaid sale,  assignment,  transfer and conveyance of the Acquired Assets, at
the Closing, the Buyer shall:

              (i) assume the Assumed Liabilities;

              (ii) pay to the Seller  [ECONOMIC  TERMS OMITTED]  payable by wire
transfer in immediately  available funds to an account  designated in writing by
the Seller;

              (iii) for each  Independent  Facility  (as  defined in Section 2.6
below) which has commenced  operations  on or before the Closing Date (each,  an
"Open  Independent  Facility"),  a true  and  complete  list of  which  shall be
provided to the Buyer at the Closing,  pay to the Seller an amount calculated as
follows:

                           (A) for each Open Independent Facility which has been
                           operational  for  a  period  of  less  than  eighteen
                           months,  an amount equal to [ECONOMIC TERMS OMITTED];
                           and

                           (B) for each Open Independent Facility which has been
                           operational  for a period of eighteen months or more,
                           an  amount  equal  to  [ECONOMIC TERMS OMITTED].

                                       4

         CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT

<PAGE>

                         [ECONOMIC TERMS OMITTED]

         The  aggregate  funds to be paid to the Seller  pursuant to Section 1.5
(a)(ii) and (a)(iii) shall be referenced to herein  collectively as the "Closing
Cash Consideration."

         (b) For each Independent Facility which has not commenced operations on
or before the Closing Date (each, a "Pending Independent  Facility"),  the Buyer
shall  pay to the  Seller  within  twenty  days of the date  that  such  Pending
Independent Facility  commences  operations,  an amount equal to [ECONOMIC TERMS
OMITTED].

         (c) With respect to each  Franchisee  Applicant  (as defined in Section
2.6 below),  the Buyer shall pay to the Seller,  upon commencement of operations
of a hotel under any of the Brands by such Franchisee Applicant, an amount equal
to [ECONOMIC TERMS OMITTED]; provided however that no such payment shall be made
with respect to the  commencement  of operations of any hotel by any  Franchisee
Applicant which is a subsidiary or affiliate of the Seller.

         (d)  Notwithstanding  anything  set  forth in this  Section  1.5 to the
contrary,  the Buyer's obligation to make payments under Sections 1.5(b) and (c)
shall terminate on the three year anniversary of the Closing Date.

(e)      For purposes of this Section 1.5, the following terms shall mean:

         "Gross Room Revenue" The gross receipts  attributable to or payable for
the rental of guest sleeping rooms at a particular  Open  Independent  Facility,
including without  limitation the net proceeds of use and occupancy and business
interruption,   rent  loss  or  similar  insurance  with  respect  to  the  Open
Independent Facility; provided however that insurance proceeds shall be included
in Gross Room Revenue  only when and to the extent  actually  received  and, for
purposes  of this  Section  1.5,  shall not exceed the amount of gross  receipts
reasonably  estimated  to have been lost as a result of the event that gave rise
to payment of the  insurance  proceeds.  Gross Room  Revenue  shall not  include
Federal,  state and local taxes or fees  collected by the franchisee of the Open
Independent  Facility for  transmittal to the appropriate  Taxing  Authority (as
defined in Section 2.11 below).

         "Standard  Royalty Rate" With respect to a particular Open  Independent
Facility,  the rate in  effect  for the  majority  of the term of the  franchise
agreement  between AIFI and the  franchisee of such Open  Independent  Facility;
provided  however that such rate shall not exceed the maximum rate in effect for
eleven of the first thirty six months of the term of such franchise agreement.

         Section 1.6.  Time and Place of Closing.  Upon the terms and subject to
the conditions of this Agreement,  the closing of the transactions  contemplated
by this  Agreement  (the

                                       5

         CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT

<PAGE>

"Closing") will take place at the offices of Cendant Corporation,  6 Sylvan Way,
Parsippany,  New Jersey, at 10:00 a.m. (local time) within five business days of
the  satisfaction or waiver of the conditions set forth in Article V, or at such
other time and place as is mutually agreed by the Buyer and the Seller. The date
on which the Closing  occurs and the  transactions  contemplated  hereby  become
effective is referred to herein as the "Closing Date."

         Section  1.7.  Deliveries  by the  Seller.  Subject  to the  terms  and
conditions hereof, at the Closing,  the Seller will deliver the following to the
Buyer:

         (a) the officer's certificates provided for in Section 5.2;

         (b) a Bill of Sale and  Assignment  duly  executed  by the  Seller  and
substantially in the form as Exhibit A hereto;

         (c) opinions of McDermott,  Will & Emery and Richards, Layton & Finger,
counsel to the Seller, which opinions shall be in substantially the same form as
Exhibit B and Exhibit C hereto, respectively;

         (d) opinion of the General  Counsel of API,  which  opinion shall be in
substantially the same form as attached Exhibit D;

(e) all other assignments and other instrument or documents reasonably necessary
in the  reasonable  judgment  of the Buyer to  evidence  the  sale,  assignment,
transfer and conveyance by the Seller of the Acquired  Assets in accordance with
the terms of this Agreement; and

         (f) all  other  documents,  instruments  and  writings  required  to be
delivered  by the  Seller  at or  prior to the  Closing  Date  pursuant  to this
Agreement.

         Section 1.8. Deliveries by the Buyer and Cendant.  Subject to the terms
and conditions  hereof, at the Closing,  the Buyer will deliver the following to
the Seller:

         (a) the officers' certificates provided for in Section 5.3;

         (b)  an  Instrument  of  Assumption  duly  executed  by the  Buyer  and
substantially in the form of Exhibit E hereto;

         (c) the  Closing  Cash  Consideration  via  wire or  other  immediately
available funds, and

         (d) all  other  documents,  instruments  and  writings  required  to be
delivered  by the  Buyer  at or  prior  to the  Closing  Date  pursuant  to this
Agreement.

         Section 1.9. Risk of Loss. Until the Closing,  any loss of or damage to
the Acquired  Assets from fire,  casualty or any other  occurrence  shall be the
sole responsibility of the Seller.

                                       6
<PAGE>

                                   ARTICLE II
                        REPRESENTATIONS AND WARRANTIES OF
                          THE PARENT AND THE SUBSIDIARY

                  The Parent,  AMI, ADI and AIHI, jointly and severally,  hereby
represent and warrant to the Buyer as follows:

         Section 2.1. Organization, Standing and Power. Each of the Parent, AMI,
ADI and AIHI is duly organized,  validly existing and in good standing under the
laws of the  jurisdiction  in  which it is  organized  and has  full  power  and
authority  and  possesses  all  governmental  franchises,   licenses,   permits,
authorizations  and approvals  necessary to enable it to own, lease or otherwise
hold its  properties  and  assets  and to  conduct  the  Business  and its other
businesses  as  presently  conducted,  other  than  such  franchises,  licenses,
permits,  authorizations and approvals the lack of which, individually or in the
aggregate,  have not had and could not reasonably be expected to have a material
adverse effect (i) on the business,  assets,  condition (financial or otherwise)
or results of operations of the Seller and its  subsidiaries,  taken as a whole,
or of the Business, (ii) on the ability of the Seller to perform its obligations
under this  Agreement or the documents to be executed in connection  herewith or
(iii) on the ability of the Seller to consummate the  transactions  contemplated
hereby (a, "Material Adverse Effect").  Each of the Parent, AIFI, AMI and ADI is
duly  qualified  to do business as a foreign  corporation  in each  jurisdiction
where the  character  of the  Acquired  Assets  held by it or the  nature of the
Business  make such  qualification  necessary  for it to conduct the Business as
currently  conducted by it except where the failure to be so qualified would not
result in a Material Adverse Effect.  Each of the Parent,  AIFI, AMI and ADI has
delivered to the Buyer true and complete copies of their respective certificates
of incorporation  and by-laws,  in each case as amended through the date of this
Agreement.  Except as set forth on Schedule 2.1,  none of the  affiliates of the
Seller is presently engaged in the operation or conduct of the Business.

         Section 2.2. Authority; Execution and Delivery; Enforceability. Each of
the  Parent,  AIFI,  AMI and ADI has full power and  authority  to execute  this
Agreement and the  documents to be executed in  connection  herewith to which it
is,  or is  specified  to  be,  a  party  and  to  consummate  the  transactions
contemplated  hereby and  thereby.  The  execution  and  delivery by each of the
Parent,  AIFI,  AMI and ADI of this  Agreement  and the documents to executed in
connection  herewith  to which it is,  or is  specified  to be, a party  and the
consummation by the Parent,  AIFI, AMI and ADI of the transactions  contemplated
hereby and thereby have been duly authorized by all necessary  corporate action.
Each of the Parent,  AIFI,  AMI and ADI has duly  executed  and  delivered  this
Agreement and, prior to the Closing,  will have duly executed and delivered each
of the  documents  to be executed in  connection  herewith to which it is, or is
specified  to be,  a  party,  and this  Agreement  constitutes,  and each of the
documents to be executed in connection  herewith to which it is, or is specified
to be, a party will after the Closing  constitute,  its legal, valid and binding
obligation,  enforceable  against it in  accordance  with its terms,  subject to
bankruptcy,  insolvency,  fraudulent  transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

                                       7
<PAGE>

         Section 2.3. No  Conflicts;  Consents.  Except as set forth on attached
Schedule 2.3, the execution  and delivery by each of the Parent,  AIFI,  AMI and
ADI of this  Agreement  does not,  the  execution  and  delivery  by each of the
Parent,  AIFI, AMI and ADI of each of the documents to be executed in connection
herewith  to which it is,  or is  specified  to be, a party  will  not,  and the
consummation of the transactions  contemplated  hereby and compliance by each of
the Parent,  AIFI,  AMI and ADI with the terms hereof will not conflict with, or
result in any violation of or default (with or without  notice or lapse of time,
or  both)  under,  or give  rise  to a right  of  termination,  cancellation  or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the  properties or assets of the Parent,
AMI, ADI, AIFI or any of their respective  subsidiaries  under, any provision of
(i) the respective Certificates of Incorporation or by-laws of the Parent, AIFI,
AMI, ADI or any of their respective subsidiaries,  (ii) any material Contract to
which the Parent,  AIFI, AMI, ADI or any of their  respective  subsidiaries is a
party or by which any of their respective properties or assets is bound or (iii)
any judgment,  order or decree ("Judgment") or statute, law, ordinance,  rule or
regulation ("Applicable Law") applicable to the Parent, AIFI, AMI, ADI or any of
their respective  subsidiaries or their respective  properties or assets. Except
as set forth on attached Schedule 2.3, no consent,  approval,  license,  permit,
order or authorization  ("Consent") of, or  registration,  declaration or filing
with, any Federal,  state, local or foreign government or any court of competent
jurisdiction,   administrative   agency  or  commission  or  other  governmental
authority  or  instrumentality,  domestic  or  foreign  (each,  a  "Governmental
Entity")  or any other  person is  required  to be  obtained  or made by or with
respect to the Parent, AIFI, AMI, ADI or any of their respective subsidiaries in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, other than compliance with
and filings under the Hart-Scott-Rodino  Antitrust Improvements Act of 1976 (the
"HSR Act").

