EXECUTION COPY

                                   $62,000,000

                                CREDIT AGREEMENT

                            Dated as of May 16, 2000

                                      among

                    THE ENTITIES LISTED ON SCHEDULE I HERETO

                                  as Borrowers

                                       and

                            THE LENDERS PARTY HERETO

                                       and

                      THE CIT GROUP/BUSINESS CREDIT, INC.,

                             as Administrative Agent

                                       and

                         HELLER HEALTHCARE FINANCE, INC.

                      as Collateral and Documentation Agent


<PAGE>


                  CREDIT AGREEMENT, dated as of May 16, 2000, among the entities
listed on Schedule I hereto (individually,  the "Borrower" and collectively, the
"Borrowers"), the Lenders (as defined below), and THE CIT GROUP/BUSINESS CREDIT,
INC. ("CITBC"),  as administrative agent for the Lenders (in such capacity,  the
"Administrative   Agent")  and  HELLER  HEALTHCARE  FINANCE,  INC.  ("HHF"),  as
collateral  and  documentation  agent for the  Lenders  (in such  capacity,  the
"Collateral Agent").

                             W I T N E S S E T H:

                  WHEREAS,  the Borrowers  have  requested that the Lenders make
available for the purposes  specified in this  Agreement a revolving  credit and
letter of credit guaranty facility; and

                  WHEREAS,  the  Lenders are  willing to make  available  to the
Borrowers such revolving credit and letter of credit guaranty  facility upon the
terms and subject to the conditions set forth herein;

                  NOW,  THEREFORE,  in  consideration  of the  premises  and the
covenants and agreements  contained  herein,  the parties hereto hereby agree as
follows:

Article I

                DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS

Section 1.1.      Defined Terms.  As used in this Agreement, the following terms
have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

                  "Accounts" means all of the following, whether now existing or
arising  in the  future,  with  respect  to each and all of the  Borrowers:  (a)
accounts  receivable  generated  from the  sale of  medical,  hospital  or other
healthcare  goods or the  rendition  of medical,  hospital  or other  healthcare
services to patients and any and all  instruments,  documents,  contract rights,
chattel  paper and general  intangibles  relating to such  accounts  receivable,
including,  without  limitation,  all accounts created by or arising from all of
such  Borrowers'  sales  of  medical,  hospital  or  other  healthcare  goods or
rendition of medical,  hospital or other healthcare services to patients of such
Borrower, and all accounts arising from such sales of goods or rendition of such
services made under any of the Borrowers'  respective  trade names or styles and
all rights of payment from all third party payors on any of such  accounts;  (b)
unpaid  sellers'  rights  (including  rescission,   replevin,  and  reclamation)
relating to the  foregoing or arising  therefrom;  (c) credit  balances  arising
thereunder; (d) guarantees or collateral for any of the foregoing; (e) insurance
policies or rights  relating to any of the foregoing;  and (f) cash and non-cash
proceeds of any and all of the foregoing.

                  "Account  Debtor" means any Person obligated on any Account of
any Borrower, including without limitation, any Governmental Authority obligated
on any Governmental Receivable.

                  "Administrative  Agent"  has  the  meaning  specified  in  the
preamble to this Agreement.

                  "Affiliate"  means,  with  respect  to any  Person,  any other
Person which,  directly or  indirectly,  controls,  is controlled by or is under
common  control with such Person,  each officer,  director,  general  partner or
joint-venturer  of such Person,  and each Person who is the beneficial  owner of
10% or more of any class of Voting  Stock of such  Person.  For the  purposes of
this definition,  "control" means the possession of the power to direct or cause
the direction of  management  and policies of such Person,  whether  through the
ownership of voting securities, by contract or otherwise.

                  "Agents" means the Administrative Agent and the Collateral
Agent.

                  "Agreement" means this Credit Agreement.

                  "Applicable  Lending  Office"  means,  with  respect  to  each
Lender,  its Domestic  Lending  Office in the case of a Base Rate Loan,  and its
Eurodollar Lending Office in the case of a Eurodollar Rate Loan.

                  "Applicable  Margin"  means with  respect to any (a) Base Rate
Loan, a rate equal to 1.5% per annum and (b) Eurodollar  Rate Loan, a rate equal
to 3.75% per annum.

                  "Approved  Fund"  means,  with respect to any Lender that is a
fund that invests in bank loans,  any other fund (other than an Investment Fund)
that  invests in bank  loans and is  advised  or managed by the same  investment
advisor as such Lender or by an Affiliate of such investment advisor.

                  "Asset Sale" has the meaning specified in Section 8.4.

                  "Assignment and Acceptance" means an assignment and acceptance
entered  into  by a  Lender  and  an  Eligible  Assignee,  and  accepted  by the
Administrative Agent in substantially the form of Exhibit A.

                  "Availability  Reserves"  means  $3,000,000  as of the Closing
Date or such  amounts as the Agents may from time to time  thereafter  establish
against the Facility based on the  Borrowers'  payment of cost  settlements  and
incurrence of cost  settlement  liabilities and such other amounts as the Agents
may from time to time establish  against the Facility,  in good faith,  in their
reasonable  judgment,   based  on  the  collectibility  of  Borrowers'  Accounts
generated by sale of medical, hospital or other healthcare goods or rendition of
medical,  hospital or other healthcare  services to patients and the performance
of the Borrowers.

                  "Available  Credit" means, at any time, an amount equal to (a)
the lesser of (i) the aggregate of the Revolving Credit Commitments in effect at
such time and (ii) the Borrowing Base at such time, minus (b) the sum of (i) the
aggregate  Revolving Credit  Outstandings at such time and (ii) any Availability
Reserves  in  effect  at such  time  plus  (c) the  cash  deposited  in the Cash
Collateral Account.

                  "Bankruptcy  Code"  means title 11,  United  States  Code,  as
amended from time to time.

                  "Base Rate" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate per annum shall be
equal at all  times to the rate of  interest  announced  publicly  by The  Chase
Manhattan  Bank, from time to time, as its prime rate in effect at its principal
office in New York City (the prime rate is not intended to be the lowest rate of
interest  charged by The Chase Manhattan Bank to its borrowers).  Each change in
the prime rate shall be effective on the date such change is publicly announced.

                  "Base Rate Loan"  means any Loan during any period in which it
bears interest based on the Base Rate.

                  "Borrowing" means a borrowing  consisting of Loans made on the
same day by the Lenders ratably  according to their respective  Revolving Credit
Commitments.

                  "Borrowing Base" means, as of any date, an amount equal to the
sum of (a) the lesser of (i) one and one-half  times trailing 12 month EBITDA of
the operating entities for the Eligible Real Property (determined as of the last
day of the most recent completed month for which Financial  Statements have been
delivered  pursuant  to Section  4.3(a) or  Section  6.1)  minus  Eligible  Real
Property  Availability,  and (ii) $10  million  plus (b) 85% of all  Borrowers',
except Flint River,  Eligible  Receivables,  and 42.5% of Flint River's Eligible
Receivables;  provided,  however,  that the Borrowing Base shall not include (A)
Flint River's Accounts upon any voluntary or involuntary  bankruptcy filing with
respect to Flint River and (B) Metropolitan  Eligible  Receivables to the extent
85% of such  Eligible  Receivables  is greater than the amount  specified in the
proviso in Section 2.1(b); provided,  further that if two-thirds of the Lenders,
in their sole discretion,  determine that there is no bankruptcy risk associated
with Flint River, 85% of Flint River's Eligible  Receivables will be included in
the Borrowing Base.

                  "Borrowing  Base  Certificate"  means  a  certificate  of  the
Borrowers substantially in the form of Exhibit B.

                  "Business  Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable Business
Day relates to notices, determinations, fundings and payments in connection with
the  Eurodollar  Rate or any  Eurodollar  Rate Loans, a day on which dealings in
Dollar deposits are also carried on in the London interbank market.

                  "Capital  Expenditures"  means, with respect to any Person for
any period,  the  aggregate  of amounts  that would be reflected as additions to
property,  plant or  equipment  on a balance  sheet of such  Person  prepared in
conformity with GAAP, excluding interest capitalized during construction.

                  "Capital Lease" means,  with respect to any Person,  any lease
of property by such Person as lessee which would be  accounted  for as a capital
lease on a balance sheet of such Person prepared in conformity with GAAP.

                  "Capital Lease Obligations" means, with respect to any Person,
the  capitalized  amount of all obligations of such Person under Capital Leases,
as determined in conformity with GAAP.

                  "Cash Collateral Account" means the  interest-bearing  account
established  by the  Borrowers  under  the sole  and  exclusive  control  of the
Collateral  Agent,  pursuant  to the  agreement  attached  hereto as Exhibit C ,
designated as the  "Collateral  Account in Favor or Heller  Healthcare  Finance,
Inc. as Collateral Agent," which is subject to the terms of Section 9.3.

                  "Cash  Equivalents"  means  (a)  securities  issued  or  fully
guaranteed or insured by the United States government or any agency thereof with
maturities not exceeding 180 days, (b) domestic  certificates of deposit or time
deposits  or  bankers'  acceptances  maturing  within 180 days after the date of
acquisition  thereof or investments in money market or mutual funds or accounts,
in each  case  issued  or  managed  by any  commercial  bank or other  financial
institution  organized  under the laws of the United States or any state thereof
or the District of Columbia or by any foreign bank which is a Lender, and in any
case having  combined  capital and  surplus of not less than  $100,000,000;  (c)
deposits in any financial  institution  insured by the Federal Deposit Insurance
Corporation;  (d)  commercial  paper of an issuer rated at least "A-1" by S&P or
"P-1" by Moody's with maturities not exceeding 180 days.

                  "Closing Date" means May ___, 2000.

                  "Code"  means  the  Internal  Revenue  Code  of  1986  (or any
successor legislation thereto), as amended from time to time.

                  "Collateral"  means all property and interests in property and
proceeds  thereof now owned or  hereafter  acquired  by any  Borrower in or upon
which a Lien is granted under any of the  Collateral  Documents  excluding  such
property  with  respect  to which the  Collateral  Agent has  released  its Lien
pursuant to this Agreement.

                  "Collateral  Agent" has the meaning  specified in the preamble
to this Agreement.

                  "Collateral  Documents"  means  the  Security  Agreement,  the
Mortgages, the Collection Account Agreements and any other document executed and
delivered by a Borrower granting a Lien on any of its property to secure payment
of the Obligations.

                  "Collection  Account"  has the  meaning  specified  in Section
2.16(a).

                  "Collection  Account  Agreements" has the meaning specified in
Section 2.16(b).

                  "Compliance  Certificate" has the meaning specified in Section
6.1(d).

                  "Concentration  Account" has the meaning  specified in Section
2.16(a).

                  "Constituent Documents" means, with respect to any Person, (a)
the  articles/certificate  of  incorporation  (or the equivalent  organizational
documents)  of  such  Person,  (b) the  by-laws  (or  the  equivalent  governing
documents)  of such  Person  and (c) any  document  setting  forth the manner of
election and duties of the directors or managing members of such Person (if any)
and the designation,  amount and/or relative rights, limitations and preferences
of any class or series of such Person's Stock.

                  "Contaminant"  means any material,  substance or waste that is
classified,  regulated or otherwise characterized under any Environmental Law as
hazardous,  toxic,  a  contaminant  or a pollutant  or by other words of similar
meaning or  regulatory  effect,  including  any  petroleum or  petroleum-derived
substance or waste, asbestos and polychlorinated biphenyls.

                  "Contractual  Obligation" of any Person means any  obligation,
agreement,  undertaking  or similar  provision  of any  Security  issued by such
Person or of any agreement,  undertaking,  contract, lease, indenture, mortgage,
deed of trust or other  instrument  (excluding  a Loan  Document)  to which such
Person is a party or by which it or any of its property is bound or to which any
of its properties is subject.

                  "Customary Permitted Liens" means, with respect to any Person,
any of the following Liens:

(a)      Liens with respect to the payment of taxes, assessments or governmental
         charges in all cases which are not yet due or which are being contested
         in good  faith by  appropriate  proceedings  and with  respect to which
         adequate reserves or other appropriate  provisions are being maintained
         to the extent required by GAAP;

(b)      Liens of landlords (including  contractual landlord liens to the extent
         they  are  not  on  Collateral)  and  liens  of  suppliers,  mechanics,
         carriers, materialmen,  warehousemen or workmen and other liens imposed
         by law created in the  ordinary  course of business for amounts not yet
         due  or  which  are  being  contested  in  good  faith  by  appropriate
         proceedings  and with  respect  to  which  adequate  reserves  or other
         appropriate  provisions are being  maintained to the extent required by
         GAAP;

(c)      deposits  made in the ordinary  course of business in  connection  with
         worker's compensation,  unemployment insurance or other types of social
         security benefits or to secure the performance of bids, tenders, sales,
         contracts (other than for the repayment of borrowed money) and deposits
         made for surety, appeal, customs or performance bonds;

(d)      encumbrances  arising  by  reason of  zoning  restrictions,  easements,
         licenses, reservations,  covenants,  rights-of-way,  utility easements,
         building restrictions and other similar encumbrances on the use of real
         property or minor  imperfections  to title of real property  other than
         Eligible Real Property which do not  materially  detract from the value
         of such real  property or interfere  with the  ordinary  conduct of the
         business conducted and proposed to be conducted at such real property;

(e)      encumbrances  arising under leases or subleases of real property  which
         do not in the aggregate  materially detract from the value of such real
         property  or  interfere  with  the  ordinary  conduct  of the  business
         conducted and proposed to be conducted at such real property;

(f)      encumbrances securing Capital Lease Obligations permitted by Section
         8.1(c) and filings describing a lessor's rights in and
         to operating leases;

(g)      judgment  Liens on appeal if and only if (i) the amount,  applicability
         or  validity  thereof  is  currently  (at the time in  question)  being
         contested in good faith by appropriate  action  promptly and diligently
         conducted and adequate cash reserves or letters of credit, in each case
         segregated to the extent required by GAAP have been set aside therefor,
         (ii) levy and  execution  thereon  have been stayed and  continue to be
         stayed and (iii) they do not in the aggregate  materially  detract from
         the value of the property (whether now owned or hereafter  acquired) of
         the Person in question or materially impair the use of such property in
         such Person's business; and

(h)      any  extension,  renewal  or  replacement  of  any  of  the  foregoing,
         provided, however, that Liens permitted under this clause (h) shall not
         be extended or spread to cover any additional  Indebtedness or property
         (whether now owned or hereafter acquired).

                  "Default" means any event which with the passing of time or
the giving of notice or both would become an Event of
Default.

                  "Dollars"  and the sign "$" each mean the lawful  money of the
United States of America.

                  "Domestic  Lending Office" means,  with respect to any Lender,
the office of such Lender  specified as its "Domestic  Lending Office"  opposite
its name on Schedule II or on the Assignment and Acceptance by which it became a
Lender or such other  office of such Lender as such Lender may from time to time
specify as such to the Borrowers and the Administrative Agent.

                  "EBITDA"  means,  with respect to any Borrower for any period,
an amount equal to (a) Net Income of such  Borrower for such period plus (b) the
sum of, in each  case to the  extent  included  in the  calculation  of such Net
Income  but  without  duplication,  (i) any  provision  for income  taxes,  (ii)
Interest  Expense,  (iii)  intercompany  interest  expense that would  otherwise
eliminate in the consolidated  financial statements of Paracelsus in conformance
with GAAP, (iv) intercompany  management fees or other intercompany charges that
would otherwise eliminate in the consolidated financial statements of Paracelsus
in conformance with GAAP, (v) loss from extraordinary  items, (vi) non-cash loss
from a change in accounting  principles,  (vii)  depreciation  and  amortization
expense,  (viii) any non-cash impairment charge, (ix) any non-cash  compensation
deduction as the result of any grant of Stock or Stock Equivalents to employees,
officers,  directors or  consultants,  (x) any aggregate net loss from the sale,
exchange or other  disposition  of capital  assets by such Borrower and (xi) any
non-cash charge or loss separately reported on the face of Paracelsus'  publicly
reported financial statements as an unusual,  restructuring or similar charge to
the extent such charge or loss is  attributable  to the Borrowers  minus (c) the
sum of, in each  case to the  extent  included  in the  calculation  of such Net
Income but without  duplication,  (i) any credit for income tax,  (ii)  interest
income, (iii) gains from extraordinary items for such period, (iv) non-cash gain
from a change in  accounting  principles,  (v) any  aggregate  net gain from the
sale, exchange or other disposition of capital assets by such Borrower, (vi) any
non-cash gain separately  reported on the face of Paracelsus'  publicly reported
financial  statements as an unusual  restructuring or similar gain to the extent
such gain is attributable  to the Borrowers,  (vii) the reversal of any non-cash
compensation  deduction as the result of any grant of Stock or Stock Equivalents
to  employees,  officers,  directors  or  consultants  and  (viii)  intercompany
management  revenues or other intercompany income that would otherwise eliminate
in the consolidated financial statements of Paracelsus in conformance with GAAP.

                  "Eligible  Assignee"  means (a) a Lender or any  Affiliate  or
Approved  Fund of such  Lender;  (b) a  commercial  bank having  total assets in
excess  of  $5,000,000,000;  (c) a finance  company,  insurance  company,  other
financial institution or fund reasonably acceptable to the Administrative Agent,
which is regularly  engaged in making loans, and having a net worth,  determined
in accordance with GAAP, in excess of  $250,000,000  or, to the extent net worth
is less than such  amount,  such a finance  company,  insurance  company,  other
financial institution or fund, reasonably acceptable to the Administrative Agent
and the  Borrowers;  or (d) a  savings  and loan  association  or  savings  bank
organized  under the laws of the United  States or any State thereof which has a
net worth, determined in accordance with GAAP, in excess of $250,000,000.

                  "Eligible  Real  Property"  means  the real  estate,  tangible
personal  property  and fixtures of hospital  facilities  (i) leased or owned by
Lancaster  Hospital  Corporation  and in the case of the real property leased by
Lancaster Hospital Corporation,  owned by Paracelsus Real Estate Corporation and
(ii) owned by  Paracelsus  Mesquite  Hospital,  Inc.  or such other  property of
comparable value (based on the trailing 12 month EBITDA thereof)  substituted as
collateral therefor with the consent of the Agents in their sole discretion.

                  "Eligible Real Property Availability" means the portion of the
Eligible  Receivables  of the  Borrowers  owning or operating  the Eligible Real
Property included in clause (b) of the definition of Borrowing Base.

                  "Eligible  Receivable" means the gross outstanding  balance of
each Account of any Borrower generated in the ordinary course of such Borrower's
business  from the  sale of  medical,  hospital  or  other  healthcare  goods or
rendition of medical, hospital or other healthcare services;  provided, however,
that no Account  shall be an Eligible  Receivable  if: (a) the amount due on the
Account,  including any  deductible  or  copayment,  is payable by an individual
beneficiary,  recipient or subscriber  individually  ("Self Pay Amount") and not
directly to a Borrower by a Governmental Authority obligated on any Governmental
Receivable,   employer  funded  health  plan,  managed  care  organization,   or
commercial medical insurance carrier reasonably acceptable to Lenders (provided,
however, that the portion of the Account that is not a Self Pay Amount may be an
Eligible Receivable), (b) the Account remains unpaid more than 150 days past the
claim or invoice  date (but in no event more than 180 days after the  applicable
medical services have been rendered); (c) the Account is subject to any asserted
defense, set-off, counterclaim, deduction, discount, credit, chargeback, freight
claim,  allowance, or adjustment of any kind; (d) any part of any goods the sale
of which has given rise to the Account has been  returned,  rejected,  lost,  or
damaged;  (e) in the case of an Account which arises from the sale of goods by a
Borrower, the sale was not an absolute sale, or the sale was made on consignment
or on approval or on a sale-or-return basis, or the sale was made subject to any
other repurchase or return agreement,  or the goods have not been shipped to the
Account Debtor or its designee;  (f) in the case of an Account which arises from
the performance of medical services, the medical services have actually not been
performed or the medical  services were  undertaken in violation of any law; (g)
the  Account is  subject to a Lien other than a Lien in favor of the  Collateral
Agent  or  Lien  described  by  subclause  (a) of the  definition  of  Customary
Permitted  Liens; (h) any Borrower knows or should have known of the bankruptcy,
receivership,  reorganization,  or  insolvency  of the Account  Debtor;  (i) the
Account is evidenced by chattel  paper or an instrument of any kind, or has been
reduced to judgment;  (j) the Account is an account of an Account  Debtor having
its principal  place of business or executive  office outside the United States;
(k) the Account  Debtor is an Affiliate or Subsidiary of any Borrower;  (l) more
than (50%) of the aggregate  balance of all Accounts of any Borrower  owing from
the Account Debtor  obligated on the Account are outstanding  more than 150 days
past their invoice date; (m) (25%) or more of the aggregate  unpaid  Accounts of
any  Borrower  from any  single  Account  Debtor  other  than from  Governmental
Authorities  obligated on any  Governmental  Receivable are not deemed  Eligible
Receivables;  (n) the total unpaid Accounts of any Borrower  related to a single
Account  Debtor,  except for Account Debtors who are  Governmental  Authorities,
exceed  (20%) of the net amount of all  Eligible  Receivables  of such  Borrower
(including  Governmental  Receivables);  (o)  any  covenant,  representation  or
warranty  contained in any Loan  Document  with respect to such Account has been
breached;  (p) the hospital facility from which such Account arose has been sold
or closed;  (q) such Account is generated by an Eligible  Real Property and such
Eligible Real Property has been mortgaged  other than in favor of the Collateral
Agent;  or  (r)  the  Account  fails  to  meet  such  other  specifications  and
requirements  which may from time to time be  established  by the Agents in good
faith,  in their  reasonable  judgment  based on  collectibility  of  Borrowers'
Accounts and performance of the Borrowers.

                  "Environmental Laws" means all applicable Requirements of Law
now or hereafter in effect, as amended or supplemented from time to time,
relating to pollution or the regulation and protection of human health, safety,
the environment or natural resources, including the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 USC.ss. 9601
et seq.); the Hazardous Material Transportation Act, as amended (49 USC.ss.
180 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as
amended (7 U.S.C.ss. 136 et seq.); the Resource Conservation and Recovery Act,
as amended (42 U.S.C.ss. 6901 et seq.); the Toxic Substance Control Act, as
amended (42 U.S.C.ss. 7401 et seq.); the Clean Air Act, as amended (42 USC.ss.
740 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C.ss.
1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C.ss.
651 et seq.); the Safe Drinking Water Act, as amended (42 U.S.C.ss. 300f et
seq.); and their state and local counterparts or equivalents.

                  "Environmental  Liabilities and Costs" means,  with respect to
any Person, all liabilities,  obligations,  responsibilities,  Remedial Actions,
losses, damages, punitive damages,  consequential damages, treble damages, costs
and expenses (including all fees, disbursements and expenses of counsel, experts
and consultants and costs of  investigation  and  feasibility  studies),  fines,
penalties, sanctions and interest incurred as a result of any claim or demand by
any other Person, whether based in contract,  tort, implied or express warranty,
strict liability, criminal or civil statute, including any thereof arising under
any  Environmental  Law,  Permit,  order  or  agreement  with  any  Governmental
Authority or other Person,  which relate to any environmental,  health or safety
condition or a Release or threatened Release,  and result from the past, present
or future operations of, or ownership of property by, such Person.

                  "Environmental   Lien"   means   any  Lien  in  favor  of  any
Governmental Authority for Environmental Liabilities and Costs.

                  "ERISA" means the Employee  Retirement  Income Security Act of
1974 (or any successor legislation thereto), as amended from time to time.

                  "ERISA  Affiliate" means any trade or business (whether or not
incorporated)  under  common  control or treated as a single  employer  with any
Borrower within the meaning of Section 414 (b) or (c) of the Code.

                  "ERISA  Event"  means  (a) a  reportable  event  described  in
Section  4043(b) or  4043(c)(1),  (2),  (3),  (5), (6), (8) or (9) of ERISA with
respect to a Title IV Plan or a  Multiemployer  Plan  unless  the 30-day  notice
requirement  with  respect  to such event has been  waived by the PBGC;  (b) the
withdrawal of any Borrower or any ERISA  Affiliate  from a Title IV Plan subject
to  Section  4063 of  ERISA  during a plan  year in  which it was a  substantial
employer,  as defined in Section  4001(a)(2) of ERISA and immediately after such
withdrawal,  the Title IV Plan has  nonforfeitable  benefits which are not fully
funded;  (c) the  complete or partial  withdrawal  of any  Borrower or any ERISA
Affiliate from any  Multiemployer  Plan under  circumstances  that result in any
Withdrawal   Liability;   (d)  notice  of  reorganization  or  insolvency  of  a
Multiemployer Plan; (e) the filing of a notice of intent to terminate a Title IV
Plan or the treatment of a plan amendment as a termination under Section 4041 of
ERISA;  (f) the  institution  of  proceedings  to  terminate  a Title IV Plan or
Multiemployer   Plan  by  the  PBGC;  (g)  the  failure  to  make  any  required
contribution to a Title IV Plan or  Multiemployer  Plan; (h) the imposition of a
lien under  Section 412 of the Code or Section  302 of ERISA on any  Borrower or
any ERISA Affiliate;  or (i) any other event or condition which might reasonably
be  expected  to  constitute  grounds  under  Section  4042  of  ERISA  for  the
termination of, or the appointment of a trustee to administer, any Title IV Plan
or  Multiemployer  Plan or the  imposition  of any  liability  under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of
ERISA.

                  "Eurocurrency  Liabilities"  has the meaning  assigned to that
term in  Regulation D of the Federal  Reserve  Board,  as in effect from time to
time.

                  "Eurodollar  Base Rate"  means,  with  respect to any Interest
Period for any Eurodollar Rate Loan, the rate (rounded upwards, if necessary, to
the nearest 1/16 of 1%) determined by the Administrative Agent to be the offered
rate for deposits in Dollars for the applicable Interest Period which appears on
the Dow Jones Markets  Telerate Page 3750 as of 11:00 a.m.,  London time, on the
second full Business Day next  preceding the first day of each Interest  Period.
In the event  that such rate does not appear on the Dow Jones  Markets  Telerate
Page 3750 (or otherwise on the Dow Jones Markets  screen),  the Eurodollar  Base
Rate for the purposes of this  definition  shall be  determined  by reference to
such other comparable publicly available service for displaying Eurodollar Rates
as may be selected by the Administrative Agent.

                  "Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar  Lending Office" opposite
its name on Schedule II or on the Assignment and Acceptance by which it became a
Lender (or, if no such office is specified, its Domestic Lending Office) or such
other office of such Lender as such Lender may from time to time specify as such
to the Borrower and the Administrative Agent.

                  "Eurodollar  Rate" means,  with respect to any Interest Period
for any  Eurodollar  Rate Loan, an interest rate per annum equal to the rate per
annum  obtained by dividing  (a) the  Eurodollar  Base Rate by (b) a  percentage
equal to 100% minus the reserve  percentage  applicable two Business Days before
the first day of such Interest Period under regulations issued from time to time
by the Federal Reserve Board for  determining  the maximum  reserve  requirement
(including any emergency,  supplemental or other marginal  reserve  requirement)
for a member  bank of the  Federal  Reserve  System  in New York City that is at
least the same size as any prime bank  located  in New York City and  designated
from  time  to time  by the  Lenders  consisting  of or  including  Eurocurrency
Liabilities (or with respect to any other category of liabilities which includes
deposits by reference to which the Eurodollar Rate is determined)  having a term
equal to such Interest Period.

                  "Eurodollar  Rate Loan"  means any Loan that,  for an Interest
Period, bears interest based on the Eurodollar Rate.

                  "Event of Default" has the meaning specified in Section 9.1.

                  "Facility"  means the  Revolving  Credit  Commitments  and the
provisions herein related to the Revolving Loans and Letters of Credit.

                  "Fair  Market  Value" means with respect to any asset or group
of assets at any date,  the value of the  consideration  obtainable in a sale of
such  asset at such  date  assuming  a sale by a  willing  seller  to a  willing
purchaser  dealing at arm's  length and  arranged  in an orderly  manner  over a
reasonable  period of time having  regard to the nature and  characteristics  of
such asset, as reasonably  determined by a Responsible Officer of such Borrower,
or, if such asset  shall have been the subject of a  relatively  contemporaneous
appraisal  by an  independent  third  party  appraiser,  the  basic  assumptions
underlying which have not materially changed since its date, the value set forth
in such appraisal.

                  "Federal  Funds Rate"  means,  for any period,  a  fluctuating
interest  rate per annum equal for each day during  such period to the  weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers,  as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal  Reserve  Bank of New York,  or, if such rate is not so published
for any day which is a Business Day, the average of the  quotations for such day
on such  transactions  received by the  Administrative  Agent from three Federal
funds brokers of recognized standing selected by it.

                  "Federal  Reserve  Board"  means the Board of Governors of the
Federal Reserve System, or any successor thereto.

                  "Financial  Covenant Debt" of any Person means Indebtedness of
the type  specified  in clauses  (a),  (b),  (c),  (d),  (e), (f) and (h) of the
definition of  "Indebtedness,"  but excluding any  outstanding  Letter of Credit
Obligations  to the  extent  they  are cash  collateralized  by cash in the Cash
Collateral Account.

                  "Financial Statements" means the financial statements of the
Borrowers delivered in accordance with Sections 4.4 and
6.1.

                  "Fiscal  Quarter" means each of the three month periods ending
on March 31, June 30, September 30 and December 31.

                  "Fiscal Year" means the twelve month period ending on December
31.

                  "Flint River" means Paracelsus Macon County Medical Center,
Inc.

                  "GAAP" means generally accepted  accounting  principles in the
United  States  of  America  as in  effect  from  time to time set  forth in the
opinions and pronouncements of the Accounting  Principles Board and the American
Institute of Certified Public  Accountants and the statements and pronouncements
of the Financial Accounting Standards Board and/or their respective  successors,
or in such other  statements  by such other  entity as may be in general  use by
significant segments of the accounting  profession,  which are applicable to the
circumstances as of the date of determination.

                  "Governmental Authority" means any nation or federal, state or
local government, or any political subdivision thereof and any entity exercising
executive,  legislative,  judicial, regulatory or administrative functions of or
pertaining to the government.

                  "Governmental   Receivables"   means  with   respect  to  each
Borrower, the Accounts of such Borrower due from medicare,  medicaid, TRICARE or
any other Governmental Authority.

                  "Guaranty  Obligation"  means,  as applied to any Person,  any
direct or  indirect  liability,  contingent  or  otherwise,  of such Person with
respect to any Indebtedness of another Person,  if the purpose or intent of such
Person in  incurring  the  Guaranty  Obligation  is to provide  assurance to the
obligee of such  Indebtedness that such Indebtedness will be paid or discharged,
or that any holder of such  Indebtedness will be protected (in whole or in part)
against loss in respect thereof including,  (a) the direct or indirect guaranty,
endorsement  (other than for  collection  or deposit in the  ordinary  course of
business),  co-making,  discounting  with recourse or sale with recourse by such
Person of  Indebtedness  of another  Person and (b) any liability of such Person
for  Indebtedness  of  another  Person  through  any  agreement  (contingent  or
otherwise) (i) to purchase, repurchase or otherwise acquire such Indebtedness or
any security therefor,  or to provide funds for the payment or discharge of such
Indebtedness  (whether in the form of a loan, advance,  stock purchase,  capital
contribution  or otherwise),  (ii) to maintain the solvency or any balance sheet
item,  level of income or financial  condition of another Person,  (iii) to make
take-or-pay or similar payments,  if required,  regardless of non-performance by
any other party or parties to an agreement,  (iv) to purchase, sell or lease (as
lessor or lessee) property,  or to purchase or sell services,  primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to assure
the holder of such  Indebtedness  against  loss, or (v) to supply funds to or in
any other manner  invest in such other Person  (including to pay for property or
services  irrespective of whether such property is received or such services are
rendered),  if in the case of any agreement described under subclause (i), (ii),
(iii),  (iv) or (v) of clause (b) of this sentence the primary purpose or intent
thereof is as described in the  preceding  sentence.  The amount of any Guaranty
Obligation  shall be equal to the amount of the  Indebtedness  so  guaranteed or
otherwise supported.

                  "Hedging Contracts" means all Interest Rate Contracts, foreign
exchange  contracts,  currency  swap or option  agreements,  forward  contracts,
commodity  swap,  purchase or option  agreements,  other commodity price hedging
arrangements, and all other similar agreements or arrangements designed to alter
the risks of any Person arising from  fluctuations in interest  rates,  currency
values or commodity prices.

                  "Indebtedness" of any Person means without duplication (a) all
indebtedness  of such Person for borrowed  money,  (b) all  obligations  of such
Person  evidenced by notes,  bonds,  debentures or similar  instruments or which
bear interest, (c) all reimbursement and all obligations with respect to letters
of  credit  to the  extent  they are not cash  collateralized  pursuant  to this
Agreement, bankers' acceptances,  surety bonds and performance bonds, whether or
not matured, (d) all indebtedness for the deferred purchase price of property or
services, other than trade payables incurred in the ordinary course of business,
(e) all  indebtedness  of such Person  created or arising under any  conditional
sale or other title  retention  agreement  with respect to property  acquired by
such Person  (even  though the rights and remedies of the seller or lender under
such  agreement in the event of default are limited to  repossession  or sale of
such property),  or pursuant to any  sale-leaseback  transaction (f) all Capital
Lease Obligations of such Person and the present value of future rental payments
under all synthetic leases, (g) all Guaranty Obligations of such Person, (h) all
obligations  of such Person to purchase,  redeem,  retire,  defease or otherwise
acquire for value any Stock or Stock Equivalents of such Person,  valued, in the
case  of  redeemable  preferred  stock,  at  the  greater  of its  voluntary  or
involuntary  liquidation  preference plus accrued and unpaid dividends,  (i) all
payments  that  such  Person  would  have  to  make  in the  event  of an  early
termination  on the date  Indebtedness  of such  Person is being  determined  in
respect of Hedging Contracts of such Person and (j) all Indebtedness of the type
referred  to above to the  extent  secured  by (or for which the  holder of such
Indebtedness has an existing right,  contingent or otherwise,  to be secured by)
any Lien upon or in property (including Accounts and general  intangibles) owned
by such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.

                  "Indemnitees"  has  the  meaning  specified  in  Section  11.4
generally.

