Document:

<PAGE>

Exhibit 4.2

  THESE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE.  SUCH SECURITIES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF REGISTRATION UNDER SAID ACT AND ALL OTHER APPLICABLE SECURITIES LAWS, OR
INFORMATION ANALYSIS INCORPORATED RECEIVES A SATISFACTORY OPINION OF COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.

                              WARRANT CERTIFICATE
                              -------------------

                  WARRANTS TO PURCHASE SHARES OF COMMON STOCK

                     OF INFORMATION ANALYSIS INCORPORATED

                        Date of Issuance:    __________

  THIS CERTIFIES that, for value received, ________________  (the "Holder") will
be entitled to purchase, subject to the provisions of this Warrant Certificate
("Warrant"), from INFORMATION ANALYSIS INCORPORATED, a Virginia corporation (the
"Company"), at the price hereinafter set forth, ________ shares of the Company's
$0.01 par value Common Stock as determined pursuant to Section 8 below.  (All of
the Company's shares of Common Stock are being hereafter referred to as "Common
Stock").  This Warrant Certificate is hereinafter referred to as the "Warrant"
and the shares of Common Stock issued or then issuable pursuant to the terms
hereof are hereinafter sometimes referred to as "Warrant Shares".

  This Warrant is subject to the following terms and conditions:

  Section 1.  Exercise:  Issuance of Certificates; Payment for Shares;
              --------------------------------------------------------
Conversion Right.
----------------

  1.1   Duration of Exercise of Warrant.  This Warrant is exercisable at the
        -------------------------------
option of the Holder at any time or from time to time but not later than 5:00
p.m. (Washington, DC Time) on the Expiration Date (as set forth in Section 14)
for all or a portion of the Warrant Shares which may be purchased hereunder.
Such exercise shall be made by presentation to the Company of the Purchase
Notice in the form attached hereto as Exhibit A along with payment of the
aggregate Exercise Price for all Warrant Shares being purchased.  The Company
agrees that the Warrants Shares purchased under this Warrant shall be and are
deemed to be issued to Holder as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares.  Certificates for the Warrant Shares so purchased,
together with any other securities or property to which Holder is entitled upon
such exercise, shall be delivered to Holder by the Company's transfer agent at
the

<PAGE>

Company's expense within a reasonable time after the rights represented by
this Warrant have been exercised.  Each stock certificate so delivered shall be
in such denominations as may be requested by Holder and shall be registered in
the name of Holder or such other name as shall be designated by Holder.  If,
upon exercise of this Warrant, fewer than all of the Warrant Shares evidenced by
this Warrant are purchased prior to the Expiration Date of this Warrant, one or
more new warrants substantially in the form of, and on the terms in, this
Warrant will be issued for the remaining number of Warrant Shares not purchased
upon exercise of this Warrant.

  1.2  Conversion Right.  In lieu of the payment of the Exercise Price, the
       ----------------
Holder shall have the right (but not the obligation), to require the Company to
convert this Warrant, in whole or in part, into shares of Common Stock (the
"Conversion Right") as provided for in this Section 1.2.  Upon exercise of the
Conversion Right, the Company shall deliver to the Holder (without payment by
the Holder of any of the Exercise Price) that number of shares of Common Stock
equal to the quotient obtained by dividing (x) the value of the Warrant at the
time the Conversion Right is exercised (determined by subtracting the aggregate
Exercise Price in effect immediately prior to the exercise of the Conversion
Right from the aggregate Market Price (as hereinafter defined) for the Warrant
Shares issuable upon exercise of this Warrant immediately prior to the exercise
of the Conversion Right) by (y) the Market Price of one share of Common Stock
immediately prior to the exercise of the Conversion Right.  "Market Price" shall
mean the Stock Price (as defined below) obtained by taking the average over a
period of thirty consecutive trading days ending on the second trading day prior
to the date of determination.  As used in this paragraph, the term Stock Price
shall mean (A) the mean, on each such trading day, between the high and low sale
price of a share of Stock or if no sale takes place on any such trading day, the
mean of the closing bid and lowest closing asked prices therefor on any such
trading day, in each case as officially reported on all national securities
exchanges on which the Common Stock is then listed or admitted to trading, or
(B) if the Common Stock is not then listed or admitted to trading on any
national securities exchange, the closing price of the Common Stock on such
date, or (C) if no closing price is available on any such trading day, the mean
between the highest and lowest closing bid prices thereof on any such trading
date in the over-the-counter market as reported by NASDAQ, (D) if the Common
Stock is not then quoted in such system, the mean between the highest and lowest
bid prices reported by the market makers and dealers for the Common Stock listed
as such by the National Quotation Bureau, Incorporated or any similar successor
organization, or (E) the higher of the last bona fide sale made by the Company
and the fair market value of the Common Stock as determined by the Board of
Directors in its good faith judgment.