         Section 2.4. Certain  Acquired Assets.  Except as set forth on Schedule
2.4, the Seller has good title to, or a valid leasehold  interest in or right to
use by license or otherwise,  the Acquired Assets,  free and clear of all Liens.
The  Acquired  Assets  include or will include as of the Closing  Date,  without
limitation,  all personal  property,  both tangible and  intangible,  rights and
agreements  necessary  to conduct  the  Business  in all  material  respects  as
conducted on or immediately prior to the date hereof.  This Section 2.4 does not
relate to Intellectual Property, which is covered by Section 2.5 below.

         Section 2.5.      Intellectual Property.
                           ---------------------

         (a) Schedule 2.5(a) sets forth a true and complete list of all U.S. and
foreign patents,  trademarks,  trademark  registration,  trademark applications,
service marks, trade names, business names, brand names,  copyrights,  copyright
registrations,  designs,  design  registration and Internet domain names and all
rights to the foregoing  (collectively,  "Intellectual  Property") owned,  used,
filed by or licensed to the Seller or any of its  subsidiaries or affiliates and
used, held for use, or intended to be used primarily in the operation or conduct
of the Business. The Assigned Intellectual Property constitutes all Intellectual
Property necessary to conduct the Business as presently conducted by the Seller.
With respect to all Assigned Intellectual Property that is registered or subject
to an application  for  registration,  Schedule  2.5(a) sets forth a list of all
jurisdictions  in which such  Assigned  Intellectual  Property is  registered or
registrations  applied

                                       8
<PAGE>

for and all  registration  and  application  numbers.  Except  as set  forth  in
Schedule 2.5(a),  (i) the registrations of all registered  Trademarks are valid,
subsisting,  and in full  force  and  effect,  (ii) the  Seller  is the sole and
exclusive  owner of (free and clear of all Liens),  and the Seller has the right
to use, execute,  reproduce,  display,  perform,  modify,  enhance,  distribute,
prepare derivative works of and sublicense, without payment to any other person,
all the Assigned  Intellectual Property and the consummation of the transactions
contemplated  hereby does not and will not  conflict  with,  alter or impair any
such rights,  (iii) during the past five years,  the Seller has not received any
written or oral  communication  from any person asserting any ownership interest
in any  Assigned  Intellectual  Property  and (iv) all  Plans  were  created  by
employees of ADI in the scope of their  employment with ADI and constitute "work
for hire".

         (b)  Except  as set  forth  on  Schedule  2.5(b)  and  in the  Assigned
Contracts,  the Seller has not  granted  any  license of any kind  relating  to,
Assigned  Intellectual  Property or the marketing or distribution  thereof.  The
Seller is not bound by or a party to any  option,  license or  agreement  of any
kind  relating to the  Intellectual  Property of any other person for the use of
such Intellectual  Property in the conduct of the Business,  except as set forth
on Schedule  2.5(b) and except for so-called  "shrink-wrap"  license  agreements
relating to computer  software  licensed in the ordinary course of the Business.
The Business as presently conducted does not violate,  conflict with or infringe
the Intellectual  Property of any other person.  Except as set forth on Schedule
2.5(b),  (i) no claims are pending or, to the  knowledge  of Seller,  threatened
against  the  Seller by any person  with  respect  to the  ownership,  validity,
enforceability,  effectiveness  or  use  in the  Business  of  any  Intellectual
Property  and (ii)  during  the past five  years,  neither  the  Seller  nor its
affiliates  have  received any written or oral  communication  alleging that the
Seller or any of its affiliates has in the conduct of the Business  violated any
rights relating to Intellectual Property of any person.

         (c) Except as set forth in Schedule 2.5(c), the Seller:

                  (i) has not granted to any third party any exclusive rights of
         any kind  (including,  without  limitation,  exclusivity with regard to
         categories  of  advertisers  on any World  Wide Web  site,  territorial
         exclusivity  or  exclusivity  with  respect  to  particular   versions,
         implementations  or translations of any of the Intellectual  Property),
         nor has the Seller  granted  any third party any right to market any of
         the   Intellectual   Property   under  any   private   label  or  "OEM"
         arrangements; or

                  (ii)  does  not  have any  outstanding  sales  or  advertising
         contract,  commitment  or  proposal  (including,   without  limitation,
         insertion orders,  slotting  agreements or other agreements under which
         the Seller has allowed  third  parties to  advertise on or otherwise be
         included  in a World  Wide Web  site)  nor,  with  respect  to any such
         existing arrangement, does the Seller currently expect to result in any
         loss to the Seller upon completion or performance thereof.

         Section 2.6.     Franchise Facilities; Marketing and Reservation Funds.
                          -----------------------------------------------------

         (a) Schedule 2.6 sets forth a true and complete  list of (a) all hotels
operating  or intended  to be operated  under any of the Brands and in which the
Seller or any of its  subsidiaries

                                       9
<PAGE>

or  affiliates  has  either a  direct  or  indirect  equity  or other  interest,
including without limitation any such hotel funded by or otherwise  organized or
operated in connection with any joint venture or other  arrangement  between the
Seller or any subsidiaries or its affiliates and any  non-affiliate  third party
(each,  an "Owned  Facility"),  indicating  whether each such Owned  Facility is
funded by or  otherwise  organized  or  operated  in  connection  with any joint
venture  or other  arrangement  between  the Seller or any  subsidiaries  or its
affiliates  and any  non-affiliate  third  party;  (b) all hotels  operating  or
intended to be  operated  under one of the Brands and which are owned by a third
party which is not an affiliate of the Seller or any of its subsidiaries  (each,
an "Independent Facility") (indicating both whether such Independent Facility is
an Open Independent  Facility or a Pending  Independent  Facility (as such terms
are  defined in Section  1.5 above) and the date on which each of the  franchise
agreements  terminate,  respectively);  and (c) all  entities  which  have filed
completed  franchise  applications  prior to the Closing Date (including without
limitation  the delivery of any  application  fees due in connection  therewith)
with the  Seller to own or  operate a hotel  under any of the  Brands  (each,  a
"Franchisee Applicant").

         (b) Except as set forth on attached  Schedule 2.6, (i) no franchisee of
any Owned  Facility or  Independent  Facility  is, or in the past six months has
been,  in default  with  respect to the payment of any  royalty,  marketing  and
reservation or other fees due to the Seller in connection with their  respective
franchise agreements (each, a "Franchise Agreement"),  (ii) no agreement entered
into by the  Seller  or any of its  affiliates  that are  primarily  used in the
operation of the Business, including without limitation each Franchise Agreement
and Management Agreement,  contains any change-in-control,  change-in-management
or other provisions granting any person the right to terminate such agreement as
the  result  of  or  otherwise  in  connection  with  the  consummation  of  the
transactions  contemplated hereby, and (iii) each of the Franchise Agreements is
in substantially the same form as the form of franchise  agreement  contained in
the  offering  circular  received  by the  franchisee  party  to such  Franchise
Agreement  (other  than  with  respect  to areas  of  protection  and  location)
including without limitation each of the Franchise Agreements,  and was executed
after the proper  observance of waiting periods under  Applicable Law. No hotels
or other  facilities  are currently or are intended to be operated  under any of
the Brands other than the Owned Facilities,  the Independent  Facilities and the
proposed hotels to be operated by the Franchisee Applicants.

         (c) All  contributions  by franchisees to the marketing and reservation
funds  maintained by the Seller  (collectively,  the "Marketing and  Reservation
Funds")  have  either  been  expended  or  deposited,  as the  case  may be,  in
accordance with the terms and conditions of the respective  documents  governing
the application of such funds.

         Section 2.7.      Contracts.
                           ---------

         (a) Schedule 2.7(a) contains a true and complete list of all contracts,
licenses,  agreements and other legally binding  arrangements,  written or oral,
that are  primarily  used,  held  for use or  intended  to be used  in,  or that
primarily  arise out of, the  operation  or conduct of the Business or otherwise
related to the licensing of the Brands  (collectively,  the  "Assigned  Existing
Contracts"),  including without limitation all Franchise  Agreements relating to
Independent Facilities (each, an "Independent  Franchise  Agreement").  The term
"Assigned Existing

                                       10
<PAGE>

Contracts"  specifically  excludes  all  Management  Contracts.  The  Seller has
provided  to the Buyer true and  complete  copies of all  Independent  Franchise
Agreements.

         (b) Except as set forth on Schedule  2.7(b),  all  Assigned  Contracts,
including without limitation all Independent  Franchise  Agreements,  are valid,
binding  and in full  force and  effect  and are  enforceable  by the  Seller in
accordance with their respective terms.  Except as set forth in Schedule 2.7(b),
the Seller has performed all obligations  required to be performed by it to date
under the Assigned  Contracts,  and it is not (with or without the lapse of time
or the giving of notice,  or both) in breach or default in any material  respect
thereunder  and, to the knowledge of the Seller,  no other party to any Assigned
Contract is (with or without the lapse of time or the giving of notice, or both)
in breach or  default in any  material  respect  thereunder.  The Seller has not
received  any written or oral notice of the  intention of any party to terminate
any Assigned  Contract.  Complete and correct copies of all Assigned  Contracts,
together with all modifications and amendments thereto, have been delivered,  or
prior to the Closing will be delivered, to the Buyer.

         (c) Schedule 2.7(c) lists each Assigned  Contract with respect to which
the Consent of the other party or parties  thereto must be obtained by virtue of
the  execution  and  delivery  of  this  Agreement  or the  consummation  of the
transactions contemplated hereby to avoid the invalidity of the transfer of such
Contract, the termination thereof, a breach,  violation or default thereunder or
any other change or modification to the terms thereof.

         (d) Schedule 2.7(d) lists all agreements  which prohibit or restrict in
any manner the Seller from freely  engaging  in the  Business in any  geographic
area.

         (e)  Schedule  2.7(e) lists all  Management  Contracts in effect on the
date hereof,  indicating the name of the Owned Facility or Independent  Facility
covered by such Management Contract.  True and complete copies of all Management
Contracts in effect on the date hereof have been provided to the Buyer.

         Section 2.8 Governmental Authorizations; Permits. The Business has been
operated in compliance with all Applicable  Laws,  except for violations  which,
individually or in the aggregate,  could not reasonably be expected to result in
a Material  Adverse Effect.  Schedule 2.8 sets forth a true and complete list of
all Assigned Permits.