                  "Interest  Expense" means, for any Person for any period,  (a)
total interest  expense of such Person for such period  determined in conformity
with GAAP and including,  in any event, interest capitalized during construction
for such  period and net costs under  interest  rate  contracts  for such period
minus (b) the sum of (i) net gains of such Person under  interest rate contracts
for such period determined in conformity with GAAP plus (ii) any interest income
of such Person for such period determined in conformity with GAAP.

                  "Interest  Period" means,  in the case of any Eurodollar  Rate
Loan, (a) initially, the period commencing on the date such Eurodollar Rate Loan
is made or on the date of conversion of a Base Rate Loan to such Eurodollar Rate
Loan and  ending  one,  two or  three  months  thereafter,  as  selected  by the
Borrowers in their Notice of Borrowing or Notice of Conversion  or  Continuation
given to the  Administrative  Agent  pursuant  to  Section  2.2 or 2.9,  and (b)
thereafter, if such Loan is continued, in whole or in part, as a Eurodollar Rate
Loan  pursuant  to  Section  2.9,  a  period  commencing  on the last day of the
immediately  preceding  Interest  Period  therefor  and ending one, two or three
months thereafter, as selected by the Borrowers in their Notice of Conversion or
Continuation  given  to  the  Administrative  Agent  pursuant  to  Section  2.9;
provided,  however,  that all of the foregoing  provisions  relating to Interest
Periods in respect of Eurodollar Rate Loans are subject to the following:

(i) if any Interest  Period would otherwise end on a day which is not a Business
Day, such Interest Period shall be extended to the next succeeding Business Day,
unless the result of such extension would be to extend such Interest Period into
another  calendar  month,  in which event such Interest  Period shall end on the
immediately preceding Business Day;

(ii) any  Interest  Period  that begins on the last  Business  Day of a calendar
month (or on a day for which there is no  numerically  corresponding  day in the
calendar  month  at the end of  such  Interest  Period)  shall  end on the  last
Business Day of a calendar month;

(iii) if any Interest Period would,  pursuant to this definition,  otherwise end
after the Revolving Credit  Termination  Date, such Interest Period shall end on
the Revolving Credit Termination Date;

(iv)     no Borrower may select any Interest Period in respect of Loans having
an aggregate principal amount of less than $1,000,000;
and

(v)      there shall be outstanding at any one time no more than six Interest
Periods in the aggregate.

                  "Interest  Rate  Contracts"   means  all  interest  rate  swap
agreements,  interest rate cap agreements,  interest rate collar  agreements and
interest rate insurance.

                  "Intermediate Concentration Account" has the meaning specified
in Section 2.16(a).

                  "Investment"  means,  with  respect  to any  Person,  (a)  any
purchase or other acquisition by that Person of (i) any Security issued by, (ii)
a  beneficial  interest  in any  Security  issued by, or (iii) any other  equity
ownership  interest in, any other Person, (b) any purchase by that Person of all
or a significant  part of the assets of a business  conducted by another Person,
and (c) any loan,  advance  (other than  deposits  with  financial  institutions
available for withdrawal on demand,  prepaid expenses,  accounts  receivable and
similar  items made or incurred in the ordinary  course of business as presently
conducted),  or  capital  contribution  by  that  Person  to any  other  Person,
including  all  Indebtedness  to such Person  arising from a sale of property by
such Person other than in the ordinary course of its business.

                  "Investment  Fund"  means  (a) any  single  customer  account,
pooled separate account or general account of an insurance company, or any other
account, the assets of which could be considered "plan assets" of any Plan under
any of  Sections  3, 401 or 403 of ERISA,  (b) any  individual  trust or common,
collective or group trust maintained by any bank, or any other trust, the assets
of which could be  considered  "plan assets" under any of Sections 3, 401 or 403
of ERISA, or (c) any entity or fund not previously  mentioned  whose  underlying
assets  include  "plan  assets" of any Plan by reason of the  investment  of the
entity or fund by "employee benefit plan" (within the meaning of Section 3(3) of
ERISA) or a "plan"  (within the meaning of Section  4975(e)(1)  of the Code) and
the application of the U.S. Department of Labor's "plan asset regulation."

                  "IRS" means the Internal  Revenue Service of the United States
or any successor thereto.

                  "Issuing  Bank"  means The Chase  Manhattan  Bank or any other
bank mutually  acceptable to CITBC and the relevant  beneficiaries that issues a
Letter of Credit for the account of any Borrower.

                  "Leases"  means,  with  respect  to any  Person,  all of those
leasehold  estates in real  property of such Person,  as lessee,  as such may be
amended, supplemented or otherwise modified from time to time.

                  "Lender" means each financial institution or other entity that
(a) is listed on the  signature  pages  hereof as a "Lender" or (b) from time to
time becomes a party hereto by execution of an Assignment and Acceptance.

                  "Letter of Credit" means any letter of credit issued  pursuant
to Section 2.3.

                  "Letter of Credit  Guaranties"  shall mean both the guaranties
delivered  by  CITBC to any  Issuing  Bank  providing  for the  guaranty  of the
obligations  of any Borrower to such  Issuing  Bank under the related  letter of
credit  application  or  reimbursement  agreement  (or other  similar  document)
between  such  Issuing  Bank  and such  Borrower  (and any  other  Borrower,  if
applicable)  and the execution by CITBC as a co-applicant  of a letter of credit
application or  reimbursement  agreement (or other similar  agreement)  with any
Borrower or Borrowers for delivery to an Issuing Bank with regard to a Letter of
Credit.

                  "Letter  of  Credit  Obligations"  means,  at  any  time,  the
aggregate amount  available to be drawn under all outstanding  Letters of Credit
in respect of which Letter of Credit Guaranties are then outstanding.

                  "Lien"   means   any   mortgage,   deed  of   trust,   pledge,
hypothecation,   assignment,  charge,  deposit  arrangement,  encumbrance,  lien
(statutory  or  other),  security  interest  or  preference,  priority  or other
security agreement or preferential  arrangement of any kind or nature whatsoever
intended to assure payment of any  Indebtedness or other  obligation,  including
any  conditional  sale or other title  retention  agreement,  the  interest of a
lessor under a Capital Lease, any financing lease having  substantially the same
economic  effect  as any of the  foregoing,  and  the  filing  of any  financing
statement   under  the  Uniform   Commercial  Code  or  comparable  law  of  any
jurisdiction naming the owner of the asset to which such Lien relates as debtor.

                  "Loan"  means any loan  made by any  Lender  pursuant  to this
Agreement.

                  "Loan  Documents"  means,  collectively,  this Agreement,  the
Revolving Credit Notes (if any), the Collateral  Documents and each certificate,
agreement or document executed by a Borrower and delivered to the Administrative
Agent or any Lender in  connection  with or pursuant to any of the foregoing and
any   amendments,   modifications,   supplements,   renewals,   extensions,   or
restatements thereof.

                  "Material  Adverse Effect" means any event or condition which,
alone or when  taken with  other  events or  conditions  occurring  or  existing
concurrently  with such event or condition (i) has a material  adverse effect on
the  business,   operations,   condition   (financial  or  otherwise),   assets,
liabilities,  prospects,  or properties of the Borrowers taken as a whole;  (ii)
has any material  adverse effect on the validity or  enforceability  of the Loan
Documents;  (iii)  materially  impairs the ability of the  Borrowers  taken as a
whole to pay and perform their Obligations;  (iv) materially impairs the ability
of the Lenders to enforce  their rights and remedies  under the Loan  Documents;
(v) has any material adverse effect on the Collateral  pledged to the Collateral
Agent, the Liens of the Lenders in the Collateral or the priority of such Liens;
or (vi) is reasonably  expected to have any material adverse effect on the Liens
of the  Lenders in the  Collateral  or the  priority  of such  Liens;  provided,
however, that any event or condition referred to in Sections 9.1(e), (f), or (j)
applicable  to Flint River  arising as a result of its existing  bond debt which
does not  constitute  a  Default  or Event of  Default  by virtue of any of such
Sections, shall not in and of itself constitute a Material Adverse Effect to the
extent such event affects Flint River.

                  "Material  Event of  Default"  means  the  Events  of  Default
specified in the following clauses of Section 9.1: clause (b) (to the extent the
provisions  thereof relate to the Borrowing Base or the Financial Statements),
clause (c) (provided,  however, that a breach of clauses (b), (c), (e) and (f)
of Section 7.12 and Sections 8.12, 8.14 and 8.15 shall not be a Material Event
of Default), and clauses (a), (d), (e), (f), (g), (j), (l) and (n).

                  "Maximum Credit" means, at any time, (a) the lesser of (i) the
aggregate of the Revolving  Credit  Commitments  in effect at such time and (ii)
the  Borrowing  Base  at  such  time  minus  (b)  the  aggregate  amount  of any
Availability  Reserve in effect at such time plus (c) the cash  deposited in the
Cash Collateral Account.

                  "Metropolitan" means Metropolitan Hospital, L.P., a Virginia
limited partnership.

                  "Mortgagee's Title Insurance Policy" means with respect to any
Eligible Real Property (a) a mortgagee's title policy (or policies) or marked up
unconditional  binder  (or  binders)  for  such  insurance  (or  other  evidence
acceptable to the Administrative Agent proving ownership thereof)  ("Mortgagee's
Title  Insurance   Policy")  dated  a  date   reasonably   satisfactory  to  the
Administrative  Agent,  and such policy  shall (A) be in an amount not less than
$10,000,000  (B) be issued at ordinary  rates,  (C) insure that the Lien granted
pursuant  to the  Mortgage  insured  thereby  creates a valid first Lien on such
parcel  free and clear of all defects  and  encumbrances,  except such as may be
approved by the Administrative Agent and Customary Permitted Liens, (D) name the
Collateral  Agent  for  the  benefit  of the  Secured  Parties  as  the  insured
thereunder,  (E) be in a form of Texas Form T-Z for  Eligible  Real  Property in
Texas and be in the form of ALTA Loan  Policy - 1992 (or such  local  equivalent
thereof as is reasonably  satisfactory to the Administrative Agent) for Eligible
Real  Property  in other  jurisdiction,  (F)  contain a  comprehensive  lender's
endorsement (including, but not limited to, a revolving credit endorsement and a
floating rate endorsement) and (G) be issued by Chicago Title Insurance Company,
Fidelity  National Title  Insurance  Company,  First  American  Title  Insurance
Company,  Lawyers  Title  Insurance  Corporation  or  any  other  title  company
reasonably  satisfactory  to the  Collateral  Agent  (including  any such  title
companies acting as co-insurers or reinsurers),  (i) evidence satisfactory to it
that all premiums in respect of each such policy , all recording fees and stamp,
documentary,  intangible  or  mortgage  taxes,  if any, in  connection  with the
Mortgage have been paid and (ii) a copy of all documents  referred to, or listed
as exceptions to title, in such title policy (or policies).

                  "Mortgages" means the mortgages,  deeds of trust or other real
estate security documents made or required herein to be made by the Borrowers to
or for the benefit of the Agents and the Lenders in respect of the Eligible Real
Property.

                  "Multiemployer Plan" means a multiemployer plan, as defined in
Section  4001(a)(3) of ERISA, to which any Borrower,  or any ERISA Affiliate has
any obligation or liability, contingent or otherwise.

                  "Net Cash Proceeds"  means  proceeds  received by any Borrower
after the Closing Date in cash or Cash Equivalents from any Asset Sale permitted
under Section 8.4.

                  "Net  Income"  means,  for any Person for any period,  the net
income (or loss) of such Person for such period,  determined in conformity  with
GAAP,  and in all events (a) the net income of any  subsidiary  or  Affiliate of
such Person shall not be considered and shall be excluded, (b) any net gain (but
not loss) resulting from an Asset Sale by such Person other than in the ordinary
course of business shall be excluded, and (c) extraordinary gains and losses and
any one-time increase or decrease to net income which is required to be recorded
because of the  adoption of new  accounting  policies,  practices  or  standards
required by GAAP shall be excluded.

                  "Non-Funding  Lender"  has the  meaning  specified  in Section
2.2(d).

                  "Non-U.S.  Lender" means each Lender or  Administrative  Agent
that is not a United  States  person as defined in  Section  7701(a)(30)  of the
Code.

                  "Notice of  Borrowing"  has the meaning  specified  in Section
2.2(a).

                  "Notice  of  Conversion  or  Continuation"   has  the  meaning
specified in Section 2.9.

                  "Obligations"   means  the   Loans,   the   Letter  of  Credit
Obligations and all other advances, debts, liabilities,  obligations,  covenants
and duties owing by the Borrowers to the  Administrative  Agent,  the Collateral
Agent, any Lender or any Indemnitee,  of every type and description,  present or
future, arising under this Agreement or under any other Loan Document, by reason
of an extension of credit,  opening or amendment of a Letter of Credit  Guaranty
or  payment  of any  draft  drawn  thereunder,  loan,  indemnification,  foreign
exchange transaction,  Hedging Contract or otherwise, whether direct or indirect
(including  those acquired by  assignment),  absolute or  contingent,  due or to
become due, now existing or hereafter  arising and however  acquired and whether
or not evidenced by any note, guaranty or other instrument or for the payment of
money. The term  "Obligations"  includes all letter of credit  guaranties,  cash
management and other fees and all interest,  charges, expenses, fees, attorneys'
fees and  disbursements  and other sums  chargeable to the Borrowers  under this
Agreement or any other Loan  Document and all  obligations  of the  Borrowers to
cash collateralize Letter of Credit Obligations.

                  "Paracelsus" means Paracelsus Healthcare Corporation.

                  "Paracelsus Virginia" means Paracelsus of Virginia, Inc., a
Virginia corporation and general partner of Metropolitan.

                  "Paribas" means Paribas.
                  "PBGC" means the Pension Benefit  Guaranty  Corporation or any
successor thereto.

                  "Permit" means any permit, approval,  authorization,  license,
variance  or  permission  required  from  a  Governmental   Authority  under  an
applicable Requirement of Law.

                  "Person"   means  an  individual,   partnership,   corporation
(including  a business  trust),  joint stock  company,  estate,  trust,  limited
liability company, unincorporated association, joint venture or other entity, or
a Governmental Authority.

                  "Prepayment  Premium"  means  (a) on any  date  that  is on or
before six months after the Closing  Date, an amount equal to 1.5% of the lesser
of the amount of the  Revolving  Credit  Commitments  then being  terminated  or
$50,000,000  and (b) on any date  after  the date that is six  months  after the
Closing  Date but on or before the first  anniversary  of the Closing  Date,  an
amount  equal  to 1% of  the  lesser  of the  amount  of  the  Revolving  Credit
Commitments then being terminated or $50,000,000.

                  "Protective  Advances" means all expenses,  disbursements  and
advances  incurred by the  Administrative  Agent  pursuant to the Loan Documents
after the occurrence and during the continuance of an Event of Default which the
Administrative  Agent  reasonably  deems  necessary  or desirable to preserve or
protect the  Collateral or any portion  thereof or to enhance the  likelihood or
maximize the amount of repayment of the Obligations.

                  "Ratable  Portion" or  "ratably"  means,  with  respect to any
Lender, the percentage  obtained by dividing (a) the Revolving Credit Commitment
of such Lender by (b) the aggregate  Revolving Credit Commitments of all Lenders
(or, at any time after the Revolving  Credit  Termination  Date,  the percentage
obtained  by  dividing  the  aggregate  outstanding  principal  balance  of  the
Revolving Credit Outstandings owing to such Lender by the aggregate  outstanding
principal balance of the Revolving Credit Outstandings owing to all Lenders).

                  "Register" has the meaning specified in Section 11.2(c).

                  "Reimbursement Obligations" means all matured reimbursement or
repayment  obligations  of the  Borrowers to CITBC with respect to payments made
under Letter of Credit Guaranties not provided by Sections 9.3 and 2.7(c).

                  "Release"  means,  with  respect to any Person,  any  release,
spill, emission,  leaking, pumping,  injection,  deposit,  disposal,  discharge,
dispersal,  leaching or  migration,  in each case, of any  Contaminant  into the
indoor  or  outdoor  environment  or into or out of any  property  owned by such
Person,  including  the movement of  Contaminants  through or in the air,  soil,
surface water, ground water or property.

                  "Remaining  Borrowers"  has the meaning  specified  in Section
2.17.

                  "Remedial  Action" means all actions required to (a) clean up,
remove,  treat or in any other way  address  any  Contaminant  in the  indoor or
outdoor  environment,  (b)  prevent the Release or threat of Release or minimize
the  further  Release so that a  Contaminant  does not  migrate or  endanger  or
threaten  to  endanger  public  health  or  welfare  or the  indoor  or  outdoor
environment  or  (c)  perform   pre-remedial   studies  and  investigations  and
post-remedial monitoring and care.

                  "Required   Amount"  means  with  respect  to  the  applicable
Borrower, an amount equal to all Loans outstanding and the outstanding amount of
all other  Obligations of all the Borrowers on the applicable date multiplied by
such  Borrower's  pro rata share of the  Borrowing  Base; a Borrower's  pro rata
share of the  Borrowing  Base will be  calculated  by dividing (i) the Borrowing
Base less the Availability  Reserves attributable to the Eligible Receivables of
such  Borrower  by (ii) the  aggregate  Borrowing  Base  less  the  Availability
Reserves attributable to the Eligible Receivables of all Borrowers.

                  "Requirement  of Law" means,  with respect to any Person,  the
common  law  and  all  federal,   state,  local  and  foreign  laws,  rules  and
regulations,   orders,  judgments,  decrees  and  other  determinations  of  any
Governmental  Authority  or  arbitrator  binding  upon such Person or any of its
property or to which such Person or any of its property is subject.

                  "Requisite Lenders" means,  collectively,  Lenders having more
than  fifty-one  percent  (51%)  of  the  aggregate  outstanding  amount  of the
Revolving Credit  Commitments or, after the Revolving Credit  Termination  Date,
fifty-one percent (51%) of the aggregate Revolving Credit Outstandings.

                  "Responsible  Officer" means, with respect to any Person,  the
chief executive officer of such Person,  the Treasurer of such Person, the chief
financial officer of such Person or the controller of Paracelsus.

                  "Restricted Payment" means any of the following,  except those
made  solely  in  Stock  or  Stock  Equivalents:   (a)  any  dividend  or  other
distribution,  direct or indirect,  on account of any Stock or Stock Equivalents
of any Borrower now or hereafter outstanding,  except a dividend or distribution
payable  solely  to any  Borrower  or  any  partner  of  Metropolitan,  (b)  any
redemption,  retirement,  sinking  fund or similar  payment,  purchase  or other
acquisition for value, direct or indirect,  of any Stock or Stock Equivalents of
any Borrower now or hereafter  outstanding  other than one payable solely to any
Borrower,  and (c) any payment or  prepayment  of  principal,  premium (if any),
interest,  fees  (including  fees to obtain any waiver or consent in  connection
with any Security) or other  charges on, or  redemption,  purchase,  retirement,
defeasance, sinking fund or similar payment with respect to, any Indebtedness of
any Borrower to  Paracelsus  or any  Affiliate  of any  Borrower  other than any
Borrower,  other than any required redemptions,  retirement,  purchases or other
payments in respect of Indebtedness owing to any Affiliate.

                  "Revolving Credit Borrowing" means Revolving Loans made on the
same day by the Lenders ratably  according to their respective  Revolving Credit
Commitments.

                  "Revolving  Credit  Commitment"  means,  with  respect to each
Lender,  the  commitment  of such  Lender to make  Revolving  Loans and  acquire
interests in other  Revolving  Credit  Outstandings  in the aggregate  principal
amount  outstanding  not to exceed the amount set forth  opposite  such Lender's
name on Schedule III under the caption "Revolving Credit Commitment," as amended
to reflect each  Assignment and  Acceptance  executed by such Lender and as such
amount may be changed pursuant to this Agreement.  The initial  aggregate amount
of all the Revolving Credit Commitments is $62,000,000.

                  "Revolving  Credit Note" means a joint and several  promissory
note of the Borrowers , subject to Section  2.1(b),  payable to the order of any
Lender in a  principal  amount  equal to the amount of such  Lender's  Revolving
Credit Commitment evidencing the aggregate Indebtedness of the Borrowers to such
Lender resulting from the Revolving Loans owing to such Lender.

                  "Revolving Credit Outstandings" means, at any particular time,
the sum of (a) the principal  amount of the Revolving Loans  outstanding at such
time plus (b) the Letter of Credit Obligations outstanding at such time.

                  "Revolving Credit Termination Date" shall mean the earliest of
(a) the Scheduled Termination Date, (b) the date of termination of the Revolving
Credit  Commitments  pursuant  to  Section  2.4 and (c) the  date on  which  the
Obligations become due and payable pursuant to Section 9.2.

                  "Revolving Loan" has the meaning specified in Section 2.1.

                  "Scheduled  Termination  Date" means the third  anniversary of
the date hereof.

                  "Secured Parties" means the Lenders and the Agents.

                  "Security"  means any Stock,  Stock  Equivalent,  voting trust
certificate,  bond, debenture,  note or other evidence of Indebtedness,  whether
secured, unsecured, convertible or subordinated, or any certificate of interest,
share or  participation  in, or any  temporary  or interim  certificate  for the
purchase or acquisition  of, or any right to subscribe to,  purchase or acquire,
any of the foregoing, but shall not include any evidence of the Obligations.

                  "Security Agreement" means an agreement,  in substantially the
form of Exhibit D, executed by the Borrowers.

                  "Solvent" means, with respect to any Person, that the value of
the assets of such Person (both at fair value and present fair  saleable  value)
is, on the date of  determination,  greater than the total amount of liabilities
(including  contingent and  unliquidated  liabilities) of such Person as of such
date and that, as of such date,  such Person is able to pay all  liabilities  of
such  Person as such  liabilities  mature and does not have  unreasonably  small
capital.  In computing the amount of contingent or  unliquidated  liabilities at
any time, such liabilities will be computed at the amount which, in light of all
the facts and  circumstances  existing at such time,  represents the amount that
can reasonably be expected to become an actual or matured liability.

                  "Stock" means shares of capital stock (whether  denominated as
common  stock  or  preferred  stock),  beneficial,   partnership  or  membership
interests, participations or other equivalents (regardless of how designated) of
or in a  corporation,  partnership,  limited  liability  company  or  equivalent
entity, whether voting or non-voting.

                  "Stock  Equivalents" means all securities  convertible into or
exchangeable for Stock and all warrants,  options or other rights to purchase or
subscribe for any Stock, whether or not presently  convertible,  exchangeable or
exercisable.

                  "Tax Return" has the meaning specified in Section 4.7(a).

                  "Taxes" has the meaning specified in Section 2.14(a).

                  "Title  IV  Plan"   means  a  pension   plan,   other  than  a
Multiemployer  Plan, which is covered by Title IV of ERISA to which the Borrower
or  any  ERISA  Affiliate  has  any  obligation  or  liability   (contingent  or
otherwise).

                  "UCC" means the Uniform  Commercial  Code as the same may from
time to time be in effect  in the State of New York or, to the  extent it may be
required to apply to any item or items of  Collateral,  the  Uniform  Commercial
Code as in effect in any other applicable jurisdiction.

                  "Unfunded  Pension  Liability"  means,  with  respect  to  any
Borrower at any time,  the sum of (a) the  amount,  if any, by which the present
value of all accrued  benefits under each Title IV Plan (other than any Title IV
Plan  subject to Section  4063 of ERISA)  exceeds the fair  market  value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA,  as determined as of the most recent  valuation date for such Title
IV Plan using the actuarial  assumptions in effect under such Title IV Plan, and
(b) the aggregate  amount of withdrawal  liability  that could be assessed under
Section  4063  with  respect  to each  Title IV Plan  subject  to such  Section,
separately  calculated  for  each  such  Title  IV  Plan as of its  most  recent
valuation  date and (c) for a  period  of five  years  following  a  transaction
reasonably  likely to be  covered  by  Section  4069 of ERISA,  the  liabilities
(whether or not  accrued)  that could be avoided by any  Borrower,  or any ERISA
Affiliate as a result of such transaction.

                  "Unused  Commitment Fee" has the meaning  specified in Section
2.10(a).

                  "Voting Stock" means Stock of any Person having ordinary power
to vote in the election of members of the board of directors, managers, trustees
or other controlling  Persons,  of such Person  (irrespective of whether, at the
time,  Stock of any other  class or classes of such  entity  shall have or might
have voting power by reason of the happening of any contingency).

                  "Weekly  Borrowing Base Certificate" has the meaning specified
in Section 6.1(g).

                  "Withdrawal  Liability" means, with respect to any Borrower at
any time,  the  aggregate  liability  incurred  (whether or not  assessed)  with
respect to all  Multiemployer  Plans  pursuant  to Section  4201 of ERISA or for
increases  in  contributions  required to be made  pursuant  to Section  4243 of
ERISA.

Section 1.2. Computation of Time Periods. In this Agreement,  in the computation
of periods of time from a specified  date to a later  specified  date,  the word
"from" means "from and  including"  and the words "to" and "until" each mean "to
but excluding" and the word "through" means "to and including."

Section 1.3.      Accounting Terms and Principles.

(a) Except as set forth below,  all accounting  terms not  specifically  defined
herein  shall  be  construed  in  conformity   with  GAAP  and  all   accounting
determinations  required to be made  pursuant  hereto  shall,  unless  expressly
otherwise provided herein, be made in conformity with GAAP.

(b) If any change in the accounting  principles  used in the  preparation of the
most  recent  Financial  Statements  referred  to in  Section  6.1 is  hereafter
required or permitted by the rules, regulations,  pronouncements and opinions of
the Financial  Accounting Standards Board or the American Institute of Certified
Public Accountants (or any successors thereto) and such change is adopted by the
Borrowers without objection from its independent  public accountants and results
in a change in any of the calculations required by Article V had such accounting
change not  occurred,  the parties  hereto agree to enter into  negotiations  in
order to amend such  provisions so as to equitably  reflect such change with the
desired result that the criteria for evaluating  compliance  with such covenants
by the  Borrowers  shall be the same after such change as if such change had not
been  made;  provided,  however,  that no  change in GAAP  that  would  affect a
calculation that measures compliance with any covenant contained in Article V or
Article VIII shall be given effect until such  provisions are amended to reflect
such changes in GAAP.

Section 1.4.      Certain Terms.

(a) The words "herein," "hereof" and "hereunder" and similar words refer to this
Agreement as a whole, and not to any particular Article, Section,  subsection or
clause in this Agreement.

(b)  References in this  Agreement to an Exhibit,  Schedule,  Article,  Section,
subsection  or  clause  refer to the  appropriate  Exhibit  or  Schedule  to, or
Article, Section, subsection or clause in this Agreement.

(c) Each  agreement  defined in this  Article I shall  include  all  appendices,
exhibits and schedules  thereto.  If the prior written  consent of the Requisite
Lenders is required hereunder for an amendment, restatement, supplement or other
modification  to any such agreement and such consent is obtained,  references in
this  Agreement  to such  agreement  shall be to such  agreement  as so amended,
restated, supplemented or modified.

(d)  References  in this  Agreement  to any statute  shall be to such statute as
amended or modified and in effect at the time any such reference is operative.

(e) The term "including" when used in any Loan Document means "including without
limitation" except when used in the computation of time periods.

(f)      The terms "Lender," "Administrative Agent" and "Collateral Agent"
include their respective successors.

                  (g)      Reference in any Loan Document to the "knowledge" or
"notice" of any Borrower means the actual knowledge or
notice of a Responsible Officer.

Article II

                                  THE FACILITY

Section 2.1.      The Revolving Credit Commitments.
                  --------------------------------

(a) On the terms and subject to the conditions contained in this Agreement, each
Lender severally agrees to make loans (each a "Revolving Loan") to the Borrowers
from time to time on any  Business  Day during the period from the Closing  Date
until the Revolving Credit Termination Date in an aggregate amount not to exceed
at any  time  outstanding  for all  such  loans  by such  Lender  such  Lender's
Revolving Credit Commitment; provided, however, that at no time shall any Lender
be obligated  to make a Revolving  Loan (i) in excess of such  Lender's  Ratable
Portion  of the  Available  Credit  and (ii) to the  extent  that the  aggregate
Revolving Credit Outstandings, after giving effect to such Revolving Loan, would
exceed  the  Maximum  Credit in effect at such  time.  Within the limits of each
Lender's Revolving Credit  Commitment,  amounts of Revolving Loans repaid may be
reborrowed under this Section 2.1.

(b) Each of the Borrowers,  jointly and severally,  will be obligated in respect
of the aggregate  principal  amount of all Loans,  and the  aggregate  amount of
credit  available  hereunder  to any of the  Borrowers  at  any  time  shall  be
determined  taking into account all Loans  outstanding  and all Letter of Credit
Obligations, regardless of which of the Borrowers may have received the proceeds
of  any of the  Borrowings  or the  benefit  of any of the  Letters  of  Credit;
provided,  however,  that notwithstanding  anything to the contrary herein or in
any other Loan Document,  Metropolitan's liability with respect to the Loans and
Letter of Credit  Obligations and all other Obligations under the Loan Documents
shall be limited  to the  greater  of (a) the Loans and  outstanding  amounts of
Letters  of Credit  borrowed  by it or  directly  used for its  benefit  and (b)
$16,000,000;  provided further,  that  Metropolitan  shall not be liable for any
Letter  of  Credit   Obligations  to  the  extent  such   obligations  are  cash
collateralized pursuant to Section 9.3.

Section 2.2.      Borrowing Procedures.

(a)  Each  Revolving  Credit  Borrowing  shall  be made on  notice  given by the
Borrowers to the  Administrative  Agent (i) not later than 11:00 a.m.  (New York
City time) on the same day,  in the case of a  Borrowing  of Base Rate Loans and
(ii) not later than 1:00 p.m. (New York City time) three  Business  Days, in the
case of a Borrowing of Eurodollar Rate Loans,  prior to the date of the proposed
Revolving Credit Borrowing.  Each such notice shall be in substantially the form
of Exhibit E (a "Notice of Borrowing"), specifying (A) the date of such proposed
Revolving Credit Borrowing,  (B) the aggregate amount of such proposed Revolving
Credit  Borrowing,  (C)  whether any portion of the  proposed  Revolving  Credit
Borrowing will be of Base Rate Loans or Eurodollar  Rate Loans,  (D) the initial
Interest  Period or Periods  for any such  Eurodollar  Rate  Loans,  and (E) the
Available  Credit  (after  giving  effect  to  the  proposed   Revolving  Credit
Borrowing). The Revolving Loans shall be made as Base Rate Loans unless (subject
to Section 2.12) the Notice of Borrowing specifies that all or a portion thereof
shall be Eurodollar Rate Loans.  Each Revolving  Credit Borrowing shall be in an
aggregate  amount of not less than $500,000 or an integral  multiple of $100,000
in excess thereof.

(b) The  Administrative  Agent  shall give to each Lender  prompt  notice of the
Administrative  Agent's receipt of a Notice of Borrowing and, if Eurodollar Rate
Loans are  properly  requested  in such  Notice  of  Borrowing,  the  applicable
interest rate determined pursuant to Section 2.12(a).  Each Lender shall, before
12:00  noon (New York City  time) on the date of the  proposed  Borrowing,  make
available  to  the  Administrative   Agent  at  The  Chase  Manhattan  Bank,  in
immediately  available  funds,  such Lender's  Ratable  Portion of such proposed
Borrowing.  After the  Administrative  Agent's  receipt  of such  funds and upon
fulfillment  of the  applicable  conditions  set forth in Sections  3.1 (for the
initial Loans) and 3.2, the Administrative  Agent will make such funds available
to the  Borrowers in the manner  specified  in the Notice of Borrowing  and will
endeavour to make such funds  available to the  Borrowers by 3:00 p.m. (New York
City time) on the date of the proposed Borrowing; provided, however, that in the
case of Base  Rate  Loans  on the  same  day,  the  Administrative  Agent  shall
endeavour to make such funds  available to the  Borrowers by 5:00 p.m. (New York
City time) on the date of the proposed Borrowing.

(c) Unless the  Administrative  Agent shall have  received  notice from a Lender
prior to the date of any  proposed  Borrowing  that  such  Lender  will not make
available to the  Administrative  Agent such  Lender's  Ratable  Portion of such
Borrowing,  the  Administrative  Agent may assume that such Lender has made such
Ratable  Portion  available  to the  Administrative  Agent  on the  date of such
Borrowing in accordance with this Section 2.2 and the Administrative  Agent may,
in reliance upon such assumption, make available to the Borrowers on such date a
corresponding  amount.  If and to the extent that such Lender  shall not have so
made such Ratable Portion available to the Administrative Agent, such Lender and
the Borrowers jointly and severally agree to repay to the  Administrative  Agent
forthwith on demand such  corresponding  amount together with interest  thereon,
for each day from the date such amount is made available to the Borrowers  until
the date such amount is repaid to the  Administrative  Agent, at (i) in the case
of the  Borrowers,  the  interest  rate  applicable  at the  time  to the  Loans
comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds
Rate for the first Business Day and  thereafter at the interest rate  applicable
at the time to the Loans  comprising such Borrowing.  If such Lender shall repay
to the  Administrative  Agent such corresponding  amount,  such amount so repaid
shall  constitute  such Lender's Loan as part of such  Borrowing for purposes of
this Agreement.  If the Borrowers shall repay to the  Administrative  Agent such
corresponding  amount,  such  payment  shall  not  relieve  such  Lender  of any
obligation it may have hereunder to the Borrowers.

(d) The failure of any Lender to make the Loan or any payment  required by it on
the date specified (a "Non-Funding Lender"), including any payment in respect of
its participation in Letter of Credit  Obligations,  shall not relieve any other
Lender of its  obligations to make such Loan or payment on such date but no such
other Lender shall be responsible for the failure of any  Non-Funding  Lender to
make a Loan or payment required under this Agreement.

Section 2.3.      Letter of Credit Guaranties.

(a) On the terms and  subject to the  conditions  contained  in this  Agreement,
CITBC agrees to issue one or more Letter of Credit  Guaranties at the request of
PHC/CHC  Holdings,  Inc.  for the  benefit of the  Borrowers,  from time to time
during the period  commencing  on the Closing  Date and ending on the  Scheduled
Termination Date; provided,  however, that no Letter of Credit Guaranty shall be
issued if:

(i) after giving effect to the issuance of such Letter of Credit  Guaranty,  the
aggregate  Revolving Credit Outstandings would exceed the Maximum Credit at such
time;

(ii)     after giving effect to the issuance of such Letter of Credit Guaranty,
the Letter of Credit Obligations at such time exceeds
$15,000,000; or

(iii)    any fees due in connection with a requested issuance have not been
paid.