  1.3  Exercise of Conversion Right.  The conversion rights provided under
       ----------------------------
Section 1.2 hereof may be exercised in whole or in part and at any time and from
time to time while any Warrants remain outstanding.  In order to exercise the
conversion privilege, the Holder shall surrender to the Company, at its offices,
this Warrant accompanied by a duly completed Notice of Conversion in the form
attached hereto as Exhibit B.  The presentation and surrender shall be deemed a
waiver of the Holder's obligation

                                       2
<PAGE>

to pay all or any portion of the aggregate Exercise Price payable for the
Warrant Shares issuable upon exercise of this Warrant. This Warrant (or so much
thereof as shall have been surrendered for conversion) shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Warrant for conversion in accordance with the foregoing
provisions. As promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver to the Holder (i) a certificate or
certificates representing the largest number of whole shares of Common Stock to
which the Holder shall be entitled as a result of the conversion and (ii) if the
Warrant is being converted in part only, a new warrant in principal amount equal
to the unconverted portion of this Warrant. If this Warrant is executed in
whole, in lieu of any fractional shares of Common Stock to which the Holder
shall be entitled, the Company shall pay to the Holder the cash equivalent
thereof based upon the Market Price.

  Section 2.  Reservation of Shares.  The Company hereby covenants that at all
  ---------   ---------------------
times during the term of this Warrant there shall be reserved for issuance such
number of shares of its Common Stock as shall be required to be issued upon
exercise of this Warrant.

  Section 3.  Fractional Shares.  This Warrant may be exercised only for a whole
  ---------   -----------------
number of shares of Common Stock, and no fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of this Warrant.

  Section 4.  Assignment of Warrant.  This Warrant, any of the Warrants, and the
  ---------   ---------------------
shares of Common Stock issuable hereunder shall not be sold, offered for sale,
pledged, hypothecated, or otherwise transferred in the absence of registration
under the Act and other applicable securities laws or the Company's receipt of
an opinion of counsel satisfactory to the Company that such registration is not
required.  Upon such transfer or assignment of this Warrant, the Holder shall
surrender this Warrant to the Company with the Assignment Form in the form
annexed hereto duly executed and with funds sufficient to pay any transfer
taxes, and the Company shall cancel this Warrant, and without charge, shall
execute and deliver a new Warrant of like tenor in the name of the assignee
entitling such assignee to all rights and interests of its assignor at the time
of assignment of this Warrant.

  Section 5.  Loss of Warrant.  Upon receipt by the Company of evidence
  ---------   ---------------
satisfactory to it of the loss, theft, or destruction of this Warrant, and of
indemnification satisfactory to it, or upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date.

  Section 6.  Rights of the Holder.  No provision of this Warrant shall be
  ---------   --------------------
construed as conferring upon the Holder hereof the right to vote, consent,
receive dividends or receive notice other than as herein expressly provided in
respect of meetings of stockholders for the election of directors of the Company
or any other matter whatsoever as a stockholder of the Company.  No provision
hereof, in the absence of affirmative action by the Holder hereof to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of the
Holder hereof, shall give rise to any liability of such Holder for the purchase
price

                                       3
<PAGE>

of any Warrant Shares or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.

  Section 7.  Exercise Price.  The Exercise Price for each Warrant Share shall
  ---------   --------------
be $______ per share; provided if the Company shall subdivide by stock split or
stock dividend its outstanding shares of Common Stock, the Exercise Price then
existing hereunder shall proportionately decrease and if the Company shall
combine its outstanding shares of Common Stock, the Exercise Price then existing
hereunder shall proportionately increase.