         Section 2.9.      Taxes.
                           ------

         (a)      For purposes of this Agreement:

         "Tax" means (i) any tax,  governmental  fee or other like assessment or
charge of any kind whatsoever (including any tax imposed under Subtitle A of the
Code and any net income,  alternative or add-on minimum tax, gross income, gross
receipts,  sales, use, ad valorem,  value added, transfer,  franchise,  profits,
license,  withholding  tax  on  amounts  paid,  payroll,   employment,   excise,
severance, stamp, capital stock, occupation, property, environmental or windfall
profit tax,  premium,  custom,  duty or other tax),  together with any interest,
penalty,  addition to tax or additional  amount due, imposed by any Governmental
Entity  (domestic or

                                       11
<PAGE>

foreign)  responsible for the imposition of any such tax (a "Taxing Authority"),
(ii) any liability for the payment of any amount of the type described in clause
(i)  above  as a  result  of a party  to this  Agreement  being a  member  of an
affiliated,  consolidated  or combined  group with any other  corporation at any
time on or prior to the Closing Date and (iii) any  liability of any person with
respect to the  payment of any  amounts of the type  described  in clause (i) or
(ii) above as a result of any  express or implied  obligation  of such person to
indemnify any other person.

         "Code" means the Internal Revenue Code of 1986, as amended.

         (b)  Except as set  forth on  Schedule  2.9,  (i) the  Seller,  and any
affiliated  group,  within the meaning of Section 1504 of the Code, of which the
Seller  is or has been a  member,  has  filed or  caused to be filed in a timely
manner (within any applicable  extension  periods) all Tax returns,  reports and
forms required to be filed by the Code or by applicable state,  local or foreign
Tax laws, (ii) all Taxes shown to be due on such returns, reports and forms have
been timely paid in full or will be timely paid in full by the due date thereof,
and (iii) no Tax Liens have been filed and no material claims are being asserted
in writing with respect to any Taxes.

         (c) Neither the Seller nor the Association is a "foreign person" within
the meaning of Section 1445 of the Code.

         Section  2.10.  Proceedings.  Schedule  2.10  sets  forth a list of all
current and pending,  or to the knowledge of the Seller threatened,  Proceedings
or claims arising out of the conduct of the Business or against or affecting any
Acquired Asset and that (a) relate to or involve more than $5,000,  (b) seek any
material  injunctive  relief or (c) relate to the  transactions  contemplated by
this  Agreement.  None of the Proceedings or claims listed in that section as to
which there is at least a reasonable  possibility of adverse determination would
be  reasonably  likely  to  result,  if so  determined,  individually  or in the
aggregate,  in a Material Adverse Effect. To the knowledge the Seller, except as
set  forth in  Schedule  2.10,  the  Seller is not a party or  subject  to or in
default  under any  Judgment  applicable  to the conduct of the  Business or any
Acquired Asset or Assumed Liability. There is not any Proceeding or claim by the
Seller  pending,  or which the Seller  intends to  initiate,  against  any other
person  arising  out of the conduct of the  Business.  To the  knowledge  of the
Seller,  there is no pending or  threatened  investigation  of or affecting  the
conduct of the Business or any Acquired Asset or Assumed Liability.

         Section 2.11. Financial  Statements;  Prepaids.  (a) Schedule 2.11 sets
forth  the  audited  balance  sheet,  statement  of  operations,   statement  of
shareholder's  equity and statement of cash flows, as of and for the fiscal year
ended December 31, 1999, for AIFI and the unaudited  balance sheet (the "Interim
Balance  Sheet") as of June 30, 2000 for AIFI, (  collectively,  the  "Financial
Statements").  The Financial  Statements  have been prepared in conformity  with
GAAP  consistently  applied  (except  in each  case as  described  in the  notes
thereto) and on that basis fairly present the financial condition and results of
operations  of the  Business  as of the  respective  dates  thereof  and for the
respective  periods  indicated;  provided  that the Interim  Balance Sheet lacks
footnotes and is subject to normal year-end adjustments.

         (b) The Business does not have any  liabilities  or  obligations of any
nature (whether  accrued,  absolute,  contingent,  unasserted or otherwise) of a
nature  required by GAAP to be

                                       12
<PAGE>

reflected  on a  consolidated  balance  sheet of the  Business  or in the  notes
thereto,  except (i) as disclosed,  reflected or reserved against in the Balance
Sheet and the notes thereto,  (ii) for items set forth in Schedule  2.11,  (iii)
for liabilities and obligations  incurred in the ordinary course of the Business
consistent  with past practice  since June 30, 2000 and not in violation of this
Agreement and (iv) for Taxes.

         (c) All of the Prepaids have arisen from bona fide  transactions in the
ordinary course of the Business.

         Section  2.12.  Absence of  Changes  or Events.  Except as set forth in
Schedule  2.12,  since  June 30,  2000 there has not been any  material  adverse
change in the business, assets, condition (financial or otherwise) or results of
operations  of the Business,  taken as a whole.  Except as set forth in Schedule
2.12, since June 30, 2000, the Seller has caused the Business to be conducted in
the ordinary course and in substantially the same manner as previously conducted
and has made all reasonable  efforts  consistent with past practices to preserve
the relationships of the Business with customers, suppliers and others with whom
the Business deals. Except as set forth in Schedule 2.12, since June 30, 2000 to
the date of this  Agreement,  the Seller has not taken any action that, if taken
after  the date of this  Agreement,  would  constitute  a  breach  of any of the
covenants set forth in Section 4.1.

         Section 2.13 Disclosure.  No  representation or warranty of the Parent,
AIFI, AMI or ADI contained in this Agreement,  and no statement contained in any
closing document, closing certificate or Schedule to this Agreement furnished or
to be furnished by or on behalf of the Parent,  AIFI, AMI or ADI to the Buyer or
any of its representatives pursuant to this Agreement,  contains or will contain
any  untrue  statement  of a material  fact,  or omits or will omit to state any
material fact  necessary,  in light of the  circumstances  under which it was or
will be made,  in order to make the  statements  herein or  therein,  taken as a
whole, not misleading.

         Section 2.14. Affiliate  Transactions.  Schedule 2.14 sets forth a true
and correct list as of the date hereof of all contracts and  agreements to which
the Business and the Seller, on the one hand, or any of their affiliates, on the
other hand,  are a party that are related to the Business and that are in effect
as of the date hereof or have been in effect during the prior year.

         Section 2.15. Brokers;  Finders and Fees. Neither the Parent, AIFI, AMI
nor ADI has employed  any  investment  banker,  broker or finder or incurred any
liability  for any  investment  banking fees,  brokerage  fees,  commissions  or
finders' fees in connection with this Agreement or the transactions contemplated
hereby.

                                   ARTICLE III
             REPRESENTATIONS AND WARRANTIES OF THE BUYER AND CENDANT

         The Buyer and Cendant,  respectively,  hereby  represent and warrant to
the Seller as follows:

         Section  3.1.  Organization.  Each of the  Buyer  and  Cendant  is duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction  in which it is  organized  and has

                                       13
<PAGE>

full power and authority and possesses all  governmental  franchises,  licenses,
permits,  authorizations  and  approvals  necessary  to enable it to operate the
Business following the Closing, except as contemplated by Section 4.18 and other
than such franchises,  licenses, permits,  authorizations and approvals the lack
of  which,  individually  or in the  aggregate,  have  not  had  and  could  not
reasonably  be expected to have a material  adverse  effect (i) on the business,
assets,  condition  (financial  or  otherwise)  or results of  operations of the
Buyer, Cendant and their respective subsidiaries,  taken as a whole, (ii) on the
ability of the Buyer or Cendant to perform the obligations  under this Agreement
or  the  documents  to  be  executed  in  connection   herewith  (including  the
Development  Agreement),  or (iii) on the  ability  of the Buyer or  Cendant  to
consummate  the  transactions  contemplated  hereby (a "Buyer  Material  Adverse
Effect").  Each of Buyer and  Cendant  is duly  qualified  to do  business  as a
foreign  corporation  in each  jurisdiction  where the operation of the Business
following the closing would make such  qualification  necessary except where the
failure to be so qualified would not result in a Buyer Material Adverse Effect.

         Section 3.2. Authority; Execution and Delivery; Enforceability. Each of
the Buyer and Cendant has full power and authority to execute this Agreement and
the  documents  to be  executed  in  connection  herewith  to which it is, or is
specified to be, a party and to consummate the transactions  contemplated hereby
and thereby. The execution and delivery by each of the Buyer and Cendant of this
Agreement and the  documents to executed in connection  herewith to which it is,
or is  specified  to be,  a party  and the  consummation  by the  Seller  of the
transactions  contemplated  hereby and thereby have been duly  authorized by all
necessary  corporate action. Each of the Buyer and Cendant has duly executed and
delivered  this  Agreement  and prior to the Closing will have duly executed and
delivered  each of the documents to be executed in connection  herewith to which
it is, or is specified to be, a party, and this Agreement constitutes,  and each
of the  documents  to be executed in  connection  herewith to which it is, or is
specified to be, a party will after the Closing constitute, its legal, valid and
binding obligation, enforceable against it in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

         Section 3.3. No Conflicts;  Consents. The execution and delivery by the
Buyer and Cendant of this  Agreement does not, the execution and delivery by the
Buyer and Cendant of each of the documents to be executed in connection herewith
to which it is, or is specified to be, a party will not, and the consummation of
the  transactions  contemplated  hereby and  compliance by the Buyer and Cendant
with the terms hereof will not conflict  with,  or result in any violation of or
default (with or without  notice or lapse of time, or both) under,  or give rise
to a right of termination,  cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the  respective  properties  or  assets of the Buyer or  Cendant  under,  any
provision of (i) the respective  certificates of  incorporation of the Buyer and
Cendant,  (ii) any Judgment or Applicable Law applicable to the Buyer or Cendant
or their  respective  properties  or assets or (iii) any  contract  material  to
Cendant and its  subsidiaries,  taken as a whole,  which the Buyer or Cendant or
any of  their  respective  subsidiaries  is a party  or by  which  any of  their
respective  properties  or assets  is bound.  No  Consent  of, or  registration,
declaration or filing with, any  Governmental  Entity is required to be obtained
or made by or with  respect  to the  Buyer or  Cendant  in  connection  with the
execution, delivery and performance of

                                       14
<PAGE>

this Agreement or the  consummation  of the  transactions  contemplated  hereby,
other than compliance with and filings under the HSR Act.

         Section 3.4.  Brokers;  Finders and Fees.  Neither the Buyer nor any of
its affiliates has employed any investment banker,  broker or finder or incurred
any liability for any investment banking,  financial advisory or brokerage fees,
commissions  or  finders'  fees  in  connection   with  this  Agreement  or  the
transactions contemplated hereby.