(b) No Letter  of Credit  Guaranty  shall be  issued in  respect  of a Letter of
Credit that expires after the earlier of (x) twelve (12) months from the date of
issuance  of such  Letter of Credit or (y) sixty (60) days  after the  Scheduled
Termination  Date;  provided,  however,  that,  the Borrowers  shall (A) 30 days
before the Scheduled  Termination Date, if a requested Letter of Credit Guaranty
relates to a Letter of Credit with an expiry date that actually  falls after the
Scheduled Termination Date, or (B) on or before the Revolving Credit Termination
Date,  if a requested  Letter of Credit  Guaranty  relates to a Letter of Credit
with an expiry date that actually falls after the Revolving  Credit  Termination
Date,  (i) cause the Issuing  Banks in respect of all such  Letters of Credit to
confirm in writing to CITBC that such  Letters of Credit  have been  returned to
such Issuing Banks undrawn and marked  "cancelled"  or (ii) if the Borrowers are
unable to do so in whole or in part, deposit cash in the Cash Collateral Account
to the extent  necessary so that the Cash Collateral  Account holds an aggregate
amount at least equal to the then undrawn amount of all such outstanding Letters
of Credit as additional  collateral  security for the Borrowers'  obligations in
connection with the Letter of Credit Guaranties.

(c) If PHC/CHC Holdings,  Inc. wishes CITBC to issue a Letter of Credit Guaranty
on its behalf for the benefit of the Borrowers, PHC/CHC Holdings Inc. shall give
CITBC notice to that effect,  specifying the proposed issuance date (which shall
be a Business Day) for such Letter of Credit  Guaranty and the related Letter of
Credit,  the stated amount of the Letter of Credit  Guaranty so  requested,  the
proposed  expiration  date of such related  Letter of Credit (which shall be the
same as the expiration date of such Letter of Credit  Guaranty) and the name and
address of the Issuing Bank and of the  beneficiary  of such  related  Letter of
Credit (as well as such further information as CITBC may request).  Such notice,
to be  effective,  must be received by CITBC not later than 11:00 A.M. (New York
City time) on the second  Business Day prior to the  requested  issuance of such
Letter of Credit Guaranty.

(d) Subject to the satisfaction of the conditions set forth in this Section 2.3,
CITBC shall, on the requested date,  issue a Letter of Credit Guaranty on behalf
of PHC/CHC  Holdings,  Inc. for the benefit of the Borrowers in accordance  with
its usual and customary business practices.  CITBC shall not issue any Letter of
Credit  Guaranty in the period  commencing  on the first  Business  Day after it
receives  written  notice  from any  Lender  that one or more of the  conditions
precedent  contained  in Section  3.2 shall not on such date be  satisfied,  and
ending when such conditions are satisfied. CITBC shall not otherwise be required
to determine that, or take notice whether, the conditions precedent set forth in
Section 3.2 have been satisfied in connection with the issuance of any Letter of
Credit Guaranty.

(e)      CITBC shall:

(i) give the Administrative Agent written notice (or telephonic notice confirmed
promptly thereafter in writing, which may be by telecopier) of the issuance of a
Letter of Credit Guaranty issued by it, of all payments under a Letter of Credit
Guaranty issued by it and request the reimbursement by the Administrative  Agent
in  accordance  with Section  2.7(c) of any  Reimbursement  Obligation  when due
(which notice the  Administrative  Agent shall promptly  transmit by telecopy or
similar transmission to each Lender); and

(ii) upon the  request  of any  Lender,  furnish  to such  Lender  copies of any
documentation as may reasonably be requested by such Lender.

(f)  Immediately  upon the  issuance by CITBC of a Letter of Credit  Guaranty in
accordance  with the terms and  conditions  of this  Agreement,  CITBC  shall be
deemed to have sold and  transferred  to each  Lender,  and each Lender shall be
deemed  irrevocably  and  unconditionally  to have  purchased  and received from
CITBC, without recourse or warranty, an undivided interest and participation, to
the extent of such Lender's Ratable  Portion,  in such Letter of Credit Guaranty
and the obligations of the Borrowers with respect thereto  (including all Letter
of Credit Obligations with respect thereto) and any security therefor.

(g) To the  extent  funds  in the Cash  Collateral  Account  are for any  reason
insufficient to cover such  obligation in accordance  with Section  2.7(c),  the
Borrowers  agree to reimburse CITBC for any payment CITBC makes under any Letter
of Credit  Guaranty  immediately  upon such payment,  irrespective of any claim,
set-off, defense or other right which the Borrowers may have at any time against
CITBC or any other  Person;  provided,  however,  that the failure to  reimburse
CITBC  under  this  subsection  (g) shall not  constitute  a Default or Event of
Default.  In the event that CITBC makes any  payment  under any Letter of Credit
Guaranty and the Borrowers  shall not have repaid such amount to CITBC  pursuant
to this clause (g) or such payment is rescinded or set aside for any reason, the
Borrowers shall be deemed to request a Revolving  Credit Loan in such amount and
CITBC shall  promptly  notify the  Administrative  Agent,  which shall  promptly
notify  each  Lender  of such  failure,  and  each  Lender  shall  promptly  and
unconditionally  pay to the  Administrative  Agent for the  account of CITBC the
amount of such  Lender's  Ratable  Portion of such  Reimbursement  Obligation in
Dollars and in  immediately  available  funds.  If the  Administrative  Agent so
notifies  such Lender  prior to 11:00 A.M.  (New York City time) on any Business
Day,  such  Lender  shall make  available  to the  Administrative  Agent for the
account  of CITBC  its  Ratable  Portion  of the  amount  of such  Reimbursement
Obligation  on such  Business  Day in  immediately  available  funds.  Upon such
payment  by a Lender,  such  Lender  shall,  whether  or not there  shall be the
continuance of a Default or Event of Default and notwithstanding  whether or not
the  conditions  precedent  set forth in Section  3.2 shall have been  satisfied
(which conditions  precedent the Lenders hereby  irrevocably waive) be deemed to
have made a Revolving  Loan to the  Borrowers  in the  principal  amount of such
Reimbursement  Obligation.  Whenever the amount of such Reimbursement Obligation
received from any Borrower as to which the Administrative Agent has received for
the  account of CITBC any  payment  from a Lender  pursuant  to this clause (g),
CITBC shall pay to the Administrative  Agent and the Administrative  Agent shall
promptly pay to each Lender, in immediately  available funds, an amount equal to
such Lender's  Ratable  Portion of the amount of such  Reimbursement  Obligation
adjusted, if necessary,  to reflect the respective amounts the Lenders have paid
in respect of such Letter of Credit Guaranty.

(h) The  obligation  of the Borrowers to pay the Loans that arise as a result of
payments  under Letter of Credit  Guaranties  shall be joint and several and all
absolute,  unconditional  and  irrevocable,  and shall be performed  strictly in
accordance  with the terms of this  Agreement,  under any and all  circumstances
whatsoever,  including the  occurrence  of any Default or Event of Default,  and
irrespective of:

(i)      any lack of validity or enforceability of any related Letter of Credit
or any Loan Document, or any term or provision
therein;

(ii)     any amendment or waiver of or any consent to departure from all or any
of the provisions of any related Letter of Credit or
any Loan Document;

(iii) the  existence  of any claim,  set-off,  defense  or other  right that any
Borrower or any other Person may at any time have against the beneficiary  under
any Letter of Credit,  the  Issuing  Bank,  any Agent or any Lender or any other
Person,  whether in connection with this  Agreement,  any other Loan Document or
any other related or unrelated agreement or transaction;

(iv) any draft or other document  presented under a Letter of Credit Guaranty or
related  Letter  of  Credit  proving  to  be  forged,  fraudulent,   invalid  or
insufficient  (other  than  insufficiency  on the  face of such  draft  or other
document to the extent CITBC is excused  thereby from paying under its Letter of
Credit  Guaranty)  in any  respect  or any  statement  therein  being  untrue or
inaccurate in any respect;

(v) payment by the Issuing Bank under a Letter of Credit against presentation of
a draft or other  document that does not comply with the terms of such Letter of
Credit,  provided,  however,  that such payment shall not have constituted gross
negligence  or willful  misconduct on the part of the Issuing Bank to the extent
CITBC is excused thereby from paying under its Letter of Credit Guaranty; and

(vi) any other act or omission to act or delay of any kind of the Issuing  Bank,
the Lenders,  the Agents or any other Person or any other event or  circumstance
whatsoever,  whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of the
Borrowers'  obligations  hereunder;   provided,  however,  that  such  event  or
circumstances  shall not have been the  result of gross  negligence  or  willful
misconduct  of the  Issuing  Bank to the extent  CITBC is excused  thereby  from
paying under its Letter of Credit Guaranty.

Any action taken or omitted to be taken by CITBC under or in connection with any
Letter  of  Credit  Guaranty,  if  taken  or  omitted  in the  absence  of gross
negligence  or  willful  misconduct,  shall  not put CITBC  under any  resulting
liability  to any  Borrower,  any Agent or any Lender.  In  determining  whether
documents  presented in connection  with a Letter of Credit Guaranty comply with
the terms thereof, CITBC may accept documents that appear on their face to be in
order,  without  responsibility  for further  investigation,  regardless  of any
notice or  information  to the  contrary  and, in making any  payment  under any
Letter of Credit Guaranty CITBC may rely exclusively on the documents  presented
to it under such  Letter of Credit  Guaranty as to any and all matters set forth
therein,  including  reliance  on the amount of any draft  presented  under such
Letter of Credit  Guaranty,  whether  or not the  amount  due under the  related
Letter of Credit equals the amount of such draft and whether or not any document
presented  pursuant to such Letter of Credit  Guaranty proves to be insufficient
in any respect, if such document on its face appears to be in order, and whether
or not any other  statement  or any other  document  presented  pursuant to such
Letter of Credit  Guaranty  proves to be  forged  or  invalid  or any  statement
therein  proves to be  inaccurate  or untrue in any respect  whatsoever  and any
noncompliance  in any immaterial  respect of the documents  presented under such
Letter of Credit  Guaranty  with the terms  thereof  shall not, in each case, be
deemed to constitute willful misconduct or gross negligence of CITBC.

(i) If and to the extent any Lender  shall not have made its Ratable  Portion of
the  amount of the  payment  required  by  clause  (g)  above  available  to the
Administrative  Agent for the account of CITBC, such Lender agrees to pay to the
Administrative  Agent for the account of CITBC  forthwith  on demand such amount
together with  interest  thereon,  for the first  Business Day after payment was
first due at the Federal Funds Rate, and thereafter  until such amount is repaid
to the  Administrative  Agent for the  account  of CITBC,  at the rate per annum
applicable to Base Rate Loans under the  Facility.  The failure of any Lender to
make available to the Administrative  Agent for the account of CITBC its Ratable
Portion of any such payment shall not relieve any other Lender of its obligation
hereunder to make available to the Administrative Agent for the account of CITBC
its Ratable  Portion of any payment on the date such payment is to be made,  but
no Lender  shall be  responsible  for the  failure  of any other  Lender to make
available  to the  Administrative  Agent for the  account  of CITBC  such  other
Lender's Ratable Portion of any such payment.

(j) Schedule 2.3 contains a schedule of certain  letters of credit  issued prior
to the  Closing  Date by Paribas for the  account of the  Borrowers.  Subject to
satisfaction of the conditions in Sections 3.1 and 3.2 on the Closing Date, such
letters of credit, to the extent outstanding,  will be guaranteed by a Letter of
Credit  Guaranty  issued by CITBC  hereunder and such Letter of Credit  Guaranty
shall be a Letter of Credit Guaranty hereunder for all purposes.

(k) If the Chase Manhattan Bank, as an Issuing Bank,  requires PHC/CHC Holdings,
Inc. to deliver collateral to the Chase Manhattan Bank to secure any obligations
to it under any Letter of Credit issued by it, CITBC agrees, upon written notice
from  Borrowers  of such  request  from the  Chase  Manhattan  Bank,  to use its
reasonable  best efforts to assist the Borrowers in finding  another bank to act
as Issuing  Bank  hereunder  and to turn over funds held in the Cash  Collateral
Account if CITBC is released from any and all  obligations it may have under any
Letter of Credit  Guaranty  or any Letter of Credit  issued  thereunder  and all
Letter of Credit Obligations have been paid in full.

(l) If CITBC  receives a notice by the  Issuing  Bank under the Letter of Credit
application  filed with the Issuing Bank, CITBC will as soon as practicable send
such notice by telecopy or hand delivery of same to the Borrowers.

Section 2.4.      Termination and Reduction of the Revolving Credit Commitments.
                  -------------------------------------------------------------

(a) The Borrowers  may,  upon at least five  Business  Days' prior notice to the
Administrative  Agent, and payment of (i) all principal,  interest and fees then
due and payable under this Agreement, (ii) any amounts owing pursuant to Section
2.12 (e),  and (iii) the  Prepayment  Premium,  if any,  terminate  in whole the
respective Revolving Credit Commitments of the Lenders.

                  (b) The Borrowers  may, upon at least five Business Days prior
notice to the Administrative  Agent, and payment of (i) all principal,  interest
and fees then due and payable  under this  Agreement,  and (ii) any amount owing
pursuant to Section  2.12(e),  reduce in part ratably the unused portions of the
respective Revolving Credit Commitments of the Lenders; provided,  however, that
each  partial  reduction  shall be in the  aggregate  amount  of not  less  than
$2,500,000 or an integral multiple of $2,500,000 in excess thereof.

Section 2.5.      Repayment of Loans. The Borrowers jointly and severally agree
to repay the entire unpaid principal amount of the Revolving Loans on the
Revolving Credit Termination Date.

Section 2.6.      Evidence of Debt.

(a) Each Lender shall maintain in accordance  with its usual practice an account
or accounts  evidencing  Indebtedness of the Borrowers to such Lender  resulting
from each  Loan of such  Lender  from time to time,  including  the  amounts  of
principal  and interest  payable and paid to such Lender from time to time under
this Agreement.

(b) The  Administrative  Agent shall  maintain  accounts in accordance  with its
usual  practice in which it will record (i) the amount of each Loan made and, if
a Eurodollar Rate Loan, the Interest Period applicable thereto,  (ii) the amount
of any  principal  or interest  due and payable by the  Borrowers to each Lender
hereunder and (iii) the amount of any sum received by the  Administrative  Agent
hereunder from the Borrowers and each Lender's share thereof, if applicable.

(c) The entries made in the accounts  maintained pursuant to clauses (a) and (b)
of this Section 2.6 shall,  to the extent  permitted by applicable law, be prima
facie evidence of the existence and amounts of the obligations recorded therein;
provided, however, that the failure of any Lender or the Administrative Agent to
maintain  such  accounts or any error therein shall not in any manner affect the
obligations of the Borrowers to repay the Loans in accordance with their terms.

(d) Notwithstanding any other provision of the Agreement,  in the event that any
Lender  requests  that the  Borrowers  execute and deliver a promissory  note or
notes payable to such Lender in order to evidence the Indebtedness owing to such
Lender by the  Borrowers  hereunder,  the Borrowers  will  promptly  execute and
deliver  a  Revolving  Credit  Note or  Revolving  Credit  Notes to such  Lender
evidencing any Revolving Credit Loans of such Lender,  substantially in the form
of Exhibit F, and the  interests  evidenced  by such note or notes  shall at all
times (including after assignment of all or part of such interests) be evidenced
by one or more  Revolving  Credit Notes  payable to the order of the payee named
therein.

Section 2.7.      Mandatory Prepayments.

(a) Upon any sale of any hospital  facility  owned or operated by any  Borrower,
the  Borrowers  shall  immediately  prepay  the Loans in an amount  equal to the
Required Amount with respect to such Borrower.

(b)  If at  any  time,  the  aggregate  principal  amount  of  Revolving  Credit
Outstandings  exceed  the  Maximum  Credit  at such  time,  the  Borrower  shall
forthwith prepay the Revolving Loans then outstanding in an amount equal to such
excess.  If any such excess  remains  after  repayment in full of the  aggregate
outstanding Revolving Loans, the Borrowers shall provide cash collateral for the
Letter of Credit  Obligations  in the  manner  set forth in  Section  9.3 to the
extent required to eliminate such excess.

(c) The Administrative  Agent shall, on behalf of the relevant  Borrowers,  make
funds  held in the  Cash  Collateral  Account  available  for any  Reimbursement
Obligation then due to CITBC in respect of any Letter of Credit Guaranty.

Section 2.8.      Interest.

(a)  Rate of  Interest.  All  Loans  and the  outstanding  amount  of all  other
Obligations  shall bear interest,  in the case of Loans, on the unpaid principal
amount  thereof from the date such Loans are made and, in the case of such other
Obligations,  from the date such other Obligations are due and payable until, in
all cases,  paid in full,  except as otherwise  provided in Section  2.8(c),  as
follows:

(i) if a Base Rate Loan or such other  Obligation,  at a rate per annum equal to
the sum of (A) the  Base  Rate as in  effect  from  time to  time,  plus (B) the
Applicable Margin; and

(ii) if a Eurodollar  Rate Loan, at a rate per annum equal to the sum of (A) the
Eurodollar  Rate  determined for the applicable  Interest  Period,  plus (B) the
Applicable  Margin in effect from time to time during such  Eurodollar  Interest
Period.

(b)  Interest  Payments.  (i)  Interest  accrued on each Base Rate Loan shall be
payable in arrears (A) on the last day of each calendar month, commencing on the
first  such day  following  the  making of such Base Rate  Loan,  and (B) if not
previously  paid in full, at maturity  (whether by acceleration or otherwise) of
such Base Rate Loan; (ii) interest accrued on each Eurodollar Rate Loan shall be
payable in arrears (A) on the last day of each  Interest  Period  applicable  to
such Loan,  (B) upon the payment or prepayment  thereof in full or in part,  and
(C) to the  extent  not  previously  paid  in  full,  at  maturity  (whether  by
acceleration  or otherwise) of such  Eurodollar  Rate Loan;  and (iii)  interest
accrued on the amount of all other  Obligations  shall be payable on demand from
and  after  the  time  such  Obligation  becomes  due and  payable  (whether  by
acceleration or otherwise).

(c) Default Interest. Notwithstanding the rates of interest specified in Section
2.8(a) or elsewhere  herein,  effective  immediately  upon the  occurrence of an
Event of Default,  and for as long  thereafter as such Event of Default shall be
continuing,  the  principal  balance  of all Loans  and the  amount of all other
Obligations  shall bear  interest  at a rate which is two  percent  per annum in
excess of the rate of interest then applicable to such Obligations.

Section 2.9.      Conversion/Continuation Option.

(a) The  Borrowers  may elect (i) at any time to convert  Base Rate Loans or any
portion  thereof to Eurodollar  Rate Loans, or (ii) at the end of any applicable
Interest  Period,  to convert  Eurodollar Rate Loans or any portion thereof into
Base Rate Loans or to continue such Eurodollar Rate Loans or any portion thereof
for an additional Interest Period; provided,  however, that the aggregate amount
of the  Eurodollar  Loans  for each  Interest  Period  must be in the  amount of
$1,000,000  or  an  integral  multiple  of  $500,000  in  excess  thereof.  Each
conversion or continuation  shall be allocated among the Loans of each Lender in
accordance   with  its  Ratable   Portion.   Each  such  election  shall  be  in
substantially  the  form of  Exhibit  G  hereto  (a  "Notice  of  Conversion  or
Continuation")  and shall be made by giving  the  Administrative  Agent at least
three Business Days' prior written notice  specifying (A) the amount and type of
Loan being  converted  or  continued,  (B) in the case of a  conversion  to or a
continuation of Eurodollar Rate Loans, the applicable  Interest Period,  and (C)
in the case of a  conversion,  the date of  conversion  (which  date  shall be a
Business Day and, if a conversion from Eurodollar Rate Loans,  shall also be the
last day of the applicable Interest Period).

(b) The Administrative Agent shall promptly notify each Lender of its receipt of
a Notice of  Conversion or  Continuation  and of the options  selected  therein.
Notwithstanding  the  foregoing,  no conversion in whole or in part of Base Rate
Loans to  Eurodollar  Rate  Loans,  and no  continuation  in whole or in part of
Eurodollar Rate Loans to other  Eurodollar Rate Loans upon the expiration of any
applicable  Interest  Period,  shall be  permitted  at any  time at which  (i) a
Default or an Event of Default shall have occurred and be continuing or (ii) the
continuation  of, or conversion  into,  would  violate any of the  provisions of
Section  2.12.  If,  within  the time  period  required  under the terms of this
Section 2.9, the Administrative Agent does not receive a Notice of Conversion or
Continuation from the Borrowers  containing a permitted election to continue any
Eurodollar  Rate Loans for an additional  Interest Period or to convert any such
Loans, then, upon the expiration of the applicable  Interest Period,  such Loans
will be automatically converted to Base Rate Loans. Each Notice of Conversion or
Continuation shall be irrevocable.

Section 2.10.     Fees.

(a) Unused  Commitment  Fee. The Borrowers agree jointly and severally to pay to
each Lender a commitment  fee on the daily average amount by which the Revolving
Credit  Commitment of such Lender exceeds such Lender's  Ratable  Portion of the
Revolving Credit Outstandings (the "Unused Commitment Fee") from the date hereof
until the Revolving Credit  Termination Date at a rate equal to .375% per annum,
payable in arrears (i) on the last day of each calendar month, commencing on the
first  such day  following  the date  hereof  and (ii) on the  Revolving  Credit
Termination Date.

(b) Minimum  Revolving  Credit  Outstanding Fee. The Borrowers agree jointly and
severally  to pay to the  Administrative  Agent for the  ratable  benefit of the
Lenders a fee equal to the amount by which the daily  average  of the  Revolving
Credit  Outstandings is below  $32,000,000,  multiplied by a rate equal to 1.25%
per annum,  payable on the first  anniversary  of the  Closing  Date  unless the
Revolving Credit  Commitment has terminated and the Obligations are paid in full
prior thereto.

(c)      Letter of Credit Fees.  The Borrowers agree to pay the following
amounts with respect to Letters of Credit Guaranties issued
by CITBC:

(i) to the  Administrative  Agent for the account of CITBC, with respect to each
Letter of Credit  Guaranty  issued by CITBC,  an issuance fee equal to 1.75% per
annum of the average  daily  maximum  amount  available  from time to time to be
drawn under such Letter of Credit  Guaranty,  payable in arrears (A) on the last
day of each  calendar  month,  commencing  on the first such day  following  the
issuance  of such  Letter of Credit  Guaranty  and (B) on the  Revolving  Credit
Termination Date; and

(ii) CITBC,  with respect to the issuance,  amendment or transfer of each Letter
of Credit Guaranty and each payment made thereunder,  documentary and processing
charges in accordance with CITBC's standard  schedule for such charges in effect
at the time of issuance, amendment, transfer or payment, as the case may be.

(d)  Closing  Fees.  The  Borrowers  jointly and  severally  agree to pay to the
Administrative  Agent,  for the ratable  benefit of the Lenders,  a facility fee
equal to .625% of the aggregate  Revolving  Credit  Commitments in effect on the
Closing Date, payable on the Closing Date.

(e) Collateral  Management Fee. The Borrowers jointly and severally agree to pay
to the  Collateral  Agent  for  the  sole  benefit  of the  Collateral  Agent  a
collateral management fee in the amount of $262,500, payable on the Closing Date
and each  anniversary  date of the Closing  Date prior to the  Revolving  Credit
Termination  Date. If any Obligations  remain unpaid after the Revolving  Credit
Termination  Date,  the  Borrowers  jointly  and  severally  agree to pay to the
Collateral  Agent for the sole  benefit  of the  Collateral  Agent a  collateral
management  fee in the amount of $21,875,  payable on the first day  immediately
after  the  Revolving  Credit  Termination  Date  and on the  first  day of each
calendar month thereafter until the date when all Obligations are paid in full.

Section 2.11.     Payments and Computations.

(a) The  Borrowers  shall  make  each  payment  hereunder  (including  fees  and
expenses)  not later than 1:00 P.M. (New York City time) on the day when due, in
Dollars, to the Administrative  Agent to its account at The Chase Manhattan Bank
at 4 New York Plaza,  15th  Floor,  New York,  New York 10004,  or to such other
address as  determined by the  Administrative  Agent and as shall be notified to
the Borrowers in writing,  in  immediately  available  funds without  set-off or
counterclaim.  The  Administrative  Agent will promptly  thereafter  cause to be
distributed  immediately available funds relating to the payment of principal or
interest or fees to the Lenders,  in accordance with the application of payments
set forth in clauses (e) and (f) of this Section  2.11, as  applicable,  for the
account of their respective Applicable Lending Offices; provided,  however, that
amounts payable  pursuant to Sections  2.12(c),  2.12(e),  2.13 or 2.14 shall be
paid  only  to  the  affected  Lender  or  Lenders.  Payments  received  by  the
Administrative  Agent after 1:00 P.M. (New York City time) shall be deemed to be
received on the next Business Day.

(b) All computations of interest and of fees shall be made by the Administrative
Agent on the basis of a year of 360 days for Eurodollar  Rate Loans and 365 days
for Base Rate Loans,  in each case for the actual number of days  (including the
first day but  excluding  the last day)  occurring  in the period for which such
interest and fees are payable. Each determination by the Administrative Agent of
an interest rate  hereunder  shall be presumed to be correct and binding for all
purposes, absent manifest error.

(c) Whenever any payment or other obligation hereunder shall be stated to be due
on a day other than a Business Day, such payment or performance shall be made on
the next succeeding  Business Day, and such extension of time shall in such case
be included in any  computation  of payment of interest or fees, as the case may
be; provided, however, that if such extension would cause payment of interest on
or principal of any Eurodollar  Rate Loan to be made in the next calendar month,
such  payment  shall be made on the  immediately  preceding  Business  Day.  The
Borrowers will have the right, as long as no Event of Default is continuing,  to
direct the application of all repayments of Revolving  Loans.  Unless  otherwise
directed  by the  Borrowers,  all  repayments  of any  Revolving  Loans shall be
applied  first to repay  such Loans  outstanding  as Base Rate Loans and then to
repay such Loans outstanding as Eurodollar Rate Loans with those Eurodollar Rate
Loans which have earlier expiring Eurodollar Interest Periods being repaid prior
to  those  which  have  later  expiring   Eurodollar   Interest   Periods.   The
Administrative  Agent will use its best efforts to apply payments as directed by
the Borrowers but the Administrative  Agent will not be required to correct,  or
in any way be liable for, any  misapplication  of such payments  directed by the
Borrowers absent willful misconduct on the Administrative Agent's part.

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

(e) Subject to the  provisions of clause (f) of this Section 2.11 (and except as
otherwise  provided in Section 2.7), all payments and any other amounts received
by the  Administrative  Agent from or for the benefit of the Borrowers  shall be
applied,  first,  to pay  principal  of and interest on any portion of the Loans
which  the  Administrative  Agent  may have  advanced  pursuant  to the  express
provisions  of  this   Agreement  on  behalf  of  any  Lender,   for  which  the
Administrative  Agent  has  not  then  been  reimbursed  by such  Lender  or the
Borrowers; second, to pay all other Obligations then due and payable; and third,
as the Borrowers so designate.  Payments in respect of Revolving  Loans received
by the  Administrative  Agent shall be  distributed to each Lender in accordance
with such  Lender's  Ratable  Portion;  and all  payments  of fees and all other
payments in respect of any other Obligation shall be allocated among such of the
Lenders  and the Agents as are  entitled  thereto,  and, if to the  Lenders,  in
proportion  to their  respective  Ratable  Portions,  except  for those  amounts
payable  pursuant  to  Sections  2.12(c),  2.12(e),  2.13 or 2.14 which shall be
payable ratably to the affected Lender(s).

(f) After the occurrence and during the continuance of an Event of Default,  the
Borrowers  hereby  irrevocably  waive the right to direct the application of any
and all  payments in respect of the  Obligations.  During the  continuance  of a
Material Event of Default or upon  acceleration of the  Obligations  pursuant to
Section 9.2, the Administrative  Agent may, and shall upon the written direction
of the Requisite Lenders, apply all payments in respect of any Obligations,  and
apply all funds on deposit in any Cash Collateral Account and all other proceeds
of Collateral, in the following order:

(i) first, to pay interest on and then principal of any portion of the Revolving
Loans which the  Administrative  Agent may have advanced on behalf of any Lender
for which the  Administrative  Agent has not then been reimbursed by such Lender
or the Borrowers;

(ii)     second, to pay Obligations in respect of any expense reimbursements or
indemnities then due the Administrative Agent and the Collateral Agent;

(iii)    third, to pay Obligations in respect of any expense reimbursements or
indemnities then due to the Lenders;

(iv)     fourth, to pay Obligations in respect of any fees then due to the
Administrative Agent, the Collateral Agent and the Lenders;

(v)      fifth, to pay interest then due and payable in respect of the Loans and
Reimbursement Obligations;

(vi)  sixth,  to pay  principal  payments  then due and payable on the Loans and
Reimbursement  Obligations and to provide cash collateral for outstanding Letter
of Credit  Obligations in the manner described in Section 9.3, and thereafter to
prepay principal payments on the Loans; and

(vii)    seventh, to the ratable payment of all other Obligations;

provided,  however,  that if  sufficient  funds  are not  available  to fund all
payments to be made in respect of any of the Obligations described in any of the
foregoing clauses first through seventh,  the available funds being applied with
respect to any such Obligation (unless otherwise specified in such clause) shall
be allocated to the payment of such Obligations ratably, based on the proportion
of the Administrative Agent's, the Collateral Agent's and each Lender's interest
in the aggregate outstanding Obligations described in such clauses. The order of
priority set forth in clauses first through  seventh of this Section 2.11(f) may
at any time and from time to time be changed by the  agreement of the  Requisite
Lenders  without  necessity  of  notice  to or  consent  of or  approval  by the
Borrowers, or any other Person. The order of priority set forth in clauses first
through  fourth  of this  Section  2.11(f)  may be  changed  only with the prior
written  consent  of the  Administrative  Agent  in  addition  to the  Requisite
Lenders.

(g) At the option of the  Administrative  Agent,  principal on the Reimbursement
Obligations  to the  extent  not  covered  by the  Cash  Collateral  Account  in
accordance with Section 2.7(c), interest, fees, expenses and other sums then due
and payable in respect of the Revolving  Loans and  Protective  Advances and not
paid by Borrower may be paid from the proceeds of Revolving Loans. The Borrowers
hereby authorize the Lenders to make Revolving Loans pursuant to Section 2.2(a),
from time to time in such Lender's  discretion,  which are in the amounts of any
and all  principal  then due and  payable  with  respect  to such  Reimbursement
Obligations,  interest,  fees,  expenses  and  other  sums  due and  payable  on
Revolving   Loan  and   Protective   Advances,   and  further   authorizes   the
Administrative Agent to give the Lenders notice of any Borrowing with respect to
such Revolving  Loans and to distribute the proceeds of such Revolving  Loans to
pay such amounts; provided,  however, that in the event of any such Borrowing in
respect  of  Protective  Advances,  the  Administrative  Agent  shall  give  the
Borrowers  notice  at  least  one  Business  Day  prior to such  Borrowing.  The
Borrowers  agree that all such  Revolving  Loans so made shall be deemed to have
been requested by them  (irrespective  of the  satisfaction of the conditions in
Section 3.2, which conditions the Lenders irrevocably waive) and direct that all
proceeds thereof shall be used to pay such amounts.

Section 2.12.     Special Provisions Governing Eurodollar Rate Loans.
                  --------------------------------------------------

(a) Determination of Interest Rate. The Eurodollar Rate for each Interest Period
for  Eurodollar  Rate Loans  shall be  determined  by the  Administrative  Agent
pursuant to the procedures set forth in the definition of "Eurodollar Rate." The
Administrative Agent's determination shall be presumed to be correct and binding
on the Borrowers, absent manifest error.

(b) Interest Rate  Unascertainable,  Inadequate or Unfair. In the event that (i)
the  Administrative  Agent  determines that adequate and fair means do not exist
for  ascertaining  the Eurodollar Rate then being  determined in accordance with
the definition  therefor or (ii) the Requisite Lenders notify the Administrative
Agent that the  Eurodollar  Rate for any  Interest  Period  will not  adequately
reflect the cost to such  Lenders of making or  maintaining  such Loans for such
Interest  Period,  the  Administrative  Agent  shall  forthwith  so  notify  the
Borrowers and the Lenders, whereupon each Eurodollar Loan will automatically, on
the last day of the current  Interest Period for such Loan,  convert into a Base
Rate Loan and the obligations of the Lenders to make Eurodollar Rate Loans or to
convert Base Rate Loans into  Eurodollar Rate Loans shall be suspended until the
Administrative  Agent shall notify the Borrowers that the Requisite Lenders have
determined that the circumstances causing such suspension no longer exist.

(c) Increased  Costs.  If at any time any Lender shall  determine that after the
date hereof the introduction of or any change in or in the interpretation of any
law, treaty or governmental rule,  regulation or order (other than any change by
way of imposition or increase of reserve  requirements  included in  determining
the  Eurodollar  Rate) or the  compliance  by such  Lender  with any  guideline,
request or directive issued after the date hereof from any central bank or other
Governmental  Authority (whether or not having the force of law), there shall be
any  increase  in the actual  cost to such Lender of agreeing to make or making,
funding or maintaining any Eurodollar Rate Loans,  then the Borrowers shall from
time to time,  upon  demand by such  Lender  (with a copy of such  demand to the
Administrative  Agent), pay to the Administrative  Agent for the account of such
Lender  additional  amounts  sufficient  to  compensate  such  Lender  for  such
increased cost. A certificate as to the amount of such increased cost, submitted
to the Borrowers and the Administrative  Agent by such Lender, shall be presumed
to be correct and binding for all purposes, absent manifest error.