  Section 8.  Number of Warrant Shares.  This Warrant shall be exercisable, in
  ---------   ------------------------
accordance with the terms hereof, for ______ shares of Common Stock; provided if
the Company shall subdivide by stock split or stock dividend its outstanding
shares of Common Stock, the Warrant Shares then issuable hereunder shall
proportionately increase and if the Company shall combine its outstanding shares
of Common Stock, the Warrant Shares then issuable hereunder shall
proportionately decrease.

  Section 9.  Certain Distributions.  In case the Company shall, at any time,
  ---------   ---------------------
prior to the Expiration Date set forth in Section 14 hereof, make any
distribution of its assets to holders of its Common Stock as a partial
liquidation distribution or by way of return of capital, other than as a
dividend payable out of earnings or any surplus legally available for dividends,
then the Holder upon the exercise of this Warrant in whole or in part in
accordance with its terms and prior to such distribution, as herein provided,
after the date of record for the determination of those holders of Common Stock
entitled to such distribution of assets, shall be entitled to receive, in
addition to the shares of Common Stock issuable on such exercise, the amount of
such assets (or at the option of the Company a sum equal to the value thereof at
the time of such distribution to holders of Common Stock as such value is
determined by the Board of Directors of the Company in good faith), which would
have been payable to the Holder had it been the holder of record of such shares
of Common Stock on the record date for the determination of those holders of
Common Stock entitled to such distribution.

                                       4
<PAGE>

  Section 10.  Dissolution or Liquidation.  In case the Company shall, at any
  ----------   --------------------------
time prior to the Expiration Date set forth in Section 14 hereof, dissolve,
liquidate or wind up its affairs, the Holder shall be entitled, upon the
exercise of this Warrant in whole or in part in accordance with its terms and
prior to any such distribution in dissolution or liquidation, to receive on such
exercise, in lieu of the shares of Common Stock which the Holder would have been
entitled to receive, the same kind and amount of assets as would have been
distributed or paid to the Holder upon any such dissolution, liquidation or
winding up, with respect to such shares of Common Stock had the Holder been the
holder of record of such share of Common Stock on the record date for the
determination of those holders of Common Stock entitled to receive any such
liquidation distribution.

  Section 11.  Reclassification, Reorganization or Merger.  In case of any
  ----------   ------------------------------------------
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation or which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant), the Company shall cause effective provision to be made so that the
Holder shall have the right thereafter by exercising this Warrant in accordance
with the terms hereof, to purchase the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, capital
reorganization or other change, consolidation or merger, by a holder of the
number of shares of Common Stock which might have been purchased upon exercise
of this Warrant immediately prior to such reclassification, change,
consolidation or merger.  Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant.  The foregoing provisions of this
Section 11 shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations and mergers.  In the event that in any such capital
reorganization or reclassification, consolidation or merger, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for or of a security of the Company other than
Common Stock, any amount of the consideration received upon the issue thereof
being determined by the Board of Directors of the Company shall be final and
binding on the Holder.

  Section 12.  Incidental ("Piggyback") Registration Rights.
  ----------   --------------------------------------------

  12.1  Notice and Participation.  If the Company at any time proposes to
        ------------------------
register any of its Common Stock for sale to the public (except with respect to
registration statements on Forms S-4, S-8, any forms replacing such forms, or
any other form not available for registering shares of Common Stock for sale to
the public), each such time it will give written notice to the Holder of its
intention so to do.  Upon the written request of the Holder, given within 15
days after receipt of any such notice, to register any of