         Section 3.5. Compliance with Laws. Each of the Buyer, Cendant and their
respective  subsidiaries have operated their respective businesses in compliance
with all Applicable Laws  pertaining to the offer or sale of franchises,  except
for (i) violations  which are disclosed in Cendant's  public filings pursuant to
the  Securities  Exchange Act of 1934,  as amended (the "SEC  Filings") and (ii)
violations  which,  individually  or in the  aggregate,  could not reasonably be
expected to result in a Buyer Material Adverse Effect.

         Section  3.6.  Proceedings.  Except  as set  forth in the SEC  Filings,
neither the Buyer, Cendant, nor any of their respective  subsidiaries is a party
to any Proceedings, nor is there pending any action before or investigation by a
Governmental  Entity with  respect to the  operation by the Buyer,  Cendant,  or
their  respective   subsidiaries  of  their  respective  businesses,   that,  if
determined  adversely  could  reasonably  be  expected,  individually  or in the
aggregate, to result in a Buyer Material Adverse Effect.

                                   ARTICLE IV
                            COVENANTS OF THE PARTIES

         Section 4.1.   Covenants of the Seller Relating to Conduct of Business.
                        -------------------------------------------------------

         (a)  Except  as  otherwise  expressly  permitted  by the  terms of this
Agreement,  including without limitation the provisions of Section 4.1(d) below,
from the date of this  Agreement  to the Closing,  the Seller shall  conduct the
Business in the usual,  regular or  ordinary  course in  substantially  the same
manner as previously conducted and use all reasonable efforts to keep intact the
Business and to preserve the  relationships  of the Business  with  franchisees,
suppliers  and others with whom the Business  deals to the end that the Business
shall be  unimpaired  at the  Closing.  In addition  (and  without  limiting the
generality  of the  foregoing),  except  as  otherwise  expressly  permitted  or
required  by the terms of this  Agreement,  the  Seller  shall not do any of the
following in connection  with the Business  without the prior written consent of
the Buyer:

              (i) permit, allow or suffer any Acquired Asset to become subjected
to any Lien of any nature whatsoever;

              (ii) acquire by merging or consolidating  with, or by purchasing a
substantial  portion of the assets of, or by any other  manner,  any business or
any  corporation,  partnership,  association or other business  organization  or
division thereof or otherwise acquire any assets (other than inventory) that are
material, individually or in the aggregate, to the Business;

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              (iii)  sell,  lease,  license or  otherwise  dispose of any of its
assets, except any Retained Asset; or

              (iv)  authorize  any of, or commit  or agree to take,  whether  in
writing or otherwise, to do any of, the foregoing actions.

         (b) The  Seller  shall  promptly  advise  the Buyer in  writing  of the
occurrence  of any matter or event that would  reasonably  be expected to have a
Material Adverse Effect on the Business.

         (c) In connection with the continuing operation of the Business between
the date of this  Agreement  and the Closing,  the Seller  shall use  reasonable
efforts  to  consult  in good  faith on a regular  and  frequent  basis with the
representatives  for the  Buyer on the  general  status  of  ongoing  operations
pursuant   to   procedures   reasonably   requested   by  the   Buyer   or  such
representatives.  The Seller  acknowledges that any such consultation  shall not
constitute a waiver by the Buyer of any rights it may have under this Agreement,
and that the  Buyer  shall  not have any  liability  or  responsibility  for any
actions  of the  Seller or any of its  officers  or  directors  with  respect to
matters that are the subject of such  consultations  unless the Buyer  expressly
consents to such action in writing.

         (d)  Notwithstanding  anything  set forth herein to the  contrary,  the
Seller:

              (i)  immediately  upon  execution  of this  Agreement,  (A)  shall
         postpone  discussions  with all prospective  franchisees of the Brands,
         unless  otherwise  directed  in  writing  by the  Buyer  and (B)  shall
         discontinue use and/or  distribution of its current Franchise  Offering
         Circular and related  materials  (the  "Current  Offering  Documents");
         provided, that the foregoing shall not restrict the Seller's ability to
         engage in  discussions  or  negotiations  with  respect to  prospective
         franchisees  in Sun Prairie,  Wisconsin  and Norwalk,  Ohio or to close
         such  transactions  using  the  Current  Offering  Documents;  provided
         further that once the Amended Offering Documents (as defined below) are
         approved  for use  pursuant  to  Applicable  Laws,  then the Seller may
         utilize  such  Amended   Offering   Documents  to  offer  and  sell  to
         prospective  franchisees except that the Buyer shall approve in writing
         all final  franchise  agreements  prior to execution by or on behalf of
         the Seller; and

              (ii) prior to the Closing,  the Seller (A) shall amend the Current
         Offering  Documents,  which amendments shall be acceptable to the Buyer
         in its sole  discretion  (the "Amended  Offering  Documents") and shall
         include,  among other things, the form of franchise agreement set forth
         as attached  Exhibit F, (B) with respect to each Owned Facility,  shall
         enter  into the  form of  amended  franchise  agreement  referenced  in
         Section  4(d)(ii)(A)  with each  subsidiary,  affiliate  or other third
         party which owns and/or  operates each such Owned  Facility  other than
         those set forth on  attached  Schedule  4.1,  which  amended  franchise
         agreement shall include the respective areas of protection set forth on
         attached  Exhibit G and (C) with respect to each Owned Facility  listed
         on Schedule  2.7(e)  (other  than those set forth on attached  Schedule
         4.1), shall enter into amendments to the

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         current  Management  Agreements,  which  amendments shall be reasonably
         acceptable  to the Buyer and shall  provide  for the  amendment  of all
         provisions  relating  to the use of the Brand  names,  the  payment  of
         royalty,  marketing and reservation fees and other terms covered by the
         new  franchise  agreements  to be  entered  into  pursuant  to  Section
         4.1(d)(ii)(B) above.

         The Seller hereby  acknowledges that all franchise  agreements  entered
into  pursuant  to  Section  4.1(d)(ii)(B)  shall  be  deemed  to  be  "Assigned
Contracts"  as  defined  herein  and  shall be  transferred  to the Buyer at the
Closing.

         Section 4.2.  Termination  of Certain  Agreements.  Effective  upon the
Closing  Date and  without  any  further  action on behalf of the  parties,  the
following  agreements shall terminate and be of no further force or effect:  (i)
the Service Mark and Proprietary  Information License Agreement,  dated March 1,
1999, between the Parent,  AIFI and AMI and ADI and (ii) the Reservation Service
Agreement,  dated May 7,  1997,  between  the  Parent  and HFS  Incorporated,  a
predecessor to Cendant.

         Section 4.3. No  Solicitation.  Neither the Parent,  AIFI, AMI, ADI nor
any of their respective officers, directors,  partners,  employees,  affiliates,
agents or representatives  will,  directly or indirectly,  solicit,  initiate or
encourage the submission of any proposal or offer from any person other than the
Buyer  or  its  directors,   officers,   employees,   or  other   affiliates  or
representatives, enter into or continue any discussions or negotiations with, or
provide any  information  to, any person other than the Buyer or its  directors,
officers, employees or other affiliates or representatives, relating to the sale
or  disposition  of the Business (any such  proposal or offer being  hereinafter
referred to as an "Acquisition Proposal"). The Seller will immediately cease and
cause to be terminated any  activities,  discussions or  negotiations  conducted
prior to the date of this  Agreement  with any parties other than the Buyer with
respect to any of the foregoing. The Parent, AIFI, AMI, ADI and other respective
officers,  directors or partners will immediately  notify the Buyer upon receipt
of any  unsolicited  offer or proposal  relating to the Business and provide all
material terms thereof.

         Section  4.4.  Access to  Information.  The Seller  shall afford to the
Buyer and its accountants,  counsel and other representatives reasonable access,
during normal business hours during the period prior to the Closing,  to all the
properties,  books,  contracts,  commitments  and records of the Business (other
than the Retained Assets), and, during such period shall furnish promptly to the
Buyer any  information  concerning  the  Business  as the  Buyer may  reasonably
request.

         Section 4.5.  Confidentiality.  The Seller  agrees to, and to cause its
affiliates to, maintain the  confidentiality  of all confidential or proprietary
information with respect to the Business and the Acquired Assets  (collectively,
"Confidential  Information") and shall not disclose any Confidential Information
except (i) where  specifically  required by Applicable Law or legal process (and
in such case only after providing the Buyer, where practicable,  with sufficient
notice to enable it to move for a protective  order), or (ii) to the extent such
information  becomes generally available to the public other than as a result of
a disclosure by the Seller or any of its affiliates in violation of this Section
4.5.

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         Section 4.6.  Reasonable  Efforts.  (a) On the terms and subject to the
conditions of this  Agreement,  each party shall use its  reasonable  efforts to
cause the Closing to occur, including taking all reasonable actions necessary to
comply promptly with all legal  requirements that may be imposed on it or any of
its affiliates with respect to the Closing.

                  (b) Each of the  Seller  and the Buyer  shall as  promptly  as
practicable,  but in no event later than twenty days following the execution and
delivery of this Agreement, file with the United States Federal Trade Commission
(the  "FTC")  and the  United  States  Department  of  Justice  (the  "DOJ") the
notification and report form, if any, required for the transactions contemplated
hereby  and any  supplemental  information  requested  in  connection  therewith
pursuant to the HSR Act. Any such  notification and report form and supplemental
information shall be in substantial  compliance with the requirements of the HSR
Act. Each of the Buyer and the Seller shall furnish to the other such  necessary
information  and  reasonable  assistance  as the other may request in connection
with its preparation of any filing or submission that is necessary under the HSR
Act.  The Seller and the Buyer  shall keep each other  apprised of the status of
any   communications   with,  and  any  inquiries  or  requests  for  additional
information from, the FTC and the DOJ and, subject to Section  6.1(a)(v),  shall
comply promptly with any such inquiry or request.  Subject to Section 6.1(a)(v),
each of the Seller and the Buyer shall use its reasonable  efforts to obtain any
clearance  required under the HSR Act for the  consummation of the  transactions
contemplated  by  this  Agreement.   For  purposes  of  this  Section  4.6,  the
"reasonable  efforts"  of the Buyer  shall not  require  the Buyer or Cendant to
dispose of any shares of capital stock or any business  assets or property or to
agree to any prohibition,  limitation or other requirement of the type set forth
in Section 5.2(c) in order to obtain HSR approval.