(d) Illegality.  Notwithstanding  any other provision of this Agreement,  if any
Lender  determines  that  the  introduction  of or  any  change  in  or  in  the
interpretation  of any law,  treaty or  governmental  rule,  regulation or order
after the date of this Agreement shall make it unlawful,  or any central bank or
other  Governmental  Authority  shall  assert  after the date  hereof that it is
unlawful,  for any Lender or its Eurodollar  Lending  Office to make  Eurodollar
Rate Loans or to continue to fund or maintain  Eurodollar  Rate Loans,  then, on
notice thereof and demand  therefor by such Lender to the Borrowers  through the
Administrative  Agent,  (i) the obligation of such Lender to make or to continue
Eurodollar  Rate Loans and to convert Base Rate Loans into Eurodollar Rate Loans
shall be suspended,  and each such Lender shall make a Base Rate Loan as part of
any  requested  Borrowing  of  Eurodollar  Rate  Loans and (ii) if the  affected
Eurodollar  Rate Loans are then  outstanding,  the Borrowers  shall  immediately
convert  each such Loan into a Base  Rate  Loan.  If at any time  after a Lender
gives  notice  under this Section  2.12(d)  such Lender  determines  that it may
lawfully make Eurodollar  Rate Loans,  such Lender shall promptly give notice of
that  determination  to the  Borrowers  and the  Administrative  Agent,  and the
Administrative  Agent shall  promptly  transmit the notice to each other Lender.
Each Borrower's right to request, and such Lender's obligation,  if any, to make
Eurodollar Rate Loans shall thereupon be restored.

(e)  Breakage  Costs.  In  addition  to all  amounts  required to be paid by the
Borrowers  pursuant to Section 2.8, the Borrower shall  compensate  each Lender,
upon demand,  for all losses,  expenses and  liabilities  (including any loss or
expense  actually  incurred  by reason of the  liquidation  or  reemployment  of
deposits  or other  funds  acquired  by such  Lender  to fund or  maintain  such
Lender's  Eurodollar  Rate Loans to the  Borrowers but excluding any loss of the
Applicable  Margin on the relevant Loans) which that Lender may actually sustain
(i) if for any reason a proposed  Borrowing,  conversion into or continuation of
Eurodollar Rate Loans does not occur on a date specified therefor in a Notice of
Borrowing or a Notice of Conversion or Continuation  given by a Borrower or in a
telephonic  request by it for  borrowing  or  conversion  or  continuation  or a
successive  Interest  Period does not commence  after  notice  therefor is given
pursuant  to Section  2.9,  (ii) if for any reason any  Eurodollar  Rate Loan is
prepaid (including  mandatorily  pursuant to Section 2.7) on a date which is not
the last day of the applicable  Interest Period,  or (iii) as a consequence of a
required conversion of a Eurodollar Rate Loan to a Base Rate Loan as a result of
any of the events  indicated in Section  2.12(d) as a consequence of any failure
by the  Borrowers  to repay  Eurodollar  Rate Loans when  required  by the terms
hereof.  The Lender  making  demand for such  compensation  shall deliver to the
Borrowers  concurrently  with such demand a written statement as to such losses,
expenses and liabilities,  and this statement shall be presumed to be correct as
to the amount of compensation due to that Lender, absent manifest error.

                  (f)  Any  Lender  claiming  any  additional   amounts  payable
pursuant to this Section 2.12 shall use its reasonable efforts  (consistent with
its  internal  policy  and  legal and  regulatory  restrictions)  to change  the
jurisdiction  of its  Applicable  Lending  Office if the making of such a change
would avoid the need for, or reduce the amount of, any such  additional  amounts
which  would be payable  or may  thereafter  accrue  and would not,  in the sole
determination of such Lender, be otherwise disadvantageous to such Lender.

                  (g) If (a) the obligation of any Lender to make or continue or
convert Loans into Eurodollar Loans has been suspended  pursuant to this Section
2.12,  (b) any Lender has  demanded  compensation  under  this  Section  2.12 or
Section 2.13 or (c) any Lender has notified the Borrowers that it is not capable
of receiving  payments  without  deduction or withholding  for taxes pursuant to
Section 2.14,  the Borrowers may replace such Lender by  designating in a notice
given to the  Administrative  Agent an Eligible Assignee to replace such Lender,
and the  Administrative  Agent may assist the  Borrowers  in finding an Eligible
Assignee  willing to replace  such  Lender.  If the  Borrowers  so  designate an
Eligible Assignee,  then the  Administrative  Agent shall give notice thereof to
the Lender to be replaced,  and thereupon and  concurrently  with the payment in
full to such  Lender of all  amounts  owed to such  Lender,  such  Lender  shall
promptly  consummate an assignment,  in accordance with Section 11.2 hereof,  of
such  Lender's  Revolving  Credit  Commitment,  Loans,  Revolving  Credit Notes,
participations in Letter of Credit  Obligations and other rights and obligations
hereunder relative to the Revolving Credit Commitment of such Lender.

Section 2.13.  Capital  Adequacy.  If at any time any Lender determines that (a)
the adoption of or any change in or in the  interpretation of any law, treaty or
governmental  rule,  regulation  or  order  after  the  date of  this  Agreement
regarding  capital  adequacy,  (b) compliance with any such law,  treaty,  rule,
regulation,  or order,  or (c)  compliance  with any  guideline  or  request  or
directive from any central bank or other Governmental Authority issued after the
date of this  Agreement  (whether or not having the force of law) shall have the
effect  of  reducing  the rate of return on such  Lender's  (or any  corporation
controlling such Lender's) capital as a consequence of its obligations hereunder
or under or in respect of any Letter of Credit to a level  below that which such
Lender or such  corporation  could have achieved but for such adoption,  change,
compliance  or  interpretation  by  an  amount  deemed  by  such  Lender  to  be
significant,  then, upon demand from time to time by such Lender (with a copy of
such  demand  to the  Administrative  Agent),  the  Borrowers  shall  pay to the
Administrative  Agent  for the  account  of such  Lender,  from  time to time as
specified by such Lender,  additional  amounts  sufficient  to  compensate  such
Lender for such  reduction.  A certificate  as to such amounts  submitted to the
Borrowers  and the  Administrative  Agent by such Lender shall be presumed to be
correct and binding for all purposes absent manifest error.

Section 2.14.     Taxes.

(a) Any and all payments by the Borrowers under each Loan Document shall be made
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions,  charges or withholdings,  and all liabilities with
respect  thereto,  excluding  (i) in the case of each  Lender and each Agent (A)
taxes  measured by its net income,  and  franchise  taxes  imposed on it, by any
jurisdiction  (or any political  subdivision  thereof) and (B) any United States
withholding  taxes  payable  with respect to payments  under the Loan  Documents
under  laws  (including  any  statute,  treaty or  regulation)  in effect on the
Closing  Date  (or,  in the  case  of an  Eligible  Assignee,  the  date  of the
Assignment and  Acceptance)  applicable to such Lender or Agent, as the case may
be, but not excluding any United States  withholding  payable as a result of any
change  in such  laws  occurring  after  the  Closing  Date (or the date of such
Assignment and Acceptance)  and (ii) in the case of each Lender,  taxes measured
by its net income,  and franchise taxes imposed on it, by any jurisdiction  (all
such non-excluded taxes, levies, imposts, deductions,  charges, withholdings and
liabilities  being  hereinafter  referred to as "Taxes").  If any Taxes shall be
required by law to be deducted  from or in respect of any sum payable  under any
Loan  Document to any Lender or Agent (i) the sum payable  shall be increased as
may be  necessary  so that  after  making  all  required  deductions  (including
deductions  applicable to additional  sums payable under this Section 2.14) such
Lender or Agent  (as the case may be)  receives  an  amount  equal to the sum it
would have received had no such  deductions  been made, (ii) the Borrowers shall
make such deductions,  (iii) the Borrowers shall pay the full amount deducted to
the relevant  taxing  authority or other authority in accordance with applicable
law, and (iv) the Borrowers shall deliver to the  Administrative  Agent evidence
of such payment.

(b) In  addition,  the  Borrowers  agree to pay any  present or future  stamp or
documentary  taxes or any other  excise or  property  taxes,  charges or similar
levies  of  the  United  States  or any  political  subdivision  thereof  or any
applicable foreign jurisdiction, and all liabilities with respect thereto, which
arise from any  payment  made  under any Loan  Document  or from the  execution,
delivery or  registration  of, or otherwise  with respect to, any Loan  Document
(collectively, "Other Taxes").

(c) Each  Borrower will  indemnify  each Lender and Agent for the full amount of
Taxes  and  Other  Taxes  (including  any Taxes or Other  Taxes  imposed  by any
jurisdiction  on amounts payable under this Section 2.14) paid by such Lender or
Agent (as the case may be) and any liability (including for penalties,  interest
and expenses)  arising  therefrom or with respect  thereto,  whether or not such
Taxes or Other Taxes were  correctly or legally  asserted  excluding  any of the
foregoing  resulting  from the gross  negligence  or willful  misconduct of such
Lender or Agent. This indemnification shall be made within 30 days from the date
such Lender or Agent (as the case may be) makes written demand therefor.

(d) Within 30 days after the date of any  payment of Taxes or Other  Taxes,  the
Borrowers will furnish to the  Administrative  Agent, at its address referred to
in Section  11.8,  the  original  or a  certified  copy of a receipt  evidencing
payment thereof.

(e) Without  prejudice to the survival of any other  agreement of the  Borrowers
hereunder,  the  agreements and  obligations of the Borrowers  contained in this
Section 2.14 shall survive the payment in full of the Obligations.

(f) Prior to the  Closing  Date in the case of each  Non-U.S.  Lender  that is a
signatory hereto,  and on the date of the Assignment and Acceptance  pursuant to
which it  becomes a Lender in the case of each  other  Non-U.S.  Lender and from
time to time  thereafter  if  requested by the  Borrowers or the  Administrative
Agent,  each Non-U.S.  Lender that is entitled at such time to an exemption from
United States  withholding tax, or that is subject to such tax at a reduced rate
under an applicable tax treaty,  shall provide the Administrative  Agent and the
Borrowers with two completed  copies of either IRS Form 4224 or Form 1001, or in
the case of a Non-U.S.  Lender claiming exemption under Section 871(h) or 881(c)
of the Code with  respect to  "portfolio  interest,"  a Form W-8 or Form W-9, or
other applicable form,  certificate or document prescribed by the IRS certifying
as to such Non-U.S.  Lender's  entitlement  to such exemption from United States
withholding  tax or reduced rate with respect to all payments to be made to such
Non-U.S.  Lender  under  the  Loan  Documents.  Unless  the  Borrowers  and  the
Administrative Agent have received forms or other documents satisfactory to them
indicating that payments under any Loan Document to or for a Non-U.S. Lender are
not  subject to United  States  withholding  tax or are subject to such tax at a
rate reduced by an applicable  tax treaty,  the Borrowers or the  Administrative
Agent shall withhold taxes from such payments at the applicable statutory rate.

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

Section 2.15.  Certain Matters Relating to the Collateral.  Without limiting the
agreements  of each  Borrower in Article V,  subject to patient  confidentiality
requirements each Borrower agrees to execute and deliver to the Collateral Agent
in such form and manner as the Collateral Agent may reasonably  require,  solely
for the Collateral  Agent's  convenience  in maintaining  records of Collateral,
such  confirmatory  schedules of Accounts as the Collateral Agent may reasonably
request,  and  such  other  appropriate  reports  designating,  identifying  and
describing  the Accounts as the  Collateral  Agent may  reasonably  require.  In
addition,  upon the Collateral Agent's reasonable request,  each Borrower shall,
subject to patient  confidentiality  requirements,  provide the Collateral Agent
with copies of agreements with such Borrower's  Account  Debtors,  and copies of
invoices to  patients,  proof of delivery of goods and  services  and such other
documentation  and information  relating to such  Borrower's  Accounts and other
Collateral as the Collateral  Agent may reasonably  require.  Failure to provide
the Collateral Agent with any of the foregoing shall in no way affect, diminish,
modify or otherwise limit the security interests granted to the Collateral Agent
for the benefit of the Secured Parties.

Section 2.16.     Matters Relating to Controlled Accounts.  All collections from
Accounts shall be managed as provided in this section, except as otherwise
expressly provided in this Agreement.

(a) The Borrowers  shall  establish and maintain at their expense with the banks
identified in Schedule 2.16(a) the electronic funds transfer  collection account
(the "EFT Collection Account") and the other accounts there identified (together
with the EFT Collection  Account,  the  "Collection  Accounts"),  with the names
there  indicated,  and subject to such changes of depositories as the Agents may
approve in advance, such approval not to be unreasonably withheld. The Borrowers
shall  ensure  that all  collections  of Accounts  are paid into the  Collection
Accounts in accordance with the procedures and arrangements in place on the date
of this  Agreement  as  previously  described  by the  Borrowers  to the Agents,
subject  to such  changes as may be  approved  in  advance  by the  Agents.  The
Borrowers shall also ensure that all funds paid into the Collection Accounts and
deemed  collected (less an amount  reasonably  determined by the Borrowers in an
amount not to exceed $5,000 at any one time in each such Collection Account) are
first  transferred  by wire  transfer or ACH  initiated by the  Borrowers'  cash
manager (in accordance with the aforementioned procedures and arrangements),  on
each Business Day, in next day funds into an intermediate  concentration account
identified in Schedule 2.16(a) (the "Intermediate Concentration Account"), or in
the  case of funds in the  electronic  funds  transfer  collection  account,  to
another Collection Account and then to the Intermediate  Concentration  Account,
and  from the  Intermediate  Concentration  Account,  then  transferred  by wire
transfer  initiated by the  Borrowers'  cash  manager,  on each Business Day, in
immediately  available  funds,  into  a  depository  account  maintained  by the
Collateral  Agent at such  commercial  bank as may be selected by the Collateral
Agent  in  its  sole   discretion  and   communicated   to  the  Borrowers  (the
"Concentration  Account").  The Borrowers  acknowledge that they waive and shall
have no right to object to or seek to delay  any such  transfer  or to cause any
other  application of any such funds. The Borrowers shall  accurately  report in
all  material  respects to the  Collateral  Agent all amounts  deposited  in the
Concentration Account to ensure the proper transfer of funds as set forth above.

(b) The Borrowers  shall cause (i) the banks at which the  Collection  Accounts,
other  than the EFT  Collection  Accounts,  and the  Intermediate  Concentration
Account are  maintained to enter into  agreements  substantially  in the form of
Exhibit H-1 hereto or otherwise in form and substance reasonably satisfactory to
the Agents (ii) the banks at which the EFT Collection Accounts are maintained to
enter  into  agreements  substantially  in the Form of  Exhibit  H-2  hereto  or
otherwise  in form and  substance  reasonably  satisfactory  to the  Agents  and
consistent with the Requirements of Law (collectively,  the "Collection  Account
Agreements"),  providing for daily  transfers by the Borrowers'  cash manager in
accordance with the procedures identified in Section 2.16(a), acknowledging that
the items received or deposited in the Collection  Accounts and the Intermediate
Concentration  Account  maintained  with them are subject to the Lien granted in
favor of the Collateral Agent for the benefit of the Secured Parties,  that such
bank has no Lien upon or right of  set-off  against  any  Collection  Account or
Intermediate  Concentration  Account  maintained  with  it or any  of the  items
received for deposit  therein or the funds  deposited from time to time therein,
except to the extent  required  by any such bank in respect of costs and charges
related solely to such Collection Account or Intermediate  Concentration Account
and that,  upon the occurrence of and during the continuance of a Material Event
of Default  and the  request  of the  Collateral  Agent,  such bank will wire or
otherwise  transfer,  in immediately  available funds, on each Business Day, all
funds  deposited or  otherwise  received in all the  Collection  Accounts or the
Intermediate  Concentration  Account  maintained  with  it to the  Concentration
Account in accordance with the terms and conditions of the applicable Collection
Account Agreement. The Collateral Agent will notify each such bank promptly upon
the cessation or cure of any such Event of Default.

(c) The Borrowers shall acknowledge that the  Administrative  Agent at all times
will maintain the Concentration  Account as a designated  collateral account and
that the  Concentration  Account will remain subject to the dominion and control
of the Administrative Agent pursuant to this Agreement,  and the Borrowers agree
(and agree to confirm to all Persons) that the  Borrowers  shall at no time have
any right to make any withdrawal from or give any instructions to the depository
with respect to the Concentration Account.

(d)  At all  times  when  no  Material  Event  of  Default  is  continuing,  the
Administrative  Agent shall after application of the funds, on a daily basis, to
Obligations  then due  under  this  Agreement,  automatically  cause  the  funds
transferred  to the  Concentration  Account  pursuant to this Section 2.16 to be
released as  promptly as  practicable  to the  Borrowers  by wiring the funds to
PHC/CHC Holdings,  Inc.'s Account at PNC Bank or any other account designated by
the  Borrowers  from time to time which  replaces  such  account so long as such
account is not a payroll account;  at all times when a Material Event of Default
is continuing, the Administrative Agent shall not have any obligation to release
funds to the Borrowers and shall apply, on a daily basis, all funds  transferred
into the  Concentration  Account  pursuant  to this  Section  2.16 to reduce the
outstanding  indebtedness  of the  Borrowers  under the Loans  and  satisfy  the
Borrowers'  other  Obligations  under  this  Agreement.  In the  event the funds
transferred  to the  Concentration  Account are  received  in the  Concentration
Account no later than 12:00 p.m. (New York City time),  then the  Administrative
Agent  shall  endeavor  to make all such  funds that are to be  released  to the
Borrowers  pursuant to this  subsection  (d)  available to the Borrowers by 5:00
p.m.(New York City time) on the same day. To the extent that any  collections of
Accounts  or  proceeds  of  other  Collateral  are  not  sent  directly  to  the
appropriate   Collection  Account  but  are  received  by  any  Borrower,   such
collections  shall be held in trust for the benefit of the  Secured  Parties and
immediately  remitted by the Borrower who  received the relevant  funds,  in the
form received,  to the appropriate  Collection  Account for transfer directly or
indirectly to the Concentration  Account.  Each Borrower acknowledges and agrees
that its compliance with the terms of this Section 2.16 is essential.

(e) All funds  transferred  from the  Concentration  Account for  application to
amounts  then due and  payable by the  Borrowers  under this  Agreement  will be
credited  against the relevant  Obligations  of the  Borrowers two Business Days
after  the   Administrative   Agent's  receipt  of  "collected   funds"  at  the
Concentration Account, if received no later than 1:00 p.m. (New York City time),
or on the third  succeeding  Business Day, if received after 1:00 p.m. (New York
City  time).  No  checks,  drafts or other  instrument  received  in either  the
Collection  Account or the  Concentration  Account  shall be treated as received
unless  and until such  instruments  have  actually  been  collected.  Except as
otherwise expressly provided in this Agreement,  the Administrative Agent shall,
for  value at the  time  specified  above in this  provision,  apply  the  funds
credited to the Concentration Account, first, to any expenses,  indemnifications
or fees then due and payable  pursuant to Article 2 or Article  11,  second,  to
interest  then  due and  payable  on the  Loans  of all the  Lenders,  provided,
however,  that any interest  which is paid by Borrowers on funds which have been
transferred  from  the  Collection  Account  but not yet  credited  against  the
relevant  Obligations  pursuant to the  provisions of this  subsection  shall be
retained by CITBC and HHF and shared  between them (pro rata in accordance  with
their  respective  Revolving  Credit  Commitments)  as  compensation  for  their
services in administering the collections.

(f) For all purposes of this  Agreement,  including the  calculation of interest
payable to the Lenders on the Loans and the calculation of the Unused Commitment
Fee,  funds  transferred to the  Concentration  Account that are released to the
Borrowers  pursuant to the first sentence of subsection (e) of this Section 2.16
shall be deemed to have been applied to payment of the Borrowers  obligations as
provided in  subsection  (e) of this Section  2.16,  and the related  release of
funds to the  Borrowers  shall be deemed a Borrowing  of Base Rate Loans made on
the date of such release; provided, however, that such release of funds will not
be subject to any conditions  that other  Borrowings  are subject to,  including
without  limitation  the  conditions  set forth in Section  3.2,  other than the
absence of a continuation of a Material Event of Default.

(g) The  Administrative  Agent will deliver to the Borrowers monthly a statement
of Loans,  charges  and  payments  made  pursuant  to this  Agreement,  and such
accounting  shall be  presumed to be correct  and  binding  upon the  Borrowers,
absent manifest error,  subject to the following.  A monthly statement delivered
pursuant to this  provision  shall be subject to  correction  determined  by the
Administrative  Agent to be necessary after receipt from the Borrowers of notice
identifying a mistake in such statement; provided such notice is received by the
Administrative  Agent within sixty (60) days of the date the Borrowers  received
such statement from the Administrative Agent. Any such notice shall be deemed an
objection only to those items specifically objected to in the notice.

Section 2.17.     Withdrawal of Borrowers.  The provisions of this Section 2.17
are in addition to the withdrawal of Borrowers permitted by Section 8.4.

(a) At any time there is no Default or Event of Default  continuing any Borrower
may, at its option,  upon not less than thirty days' prior written notice to the
Agents,  choose to pledge  Accounts  to  another  lender  in  connection  with a
financing secured by real estate and cease to be a Borrower hereunder so long as
immediately  after giving effect  thereto (i) there are at least five  Borrowers
continuing under this Agreement (the "Remaining Borrowers") who operate hospital
facilities  (including the Eligible Real  Property) and the related  Accounts of
such hospitals  remain pledged as Collateral to the Collateral  Agent,  (ii) the
Available Credit with respect to the Remaining  Borrowers is at least $5,000,000
and (iii) the Financial Covenant Debt of the Remaining Borrowers  (including any
Obligations  which  continue  to be owed to the Lenders by such  Borrower  after
giving effect to such Borrower's hospital facility having been mortgaged or such
Borrower's  accounts  receivable having been pledged) is not more than 3.25X the
trailing 12 month  EBITDA of the  Remaining  Borrowers as of the last day of the
most recently completed month for which Financial Statements have been delivered
pursuant to Section 6.1; provided, however, that the EBITDA of PHC/CHC Holdings,
Inc. for the year ended  December 31, 2000 shall be based on annualized  results
for January 1, 2000 forward.  Immediately upon or  substantially  simultaneously
with such pledge of Accounts by such  Borrower,  its Accounts  shall be excluded
from the  Borrowing  Base  and such  Borrower  shall  immediately  cease to be a
Borrower and immediately cease to have any obligation under any Loan Document.

(b) Any Borrower may, at its option,  upon not less than thirty (30) days' prior
written  notice to the Agents,  choose to close its hospital  facility and cease
operations  and cease to be a Borrower  hereunder so long as  immediately  after
giving effect  thereto (i) there are at least five  Borrowers  continuing  under
this  Agreement who operate  hospital  facilities  (including  the Eligible Real
Property)  and  the  related  Accounts  of  such  hospitals  remain  pledged  as
Collateral to the Collateral  Agent,  (ii) the Available  Credit with respect to
the Remaining  Borrowers is at least $5,000,000 and (iii) the Financial Covenant
Debt of the Remaining Borrowers  (including any Obligations which continue to be
owed to the Lenders by such  Borrower  after  giving  effect to such  Borrower's
hospital  facility  being  closed) is not more than 3.25X the  trailing 12 month
EBITDA  of the  Remaining  Borrowers  as of the last  day of the  most  recently
completed month for which Financial  Statements have been delivered  pursuant to
Section 6.1; provided,  however,  that the EBITDA of PHC/CHC Holdings,  Inc. for
the year ended  December  31,  2000  shall be based on  annualized  results  for
January 1, 2000 forward.  Immediately upon or substantially  simultaneously with
such closure of a hospital  facility by such  Borrower,  its  Accounts  shall be
excluded from the Borrowing Base and such Borrower shall immediately cease to be
a Borrower and immediately cease to have any obligation under any Loan Document.

(c) Any  Borrower  may,  at its  option,  upon its failure to comply with any of
Sections  4.16,  7.10 or 8.16 and prior  written  notice  to the  Administrative
Agent, choose to cease being a Borrower hereunder or choose to have its Accounts
excluded  from the Borrowing  Base during any period when the hospital  facility
owned or leased by such Borrower remains  operational so long as (a) immediately
after  giving  effect to the choice to withdraw  as a Borrower  (i) there are at
least five  Borrowers  continuing  under this  Agreement  who  operate  hospital
facilities  (including the Eligible Real  Property) and the related  Accounts of
such hospitals  remain pledged as Collateral to the Collateral  Agent,  (ii) the
Available Credit with respect to the Remaining  Borrowers is at least $5,000,000
and (iii)  Financial  Covenant Debt of the Remaining  Borrowers  (including  any
Obligations  which  continue  to be owed to the Lenders by such  Borrower  being
excluded  hereunder)  is not more than 3.25X the trailing 12 month EBITDA of the
Remaining  Borrowers as of the last day of the most recently completed month for
which  Financial  Statements  have  been  delivered  pursuant  to  Section  6.1;
provided,  however, that the EBITDA of PHC/CHC Holdings, Inc. for the year ended
December  31,  2000 shall be based on  annualized  results  for  January 1, 2000
forward or (b)  immediately  after  giving  effect to a choice to  exclude  such
Borrower's Accounts from the Borrowing Base the Available Credit with respect to
the  Borrowers  is  at  least  $2,500,000.  Immediately  upon  or  substantially
simultaneously  with such  Borrower  ceasing  to be a  Borrower  hereunder,  its
Accounts  shall be excluded  from the  Borrowing  Base and such  Borrower  shall
immediately  cease to be a Borrower and immediately cease to have any obligation
under any Loan Document.

Article III

               CONDITIONS TO LOANS AND LETTER OF CREDIT GUARANTIES

Section  3.1.  Conditions  Precedent  to  Initial  Loans  and  Letter  of Credit
Guaranties. The obligation of each Lender to make the Loans requested to be made
by it on the Closing Date and the  obligation of CITBC to issue Letter of Credit
Guaranties  on the  Closing  Date is subject to the  satisfaction  of all of the
following conditions precedent:

(a) Certain  Documents.  The  Administrative  Agent  shall have  received on the
Closing Date each of the following, each dated the Closing Date unless otherwise
indicated or agreed to by the Agents, in form and substance  satisfactory to the
Agents and in sufficient copies for each Lender:

(i) this  Agreement,  duly executed and delivered by the Borrowers  and, for the
account of each  Lender  requesting  the same,  a  Revolving  Credit Note of the
Borrowers conforming to the requirements set forth herein;

(ii) the Security  Agreement,  duly  executed by the  Borrowers,  together  with
evidence  satisfactory to the Agents that the Collateral  Agent (for the benefit
of the  Secured  Parties)  has a valid and  perfected  first  priority  security
interest in the  Collateral,  including (x) such documents duly executed by each
Borrower as the Agents may request with respect to the perfection of the Secured
Parties' security interests in the Collateral  (including  financing  statements
under the UCC and other applicable  documents under the laws of any jurisdiction
with respect to the  perfection of Liens created by the Security  Agreement) and
(y)  copies of UCC search  reports as of a recent  date  listing  all  effective
financing  statements that name any Borrower as debtor,  together with copies of
such financing  statements,  none of which shall cover the Collateral except for
those which shall be terminated on the Closing Date;

(iii) unless  otherwise set forth in the Post Closing  Agreement,  the Mortgages
together with: (A) a Mortgagee's  Title Insurance  Policy for each Eligible Real
Property;   (B)  current  as-built  surveys,   evidence  of  appropriate  zoning
compliance and certificates of occupancy,  in each case reasonably  satisfactory
in  form  and  substance  to  the   Administrative   Agent;  (C)  evidence  that
counterparts  of the  Mortgages  have been  recorded in all places to the extent
necessary or desirable, to create a valid and enforceable first priority lien on
property  described  therein in favor of the Collateral Agent for the benefit of
the  Secured  Parties  (or in favor of such other  trustee as may be required or
desired  under local law);  and (D) an opinion of counsel in each state in which
any Mortgage is recorded in form and substance and from counsel  satisfactory to
the Agents;

(iv) a favorable opinion of (A) Mayor, Day, Caldwell, Keeton, L.L.P., counsel to
the Borrowers,  in  substantially  the form of Exhibit I, and (B) counsel to the
Borrowers in their respective  states,  in each case addressed to the Agents and
the  Lenders  and  addressing  such  other  matters as any  Lender  through  the
Administrative Agent may reasonably request.

(v) a copy of the  articles  or  certificate  of  incorporation  (or  equivalent
organizational documents) of each Borrower, certified as of a recent date by the
Secretary of State of the state of incorporation of such Borrower, together with
certificates  of such  official  attesting  to the good  standing  of each  such
Borrower;

(vi) a certificate  of the Secretary or an Assistant  Secretary of each Borrower
certifying  (A) the names and true  signatures  of each officer of such Borrower
who has been  authorized  to execute  and  deliver  any Loan  Document  or other
document required hereunder to be executed and delivered by or on behalf of such
Borrower,  (B) the by-laws (or equivalent Constituent Document) of such Borrower
as in  effect on the date of such  certification,  (C) the  resolutions  of such
Borrower's  Board of Directors  (or  equivalent  governing  body)  approving and
authorizing  the execution,  delivery and  performance of this Agreement and the
other  Loan  Documents  to which it is a party and (D) that  there  have been no
changes in the certificate of incorporation (or equivalent Constituent Document)
of  such  Borrower  from  the  certificate  of   incorporation   (or  equivalent
Constituent Document) delivered pursuant to the immediately preceding clause;

(vii) a certificate of the chief financial officer or treasurer of each Borrower
or the  Controller  of  Paracelsus,  stating that such Borrower is Solvent after
giving effect to the initial Loans and Letters of Credit, the application of the
proceeds thereof in accordance with Section 7.9 and the payment of all estimated
legal, accounting and other fees related hereto and thereto;

(viii)  a  certificate  of a  Responsible  Officer  to the  effect  that (A) the
condition set forth in Section  3.2(b) has been  satisfied and (B) no litigation
not listed on Schedule 4.6 shall have been commenced against any Borrower which,
if adversely determined, would have a Material Adverse Effect; and

(ix)  evidence  satisfactory  to the  Administrative  Agent  that the  insurance
policies  required by Section 7.5 and any Collateral  Document are in full force
and effect,  together with  endorsements in respect of insurance on the Eligible
Real Property naming the Collateral Agent, on behalf of the Secured Parties,  as
an  additional  insured  and/or  loss payee under all  insurance  policies to be
maintained with respect to the properties of Borrowers.

(b) Cash  Management.  The  Administrative  Agent shall have  received  evidence
reasonably  satisfactory  to Agents that, as of the Closing Date, the procedures
with  respect to cash  management  required by Section  2.16 and the  Collateral
Documents  have been  established  and are  currently  being  maintained by each
Borrower.

(c) Fee and  Expenses  Paid.  There  shall have been paid to the  Administrative
Agent, for the account of the Administrative Agent, the Collateral Agent and the
Lenders, as applicable,  all fees due and payable on or before the Closing Date,
and all expenses due and payable on or before the Closing Date.

(d) Consents,  Etc.  Each of the Borrowers  shall have received all consents and
authorizations  required pursuant to any material Contractual Obligation of such
Borrower  with any other  Person  and  shall  have  obtained  all  consents  and
authorizations   of,  and  effected  all  notices  to  and  filings  with,   any
Governmental  Authority,  in each case, as may be necessary to allow each of the
Borrowers  lawfully  (A) to  execute,  deliver  and  perform,  in  all  material
respects,  their respective obligations  hereunder,  the Loan Documents to which
each of them, respectively, is, or shall be, a party and each other agreement or
instrument to be executed and delivered by each of them, respectively,  pursuant
thereto or in connection  therewith,  and (B) to create and perfect the Liens on
the  Collateral  to be owned by each of them in the manner  and for the  purpose
contemplated by the Loan Documents.

(e)  The   Administrative   Agent  shall  have  received   evidence   reasonably
satisfactory  to the  Agents  that all  uncollected  Accounts  of the  Borrowers
subject to the existing  securitization  program with Bankers Trust Company,  as
trustee, have been reconveyed to the respective originating  Borrowers,  in form
and substance  satisfactory to the Agents and that such trustee relinquishes any
interests it may have had in the Accounts.

(f)      Paribas Liens.  The Administrative Agent shall have received evidence
satisfactory to it that Paribas has released all liens against any Borrower or
any property of any Borrower.

(g)      Additional Matters.  The Administrative Agent shall have received such
additional documents, information and materials as any Lender, through the
Administrative Agent, may reasonably request.

(h) Post Closing Agreement.  The Administrative Agent shall have received a post
closing agreement with terms and conditions  satisfactory to the  Administrative
Agent  obligating  the Borrowers to provide the  Administrative  Agent with such
items as the  Administrative  Agent may require  within such time periods as the
Administrative  Agent shall specify therein,  including,  without limitation,  a
Collection  Account  Agreement  for each  Collection  Account  and  Intermediate
Concentration Account.

Section 3.2.  Conditions  Precedent to Each Loan and Letter of Credit  Guaranty.
The  obligation of each Lender on any date  (including the Closing Date) to make
any Loan and of CITBC on any date  (including  the  Closing  Date) to issue  any
Letter of Credit Guaranty is subject to the satisfaction of all of the following
conditions precedent:

(a) Request for Borrowing or Issuance of Letter of Credit Guaranty. With respect
to any Loan, the Administrative Agent shall have received a duly executed Notice
of Borrowing and with respect to any Letter of Credit Guaranty, CITBC shall have
received notice pursuant to Section 2.3(c).

(b) Representations and Warranties;  No Defaults. The following statements shall
be true on the date of such Loan or  issuance,  both  before  and  after  giving
effect thereto and, in the case of such Loan, to the application of the proceeds
therefrom:

(i) Except for Loans to reimburse  drawings under any Letter of Credit Guaranty,
and  except  for  conversions  of  Eurodollar  Rate  Loans  into Base Rate Loans
pursuant to Section 2.9, the representations and warranties set forth in Article
IV and in the other Loan  Documents  shall be true and  correct on and as of the
Closing Date and shall be true and correct in all material respects on and as of
any such date after the Closing  Date with the same effect as though made on and
as of such  date,  except to the  extent  such  representations  and  warranties
expressly relate to an earlier date;

(ii) Except for Loans to reimburse drawings under any Letter of Credit Guaranty,
and  except  for  conversions  of  Eurodollar  Rate  Loans  into Base Rate Loans
pursuant  to Section  2.9, no Default or Event of Default  has  occurred  and is
continuing; and

(iii)  Except  for  Loans to  reimburse  drawings  under  any  Letter  of Credit
Guaranty,  and except for  conversions  of Eurodollar  Rate Loans into Base Rate
Loans pursuant to Section 2.9, the Borrowers  shall have delivered the Borrowing
Base Certificate required by Section 6.1(h).