                                       5
<PAGE>

the Holder's shares (the "Shares") of Common Stock purchased upon exercise of
this Warrant (which request shall state the intended method of disposition
thereof), the Company will use its best efforts to cause the Shares as to which
registration shall have been so requested to be included in the securities to be
covered by the registration statement proposed to be filed by the Company, all
to the extent requisite to permit the sale or other disposition by the Holder
(in accordance with its written request) of such Shares so registered. No
request shall be made under this Section 12 in connection with any registration
of Common Stock in connection with a merger or acquisition transaction unless
such transaction is accompanied by an offering through which the Company is
seeking to obtain cash proceeds through the sale of Common Stock or other
securities convertible or exercisable for Common Stock. In the event that any
registration pursuant to this Section 12 shall be, in whole or in part, an
underwritten public offering of Common Stock, any request by the Holder pursuant
to this Section 12 to register Shares shall specify that either (i) such Shares
are to be included in an underwriting on the same terms and conditions as the
shares of Common Stock otherwise being sold through underwriters under such
registration, or (ii) such Shares are to be sold in the open market without any
underwriting, on terms and conditions comparable to those normally applicable to
offerings of common stock in reasonably similar circumstances. If, in connection
with any registration under this Section 12, the managing underwriters advise
the Company in writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can be sold in an
orderly manner in such offering within a price range acceptable to the Company,
the Company will include in such registration (i) first, the securities the
Company proposes to sell, (ii) second, the Restricted Stock (as such term is
defined in that certain Registration Rights Agreement, dated February 27, 1997,
by and between the Company and the Investors named therein), requested to be
included in such registration, pro rata among the holders of such Restricted
Stock on the basis of the number of shares requested to be registered by each
such holder, (iii) third, the Shares requested to be registered by the Holder,
and (iv) fourth, other securities requested to be included in such registration.
Notwithstanding anything to the contrary contained in this Section 12, in the
event that there is a firm commitment underwritten offering of securities of the
Company pursuant to a registration covering any shares of Common Stock and the
Holder does not sell the Holder's Shares to the underwriters of the Company's
securities in connection with such offering, the Holder shall refrain from
selling such Shares so registered pursuant to this Section 12 during the period
of distribution of the Company's securities by such underwriters and the period
in which the underwriting syndicate participates in the after market; provided,
                                                                      --------
however, that the Holder shall, in any event, be entitled to sell its Shares in
-------
connection with such registration or otherwise commencing on the 180th day after
the effective date of such registration statement. The Company agrees to keep
any registration statement filed under this Section 12 current and effective for
a period of not less than nine (9) months.

  12.2  Expenses.  All expenses incurred by the Company in complying with
        --------
Section 12 hereof, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of

                                       6
<PAGE>

counsel and independent public accountants for the Company, fees of the National
Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents
and registrars, costs of insurance and the fees and expenses of counsel for the
Company, but excluding any Selling Expenses, are herein called "Registration
Expenses". All underwriting discounts and selling commissions applicable to the
sale of Shares are herein called "Selling Expenses". The Company will pay all
Registration Expenses in connection with each registration statement filed
pursuant to Section 12 hereof. In connection with each registration statement
filed pursuant to Section 12 hereof, the Holder will pay all Selling Expenses
directly related to the Holder's Shares.

  Section 13.  Notices to Warrant Holder.  In case the Company shall, at any
  ----------   -------------------------
time prior to the Expiration Date set forth in Section 14 hereof, (i) pay any
dividend or make any distribution upon the shares of its Common Stock, or (ii)
offer to the holders of Common Stock for subscription or purchase by them any
shares of stock of any classes or any other rights, or (iii) if any capital
reorganization of the Company, reclassification of the Common Stock of the
Company, consolidation or merger of the Company with or into another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be affected, then, in any such case, the Company shall
cause to be delivered to the Holder, at least 10 days prior to the date
specified in (a) or (b) below, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which (a) a record is
to be taken or the stock transfer books of the Company are to be closed for the
purpose of determining the stockholders entitled to receive such dividend,
distribution or rights, or (b) a record is to be taken or the stock transfer
books of the Company are to be closed for the purpose of determining the
stockholders entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reclassification, reorganization,
consolidation, merger, dissolution, liquidation or winding up.

  Section 14.  Expiration Date. The Warrant shall terminate on the Expiration
  ----------   ---------------
Date and may not be exercised on or after such date.  The Expiration Date shall
be five years from the issuance date of this Warrant.

                                       7
<PAGE>

  Section 15.  Applicable Law.  This Warrant shall be construed in accordance
  ----------   --------------
with the laws of the Commonwealth of Virginia.