         (c) Each  party  shall,  and shall  cause its  affiliates  to,  use its
reasonable efforts to obtain,  and to cooperate in obtaining,  all Consents from
third parties  necessary or  appropriate  to permit the transfer of the Acquired
Assets  to,  and the  assumption  of the  Assumed  Liabilities  by,  the  Buyer;
provided,  however,  that the parties  shall not be required to pay or commit to
pay any amount to (or incur any obligation in favor of) any person from whom any
such consent may be required (other than nominal filing or application fees).

         Section 4.7. Expenses; Transfer Taxes. (a) Without regard to whether or
not the Closing  takes place,  and except as set forth in Article VII, all costs
and expenses  incurred in connection  with this  Agreement,  the documents to be
executed in connection  herewith and the  transactions  contemplated  hereby and
thereby shall be paid by the party  incurring such expense,  including all costs
and expenses incurred pursuant to Section 4.6.

                  (b)  All  Transfer  Taxes  applicable  to the  conveyance  and
transfer  from the  Seller to the  Buyer of the  Acquired  Assets  and any other
transfer or documentary  taxes or any filing or recording fee applicable to such
conveyance  and  transfer  shall be paid by the  Buyer.  Each  party  shall  use
reasonable  efforts to avail itself of any  available  exemptions  from any such
taxes or fees,  and to  cooperate  with  the  other  parties  in  providing  any
information and documentation that may be necessary to obtain such exemptions.

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         Section  4.8.  Collection  of  Receivables.  Each party shall  promptly
deliver  to the other  party any cash or other  property  received  directly  or
indirectly by it with respect to the accounts  receivable of the other party and
such other related items.

         Section  4.9.  Supplemental  Disclosure.  The  Seller  shall  have  the
continuing  obligation  until the Closing  promptly to  supplement  or amend the
Schedules  hereto with  respect to any matter  hereafter  arising or  discovered
that,  if  existing  or known at the date of this  Agreement,  would  have  been
required  to be set  forth or  described  therein;  provided,  however,  that no
supplement or amendment to such Schedules  shall have any effect for purposes of
determining  whether  any person is  entitled  to  indemnification  pursuant  to
Article VII.

         Section 4.10. Related Documents.  Simultaneously with the Closing,  the
Parent and the Buyer shall enter into each of the following agreement:

         (a)  the   Development   Agreement,   which   agreement   shall  be  in
substantially the same form as attached Exhibit H;

         (b)  the  Royalty  Sharing  Agreement,  which  agreement  shall  be  in
substantially the same form as attached Exhibit I;

         (c) the  Preferred  Manager  Agreement,  which  agreement  shall  be in
substantially the same form as attached Exhibit J; and

         (d) the intellectual  property  assignment  documents,  which documents
shall be in substantially the same form as attached Exhibit K.

         Section 4.11. Post-Closing  Cooperation.  Following the Closing, at the
request and expense of the Buyer,  the Seller shall  provide such  assistance to
the  Buyer  as  shall be  reasonably  requested  by the  Buyer  to  obtain  such
amendments  to the  franchise and other  agreements  governing  the  Independent
Facilities  as the  Buyer,  in its sole  discretion,  shall deem  necessary.  In
addition,  the Seller  shall  provide  the Buyer with  reasonable  access to its
computer  software  and data in order to permit the Buyer to review and  compile
information  with  respect to the  facilities  operating  under the  Brands.  In
addition,  after the Closing,  upon reasonable written notice, the Buyer and the
Seller  shall  furnish or cause to be  furnished  to each other,  as promptly as
practicable,  such  information and assistance (to the extent within the control
of such party) relating to the Acquired Assets  (including,  access to books and
records)  as is  reasonably  necessary  for the filing of all Tax  returns,  and
making of any election  related to Taxes,  the  preparation for any audit by any
Taxing  Authority,  and  the  prosecution  or  defense  of any  claim,  suit  or
proceeding  related  to any Tax  return.  After the  Closing,  the  Buyer  shall
cooperate with the Seller,  at the Seller's  request and expense,  in furnishing
information  and  other  assistance   reasonably  requested  by  the  Seller  in
connection with any Proceedings  related to the operations of the Business prior
to the Closing.

         Section 4.12.  Public  Announcements.  Prior to the Closing,  except as
otherwise  agreed to by the  parties,  the  parties  shall not issue any report,
statement or press release or otherwise make any public  statements with respect
to this Agreement and the  transactions  contemplated

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hereby,  except as in the reasonable  judgment of a party may be required by law
or in  connection  with  its  obligations  as a  publicly-held,  exchange-listed
company,  in which case the parties will use commercially  reasonable efforts to
reach mutual agreement as to the language of any such report, statement or press
release. Upon the Closing, the parties will consult with each other with respect
to the issuance of a joint  report,  statement or press  release with respect to
this Agreement and the transactions contemplated hereby.

         Section 4.13.  Agreement Not To Compete.  (a) Each of the Parent, AIFI,
AMI and ADI understands that the restrictions contained in this Section 4.13 are
reasonable  and necessary to protect the  legitimate  interests of the Buyer and
that the Buyer would not have entered into this Agreement  absent the provisions
of this  Section  4.13 and,  therefore,  for a period of the  longer of five (5)
years from the Closing or the date of termination of the  Development  Agreement
(as defined below), neither the Parent, AIFI, AMI nor ADI shall, and shall cause
each of its Related Parties (as defined below) not to, directly or indirectly:

              (i)  engage in  activities  or  businesses  within  North  America
substantially in competition with the Business, including:

                   (A) establishing, developing or selling franchises of any new
              proprietary hotel, motel or resort brand,

                   (B) developing,  for any  non-affiliate  person, in excess of
              five (5) hotel, motel or resort facilities  annually which operate
              under any  proprietary  brand  other than the  Brands  (determined
              based on the  dates of  relevant  construction  starts);  provided
              however  that the Seller only shall be  permitted to develop up to
              (1) three such facilities in the twelve month period following the
              Closing  and (2) four such  facilities  in the  thirteen to twenty
              four month period following the Closing,

                   (C) developing,  owning or operating, on behalf of API or any
              of its subsidiaries or affiliates,  any newly  constructed  hotel,
              motel or resort  facilities  which operate  under any  proprietary
              brand  other  than the Brands or any of  then-current  proprietary
              brands of Cendant or its subsidiaries;  provided, however, that in
              the  event  that   Cendant   sells,   transfer  or  conveys  to  a
              non-affiliate  third party in excess of fifty percent (50%) of its
              interests in Wingate  Inns  International,  Inc.  then up to fifty
              (50%) of all new facilities  developed by API and its subsidiaries
              and  affiliates  following  the  date of such  sale,  transfer  or
              conveyance  may be developed for operation  under any  proprietary
              brand,

                   (D)   acquiring,   owning,   operating  or   performing   (as
              applicable), on behalf of the Seller or any of its subsidiaries or
              affiliates,  (1) any existing  hotel,  motel or resort  facilities
              which operate under any proprietary brand other than the Brands or
              any  of  then-current   proprietary   brands  of  Cendant  or  its
              subsidiaries,  (2) any entity which  engages in the  management of
              hotel, motel or resort facilities or (3) contracts relating to the
              management of hotel, motel or resort facilities;  provided however
              that the  foregoing  prohibition  shall  not  apply so long as the
              aggregate  funds  expended  from  the  Closing  Date  through  any
              subsequent  date

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              during the term hereof  (each,  a  "Measurement  Period") by or on
              behalf of the Seller (through third party  financing,  issuance of
              the  debt of the  Seller  or its  subsidiaries  or  affiliates  or
              otherwise) (the "Funds") in conducting the activities set forth in
              this Section  4.13(a)(i)(D)  shall not exceed twenty percent (20%)
              of the sum of (1) the Funds expended by or on behalf of the Seller
              in the  development  of new  facilities  which  operate  under the
              Brands during such  Measurement  Period and (2) the Funds expended
              by or on behalf of the Seller in  conducting  the  activities  set
              forth  in  this  Section  4.13(a)(i)(D)  during  such  Measurement
              Period;  provided  further that any such existing hotel,  motel or
              resort facility  acquired by the Seller or any of its subsidiaries
              or affiliates in  compliance  with the preceding  proviso shall be
              converted  to one of the  proprietary  brands  of  Cendant  or its
              subsidiaries promptly upon purchase,

                   (E)  assisting any person in any way to do, or attempt to do,
              anything prohibited by clauses (A) through (D) above; and

              (ii)  disclose or furnish to anyone any  confidential  information
relating to the Business or otherwise  using such  confidential  information for
its own benefit or the benefit of any other person.

         (b)  Notwithstanding  anything  set  forth  in  this  Agreement  to the
contrary,  (i) the  prohibitions of this Section 4.13 shall not apply to (A) the
provision of management  services by the Seller to any unaffiliated  third party
by the Seller or (B) the ownership or operation of the  facilities of the Seller
which are  operated  under any  proprietary  brand (other than the Brands or the
proprietary brands of Cendant or any of its subsidiaries) and listed on attached
Schedule 4.13 (ii) the prohibitions of Section 4.13 (a)(i)(D) shall terminate on
the five year  anniversary  of the  Closing  Date,  (iii) the Funds  utilized to
purchase any facility  converted to one of the proprietary  brands of Cendant or
its  subsidiaries  within ninety (90) days of the closing of the  transaction to
purchase  such  facility  shall not be  included in the  calculation  to be made
pursuant to subsection (2) contained in the first proviso in Section 4.13(a) (i)
(D) above,  and (iv) if API and the Buyer jointly  determine that the conversion
provided pursuant to Section 4.13(a)(i)(D) is not advisable,  then API shall pay
to the Buyer  payments in accordance  with the  provisions of Section 5.2 of the
duly executed Development Agreement (as defined below).

         (c)  Notwithstanding  any  other  provision  of this  Agreement,  it is
understood and agreed that the remedy of indemnity  payments pursuant to Article
VIII and other  remedies at law would be inadequate in the case of any breach of
the  covenants  contained  in Section  4.13(a).  The Buyer  shall be entitled to
equitable relief, including the remedy of specific performance,  with respect to
any breach or attempted breach of such covenants.

         (d) For  purposes of this  Agreement,  the term  "Related  Party" shall
mean,  with  respect  to API or any of its  subsidiaries,  a direct or  indirect
subsidiary  of,  another  person  controlled  by or any successor or assign of a
majority of the business or assets of API or any of its subsidiaries.

         Section  4.14.  Further  Assurances.  From  time to  time,  as and when
requested by any party,  each party shall  execute and  deliver,  or cause to be
executed and delivered,  all such

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documents  and  instruments  (subject to Section  4.6),  as such other party may
reasonably   deem  necessary  or  desirable  to  consummate   the   transactions
contemplated by this Agreement,  including, in the case of the Seller, executing
and delivering to the Buyer such assignments, deeds, bills of sale, consents and
other  instruments  as the  Buyer  or its  counsel  may  reasonably  request  as
necessary or desirable for such purpose.