(c)  Borrowing  Base.  After  giving  effect to the Loans or  Letters  of Credit
requested to be made or issued on any such date and the use of proceeds thereof,
the Revolving  Credit  Obligations  shall not exceed the Maximum  Credit at such
time.

(d) No Legal Impediments. The making of the Loans or the issuance of such Letter
of Credit on such date does not violate any Requirement of Law applicable to the
Borrowers on the date of or  immediately  following such Loan or issuance and is
not enjoined, temporarily, preliminarily or permanently.

(e) Title/Lien  Priority.  In jurisdictions where a revolving credit endorsement
is not available, the Administrative Agent shall have received such endorsements
to  Mortgagee's  Title  Insurance  Policies  for each  parcel of  Eligible  Real
Property,  in form and substance  reasonably  satisfactory to the Administrative
Agent, as the Administrative  Agent shall reasonably  require,  including "bring
down  endorsements"  to insure that,  after giving effect to such advance of the
Loan or Letter of Credit,  the Liens  created by the  applicable  Mortgages  and
insured by such  Mortgagee's  Title Insurance  Policies  constitute  valid first
priority Liens on such parcels of Eligible Real Property,  free and clear of all
defects and  encumbrances,  except those referred to in such  Mortgagee's  Title
Insurance  Policies  at the time such  policies  were  originally  issued to the
mortgagee,  and that each  Mortgagee's  Title  Insurance  Policy is in an amount
equal to the value of the applicable parcel of Eligible Real Property reasonably
determined  by the  Administrative  Agent as of the Closing Date of such Loan or
Letter of Credit.

Each  submission  by the  Borrowers to the  Administrative  Agent of a Notice of
Borrowing  and the  acceptance  by the  Borrowers  of the  proceeds of each Loan
requested  therein,  and each  submission by the Borrowers of a Letter of Credit
Guaranty  Request and the issuance of each Letter of Credit  Guaranty  Requested
therein,  shall be deemed to  constitute  a  representation  and warranty by the
Borrowers  as to the  matters  specified  in  Section  3.2(b) on the date of the
making of such Loan or the issuance of such Letter of Credit Guaranty.

Article IV

                         REPRESENTATIONS AND WARRANTIES

                  To  induce  the  Lenders  and the  Agents  to enter  into this
Agreement,  the  Borrowers  represent  and warrant to the Lenders and the Agents
that,  on and as of the Closing  Date,  after giving effect to the making of the
Loans and other  financial  accommodations  on the Closing Date and on and as of
each date as required by Section 3.2(b):

Section 4.1. Corporate Existence; Compliance with Law. Each of the Borrowers (a)
is duly organized,  validly  existing and in good standing under the laws of the
jurisdiction  of  its  incorporation;   (b)  is  duly  qualified  as  a  foreign
corporation and in good standing under the laws of each jurisdiction  where such
qualification  is  necessary,  except where the failure to be so qualified or in
good standing would not have a Material  Adverse  Effect;  (c) has all requisite
power and authority and the legal right to own, pledge, mortgage and operate its
properties,  to lease the  property it  operates  under lease and to conduct its
business as now or currently  proposed to be conducted  except where the failure
to do so would not have a Material Adverse Effect; (d) is in compliance with its
Constituent  Documents and is in compliance with all applicable  Requirements of
Law except where the failure to be in compliance would not in the aggregate have
a Material Adverse Effect; and (e) has all necessary licenses, permits, consents
or approvals from or by, has made all necessary  filings with, and has given all
necessary notices to, each Governmental  Authority having  jurisdiction,  to the
extent required for such ownership,  operation and conduct, except for licenses,
permits,  consents,  approvals  or filings  which can be obtained or made by the
taking of  ministerial  action to secure  the grant or  transfer  thereof or the
failure to obtain or make  would not in the  aggregate  have a Material  Adverse
Effect.

Section 4.2.      Corporate Power; Authorization; Enforceable Obligations.
                  -------------------------------------------------------

(a) The  execution,  delivery  and  performance  by each  Borrower  of the  Loan
Documents  to  which  it is a party  and the  consummation  of the  transactions
contemplated thereby:

(i)      are within such Borrower's corporate, limited liability company,
partnership or other powers;

(ii)     have been or, at the time of delivery  thereof  pursuant to Article III
         will have been  duly  authorized  by all  necessary  corporate  action,
         including the consent of shareholders where required;

(iii)    do  not  and  will  not  (A)  contravene   any  Borrower's   respective
         Constituent  Documents,  (B)  violate  any  other  Requirement  of  Law
         applicable  to any Borrower  (including  Regulations  T, U and X of the
         Federal  Reserve  Board),  or any order or  decree of any  Governmental
         Authority or arbitrator  applicable to any Borrower,  (C) conflict with
         or result in the breach of, or constitute a default under, or result in
         or permit the termination or acceleration of, any material  Contractual
         Obligation  of any Borrower or (D) result in the creation or imposition
         of any Lien upon any of the property of any  Borrower  other than those
         in favor of the Secured Parties pursuant to the Collateral Documents or
         otherwise permitted under Section 8.2 hereof; and

(iv)     do not require the consent of,  authorization  by,  approval of, notice
         to, or filing or registration  with, any Governmental  Authority or any
         other  Person,  (x) other than those the  failure of which to obtain or
         make would not have a Material  Adverse Effect and (y) other than those
         listed on Schedule  4.2(a) and which have been or will be, prior to the
         Closing  Date,  obtained or made,  copies of which have been or will be
         delivered to the Administrative Agent pursuant to Section 3.1, and each
         of which on the  Closing  Date will be in full force and effect and (z)
         other than with respect to the Collateral,  filings required to perfect
         the Liens created by the Collateral Documents.

(b) This Agreement has been, and each of the other Loan Documents will have been
upon delivery thereof pursuant to the terms of this Agreement, duly executed and
delivered  by each  Borrower  thereto.  This  Agreement  is,  and the other Loan
Documents  will be,  when  delivered  hereunder,  the legal,  valid and  binding
obligation  of each  Borrower  thereto,  enforceable  against  such  Borrower in
accordance with its terms.

Section 4.3.      Financial Statements.

(a) The  consolidated  balance sheets of Paracelsus as at December 31, 1999, and
the related  consolidated  statements of operations,  retained earnings and cash
flows of  Paracelsus  for the fiscal year then ended  certified by Ernst & Young
LLP,  copies of which have been  furnished  to each Lender,  fairly  present the
consolidated  financial  condition  of  Paracelsus  as at  such  dates  and  the
consolidated  results of the  operations of  Paracelsus  for the period ended on
such dates,  all in conformity  with GAAP. The unaudited  consolidating  balance
sheets of Paracelsus  (which includes the Borrowers) as at February 29, 2000 and
the related  unaudited  consolidating  statements of  operations,  of Paracelsus
(which  includes the Borrowers) for the period then ended,  copies of which have
been  furnished to each Lender,  fairly  present the financial  condition of the
Borrowers as at such dates and the results of the  operations  of the  Borrowers
for the period ended on such dates,  all in conformity with GAAP (subject to the
absence of footnote disclosure and normal year-end audit adjustments).

(b) None of the Borrowers has any material  obligation,  contingent liability or
liability for taxes, long-term leases or unusual forward or long-term commitment
which is not  reflected in the  Financial  Statements  referred to in clause (a)
above or in the notes thereto or permitted by this Agreement.

(c) The budget for the fiscal year ending December 31, 1999, a copy of which has
been  delivered  to each  Lender,  has been  prepared  by the  Borrowers  having
operating  facilities  in light of the past  operations  of its  business.  Such
budget is based upon estimates and assumptions stated therein,  all of which the
applicable  Borrowers  believe  to be  reasonable  and fair in light of  current
conditions  and  current  facts  known  to such  Borrowers  and,  as of the date
prepared,  reflected such Borrower's good faith and reasonable  estimates of the
future  financial  performance  of such  Borrower  and of the other  information
projected therein for such Borrowers for the periods set forth therein.

Section 4.4.      Material Adverse Effect.  Since February 29, 2000 there have
been no events or developments that in the aggregate have had a Material Adverse
Effect.

Section 4.5. Solvency.  Both before and after giving effect to (a) the Loans and
Letter of Credit  Obligations to be made or extended on the Closing Date or such
other date as Loans and Letter of Credit  Obligations  requested  hereunder  are
made or extended, (b) the disbursement of the proceeds of such Loans pursuant to
the  instructions  of the  Borrowers  and (c) the  payment  and  accrual  of all
transaction  costs in connection  with the foregoing,  each Borrower (other than
Flint River in the event that circumstances  solely related to its existing bond
debt result in Flint River not being Solvent) is Solvent.

Section  4.6.  Litigation.  There are no  pending  or, to the  knowledge  of the
Borrowers,  threatened  actions,  investigations  or  proceedings  to which  any
Borrower is a party,  or any property of a Borrower is subject before any court,
Governmental  Authority  or  arbitrator  other than those that in the  aggregate
would not have a Material Adverse Effect. The performance by any Borrower of its
obligation under any of the Loan Documents is not restrained or enjoined (either
temporarily,  preliminarily or  permanently).  Schedule 4.6 lists all litigation
pending  against any  Borrower  at the date  hereof  which would have a Material
Adverse Effect.

Section 4.7.      Taxes.

(a) All material  federal,  state,  local and foreign  income and  franchise and
other tax returns,  reports and  statements  (collectively,  the "Tax  Returns")
required  to be filed by the  Borrowers  have been  filed  with the  appropriate
Governmental  Authorities  in all  jurisdictions  in which such Tax  Returns are
required to be filed,  and all taxes,  charges and other  impositions  reflected
therein have been paid prior to the date on which any fine,  penalty,  interest,
late charge or loss may be added thereto for  non-payment  thereof  except where
contested  in good faith and by  appropriate  proceedings  if adequate  reserves
therefor  have been  established  on the  books of the  respective  Borrower  in
conformity  with GAAP. As of the Closing  Date,  except as disclosed on Schedule
4.7(a),  no Tax  Return  is  under  audit  or  examination  by any  Governmental
Authority and no notice of such an audit or  examination or any assertion of any
claim for Taxes has been given or made by any Governmental Authority. Proper and
accurate  amounts  have  been  withheld  by each  Borrower  from its  respective
employees for all periods in  compliance in all material  respects with the tax,
social   security  and   unemployment   withholding   provisions  of  applicable
Requirements  of  Law  and  such  withholdings  have  been  timely  paid  to the
respective Governmental Authorities.

(b) Except as disclosed on Schedule 4.7(b),  none of the Borrowers has (i) as of
the  Closing  Date,  executed  or filed  with the IRS or any other  Governmental
Authority any  agreement or other  document  extending,  or having the effect of
extending,  the period for the  filing of any Tax  Return or the  assessment  or
collection of any charges;  (ii) any obligation under any tax sharing  agreement
or  arrangement  other  than that to which the  Administrative  Agent has a copy
prior to the date thereof; or (iii) been a member of an affiliated,  combined or
unitary   group  other  than  the  group  of  which  the  Borrowers  are  common
subsidiaries.

Section 4.8. Full  Disclosure.  The  information  prepared or furnished by or on
behalf of the Borrowers in  connection  with this  Agreement,  except any budget
delivered to the Lenders,  or the consummation of the financing taken as a whole
does not  contain  any untrue  statement  of a material  fact or omit to state a
material fact necessary to make the statements  contained  therein or herein not
misleading.  Any budget delivered to the Lenders in connection herewith is based
upon  estimates  and  assumptions  stated  therein,  all of which the  Borrowers
believe,  as of the date of the delivery  thereof or, in the case of the initial
budget  previously  delivered to the Lenders  pursuant to Section 4.3, as of the
date of  preparation  of such budget,  to be reasonable and fair in light of the
then current  conditions  and the then current  facts known to the Borrowers and
reflect  the  Borrowers'  good  faith and  reasonable  estimates  of the  future
financial  performance  of the Borrowers and of the other  information  provided
therein  for the  periods set forth  therein.  All facts known to the  Borrowers
which the Borrowers  reasonably  believe are material to an understanding of the
financial condition, business, properties or prospects of the Borrowers taken as
one enterprise have been disclosed to the Lenders.

Section  4.9.  Margin  Regulations.  No Borrower  is engaged in the  business of
extending  credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Federal  Reserve  Board),  and no proceeds of
any  Borrowing  will be used to purchase or carry any margin  stock or to extend
credit to others for the purpose of  purchasing  or carrying any margin stock in
contravention of Regulation T, U or X of the Federal Reserve Board.

Section 4.10.     No Burdensome Restrictions; No Defaults.

(a) None of the  Borrowers  (i) is a party  to any  Contractual  Obligation  the
compliance with which would have a Material Adverse Effect or the performance of
which by any thereof,  either unconditionally or upon the happening of an event,
would  result in the  creation  of a Lien  (other  than a Lien  permitted  under
Section  8.2) on the property or assets of any thereof or (ii) is subject to any
charter or corporate restriction which would have a Material Adverse Effect.

(b) Other than those defaults  which in the aggregate  would not have a Material
Adverse Effect, none of the Borrowers is in default under or with respect to any
Contractual  Obligation  owed  by it  and,  to  the  knowledge  of  each  of the
Borrowers, no other party is in default under or with respect to any Contractual
Obligation owed to any Borrower.

(c)      No Default or Event of Default has occurred and is continuing.

Section 4.11.  Investment  Company Act; Public Utility Holding Company Act. None
of the Borrowers is (a) an "investment company" or an "affiliated person" of, or
"promoter"  or "principal  underwriter"  for, an  "investment  company," as such
terms are defined in the  Investment  Company  Act of 1940,  as amended or (b) a
"holding  company," or an  "affiliate"  of a "holding  company" or a "subsidiary
company"  of a "holding  company,"  as each such term is defined and used in the
Public Utility Holding Act of 1935, as amended.

Section  4.12.  Use of  Proceeds.  The  proceeds of the Loans and the Letters of
Credit  related  to the  Letter  of  Credit  Guaranties  are  being  used by the
Borrowers  solely as follows:  to provide  funds to (i)  Paracelsus,  to pay for
actual  expenses not exceeding  $7,000,000  per calendar year,  (ii)  Affiliates
other than Paracelsus to pay for liabilities of sold,  dormant,  holding company
or  discontinued   entities  that  relate  to  workers'   compensation   claims,
malpractice  insurance  claims,   medicare/medicaid   cost  report  liabilities,
residual accounts payable,  residual payroll checks and residual state taxes, in
any event not exceeding $5,000,000 per calendar year, (iii) pay for the transfer
of accounts receivable to the respective  Borrowers who originated them from the
existing accounts  receivable  securitization  program,  (iv) refinance existing
accounts  receivable  working capital secured  Indebtedness and letter of credit
exposure to  Paribas,  (v) finance  capital  expenditures,  and (vi) for general
working capital and corporate and partnership purposes. Notwithstanding anything
to the  contrary  in this  Section  4.12 or in Section 8.3 or Section  8.5,  the
Borrowers may use proceeds of Letters of Credit  related to the Letter of Credit
Guaranties,  to the extent they are cash collateralized pursuant to Section 9.3,
for the benefit of any Affiliates on an unlimited basis.

Section 4.13. Insurance.  All policies of insurance required to be maintained by
Section  7.5 are in full force and effect and are of a nature and  provide  such
coverage as is  sufficient  and as is  customarily  carried by businesses of the
size and character of such Person.

Section 4.14.     Labor Matters.

(a) There are no strikes,  work stoppages,  slowdowns or lockouts  pending or to
the knowledge of Borrowers threatened against or involving any of the Borrowers,
other  than  those  which in the  aggregate  would not have a  Material  Adverse
Effect.

(b) There are no unfair labor practices,  grievances or complaints pending,  or,
to any Borrower's knowledge,  threatened against or involving any Borrower,  nor
are there any  arbitrations  or  grievances  threatened  involving any Borrower,
other than  those  which,  in the  aggregate  would not have a Material  Adverse
Effect.

(c) Except as set forth on Schedule  4.14, as of the Closing  Date,  there is no
collective  bargaining  agreement  covering  any of the  employees of any of the
Borrowers.

(d)      Schedule 4.14 sets forth, as of the date hereof, all material
consulting agreements of each of the Borrowers.

Section 4.15.     ERISA.

(a)  Schedule  4.15  separately  identifies  as of the date  hereof all Title IV
Plans, all Multiemployer  Plans and all of the employee benefit plans within the
meaning of Section  3(3) of ERISA to which any Borrower  has any  obligation  or
liability, contingent or otherwise.

(b) Each  employee  benefit plan of each  Borrower  which is intended to qualify
under Section 401 of the Code does so qualify,  and any trust created thereunder
is exempt from tax under the provisions of Section 501 of the Code, except where
such failures in the aggregate would not have a Material Adverse Effect.

(c) Each Title IV Plan is in compliance in all material respects with applicable
provisions  of  ERISA,  the  Code  and  other  Requirements  of Law  except  for
non-compliances that in the aggregate would not have a Material Adverse Effect.

(d) There has been no,  nor is there  reasonably  expected  to occur,  any ERISA
Event which would have a Material Adverse Effect.

(e) Except to the extent set forth on Schedule  4.15,  none of the  Borrowers or
any  ERISA  Affiliate  would  have any  Withdrawal  Liability  as a result  of a
complete withdrawal as of the date hereof from any Multiemployer Plan.

Section 4.16.     Environmental Matters.

(a) The  operations of each  Borrower  have been and are in compliance  with all
Environmental  Laws,  including obtaining and complying with Permits required by
Environmental Laws, other than  non-compliances that would not have a reasonable
likelihood  of any Borrower  incurring  Environmental  Liabilities  and Costs in
excess of $1,000,000 individually,  and $2,500,000,  in the aggregate for all of
the Borrowers.

(b) None of the Borrowers or any real property currently or, to the knowledge of
any Borrowers,  previously  owned,  operated or leased by or for any Borrower is
subject to any pending or, to the knowledge of any Borrower,  threatened, claim,
order, agreement,  notice of violation,  notice of potential liability or is the
subject of any pending or to the knowledge of any Borrower threatened proceeding
or   investigation   by  any   Governmental   Authority  under  or  pursuant  to
Environmental  Laws  other  than  those  that have a  reasonable  likelihood  of
resulting  in any  Borrower  incurring  Environmental  Liabilities  and Costs in
excess of $1,000,000  individually,  and  $2,500,000 in the aggregate for all of
the Borrowers.

(c)      Except as disclosed on Schedule 4.16, none of the Borrowers is a
treatment, storage or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C.ss. 6901 et seq., the regulations
thereunder or any state analog.

(d) There are no facts,  circumstances or conditions  arising out of or relating
to the operations or ownership of real property owned, operated or leased by any
Borrower  which  could  reasonably  be  expected  to give rise to  Environmental
Liability Cost which are not specifically  included in the financial information
furnished  to the  Lenders  other than  those  that would not have a  reasonable
likelihood of resulting in such Borrower incurring Environmental Liabilities and
Costs in excess of $1,000,000 individually,  and $2,500,000 in the aggregate for
all of the Borrowers.

(e) As of the date hereof, no Environmental Lien has attached to any property of
any Borrower and, to the knowledge of any Borrower,  no facts,  circumstance  or
conditions  exist  that  could  reasonably  be  expected  to  result in any such
Environmental Lien attaching to any such property.

(f) Each  Borrower has  provided  the Lenders with copies of all  environmental,
material health or material safety audits,  studies,  assessments,  inspections,
investigations  or other  environmental  material  health  and  material  safety
reports relating to any Eligible Real Property.

Section 4.17. Intellectual Property. Each Borrower owns or licenses or otherwise
has the  right  to use all  licenses,  permits,  patents,  patent  applications,
trademarks,  trademark  applications,  service marks,  trade names,  copyrights,
copyright  applications,   franchises,  authorizations  and  other  intellectual
property rights (including all Intellectual  Property as defined in the Security
Agreement) that are necessary for the operations of their respective businesses,
without  infringement  upon or conflict with the rights of any other Person with
respect  thereto,  including all trade names  associated  with any private label
brands  of any  Borrower  except  where  the  failure  to do so would not have a
Material  Adverse  Effect.  To any  Borrower's  knowledge,  no  slogan  or other
advertising device, product,  process, method,  substance, part or component, or
other material now employed, or now contemplated to be employed, by any Borrower
infringes  upon or conflicts  with any rights owned by any other Person,  and no
claim or  litigation  regarding  any of the  foregoing is pending or  threatened
which, in each case, would have a Material Adverse Effect.

Section 4.18.     Title; Real Property.

(a) Each Borrower has good and marketable title to, or valid leasehold interests
in, all real property  purported to be owned by it including  those reflected on
the most recent Financial Statements delivered by the Borrowers and none of such
properties  and assets is  subject to any Lien,  except  Liens  permitted  under
Section  8.2.  Each  Borrower  has  received  all deeds,  assignments,  waivers,
consents,  non-disturbance and recognition or similar agreements,  bills of sale
and other  documents,  and have duly effected all recordings,  filings and other
actions necessary to establish, protect and perfect each Borrower's right, title
and  interest  in  and  to  all  such  property,   except  to  the  extent  that
noncompliance with this sentence would not have a material adverse effect on any
Eligible Real Property or a Material Adverse Effect.

(b) Except as  permitted  by  Section  8.4,  no  Borrower  owns or holds,  or is
obligated  under or a party to,  any  option,  right of first  refusal  or other
contractual right to purchase,  acquire, sell, assign or dispose of any hospital
facility owned or leased by such Borrower.

(c) Except to the extent that  noncompliance with this Section 4.18(c) would not
have a material  adverse  effect on any  Eligible  Real  Property  or a Material
Adverse Effect (i) all components of all  improvements  included within the real
property  owned  or  leased  by  any  Borrower  (collectively,  "Improvements"),
including  the  roofs  and   structural   elements   thereof  and  the  heating,
ventilation, air conditioning,  plumbing,  electrical,  mechanical, sewer, waste
water,  storm  water,  paving and  parking  equipment,  systems  and  facilities
included  therein,  are in good working order and repair;.  (ii) all water, gas,
electrical, steam, compressed air, telecommunication,  sanitary and storm sewage
lines and systems and other similar  systems  serving the real property owned or
leased by any Borrower are installed and operating and are  sufficient to enable
the real  property  owned or leased by such  Borrower to continue to be used and
operated in the manner  currently  being used and operated,  and no Borrower has
any knowledge of any factor or condition that could result in the termination or
material  impairment of the  furnishing  thereof;  and (iii) no  Improvement  or
portion  thereof is dependent for its access,  operation or utility on any land,
building or other  Improvement not included in the real property owned or leased
by any Borrower.

(d) No portion of any Eligible Real Property owned or leased by any Borrower has
suffered any damage by fire or other casualty loss greater than $1,000,000 which
has not  heretofore  been  completely  repaired  and  restored  to good  working
condition  except to the extent  Borrowers  have  complied  with Section 7.5. No
portion of any Eligible Real Property owned or leased by any Borrower is located
in a  special  flood  hazard  area as  designated  by any  federal  Governmental
Authority  unless flood  insurance is  maintained  therefor in  accordance  with
Section 7.5.

(e) All Permits  required to have been issued or  appropriate to enable all real
property  owned or leased by any  Borrower to be lawfully  occupied and used for
all of the  purposes  for which they are  currently  occupied and used have been
lawfully issued and are in full force and effect,  other than those which in the
aggregate would not have a Material Adverse Effect.

(f) None of the Borrowers has received any notice, or has any knowledge,  of any
pending,  threatened or contemplated  condemnation proceeding affecting any real
property  owned or leased by any  Borrower  or any part  thereof,  except  those
which, in the aggregate, would not have a Material Adverse Effect.

Article V

                               FINANCIAL COVENANTS

                  As  long as any of the  Obligations  or the  Revolving  Credit
Commitments remain  outstanding,  unless the Requisite Lenders otherwise consent
in writing, each Borrower agrees with the Lenders and the Agents that:

Section 5.1.  Minimum  EBITDA.  The  Borrowers,  on a consolidated  basis,  will
maintain  during each  calendar year  (commencing  with the calendar year ending
December 31, 2000),  EBITDA of not less than zero for each cumulative period (a)
commencing on the first day of such calendar year and (b) ending on the last day
of each successive calendar month during such calendar year; provided,  however,
for the calendar year ending  December 31, 2000,  EBITDA will be calculated  for
the  period  commencing  April  1,  2000  and  ending  on the  last  day of each
successive  calendar month thereafter until and including December 31, 2000. For
purposes of this Section 5.1,  EBITDA  means,  with respect to the  consolidated
Borrowers  for any  period,  (a)  EBITDA (as  defined  in  Section  1.1) of such
Borrowers minus (b) the sum of (i) capital  expenditures of the Borrowers,  (ii)
Interest  Expense paid by the Borrowers to  unaffiliated  third  parties,  (iii)
principal  payments by the  Borrowers on any  Indebtedness  due to  unaffiliated
third parties, (iv) Paracelsus overhead cost and (v) distributions to Paracelsus
(exclusive  of  Paracelsus  overhead  cost)  and other  Affiliates  made by such
Borrowers  provided that such  distribution  shall exclude (A) cash expenditures
made in  conjunction  with  the  termination  of the  receivable  securitization
program with Sheffield Receivables  Corporation made  contemporaneously with the
closing hereof, and (B) net proceeds from Indebtedness  permitted under Sections
8.1 (h) or 8.1(l) of this Agreement.

Article VI

                               REPORTING COVENANTS

                  As  long as any of the  Obligations  or the  Revolving  Credit
Commitments remain  outstanding,  unless the Requisite Lenders otherwise consent
in writing,  each Borrower agrees with the Lenders, the Collateral Agent and the
Administrative Agent that:

Section 6.1.      Financial Statements.  The Borrowers shall furnish to the
Administrative Agent (with sufficient copies for each of the Lenders) the
following Financial Statements:

(a) Monthly  Reports.  Within 45 days after the end of each fiscal month in each
Fiscal  Year,  financial  information  regarding  the  Borrowers  consisting  of
unaudited  balance sheets of Paracelsus  showing  consolidated and consolidating
figures  (including figures for the Borrowers) as of the close of such month and
the related  statements of income and related  consolidated cash flow statements
for such month and that  portion of the  current  Fiscal  Year  ending as of the
close of such  month,  setting  forth in  comparative  form the  figures for the
corresponding period in the prior year with respect to the income statement only
and the figures  contained in the budget for the current  Fiscal  Year,  in each
case  certified by a Responsible  Officer of each Borrower as fairly  presenting
the consolidated and consolidating financial position of the Borrowers as at the
dates  indicated  and the  results  of their  operations  and cash  flow for the
periods  indicated in  accordance  with GAAP (subject to the absence of footnote
disclosure and normal year-end audit adjustments).

(b) Quarterly  Reports.  Within 45 days after the end of each Fiscal  Quarter of
each Fiscal Year,  financial  information  regarding the Borrowers consisting of
unaudited  balance sheets of Paracelsus  showing  consolidated and consolidating
figures  (including  figures for the  Borrowers) as of the close of such quarter
and the  related  statements  of  income  and  related  consolidated  cash  flow
statements for such quarter and that portion of the Fiscal Year ending as of the
close of such  quarter,  setting forth in  comparative  form the figures for the
corresponding  period in the prior year and with respect to the income statement
only the figures  contained in the budget for the current  Fiscal Year,  in each
case  certified by a Responsible  Officer of each Borrower as fairly  presenting
the consolidated and consolidating financial position of the Borrowers as at the
dates  indicated  and the  results  of their  operations  and cash  flow for the
periods  indicated in  accordance  with GAAP (subject to the absence of footnote
disclosure and normal year-end audit adjustments).

(c) Annual Reports. Within 120 days after the end of each Fiscal Year, financial
information regarding the Borrowers consisting of consolidated balance sheets of
Paracelsus showing consolidated and consolidating figures (including figures for
all  Borrowers) as of the end of such year and related  statements of income and
related  consolidated  cash flow  statements of Paracelsus for such Fiscal Year,
all  prepared  in  conformity  with  GAAP  and  certified,  in the  case of such
consolidated  financial  statements,  by Ernst & Young LLP or other  independent
public   accountants  of  recognized   national   standing   acceptable  to  the
Administrative  Agent,  together with the report of such accounting firm stating
that (i) such financial  statements  fairly present the  consolidated  financial
position  of  Paracelsus  as at the  dates  indicated  and  the  results  of its
operations  and cash flow for the  periods  indicated  in  conformity  with GAAP
applied on a basis  consistent  with prior years  (except for changes with which
such independent  certified public accountants have not objected and which shall
have been  disclosed  in the notes to the  financial  statements),  and (ii) the
examination by such accountants in connection with such  consolidated  financial
statements  has  been  made  in  accordance  with  generally  accepted  auditing
standards,  and  accompanied by a certificate  stating that in the course of the
regular audit of the business of the Borrowers such accounting firm has obtained
no  knowledge  that a Default or Event of  Default  in respect of the  financial
covenants  contained in Article V has occurred and is continuing,  or, if in the
opinion of such accounting  firm, a Default or Event of Default has occurred and
is  continuing  in respect of such  financial  covenants,  a statement as to the
nature thereof.

(d)  Compliance  Certificate.  Together  with  each  delivery  of any  Financial
Statement  pursuant  to  clauses  (a),  (b)  and  (c) of  this  Section  6.1,  a
certificate  of  a  Responsible  Officer  of a  Borrower  (each,  a  "Compliance
Certificate")  (i)  showing  in  reasonable  detail  the  calculations  used  in
determining  compliance with the financial covenant contained in Article V which
is tested  on a  monthly  basis and (ii)  stating  that no  Default  or Event of
Default has occurred and is  continuing  or, if a Default or an Event of Default
has occurred and is continuing,  stating the nature thereof and the action which
the Borrowers propose to take with respect thereto.

(e) Budget.  Not later than 60 days after the end of each Fiscal  Year,  (i) the
annual  budget  of the  Borrowers  having  operating  facilities  for  the  next
succeeding  Fiscal Year  approved by the Board of Directors of  Paracelsus,  and
(ii) forecasts prepared by management of such Borrowers for each fiscal month in
the next succeeding Fiscal Year, including, in each instance described in clause
(i) and (ii) above (A) a projected year end consolidated and  consolidating  (on
an individual hospital basis) income statement and a consolidated  balance sheet
of Paracelsus and a consolidated statement of cash flows of Paracelsus and (B) a
statement of all of the material assumptions on which such forecasts are based.

(f) Management Letters,  Etc. Within five Business Days after receipt thereof by
the  board  of  directors  of  Paracelsus,  copies  of each  management  letter,
exception  report or similar  letter or report  received by Paracelsus  from its
independent certified public accountants.

(g) Borrowing  Base  Certificates.  No later than the third Business Day of each
week, a Borrowing Base  Certificate as of the end of the  immediately  preceding
week (the  "Weekly  Borrowing  Base  Certificate"),  executed  by a  Responsible
Officer  of a  Borrower  (on  behalf  of the  Borrowers)  and no later  than the
twenty-fifth  day of each calendar month, a Borrowing Base Certificate as of the
end of the immediately  preceding month,  executed by a Responsible Officer of a
Borrower  (on behalf of the  Borrowers);  provided,  however,  that each  Weekly
Borrowing Base  Certificate  does not have to update any information on Accounts
specified in clauses (l), (m) and (n) of the definition of Eligible Receivable.

Section 6.2.  Default Notices.  As soon as practicable,  and in any event within
three  Business  Days after a  Responsible  Officer of any  Borrower  has actual
knowledge of the existence of any Default, Event of Default or other event which
has had a Material Adverse Effect or which could reasonably be expected to cause
or  result  in  a  Material  Adverse  Effect,   the  Borrowers  shall  give  the
Administrative  Agent notice  specifying  the nature of such Default or Event of
Default or other event,  including the anticipated effect thereof, which notice,
if given by  telephone,  shall be  promptly  confirmed  in  writing  on the next
Business Day.

Section 6.3. Litigation.  Promptly after the commencement thereof, the Borrowers
shall give the  Administrative  Agent written notice of the commencement of each
action, suit or proceeding before any domestic or foreign Governmental Authority
or arbitrator, to which any Borrower is a party, or any property of any Borrower
is subject, which in the reasonable judgment of the Borrowers,  could reasonably
be expected to result in liability to the Borrowers (after taking insurance into
account) in an amount equal to $500,000 or more; provided, however, that nothing
in this Section 6.3 shall require  disclosure of matters which could  reasonably
be  expected  to  result in a waiver of the  attorney-client  privilege  or work
product protection of any Borrower or any of its Affiliates or a violation of an
obligation  of any Borrower or any of its  Affiliates  imposed by court order or
otherwise imposed by law.

Section 6.4.  Asset Sales.  At least five Business Days prior to any Asset Sale,
except any Asset Sale described in clauses (a), (b), (c) and (f) of Section 8.4,
anticipated  to generate in excess of  $1,000,000  in Net Cash  Proceeds  and at
least 60 days prior to any Asset Sale  pursuant  to  Section  8.4(f),  Borrowers
shall send the  Administrative  Agent a notice (a) describing such Asset Sale or
the nature and material terms and conditions of such transaction and (b) stating
the estimated Net Cash Proceeds anticipated to be received by any Borrower.

Section 6.5. SEC Filings;  Press Releases.  Promptly after the sending or filing
thereof,  the Borrowers  shall send the  Administrative  Agent copies of (a) all
reports  which  Paracelsus  sends to its  Security  holders  generally,  (b) all
reports and  registration  statements which Paracelsus files with the Securities
and Exchange  Commission or any national or foreign  securities  exchange or the
National  Association  of Securities  Dealers,  Inc.,  (c) all press releases of
Paracelsus  and  (d)  all  other  statements   concerning  material  changes  or
developments in the business of any Borrower made available by Paracelsus to the
public.

Section 6.6.  Labor  Relations.  Promptly  after becoming aware of the same, the
Borrowers shall give the Administrative Agent written notice of (a) any material
labor  dispute to which any  Borrower  is or may become a party,  including  any
strikes, lockouts or other disputes relating to any of such Person's facilities,
and (b) any  material  Worker  Adjustment  and  Retraining  Notification  Act or
related liability incurred with respect to the closing of any facility of any of
such Person.