Attest:                        INFORMATION ANALYSIS INCORPORATED

_________________________      By:___________________________
Richard S. DeRose, Secretary      Sandor Rosenberg, President

                                       8
<PAGE>

                                 ASSIGNMENT FORM
                                 ---------------

Dated:__________________  For value received_____________________ hereby sells,

assigns and transfers unto

Name____________________________________________________________

                 (Please typewrite or print in block letters)

Address_____________________________________________________ and

appoints________________________________________________________________________

Attorney to transfer the said Warrant on the books of the within named Company

with full power of substitution in the premises.

                                     Signature________________________________

                                       9
<PAGE>

                                 PURCHASE NOTICE
                                 ---------------

  The undersigned hereby irrevocably elects to exercise its right to purchase
_________ shares of the $0.01 par value Common Stock of Information Analysis
Incorporated, such right being pursuant to a Warrant dated _____________, 200_,
and as issued to the undersigned by Information Analysis Incorporated, and
remits herewith the sum of $_________ in payment for same in accordance with the
Exercise Price specified in Section 7 of said Warrant.

INSTRUCTIONS FOR REGISTRATION OF STOCK

Name___________________________________________________________

Address________________________________________________________

                 (Please typewrite or print in block letters)

                                       Signature_______________________________

                                                                       EXHIBIT A

                                      10
<PAGE>

                                                                       EXHIBIT B
                              NOTICE OF CONVERSION

       (To be executed upon exercise of Warrant pursuant to Section 1.3)

  The undersigned hereby irrevocably elects to surrender its Warrant for such
Warrant Shares pursuant to the conversion right provisions of the within
Warrant, as provided for in Section 1 of such Warrant.

  Please issue a certificate or certificates for such Warrant Shares in the name
of, and pay cash for fractional shares pursuant to Section 4.3 of the Warrant.

                           Name:___________________________________________

                           (Please Print Name, Address and Social Security No.)

                           Address:________________________________________

                                   ________________________________________

                                   ________________________________________

                           Social Security No.:____________________________

                           Signature:______________________________________

                           NOTE:  The above signature should correspond
                                  exactly with the name on the first page
                                  of this Warrant or with the name of the
                                  assignee appearing in the assignment
                                  form below.

  And if said number of shares shall not be all the shares exchangeable or
purchasable under the within Warrant, a new Warrant is to be issued in the name
of the undersigned for the balance remaining of the Warrant Shares purchasable
thereunder.

                                       11<PAGE>

                                                                    Exhibit 10.1
                                                                    ------------

                              AMENDMENT NO. 1 TO
                        COMPETITIVE ADVANCE AND MULTI-
                     CURRENCY CREDIT FACILITIES AGREEMENT

     This AMENDMENT NO. 1 TO COMPETITIVE ADVANCE AND MULTI-CURRENCY CREDIT
FACILITIES AGREEMENT (this "Amendment") is dated as of October 1, 2001 by and
among CHOICE HOTELS INTERNATIONAL, INC., a Delaware corporation (the
"Borrower"), THE CHASE MANHATTAN BANK, a New York banking corporation, as agent
for the Lenders (in such capacity, the "Agent"), and the Lenders.

     Reference is made to that certain Competitive Advance and Multi-Currency
Credit Facilities Agreement dated as of June 29, 2001 among the Borrower, the
Agent and the Lenders; as affected by that certain Accession Agreement dated as
of the date hereof among the Borrower, the Agent and Bank Hapoalim B.M. (as so
affected, the "Credit Agreement").  Capitalized terms which are used herein
without definition shall have the meanings given them in the Credit Agreement.

     WHEREAS, the Borrower has requested that the Lenders make various
reallocations among the Term Commitment, Revolving Tranche A Commitment and
Revolving Tranche B Commitment made pursuant to the Credit Agreement while
keeping the sum of such commitments, taken in the aggregate, constant;

     WHEREAS, the Lenders have agreed to such reallocations on the terms and
conditions contained in this Amendment.