         Section 4.15.  Purchase Price  Allocation;  Tax Filings.  Within ninety
days  following the Closing Date,  the Buyer and the Seller shall  negotiate and
draft a schedule (the "Allocation Schedule") allocating the Purchase Price among
the Acquired  Assets.  The  Allocation  Schedule shall be prepared in accordance
with Section 1060 of the Code and the regulations promulgated  thereunder.  Each
of the Buyer and the  Seller  shall (a)  timely  file all forms and Tax  returns
required to be filed in connection with such Allocation  Schedule,  (b) be bound
by such Allocation  Schedule for purposes of determining  Taxes, (c) prepare and
file,  and cause its  affiliates to prepare and file, its Tax Returns on a basis
consistent with such Allocation Schedule and (d) take no position, and cause its
affiliates to take no position,  inconsistent  with such Allocation  Schedule on
any  applicable  Tax  return,  in any  audit or  proceeding  before  any  Taxing
Authority,  in any  report  made  for Tax,  financial  accounting  or any  other
purposes or otherwise.  In the event that the Allocation Schedule is disputed by
any Taxing Authority,  the party receiving notice of such dispute shall promptly
notify the other party hereto  concerning  the existence and  resolution of such
dispute.

         Section  4.16.  Names  Following  Closing.  Immediately  following  the
Closing,  the Parent  shall  amend,  and shall  cause  each of its  subsidiaries
including  AMI,  ADI  and  AIFI,  to  amend,  its  respective   certificates  of
incorporation  and any  certificates  of assumed name or d/b/a  filings so as to
eliminate  its  right to use the names  "AmeriHost",  or any name  that,  in the
judgment  of the Buyer,  is similar to any such  names,  and except  pursuant to
valid license agreements entered into or to be entered into in connection with a
current or future Owned  Facility,  neither the Seller nor any of its affiliates
shall  thereafter use those names or other names acquired by the Buyer hereunder
or names confusingly similar thereto. Notwithstanding anything set forth in this
Section 4.16 to the contrary, the Parent shall not be required to effectuate the
change to its certificate of incorporation  changing its name until  immediately
following its next annual meeting of  stockholders.  The Seller shall  indemnify
and hold harmless Cendant, the Buyer and their respective  directors,  officers,
employees, affiliates, controlling persons, agents and representatives and their
successors and assigns from and against all liability,  demands, claims, actions
or  causes  of  action,   assessments,   losses,  damages,  costs  and  expenses
(including,  without  limitation,   reasonable  attorneys'  fees  and  expenses)
asserted against or incurred by any such person as a result of or arising out of
the use of the name  "AmeriHost"  by the  Seller or any of its  subsidiaries  or
affiliates  prior  to the  date  on  which  all  such  name  changes  have  been
effectuated.

         Section  4.17.  Transfers  Not Effected as of Closing.  Nothing  herein
shall be deemed  to  require  the  conveyance,  assignment  or  transfer  of any
Acquired  Asset  that by its  terms or by  operation  of law  cannot  be  freely
conveyed,  assigned,  transferred  or assumed.  To the extent the parties hereto
have  been  unable to obtain  any  Consents  required  for the  transfer  of any
Acquired  Asset and to the extent not  otherwise  prohibited by the terms of any
Acquired  Asset,  the  Seller  shall  continue  to be bound by the terms of such
applicable  Acquired Asset and the Buyer shall pay,  perform and discharge fully
all of the  obligations  of the  Seller  or any of their  respective

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affiliates  thereunder  from and after the Closing.  The Seller  shall,  without
consideration  therefor, pay, assign and remit to the Buyer promptly all monies,
rights and other  consideration  received  in respect of such  performance.  The
Seller shall exercise or exploit their rights in respect of such Acquired Assets
only as reasonably directed by the Buyer and at the Buyer's expense.  Subject to
and in accordance  with Section 4.10,  the parties  hereto shall continue to use
their commercially  reasonable efforts to obtain all such unobtained Consents at
the earliest  practicable date. If and when any such Consents shall be obtained,
then the Seller shall promptly assign their rights and obligations thereunder to
the Buyer  without  payment of  consideration  and the Buyer shall,  without the
payment of any consideration therefor,  assume such rights and obligations.  The
parties shall execute such good and  sufficient  instruments as may be necessary
to evidence such assignment and assumption.  Each party shall be responsible for
all costs  associated  with  obtaining the Consents  requested to be obtained by
each party.

         Section 4.18.  Qualification of the Buyer and Cendant.  The Buyer shall
use  commercially   reasonable  efforts  to  take  all  action  necessary  under
Applicable Laws,  including  qualifications  and approvals  required under state
franchising  laws, to allow the Buyer and Cendant to conduct the Business in all
jurisdictions where such action is required promptly after the Closing.

         Section 4.19.  Transition Services.  For a period of one year after the
Closing,  the Parent shall provide the following  transition services to Cendant
(the "Transition Services"):  (a) reasonable assistance in the management of the
Brands;  (b) reasonable  assistance in the  development of new hotels with other
franchisees,   including  without  limitation  the  provision  of  architectural
assistance to such franchisees and its advisors;  (c) reasonable assistance with
regard to the marketing of the Brand; and (d) reasonable  assistance with regard
to consulting with franchisees of the Brand,  including  without  limitation the
provision  of  training   relating  to  the  operation  of  the  Brand  to  such
franchisees.  The Parent shall provide the  Transition  Services at no charge to
Cendant  so long as the Parent  does not incur  significant  expenses  or is not
required  to  devote  significant  management  time  to  the  provision  of  the
Transition Services. If the Parent incurs significant expenses or is required to
devote significant  management time to the provision of the Transition Services,
Parent shall have the right to discontinue  the Transition  Services in whole or
in part upon sixty (60) days prior written notice to the Buyer.

         Section 4.20.  Agreement with PMC Commercial  Trust.  The Buyer and the
Seller shall enter into an agreement  with PMC Commercial  Trust ("PMC"),  which
agreement shall be in substantially the same form as attached Exhibit L.

                                    ARTICLE V
                CONDITIONS TO CONSUMMATION OF THE ASSET PURCHASE

         Section 5.1. Conditions to Each Party's  Obligation.  The obligation of
the Buyer to purchase the Acquired  Assets and the  obligation  of the Seller to
sell the Acquired  Assets to the Buyer is subject to the  satisfaction or waiver
on or prior to the Closing of the following conditions:

                                       23
<PAGE>

         (a)  The  waiting  period  under  the HSR  Act,  if  applicable  to the
consummation of the transactions contemplated hereby, shall have expired or been
terminated.  All material authorizations,  consents,  orders or approvals of, or
declarations  or filings with, or expirations of waiting periods imposed by, any
Governmental   Entity   necessary  for  the  consummation  of  the  transactions
contemplated hereby shall have been obtained or filed or shall have occurred.

         (b) No Applicable Law enacted, entered, promulgated, enforced or issued
by any  Governmental  Entity or other legal restraint or prohibition  preventing
the consummation of the transactions contemplated hereby shall be in effect.

         Section 5.2.  Conditions to Obligation of the Buyer.  The obligation of
the  Buyer  to  purchase  and pay for the  Acquired  Assets  is  subject  to the
satisfaction  (or  waiver by the Buyer) on or prior to the  Closing  Date of the
following conditions:

         (a) The representations and warranties of the Parent, AIFI, AMI and ADI
made in this  Agreement and the documents to be executed in connection  herewith
qualified  as to  materiality  shall  be true  and  correct,  and  those  not so
qualified  shall be true and correct in all  material  respects,  as of the date
hereof and as of the time of the Closing as though made as of such time,  except
to the extent such representations and warranties expressly relate to an earlier
date  (in  which  case  such  representations  and  warranties  qualified  as to
materiality shall be true and correct,  and those not so qualified shall be true
and correct in all material respects, on and as of such earlier date), except as
otherwise  contemplated by this  Agreement,  and the Buyer shall have received a
certificate signed by an authorized officer of each of the Parent, AIFI, AMI and
ADI to such effect.

         (b) Each of the  Parent,  AIFI,  AMI and ADI shall  have  performed  or
complied in all material respects with all obligations and covenants required by
this  Agreement to be performed or complied  with by each of them by the time of
the  Closing,  and the Buyer  shall  have  received a  certificate  signed by an
authorized officer of each of the Parent, AIFI, AMI and ADI to such effect.

         (c)  There  shall not be  pending  or  threatened  any  Proceeding  (i)
challenging or seeking to restrain or prohibit the  transaction  contemplated by
this Agreement to obtain from Cendant,  the Buyer or any of its  subsidiaries in
connection  with the  transactions  contemplated  hereby  any  damages  that are
material  in relation to Cendant  and its  subsidiaries  taken as a whole,  (ii)
seeking to prohibit or limit the ownership or operation by Cendant or any of its
subsidiaries of any portion of the business or assets of Cendant  (including the
Business),  or any of its  subsidiaries,  or to  compel  Cendant,  or any of its
subsidiaries  to dispose of or hold  separate  any  portion of the  business  or
assets  of  Cendant  (including  the  Business),  the  Seller  or any  of  their
respective  subsidiaries,   in  each  case  as  a  result  of  the  transactions
contemplated by this Agreement,  (iii) seeking to impose  limitations on ability
of Cendant to acquire or hold,  or  exercise  full rights of  ownership  of, the
Acquired Assets or (iv) seeking to prohibit  Cendant or any of its  subsidiaries
from effectively controlling in any respect the Business.

         (d) The Buyer  shall  have  received  written  Consents  from all third
parties listed on attached Schedule 5.2.

                                       24
<PAGE>

         (e) From and after the date  hereof,  there  shall not have  occurred a
change or event which has had a Material  Adverse  Effect,  nor shall there have
occurred a change or event which would reasonably be expected to have a Material
Adverse Effect.

         (f) The Buyer shall have  received a  confidentiality  and  non-compete
agreement,  duly executed by Michael  Holtz in his  individual  capacity,  which
agreement shall be in substantially the same form as attached Exhibit M.

         (g) The Seller shall have  furnished to the Buyer such other  documents
relating to the Seller's  corporate  existence and authority,  absence of Liens,
and such  other  matters as the Buyer or its  counsel  may  reasonably  request,
including without limitation copies of all UCC-3 financing  statements and other
release documents relating to the security interests of Bridgeview Bank.

         Section 5.3.  Conditions to Obligation of the Seller. The obligation of
the Seller to sell,  assign,  convey, and deliver the Acquired Assets is subject
to the satisfaction (or waiver by the Seller) on or prior to the Closing Date of
the following conditions:

         (a) The representations and warranties of the Buyer and Cendant made in
this Agreement and the documents to be executed in connection herewith qualified
as to materiality shall be true and correct, and those not so qualified shall be
true and correct in all material  respects,  as of the date hereof and as of the
time of the  Closing as though made as of such time,  and the Seller  shall have
received  a  certificates  signed  by an  authorized  officers  of the Buyer and
Cendant, respectively, to such effect.