Section  6.7.  Tax  Returns.  Upon  the  request  of  the  Agents,  through  the
Administrative  Agent, the Borrowers will provide copies of all federal,  state,
local and foreign tax returns and reports filed by each Borrower and Paracelsus,
as applicable,  in respect of taxes measured by income (excluding sales, use and
like taxes).

Section 6.8.  Insurance.  As soon as is  practicable  and in any event within 90
days  after  the end of  each  Fiscal  Year,  the  Borrowers  will  furnish  the
Administrative  Agent (in sufficient  copies for each of the Lenders) with (a) a
report in form and substance  satisfactory to the Agents  outlining all material
insurance  coverage  maintained  as of the date of such report in respect of the
Borrowers  and the  duration  of such  coverage  and (b) an  insurance  broker's
statement  that all premiums  then due and payable with respect to such coverage
have been paid.

Section 6.9. ERISA Matters. Each Borrower shall furnish the Administrative Agent
(with sufficient copies for each of the Lenders):

(a)  promptly  and in any event  within 30 days  after  such  Borrower  or ERISA
Affiliate knows or has reason to know that any ERISA Event has occurred;

(b) promptly and in any event  within 10 days after such  Borrower  knows or has
reason to know that a request for a minimum  funding waiver under Section 412 of
the Code has been filed with respect to any Title IV Plan or Multiemployer Plan,
a written  statement of a Responsible  Officer of such Borrower  describing such
ERISA  Event or waiver  request  and the  action,  if any,  which such  Borrower
proposes to take with  respect  thereto and a copy of any notice  filed with the
PBGC or the IRS pertaining thereto;

(c)  simultaneously  with the date that such Borrower or ERISA Affiliate files a
notice of intent to  terminate  any  Title IV Plan,  if such  termination  would
require material  additional  contributions in order to be considered a standard
termination  within the meaning of Section 4041(b) of ERISA, a copy of each such
notice.

Section  6.10.  Environmental  Matters.  The  Borrowers  shall  provide  to  the
Administrative  Agent,  within 60 days of its  request,  an  environmental  site
assessment  report  prepared  by  a  consultant  reasonably  acceptable  to  the
Administrative  Agent and in a form and  scope  reasonably  satisfactory  to the
Administrative Agent for any Eligible Real Property. Each Borrower shall provide
the  Administrative  Agent  promptly  and in any  event  within  10 days of such
Borrower having knowledge of any of the following,  written notice of any of the
following (in each case after giving effect to any recovery from insurance):

(a) that any Borrower is or may be liable to any Person as a result of a Release
or  threatened  Release  which could  reasonably  be  expected  to subject  such
Borrower to Environmental Liabilities and Costs of $500,000 or more;

(b)      the receipt by any Borrower of notification that any real or personal
property of such Borrower is or is reasonably likely to be subject to any
Environmental Lien of $500,000 or more;

(c) the  receipt by any  Borrower  of any notice of  violation  of or  potential
liability  under,  or knowledge by such  Borrower  that there exists a condition
which could  reasonably  be expected to result in a violation by any Borrower of
or liability of any Borrower under any Environmental  Law, except for violations
and  liabilities  the  consequence  of  which  in the  aggregate  would  have no
reasonable  likelihood of subjecting such Borrower to Environmental  Liabilities
and Costs of $500,000 or more;

(d)  the   commencement  of  any  judicial  or   administrative   proceeding  or
investigation  alleging a  violation  by any  Borrower  of or  liability  of any
Borrower  under any  Environmental  Law,  which in the  aggregate,  if adversely
determined,  would have a reasonable  likelihood of subjecting  such Borrower to
Environmental Liabilities and Costs of $500,000 or more;

(e) any proposed  acquisition of stock,  assets or real estate,  or any proposed
leasing of property,  or any other  action by any Borrower  other than those the
consequences of which in the aggregate have reasonable  likelihood of subjecting
the Borrowers collectively to Environmental Liabilities and Costs of $500,000 or
more;

(f) any proposed action by any Borrower or any proposed change in  Environmental
Laws which in the  aggregate  have a reasonable  likelihood  of  requiring  such
Borrower to obtain  additional  environmental,  health or safety Permits or make
additional  capital  improvements to obtain compliance with  Environmental  Laws
that in the  aggregate  would cost  $500,000 or more in a Fiscal Year or subject
such Borrower to additional  Environmental  Liabilities and Costs of $500,000 or
more; and

(g) upon  written  request by any Lender  through the  Administrative  Agent,  a
report providing an update of the status of any environmental,  health or safety
compliance,  hazard  or  liability  issue  identified  in any  notice  or report
delivered pursuant to this Agreement.

Section 6.11.     Borrowing Base Determination.

(a) The Administrative  Agent may conduct, or may cause to be conducted,  at the
Borrowers'  expense such appraisals (which shall be conducted no more frequently
than once per fiscal  year and only with  respect to  Eligible  Real  Property),
investigations and reviews as the Administrative Agent reasonably determines are
needed for the purpose of determining the Borrowing Base, all upon notice and at
such  times  during  normal  business  hours  and as often as may be  reasonably
determined  by  the   Administrative   Agent   (provided,   however,   that  the
Administrative Agent shall not be required to provide such notice if there is an
Event of Default  continuing).  The  Borrowers  shall  cooperate  fully with the
Administrative   Agent  and  all  others   involved  with  any  such  appraisal,
investigation  or  review  to ensure  that the  Administrative  Agent is able to
timely complete such appraisal, investigation or review.

(b) The Borrowers shall promptly notify the  Administrative  Agent in writing in
the event that at any time such Borrower  knows that (i) the  Borrowing  Base of
all  Borrowers  is less than 85% of the  Borrowing  Base  reflected  in the most
recent Borrowing Base Certificate  delivered  pursuant to Section 6.1(h) or that
(ii) the outstanding  Revolving Credit Outstandings exceed the Borrowing Base as
a result of a decrease therein, and the amount of such excess.

Section 6.12. Other  Information.  The Borrowers will provide the Administrative
Agent or any  Lender  with  such  other  information  respecting  the  business,
properties, condition, financial or otherwise, or operations of the Borrowers as
any Lender  through the  Administrative  Agent may from time to time  reasonably
request.

Article VII

                              AFFIRMATIVE COVENANTS

                  As long as the Obligations or the Revolving Credit Commitments
remain  outstanding,  unless the Requisite Lenders otherwise consent in writing,
each Borrower agrees with the Lenders and the Agents that:

Section 7.1.      Preservation of Corporate Existence, Etc.  Each Borrower shall
preserve and maintain its corporate existence, rights (charter and statutory)
and franchises, except as permitted by Sections 8.3 and 8.4.

Section 7.2.  Compliance  with Laws,  Etc. Each  Borrower  shall comply with all
applicable  Requirements of Law,  Contractual  Obligations  and Permits,  except
where the  failure  so to  comply  would not in the  aggregate  have a  Material
Adverse Effect.

Section  7.3.  Conduct  of  Business.  Except  as  expressly  permitted  in this
Agreement,  each Borrower shall (a) conduct its business in the ordinary  course
and (b) use its reasonable  efforts,  in the ordinary course and consistent with
past  practice,  to preserve  its  business and the goodwill and business of the
customers, advertisers, suppliers and others having business relations with such
Borrower,  except in each case where the failure to comply with the covenants in
each of clauses  (a) and (b) above  would not in the  aggregate  have a Material
Adverse Effect.

Section 7.4. Payment of Taxes, Etc. Each Borrower shall pay and discharge before
the same  shall  become  delinquent,  all  lawful  governmental  claims,  taxes,
assessments,  charges and levies which could reasonably be expected to adversely
affect the Accounts, except where contested in good faith, by proper proceedings
and  adequate  reserves  therefor  have  been  established  on the books of such
Borrower in  conformity  with GAAP and all other  material  lawful  governmental
claims, taxes,  assessments,  charges and levies, except where contested in good
faith,  by  proper   proceedings  and  adequate   reserves  therefor  have  been
established  on the books of such  Borrower in  conformity  with GAAP and except
where such failure to pay will not have a Material Adverse Effect. The Borrowers
will promptly,  but in any event within 5 Business Days,  notify  Administrative
Agent in writing upon (i) receipt of a notice to commence,  or commencement  of,
any  material  audit or  examination  by any  Governmental  Authority of any Tax
Return or any  assertion  of any  material  claim for Taxes by any  Governmental
Authority or (ii) execution or filing with the IRS or any Governmental Authority
any agreement or other  document  extending,  or having the effect of extending,
the period  for the  filing of any  material  Tax  Return or the  collection  or
assessment of any charges.

Section  7.5.  Maintenance  of  Insurance.  Each  Borrower  shall (i)  maintain,
insurance with responsible and reputable  insurance companies or associations in
such amounts and covering such risks as is usually carried by companies  engaged
in similar businesses and owning similar properties in the same general areas in
which such Borrower  operates,  and, in any event, all insurance required by any
Collateral  Documents  and (ii)  cause all such  insurance  against  loss on any
Eligible  Real  Property to name the  Collateral  Agent on behalf of the Secured
Parties as additional insured or loss payee, as appropriate, and to provide that
no cancellation,  material  addition in amount or material change in coverage on
such insurance shall be effective until after 30 days' written notice thereof to
the  Collateral  Agent.  So long as no  Event  of  Default  is  continuing,  the
Borrowers  shall have the right to use the  proceeds  of casualty  insurance  to
repair or replace damaged or destroyed  property.  Upon any loss with respect to
any Eligible Real Property, the Borrowers shall, as soon as practicable,  repair
or replace such damaged or destroyed  property and in the event of any such loss
greater than  $1,000,000,  within 30 days of such loss,  the Borrowers  shall at
their  option,  assign  all  the  proceeds  of  the  casualty  insurance  to the
Collateral  Agent or  pledge  in favor of the  Collateral  Agent a new  hospital
facility in substitution  for such damaged  Eligible Real Property,  and deliver
appropriate  documentation  to  evidence  such  substitution,  all in  form  and
substance  reasonably  satisfactory  to the Agents.  Until the Collateral  Agent
receives the assignment of the proceeds of the casualty  insurance or the pledge
of a new hospital facility, in each case, in form and substance  satisfactory to
the  Agents,  the Agents  will have the right to reserve  against  the  Facility
reasonable  amounts  determined  by them,  in good  faith  in  their  reasonable
judgement to reflect the loss of Collateral.

Section  7.6.  Access.  Subject to patient  confidentiality  requirements,  each
Borrower  shall  from  time to time  permit  the  Administrative  Agent  and the
Lenders,  or any agents or  representatives  thereof,  upon reasonable notice by
telecopy,  telephone or hand delivery of same,  but in any event,  not less than
five Business Days after  written  notification  of the same (except that during
the continuance of an Event of Default, no such notice shall be required) to (a)
examine and make copies of and  abstracts  from the records and books of account
of such Borrower,  (b) visit the  properties of such  Borrower,  (c) discuss the
affairs,  finances  and  accounts of such  Borrower  with any of its  respective
financial  officers  or  directors,  and  (d)  communicate  directly  with  such
Borrower's  independent  certified  public  accountants.   Each  Borrower  shall
authorize  its  independent  certified  public  accountants  to discuss with the
Administrative  Agent or any Lender any and all financial  statements  and other
information of any kind, as the  Administrative  Agent or any Lender  reasonably
requests from such Borrower and which such  accountants may have with respect to
the  business,  financial  condition,  results of operations or other affairs of
such Borrower.

Section 7.7.  Keeping of Books.  Each Borrower shall keep proper books of record
and account,  in which full and correct entries shall be made in conformity with
GAAP of all financial transactions and the assets and business of such Borrower.

Section 7.8.  Maintenance of  Properties,  Etc. Each Borrower shall maintain and
preserve,  (a) all of its  properties  which are necessary in the conduct of its
business in good working order and condition  (ordinary wear and tear excepted),
(b) all rights,  permits,  licenses,  approvals and  privileges  (including  all
Permits)  which are used or useful or necessary in the conduct of its  business,
and (c) all registered patents,  trademarks, trade names, copyrights and service
marks with respect to its business;  except where the failure to so maintain and
preserve in the case of each of (a), (b) and (c) would not in the aggregate have
a Material Adverse Effect.

Section 7.9.      Application of Proceeds.  Each Borrower shall use the entire
amount of the proceeds of the Loans as provided in Section 4.12.

Section 7.10. Environmental. Each Borrower shall comply in all material respects
with  Environmental  Laws and,  without  limiting the  foregoing,  such Borrower
shall,  at its sole  cost and  expense,  upon  receipt  of any  notification  or
otherwise  obtaining  knowledge  of any  Release  or  other  event  that has any
reasonable likelihood of such Borrower incurring  Environmental  Liabilities and
Costs in excess of $1,000,000 for each event or,  $2,500,000 for all such events
in the aggregate,  address in good faith and in a manner reasonably  appropriate
under the  circumstances  of any such  matter,  including  when  applicable  (a)
conducting  or paying  for  consultants  to  conduct,  tests or  assessments  of
environmental  conditions  at  such  operations  or  properties  (including  the
investigation  and  testing  of  subsurface  conditions),  and (b)  taking  such
Remedial  Action,  investigational  or other action as required by Environmental
Laws or a Governmental  Authority or that are  appropriate  and consistent  with
good business practice to address the Release or event.

Section 7.11.     Real Property.

(a) Each  Borrower  shall (i) comply in all  material  respects  with all of its
respective  obligations under all of its respective Leases now or hereafter held
respectively by it with respect to real property;  provided,  however,  that any
default by Flint River under its lease solely as a result of its  existing  bond
debt shall not constitute a breach of this  provision;  (ii) not modify,  amend,
cancel,  extend or otherwise change in any materially  adverse manner any of the
terms,  covenants or conditions  of any such Leases;  (iii) not assign or sublet
any other  Lease if such  assignment  or sublet  would have a  Material  Adverse
Effect; and (iv) provide the Administrative  Agent with a copy of each notice of
material  default under any material  Lease  received by such Borrower  promptly
upon  receipt  thereof  and deliver to the  Administrative  Agent a copy of each
notice  of  default  sent  by  such  Borrower  under  any  Lease   substantially
simultaneously with its delivery of such notice under such Lease.

(b) At least 15 Business Days prior to (i) entering into any Lease (other than a
renewal of an existing  Lease) for the  principal  place of  business  and chief
executive  office of any Borrower or any other Lease  (including any renewal) in
which the annual rental payments are  anticipated to equal or exceed  $1,000,000
or (ii)  acquiring of any material  owned real  property,  such  Borrower  shall
provide the Administrative Agent written notice thereof provided,  however, that
Borrowers  are not  required to give any  additional  notice with respect to the
acquisition permitted pursuant to Section 8.1(i) .

Section 7.12. Matters Related to Accounts.  Each Borrower shall comply with each
of the  following  covenants in connection  with all Accounts,  or in connection
with such Borrower's  dealings with its patients or any Account Debtor,  in each
case, in all respects  subject to  obligations  of patient  confidentiality  and
other requirements of applicable law:

(a) in all material  respects keep accurate and complete records of its Accounts
and payments and collections  thereon and allow the Agents, and their respective
designated  representatives,  at reasonable times and upon reasonable notice, to
review such records as well as medical records,  insurance  verification  forms,
assignment of benefits, and any relevant documentation thereon;

(b) if any of its Accounts in an aggregate  face amount in excess of $250,000 in
the aggregate for such Borrower cease, to such Borrower's knowledge,  to qualify
as Eligible  Receivables,  give each Agent notice of the circumstances  promptly
and in any event not later than three Business Days after such Borrower  becomes
aware of the circumstances;

(c) give each Agent prompt notice of any matter,  to such Borrower's  knowledge,
materially  affecting the value,  enforceability or collectibility of any of its
Account or Accounts (excluding any Self Pay Amount) in excess of $250,000 in the
aggregate for such Borrower outstanding at any time and of all material customer
disputes,  offsets,  defenses,   counterclaims,   returns,  rejections  and  all
reclaimed or repossessed merchandise or goods;

(d)  whether or not an Event of Default  has  occurred,  take such  action  upon
request by the Administrative Agent to enable any of its officers,  employees or
agents,  at any  time or  times,  in the  name of  Administrative  Agent or such
Borrower,  to verify the  validity,  amount or any other matter  relating to any
Accounts of such  Borrower,  by mail,  telephone,  facsimile or  otherwise,  and
otherwise  cooperate  fully  with the  Administrative  Agent to  facilitate  and
promptly conclude such verification process;

(e) in the first  instance,  endeavor to make collection of the Accounts of such
Borrower,  to expedite  collection,  until such time as the Administrative Agent
has notified  the  Borrowers  that a Material  Event of Default has occurred and
that,  thereafter,  only the  Collateral  Agent will (subject to applicable  law
regarding  Medicaid/Medicare  Account Debtors or other governmental payors), and
such Borrower shall not, endeavor to make collection of such Accounts; and after
such  notice  from the  Administrative  Agent,  if the  Administrative  Agent so
requests,  cooperate  with the  Collateral  Agent to give  notice to the Account
Debtors on such Borrowers' Accounts that such Accounts have been assigned to the
Collateral Agent for the benefit of the Secured Parties;

(f) in addition to clause (e) above,  to the extent  requested by the Collateral
Agent,  (A) provide  written  notice to each  private  indemnity,  managed  care
(except with respect to  Governmental  Receivables)  or other  insurer who is an
Account Debtor on any Account of such Borrower and,  thereafter,  promptly after
such insurer  (other than a Governmental  Authority  obligated on a Governmental
Receivable)  becomes  an Account  Debtor on any such  Account,  provide  written
notice to such  insurer,  that the  Collateral  Agent  has been  granted a first
priority lien and security  interest in, upon and to all Accounts  applicable to
such  insurer  and  directs  such  Account  Debtor  to make  payments  into  the
appropriate  Collection  Account,  and  (B)  do  anything  further  that  may be
reasonably requested by the Agents to preserve or protect the security interests
in the Collateral  contemplated  in this Agreement and the Collateral  Documents
and  effectuate  the intentions and objects of this Agreement and the Collateral
Documents,  including,  but not  limited  to,  the  execution  and  delivery  of
Collection Account  Agreements in accordance with Section 2.16(b),  continuation
statements, amendments to financing statements, and any other documents required
under this Agreement and the Collateral Documents; and

(g) notify the  Collateral  Agent in writing  three  Business  Days prior to any
termination or modification of the EFT Collection  Account Agreement and execute
a new EFT  Collection  Account  Agreement  satisfactory  in all  respects to the
Agents  before the actual  termination  or  modification  of the EFT  Collection
Account Agreement.

Section  7.13.  Trade  Payables.  Each  Borrower  shall pay all  trade  payables
incurred in the ordinary course of business as they become due,  consistent with
current practices, except where the failure so to pay would not in the aggregate
have a Material Adverse Effect.

Article VIII

                               NEGATIVE COVENANTS

                  As  long as any of the  Obligations  or the  Revolving  Credit
Commitments  remain  outstanding,  without the written  consent of the Requisite
Lenders, each Borrower agrees with the Lenders and the Agents that:

Section 8.1.      Indebtedness.  Each Borrower will not create, incur, assume or
otherwise become or remain directly or indirectly
                  ------------
liable with respect to any Indebtedness except:

(a)      the Obligations;

(b)     Indebtedness existing on the Closing Date and disclosed on Schedule 8.1;

(c)  Capital  Lease  Obligations  incurred  by  the  Borrowers  to  finance  the
acquisition of fixed assets in an aggregate  outstanding principal amount not to
exceed  $5,000,000  per  year  (not  including  any  Capital  Lease  Obligations
permitted by Section 8.1(l));

(d)      Purchase money Indebtedness;

(e) Renewals, extensions,  refinancings and refundings of Indebtedness permitted
by clause (b), (c) or (d) of this Section 8.1; provided,  however, that any such
renewal  extension,  refinancing  or  refunding  in clause  (c) and (d) is in an
aggregate  principal  amount not greater than the principal amount of, and is on
terms no less  favorable  to such  Borrower,  including  as to weighted  average
maturity, than the Indebtedness being renewed, extended, refinanced or refunded;

(f)      Indebtedness arising from intercompany loans to such Borrower from any
other Affiliate;

(g)      Indebtedness arising under any performance or surety bond entered into
in the ordinary course of business or any appeal or supersedeas bond;

(h)  Indebtedness  either  secured  by any  property  other than  Collateral  or
unsecured Indebtedness,  in each case not otherwise permitted under this Section
8.1, in an aggregate  outstanding  principal amount not to exceed $75,000,000 at
any time in the  aggregate  for all of the  Borrowers  so long as  after  giving
effect to the  incurrence  of such  Indebtedness  (i)  there  are at least  five
Borrowers continuing to operate hospital facilities (including the Eligible Real
Property)  and  the  related  Accounts  of  such  hospitals  remain  pledged  as
Collateral to the Collateral  Agent,  (ii) the Available  Credit with respect to
the Remaining  Borrowers is at least $5,000,000 and (iii) the Financial Covenant
Debt of the  Remaining  Borrowers  is no more than 3.25X the  trailing  12 month
EBITDA  of such  Remaining  Borrowers  as of the last  day of the most  recently
completed month for which Financial  Statements have been delivered  pursuant to
Section 6.1; provided,  however,  that the EBITDA of PHC/CHC Holdings,  Inc. for
the year ended  December  31,  2000  shall be based on  annualized  results  for
January 1, 2000 forward;

(i)      Approximately $1,800,000 in debt incurred by Metropolitan in connection
with the assumption of the debt related to the medical office building to be
acquired by Metropolitan;

(j)      Hedging Contracts permitted by Section 8.15;

(k) each Borrower may  guarantee  the income or debts of individual  health care
professionals  (or of professional  corporations or partnerships  some or all of
which are owned by individual  health care  professionals)  associated  with its
respective hospital facility;  provided, however, that all such guaranties, when
added to the loans and extension of credit made pursuant to Section 8.3(h),  may
not exceed  $15,000,000 in the aggregate at any one time  outstanding for all of
the Borrowers; and

(l)      sale-leasebacks of any medical office building pursuant to Section 8.4
(g); and

(m)      Indebtedness in respect of Letter of Credit Guaranties or Letters of
Credit contemplated by Section 2.3(k).

Section 8.2. Liens,  Etc. Each Borrower will not create or suffer to exist,  any
Lien upon or with respect to any of its properties or assets,  whether now owned
or hereafter acquired, or assign any right to receive income, except for:

(a)      Liens created pursuant to the Loan Documents;

(b)      Liens existing on the date of this Agreement and disclosed on Schedule
8.2;

(c)      Customary Permitted Liens of any Borrower;

(d) Purchase  money Liens granted by such Borrower  (including the interest of a
lessor  under a Capital  Lease and Liens to which any property is subject at the
time of the Borrower's  acquisition  thereof)  securing  Indebtedness  permitted
under Section 8.1(c) and (d) and limited in each case to the property  purchased
with the proceeds of such purchase money Indebtedness or subject to such Capital
Lease and Liens granted by such Borrower securing  Indebtedness  permitted under
Section 8.1(l) and limited to the property subject to such lease;

(e) Any Lien securing the renewal,  extension,  refinancing  or refunding of any
Indebtedness  secured by any Lien  permitted  by clauses (b), (d) or (e) of this
Section 8.2 without any change in the assets subject to such Lien;

(f)      Liens on equipment in favor of lessors securing operating leases of
such equipment;

(g)      Liens on property other than Collateral granted in connection with the
incurrence of Indebtedness permitted under Section 8.1(h);

(h)      Liens permitted under any Mortgage;

(i) Other Liens on property  other than  Accounts  and other Liens to the extent
they are  junior to the  Collateral  Agent's  Lien,  so long as the  obligations
secured  thereby  do not  exceed  $1,000,000  in the  aggregate  at any one time
outstanding;

(j) Any Lien on  property  other than  Collateral  required to be pledged to The
Chase  Manhattan  Bank by the  Letter of  Credit  application  submitted  by the
Borrowers to The Chase Manhattan Bank; and

(k)      Liens on cash or Cash Equivalents to collateralize letters of credit at
any Issuing Bank contemplated by Section 2.3(k)

Section 8.3.      Investments.  Each Borrower will not, directly or indirectly,
make or maintain any Investment except:

(a)      Investments existing on the date of this Agreement and disclosed on
Schedule 8.3;

(b) Investments in Cash and Cash Equivalents held in the Cash Collateral Account
or the Concentration  Account with respect to which the Collateral Agent for the
benefit of the Secured Parties has a first priority perfected Lien;

(c) Investments in Cash and Cash Equivalents in existing  accounts  disclosed on
Schedule 8.3 under "Existing Accounts", in the amounts existing in such accounts
as of the close of business on the day before the Closing Date and  disclosed on
Schedule 8.3 under "Existing Accounts";

(d)      other Investments in Cash and Cash Equivalents;

(e) Investments in accounts,  contract rights and chattel paper (each as defined
in the Uniform  Commercial Code),  notes receivable and similar items arising or
acquired in the ordinary course of business consistent with the past practice of
such Borrower;

(f)      Investments received in settlement of amounts due to such Borrower
effected in the ordinary course of business;

(g)      Investments by any Borrower in any other Borrower;

(h) Loans or advances to  employees  of the Borrower  and/or  physicians  in the
ordinary course of business,  consistent with current practices, which loans and
advances  shall  not  exceed  the  aggregate  outstanding  principal  amount  of
$1,000,000  individually,  and, when added to the Indebtedness incurred pursuant
to Section 8.1(k),  $15,000,000 in the aggregate at any one time outstanding for
all of the Borrowers;

(i)      Investments from the accounts described in Section 8.3(c) in the
amounts shown on Schedule 8.3 under "Existing Accounts".

(j) Investments from proceeds of the  Indebtedness  permitted by Section 8.1 (h)
or from proceeds of any equity investment (by an investor who is not a Borrower)
in such  Borrower so long as no Default or Event of Default has  occurred and is
continuing;

(k)  Investments  in Paracelsus  from the proceeds of Revolving  Credit Loans or
sources other than those identified in Sections  8.3(c),  8.(i) and 8.3(j) in an
aggregate  amount,  when added to the  Restricted  Payment  described in Section
8.5(a),  not to exceed  $7,000,000 in any calendar year so long as the Available
Credit  is at least  $3,500,000  and no Event of  Default  has  occurred  and is
continuing;

(l)  Investments in Affiliates  other than Paracelsus or any other Borrower from
the proceeds of Revolving Credit Loans or sources other than those identified in
Sections  8.3(c),  8.3(i) and 8.3(j) in an aggregate  amount,  when added to the
Restricted  Payment described in Section 8.5(b), not to exceed $5,000,000 in any
calendar year so long as the  Available  Credit is at least  $2,500,000;  and no
Material  Event of Default has occurred and is  continuing;  provided,  however,
that the restrictions in this section shall not apply to payments to PFC Funding
Corp II  contemplated  by clause  (iii) of Section  4.12 and made on the Closing
Date; and

                  (m) seller notes received by such Borrower in connection  with
the sale of any asset  permitted under this Agreement so long as any such seller
note in an aggregate  principal  amount of  $1,000,000 or more is pledged to the
Lender.

Section 8.4.  Sale of Assets.  Each Borrower  will not sell,  convey,  transfer,
lease or  otherwise  dispose  of,  any of its  assets  or any  interest  therein
(including  the sale or factoring at maturity or  collection of any accounts) to
any Person,  or permit or suffer any other Person to acquire any interest in any
of its assets (any such disposition being an "Asset Sale"), except:

(a)      the sale or disposition of inventory in the ordinary course of
business;

(b)       the sale or disposition of property no longer used or useful in the
ordinary course of business;

(c)      the lease or sublease of real property not constituting a sale and
leaseback, to the extent not otherwise prohibited by this Agreement;

(d)      assignments and licenses of intellectual property of such Borrower in
the ordinary course of business;

(e)      sales or other dispositions other than real property or Collateral
between and among the Borrowers;

(f) as long as no Event  of  Default  is  continuing,  the sale of any  hospital
facility  (and/or sale of the related  Accounts of such hospital) other than the
Eligible  Real  Property,  as long as after giving effect to such sale (i) there
are at least 5 Borrowers  continuing to operate hospital  facilities  (including
the Eligible Real Property) and the related  Accounts of such  hospitals  remain
pledged as Collateral to the Collateral  Agent,  (ii) the Available  Credit with
respect  to the  Remaining  Borrowers  is at  least  $5,000,000  and  (iii)  the
Financial  Covenant Debt of the Remaining  Borrowers  (including any Obligations
which continue to be owed to the Lenders by such Borrower after giving effect to
such Borrower's  hospital facility having been sold or such Borrower's  Accounts
having  been sold) is no more than 3.25X the  trailing  12 month  EBITDA of such
Remaining  Borrowers as of the last day of the most recently completed month for
which  Financial  Statements  have  been  delivered  pursuant  to  Section  6.1;
provided,  however, that the EBITDA of PHC/CHC Holdings, Inc. for the year ended
December  31,  2000 shall be based on  annualized  results  for  January 1, 2000
forward; provided, further, that such Borrower may consummate such sale pursuant
to this clause (f) during the  continuance  of an Event of Default if,  prior to
such sale,  two-thirds of the Lenders and the Borrowers  mutually agree upon the
disposition of the proceeds of such sale, provided,  further,  that no such sale
or application of proceeds shall require a mandatory  reduction in the Revolving
Credit Commitment and

(g)      Sale-leasebacks to the extent the debt associated with such
sale-leaseback is permitted under Section 8.1.

All  Accounts of the  Borrowers  that are sold and all  Accounts  related to any
hospital  facility  sold  pursuant to clause (f) above will be excluded from the
Borrowing Base  immediately upon such sale and the Borrowers who owned or leased
the hospital  facilities sold or the Accounts sold pursuant to clause (f) above,
will cease to be Borrowers hereunder  immediately upon such sale and immediately
cease to have any obligation under any loan Document.

Section 8.5.  Restricted  Payments.  Other than  Restricted  Payments  made from
proceeds of  Indebtedness  permitted  under  Section  8.1(h),  from the accounts
described in Section 8.3(c),  from Investments  described in Section 8.3 (i), or
from the proceeds of an equity investment (by an investor who is not a Borrower)
in such Borrower, each Borrower will not, directly or indirectly declare, order,
pay,  make or set apart any sum for any  Restricted  Payment  except  Restricted
Payments (a) to Paracelsus in an aggregate amount, when added to the Investments
described in Section  8.3(k),  not to exceed  $7,000,000 in any calendar year so
long as after giving effect thereto, Available Credit is at least $3,500,000 and
(b) to Affiliates  other than Paracelsus in an aggregate  amount,  when added to
the  Investments  described in Section 8.3(l),  not to exceed  $5,000,000 in any
calendar year so long as after giving  effect  thereto,  Available  Credit is at
least $2,500,000;  provided,  however, that no Restricted Payment,  other than a
Restricted  Payment from the  accounts  described  in Section  8.3(c),  shall be
permitted if an Event of Default has occurred and is  continuing  at the date of
declaration or payment thereof or would result therefrom.

Section 8.6. Restriction on Fundamental Changes;  Permitted  Acquisitions.  Each
Borrower will not (a) merge with any Person,  (b)  consolidate  with any Person,
(c) acquire all or  substantially  all of the Stock or Stock  Equivalents of any
Person,  (d) acquire all or substantially all of the assets of any Person or all
or  substantially  all of the assets  constituting  the  business of a division,
branch or other unit  operation of any Person,  (e) enter into any joint venture
or  partnership  with any  Person  or (f)  acquire  or  create  any  subsidiary;
provided, however, that Metropolitan may acquire certain equity interests in the
Metropolitan   Medical  Office  Building  Partnership  in  connection  with  the
incurrence of Indebtedness pursuant to Section 8.1(i);

Section 8.7.      Change in Nature of Business. Each Borrower will not make any
material change in the nature or conduct of its business as carried on at the
date hereof.

Section 8.8.  Transactions  with  Affiliates.  Each Borrower will not, except as
otherwise expressly permitted pursuant to Sections 8.1, 8.3, 8.4 and 8.5, do any
of the following: (a) make any Investment in an Affiliate of such Borrower which
is not a Borrower; (b) transfer, sell, lease, assign or otherwise dispose of any
asset to any Affiliate of such Borrower which is not a Borrower;  (c) merge into
or  consolidate  with or purchase or acquire  assets from any  Affiliate of such
Borrower which is not a Borrower  hereunder;  (d) repay any  Indebtedness to any
Affiliate of such Borrower which is not a Borrower;  or (e) enter into any other
transaction  directly or indirectly  with or for the benefit of any Affiliate of
such Borrower which is not a Borrower  (including  guaranties and assumptions of
obligations of any such Affiliate),  except for (i) transactions in the ordinary
course of business  on a basis no less  favorable  to such  Borrower as would be
obtained in a comparable arm's length transaction with a Person not an Affiliate
and (ii) salaries and other  employee  compensation  to officers or directors of
such  Borrower  commensurate  with  reasonable  compensation  levels;  provided,
however,  that Metropolitan may engage in transactions with its limited partners
consistent with past practice.

Section 8.9.  Modification  of  Constituent  Documents.  Each  Borrower will not
change its capital structure  (including in the terms of its outstanding  Stock)
or otherwise amend its Constituent Documents,  except for changes and amendments
which do not materially  affect the rights and  privileges of such Borrower,  or
materially  and  adversely  affect the  interests  of the Agents and the Lenders
under the Loan Documents or in the Collateral.

Section 8.10. Accounting Changes; Fiscal Year. Each Borrower will not change its
(a)  accounting  treatment and reporting  practices or tax reporting  treatment,
except  as  permitted  by  GAAP or as  required  by any  Requirement  of Law and
disclosed to the Lenders and the Administrative Agent or (b) Fiscal Year.

Section 8.11.     Margin  Regulations.  Each  Borrower  will not use any portion
of the  proceeds of any credit  extended  hereunder to purchase or carry
Margin Stock.

Section 8.12.  Operating Leases.  Each Borrower will not become or remain liable
as lessee or  guarantor  or other  surety with  respect to any  operating  lease
(other  than  sale-leaseback  transactions  otherwise  permitted),   unless  the
aggregate  amount of all rents paid or accrued under all such  operating  leases
shall not exceed $10,000,000 in any Fiscal Year.