     NOW THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

     1.  Amendments to the Credit Agreement.  Effective as of the Effective Date
         ----------------------------------
(as hereinafter defined), the Credit Agreement is amended in the following
respects:
<PAGE>

                                      -2-

     (a) Section 2.12(d) of the Credit Agreement is amended by deleting the
repayment chart set forth therein in its entirety and substituting the following
repayment chart in place thereof:
<TABLE>
<CAPTION>
             Date                    Amount
             ----                    ------
<S>                               <C>
     1.  October 1, 2001          $2,875,000.00
     2.  January 1, 2002          $2,875,000.00
     3.  April 1, 2002            $2,875,000.00
     4.  July 1, 2002             $3,833,333.33
     5.  October 1, 2002          $3,833,333.33
     6.  January 1, 2003          $3,833,333.33
     7.  April 1, 2003            $3,833,333.33
     8.  July 1, 2003             $4,791,666.67
     9.  October 1, 2003          $4,791,666.67
    10.  January 1, 2004          $4,791,666.67
    11.  April 1, 2004            $4,791,666.67
    12.  July 1, 2004             $5,750,000.00
    13.  October 1, 2004          $5,750,000.00
    14.  January 1, 2005          $5,750,000.00
    15.  April 1, 2005            $5,750,000.00
    16.  July 1, 2005             $7,427,083.33
    17.  October 1, 2005          $7,427,083.33
    18.  January 1, 2006          $7,427,083.33
    19.  April 1, 2006            $7,427,083.33
</TABLE>

     (b) The Credit Agreement is further amended by deleting Schedule 2.01
attached thereto and replacing it with Schedule 2.01 attached hereto.

     2.  Representations and Warranties.  The Borrower hereby represents and
         ------------------------------
warrants as of the date hereof that (a) each of the representations and
warranties of the Borrower contained in the Credit Agreement, the other Loan
Documents or in any document or instrument delivered pursuant to or in
connection with the Credit Agreement or this Amendment are true as of the date
as of which they were made and are true at and as of the date of this Amendment
(except to the extent that such representations and warranties relate expressly
to an earlier date) and (b) no Default or Event of Default exists on the date
hereof.

     3.  No Other Changes.  Except as specifically amended by this Amendment,
         ----------------
the Credit Agreement and the other Loan Documents
<PAGE>

                                      -3-

shall remain unaltered and in full force and effect. This Amendment and the
Credit Agreement shall be read and construed as one agreement.

     4.  Counterparts.  This Amendment may be executed in two or more
         ------------
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.

     5.  Effectiveness.  The effectiveness of this Amendment is subject to the
         -------------
execution and delivery of this Amendment by the Borrower and each of the
Lenders, and the reaffirmation of the Guarantee Agreement by each Guarantor (the
date on which such conditions have been satisfied being referred to herein as
the "Effective Date").

                 [Remainder of Page Intentionally Left Blank]
<PAGE>

                                      -4-

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.

                         CHOICE HOTELS INTERNATIONAL, INC.

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

                         THE CHASE MANHATTAN BANK,
                         individually and as Issuing Bank and
                         Agent

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

                         FLEET NATIONAL BANK, individually
                         and as Syndication Agent

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

                         FIRST UNION NATIONAL BANK,
                         individually and as Documentation
                         Agent

                         By:
                            --------------------------------
                            Name:
                            Title:
<PAGE>

                                      -5-

                         CITICORP REAL ESTATE, INC.

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

                         ALLFIRST BANK

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

                         CHEVY CHASE BANK FSB

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

                         THE DAI-ICHI KANGYO BANK, LTD.

                         By:
                            --------------------------------
                            Name:
                            Title:
<PAGE>

                                      -6-

                         E. SUN COMMERCIAL BANK, LTD.,
                         LOS ANGELES BRANCH

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

                         THE FUJI BANK, LIMITED

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

                         SUNTRUST BANK

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

                         BANK HAPOALIM B.M.

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

                         By:
                            --------------------------------
                            Name:
                            Title:
<PAGE>

     Each of the undersigned hereby acknowledges the foregoing Amendment No. 1
and reaffirms its guaranty under the Guarantee Agreement dated as of June 29,
2001 in favor of The Chase Manhattan Bank, as Agent, and acknowledges and agrees
that such Guarantee Agreement remains in full force and effect.

     Executed as of the date first set forth above.

                         CHOICE HOTELS INTERNATIONAL SERVICES CORP.

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

                         QUALITY HOTELS EUROPE, INC.

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

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