         (b) The Buyer and  Cendant  shall have  performed  or  complied  in all
material respects with all obligations and covenants  required by this Agreement
to be  performed  or  complied  with by the Buyer and Cendant by the time of the
Closing,  and the  Seller  shall  have  received  a  certificates  signed  by an
authorized officer of the Buyer and Cendant, respectively, to such effect.

         (c) From and after the date  hereof,  there  shall not have  occurred a
Buyer  Material  Adverse  Effect not shall there have occurred a change or event
that would reasonably be expected to result in a Buyer Material Adverse Effect.

                                   ARTICLE VI
                                   TERMINATION

         Section 6.1. Termination.  (a) Notwithstanding anything to the contrary
in this  Agreement,  this  Agreement  may be  terminated  and  the  transactions
contemplated by this Agreement abandoned at any time prior to the Closing:

                  (i)  by mutual written consent of the Seller and the Buyer;

                                       25
<PAGE>

                  (ii) by the  Seller,  if any of the  conditions  set  forth in
Sections 5.1 or 5.3 shall have become  incapable of  fulfillment,  and shall not
have been waived by Seller;

                  (iii) by the  Buyer,  if any of the  conditions  set  forth in
Sections 5.1 or 5.2 shall have become  incapable of  fulfillment,  and shall not
have been waived by the Buyer; or

                  (iv)  by the  Seller  or the  Buyer, if the  Closing does  not
occur on or prior to December  31, 2000; or

                  (v) by the  Buyer if, in its  reasonable  opinion,  compliance
with any  "second  request"  made by the FTC or the DOJ  pursuant to the HSR Act
would be unduly  burdensome  or would  require  the Buyer to incur  expenses  in
excess of $200,000;

provided,  however,  that the party seeking termination pursuant to clause (ii),
(iii),  (iv)  or  (v) is  not  then  in  breach  of any of its  representations,
warranties, covenants or agreements contained in this Agreement.

         (b) In the event of  termination by the Seller or the Buyer pursuant to
this Section 6.1,  written notice thereof shall  forthwith be given to the other
and the transactions contemplated by this Agreement shall be terminated, without
further action by any party.

         Section 6.2. Effect of Termination. If this Agreement is terminated and
the transactions  contemplated hereby are abandoned as described in Section 6.1,
this  Agreement  shall become null and void and of no further  force and effect,
except for the provisions of (i) Section 4.7 relating to certain expenses,  (ii)
Section 6.1 and this Section 6.2 and (iii)  Section 4.12  relating to publicity.
Nothing  in this  Section  6.2  shall be deemed to  release  any party  from any
liability  for any  breach by such  party of the terms  and  provisions  of this
Agreement or to impair the right of any party to compel specific  performance by
any other party of its obligations under this Agreement.

         Section 6.3. Amendments and Waivers.  This Agreement may not be amended
except by an  instrument  in  writing  signed  on behalf of each of the  parties
hereto. By an instrument in writing the Buyer and Cendant,  on the one hand, and
the Seller,  on the other hand, may waive compliance by the other party with any
term  or  provision  of this  Agreement  that  such  other  parties  were or are
obligated to comply with or perform.

                                   ARTICLE VII
                          SURVIVAL AND INDEMNIFICATION

         Section  7.1.  Survival  Periods.   Each  of  the  representations  and
warranties made by the parties in this Agreement shall survive the Closing for a
period of two (2) years;  provided,  however,  that (i) the  representations and
warranties  contained in Sections 2.2 and 3.2 shall survive the Closing  without
limitation (subject to any applicable  statutes of limitations),  other than the
termination  of this  Agreement,  and (ii) the  representations  and  warranties
contained in Sections 2.9 and 2.10 shall  survive for the  applicable  period of
the  relevant  statute of  limitations  (taking into  account  valid  extensions
thereof).  No claims or causes of action may be brought against the Seller,  the
Buyer or Cendant based upon, directly or indirectly, any of the

                                       26
<PAGE>

representations,  warranties  or  agreements  contained  in  Articles II and III
hereof after the  applicable  survival  period or, except as provided in Section
6.2 hereof, any termination of this Agreement.  This Section 7.1 shall not limit
any covenant or agreement of the parties that contemplates performance after the
Closing.

         Section 7.2.  Agreement of the Parent,  AIFI, AMI and ADI to Indemnify.
(a) Subject to the terms and conditions set forth herein, the Parent,  AIFI, AMI
and ADI shall,  jointly and  severally,  indemnify  and hold harmless the Buyer,
Cendant  and  their  respective  directors,  officers,  employees,   affiliates,
controlling persons, agents and representatives and their successors and assigns
(collectively, the "Buyer Indemnitees") from and against all liability, demands,
claims,  actions or causes of action,  assessments,  losses,  damages, costs and
expenses  (including,   without  limitation,   reasonable  attorneys'  fees  and
expenses)  (collectively,  the "Buyer Damages")  asserted against or incurred by
any  Buyer  Indemnitee  as a result  of or  arising  out of (i) a breach  of any
representation  or warranty of the Parent,  AIFI,  AMI or ADI  contained in this
Agreement, (ii) a breach of any covenant or agreement on the part of the Parent,
AIFI, AMI or ADI under this Agreement, or (iii) the Excluded Liabilities and the
Retained Assets.

         (b) The Parent,  AIFI,  AMI and ADI shall be obligated to indemnify the
Buyer Indemnitees pursuant to clause (i) of Section 7.2(a) only for those claims
giving rise to Buyer  Damages as to which the Buyer  Indemnitees  have given the
Seller written notice thereof prior to the end of the applicable survival period
(as  provided  for in Section  7.1).  Any written  notice  delivered  by a Buyer
Indemnitee  to the with  respect to Buyer  Damages  shall set forth with as much
specificity  as is  reasonably  practicable  the  basis of the  claim  for Buyer
Damages and, to the extent reasonably practicable,  a reasonable estimate of the
amount thereof.

         Section 7.3.  Agreement of the Buyer to  Indemnify.  (a) Subject to the
terms and  conditions  set forth  herein,  the Buyer  shall  indemnify  and hold
harmless  the  Parent,  AIFI,  AMI,  ADI and  each of its  directors,  officers,
employees, affiliates, controlling persons, agents and representatives and their
successors and assigns (collectively, the "Seller Indemnitees") from and against
all  liability,  demands,  claims,  actions  or causes of  action,  assessments,
losses, damages, costs and expenses (including,  without limitation,  reasonable
attorneys' fees and expenses) (collectively,  "Seller Damages") asserted against
or  incurred  by any Seller  Indemnitee  as a result of or arising  out of (i) a
breach of any  representation  or warranty of the Buyer or Cendant  contained in
this  Agreement,  (ii) a breach of any  covenant or agreement on the part of the
Buyer or Cendant under this Agreement and (iii) the Assumed  Liabilities and the
Acquired Assets.

         (b) The Buyer shall be obligated to  indemnify  the Seller  Indemnitees
pursuant to clause (i) of Section  7.3(a) only for those  claims  giving rise to
Seller Damages as to which the Seller  Indemnitees  have given the Buyer written
notice thereof prior to the end of the applicable  survival  period (as provided
for in Section 7.1). Any written notice delivered by a Seller  Indemnitee to the
Buyer with respect to Seller Damages shall set forth with as much specificity as
is reasonably  practicable the basis of the claim for Seller Damages and, to the
extent reasonably practicable, a reasonable estimate of the amount thereof.

         Section  7.4.  Third-Party  Indemnification.  The  obligations  of  the
Parent,  AIFI, AMI and ADI to indemnify the Buyer  Indemnitees under Section 7.2
hereof  with  respect  to Buyer  Damages  and the  obligations  of the  Buyer to
indemnify  the  Seller  Indemnitees  under  Section  7.3

                                       27
<PAGE>

with respect to Seller  Damages,  in either case resulting from the assertion of
liability  by third  parties  (each,  as the case  may be, a  "Claim"),  will be
subject to the following terms and conditions:

         (a) Any  party  against  whom  any  Claim  is  asserted  will  give the
indemnifying  party written  notice of any such Claim promptly after learning of
such Claim, and the  indemnifying  party may at its option undertake the defense
thereof by representatives of its own choosing. Failure to give prompt notice of
a Claim hereunder shall not affect the indemnifying  party's  obligations  under
this  Article VII,  except to the extent the  indemnifying  party is  materially
prejudiced by such failure to give prompt  notice.  If the  indemnifying  party,
within thirty (30) days after notice of any such Claim,  or such shorter  period
as is reasonably required,  fails to assume the defense of such Claim, the Buyer
Indemnitee or the Seller Indemnitee, as the case may be, against whom such claim
has been made will (upon  further  notice to the  indemnifying  party)  have the
right to undertake the defense,  compromise or settlement  (subject to the terms
of Section  7.4(c)) of such claim on behalf of and for the account and risk, and
at  the  expense,  of the  indemnifying  party,  subject  to  the  right  of the
indemnifying  party to assume  the  defense  of such  Claim at any time prior to
settlement, compromise or final determination thereof.

         (b) So long as the  indemnifying  party has  assumed the defense of any
Claim in the manner  set forth  above,  the  indemnifying  party  shall have the
exclusive  right to  contest,  defend and  litigate  such  Claim and,  except as
expressly  provided in Section  7.4(c),  shall have the exclusive  right, in its
sole discretion, to settle any such claim, either before or after the initiation
of  litigation  at such time and on such terms as the  indemnifying  party deems
appropriate.  If the indemnifying  party elects not to assume the defense of any
such Claim (which shall be without  prejudice to its right at any time to assume
subsequently such defense), the indemnifying party will nonetheless be entitled,
at its own expense, to participate in such defense.  The indemnified party shall
have the right to participate,  at its own expense with separate  counsel (which
counsel shall act in an advisory  capacity only), in any such contest,  defense,
litigation or settlement  conducted by the indemnifying party. After notice from
the  indemnifying  party to such indemnified  party of the indemnifying  party's
election to assume the defense of such Claim, the indemnifying party will not be
liable to such  indemnified  party for any expenses of the  indemnified  party's
counsel that are  subsequently  incurred in connection with the defense thereof;
provided, however, that the expense of such indemnified party's counsel shall be
paid by the indemnifying party if the indemnifying party requested such separate
counsel to participate.