Section 8.13.  Cancellation of  Indebtedness  Owed to It. Each Borrower will not
cancel any material claim or  Indebtedness  owed to it in an amount greater than
$1,000,000 or in an aggregate  amount greater than $2,000,000 in any fiscal year
for all of the Borrowers;  provided,  however,  the  cancellation  of a claim or
Indebtedness   for   purposes  of  this  Section  8.13  shall  not  include  the
cancellation of (i) any claim or Indebtedness  required to be cancelled pursuant
to a bankruptcy,  restructuring or plan of reorganization,  (ii) any amount owed
in respect of any account in the ordinary course of business and consistent with
past  practices  and  (iii)  any  obligation  of PFC  Funding  Corp II solely in
connection   with  the   termination   of  the  existing   accounts   receivable
securitization  program  contemplated by clause (iii) of Section 4.12 that is to
occur on the Closing Date.

Section 8.14. No Speculative Transactions.  Each Borrower will not engage in any
speculative transaction or in any transaction involving Hedging Contracts except
for the sole purpose of hedging in the normal  course of business or  consistent
with industry practices.

Section 8.15.  Compliance with ERISA.  Each Borrower will not cause or permit to
occur (a) an event which could result in the  imposition of a Lien under Section
412 of the Code or  Sections  302 or 4068 of ERISA  or (b) an ERISA  Event  that
would have a Material Adverse Effect.

Section  8.16.  Environmental.  Each  Borrower  will not allow a Release  of any
Contaminant in violation of any Environmental Law; provided,  however,  that any
Borrower  shall not be  deemed  in  violation  of this  Section  8.16 if, as the
consequence  of any such Release,  such Borrower  would not incur  Environmental
Liabilities  and Costs in excess of $1,000,000  and as a consequence of all such
Releases, $2,500,000 in the aggregate for all of the Borrowers.

Article IX

                                EVENTS OF DEFAULT

Section 9.1.      Events of Default.  Each of the following events shall be an
Event of Default:

(a) The Borrowers shall fail to pay, repay or prepay on the due date thereof any
amount of principal of any Loan or Reimbursement Obligation (including,  without
limitation  payments  required under Section 2.7), or within five (5) days after
the due date thereof any interest on any Loan,  fees under the Loan Documents or
any other Obligation.

(b) Any  representation  or warranty  made or deemed made by any Borrower in any
Loan  Document or in any  certificate,  report,  notice or  financial  statement
furnished at any time in  connection  therewith  shall be false,  misleading  or
erroneous in any material respect when made or deemed to have been made.

(c) Any Borrower shall fail to perform,  observe or comply with (i) clauses (a),
(b),  (c),  (d),  (e) and (f) of Section 6.1 and such failure is not remedied to
the sole  satisfaction  of the  Requisite  Lenders  or waived in  writing by the
Requisite Lenders within five days after any Responsible Officer of any Borrower
has  knowledge  that, or any Lender has given such  Borrower  notice that,  such
failure has  occurred,  (ii) clause (g) of Section  6.1, and such failure is not
remedied to the sole  satisfaction of the Requisite Lenders or waived in writing
by the  Requisite  Lenders  within  two 2 Business  Days  after any  Responsible
Officer  of any  Borrower  has  knowledge  that,  or any  Lender  has given such
Borrower  notice that,  such failure has occurred,  or (iii) any other covenant,
agreement or term contained in any Loan Document other than Sections 4.16,  7.10
and  8.16 of this  Agreement  and  such  failure  is not  remedied  to the  sole
satisfaction  of the  Requisite  Lenders or waived in  writing by the  Requisite
Lenders  within 30 days  after  any  Responsible  Officer  of any  Borrower  has
knowledge  that, or any Lender has given such Borrower notice that, such failure
has occurred.  Notwithstanding the foregoing,  there shall be no requirement for
prior  notice,  knowledge  or grace period in the event of or the failure of any
Borrower to comply with any term,  covenant or  agreement  contained  in Section
2.16, Article V, Sections 6.2, 6.11, 7.1, 7.6, 7.9, 7.12, or Article VIII (other
than Sections 8.10 or 8.12).

(d) Any Borrower  shall fail to perform,  observe or comply with Sections  4.16,
7.10 or 8.16 and such  failure is not remedied to the sole  satisfaction  of the
Requisite  Lenders or waived in writing by the Requisite  Lenders within 30 days
after any Responsible  Officer of any Borrower has knowledge that, or any Lender
has given such  Borrower  notice  that,  such  failure has  occurred;  provided,
however, that such failure shall not constitute a Default or Event of Default if
such Borrower  resolves the issue before such grace period  expires by excluding
its Accounts from the Borrowing  Base or by ceasing to be a Borrower  hereunder,
all  in  accordance  with  Section   2.17(c);   provided,   further,   that  the
Administrative  Agent shall include such excluded Accounts in the Borrowing Base
if such Borrower has not ceased being a Borrower once such Borrower has remedied
such failure and no Event of Default has occurred and is continuing;

(e) Any Borrower shall admit in writing its inability to, or be generally unable
to,  pay its  debts as such  debts  become  due;  provided  however,  that  this
provision  shall not be applicable in the event Flint River is unable to pay its
bond debt so long as Flint River  ceases to be a Borrower and an amount equal to
the Required Amount with respect to Flint River are repaid immediately upon such
inability to pay the bond debt as it becomes due.

(f) Any Borrower  shall (i) apply for or consent to the  appointment  of, or the
taking of possession by, a receiver, custodian, trustee, examiner, liquidator or
the like of itself or of all or any substantial part of its property,  (ii) make
a  general  assignment  for the  benefit  of its  creditors,  (iii)  commence  a
voluntary case under the Bankruptcy  Code, (iv) institute any proceeding or file
a petition  seeking to take  advantage of any other law relating to  bankruptcy,
insolvency, reorganization,  liquidation, dissolution, winding-up or composition
or  readjustment  of debts,  (v) fail to controvert in a timely and  appropriate
manner,  or  acquiesce  in  writing  to,  any  petition  filed  against it in an
involuntary  case  under the  Bankruptcy  Code,  or (vi) take any  corporate  or
similar  such  action  for the  purpose  of  authorizing  any of the  foregoing;
provided, however, that this provision shall not be applicable to Flint River if
it has ceased to be a Borrower and an amount  equal to the Required  Amount with
respect to Flint  River shall have been repaid  prior to the  occurrence  of any
event in this subsection (f).

(g) A proceeding or case shall be commenced,  without the application,  approval
or consent of any Borrower in any court of competent  jurisdiction,  seeking (i)
its reorganization,  liquidation, dissolution, arrangement or winding-up, or the
composition or  readjustment  of its debts,  (ii) the appointment of a receiver,
custodian,  trustee, examiner,  liquidator or the like of any Borrower or of all
or any substantial  part of its property,  or (iii) similar relief in respect of
any Borrower under any law relating to bankruptcy,  insolvency,  reorganization,
winding-up or  composition or adjustment of debts,  and such  proceeding or case
shall  continue  undismissed,  or an  order,  judgment  or decree  approving  or
ordering  any of the  foregoing  shall be entered and  continue  unstayed and in
effect,  for a period of 60 or more  days;  or an order for relief  against  any
Borrower  shall be entered in an  involuntary  case under the  Bankruptcy  Code;
provided, however, that this provision shall not be applicable to Flint River if
it ceases to be a Borrower under the Facility immediately upon the occurrence of
any event in this  paragraph  and an amount  equal to the  Required  Amount with
respect to Flint River shall be repaid and any amounts  outstanding in excess of
the Available Credit as a result of the exclusion of Flint River's Accounts from
the  Borrowing  Base  shall be paid no later than five  Business  Days after the
occurrence of any event in this paragraph. Borrowers other than Flint River will
continue to be able to borrow under the Facility (as long as they are  otherwise
able to under the  Facility)  during  such 5  Business  Day grace  period and no
Default shall be deemed to occur during such 5 day grace period  solely  because
of any occurrence of any event in this paragraph.

(h) Any Borrower  shall fail to  discharge  within a period of 30 days after the
commencement  thereof  any order of  attachment,  sequestration,  forfeiture  or
similar  order or orders  involving  an  aggregate  amount of  $500,000  or more
against any of its properties.

(i) Any one or more judgments,  settlements or decrees shall be entered against,
or agreed to by any Borrower  involving an aggregate  liability in the aggregate
amount at any time of  $3,000,000  or more in excess of any  amounts  covered by
insurance,  and all of such  judgments,  settlements  and decrees shall not have
been vacated, discharged, satisfied, stayed or bonded pending appeal, or paid or
otherwise discharged, within 30 days from the date of entry thereof or agreement
thereto or, with respect to matters subject to appeal, within the later to occur
of such 30 days or within the time period  available for appeal under applicable
law.

(j) Any  Borrower  shall fail to pay when due,  after  taking  into  account any
applicable  cure or grace  periods  (and shall not have been waived or otherwise
cured), any principal of or interest on any debt having a principal amount of at
least $3,000,000,  or the maturity of any such debt shall have been accelerated;
provided however, that this provision shall not be applicable in the event Flint
River is  unable  to pay its bond  debt so long as Flint  River  ceases  to be a
Borrower and an amount equal to the Required  Amount with respect to Flint River
are repaid  immediately  upon such  inability to pay the bond debt as it becomes
due.

(k) Any event shall have occurred, after taking into account any applicable cure
or grace  periods  (and  shall not have been  waived or  otherwise  cured)  with
respect  to any debt  having a  principal  amount of at least  $3,000,000,  that
permits  any holder or  holders  of such debt or any person  acting on behalf of
such debt or any person acting on behalf of such holder or holders to accelerate
the  maturity  thereof;  provided,  however,  that this  provision  shall not be
applicable to Flint River with respect to its existing bond debt.

(l) Any Loan  Document  shall  cease to be in full  force and effect or shall be
declared  null and  void or the  validity  or  enforceability  thereof  shall be
contested  or  challenged  by any  Borrower or any of its  shareholders,  or any
Borrower  shall deny that it has any further  liability or obligation  under any
Loan Document  except to the extent such  liability or obligation is released by
any  Agent  or  Lender,  as the case may be,  or the  Lien  created  by the Loan
Document  shall for any reason  cease to be a valid,  first  priority  perfected
Lien,  subject to Liens  permitted  by Section 8.2,  upon any of the  Collateral
purported  to be covered  thereby  except to the extent such Lien is released by
the Collateral Agent.

(m)  Any  ERISA  Event  shall  occur  and  the  amount  of all  liabilities  and
deficiencies resulting thereupon,  whether or not assessed exceeds $2,500,000 in
the aggregate.

(n)      An event or condition shall occur that results in a Material Adverse
Effect.

Notwithstanding  anything  to  the  contrary  herein,  any  default  by  PHC/CHC
Holdings,  Inc.  under a Letter of Credit  issued  by The Chase  Manhattan  Bank
solely  because of its  failure to provide  additional  collateral  to The Chase
Manhattan  Bank will not  result in a Default  or Event of  Default  under  this
Agreement.

Section  9.2.  Remedies.  During the  continuance  of any Event of Default,  the
Administrative Agent (a) may, and shall at the request of the Requisite Lenders,
by notice to the  Borrowers,  declare  that all or any portion of the  Revolving
Credit  Commitments  be  terminated,  whereupon the obligation of each Lender to
make any Loan and CITBC to issue any Letter of Credit Guaranty shall immediately
terminate  to the  extent of such  termination,  and/or (b) may and shall at the
request of the Requisite Lenders, by notice to the Borrowers, declare the Loans,
all interest  thereon and all other amounts and  Obligations  payable under this
Agreement  to be  forthwith  due and  payable,  whereupon  the  Loans,  all such
interest and all such amounts and Obligations  shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby  expressly waived by the Borrowers;  provided,  however,
that upon the occurrence of the Event of Default  specified in Section 9.1(f) or
(g) (A) the  Revolving  Credit  Commitments  of each Lender to make Loans and of
each  Lender and CITBC to issue or  participate  in Letter of Credit  Guaranties
shall  automatically  be terminated and (B) the Loans, all such interest and all
such amounts and Obligations shall automatically  become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrowers.  In addition to the remedies set forth
above,  the  Collateral  Agent may  exercise  any  remedies  provided for by the
Collateral  Documents in accordance with the terms thereof or any other remedies
provided by applicable law.

Section 9.3. Actions in Respect of Letters of Credit. From and after the Closing
Date,  the  Borrowers  shall  pay to the  Administrative  Agent  in  immediately
available  funds at the  Administrative  Agent's  office  referred to in Section
12.3, for deposit in a Cash Collateral  Account,  an amount equal to 100% of the
sum  of  all  outstanding  Letter  of  Credit  Obligations  for  application  in
accordance  with Section  2.7(c).  If the cash  (including  any interest  earned
thereon) in the Cash Collateral Account exceeds at any time the aggregate amount
of all outstanding Letter of Credit Obligations,  the Administrative Agent shall
pay,  or direct  the  applicable  bank to  release,  the  amount of such  excess
promptly  to the  Borrowers  as long as there is no  Default or Event of Default
continuing.

Article X

                      THE ADMINISTRATIVE AGENT; THE AGENTS

Section 10.1.     Authorization and Action.

(a) Each Lender hereby appoints CITBC as the Administrative  Agent hereunder and
HHF  as  the  Collateral   Agent  hereunder  and  each  Lender   authorizes  the
Administrative  Agent and the Collateral Agent to take such respective action as
agent on its behalf and to exercise  such powers  under this  Agreement  and the
other Loan Documents as are delegated to each of them under such  agreements and
to exercise such powers as are reasonably  incidental thereto.  Without limiting
the foregoing, each Lender hereby authorizes the Administrative Agent to execute
and deliver, and to perform its obligations under, each of the Loan Documents to
which the Administrative Agent is a party and to exercise all rights, powers and
remedies that the  Administrative  Agent may have under such Loan  Documents and
each Lender agrees that under the Collateral  Documents the Collateral  Agent is
acting as agent for the other Secured Parties.

(b) As to any matters not expressly provided for by this Agreement and the other
Loan  Documents  (including  enforcement  or  collection),  Agents  shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain  from  acting  (and shall be fully  protected  in so acting or
refraining from acting) upon the instructions of the Requisite Lenders, and such
instructions  shall be binding  upon all  Lenders  provided,  however,  that the
Agents  shall not be  required  to take any action  which (i) the Agents in good
faith believe  exposes them to personal  liability  unless the Agents receive an
indemnification  satisfactory  to them from the  Lenders  with  respect  to such
action or (ii) is contrary to this Agreement or applicable law. The Agents agree
to give to each  Lender  prompt  notice  of  each  notice  given  to them by any
Borrower pursuant to the terms of this Agreement or the other Loan Documents.

(c) In performing  their functions and duties hereunder and under the other Loan
Documents,  the  Agents  are acting  solely on behalf of the  Lenders  and their
duties are entirely administrative in nature. The Agents do not assume and shall
not be deemed to have assumed any  obligation  other than as expressly set forth
herein and in the other Loan Documents or any other  relationship  as the agent,
fiduciary or trustee of or for any Lender or holder of any other Obligation. The
Agents may perform any of their  duties  under any of the Loan  Documents  by or
through their agents or employees.

Section 10.2. The Agents' Reliance,  Etc. Neither of the Agents nor any of their
Affiliates or any of the respective directors,  officers, agents or employees of
such  Agents or any such  Affiliate  shall be  liable  for any  action  taken or
omitted to be taken by it,  him,  her or them under or in  connection  with this
Agreement  or the other  Loan  Documents,  except  for any such  Person's  gross
negligence or willful misconduct. Without limiting the foregoing, each Agent (a)
may  treat the payee of any  Revolving  Credit  Note as its  holder  until  such
Revolving Credit Note has been assigned in accordance with Section 11.2; (b) may
rely on the Register to the extent set forth in Section 11.2(c); (c) may consult
with legal counsel, independent public accountants and other experts selected by
it and shall not be liable for any  action  taken or omitted to be taken in good
faith by it in  accordance  with the  advice  of such  counsel,  accountants  or
experts;  (d) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations made
by or on behalf of the Borrowers in or in connection  with this Agreement or any
of the  other  Loan  Documents;  (e)  shall  not have any duty to any  Lender to
ascertain or to inquire either as to the performance or observance of any of the
terms,  covenants  or  conditions  of this  Agreement  or any of the other  Loan
Documents  or the  financial  condition  of any  Borrower,  or the  existence or
possible  existence  of any  Default  or  Event of  Default;  (f)  shall  not be
responsible   to  any  Lender  for  the  due  execution,   legality,   validity,
enforceability,  genuineness,  sufficiency  or value of this Agreement or any of
the other Loan Documents or any other instrument or document  furnished pursuant
hereto or thereto;  and (g) shall incur no  liability  to any Lender under or in
respect of this  Agreement or any of the other Loan Documents by acting upon any
notice,  consent,  certificate  or other  instrument or writing (which may be by
telecopy) or any  telephone  message  believed by it to be genuine and signed or
sent by the proper party or parties.

Section 10.3. The Agents  Individually.  With respect to its respective  Ratable
Portion,  each of CITBC and HHF shall have and may  exercise the same rights and
powers  hereunder and is subject to the same  obligations and liabilities as and
to the extent set forth  herein for any other  Lender.  The terms  "Lenders"  or
"Requisite  Lenders"  or any similar  terms  shall,  unless the context  clearly
otherwise indicates, include the Administrative Agent or Collateral Agent in its
individual capacity as a Lender or as one of the Requisite Lenders.

Section 10.4.  Lender Credit Decision.  Each Lender  acknowledges that it shall,
independently  and without reliance upon the  Administrative  Agent or any other
Lender, conduct its own independent investigation of the financial condition and
affairs of any Borrower in  connection  with the making and  continuance  of the
Loans  and  with the  issuance  of the  Letters  of  Credit.  Each  Lender  also
acknowledges  that  it  will,   independently  and  without  reliance  upon  the
Administrative  Agent  or any  other  Lender  and  based on such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit  decisions in taking or not taking action under this  Agreement and other
Loan Documents.

Section 10.5.  Indemnification.  Each Lender agrees to indemnify  each Agent and
each of its  Affiliates,  and  each of  their  respective  directors,  officers,
employees,  agents and advisors (to the extent not reimbursed by the Borrowers),
from  and  against  such  Lender's  aggregate  Ratable  Portion  of any  and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses and  disbursements  (including fees and  disbursements of legal
counsel) of any kind or nature  whatsoever which may be imposed on, incurred by,
or asserted against,  any Agent or any of its Affiliates,  directors,  officers,
employees,  agents and  advisors  in any way  relating to or arising out of this
Agreement  or the other Loan  Documents  or any action taken or omitted by Agent
under this Agreement or the other Loan  Documents;  provided,  however,  that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
resulting  from the any  Agent's  or  Affiliate's  gross  negligence  or willful
misconduct.  Without limiting the foregoing, each Lender agrees to reimburse the
Agents promptly upon demand for its ratable share of any out-of-pocket  expenses
(including fees and  disbursements  of legal counsel)  incurred by the Agents in
connection   with  the   preparation,   execution,   delivery,   administration,
modification,  amendment or enforcement  (whether  through  negotiations,  legal
proceedings  or  otherwise)  of, or legal  advice in  respect  of its  rights or
responsibilities  under,  this  Agreement  or the other Loan  Documents,  to the
extent that the Agents are not reimbursed for such expenses by the Borrowers.

Section 10.6.  Successor  Agents.  Subject to the acceptance of appointment by a
successor  Agent as provided  below,  each of the  Administrative  Agent and the
Collateral  Agent may resign at any time by giving written notice thereof to the
Lenders and the  Borrowers.  Upon any such  resignation,  the Requisite  Lenders
shall have the right to appoint a successor  Agent.  If no  successor  Agent (i)
shall  have been so  appointed  by the  Requisite  Lenders,  and (ii) shall have
accepted such  appointment,  within 30 days after the retiring Agent's giving of
notice of  resignation,  then the retiring  Agent may, on behalf of the Lenders,
appoint a successor Agent, selected from among the Lenders. In either case, such
appointment  shall be subject to the prior  written  approval  of the  Borrowers
(which  approval  may not be  unreasonably  withheld or delayed and shall not be
required upon the occurrence and during the continuance for more than 30 days of
an Event of  Default).  Upon the  acceptance  of any  appointment  as Agent by a
successor  Agent,  such successor  Agent shall succeed to and become vested with
all the rights,  powers,  privileges and duties of the retiring  Agent,  and the
retiring  Agent shall be  discharged  from its duties and  obligations  from and
after such date under this Agreement and the other Loan Documents.  Prior to any
retiring Agent's  resignation  hereunder as Agent, the retiring Agent shall take
such action as may be reasonably  necessary to assign to the successor Agent its
rights as Agent under the Loan Documents.  After such resignation,  the retiring
Agent shall  continue  to have the  benefit of this  Article X as to any actions
taken or omitted to be taken by it while it was Agent under this  Agreement  and
the other Loan Documents.

Section 10.7.     Concerning the Collateral and the Collateral Documents and
Releases of Borrowers.

(a) Each Lender agrees that any action taken by the  Administrative  Agent,  the
Collateral  Agent or the Requisite  Lenders (or,  where  required by the express
terms of this Agreement, a greater proportion of the Lenders) in accordance with
the  provisions  of this  Agreement  or of the  other  Loan  Documents,  and the
exercise by the  Administrative  Agent,  the  Collateral  Agent or the Requisite
Lenders (or, where so required, such greater proportion) of the powers set forth
herein or therein,  together with such other powers as are reasonably incidental
thereto,  shall be  authorized  and  binding  upon all of the  Secured  Parties.
Without  limiting the  generality of the foregoing,  the Collateral  Agent shall
have the sole and exclusive right and authority to (i) act as the disbursing and
collecting  agent for the Lenders with  respect to all payments and  collections
arising in connection herewith and with the Collateral  Documents;  (ii) execute
and deliver each Collateral  Document and accept delivery of each such agreement
delivered by the Borrowers;  (iii) act as collateral agent for the other Secured
Parties for  purposes of the  perfection  of all  security  interests  and Liens
created by such  agreements and all other  purposes  stated  therein;  provided,
however, that the Collateral Agent hereby appoints,  authorizes and directs each
Lender  to act as  collateral  sub-agent  for the  Administrative  Agent and the
Lenders for purposes of the perfection of all security  interests and Liens with
respect to the Borrowers' respective Collection,  Intermediate Concentration and
Concentration  Accounts  maintained with, and cash and Cash Equivalents held by,
such Lender; (iv) manage, supervise and otherwise deal with the Collateral;  (v)
take such action as is necessary or  desirable  to maintain the  perfection  and
priority of the security  interests and Liens created or purported to be created
by the Collateral  Documents;  and (vi) except as may be otherwise  specifically
restricted  by the terms  hereof or of any other  Loan  Document,  exercise  all
remedies given to the Collateral  Agent and the Secured  Parties with respect to
the Collateral  under the Loan  Documents  relating  thereto,  applicable law or
otherwise.

(b) Each of the Lenders hereby directs, in accordance with the terms hereof, the
Collateral  Agent to release  (or, in the case of clause (ii) below,  release or
subordinate)  any Lien  held by the  Collateral  Agent  for the  benefit  of the
Lenders and the  Collateral  Agent hereby agrees to release any Lien held by the
Collateral Agent for the benefit of the Lenders:

(i) against all of the  Collateral,  upon  termination  of the Revolving  Credit
Commitments  and payment and  satisfaction  in full of all Loans,  Reimbursement
Obligations  and  all  other  Obligations  which  have  matured  and  which  the
Collateral  Agent has been notified in writing are then due and payable (and, in
respect of contingent Letter of Credit  Obligations,  with respect to which cash
collateral has been deposited or a back-up letter of credit has been issued,  in
either case on terms satisfactory to the Collateral Agent and CITBC);

(ii)     against any part of the Collateral that is subject to a Lien permitted
by Section 2.17(a);

(iii)  against  any part of the  Collateral  sold,  closed or  disposed  of by a
Borrower if such sale,  closure or disposition  is permitted by Section  8.4(a),
(b) and (f) or Section 2.17(b) (or permitted  pursuant to a waiver or consent of
a transaction otherwise prohibited by this Agreement);

(iv) against any other Collateral with a book value of up to $2,500,000, if such
release is consented to by the Requisite Lenders,  or any part of the Collateral
in excess of such  amount,  if such  release is consented to by all the Lenders;
and

(v)      in connection with the substitution of Eligible Real Property in
accordance with the definition of such term.

Each of the Lenders hereby  directs the  Collateral  Agent to and the Collateral
Agent shall  execute and deliver or file such  termination  and partial  release
statements  and do such other  things as are  necessary  to release  Liens to be
released  pursuant to this Section 10.7 and each of the Lenders  hereby  directs
the  Agents  to, and the Agents and the  Lenders  shall,  release  the  relevant
Borrowers  from  their  respective  obligations  under  the  Loan  Documents  as
contemplated by Section 2.17 and Section 8.4 promptly upon the  effectiveness of
any such release pursuant to such respective Section.

(c) Each of the  Agents and the  Lenders  agree to execute  such  documents  and
instruments as any Borrower may reasonably request to evidence or effectuate the
release  of any of  the  Collateral  or of any  Borrower  from  its  Obligations
hereunder as permitted by Section 2.17 or Section 8.4.

Article XI

                                  MISCELLANEOUS

Section 11.1.     Amendments, Waivers, Etc.

(a) No amendment or waiver of any provision of this  Agreement or any other Loan
Document nor consent to any  departure by any  Borrower  therefrom  shall in any
event be  effective  unless  the same  shall be in  writing  and  signed  by the
Borrowers,  the Agents and the  Requisite  Lenders,  and then any such waiver or
consent  shall be effective  only in the specific  instance and for the specific
purpose for which given; provided, however, that no amendment, waiver or consent
shall, unless in writing and signed by each Lender, in addition to the Requisite
Lenders, do any of the following:

(i) waive any of the  conditions  specified  in Section  3.1 or 3.2 except  with
respect to a condition based upon another provision hereof,  the waiver of which
requires only the concurrence of the Requisite Lenders;

(ii)     increase the Revolving Credit Commitments of the Lenders;

(iii)    extend the scheduled final maturity of any Loan;

(iv) reduce the principal amount of any Loan or Reimbursement  Obligation (other
than by the payment or prepayment  thereof);  (v) reduce the rate of interest on
any Loan or Reimbursement Obligations or any fee payable under Section 2.10;

(vi)     postpone any scheduled date fixed for payment of such interest or fees;

(vii)  change the  aggregate  Ratable  Portions  of the  Lenders  which shall be
required for the Lenders or any of them to take any action hereunder;

(viii)   increase the Borrowing Base above the rates set forth in the definition
thereof;

(ix) release any of the  Collateral or any Borrower from its  obligations  under
any of the Loan  Documents  except as provided  in the last  sentence of Section
10.7(b) (or permitted pursuant to a waiver or consent of a transaction otherwise
prohibited by this Agreement); or

(x)      amend Section 10.7(b) or this Section 11.1 or the definition of the
terms "Requisite Lenders" or "Ratable Portion";

and provided,  further,  that no amendment,  waiver or consent shall,  unless in
writing and signed by the  relevant  Agent in  addition to the Lenders  required
above to take such action,  affect the rights or duties of such Agent under this
Agreement or the other Loan Documents.

(b) The  Administrative  Agent may,  but shall have no  obligation  to, with the
written concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given. No
notice to or demand on any Borrower in any case shall  entitle such  Borrower to
any other or further notice or demand in similar or other circumstances.

Section 11.2.     Assignments and Participations.

(a) Each Lender may sell, transfer,  negotiate or assign to one or more Eligible
Assignees all or a portion of its rights and  obligations  hereunder  (including
all of its rights and obligations with respect to the Revolving Credit Loans and
the Letters of Credit); provided,  however, that (i) such assignment shall cover
the same percentage of such Lender's Revolving Credit Outstandings and Revolving
Credit  Commitment and (ii) the aggregate amount being assigned pursuant to each
such assignment (determined as of the date of the Assignment and Acceptance with
respect  to such  assignment)  shall in no event  (if less  than the  Assignor's
entire  interest) be less than $5,000,000 or an integral  multiple of $1,000,000
in excess thereof;  provided,  further, that in the case of any assignment to an
Eligible  Assignee that is not, prior to the date of such assignment,  a Lender,
an Affiliate of a Lender (other than any Investment Fund) or an Approved Fund of
a  Lender,  such  assignment  shall  be  subject  to the  prior  consent  of the
Administrative  Agent and the Borrowers (which consent shall not be unreasonably
withheld or delayed) and in the case of any  assignment  to an Affiliate  (other
than any Investment  Fund) or Approved Fund of a Lender,  such Lender shall give
the  Borrowers  at least five days' prior notice of such  assignment;  provided,
however,  that  notwithstanding  any other  provision of this Section 11.2,  the
consent of the Borrowers  shall not be required for any assignment  which occurs
when any Event of Default shall have occurred and be continuing for more than 30
consecutive days.

(b)  The  parties  to  each   assignment   shall  execute  and  deliver  to  the
Administrative  Agent,  for its  acceptance  and  recording,  an Assignment  and
Acceptance,  together with any Revolving Credit Note (if the assigning  Lender's
Loans are evidenced by a Revolving Credit Note) subject to such assignment.  The
Administrative  Agent shall give prior notice of such assignment to Borrowers in
the event the Borrowers do not have consent rights pursuant to Section  11.2(a).
Upon such execution,  delivery,  acceptance and recording and the receipt by the
Administrative  Agent from the  assignee of an  assignment  fee in the amount of
$3,500  from and after the  effective  date  specified  in such  Assignment  and
Acceptance,  (i) the assignee thereunder shall become a party hereto and, to the
extent that rights and  obligations  under the Loan Documents have been assigned
to such assignee pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender,  and if such Lender were CITBC,  the rights of CITBC as
an  issuer  of  Letter of  Credit  Guaranties  hereunder  and (ii) the  assignor
thereunder shall, to the extent that rights and obligations under this Agreement
have been assigned by it pursuant to such Assignment and Acceptance,  relinquish
its rights  (except those which survive the payment in full of the  Obligations)
and be released from its obligations under the Loan Documents,  other than those
relating to events or circumstances  occurring prior to such assignment (and, in
the case of an Assignment and Acceptance  covering all or the remaining  portion
of an assigning  Lender's rights and obligations under the Loan Documents,  such
Lender shall cease to be a party hereto).

(c) The  Administrative  Agent  shall  maintain  at its  address  referred to in
Section 11.3 a copy of each Assignment and Acceptance  delivered to and accepted
by it and a register for the recording of the names and addresses of the Lenders
and the Revolving  Credit  Commitments of and principal  amount of the Loans and
Letter  of  Credit  Obligations  owing to each  Lender  from  time to time  (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrowers, the Administrative Agent and
the Lenders may treat each  Person  whose name is recorded in the  Register as a
Lender for all purposes of this  Agreement.  The Register shall be available for
inspection  by the  Borrowers,  the  Administrative  Agent or any  Lender at any
reasonable time and from time to time upon reasonable prior notice.

(d) Upon its receipt of an Assignment  and  Acceptance  executed by an assigning
Lender  and an  Eligible  Assignee,  the  Administrative  Agent  shall,  if such
Assignment  and Acceptance has been  completed,  (i) accept such  Assignment and
Acceptance,  (ii) record the information  contained  therein in the Register and
(iii) give prompt  notice  thereof to the  Borrowers.  Within five Business Days
after its receipt of such notice, each Borrower,  at its own expense,  shall, if
requested by such assignee, execute and deliver to the Administrative Agent, new
Revolving Credit Notes to the order of such Eligible Assignee in an amount equal
to the Revolving  Credit  Commitments  assumed by it pursuant to such Assignment
and Acceptance and, if the assigning Lender has surrendered any Revolving Credit
Note for exchange in connection  with the assignment and has retained  Revolving
Credit  Commitments  hereunder,  new Revolving  Credit Notes to the order of the
assigning Lender in an amount equal to the Revolving Credit Commitments retained
by it hereunder. Such new Revolving Credit Notes shall be dated the same date as
the  surrendered  Revolving  Credit  Notes and be in  substantially  the form of
Exhibit F.

(e) In addition to the other  assignment  rights  provided in this Section 11.2,
each Lender may assign, as collateral or otherwise, any of its rights under this
Agreement  (including  rights to payments of principal or interest on the Loans)
to any Federal  Reserve Bank  pursuant to  Regulation  A of the Federal  Reserve
Board without notice to or consent of the Borrower or the Administrative  Agent;
provided,  however,  that no such assignment  shall release the assigning Lender
from any of its obligations hereunder.

(f) Each Lender may sell  participations  to one or more Persons  (other than an
Investment  Fund) in or to all or a portion of its rights and obligations  under
the Loan  Documents  (including all its rights and  obligations  with respect to
Revolving Credit Loans and Letters of Credit).  The terms of such  participation
shall not, in any event,  require the  participant's  consent to any amendments,
waivers or other  modifications  of any  provision  of any Loan  Documents,  the
consent to any  departure by any Borrower  therefrom,  or to the  exercising  or
refraining from exercising any powers or rights which such Lender may have under
or in  respect  of the  Loan  Documents  (including  the  right to  enforce  the
obligations of the  Borrowers),  except if any such  amendment,  waiver or other
modification or consent would (i) reduce the amount,  or postpone any date fixed
for,  any  amount  (whether  of  principal,  interest  or fees)  payable to such
participant under the Loan Documents,  to which such participant would otherwise
be  entitled  under such  participation  or (ii) result in the release of all or
substantially  all of the  Collateral  other  than in  accordance  with  Section
10.7(b).  In the event of the sale of any participation by any Lender,  (A) such
Lender's  obligations under the Loan Documents shall remain unchanged,  (B) such
Lender shall remain solely  responsible to the other parties for the performance
of such obligations, (C) such Lender shall remain the holder of such Obligations
for all purposes of this Agreement,  and (D) the Borrowers,  the  Administrative
Agent and the other Lenders shall continue to deal solely and directly with such
Lender in  connection  with such  Lender's  rights  and  obligations  under this
Agreement.  In the case of any participation to an Eligible Assignee that is not
a Lender prior to the date of such participation, an Affiliate of a Lender or an
Approved Fund, such  participation  shall be subject to the prior consent of the
Borrowers so long as no Event of Default has occurred and is continuing for more
than 30 days (which consent shall not be unreasonably  withheld or delayed).  In
the case of any  participation  to an Affiliate or an Approved Fund of a Lender,
such Lender shall give the Borrowers at least five days prior written  notice of
such  participation.  Each  participant  shall be  entitled  to the  benefits of
Sections 2.12,  2.13 and 2.14 as if it were a Lender;  provided,  however,  that
anything herein to the contrary notwithstanding, the Borrowers shall not, at any
time,  be  obligated  to pay to any  participant  of any interest of any Lender,
under  Sections  2.12,  2.13 or 2.14,  any sum in  excess  of the sum  which the
Borrowers  would have been  obligated  to pay to such  Lender in respect of such
interest had such participation not been sold.

Section 11.3.     Costs and Expenses.

(a) Each Borrower  jointly and severally agrees upon demand to pay, or reimburse
the Agents for,  all of the Agents'  reasonable  internal  and  external  audit,
legal, appraisal,  valuation,  filing, document duplication and reproduction and
investigation  expenses and for all other reasonable costs and expenses of every
type and nature (including,  without  limitation,  the reasonable fees, expenses
and  disbursements  of the Agents'  counsel,  Weil,  Gotshal & Manges LLP, local
legal counsel,  auditors,  accountants,  appraisers (for appraisals conducted no
more than once per year and only on the Eligible Real  Property),  insurance and
environmental advisers, and other consultants and agents) incurred by the Agents
in connection with (i) the Agents' audit and  investigation  of the Borrowers in
connection with the preparation, negotiation and execution of the Loan Documents
and any Agent's periodic audits of the Borrowers to the extent that the expenses
of each  such  periodic  audit do not  exceed  $20,000;  (ii)  the  preparation,
negotiation,  execution and interpretation of this Agreement (including, without
limitation,  the satisfaction or attempted satisfaction of any of the conditions
set  forth in  Article  III),  the Loan  Documents  and any  proposal  letter or
commitment  letter  issued in  connection  therewith and the making of the Loans
hereunder;  (iii) the creation,  perfection or protection of the Liens under the
Loan Documents (including,  without limitation, any reasonable fees and expenses
for local counsel in various jurisdictions);  (iv) the ongoing administration of
this  Agreement  and  the  Loans,   including  consultation  with  attorneys  in
connection therewith and with respect to the Agents' rights and responsibilities
hereunder and under the other Loan Documents; (v) the protection,  collection or
enforcement  of any of the  Obligations  or the  enforcement  of any of the Loan
Documents;  (vi)  the  commencement,   defense  or  intervention  in  any  court
proceeding relating in any way to the Obligations,  any Borrower,  any Affiliate
of any Borrower,  this Agreement or any of the other Loan  Documents;  (vii) the
response  to,  and  preparation  for,  any  subpoena  or  request  for  document
production  with which any Agent is served or deposition or other  proceeding in
which such Agent is called to testify,  in each case, relating in any way to the
Obligations,  any Borrower,  any Affiliate of any Borrower this Agreement or any
of the other  Loan  Documents;  and (viii) any  amendments,  consents,  waivers,
assignments,  restatements,  or supplements to any of the Loan Documents and the
preparation, negotiation, and execution of the same.

(b) Each Borrower  further agrees to pay or reimburse the Agents and each of the
Lenders upon demand for all reasonable  costs and expenses,  including,  without
limitation,  reasonable  attorneys' fees (including  allocated costs of internal
counsel and costs of  settlement),  incurred by the  Administrative  Agent,  the
Collateral  Agent  or  such  Lenders  (i) in  enforcing  any  Loan  Document  or
Obligation  or any security  therefor or exercising or enforcing any other right
or remedy  available by reason of an Event of Default;  (ii) in connection  with
any refinancing or restructuring of the credit  arrangements  provided hereunder
in the nature of a "work-out" or in any  insolvency  or  bankruptcy  proceeding;
(iii) in  commencing,  defending or intervening in any litigation or in filing a
petition,  complaint,  answer, motion or other pleadings in any legal proceeding
relating to the Obligations,  any Borrower, and related to or arising out of the
transactions contemplated hereby or by any of the other Loan Documents; and (iv)
in  taking  any  other  action  in or with  respect  to any  suit or  proceeding
(bankruptcy  or otherwise)  described in clauses (i) through  (iii) above.  Each
Borrower further agrees to pay on demand for all of the Agents' reasonable costs
and expenses related to its due diligence in connection with the consummation of
the transactions contemplated by the Loan Documents less the good faith deposits
in the aggregate amount of $250,000 made to date.

Section 11.4.     Indemnities.

(a) Each Borrower agrees to indemnify and hold harmless each Agent,  each Lender
and each of their respective  Affiliates,  and each of the directors,  officers,
employees, agents, representative,  attorneys, consultants and advisors of or to
any  of  the  foregoing   (including  those  retained  in  connection  with  the
satisfaction  or attempted  satisfaction  of any of the  conditions set forth in
Article III) (each such Person being an  "Indemnitee")  from and against any and
all third party claims, damages,  liabilities,  obligations,  losses, penalties,
actions,  judgments,  suits,  costs,  disbursements  and expenses of any kind or
nature  (including  reasonable  fees and  disbursements  of  counsel to any such
Indemnitee)  which may be imposed on,  incurred by or asserted  against any such
Indemnitee in connection with or arising out of any investigation, litigation or
proceeding,  whether  or not any such  Indemnitee  is a party  thereto,  whether
direct,  indirect,  or consequential and whether based on any federal,  state or
local  law or  other  statutory  regulation,  securities  or  commercial  law or
regulation, or under common law or in equity, or on contract, tort or otherwise,
in any manner  relating  to or  arising  out of this  Agreement,  any other Loan
Document,  any Obligation,  any Letter of Credit Guaranty,  or any act, event or
transaction related or attendant to any thereof, including,  without limitation,
any act by a bank pursuant to any Collection  Account  Agreement,  or the use or
intended use of the proceeds of the Loans or Letters of Credit related to Letter
of Credit  Guaranty or in  connection  with any  investigation  of any potential
matter covered  hereby  (collectively,  the  "Indemnified  Matters");  provided,
however,  that such Borrower  shall not have any  obligation  under this Section
11.4 to an  Indemnitee  with  respect  to any  Indemnified  Matter  caused by or
resulting from the gross negligence or willful misconduct of any Indemnitee,  as
determined  by a court  of  competent  jurisdiction  in a  final  non-appealable
judgment or order.  Without limiting the foregoing,  Indemnified Matters include
(i) all  Environmental  Liabilities and Costs arising from or connected with the
past,  present or future  operations  of the Borrowers or involving any property
subject to a  Collateral  Document,  or damage to real or  personal  property or
natural resources or harm or injury alleged to have resulted from any Release of
Contaminants  on,  upon or into such  property  or any  contiguous  real  estate
regardless of whether such releases are attributable to Borrower; (ii) any costs
or liabilities  incurred in connection with any Remedial  Action  concerning the
Borrowers or any real property owned, operated or leased by Borrower;  (iii) any
costs or liabilities  incurred in connection with any  Environmental  Lien; (iv)
any costs or liabilities  incurred in connection with any other matter under any
Environmental Law, including CERCLA and applicable state property transfer laws,
whether,  with respect to any of such  matters,  such  Indemnitee is a mortgagee
pursuant to any leasehold mortgage, a mortgagee in possession,  the successor in
interest to any  Borrower,  or the owner,  lessee or operator of any property of
any Borrower by virtue of  foreclosure,  except,  with respect to those  matters
referred to in clauses (i), (ii),  (iii) and (iv) above,  to the extent incurred
following (A)  foreclosure by any Agent or any Lender or any Agent or any Lender
having become the successor in interest to such  Borrower,  or (B)  attributable
directly to acts or omissions  of any Agent,  such Lender or any agent on behalf
of the  Administrative  Agent or such  Lender to the  extent  any such  Person a
"Person in Control" under any Environmental Law.

(b) Each Borrower shall  indemnify each Agent and each Lender for, and hold each
Agent  and  each  Lender  harmless  from and  against,  any and all  claims  for
brokerage  commissions,  fees and other compensation made against each Agent and
each Lender for any broker,  finder or consultant with respect to any agreement,
arrangement or understanding  made by or on behalf of any Borrower in connection
with the transactions contemplated by this Agreement.

(c)  Each  Agent  and  each  Lender  agree  that  in the  event  that  any  such
investigation,  litigation or proceeding set forth in subparagraph  (a) above is
asserted  or  threatened  in  writing  or  instituted  against  it or any  other
Indemnitee,  or any Remedial Action,  is requested of it or any of its officers,
directors,  agents and employees,  for which any Indemnitee may desire indemnity
or defense  hereunder,  such  Indemnitee  shall promptly notify the Borrowers in
writing.

(d) Each Borrower,  at the request of any Indemnitee,  shall have the obligation
to defend against any such investigation,  litigation or proceeding or requested
Remedial Action and such Borrower,  in any event, may participate in the defense
thereof with legal  counsel of such  Borrower's  choice.  In the event that such
Indemnitee   requests  such  Borrower  to  defend  against  such  investigation,
litigation or  proceeding  or requested  Remedial  Action,  such Borrower  shall
promptly do so and such Indemnitee shall have the right to have legal counsel of
its choice at its expense  participate in such defense. No action taken by legal
counsel chosen by such Indemnitee in defending  against any such  investigation,
litigation or proceeding or requested  Remedial Action,  shall vitiate or in any
way impair any  Borrower's  obligation  and duty hereunder to indemnify and hold
harmless such Indemnitee.

(e) Each Borrower agrees that any  indemnification or other protection  provided
to any Indemnitee pursuant to this Agreement (including pursuant to this Section
11.4) or any other  Loan  Document  shall  (i)  survive  payment  in full of the
Obligations  and (ii) inure to the  benefit of any Person who was at any time an
Indemnitee under this Agreement or any other Loan Document.

Section 11.5.  Limitation of Liability.  Each Borrower agrees that no Indemnitee
shall have any  liability  (whether  direct or indirect,  in  contract,  tort or
otherwise) to any Borrower or any of their equity holders or creditors for or in
connection  with the  transactions  contemplated  hereby  and in the other  Loan
Documents, except to the extent such liability is found in a final judgment by a
court of competent  jurisdiction  to have  resulted  from any such  Indemnitee's
gross  negligence  or  willful  misconduct.  In no  event,  however,  shall  any
Indemnified  Party  be  liable  on any  theory  of  liability  for any  special,
indirect, consequential or punitive damages.

Section 11.6.  Right of Set-off.  Each Lender and each  Affiliate of a Lender is
hereby authorized,  to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand,  provisional or final)
at any time held and other  indebtedness at any time owing by such Lender or its
Affiliates  to or for the credit or the account of the Borrowers (i) at any time
during the continuance of any Event of Default,  against any and all Obligations
then due and payable and (ii) at any time during the  continuance  of a Material
Event  of  Default,  against  any and all of the  Obligations  now or  hereafter
existing  whether  or not such  Lender  shall  have made any  demand  under this
Agreement  or any other Loan  Document  and  although  such  Obligations  may be
unmatured.  Each Lender agrees  promptly to notify the Borrowers  after any such
set-off  and  application  made  by such  Lender  or its  Affiliates;  provided,
however,  that the failure to give such notice  shall not affect the validity of
such set-off and application.  The rights of each Lender under this Section 11.6
are in addition to the other  rights and  remedies  (including  other  rights of
set-off) which such Lender may have.

Section 11.7.     Sharing of Payments, Etc.

(a) If any Lender  shall  obtain any payment  (whether  voluntary,  involuntary,
through  the  exercise of any right of set-off or  otherwise)  on account of the
Revolving  Loans made by it (other than pursuant to Sections 2.12, 2.13 or 2.14)
in excess of its  Ratable  Portion of  payments  obtained  by all the Lenders on
account of such Obligations, such Lender (a "Purchasing Lender") shall forthwith
purchase from the other Lenders (each, a "Selling  Lender") such  participations
in their  Loans or  other  Obligations  as  shall  be  necessary  to cause  such
Purchasing Lender to share the excess payment ratably with each of them.

(b) If all or any portion of any  payment  received  by a  Purchasing  Lender is
thereafter  recovered  from such  Purchasing  Lender,  such  purchase  from each
Selling  Lender  shall be rescinded  and such Selling  Lender shall repay to the
Purchasing  Lender the purchase  price to the extent of such  recovery  together
with an amount equal to such Selling  Lender's  ratable share  (according to the
proportion of (i) the amount of such Selling Lender's required repayment to (ii)
the total amount so  recovered  from the  Purchasing  Lender) of any interest or
other  amount paid or payable by the  purchasing  Lender in respect of the total
amount so recovered.

(c)  Each  Borrower   agrees  that  any   Purchasing   Lender  so  purchasing  a
participation  from a Selling  Lender  pursuant to this Section 11.7 may, to the
fullest extent permitted by law,  exercise all its rights of payment  (including
the right of set-off)  with  respect to such  participation  as fully as if such
Lender  were  the  direct  creditor  of  such  Borrower  in the  amount  of such
participation.

Section  11.8.  Notices,   Etc.  All  notices,   demands,   requests  and  other
communications  provided for in this Agreement shall be given in writing,  or by
any telecommunication device capable of creating a written record, and addressed
to the  party to be  notified  as  follows  (failure  to  provide  a copy to the
respective counsel shall not be a Default or Event of Default hereunder):

(a)      if to the Borrowers:

                           c/o PHC/CHC Holdings, Inc.
                           515 W. Greens Road, Suite 500
                           Houston, Texas  77067
                           Attention:  Deborah Frankovich
                           Telecopy No:  281-774-5420 and 281-774-5250

                           with a copy to:

                           Mayor, Day Caldwell & Keeton LLP
                           760 Louisiana, Suite 1900
                           Houston, Texas  77002
                           Attention: Gail Merel, Esq.
                           Telecopy No: 713-225-7047


(b)      if to any Lender, at its Domestic Lending Office specified opposite its
name on Schedule II or on the signature page of any
applicable Assignment and Acceptance;

(c)      if to the Administrative Agent or CITBC as Lender:

                           The CIT Group/Business Credit, Inc.
                           Two Lincoln Centre
                           Suite 200
                           5420 LBJ Freeway
                           Dallas, TX 75240
                           Attention:  Lan Haverfield
                           Telecopy No: 972-455-1690

                           with a copy to:

                           Weil, Gotshal & Manges LLP
                           767 Fifth Avenue,
                           New York, New York  10153-0119
                           Attention:  Warren Buhle, Esq.
                           Telecopy No: (212) 310-8007

(d)      if to the Collateral Agent or HHF as Lender:

                           Heller Healthcare Finance, Inc.
                           2 Wisconsin Circle, 4th Floor
                           Chevy Chase, MD 20815
                           Attention: Loan Administration
                           Telecopy No: 301-664-9890

                           with copies to:

                           Weil, Gotshal & Manges LLP
                           767 Fifth Avenue,
                           New York, New York  10153-0119
                           Attention:  Warren Buhle, Esq.
                           Telecopy No: (212) 310-8007

                                    and

                           Streich Lang P.C.
                           One Renaissance Square
                           Two North Central Avenue
                           Phoenix, AZ  85004-2391
                           Attention:  John Dawson
                           Telecopy No. (602) 229-5690

or at such other  address as shall be notified in writing (i) in the case of the
Borrowers and the Agents, to the other parties and (ii) in the case of all other
parties,  to the Borrowers and the  Administrative  Agent.  All such notices and
communications  shall be effective upon personal delivery (if delivered by hand,
including  any  overnight  courier  service),  3 Business Days after having been
deposited in the U.S. mails, certified mail return receipt requested (if sent by
U.S.  mail),  or when  properly  transmitted  (if  sent by a  telecommunications
device);   provided,   however,   that   notices  and   communications   to  the
Administrative  Agent  pursuant to Article II or X shall not be effective  until
received  by the  Administrative  Agent.  Notices to the  Borrowers  pursuant to
Section IX will not be sent by U.S. mail.

Section 11.9. No Waiver;  Remedies.  No failure on the part of any Lender or any
Agent to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof;  nor shall any single or partial exercise of any such right
preclude  any other or further  exercise  thereof or the  exercise  of any other
right.  The remedies  herein  provided are  cumulative  and not exclusive of any
remedies provided by law.

Section 11.10.  Binding Effect.  This Agreement  shall become  effective when it
shall  have  been  executed  by the  Borrowers  and  the  Agents  and  when  the
Administrative  Agent  shall have been  notified by each Lender that such Lender
has executed it and thereafter shall be binding upon and inure to the benefit of
the Borrowers,  the Agents and each Lender and their  respective  successors and
permitted assigns,  except that the Borrowers shall not have the right to assign
their rights  hereunder or any interest herein without the prior written consent
of the Lenders.

Section 11.11.      Governing Law.  This Agreement and the rights and
obligations of the parties hereto shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.

Section 11.12.       Submission to Jurisdiction; Service of Process.

(a) Any legal action or proceeding  with respect to this  Agreement or any other
Loan  Document  may be  brought in the courts of the State of New York or of the
United  States  of  America  for the  Southern  District  of New York,  and,  by
execution  and delivery of this  Agreement,  each  Borrower  hereby  accepts for
itself  and in respect  of its  property,  generally  and  unconditionally,  the
jurisdiction  of the aforesaid  courts.  The parties  hereto hereby  irrevocably
waive any objection,  including any objection to the laying of venue or based on
the grounds of forum non conveniens, which any of them may now or hereafter have
to  the  bringing  of  any  such  action  or  proceeding   in  such   respective
jurisdictions.

(b)  Nothing  contained  in this  Section  11.12  shall  affect the right of the
Administrative  Agent  or any  Lender  to  serve  process  in any  other  manner
permitted by law or commence legal  proceedings or otherwise proceed against any
Borrower in any other jurisdiction.

Section 11.13.      Waiver of Jury Trial.  EACH OF THE AGENTS, THE LENDERS AND
THE BORROWERS IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.

Section 11.14. Marshaling;  Payments Set Aside. None of the Agents or any Lender
shall be under any  obligation to marshal any assets in favor of any Borrower or
any other  party or against or in payment of any or all of the  Obligations.  To
the extent that any Borrower  makes a payment or payments to the  Administrative
Agent or the Lenders or any of such Persons  receives  payment from the proceeds
of the  Collateral  or exercise  their  rights of set-off,  and such  payment or
payments or the proceeds of such  enforcement  or setoff or any part thereof are
subsequently invalidated,  declared to be fraudulent or preferential,  set aside
or required to be repaid to a trustee,  receiver or any other party, then to the
extent of such recovery,  the obligation or part thereof originally  intended to
be satisfied,  and all Liens, right and remedies therefor,  shall be revived and
continued  in full force and effect as if such payment had not been made or such
enforcement or set-off had not occurred.

Section 11.15.      Section Titles.  The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.

Section 11.16. Execution in Counterparts.  This Agreement may be executed in any
number of counterparts and by different parties in separate  counterparts,  each
of which when so  executed  shall be deemed to be an  original  and all of which
taken together shall constitute one and the same agreement.  Signature pages may
be  detached  from  multiple  separate  counterparts  and  attached  to a single
counterpart so that all signature pages are attached to the same document.

Section 11.17. Entire Agreement. This Agreement,  together with all of the other
Loan  Documents  and all  certificates  and  documents  delivered  hereunder  or
thereunder,  embodies  the entire  agreement of the parties and  supersedes  all
prior  agreements  and  understandings  relating to the subject  matter  hereof.
Delivery  of  an  executed   signature  page  of  this  Agreement  by  facsimile
transmission   shall  be  as  effective  as  delivery  of  a  manually  executed
counterpart hereof.

Section  11.18.  Confidentiality.  Each  Lender  and each  Agent  agrees  to use
commercially reasonable efforts (equivalent to the efforts such Persons apply to
maintain the  confidentiality  of their own  confidential  information)  to keep
non-public  information  obtained  by it  pursuant  hereto  and the  other  Loan
Documents  or  otherwise  provided  to its  by or on  behalf  of the  Borrowers,
confidential  and agrees that it will only use such  information  in  connection
with the  transactions  contemplated  by this  Agreement and not disclose any of
such information other than (a) to such Lender's or Agent's, as the case may be,
employees,  representatives and agents who are or are expected to be involved in
the  evaluation  of  such   information  in  connection  with  the  transactions
contemplated by this Agreement and who are advised of the confidential nature of
such  information  and who  agree for the  benefit  of the  Borrowers  and their
Affiliates  to be bound by the terms of this  Section  11.18,  (b) to the extent
such information  presently is or hereafter  becomes available to such Lender or
Agent, as the case may be, on a non-confidential  basis from a source other than
any  Borrower or any  Affiliate of any  Borrower,  which  source,  to the actual
knowledge of such Lender or Agent at the time, is not then  prohibited by duties
of  confidentiality  from transmitting such information to such Lender or Agent,
(c) as, in the reasonable  opinion of any Lender or its counsel required by law,
regulation  or judicial  order or  requested or required by bank  regulators  or
auditors,   (d)  to  assignees  or  participants   or  potential   assignees  or
participants  who agree to be bound by the provisions of this Section 11.18, (e)
in connection  with any  litigation to which the Lenders are a party,  or (f) to
the extent such  information  ceases to be confidential  through no fault of the
Lenders or the Agents;  provided,  however, that to the extent practicable,  any
Lender or Agent disclosing any non-public  information pursuant to clause (c) or
(e) shall  endeavor in good faith to give the  Borrowers  prompt  prior  written
notice of such disclosure.


<PAGE>


                       SIGNATURE PAGE TO CREDIT AGREEMENT

                       SIGNATURE PAGE TO CREDIT AGREEMENT

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

                                      THE CIT GROUP/BUSINESS CREDIT, INC.
                                      as Administrative Agent and Lender

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


                                      HELLER HEALTHCARE FINANCE, INC.
                                      as Collateral and Documentation Agent
                                      and Lender

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


                                      PHC/CHC HOLDINGS, INC.
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title:  Vice President, Treasurer and
                                      Assistant Secretary

                                      PHC-B OF MIDLAND, INC.
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title:  Vice President, Treasurer and
                                      Assistant Secretary

                                      METROPOLITAN HOSPITAL, L.P.
                                      By: PARACELSUS OF VIRGINIA, INC.
                                      General Partner
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title:  Vice President, Treasurer and
                                      Assistant Secretary

                                      LANCASTER HOSPITAL CORPORATION
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title:  Vice President, Treasurer and
                                      Assistant Secretary

                                      PARACELSUS CLAY COUNTY HOSPITAL, INC.
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title: Vice President, Treasurer and
                                      Assistant Secretary

                                      PARACELSUS FENTRESS COUNTY GENERAL
                                      HOSPITAL, INC.
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title: Vice President, Treasurer and
                                      Assistant Secretary

                                      PARACELSUS MACON COUNTY MEDICAL CENTER,
                                      INC.
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title: Vice President, Treasurer and
                                      Assistant Secretary

                                      PARACELSUS MESQUITE HOSPITAL, INC.
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title: Vice President, Treasurer and
                                      Assistant Secretary

                                      PARACELSUS SANTA ROSA MEDICAL CENTER, INC.
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title: Vice President, Treasurer and
                                      Assistant Secretary

                                      BAYTOWN MEDICAL CENTER, INC.
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title: Vice President, Treasurer and
                                      Assistant Secretary

                                      PARACELSUS HEALTHCARE CORPORATION OF
                                      NORTH DAKOTA, INC.
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title: Vice President, Treasurer and
                                      Assistant Secretary

                                      PARACELSUS REAL ESTATE CORPORATION
                                      By:
                                      ------------------------------------------
                                      Name: Deborah H. Frankovich
                                      Title: Vice President, Treasurer and
                                      Assistant Secretary


<PAGE>




                                   SCHEDULE I

                                    Borrowers

BAYTOWN MEDICAL CENTER, INC.

METROPOLITAN HOSPITAL, L.P.

LANCASTER HOSPITAL CORPORATION

PARACELSUS REAL ESTATE CORPORATION

PARACELSUS CLAY COUNTY HOSPITAL, INC.

PARACELSUS FENTRESS COUNTY GENERAL HOSPITAL, INC.

PARACELSUS HEALTHCARE CORPORATION OF NORTH DAKOTA, INC.

PARACELSUS MACON COUNTY MEDICAL CENTER, INC.

PARACELSUS MESQUITE HOSPITAL, INC.

PARACELSUS SANTA ROSA MEDICAL CENTER, INC.

PHC/CHC HOLDINGS, INC.

PHC-B OF MIDLAND, INC.



<PAGE>




                                   SCHEDULE II

              APPLICABLE LENDING OFFICES AND ADDRESSES FOR NOTICES

1.       The CIT Group/Business Credit, Inc.:        Domestic Lending Office:
                                                     The Chase Manhattan Bank
                                                     4 New York Plaza
                                                     15th Floor
                                                     New York, NY  10004

                                                     Attn: Lan Haverfield
                                                     Fax no: (972) 455-1690

                                                     Eurodollar Lending Office:
                                                     (same as Domestic Lending
                                                     Office)


2.       Heller Healthcare Finance, Inc.:            Domestic Lending Office:
                                                     Heller Healthcare Finance,
                                                     Inc.
                                                     2 Wisconsin Circle
                                                     4th Floor
                                                     Chevy Chase, MD  20815
                                                     Attn: Loan Administration
                                                     Fax no: (301) 664-9890

                                                     Eurodollar Lending Office:
                                                     (same as Domestic Lending
                                                     Office)


<PAGE>


                                  SCHEDULE III

                                   COMMITMENTS

                                                     Revolving Credit

Lender                                      Commitment

The CIT Group/Business Credit, Inc.         $31,000,000


Heller Healthcare Finance, Inc.             $31,000,000

<PAGE>


                                              iv

                                TABLE OF CONTENTS

<TABLE>
<S>     <C>

Article I             Definitions, Interpretation And Accounting Terms..................................1

         Section 1.1........................................................................Defined Terms 1

         Section 1.2..........................................................Computation of Time Periods 23

         Section 1.3......................................................Accounting Terms and Principles 23

         Section 1.4........................................................................Certain Terms 23

Article II            The Facility.....................................................................24

         Section 2.1.....................................................The Revolving Credit Commitments 24

         Section 2.2.................................................................Borrowing Procedures 25

         Section 2.3..........................................................Letter of Credit Guaranties 26

         Section 2.4........................Termination and Reduction of the Revolving Credit Commitments 31

         Section 2.5...................................................................Repayment of Loans 31

         Section 2.6.....................................................................Evidence of Debt 31

         Section 2.7................................................................Mandatory Prepayments 32

         Section 2.8.............................................................................Interest 32

         Section 2.9.......................................................Conversion/Continuation Option 33

         Section 2.10................................................................................Fees 34

         Section 2.11...........................................................Payments and Computations 35

         Section 2.12..................................Special Provisions Governing Eurodollar Rate Loans 38

         Section 2.13....................................................................Capital Adequacy 40

         Section 2.14...............................................................................Taxes 40

         Section 2.15..........................................Certain Matters Relating to the Collateral 42

         Section 2.16.............................................Matters Relating to Controlled Accounts 42

         Section 2.17.............................................................Withdrawal of Borrowers 45

Article III           Conditions To Loans And Letter Of Credit Guaranties..............................47

         Section 3.1................Conditions Precedent to Initial Loans and Letter of Credit Guaranties 47

         Section 3.2......................Conditions Precedent to Each Loan and Letter of Credit Guaranty 49

Article IV            Representations and Warranties...................................................51

         Section 4.1.............................................Corporate Existence; Compliance with Law 51

         Section 4.2..............................Corporate Power; Authorization; Enforceable Obligations 51

         Section 4.3.................................................................Financial Statements 52

         Section 4.4..............................................................Material Adverse Effect 53

         Section 4.5.............................................................................Solvency 53

         Section 4.6...........................................................................Litigation 53

         Section 4.7................................................................................Taxes 53

         Section 4.8......................................................................Full Disclosure 54

         Section 4.9...................................................................Margin Regulations 54

         Section 4.10.............................................No Burdensome Restrictions; No Defaults 55

         Section 4.11..........................Investment Company Act; Public Utility Holding Company Act 55

         Section 4.12.....................................................................Use of Proceeds 55

         Section 4.13...........................................................................Insurance 55

         Section 4.14.......................................................................Labor Matters 56

         Section 4.15...............................................................................ERISA 56

         Section 4.16...............................................................Environmental Matters 56

         Section 4.17...............................................................Intellectual Property 57

         Section 4.18................................................................Title; Real Property 58

Article V             Financial Covenants..............................................................59

         Section 5.1.......................................................................Minimum EBITDA 59

Article VI            Reporting Covenants..............................................................60

         Section 6.1.................................................................Financial Statements 60

         Section 6.2......................................................................Default Notices 62

         Section 6.3...........................................................................Litigation 62

         Section 6.4..........................................................................Asset Sales 62

         Section 6.5..........................................................SEC Filings; Press Releases 62

         Section 6.6......................................................................Labor Relations 62

         Section 6.7..........................................................................Tax Returns 63

         Section 6.8............................................................................Insurance 63

         Section 6.9........................................................................ERISA Matters 63

         Section 6.10...............................................................Environmental Matters 63

         Section 6.11........................................................Borrowing Base Determination 64

         Section 6.12...................................................................Other Information 65

Article VII           Affirmative Covenants............................................................65

         Section 7.1............................................Preservation of Corporate Existence, Etc. 65

         Section 7.2...........................................................Compliance with Laws, Etc. 65

         Section 7.3.................................................................Conduct of Business. 65

         Section 7.4...............................................................Payment of Taxes, Etc. 65

         Section 7.5.............................................................Maintenance of Insurance 66

         Section 7.6...............................................................................Access 66

         Section 7.7.....................................................................Keeping of Books 67

         Section 7.8......................................................Maintenance of Properties, Etc. 67

         Section 7.9..............................................................Application of Proceeds 67

         Section 7.10.......................................................................Environmental 67

         Section 7.11.......................................................................Real Property 67

         Section 7.12.........................................................Matters Related to Accounts 68

         Section 7.13.....................................................................Trade Payables. 69

Article VIII          Negative Covenants...............................................................70

         Section 8.1.........................................................................Indebtedness 70

         Section 8.2..........................................................................Liens, Etc. 71

         Section 8.3..........................................................................Investments 72

         Section 8.4.......................................................................Sale of Assets 73

         Section 8.5..................................................................Restricted Payments 74

         Section 8.6...........................Restriction on Fundamental Changes; Permitted Acquisitions 75

         Section 8.7.........................................................Change in Nature of Business 75

         Section 8.8.........................................................Transactions with Affiliates 75

         Section 8.9................................................Modification of Constituent Documents 75

         Section 8.10.....................................................Accounting Changes; Fiscal Year 75

         Section 8.11..................................................................Margin Regulations 76

         Section 8.12....................................................................Operating Leases 76

         Section 8.13.............................................Cancellation of Indebtedness Owed to It 76

         Section 8.14.........................................................No Speculative Transactions 76

         Section 8.15...............................................................Compliance with ERISA 76

         Section 8.16.......................................................................Environmental 76

Article IX            Events of Default................................................................77

         Section 9.2.............................................................................Remedies 80

         Section 9.3..............................................Actions in Respect of Letters of Credit 80

Article X             The Administrative Agent; the agents.............................................81

         Section 10.1............................................................Authorization and Action 81

         Section 10.2..........................................................The Agents' Reliance, Etc. 81
         Section 10.3.............................................................The Agents Individually 82

         Section 10.4..............................................................Lender Credit Decision 82

         Section 10.5.....................................................................Indemnification 82

         Section 10.6....................................................................Successor Agents 83

         Section 10.7...................................................Concerning the Collateral and the
                                                                 Collateral Documents and
                                                                 Releases of Borrowers .................. 83
Article XI            Miscellaneous...................................................................... 85

         Section 11.1...........................................................Amendments, Waivers, Etc. 85

         Section 11.2......................................................Assignments and Participations 86

         Section 11.3..................................................................Costs and Expenses 89

         Section 11.4.........................................................................Indemnities 90

         Section 11.5.............................................................Limitation of Liability 91

         Section 11.6....................................................................Right of Set-off 92

         Section 11.7...........................................................Sharing of Payments, Etc. 92

         Section 11.8.......................................................................Notices, Etc. 92

         Section 11.9.................................................................No Waiver; Remedies 94

         Section 11.10.....................................................................Binding Effect 94

         Section 11.11......................................................................Governing Law 95

         Section 11.12.....................................Submission to Jurisdiction; Service of Process 95

         Section 11.13...............................................................Waiver of Jury Trial 95

         Section 11.14.....................................................Marshaling; Payments Set Aside 95

         Section 11.15.....................................................................Section Titles 95

         Section 11.16..........................................................Execution in Counterparts 96

         Section 11.17...................................................................Entire Agreement 96

         Section 11.18....................................................................Confidentiality 96


</TABLE>

<PAGE>


SCHEDULES

 Schedule I                -        Borrowers
 Schedule II               -        Applicable Lending Offices and Addresses for
                                    Notices
 Schedule III                       Revolving Credit Commitments
 Schedule 2.3                       Letters of Credit
 Schedule 2.16(a)                   Collection Accounts
 Schedule 4.2(a)           -        Consents
 Schedule 4.6              -        Litigation
 Schedule 4.7              -        Tax Matters
 Schedule 4.14             -        Labor Matters
 Schedule 4.15                      ERISA Matters
 Schedule 4.16             -        Environmental Matters
 Schedule 8.1              -        Existing Indebtedness
 Schedule 8.2              -        Existing Liens
 Schedule 8.3              -        Existing Investments

EXHIBITS

Exhibit A                  -        Form of Assignment and Acceptance
Exhibit B                  -        Form of Borrowing Base Certificate
Exhibit C                  -        Form of Cash Collateral Account
Exhibit D                           Form of Pledge & Security Agreement
Exhibit E                  -        Form of Notice of Borrowing
Exhibit F                  -        Form of Revolving Credit Note
Exhibit G                  -        Form of Notice of Conversion or Continuation
Exhibit H                           Forms of Collection Account Agreement
Exhibit I                  -        Form of Opinion of Counsel for the Borrowers