         (c) Without the prior written consent of the  indemnified  party (which
consent shall not be unreasonably  withheld or delayed),  the indemnifying party
shall not  admit any  liability  with  respect  to,  or  settle,  compromise  or
discharge,  any Claim or  consent  to the  entry of any  judgment  with  respect
thereto,  except in the case of any settlement that includes as an unconditional
term thereof the delivery by the claimant or plaintiff to the indemnified  party
of a written  release from all liability in respect of such Claim.  In addition,
whether or not the  indemnifying  party  shall have  assumed  the defense of the
Claim,  the indemnified  party shall not admit any liability with respect to, or
settle,  compromise  or  discharge,  any  Claim or  consent  to the entry of any
judgment  with  respect  thereto,  without  the  prior  written  consent  of the
indemnifying  party  (which  consent  shall  not  be  unreasonably  withheld  or
delayed),  and the  indemnifying  party will not be subject to any liability for
any such  admission,  settlement,

                                       28
<PAGE>

compromise,  discharge  or  consent to  judgment  made by an  indemnified  party
without such prior written consent of the indemnifying party.

         (e) The  indemnifying  party and the indemnified  party shall cooperate
fully in all aspects of any investigation, defense, pre-trial activities, trial,
compromise,  settlement or discharge of any claim in respect of which  indemnity
is sought  pursuant  to this  Article  VII,  including,  but not  limited to, by
providing  the other party with  reasonable  access to  employees  and  officers
(including as witnesses) and other information.

         Section  7.5.  Limitations.  Neither  the  Buyer nor  Cendant  shall be
entitled  to  indemnification  from the  Parent,  AMI,  AIFI or ADI  pursuant to
Section  7.2(a)(i)  unless  and until  the  aggregate  amount  of Buyer  Damages
incurred  pursuant to that section shall exceed $100,000 as to which the Parent,
AMI,  AIFI and ADI  shall be  responsible  only for the  excess  over  $100,000;
provided however that the foregoing  limitation shall not apply to Buyer Damages
resulting  from the breach of the  representations  or  warranties  set forth in
Sections  2.1, 2.2 or 2.4. The maximum  aggregate  amount  recoverable  from the
Parent, AMI, AIFI and ADI pursuant to Section 7.2(a)(i) shall be an amount equal
to the consideration  paid to the Seller pursuant to Sections 1.5(a) through (c)
above.  The  representations  and  warranties  contained in this  Agreement  are
exclusive and supersede any other  representations  and  warranties , express or
implied  in  negotiations  or  otherwise,  including  but  not  limited  to  the
warranties  of  merchantability   and  fitness  for  a  particular  purpose.  No
representations  and  warranties  whatsoever  are  made as to any  forecasts  or
projections.

         Section 7.6. Tax and Insurance  Offsets.The amount of any Buyer Damages
or Seller Damages, as the case may be, suffered by an Indemnified Party shall be
reduced by any net tax,  insurance  or other  benefits or claims  against  third
parties  which are paid to such party in respect of or as a result of such Buyer
Damages  or Seller  Damages  or the  facts or  circumstances  relating  thereto;
provided  however that the party  entitled to receipt of such benefits or claims
shall use commercially reasonable efforts to collect such benefits or claims. If
any Buyer Damages or Seller Damages for which  indemnification is made hereunder
are subsequently reduced by any tax benefit,  insurance payment or other benefit
or recovery  from a third party,  the value of such tax benefit or other benefit
or the  amount  of such  payment  or other  recovery  shall be  remitted  to the
Indemnifying Party.

         Section  7.7.  Exclusive  Remedy.  Except  with  respect  to claims for
specific   performance  or  with  respect  to  fraud  in  the  inducement,   the
indemnification  provisions  of  this  Article  shall  be the  exclusive  remedy
following  the Closing for any claim  related to the  transactions  contemplated
hereby,  including without  limitation,  any breaches or alleged breaches of any
representation,  warranty  or failure  to fulfill  any  covenants  or  agreement
contained  herein,  except for  covenants  or  agreements  of the  parties  that
contemplate performance after the Closing.

                                  ARTICLE VIII
                            MISCELLANEOUS PROVISIONS

         Section 8.1.  Entire  Agreement.  This  Agreement  and the exhibits and
schedules  attached hereto and made part hereof (including the Schedules hereto)
constitute  the entire

                                       29
<PAGE>

agreement of the parties  relating to the subject  matter  hereof and  supersede
other prior  agreements  and  understandings  between the parties  both oral and
written regarding such subject matter.

         Section 8.2. Severability. Any provision of this Agreement that is held
by a court of competent  jurisdiction to violate Applicable Law shall be limited
or  nullified  only to the extent  necessary to bring the  Agreement  within the
requirements of such law.

         Section  8.3.  Notices.  Any  notice  required  or  permitted  by  this
Agreement  must be in  writing  and  must be sent by  facsimile,  by  nationally
recognized  commercial  overnight courier, or mailed by United States registered
or certified mail,  addressed to the other party at the address below or to such
other  address  for  notice  (or  facsimile  number,  in the case of a notice by
facsimile) as a party gives the other party written notice of in accordance with
this Section 8.3. Any such notice will be effective as of the date of receipt:

      if to the Buyer:                       if to the Seller:
        Cendant Finance                        Amerihost Properties, Inc.
        Holding Corporation                    2355 South Arlington Heights Road
        6 Sylvan Way                           Suite 400
        Parsippany, New Jersey 07054           Arlington Heights, Illinois 60005
        Telecopy: (973) 496-5331               Telecopy: (847) 228-5409
        Attention: Senior Vice President       Attention: President
          Law and Corporate Secretary

      with a copy to:                        with a copy to:
        Cendant Corporation                    McDermott, Will & Emery
        6 Sylvan Way                           227 West Monroe Street
        Parsippany, NJ 07054                   Chicago, Illinois 60606-5096
        Telecopy:  (973) 496-5331              Telecopy: (312) 372-2000
        Attention: Senior Vice President,      Attention: Helen R. Friedli, PC
          Law and Corporate Secretary

         Section 8.4.  Governing Law;  Consent to  Jurisdiction.  This Agreement
shall be governed by,  enforced under and construed in accordance  with the laws
of the State of Delaware, without giving effect to any choice or conflict of law
provision or rule thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of (a) the state courts of the State of Delaware, and (b)
the United States  District  Court for the State of Delaware for the purposes of
any suit, action or other proceeding arising out of this Agreement, any document
executed  in  connection  herewith  or any  transaction  contemplated  hereby or
thereby.  Each of the parties hereto further agrees that service of any process,
summons,  notice or document by U.S.  registered mail to such party's respective
address set forth above  shall be  effective  service of process for any action,
suit or  proceeding  in  Delaware  with  respect to any  matters to which it has
submitted  to  jurisdiction  in this  Section  8.4.  Each of the parties  hereto
irrevocably and  unconditionally  waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated  hereby in (i) the state Courts of the State of  Delaware,  or (ii)
the  United  States  District  Court for the State of  Delaware  and

                                       30
<PAGE>

hereby and thereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court  that any such  action,  suit or  proceeding
brought in any such court has been brought in an inconvenient forum.

         Section 8.5.    Descriptive Headings; Counterparts and Interpretations.
                         ------------------------------------------------------

         (a) The  descriptive  headings  herein are inserted for  convenience of
reference  only and shall in no way be  construed  to define,  limit,  describe,
explain, modify, amplify, or add to the interpretation,  construction or meaning
of any provision of, or scope or intent of, this Agreement nor in any way affect
this  Agreement.  This  Agreement may be signed in  counterparts  and all signed
copies  of  this  Agreement  will  together  constitute  one  original  of  this
Agreement.  This Agreement  shall become  effective when each party hereto shall
have  received  counterparts  thereof  signed by all the other  parties  hereto.
Facsimile  copies of the Agreement,  signed in counterpart,  shall be considered
for all purposes, including delivery, as originals.

         (b) For all  purposes  hereof:  (i)  "affiliate"  of any  person  means
another person that directly or indirectly,  through one or more intermediaries,
controls,  is controlled by, or is under common control with, such first person;
(ii) "including" means including,  without limitation;  (iii) "person" means any
individual,  firm, corporation,  partnership,  limited liability company, trust,
joint venture,  Governmental  Entity or other entity;  and (iv) "subsidiary"` of
any person  means  another  person,  an amount of the voting  securities,  other
voting ownership or voting partnership interests of which is sufficient to elect
at least a majority of its Board of  Directors or other  governing  body (or, if
there are no such  voting  interests,  50% or more of the  equity  interests  of
which) is owned directly or indirectly by such first person.

         Section 8.6. Assignment.  Neither this Agreement nor any of the rights,
interests  or  obligations  hereunder  shall be  assigned  by any of the parties
hereto  (whether by operation  of law or  otherwise)  without the prior  written
consent  of the other  parties,  except  that  this  Agreement  and the  rights,
interests and  obligations of the Buyer may be assigned by Buyer to an affiliate
of the Buyer  without  the  consent of the Seller;  provided  however  that such
assignment shall not release the Buyer of its obligations hereunder.  Subject to
the  preceding  sentence,  this  Agreement  will be binding  upon,  inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.

         Section 8.7. No Third-Party  Beneficiaries.  This  Agreement  shall not
benefit  or create  any  right or cause of action in or on behalf of any  person
other than the parties hereto;  provided,  however,  that this Agreement will be
binding upon,  inure to the benefit of, and be  enforceable  by, the parties and
their respective successors and permitted assigns.

                                       31
<PAGE>

         IN WITNESS  WHEREOF,  each of the undersigned has caused this Agreement
to be duly signed as of the date first above written.

                                            CENDANT FINANCE HOLDING
                                              CORPORATION

                                            By:  /s/ James E. Buckman
                                                 ----------------------
                                                  James E. Buckman, Senior
                                                     Executive Vice President
                                                     and General Counsel

                                            CENDANT CORPORATION

                                            By:  /s/ David Wyshner
                                                 ----------------------
                                                  David Wyshner, Senior Vice
                                                     President, Planning and
                                                     Development

                                            AMERIHOST PROPERTIES, INC.

                                            By:  /s/ Michael P. Holtz
                                                  --------------------
                                                     Michael P. Holtz,
                                                     President

                                            AMERIHOST INN FRANCHISING, INC.

                                            By:  /s/ Michael P. Holtz
                                                  --------------------
                                                     Michael P. Holtz,
                                                     President

                                            AMERIHOST MANAGEMENT, INC.

                                            By:  /s/ Michael P. Holtz
                                                  --------------------
                                                     Michael P. Holtz,
                                                     President

                                       32
<PAGE>

                                            AMERIHOST DEVELOPMENT, INC.

                                            By:  /s/ Michael P. Holtz
                                                  --------------------
                                                     Michael P. Holtz,
                                                     President

                                       33

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